Thursday 26 November 2015

The judgment on the ownership of bitcoins has been published.

As I mentioned in my earlier post, the Tokyo District Court in its judgment on 5 August 2015 denied the ownership (more precisely, "shoyûken" in Japanese) of bitcoins. In that post, I have also noted that translating "shoyuken" into the English word "ownership" may be misleading.
Until recently, the only way to examine the actual text of the judgment was to go in person to the Court pursuant to Article 91(1) of the Code of Civil Procedure. But it is now reported on Westlaw Japan (accessible by subscribers only). Reading it through, I have picked up some noteworthy points from the court's summary of the parties' arguments and its own reasoning. 

1. The plaintiff relied on Article 62 of the Bankruptcy Act which provides: 
The commencement of bankruptcy proceedings shall not affect the right to recover, from the bankruptcy estate, property that does not belong to the bankrupt. 

2. The plaintiff claimed the return of bitcoin units as appearing in his or her account with MTGOX. The plaintiff admitted that MTGOX had merged those with units from other customers and held them in addresses which were not associated with any specific customers and for which only MTGOX kept private keys. But the plaintiff argued that those units constituted a commingled deposit (“konzô kitaku”) over which each depositor retained “shoyûken” in proportion to his or her share. 

3. The court reasoned deductively from the following provisions of the Japanese Civil Code to reach its conclusion that bitcoin, being intangible, could not be an object of shoyûken. 
Article 85 The term "thing" (“butsu”) as used in this Code shall mean tangible property. 
Article 206 The shoyûken holder of a thing (“butsu”) shall have the right to freely use, profit from and dispose of it, subject to the restrictions prescribed by law. 
My comment: This conclusion is hardly controversial, as noted in my earlier post

4. The court disposed of the case, holding that the plaintiff could not obtain recovery, under Article 62 of the Bankruptcy Act, of the bitcoin units based on his or her shoyûken over them. 
My comment: It is true that most claims under Article 62 in practice are for the recovery of tangible property and are based on shoyûken. It is, however, also possible to recover intangible property, such as chose in action and intellectual property right, under this provision. In such cases, shoyûken, by definition, cannot be the basis of the claim. But the claim can be based on the proof that the property belongs to the claimant. Thus, “ownership” in its usual sense of the English word, as opposed to a narrower concept of “shoyûken” under Japanese law (See my earlier post), can be the basis of a claim under Article 62. The Court did not consider the possibility of recovery of the bitcoin units under that provision based on the argument that they were owned by (namely, belonged to, rather than an object of "shoyûken" of) the claimant. Nor did the plaintiff’s submission (as summarized by the Court) contain this argument. The consideration of this argument would have made it necessary for the Court to step into a theoretically difficult territory: it would have had to determine who owned the bitcoin units which were deposited and commingled with other units.

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