The bitcoin addresses are randomly generated long alphanumeric strings and prone to be mistyped. If bitcoin is transferred to a wrong address by mistake, what law is applicable to a restitutionary claim by the transferor against the transferee?
This post will consider this question under the Rome II Regulation (Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations) as it is an influential instrument in private international law. Its Article 10 contains choice-of-law rules for unjust enrichment in the following terms:
1. If a non-contractual obligation arising out of unjust enrichment, including payment of amounts wrongly received, concerns a relationship existing between the parties, such as one arising out of a contract or a tort/delict, that is closely connected with that unjust enrichment, it shall be governed by the law that governs that relationship.
2. Where the law applicable cannot be determined on the basis of paragraph 1 and the parties have their habitual residence in the same country when the event giving rise to unjust enrichment occurs, the law of that country shall apply.
3. Where the law applicable cannot be determined on the basis of paragraphs 1 or 2, it shall be the law of the country in which the unjust enrichment took place.
4. Where it is clear from all the circumstances of the case that the non-contractual obligation arising out of unjust enrichment is manifestly more closely connected with a country other than that indicated in paragraphs 1, 2 and 3, the law of that other country shall apply.
In most cases of mistaken remittance, para. 3 will be applicable. Its connecting factor is the occurrence of the unjust enrichment, as distinguished from the occurrence of the event giving rise to the enrichment.
The application of this provision to mistaken remittance of a bank deposit is not particularly difficult. If, for example, A mistakenly transfers money from his Italian bank account to B's bank account in Spain, Spanish law is applicable to A's restitutionary claim against B. It has been suggested that in localising the situs of enrichment, the discrete asset, rather than the centre of wealth of the enriched person, should be focused on (Huber / Huber / Bach, Rome II Regulation (2011), Art. 10, para. 28). Thus, even if B lives in Portugal and maintains all assets there, it is immaterial.
The application of para. 3 is not as simple in the case of remittance of cryptocurrency such as bitcoin, since there is no such thing as a bank account. Remittance of cryptocurrency takes place between addresses on a blockchain. The addresses are not associated with any physical location, unlike bank accounts. Neither is it possible to localise the blockchain since it is a distributed ledger. Faute de mieux, the unjust enrichment should be deemed to have taken place at the habitual residence of the enriched person. The concept of "habitual residence" is elaborated on at Article 23 in the following terms:
1. For the purposes of this Regulation, the habitual residence of companies and other bodies, corporate or unincorporated, shall be the place of central administration.
Where the event giving rise to the damage occurs, or the damage arises, in the course of operation of a branch, agency or any other establishment, the place where the branch, agency or any other establishment is located shall be treated as the place of habitual residence.
2. For the purposes of this Regulation, the habitual residence of a natural person acting in the course of his or her business activity shall be his or her principal place of business.
Paragraph 2 would not be applicable in the context presently discussed because the person enriched by receiving a mistakenly remitted cryptocurrency would not be deemed to be "acting in the course of his or her business activity." Nor would the second sentence of paragraph 1 be applicable since it seems only concerned with the habitual residence of a tortfeasor.
This post will consider this question under the Rome II Regulation (Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations) as it is an influential instrument in private international law. Its Article 10 contains choice-of-law rules for unjust enrichment in the following terms:
1. If a non-contractual obligation arising out of unjust enrichment, including payment of amounts wrongly received, concerns a relationship existing between the parties, such as one arising out of a contract or a tort/delict, that is closely connected with that unjust enrichment, it shall be governed by the law that governs that relationship.
2. Where the law applicable cannot be determined on the basis of paragraph 1 and the parties have their habitual residence in the same country when the event giving rise to unjust enrichment occurs, the law of that country shall apply.
3. Where the law applicable cannot be determined on the basis of paragraphs 1 or 2, it shall be the law of the country in which the unjust enrichment took place.
4. Where it is clear from all the circumstances of the case that the non-contractual obligation arising out of unjust enrichment is manifestly more closely connected with a country other than that indicated in paragraphs 1, 2 and 3, the law of that other country shall apply.
In most cases of mistaken remittance, para. 3 will be applicable. Its connecting factor is the occurrence of the unjust enrichment, as distinguished from the occurrence of the event giving rise to the enrichment.
The application of this provision to mistaken remittance of a bank deposit is not particularly difficult. If, for example, A mistakenly transfers money from his Italian bank account to B's bank account in Spain, Spanish law is applicable to A's restitutionary claim against B. It has been suggested that in localising the situs of enrichment, the discrete asset, rather than the centre of wealth of the enriched person, should be focused on (Huber / Huber / Bach, Rome II Regulation (2011), Art. 10, para. 28). Thus, even if B lives in Portugal and maintains all assets there, it is immaterial.
The application of para. 3 is not as simple in the case of remittance of cryptocurrency such as bitcoin, since there is no such thing as a bank account. Remittance of cryptocurrency takes place between addresses on a blockchain. The addresses are not associated with any physical location, unlike bank accounts. Neither is it possible to localise the blockchain since it is a distributed ledger. Faute de mieux, the unjust enrichment should be deemed to have taken place at the habitual residence of the enriched person. The concept of "habitual residence" is elaborated on at Article 23 in the following terms:
1. For the purposes of this Regulation, the habitual residence of companies and other bodies, corporate or unincorporated, shall be the place of central administration.
Where the event giving rise to the damage occurs, or the damage arises, in the course of operation of a branch, agency or any other establishment, the place where the branch, agency or any other establishment is located shall be treated as the place of habitual residence.
2. For the purposes of this Regulation, the habitual residence of a natural person acting in the course of his or her business activity shall be his or her principal place of business.
Paragraph 2 would not be applicable in the context presently discussed because the person enriched by receiving a mistakenly remitted cryptocurrency would not be deemed to be "acting in the course of his or her business activity." Nor would the second sentence of paragraph 1 be applicable since it seems only concerned with the habitual residence of a tortfeasor.
No comments:
Post a Comment