The UK Law Commission, an independent body, set up by British Parliament, announced on Thursday that it is investigating reforms into blockchain-based smart contracts, with the aim to bring legal clarity.
According to the statement, the independent agency conducted some initial research into the laws surrounding smart contracts and found that a more thorough project was needed. It aims to ensure that the law is flexible enough to apply in a global digital context and to identify any areas that need to be improved.
A smart contract is a computer protocol intended to digitally allow for the application of a transaction by verifying, and enforcing the negotiation or performance of a contract. Through smart contracts, credible transactions can be implemented without the need for a third party.
Making the UK attractive for enterprises
According to the report, the Law Commission sees the value in smart contracts and believes they have the advantage of increasing “trust and certainty” and can boost transaction efficiency among businesses. Therefore, the agency believes that UK laws should be relevant to the current ecosystem and make Britain attractive for enterprises.
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In the working paper, it states: “It is important to ensure that English courts and law remain a competitive choice for business. Therefore, there is a compelling case for a Law Commission scoping study to review the current English legal framework as it applies to smart contracts.”
The working paper follows on from a report which was published by the commission at the end of last year. In the report, it highlighted the use of smart contracts as one of the 14 areas that are set to have its laws reformed after feedback from the public is received.
At the time, the commision said: “there are questions about how this feature (smart contract) would interact with contract law concepts such as implied terms or contracts which are held to have been void from the outset. There are also questions about data protection law.”
In December, the UK commision also added that the research process could take anywhere between 9 to 18 months to complete.