Blockchain-based smart contracts and conflict rules for business-to-business operations

• Author: Georgina Garriga Suau
• Position: Profesora Agregrada Serra Húnter de Derecho internacional privado de la Universitat de Barcelona
• Pages: 559-585

www.reei.org

REEI, núm. 41, junio 2021

DOI: 10.17103/reei.41.16

BLOCKCHAIN-BASED SMART CONTRACTS AND

CONFLICT RULES FOR

BUSINESS-TO-BUSINESS OPERATIONS

BLOCKCHAIN-BASED SMART CONTRACTS Y NORMAS

DE CONFLICTO PARA OPERACIONES ENTRE

PROFESIONALES

GEORGINA GARRIGA SUAU

Summary: I. INTRODUCTION. II. BLOCKCHAIN-BASED SMART CONTRACTS’

LEGAL IMPLICATIONS. III. THE LAW APPLICABLE TO BLOCKCHAIN-BASED

SMART CONTRACTS. IV. FINAL REMARKS.

ABSTRACT: In recent years, the irruption of blockchain technology has enhanced the impact of smart

contracts in the international trade scenario, although not without raising some problems, particularly, in

terms of Private International Law. This paper, thus, addresses such problems when it comes to determining

the applicable law from a business-to-business perspective leaving aside the particular problems raised by

the conflict-of-law rules oriented to protect the weaker party to a contract. The analysis, however, starts

with a g eneral approach to the two concepts which are the object of this paper: smart contracts and

blockchain technology.

RESUMEN: En los últimos años, la irrupción de la tecnología blockchain ha incrementado la proyección de

los smart contracts en el escenario del comercio internacional, no sin pla ntear algu nos problema s, en

particular, por lo que respecta al Derecho internaciona l privado. Este artículo, por lo tanto, aborda tales

problemas en el ámbito del conflicto de leyes desde una perspectiva business-to-business, dejando de lado

los problemas planteados por las n ormas de conflicto orientadas a proteger a la parte débil del contrato.

El análisis, sin embargo, empieza con un a aproximación g eneral a los dos conceptos objeto de este

artículo: los smart contracts y la tecnología blockchain.

KEYWORDS: Blockchain; Smarts Contracts; Bitcoin; ETHEREUM; Private International Law; Conflict

rules; Rome I Regulation.

PALABRAS CLAVE: Blockchain; Smart contracts; Bitcoin; ETHEREUM; Derecho internacional privado;

normas de conflicto; Reglamento Roma I.

Date of reception: 27 October 2020. Final acceptance: 24 February 2021.

 Profesora Agregrada Serra Húnter de Derecho internacional privado de la Universitat de Barcelona. Email:

ggarriga@ub.edu.

[41] REVISTA ELECTRÓNICA DE ESTUDIOS INTERNACIONALES (2021)

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DOI: 10.17103/reei.41.16

I. INTRODUCTION

When anyone is using a vending machine in order to acquire a given product, let’s say, a

bottle of water, that person is entering into a smart contract, in its most traditional

meaning. Indeed, the costumer acquires the selected product by the mere action of

introducing coins into the vending machine. This example illustrates the automated

execution of the selling obligation as a result of the occurrence of the condition of paying

the price by the buyer. Nick Szabo, the legal scholar and cryptographer that coined the

above-mentioned expression of smart contracts for the first time in 1994

1

, used this

concrete example two years later

2

to illustrate how an automated contractual obligation

works.

Now, in the 21st century, the irruption of distributed digital ledgers

3

has enhanced smart

contracts’ functionalities to such an extent that major industries such as insurance, health,

energy, finance and telecommunications, among others, are utilizing blockchain-based

smart contracts to either transact

4

or develop projects aimed at implementing such a

technology.

5

To introduce just one example, blockchain-based smart contracts can enable

one party to deploy a smart contract on a given blockchain which, in exchange for a

cryptoasset, performs algorithmic investment.

6

Beyond the technological and computational analysis, legal research on blockchain-based

smart contracts has also been conducted in recent years, although most of it has focused

mainly on the compatibility of smart contracts with Contract Law, while little attention

has been paid to smart contracts and Conflict of Laws.

7

The still-emerging concept of

1

SZABO, N., “Smart Contracts”, 1994, available at:

https://www.fon.hum.uva.nl/rob/Courses/InformationInSpeech/CDROM/Literature/LOTwinterschool200

6/szabo.best.vwh.net/smart.contracts.html.

2

SZABO, N., “Smart Contracts: Building Blocks for Digital Markets”, 1996, available at:

https://www.fon.hum.uva.nl/rob/Courses/InformationInSpeech/CDROM/Literature/LOTwinterschool200

6/szabo.best.vwh.net/smart_contracts_2.html.

3

Satoshi Nakamoto, an alias for a person or people behind it, invented the first decentralized public digital

ledger for transacting with Bitcoin, a virtual currency; NAKAMOTO, S., “Bitcoin: Peer-to-Peer Electronic

Cash System”, October 2008, available at: https://bitcoin.org/bitcoin.pdf.

4

For instance, see SMART CONTRACTS ALLIANCE and DELOITTE, “Smart Contracts: 12 Use Case s

for Business & Beyond”, 2016, p. 9, available at: https://digitalchamber.org/wp-

content/uploads/2018/02/Smart-Contracts-12-Use-Cases-for-Business-and-Beyond_Chamber-of-Digital-

Commerce.pdf; EUROPEAN PARLIAMENT, Blockchain for supply chains and international trade.

Report on key features, impacts and policy options, May 2020, available at:

https://www.europarl.europa.eu/RegData/etudes/STUD/2020/641544/EPRS_STU(2020)641544_EN.pdf.

5

CBINSIGHTS, “Banking is Only the Beginning: 58 Big Industries Blockchain Could Transform”, April

2, 2020, available at: https://www.cbinsights.com/research/industries-disrupted-blockchain/; ORTEGA

GIMÉNEZ, A., “Smart Contracts” y Derecho internacional privado, Pamplona, 2019, pp. 37-42.

6

UK JURISDICTION TASKF ORCE, “Legal statemen t on cryptoassets and smart contracts”, November

2009, pp. 33-34, available at: https://technation.io/about-us/lawtech-panel/. Besides, on this type of smart

contract, see also TJONG TJIN TAI, T., “Implemen ting Excuses”, in DIMATTEO, L. A., CANNARSA,

M. and PONCIBÒ, C. (eds.), The Cambridge Handbook of Smart Contracts, Blockchain Technology and

Digital Platforms, Cambridge University Press, Cambridge, 2020 , pp. 82-83 (pp. 80-101).

7

On Smart contracts and conflict of laws, see RÜHL, G., “The Law Applicable to Smart Contracts, or

Much Ado About Nothing”, Blog post, https://www.law.ox.ac.uk/business-law-blog/blog/2019/01/law-