The webinar was opened by ELI President Pascal Pichonnaz (Professor, University of Fribourg), who pointed out that the estimations for the global blockchain technology market size by 2030 lie at around EUR 1.46 trillion in comparison to the pharmaceutical industry, which is estimated at EUR 1.25 trillion by the same period. This shows the importance of the ELI Principles, which might help to address important unanswered questions in this area. The pre-copyedited and pre-formatted version of the Principles is available here.
Sjef van Erp (Emeritus Professor of Civil Law and European Private Law at Maastricht University, Project’s Chair) and Martin Hanzl (Attorney-at-Law and Head of New Technologies at EY Law Austria, Project’s Co-Reporter) went on to briefly present the ELI Principles, adding that they could be a good basis for a project on the regulation of Non-Fungible tokens and that the Uniform Law Commission has begun a project on the tokenisation of real estates. Hanzl pointed out that the aim of the Principles was to give a guidance on how to deal with this phenomena from a legal, but also practical point of view. The Principles draw a distinction between private and public blockchain as well as smart legal contracts (a legally binding declaration of will, such as an offer or acceptance or constitute a legal agreement itself; or merged with the legal agreement and therefore exists simultaneously both on-chain and off-chain) and transacting smart contracts (mere code and no legal agreement exists; or a tool to execute a legal agreement; the legal agreement exists off-chain), to reflect the variety of situations in which such technology could be used. Van Erp focused on the Principles dealing with consumer protection, emphasising the need for weaker parties to be given additional protection in this context. The ELI Principles therefore draw on solutions provided for in the EU consumer acquis and the regulatory framework on financial instruments. The Principles also introduce a duty to (re-)code, ie a duty to include the right of reflection and the right of withdrawal into a smart contract.
Lukas Repa (Senior Policy Officer, Digital Markets (Economic relationship, technology, interoperability, and safety) (CNECT.F.3), European Commission) congratulated ELI for the Principles and pointed out that the ELI Principles effectively address some of the questions the Commission had considered . Among other things, he welcomed the helpful distinction between smart legal contracts and transacting smart contracts as well as noted, with great interest, the suggestion of a duty to re-code. He explained that the Commission looked into the question whether civil law needs to be adapted in order to allow software to assume the status of a legally enforceable contract. After careful analysis, it concluded that it was not necessary to take immediate action and that a case-by-case assessment would be preferable as current rules are sufficiently technology neutral, in a similar vein to ELI’s Principles, and are clear for judges to interpret. He added that the Principles on consumer protection make common sense, as there is no reason why laws should derogate from compulsory consumer protection standards in Europe simply because there is an element of technology in the picture. He provided a brief regulatory update of developments at the European Commission, pointing out relevant aspects from the Markets in Crypto-Assets (MiCA) Regulation, eIDAS Regulation and the proposed Data Act, in particular referring to the importance of the kill switch under art 30 of the Data Act. Repa felt that the kill switch is probably one key missing provision in the Principles to cover incidences of hacking that harm the consumer for example.
Tamara Rubey (Head of Legal at Coinpanion) emphasised that the ELI Principles provide much needed guidance for legal practice and congratulated the team for this achievement. She elaborated further on the legal nature of smart contracts and legally binding declarations they can trigger. She fully supported ELI’s focus on consumer protection. She further discussed the solutions provided for in Principle 17 (Duty to Code Cooling-Off (Right of Reflection or Right of Withdrawal)) with the speakers, who pointed out the need to update a smart contract whenever the law changes and ultimately, if needed, to use the kill switch function.
During the Q&A session, participants discussed how fraud can be combated in blockchain transactions, whether the ELI Principles should also be applied to transacting smart contracts and whether general terms and conditions need to be coded into smart contracts.
Martin Hanzl’s and Sjef van Erp’s presentation is available here and the webinar recording is available below.
