Lloyd's Maritime and Commercial Law Quarterly
Digital assets and applicable law: in defence of the lex situs
Adam Sanitt *
The lex situs, as a long-established concept of English private international law, may hardly seem to need a defence.
But the difficulties in applying existing principles to digital assets, a variety of recent judgments involving digital assets and the current Law Commission consultation on private international law for digital assets have all put this concept in the spotlight and, in some cases, subjected it to criticism. In this article, we redress the balance. We argue that the lex situs is supported by both principle and practicality, and that a vital distinction between observers and actors reveals how the lex situs should be applied to digital assets.
I. INTRODUCTION
The lex situs is the shorthand Latin tag for the law of the place where an asset is situated. By extension, it is also used for the principle that this law should be applied to certain questions concerning that asset, such as proprietary issues.
The lex situs is long established as a concept of English private international law. It has been applied to both existing categories of property: choses in possession and choses in action.1 Digital assets have recently been recognised as property and, although the details are still being developed, are likely to be treated as a new third category distinct from choses in possession and choses in action.2 This immediately raises the question whether,
* Knowledge Director, Norton Rose Fulbright LLP. The author is a member of the Law Commission’s expert advisory panel for the project “Digital assets: which law, which court?”. The author would like to thank the anonymous reviewer for their helpful comments.
The following abbreviations are used:
Dicey, Morris & Collins: Lord Collins of Mapesbury and Jonathan Harris (eds), Dicey, Morris & Collins, The Conflict of Laws, 16th edn (Oxford, 2022);
Law Com No 412: Law Commission, Digital Assets: Final Report, June 2023;
PD6B: Civil Procedure Rules Part 6 Practice Direction 6B—Service out of the jurisdiction;
Watts & Low: P Watts and K Low, “The Case for Cryptoassets as Property”, in S Agnew and M Smith (eds), Law at the Cutting Edge (2024).
1. See Dicey, Morris & Collins, [24R.068] (Rule 140) (immovables); [25R.001] (Rule 141) and [25R.020] (Rule 142) (tangible movables); [23R.023] (Rule 136) and [25R.057] (Rule 143) (intangibles).
2. We use “digital assets” as an umbrella term but avoid trying to give a precise definition. We follow the same nomenclature as Law Com No 412 and the Law Commission’s proposed legislation contained in “Digital assets as personal property: Short consultation on draft clauses” (February 2024). A wider approach is suggested in the UNIDROIT Principles on Digital Assets and Private Law, Art.5 (UNIDROIT 2023 Study LXXII – WG8 – Doc 6) that may include, for instance, entities such as password-protected Word files. The discussion here is centred around a narrower conception of digital assets—the paradigm example is bitcoin. We also avoid giving a description of the technology underlying digital assets, except for aspects that are relevant to the discussion. Explanations are available, for example, in C Kerrigan (ed), Crypto and Digital Assets Law and Regulation (London, 2023) and S Green and A Sanitt, “Smart Contracts”, in PS Davies and M Raczynska (eds), Contents of Commercial Contracts (London, 2020). English cases where digital assets have been recognised as property include AA v Persons Unknown, Re Bitcoin [2019] EWHC 3556 (Comm); [2020] Lloyd’s Rep FC 127; [2020] 4 WLR 35; LMN v Bitflyer Holdings Inc [2022] EWHC 2954 (Comm); Osbourne v Persons Unknown [2023] EWHC 39 (KB) and [2023] EWHC 340 (KB); Tulip Trading Ltd v Van der Laan [2023] EWCA Civ 83; [2023] 4 WLR 16; and Piroozzadeh v Persons Unknown [2023] EWHC 1024 (Ch). See also UK Jurisdiction Taskforce, Legal statement on cryptoassets and smart contracts (November 2019).
Digital assets and applicable law
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