As part of 2020-2022 Triennial Work Programme, a UNIDROIT Working Group has been established with the objective to develop a future legal instrument containing principles and legislative guidance in the area of private law and digital assets.
The preparation of a guidance document on Digital Assets and Private Law is expected to take place over four in-person sessions of the Working Group in 2020-2021 and to be adopted by early 2022.
In 2015, UNIDROIT received a proposal from the Ministry of Justice of Hungary suggesting the development of model laws in the domain of “business informatics”. This was followed by a joint proposal from the Ministry of Industry and Trade of the Czech Republic in 2016 and 2018, suggesting that UNIDROIT include topics relating to the distributed ledger technology (including blockchain) and inheritance of digital properties in the 2020-2022 Work Programme.
A similar proposal relating to the legal aspects of smart contracts and artificial intelligence was also presented to UNCITRAL, and it was decided for both organisations to explore these domains and identify specific areas in which work could be undertaken. To this end, UNCITRAL and UNIDROIT organised two joint workshops, in May 2019 and March 2020, respectively. The UNIDROIT General Assembly, at its 78th session in December 2019, approved the inclusion of a project in the area of Artificial Intelligence, Smart Contracts and Distributed Ledger Technology (DLT) in the UNIDROIT Work Programme for the 2020-2022 triennium at a medium priority. Following the mandate received, the Secretariat produced a more refined scope of the project and presented the proposal focusing on Digital Assets and Private Law.
At its 99th session in September 2020, the UNIDROIT Governing Council approved the project for the 2020-2022 Triennial Work Programme as a high priority project.
Broadly, the Project aims to provide legislative guidance and to develop principles relating to the legal nature, transfer and use of digital assets. This would include a legal taxonomy of digital assets and an analysis focusing on proprietary interests while considering specific issues arising in various contexts, such as secured transactions, applicable law in cross-border transactions, insolvency, and the legal position of intermediaries. The approach to be followed would be neutral, seeking to accommodate diverse types of assets and technologies, along with various legal cultures. The principles identified would embody best practices and international standards and enable jurisdictions to take a common approach to legal issues arising from the transfer and use of digital assets.
Further refinements of the scope will be considered by the members of the Working Group for the Project.
The work on Digital Assets and Private Law will also seek to create synergies with other UNIDROIT projects and existing instruments, as well as carefully coordinating with UNCITRAL’s work in this field, especially in developing a taxonomy of digital assets.
In terms of the relationship with existing UNIDROIT instruments, important aspects envisaged in the Digital Assets and Private Law Project concern, amongst others, the legal analysis of holding , transfer, and the taking of security over digital assets, issues relating to the provision of digital asset custody services, and issues relating to the insolvency of the custodian of digital assets. These items naturally link with the Institute’s work in capital markets and, more precisely, in the area of intermediated securities, providing crucial connections with existing instruments such as the UNIDROIT Convention on Substantive Rules for Intermediated Securities (2013) and the UNIDROIT Legislative Guide on Intermediated Securities (2017).
Regarding synergies with other projects of the current Work Programme, there is a natural fit with the Best Practices of Effective Enforcement Project, which will undertake the analysis of the impact of new technologies on enforcement as one of its main objectives. This constitutes a natural opportunity for cross-fertilisation between the two projects, and, to this end, a number of experts involved in the Working Group on the Digital Assets Project have already been contacted to help identify concrete examples of the application of new technologies in the context of enforcement. Additionally, a workshop organised on 21 September 2020 on Enforcement featured a panel on the impact of new technologies on enforcement with presentations delivered on a taxonomy of technological applications in enforcement proceedings, smart contracts and enforcement, and enforcement and digital assets.
Another area which presents an opportunity for cross-cutting work is the joint UNIDROIT – UNCITRAL project concerning a Model Law on Warehouse Receipts. There is a direct relationship with this project which examines the issuance and transfer of electronic warehouse receipts for goods stored in warehouses. In this connection, one of the categories of digital assets to be examined in the Digital Assets Project concerns digital tokens which are linked to an external, non-digital asset. By fostering exchanges between the two Working Groups, the legal analysis undertaken in the context of both projects would be enriched. Moreover, should the work in the project to draft a Model Law on Factoring cover receivables issued in the form of digital assets, the cross-fertilisation between both projects would also bring about an important benefit.
Additionally, this project also presents synergies with a project on Best Practices in the Field of Electronic Registry Design and Operation which is run by the Cape Town Convention Academic Project, in partnership with the UNIDROIT Foundation, Aviareto, and the Aviation Working Group. This project is developing a best practice guide for electronic registries, focused on collateral registries, which may be an important element of a system of digital assets, particularly when used as collateral.
Exploratory Working Group and Workshop
On the basis of feedback received from the Governing Council, and with a mandate to do so, the Secretariat set up an Exploratory Working Group, chaired by Professor Hideki Kanda. The Group held five meetings between July and September 2020 and prepared a Preliminary Issues Paper which served as the basis of the Issues Paper which the formally constituted Working Group for this project would consider.
The UNIDROIT Secretariat, with the assistance of the Exploratory Working Group, organised an Exploratory Workshop on Digital Assets and Private Law which was held on 17 and 18 September 2020 in a hybrid manner, prior to the second meeting of the Governing Council at its 99th session. The Exploratory Workshop presented an overview of the issues identified by the Exploratory Working Group and sought input from experts. Its outcomes contributed towards the final Issues Paper prepared for the first meeting of the full Working Group for this project which was held on 17-19 November 2020.
The Digital Assets and Private Law Working Group
As consistent with the Institute’s established working methodology, a Working Group has been established, composed of international legal experts and observers representing different legal systems with expertise in a number of relevant fields such as property law, secured transactions and digital technology.
The Digital Assets and Private Law Working Group is composed of:
In addition, several international, regional and private organisations with interdisciplinary expertise in the field of digital assets and private law have been, or may be, invited to participate as observers in the Working Group, with the objective to assist in both the adoption and the implementation of the guidance document once it has been adopted:
Finally, UNIDROIT may also invite a number of industry associations to participate as observers in the Working Group to ensure that the guidance document will address the private sector’s needs. The latter will also assist in promoting the implementation and use of the guidance document. The following private sector association has been invited to participate as an observer in the Working Group, but more may be invited:
The International Swaps and Derivatives Association (ISDA)
In addition to the ordinary Working Group, a Steering Committee composed of governmental and technical experts will be observing and assisting the activities of the Working Group.
1st Working Group Meeting
The first meeting of the Working Group took place in a hybrid manner on 17 – 19 November 2020.
2nd Working Group Meeting
The second meeting of the Working Group took place in a hybrid manner on 16 – 18 March 2021.
3rd Working Group Meeting
The third meeting of the Working Group took place in a hybrid manner on 30 June – 2 July 2021.
4th Working Group Meeting
The fourth meeting of the Working Group took place in a hybrid manner on 2 – 4 November 2021.
5th Working Group Meeting
The fifth meeting of the Working Group will take place in a hybrid manner on 7 – 9 March 2022.