UNCITRAL

UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW

Modernizing International Trade Law
to Support Innovation andSustainable Development
Proceedings of the Congress of
the United Nations Commission
on International Trade Law
Vienna, 4-6 July 2017
Volume 4: Papers presented at the Congress

UNITED NATIONS

Further information may be obtained from:
UNCITRAL secretariat, Vienna International Centre,
P.O. Box 500, 1400 Vienna, Austria
Telephone: (+43-1) 26060-4060
Internet: www.uncitral.org

Telefax: (+43-1) 26060-5813
E-mail: uncitral@uncitral.org

UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW

Modernizing International Trade Law
to Support Innovation andSustainable Development
Proceedings of the Congress of
the United Nations Commission
on International Trade Law
Vienna, 4-6 July 2017
Volume 4: Papers presented at the Congress

UNITED NATIONSVienna, 2017© United Nations, November 2017. All rights reserved.
The designations employed and the presentation of material in this publication do not imply
the expression of any opinion whatsoever on the part of the Secretariat of the United Nations
concerning the legal status of any country, territory, city or area, or of its authorities, or­concerning the delimitation of its frontiers or boundaries.
The views expressed in this publication are the authors’ own and do not necessarily reflect
those of the United Nations, UNCITRAL or its Secretariat. All references and links to sources
are the responsibility of the authors. The contributions are reproduced with ­permission of
the authors.
Publishing production: English, Publishing and Library Section, United Nations Office at
Vienna.

Contents
Session 1. Qualitative and quantitative benefits in the use of Model Laws . . . . . . . 1
The impact of UNCITRAL on Foreign Direct Investment .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 1Andrew Myburgh, World Bank
Jordi Paniagua, University of Valencia, Spain
Model Laws as Instruments for Harmonization and Modernization .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 10
Reinmar Wolff, University of Marburg, Germany
Harmonization of National Legislation through Model Laws: From the United Nations
Commission on International Trade Law to the League of Arab States and the Gulf
Cooperation Council.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 22
Mohamed Y. Mattar, Qatar University College of Law, Qatar

Session 2. Opportunities and challenges in the use of UNCITRAL models. . . . .  30
International Insolvency Law’s Cross-Roads and the New Modularity .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 30
John Pottow, University of Michigan Law School, United States of America
Investment Law and Climate Disputes: The Role of the UNCITRAL in Powering
Sustainable Development . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 32
Fernando Dias Simões, Faculty of Law of the University of Macau, Macau SAR,
People’s Republic of China
The Reduction of the Legal Obstacles Faced by MSMEs in the Footsteps of the Previous
Attempts at Harmonizing Company Law: Will UNCITRAL Reinvent the Role ofHarmonization in Company Law? .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 41
Corrado Malberti, University of Trento, Italy
Problems on harmonization and unification of international commercial law.  .  .  .  .  .  .  .  .  .  .  . 50
Ana Teresa de Abreu Coutinho Boscolo, University of São Paulo, Brazil

Session 4. Integrated systems to support cross-border trade. . . . . . . . . . . . . . . . . 66
Towards a ‘digital fitness check’ for existing legal instruments .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 66
Christiane C. Wendehorst, University of Vienna and European Law Institute, Vienna,
Austria
Ownership of data and the numerus clausus of legal objects .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 69
Sjef van Erp, Maastricht University, The Netherlands; European Law Institute, Vienna,
Austria
Implications of the Blockchain Technology for the UNCITRAL Works .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 81
Koji Takahashi, Doshisha University Law School, Japan
Lost and found in smart contract translation — considerations in transitioning
to automation in legal architecture . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 95
Scott Farrell, Heidi Machin and Roslyn Hinchliffe, King & Wood Mallesons, Australiaiii

Implications of the Blockchain Technology for the UNCITRAL Works
Koji Takahashi, Doshisha University Law School, Japan ※1.

Overview

The blockchain technology is an algorithm which was invented to create the Bitcoin cryptocurrency
around 2009. Its significance lies in the fact that it has made it possible for a consensus to be reached (at apractical level) about the evolution of data on an open online network. It thus enables the synchronisationof distributed ledgers without the involvement of a trusted intermediary. For this reason, the blockchain
technology is often called “the distributed ledger technology” and helps enhance the security and integrityof data. But the blockchain technology is not just about creating ledgers. It also makes it possible to trade
tokens online on a P2P (peer-to-peer) basis and hold them without the involvement of intermediaries. The
tokens are either cryptocurrency units of self-anchored value or asset-backed tokens, i.e. tokens for which
there exists the underlying asset they represent. While the blockchain technology is capable of a myriad of
applications, its potential is greatest in the areas where disintermediated P2P transactions can be madepossible.
While the Bitcoin’s blockchain is public in the sense that it is a platform open to all who wishes to use
it, there have also been many initiatives to create private blockchain platforms: either consortium type or
fully private type. In common with public blockchains, they generate append-only distributed ledgers via achain of blocks. However, unlike public blockchains, they are not open. Thus, consortium blockchains area member-only platform where there exists an administrator who grants permissions to one group of
members to make transactions and another (which may overlap with the former) to do the block validation.
In common with public blockchains, however, they dispense with a central registry and operate instead withsynchronised distributed ledgers. Accordingly, both public and consortium blockchains fall within the legal
analysis of the present article, though which particular legal issues arise will depend on the precise
configuration of the particular blockchain such as whether or not it is powered by tokens.1 Fully private
blockchains, on the other hand, merely represent the replacement by the adopting organization of its central
database with distributed ledgers. Since it is a purely internal matter of the single organization which adopts
it, fully private blockchains do not fall within the present analysis except for the issue to be discussed at
Ch. 0 below.
In the first half of this article, we will examine the existing UNCITRAL works to see what legal issues
arising from the use of the blockchain technology may be resolved under such works. In the second half,
we will turn to examine a practically significant problem raised by the technology which calls for a globallyunified solution but is untouched by the existing works of UNCITRAL or any other internationalorganization.
2.

Under the Model Law on Electronic Commerce (1996) (EC Model Law), the Model Law on Electronic
Signatures (2001) (ES Model Law) and the Convention on the Use of Electronic Communications inInternational Contracts (2005) (EC Convention)

One of the principles guiding UNCITRAL in its works in electronic commerce is the principle oftechnology neutrality or technological neutrality, which means that the law should neither require nor
assume the use of a particular technology for communicating or storing information electronically.2 The__________________※

1

2

I wish to record my gratitude to the UNCITRAL Secretariat for hosting me as a visiting scholar while I wasundertaking research on the present topic. It greatly facilitated my understanding of the working of UNCITRAL.
Depending on the consensus algorithm adopted, a private blockchain does not require tokens of self -anchoredvalue for incentivising the block validation. Even on such a blockchain, it is possible to issue and circulate asset based tokens, i.e. tokens for which there exists the underlying asset they represent.
See the Guide to Enactment of the Electronic Signatures Model Law (2001) para. 5; the preamble of theElectronic Communications Convention. In the context of the EC Model law, the expression “media-neutral” isused to convey the same idea (See the Guide to Enactment of the Electronic Commerce Model Law (1996) para.
24). Only later, has that expression come to be understood as referring more narrowly to non -discrimination81

principle helps ensure that the law is able to accommodate future technological developments. Thus, theblockchain technology, though not yet invented when those three instruments were created, is not excluded
from their scope of application.
It follows that under the EC Model law, admissibility in evidence or other legal effect may not bedenied to information solely on the ground that it is in the form of a data message stored in a blockchain 3(See Articles 5 and 9). In the context of contracts, an offer and the acceptance of an offer may be expressedby means of data messages stored on a blockchain (See Article 11, as affirmed by Article 8 of the EC
Convention). The performance of contractual obligations are also subject to the EC Model Law and the EC
Convention.4 Article 12 of the EC Convention only mentions the formation of contract but States may,where appropriate under their legal systems, extend the principle by providing that the performance of acontract by an automated system may not be denied effect on the sole ground that no natural person
intervened in each of the individual actions carried out by the automated system. This would improve clarity
with respect to a so-called “smart contract.”5
The principle of technological neutrality does not mean that any technology can create a data message
which satisfies the paper-based requirements such as those of writing and a signature. Only the technology
capable of fulfilling the purposes and functions of the paper-based requirements can create a data message
which is deemed to meet those requirements. This is called the principle of functional equivalence, anotherprinciple underlying the UNCITRAL works in electronic commerce. Thus, the EC Model law sets out theconditions which a data message must meet to fulfil the purposes and functions of the paper-based
requirements of writing and a signature (Articles 6 and 7). The ES Model Law elaborates on the conditions
for the signature requirement. A data message stored in a blockchain will be deemed to meet therequirements of writing and a signature if it satisfies the respective conditions. The EC Model law also
provides that there must exist a reliable assurance as to the integrity of information contained in a data
message before the information is deemed to satisfy the paper-based requirement that it be presented in its
original form (Article 8). The blockchain technology is particularly apt to provide a reliable assurance as tothe integrity of information since it is tamper resistant.
3.

Under the Model Law on Electronic Transferable Records (2017) (ETR Model Law) and theRotterdam Rules (2008)

Whereas the three instruments examined above deal with data messages, the ETR Model Law deals
with electronic transferable records (Article 1(1)). It sets out the conditions which must be met for anelectronic record to be treated as a transferable document (Article 10). The latter is a document that entitles
the holder to claim the performance of the obligation indicated in the document and to transfer the right toperformance by means of the transfer of that document (Article 2). Bills of lading and warehouse receipts,
for example, are covered. Electronic bills of lading are also covered by the Rotterdam Rules (United Nations
Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea), which calls
them “negotiable electronic transport records” (See Article 1(15)).
It should, however, be noted that the ETR Model Law is not applicable to cryptocurrencies such as the
Bitcoin because a cryptocurrency holder has no right to claim any performance from anybody.
Cryptocurrencies have self-anchored value because the participants in the underlying blockchain system
are willing to accept them as a means of payment.
__________________

3

4
5

between paper and electronic media (See the Guide to Enactment of the Electronic Signatures Model Law (2001)
para. 5).
It is possible to embed metadata in, for example, the Bitcoin’s blockchain, which allows the extra information to
be added to the Bitcoin transactions.
Para. 81 of the Guide to Enactment of the Model Law; Article 1(1) of the Convention.
The expression “smart contract” is a misnomer. It is in fact a computer code stored on a blockchain, triggered bytransactions on it and reads and writes data in it: Gideon Greenspan, “Beware the impossible smart contract”(2016) (http://www.multichain.com/blog/2016/04/beware-impossible-smart-contract/). The “smart contract” will
give rise to a host of new legal issues but its relevance to a contract only lies in the fact that it can automate theonline execution of the part of a contract which says “if A happens, then do B.”82

It should further be noted that an electronic equivalent of securities (such as shares and bonds) is
outside the scope of the ETR Model Law (Article 1(3)). It follows that blockchain-based tokens representing
securities (cryptosecurities) cannot be deemed to be securities under the ETR Model Law. A separate
legislation would be needed to set out conditions for treating them as legally equivalents.
Both the ETR Model Law and the Rotterdam Rules adhere to the principle of technology neutrality. Thus,
the draft explanatory notes for the ETR Model Law explain that reference in the Model Law to electronictransferable record management systems does not imply the existence of a system administrator or otherform of centralized control.6
Both the ETR Model Law and the Rotterdam Rules also adhere to the principle of functional
equivalence. They set out the conditions which electronic records must satisfy to fulfil the purposes andfunctions of the requirements relevant to transferable documents. Among such requirements, mostimportant is the guarantee of singularity. Since a transferable document embodies the right to claim theperformance of an obligation from another, it is essential to prevent multiple claims from being made on
one and the same obligation. To this end, the law generally requires that there be only one original copy (orone set of original copies)7 of a transferable document in circulation. In an electronic environment,
providing an absolute guarantee of non-replicability may not be technically feasible since systems may
retain copies of data. The ETR Model Law seeks to prevent multiple claims by requiring the use of a reliable
method to identify an electronic record as the electronic transferable record and establish an exclusive
control of it (Articles 10(1)(b)(i)(ii) and 11(1)(a)).8 The Rotterdam Rules, too, treat the exclusive control ofan electronic transport record as functionally equivalent to the possession of a transport document (Article
8(b)). Traditionally, the administrator of an electronic registry has been entrusted to ensure that the relevant
electronic records are subject to the exclusive control of their holders. The blockchain technology is now
capable of replacing such an administrator with an algorithm which guarantees that there is a single true
version of distributed ledgers and ensures that the tokens recorded therein are subject to the exclusive
control of their holders, i.e. the holders of the private keys.9 There certainly are possibilities that a private
key is disclosed intentionally or accidentally to two or more persons. More than one person would thenhave control over the cryptocurrency units held in the corresponding address. That would not, however,prevent the control from being characterised as exclusive since those persons have control to the exclusionof all others.10
The reliability of the above-mentioned methods will be assessed by adjudicators on an ex post (i.e.
after the occurrence of a dispute) basis. It would, however, be unfortunate if there were no foreseeability as
to which methods would pass the reliability test since the use of such methods would then be deterred. A
thought should, therefore, be given to the possibility of compiling a list of reliable methods on an ex ante
basis. Such a list would need to be reviewed from time to time because neither the configuration of a central
registry nor the algorithm of a blockchain is permanently fixed.
The ETR Model Law also provides that the requirement of a signature may be met by an electronictransferable record only if a reliable method is used to identify that person (Article 9 on signature). The
draft explanatory notes acknowledge that certain electronic transferable records management systems, suchas those based on distributed ledgers, may identify a signatory by referring to a pseudonym rather than areal name.11 The notes suggest that an identification by a pseudonym and the possibility of linking it to areal name, if need be, would satisfy the requirement to identify a signatory.12 A remaining question is when__________________
6
7
8
9

10

11

12

Para. 167 of A/CN.9/920 (2017).
It is an age-old practice to issue and circulate multiple copies of an original bill of lading.
Para. 65 of the draft Explanatory Notes (A/CN.9/920 (2017)).
For details, see Koji Takahashi, “Blockchain Technology and Electronic Bills of Lading” (2016) 22 Journal ofInternational Maritime Law 202.
The draft Explanatory Notes, supra note 8, also states at para. 95 that the reference to the person in control does
not exclude the possibility of having more than one person exercising control.
Para. 60 of A/CN.9/920 (2017). This interpretation is compatible with the understanding expressed in the Guide
to Enactment for the Model Law on Electronic Signatures (2001) which states that the concept of identification
may rely on other characteristics than a name (para. 117).
Para. 60 of A/CN.9/920 (2017). The same interpretation may be given to the notion of “identification” of the83

it is sufficient to rely solely on a pseudonym and when it is necessary to have the possibility of linking a
pseudonym to a real name. Signatures have a range of purposes.13 To take signatures for endorsements as
an example, where it is sufficient for signatures to establish that endorsements are back to back as underbills of lading, pseudonyms would be just as good as real names. Where, on the other hand, it is possible to
make a recourse against endorsees as under bills of exchange or promissory notes,14 it will be necessary tohave the possibility of linking pseudonyms to real names. The explanatory notes further suggest that linking
of a pseudonym to a real name may be based on factual elements to be found outside distributed ledger
systems.15 This stands to reason since sensitive information is not supposed to be stored on open ledgers.
4.

Under the Model Law on Secured Transactions (2016) (ST Model Law)

Another existing work of the UNCITRAL which has relevance to the blockchain technology is the ST
Model Law. Any asset having market value will generate demand for use as a collateral. In the light of thecategorization of assets adopted by the ST Model Law, it will be convenient to classify blockchain-related
assets into four groups: receivables denominated in a cryptocurrency, the units of cryptocurrencies,
blockchain-based tokens representing negotiable documents, and blockchain-based tokens representing
securities. After examining the creation and effects of security rights in those assets under the ST Model
Law, we will turn our attention to the question whether a blockchain-based distributed-ledger platform may
serve as a Registry within the meaning of the ST Model Law. The latter question can arise irrespective ofwhether the asset itself in which security rights are created is related to the blockchain.
(a) Receivables denominated in a cryptocurrency16
The ST Model Law is applicable to security rights in “movable assets” (Article 1(1)). The words“movable asset” are defined broadly as a tangible or intangible asset, other than immovable property(Article 2(u)). Receivables are thus a “movable asset.” The ST Model Law contains a number of special
rules for security rights in receivables (e.g. Article on contractual limitations on the creation of security
rights; Articles 61 to 67 on the rights and obligations of third-party obligors). Such rules as well as thegeneral rules contained in the ST Model Law would also be applicable to a receivable denominated in a
cryptocurrency.
A right to payment of funds credited to a bank account is a receivable in the ordinary use of the word.
But it is excluded from the definition of “receivable” under the ST Model Law (Article 2(dd)) as the latter
contains a special set of rules for bank deposits (Article 25 on effectiveness against third parties and Article
47 on priority). If any bank should (by clearing regulatory hurdles) accept deposits in a cryptocurrency,
those rules would be applicable to them. Are they also applicable to cryptocurrency units deposited with an
online wallet provider? The answer depends on whether the provider falls within the expression “authorized
deposit taking institution” within the meaning of Article 2(c) which defines the expression “bank account.”
If it is possible to give a broad and non-technical interpretation to those two expressions,17 an online wallet
provider may qualify to be an “authorized deposit taking institution” where it is authorized by law to receive
the deposit of cryptocurrencies.

__________________

13
14

15
16

17

person in exclusive control of an electronic transferable record, a requirement which must be met to establish
functional equivalence to the possession of a transferable document (draft Article 11(1) on control).
See the Guide to Enactment for the Model Law on Electronic Signatures (2001) para. 29.
See Articles 15 and 77 of the Convention Providing a Uniform Law For Bills of Exc hange and Promissory Notes(1930).
Para. 60 of A/CN.9/920 (2017).
I wish to record my gratitude to Marek Dubovec for his helpful comments on this and next sections. Anyremaining misconceptions are mine.
The enacting State may alternatively wish to consider, as suggested by the draft Guide to Enactment of the Model
Law (A/CN.9/WG.VI/WP.73, para. 39) as a possibility, replacing the term “authorized deposit-taking institution”
with a generic term broad enough to include any institution authorized to receive deposits.

84

(b) Units of cryptocurrencies
We are here concerned with the creation and effects under the ST Model Law of security rights incryptocurrency units themselves rather than in a receivable denominated in a cryptocurrency. The practiceof granting a consensual lien on cryptocurrency units already exists in financed purchases of them on an
exchange.18
The ST Model Law provides that any type of movable asset may be encumbered (Article 8(a)) by asecurity agreement. Cryptocurrency units are a “movable asset,” defined broadly by the ST Model Law as
a tangible or intangible asset other than immovable property (Article 2(u)).
In order to create a security right under the ST Model Law, the grantor must have power to do so but
does not have to be the owner of the encumbered asset (Article 6 (1)). Indeed, it will not be necessary forthe asset to qualify for an object of ownership19 since security rights need only to capture the value of theasset.
The encumbered asset must be described in the security agreement “in a manner that reasonably allows
their identification” (Article 9(1)). This standard is met by a broad description which indicates that theencumbered assets consist of all the grantor’s movable assets within a generic category (Article 9(2)).20 It
follows that a general description “all cryptocurrency” would suffice.
Where a security right is created in cryptocurrency units, the next question which arises is how tomake it effective against third parties. One possibility is the registration of a notice with respect to thesecurity right in the Registry (Article 18(1)). Another possibility, the possession of the encumbered asset,
is only available to tangible assets under the ST Model Law (Article 18(2)). The ST Model Law being
merely a model for legislation, the enacting State may wish to make an exception for cryptocurrency units
by equating the possession of a private key for cryptocurrency units to the possession of a tangible asset.
The rationale for Article 18(2) is that the transfer of possession of the encumbered tangible asset eliminates
the risk that third parties will be misled into thinking that the grantor holds unencumbered title to the asset.21
The same risk may be avoided where encumbered cryptocurrency units have been transferred to an address
for which the secured creditor possesses the private key.22
Under the ST Model Law, the word “money” is defined as currency authorized as legal tender by aState (Article 2(t)). A cryptocurrency would be capable of meeting this definition if any State authorized it
as its legal tender.23 However, “money” is supposed to be a tangible asset under the ST Model Law (SeeArticle 2(ll)).24 Consequently, the special rules for preserving negotiability of “money” contained in the ST
Model Law (Article 48 on priority) are not applicable to cryptocurrencies. It follows that where
cryptocurrency units are subject to a blanket security right covering all of the granter’s movable assets25
which has been made effective against third parties by registration,26 the transferee would acquire them__________________
18
19

20

21
22

23

24
25
26

See e.g. para. 3 of the terms of service of Bitfinex.com (https://www.bitfinex.com/terms).
As examined infra at ch. 0, whether cryptocurrency units qualify for an object of ownership would currently be
an open question under most legal systems.
See also the UNCITRAL Legislative Guide on Secured Transactions (2007) chap. II, para. 58 (p. 79), whichnotes that many legal systems allow encumbered assets to be described in general terms, acknowledging thatspecific identification of individual items may not be practical or even possible for certain assets.
See ibid., chap. III, para. 47 (p. 114).
See ibid., chap. I, paras. 80 and 81 (p. 50), where it is observed that in some States, control over intangible assets
is treated as a notional possession of them since it achieves the ends comparable to those at tained by thepossession of tangible assets.
One possibility is to authorise an existing cryptocurrency as a legal tender. There is also the idea of issuing themoney of central bank on a blockchain ledger, which has been considered in a number of coun tries. The latter
type of money should, however, be seen as receivables against the central bank denominated in a cryptocurrency
and accordingly would fall within the foregoing analysis at Ch. 0.
As seen above, a bank deposit is subject to another set of special rules.
See Article 9(2).
See Article 18(1) as well as the Model Registry Provisions Article 11(2).

85subject to the security right (See Article 34(1) on priority). This is so even if the transferee has no knowledgeof the security right. It has been pointed out that a similar result arises under Article 9 of the U.S. Uniform
Commercial Code, which has been considered problematic.27 The ST Model Law would need to beamended if it is thought that cryptocurrencies ought to benefit from rules similar to those for money. In themeantime, the ST Model Law being merely a model, the enacting State may wish to devise special rules
for cryptocurrency units to preserve their negotiability.
(c) Blockchain-based tokens representing negotiable documents
The ST Model Law contains a set of special rules for “negotiable documents”28 (e.g. Article 16 on
creation, Article 26 on effectiveness against third parties, Article 49 on priority and Article 85(2) on theapplicable law). But since “negotiable documents” are supposed to be a tangible asset under the ST Model
Law (See Article 2(ll)),29 electronic negotiable documents, including blockchain-based tokens representing
negotiable documents, are not subject to the special rules for “negotiable documents.” They instead fallwithin the concept of “intangible asset”, which is defined as “any movable asset other than a tangible asset”(Article 2(p)). But it is in practice pointless to create a security right in an electronic negotiable document
unless it is extended, by virtue of the applicable law, to the tangible asset covered by the document (Thisindeed is what Article 16 does to “negotiable documents”, i.e. paper documents). Furthermore, as a resultof the non-applicability of Article 49(3) (a provision for preserving the negotiability of “negotiable
documents”30), a problem similar to that outlined above in the context of cryptocurrency units would arise
with respect to electronic negotiable documents.
To avoid those problems, the enacting State may wish to extend the application of the special rules for“negotiable documents” to electronic negotiable documents. The adoption of the ETR Model Law would
have the desired effect so far as the issues are covered by it.31 This is because the ETR Model Law seeks tobridge the divide between the paper world and the electronic world by extending the application of paperbased rules to an electronic record which satisfies the requirements for functional equivalence to thecorresponding “transferable document” as set out in Article 10 of the ETR Model Law (hereafter“qualifying electronic transferable record”). It should be noted that, as examined above, a blockchain-based
token, too, can be a qualifying electronic transferable record. It should also be noted that the notion of“transferable documents” under the ETR Model Law largely overlaps with that of “negotiable documents”
under the ST Model Law. It follows that a security interest created in a qualifying electronic transferable
record would be extended to the tangible asset covered by it by virtue of Article 16 of the ST Model Law.
The requirement of “possession” of a “negotiable document” under Articles 26, 49 and 85(2) under the ST
Model Law would be met by the “exclusive control” (Article 11 of the ETR Model Law) of a qualifying
electronic transferable record. Consequently, Article 49(3) (the provision for preserving the negotiability of“negotiable documents”) would also be applicable to a qualifying electronic transferable record under“exclusive control,” which avoids the problem identified above. But the determination of “the State inwhich the document is located” under Article 85(2) is not assisted by the ETR Model Law since the latter
contains no provision for determining the place in which an electronic negotiable document is deemed to
be located.

__________________
27

28

29

30
31

See
e.g.
Bob
Lawless,“Is
UCC
Article9theAchillesHeelof
Bitcoin?”(http://www.creditslips.org/creditslips/2014/03/is-ucc-article-9-the-achilles-heel-of-bitcoin.html) (2014); JeanneSchroeder, “Bitcoin and the Uniform Commercial Code” (2015-2016) 24 U. Miami Bus. L. Rev. 1.
The Model Law contains no definition of this term. According to the Legislative Guide on Secured Transactions,Introduction, para. 20 (p. 10), it means a document, such as a warehouse receipt or a bill of lading, that embodies
a right to delivery of tangible assets and satisfies the requirements for negotiability under the law governing
negotiable documents.
The Legislative Guide on Secured Transactions, too, was prepared against the background of paper-form
negotiable documents (ibid., p. 11 at fn. 25).
See ibid., ch. V, para. 167 (p. 228).
At its 50 th session (July 2017), the UNCITRAL has decided that the Guide to Enactment of the Model Law on
Secured Transactions should state that States adopting both model laws ought t o consider their relationships,
leaving the States to make their own analysis.

86

(d) Blockchain-based tokens representing securities
Under the ST Model Law, “non-intermediated securities” are securities (i.e. shares and bonds)32 otherthan those credited to a securities account (Article 2(w)). “Securities account” is in turn defined as meaning
an account maintained by an intermediary to which securities may be credited or debited (Article 2(ii)). A
blockchain would make it possible to trade securities on a P2P basis and hold them without the involvementof a trusted intermediary. Blockchain-based tokens representing securities (cryptosecurities) would,
therefore, be “non-intermediated securities.” They are also unrepresented by a “certificate”, which under
the ST Model Law refers only to a tangible document subject to physical possession.33 It follows thatcryptosecurities would fall within the definition of “uncertificated non-intermediated securities” (Article 2(mm)). They would accordingly be subject to special rules for such securities as contained in the ST Model
Law (Article 27 on effectiveness against third parties and Article 51 on priority). Thus, a security right incryptosecurities is made effective against third parties by the conclusion of a control agreement (between
the grantor, the secured creditor and the issuer) (See Article 27) and has priority over a security right in thesame cryptosecurities for which registration is made in the Registry (See Article 51(3)).
(e) Use of a blockchain-based distributed-ledger platform as a Registry for security rights
Under the ST Model Law, the registration of a notice in the Registry renders the security right effective
against third parties (Article 18(1)). Can a distributed-ledger platform serve as a Registry?
The ST Model Law contains in Chapter IV a set of rules called “Model Registry Provisions.” Those
rules envisage the existence of a registrar who administers the Registry (Article 27). Public blockchains are
not administered by any specific person and accordingly would not fit this profile. The administrator of a
private blockchain may, on the other hand, be appointed by the enacting State to be a registrar under
Article 27. Through the power of appointment and dismissal, the enacting State is ultimately in charge of
the Registry’s operation. It would in fact be unlikely for any State to put faith in public blockchains since
they are not controlled by any specific entity. Besides, the consensus algorithm of a public blockchain which
relies on the “longest chain rule” is incompatible with the provisions in Article 13. The former leaves thepossibility that in the event of a fork, records in a chain will be abandoned in favour of those in anotherchain which eventually becomes longer. The latter, on the other hand, makes the registration of a noticeeffective when the information in the notice is entered into the Registry record and provides that the
information must be entered in the order in which each notice is submitted. With a private blockchain, it
should be possible to devise a consensus algorithm compatible with the provisions in Article 13.
Furthermore, blockchain ledgers, which are an append-only log, are perfect to fulfil the requirement that
the Registry must preserve all information contained in the record (Article 29(2)). It follows that distributed
ledgers on a private blockchain platform may serve as a Registry.
5.

Proprietary restitution of blockchain-based tokens

Having examined the existing works of UNCITRAL, we will now turn our attention to a problem
which is untouched by UNCITRAL or any other international organizations. There are a number ofcircumstances which raise the question whether it is possible to obtain the restitution of blockchain-based
tokens by means of proprietary claims. Among the private-law issues arising from the use of the blockchain
technology, uncertainty over the availability of such claims seems to be a problem of particular significance.
It also calls for a globally unified solution.
What follows will illustrate the problem, outline the legal bases of claims which may be made, andidentify the issues involved in such claims. It will then explain why the problem calls for a globally unified
solution and consider what approach should be taken to make a uniform law.

__________________
32
33

See para. 54 of the draft Guide to Enactment (A/CN.9/WG.VI/WP.73).
Ibid., para. 40.

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(a) Illustration of the problem
The pre-existing forms of electronic money, which are often in the shape of pre-paid cards, provide
the holders with credits redeemable from the issuers. Accordingly, most legal problems may be handled
under the law of obligations. By contrast, holding cryptocurrency does not by itself entitle the holder to any
claim against anybody. Accordingly, proprietary issues become more important.
The significance of proprietary issues is most evident where insolvency hits the holder ofcryptocurrency units who, in a variety of circumstances, is under obligation to return the units to anotherperson. That other person may join other creditors in the insolvency proceedings, which would usually yieldto him only a partial recovery. But if he could make a proprietary claim to obtain the restitution of the units,
he would be able to make a full recovery.34 The availability of such a claim is, however, currently unclear.
The problem arises in a number of circumstances such as those described in Cases 1 to 3 below.
Case 1: Theft of cryptocurrency units.
Suppose that cryptocurrency units have been stolen by means of, for example, malware and thentransferred to third parties. The original holder may have a claim in tort for damages covering the valueof the stolen units against the thief or against a mala fide transferee. But it would not lead to a fullrecovery in the case of insolvency of the thief or transferee. If the original holder has a proprietaryclaim for the restitution of the units, he will be able to obtain a full recovery.
Case 2: Mistaken remittance of cryptocurrency units.
Suppose that cryptocurrency units have been mistakenly remitted to a wrong address or in a wrong
quantity. The sender may have a personal claim against the recipient in unjust enrichment for the
restitution of the value of the units. But it would not lead to a full recovery if the recipient has become
insolvent. If the sender has a proprietary claim for the restitution of the units, he will be able to obtaina full recovery.
Case 3: Entrusting of cryptocurrency units to another person.
While the blockchain technology allows cryptocurrency units to be held and traded without the
involvement of intermediaries, the users may opt to entrust ancillary service providers with theircryptocurrency units for reasons of convenience. Thus, instead of holding their cryptocurrency units
themselves, some may use an online wallet, entrusting their units to the wallet provider. Again, manyusers of cryptocurrencies buy and sell them through an online exchange and in the course oftransactions entrust the exchange provider with their cryptocurrency units. These customers would
have a contractual claim for the return of their cryptocurrency units or their value from the provider ofwallet or exchange. But it would not lead to a full recovery if the provider becomes insolvent. If thecustomer has a proprietary claim for the restitution of the units, he will be able to obtain a full recovery.
There is a real case in point. Mt.Gox was once the world’s biggest provider of a Bitcoin exchange. It
became insolvent and entered into winding-up proceedings. Most of the creditors were its former customers
who had entrusted it with bitcoins and/or fiat currencies. One of them filed a suit against the insolvency
representative, seeking a full recovery of the bitcoin units of which, or the value of which, he had acontractual right to return from Mt.Gox. He did so by asserting ownership over them rather than making apersonal contractual claim.35
The proprietary issues also have practical significance outside the context of insolvency. Thus, if
cryptocurrency units have been seized by a creditor of the holder, the person who has a proprietary claim__________________
34

35

It should be noted that for creditors who have no proprietary claim for restitution, there remains the possibilityof obtaining priority over other creditors conferred by a statutory lien.
For the outcome of the case, see infra ch. 0.

88for the restitution of the units would be able to challenge the seizure. Such situations can also arise from anumber of circumstances including those described in Cases 1 to 3 above.
The significance of the proprietary issues extends beyond cryptocurrencies to non-monetary tokens
which may be traded and held on a blockchain, such as those representing securities (cryptosecurities), 36
those for controlling domain names and those used in an ICO (Initial Coin Offering).37 Circumstances
analogous to those described in Cases 1 to 3 above will raise the question whether it is possible to obtain
their restitution by means of proprietary claims.
(b) Legal bases of proprietary claims for restitution
A proprietary restitutionary claim may most obviously be based on ownership. The legal systems
which have inherited the Roman law concept of ownership, dominium, would allow an action to be filed
for rei vindicatio (vindication of property: an owner’s claim against the possessor for the return of theproperty)38 which may be made outside insolvency proceedings. The plaintiff’s claim in the Mt.Gox caseoutlined above falls within this category.
For other legal systems, notably common law systems, rei vindicatio is an alien concept. Thus, in the
English common law, the tort of conversion fills the gap of the missing vindicatio. Although nominallytortious, it has become the remedy to protect the ownership of goods.39 The delivery of the goods may beordered at the discretion of the court,40 which will be exercised where the defendant is insolvent.41
In some legal systems, a proprietary restitutionary claim may alternatively be made on the basis of a
resulting or constructive trust. Where the claimant can show that he has an equitable proprietary interest inproperty that is in the possession of the defendant, the court may declare that the property is held on trust
for the claimant and it will order the defendant to transfer this property in specie to the claimant.42 Many
claims to a resulting or constructive trust are motivated by the principle that property held by the bankrupt
on trust for another person does not form part of the bankrupt’s estate.43 Thus, in Re Goldcorp Exchange
Ltd,44 a dealer in gold became insolvent and its customers sought a declaration that the dealer had heldbullion on trust for them. In another case, Chase Manhattan v. Israel-British Bank,45 a transfer of a dollardenominated bank deposit was made in error and the transferee was subsequently would up. The transferorsought a declaration that the transferee had become a trustee of the paid sum for the transferor. It can be
anticipated that a claim to a resulting or constructive trust will be triggered to obtain the restitution ofblockchain-based tokens in such circumstances as those described in Cases 1 to 3 above.
(c) Issues involved in the claims of different legal bases
Where an ownership-based vindicatio claim is made to seek the restitution of blockchain-based tokens,the first issue which must be addressed is whether such tokens qualify to be an object of ownership. Thus,__________________
36

37

38
39

40
41
42

43
44
45

See e.g. Philipp Paech, “Securities, intermediation and the blockchain: an inevitable choice between liquidity
and legal certainty?” (2016) 21(4) Unif Law Rev 612, 637.
It is a means of raising capital which IT start-ups have begun to use. They issue and sell coins (tokens) on a
blockchain which entitle the holders to receive services and dividends from them. Besides the private -law issues
examined by this article, this method raises regulatory issues: See e.g. the U.S. Securities and Exchange
Commission, “Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The
DAO” (Release No. 81207 / July 25, 2017).
e.g. section 985 of the German BGB (Civil Code).
OBG Ltd v Allan [2007] UKHL 21, para. 308 (House of Lords). See also Andrew Burrows (ed.) English Private
Law (3rd ed., 2013) paras. 17.304 and 17.309 [Donal Nolan and John Davies].
Torts (Interference with Goods) Act 1977, s 3.
See Richard Calnan, Proprietary Rights and Insolvency (2 nd ed., 2016) para. 2.108.
See e.g. Boscawen v Bajwa [1996] 1 WLR 328, 335 (English Court of Appeal); Giumelli v Giumelli (1999) 196
CLR 101 [3] (High Court of Australia).
Andrew Burrows (ed.) English Private Law (3rd ed., 2013) para. 4.152 [William Swadling].
[1995] 1 AC 74 (Privy Council).
[1981] Ch 105 (English High Court).

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in the Mt.Gox case outlined above, the Tokyo District Court dismissed the claim by denying that bitcoin
units could be an object of ownership.46 The court’s reasoning rested on a formal analysis as it relied on theJapanese law concept of “shoyûken,” a concept which signifies ownership but is statutorily limited totangibles as its objects. Some legal systems, like Japanese law, restrict the object of ownership to tangibles
while others extend it to intangibles.47 In the systems which belong to the latter camp, the exact category ofintangibles which qualify as an object of ownership may not be set in stone. In the legal systems whichcurrently restricts the object of ownership to tangibles, whether the law should remain static is anotherquestion. The blockchain-based tokens may compel the legislature and judiciary in each State to consider
de lege ferenda (with a view to the future law) whether their concept of ownership should embrace them.48
A case may be made for treating certain kinds of them as being an object of ownership bydistinguishing them from other digital assets or data on account of, inter alia, their amenability to exclusive
control by the holders.49
The same issue will arise where the restitution of blockchain-based tokens is claimed in tort ofconversion.50 It has been litigated whether the remedy of conversion is available to protect intangibles suchas choses in action,51 information in a database52 and domain names.53 The blockchain-based tokens will bea latest addition to this list.
If blockchain-based tokens, or certain kinds of them, qualify to be an object of ownership, the nextquestion to be addressed is what should be the test for determining the owner. It would accord with theintuition of many users of such tokens to consider that the holder of the private key for the address at which
tokens are held owns them. This intuition presumably stems from the fact that the holder of the private key
has an exclusive control over the tokens. But the rule cannot be as simple. For one thing, there are situations
which require an elaboration of what it means to be the holder of a private key as where the private key has
been intentionally or accidentally disclosed to two or more persons. For another, there may be circumstancesin which it is thought that an ownership-based claim for the restitution of tokens should be allowed against
the present holder. Each of the circumstances described in Cases 1 to 3 above merits consideration in thislight. Thus, the case for allowing such a claim may be considered to be stronger where the holder is a thief(Case 1) or an online wallet provider (Case 3) than in other situations. Such circumstances as described by
Cases 1 and 2 would also raise the questions whether the nemo dat rule (that no one can give a better title
than he himself has) should prevail and when exceptions, if any, should be made.54__________________
46
47

48

49

50

51
52
53
54

The judgment of the Tokyo District Court on 5 August 2015 (2015WLJPCA08058001).
Akkermans classifies German and Dutch laws into the former category, while French law in the latte r (Bram
Akkermans “Property Law” in Jaap Hage & Bram Akkermans (ed.) Introduction to Law (2014) 71, 78). Von Bar
and Drobnig add Greek law to the former camp and the laws of Portugal, Italy, Austria, Belgium, Spain, Sweden,
and Scotland to the latter (Christian von Bar and Ulrich Drobnig, The Interaction of Contract Law and Tort andProperty Law in Europe A Comparative Study (2004) 317).
For academic discussions, see e.g. Shawn Bayern, “Dynamic Common Law and Technological Change: The
Classification of Bitcoin” 71 Wash & Lee L Rev Online (2014) 22, 34; Joshua Fairfield, “BitProperty” 88 S. Cal.
L. Rev. 805 (2015); David Quest, “Taking security over bitcoins and other virtual currency” (2015) 7 JIBFL 401;
Matthew Lavy & Daniel Khoo, “Who Owns Blockchains? An English Legal Analysis”(http://sclbc.zehuti.co.uk/site.aspx?i=ed47875 (2016).
It should be noted by way of contrast that the digital assets of an online game disappear if the provider of thegame erases the data on its server.
Sjef van Erp, “Comparative Property Law” in Mathias Reimann & Reinhard Zimmermann (eds), Oxford
Handbook of Comparative Law (2006) 1044 at 1062, notes that what qualifies as an object of property law is afundamental property law question which is as pressing in the civil law systems as in the common law systems.
The author cites domain names, the right to use a wireless network and emissions quota as examples of possible
new objects.
OBG v Allan [2007] UKHL 21 (House of Lords).
Your Response Limited [2014] EWCA Civ 281 (English Court of Appeal).
Kremen v Cohen, 337 F 3d 1024 (2003) (U.S. Court of Appeals for the Ninth Circuit).
For a consideration under English law, see Joanna Perkins and Jennifer Enwezor, “The legal aspect of virtual
currencies” [2016] 10 JIBFL 569.

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Where a proprietary claim arising from a resulting or constructive trust is made to seek the restitutionof blockchain-based tokens, it is not necessary to consider whether such tokens can be an object ofownership in the sense of a source of vindiatio claim. Intangible assets are capable of being trust property55
and so will be blockchain-based tokens. But another issue, no less difficult, will arise: under whatcircumstances the holder of blockchain-based tokens is deemed to hold them on trust for the claimant.
Whether the claim for restitution is based on ownership or arises from a resulting or constructive trust,it gives rise to the additional question, namely in what way the tokens must be identified. If specificidentification were required, it would have to be possible to technically trace the tokens of which restitution
is sought. The transactions of blockchain-based tokens are traceable since they are recorded immutably inthe blockchain. This should make the task of identification of blockchain-based tokens easier than would
be the case with tangible goods. It should, however, be noted that while transactions are traceable on a
blockchain, tokens are less so unless they are individually coloured. Consequently, it will often be difficult
to specifically identify the tokens of which restitution is sought. It is important, however, to realise thatwhat matters in law is not technical traceability but normative traceability. To affirm normative traceability,
it may be enough to be able to say that the person from whom the restitution is sought could be deemed tohold all or part of the units of which the restitution is sought. To illustrate the point by an easy case, supposethat Alice had 70 units at her address. Bob has stolen them through a phishing attack and transferred themto his address in which they have been mixed up with the 30 units he had held there. Unless the stolen 70
units had been coloured, it will not be technically possible to say which of the 100 units Bob now holds at
his address are originally Alice’s. It is, however, possible to say that Bob holds the stolen 70 units. The
question will certainly become more difficult if Bob makes a transfer from his address. But it may bepossible to normatively trace the stolen units up to some point.
(d) Why the problem calls for a globally unified solution
If each national legal system is left to its own device, divergent positions may emerge over each of theissues examined above. Thus, legal systems may come to differ as to whether blockchain-based tokens
qualify as an object of ownership and what are the tests for determining owners. Although legal uncertainty
arising from divergence among national laws may be mitigated if the governing law is predictable, it is notclear for reasons examined below what law governs proprietary claims for the restitution of tokens on a
public blockchain. The lack of clarity and predictability of governing law, coupled with the novelty andpractical significance of the problem, makes a strong case for a globally unified solution.
New issues of contract law, by contrast, do not immediately call for a globally unified solution. Rather,
there is a lot to be said for leaving them to be dealt with by each domestic law for the time being. This isbecause party autonomy is well established as a principle of choice of law for contractual issues.56 It allows
contracting parties to choose the legal systems which they find will provide the best rules for their contract.
This provides legal certainty for the parties and may at the same time motivate the national law makers tocompete with each other with a view to making their legal system attractive for parties’ choice. Whenfavoured rules eventually emerge, an international unification may then be attempted along such rules.
For proprietary issues, party autonomy is generally not accepted as a choice-of-law principle. In thefirst place, it is unworkable between the parties whose relationships are not contractual except to the extent
ex post (after the event) choice is permitted. Furthermore, the freedom of parties to choose the governing
law by agreement can produce the fragmentation of governing law among different pairs of parties. Such a
result might not be seen so unpalatable in the eyes of some legal systems, typically common law systems,
which handle proprietary questions relatively, namely by asking which of the two competing litigants has
the better right. On the other hand, the legal systems which have inherited the Roman law concept of__________________
55

56

With respect to an emissions quota, see Armstrong DLW GmbH v Winnington Networks Ltd [2012] EWHC 10.
More generally, equitable property interests can be created over assets which the common law does not regard
as property: See Calnan, supra note 41, para. 2.69.
As reflected in Article 2 of the Hague Principles on Choice of Law in International Commercial Contracts, a text
which has been endorsed by UNCITRAL (Report of the 48th session (2015) A/70/17 para. 240).

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ownership, dominium, would favour the absolute exclusivity, or the erga omnes (“towards everyone”)
effect, of ownership. It is true that this conceptual absoluteness tolerates some relativism to creep in at theevidential level due to difficulties of proof:57 since the perfect proof of ownership tracing up all priortransactions to the first owner would be difficult or impossible, it is described as a devil’s proof (“probatio
diabolica”). At the choice-of-law level, however, it makes more sense to specify a single law for
determining ownership irrespective of who, among a number of stakeholders, are the litigants in a particular
case.
With respect to tangible goods, it is well established that proprietary issues are governed by the law of
the country where it is situated (lex situs). With respect to intangibles, of which blockchain-based tokens
are an example, choice-of-law rules are far from settled. With respect to an emissions quota, which isfinancially valuable data like a blockchain-based token, it has been suggested that the proprietary issues
should be subject to the law of the country where it is registered.58 This connecting factor does not workwith a blockchain-based token since it is not registered on a national registry. Where a consortium
blockchain is used, it may be possible to ascertain the law of the country with which it is most closely
connected by having regard to the country in which it is administered. On the other hand, a publicblockchain is not administered by any specific entity and the tokens are recorded on ledgers which are
distributed on a borderless network. This makes it difficult to localize tokens on a public blockchain andconsequently renders the governing law of their ownership unclear.
The same problem of uncertainty exists where a restitutionary claim is made for the tort of conversion.
It has been suggested that the claim should be characterized as proprietary for choice-of-law purposes since,
although it is nominally tortious, property rights are ultimately at stake.59 As seen above, thischaracterization does not lead to clear choice-of-law rules where tokens on a public blockchain are theobject of the claim.
The governing law of a proprietary restitutionary claim arising from a resulting or constructive trust is
no clearer. Some have argued that it should be specified by the choice-of-law rules for unjust enrichment60
on the ground that constructive trusts arise in response to unjust enrichment.61 Others have argued that theproper characterisation is proprietary on the ground that the issue of whether property is impressed with atrust lies at the heart of such a claim.62 Whichever characterization is adopted, the governing law is not clear
where tokens on a public blockchain are the object of the claim. Thus, we have seen above that the
proprietary characterization would not lead to clear choice-of-law rules. The characterization of unjust
enrichment would result in the application of the law of the place of enrichment.63 In the case of transfer toan address on a public blockchain, the place of enrichment is unclear since the blockchain is borderless.
This may be contrasted with the case of transfer of deposit to a bank account. The place of enrichment
would then be easily identifiable through the geographical location of the branch office with which theaccount is held.

__________________
57

58
59

60

61
62

63

Peter Birks, “The Roman Law Concept of Dominium and the Idea of Absolute Ownership” (1985) Acta Juridica
1, 28.
Koji Takahashi, “Conflict of Laws in Emissions Trading” (2011) 13 Yearbook of Private International Law 145.
James Fawcett & Janeen Carruthers, Cheshire, North & Fawcett Private International Law (14 th ed., 2008) 794
and 821.
This characterisation seems, however, unsupportable in the context of the Ro me II Regulation which contains
rules for unjust enrichment (Article 10) because its full title (Regulation (EC) No 864/2007 of the European
Parliament and of the Council of 11 July 2007 on the law applicable to non -contractual obligations) indicatesthat it is concerned with personal remedies rather than proprietary remedies. See e.g. Adeline Chong, “Choice of
Law for Unjust Enrichment/Restitution and the Rome II Regulation” (2008) 57 ICLQ 863. For a contrary view,see e.g. Peter Huber (ed.) Rome II Regulation (2011) Art. 1 para. 26 [Ivo Bach].
See e.g. George Panagopoulos, Restitution in Private International Law (2000) 70.
See e.g. Adeline Chong, “The Common Law Choice of Law Rules for Resulting and Constructive Trusts ” (2005)
54 ICLQ 855.
See Christopher v Zimmerman (2001) 192 DLR (4th) 476 (British Columbia Court of Appeal).

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(e) Approach to a uniform law making
We have seen above various circumstances in which proprietary claims may be made to obtain therestitution of blockchain-based tokens. We have found that uncertainty over the availability of such claims
is a significant problem. We have further seen a strong case for devising a globally unified solution to thatproblem. A globally unified solution may be formulated by an instrument in the form of a convention ormodel law. We will now consider what should be the approach to making a uniform law instrument.
As we have seen, there are divergent legal bases on which proprietary restitutionary claims may bemade under the existing legal systems. Thus, some legal systems allow a claim for rei vindicatio based onownership while others require a similar claim to be framed in the tort of conversion. Some legal systems
know the principle of a resulting or constructive trust while others do not. It follows that if a uniform law
uses the expression of rei vindicatio, it risks alienating States in whose legal systems this concept is
unknown. The same is true if a uniform law uses any other terms of art such as the tort of conversion,
resulting trust and constructive trust. A uniform law should instead choose neutral terms or, in their absence,
use terms in a non-technical sense. Thus, if the English word “ownership” is used, care should be taken not
to equate it with a notion of any particular legal system such as the French propriété,64 German Eigentum,65Japanese shoyûken66 and indeed the English law concept of ownership.67 Again, if the expression“proprietary restitutionary claim” is used, the uniform law should steer clear of the dogmatic debate inEnglish law over whether its cause of action is unjust enrichment or the vindication of a property right. 68
This stance would also accommodate the legal systems, typically civil law systems, which do not grant
proprietary remedies in response to unjust enrichment.69
By choosing neutral terms or using terms in a non-technical sense, a uniform law can avoid getting
mired in doctrinal debates prevailing in the existing legal systems. There is indeed no need for a uniform
law to address the issues involved in the claims of different legal bases as identified in the foregoinganalysis, at any event in the context of the specific domestic legal systems in which they arise. Thus, it is
not the task of a uniform law to address whether, for example, the Japanese law concept of shoyûken should
cover bitcoin units. What a uniform law instead should do is to prescribe the results for a selection of
circumstances which each legal system should produce.70 It should thus address whether proprietary
restitution should be permitted in such circumstances as those described in Cases 1 to 3 above. Even if itshould happen that after a careful consideration, the drafters decide not to grant proprietary restitution in
any of such circumstances, it would still be better to enunciate the position than leaving it uncertain.
Once a uniform law has been formulated, the enacting States have options: either (1) work out how toreconcile the prescribed results with its existing legal framework or (2) introduce the uniform law as
containing a sui generis framework. The option (2) would be difficult if the existing law had alreadyproduced legislation or a body of case law on the subject matter. But it may be a viable option with respect
to a novel asset like blockchain-based tokens.
Finally, it will be necessary to say a few words about execution procedure. When it comes to the
execution of a decision allowing a proprietary claim for the restitution of blockchain-based tokens, it will
be necessary to have them transferred to the successful claimant by way of obtaining the private key. The__________________
64
65
66
67

68
69
70

Article 544 of the French Code civil.
Section 903 of the German BGB (Civil Code).
Article 206 of the Minpo (Japanese Civil Code).
It is an elusive concept but is conventionally defined as the residue of legal rights in an asset remaining in aperson after specific rights over the asset have been granted to others. See Ewan McKendrick & Roy Goode,
Goode on Commercial Law (4th ed. 2010) 34.
See e.g. Graham Virgo, The Principles of the Law of Restitution (3rd ed., 2015) 7.
George Panagopoulos, Restitution in Private International Law (2000) 61.
This approach to a uniform law making is described as a functional approach and favou red by Hideki Kanda,“Methodology of Harmonization and Modernization of Legal Rules on Secured Transactions -- Legal, Functionalor Otherwise?” (a paper delivered at the UNCITRAL Fourth International Colloquium on Secured Transactions(2017), available at the UNCITRAL website).

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process may encounter difficulties where the defendant resists disclosing the key. In some legal systems, acompulsory mechanism such as the threat of sanctions for contempt of court may be available to compel
disclosure. Where the key is stored in a tangible medium such as a hard disc or paper, the seizure of themedium may be possible under some legal systems. It would not be necessary for a uniform law toharmonise this aspect of law since, as with other procedural issues, the method of execution may be left tothe lex fori, i.e. the law of the place where the procedure is to be taken.
6.

Concluding remarks

The legal issues which we have examined above are diverse. Some of them concern the use of
distributed ledgers generated by the blockchain technology such as the legal effects of data messages
recorded therein. As well as generating distributed ledgers, the blockchain technology makes it possible totrade tokens online on a P2P basis and hold them without the involvement of intermediaries. Those tokens
are an object of unprecedented type. Thus, bitcoin units, for example, only exist conceptually as an entry ina blockchain address. They cannot be copied or stored in a tangible medium since there is no such thing asa string of alphanumeric characters for each of the units: what can be stored is rather the private keys toreassign them.71 Such unique features72 of blockchain-based tokens are a rich source of novel legal issues.
In the first half of this article, we have examined the existing UNCITRAL works to see what legal
issues raised by the blockchain technology may be resolved under them. With principles such as those oftechnological neutrality and functional equivalence, the existing works are flexible enough to accommodate
the blockchain technology. While there are a few unanticipated issues which the technology raises, they
may be dealt with by further developing those works.
In the second half of the article, we have examined the circumstances which raise the question whether
it is possible to obtain the restitution of blockchain-based tokens by means of proprietary claims. Amongthe private-law issues arising from the use of the blockchain technology, the uncertainty over the availabilityof such claims is a problem of particular significance. It also calls for a globally unified solution but isuntouched by the existing works of UNCITRAL or any other international organization. UNCITRAL has arich experience in the areas of particular relevance such as electronic commerce, insolvency and security
interests. It also has a good record of respecting the divergence of existing legal frameworks while at thesame time working towards harmonization. All this makes UNCITRAL an ideal and the natural forum forproviding a globally unified solution to the problem identified.

__________________
71

72

Antony Lewis, “A gentle introduction to digital tokens” (https://bitsonblocks.net/2015/09/28/a-gentleintroduction-to-digital-tokens/).
Perkins & Enwezor, supra note 54, see certain virtual currencies as a new form of property under English law as
they share characteristics of both intangible property and choses in possession .

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V.17-06783