Digital Disputes

The Business and Property Courts deal with a range of disputes involving digital assets and digitalised transaction documents, including disputes relating to smart contracts, crypto currency, NFTs (non-fungible tokens) and intellectual property rights in digital assets.

Disputes of this kind fit seamlessly into the work of the Business and Property Courts:

  • The courts of England and Wales are home to the common law, and to that law as the business law of choice, nationally and internationally.
  • The digital age has changed the content and practice of business on an unprecedented scale and at an unprecedented pace. Those changes have had an equally significant impact on the dispute resolution needs of the business community.  
  • Commercial dispute resolution in England and Wales has historically worked with business – both domestic and international– to ensure that commercial law continues to serve the needs of business, promoting efficiency in transacting and confidence that transactional goals will be realised. This has involved developing commercial law to ensure that it keeps pace with changes in commerce in both the subject-matter of commercial activity, and in types of transactions necessary to protect the interests and expectations of transacting parties.

The underlying fundamentals of English law are, as proven over the last century and more, able to address the changing needs of business. The combination of flexibility and certainty that English law offers has proved attractive to business. International confidence and trust in the UK judiciary is a matter of record. So too is the quality of the legal profession with expertise in English law.

The Business and Property Courts comprise a number of different courts whose expertise will be relevant to different types of digital asset disputes:

  • Claims about tracing into digital assets, and identification of the applicable law, or when possessory-based rights and remedies are available for dematerialised assets, raise issues which are frequently considered by the Chancery Division and Commercial Court.
  • Ownership, subsistence and infringement of intellectual property rights in digital assets/software (e.g. copyright, database right, design rights) as well as related rights in confidential information and/or passing off, are dealt with in the Chancery Division.
  • Disputes relating to software and operating system functionality or, the operation of algorithms benefit from the technical expertise which the Technology and Construction Court and the Patents Court provide.
  • Disputes arising out of the insolvency of exchanges or intermediaries involved with trading or custody of crypto-assets

The judges of all three courts are familiar with the channels of digital communication, and their implications for the service of proceedings, when and where transactions are concluded and whether formality requirements have been satisfied.

Anticipating the digital disputes wave

The UK government and judiciary have been considering and preparing for the advent of a wave of disputes related to digital assets for some time.

Potential issues have been reviewed by:

  • The UK Cryptoassets Taskforce, which comprises the Financial Conduct Authority (“FCA”), HM Treasury, and the Bank of England: see Final Report (PDF)
  • UK Jurisdictional Task Force (“UKJT”) which in November 2019 published a Legal Statement on Cryptoassets and Smart contracts (external link)
  • Law Commission for England and Wales Digital Assets: Consultation paper (Law Com No 256 (external link), 28 July 2022) which contained reform proposals to better recognise and protect digital assets, especially cryptoassets and NFTs
  • Law Commission for England and Wales Electronic Trade Documents Report and Bill (Law Com No 405 (external link), 9 February 2022) which makes provision for those rights which attach to the possession of trade documents to apply to those which are in dematerialised form. Legislation to give effect to this report is currently before the UK Parliament
  • Amendments by the Civil Procedure Rules Committee to the gateways for service out of the jurisdiction which included gateways better suited to digital commerce or for obtaining the information necessary to bring claims relating to digital assets
  • The current Master of the Rolls, see for example:
  1. ‘Cryptoassets as property: how can English law boost the confidence of would-be parties to smart legal contracts?’ (Joint Northern Chancery Bar Association and University of Liverpool Lecture, (PDF) 2 May 2019)
  2. Sir Brian Neill Lecture 2022
  3. Keynote speech May 2022: The economic value of English law in relation to DLT and digital assets

Applying common law principles to new disputes

The Court frequently engages with issues arising from digital commerce, including Smart Contracts and digital assets or currency and transactions involving NFTs (Non Fungible Tokens). The Court has addressed:

There are also a range of disputes which have come before the courts where issues associated with digital businesses or products engage conventional claims:

  • Wright v BTC Core and others [2023] EWHC 222 (Ch) (external link) concerns a claim to own copyright and database right in various alleged works used in the Bitcoin System. This judgment dealt with the issue whether there was an arguable case that copyright subsisted in the file format used in the Bitcoin Blockchainwith the judge finding that there was no expression of the structure in any Bitcoin file sufficient to found a claim to copyright.
  • Crypton Digital Assets Ltd v Blockchain Luxembourg SA and others [2021] EWHC 1172 (Ch), [2021] EWHC 3194 (Ch) (external link) is a case arising from the creation of a cryptocurrency dealing platform, involving claims of conspiracy and breach of fiduciary duty.
  • JSC Commercial Bank Privatbank v Kolomoisky and others [2021] EWHC 403 (Ch) (external link) related to assets subject to a freezing injunction granted in the context of a much wider dispute of alleged fraud in relation to a Ukrainian bank.
  • (1) Blockchain Optimization SA (2) Petrochemical Logistics Ltd v (1) LFE Market Ltd and others [2020] EWHC 2027 (Comm) (external link) is a fraud case arising from the start-up of a crypto-currency platform in which the claimants say that they provided loan finance in return for worthless digital tokens.
  • C Wzrd Ltd v Toray Kortan [2020] EWHC 1360 (Ch) (external link) concerned the incorporation of a company intended to provide an online platform for marketing and discussion of cryptocurrencies. It is alleged that the defendants took the claimant’s customer information and database, and then sought to use them to set up a rival offering.
  • Ramona ANG v Reliantco Investments Ltd [2019] EWHC 879 (Comm) (external link). The underlying dispute concerned the closure of an online trading account used to trade Bitcoin futures with the issue in the case being the platform provider’s entitlement to do so and the relief which followed if it was not..
  • SAP UK Ltd v Diageo Great Britain Ltd [2017] EWHC 189 (TCC) (external link) concerned the breach of a software licence, which involved a technical comparison of two systems.
  • CIS General Insurance Ltd v IBM [2021] EWHC 347 (TCC) (external link) concerned a termination dispute in respect of an IT system which required the court to determine whether the source code had been developed, copied or re-written.

Issues in digital disputes

Many issues which arise in digital disputes are essentially the same issues which are frequently considered by the Business and Property Courts:

  • Urgent interim relief including:
    • Identifying a wrongdoer: the courts can grant relief in appropriate cases to require others who have information which would help to identify a wrongdoer to provide information
    • Making orders to ensure that a wrongdoer does not hide or spend funds in dispute or so as to hinder the enforcement of any judgment against them.
  • Serving proceedings on a party who is abroad
  • Serving a person when their location is unknown
  • Requiring a claimant to provide security for the defendant’s costs
  • Enforcing judgments and arbitral awards
  • Requiring a judgment debtor to identify assets against which a judgment can be enforced
  • Identifying beneficial ownership and classifying claims as proprietary or personal, particularly in the context of insolvency

Speeches by judges of the Business and Property Courts on issues raised by digital disputes

Judges of the Business and Property Courts frequently give speeches or participate in projects or seminars discussing issues relating to digital assets and commerce. These have included:

  • A seminar on the challenges of cryptocurrency for which Mr Justice Robin Knowles gave the opening address on 1 February 2021;
  • A speech by His Honour Judge Pelling KC  on “Issues in Cryptocurrency Fraud Claims” (20 July 2022)
  • Mr Justice Fraser chaired the Industry Working Group on Electronic Signatures, whose interim report was published on 1 February 2022.
  • On 18 May 2023 Mr Justice Waksman is a member of a LIDW panel discussing “Looking to the future: how will the metaverse and AI change practice?”.
  • His Honour Judge Pelling KC, the Judge in Charge of the London Circuit Commercial Court, gave a talk at the 2nd Annual Crypto in Disputes event on 28 June 2023 entitled “Issues in Crypto Currency Fraud Claims – An Update”.