Blockchain and the legal sector The Rule of Law demands timely and affordable access to legal advice but can advanced technology help? “we will sell to no man, we will not deny or defer to any man either Justice, or Right” (Magna Carta) . On a recent visited to Gozo (a beautiful island next to and part of Malta, but that’s a different article entirely) at the end of the holiday I found myself sat at the airport, failing to deal with my children’s constant tantrums, when something flashed up on the advertising screen. More than welcome of a brief distraction from my ineffective parenting I was quite willing to be influenced; ‘Blockchain, Big Data and A.I. skills are in high demand’ it read. You might normally expect to be told how many steps it is to the nearest Burger King but this fits with Malta’s ambitions to be the ‘Blockchain Island’. For Blockchain to secure the support of a whole country is quite an achievement and testament to the potential of the technology, so I thought perhaps it’s time to review where we are in the development of Blockchain and its application. Rightly, in my view, the legal sector in particular is looking more and more to understand what it can do and how it might change the way things are currently done. I don’t believe you have to be a Blockchain genius to know it is rarely a bad thing to remind ourselves of the basics. Especially for those looking at this technology for the first time, it is helpful to start by asking ‘what actually is Blockchain’? Never underestimate the importance of simplicity if trying to persuade anyone of anything (I was always taught) although I have to admit I often wasn't able to execute the mantra 'brevity is not a sign of a weak argument'. Despite many, many articles having been written about Blockchain it is, in essence, a database (so far so good). Shared across a network of computers this database contains a growing list of records, called blocks. A record added to the chain is very difficult to change and it contains a unique code called a hash. The records the network accepts are added and each block contains a hash of the previous block with a time stamp (forming the chain). At first glance, considering the fact modification of the data contained in the Blockchain is controlled and because it can record transactions between two parties efficiently and in a verifiable and permanent way it has obvious potential to the legal sector. Leaving aside its foundations in cryptocurrency it is still nonetheless a technology with much hype and remains largely not well understood, so how exactly could Blockchain impact upon the work of solicitors, barristers and the court service generally?
Back in October 2019, the current President of the Law Society Simon Davis set out some of the benefits to the profession of advanced technology generally: “our research shows the synthesis of ‘law’ and ‘tech’ is establishing the UK as a global leader. our leadership in lawtech will bring economic benefits, but it will also further establish our reputation as a global legal centre.” “london is becoming a hub for legal technology, with the capital topping the European investment charts for funding into fast growing sectors such as artificial intelligence, cybersecurity and FinTech.” In recent times growth areas of Lawtech have been reported by the Law Society research to include: legal analytics; legal project management; governance and compliance; and contract management (note: the Law Commission approved on 4 September 2019 the use of esignatures to execute documents). On a more established footing are areas including: collaboration tools; document management; IP management; and e-billing. Not content to be a follower the Law Society believes the UK is having a significant role in Lawtech on the worlds’ stage with the closest competitors being Singapore, Hong Kong and the Netherlands. Concentrating on Blockchain specifically now. Howsoever it is dressed up it is still a form of database so it can be implemented by any industry that needs to verify and track information. Action has been called for recently by the Legal Services Board urging legal services regulators to embrace the opportunities provided by Blockchain technology. My advice to anyone interested in the potential for Blockchain to the legal sector (and you really should be interested) would be to listen to the podcast 'Talking Talk' in which Dr Anna Donovan (inaugural vice dean of innovation at UCL) discusses the evolution of Blockchain as a tool for radically simplifying common legal tasks such as identity verification and contract fulfilment. Blockchain, ‘provides significant opportunities to enhance consumers’ access to legal services, particularly once we reach widespread adoption" she argues. Embracing the technology may interest some particularly because of this point – enhancing consumers access to legal services. Reports of justice becoming less accessible cause us all significant concern so it is a matter of great interest to the profession, all of whom care deeply about access to justice and legal services, to hear Dr. Donovan talk in these terms, “this will mean that consumers can have their legal needs met in a more direct, faster and potentially cheaper manner (in comparison to current models).” So, adopting the Law Commission’s list of growth areas it is clear lawyers may be particularly interested (from a client perspective as well) to understand the implications of Blockchain to contract management. I suspect even aside from the potential benefits to their own firm, for solicitors and counsel to understand the context of disputes they need to have a firm grasp of the latest developments on contract process utilising advanced technology. My understanding is that clients have already and for some time been seeking advice on such developments, no doubt anxious about the possible pitfalls of engaging and deploying the technology. I return to the LSB podcast, “at the moment, a small number of legal services providers are offering services to their consumers that leverage smart contract technology, whilst others are developing complementary dispute resolution mechanisms.” Succumbing to the appeal of Blockchain is seemingly a slow process
however. Surprisingly, despite its potential the LSB research suggests levels of use of advanced technology such as Blockchain are as low as 2% of providers. Surprising no one is the fact there is a great deal of active debate at the current time around the implications for the English legal system of Blockchain technology on established rules of contract and liability. Hand in glove with the development and increased deployment of Blockchain technology is the regulation that is evolving around its use. Again I return to the LSB (this time to the Chair Dr Helen Phillips), “it’s important though that we all understand the risks and potential pitfalls of these innovations, and the LSB is looking carefully at the role regulators must have in protecting users of legal services.” Regulation is going to be crucial for consumer confidence and the use of smart contracts is a case in point. Indeed you may (or may not) have heard the term Ethereum; this is an open-source, public, blockchain-based platform that enables developers to build and deploy decentralised applications (“DApps”), sometimes referred to as smart contracts. Now the point about smart contracts is that they permanently record every step of the process, thereby assets can change ownership and payments can be made automatically once certain conditions are satisfied. Going beyond the theory and into application the idea is that tasks previously taking days could be reduced down to minutes. Other applications include Monax (previously known as Eris) which is another application platform, sitting between a Blockchain client and the operating system. Ultimately the potential here is that instead of the old-fashioned means of exchanging emails, word documents, and PDFs, a shared infrastructure can be created with the ability to store collaboratively; contracts, documents, information and assets across multiple computers, instead of in one location. Readers of this will undoubtedly be asking ‘but how safe is the data, what is the risk?’ (lawyers tend to be anxious about that sort of thing). PECB wrote a very good article recently, ‘Blockchain: the promised land of risk managers’ in which they wrote ‘Blockchain has been praised precisely for setting an unprecedented level of security when it comes to its uses in the cyberspace, but also when it comes to the security of personal data.’ A very interesting read will be the outcome of the UK Jurisdiction Taskforce (UKJT) public consultation, commissioned in May 2019, entitled ‘The status of cryptoassets, distributed ledger technology and smart contracts under English private law’. Starting with a bold statement ‘Smart contracts will only finally take off when market participants and investors have confidence in them’ the theory is that one reason for some lack of confidence is a perceived legal uncertainty. ‘Scalability, Interoperability and Sustainability of Blockchains’, a report prepared by the EU Blockchain Observatory and Forum in March 2019, also attempted to tackle this, raising inter alia the tensions between GDPR and Blockchain and the legal status of smart contracts. I await the report and recommendations of the UKJT Ccnsultation. Only a few months ago the Law Society published, in September 2019, 'Technology, Access to Justice and the Rule of Law' which I thoroughly recommend and which concludes as follows: ‘technology is not, in itself, the silver bullet to making the justice and legal system more accessible. to achieve its potential, it is important that a blueprint for innovation is developed. this blueprint should be centred on the person with legal needs and framed by the principles and resources of the organisation.’
‘the Government should recognise that any technology-based initiative aiming to promote access to justice will only be successful if users are ultimately able to understand and access legal advice directly from a qualified lawyer who can help them resolve their problems.’ No such change can be achieved without funding and the Lord Chancellor had already announced in June 2019, at the Law Society’s ‘A.I in Legal Services Summit’ that the UK Government is committing over £2 million of funding to support the UK’s lawtech sector. For the legal sector the necessity to maintain pace with the advanced technology market, and the potential it offers is being taken seriously at the highest level of the executive and judiciary. Other jurisdictions are doing the same and international collaboration will be extremely useful to shape the way forward. Right now leading solicitor firms and barristers’ chambers will be seeking to understand and adopt advanced technology to ensure they are not left behind, either by other firms or by the clients they serve, but they will also be appropriately cautious and will need to stay abreast of (or ideally be a part of) the outcome of the ongoing research. Formulating a way forward will require a balance between utilising the power of the technology whilst also ensuring that us as human beings understand what is happening and how it benefits us. Advanced technology will have some answers to better manage the whole legal system and this is no doubt why the investment is being made to understand the potential. Imagine liaising with the court service with absolute confidence that the judge has the right bundle, consistent with the advocates, the parties and the witness bundle. Recording any pages added or removed, tracked accurately and applied consistently across the group. Next, what about court orders? Especially helpful in cases with multiple parties where complex directions have been discussed, currently multiple versions of the same document could exist with amendments being made to the original draft with then further amendments being applied to that amended document by some and to the original document by others. So to the summary, Blockchain technology is about more than cryptocurrency (the trap many fall in to when dismissing its potential). Smart contracts, decentralised transactions and most recently a property management system known as LP01 could all in time assist the legal profession. Bringing us back to the lovely Malta – the LP01 application was developed by ledger projects based in Malta to simplify notarial work and to offer updated data on property sales in the country. Even conveyancing solicitors should sit up and take note as Blockchain will reach you too! Now let me tell you about Gozo… NobleProg (UK) Ltd is a leader in the advanced technology market, specialising in the latest developments in A.I., Big Data, Cyber Security and more. We run courses on Blockchain including Blockchain - Theory and Practice, Blockchain for Financial Bodies, Applying Business Rules to Smart Contracts and Build a Smart Contract Application. Benjamin Jenkins NobleProg (UK) Ltd. Director