In addition, the International Swaps and Derivatives Association (ISDA) recently published four white papers that analyze the legal issues related to the use of “smart derivative contracts” from a French, Irish, Japanese and New York legal perspective. Although these white papers do not address the applicability of smart contracts (this has been explored in previous guidelines published by ISDA); They examine issues related to determining the law that governs the smart contract and the jurisdiction that applies in the event of a smart contract dispute. These problems arise when derivatives are traded across borders. These are nothing more than broad analogies with the smart contract topics covered in this chapter. The intention to avoid all legal consequences is not the same as the intention to circumvent the courts through arbitration; the intention to exclude liability in a contract is not the same as the intention to exclude any liability by preventing an agreement from being a contract. All political arguments have a certain circularity: if there is a contract, legal checks apply and show that a contract exists; If there is no contract, the agreement is outside the scope of these controls and cannot prove that a contract exists. However, it is clear from these examples that there are restrictions on the restriction of judicial review, that these restrictions are limited by political considerations, and that attempts to remain artificially outside their scope are often unsuccessful. Smart contracts work by programming them on a decentralized blockchain network that defines the terms of a particular transaction. One way to imagine a smart contract is computer programming “if/then” or conditionally.14 In addition, smart contracts will always bring challenges and uncertainties that some sort of legal framework should address. Smart contracts are immutable in nature, which raises concerns about the automatic execution of the service in all circumstances, without exception or in terms of context.
What happens if a smart contract is entered into, for example, through coercion, coercion, misconception or misrepresentation? What happens if the performance of a smart contract is actually illegal? A party may wish to prevent the automatic performance of such a contract and needs the assistance of the law to do so. In addition, smart contracts are written in code rather than plain language, which can lead to questions of interpretation, comprehensibility and validity decided by the courts. The example of the vending machine is often chosen to explain the functionality of smart contracts. The buyer selects the desired product, places the amount of the specified purchase price in the vending machines, and in the last step, the vending machine releases the desired product. Smart contracts work in the same way. Traditional contracts create devilishly difficult problems of interpretation because of the many ways in which human language can be used and understood. But these multiple possible meanings do not exist for artificial intelligence. As Susskind puts it, computers are “powerful and non-thinking” agents.31 Therefore, from the point of view of the computer performing a smart contract, there is no room for interpretation, and the instructions presented to it have a unique meaning.
However, the possible meanings for its authors and interested third parties are multiple. The process of medico-legal interpretation in this area is therefore likely to be much more complicated than in the conventional context. The broad linguistic symmetry of conventional procurement, in which the authors of the agreement, as well as third parties, use the same basic lexicon32, is lacking in this context: computer code is qualitatively different from human language. A human reading of the code will therefore make only a limited contribution to determining the desired effect of language intended for artificial intelligence. While human-to-human interaction is open to conflicting interpretations on both sides, human-computer interaction will only have multiple meanings for those who choose the language to use, not for the recipient of that language. Of course, while a computer does what it is told, it does not mean that it will do what the parties intended to do. And as Lewison LJ made clear, the court`s task is “not. determine “what the parties intended to agree”, but what the instrument means. 33 The immutability of the Ethereum blockchain, this inability to fix vulnerabilities in written code, coupled with the inherent inability to process semantic information or capture the true intent behind the DAO smart contract, ultimately led to the logical impasse that led to the decision to modify (or hard fork) the Ethereum blockchain protocol, Effective reversal of DAO transactions. Other strategy-based examples can be provided.
One of them is an express agreement between the parties to submit disputes to arbitration. This is an exclusion only of enforcement by the courts and not of enforcement in general, but it is subject to legal limitations. Arbitration agreements for appeals below a fixed amount are considered unfair under the Arbitration Act 1996.26 Beyond this amount, an arbitration agreement can still be considered unfair under the Consumer Contracts Unfair Terms Regulations,27 and now by the Consumer Rights Act 2015. The injustice lies in the consumer`s difficulty in achieving an efficient and cost-effective application of his agreement – a policy that would also apply to smart contracts. This broad interpretation might be sufficient to regulate smart contracts, but it could also lead to the ECTA provisions perhaps going a little too far. Although separate elements of CPA, POPI and ECTA are the only means currently available to regulate smart contracts, there is still a clear need for further regulation and harmonisation of the law due to inadequate regulation. However, programmers can fill this gap with their ability to understand both human and machine language. The use of the services of such an expert to represent before the court what the machine in question was required to do under the Smart Contract Code hardly differs, at some level, from the use of the services of a human language translator, as is customary when contracts are written in a foreign language.41 The difference from the code lies in the actions of the court after that translation. .