In its latest consultation, which runs to 8 September 2025, the Law Commission is seeking views on (i) a proposed new power to grant free-standing information orders at the initial stages of pre-action investigations in cases involving digital assets, (ii) means of resolving conflicts of law in cases involving "truly omniterritorial features" tokens, and (iii) reforming section 72 of the Bills of Exchange Act 1882. Below, we consider these proposals in detail. Responses can be submitted online, via email, or by post.
The Law Commission has been actively working on addressing the legal implications of emerging advanced technologies. Its work has uncovered private international law issues connected to the fact that these technologies transcend and defy traditional geographical boundaries so that traditional analysis of jurisdiction, applicable law and international recognition and enforcement becomes strained. While the English common law may be flexible enough to recognise crypto-tokens and other digital assets as property, the consultation indicates the Law Commission considers law reform will be required to address some if not all of these issues: For more information on its previous work, see our insights here: A new frontier for digital assets: Key insights from the Law Commission Report and here: Proposed draft legislation on the recognition of digital assets as personal property.
The Law Commission believes there is a clear case for reform to introduce the power to make free-standing information orders at the initial stages of investigations in cases involving digital and decentralised environments to assist claimants.
Tension between the territoriality principle and the decentralised nature of digital assets
The jurisdictional gateways in England and Wales are framed in
territorial terms, with a significant emphasis on geographical
location. These can be difficult to apply when digital assets and
distributed ledger technology (DLT), on which they are often based,
exist "everywhere and nowhere". This
"omniterritoriality" means they have simultaneous and
equally valid connections to multiple jurisdictions.
The pseudo-anonymous nature of blockchain transactions creates
evidential issues in "localising" an act or object. This
creates challenges for the victims of crypto fraud, who are unable
to identify defendants or trace assets. Claimants often rely on
intermediaries, such as crypto exchanges, to obtain information or
recover assets. However, existing rules for information orders
(e.g., Norwich Pharmacal and Bankers Trust orders) require either a
connection to proceedings in the jurisdiction or an intention to
commence proceedings in the jurisdiction. This limitation is
problematic for crypto cases where claimants may not know where
proceedings might start. Courts have adopted a pragmatic approach
in many cases. They have for instance allowed service by
non-fungible tokens (NFT) and permitted claims against
"persons unknown." But without consistency.
Omniterritoriality therefore also creates access to justice issues,
since crypto-fraud victims have more hurdles to overcome compared
to claimants in contractual or property disputes involving
identified defendants within the jurisdiction.
The Law Commission believes there is a clear case to introduce the
power to make free-standing information orders. These would operate
independently of any substantive claim or identified defendant and
would allow claimants to seek information from third-party
intermediaries, such as crypto exchanges. They would assist
claimants at the initial stages of pre-action investigations in
digital and decentralised environments by supporting the
preliminary investigations necessary to bring a fully pleaded
claim, demonstrate an "adequate link" to England and
Wales, or commit to commencing proceedings in the
jurisdiction.
The consultation paper recognises some implicit difficulties in
introducing this power, not least of which are challenges around
enforcing these orders. It proposes some guardrails to ensure that
it is exercised in a proportionate and principled way: requiring
the claimant to demonstrate a case of a certain strength
("merits test") as well as necessity and the
impossibility of making the application elsewhere; and requiring a
tangible connection to England and Wales (e.g., the claimant's
habitual residence). Additionally, the proposals emphasise the
importance of avoiding conflicts with international principles of
jurisdiction and ensuring that the orders are not used to unduly
burden innocent third parties or circumvent established rules of
international law.
The appropriate court for cross-border property and tort claims concerning crypto-tokens
The Law Commission has provisionally concluded that a specific
crypto-token gateway is unnecessary. Existing jurisdictional
gateways are broad enough to cover claims involving crypto-tokens.
Courts already possess the tools to interpret these gateways
according to private international law principles. The Law
Commission believes that the challenges in crypto-token cases arise
from the novel factual circumstances created by their
characteristics: omniterritoriality, decentralisation, and
pseudo-anonymity. They suggest the solution lies in interpreting
and applying existing principles.
The Law Commission believes that crypto-tokens should be
"localised" based on where they can be effectively
controlled at the time proceedings begin. In tort cases, damage
should be tied to the victim's physical location when it
occurred. If the damage cannot be clearly localised or if the
defendant is identifiable, pursuing the defendant in their home
court should remain an option. Courts are therefore being
encouraged to avoid reliance on arbitrary or inconsistent fictions,
such as linking crypto-tokens to the domicile of the owner, and
instead adopt a principled approach that reflects the realities of
the decentralised environment. This strategy promotes iterative and
purposeful interpretation. It ensures that existing gateways adapt
to new technologies without requiring major reform. However, the
consultation will test whether a crypto-specific gateway will offer
greater clarity and consistency.
Different approaches to determining the applicable law in cases involving digital assets
Omniterritoriality also creates conflict of laws issues. A
traditional multilateralist approach is premised on the idea that
every legal issue "belongs" to a single legal system. It
assumes the natural "seat" of the claim can be identified
via a "connecting factor", such as the location of
property, the place where an act occurred, or the domicile of a
party. In cases involving decentralised blockchains, decentralised
finance (DeFi) systems and crypto-tokens involving servers, mining
nodes, or private keys connected to multiple locations, no single
jurisdiction emerges as the clear "winner". This has led
to arbitrary or tenuous results.
The proposed solution is for courts to adopt a supranational
framework in cases involving decentralised phenomena, where it
would not be appropriate to apply the law of any one particular
sovereign state. The Law Commission accepts that this would require
a significant shift from the established multilateralist approach
and the development of a special body of substantive rules.
However, it is not suggesting this is achieved via legislative
reform. Rather it advocates for the organic development of a
framework through the common law on a case-by-case basis. The
consultation contains a lengthy list of possibly relevant factors
to determining jurisdiction under a supranational approach,
including:
- the location of the original coder's primary residence, or the place where the website with their white paper is registered;
- the domicile of the creator of the DeFi protocol;
- the location of the majority of the platform's contributor team who maintain the smart contract;
- where the servers are hosted;
- the location of the majority of mining nodes;
- the place from which the crypto-tokens can currently be controlled;
- where the person controlling the private key was at the time of the transfer; or
- where the acquiring party was located at the time of the disputed acquisition.
Beyond these technical and territorial factors, the Law Commission suggests that courts should examine the contents of any public disclosures about the DLT network, the substantive property laws, whether the parties voluntarily participated in the DLT network, any prejudice to third parties, the potential impact on other network participants, the effectiveness of any remedy, and broader policy concerns such as commercial certainty, clarity, and the sovereign authority to grant property rights.
Reform of section 72 of the Bills of Exchange Act 1882
The Law Commission has identified several reasons why s72 no longer aligns with modern private international law principles and commercial realities:
- given the globalisation of trade and the increased use of digital and decentralised technologies, the "place of contracting" often has only a tenuous connection to the parties or the transaction, leading to uncertainty and disputes;
- it does not explicitly allow for party autonomy, which is seen as inconsistent with contemporary expectations and practices in commercial law; and
- determining "where" a contract is made, issued, or delivered is particularly ill-suited to the realities of digital and decentralised environments, such as electronic trade documents (ETDs) and blockchain-based transactions.
The Law Commission is proposing legislative reforms to modernise the provision to address both paper and electronic bills, allowing for greater party autonomy in determining the applicable law. Under the proposed reforms, the default rule would allow the parties incurring obligations under a bill of exchange to expressly choose the governing law, with such choice clearly indicated on the bill itself. In the absence of a valid choice, fallback rules would apply, such as the law of the place where the instrument is payable for the acceptor, or the habitual residence of the relevant secondary party for other parties incurring liability. These reforms aim to eliminate reliance on outdated connecting factors, such as the place of issue or delivery, which are increasingly difficult to apply in digital and decentralised contexts, and instead focus on ensuring legal certainty, predictability, and fairness for all parties involved.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
