Structured data format a “great step forward” for digital contracts

Vos: Project removes impediment

The Master of the Rolls has hailed the launch of a universal structured data format for the creation of digital contracts as a “great step forward”.

The Legal Schema project was developed by Peter Hunn, founder of smart contract specialist Clause, as part of the Lawtech UK sandbox pilot.

It is “an open-source initiative that provides a common language for creating and managing legal documents as data, much like does for webpages”.

In the same way that “schemas underpin and enable web development”, the Legal Schema both supported the development of individual digital contracts and enabled them to interact with each other.

“The result being that the emerging smart contract and digital asset industries in the UK can benefit from both strong legal and technical foundations.”

The Master of the Rolls, Sir Geoffrey Vos, said the project, backed by LawtechUK, would remove the “fourth impediment” to the “ubiquitous usage” of smart contracts – the absence of a “universally accepted method of digitising commercial and legal documentation”.

The first impediment, the need for a clearer understanding of the legal status of smart contracts and cryptoassets, was removed by the UK Jurisdiction Taskforce’s legal statement on the issue at the end of 2019.

He said that “one or more dependable central bank digital currencies” would “hopefully emerge soon”, removing the second impediment.

The third impediment was removed by the publication of the UK Jurisdiction Taskforce’s digital dispute resolution rules in April this year.

In a foreword to a white paper published by LawtechUK to mark the launch of Legal Schema, Sir Geoffrey said: “Uniformity in machine readable text will be a great step forward for smart contracts and mainstream usage of cryptoassets.”

LawtechUK is a government-backed initiative delivered through a collaboration between growth platform Tech Nation, the Lawtech Delivery Panel and the Ministry of Justice.

It said Mr Hunn “set out to demonstrate the practical application of digital document technologies and to enable their adoption, so that legal documents can be produced in structured formats that mean their contents can be easily used for reporting, analysis, automated processing, lifecycle management and more”.

This was “far from the reality today”, where legal documents were “typically written only in natural language text and stored as such or as photographic images (PDF etc), without any supporting code that acts as a map or instructions enabling a computer to read it.

“This analogue way of producing and administering legal documentation is limited and inefficient and will be widely restructured and digitised in the coming years, enabling the public and private sectors to realise a wide range of benefits spanning productivity, accuracy, transparency and risk management, at home and across borders.”

The next step would be a second phase of research, involving Oxford University and University College London.

Mr Hunn said: “Accelerating the adoption and use of smart contracts and cryptoassets is critical to the global competitiveness of the UK as a jurisdiction.

“The work of the UK Jurisdiction Taskforce and the current Law Commission projects are a testament to this.

“It became apparent through our work in the sandbox that, in order to do so, there is a simple, universal, means to add structured data into contractual documents to transform them into digital agreements.”

Sarah Green, a Law Commissioner, added: “The digitisation of both documentation and assets is inevitable and critical in maintaining a jurisdictional regime that is internationally competitive and fit for today’s commercial purposes.”

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