Similar to FinTech, LegalTech or LawTech is an industry that uses technology and innovation in the legal sector. Blockchain and smart contract technology can support the legal sector by, for example, securing document storage.
Late last month, the Law Commission issued
its advice to the U.K. government on smart contracts for legal application. The authors believe the current legal framework in England and Wales is ready for technological solutions such as smart legal contracts. In the U.K., smart contracts are already often applied to conventional contracts, so they may soon become an integral part of standard legal practice.
conditions of that contract are met. Decentralization makes blockchain a digital notary. All participants in the system have the same registry, which is automatically updated to the latest version every time a change is made. The parties don’t need to act for the obligation to be fulfilled: they describe their intentions when they enter into the contract, and the smart contract automatically fulfills the stipulated conditions.
Smart contracts offer the legal sector great opportunities for automation and simplification. In essence, it’s a new system of economic relations, where contracts are concluded and executed automatically. The program records the terms of the contract, sensors monitor the occurrence of certain contractual circumstances, and the program sends a signal for payment.
Smart contracts and blockchain bring several benefits to the legal sphere:
Automation of legal relationships. Once input data is received and processed, a smart contract will execute the embedded algorithm.
Minimization of the human factor. While people are prone to making mistakes, paying attention to the wrong details, misspelling names and dates, a smart contract will execute everything on time and without errors.
Predictability. Traditional contracts often don’t allow for accurate calculation of financial flows due to long contract durations and delayed payments. When a company uses smart contracts, predictability becomes possible.
Lower maintenance costs. It's cheaper to get a smart contract than to hire a lawyer.
Speed. Smart contracts are executed instantly.
Blockchain technology is a transparent, unchangeable, and secure distributed ledger that allows lawyers to register and resolve different types of legal issues. Smart contracts
eliminate paperwork while achieving the highest level of security. Since data blocks in a blockchain cannot be corrupted or eliminated, a blockchain-backed registry will have the highest possible degree of security – and not only against intentional illegal actions but also accidents, such as fire or power outages. Data blocks are also better protected against illegal actions of the registrars and forgery than paper documents
Smart contracts have many uses in the legal system. They can be used in
• the purchase and sale of real estate and vehicles,
• supply of goods and raw materials,
• intellectual property,
• loans and credit,
• finance and banking,
• corporate management, and
Systems of rights registration for real estate are the first examples of regulators’ interest in the perception of legal blockchain, because such registration improves the speed and quality of public-services delivery in the real estate market. The Land Registry of Sweden
has begun to define the general architecture of a blockchain system for maintaining a real estate registry and identify the financial, legal, and social challenges associated with implementing the system.
Public registries, such as the real estate registry, become as public as possible when they are backed by blockchain. Any user will see it at once and in its most up-to-date form. Accordingly, market transparency will increase many times over, and the possibilities for committing crimes on this market will decrease. The data blocks in blockchain can be used as registry extracts or electronic documents that certify real estate rights. The procedure of getting acquainted with the history of transactions with respect to particular objects will be accelerated and simplified. This is essential for the business of real estate companies, mortgage brokers, credit institutions, and insurers.
First and foremost, when blockchain technology is used properly, lawyers are freed from doing a significant amount of routine work: checking counterparties, referring to third-party specialists, notarization, etc. Using blockchain, lawyers can concentrate their efforts on solving more significant tasks that require high qualifications and professional involvement.
Blockchain is an adaptive and transformative technology that will help speed up the legal system entirely. Lawyers must now step out of their comfort zone and learn the technology that’s in use in many industries and is sure to develop further. The digital economy
needs digital legal support, and this stage is on its way. Lawyers and lawmakers now face a difficult task: they need to develop definitions and regulations for the very process of execution of smart obligations and consider their responsibilities.