What technology development will create the most legal change in your jurisdiction?
Technology (second edition)
The most recent legal changes concerning technology development in Indonesia concern the growth and progression of e-commerce, as represented by companies such as Lazada, Tokopedia and Shopee. To enter the e-commerce sector in Indonesia, investors must first decide what role they will play, i.e. online retailer and/or web portal provider.
The Indonesian government issued Presidential Regulation No. 74 of 2017 on E-Commerce Roadmap for 2017-2019 (the “E-Commerce Roadmap”). This roadmap aims to provide direction and strategic guidance to various government agencies to support and accelerate the development of e-commerce in Indonesia. The roadmap covers funding, taxation, consumer protection, education and human resources, logistics, communication infrastructure, cybersecurity and the implementation and management of e-commerce activities.
It is anticipated that smart contracts will have a substantial impact on – amongst other – real estate transactions, payment transactions and financial instruments such as letters of credit. An increased use of smart contracts could trigger a fundamental change in the way Dutch contract law is applied to such contracts. Traditional contract law concepts may not necessarily work in case of self-executing contracts which enable to execution of complex financial transactions without any intervention. In this respect, the manner in which Dutch law deals with the interpretation and performance of agreements and the remedies available to claimants in case of non-performance by the other party may need to be revisited.
The use of encryption and blockchain technologies will probably lead to important changes in the Brazilian legal system. On encryption, several discussions are taking place in the Supreme Court regarding the lawfulness of using strong encryption systems to ensure privacy, in opposition of allowing law enforcement agencies to wiretap private communications systems. As for blockchain, we believe that such technology will probably lead to a material change on how legal documents are treated. By creating a safe environment for identifying individuals/legal entities online and assuring integrity of documents, it will certainly affect and lead to a material change on how the judiciary and other stakeholders deal with documentation in the country.
The most legal change will probably relate to advancements in Artificial Intelligence (AI). AI has disrupted so many fields and most people rely heavily on it every day. The legal provisions surrounding it are either very limited or non-existent which can create colourful legal debates. For instance, issues related to ownership of IP´s that are created by an AI system is an on-going debate that needs to be addressed. Lack of liability provisions will also trigger need for a legal reform.
In addition to AI, cybercrime poses a great challenge and still remains, to some extent, out of reach for legislators, as its scale has become global. With the fourth industrial revolution fast approaching, there is growing risk of cyber-attacks and at the same time more difficulty to prevent them.
It is hard to name only one technology development that would have the biggest legal impact, since any such important development has the ability to produce equally important legal change.
In Romania, as well as worldwide, one of the closest technology developments that have an appreciably effect on society is the development of the Internet of Things (IoT). We now live in a world in which all of our devices are connected to the Internet and the cloud. IoT has developed beyond just laptops, smartphones and tablets and now, includes everything from fitness trackers to even "smart" toys ("smart" fashion toys, like "My friend Cayla" - that has been recently designated as a spy tool by authorities across Europe).
One of the biggest problems that the IoT has is security. When all of your devices constantly collect data and communicate between themselves and even interact with the environment around them, one must be sure that they are not easily "corrupted" and that one`s data is not "stolen". Moreover, there is a need to develop devices and networks with an intense focus on security and create a compatible platform for the IoT. Currently, there are apps and devices that are unable to communicate between themselves due to lack of standardization. Hence, security and standardization are two major aspects to be dealt with by coming legislation.
In addition, the use of IoT also means that all of our data is collected and further processed for commercial purposes, as companies rely more and more on Big Data Analytics (i.e. the process of collecting, organizing and analyzing large sets of data to discover patterns and other useful information) to understand and predict human behavior, laws will need to cover not only more efficient data privacy mechanisms.
Although efforts are being made in enhancing security and protecting privacy, one still cannot keep up with the fast pace of technology.
Many digital technology trends will require the enactment of specific laws, otherwise our current legal system will be applied analogically to regulate these new legal trends. It is no secret that Artificial Intelligence and its derivatives would preferably need a specific regulation, including, among others, regulations regarding Internet of Things or autonomous vehicles.
Not only Artificial Intelligence, but also the regulation of blockchain will certainly be considered one of the most challenging legal changes that must be faced in order to totally secure the transactions made by blockchain technology. In February 2018, the Banco de España (Spanish Banking Authority) and the CNMC issued a joint declaration about "cryptocurrencies". In this declaration both bodies declared that "cryptocurrencies" are not regulated in the European Union. This implies that if a person buys or keeps "cryptocurrencies", he/she does not benefit from the guarantees and safeguards associated with regulated financial products. Additionally, both entities also argued that on many occasions the different actors involved in "cryptocurrencies" businesses are located in different countries, so that the resolution of any conflict could be outside the competence scope of the Spanish authorities and would be subject to the regulatory framework of the country in question, which may be a problem for the person acquiring these products. In light of the above, transactions made by blockchain technology, including but not limited to financial transactions, would be one of the biggest legal changes not only for Spain but also for the European Union.
Additionally, 3D and 4D printing technology will have a huge impact on many fields, as it could imply a substantial change to the implementation of intellectual property and health regulations. In Spain 3D printing technology has being used in the food, architectural or clothing industries, where lot of start-ups are becoming specifically focused on 3D printing technology, whereas 4D printing technology has been tested and issued in the field of health. Certainly this technology will have to be regulated in order to protect everyone's rights as this printing technology must be controlled in order not to breach third parties' rights and to not create products which are subject to authorisations in Spain or even illegal items.
While A.I. and Robotic Process Automation continued to dominate debates in the legal circles for the last few years, the disruptive appearance and spread of Blockchain technology has completely changed things in India. While A.I. continues to be a critical area of study, it is Blockchain that has been identiﬁed to have the potential to aﬀect the legal system in India to a larger extent.
In its Budget for 2018-19, the Government of India has committed to explore the usage of Blockchain technology and usher in a digital economy. The Reserve Bank of India (RBI) has prohibited banks and ﬁnancial institutions regulated by it, from dealing with cryptocurrencies. However, the potential of the underlying Blockchain technology is acknowledged and both the Government and the RBI permit its usage in other avenues.
Some of the foreseeable changes that Blockchain technology could cause include:
a. Redundancy of various central agencies and/ or ﬁnancial intermediaries;
b. Complete overhaul in the mode and manner of property registrations, making title veriﬁcations redundant;
c. Complete overhaul in intellectual property registration and enforcement, making the process fully eﬀective.
We believe AI will create the most legal challenge for the Turkish jurisdiction as the current liability is bound to create in unjust situations when applied to situations where AI is involved. Widespread use of AI and other similar autonomous devices (e.g. autonomous cars) will require a reconstruction of liability principles under Turkish Law.
It is plausible that the swift development of A.I. and self-controlling vehicles will result in the biggest legal change in the near future. However, one should not underestimate the legal and economic consequences that could occur if crypto currencies and blockchain technologies are allowed to further develop.
Based on its general technology neutrality, the Swiss regulatory framework allows for ample regulatory latitude and room for development for technology driven business models and companies, including compared with other jurisdictions. Specific areas of presumed legal development includes the legal classification of virtual currencies as digital objects and the evidentiary value of confirmations provided for digitised assets and the transfer thereof by means of distributed ledger technology (public faith in blockchain entries).
Big data, cloud computing, internet of things (IoT) and AI may create the most legal changes in China. These new technologies will all involve the processing and the storage of huge amount of data, and will eventually direct to the same legal issues in the protection of personal information and privacy, data and network security as well as the security examination in cross-border data transfer. Another legal change brought by AI could be the legislation specifically for proportionating liabilities when AI malfunctions or infringes others’ legitimate rights.
Blockchain, along with distributed ledger technology and self-executing codes (e.g. on-chain/ledger smart contracts) form part of a series of technologies which have the potential of bringing long-waited advancements to our jurisdiction and fundamentally cause a change in the legal framework applicable to all kinds of commercial, financial and governmental activities.
The self-enforceable, decentralized, counterparty-absent modus operandi of distributed protocols can help bring legal certainty, traceability and fraud-avoidance attributes to emerging economies that lack said characteristics, fostering both foreign and local investments into domestic markets.
Some of the business and/or governmental activities that could be fundamentally disrupted in our jurisdiction by such technologies are (including, without limitation) the following:
- Payments and remittances;
- Mortgage initiations;
- Trade finance;
- Supply chain;
- Open banking;
- Audit processes; and
- Governmental registries.
With respect to other characteristics of distributed protocols, the immutable and real-time verification of the conducted transactions can lead to a perfectly traceable history of the assets placed/traded on-ledger, enabling first world compliance standards over local and international regulatory provisions, such as: (i) know your customer verification; (ii) anti-money laundering; (iii) terrorism financing; (iv) data and privacy protection; (v) anti-bribery & corruption, and (vi) government budget execution, among others.
The increased global adoption of blockchain technology and AI appear to be the principal technological harbingers of legal change in Malaysia. Currently, there is no regulatory framework in place to govern the use of such technology and related services in Malaysia.
The Malaysian Ministry of Science, Technology and Innovation (“MOSTI”) has established a special taskforce to study the implementation of blockchain in the country as well as the Shariah compliance component of the technology as it has identified that blockchain has immense potential applications across various industries, especially the Islamic finance sector, and acknowledges that the technology could provide efficiencies. While the taskforce is presently at a nascent stage, MOSTI is determined to engage in discussions with various stakeholders on the development of blockchain and to develop a Shariah-compliant guideline for blockchain technology.
The UN Centre for Trade Facilitation and Electronic Business (UN/CeFact)’s whitepaper titled, ‘White Paper on the technical applications of blockchain to UN Centre for Trade Facilitation and Electronic Business (UN/CeFact) deliverables’ (“Whitepaper”), was brought to the attention of the Malaysian National Standards Committee on Blockchain and Distributed Ledger Technologies (“Committee”) and the Committee has been tasked with the development of standards and guidelines on blockchain and distributed ledger technologies in Malaysia.
With the rapid implementation of blockchain technology and AI, purveyors will soon be subject to greater regulation and scrutiny in the near future, and the widespread implementation of blockchain technology and AI will have a domino effect on the Malaysian legal framework.
The block chain is generating the most substantial legal change, in France like elsewhere. As this technology relies on a chronological transactions database that is both distributed and encrypted, it ensures the integrity of the identification of the author of a legal act as well as the apparently flawless traceability of the origin and subsequent stages of a transaction.
While countries are competing to attract Initial Coin Offerings (ICOs) with crypto-currencies based on this technology, this type of transaction challenges lawmakers because it by-passes the rules applicable to public tenders on stock markets, enables start-ups and businesses to raise funds beyond government agencies’ control, and offers anonymity despite anti-money laundering regulations. Currently, the tendency of the French regulator is to refrain from regulating this market directly in order not to restrain its development and, rather, to foster the development of reliable tools such as an optional visa which could be granted by the ACPR on currency issuances.
Similar challenges will be posed by the block chain in other areas of the law such as with regard to financial transactions, land registration, royalty collection societies, the issuance of bonds, etc..
The most legal change is to be expected regarding artificial intelligence. As mentioned above the liability for malfunctions of A.I. is still unsolved in German law. The lack of liability provision will trigger need for a legal reform. Essential questions that have to be solved soon are for example: Who will be liable for robots? Will intelligent machines be able to conclude valid contracts and under which requirements, e.g. in the Internet of Things (IoT)?
The increasing adoption of cryptocurrencies and blockchain technology in Singapore will drive the need for significant legal change. Currently, there is no regulatory framework in place to govern the use of such technology or provision of related services in Singapore.
However, in 2016, the MAS has proposed, in a consultation paper, a new regulatory framework and governance model for payment solutions. A second consultation paper on a Proposed Payment Services Bill was issued in November 2017. Among other changes, the consultation papers propose to bring all payment regulations under a single framework (i.e. the proposed Payment Services Act) that will provide for the licensing, regulation and supervision of all payment services, including stored value facility holders, remittance companies and virtual currency intermediaries. Hence, it is likely that virtual currency intermediaries (such as Bitcoin exchanges) will be subject to greater regulation and scrutiny in the near future.
Separately, the MAS has issued a statement in Aug 2017 and a follow-up guidance document in Nov 2017 clarifying that an offer or issue of digital tokens may be regulated by the MAS if the digital tokens constitute capital markets products under the Securities and Futures Act (Chapter 289).
The increased use of plant and equipment capable of operation with limited or no human intervention across industries raises many complex challenges to traditional legal concepts. It is unclear how established legal principles, including negligence, contract, privacy, cybersecurity, telecommunications and radiocommunications, will apply to the use of such technology. For example, information-sharing between automated products may increase the efficacy of such technology in the avoidance of hazards. However, such sharing may amount to an interference with privacy, leave the technology open to cybersecurity attacks, or raise questions with respect to intellectual property rights.
Use of automated technology also raises ethical questions with respect to liability allocation, particularly in instances where plant and equipment has been pre-programmed to interpret and respond to surrounding sensory information in specific ways. For example, it is unclear whether a manufacturer's duty of care should extend from the end user of an automated product to third parties impacted by its malfunction, particularly in the case of autonomous vehicles and road accidents. Negotiated contractual provisions may not adequately address this issue given the existence of established privity principles as against the likely presence of third party stakeholders.
The Internet of Things, or network-connected smart devices, will drive significant legal change. For example, autonomous vehicles (reliant on network-connected sensors) require a rethinking of legal relationships, from who bears tort liability in the event of an injury, to the nature of driver and vehicle insurance. Smart devices may be capable of entering into contracts with other devices, using self-executing provisions maintained on a blockchain. These technological developments will require a re-evaluation of basic principles of contract law, including 'meeting of the minds' and contracting capacity.
While it is expected that Internet of Things (IoT), artificial intelligence (AI) and robotic process automation (RPA) will continue to cause substantial changes in the legal arena, blockchain technologies have the potential to make a significant impact on various transactions (such as payment transactions and financial instruments) and will most likely create a new legal system (such as smart contracts, IP rights management and property title registrations). Such movement will entail substantial changes in laws and regulatory bodies.
In our view, the development of A.I. seems to be the most challenging technology development as far as change in the Polish legal system is concerned. The issue requires thorough analysis of the civil, criminal, and administrative regimes in order to establish specific regulations covering e.g. liability (both civil and criminal) for A.I. malfunctions, submitting declarations of intent, granting copyright. It is therefore, further development of A.I. that is to be expected to create the most legal change in Polish law.