Smart contracts

Alexander Savelyev, Ph.D,

Legal Attorney IBM Russia, Associate Professor of the Faculty of
law, Senior Researcher of International Laboratory for IT and IP
Law, Higher School of Economics, Moscow

Conference: Law in the Digital Era, 10-12 December 2017, University of Lapland
What is Smart Contract? contract”?

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 What is Smart Contract?

 A piece of code which automates performance of some

obligations by the parties?
 Self-sufficient binding agreement existing in the form of
computer code?
 Both?

ISO/TC 307. Blockchain and distributed ledger technologies

https://www.iso.org/committee/6266604.html

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 Examples of Smart contracts

1. Crowdfunding agreement
i. Smart contract administers collection of investments made in a form of
cryptocurrency
ii. If certain amount is reached – it is transferred to beneficiary
iii. If not – investments are returned to their initial owners
2. Agreement of mutual insurance
i. Smart contract administers information about insurance risks and payments
ii. If an event occurred (e.g. draught) – certain amount of currency is
transferred to beneficiary
iii. Information is received from agreed online sources

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Belarus approach
• Smart contract - program code, functioning on the blockchain, for the
purposes of conclusion and/or performance of contracts and other
acts of legal significance.
• A person, which performed a transaction using a smart contract, is
considered to be duly informed about its terms, including those
represented in a program code, unless it is proven otherwise.

[From the draft of the Decree of the President on the Park of High
Technologies]

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 What is so unique in Smart contracts?

 Vending Machine – a “Smart” contract of the “old age”?

Features of Smart contracts:

1) Digital
2) Contractual terms are embedded in software code
3) Conditional nature (“if X, then Y”)
4) Self-sufficiency & Self-enforcement
5) Irrevocable [multiple instances] Blockchain enabled

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Smart contract as a computer program
computer program is a
set of data and
instructions presented
in an objective form
and capable of causing
a computer or other
computing device to
achieve a specific
result.

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Legal consequences:
• Registration
• Licensing (including click-wrap licenses)
• Applicability of open source licenses
• Remedies for IP infringement
• No liability for faulty code under Russian law -->
caveat emptor approach

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Smart contract as a contract. How to implement
in the current reality?
1) “Corporate” approach: «Paper agreement/or signed with digital
signature + Smart contract

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Smart contract as a contract. How to implement
2) “Simplified approach”: Click-wrap license agreement + Smart
contract

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Smart contract as a new paradigm of contracting
Convergence of IT technologies  M2M contracting

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New approach to IP rights distribution
1. Blockchain enables cryptocurrency payments  simplicity of using
open source/creative commons licenses + licensee fee.
2. Smart contracts allow automatic and instantaneous payments to
designated parties + expiration of a license after a certain amount
of time  old intermediaries disappear, new emerge (e.g. operators
of storage of digital content)
 Russian IP Blockchain/Smart contract project: “IPchain.ru” (based on
Hyperledger Fabric)
 Savelyev, Alexander. Copyright in the Blockchain Era: Promises and
Challenges https://ssrn.com/abstract=3075246

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"IPChain” – Russian prototype of blockchain for IP
www.ipchain.ru

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Challenges of Smart contracts as “contracts”
• Irreversible nature of smart contracts.
Ideal Smart Contract = Pacta sunt servanda in absolute form

• Illegal smart contracts

• Self-sufficiency “Smart Contracts represent new challenge to legal

regulation. Systems creating such contracts live by their own rules,
beyond the boundaries of law” (Dmitry Medvedev, prime-minister of
Russia

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Some further details:
• Savelyev, Alexander. Contract law 2.0: ‘Smart’ contracts as the
beginning of the end of classic contract law // Information and
Communications Technology Law. 2017. Vol. 26. No. 2.

• Savelyev, Alexander. Copyright in the Blockchain Era: Promises and

Challenges // Computer and Security Law Review, 2017.

Also available on SSRN

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 THANK YOU!

ALEXANDER SAVELYEV,
alexandersavelyev83@gmail.com
https://www.hse.ru/org/persons/57906411

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