Property (Digital Assets Etc.) Bill: Property Rights in a Digital Landscape

Why should I read this?

 

Property rights over digital assets

 

The Bill confirms that a digital or electronic thing is capable of attracting personal property rights even if it does not fall within the traditional categories of choses (or “things”) in action or choses in possession.

 

Recent court decisions in this area - most prominently Tulip Trading v Van der Laan and Others [2023] EWCA Civ 83 and D’Aloia v Persons Unknown [2024] EWHC 2342, have also held that crypto-assets attract property rights. In D’Aloia, the court found that USDT (a stablecoin pegged to the US Dollar) was “neither a chose in action nor a chose in possession, but rather a distinct form of property not premised on an underlying legal right. It can be the subject of tracing and can constitute trust property in the same way as other property”. The judgment in D’Aloia therefore aligns with the approach under the Bill, and likely took direction from the draft Bill, noting the judgment in this case was given after the draft Bill was published.

 

The intention of the Bill is to formalise this position in statute. In doing, the Bill offers practical benefits for parties to disputes, particularly in cases concerning fraud or digital asset recovery. For example, if digital assets are capable of attracting personal property rights, claimants may pursue proprietary claims against third parties, including in cases involving “persons unknown” (such as in D’Aloia).

 

Jurisdictional gateways

 

The clarification of the rights attaching to digital assets, as provided by the Bill, will also assist with the challenge of establishing jurisdiction within England and Wales when litigating digital asset claims and facilitates the Courts of England & Wales in dealing with more digital asset disputes, even where the circumstances may not otherwise traditionally have fallen squarely within the jurisdiction.

 

Establishing digital assets as property is important in the context of jurisdictional gateways. Establishing jurisdiction Gateway 11 in paragraph 3.1 of Practice Direction 6B provides:

 

Claims about property within the jurisdiction

(11) The subject matter of the claim relates wholly or principally to property within the jurisdiction, provided that nothing under this paragraph shall render justiciable the title to or the right to possession of immovable property outside England and Wales.

 

Under the Bill, given digital assets will attract personal property rights, parties will be able to more readily rely on Gateway 11 to establish the jurisdiction of the Courts of England and Wales. Parties will still need to prove that digital assets themselves are “within the jurisdiction” and the government’s recent consultation on Digital Assets and (Electronic) Trade Documents in Private International Law is likely to address this and provide further clarity. If the proposals are followed through, a new gateway is likely to be introduced to address the “omni territorial” nature of digital assets.

 

In summary, whilst the Bill does not radically alter the existing legal principles, it provides helpful clarification to parties to disputes. This is likely to streamline proceedings and improve legal certainty for parties. It also evidences Parliament’s desire to maintain England and Wales as the leading global forum for disputes, including those concerning decentralised technology and digital assets.