вя.jpg

Вадиян Роберт

 

  

Студент 4 курса бакалавриата юридического факультета им. М.М. Сперанского Института права и национальной безопасности Российской академии народного хозяйства и государственной службы при Президенте РФ

Автор статьи: 

"THE LOSS OF CHANCE DOCTRINE IN RUSSIAN AND ENGLISH LEGISLATION"

  

 

 

ANNOTATION: This article analyses the loss of chance doctrine in English and Russian law and compares their approaches to the evaluation of damages caused by loss of chance. The present article also illustrates some of the problems that can arise during the application of the loss of chance doctrine. Along with significant amendments to the legislation on contractual damages in Russia, it is submitted that compensation for loss of a chance in Russia is also possible.

 

KEYWORDS: English law, contract law, damages, loss of chance, common law, civil law.

 

 

АННОТАЦИЯ: Данная статья анализирует доктрину утраты шанса в английском и российском законодательствах и сравнивает английский и российский подходы к убыткам, вызванным утратой шанса. Настоящая статья также демонстрирует некоторые проблемы, которые могут возникнуть в процессе применения доктрины утраты шанса. Учитывая последние изменения российского законодательства в сфере договорной ответственности, в статье находит подтверждение мнение о том, что компенсация за утрату шанса в России также возможна.

 

КЛЮЧЕВЫЕ СЛОВА: Английское право, договорное право, убытки, утрата шанса, общее право, континентальное право.

T

here is a wide-spread opinion that law is a formal measure of justice in society.

Modern democratic law systems are based on social responsibility and justice, equality, solidarity, and human rights. Tort law also has to comply with modern standards and this was the reason for creating a doctrine called “the Loss of Chance”. It is also known as “the loss of opportunity”, which is well recognized primarily in the UK. The Loss of Chance doctrine, as a part of English tort law, is based on the following principle: if the plaintiff loses an opportunity to obtain a benefit due to the defendant’s actions and/or negligence, the defendant should be liable for the damages caused by these actions. There could be a situation when damages, in their traditional understanding, cannot be proven. For example, a person is diagnosed with some kind of lethal disease and there is a 30 percent probability that this disease will be cured, but doctor fails to diagnose it. A person goes for a checkup again and another doctor identifies this disease, but the chance has lowered drastically and there is no hope left. Thus, a patient dies, and his relatives bring an action against the doctor. Loss of a chance is often justified in these cases because a doctor breached a duty to protect a patient from the preexisting condition, and a patient would have placed a high value on the chance of a cure even if it was less than 50 percent. This concept of negligent medical care causes a patient to have a lower percentage of survival, or a less favorable outcome, which is undoubtedly an unfortunate event. The main issue related to the Loss of Chance doctrine is whether a party had an ability to avoid losses or gain profits. As a general rule, the plaintiff is required to prove that he had a reasonable or substantial chance of getting profit. Then a court should calculate the probability of this particular action and then decide whether to award the plaintiff with an estimated amount of compensation. Commonwealth countries (including the UK) stick to an idea: a plaintiff must convince a court that there is a greater than 50 percent probability that his (or her) proposition is true. This standard is called a “balance of probabilities” and its application is very problematic, which was mentioned by Lord Reid during a lawsuit at House of Lords. He criticized the balance of probabilities approach and noted: “you can prove that a past event happened, but you cannot prove that a future event will happen, and I

1

do not think that the law is so foolish as to suppose that you can. All that you can do is to evaluate the chance. Sometimes it is virtually 100 percent; sometimes virtually nil. But often it is somewhere in between. And if it is somewhere in between I do not see much difference between a probability of 51 percent and a probability of 49 percent”1 . Damages should be assessed while having a probability over 50 percent and a claim should be dismissed if the probability is under 50 percent, which arises a new question: what decision should be made by a court if the balance of probabilities is exactly 50 percent? If the plaintiff proves his position and a court says “we think it is more probable than not,” the case succeeds, but if probabilities are equal, the case fails, thus there is a very slight difference between success and failure. That is why the “balance of probabilities” standard is often contrasted with the “beyond reasonable doubt” standard, where a court has to be convinced that there is “no doubt” that something is true. V. V. Baibak is of the opinion that the statistical method could be very effective. If the plaintiff in sists on having a chance, a statistical report could be conclusive evidence, if this report demonstrates that the plaintiff or other parties would succeed in similar conditions2. Obviously, this evidence will not be considered as determinative, but it could demonstrate not only the will of the plaintiff to get the biggest compensation, but a well-justified calculation. Thus, the principle has prompted many debates all around the world, as English courts also use “minimum obligation rule” or “minimum performance rule”, which is an established legal principle first mentioned in Abrahams v Herbert Reiach Ltd case - a party which has an option to perform the contract in one of several ways, will act in a least onerous way. In the loss of chance cases, courts do not apply the “minimum obligation rule” as the reality of a chance lost by a plaintiff shall not be contested even if another party was supposed to act in the most onerous way possible to make this chance viable3,4. The clearest and most famous case on this topic is Allied Maples Group Ltd v Simmons & Simmons5 .

1. Davies v Taylor: HL 1974

 

2. V. V. Baibak – Loss of opportunity (loss of chance) as a form of contract loss – 11 P.

 

3. Abrahams v Herbert Reiach Ltd [1922] 1 K.B. 477

 

4. Jones v. IOS (RUK) Ltd. [2012] EWHC 348 (Ch)

2

Simmons & Simmons (hereinafter referred to as “S&S”) was a consulting company that advised Allied Maples Group Ltd (hereinafter referred to as “AMG”) during their takeover of a group of companies, but S&S negligent advice left Allied Maples Group with a bunch of liabilities, which company didn’t intend to have at all. AMG demanded that if they knew about that kind of risk they would negotiate with their counterparty and insist on having an indemnity. The plaintiff was entitled to recover a sum to reflect their loss of a chance of negotiating the liability and the court had no doubts that AMG would get an indem - 

DESPITE THAT, THE LOSS OF CHANCE DOCTRINE IS VERY RARELY APPLIED IN INTERNATIONAL DISPUTES DUE TO THE RESTRICTIONS IMPOSED BY OTHER CONFLICT OF LAW RULES

nity. In AMG v S&S the plaintiff’s loss depended upon the action of another party and the plaintiff should have convinced the court that there was a real possibility of this outcome, not necessarily a 100 percent positive one. Hobhouse LJ said: ‘The plaintiffs have satisfied the court that the loss they have suffered is not nominal. They are not obliged to prove more than that they have lost something of substance.

 

This they have done by showing that they had a measurable chance of negotiating significantly better terms.” In Chaplin v Hicks, which was the case that created the loss of chance doctrine, a woman who was wrongly deprived of the chance of being one of the winners in a beauty competition was awarded damages for loss of chance6. An action was brought by an actress Chaplin (the plaintiff) against the Hicks (the defendant), a theatrical manager. Hicks an

nounced a beauty contest in a newspaper, where the top 50 would be invited to an interview and 12 would be selected for employment. Chaplin got through to the final 50 but did not receive her invitation for an interview until it was too late to attend. She brought an action against Hicks based on loss of chance of gaining employment and thus was awarded 100 pounds. One judge reasoned that because there were fifty competitors for twelve prizes the average chance of success was approximately 25 percent, and the “doctrine of averages” could be used there. Sir Vaughan Williams LJ has stated in a court ruling “the fact that damages cannot be assessed with certainty does not relieve the wrongdoer of the necessity of paying damages for his breach of contract”. In this example, the сourt used Loss of Chance doctrine to calculate damages which are hard to avaluate as there is no concrete amount of money or assets. Surprisingly, that the quotation of a judge from a common law country became part of Russian civil legislation a hundred years later and remained unchanged, which will be discussed later. Loss of chance doctrine could also be found in many international legal documents. For example, article 7.4.3. of UNIDROIT Principles of International Commercial Contracts has a direct rule that “compensation may be due for the loss of a chance in proportion to the probability of its occurrence”7 . Vienna Convention on Contracts for the International Sale of Goods, which is frequently used all around the world, doesn’t contain that rule, but many law specialists admit that this rule is consequential upon the meaning of several articles. For instance, article 74 of CISG states that losses include loss of profit, thus it can be interpreted as an ability to get compensation due to loss of chance8. B. Zeller states that the CISG allows some measure of damages in cases of chance9. Despite that, the loss of chance doctrine is very rarely applied in international disputes due to the restrictions imposed by other conflict of law rules. There is an opinion that a chance in business relations has its value10. Business entities do their best

5. Allied Maples Group Ltd v Simmons and Simmons: CA 1995

 

6. Chaplin v Hicks [1911] 2 KB 786 The UNIDROIT Principles of International Commercial Contracts

 

7. The UNIDROIT Principles of International Commercial Contracts

 

8. The United Nations Convention on Contracts for the International Sale of Goods (signed at 11/04/1980)

9. Zeller B. Damages under the Convention on Contracts for the International Sale of Goods. New York: Oceana Publications, 2005. 247 p.

 

10. Saidov D. The Law of Damages in the International Sale of Goods. Oxford, 2008. P. 71

3

11. The Civil Code of the Russian Federation (Part One No. 51-FZ of November 30, 1994)

 

12. Plenum of the Supreme Court №7 dated 24/03/2016 “On Courts’ application of some provisions of the Civil Code of the Russian Federation about liability on breach of obligations»

 

13. The decision of Presidium of the Supreme Court of Arbitration of the Russian Federation No 2929/11 dated 06/09/2011

 

14. Plenum of the Supreme Court of Arbitration №62 dated 30/07/2013

 

15. The Civil Code of the Russian Federation (Part One No. 51-FZ of November 30, 1994) The

 

16. decision of Presidium of the Supreme Court of Arbitration of the Russian Federation № 8974/09 dated 03/11/2009 (А56-19229/2008)

4

THIS COURT RULING CONFIRMS TH AT THEORETIC ALLY THE DOCTRINE OF LOSS OF CHANCE E X ISTS IN RUSSIA, BEING A KIND OF «LEGAL GHOST»

ically took into account the probability of TNK-BP’s successful negotiations with Rosneft despite Rosneft’s opinion that TNK-BP almost had no chance of success due to lack of experience in joint venture oil projects18. Also, the сourt failed to consider a strong assumption that negotiations would have resulted in an agreement and its’ execution.

 

This court ruling confirms that theoretically the doctrine of loss of chance exists in Russia, being a kind of «legal ghost». Considering all of the above, the application of the “loss of chance” doctrine is very burdensome for Russian courts, because there is no legal act that would officially introduce this doctrine to the Russian legislation. However, with current missed profit concept courts can recover damages caused by loss of opportunity. During its’ evolution, Russian law adopted many provisions of English legislation, such as estoppel (p. 5 article 166 of the Russian Civil Code:

 

An application for invalidity of a transaction shall not have a legal effect if the person referring to the transaction’s invalidity does not act in good faith, in particular, if the behavior thereof after carrying out the transaction gave grounds to other persons to rely upon the transaction’s validity19) and indemnity, so an introduction of the “loss of chance” to the Russian law is just a matter of time. Unlike the Russian approach to this kind of losses, in England the doctrine of loss of chance is still widely used by courts. Case law in this category of cases is quite diverse, despite the fact that claims for compensation of losses caused by the loss of chance are relatively rare. In the light of the foregoing, it is expected that Russian law will someday officially introduce the possibility of recovering losses according to the loss of chance doctrine, as this approach seems to be quite fair and reasonable.

17. The decision of Commercial Court of Tyumen’ dated 27/06/2012 (А70-7811/2011)

 

18. A. G. Karapetov – “Oil wars and private law”

19. The Civil Code of the Russian Federation (Part One No. 51-FZ of November 30, 1994)

5

BIBLIOGRAPHY

LEGAL ACTS:

1. The Civil Code of the Russian Federation (Part One No. 51-FZ of November 30, 1994) // Собрание законодательства РФ. 1994. № 32. Ст. 3301.

 

2. The United Nations Convention on Contracts for the International Sale of Goods (signed at 11/04/1980), URL: https://www.uncitral.org/ pdf/english/texts/sales/cisg/V1056997-CISG-ebook.pdf.

 

3. The UNIDROIT Principles of International Commercial Contracts, URL: https://www.unidroit.org/english/principles/contracts/principles2016/principles2016-e.pdf.

CASES:

1. Abrahams v Herbert Reiach Ltd [1922] 1 K.B. 477.

 

2. Allied Maples Group Ltd v Simmons and Simmons: CA 1995.

 

3. Chaplin v Hicks [1911] 2 KB 786.

 

4. Davies v Taylor: HL 1974.

 

5. Jones v. IOS (RUK) Ltd. [2012] EWHC 348 (Ch).

 

6. The decision of Commercial Court of Tyumen’ dated 27/06/2012 (А70-7811/2011) // ConsultantPlus.

 

7. The decision of Presidium of the Supreme Court of Arbitration of the Russian Federation No 2929/11 dated 06/09/2011 // ConsultantPlus.

 

8. The decision of Presidium of the Supreme Court of Arbitration of the Russian Federation № 8974/09 dated 03/11/2009 (А56-19229/2008) // ConsultantPlus.

 

9. Plenum of the Supreme Court №7 dated 24/03/2016 “On Courts’ application of some provisions of the Civil Code of the Russian Federation about liability on breach of obligations» // ConsultantPlus.

НОРМАТИВНО-ПРАВОВЫЕ АКТЫ:

1. Гражданский Кодекс Российской Федерации (Часть 1 от 30 ноября 1994 года N 51-ФЗ). // Собрание законодательства РФ. 1994. № 32. Ст. 3301.

 

2. Венская Конвенция о договорах международной купли-продажи (принята 11/04/1980), URL: https://www.uncitral.org/pdf/english/texts/sales/ cisg/V1056997-CISG-e-book.pdf.

 

3. Принципы международных коммерческих договоров УНИДРУА, URL: https://www.unidroit. org/english/principles/contracts/principles2016/ principles2016-e.pdf.

СУДЕБНАЯ ПРАКТИКА:

1. Abrahams v Herbert Reiach Ltd [1922] 1 K.B. 477

 

2. Allied Maples Group Ltd v Simmons and Simmons: CA 1995.

 

3. Chaplin v Hicks [1911] 2 KB 786.

 

4. Davies v Taylor: HL 1974.

 

5. Jones v. IOS (RUK) Ltd. [2012] EWHC 348 (Ch).

 

6. Постановление Президиума Высшего Арбитражного Суда Российской Федерации №2929/11 от 06/09/2011 // СПС «КонсультантПлюс».

 

7. Постановление Президиума Высшего Арбитражного Суда Российской Федерации № 8974/09 от 03/11/2009 (А56-19229/2008) // СПС «КонсультантПлюс».

 

8. Решение Арбитражного суда города Тюмень от 27/06/2012 (А70-7811/2011) // СПС «КонсультантПлюс».

 

9. Постановление Пленума Верховного Суда РФ от 24.03.2016 N 7 (ред. от 07.02.2017) «О применении судами некоторых положений Гражданского кодекса Российской Федерации об ответственности за нарушение обязательств»; // СПС «КонсультантПлюс».

REFERENCES:

НАУЧНАЯ ЛИТЕРАТУРА:

1. Байбак В. В. – Утрата благоприятной возможности (loss of a chance) как разновидность договорных убытков (11 P.), URL: https://publications.hse. ru/articles/166533564.

 

2. Карапетов А. Г.– “Нефтяные войны и частное право”, личный блог, URL: https://zakon.ru/ blog/2012/8/14/neftyanye_vojny_i_chastnoe_pravo.

 

3. Saidov D. The Law of Damages in the International Sale of Goods. Oxford, 2008. P. 71.

 

4. Zeller B. Damages under the Convention on Contracts for the International Sale of Goods. New York: Oceana Publications, 2005. 247 p.

6

ANNOTATION: This article is devoted to the problem of implementation of digital technologies into modern economy and its legal regulation. Ancillary, the main digital technologies and their influence and impact on legislation, economy and society will be studied, as well as a review of judicial practice on the grounds of any infringements in the field of digital technologies. In addition, it will be subjected to scientific review and probing in order to learn the prospects and feasibility of using distributed ledgers technology and other digital technologies as a solution to legal and economic problems. The genesis of the terms Digital Economy and Digital Technologies in economy was first mentioned in early 1990s in Japan. Later on, this term was described as an instrument of market-based businesses on the Internet. Also, this article is divided into 2 parts.

 

KEYWORDS: Digitalization, Internet, Blockchain, Public Blockchain, Distributed ledgers, Cryptography, DLT, Bitcoin, Smart Contract, Digital signature, GDPR, Data protection, Big Data.

 

АННОТАЦИЯ: Данная статья посвящена проблеме внедрения цифровых технологий в современную экономику и её правовое регулирование. Также, будут изучены основные цифровые технологии и их влияние на законодательство, экономику и общество, а также проведён обзор судебной практики по основаниям любых нарушений в сфере цифровых технологий. Кроме того, будет подвергнуто научному рассмотрению, исследованию и зондированию с целью изучения перспектив и целесообразности использования технологии распределённых реестров данных и других цифровых технологий в качестве решения правовых и экономических проблем. Впервые термин «цифровая экономика» был упомянут в начале 1990-х годов в Японии. Позже этот термин был описан как инструмент рыночного бизнеса в Интернете. Также, эта статья состоит из двух частей.

 

КЛЮЧЕВЫЕ СЛОВА: цифровизация, интернет, блокчейн, публичный блокчейн, распределённые реестры, криптография, цифровая лента с линейной записью, биткойн, смарт-контракт, цифровая подпись, общий регламент по защите данных, защита данных, большие данные

T

he entrance to the modern era of digital technologies

got to be accompanied by certain processes and new rules for regulating public relations should be applied. That is why it is extremely important that legal institutions regulate this area as soon as possible. For instance, blockchain technology was created by the group of cryptoanarchists who defended the ideas of privacy and personal freedom. The improvements of surveillance methods and the expansion of Internet communications open up huge opportunities for governmental computer surveillance of people. Cryptoanarchists believe that the protection from this phenomenon may be the development and use of cryptography. They and cipher punks believe that the laws of mathematics are stronger than human laws (legislation) and, thus, cryptanarchism is immortal. However, it occurred that this technology also could be really useful for States and their governments. Now almost every well-developed country invests in such technologies, and Russia is no exception. If you pay attention to the system of Russian so-called “National projects”, one particular of twenty-two of them is called National program “Digital economy of Russian Federation” and contain the Federal project which is called “Digital Public Administration”. There are 6 direction in the execution of the project: “Information

7

security”, “Legal regulation of the digital environment”, “Personnel for the digital economy”, “Information infrastructure”, “Digital technology” and “Digital public administration”. As we see, Russia is moving towards this tendency and it is our purpose to analyze its potential. There are already existing examples of how digital technologies help businesses. As we all know, venture capital was the main source of funding for startups and other business projects. But with blockchain technologies, ICO and STO have become a more reliable and easy way to raise money for entrepreneurs. And it is already a reality that ICO and STO can replace venture capital in all aspects. There are several perspective digital technologies such as Big Data, Internet of Things, Blockchain, Quantum technologies, Virtual Reality, Augmented Reality, Artificial Intelligence and Neural Technologies, Robots and wireless communications. Of course, almost everyone is acquainted with at least one of the technologies presented, but not everyone is aware about their influence on the economy and social life and the complexity of their legal regulation.

 

BLOCKCHAIN

 

Indeed, the blockchain would be the most interesting subject of discussion. This technology has recently joined a group of technologies that have been deemed as subversive and disastrous to a lot of international and domestic legal principles in numerous states. As it was mentioned earlier, the reason is hidden in the genesis of this technology related to cryptoanarchists and arises from its essence. The main aim of this article is to examine how blockchain and other digital technologies might be compatible with regulatory and legal models. The first things that comes to mind about blockchain is cryptography. This technology allows individuals and companies to protect almost any piece of information and data. Owing to this fact, data protection is considered as an example of an area of law that is claimed to be unlikely reconciled with blockchain and distributed ledgers. Hence, there are variety of identified conflicts and slew concerns about blockchain. These concerns about blockchain are placed in the context of eternal historical debates about new technologies versus legislation and law. If we dig deeper into the history of digital technologies, not least information technologies abound with statements that a particular development will be extremely “disruptive” and will lead to the obsolescence of established legal norms and regulatory framework. Probably the most striking illustration is the enthusiastic reception that cyber libertarians have given to the public Internet in the nineties. At the time, some predicted that not only would specific legal constructions be challenged,

8

but also nation states would become obsolete. In this particular dispute, the most illustrative example is the Declaration of independence of cyberspace, adopted by John Perry Barlow in 1996, this included claims that: “Governments of the Industrial World… You have no sovereignty where we gather…. Your legal concepts of property, expression, identity, movement, and context do not apply to us. They are based on matter, and there is no matter here1 .” This statement whatsoever was clearly exaggerated. The most fascinating thing about it is that John Perry Barlow later commented 10 years later: “We all ger older and wiser”. As a matter of fact, internet so-called “online” activities were subjected to more legal and regulatory rules, then comparable “offline” activities2. It goes without saying, new technologies do not fit perfectly into existing legislative paradigm all the time, and enforcement can be complex, but legislators and courts have so far managed to adjust, albeit with a lag, to each wave of innovation.

 

One of the most intractable legal issue about how data protection rules and concepts will impose to blockchain. There are discussions related to compatible blockchain platforms that include the processing of personal data. Jan Philipp Albrecht, a Member of European Parliament who played a prominent role in developing and refining the EU’s General data protection regulation (GDPR), suggested that it is nearly impossible. In his opinion: “GD GDPR, if they do not provide for [the exercise of data subjects’ rights] based on their architectural design. This does not mean that blockchain technology, in General, must adapt to GDPR, it simply means that it probably cannot be used to process personal data.3” Jan Philipp Albrecht and his disapproving view of blockchain as a single technology for processing personal data seems premature and trivialized. As with many other technologies, the ability to pro

cess personal data using blockchain technology in a manner compatible with GDPR will depend on the specific technical and organizational model underlying a particular blockchain application. However, before we continue to explore this issue, we need to make the concept of blockchain clearer. Peradventure, it is more correct to start explanation on blockchain with the clarification of the fact that there is no single blockchain as such. It is more correct to say that there are several types of blockchains, and each type of blockchains can eventually give rise to completely different legal consequences and disadvantages. In contrast to diverse recently introduced technologies, there is still no generally accepted definition of blockchain4. Expressively, this is not surprising, given the unorthodox origin of the first popular blockchain app - bitcoin, the rapid pace at which blockchain is evolving, and the fact that this term is used to cover a wide range of models for creating and managing ledgers of transactions. Howbeit the brilliant idea of using a hashed block chain to create a secure ledger dates back to the early nineties, the concept only became widespread with the publication in 2008 of an article called “Bitcoin: a peer-to-peer electronic cash system”, authored by an unknown person or person who used the name Satoshi Nakamoto5. If you delve into the technological aspect of the problem, you should refer to the National Institute of Standards and Technology (hereafter “ NIST”) (eng. National Institute of standards and technology). The technology review prepared by NIST defines blockchains as blocks of distributed digital ledgers of cryptographically signed transactions6. The essence of the technology is that after the agreement on validation of the created block, this block is immediately added to the chain and cryptographically linked to the previous block. If any participant tries to interfere with a transaction that is recorded in the block (proof of distortion),

1. John Perry Barlow, ‘A Declaration of the Independence of Cyberspace’, 8 February 1996, available at: https://www.eff.org/cyberspace-independence.

 

2. [“Cyberspace and the “no regulation” fallacy’ in Christopher Millard and Robert Carolina, ‘Commercial transactions on the global information infrastructure: a European perspective’, John Marshall J. Computer & Info. Law, Vol. 14, 269 (1996).

 

3. David Mayer, ‘Blockchain technology is on a collision course with EU privacy law’, IAPP Privacy Advisor, 27 February 2018. Available at: https://iapp.org/news/a/blockchaintechnology-is-on-a-collision-course-with-eu-privacy-law/.

 

4. “The NIST Definition of Cloud Computing” had reached its 16th, and final, version by September 2011. Available at: https://csrc.nist.gov/publications/detail/sp/800-145/final.

 

5. Arvind Narayanan, Joseph Bonneau, Edward Felton, Andrew Miller and Stephen Goldfeder, “Bitcoin and Cryptocurrency Technologies: A Comprehensive Introduction” (Princeton University Press, 2016). The Nakamoto paper is available here: https://bitcoin. org/bitcoin.pdf.

 

6. Yaga D., Mell P., Roby N., Scarfone K. Blockchain Technology Overview // NIST. October 2018. URL: https://nvlpubs.nist.gov/nistpubs/ir/2018/NIST.IR.8202.pdf. P.1.

9

to increase the probability of getting a lucrative deal, they negotiate with each other to create conducive conditions to gain profit. Losing a chance may potentially affect business success as an entity will not be able to obtain a benefit or avoid losses. Compensatory awards for loss of chance are justified. If damages cannot be evaluated with certainty no court shall dismiss the appeal based only on that matter, nevertheless, this principle will be discussed below. Russian law has a concept of damages and losses as well. To be precise, they are divided into two groups: compensatory damages and the missed profit. Missed profit means unreceived profits, which this person would have derived under the ordinary conditions of the civil turnover if his right were not violated11.

 

The difference is that the Russian legal system doesn’t have the Loss of Chance doctrine, therefore there are no rules that may or shall be applied by сourts while resolving the dispute. Some kind of the Loss of Chance doctrine is contained in article 20 of the Plenum of the Supreme Court №7 dated 24/03/2016“12. A party which unfaithfully negotiates or stops negotiation on concluding the contract shall compensate losses incurred by an aggrieved party. These losses may include losses incurred concerning negotiation, losses suffered while concluding the future contract, as well as losses incurred in connection with loss of an opportunity to conclude a contract with another party.

 

Despite having сivil law rather than сommon law system, the Russian legal system shares a principle which was mentioned by Sir Vaughan Williams LJ in Chaplin v Hicks case. In its judgment in “SMARTS” case, The Supreme Court of Arbitration of the Russian Federation has developed a rule that “The Court shall not dismiss an appeal of a company’s member solely because of damages cannot be assessed with certainty”13, which was later introduced to Russian legislation as a part of decision of the Plenum of the Supreme Court of Arbitration №62 dated 30/07/201314. However, this rule is

Simmons & Simmons (hereinafter referred to as “S&S”) was a consulting company that advised Allied Maples Group Ltd (hereinafter referred to as “AMG”) during their takeover of a group of companies, but S&S negligent advice left Allied Maples Group with a bunch of liabilities, which company didn’t intend to have at all. AMG demanded that if they knew about that kind of risk they would negotiate with their counterparty and insist on having an indemnity. The plaintiff was entitled to recover a sum to reflect their loss of a chance of negotiating the liability and the court had no doubts that AMG would get an indem - 

DESPITE THAT, THE LOSS OF CHANCE DOCTRINE IS VERY RARELY APPLIED IN INTERNATIONAL DISPUTES DUE TO THE RESTRICTIONS IMPOSED BY OTHER CONFLICT OF LAW RULES

nity. In AMG v S&S the plaintiff’s loss depended upon the action of another party and the plaintiff should have convinced the court that there was a real possibility of this outcome, not necessarily a 100 percent positive one. Hobhouse LJ said: ‘The plaintiffs have satisfied the court that the loss they have suffered is not nominal. They are not obliged to prove more than that they have lost something of substance. This they have done by showing that they had a measurable chance of negotiating significantly better terms.” In Chaplin v Hicks, which was the case that created the loss of chance doctrine, a woman who was wrongly deprived of the chance of being one of the winners in a beauty competition was awarded damages for loss of chance6. An action was brought by an actress Chaplin (the plaintiff) against the Hicks (the defendant), a theatrical manager. Hicks an

Another example is Prokhorov (TNK-BP) v. BP Russian Investments LTD (BP)17. TNK-BP is a joint venture of English BP and Russian shareholders. BP violated the shareholder’s agreement concluded with Russian participants in TNK-BP and then decided to enter into direct negotiations with Rosneft on participation in several oil projects in the Russian Federation. The point is that TNK-BP had the preemptive right to enter into such projects in the Russian Federation. After that, the management of TNK-BP itself began to consider the option of entering into a partnership with Rosneft. But the board of directors of TNK-BP with the help of directors BP stopped TNK BP from joining the project and TNK-BP was forced to refrain from potentially promising negotiations with Rosneft due to a conflict of interest. TNK-BP’s shareholder Andrei Prokhorov filed a lawsuit to recover his missed profit, accusing BP of bypassing TNK-BP’s preemptive right to enter into potentially profitable projects in Russia. Thereby TNK had lost a chance to have a strategic partnership with Rosneft Joint Stock Company and, subsequently, lost a chance to participate in EPNZ-1, EPNZ-2 and EPNZ-3 shelf development programs at the Kara Sea. In this complicated company law case estimated amount of missed profit was 7 700 000 000 USD. Nevertheless, the сourt pointed the parties’ attention to the fact that Rosneft proposed to initiate shelf development to other companies, such as LUKOIL, Bashneft, and Surgutneftegaz and calculated the missed profit as 7 700 000 000 USD (total amount) / 4 (number of participants), representing 25 percent chance of participating in the development project. In this particular case, the amount of missed profits was established unambiguously, which contrasts with English cases mentioned above. A. G. Karapetov disagrees with сourt’s ruling and believes that the сourt mechan

1. V. Baibak – Loss of opportunity (loss of chance) as a form of contract loss – 11 P. URL: https://publications.hse.ru/articles/166533564.

 

2. A. Karapetov – “Oil wars and private law”, personal blog, URL: https://zakon.ru/blog/2012/8/14/ neftyanye_vojny_i_chastnoe_pravo.

 

3. D. Saidov The Law of Damages in the International Sale of Goods. Oxford, 2008. P. 71.

 

4. B. Zeller - Damages under the Convention on Contracts for the International Sale of Good

ил.jpg

Ильин Егор

 

  

Студент 3 курса бакалавриата юридического факультета им. М.М. Сперанского Института права и национальной безопасности Российской академии народного хозяйства и государственной службы при Президенте РФ

Автор статьи: 

"DIGITAL TECHNOLOGIES AND LAW: REALITY OR MYTH: PART I"

  

 

 

7. Yaga D., Mell P., Roby N., Scarfone K. Op. Cit. P.1

 

8. Yaga D., Mell P., Roby N., Scarfone K. Op. Cit. P.53. Sermpinis Th., Sermpinis Ch. Traceability Decentralization in

 

9. Supply Chain Management Using Blockchain Technologies // ArXiv. 2018. URL: arxiv.org/pdf/ 1810.09203.pdf

 

10. Popper N. Understanding Ethereum, Bitcoin’s Virtual Cousin // The New York Times. 2 October 2017. URL: https://www.nytimes.com/2017/10/01/technology/ what-isethereum.html

 

11. Mik E. Smart Contracts: Terminology, Technical Limitations and Real World Complexity // Law, Innovation and Technology. 2017. Vol. 9. Iss. 2. P. 269–300; Lexi B., Jurisevic A., Kong M., Liu E., Gauthier F., Gramoli V., Holz R., Scholz B. Vandal: A Scalable Security Analysis Framework for Smart Contracts // ArXiv. 11 September 2018. URL: https://arxiv. org/pdf/1809.03981.pdf

 

12. Mamaeva N.V., Burkov A.V. Comparative analysis of the cryptocurrency market // Scientific enquiry in the contemporary world: theoretical basiсs and innovative approach, 2017. No 11. С. 86–88.

 

13. Nick Szabo, 1997. Formalizing and securing relationships on public networks. First Monday, volume 2, number 9.

10

ed by a chain of blocks. However, at that time, the limited technological paradigm could not allow the creation of such a structure. However, this situation lasted until 2008, the year of the creation of bitcoin – the most famous blockchain, though not the only one. Smart contract technology was supposed to facilitate the process of making deals. For example, for real estate transactions, it was necessary to apply to a notary and wait for the completion of all

THIS SMART CONTRACT IS THE SOURCE CODE, WHICH IS LOCATED IN THE BLOCKCHAIN ITSELF, WHICH, AS IT WAS ALREADY FOUND OUT, IS A CHAIN OF BLOCKS CONSISTING OF A MASS OF COMPUTER NODES

formalities. Given the ambiguity of the positions of many courts in the process of many court hearings on disputes related to such civil turnover, the understanding of the usefulness of this technology comes quite quickly. No one wants to lose money and time in courts because of the counterparty’s bad faith, so the conclusion of self-executing smart contracts allows bona fide parties to save not only time, money, but also nerves. It also allows you to establish a reliable and automatic system for the execution of these contracts on a permanent basis. If one of the parties violates the terms of the contract, penalties are automatically imposed on that party. It is thanks to cryptography that you can avoid all sorts of distortions and changes to the established terms of the contract of one party without the consent of the other. Despite the unequivocal uselessness of lawyer’s activities, which, of course, is not always solidly positive, but still in economic and financial terms, such contracts are the most profitable in terms of time and money costs due to all these advantages. As a rule, cryptocurrency is used to confirm transactions between users. A cryptocurrency is a

virtual or digital currency that uses cryptographic technologies to secure transactions. And despite the rapid growth of technology, blockchain and smart contracts are just beginning to flow into everyday life and are still an outlandish technology for ordinary people, however, even for many lawyers and even civilists. To clarify all the elements of the narrative, it is worth noting the definition of Turing completeness. And although the terminology and description as a whole cannot fully provide an understanding of this object, it is still necessary to designate at least a technical definition. The completeness of Turing means that the characteristic of the set of computing elements, if we believe the computability theory, contains the possibility of implementing almost any computable function on such a performer14. Simply put, the performer is complete if each computable function has its own element that calculates this function, or else, in other words, if the performer allows you to write each presented function. It is in this respect that Etherium is much more versatile and more functional for performing tasks. Thus, as with a lot of problems that arise in data protection legislation, the correct answer to the question of whether the blockchain can be used for processing personal data is not binary, but rather “It depends”. There is no doubt that a lot of work needs to be done not only with regard to personal data, but also with regard to other legal consequences of blockchain, including the role of contract law in managing assets and relationships “inside the chain” and “outside the chain”. Maybe unsurprisingly, cryptocurrencies and Initial Coin offering have received particular attention from lawmakers and financial services regulators with approaches ranging from attempted bans to constructive engagement15. Thus, this section offers a brief overview of the characteristics of public blockchain technology. Some researchers single out as a fundamental characteristic of public blockchains their distribution and not dependence on trust to other parties of the relationship or to the Central apparatus - everything happens autonomously16. In addition, it is

14. Brainerd, W.S., Landweber, L.H. Theory of Computation. — Wiley, 1974.

 

15. Chris Reed, Uma Sathyanarayan, Shuhui Ruan and Justine Collins, “Beyond Bitcoin: legal-impurities and off-chain assets”, International Journal of Law and Information Technology, Vol. 26(1), 160.

11

state level is the state of Estonia. Estonia has been using blockchain since 2012 to protect and preserve data in the judicial, legislative, and health sectors25. The last component of the technology is the consensus mechanism, which is the process of reaching an agreement within this distributed system. It is consensus that allows nodes in a distributed peerto-peer network to work together without knowing about each other or trusting each other. This mechanism includes a designated set of rules located inside the system code, coordinated by a network of nodes that operate under the control of a single software program, where the rules govern the creation of new blocks26. This set of rules can ensure network consistency, but more importantly, any participant’s behavior is acceptable and appropriate27. In summary, we can consider this mechanism as a fundamental mechanism that solves the problems of trust between users in a distributed peer-to-peer network28. One of the most important issues of using this technology in law in relation to the music industry and copyright protection is the dilemma about the legal regulation of this technology. On the one hand, excessive restrictions can stifle any innovation, but on the other hand, the complete absence of legal regulation can lead to injustice, which can stop the introduction of this technology in other sectors of life29. With the spread of blockchain technology, the interest of legislators in regulating this technology is also spreading. There are also positive examples, the Court of justice of the European Union exempted bitcoin transactions from value added tax, since the EU considers bitcoin as a legal tender30. However, despite this, blockchains will always strive for independence and alienation from public authorities. Therefore, bitcoin became the

16. Fairfield J.A.T. Bitproperty // Southern California Law Review. 2015. Vol. 88. No. 4. P. 805, 808

 

17. Maas T. What is Blockchain Technology? // Law & Blockchain. 21 June 2017. URL: https:// www.lawandblockchain.eu/post-template/

 

18. Distributed Ledger Technology: Beyond Block Chain. A Report by the UK Government Chief Scientific Adviser. London, 2017. P. 17.

 

19. Maas T. Blockchain: the 3 Core Components // LinkedIn. 24 October 2017. https://www. linkedin.com/pulse/blockchain-3-core-components-thijs-maas

 

20. Bacon J., Michels J.D., Millard C., Singh J. Blockchain Demystified // SSRN. 20 December 2017. URL: https://ssrn.com/abstract=3091218

 

21. Rosic A. What is Blockchain Technology? A Step-by-Step Guide for Beginners // Blockgeeks. 2016. URL: https://blockgeeks.com/guides/what-is-blockchaintechnology/

 

22. Uggla C., Hallström C.-J. Is It as Trustless as They Say? A Functional Analysis of the Blockchain and Trust. Jönköping, 2018 // URL: https://pdfs.semanticscholar.org/7668/ afe9165f549d755402965161ba3d242c4d5b.pdf

 

23. Bacon J., Michels J.D., Millard C., Singh J. Op. cit. P. 6.

 

24. Distributed Ledger Technology: Beyond Block Chain. P. 18.

 

25. We Have Built a Digital Society and So Can You // e-Estonia. URL: https://e-estonia.com/

 

26. Maas T. Blockchain: The 3 Core Components.

 

27. Bacon J., Michels J.D., Millard C., Singh J. Op. cit. P. 13.

 

28. Chen L., Xu L., Gao Z., Lu Y., Shi W. Tyranny of the Majority: On the (Im)Possibility of Correctness of Smart Contracts // IEEE Security and Privacy. 2018. Vol. 16. Iss. 4. P. 30–37.

 

29. Telpner J. The Lion, the Uncorn, and the Crown. Striking a Balance Between Regulation and Blockchain Innovation. Toronto, 2018. URL: https://www.sullivanlaw. com/assets/ htmldocuments/Telpner_The%20Lion%20the%20Unicorn%20and%20 the%20 Crown_Blockchain%20Research%20Institute.pdf

 

30. Skatteverket v. David Hedqvist, Case C-264/14 16

12

AN INTERESTING EX AMPLE OF BLOCKCHAIN CENTRALIZATION BY A THIRD PARTY AND THE USE OF THIS TECHNOLOGY AT THE STATE LEVEL IS THE STATE OF ESTONIA. ESTONIA HAS BEEN USING BLOCKCHAIN SINCE 2012 TO PROTECT AND PRESERVE DATA IN THE JUDICIAL, LEGISLATIVE, AND HEALTH SECTORS

of Uber37,38. Uber has not always been a supporter of cooperation with the state or other regulators, but now the company is actively lobbying for regulatory intervention in the insurance sector in the US legislation39,40. And as we can see now, Uber is still actively pursuing compliance with these requirements41. Above, the author considered the blockchain technology both from a technical perspective and through the prism of legislation. Now we need to understand the most important thing. How can this technology allow you to protect copyrights? The answer to this question can serve as an analysis of the disorganizing potential of blockchain in the field of intellectual law. In particular, let’s look at how this technology can help preserve aesthetic works of art, including musical, literary or artistic works42. This technology can, to varying degrees, have different effects on copyright, as was announced in the European Parliament resolution “on distributed ledger technologies and blockchains: building trust by eliminating intermediaries” of October 3, 201843. However, in this paper, the author proposes to consider the most positive aspects of using distributed registries. This resolution highlights patterns of using blockchain technology to protect copyrights: 1. the Technology can be used to manage and track intellectual property in order to facili

31. Reed C., Murray A. Rethinking the Jurisprudence of Cyberspace. Cheltenham, 2018.

 

32. Lopp J. Bitcoin and the Rise of the Cypherpunks // Coin Desk. 9 April 2016. URL: https:// www.coindesk.com/the-rise-of-the-cypherpunks

 

33. Stankovic S. An Introductory Guide to Cryptocurrency Regulation // Un- block. 15 January 2018. URL: https://unblock.net/cryptocurrency-regulation/

 

34. Garber J. Bitcoin Spikes after Japan Says it’s a Legal Payment Method // Business Insider. 03.04.2017). URL: http://uk.businessinsider.com/bitcoin-price-spikes-as- japanrecognizes-it-as-a-legal-payment-method-2017-4?r=US&IR=T

 

35. Swan M. Blockchain: Blueprint for a New Economy. Sebastopool, 2015.

 

36. Werbach K.D. The Song Remains the Same: What Cyberlaw Might Teach the Next Internet Economy // Florida Law Review. 2017. Vol. 69. No. 3. P. 887, 889.

 

37. Noto La Diega G. Uber Law and Awareness by Design. An Empirical Study on Online Platforms and Dehumanised Negotiations // Revue européenne de droit de la consommation. 2016. No. II. P. 383–413.

 

38. Kenney M., Zysman J. The Rise of the Platform Economy // Issues in Science and Technology. 2016. Vol. 32. No. 3. URL: https://issues.org/the-rise-of-the-platformeconomy/

 

39. Insurance Aligned // Uber Newsroom. 24 March 2015. URL: https://www. uber.com/ newsroom/introducing-the-tnc-insurance-compromise-model-bill

 

40. Arvelo F. RESIST — Uber and Subverting Regulations // The Bespoke Lawyer. 10 March 2017. URL: https://www.bespokelawyer.com/resist-uber-and- subverting-regulations/

 

41. An Update on Insurance // Uber Newsroom. 1 March 2018. URL: https:// www. uber. com/newsroom/an-update-on-insurance

 

42. Waelde C., Brown A., Kheria S., Cornwell J. Contemporary Intellectual Property. Oxford, 2016. P. 3. European Parliament resolution of 3 October 2018 on distributed ledger technologies and blockchains6 building trust with disintermediation (2017/2772(RSP)) //

 

43. European Parliament. URL: http://www.europarl.europa.eu/doceo/document/TA-8-2018-0373_ EN.html 31

13

tate the protection of copyrights or patents; 2. the Technology can be used to create a public ledger that can identify the intellectual property and copyright of artists on it; 3. blockchain can also help strengthen the links between the Creator and his works; 4. due to the transparency of the technology, creators can track the use of their works and adjust the amount of royalties accordingly. However, despite the transparency and the prospect of no intermediaries, it is unlikely that the latter will be completely abandoned in the near future44. One of the reasons for this is, oddly enough, the huge investment of intermediaries themselves in blockchain technology45. One of the main merits of the above-mentioned Berne Convention is the fact that copyright arises from the author’s work directly from the moment of creation of the work, and not after registration by the state46. The formalities associated with ex ante control of the work could indicate a developed censorship. The provisions of the Convention abolished these formalities and secured exclusive copyrights47. It follows that the real heir to this idea of copyright protection is the blockchain technology, which is able to protect authors from both censorship and violation of their exclusive rights. Moreover, the technology can make the copyright protection procedure not only more transparent and secure, but also cheaper, but also user-friendly, which is also important48,49. Considering the features of blockchain technology, we have identified cryptographic technologies as a guarantee of security, which can mean resistance to fraud or distortion, which is, of course, an important function of the technology in relation to copyright protection50. However, in the field of copyright protection, there is a mechanism for depositing works in In - 

14

Spotify52, could not take place due to the preservation of content. In this context, difficulties with copyright protection are compounded by problems with tracking the use and reproduction of the work by users due to the widespread exchange between them53. In the age of the Internet, the exchange of copyrighted materials takes place with enviable ease and copyright holders are not physically able to control each use of their material in standard ways54. Another reason for copyright infringement is the difficulty of identifying the author or authors of the work55. The most common reason for this is the lack of uniform requirements for registering copyrights on the Internet (as a cost of the author’s absolute exclusive rights arising from the moment of creation). This results in the absence of a single updated metadata database for musical works. Music metadata is information about the authors of a piece of music. Music metadata is usually fragmented and completely out of sync with each other. Since different copyright holders decide which data to make public and which to keep private56. Despite the fact that some legal acts, such as the law “On protection of copyright and patent rights, as well as rights in the field of design works” of 1988, stand out as authors - creators of text, Creator of music and producer of sound recordings, there are still other realities in business57. In addition to these entities, the circle of people involved in a piece of music also consists of engineers, mastering specialists, and intermediaries in the form of music distribution services. It is for this reason that artists receive part of the royalty only after a long time58. The blockchain technology in question is able to solve all these problems in the field of copyright protection. One example of a blockchain-based music platform is Mycelia. This platform allows artists of musical works to issue a token, which is

50. O’Hara K. Smart Contracts –Dumb Idea // IEEE Internet Computing. 2017. Vol. 21. Iss. 2. P. 97–101.

 

51. Bacon J., Michels J.D., Millard C., Singh J. Op. cit. P. 13. О проблемах, связанных с отказами узлов, см.: Li J. Data Transmission Scheme Considering Node Failure for Blockchain // Wireless Personal Communications. 2018. Vol. 103. Iss. 2. P. 179–194.

 

52. United States District Court, S.D. New York. Ferrick, et. al.v. Spotify, USA Inc. et. al. Case No. 16-cv-8412 (AJN).

 

53. All Eyes on the Sharing Society // World Intellectual Property Review. March, April 2015. URL: www.rightsdirect.com/wp-content/uploads/sites/6/2015/04/ WIPR-Kim-Zwollo-04-2015.pdf

 

54. Haas R. Twitter: New Challenges to Copyright Law in the Internet Age //

 

55. The John Marshall Re- view of Intellectual Property Law. 2010. Vol. 10. P. 231–254. The UK Copyright, Designs and Patents Act 1988. Sec. 11.

 

56. Wallach D.A. Bitcoin for Rockstars // Wired. 12 October 2014. URL: https:// www.wired. com/2014/12/bitcoin-for-rockstars/

 

57. Wallach D.A. Bitcoin for Rockstars // Wired. 12 October 2014. URL: https:// www.wired. com/2014/12/bitcoin-for-rockstars/

 

58. Heap I., Tapscott D. Blockchain Could Be Music’s Next Disruptor // Fortune. 22 September 2016. URL: https://fortune.com/2016/09/22/blockchain-music-disruption

15

blockchain and interested parties in the face of copyright holders and authors. The blockchain technology most closely reflects the essence of civil law as such. The private nature of the relationship between users of the network and the desire to distance themselves from state regulation makes this technology ideologically suitable for many civil law institutions, in particular, relations in the field of economics relations and intellectual property. But more importantly, this technology can not only ideologically match the spirit of civil relations, but also provide effective methods of preventing violations of civil rights.

 

DIGITAL SIGNATURE

 

The next suggested topic is digital signature. This technology is closely related to blockchain, in fact, it is based on it. As we all know, the main principle of cryptography is that the unknown element is only the key, the method of cryptography must be known. The main essence of digital signature is the principle of creating a pair of cryptographic keys that only the owner could know. As it is well-known, cryptography is a method of hiding the content of a message, used from ancient times to the present day. Like plain text, a text message can be a stream of binary digits, a text file, a bitmap, a digital audio recording, an audio image of a video or movie and any other information formed into digital bits. When a message is encrypted, it is called a ciphertext or cryptogram. The opposite procedure, that is, turning an encrypted text back into an open one, is called decryption (or decryption). Essentially, modern cryptographic systems use a mathematical process to convert one set of characters that have a value (binary data) into a second set of characters that do not have a value. Cryptography usually requires a number of functions, the most important of which is authenticity, not secrecy60. This technology is already used in many areas such as banking, governmental services etc.

59. Wright A., Filippi de P. Decentralized Blockchain Technology and the Rise of Lex Cryptographia // SSRN. 10

 

60. March 2015. URL: https://papers.ssrn.com/sol3/ papers. cfm?abstract_id=2580664 Mason, Stephen. «Digital Signatures.» In Electronic Signatures in Law, 295-338. University of London Press, 2016. Accessed March 3, 2020. doi:10.2307/j.ctv5137w8.20.

16

BIBLIOGRAPHY

16

the other participants will immediately notice this action. Moreover, the older this block is, the more difficult it is to fake this block (resistance from distortion). This distributed nature of blockchains comes from the fact that each participant in the transaction has a complete copy of the block chain, and new blocks that appear are replicated on copies of this ledger7 .

 

There are three main elements that help us understand blockchain technology better. Blockchain is a system: • to record a number of data elements (for example, transactions between parties); • that uses cryptography to make it difficult to manipulate past entries in the book; • that is the sequential process of storing one or more copies of a workbook and adding new operations. But it should also be added that not all blockchains are fully distributed. There is also a difference between private blockchains and public blockchains. A good example of a public blockchain is bitcoin, in which each user can view all existing transactions in the chain: users also have a full copy of the chain. In such a chain, each user has the same equal power as other participants, so-called peer-to-peer (p2p). Private blockchains are not peer-to-peer, nor are they functioning without an established intermediary. private blockchains are absolutely transparent, since they are moderated by an administration or a consortium that can provide access to users of blocks8. Another advantage of using peer-to-peer public blockchains is its decentralization, which allows it to be resistant to any attacks. If an attack occurs on

one of the nodes, then due to the lack of a coordination center, this attack on one of the nodes will not be able to disrupt the functioning of the entire system, since other nodes will be able to continue further functioning9. The legal analysis of the blockchain system will not be carried out on the example of bitcoin, since this blockchain can be used exclusively for simple transactions. Also, bitcoin does not allow chain users to create smart contracts, which are protocols for automatically executing actual contracts. It is more correct to consider as an example a blockchain of the Etherium type, which is also an example of a public bitcoin. Etherium also has the Turing completeness property, which makes it more versatile and applicable for more cases 10,11. By the way, a smart contract is a computer Protocol that allows all parties to negotiations to exchange their assets between each other, for example, shares, property or money. A smart contract allows you to perform such operations without resorting to the help of a third party as an intermediary. This smart contract is the source code, which is located in the blockchain itself, which, as it was already found out, is a chain of blocks consisting of a mass of computer nodes12. Nick Szabo first came up with the idea of smart contracts in 199413. Nick was both a specialist in law and cryptology. The idea was that a decentralized ledger would allow transactions to be made in the virtual space automatically and cryptographic systems would ensure the security of these transactions, as well as protect them from hacking. This technology had to be based on a set of computers that were connect

worth emphasizing that the blockchain technology as such consists of many structural elements, the set of which may vary in different services17. One of the presented technologies, oddly enough, is the blockchain technology itself. In this context, we will understand blockchain as a way of structuring data. Using cryptographic tools, the technology of the blockchain is getting really unique. The peculiarity is expressed in the use of certain cryptographic resources. The blockchain technology is able to create a record of absolutely any data and authenticate the identity of the parties to the transaction, while being resistant to any unauthorized access to these records18. This particular feature of this technology is used everywhere in every blockchain application19. The next element is a network. Early blockchain applications such as Etherium or Bitcoin operate on a public blockchain that is distributed over a peerto-peer (p2p) network20. In this case, all blockchain operations are functions of the network as a whole. Such a network is called “nodes” of computers that are managed by the network together, which means that in practice there is no Central authority21. It is also worth noting that not all blockchains are systems that do not require trust from other users22. However, this is only true for bullet blockchains, which can be used freely without trust by any users. In private blockchains, however, the opposite situation exists: trust between users arises precisely because of the centralization element23. An example of a centralized blockchain based on trust is the Ripple blockchain, which relies on venture capital. This blockchain requires a certain degree of trust to verify all transactions24. An interesting example of blockchain centralization by a third party and the use of this technology at the

first blockchain that began to focus on eliminating the direct influence of state institutions on the currency as a whole. Many lawyers often ask about the nature of blockchains and the possibility of their regulation by the state31. At the moment, however, blockchain has already moved away from the period of cyberpunk, when such technology was perceived as a tool of the society of libertarian political views, which were ardent opponents of the establishment and state regulation of the economy32,33. In addition to Estonia, Japan has also officially recognized blockchain, moreover, it uses this technology as one of the payment methods, along with the national currency34. It is this rapid development of technology that can contribute to the revolutionary development of methods for using blockchains in various sectors of society35. Ending the topic with the concept of blockchain and the issue of its legal regulation, consider the example of the Uber Corporation. The main message is the paradox of blockchain decentralization and the inevitability of its regulation. Some authors agree that this trend toward centralization is simply inevitable36. This conclusion follows both from the early stages of the development of Internet Commerce and their later scenario of the development of the “platform economy”, and some believe that this development of the trend for regulation will only develop, as we will consider the example

44. O’Dair M. Music on the Blockchain. Blockchain for Creative Industries Research Cluster. London, 2016.

 

45. ASCAP, SACEM, and PRS for Music Initiate Joint Blockchain Project to Improve Data Accuracy for Rights Holders // PRS for MUSIC. 7 April 2017. URL: https://www. prsformusic.com/press/2017/prs-for-music-ascap-and-sacem-initiate-jointblockchain-project

 

46. Berne Convention for the Protection of Literary and Artistic Works of September 9, 1886 // https://www.wipo.int/treaties/en/text.jsp?file_id=283700

 

47. Mann A.J. The Anatomy of Copyright Law in Scotland before 1710 // Research Handbook on the History of Copyright Law / Ed. by I. Alexander, H.T. Gómez-Arostegui. Cheltenham, 2016. P. 99.

 

48. Savelyev A. Copyright in the Blockchain Era: Promises and Challenges // Computer Law & Security Review. 2018. Vol. 34. Iss. 3. P. 550.

 

49. Buntinx J.-P. Future Use Cases for Blockchain Technology: Copyright Registration // Bitcoin News. 4 August 2015. URL: https://news.bitcoin.com/future-use-cases-forblockchain-technology-copyright-registration/

ternet registries, but unlike depositing in distributed blockchain registries, depositing in regular archives may not be as secure due to censorship and removal of works by state authorities. In the blockchain, such a situation with the deposit of a work cannot occur due to the distribution of the network51. 

SUMMING UP, WE CAN STATE THAT BLOCKCHAIN TECHNOLOGY, IN PARTICULAR, PUBLIC BLOCKCHAINS CAN HAVE A REVOLUTIONARY IMPACT ON THE PROTECTION OF COPYRIGHT AND REL ATED RIGHTS BY RESOLVING PROBLEMS WITH THE REGISTRATION OF INTELLECTUAL PROPERTY AND PROTECTION OF VIOL ATED RIGHTS, THANKS TO AN ESTABLISHED CRYPTOGRAPHIC SYSTEM OF DISTRIBUTED REGISTRIES THAT STORE ALL THE ORIGINAL DATA THAT CANNOT BE FORGED OR CHANGED

In addition to fighting censorship, the blockchain also fights copyright infringement by unauthorized users and, consequently, anticipates financial losses for copyright holders and authors. If the owners of the Spotify streaming service used distributed ledger technology, the payment of compensatory damages of $ 112 million to copyright holders and authors, according to the case of Ferrick, et. al. V.

transferred to the owner only when the latter signs the transaction with their individual and private key, which completely eliminates the possibility of users illegally using music or transferring data. As for the metadata of musical works, the public blockchain of peer-to-peer distributed networks can create a global metadata database that will be constantly updated and will be resistant to external influences. A global metadata database based on blockchain has a number of advantages over territorial metadata databases that are controlled by government agencies. A distributed global blockchain does not require trust from the governments of one country to the governments of another, which makes it possible to create a single secure ledger of music metadata that is not burdened with bureaucratic mechanisms59.

 

Summing up, we can state that blockchain technology, in particular, public blockchains can have a revolutionary impact on the protection of copyright and related rights by resolving problems with the registration of intellectual property and protection of violated rights, thanks to an established cryptographic system of distributed registries that store all the original data that cannot be forged or changed. The author has considered many legal precedents where plaintiffs had to prove that they belonged to the work. This is due to the lack of a reliable system of copyright registers. Existing registries can be falsified, censored, or simply inconvenient. The mechanism of copyright registration based on blockchain technology is able to solve this problem in all aspects. However, despite these arguments, it is currently too early to draw unambiguous conclusions about the breakthrough impact of blockchain, at least due to the lack of an up-to-date regulatory framework and obstacles to the modernization of this technology at all levels and in various areas. For an unambiguous breakthrough in this area, it is necessary to properly interact between the authorities, legal scientists, experts in the field of

CONCLUSION

 

To draw the conclusion, it is worth to say that this is probably one of the most complex and complicated issues of the last couple decades. Digital technologies have come to our lives rapidly. Businesses and states have learned convenience of digital technologies. Many economies are based on these technologies’ exploitation. That is why the regulation in this area is vital for our society. The sooner we regulate this area, the sooner we will be able to gain profits from this area. And it was our goal to see how these technologies can easily lower uncertainty and how they therefore promise to transform our economic systems in radical ways. To sum-up abovementioned information, the transformative influence of digitalization is difficult to overestimate. This effect is visible worldwide, as well as in the production of knowledge, political participation, and social structures. Multiple parties participate in this transformation, making choices and thus allowing technology and states, society to mutually beneficial influence on each other. But how receptive or responsive are various state authorities to this transformation? It should require these parties to think about the type of digital innovations that can contribute to the achievement of the rule of law goals and also consider those that can hinder or even block these goals. It is quite obvious that democracy and law have always been adapted to new tendencies and trends. The recent years are no exception. It is essential this formation be carried out in a more or less balanced way. Taking into consideration that this technology cannot be considered cost-free and that new tools should be applied in accordance with their own interests or tasks.

1. All Eyes on the Sharing Society // World Intellectual Property Review. March, April 2015. URL: www.rightsdirect.com/wp-content/uploads/sites/6/2015/04/ WIPR-Kim-Zwollo-04-2015.pdf

 

2. An Update on Insurance // Uber Newsroom. 1 March 2018. URL: https://www.uber.com/newsroom/an-update-on-insurance

 

3. Arvelo F. RESIST — Uber and Subverting Regulations // The Bespoke Lawyer. 10 March 2017. URL: https:// www.bespokelawyer.com/resist-uber-and-subverting-regulations/

 

4. Arvind Narayanan, Joseph Bonneau, Edward Felton, Andrew Miller and Stephen Goldfeder, “Bitcoin and Cryptocurrency Technologies: A Comprehensive Introduction” (Princeton University Press, 2016). The Nakamoto paper is available here: https://bitcoin.org/ bitcoin.pdf

 

5. ASCAP, SACEM, and PRS for Music Initiate Joint Blockchain Project to Improve Data Accuracy for Rights Holders // PRS for MUSIC. 7 April 2017. URL: https:// www.prsformusic.com/press/2017/prs-for-music-ascap-and-sacem-initiate-joint-blockchain-project

 

6. Bacon J., Michels J.D., Millard C., Singh J. Blockchain Demystified // SSRN. 20 December 2017. URL: https:// ssrn.com/abstract=3091218

 

7. Bacon J., Michels J.D., Millard C., Singh J. Op. cit. P. 13. О проблемах, связанных с отказами узлов, см.: Li J. Data Transmission Scheme Considering Node Failure for Blockchain // Wireless Personal Communications. 2018. Vol. 103. Iss. 2. P. 179–194.

 

8. Berne Convention for the Protection of Literary and Artistic Works of September 9, 1886 // https://www. wipo.int/treaties/en/text.jsp?file_id=283700

 

9. Brainerd, W.S., Landweber, L.H. Theory of Computation. — Wiley, 1974.

 

10. Buntinx J.-P. Future Use Cases for Blockchain Technology: Copyright Registration // Bitcoin News. 4 August 2015. URL: https://news.bitcoin.com/future-use-cases-for-blockchain-technology-copyright-registration/

 

11. Chen L., Xu L., Gao Z., Lu Y., Shi W. Tyranny of the Majority: On the (Im)Possibility of Correctness of Smart Contracts // IEEE Security and Privacy. 2018. Vol. 16. Iss. 4. P. 30–37.

 

12. Chris Reed, Uma Sathyanarayan, Shuhui Ruan and Justine Collins, “Beyond Bitcoin: legal-impurities and offchain assets”, International Journal of Law and Information Technology, Vol. 26(1), 160.

 

13. Copyright, Designs and Patents Act 1988. Sec. 3 (1), 5A, and 10A.

 

14. Cyberspace and the “no regulation fallacy’ in Christopher Millard and Robert Carolina, ‘Commercial transactions on the global information infrastructure: a European perspective’, John Marshall J. Computer & Info. Law, Vol. 14, 269 (1996).

 

15. David Mayer, ‘Blockchain technology is on a collision course with EU privacy law’, IAPP Privacy Advisor, 27 February 2018. Available at: https://iapp.org/news/a/ blockchain-technology-is-on-a-collision-coursewith-eu-privacy-law/.

 

16. Distributed Ledger Technology: Beyond Block Chain. A Report by the UK

 

17. Distributed Ledger Technology: Beyond Block Chain. P. 18.

 

18. European Parliament resolution of 3 October 2018 on distributed ledger technolo- gies and blockchains6 building trust with disintermediation (2017/2772(RSP)) // European Parliament. URL: http://www.europarl.europa.eu/doceo/document/TA-8-2018-0373_ EN.html 

 

19. Fairfield J.A.T. Bitproperty // Southern California Law Review. 2015. Vol. 88. No. 4. P. 805, 808

 

20. Garber J. Bitcoin Spikes after Japan Says it’s a Legal Payment Method // Business Insider. 03.04.2017). URL: http://uk.businessinsider.com/bitcoin-price-spikesas-japan-recognizes-it-as-a-legal-payment-method2017-4?r=US&IR=T

 

21. Government Chief Scientific Adviser. London, 2017. P. 17.

 

22. Haas R. Twitter: New Challenges to Copyright Law in the Internet Age // The John Marshall Re- view of Intellectual Property Law. 2010. Vol. 10. P. 231–254.

 

23. Heap I. Tapscott D. Blockchain Could Be Music’s Next Disruptor // Fortune.22 September 2016. URL: https://fortune.com/2016/09/22/blockchain-music-disruption

 

24. https://www.linkedin.com/pulse/blockchain-3-corecomponents-thijs-maas

 

25. Insurance Aligned // Uber Newsroom. 24 March 2015. URL: https://www.uber.com/newsroom/introducing-the-tnc-insurance-compromise-model-bill

 

26. John Perry Barlow, ‘A Declaration of the Independence of Cyberspace’, 8 February 1996, available at: https:// www.eff.org/cyberspace-independence.

 

27. Kenney M., Zysman J. The Rise of the Platform Economy // Issues in Science and Technology. 2016. Vol. 32. No. 3. URL: https://issues.org/the-rise-of-the-platform- economy/

 

28. Lopp J. Bitcoin and the Rise of the Cypherpunks // Coin Desk. 9 April 2016. URL: https://www.coindesk.com/ the-rise-of-the-cypherpunks

 

29. Maas T. Blockchain: the 3 Core Components // LinkedIn. 24 October 2017.

 

30. Maas T. Blockchain: The 3 Core Components.

 

31. Maas T. What is Blockchain Technology? // Law & Blockchain. 21 June 2017. URL: https://www.lawandblockchain.eu/post-template/

 

32. Mamaeva N.V., Burkov A.V. Comparative analysis of the cryptocurrency market // Scientific enquiry in the contemporary world: theoretical basiсs and innovative approach, 2017. No 11. С. 86–88.

 

33. Mann A.J. The Anatomy of Copyright Law in Scotland before 1710 // Research Handbook on the History of Copyright Law / Ed. by I. Alexander, H.T. Gómez-Arostegui. Cheltenham, 2016. P. 99.

 

34. Mason, Stephen. «Digital Signatures.» In Electronic Signatures in Law, 295-338. University of London Press, 2016. Accessed March 3, 2020. doi:10.2307/j. ctv5137w8.20.

 

35. Mik E. Smart Contracts: Terminology, Technical Limitations and Real World Complexity // Law, Innovation and Technology. 2017. Vol. 9. Iss. 2. P. 269–300; Lexi B., Jurisevic A., Kong M., Liu E., Gauthier F., Gramoli V., Holz R., Scholz B. Vandal: A Scalable Security Analysis Framework for Smart Contracts // ArXiv. 11 September 2018. URL: https://arxiv.org/pdf/1809.03981.pdf

 

36. Nick Szabo, 1997. Formalizing and securing relationships on public networks. First Monday, volume 2, number 9.

 

37. Noto La Diega G. Uber Law and Awareness by Design. An Empirical Study on Online Platforms and Dehumanised Negotiations // Revue européenne de droit de la consommation. 2016. No. II. P. 383–413.

 

38. O’Dair M. Music On the Blockchain. Blockchain for Creative Industries Research Cluster. London, 2016.

 

39. O’Hara K. Smart Contracts –Dumb Idea // IEEE Internet Computing. 2017. Vol. 21. Iss. 2. P. 97–101.

 

40. Popper N. Understanding Ethereum, Bitcoin’s Virtual Cousin // The New York Times. 2 October 2017. URL: https://www.nytimes.com/2017/10/01/technology/ what-is-ethereum.html

 

41. Reed C., Murray A. Rethinking the Jurisprudence of Cyberspace. Cheltenham, 2018

 

42. Rosic A. What is Blockchain Technology? A Step-byStep Guide for Beginners // Blockgeeks. 2016. URL: https://blockgeeks.com/guides/what-is-blockchain- technology/

 

43. Savelyev A. Copyright in the Blockchain Era: Promises and Challenges // Computer Law & Security Review. 2018. Vol. 34. Iss. 3. P. 550.

 

44. Sermpinis Th., Sermpinis Ch. Traceability Decentralization in Supply Chain Management Using Blockchain Technologies // ArXiv. 2018. URL: arxiv.org/ pdf/ 1810.09203.pdf

 

45. Stankovic S. An Introductory Guide to Cryptocurrency Regulation // Un- block. 15 January 2018. URL: https://unblock.net/cryptocurrency-regulation/

 

46. Swan M. Blockchain: Blueprint for a New Economy. Sebastopool, 2015.

 

47. Telpner J. The Lion, the Uncorn, and the Crown. Striking a Balance Between Regulation and Blockchain Innovation. Toronto, 2018. URL: https:// www.sullivanlaw.com/assets/htmldocuments/Telpner_The%20Lion%20the%20Unicorn%20and%20 the%20Crown_Blockchain%20Research%20Institute.pdf

 

48. The NIST Definition of Cloud Computing had reached its 16th, and final, version by September 2011. Available at: https://csrc.nist.gov/publications/detail/ sp/800-145/final

 

49. The UK Copyright, Designs and Patents Act 1988. Sec. 11.

 

50. Uggla C., Hallström C.-J. Is It as Trustless as They Say? A Functional Analysis of the Blockchain and Trust. Jönköping, 2018 // URL: https:// pdfs.semanticscholar.org/7668/afe9165f549d755402965161ba3d242c4d5b.pdf

 

51. Waelde C., Brown A., Kheria S., Cornwell J. Contemporary Intellectual Property. Oxford, 2016. P. 3.

 

52. Wallach D.A. Bitcoin for Rockstars // Wired. 12 October 2014. URL: https://www.wired.com/2014/12/ bitcoin-for-rockstars/

 

53. We Have Built a Digital Society and So Can You // e-Estonia. URL: https://e-estonia.com/

 

54. Werbach K.D. The Song Remains the Same: What Cyberlaw Might Teach the Next Internet Economy // Florida Law Review. 2017. Vol. 69. No. 3. P. 887, 889.

 

55. Wright A., Filippi de P. Decentralized Blockchain Technology and the Rise of Lex Cryptographia // SSRN. 10 March 2015. URL: https://papers.ssrn. com/sol3/papers.cfm?abstract_id=2580664

 

56. Yaga D., Mell P., Roby N., Scarfone K. Blockchain Technology Overview // NIST. October 2018. URL: https://nvlpubs.nist.gov/nistpubs/ir/2018/NIST. IR.8202.pdf. P.1.

A GOOD EX AMPLE OF A PUBLIC BLOCKCHAIN IS BITCOIN, IN WHICH EACH USER CAN VIEW ALL EXISTING TR ANSACTIONS IN THE CHAIN: USERS ALSO HAVE A FULL COPY OF THE CHAIN. IN SUCH A CHAIN, EACH USER HAS THE SAME EQUAL POWER AS OTHER PARTICIPANTS, SO-CALLED PEER-TO-PEER

«President Law Journal»