ISDA Updates Legal Papers on Smart Contracts and DLT

The International Swaps and Derivatives Association (ISDA) has worked with R3, Clifford Chance, Jones Day, Linklaters and McCann FitzGerald to publish four new whitepapers, which consider the private international law, or conflict-of-law, aspects of derivatives contracts involving distributed ledger technology (DLT).

One of the main reason of the publishing is that the trading of derivatives on a DLT platform raises a number of questions from a private international law perspective, includes the uncertainty about where data, assets and counterparties are located in a DLT environment, which law would apply in each case, as well as what would happen if there are conflicts of law.

The ISDA outlined the main questions the papers cover:

-Whether the introduction of DLT or a DLT platform provider to a traditional trading relationship might have implications for the resolution of contractual disputes.

-How to identify the legal situs of digital assets for effecting payments or exchanging collateral on certain DLT platforms.

“We strongly believe that new technologies will bring substantial benefits to derivatives markets, but it is important the legal treatment of derivatives traded on DLT platforms is examined and understood as clearly as possible. These papers explore the key issues from the perspective of the governing laws and jurisdictions typically used in ISDA documentation,” said Katherine Tew Darras, General Counsel at ISDA.

In January 2020, ISDA, R3, Clifford Chance and the Singapore Academy of Law jointly published Private International Law Aspects of Smart Derivatives Contracts Utilizing Distributed Ledger Technology. That paper considered the private international law, or conflict-of-law, aspects of derivatives contracts governed by the laws of England and Wales or Singapore involving DLT.