Virtually Everything | Series 2, Episode 7 | Breaking New Ground: Service by NFT in the UK Courts

In the latest episode of Virtually Everything, hosts Lucy Nash and Vyasna Mahadevey are joined by Elisabeth Wagner, an Associate in the International Arbitration and Commercial Litigation Group based in London. Together, they delve into the fascinating and rapidly evolving topic of using non-fungible tokens (NFTs) as a method of legal service in the UK courts.

Elisabeth begins by introducing herself and explaining her role in assisting clients with complex international disputes, particularly within financial services and company law matters. Her interest in NFTs stems from the unique legal challenges they present as a novel digital asset class. She provides a foundational explanation of NFTs, describing them as non-fungible tokens that create a unique, traceable representation of an underlying digital or physical asset, distinguishing them from fungible tokens like Bitcoin, which are interchangeable.

The conversation shifts to the concept of service by NFT, a "hot topic" in UK legal circles. Elisabeth explains that service refers to the procedural act of ensuring court documents are brought to the attention of a party involved in legal proceedings. While traditional methods include post or personal delivery, service by NFT falls under "alternative methods," requiring court approval. This innovative method involves transferring an NFT containing an embedded hyperlink to the documents into the defendant’s digital wallet, effectively embedding the service within the blockchain.

The hosts and Elisabeth discuss the potential benefits and challenges of this approach. On the one hand, embedding legal service into the blockchain offers traceability and transparency, especially valuable in cases involving unknown defendants or fraud, where the only information available may be the digital wallet address. However, there are significant concerns regarding data protection and confidentiality since the blockchain’s public nature may expose sensitive information. Elisabeth highlights recent English case law addressing these issues, such as Tai Mo Shan Limited v. Persons Unknown, where courts implemented measures like redactions and password protections to balance accessibility with privacy.

Elisabeth also outlines the procedural requirements for obtaining court permission to use service by way of NFT for service out of the jurisdiction, which will be required where the Defendant’s location is unknown and may be outside the jurisdiction. She emphasises that service by NFT may not be viable in jurisdictions where it conflicts with local laws, adding a layer of complexity for cross-border disputes.

The discussion concludes with a forward-looking perspective. Lucy speculates whether courts in other jurisdictions, such as the DIFC (Dubai International Financial Centre) Courts, might adopt similar approaches, given their openness to embracing international standards and technological innovation. While such developments remain to be seen, they reflect the broader trend of legal systems adapting to the needs of the virtual assets sector.

This podcast forms part of the Virtually Everything podcast series. To find out more about the topics discussed in the series, please visit our dedicated Digital Assets and Blockchain page.