Digital White Papers

21 WWW.ILTANET.ORG | ILTA WHITE PAPER POTPOURRI Reframing the AI Question in Law what about the legal infrastructure that underlies that? We are geing signals now that it's woefully inadequate as well. Take that most fundamental instrumentality of law — the contract. It has operated in exactly the same manner for centuries. Two or more parties come together on a subject and agree to an undertaking. Consideration is exchanged and, most oen, that agreement is recorded, oen at extraordinary length in unintelligible legalese. Every possible risk is inscribed, whether by quill and ink or word processor — and that wrien record becomes the only vehicle for enforcement of the parties' undertakings. Even a simple corporate asset acquisition is likely to generate hundreds of pages of various agreements for the transfer, for financing and security. And something as simple as obtaining a mobile phone? Dozens of pages of user agreement legalese. If ever there was a cause for dissatisfaction, our mechanism for contracting is it. Creating and enforcing contracts is profoundly inefficient, even where the parties possess equal bargaining power. And in contracts of adhesion, where only one party truly has bargaining power, contracts only serve to obfuscate rights. Which brings us to enforcement. Contracts are wrien on the assumption that the courts are available to help parties enforce their agreements. But if the courts were ever an efficient means of enforcing the trustworthiness of agreements, that day is long past. Only the most desperate and well-funded litigants now take contracts to court. The delay and expense inherent in modern litigation — where e-discovery expenses are likely to dwarf the cost of resolving the underlying dispute — is an almost insurmountable barrier to contracting parties. It was in this context that lawyer-computer scientist Nick Szabo began in the 1990s to describe an alternative method for securing agreements dependent on trust. He coined the term "smart contract" for such agreements and began to define cryptographic protocols (which have come to be called blockchain) to serve as an infrastructure for "trustless" agreements. And these would circumvent the limitations and frustrations inherent in our other means of recording and securing agreements. Billions of dollars a year are now pouring into the fleshing out of blockchain and smart contract infrastructure. The point here is not that blockchain is a fait accompli or that it is even the right way to remedy the inefficiencies inherent in contracting. Rather, it is that even our most basic of legal instrumentalities are so woefully inadequate as to prompt clients (e.g., the big banks now funding a lot of blockchain development) to undertake a huge DIY effort to fix the problem. The shortcomings just described, which are large enough to cause an uproar among corporate clients, are small compared to exponentially larger scale problems beseing the poor, middle class and small business individuals who seek justice in our system. The World Justice Project (WJP) measures the effectiveness of the rule of law in countries the world over. A functioning legal system is essential to the delivery of the other necessities of a civil society. Without the rule of law, citizens lose access to health care, education and economic security. WJP measures thirty seven variables in assessing how firmly the rule of law is established in various countries. In many of these, the U.S. shines. Its governments are open and transparent, government powers are limited constitutionally, and laws are stable and accessible to the public. The emergence of blockchain technology in aid of large financial institutions is probably the most significant change in the legal service model.

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