Property (Digital Assets etc) Bill

Debate between Lord Ponsonby of Shulbrede and Baroness Bennett of Manor Castle

Second reading committee
Wednesday 6th November 2024 Grand Committee

[Lord Ponsonby of Shulbrede (Lab)]

My Lords, I am grateful to those noble Lords who contributed to today’s debate. All of them will, I hope, acknowledge the expertise in the Room. Committee stage is likely to be very expert as well; I look forward to it.

I am keen to emphasise, as the noble Lords, Lord Clement-Jones and Lord Sandhurst, did, the great deal of work that has gone into the Bill: from the Law Commission, which produced an excellent report and followed that up with a consultation on the proposed Bill, and from the practitioners, businesses, academics and organisations that engaged with the process throughout. I give my thanks to all who were involved in that work.

The result of those efforts is a simple but elegant Bill. As has been said, most notably by the noble and learned Lord, Lord Thomas, it will support our efforts to remain a pre-eminent jurisdiction, with English and Welsh law the global law of choice, and it will signal that the UK is a leader in innovation and technology. As our society evolves, so too must our laws. The Bill is just one of the ways in which we are modernising our legal framework. I will endeavour to address some of the points made by noble Lords. If I miss any points in particular, I will of course write to noble Lords.

First, the noble Lord, Lord Holmes, asked a number of questions, and I will have a go at answering them— I recognise his expertise in this matter. The first question was on whether the Government are sure that the current categorisation is not exhaustive and unable to accommodate existing digital assets. The Law Commission considered this option as part of its extensive and detailed report. It acknowledged that it would be possible to recognise crypto tokens as falling within an expanded category of things in action—that is, to treat “things in action” as a catch-all category for all personal property that is not capable of possession. However, crypto tokens and similar assets are fundamentally different from other things in action, which can only be claimed or enforced through a court action. For example, unlike debt they can be stolen, which in some ways makes them more like things in possession despite them not being physical objects.

Digital assets could not have been conceived when the original categories of personal property were developed and so it is no wonder that these do not fit neatly into either category. The commission, and most of its consultees, concluded that it would be better for the law to recognise that this unique combination of features means that they belong to a different category. That is why we chose the third category option, which is promoted in the Bill.

The second point the noble Lord, Lord Holmes, made, was on the implications for our courts. One of the great strengths of the common law is its ability to evolve. We are, however, dependent on the right cases being brought to the precedent-setting courts. While we could have left the law to develop, there is no guarantee of if or when this would happen, and in the meantime the uncertainty would remain about whether digital assets could be treated as personal property. The underlying point of the Bill is to put into statute the way that the common law was developing in any case, and to allow the common law to continue to develop once this particular bit of legislation is in place. To that end, the Government took the decision to legislate to give the market confidence and clarity in English and Welsh law. It also provides a strong indication to the courts that Parliament then intends to develop common law and that there is a further category of personal property that some digital assets can fall within.

The third question the noble Lord, Lord Holmes, asked, was on what this means for the common-law community. The Bill does not put the law of England and Wales at odds with other common-law countries. Courts in New Zealand and Singapore have considered that crypto assets are capable of attracting property rights and question the appropriateness of there being only two categories of personal property. The Bill is consistent with further international legal developments —for example, the US, New Zealand, Singapore and the Dubai International Finance Centre have recognised crypto tokens as property, and the latter has recognised them as specifically belonging to a new category of personal property.

The noble Lord, Lord Holmes, asked about Scotland. Scotland’s law of personal property is distinct and does not share concepts of things in action or things in possession, so any legislative intervention in this area would have to be slightly different. I understand that the Scottish Government recently appointed an expert reference group to consider how Scots private law may best accommodate digital assets. It will be interesting to see how its work develops in this area. No noble Lord raised Northern Ireland, but the Bill could be extended to include Northern Ireland, subject to a legislative consent Motion at the Northern Ireland Assembly’s request.

The noble Lord, Lord Vaizey, spoke about the importance of the financial regulation of crypto assets. The Bill supports and complements the work of the Treasury and the Financial Conduct Authority, which are currently working on appropriate financial regulation of crypto assets.

The noble Baroness, Lady Bennett, asked what impact the Bill will have on things such as illegal transactions, fraud and tax avoidance. I recognise her points, and the answer is that the Bill deals only with a specific issue of personal property law. Illegal transactions, fraud and tax avoidance are properly dealt with by other statutes and initiatives.

The noble Baroness spoke about the environmental impact of crypto in a wider sense, and my noble friend Lord Stansgate also made that point. Of course, the Bill does not have a direct environmental impact, as it does not mandate for an increase in the use of crypto tokens or other digital assets—digital assets will continue to be used and created regardless of the Bill. Rather, the Bill is about clarifying the legal status of digital assets that already exist when a dispute has arisen. The Bill will help keep the courts of England and Wales as a leading place to mitigate these disputes.

However, I agree that environmental issues are important. This falls to a much wider discussion on things such as improving energy efficiency and adoptable sustainable power sources, and that is best addressed by other statutes and initiatives. Conversely, it is possible that the Bill could bring positive environmental benefits by enabling innovative green finance for particular projects and things. Nevertheless, I take the noble Baroness’s point.

My noble friend Lord Stansgate asked a number of questions. The first was: is the panel on the legal concept of control proceeding? I am happy to confirm that the UK Jurisdiction Taskforce, an expert group chaired by the Master of the Rolls, is taking forward this work, as a body that already has an internationally credible voice in the intersection of law and technology. In fact, I met Sir Geoffrey Vos last week, and we spoke about that very point.

Secondly, my noble friend asked whether the Bill would help in the division of matrimonial property on divorce—the noble Lord, Lord Meston, made this point as well. I am pleased to say that the Bill will help courts to say with confidence, in divorce cases, that crypto assets are matrimonial property. This is also a case for crypto assets on death.

The third question my noble friend raised was: will the Bill help people access the iPhone photos, for example, of deceased relatives? The situation for other digital assets, such as digital photos, is not addressed by the Bill, as the assets are not personal property. So it will not address that point as such, but it will be for the common law to develop the answers to those sorts of questions.

The noble Lord, Lord Freyberg, in a thoughtful speech of which he gave me good notice—I thank him for that—raised the impact of NFTs on the traditional art market. As he rightly said, there are many different aspects to this, and many uses for digital assets, giving rise to different legal, practical and other issues. This Bill does not purport to deal with all the issues that arise; that would be a very different and hugely extensive Bill. This Bill deals with a discrete issue of personal property law; it does not relate to the existing statutory framework of copyright law, artists’ resale rights or consumer protection law. Those areas of law raise different policy issues and need to be considered separately. I recognise the important work done by the CMS Select Committee on issues such as copyright infringement, and other bodies such as the Financial Conduct Authority on issues of consumer misinformation about crypto. These issues are too varied and complex to be brought within the present Bill, which is deliberately limited in scope.

On the noble Lord’s comments relating to AI, the Government believe in both human-centred creativity and the potential of AI to open up new creative frontiers. The AI and creative sectors are both essential to our mission to grow the UK economy. However, this is an area which requires thoughtful engagement. I understand that the Intellectual Property Office, the Department for Science, Innovation and Technology and the Department for Culture, Media and Sport are working closely with a range of stakeholders, including artists, on issues related to AI, copyright and IP. This includes holding round tables with AI developers and representatives from the creative industries.

I thank the noble Lord, Lord Clement-Jones, for his broad support for the Bill, although he asked whether this should be left to the common law. The idea is that this Bill will enable the common law to continue developing in this field. There will be new technologies, including things that perhaps we have not even thought about in this debate. The law of personal property is an area which has traditionally been developed through common law. If the noble Lord wishes to pursue the issue, we could develop it in Committee.

[Baroness Bennett of Manor Castle (GP)]

Will the Minister write to me about the issue I raised from COP 16 about digital sequence information on genetic resources, and the broader point about digital commons?

[Lord Ponsonby of Shulbrede (Lab)]

Yes, I will be happy to write to the noble Baroness.

Commission on Justice in Wales

Debate between Lord Ponsonby of Shulbrede and Baroness Bennett of Manor Castle

Monday 7th October 2024 Lords Chamber

[Lord Ponsonby of Shulbrede (Lab)]

The noble and learned Lord’s report was a large piece of work. As I said in my initial Answer, it is for the Senedd to take forward the vast bulk of the recommendations, and the UK Government are acting on some of the recommendations and are continuing to act particularly on the disaggregation of data. The Labour manifesto made clear that the principal objective of the noble and learned Lord’s report is not one that the current Government share. We want to work in practical ways for the benefit of Wales, and the examples that I gave of youth justice and probation are good examples of that.

[Baroness Bennett of Manor Castle (GP)]

My Lords, following on from the question from the noble Lord, Lord Wigley, who noted that the Labour Government seem, as in many things, to be following the path of the Tory Government, and picking up the point made by the noble and learned Lord, Lord Thomas, if the Government wish to maintain the union, given that there is rising evidence of interest in independence in Wales, would it not be a good idea to explain clearly to the people of Wales why, as the noble and learned Lord said, the Government are going against this report of independent experts that was very carefully considered?

[Lord Ponsonby of Shulbrede (Lab)]

It is worth saying that Welsh lawyers and Welsh law firms benefit from being part of the internationally-renowned English and Welsh legal system, and the Welsh people have consistently voted against devolution—the noble Baroness looks confused, but that is the context within which we are dealing with this question. We are clear that there are profound benefits from keeping a combined legal system for England and Wales. A couple of practical examples are in the context of prisons, where there is no women’s prison in Wales nor any category A offender prison. That is not a cost to Wales, but it is beneficial to the combined system as there are savings to be made through not repeating, for example, women’s prisons in different parts of the country. The benefit is there, and we want to protect it and manage the system for the benefit of the people of both England and Wales.

Fundamental Rights and the Rule of Law

Debate between Lord Ponsonby of Shulbrede and Baroness Bennett of Manor Castle

Thursday 25th July 2024 Lords Chamber

[Lord Ponsonby of Shulbrede (Lab)]

Yes, I think I do agree with the noble Lord, Lord Carter. I spoke to Sir Peter Gross about this a number of years ago, and I will make essentially the same point that I have made in answering other questions from noble friends. There is a role for greater promotion within our schools, and that should be seriously looked at.

[Baroness Bennett of Manor Castle (GP)]

My Lords, in a speech to the Institute for Government on 10 July 2023, the then Attorney-General said:

“Laws should be accessible, intelligible, clear, and predictable”.


The last two questions have referred to the difficulty and lack of understanding of the UK’s constitutional arrangements. Our constitution, accreted by centuries of historical accident, fails to fit the criteria the Attorney-General set out. Are the Government prepared to set out a path towards a modern, democratic, functional written constitution?

[Lord Ponsonby of Shulbrede (Lab)]

I think the short answer to that is no. The accretion of laws the noble Baroness refers to is the common law system. She is shaking her head, but that is an accretion of laws over centuries. All the lawyers I have spoken to are very proud of it and think it a flexible system. Many times, it is a better way of dealing with changing circumstances than primary legislation. We want to keep that flexibility in our current arrangements.