Blockchain transactions are capable of crossing jurisdictional boundaries as the nodes on a blockchain can be located anywhere in the world. This poses complex jurisdictional legal concerns which require careful consideration with respect to blockchain transactions.
The principles of legal contracts and title of ownership differ across jurisdictions, therefore identifying the appropriate governing law is difficult but highly important. In traditional transactions, for example, if one of the parties is at fault then irrespective of the transacting mechanism or location, the party at fault can be sued and the applicable jurisdiction will most likely be contractually governed. However, in the blockchain’s decentralized environment, it may be difficult to identify the appropriate laws that apply.
Without taking a detailed approach, every transaction on a blockchain could fall under the jurisdiction of the location of each and every node in the network. This would result in the blockchain’s necessity to abide with the compliance requirements of a vast number of legal jurisdictions. In the event a fraudulent or erroneous transaction is made, finding the transaction’s location on the blockchain can become a challenge.
Ensuring parameters are in place via jurisdictional clauses are essential and can ensure that a blockchain’s users have legal certainty as to the law which would be applied to determine the rights and obligations of the parties to the agreement and which courts or legal forums will handle any disputes that arise.