Nov 2023
In the crypto world, does it really matter where you are? Is there a sunny offshore paradise perspective on the click of a button and a fintech trade? The answer lies as usual in how to unravel a problem should it arise. Both choice of law and location for dispute resolution should force everyone to think ahead when it comes to doing crypto deals.
Business-to-Consumer (B2C) Contracts
The British Virgin Islands (BVI) is well-known as an incorporation centre, having attracted in excess of 600,000 active companies, many of which are used in such structures globally. While there is no need here to revisit the benefits of BVI companies as a choice of vehicle, a quick survey of some of the major crypto platforms shows the express choice of BVI law (and sometimes also the location) as the governing law in their B2C contracts. With the inequality of bargaining power and the “take it or leave it” approach to B2C terms and conditions, many consumers are now in the BVI even if they couldn’t point to it on a map. This matters in these days of high-octane crypto trade with the constant threat of imminent collapse, when having a calculated risk assessment of where you may need to resolve your dispute might influence with whom you choose to trade in the first place.
Some factors to take into account when considering B2C contract terms include: whether you have an appetite for bothering with dispute resolution should issues arise; whether you are obliged to get BVI legal advice if you do; whether you would have to go to the BVI; and, if so, how you would get there. It may sound flippant but depending on the investment, it could be a material consideration. Fortunately, there is a range of professional assistance in the BVI should it come to that, and most likely at no further expense than in your city of residence. However, unfamiliar territory is clearly to the litigation advantage of the defendant and can therefore be expected to be exploited.
Arbitration of Crypto Disputes
Equally popular is the election of arbitration in a jurisdiction of choice. Some jurisdictions offer rules of arbitration that allow for online attendance of any dispute, or even a fast track to resolution. Arbitration tends to be more informal and less expensive than court-based litigation but is unavailable unless agreed between the parties. Equally, if it is in the B2C contract then it can’t be opted out. It is worth checking the rules that are imposed, as some jurisdictions also offer the opportunity for the arbitrator to not only decide the dispute but to carry out enforcement without further ado. That may appeal in reaching a speedy resolution, unless of course you don’t agree with the result!
Business-to-Business (B2B) Contracts
With respect to B2B contracts, these are by their own definition more bespoke and require careful thought before determining a dispute resolution mechanism. When negotiating for your company, bear in mind your fiduciary duties to get the best deal possible commercially, as well as when considering the route to enforce against breaches. There is considerably more bargaining power from the position of investor in a crypto business than there is from that of a consumer. While there is an immediate cost involved in investing in legal advice as to the terms of investment generally, having the right dispute resolution clauses in particular can save multiples of that expense later.
Asset Tracing and Recovery
Should there be an issue in relation to the conduct of a company’s affairs, the BVI is indeed an excellent jurisdiction to start your asset tracing exercise, wherever it may lead. Causes of action such as breach of fiduciary duty, or economic torts such as unlawful means conspiracy, are well-trodden paths that act as a springboard for asset recovery. Going overseas or down crypto tunnels are steps that follow and BVI proceedings are recognised the world over as a firm foundation to those steps. Do not think for a moment that you cannot take those steps or get effective relief for your claim just because you are offshore.
For more information or assistance in protecting your rights under crypto contracts, or to explore opportunities for asset tracing and recovery, please reach out to the author using the contact details below or your usual contact at Conyers.