Earlier this week (29 November 2022), the High Court of Justice of England and Wales delivered the judgment on the case LMN v. Bitflyer Holdings Inc. and others [2022] EWHC 2954 (Comm).
The claim for information order was brought by LMN, a cryptocurrency exchange incorporated in England, which alleged that some two years ago, hackers obtained access to its systems and transferred millions of dollars-worth of cryptocurrency from it. LMN’s expert traced the transactions believed to have been carried out by the hackers until they reached an exchange address; thereafter, the expert could not discover what became of the cryptocurrency. Needing information from the exchanges about the individuals behind the transactions, LMN sought orders for disclosure of information from the exchanges. Given the cross-border nature of the case, the Court addressed the question of the applicable law in the light of Regulation (EC) No 864/2007, applicabe as retained EU law (see, https://www.legislation.gov.uk/uksi/2019/834/note/made).
In the decision, the High Court stated that (par. 20): “The case summarised in the preceding paragraphs has been formulated on the basis that the law of England and Wales is applicable. I concluded that there is a good arguable case that that is so. Specifically there is a good arguable case that:
(1) The claim can be regarded as one involving a non-contractual obligation arising out of a tort/delict for the purposes of Article 4(1) of the Rome II Regulation (Reg (EC) No. 864/2007, as amended).
(2) That the relevant cryptocurrencies were at the time of the hack located and has their situs in England and Wales, on the basis that [LMN] is resident and carries on its relevant business here. This is supported by the analysis in Dickinson Cryptocurrencies in Public and Private Law para. 5.109 and Dicey Morris & Collins on the Conflict of Laws (16th ed) para. 23-050; and by the reasoning in Tulip Trading Ltd v Bitcoin Association for BSV [2022] EWHC 667 (Ch) at [147]-[149] per Falk J. I consider that there is a good arguable case that this is so, notwithstanding the fact that [LMN]’s servers are located in Romania, which may be regarded as an adventitious circumstance.
(3) That accordingly, either the cryptocurrency can be regarded as ‘damaged’ in England and Wales because it is in England that it was taken from [LMN]’s control (see Dicey Morris & Collins op cit at para. 35-027) or because [LMN] as an English company has suffered loss and damage in England”.
The text of the judgment is available here.
On Rome II Regulation, the readers of RDIPP may refer to:
Gabriella Carella, 2005, No 1, 25 ff.; Russell J. Weintraub, 2005, No 3, 561 ff.; Alberto Malatesta, 2006, No 1, 47 ff.; Luís de Lima Pinheiro, 2008, No 1, 5 ff.; Cristina M. Mariottini, 2012, No 3, 647 ff.; Lidia Sandrini, 2013, No 3, 677 ff.; Paola Ivaldi, 2013, No 4, 869 ff.; Filippo Marchetti, 2017, No 4, 883 ff.
Moreover, see, in our Book Series:
Stefania Bariatti (ed.), Book No 74; Stefania Bariatti, Ilaria Viarengo, Francesca C. Villata (eds.), Book No 81.
Lastly, on virtual currencies and private international law, the readers of RDIPP may refer to:
Paolo Bertoli, 2018, No 3, 581 ff.