BioGenome

'Ethical, legal, and social issues in the Earth BioGenome Project' by Jacob S Sherkow, Katharine B Barker, Irus Braverman, Robert Cook-Deegan, Richard Durbin, Carla L Easter, Melissa M. Goldstein, Maui Hudson, W. John Kress, Harris A. Lewin, Debra J H Mathews, Catherine McCarthy, Ann M McCartney, Manuela da Silva, Andrew W Torrance, and Henry T Greely in (2022) 119(4) PNAS e2115859119 comments 

The Earth BioGenome Project (EBP) is an audacious endeavor to obtain whole-genome sequences of representatives from all eukaryotic species on Earth. In addition to the project’s technical and organizational challenges, it also faces complicated ethical, legal, and social issues. This paper, from members of the EBP’s Ethical, Legal, and Social Issues (ELSI) Committee, catalogs these ELSI concerns arising from EBP. These include legal issues, such as sample collection and permitting; the applicability of international treaties, such as the Convention on Biological Diversity and the Nagoya Protocol; intellectual property; sample accessioning; and biosecurity and ethical issues, such as sampling from the territories of Indigenous peoples and local communities, the protection of endangered species, and cross-border collections, among several others. We also comment on the intersection of digital sequence information and data rights. More broadly, this list of ethical, legal, and social issues for large-scale genomic sequencing projects may be useful in the consideration of ethical frameworks for future projects. While we do not—and cannot—provide simple, overarching solutions for all the issues raised here, we conclude our perspective by beginning to chart a path forward for EBP’s work. 

The Earth BioGenome Project (EBP) is an audacious endeavor, an attempt to obtain whole-genome sequences from specimens of every eukaryotic species on Earth—land, sea, sky, or underground. We know of about 2 million such species ranging in size from the blue whale to a single-cell plankton in the class Mamiellophyceae; it is estimated that about another 7.5 million currently unknown eukaryotic species exist. The knowledge generated by EBP may “lead to new food sources, revolutionary bio-inspired materials, and innovations to treat human, animal, and plant diseases”. Also, “[i]f successful, the EBP will completely transform our scientific understanding of life on earth and provide new resources to cope with the rapid loss of biodiversity and habitat changes that are primarily due to human activities and climate change”. 

The scientific and technical problems of finding, sampling, sequencing, databasing, and analyzing these eukaryotic genomes are enormous, but so too are the ethical, legal, and social challenges associated with the project. This perspective highlights and categorizes many of the ethical, legal, and social issues currently confronting EBP and suggests a path forward. At the same time, we recognize that the problems inherent in the complexity of interests in a project like EBP are myriad, that solutions to some of these issues may be controversial or currently unavailable, and that resolving disputes over individual sequencing projects will likely require further input, not only of EBP and its members but also the broader public as well. It is nonetheless our belief that these problems can be managed well enough to enable EBP to proceed—and to succeed—equitably and fairly for all of humanity and the biosphere. 

Legal Issues 

EBP’s goal of sequencing representatives from all extant Eukarya raises a number of significant international and national legal challenges. These concern basic legal obligations on the part of researchers, such as proper sample collection and permitting, but also more complex requirements, such as the Nagoya Protocol’s requirements regarding access and benefit sharing (ABS) for the utilization of genetic resources. Beyond these obligations, EBP and its member projects face difficult questions pertaining to rights and responsibilities regarding intellectual property (IP), sample collecting practices, accessioning rules for collected samples, and biosafety and national security restrictions. ... 

Sequencing a genome often requires a tissue sample from the species, and most countries have regulations governing the collection of biological samples for research. EBP’s work, by its nature, is international in scope; a great number of species are endemic to only a single country or very few. This means that EBP researchers, at least today, are frequently tasked with collecting samples in one jurisdiction and preparing and sequencing them in another. As discussed later in this paper, fostering the sequencing of species in the country in which they are found is a future project goal. 

Many countries have biological permitting restrictions for engaging in species sample collection, some of which are the consequence of international treaties, while others are entirely domestic in nature. The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) is perhaps the best-known of such international treaties in this regard and regulates the import, export, and reexport of International Union for Conservation of Nature (IUCN)-listed endangered species and derived materials without prior permitting from their respective source countries. Beyond CITES, a number of other legal frameworks operate similarly, including the Migratory Bird Treaty Act (implementing separate conventions among Canada, Mexico, Japan, and Russia), the Marine Mammal Protection Act, and the African Elephant Conservation Act. 

Supranational jurisdictions, such as the European Union, have a host of similar limitations among their respective member nations. In addition, biological samples sourced from Antarctica, specifically, are subject to governance under the Antarctic Treaty System, which encompasses not only the Antarctic Treaty, which came into force in 1962 and now has 54 members, but also over 200 separate requirements, including those in the Protocol on Environmental Protection to the Antarctic Treaty. Marine samples have yet further sampling and permitting restrictions, governed in many instances by the United Nations Convention on the Law of the Sea (UNCLOS) or, in the special case of cetaceans, the International Convention for the Regulation of Whaling (ICRW). 

Some jurisdictions, meanwhile, have purely domestic permitting requirements for species of significant national interest, such as the United States Bald and Golden Eagle Protection Act, and yet others may institute special national permitting processes for foreign researchers regardless of the particular species to be collected. In addition, some permitting processes may include requirements pertaining to vouchering—requiring a third party to maintain an archetypal specimen in an accessible collection. 

Assessing compliance with this web of legal obligations is complex, but necessary, and EBP researchers will need to take a systematized, species-by-species, sample-by-sample, and jurisdiction-by-jurisdiction approach to ensure compliance with these laws. The costs, in terms of researcher time and effort, are likely to be nontrivial. Nonetheless, many of the protections instituted in the above laws were put in place precisely to avoid the exploitation of biological resources that is currently contributing to the global decimation of biodiversity. Others, meanwhile, are geared to share the benefits of biodiversity as a solution to extractive biocolonialism. A principal goal of EBP is to halt, if not reverse, the global decline in biodiversity; circumventing restrictions on sample collection, aside from being illegal, may be counterproductive in the context of creating benefits for society and human welfare.

Further

Data and DSI 

Woven throughout the issues raised above are complexities regarding the generation and sharing of the sequence data, known under the CDB and Nagoya Protocol as DSI. DSI, like all other digital material, is easily shared across borders. This complicates how DSI is, and should be, considered under the Nagoya Protocol’s ABS principles, and there are conflicting views regarding unrestricted access to genomic data and the rights and interests of nations, Indigenous peoples, and local communities to control such data. A meeting last year between representatives from the European Union and China summarized the potential conflict concerning DSI and Nagoya’s DSI requirements this way: “Open data [are] a key component of the smooth functioning of science globally. However, open access may restrict options to address benefit sharing and the challenge is to generate a different approach that maintains the efficiencies of the current model in delivering societal monetary and non-monetary benefits arising from activities within the current system”. 

Assessing whether this conflict is real or hypothetical lies in the details of any DSI sharing regime. Much of the difficulty lies in narrowly conceiving of the benefits contemplated as primarily arising from a “payment for data” regime, even while there are greater opportunities for collaboration around other value-generating activities. At the same time, there are models where open data have produced monetary rewards for its generators, such as providing data hosting, developing analysis tools, or selling derivative products from such data. One relevant example might be the establishment and support of local sequencing capacity within source nations currently deprived of it and furthering training in the area. The COVID-19 pandemic has demonstrated the need to expand sequencing capacity globally. Researchers from sequencing-capacity-rich nations whose sequencing efforts will primarily focus on source nations without such resources should commit to generating solutions for this gap in sequencing capacity. Depending on how they are deployed, open data and a call for benefit sharing may not be in conflict but such a result will require careful analysis of how to provide meaningful benefits.

Darkness

'The dark authoritarians: Profiling the personality, emotional style, and authoritarian attitudes of the major American parties' by Ryan Bird, Hayden Hickey Mackenzie, Joel Leavitt and Jennifer L Robinson in (2022) 186(B) Personality and Individual Differences 111298 comments 

Many are concerned that authoritarianism is increasing across the political spectrum. In the current study, we investigated the extent to which dark personality variables (i.e., psychopathy, narcissism, Machiavellianism) predict both right- and left-wing authoritarianism (RWA and LWA) between Republicans and Democrats. We developed profiles of individuals' political and personality characteristics concomitant with endorsement of authoritarianism. Our findings (n = 527) suggest a complex interaction between dark traits and political views. Using latent profile analysis, we uncovered underlying profiles characterizing distinct groups of individuals across party identification, LWA, RWA, and dark traits. Four latent profiles emerged: (1) a typical Democrat, low in dark traits and higher in LWA; (2) a typical Republican, low in dark traits and higher in RWA; (3) a dark Democrat, high in dark traits and high in both RWA and LWA; (4) a dark Republican, high in dark traits and high in both RWA and LWA. Together, these data suggest that authoritarianism manifests differentially across the political spectrum and is influenced by emotional style.

Sorting

'Social Norms in Selective Reproduction: Implications for the Wide Offer of Genetic Screening Technologies' by Ainsley J Newson in ELSIhub comments 

 The ability to offer genetic information to inform reproductive decisions, for example through reproductive genetic carrier screening, expanded prenatal testing, or preimplantation embryo screening, is increasingly prevalent. A defining feature of such technologies is that they offer information on many genetic conditions in the one test. Common rationales for expanding the offer of such information include that the results can inform people’s decisions regarding selective reproduction or prepare them to parent a child with a genetic condition. 

While it remains vital for providers to ensure that decisions about whether to undergo screening can be made autonomously, in alignment with one’s own values, focusing only on individual choice is deficient. It is also important that providers, policymakers, and bioethicists consider the social context in which such choices are offered and made, especially because these contexts and the norms they generate shape and influence individual choice, and such choices are going to become increasingly common. 

Scholars of disability theory and feminist philosophy have argued along these lines for a long time. But the importance of attending to social context and social norms when designing and implementing large-scale reproductive genetic screening interventions is now gaining wider attention. ... one can argue that it is imperative that those offering such testing emphasize that testing is a choice and ensure that people undertaking it can access clear and balanced information about the conditions (or groups of conditions) being screened for. It is also important for people to have the opportunity to critically reflect on the reasons they are having this testing and what they might do with the information they receive.

Papers in the particular ELSIhub collection consider 

• who gets (and should get) a say in describing disability and difference, how autonomy and responsibility are intertwined and sometimes at odds, 
• what the proper role of the state should be in testing (including how public health ethics can help us think about this), and 
• how we can reflect on and learn from eugenics practices, including the social risks that arise from a cumulative set of unfettered, private reproductive choices. 

Newson notes that the papers complement material in the ELSIhub collection (edited by Melanie Myers and Emily Wakefield) on Expanded Carrier Screening (ECS): Clinical and Ethical Considerations for Genetic Counseling.

NHS negligence and compensation

'The value of compensation', a report by the UK Association of Personal Injury Lawyers (APIL) as part of the House of Commons Health and Social Care Select Committee inquiry on NHS litigation reform, comments 

 The essential purpose of compensation is to, as far as possible, enable the person who has suffered from negligent medical treatment to get back to a ‘normal life’, i.e. the position they were in prior to the negligence occurring. The impacts of negligence are wide-ranging and include job loss, poor physical health, financial troubles, relationship breakdowns and a loss of self-identity and self-worth. Patients who have suffered negligent medical treatment may be able to take legal action against the NHS and claim compensation if it can be shown that the negligence has directly resulted in injury. Patients can take legal action on behalf of themselves or on behalf of their next of kin if that person doesn’t have capacity to pursue action themselves or has died as a result of the negligence. 

Compensation is split into three parts – general damages, that is compensation for pain, suffering and the detrimental effect on quality of life; special damages for past losses, that is compensation for upfront expenses related to the injury; and special damages for future loss, that is compensation for the loss of earnings in the future, or the loss of earning potential, and future care.  

Examples of clinical negligence include the healthcare provider:

• Failing to diagnose a condition or making the wrong diagnosis 

• Negligence during a procedure or operation 

• Administering the wrong drug 

• Failing to get informed consent for treatment 

• Failing to warn about the risks of a particular treatment

NHS organisations pay an annual premium to the Clinical Negligence Scheme for Trusts (CNST), an insurance scheme administered by NHS Resolution, to mitigate against the cost of clinical negligence claims. Typically, NHS Resolution represents the NHS when a patient takes legal action against the NHS and claims compensation. There are also other, more minor schemes which NHS organisations pay into to mitigate the cost of clinical negligence claims. 

At present Judicial College Guidelines for the Assessment of General Damages in Personal Injury Cases are used to determine the financial value of general damages. These guidelines place an upper limit on the amount of compensation that can be awarded for each type of claim. Every penny of special damages must be accounted for in a schedule of loss.

The report comments  

1. The consequences of NHS negligence are wide-ranging 

NHS negligence causes significant disruption to patients’ lives and to the lives of their family and friends. Peoples’ physical, emotional and financial health can be seriously affected by the injury caused through negligent care. With the help of compensation, some can recover from, or adapt to, the consequences of NHS negligence relatively quickly. However, compensation doesn’t always stretch to help with the longer- term effects of negligence, which many suffer from for the rest of their lives. When rapid recovery isn’t possible, people can fall into a spiral of decline. Financially, they face mounting debt; psychologically the pain and suffering can result in poor mental health, including depression. In the cases with the most serious consequences, the negligent act can become embedded in the patient’s sense of self-identity and self-worth. It’s not possible for people to return to the life they previously enjoyed when they have lost relatives unexpectedly or when the negligence has caused acute impairment. In these circumstances some find it difficult to see themselves as ‘more than’ the victim of the negligence. The fight for justice can become an all-consuming process. 

2. The injury caused by NHS negligence has both direct and indirect costs 

Direct costs are commonly associated with: • A reduction in household income • Increased expenditure due to the need to travel to appointments • Unexpected costs associated with increased living expenses • Direct costs of home adaptations or mobility aids Again, rapid recovery is key for mitigating against indirect costs associated with long-term unemployment and relationship breakdown. If patients are unable quickly to cope with financial  pressures, it can take a long time for their standard of living to return to ‘normal’. Some may never have access to the same financial opportunities they had before the negligent event. This in turn has a negative effect on their quality of life. 

3. Compensation helps people to rebuild their lives 

The role of compensation is multifaceted and serves to help people who have suffered injury because of negligent care get their lives back on track. Financially, it helps people to recoup expenses or loss associated with direct costs, and in doing so alleviates financial pressure. Functionally, it provides access to the private treatment or alternative therapies needed to aid physical recovery and mitigate against long term damage. When physical recovery is not possible, compensation helps people adapt to their impairment and provides access to home adaptations and mobility aids. In doing so it helps people regain independence and freedom. 

4. Private treatment is often a key factor in recovery 

Private treatment aids recovery, both physically and mentally. It includes treatments such as physiotherapy and acupuncture, which contribute to better mobility and dexterity, and corrective surgery, which helps in the rehabilitation process and in improving the patient’s condition. Having access to quality treatment quickly provides reassurance to those who feel like their life has been put on pause. 

5. Compensation can be an effective acknowledgement of what can’t be replaced 

On an emotional level, compensation can be perceived by the patient and/or their next of kin to be recognition of the injustice experienced. Families experience avoidable pain, suffering and loss as a result of negligence and it is important to acknowledge, and be empathetic towards, the real-life consequences felt by individuals. In a top-down institution, some patients feel there is a tendency to lose sight of the people affected by negligence. When a life has been lost, compensation can go some way towards honouring that person’s contribution and acknowledging the opportunities missed. For families to feel any sense of justice for the deceased, it is important that the NHS is held accountable and recognises the loss of life. 

6. Where negligence has caused uncertainty about the future, compensation offers reassurance 

Especially in cases where children are involved (either directly or indirectly), the negligence causes particular anxiety around potential long-term implications for the patient and their family, especially in relation to on-going health problems and financial stability. Compensation has a key role in providing a sense of security. Knowing that there are funds to fall back on for further treatment or to facilitate financial stability offers reassurance to patients living with unknown consequences. It is important for people to feel that they can protect their family against future disadvantage caused by the negligent act. From an emotional perspective, this is important as it allows people to feel they can move forward. 

7. The compensation awarded is ‘not life changing’, it simply helps people get back on track 

Patients place huge value on compensation because it helps them get back on track and recover from the negative fall-out that was caused by the negligence. Compensation does not provide the means for people to elevate their standard of living. It simply facilitates a ‘return to normal’, or an adaption to a ‘new normal’, post the negligent event. 

8. Compensation isn’t about shaming the NHS, but about recognition of wrongdoing 

Many patients mention their admiration and respect for the NHS and the work that they do, and some mention not feeling particularly happy at having to take action against them. However, it is considered important that negligence and wrongdoing are recognised and equally that these experiences are not repeated for others.

Mafia Economics

'Returns to education in criminal organizations: Did going to college help Michael Corleone?' by Nadia Campaniello, Rowena Gray and Giovanni Mastrobuoni in (2016) 54 Economics of Education Review comments 

Is there any return to education in criminal activities? This paper is one of the first to investigate whether education has not only a positive impact on legitimate, but also on illegitimate activities. We use as a case study one of the longest running criminal corporations in history: the Italian-American mafia. Its most successful members were capable businessmen, orchestrating crimes that required abilities that might be learned at school: extracting the optimal rent when setting up a racket, weighting interests against default risk when starting a loan sharking business or organizing supply chains, logistics and distribution when setting up a drug dealing system. We address this question by comparing mobsters to a variety of samples drawn from the United States 1940 Population Census, including a sample of their closest (non-mobster) neighbors. We document that mobsters have one year less education than their neighbors on average. We find that mobsters have significant returns to education of 7.5–8.5% , which is only slightly smaller than their neighbors and 2–5 percentage points smaller than for U.S.-born men or male citizens. Mobster returns were consistently about twice as large as a sample of Italian immigrants or immigrants from all origin countries. Within that, those charged with complex crimes including embezzlement and bookmaking have the highest returns. We conclude that private returns to education exist even in the illegal activities characterized by a certain degree of complexity as in the case of organized crime in mid-twentieth century United States. 

Additional years of education are known to increase earnings in legitimate labor activities. But, what about illegal ones? In this study we will not discuss the activities of common criminals. Our focus is professional criminals who belonged to one of the most successful and long-lasting criminal organizations: the Italian-American mafia between the 1930s and the 1960s. We match a list set up by the Federal Bureau of Narcotics (FBN) of 712 mobsters belonging to the Italian-American mafia with the 1940 United States (U.S.) Census of Population. This gives us information about income, housing values, education, job characteristics, as well as the precise address of residence for each individual. We create a sample of white, male, similarly aged, neighbors of these mobsters that serves as the closest comparison group and we also present estimated returns to education for other samples drawn from the 1940 Census, including all working-age white men; whites born in the U.S.; all U.S. citizens; all immigrants; all Italian immigrants; and second-generation Italians (who are born in the U.S. but have at least one parent born in Italy). 

Economists have shown that increased levels of education reduce criminal participation. This implies that education is valued more by legitimate firms than by illegitimate ones. This is consistent with our first finding: mafia mobsters have on average one less year of education when compared to the sample of neighbors. 

But, this finding does not imply that annualized returns to education are smaller for organized crime members than for ordinary workers. Criminal careers are known to start very early and are likely to be interwoven with schooling choices. Individuals who choose to be part of the mafia are likely to trade off income and power for risk of injury, prison, and death. This alone, without the need of lower returns to education, would predict a lower investment in education as there would be fewer years of working life in which to recoup foregone wages (Mincer, 1974). Indeed, economic theory predicts that individuals with lower (working) life expectancy should have larger annualized returns to education. 

This is true unless the extra schooling is not marketable. So, is schooling marketable in the mafia? This question really involves the mafia’s complex business model and the link between human capital and schooling. Let us start with the latter. If one takes Bowles and Gintis (2002)’s view that schools “prepare people for adult work rules, by socializing people to function well (and without complaint) in the hierarchical structure of the modern corporation” it would seem that schools are an ideal training environment for aspiring mobsters. 

While we do not fully embrace this view of schooling, many of the skills students acquire at school are likely to be useful when setting up a racket (i.e. extracting the optimal rent), a loan sharking business (i.e. weighting interests against default risks), a drug dealing system (i.e. setting up supply chains), etc. It is ultimately an empirical question as to whether the returns to education in the mafia are similar to the ones ordinary workers enjoy. This comparison, we believe, is also informative about the workings of the mafia. The results presented below hold, we argue, for criminals engaged in complex criminal activities, but may not be more generally true of petty criminals or criminals operating at the lowest levels of criminal organizations, whose everyday tasks are much simpler and do not involve the planning, risk evaluation, and communication skills needed of those higher in the network. We are therefore providing a counterpoint to Carvalho and Soares, and Levitt and Venkatesh (2000), who study the characteristics of regular gang members. 

We estimate Mincer-type regressions using log income and log housing value as the main outcomes. The main independent variable of interest is years of education. We present results for the mobster sample and compare to other reasonable comparison groups: all men; U.S. citizens; immigrants; Italian immigrants and second-generation Italian men; and a sample of mobster neighbors, who lived on the same block (and usually the same exact street) in 1940. 

We find large returns to education within the mafia, no matter the model, or the outcome variable, that we use. This shows that private returns to education exist not only in legitimate but also in the illegitimate activities that imply a sufficient degree of complexity. Mobster returns (in terms of income) to a year of schooling are around 7.5–8.5% , compared to 9–10% for the neighbor sample and 10.5–13% for the U.S. born and U.S. citizen samples. Interestingly, mobster returns are substantially larger than we find for the immigrant and, especially, the Italian immigrant, samples, while they are only about one percentage point higher than we find for second-generation Italians. Moreover, for mobsters who, according to the FBN records, were involved in white-collar crimes or in crimes that require running an illegal business (i.e., racketeering, loan sharking, bootlegging, etc.) we find returns to education that are about three times as large as for those who are involved in violent crimes (i.e., robberies, murders, etc.). 

To our knowledge, this is the first systematic attempt to estimate the returns to education in criminal activities and provides intuitive insights into the workings of complex criminal gangs such as the mafia and into the factors considered by those deciding to become criminals in the first place. Carvalho and Soares provide some evidence on the returns to education for low level Rio de Janeiro gang members but it is not the main focus of their study. 

The paper proceeds as follows. We first discuss the existing literature on education and crime, before providing a brief overview of the history of mafia organizations and members in the U.S. before 1960. We then present our novel dataset as well as our comparison samples drawn from the U.S. Census. We then discuss the empirical methodology before finally presenting our results, discussing mechanisms, and concluding.

Pharma and other IP Protection

The Benefits of Intellectual Property Rights in EU Free Trade Agreements report by Fredrik Erixon, Oscar Guinea, Erik van der Marel and Philipp Lamprecht at the European Centre for International Political Economy calls for stronger intellectual property protection for the EU pharma sector and other rights interests.

The authors provide 'key takeaways' -

 1: What are Intellectual Property Rights and why do they matter? 

Intellectual Property gives the creator (e.g. an artist, a company doing R&D, indigenous peoples, a creative studio) an exclusive right over the commercial use of that intellectual creation for a certain period of time. IP motivates people/companies to invest in innovation by providing the opportunity to recoup the investments made. By motivating such new discoveries, innovations and other immaterial creations, IP directly leads to progress that is beneficial for society as a whole. 

2: The economy-wide relevance of IP-intensive industries 

IP-intensive industries constitute 44.8 percent of EU GDP and generate 38.9 percent of total EU employment. Wages are 47 percent higher on average in IP-intensive industries compared to non-IP-intensive industries. They are responsible for 68% of total EU exports and they drive investments in the EU economy (51% of all investments occur in a set of IP-intensive industries). 

3: EU trade agreements: strong on niche types of IP but weaker on the broad IP types 

EU FTAs are particularly strong in some niche types of IP (e.g. geographical indications), but less so in the broad types of IP of patents and trademarks, while the latter matter most economically. The EU did not copy the equivalents of EU law into its FTAs and there is much less focus on patents and trademarks in EU FTAs compared to US FTAs. 

4: 55% of EU exports (of which 60% is IP intensive) are not covered by an FTA 

Because of the EU’s bilateral FTA strategy, the share of EU exports covered by FTAs rose to 45% in 2018 and IP-intensive trade covered by FTAs grew fast. However, 55% of all EU exports are not covered by bilateral FTAs and 60% of these exports are IP-intensive. They do not have FTA IP protection which could be an issue for trade with countries where IP systems (including enforcement) are weaker. 

5: The EU IP score and EU’s global share of IP-intensive exports declined 

From 2009 to 2018, the EU IP score has declined vis-à-vis the US, China, Japan and Switzerland. The global share of EU IP-intensive exports is also eroding gradually. The fact that the decline in IP-intensive export shares is gradual is likely due to the long-term nature of R&D, which also means this trend cannot easily be turned around once it happens. 

6: Sector-specific relevance of IP-intensive industries. 

Most value-added for the EU economy is created by machinery (€232bn), motor vehicles (€206bn), and architecture & engineering (€158bn). Pharmaceuticals (€161k), telecoms (€156k), chemicals (€107k), transport equipment (€88k) and motor vehicles (€81k) create the most productive and highest value-added jobs. These sectors are 2-3 times as productive as non-IP-intensive industries (€51k). Machinery (€240 bn), motor vehicles (€169 bn), chemicals (€161 bn) and pharmaceuticals (€135bn) contribute most to EU exports. IP-intensive sectors export 68% of all EU exports. Telecom (€44k per person), motor vehicles (€39k p.p.), machinery (€22k p.p.) and electrical equipment (€13k p.p.) create most investments per capita in the EU in 2019. 

7: Strengthening IP in EU FTAs has a significant positive economic and societal effect for the EU and EU Member States 

Stronger IP provisions in EU FTAs matter: they create a level playing field, improve market access, reduce trade costs for IP-intensive products, and create predictability for long-term investments. Stronger IP provisions in EU FTAs lead – each year – to higher EU GDP (€63bn), more EU exports (€74bn), higher investments in the EU (€17bn) and higher wages for EU citizens (€245 per EU family of 4). Every EU Member State benefits. All 27 EU Member States participate in these gains. 

8: Strengthening IP in EU FTAs also has positive sectoral effects in the EU and in EU Member States 

The EU IP-intensive sectors that would increase exports most in case of stronger IP provisions in EU FTAs are: machinery (+4.0%), transport equipment (+3.4%) and electronics (+3.2%). In terms of production, transport equipment (+6.3%), machinery (+2.3%), electronics (+2.2%), electrical equipment (+2.0%) and pharmaceuticals (+2.0) would increase production in the EU. 

9: Patents and trademarks matter most for IP-intensive EU exports 

The largest positive impact on exports comes from patent and patent-related provisions, followed by the effects of trademarks. For EU FTAs, however, the patent and trademark provisions have a weaker trade-enhancing effect compared to other FTAs due to EU FTA patent and trademark provisions being weaker than those in other FTAs. By strengthening these provisions a stronger export performance and more export-oriented jobs in EU Member States would result. 

10: IP and the EU Industrial Strategy: an opportunity for EU IP-intensive industries 

The biggest gains in economic activity are created when new innovations such as digital technologies, new machines, innovative medicines, and green technologies are also broadly adopted. IP provisions in EU FTAs can meaningfully contribute to EU strategic resilience by promoting innovation in the EU, driving the digital transformation, green technology development and R&D into innovative medicines, especially if done in parallel to a strong regulatory framework and deepening of the EU Single Market. 

11: IP in the EU pharmaceutical strategy: the EU at a crossroads 

The EU has lost ground in terms of pharmaceutical innovation – the most R&D intensive industrial sector – since 1990. The EU Pharmaceutical Strategy has the potential to turn this trend around, but in spite of some positive IP elements in the strategy, it looks like this may not happen, mainly because it could introduce conditionalities on IP and incentives. This is the opposite of what the EU’s global trading partners are doing and could undermine the positive effect of strong IP provisions in EU FTAs. 

12: IP effective against counterfeit goods 

Counterfeiting is a violation of IP. Strong IP provisions (e.g. trademarks, patents, copyrights) that are enforced jointly by companies and governments (e.g. an EU-wide food fraud risk management system, the EU falsified medicines directive) are one of the most efficient ways to combat counterfeiting and piracy and reducing their negative economic, environmental, health and societal impact. 

13: IP and biodiversity 

The EU-ANDEAN FTA contains most IP provisions on the protection of ‘traditional knowledge and genetic resources’. IP helps to combat the overexploitation of natural resources, supporting the lives and livelihoods of indigenous and local communities and allowing these communities to capture larger shares of the economic benefits, while focusing on preserving the planet for future generations. 

14: IP and SMEs 

The protection granted from IP is vital for small- and medium-sized enterprises (SMEs). Many SMEs fail to consider their IP in early stages of development and overlook that it is one of their most valuable assets. Stronger IP provisions in EU FTAs, linked to SME chapters, could help SMEs overcome the export hurdle as more predictability and certainty are provided and investments protected. Stronger FTA enforcement too is especially beneficial for SMEs who do not have the resources for legal battles to protect their (intellectual) property.

The paper offers the following policy recommendations - like Captain Renault in Casablanca I confess to being "shocked, shocked" - 

1: Stronger IP provisions in EU FTAs 

The EU should strengthen IP provisions in EU FTAs to the level of protection provided for in EU law, especially, but not only, with developed countries (e.g. Australia, New Zealand, Chile). The EU has the opportunity to deepen FTAs and strengthen IP after several years when FTAs are ‘upgraded’ to the benefit of EU Member States’ and trading partner economies. Mirroring the EU IP system in EU FTAs was the ambition in 2006 of the ‘Global Europe’ strategy. If the EU would refocus on this objective in 2021, the EU economy and its citizens would benefit in various ways: economically (e.g. higher levels of welfare, investments and exports), socially (e.g. higher wages, more high-quality export jobs), environmentally (e.g. support for biodiversity, green technologies), and in terms of recapturing part of the EU’s former global leadership in innovation, and via stronger resilience for the EU economy. 

2: Strengthen patent and trademark provisions in EU FTAs especially 

The EU is already including strong provisions in its FTAs for geographical indications (GIs), plant variety rights (PVRs) and – depending on the trade partners – traditional knowledge. But the EU should include stronger provisions on two large types of IP: trademarks and patents. For these two types, the EU should agree provisions in line with those provided for in EU law. Currently, EU FTAs are weaker in these two types of IP than other FTAs, notably US FTAs, while these two types of IP are among the most important for the EU and EU Member State economies. The current levels of trademark and patent protection constitute the largest untapped potential of EU FTAs. The EU should lift the level of patent and trademark protection to what is already done on GIs. On trademarks, the EU could include provisions in its FTAs that would allow for the refusal or invalidation of a trademark on the grounds of bad faith, in order to disincentivise bad faith registrations by local companies infringing foreign trademarks. On patents, the EU could agree on EU-levels of RDP and SPC provisions in its FTAs. 

3: Strengthen the enforcement of FTAs 

The EU should strengthen IP in EU FTAs via more emphasis on enforcement of its FTAs, including for IP provisions. The appointment of the Chief Trade Enforcement Officer (CTEO) in 2020 and the entering into force new trade enforcement rules in February 20212 are important. In addition, the EU should continue its bi-annual reporting on IP frameworks in third countries, the use of bilateral IP forums to strengthen IP frameworks in third countries, and use the Access2Markets Database to collect and follow IP-related market access barriers. In addition, trading partners should not be allowed to circumvent FTA provisions by adopting mitigating domestic policies that undo the effect of the FTA after the FTA has been applied. Also, the EU should actively check how the FTA (and its IP provisions) are embedded  in national laws of the partner countries, taking likely implementation and enforcement already into account when (re)negotiating an FTA, and the scope of dispute settlement provisions in EU FTAs should as a standard include trade-related disputes arising from the violation of IP. This will strengthen global IP enforcement and – for example – help address the common challenge of counterfeit / fake goods that have significant negative economic, environmental, health and reputational effects. 

4: Strengthen the wording of IP provisions in EU FTAs 

Effectiveness of IP provisions in EU FTAs does not only depend on more or longer protections (e.g. years of copyrights, patent term restoration or trademarks), but also on the detailed ways of wording provisions in EU FTAs. One way to strengthen IP in EU FTAs would be for the European Commission to engage in a dialogue with IP-intensive industries to discuss how provisions are applied / work in practice and how they could be reformulated to become more effective in protecting and enforcing IP on the ground.  

5: Link IP in FTAs more directly to EU strategic objectives 

The EU should add a requirement in its impact assessment work around EU FTAs to explore the effects of strong IP provisions in EU FTAs on achieving EU core policy objectives, especially in combination with the trade enhancing effects of the FTA. For example, how can IP strengthen the EU’s Green Deal, the Digital Transformation, support economic development of the poorest nations in the world, or increase EU strategic resilience against future pandemics? And what flanking measures could be agreed upon with the EU’s trading partners to allow the IP framework to best support these policy objectives. 

6: Make IP work better for SMEs 

With IP generating substantial benefits for SMEs in Europe, there is not only a need to strengthen IP provisions in EU FTAs overall with a focus on benefiting SMEs, also a clear link to SME chapters in EU FTAs needs to be made and the FTAs need to be flanked by a stronger interaction between IP offices, SME support institutions, business associations, national, regional and local governments and other relevant actors to first identify the IP needs of entrepreneurs and remove barriers to a more effective use of the IP system. 

7: Support partner countries to enforce IP better 

Very often, implementation and enforcement of IP in trading partner countries is weak and not up to the level of implementation and enforcement in the EU. This is not always bad will, but also simply the result of weaker systems and structures, lack of budgets, and lack of understanding of IP. We therefore recommend the EU to think of flanking capacity building projects in the area of IP – especially in case of FTAs with developing countries. These capacity building projects could focus on: 1) Helping trade partners to set-up specialised IP courts and train judges that will strengthen domestic IP enforcement; 2) Support partner countries to be clear on what has to happen with seized counterfeit goods: create ample storage space for detention of seized products and budgets for destruction of these counterfeit goods; 3) Awareness raising on what IP is and what IP enforcement entails. 

8: Extend the global coverage of EU FTAs 

Ideally, each country would have its own strong domestic IP system to support innovation and R&D and protect creators from illegal use of ones’ IP. This is vital for IP-intensive industries first and foremost, but also for the EU, because if EU company’s IP rights are violated in a third country, the negative consequences are also born by the EU where the investment costs were made and where falsified goods could enter. Parallel to deepening IP in EU FTAs, the EU should consider expanding the bilateral coverage of EU FTAs with strong IP provisions with Australia, New Zealand, Indonesia, Chile, but also – more challenging – with key trade partners like China and Russia where domestic IP systems are much weaker and an FTA would add much-needed legal certainty for industry. Also an understanding with the US, where EU and US could together set a global example of strong IP provisions driving R&D and innovation, should be considered. 

9: Explain the benefits of IP better 

Because they are important, but also conceptually difficult to understand, the EU – together with EU IP-intensive industries – should explain more about what IP is, how they work, and why it is important for the EU to have a strong IP framework. Especially the use of concrete examples in illustrating IP is important. One way would be to add more information to the “Report on the protection and enforcement of Intellectual property rights in third countries”. Another way would be to explain the quid pro quo inherent in certain IP rights. For example, patents will not be granted unless the patent application contains sufficient detail concerning the invention, permitting further research. Similarly, regulatory data protection (RDP) for innovative medicines protects marketing authorisation dossiers which in turn leads to more transparency. That transparency forms the basis for future generic and biosimilar products. 

10: IP provisions in EU FTAs matter for EU Member States 

Working on stronger IP provisions in EU FTAs is not only a role for the European Commission or the negotiators. Industry has an important role to play by highlighting the actual effects and benefits of IP provisions in EU FTAs and share these broadly, including illustrative examples. IP-intensive industries should invest into reporting and be transparent about the relevance of different IP provisions for them. This also applies to making clear to EU Member States what the specific Member State benefits of stronger IP in EU FTAs are in terms of production, exports, jobs and wages – and for what types of IP and IP-intensive industries these effects are most pronounced.

UK Smart Contracts

The UK Law Commission paper on Smart Contracts states 

1.1 Emerging technologies, such as distributed ledgers, are increasingly used to create “smart contracts”: computer programs which run automatically, in whole or in part, without the need for human intervention. Smart contracts can perform transactions on decentralised cryptocurrency exchanges, facilitate games and the exchange of collectibles between participants on a distributed ledger, and run online gambling programs. 

1.2 Smart contracts can also be used to define and perform the obligations of a legally binding contract. It is this specific type of smart contract – a “smart legal contract” – that is the subject of our analysis. For the purposes of this paper, we define a smart legal contract as a legally binding contract in which some or all of the contractual obligations are defined in and/or performed automatically by a computer program. Smart contracts, including smart legal contracts, tend to follow a conditional logic with specific and objective inputs: if “X” occurs, then execute step “Y”. 

1.3 Smart legal contracts are expected to revolutionise the way we do business, particularly by increasing efficiency and transparency in transactions. They are increasingly being considered by contracting parties as a means of automating specific processes within conventional contracts, from payment of insurance claims to managing supply chains. Currently, smart legal contracts are likely to be useful in respect of only fairly rudimentary agreements, such as to transfer an amount of cryptocurrency to a person’s wallet when certain conditions are met. However, as the technology underpinning smart legal contracts becomes increasingly sophisticated, a greater range of obligations may be suitable for coding, resulting in these contracts becoming increasingly more complex and able to perform a greater range of tasks. 

1.4 Smart legal contracts can take a variety of forms with varying degrees of automation. In the first instance, a smart legal contract may take the form of a natural language agreement with performance automated by code. Alternatively, a smart legal contract may be written solely in (and performed by) code. In between these two extremes, a smart legal contract may take the form of a hybrid contract, consisting of both natural  language and coded terms. Different forms of smart legal contract give rise to different legal considerations. 

1.5 Automation should be considered on a spectrum. Smart legal contracts which involve elements of standard automation, such as payment by way of direct debit, have been in use for many years and are therefore unlikely to give rise to novel legal issues. However, a smart legal contract drafted primarily or solely in code and recorded on a distributed ledger, is likely to give rise to novel legal questions; the automation in question takes the contract out of the realm of legal familiarity. 

Background 

1.6 The Law Commission was asked by the Lord Chancellor to include work on smart legal contracts as part of our 13th programme, agreed in December 2017. After discussions with stakeholders, our initial intention was to publish a call for evidence in January 2019. 

1.7 In the same period, the Lawtech Delivery Panel was created with the support of Government. There was clearly some common ground between the proposed Law Commission work and that of the Delivery Panel, and in particular its UK Jurisdiction Taskforce (“UKJT”). In those circumstances, we agreed to pause our work until such time as the conclusions of the UKJT were known. 

1.8 In November 2019, the UKJT published its legal statement on cryptoassets and smart contracts. The UKJT Legal Statement concluded that, in principle, smart contracts are capable of giving rise to binding legal obligations, enforceable in accordance with their terms. Following this, the Ministry of Justice asked the Law Commission to undertake a scoping study on smart legal contracts. 

1.9 The purpose of the scoping exercise is to provide an analysis of the current law as it applies to smart legal contracts, highlighting any uncertainties or gaps, and identifying such further work as may be required now or in the future. The project is intended to build on the foundations laid by the UKJT Legal Statement, and consider additional questions raised by stakeholders regarding smart legal contracts. Our terms of reference do not include other areas of law in so far as they relate to smart legal contracts, such as tax and data protection. Our full terms of reference are set out at Appendix 1. 

Call for evidence 

1.10 In December 2020, we published a call for evidence, which closed on 31 March 2021. The primary function of the call for evidence was to seek views about, and evidence of, the ways in which smart legal contracts were being used, and the extent to which the existing law could accommodate them. In each chapter of the call for evidence, we set out our understanding of law and practice, and asked consultees for their views. We did not make any proposals for law reform. 

1.11 We received 47 responses to the call for evidence. The responses were from a mix of stakeholders, including individuals who responded in their personal capacity, individuals who responded on behalf of organisations, and academics. We summarise our findings and conclusions to the consultation exercise in this paper. A list of all consultees who responded to the call for evidence is set out in Appendix 2. 

Extent 

1.12 This project focuses on the law of England and Wales. International conventions, including the United Nations Convention on Contracts for the International Sale of Goods, are not considered. 

1.13 In relation to Wales, we consider that the subject matter of the project is reserved, being primarily a matter of private law.  

1.14 The project does not consider the law of Scotland or of Northern Ireland. 

Activity in other jurisdictions 

1.15 Some other countries have already taken steps to put smart legal contracts and associated concepts on a statutory footing. In addition, courts in other jurisdictions have had the opportunity to consider some of the issues that we discuss in this paper. Given the cross-border nature of many of the transactions which take place using smart legal contracts, it is and will continue to be important to be aware of developments elsewhere, with the hope that legal approaches will be broadly compatible. In the call for evidence, we asked consultees which other jurisdictions we should look to for their approach to smart legal contracts. 

1.16 Consultees noted that various states in the United States of America including Arizona, Illinois and Tennessee have introduced legislation which defines the term “smart contract”, and provides that a contract is not to be denied legal effect solely because it is a smart contract. 

1.17 Some consultees mentioned other jurisdictions which are perceived as being particularly proactive in the development and use of smart legal contracts and distributed ledger technology, including Australia, China, Dubai, Estonia, India, New Zealand, Sweden and Switzerland. Several consultees commented that Singapore is   particularly important because of its advanced use of smart legal contracts, and for its developing jurisprudence on smart legal contracts following High Court and Court of Appeal decisions in Quoine Pte Ltd v B2C2 Ltd. 

1.18 We refer to specific developments in other jurisdictions throughout this paper, where they are relevant to the particular issues being discussed. 

Related work within the Law Commission 

1.19 The UKJT Legal Statement also considered the legal status of cryptoassets. The Law Commission is currently working on a separate digital assets project drawing on this aspect of the UKJT Legal Statement. We published a call for evidence on digital assets in April 2021. We are analysing the responses received, and intend to publish a consultation paper next year.  

Structure of the paper 

1.20 This paper analyses the current law as it applies to smart legal contracts, particularly in relation to:

(1) formation and enforceability, including in relation to deeds; 

(2) interpretation; 

(3) remedies; 

(4) vitiating factors (mistake, misrepresentation, duress and undue influence); 

(5) consumer protection; and 

(6) jurisdiction. 

1.21 It comprises six further chapters. In each chapter, we provide a summary of the responses we received to the various questions raised in the call for evidence. We build on additional insights provided by consultees, and provide more complex and detailed examples. We also explain where, and why, our thinking has changed and developed since the call for evidence, and draw on consultee views to inform our thinking and to formulate our conclusions. 

1.22 In Chapter 2, we set out the background to smart legal contracts, our working definition of what a smart legal contract is, current use cases and a discussion of distributed ledger technology in the context of smart legal contracts. We include a discussion on the prevalence of the various forms of smart legal contracts, how they are used in practice, and the costs and benefits associated with smart legal contracts. 

1.23 The next three chapters provide an analysis of the “lifecycle” of a contract formed under the law of England and Wales (from negotiation through to remedies for breach) and explain how the law might apply to smart legal contracts. Chapter 3 considers the formation of a smart legal contract, including whether the parties intended to enter into legal relations, with all the associated legal rules and remedies. In Chapter 4, we consider how the courts might interpret a smart legal contract, looking at existing principles of interpretation. In Chapter 5, we consider the remedies which might be relevant if things “go wrong”, such as where the code does not execute as one or more of the parties intended. 

1.24 In Chapter 6, we specifically consider potential issues for consumers who enter into smart legal contracts, and consider how existing consumer protections might apply in the context of smart legal contracts. 

1.25 In Chapter 7, we consider the factors which may determine whether the courts of England and Wales have jurisdiction in relation to a smart legal contract, in the absence of a jurisdiction or choice of court agreement between the parties. 

Conclusions 

Existing legal principles can accommodate smart legal contracts 

1.26 In this paper, we undertake a detailed analysis of the application of existing contract law to smart legal contracts. Our findings conclude that the current legal framework is clearly able to facilitate and support the use of smart legal contracts. Current legal principles can apply to smart legal contracts in much the same way as they do to traditional contracts, albeit with an incremental and principled development of the common law in specific contexts.  In general, difficulties associated with applying the existing law to smart legal contracts are not unique to them, and could equally arise in the context of traditional contracts. In addition, even though some types of smart legal contract may give rise to novel legal issues and factual scenarios, existing legal principles can accommodate them. 

1.27 This paper therefore builds on the conclusions reached by the UKJT Legal Statement, which established that the current legal framework is sufficiently robust and adaptable so as to facilitate and support the use of smart legal contracts. The conclusions reached in this paper echo the view expressed by Sir Geoffrey Vos below.

English law is in a good position to provide the necessary legal infrastructure to facilitate smart legal contracts if, but only if, we try to keep any necessary reforms simple. We should, I think, keep sharply in focus the advantages of the common law. It is dependable and predictable and able to build on clear principles so as to apply them to new commercial situations. We should, therefore, be looking to identify and, if necessary, remove any fundamental legal impediment to the use of smart contracts. We should try to avoid the creation of a new legal and regulatory regime that will discourage the use of new technologies rather than provide the foundation for them to flourish. 

1.28 The flexibility of our common law means that the jurisdiction of England and Wales provides an ideal platform for business and innovation, without the need for statutory law reform. 

1.29 The market also has an opportunity to anticipate and cater for potential uncertainties in the legal treatment of smart legal contracts by encouraging parties to include express terms aimed at addressing them. Throughout the paper, we identify particular issues that parties may wish to address in their smart legal contract in order to promote certainty and party autonomy. A non-exhaustive list of these issues is set out in Appendix 3 to this paper. In addition, as smart legal contracts become increasingly prevalent, we anticipate that the market will develop established practices and model clauses that parties can make use of when negotiating and drafting their smart legal contracts. We hope that work in this area could be led by the UKJT or LawtechUK. 

1.30 We also consider separate, related areas of law, such as the law of deeds and the rules on jurisdiction. Deeds and private international law are the two areas where we think future work is required to support the use of smart contract technology in appropriate circumstances. In relation to both of these areas, future law reform projects are in train. 

Related technological advancements 

1.31 Smart legal contracts should not be considered in isolation. Related technological developments, such as the evolution of sophisticated smart contract platforms and the digitisation of contracts, have a direct bearing on smart legal contracts and their uptake. Digital contract initiatives and associated technologies are aimed at digitising commercial and legal documentation.  Rather than being written in natural language and stored as such, such technologies enable a contract to be produced in structured formats, with supporting code that acts as a map or set of instructions, enabling a computer to read it.  Legal documents produced in such a format can have their contents more easily read for reporting, analysis, automated processing, and lifecycle management.16 Even though a digital contract does not need to be a smart legal contract, digital contracts will likely trend towards the inclusion of coded elements. Although these developments are outside the scope of this paper, it is worth noting their advancements. 

1.32 The development of smart legal contracts may introduce new issues and harms which the law needs to respond to. For example, oracles (external data sources which transmit information to a computer program) may require further consideration or indeed regulation. As technology and use cases develop, it will be important to keep the law under review, and consider whether reform or regulatory intervention is necessary to address novel issues which arise.