The influences of new technology on a 700-year-old profession.
In 2008, the first use of the blockchain came about with a phenomenon that many people today consider a revolution: Bitcoin. Invented by Satoshi Kishimoto (a pseudonym), this technology is today a significant topic in the spheres of new technologies. However, the blockchain is a technology that can apply to many areas but also to raise some issues, including on a legal level. This is why the very existence of the blockchain and its possibilities allows us to question the impact of this technology on the professions of the notary.
This article will address many issues such as legitimacy, security or the disappearance of trusted third parties who are at the heart of blockchain technology.
Focus on Blockchain Technology
Regarding the latter, it is essential to redefine the nature. According to Modex’s smart contract marketplace, the blockchain is a technology of storage and transmission of information, transparent, secure, and operating without central control body. It constitutes a database containing all the history of exchanges made between its users since its creation: no data will be lost. On the other hand, this technology has the advantage of allowing its users the possibility of freely consulting the transaction registers.
Operation Blockchain by Blockchain
Also, it is important to understand the distinction between a private blockchain and a public blockchain. The public blockchain is the historic blockchain. It is usable by everyone, and everyone has access to the registry of the chain. It is complete disintermediation not supervised by a private organization. On the other hand, private blockchains can be created by consortia (banks for example) and intended only for members of this chain or created by a single actor, again a potential financial institution.
It is in this technological framework that the issues related to the notary are raised and that we will define below.
The profession of the notary is essentially seven in number. It can be a notary, having the particularity of being a keeper of the seals but not only. A notary is often accompanied or in connection with a trainee notary, an assistant notary, a clerk, a formalist study, a taxing accountant or a real estate negotiator. These trades have quite varied roles, being able to be oriented technical law, administration, management and of course the affixing of the seal of the State. Notarial deeds can take many forms and will involve real estate, marriage contracts, wills, births and civil status in a legal environment.
As part of the blockchain, notary trades are not affected by all the possibilities that this technology offers. This is going to be a topic of great debate in the notarial profession and the future that can be envisaged for these businesses with the emergence of smart contracts.
The role of smart contracts and issues related to the notarial profession
The term “smart contract” is misleading because it is not a contract per se. It is, in fact, a sum of checks and automatic achievements of contractual obligations. Concretely, a smart contract is an autonomous program, which will automatically execute conditions defined and registered beforehand in the blockchain.
Unlike a program not implemented in a blockchain but on more conventional technologies also capable of autonomy, the smart contract is tamper-proof, non-modifiable and completely secure. Thus, smart contracts are a lever of trust between parties exciting since compliance with the contract is automated. Fraud is therefore theoretically impossible.
The primary issue of smart contracts for use generally governed by legislation is the applicability of the contract in this context. Therefore, two possibilities are likely to emerge: either the contracts will enter the existing legislation, or it will be necessary to legislate to consider their role in the society.
Regarding notarial professions, what we will be interested in is the following question: can a notarial deed be valid if it is a smart contract? As we mentioned earlier, the prognoses of application areas of the smart contract are varied and may involve real estate transactions among others, for which the presence of a notary is essential.
This is where an essential problem appears: what is the use of a notary? Notaries are now guardians of the seal of the state. The seal is the mark of public authority. That is to say, and it represents the authority of the Republic (and historically of the King or the Emperor). Thus, when a seal is affixed to an act drawn up by the notary, it becomes a notarial act. It has the force of public authority. Therefore, the notarial act is at the top of the hierarchy in providing evidence, which makes it an indisputable act — which creates a parallel with smart contracts. The only existing way to challenge a notarial act is to go through the procedure called a forgery, which, for comparison, amounts to challenging a judicial decision.
Therefore, a smart contract can hardly take the place of an authentic act today, both from a legal and a technological point of view. However, if this were to be envisaged, one could imagine consortium blockchains, representing digitized cadasters in which the authentic deeds, as well as the seals, could be added to the registers. As a reminder, the cadaster is a set of plans and administrative files, which identify the total property properties located in each town, and which records the value to serve as a basis for calculation of certain taxes. Thanks to Smart Contract technology, compensation is automatic, completely secure and without fraud.
A practical case of a smart contract
The concept of the Smart Contract did not appear thanks to the blockchain: Nick Szabo made the first mention of such a program in 1994. To better understand them, here is an example of typical use of the smart contract.
This case is that of Axa, the insurance company that, for the launch of its product Fizzy, based on the use of Smart Contracts Ethereum: the oracles. These oracles are a bit special because their role is to connect the outside world (databases, API, web service) to the blockchain. It is, therefore, a bridge between a blockchain and an external data source.
Fizzy, travel insurance, is based on a smart Ethereum contract that will automatically trigger compensation to the insured in case of delay of his plane between Paris Charles de Gaulle and the United States. This type of smart contract is a fascinating application, especially when we consider that about 60% of passengers affected by a delay does not claim compensation in case of delay. While this may sound like a benefit to the transport companies, it should be remembered that these companies can pay heavy taxes when compensation is not paid to customers. Thanks to smart contracts, the indemnifications are done securely, the insured are sure to be reimbursed, and the airlines are protected from the taxes that may threaten them. Furthermore,
The emergence of the LegalTech market and their opportunities
For a few years, after appearing in countries of Anglo-Saxon law like the United States, the LegalTech’s, these startups wishing to digitize the administrative and judicial procedures.
The LegalTech’s are quite interesting UFOs in the sky of the startups since they link the legal field and the new technologies. The clear objective of these structures is to propose 100% digital solutions regarding democratization of all the administrative and judicial procedures that small businesses and individuals are likely to face.
The collaboration of LegalTech with the notarial professions would be interesting in more than one way, primarily to allow the digitization of notarial acts and seals as medium-term prospects. However, just mentioning this type of practice reveals many barriers: digitizing a notarial act means digitizing the seal of the state, which is historically not acceptable. The notary is an ancient profession, and it is now several centuries since the notaries are guardians of the Seals. Beyond the legal aspect, the notary is a profession belonging to the culture of the state and deeply rooted in the mores of society.
Disappearance or complementarity with the possibilities offered by the blockchain?
Conceptually, smart contracts and notarial acts are quite similar: they bring confidence and security as well as minimal risks of falsification. The two significant differences brought by smart contracts technology used and disintermediation. However, notarial deeds have a strength that smart contracts do not yet have: a legislative framework and the mark of state authority. The disappearance of notary professions now seems impossible, both regarding expertise and the socio-cultural importance of these professions. On the other hand, a Keeper of the Seals cannot be a startup, as legitimate and reliable as it is, the symbolism of this responsibility is at the heart of the matrimonial, inheritance and real estate law, in which one finds in particular birth certificates,
How can notary trades adapt or evolve?
As we have seen previously, complementarity cannot be ruled out between smart contracts and notarial deeds (notarial professions more generally). Nevertheless, the existence of complementarity induces an adaptation on the part of the notarial jobs which must not break the essence of the profession. Thus, one can imagine cadasters or notary firms to use LegalTech as a provider for the digitalization of registers.
The notary’s office would be at the same time in connection with the State, the set of parties concerned by the authentic acts but also new players in the market, offering CRM (Customer Relationship Management) services coupled with private blockchains on which it will be possible to issue confidential access to the set of rights holders.
These CRM offers would be used to manage all clients of the notary firm and would allow communicating optimally with the latest. On the other hand, the CRM could be linked to the private blockchain of the cadaster in which the notarial act will be secured and searchable by the parties.
To go further in the reflection, one could imagine that a blockchain of the national consortium is set up by the state, in which sub-blockchains would be created precisely by cadaster. The prospects for a national consortium blockchain are exciting both politically and technologically and economically, playing an influential role in job creation. On the other hand, the CRM could be linked to the private blockchain of the cadaster in which the notarial act will be secured and searchable by the parties.
To go further in the reflection, one could imagine that a blockchain of the national consortium is set up by the state, in which sub-blockchains would be created precisely by cadaster. The prospects for a national consortium blockchain are exciting both politically and technologically and economically, playing an influential role in job creation.
On the other hand, the CRM could be linked to the private blockchain of the cadaster in which the notarial act will be secured and searchable by the parties. To go further in the reflection, one could imagine that a blockchain of the national consortium is set up by the state, in which sub-blockchains would be created precisely by cadaster.
The prospects for a national consortium blockchain are exciting both politically and technologically and economically, playing an influential role in job creation. In which sub-blockchains would be created precisely by cadaster. The prospects for a national consortium blockchain are interesting both politically and technologically and economically, playing a substantial role in job creation. In which sub-blockchains would be created precisely by cadaster. The prospects for a national consortium blockchain are interesting both politically and technologically and economically, playing an active role in job creation.
Can trades be created by the union blockchain / notarial?
As we have seen before, despite the legislative and socio-cultural obstacles of such a union, the opportunities remain numerous. Many trades could emerge if the State helped to lift the blocking elements, even to legislate. Therefore, the establishment of such a digitization project would be the object of creation of government engineers, specialized in the blockchain to set up the construction site of production of a consortium blockchain and its maintenance, development at various companies providing smart contracts and blockchain solution or even on marketplaces like Modex marketplace for notarial firms but also the emergence of specialized notaries in the blockchain, thus developing a pool of very skilled profiles in US. Finally,
To envisage a promising future for a union between the professions of the notary and the blockchain is not irrelevant. If the barriers a priori exist are currently challenging to surmount without the help of the State, there is every reason to believe that the State could be favorable and help in the implementation of this project, given that it could win.
While considering the opportunities, it is quickly understood that the state would win both in terms of influence, reputation and pioneer in the establishment of a national consortium blockchain. Added to this is the economic factor with the creation of employment and value. By coupling the LegalTech, the blockchain and the notarial, it is conceivable to see a new market come into existence, with almost guaranteed durability, in a context of strong growth.