New blockchain-based smart legal contracts for Australian businesses
CSIRO’s Data61 has formed a consortium with law firm Herbert Smith Freehills and IBM to build Australia’s first cross-industry, large-scale, digital platform to enable Australian businesses to collaborate using blockchain-based smart legal contracts.
Known as the Australian National Blockchain (ANB), the new platform has the potential to represent a significant new piece of infrastructure in Australia’s digital economy, enabling companies nationwide to join the network to use digitised contracts, exchange data and confirm the authenticity and status of legal contracts.
Once completed, the ANB will enable organisations to digitally manage the lifecycle of a contract, not just from negotiation to signing, but also continuing over the term of the agreement, with transparency and permissioned-based access among parties in the network. The service will provide organisations the ability to use blockchain-based smart contracts to trigger business processes and events.
ANB will provide smart legal contracts (SLC) that contain smart clauses with the ability to record external data sources such as Internet of Things (IoT) device data, enabling these clauses to self-execute if specified contract conditions are met.
For example, construction site sensors could record the time and date of a delivery of a load on the blockchain and trigger a smart contract between the construction company and the bank that would automatically notify the bank that terms have been met to provide payment on that load delivery.
ANB will be the first large-scale, publicly available blockchain solution available to businesses of all kinds across Australia, and designed for Australian legal compliance.
Blockchain is a distributed ledger technology that enables permissioned sharing of an immutable record among parties to create consensus and trust. It empowers multiple trading partners to collaborate and establish a single shared view of a contract without compromising details, privacy or confidentiality. Blockchain-enabled smart contracts also hold the potential to be used with AI and advanced analytics to help ensure regulatory compliance or to provide new business insights.
“Technologies like blockchain are set to transform the legal industry and the wider business landscape as we know it,” Natasha Blycha, Blockchain and Smart Legal Contract Lead from Herbert Smith Freehills said.
“This presents a huge opportunity for agile and forward-thinking firms and has potential to deliver significant benefits to our clients and the business community as a whole. Our clients are enthusiastic about process automation, and how it can support a move away from paper-based systems, simplify supply chains and quickly and securely share information with customers and regulators.”
Consortium partners Herbert Smith Freehills, Data61, and IBM will first test the concept as a pilot project, using IBM Blockchain. The consortium is already working with another Australian law firm to bring the ANB to market. Going forward, regulators, banks, law firms and other Australian businesses will be invited to participate in the pilot which is expected to start before the end of the year.
“IBM Blockchain and the IBM Cloud provide the highest level of security to support even highly regulated industries such as healthcare and government, and IBM has extensive experience building blockchain networks and convening large consortia focused around solving important business problems,” Paul Hutchison, Vice President and Partner, Cognitive Process Transformation, IBM Global Business Services said.
“Blockchain will be to transactions what the internet was to communication – what starts as a tool for sharing information becomes transformational once adoption is widespread. The ANB could be that inflection point for commercial blockchain, spurring innovation and economic development throughout Australia.”
In 2017, Data61 delivered two comprehensive reports for Treasury on how blockchain technology could be adopted across government and industry in Australia.
“Our reports identified distributed ledger technology as a significant opportunity for Australia to create productivity benefits and drive local innovation,” Dr Mark Staples, senior research scientist at CSIRO’s Data61 said.
“Data61’s independence and world-leading expertise will help to catalyse the creation of digital infrastructure for Australian businesses to transition to a digitally-enabled future. For complex enterprise contracts, there are huge opportunities to benefit from our research into blockchain architecture and into computational law. Smart contracts have many applications, and as the ANB progresses we look forward to exploring other business use cases to roll out.”
Should the Australian pilot be successful, the consortium intends to roll out the technology to other markets beyond Australia.
