Property (Digital Assets etc) Bill [HL]

Committee

10:31:00

Clause 1: Objects of personal property rights

Amendment 1

Moved by

1: Clause 1, page 1, line 2, leave out from first “thing” to second “is” Member’s explanatory statement This probing amendment seeks to remove the parenthetical reference to “digital or electronic” things.

My Lords, both amendments in this group are tabled in my name. Before I speak to them, as chair of the Special Public Bill Committee on this Bill I express my thanks on the Committee’s behalf to our dedicated staff, notably our hard-working clerk, Matthew Burton, and to all those who went to the trouble of submitting evidence to us. We received almost 50 written submissions from industry, legal practice and academia and we heard a dozen witnesses in oral evidence sessions, in addition to the Minister who did double duty, not only as a Committee Member but as a witness. We are grateful to all of them and in particular to Professor Sarah Green, who took this project through the Law Commission and who, although she no longer works there, gave oral evidence to us on the Law Commission’s behalf on not one but two occasions. The extensive preparatory work of the Law Commission, evident in its 529-page consultation of July 2022, its 283-page final report of June 2023 and its 70-page supplementary report of July 2024, has been translated into a Bill of just two clauses. However, short as it is, the Bill could not be described as uncontroversial. Most of the industry bodies and some of the practitioners and scholars who gave evidence to us support the Bill in its current form or with amendments. Others, for example the Commercial Bar Association and Chancery Bar Association, think it unnecessary and that it serves no useful purpose. Yet others considered it, for a variety of reasons, to be positively harmful. Some thought that crypto assets should be denied the status of property; others thought that the Bill should be confined to crypto assets; yet others suggested ways in which the wording of the Bill could be improved. Though it is not the function of a Committee such as this to report in writing, and though we are conscious of the extremely thorough consideration given to precisely these issues by the Law Commission over several years, we owe it to our witnesses to show that they have been heard. I shall move quite a few amendments this morning and I start by making three remarks applicable to all of them. First, the amendments in my name are tabled on behalf of the Committee as a whole, which discussed them before they were tabled. I am grateful to the noble Lord, Lord Holmes of Richmond, whose legal and practical expertise in relation to digital assets was of great assistance to the Committee, for adding his name to each of them. Secondly, these amendments were chosen by the Committee to reflect the thrust of the evidence submitted to us. We wanted to draw attention to the main themes of that evidence, so that any noble Lord—whether a Member of the Committee or not—had an opportunity to pick up and develop those themes in this debate or at a later stage. Thirdly, each of the amendments in my name—I say nothing of the others—is a probing amendment, so I will seek to explain them in neutral terms, I look forward to hearing what the Minister has to say about them, but I do not propose to test the opinion of the Committee on any of them at this stage. Should any Member of the House so wish, it will be possible in the normal way for these or any other amendments to be tabled on Report and put to a vote at that stage. Amendment 1 would shorten Clause 1 of the Bill, its only operative clause, which provides that “a thing (including a thing that is digital or electronic in nature) is not prevented from being the object of personal property rights merely because it is neither … a thing in possession, nor … a thing in action”. A number of witnesses had difficulty with the words in parentheses, “including a thing that is digital or electronic in nature”. These included Professor Louise Gullifer, in other respects a staunch supporter of the Bill, who pointed out that “digital assets” is a term of uncertain meaning and that the phrase risked distracting from the fact that the Bill should apply to non-digital forms of assets, such as carbon emissions allowances and verified carbon credits. Others found the word “electronic” particularly misconceived. In deference to those views, Amendment 1 would remove the phrase in parentheses and Amendment 8 would effect the equivalent surgery to the Short Title of the Bill, which would become the Property (Objects of Personal Property Rights) Bill. I beg to move.

My Lords, it is a pleasure to follow the noble Lord, Lord Anderson of Ipswich. In doing so, I declare my technology interests as set out in the register, not least as adviser to Ecospend, Members Capital Management and another that has temporarily slipped my mind but is on the register—it will come back to me and I will mention it as I go along. I thank the noble Lord, Lord Anderson, for his expert and excellent chairmanship of the Committee. It was a pleasure to be part of the Special Public Bill Committee and to work alongside many Members who will be speaking today. As has already been set out, hundreds of pages of evidence and hundreds of pages of reports from the Law Commission—I thank Professor Sarah Green for her work on this—have been boiled down to one of the shortest Bills that will come before Parliament this Session. Ultimately, in all of those hundreds of pages we find ourselves coming back to a small number of questions and principles. To gain perspective, it is worth going international for a moment, if I may, and to seek analysis of the approach that has been taken by other jurisdictions. We have seen action in Gulf states and areas of the Asia-Pacific, but probably most relevant to our considerations today is the approach that has been taken by the European Union and its MiCA legislation on this subject. I raise this at this stage because understandably the EU in its jurisdiction takes a particularly prescriptive approach and comes up with a new definition for crypto assets, which will obviously have to form its way through all the processes and be developed through those channels. It is why I believe that these first probing amendments are particularly helpful, because they go to the point of assessing whether we want to introduce new concepts into the Bill or whether we want to have a principles-based approach to digital assets, which I think this Bill can effectively do, with potentially some amendments. I support these changes because they stop the issue of too prescriptive an approach. They simplify the Bill, making it even shorter than what currently exists. It will be positive for a digital assets ecosystem in this country, which is already developing very well. Many countries internationally are looking to the UK to see what approach we take here. Be in no doubt: though so many of the headlines for the last two years have been all about AI, as if that is the only “new technology” in play, digital assets and technologies enabled through distributed ledger technologies and blockchain will be at least as significant as AI. In fact, predictions are that, by 2030, 80% of value will be transacted through digital assets, which shows the critical importance of getting this Bill right from a principles perspective. Before I sit down, I have remembered my other declaration, as adviser to Lombard Electronic Market Infrastructure. I look forward to the debate and to the Minister’s response to this set of amendments.

My Lords, I will make a few brief remarks now so that I do not have to repeat them if I stand up at any other stage. I am not a lawyer, and I have found the experience of being on this Committee extremely interesting. I thank the staff—our clerk in particular—and all the people who gave evidence. It has been an eye-opening process to see the sheer amount of evidence collected in the course of the Law Commission’s initial report and the work that we have had to do as a special Committee. Indeed, when I pressed “print” on my desktop printer in the House to print out the evidence, I had to follow that by ringing up the attendants to get new toner for the printer, because it is vast. I have not brought the evidence that we have all got, but it is a huge amount. For that reason, I am particularly grateful that it has been simplified for us in the way that it has by our clerk and so on. We have also listened to a great deal of evidence, which has been very interesting. Amendment 1 has an element of a simplicity about it—removing the words in brackets—but I am somewhat agnostic on this point. On some of the other amendments, I am not so much, but I am interested to hear what the Minister has to say. After all the work that has been done on the Bill, and given the views we have heard in favour and against some of the amendments that we will discuss this morning, I am not yet convinced that this is necessary. I therefore look to the Minister to persuade me that it may be best to leave the wording as it is originally.

My Lords, I also thank our staff, particularly our clerk Matthew Burton, and all the evidence givers, particularly Professor Sarah Green, as the Chair indicated. I also thank the Chair himself, who has helped us through what has been an extremely interesting experience. The last Law Commission Bill that I sat on was pretty uncontroversial—there was not a great deal of evidence—but this one is wholly different, and we have had to weigh the evidence. Certainly, in considering these groups, I think that many of us have had to think quite carefully about the balance of argument between the different parties who have given evidence. I also thank the Chair for how he has tabled these probing amendments at this stage, because they tease out the key issues that we need to consider. Broadly, we need to consider whether the whole Bill is fit for purpose. I was very grateful to the noble Lord, Lord Holmes, for his introduction. I add only that it is quite important that we look at the US situation and Article 12 of the Uniform Commercial Code in terms of controllable electronic products. This attempts to do the same for classifying digital assets, and we need to consider whether the Bill fits not only the European and other jurisdictions but the US and the various states now adopting the Uniform Commercial Code. I am with the noble Viscount, Lord Stansgate, on this set of amendments. There are considerable arguments for it and some against it, but I probably favour the status quo. Unintended consequences are an argument that some use, saying that, in the phrase “digital or electronic”, “digital” refers to the information while “electronic” refers to the device, which may cause confusion. Bills are often about signposting, and I feel that both the Title and Clause 1 are useful for that. The whole purpose of the Bill is to start giving clarity to digital assets, so I believe that they are not misleading but useful signals. Having considered this, I do not favour removal of either of those phrases from the Bill, but I shall be very interested to hear what the Opposition and the Minister have to say. We can all be easily swayed by convincing arguments, even at this stage, after however many pages of evidence.

10:45:00

My Lords, I also thank Matthew Burton and the clerks who have been involved in this behind the scenes. I am not in favour of this amendment. The way the Bill is drafted is very simple: by reading it, you understand exactly what it is about. Taking these words out widens it and makes you think, “What other kinds of property are there?”. We are talking about electronic and digital assets, which are the very essence of what the Bill is about, and removing that seems to me the wrong route. With respect, I certainly would not support this amendment.

Like I others, I am grateful to our Chair, the noble Lord, Lord Anderson of Ipswich, and to our admirable clerk, Matthew Burton, who has made what would have been an impenetrable task not straightforward but much less difficult. On these amendments, I am of the same view as the noble Lord, Lord Shamash. The Title and the “digital assets” description open the door to make it clear that we are now including things that might not otherwise have been covered. That is important. They might have been covered but there might have been doubt, and this makes it clear that they are covered where they do not fit comfortably, or indeed at all, into the two traditional descriptions of a thing—a chose—in action or in possession. But it does not close it down; it simply says that it includes that. These things are already being dealt with in practice, in banks, financial institutions and the like. So I would leave the description—that will apply when we come to that—and Clause 1 exactly as they are. As we look at this, we all have to remember that, while not infallible, the Law Commission produced a very long report, having spent three years looking at this and taking its own evidence. Although it is not infallible, it understands the law. It understands the common law, and we would be bold—I will say no more than that—to second guess it.

My Lords, I, too, thank Matthew Burton and other people who have facilitated the passage of the Bill through Parliament so far. I also thank our Chairman. We have been lucky to have such an effective Chairman, who has guided us through this whole process. As we have just heard, a huge amount of evidence has been submitted to the Committee and, although the Bill is small, it raises issues of principle and practice. It is also very future-looking, which is an important part of it and one reason the Government are keen that it should be passed in its current form. I also thank the people who have given evidence to the Committee. I know that Committee Members have found their contributions insightful and thought-provoking, and they have greatly enhanced the Committee’s understanding of the issues at hand and the quality of the debates that we have had and will have today. These amendments look to remove references to specific classes of things that the Bill seeks to apply to—“electronic” and “digital”. These changes were suggested by the City of London Law Society, which suggested that this wording be removed to reflect that the Bill is about personal property rights and not digital assets specifically. The noble Lord, Lord Anderson, is quite right to draw attention to the fact that this Bill is not restricted to electronic or digital things. However, the current wording of the Bill already makes it clear that it is not prescribing what things would fall under the Bill. These amendments would not change that in practice. Furthermore, the current drafting of the Bill includes the terms “electronic”, “digital” and “digital assets” to reflect the fact that digital things are likely to be the main type of asset that this Bill is concerned with at present. While there is nothing in the Bill to restrict it to these specific types of things, the Law Commission considered that, on balance, it would be helpful to include these terms to give context to the Bill. This is because these are the types of assets most likely to engage the Bill in the short term. The Government agree with this assessment. In summary, the Government’s view is that the current drafting strikes a careful balance. It ensures that the Bill is not restrictive as to the category of things to which it applies, while signalling the types of assets with which it is likely to be concerned in the short to medium term. With that in mind, I ask the noble Lord, Lord Anderson, to withdraw his amendment.

I thank all noble Lords who have taken part in this short debate. Many warm words were exchanged, but I think that it is fair to say that not many of them were reserved for this amendment. It is absolutely right that the amendment should have been tested in the marketplace of opinion and the conclusion reached by the Law Commission, certainly on the balance of this debate, is that there is no great appetite for overturning this. The noble Lord, Lord Clement-Jones, made an interesting point about signposts. It put me in mind of a comment on the Bill from DECaDE, the Centre for the Decentralised Digital Economy. It said: “While as a restatement of the law its function is mainly symbolic, it sends important signals: to the judiciary that extensive rather than restrictive interpretations are encouraged, and to the technology sector that innovation and experimentation, within reason, is rewarded.” Perhaps we are looking here at a signal or a signpost, which is not entirely out of place. In any event, I beg leave to withdraw Amendment 1.

Amendment 1 withdrawn.

Amendment 2

Moved by

2: Clause 1, page 1, line 2, at end insert “and has never been” Member’s explanatory statement This probing amendment seeks to give the Bill retrospective effect.

My Lords, Acts of Parliament, unlike judicial declarations of the common law, are presumed to be prospective-only in their effect. The Law Commission expressed the opinion in its final report that there is nothing in this Bill to displace that presumption. Amendment 2 would displace it and would give the Bill declaratory or retrospective effect. Amendment 9 would make an equivalent change to the Long Title of the Bill. This is a course urged on us by a number of witnesses, including a group of academics from the University of Aberdeen, who told us: “It may be highly artificial and complicated if different rules were to apply to the same type of property before and after the introduction of the legislation.” Some took a different view, while others thought that it scarcely mattered because the courts were likely to treat the Act as declaratory of the previous law in any event. Others, I know, wish to explore this issue in more detail, so I will leave it there. I beg to move.

My Lords, it is a pleasure to speak to these amendments and to have co-signed them with the noble Lord, Lord Anderson of Ipswich. Again, I thank the clerk, Matthew Burton, for all his work through all the sessions of our Special Public Bill Committee deliberations. Retrospection is important here because of the nature of digital assets, how they are transacted, how they are constructed and how this could create potential difficulties in a market that is already well-established, not just in the UK but globally. Perhaps in the specificity of property rights there has not been such a consideration of retrospection since the Law of Property Act 1925. It took almost a century—slightly less—to bring together how land was considered as a consequence of that statute. On balance, I believe that the Bill as currently drafted in respect of retrospection is probably right but, as the noble Lord, Lord Anderson, said, it is right for the amendment to be brought and discussed at this stage. I know that other noble Lords have opinions on this matter.

My Lords, I rise simply to echo others in thanking the Committee clerks and the noble Lord, Lord Anderson, for their work in bringing the Bill to where we have got to today. I just have one question on this amendment. How far back does this retrospection go? What would be the impact, potentially, of retrospection going back many decades?

My Lords, first, I am in error in not having thanked the noble Lord, Lord Anderson, as fulsomely as I should have done when I stood up a moment ago. We have been very lucky with his chairship. I felt bad listening to all the other tributes having not properly contributed my own. On the question of retrospectivity, as I understand it the Law Commission did not want the Bill to contradict any earlier court decisions. In the Special Public Bill Committee’s inquiry, we were told of individual judgments made in other jurisdictions, such as Singapore, Dubai and Australia, relating to property rights attaching to digital assets. As a result, we have been given different advice on whether the Bill should be made retrospective. Some have argued that retrospective effect could lead to significant uncertainty and disrupt existing contractual and legal arrangements for digital assets. Others have argued that making the law retrospective would make matters complicated and lead to digital assets with the same type of property before and after the introduction of the legislation. A rather more obtuse argument suggested that non-retroactivity would create inequitable outcomes, because digital assets with the same qualities might be treated differently, depending on whether they became the object of property rights before or after the Bill. Given the apparent fact that relatively few cases have arisen in other jurisdictions—it may well be that people around the world are looking to see what we do here—and the possibility that this Bill will make a real impact on future cases, it does not seem at all compelling that the Bill needs to be retrospective to make it effective. Therefore, I am against the amendments in this group.

My Lords, I am coming down on exactly the same side as the noble Viscount, Lord Stansgate, once again. To weigh the amendments on retroactivity and retrospectivity in the balance, it can be argued that there is no practical reason to apply the Bill retrospectively, because it simply confirms the common-law position—indeed, that is the position that the Law Commission and Professor Green have taken throughout. Therefore, applying retroactivity and retrospectivity would not add anything to the Bill. There is a general presumption whereby most lawyers feel rather uncomfortable with legislation that has retroactive effect. That is certainly not the convention and it does not really deal with the specific problem—no specific issue has been brought to our attention that making the Bill retroactive would cure. Professor Green stated that the law would likely recognise property rights for digital assets with or without the Bill. The Bill is all about clarification—that is certainly the case made by those actively proposing it. There has not been an English court case in which an asset has been held not to be capable of being the object of property rights due to not being a thing in possession or action. That, again, is what Professor Green has stated. We need to listen to Professor Green as the key proponent of the Bill and should not go down the retroactive route.

I support what the noble Lord, Lord Clement-Jones, and my noble friends Lord Bassam and Lord Stansgate have said. But my noble friend Lord Bassam’s question is crucial: how far back do we go? I look up in this Room and see Moses with his tablets. Are we going back that far? We cannot, in reality. If those tablets were electronic and digital in nature, in theory we could, but they were not. It is interesting—the caption talks about the “tables of the law”. I always thought it was “tablets”, but that is by the bye. I am certainly not in favour of this amendment. Unless there were a real reason for it, I would vote against it.

11:00:00

My Lords, let me begin by summarising where we are; it is important. The law of England has conventionally divided things that can be the object of personal property rights into two categories: things in action and things in possession, with different qualities and sometimes slightly different rights. Personal property rights are, in all cases, important because they allow the owner of a thing of whatever nature to protect their enjoyment of it through the legal system, in a predictable and commonly recognised way. The Bill confirms the existence of a third category of property—one that does not fit comfortably into either of the two established categories, but that we all accept that there should be—and facilitates the development of its treatment under English law. It does so prospectively only. It will then be for the courts to develop the law in relation to the treatment of this third category, or widening of existing categories—whichever way one wishes to look at it. That is of practical importance because property can be subject to slightly different rights and remedies depending on whether it is a thing in action or a thing in possession. The rights of this new third category could be based on these or depart from them, and that will be up to the judges and the common law. That is the best way forward, dealing with it case by case. Further, the Bill leaves the courts free to do this, and those who favour the Bill believe that this makes it easier for the courts to depart from traditional categories and to develop a new class of property that better reflects the qualities and uses of new assets. That is all going forward. Should it be retrospective? The Law Commission has produced a Bill that is not retrospective. It believes that the Bill should not appear to or actually contradict earlier court decisions. However, it argues that, if earlier decisions are taken to appeal in higher courts, that is a matter for the higher courts. In this instance, the Bill could usefully clarify matters, and those who have given evidence to the Committee have had different views about the merits of retrospectivity. Some have argued that retrospectivity will lead to uncertainty. Others argue that it might be complicated, with different rules to apply to the same type of property depending on whether we are looking at something before or after the introduction of the legislation. On the other hand, those who favour retrospectivity have said that not to make it so will be inequitable. They say that digital assets with the same qualities and use might be treated differently, depending on whether they become the object of any property rights before or after the Bill. A further significant view is that retrospectivity, on the other hand, would undermine existing arrangements that have been based on assets that fall into one of the existing categories, and where people believe that they know what their rights are, based on earlier decisions. On the other hand, not to be retrospective can be said, or has been argued, to undermine the core purpose of making certain digital assets the object of property rights when they were not before. Whether or not an asset would be the object of property rights would depend on the time when it was constituted. There are arguments both ways, and it is not straightforward, but I suggest that the better course is to leave the Bill as it is—to see it as clarifying recent case law and not retrospective. Arguably, it affirms past decisions, so to ask when the Bill operates in time is not material if that argument is right—we can leave this to the courts to decide. Indeed, since earlier cases have already questioned the commercial arrangements relating to digital assets that have been assumed to be things in action, it seems really that the Bill cannot affect existing digital assets either way. Certainty has its advantages and, as I said earlier, we must remember that the Law Commission looked at everything very carefully over three years. It concluded that much of the current law concerning causes of action and remedies can be applied to the third category of things without this reform. What is required, it argues, is that the courts continue to recognise the existence of a third category of things that do not fit into what might be described as the Victorian classification, good as it is. Those include their distinct functionality and technical characteristics, but the law is carefully worded not to limit it to digital assets. It is open; it just includes them, but it will encourage the courts to think more generously when something new is argued. The courts will then apply existing legal principles to such things as appropriate, where something in particular does not fit comfortably into the two existing categories but where the court thinks that rights should be deemed to exist. That will be going forward. It can grant, where appropriate, existing remedies or even perhaps develop new remedies tailored to the new category. That is the benefit of our flexible English common law. In summary, therefore, I adhere to the Law Commission’s view. I do not favour an amendment to introduce retrospectivity, which could produce uncertainty and unfairness—I am not saying it will. I leave the matter there.

My Lords, the Government agree with everything that noble Lords have said in this short debate. I do not know whether the noble Lord, Lord Anderson, will have a go at answering my noble friend Lord Bassam’s question about how far back retrospectivity will go. I am sure he will not rise to the challenge of my noble friend Lord Shamash regarding Moses; I do not know whether there was some sort of sort of prize he was looking for to see how far he could go back with retrospectivity. I thought the central point was really made by the noble Lord, Lord Clement-Jones, when he said that no specific examples were given where retrospectivity would have addressed a particular problem. That is indeed the nub of the issue. I also agree with everything that the noble Lord, Lord Sandhurst, said when he summed up this group of amendments. The Bill provides certainty on whether there exists a further category of personal property, and it confirms the position that has been gradually emerging through case law in recent years. This confirmatory approach means that, if the Bill is passed, there should not be a difference of treatment by the courts of the relevant cases before or after it comes into force. This is why the Bill has not been drafted to have retrospective effect. Although the purpose of the Bill is confirmatory, it is important that the commercial benefits of making what might be seen as a relatively small legal change are very significant and justify legislating. That is because the idea that there are only two categories has been around for so long and is so entrenched in our legal system. Therefore, the Bill does not act retrospectively; rather, it confirms the emerging common-law position—for example, in a High Court decision in September on the D’Aloia case. This is important because it signals that the common law should be developed in this way, and it removes any uncertainty about whether a further category can and should exist. Given that the Bill is confirmatory, it should not result in a difference of treatment by the courts of digital assets before or after the coming into force of the Act. This means that there is no need for the Bill to have retrospective effect. With this in mind, I urge the noble Lord to withdraw the amendment.

My Lords, I am grateful once again to all noble Lords who took part in this short debate, in particular, I think, to the Minister for batting on to me the profound question of the noble Lord, Lord Bassam of Brighton, about how far back retrospection goes. My no doubt inadequate answer to that is that it goes back as far as it would had a new doctrine been declared by a court of the common law, because judgments are of course presumed to declare the law—as it has always been—and the amendment would have given similar effect to the Bill. Of course, it gets complicated where parties have arranged their affairs previously on the basis of a different understanding of the law. In view of the fact that the Bill is largely confirmatory of the law, there must at least be some doubt about whether that was the case here. This debate concerned another issue on which the Law Commission reached its conclusion on balance. Having heard in particular the careful exegesis of the noble Lord, Lord Sandhurst, one can perhaps understand why. We received some evidence challenging the Law Commission’s conclusion—for example, from Dr Benjamin Hayward of Monash law school, citing cautionary Australian experience. But there has been no equivalent expression of dissent in this Committee—indeed, quite the contrary—so I conclude that there is no significant movement on this issue in favour of change. I beg leave to withdraw Amendment 2.

Amendment 2 withdrawn.

Amendment 3

Moved by

3: Clause 1, page 1, line 5, leave out “a thing in” and insert “capable of” Member’s explanatory statement This probing amendment, connected to another in the name of Lord Anderson of Ipswich, seeks to provide a statutory basis for recognising digital assets as property, while removing any presumption that these assets cannot be accommodated by the existing two categories of personal property rights.

My Lords, this group and the following group take us to the heart of the debate concerning the Bill. In their different ways, they address the issue of the extent to which the Bill should guide the judges into creating one or more categories of property other than the traditional categories of things in possession and things in action. The Law Commission told us that the Bill responds to digital assets that cannot easily be characterised either as things in possession, such as a bag of gold, or things in action, such as a debt whose existence relies on both a legal system that recognises it and the existence of claims in relation to it. It gave the example of a non-fungible token on a distributed ledger: a piece of software on a piece of hardware that represents a particular right. It has an independent existence, separate from its legal recognition and from claims made in relation to it, yet it is hard to see it as a conventional asset able to be possessed. The Law Commission accepted that, after developments in the case law, there is less doubt now than there was in 2021, when the law reform project began, that these things can be the object of property rights. More doubtful, however, is how these property rights are to be characterised and how they are to be treated by the English law of property. The Bill constitutes a gentle nudge towards the territory of the so-called tertium quid, as it was referred to disapprovingly in the 1885 judgment of Colonial Bank v Whinney—in other words, a further category or categories of property, distinct from things in possession and things in action. The Bill does not prescribe the boundaries of such categories, the type of thing that falls within those boundaries or the nature of the remedies that attach to the new category or categories. All these remain to be worked out by the courts, no doubt over a period of many years. There is an alternative approach, pioneered in recent judgments in Australia and Singapore, which is to classify these digital assets as things in action. That approach was justified in a lecture given last summer by Justice Jackman of the Federal Court of Australia, in which he contended that no third category is necessary because the thing in action is a broad tent encompassing a diversity of intangible rights, including milk quotas, statute barred debts, government bonds and cryptocurrencies. He expressly criticised the Law Commission’s approach and this Bill. The Supreme Court of Victoria subsequently held that cryptocurrencies are things in action, as the Singaporean High Court had already done. This led some of our witnesses to question whether the Bill was on the right track. It was widely acknowledged that, where England leads in matters of commercial law, other jurisdictions often follow. But the Financial Law Committee of the City of London Law Society, by a majority, was wary of fostering a divide in the common-law world. Some went as far as to suggest that the Bill might make London a less desirable jurisdiction for the resolution of disputes concerning digital assets. Others considered that, as a matter of principle, it was not necessary or advisable to nudge the judges one way or the other. If they preferred the wisdom of Justice Jackman to that of the Law Commission, they should feel at liberty to say so, without what some might see as a presumption that they should take the second course.

11:15:00

It was in this context that Amendments 3 and 4 were put forward by the City of London Law Society, supported by several others, including Professor Duncan Sheehan. Its objective, like that of the Law Commission, is to give the judges the key to treating new forms of digital assets as property. But it did not wish to prejudge the issue of whether the judges should do this within the classic categories of property or by devising a new category or categories. Read as a whole, Amendments 3 and 4 would rephrase Clause 1 to provide, without reference to the legal categories of things in possession and things in action, that something is not prevented from being the object of personal property rights merely because it is neither capable of possession nor a right that may be claimed and enforced only by legal action or proceedings against another person or persons.

I understand this amendment as going at least some way with the Law Commission, in that, contrary to the position of some critics of the Bill, it would confirm the power of the judges to declare new digital assets to be property. Neither would the amendment prevent the judges from having regard to the analysis in the final report of the Law Commission, should they find that helpful in developing the common law. The difference is that the amendment is agnostic about whether the judges follow the Law Commission’s route or the Australian route, whereas the Bill might be read as giving them a steer.

It is fair to record that the reaction of Professor Green when we asked her about this amendment was strongly negative. She underlined to us that

“if that were the drafting of the Bill, it would completely undermine the Law Commission’s position and recommendation”.

I look forward to hearing what noble Lords and the Minister have to say about this amendment. I beg to move.

My Lords, again, it is a pleasure to follow the noble Lord, Lord Anderson of Ipswich, not least to be able to say “tertium quid” again. It is certainly at the heart of our discussions, but to me it sounds like it could be a cryptocurrency in its own right. As the noble Lord, Lord Anderson, rightly says, this takes us to the very heart—the meat—of all our deliberations and discussions and all the contentions around the Bill. To take a step back, why do businesses choose to base themselves in the United Kingdom? Why do innovators choose to come to these shores? Why do investors seek to deploy their funds and resources in the United Kingdom? I contend that it is due to at least three factors: clarity, certainty and consistency—not least the clarity, certainty and consistency that come from the great good fortune that we have of English common law. The question that we are addressing harks back to the previous group. We were of a single mind, rightly, that retrospectivity would perhaps not be the right approach because of the uncertainty that it would certainly bring to the treatment of digital assets in this country. On this group, does the Bill as currently constructed deliver on certainty, clarity and consistency? It must be the case, at least in the first instance—this was agreed by a number of witnesses, not least Professor Green herself—that, on passage, there would have to be a development of legal thought coming from the Bill, which would be a period of at least less certainty, if not uncertainty, as a result of this creation of a third category. That brings us on to this point: is it the case that digital assets are so different in their construction and essence—so different from anything that has previously passed in the hundreds of years of English common-law tradition—that a new category of property right needs to be at least contemplated and developed as a result of the Bill? As a number of witnesses brought to the Committee, as the noble Lord, Lord Anderson, rightly identifies, things in action is a highly inclusive, flexible, developmental and helpful category of property rights. Is it the case that digital assets cannot fit within that category, and has it never been the case before that other items, aspects, elements and developments in our society have not been tricky at the time but have been able to fit within either category of property right? Finally, it is clear that if a third category is developed, that is in no sense the end of the story. A fourth, fifth or 13th category of property right may well be opened up as a result of this. In fact, it opens that pathway to have an increasing number of categories with potentially increasing specificity as they are developed. Again, it was agreed by Professor Green that this could be the case as a result of the Bill. In conclusion, are we looking for clarity, certainty and consistency—the three Cs that are some of the key deliverers of growth, investment, and innovation in this country? Does the meat of the Bill deliver that or not? I look forward to the Minister’s response.

My Lords, I begin with a confession. I do mind confessing this, but I had never heard of Colonial Bank v. Whinney before I joined this special Committee. Maybe other Members talked of nothing else, but I had never heard of it. Tertium quid, which I agree is such a wonderful phrase, is, as I understand it, the basis on which common law has developed for a long time. Of course, we do not really use that language anymore, but it was a way of dividing things into these two categories. When I first heard the phrases “choses in possession” and “choses in action”, I am afraid it took me a moment to realise that that is of course French. I should look more frequently at my passport, which after all is also in French. It betrays the French influence on British life. That judgment in 1885 preceded the development of modern technology, which is what has brought this whole issue about in the first place. It would have been the same if we had been talking 100 years later. When I hear the noble Lord, Lord Holmes, talk about the possibility of a fourth, fifth or sixth category, it begins to remind me of what mathematicians are very happy with: the third, fourth and fifth dimensions and beyond. There are mathematicians who happily work in a dozen dimensions at the same time. I may not live long enough to see how the common law develops in treating and developing new categories of choses in possession. However, as the noble Lord, Lord Anderson, said at the beginning, this is at the heart of the Bill. For simplicity’s sake, we should leave the Bill as it is. Perhaps I should quit while I am ahead. That is my basic point: I think it is good enough as it is. Although I have drafted more things to say, looking around at the faces of noble Lords, I think I will call it quits.

My Lords, we are dangerously close to agreeing on all the amendments, which is never a good thing. All noble Lords so far have agreed that these amendments absolutely go to the heart of the argument for the Bill. I am afraid that I entirely agree. This is not a case of “on the one hand, on the other hand”, like some of the other amendments. However, it is an argument between those who believe that this is a relatively minimalist step and a permissive provision in the Bill to confirm the development of the common law, or whether it is an unhelpful intervention, giving too much of a steer towards the creation of a third class of asset. When you look at the arguments for the amendments, they are rather unhelpful as a result. Heaven knows how many debates take place about an 1885 case, the Colonial Bank case, which is at the root of this Bill. The phrases “a thing in action” and “a thing in possession” are well-known, well-defined phrases and concepts in common law. I believe defining it in the Bill would cause further confusion. It can be argued that the proposed definition is too narrow and that the concept of a thing in action is broad enough to encompass some digital assets. Let us see how that plays out in the common law. That is certainly the argument of the Law Commission, and the Bill in its current form does entirely that. I do not think it necessary to define those two concepts of things in action and things in possession any further. I am a fan of tertium quid as well. I am very surprised that the noble Lord, Lord Holmes, did not attach a hashtag to that—that would have made it so much more attractive. I agree with him that flexibility is the issue here. I agree with the noble Viscount, Lord Stansgate, that this is a recognition of modern technology. It is but a light touch on the tiller, but we should keep it in its current form.

From the tenor of my earlier remarks, noble Lords may not be surprised that I say: leave the Bill as it is. Thinking about tertium quid, I shall say only that I wondered if it should perhaps be a pop group. Anyway, moving to more serious matters, I do not believe even now, today, that there is a presumption in the common-law courts that digital assets cannot be accommodated in the existing two categories. The Australians have managed to squeeze them in. It is simply that it is not settled and there is uncertainty. It is possible that some things that really do deserve property rights might, by some clever lawyer’s argument, fall outside the two categories and not receive the protection they deserve. The proposed wording may go too far. The current wording is elegant and encompasses both digital assets not necessarily easily categorised in the conventional classifications. It also encompasses other things not yet contemplated or in our imagination, but which, when they are contemplated and come into existence, will be thought by society and the courts to deserve rights. That is what the Bill is doing; it is expressly not limited. To date, we proceed only on the two categories of things in action and things in possession. That is the law. The Bill is right to take that as the starting point but to make it plain that these will not be set in stone as the only categories. It widens it. The Bill achieves protection for these future unimagined things —if I may use that word—as well as making it clear that existing digital assets will also be protected. We would be bold, I suggest, to depart from the views of Professor Green, who really was very hostile to this amendment. Leave it in the Bill as it is. The yet unimagined will be encompassed, when necessary, in the future. Less is more.

11:30:00

My Lords, I thank noble Lords for raising this important issue. As everyone has said, it goes to the heart of the Bill, which I hope provides the noble Lord, Lord Holmes, with the clarity, certainty and consistency that he seeks. The amendments would prevent recognition in statute of a further category of personal property beyond things in action and things in possession. We have heard and seen evidence from those who support these amendments, such as the City of London Law Society and Travers Smith. They argue that the existing category of things in action is sufficiently flexible to accommodate novel assets. This approach was considered in the Law Commission consultations, but rejected on the basis that it was not helpful to the development of the law to extend either category, given the unique characteristics of digital assets. The preference for a further category was supported by a strong majority of consultees to both the consultations undertaken by the commission, one on the underlying policy and one on the draft Bill. Some stakeholders have suggested that the purpose of the Bill is merely to confirm that certain assets, such as crypto assets, can be regarded as property. That is not quite right, given that this is already largely beyond doubt. Rather, as many noble Lords are aware, the purpose of the Bill is to dispel the entrenched idea that there can be only two categories of personal property. The committee has heard evidence from stakeholders who hold on to this two-category view. While understandable, it is a view that has its roots in history, including an influential statement in the 19th-century case to which we have heard reference. That statement was made at a time when new assets such as crypto tokens simply could not have been conceived of. The world has moved on and the law needs to move on with it. The key point of the Bill is to unblock this uncertainty and to confirm that it would be appropriate for the courts to recognise personal property beyond the traditional categories in appropriate cases. The Bill confirms the position already emerging through case law in the lower courts. The Law Commission, supported by a wide range of stakeholders, concluded that it is better and clearer for the law to recognise a further category of personal property that can properly respond to the unique features of emerging assets and develop legal responses appropriate to those features. The Committee has heard from stakeholders who would prefer to see these emerging assets categorised as things in action, on the basis that their approach would give more legal certainty. Although the Government recognise that these sincerely held views result from careful consideration of a complex issue, we remain convinced that the approach in the Bill is the right one. The need for new solutions is the result of the unique features of these assets and not their categorisation. For example, the existing rules on transfer of things in action or on remedies for interference with things in action are simply not adequate for assets such as crypto tokens because of their unique nature, as we heard in the evidence presented by Professor Green. Either way, the law, through the courts, will have to respond to their new features. The Government remain convinced that the Bill is the right and best way to do this. On that note, I remind the Committee of the evidence given by Professor Sarah Green of the Law Commission in her second session. When asked about one of the suggested amendments, she said: “That would really take away the whole bite of the Bill”. She also said that, “the whole mischief that it addresses is that we no longer have to be stuck with these categories”. This is a view that the Government support. By removing this uncertainty around a possible further category, we will give the courts the freedom to develop our common law in a way that can consider the unique features of digital assets and other assets that we cannot foresee being created. The suggested amendment appears to curtail that freedom and could cast doubt on recent case law. Considering this, I urge the noble Lord to withdraw his amendment.

I thank all noble Lords once again who have contributed to this interesting debate. It struck me, listening to the debate, that the Bill is already greatly scaled down from the original scope of the Law Commission's consultation. The proposed amendment, logical and appealing to some significant players though it undoubtedly is, would scale down its ambitions still further and perhaps leave an even greater range of outstanding issues to be argued over by lawyers. Perhaps I should have declared an interest as a member myself of the Bar of England and Wales—although not, I hasten to add, one nearly clever enough to be at any risk of being instructed in cases such as this. It seemed to me that the noble Viscount, Lord Stansgate, summed up the mood of the Committee very well when he said that, for simplicity’s sake, we should leave the Bill as it is. With that in mind, I beg leave to withdraw Amendment 3.

Amendment 3 withdrawn.

Amendment 4 not moved.

Clause 1 agreed.

Amendment 5

Moved by

5: After Clause 1, insert the following new Clause— “Attributes of digital assets conferring property rightsIn determining whether a digital thing can be the object of personal property rights, regard may be had to whether the thing—(a) is composed of data represented in an electronic medium, including in the form of computer code, electronic, digital or analogue signals,(b) exists independently of persons and exists independently of the legal system, and(c) is rivalrous.”Member’s explanatory statement This probing amendment seeks to specify indicia that may be considered by the courts when determining whether digital things can be the object of personal property rights.

My Lords, from scaling down the ambitions of the Bill, we turn now to scaling them up. Amendment 5 illustrates another substantial segment of the opinions put to us from those who think that the Bill is essentially pointless because it gives the key to a door which the judges have already unlocked on their own without the assistance of Parliament, and from those who see the Bill as a missed opportunity to give the judges some additional guidance. Variants on an amendment of this nature, were put to us by a significant number of those who gave evidence to us. Some cited the recent comment of a deputy High Court judge in the case of D’Aloia v Persons Unknown 2024, EWHC 2342 Chancery, who said: “Assuming that the Bill became law, it is not clear what the judge would be expected to do”. A group from academia and industry, led by Professor Monomita Nandy, was typical in telling us that the Bill should establish high-level criteria to guide the courts and include illustrative examples of qualifying assets. As Professor Green reminded us, the Law Commission had itself thought, at the start of the consultation process in 2022, that it might be a good idea to be more definitive and to set out a list of criteria, or what she called indicia, of assets that would go into the third category. Prominent among those indicia were those set out in Amendment 5: data represented in an electronic medium; existing independently of persons and of the legal system; and being “rivalrous”, which in rough terms, as I understand it, means that two people cannot make simultaneous use of the same asset. The Law Commission retreated from this initial suggestion, pointing to the risks of being too prescriptive and to the desirability of leaving a fast-moving technological area to the discretion of the judges. None the less, a considerable number of witnesses advocated greater specificity in the Bill and, while their suggested amendments took several different forms, the Committee puts forward this illustrative amendment to facilitate a debate, should noble Lords wish to have one, about the merits or otherwise of this course of action. I beg to move.

My Lords, it is a pleasure to support the noble Lord, Lord Anderson of Ipswich, in bringing forward this amendment. Again, it brings us back to that perennial question of prescription versus principle. It is unquestionably true that by including the words set out in this amendment, greater clarity would be brought to the Bill, both for the judiciary but also for those right across the digital assets industry in this country and, indeed, internationally. We already saw the significance of what the UK does on these matters, with the UAE already passing into law the Bill as currently drafted. The significance of what we do cannot in any sense be overstated. If we leave the Bill as is, which is obviously always beguilingly appealing, there will potentially—perhaps this is unproblematic—at some stage shortly after the Bill, within the first 12 months, be a necessity to publish some form of FAQs, guidance or steer documents from the department. I say “unproblematic”, but if that is at least somewhat likely to happen, it is worth considering the clarity provided by the wording in this amendment.

I wonder—this is, I guess, the question for the noble Lord, Lord Anderson, from the noble Lord, Lord Holmes—what advantage adding this extra clarity brings to the consideration of these issues. If it does not bring any benefit, I cannot see why we need the additional clarity. Could we not end up in a situation where we are boxed in by that clarity, when we actually need something rather more fluid by way of definition?

I make a simple point: however well drafted this amendment may seem and however much it seeks to give a steer to the judges, as has been mentioned, I am not sure that the wording is good enough. I do not think it is necessary anyway. For example, quantum computing is now under development, and there is no reference to quantum computing here. To take that example alone, I wonder whether wording like this can be easily overcome by new technological developments. The whole point of the Bill is to set out something relatively simple, to take into account new technology and to enable judges to develop common law in the way they do. In passing, another word I have learned since joining this special Committee is “rivalrous”. In political parties there is plenty of rivalry, but “rivalrous” is different. Yet, I am still slightly curious about this. I know it is applied to things such as non-fungible assets. At Second Reading, I referred to an exhibition I saw in Denmark of pictures by David Hockney that were all on iPads, all of which were identical. In a way, the fact that I do not own them does not prevent one person enjoying a digital asset because you are both looking at what could be exactly the same drawing on whichever iPad you choose to have. That may be considered irrelevant, but I think Amendment 5 certainly is.

My Lords, this has been really interesting. This is the beginning of a debate on this amendment, and of all the amendments put forward by the noble Lord, Lord Anderson, this is the one I am most tempted by. I was interested to hear both what the noble Lord, Lord Holmes, and the noble Viscount, Lord Stansgate, had to say. In my view, the amendment provides a possible benefit to courts with specific factors to consider when deciding whether a digital asset can be the object of property rights. It meets the criteria of the noble Lord, Lord Holmes, of clarity, certainty and consistency in that respect. In particular, the criterion of “rivalrous”—although it was not something that I learned when I was doing my articles, but then a thing in action was not either—highlights the need for scarcity. The nature of property is something limited in its use by multiple parties. By clarifying the status of digital assets, the amendment could well be further supporting commercial activity. Secured creditors need certainty about their rights over digital assets and the criteria in the amendment could provide a sound basis for protecting those assets. I echo what the noble Lord, Lord Holmes, said about Dubai. Dubai International Financial Centre adopted a third category of personal property in its recent digital assets law. In that respect, we are moving with the tide. This is merely a further touch on the tiller. It gives a certain flexibility but also guidance to judges without the need for some sort of code that the noble Lord, Lord Holmes, talked about. It removes the presumption that digital assets cannot be accommodated by the existing two categories of personal property rights, even more than the Bill does in its current form. The one probable objection to it is the use of “rivalrous”. It is not a term in common usage, and it may be unclear exactly whether that is the right criterion to use in respect of a digital asset.

11:45:00

As for quantum computing, I would have thought that, on a first look, electronic data represented in an electric medium, including in the form of computer code, electronic, digital or analogue signals would probably encompass the underlying signals used in quantum computing. I would be interested to hear whether the Minister thinks this is the case.

I do not believe that this particularly limits judicial discretion. It may be welcomed by the judiciary when considering digital assets in the future and it is a certainly a road they will go down in practice, even if it is not enshrined in the Bill.

My Lords, I hesitate to intervene, but I spoke at Second Reading and I am grateful for the opportunity to attend this stage of proceedings. I can see that Amendment 5 is attractive. Lawyers like checklists, but they also like checklists that do not propose an exclusive or mandatory list of matters to which regard may be had. I suggest that there is a lot to be said for this amendment, if it were made a little clearer with a little more emphasis that it is not meant to be a comprehensive list of matters to which a court should have regard.

My Lords, I certainly echo the observations of the noble Viscount, Lord Stansgate. I am concerned that this list might be seen as too prescriptive. The relative silence of the current Bill is golden. It simply says that you are not prevented from having rights merely because you are not one of the things we have always given rights to, to date. In other words, it is opening the door to give rights to any new type of thing or existing thing that it is believed should acquire such rights. We do not need a wider definition. The danger is that, looking at that list, people will argue that a thing does not have those qualities—A, B and C—so is it really capable of being an asset? It will bring in uncertainty. As it is, if the courts are faced with something completely new which we have not yet imagined, they can hear expert evidence at the time as to what the qualities and attributes are. The Bill will assert whether a digital thing—or any thing, which may not even be digital but some unimagined concept—has characteristics that make it desirable to give property rights. At least, I believe it will. Asserting these attributes may detract from that. It may subconsciously narrow the views of the courts and judges. Even if we do not know what the effect may be, that is certainly a real risk when a new type of thing—which none of us has yet conceived of—is introduced. I repeat: the Bill has elegant brevity; let us leave it as it is.

My Lords, I support what the noble Lord, Lord Sandhurst, said. When I was looking at the amendments last night, I wrote in the margin, on this amendment “restricts future developments”. I am not in favour of this amendment for that reason, as was ably put by the noble Lord, Lord Sandhurst.

I am grateful to the noble Lord, Lord Anderson, for initiating this debate. Of course, it is right that we should carefully consider all elements in the Bill. As a number of noble Lords said, the previous group and this group go to the heart of the meat of the Bill. In its publication, the Law Commission discussed at length the features of assets that have characteristics of property but do not fit easily into the existing categories. The features the Law Commission considered are precisely those set out in this amendment. However, the Law Commission received clear feedback that a more detailed statutory provision incorporating these features could be counterproductive. It could create unhelpful boundary challenges, lead to undue complexity, and prevent the common law being able to respond flexibly and dynamically to new technologies and unforeseen challenges. This feedback was reflected in some of the written evidence submitted to the Committee. Having carefully considered the evidence, the Government’s view is that including the features set out in this amendment could undermine the flexibility that the current drafting affords the courts. The Bill deliberately does not try to define the types of asset that may fall within its scope. Rather, it unblocks the common law and leaves it to the courts to develop the appropriate principles. By doing this, English and Welsh law can remain dynamic, globally competitive and a useful tool for those in the digital asset market. This builds on centuries of world-renowned common law development. Personal property rights are traditionally developed by the common law. Statute does not seek to define things in action or things in possession, and it does not need to define any further category or categories. The common-law approach has allowed for a nuanced and flexible approach not possible to achieve in statute. Courts will be able to draw on a significant body of case law developed over hundreds of hundreds of years to assess whether particular assets constitute property and to determine their appropriate categorisation. The Bill, as drafted, distinguishes the law of England and Wales as a flexible and open system that is alive to the particular characteristics and features of new and emerging assets, and including these features would potentially undermine that. If this amendment were ever put to a vote, I would urge noble Lords to vote against it. My noble friend Lord Stansgate raised quantum computing and whether that fits into electronic, digital or analogue signals. That point was taken up by the noble Lord, Lord Clement-Jones. My first degree was in physics, and I used to think about quantum computing many decades ago. To me, quantum computing is not necessarily digital or analogue; it is a different way of looking at energy. Obviously, it is electrical and electronic in its basis, but the way one analyses the mathematics of quantum mechanics and computing is possibly different, if I may put it like that, from the categories defined in this. My knowledge of this subject is literally decades old, but my superficial view is that it does not necessarily fit into the categories specified in the amendment. I urge the noble Lord, Lord Anderson, to withdraw his amendment.

My Lords, this amendment facilitated a debate and, if I may say so, a particularly interesting one. It was a particular pleasure to hear not only from every member of the Committee here present but also from the noble Lord, Lord Meston, whose expertise in this area is evident to anybody who read the minutes of our Second Reading debate. Speaking on a personal level, I was very sorry not to have him added to the galaxy of talent on the Bill Committee. Of course, we are not done with the Bill yet, but if I were to venture to summarise the zeitgeist of the Committee on the last two groups—with their amendments seeking to make the Bill first less prescriptive and then more prescriptive—I would say that, in these central respects, we have a Goldilocks Bill: not too hot and not too cold. The arguments have been carefully considered, as they were in great detail by the Law Commission, but at this stage at least, they appear not to have found favour with the Committee. I beg leave to withdraw Amendment 5.

Amendment 5 withdrawn.

Amendment 6

Moved by

6: After Clause 1, insert the following new Clause— “Review: impact of any digital assets being treated as property by virtue of this Act(1) Within six months of the day on which this Act is passed, the Secretary of State must lay before both Houses of Parliament a review analysing the impacts of this Act. (2) The review made under subsection (1) must include analysis of the impact of any digital assets being treated as property by virtue of this Act on—(a) data centre power usage in relation to digital assets,(b) the need for data centre construction and expansion,(c) the viability of creating a government digital sovereign gilt,(d) the desirability of establishing an objective for the National Wealth Fund relating to tokenisation opportunities,(e) the need for further regulation of stablecoins and tokenised deposits,(f) the need for international interoperability standards for digital bonds, and(g) the need for a review of the tax regime to assess how it interacts with digital assets.”

In standing up to move an amendment, I must declare that I am not the noble Lord, Lord Anderson of Ipswich.

That is a shame.

I know; I feel it too. It is a pleasure to move my Amendment 6, the purpose of which is to have a debate on the broader issues that underpin both the blockchain and distributed ledger technologies, which necessitate digital assets, as well as more broadly on what it will take for our economy, our society, individuals, communities, cities and our country to gain the benefits of all these new technologies, while being very cognisant of the challenges. It seems that our deliberations on the Bill provide the opportunity, and it is right that we should consider these issues at this stage. If we pass the Bill, it will inevitably have an impact on the digital asset ecosystem in this country, and that has social, economic, legislative, political and regulatory consequences. It is some of those, in a non-exhaustive list, that I wanted to put out for discussion in Amendment 6. First, data centres are in many respects the foundries, furnaces and factories that underpin so much of these new technologies. It is important that we consider how these data centres are fuelled. Digital assets can be particularly energy intensive, so it would be very good to hear from the Government a commitment to data centres being fuelled through renewables, with a real commitment to further focus on our SMR—small modular reactor—technologies in this country. It would be good to hear from the Government on where we seek to put these data centres and how we ensure that the grid connectivity is in place so that we do not have renewables being generated when it is not possible to get that into these data centres, and so that people do not have to finance renewables that cannot be deployed, not least for data centre technologies. Secondly, on where we seek to locate data centres, they can obviously have extraordinary powers in the technology, such as digital assets, that they enable. They can also have a positive potential impact on local economies and be a real part of what was once called—I do not think it is any more—the levelling-up agenda, to which we should all be thoroughly committed. It is social mobility, or whichever phrase we choose to put to it. The Bill gives us the opportunity to further discuss issues around a potential digital sovereign gilt from the Government. It was a disappointment to me that the previous Administration did not bring forward such a gilt. It could have extraordinary possibilities, by both demonstrating the strength of these new technologies and driving economic growth, new possibilities and a real sense of how the Government, legislatively and economically, are facing forward into the opportunities from these new technologies. Furthermore, with the positive announcement about the National Wealth Fund, perhaps an objective for it could be looked at to see how it could get involved in this whole digital asset and tokenisation discussion. I would be interested in the Minister’s comments on what further right-size regulation, as a result of the passage of the Bill, could be powerful and positive across the whole issue of stablecoins and tokenisation. As I mentioned on the first set of amendments, this is the coming economy. The majority of value will be transacted through digital assets, and that is estimated to be 80% by 2030. Therefore, it matters how we structure this, how we underpin it, and what part the UK seeks to play in the digital asset space. Obviously, the question of the sovereign gilt is important. In the private bond market, what role are the Government intending to play in driving forward the interoperability of digital bonds which will be required if we are to have a thriving international market for these newly created and inspired digital bonds?

12:00:00

Finally, for the Minister there is the whole question of taxation. We have seen a lot of discussions, rightly, around the taxation of big tech and how that is currently—shall we say—suboptimal, not least for the UK but for many economies around the globe. In summing up, will the Minister say something about the whole question of taxation of digital assets? With a positive taxation regime, with right-size regulation and an understanding of how we finance and fuel these new technologies, not least digital assets, there is such a positive opportunity—it is never an inevitability—for the UK if we get all that right. I beg to move.

This amendment is different from the others on the Marshalled List. We have had the Anderson-Holmes double act throughout, and we have two other amendments that are in a single name only—my noble friend Lord Ponsonby’s, which we are coming to, and the one we are discussing now. The speech of the noble Lord, Lord Holmes, has blown this debate wide open into areas that I had not expected we would cover, to be honest. On the other hand, when I looked at proposed new subsection (2)(a) in his amendment, about which he has just spoken, it was music to my ears. It is about data centre power usage, and a week ago this very day I had a Question in the Chamber on that very subject. He is right, and I seem to remember I said to the House, that I am not sure that noble Lords realise what staggeringly high quantities of energy they use. It is amazing. He just triggered my memory: I was going down the Columbia river in Washington state in the United States, and I saw my first server farm, which was an enormous building, utterly grey and inconspicuous except for its size. It was right next to an electricity substation and by a river because, my goodness, you need the water to cool all the electronic equipment involved. That is, I think, broadly beside the point as we consider the Bill. I am in favour of a review. I am sure a lot of people in the legal world will be interested to know how the Bill pans out and what effect it will have. When the noble Lord, Lord Holmes, was speaking, I thought, “You don’t just need my noble friend Lord Ponsonby here to answer all your questions; you need my noble friends Lord Hunt and Lord Livermore”. Nevertheless, I hope that my noble friend Lord Ponsonby will indicate the way in which it no doubt will be possible to have some kind of review of this legislation and its impact. I congratulate the noble Lord, Lord Holmes, on trying to have a long list, but I do not think it is particularly relevant to the Bill, although I am in favour of finding out what effect it has. I also thank him for triggering my memory of a server farm, which I would not otherwise have been called on to speak about in Committee.

The noble Lord, Lord Holmes, has a massive smile on his face at the moment, and it just strikes me immediately that, with proposed new subsection (2), he is using the Bill as a vehicle to try to get stuff in that he would not have got into other places. There is a case for having a review, but not after six months. Goodness gracious, I can think of a much longer period if we actually produce anything, because the real test is when we have gone through the court process and—heaven help us—that could be five years. Let us have a review, yes, but not after six months.

That is a very good point. There is a case for a review and my noble friend Lord Stansgate put his finger on it, as did my noble friend Lord Shamash. But is not this the sort of review that you would want undertaken by a Select Committee, where it takes some evidence after a number of years and gives it further and deeper consideration? The range of subjects covered in the review could be wider than what is in the amendment, although it has quite an exciting list to start with. This is exactly the sort of issue which one of our Lords Select Committees could look at in two or three years’ time.

I also think that the noble Lord, Lord Holmes, has done us a service, because we have been so mired in the detail of the Bill and its legalities that it is very easy to forget exactly what its purpose is and what we hope will come out of the common law with the appropriate steer from the Bill: the growth in certainty for business and the ability to trade and own digital assets. It is perfectly valid, whether or not you enshrine it in statute. I think the Government or whoever will be responsible—the MoJ, DSIT or the Treasury; I suspect it is probably cross-departmental—will be well advised over a period of time to see whether the Bill and the common law are doing their job. For instance, the prophets of doom who say that Singapore and Australia have got it right and Dubai and the UK are getting it wrong may be proved correct. As the noble Lord, Lord Bassam, says, we may well do it in another way, but it is certainly worth reviewing that because, after all, we are trying to predict with the Bill what will be the most effective way of determining what are assets and whether we should have that third class of assets. I hope we have done good work on the Bill, but it is certainly worth checking afterwards.

I am tempted by this amendment. It has attractions but in a sense it does not go far enough. The first observation I make, of course, is that in proposed new subsection (2) the words “must include analysis of the impact” are not exclusionary—it has to include them but the review can address anything else. What this debate, and this carefully drafted list of seven things to be considered, have shown is that there will be change and that there is a lot happening out there now. The Prime Minister and the Chancellor have asked for growth, particularly in the digital and related fields. There is an attraction in telling the Government that they should set up something rather like a commission to look at this—but that is nothing to do with the terms of Clause 1. In other words, it is a separate thing to say, “We’ve all had a look at this, and what struck us is that there needs to be a co-ordinated look at the different topics listed here”—someone might actually find an eighth topic or a ninth. That could indeed be set up in the next six months. It would also be useful to have a review in five years’ time to see how the Bill’s provisions, when enacted, are operating and whether at that stage there should be further amendment. That is a completely separate topic. In other words, is this actually a good law? It is too important to leave it just to fester there, because if it is creating problems we must act and help the courts. They have seen some problems—and not just the courts; it is the people going through the courts we are really helping. If there is to be an amendment, it should be a twofold amendment along the lines I have suggested. Six months is one thing—that should include all the topics proposed by my noble friend Lord Holmes—but we should have a five-year review of the Act’s effectiveness, from the date that it is passed.

My Lords, I am grateful to the noble Lord, Lord Holmes, for moving his amendment, which looks to require a review, within six months of the Bill’s passing, on the impact of any digital assets being treated as property by virtue of its provisions. The amendment assumes that the Bill’s impact will be far-reaching. It requires analysis of certain areas, including data centre construction and usage, and the wider financial status of digital assets. However, as noble Lords are aware, the Bill confirms the position already emerging through case law in the lower courts on the status of certain types of digital assets as property. It is looking not to change the direction of travel but to expedite the development of our law to ensure that it remains world-leading. Given that this is a subtle change, we do not expect the Bill to have a significant impact, if any, on the topics listed in the amendment. For example, the amendment calls for a review of the tax regime. The taxation of crypto assets is dealt with under the existing tax framework, and HMRC has published extensive guidance to set out its interpretation of how the current law applies in different scenarios. The Government do not intend for the Bill to change this, and they do not anticipate that it will. The same applies to the further proposals for analysis to be carried out on the wider impact of the Bill on the financial status of digital assets. The Bill simply reinforces the existing position in common law and is solely concerned with personal property rights. The amendment also requires that the proposed review considers the impact of the of the Bill on “data centre power usage” in relation to digital assets and the need for data centre “construction and expansion”. Although I agree that considering environmental issues such as these is important, the Bill does not mandate the increased use of crypto tokens or other digital assets. Any discussions regarding data centre usage are therefore best addressed by other statutes or initiatives. I will raise one final point about the practical implications of this amendment. The topics listed in the amendment are broad, complex and technical. There will be many influences on these areas that are far greater than the Bill. It will be extremely difficult, if not impossible, to assess the impact of digital assets being treated as property by virtue of the Bill. The Government foresee the impact of the Bill to be positive: it will help to bring clarity to the law of personal property and ensure that the UK remains a leading place within which to innovate. We will, of course, keep an eye on its impact so that we can champion the effect it will have on the jurisdiction. All noble Lords were sympathetic to looking at this in the future. I of course acknowledge that this needs to be kept under review in the general sense, but my noble friend Lord Bassam made a particularly important point—of course, he speaks as a former Chief Whip of a number of years—on the importance of looking at this cross-departmentally and in a strategic way, which the House of Lords committee system is very good at. That may well be something that comes up in future years, and I would welcome that, but in the meantime I ask the noble Lord, Lord Holmes, to withdraw his amendment.

My Lords, I thank all noble Lords who have taken part in this debate. The purpose of the amendment was to do exactly that: to have a debate on these issues around this special Bill Committee. I thank the Minister for his response. While agreeing with the sentiment, I think the Government will need to look at a number of these issues: although they are not specific to the Bill, they are certainly consequential to it. If the Bill is to achieve the objectives we all seek, it will necessarily have consequences for a number of the areas set out in this amendment. I completely agree with comments made by noble Lords about my overexuberance around six months. There is a need to curb my enthusiasm when we discuss such issues. But, in an attempt to draw consensus, I will bring together the concept of how there is much that can be done within six months, as my noble friend Lord Sandhurst said. To combine what was said by the noble Lords, Lord Shamash and Lord Bassam, I think that a Lords post-leg review committee after five years—to discuss the Bill, the issues set out in this amendment and more—could provide an excellent opportunity to go into these details. I very much look forward to serving under the chairmanship of the noble Lord, Lord Bassam, on that committee. For now, I beg leave to withdraw the amendment.

Amendment 6 withdrawn.

Clause 2: Extent, commencement and short title

Amendment 7

Moved by

7: Clause 2, page 1, line 8, leave out “only” and insert “and Northern Ireland” Member’s explanatory statement This amendment extends the territorial extent of the Bill so that it will form part of the law of Northern Ireland as well as that of England and Wales.

My Lords, Clause 2 sets out the Bill’s formal Title, territorial extent and commencement date. It establishes that, on achieving Royal Assent, the legislation will officially be known as the Property (Digital Assets etc) Act 2025. The Act will come into force immediately on receiving Royal Assent and will not have retrospective effect. As the legislation confirms the current common-law position, stakeholders are unlikely to require extensive preparation. This swift implementation will provide clarity to the legal framework around digital assets without delay, offering the relevant sectors the increased certainty they require.

12:15:00

As introduced, the Bill applies to England and Wales only. It is the product of recommendations made by the Law Commission of England and Wales, which can make recommendations for England and Wales only. The Law Commission did not therefore make a recommendation regarding Northern Ireland in its report on digital assets. However, I have now tabled an amendment to extend the Bill’s territorial extent to Northern Ireland. Although Northern Ireland’s property law is separate, it is very similar to that of England and Wales.

I understand that the Northern Ireland Executive have carefully studied the Bill and have consulted relevant stakeholders to assess its impact on its property law and relevant sectors. Following this, I have received confirmation from the Northern Ireland Executive that they would like the territorial extent of the Bill to be extended to include Northern Ireland. Therefore, if the Committee agrees, the Bill will apply to England and Wales and Northern Ireland. This will provide consistency for the status of digital assets in property law across these jurisdictions, and will minimise legal discrepancies.

Extending the Bill to Northern Ireland is expected to bring the same practical benefits as it would in England and Wales. This includes providing clarity to its law while still letting courts retain freedom to make decisions. Furthermore, it would provide consistency for the status of digital assets in property law across England, Wales and Northern Ireland. For these reasons, I hope that all Members of the Committee will support this amendment. I beg to move.

I have a very simple question for my noble friend: what discussions have taken place between the Government and the Scottish Parliament and Government? I know that the Scottish system is different—there is a different judicial system, set-up and so on—but we are a common market, and these things are important across the whole United Kingdom, so I would like to be reassured on that point.

My Lords, very briefly, I support this amendment and am pleased to hear the Minister tell the Committee that the Northern Ireland Executive have been involved, which is a very good thing. I am therefore pleased that the Bill has come forward at a time when the Northern Ireland Executive have been functioning. I do not know whether the Assembly itself took any part in the consideration, but at least the Executive were involved, which is terribly important.

My Lords, I need say nothing more than that I agree.

I will answer my noble friend Lord Bassam’s question about Scotland. As he knows, Scotland’s property law is different from that of England and Wales and does not share the concept of things in action and things in possession. Therefore, there is no intention to extend the Bill to Scotland, as any legislative intervention in this area would have a different effect. However, separately, the Scottish Government are consulting on options for possible legislative changes to Scottish private law to clarify the status of digital assets as property. I am grateful for the contributions made by noble Lords.

Amendment 7 agreed.

Amendment 8 not moved.

Clause 2, as amended, agreed.

In the Title

Amendment 9 not moved.

Amendment 10

Moved by

10: Title, line 1, leave out “capable of” and insert “not prevented from” Member’s explanatory statement This probing amendment seeks to restate the long title more clearly, so that it is consistent with the operative clause of the Bill.

My Lords, Amendment 10 in my name relates to the Long Title, which currently reads: “To make provision about the types of things that are capable of being objects of personal property rights”. Of course, the Long Title does not have legal force, but it forms part of the Bill. The amendment was suggested to the Committee by Mr Adam Temple of counsel. As proposed by the Law Commission in its short consultation on draft clauses of February 2024, the Bill would have provided in its Clause 1 that a thing is capable of being the object of personal property rights, despite the fact that it is neither a thing in possession nor a thing in action. In its supplemental report of July 2024, the Law Commission revised the draft Bill into its current form. As it explained at 3.4, the words “capable of being” in Clause 1 were replaced by “not prevented from being” in order to remove the possible unintended implication that any thing was capable of being personal property. However, the Long Title that was proposed in February 2024, including the words “capable of being”, survives unamended, for whatever reason—or perhaps for no reason. This amendment would bring the Long Title into line with the current wording of the Bill by replacing the words “capable of” with the words “not prevented from”. Whether that is simple pedantry or simple good sense—or perhaps, as I am inclined to think, both—I leave it to your Lordships to judge. I beg to move.

My Lords, I have the pleasure of supporting the amendment of the noble Lord, Lord Anderson, for reasons not least of clarity and consistency, but also relating to the point raised by the noble Lord, Lord Clement-Jones, that this Bill is as much about sending signals as to what it does and does not do. Though the Long Title does not have legal effect, it would be at the least extraordinarily odd for us not to make this change at this stage. It would make it clearer for both professionals and non-lawyers when reading this Act, as it would be. If it is left unamended, there would be a suggestion that there must be something in this and that the Long Title is to be taken into consideration in a way that was obviously intended. I very much support this change. It may be that we decide to make the change and perfect the Bill in that respect today.

My Lords, I fully understand that the Short Title of a Bill does not form part of its legal effect. I can think of many Bills—and we have passed several in the last few years since I have been in your Lordships’ House—that have been enormously long. For that reason, looking at the Title of the Bill is very helpful. However, I cannot think of a Bill that is shorter than the one before us and I honestly do not see that anyone could be prevented from having the clarity and consistency that the noble Lord has just referred to just by reading Clause 1. Therefore, I am not sure that there is any great need to change the Title. Clause 1 is good enough in itself.

My Lords, I think we are talking about the Long Title here. As usual, the noble Lord, Lord Holmes, and I are singing from the same hymn sheet, because it is about signals. The phrase “not prevented from” more accurately reflects the Bill’s intent. He is quite right that it avoids misinterpretation or indeed even mischief, because there are those who are still not going to be happy if the Bill goes through and any chink in its armour will be exploited. The proposed change is more neutral language, which reflects the actual law that will be set out in the Bill, and it addresses concerns about the original wording. I would like to see this amendment go through this Committee, if humanly possible.

I do not find this easy, but the Title is probably broader than Clause 1. It gives a purpose without limit. It simply says that the Bill makes provisions for things that are capable: in other words, look at the Bill to see what falls within that. Clause 1 simply says that something is not prevented from acquiring property rights simply because it is not A or B which was thought hitherto to be a constraint. The Title says that our purpose is to give property rights, but the Bill says that, actually, anything can have property rights, even if it did not have them before or was never considered to have them, or even though we do not know about it yet and have not imagined it. While I find some of the things that noble Lords have said to be persuasive, I am not actually persuaded. The court will have unfettered discretion under Clause 1 and we should leave it like that. We are giving property rights where it is apparent they should exist, even though at the moment we cannot imagine them, and we are not limiting that by any existing categorisation or any categorisation at all. So, leave it as it is.

The Government agree with the noble Lord, Lord Sandhurst, on this point. This amendment seeks to restate the Long Title so that it is consistent with the operative clause in the Bill. As we have heard, the amendment was suggested by Adam Temple, a senior barrister who specialises in financial services. As far as I am aware, the suggested amendment would have no effect on the Bill. The current drafting makes it clear that the Bill is facilitative in nature. It does not order a specific legal response to any specific class of digital asset. This would remain the case if the proposed amendment was adopted. I can do no better than quote Professor Sarah Green at her second evidence session when asked about this amendment. She said: “I do not know what the problem with the Long Title is, in that it seems to me to say exactly what the Bill is doing. That is to say, and this is the point about the facilitative nature of the Bill, ‘these are things that are capable’, that is, courts can, ‘of being the object of property rights if the court thinks this is appropriate in the circumstances’. So, I do not understand the objection to ‘capable’ in the Long Title”. Given this, I ask the noble Lord to withdraw his amendment. If he chooses to press it to a vote, I urge noble Lords to vote against it.

My Lords, having, I hope, studiously maintained my neutrality throughout these debates, I must say that my spine has been rather stiffened by the noble Lords, Lord Holmes of Richmond and Lord Clement-Jones. I have not been persuaded to the contrary even by the combined might of the noble Lords, Lord Sandhurst and Lord Ponsonby. The word “capable” was found objectionable in Clause 1. That is why it was removed between February and July 2024. If one is paying attention to these things, it should, it seems to me, be removed also from the Long Title. One should try to be accurate, even when it does not matter very much. I hope that the Minister might go away and have a little think about this. That is the conclusion of our Committee debates. I believe that it is at this point that the Special Public Bill Committee—though not, I hope, what Shakespeare called an “insubstantial pageant”—melts into air and leaves “not a rack behind”. I am grateful to all those who contributed to the operation of the Committee, which, speaking personally, I very much enjoyed. I wish the Bill well for the remainder of its passage.

Amendment 10 withdrawn.

Title agreed.

I am a complete newbie to a Special Public Bill Committee, but I particularly thank the noble Lord, Lord Anderson, for all his leadership and help in looking after all of us as Committee Members. This has gone through incredibly smoothly and I am personally very grateful to him.

Bill reported with an amendment.

Committee adjourned at 12.30 pm.