Digital Smart Contracts and the Governing Law in Light of Private International Law

Abstract

With the emergence of new technologies at the dawn of the 21st century, a novel form of electronic contracts known as “smart contracts” has entered the realm of digital interactions. These contracts, which are designed based on distributed ledger technology (blockchain), programming code, and in some cases the Internet of Things (IoT), enable automatic execution without the need for human intervention, thus creating a fundamental transformation in the traditional structure of contractual obligations. Despite their unique technical features, smart contracts pose serious challenges in the realm of determining the applicable law and resolving disputes arising from them, particularly in cross-border contexts. The fundamental question is whether classical rules of private international law—especially conflict of laws rules—are capable of addressing the complexities inherent in smart contracts. This study, adopting an analytical–comparative approach, examines the foundations and criteria for determining the governing law applicable to smart contracts within the Iranian legal system and compares them with the Rome I Regulation in the European Union. The findings indicate that if the governing law is explicitly determined at the stage of coding the contract by the parties, the conflict of laws can be effectively managed. However, in the absence of such an agreement, dispute resolution bodies are compelled to resort to general rules of determining the applicable law, which, in Iranian law, still face significant gaps in this regard. The Rome I Regulation, particularly Articles 3 and 4, offers more precise solutions for determining the applicable law in the absence of an agreement and can be considered a suitable model for the development of Iran’s domestic legal framework concerning digital contracts.