Competence and Offenses in the Metaverse

If someone attends a pop concert in the metaverse from their home in the UK, where the metaverse is hosted on a South Korean server, the artist sings from their home in the US and tickets are sold by a concert organizer based in Canada, it is difficult to determine where the concert is taking place and which court(s) might have jurisdiction to hear claims for losses resulting from this concert.

In the ninth article of our series, we explore how courts might approach this issue of identifying an appropriate jurisdiction for disputes arising from the Metaverse.

Cross-border litigation

When someone believes that their rights have been violated and they want to enforce those rights or seek some sort of remedy to compensate them for their loss or injury, they turn to the courts and tribunals. Where there is no cross-border element to the claim, the claimant’s local courts and tribunals should normally assume jurisdiction over the claim. Where there is a cross-border element (for example, the defendant in the claim resides or carries on business in another country), things can get complicated. Countries generally have rules in place to help their courts determine whether, and on what basis, they can exercise jurisdiction over a dispute. These rules are generally inspired by the principles of the United Nations Charter such as sovereign equality, non-intervention and territorial integrity. In addition, some countries are parties to international conventions regarding jurisdiction in cross-border disputes and, in some cases, the recognition and enforcement of judgments rendered in such disputes. Collaboration in this area continues: it was only in 2019 that the Hague Judgments Convention was concluded.

Matters become more complicated, however, when the alleged events or conduct take place outside the physical world. The dominance of the Internet, for example, has led countries to adapt their legal frameworks and create new laws to address disputes arising from its use. It is unclear how these laws will apply to the avatars that inhabit the metaverse and the trading of digital assets, such as non-fungible tokens (“NFTs”), that occur there. English courts, for example, have recently shown themselves willing to exercise jurisdiction over a claim relating to NFTs held in a marketplace operated by a US company, on the grounds that the NFTs are arguably property under of English law. The court held that the location of NFTs is the place where their owner is domiciled. Similarly, we have seen UK tax authorities seize NFTs as part of tax evasion. This is a rapidly developing area of ​​law and there are real possibilities for international jurisdictional disputes.

Crimes in the Metaverse

The choice of jurisdiction depends to some extent on the nature of the dispute. In the context of tort wrongdoing, jurisdictional rules generally require some degree of nexus between the wrongdoing and the country in question. Under the recast Brussels regulations that apply in the European Union, for example, jurisdiction for tort actions is determined by reference to the place where the damage occurred or the place of the wrongful act that gave rise cause this damage. In England and Wales, similarly, the courts may exercise jurisdiction provided that the damage is suffered in the jurisdiction or the damage results from an act committed there.

One wonders how these principles would apply to wrongdoing in the Metaverse. However, given the metaverse’s potential uses for socializing, working, gaming, shopping, commerce, and entertainment, it is likely that crimes will be committed in this virtual space. For instance:

  • A dishonest trader selling goods in the metaverse may commit the offense of deception if they falsely state that the goods they are selling are the goods of a (usually well-known) third party. The harm caused here relates to the right of the third party to the goodwill of his business, and the plaintiff is that third party.
  • The tort of misrepresentation (also known as negligent misrepresentation or the tort of deceit in other countries), where misrepresentation is relied upon to cause loss, could also become common. For example, a company may purchase advertising “space” at a pop concert held in the Metaverse based on false claims made by the concert organizer about the visibility of that advertising space.
  • The tort of negligence may also be relevant if the courts recognize new situations where a duty of care might arise in connection with the conduct of avatars in the metaverse. Metaverse providers could themselves be subject to legal duties of care, at least in Britain if the Online Safety Bill is enacted, if not as a result of regulation by other countries as well .

In each of the above areas, the courts will need to determine the location of the wrongdoing and identify the perpetrator of the wrongdoing. Various considerations will apply. For example, the court may have to determine whether an avatar can be given separate legal personality or be treated as an independent tortfeasor. It seems more likely at this point that an avatar’s statements and conduct are attributed to the person controlling it, but if ever an avatar exercised independent decision-making (i.e. had a artificial intelligence), the issue could become more complicated.

It will also be interesting to see how the courts determine where the “damage” caused by a tort lies. It will probably depend on the facts of the case. For example, if the third-party merchant in the surrogate scenario described above was also a real-world merchant, courts would have to determine whether the damage occurred in the metaverse, the real world, or both. Meanwhile, if the third party operated only in the metaverse, the courts would have to consider whether the damage occurred only in the metaverse or instead of its ultimate (human) beneficial owner. The question would be even more complicated if the company were a product of AI. Similarly, if the locus of both wrongdoing and harm were the metaverse, could existing concepts of jurisdiction be stretched to accommodate that tort?

Finally, there is the intriguing possibility of the creation of a unique set of courts or tribunals exclusively to hear claims arising from behavior taking place in the metaverse. Under this system, countries could each agree to cede jurisdiction over these matters – or certain categories of them – to “metaverse courts”. Such a system could help manage claims where there are competing jurisdictional claims between courts in different countries. The metaverse courts could themselves operate within the metaverse. There is no serious public debate about such an approach yet, but as the Metaverse takes shape in the coming years, it could be part of the discussion.

About Leah Albert

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