Lord Sandhurst (Con)

My Lords, traditionally, English common law has recognised two forms of property: tangible things in possession and intangible things in action, such as debts and shares. However, as we have heard, with the rise of digital assets such as crypto- currencies, tokens and non-fungible tokens we encounter items that do not fit neatly into either category. These assets are becoming essential in modern commerce, and it is vital that English law remain at the forefront of international trade, safeguarding London’s position as a legal and financial hub. The Law Commission looked at this and proposed a third category of property to accommodate such digital innovations, allowing for legal evolution without imposing rigid definitions that might exclude future technologies. The commission emphasised that statutory intervention must not undermine the existing legal clarity or introduce unnecessary complications. The flexibility of English common law is a strength; it has already adapted to address key questions in the digital sphere. The current regime offers a balance of predictability and adaptability, making our jurisdiction well positioned to lead in this space. The Bill the commission drafted, which is now before us, does just that. We have tested it thoroughly in Committee. I have listened carefully to the concerns raised by my noble friend Lord Holmes of Richmond, and while I recognise them, the Bill has been carefully drafted and it is not necessary to amend it—save for Amendment 6, which we will come to later. Addressing Amendments 1 and 2 in a little more detail, it will be for the courts to develop the law on the treatment of this category or to widen existing categories—whichever way one wishes to look at it. The proposed wording of Amendment 1 goes too far. The Bill’s wording is elegant and encompasses digital assets, which are not easily categorised in the conventional classifications. It also encompasses other things not yet contemplated or in our imagination but which, when they do come into existence, will be thought by the courts to deserve rights. That is what the Bill is doing; it is expressly not limited by over-definition. It achieves protection for these as yet unimagined things, while making it clear that existing digital assets will be protected. We would be bold to depart from the views of Professor Green, chair of the Law Commission report, who is very hostile to this sort of amendment. When asked about one such suggested amendment, she said: “That would really take away the whole bite of the Bill … the whole mischief that it addresses is that we no longer have to be stuck with these categories”. Therefore, we cannot support Amendments 1 and 2. Turning to Amendment 3, on codes of practice, we follow the reasoning which I have outlined. Any code of practice risks definitions which do not accommodate a new type of activity or entity outside its scope, but which is worthy of protection. Equally, the code might suggest that property rights be given to an activity which, after the detailed investigation that a trial can give, a court rightly decides should not be so protected. It is best left to the courts, which will receive evidence, hear arguments from competing parties and be able to resolve those matters. The six-month period is too soon. If the Law Commission had thought this a good idea, it could have said so. It is contrary to the tenor of its lengthy report. If the Act would, in five years’ time or whenever, benefit from amendment, it should be done with the benefit of hindsight and experience. Meanwhile, such amendment is premature.