UKSLSS Newsletter (Final Issue: June/July 2019)

United Kingdom Singapore Law Students’ Society

Monthly Newsletter

Issue 7: June/July 2019

Editorsʼ Foreword Dear Members, Welcome to the final newsletter of the year! We hope that the exam season has gone well for all, and that everyone is finally able to lighten up.

This month’s theme concerns the ‘Perils and Uncertainty of the New Legal Tech Age’, as we build upon our previous themes in March and April. In March, we introduced the rise of Artificial Intelligence (AI) as a tool and reflected changing legal expectations in the legal landscape, whereas in April we highlighted the need for regulations to afford increased protection of rights pertaining to individual privacy. In our legal tidbits section, Ohana sheds light on the impact of Smart Contracts, underlining certain weaknesses despite its value and room for growth. Equally important, Ronald notes the effects brought about by the Personal Data Protection Act (PDPA) 2012 upon the car-hire service, Grab, in Singapore. In addition, Jiaqi stresses on the uncertain nature brought about by the use of cryptocurrency, specifically, in line with Facebook’s new launch of their new cryptocurrency, Libra. To end it off, Ashley elucidates the challenges faced and opportunities in a Fintech World, specific to Singapore and London, as both cities share similarities as major financial hubs.

Finally, this leads us to our ‘Features’ section whereby we explore the uncertainties regarding the nature of cryptocurrencies and it’s potential regulatory challenges by former Editor-In-Chief, Grace Chong. Grace’s insight into cryptocurrency proves invaluable, given the influence of and increasing usage of cryptocurrencies in this modern day and age.

As the 2018-19 academic year draws to an end, we would like to thank all ‘Features’ section contributing guests for their thoughtful contributions and for sharing their experience and wisdom. Also, we are appreciative towards all UKSLSS members for your continued support, both in the past and upcoming endeavours.

Cheers to an enjoyable summer break! See you soon!

With warmest regards, The UKSLSS Newsletter Editorial Committee 2018/2019 Edwin Teong (Editor-In-Chief) Shermaine Lim (Managing Editor) Ronald Lee (Deputy Editor) Kimberley Ng (Design Director, Resident Writer) Yu Jiaqi (Resident Writer) Ohana Naidu (Resident Writer) Ashley Chiang (Resident Writer)

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Legal Tidbits

The increasing significance of the Personal Data Protection Act (PDPA) By: Lee Jian Qing, Ronald, University of Bristol

The Personal Data Protection Act has recently received attention as organisations that have breached regulations were fined by the Commissioner of Personal Data Protection.

This reflects the importance of protecting the personal data of consumers in a modern, digital economy such as Singapore.

The car hire service, GrabCar, was fined $16,000 for divulging the personal information of more than 120,000 customers. In addition, a separate complaint was also lodged by two passengers who used GrabHitch to book carpool rides provided by two different drivers.

The passengers complained that the drivers had posted their data without their consent on Facebook. This has led to a notable decision by the Deputy Commissioner of the Personal Data Protection Committee (PDPC) - Mr Yeong Zee Kin deemed that a GrabHitch driver is not considered as an "organisation" under the PDPA. Instead, it is the firm (Grab) that discloses the passengers' personal data to GrabHitch drivers in the company's preferred method and for a purpose deemed acceptable by the firm.

Hence, this would mean that the firm is responsible for the actions of private drivers. This clearly has implications in terms of blurring the distinction between independent contractors and employers under the Employment Act 1968.

Following this decision, Grab is prepared to challenge the decision as “there is a lack of clarity on the extent to which an organisation is responsible for educating private individuals offering services on a personal capacity, about personal data protection". Simultaneously, Grab has made updates to their GrabHitch service by introducing a number-masking function to protect passenger data.

To prevent future incidents, Grab has also added more rigorous data validation and checks, including new processes that require a third person to perform sanity checks on data.

Similarly, a law firm has also been fined $8000 for disclosing private information by incorrectly sending emails in three instances which exposed client-sensitive information. The two emails sent by an administrative staff member contained the complainant's and his sister's residential address and their NRIC numbers.

Subsequently the managing partner sent an email to the complainants enclosing two attachments, reflected the full names of other clients who were unrelated to the complainant's property transaction. Following this incident, the managing partner issued an apology to the affected parties and offered to refund the legal costs and absorb all disbursements in handling the property transactions. The Commissioner noted that the repeated errors showed " care and responsibility� towards handling personal data “had not been sufficiently ingrained within the organisation". The firm was also found to lack adequate security arrangements to protect clients' data, breaching its protection obligations under section 24 of the PDPA and had not implemented policies to protect personal data as required under section 12 of the PDPA. These cases are an indication that there is an increasingly tougher stance adopted by the law against personal data breaches, which undoubtedly bode well for consumers given the slew of hacking incidents that have affected government organisations such as SingHealth in 2018. A stringent attitude towards ensuring the protection of personal information is a welcome development.

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Legal Tidbits

Singapore and London: Challenges & Opportunities in a Fintech World By: Ashley Chiang, University College London

According to a recent international research report (“Fintech Innovations: Perspectives from Singapore and London”), the four essential elements of a successful fintech hub include capital markets, talent, strong government support and progressive regulation.

However, even in leading fintech economies such as the US, these elements are segregated in terms of location – while Silicon Valley is the hub for talent and capital, New York has the established financial markets, and Washington DC enables regulatory functions.

However, this is starkly contrasted to Singapore and London, which are uniquely placed as financial hubs that bring all five key elements together. Both locations have governmental regulators who actively support the growth of the fintech industry, with initiatives such as regulatory sandboxes, which enable firms to experiment with new innovations in a controlled setting. In addition, both cities are well-positioned as established financial markets and hubs with a substantial pool of investors who provide essential capital to fintech firms.

Both Singapore and London have been actively attracting foreign and local talent into the fintech industries. In terms of foreign talent, a 2018 survey by Innovate Finance highlights that 42% of the surveyed fintech companies in the UK workforce were foreign nationals, mainly working in technical roles. Likewise, Singapore has shown a clear commitment to reach out to other hubs in the neighboring regions, especially Southeast Asia, to source for suitable technical talent. With regards to domestic talent, the UK is offering a free Fintech 101 online course, while Singapore intends to establish the TechSkills Accelerator (TeSA) Fintech Collective, to build up competent professionals in the fintech industry.

While Singapore and London stand a significant competitive advantage from their unique ability to bring all five key elements together, both cities do face rising challenges unique to the Fintech context as well. Most notably, the astounding growth of artificial intelligence has paved the way for the rise of “deepfakes” – the technology that manipulates texts, voices, pictures and videos, thus generating “neutral fakes news”. This is especially dangerous as its infiltration into Fintech hubs will quickly make transactions made on such platforms much more susceptible to unreliable and even completely false information.

In response to this, both cities have found suitable legislation to combat this daunting challenge, with Singapore passing the Protection from Online Falsehoods and Manipulation Bill last month. However, it is foreseen that much more will be done, as new technology specifically detecting AI-generated falsehoods are already in the works.

Singapore and London remain key players in the Fintech sphere that strive to continually capitalize on their unique advantages, while effectively responding to new challenges.

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Legal Tidbits

Making Way for Smart Contracts By: Ohana Naidu, University College London

Bitcoin and Blockchain technology is well-known to be the foundation of cryptocurrencies. What is less apparent is its function in serving as a springboard for various technological developments, including the materialization of ‘smart contracts’. At first glance, smart contracts serve the same purpose as their traditional counterpart - laying out the terms of an agreement between the parties. However, the difference lies in the terms of the agreement, written directly into lines of cryptographic code, which authenticates, implements and applies the terms.

Smart contracts are generally self-executing and self-authenticating, permitting transactions and agreements to be carried out between disparate parties whilst omitting the need for a central authority, legal system or external enforcement mechanism to administer the contract’s enforcement. The elimination of the intermediary in the transaction, coupled with the high predictability of code, means this could potentially slash the cost of business transactions. Smart contracts also render transactions transparent and traceable - the code of smart contracts is easy to scrutinize while a complete record is kept of every transaction by virtue of the blockchain.

Despite how impressive smart contracts may seem on paper, it could equally be contested that they are neither ‘smart’ nor ‘contracts’. Their dependability rests fully on the code outlining them and relies on the blockchain’s security to prevent manipulation. While smart contracts could vastly improve the efficiency of simple contractual agreements, contracts of a more complicated nature often require human perception or face-to-face negotiation.

Blockchain technology has been widely celebrated for its immutable nature, which has had a multitude of positive ramifications. However, this could potentially be as much of a bane as it is a boon. The code that forms the basis of smart contracts are equally likely to fall victim to human error as traditional contracts, meaning the risk of adverse effects is not entirely mitigated. Furthermore, agreements made in the form of smart contracts are not necessarily legally binding. As of now, it remains uncertain whether parties to the agreement would require provisions to be made outside the realm of blockchain (traditional legal agreements) in accompaniment to smart contracts.

Despite this, smart contracts have been gaining traction in the business realm. Several states in the US, such as Arizona, have passed legislation which makes provisions for the reception of smart contracts as routine business practice. Nonetheless, smart contracts are still susceptible to vulnerability. One unfortunate instance was in 2016, where a loss of 3.6 million Ether (roughly USD$50 million) was caused as a result of a hack targeted at a flaw of smart contracts serving as a base for The DAO, a form of investor-directed venture capital fund.

However, the growth of smart contracts does not seem to be deterred, with its adoption in new industries. For instance, the publishing industry has adopted smart contracts in implementing copyright and fighting plagiarism.

Thus, despite being relatively new, the rapidly increasing popularity of blockchain-based smart contracts is strong assurance of their continued growth.

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Legal Tidbits Certain barriers remain to the broader endorsement of smart contracts - especially the frailty of cyber security - which incites fears of possible losses of funds. Underhanded developers are also a threat to the industry, even with increased regulation put in place. While lawyers may not be equipped to increase the robustness of the code ourselves, the task at hand lies in fully understanding and tasking ourselves to combat the possible legal consequences of smart contracts.

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Legal Tidbits

New Cryptocurrency in the Making: Libra By: Yu Jiaqi, University of Oxford

In June 2019, Facebook, in partnership with a multitude of large corporations such as Uber, Spotify, PayPal and VISA, announced that it would lead the effort to create a new global cryptocurrency called Libra. This digital currency would be created with blockchain technology, and managed through a subsidiary, Calibra, that would provide financial services to individuals and businesses. Libra is arguably different from existing cryptocurrencies such as Bitcoin and Ripple, which are unstable currencies as they are supported purely by the willingness of users to accept them without any intrinsic value. Libra, on the other hand, would be backed by actual reserves, the Libra Reserve, where monetary value is presumably held in reserve somewhere when transactions are made. Moreover, unlike its esoteric counterparts, Libra promises to be user-friendly and embedded into Facebook and WhatsApp. Facebook thus claims that Libra would “bring together the attributes of the world’s best currencies: stability, low inflation, wide global acceptance and fungibility”.

Facebook’s subsidiary Calibra would be privy to any user’s account balance and spending, and could potentially offer to sell retailers an algorithm that will maximize the price for what consumers can afford to pay for a product. Moreover, large companies that are sitting on the board of governors for the Libra system would be able to gain significant advantages and potentially violate competition laws through their exploitation of the currency. One example would be the possible incentive of giving Libra users discounts on Uber rides, which would give Uber disproportionate advantage over other ride-sharing businesses.

However, there are glaring problems with Facebook’s new currency. Firstly, the intricacy and difficulty of organising a functioning payment system is not a project that a social institution with the level of privacy and technical problems like Facebook should be leading. Enormous investments into compliance systems are required to prevent money-laundering, terrorist financing, tax avoidance and counterfeiting, which Facebook might simply not be equipped to accomplish.

Lastly, it has been argued that Libra would dent national security and sovereignty, as they would lessen the impact of international economic sanctions on supposedly rogue nations. A parallel private currency that enables an open flow of money across all borders would prevent for example the United States from using economic sanctions to bar entities from using their financial system in ways that would harm their interests.

Having an established cryptocurrency would potentially allow technological corporations and venture capitalists to decide matters of political significance, which should not be the case.

Secondly, the existence of Libra would blur the lines between banking and commerce, which is an intersection that has generally been prohibited in the United States since the Civil War.

Thirdly, the potential intertwining of Libra and any private currency system with our global economy introduces a systemic risk into our economy. In the event that the Libra system backed by bonds and financial assets is penetrated, and if users wish to sell their currency all at once, a public bailout might be necessary to prevent an economic collapse. Clearly, a private international payments network that would need to be backed by taxpayers because it’s too big to fail would only be a liability on the economy.

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Legal Tidbits Rather than being democratic, cryptocurrencies like Libra are managed by a self-selected council of corporations which the people have absolutely no say in. Allowing such institutions to structure money and payments is perhaps something that emboldens with too much power but little responsibility demanded for it.

As such, it would appear that there are still many areas of uncertainty to be ironed out, before cryptocurrencies can truly take flight.

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Features

The following is an article relating to uncertainty regarding the nature of cryptocurrencies and potential regulatory challenges outlined in great detail. The UKSLSS editorial team wishes to express its sincere gratitude to former Editor-In-Chief, Grace Chong and Herbert Smith Freehills for agreeing to contribute her piece. Credits also go to Grace’s fellow writers from Herbert Smith Freehills who collaborated with her on this article listed as follows: Natasha Blycha (Blockchain Lead), Amy Ciolek (Senior Associate), Katherine Gregor (Senior Associate), Charles Kim (Senior Associate) and Danila Logofet (Partner).

Announcements

The society’s annual flagship event, the Singapore Legal Forum 2019 will be held at the National Gallery, Singapore on 24th August 2019 from 12pm to 6pm. Our Guest of Honour for SLF 2019 will be Justice Kannan Ramesh. Our theme for this year's forum is: "The Legal Industry of Tomorrow: Our Race for Relevance". As the legal industry evolves, we hope to be able to better equip our members with the necessary tools and knowledge in our race for relevance, and face the challenges ahead from technology disruptions to transforming business models. On this note, the society is recruiting for volunteers on that day to help facilitate the running of the event.

Please visit the UKSLSS facebook page and Singapore Legal Forum 2019 event page to find out more!

Important Links SLF 2019 Facebook event page - https://www.facebook.com/events/471529970289161/ SLF 2019 Volunteer Recruitment Application Link - https://forms.gle/2nxMVrWvkpCyVV3s9 SLF 2019 Sign Up Link - https://www.eventbrite.co.uk/e/singapore-legal-forum-2019-tickets-64140569169?aff=ebdssbdestsearch We hope to see you there!

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