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Smart Contract Disputes

Does "Code is Law" hold up in court?

No, traditional law overrides code. If a smart contract produces an illegal result (like theft or unjust enrichment), courts can order restitution regardless of what the code allowed technically.

How do you sue anonymous parties in crypto disputes?

We use blockchain forensics to trace assets to centralized exchanges (CEXs) where KYC data exists. We then seek court orders to freeze funds and reveal the identity of the account holder.

Are decentralized arbitration (Kleros) rulings enforceable?

Not automatically like state court judgments. However, if the parties agreed to it in a valid contract, the ruling can be enforced as a contractual obligation or through traditional arbitration recognition treaties.

What is the jurisdiction for smart contract disputes?

Jurisdiction is complex and often determined by the location of the defendant, the server, or terms in the User Agreement. We help establish Georgian jurisdiction where applicable or coordinate international actions.

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"Code is Law" is a popular principle among crypto enthusiasts, but in the real world, it often clashes with traditional law. When a smart contract malfunctions, a hack occurs, or the code's logic differs from the parties' real agreement, a dispute arises. Smart contract disputes are a new and complex area of law where traditional courts often struggle due to a lack of technical expertise. Specialized lawyers are needed to translate blockchain transactions into language understandable to a judge or to use Alternative Dispute Resolution (ADR) mechanisms.

What Does the Smart Contract Disputes Service Cover?

Our service covers the full cycle of dispute resolution:

  • Fact Analysis (Forensics): Studying blockchain transactions and collecting evidence (Tx Hashes, logs) to establish what actually happened.
  • Negotiation and Mediation: Attempting to resolve the conflict out of court, including sending "On-chain" messages.
  • Court Representation: Preparing lawsuits and representing clients in Georgian or international courts regarding the recovery of digital assets or compensation for damages.
  • Decentralized Arbitration: Conducting disputes on specialized platforms (e.g., Kleros, Aragon) if provided for in the parties' agreement.
  • Asset Tracing and Recovery: Conducting legal procedures at exchanges (CEXs) to freeze and recover funds.

Common Real-World Scenarios

Smart contract disputes often arise when:

  • Users lose deposits due to an exploit in a DeFi protocol and demand compensation from developers.
  • A smart contract for buying/selling an NFT does not transfer copyright, leading to a dispute between the buyer and the creator.
  • A DAO voting result is manipulated via a "Flash Loan" attack, and minority members challenge the outcome.
  • An Automated Market Maker (AMM) miscalculates prices due to Oracle Manipulation, causing losses for traders.
  • A programmer fails to fulfill an order, and funds locked in a smart contract get "stuck."

Georgian Legislation and Regulations

In Georgia, a smart contract is considered a transaction concluded in electronic form (Civil Code Articles 60 and 327). If the execution of the code leads to an unlawful result (e.g., unjust enrichment), the victim has the right to demand restoration of the original state under Article 976 of the Civil Code. The Civil Procedure Code is used for dispute resolution. The main challenge is identifying the defendant (due to anonymity) and establishing jurisdiction. Georgian courts accept electronic evidence, although expert involvement is often required to decipher blockchain records.

Service Process

Legal.ge specialists will help you:

  1. Strategy Definition: Cost-benefit analysis — is it worth starting a dispute?
  2. Defendant Identification: Using crypto-investigators to identify the real person behind a wallet.
  3. Legal Action: Filing a lawsuit or initiating arbitration.
  4. Enforcement: Enforcing court decisions on digital assets (which is still novel for the Georgian Enforcement Bureau).

Why Legal.ge?

A smart contract dispute is not an ordinary court case. A judge may not understand "Gas Fee" or "Reentrancy Attack." Legal.ge gives you access to lawyers who possess both technological and procedural knowledge to effectively protect your interests in digital disputes.

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