THIS DISSERTATION IS SUBMITTED IN PARTIAL FULFILLMENT OF THE ACADEMIC REQUIREMENTS

FOR THE SEMINAR PAPER TRANSPORTATION LAW

REGULATION OF THE TRANSPORTATION INDUSTRY WITH

BLOCKCHAIN TECHNOLOGY

UNDER THE GUIDANCE OF

ASSISTANT PROFESSOR OF LAW

MR. DIVYA TYAGI

Submitted by:

Mahim J. Sharma

12A071

(2012-17)

1
ACKNOWLEDGMENT

I deem it to be my utmost privilege to present this research on this very pertinent topic of
Transportation Law.

At the outset, I would like to express our deepest gratitude to the Respected Director, Mr. Bimal Patel,
Gujarat National Law University, for granting this wonderful opportunity to research for which I shall
remain indebted forever.

At this juncture, I would like to express my deepest gratitude to Mr. Divya Tyagi, Assistant Professor
at the Gujarat National Law University for his immense resourcefulness and precious guidance in the
course of preparing this dissertation.

It is indeed impossible to mention the names of everyone- friends; fellow students, resourceful
bloggers and legal experts who have helped me formulate our ideas through stimulating discussions.

Therefore, all in all, I take this opportunity to express my heartfelt gratitude to one and all under
whose valuable support I could conclude my research fruitfully and contribute to the field of law.

2
Contents
1. Introduction .................................................................................................................................... 4
RESEARCH OBJECTIVES ....................................................................................................................... 6
RESEARCH QUESTIONS........................................................................................................................ 6
SCOPE AND LIMITATIONS ................................................................................................................... 7
RESEARCH METHODOLOGY ................................................................................................................ 8
TENTATIVE CHARACTERISATION ......................................................................................................... 8
LITERATURE SURVEY ........................................................................................................................... 9
2. The Blockchain Technology and its Application to the Legal Field ............................................... 10
2.1 Features of a Blockchain ............................................................................................................. 12
2.2 Smart contracts ........................................................................................................................... 13
2.3 Application to the Legal Field...................................................................................................... 15
3. Jurisprudence of Applying Blockchain to Transportation Law...................................................... 18
4. The Problems in the Indian Transportation System ..................................................................... 21
4.1 Licensing of Vehicles and Drivers .......................................................................................... 21
4.2 Road Traffic Accidents .......................................................................................................... 22
4.3 Blockchains for efficiency in Transport and Taxation ................................................................. 23
4.4 Insurance ..................................................................................................................................... 25
4.5 The Ownership of Cars and Peer to Peer Ride Sharing ............................................................... 27
4.6 Shipping Industry ........................................................................................................................ 32
5. Autonomous Vehicles: The Application of Blockchain to Reduce Legal Hurdles and the Current
Law 34
6. Technology and Law: The Need to Join Hands ............................................................................. 39
7. Ethical Issues and Limitations of Blockchain ................................................................................. 41
8. Conclusion ......................................................................................................................................... 44
9. BIBLIOGRAPHY .............................................................................................................................. 45
Web articles ..................................................................................................................................... 45

3
 1. Introduction

The concept of the Blockchain technology is a radical one, something that can change and
create a way of life for a complete generation. The concept basically aims at eliminating the
root cause of all major problems faced by an individual and by a corporation, that is, the
violation of trust. The meaning of trust here signifies a very wide domain of activities,
from bookkeeping and managing bank transactions, to the cab driver, school teacher and
local government representative, with whom our faith resides at some or the other point.

The Blockchain is a technology aimed at decentralising an organisation or a sector, by

replacing this trust with a cryptographic proof, creating a transparent, distributed, peer to peer
network for performing transactions. It is a distributed database of all transactions, that are
then verified by nodes within the network, and after the relaying and verification of these
transactions, they are combined with other transactions to create a block and added to the
Blockchain. The trust-less feature of the Blockchain allows for all computing power on the
network to have a copy of these transactions in the form of a ledger, and the ability to
invalidate a transaction, if it seems to be an illegitimate one.

The most common example of a successful Blockchain application is the bitcoin. It is

based on the cryptographic hash function and serves as an alternative to fiat currency, by
creating a decentralised ledger with a peer to peer management of transactions. The proof-of-
work concept requires solving cryptographic math problems by using computing power, to
receive a bitcoin as a consequence of this work (application of computing power). The
miners who use this computing power to extract bitcoins, also maintain the network by
validating transactions within a block and getting a bitcoin as a result of this work.

The transportation industry is seeing technological advancement at a massive scale,

especially with the self-driven car becoming realer by the day. The use of AI, electronic
power and other new technology in the transportation industry creates a huge scope for the
Blockchain technology to be applied in this sector. A recent example goes to the shipping
industry management in the UK that has adapted a Blockchain technology to manage and
provide open information of shipping containers. Since 1st July 2016, Contracting
Governments to the International Maritime Organizations SOLAS treaty (International
Convention for the Safety of Life at Sea) have been required to implement new requirements
related to the Verified Gross Mass (VGM) of packed containers. The new regulation puts the

4
responsibility on the shipper to ensure that an accurate VGM is provided to the
terminal/carrier for every container loaded prior to it being allowed to be shipped on-board on
a vessel. Using the TrustMe solution, VGM data is stored on the global Blockchain,
providing a permanent records visible to port officials, shippers and cargo owners.1

The technical scope ranges from smart contracts for car purchases, better supply chain
management, autonomous cars being made practical, a de-centralised and optimised public
transport system connecting all citizens, and many more. The regulatory aspect on the other
hand is an interesting one, mainly because the optimisation of any mode of transport will
reduce the need for regulation altogether. For example, if there is a need to adhere to certain
traffic rules, the Blockchain and its users shall verify whether the rules are being adhered to,
by not allowing them to be broken at all.

However, as efficient and revolutionary as the Blockchain might be, it does not come without
its own sets of problems, the major one being implementation. A system, although redundant
and mundane, stands in place, and revamping it by removing the requirement of trust is a
mammoth task.

This research aims at developing a model that can allow the influx of this technology in the
transport industry, while also dwelling on the regulatory improvements that can be brought in
the Indian arena, allowing for a de-centralised and efficient transportation system.

1
Peter Buxbaum, 'First Shipping Use Of Public Blockchain Technology | Global Trade Magazine' (Global
Trade Magazine, 2017) <http://www.globaltrademag.com/global-trade-daily/first-shipping-use-public-
blockchain-technology> accessed 13 February 2017.

5
RESEARCH OBJECTIVES

The research is undertaken with the following objectives:

To understand the probable advancements in Blockchain technology and transportation

industry individually,

furthering it with possible usage of Blockchain in the said industry, and

to analyse and suggest changes possible to the existing legal and regulatory framework for
the purposes of this usage,

the primary and unalterable objective being efficiency and de-centralisation by maximising
accountability.

RESEARCH QUESTIONS

The following research questions will be dealt with in this study, aiming to envisage the
problem to its roots:

1. How can the Blockchain technology be applied in the transportation industry to

ensure efficiency and accountability for the new models?

2. What will be the legal problems for this application?

3. What can be the legal and regulatory changes in the system to ensure a smooth
application, along with extending the features of efficiency and accountability to the
governing laws?

6
SCOPE AND LIMITATIONS

The purpose of this research is to analyse the Blockchain technology and its possible usage in
the transportation industry in the future, and examine the legal and regulatory challenges to
the same, with a view to streamline the legal system for the transition to this technology. The
two major tenets to ensure that the legal model evolves with the technology are efficiency
and accountability, by minimising human based trust.

This study is restricted to primary and secondary sources of data and no empirical research is
being conducted. The research extends to technical evaluation of Blockchain and
transportation, but limits itself at the basic concepts required for this legal analysis.

7
RESEARCH METHODOLOGY

The research methodology adopted is doctrinal, in order to come up with a pragmatic legal
model.

The resources to this research are primary and secondary in nature. Books, articles, studies,
empirical research and other publications will be referred to for grasping the research
problem to its roots. The research will also use various market analysis articles and web
publications by eminent Blockchain and bitcoin enthusiasts for forming a speculative
opinion.

TENTATIVE CHARACTERISATION

This paper will essentially deal with three main topics. The first part will consist of a data
based speculative analysis of the application of Blockchain in the transportation industry,
covering public transport, privately owned vehicles, supply chains, autonomous cars and
regulatory applications.

The second part will consist of identifying the legal barriers to such an application, while at
the same time attempting to optimise the transportation laws via Blockchain. The research
will aim at a mutual benefit, wherein both the law, and the industry, are the beneficiaries.

The third part will deal with the changes that will be required in the legal and regulatory
system of India for the application of Blockchain.

8
LITERATURE SURVEY

The main sources of reference in this study include:

1. Satoshi Nakamoto, 'Bitcoin: A Peer-To-Peer Electronic Cash System' [2008]

metzdowd.com.

This resource is the white paper on bitcoins that was released on October 2008 on The
Cryptography mailing list at metzdowd.com. This paper explains the concept behind the
bitcoin and the Blockchain application of the same, and is the basis of the first successful
application of the Blockchain at such a massive scale.

2. Melanie Swan, Blockchain: Blueprint For A New Economy (1st edn, O'Reilly
2015).

This source is authored by the founder of the Institute for Blockchain Studies, and is a
comprehensive guide to the concepts, features, and applications of Blockchain. This source
has been used by the researcher for the purposes of technical research and context building.

3. Blockchain Technology and Decentralized Governance: Is the State Still

Necessary?

This paper gives a perspective into the characteristics and the functioning of a hypothetical
autonomous government, solving a variety of weaknesses, and is essential for
understanding a Blockchain model, and creating a model within the transport industry.

9
 2. The Blockchain Technology and its Application to the
Legal Field

A blockchain can be simply explained as a distributed database of records or public ledger of

all transactions or digital events that have been executed and shared among participating
parties. Each transaction in the public ledger is verified by consensus of a majority of the
participants in the system. Once the information is entered, it can never be erased. The
blockchain contains a certain and verifiable record of every single transaction ever made. To
use a basic analogy, it is easy to steal a cookie from a cookie jar, kept in a secluded place
than stealing the cookie from a cookie jar kept in a market place, being observed by
thousands of people.2

For understanding the Blockchain technology, we will take the case of the Bitcoin (although
the application should not be understood as limited to such coins, as these are just the tip of
the blockchain iceberg). Bitcoin is the most popular example of a Blockchain technology, and
has faced both appreciation and criticism since its inception. The cryptocurrency has faced
various problems in the form of government condemnation, and its use in various illegal
operations, due to its highly anonymous nature. On the other hand, Marc Andreessen, the
doyen of Silicon Valleys capitalists, listed the blockchain distributed consensus model as the
most important invention since the Internet itself. Johann Palychata from BNP Paribas wrote
in the Quintessence magazine that bitcoins blockchain, the software that allows the digital
currency to function should be considered as an invention like the steam or combustion
engine that has the potential to transform the world of finance and beyond.3

In his original Bitcoin white paper, Satoshi Nakamoto defined an electronic coin the
Bitcoin as a chain of digital signatures known as the blockchain.4 The blockchain enables
each coin owner to transfer an amount of currency directly to any other party connected to the
same network without the need for a financial institution to mediate the exchange. Bitcoin,
like other blockchains, uses cryptography to validate transactions, which is why digital
currencies are often referred to as cryptocurrencies. Bitcoin users gain access to their
balance through a password known as a private key. Transactions are validated by a network

2
'Blockchain Technology Beyond Bitcoin' (Berkeley University Sutardja Center for Entrepreneurship &
Technology 2015).
3
Delloite LLP, 'Blockchain Enigma Paradox Oppurtunity' (Deloitte LLP 2016).
4
Nakamoto S, 'Bitcoin: A Peer-To-Peer Electronic Cash System' [2008] metzdowd.com

10
of users called miners, who donate their computer power in exchange for the chance to gain
additional bitcoins using a shared database and distributed processing.5

To better understand the model and its efficiency, consider the illustration provided below:

Source: Deloitte University Press

5
Ibid

11
The essential feature of the Blockchain the researcher wishes to emphasize on is the
distributed consensus and a system eliminating the need for trust. The banking system,
securities market, education system, public bodies, governments, and international bodies,
everything around us works on the principle of trust. This trust has often been violated over
the years, as highlighted by various scams and disputes all over the world. Politicians are
caught in corruption scandals, banks need bailouts after giving bad loans, and the securities
market often faces fraud or malfeasance of sorts. This all emanates from violation of trust that
we as citizens of a social contract, have placed on these institutions.

The Blockchain technology has the capability to eliminate this need for a trust, and handover
everything to the stakeholders, or the citizens. Although suffering from regulatory issues and
technical challenges, the technology although in its nascent stage, has the capacity to change
the way of life for everyone on this planet.

2.1 Features of a Blockchain

Distribution of data across all computers of the users, in real time. This provides
access to a copy of the Blockchain to all the participants, thus negating the need for a
central institution such as a Bank.

Cryptography and digital signatures are used to provide security and validity of
transactions. Eg: the SHA-256 and RIPEMD-160 encryption used in bitcoins are one
of the strongest encryptions. It reduces risk of fraud and theft, allowing identification
of members and organisations.

Decentralisation and participation by the users is another outstanding feature of the

blockchain, and it gives the users the power to keep track of their transactions, and the
network as a whole. There is no need for a central verifying authority, in which we
have to lay our trust.

The Blockchain data, once stored cannot be erased or altered, except in theory with
more than 50% consensus of the users on the network. This makes it highly

12
 improbable to cause any tampering with information that has been stored on the
blocks.
Blockchains are time-stamped, providing an accurate source for verification.

Programmable nature of blockchains makes it easy to use in a number of applications

to create self-executing operations, on the basis of certain programmed pre-
conditions. Eg: If by 1st January 2017, the payment of Rs. 1 crore is not received by
the Bank of Baroda from Mr. XYZ, the property kept as a guarantee shall be
transferred to the Bank and all revenue records and mutation entries can be changed
according to the programme. As utopian as it may sound, this kind of application is
possible with the spread of Blockchain.

2.2 Smart contracts

The key idea of smart contracts is that the decentralized ledger can be used to register,
confirm, and transfer all manner of contracts and property. Satoshi Nakamoto started by
specifying escrow transactions, bonded contracts, third-party arbitration, and multiparty
signature transactions. All financial transactions could be reinvented on the blockchain,
including stock, private equity, crowdfunding instruments, bonds, mutual funds, annuities,
pensions, and all manner of derivatives (futures, options, swaps, and other derivatives).6

The applications range from financial transactions, public records, identification systems, to
private records such as loans and contracts, attestation by the public/users of the blockchain,
physical asset keys preventing unauthorized entries, and validation to intangible assets such
as patents, domain names, copyright etc. Public records, too, can be migrated to the
blockchain: land and property titles, vehicle registrations, business licenses, marriage
certificates, and death certificates. Digital identity can be confirmed with the blockchain
through securely encoded drivers licenses, identity cards, passports, and voter registrations.
Private records such as IOUs, loans, contracts, bets, signatures, wills, trusts, and escrows can
be stored. Attestation can be executed via the blockchain for proof of insurance, proof of
ownership, and notarized documents.

6
Swan M, Blockchain: Blueprint For A New Economy (2nd edn, O'Reilly 2015)

13
A contract in the traditional sense is an agreement between two or more parties to do or not
do something in exchange for something else. Each party must trust the other party to fulfill
its side of the obligation. Smart contracts feature the same kind of agreement to act or not act,
but they remove the need for one type of trust between parties. This is because a smart
contract is both defined by the code and executed by the code, automatically without
discretion. Contract compliance or breach is at the discretion of human agents in a way that it
is not with blockchain-based or any kind of code-based contracts.7 Further, smart contracts
impact not just contract law, but more broadly the notion of the social contract within society.
We need to determine and define what kinds of social contracts we would like with code
law, automatically and potentially unstoppably executing code. Parties agreeing to the
contract could choose a legal framework to be incorporated into the code. There could be
multiple known, vetted, legal frameworks, such that users pick a legal framework as a feature
of a smart contract. Thus, there could be a multiplicity of legal frameworks, just as there
could be a multiplicity of currencies.

Author Melanie Swan in her book, Blockchain: A Blueprint for the new economy, provides a
comprehensive idea of the 3 main essentials of smart contracts, i.e. autonomy, self-
sufficiency, and decentralization.

In fact, three elements of smart contracts that make them distinct are autonomy, self-
sufficiency, and decentralization. Autonomy means that after it is launched and running, a
contract and its initiating agent need not be in further contact. Second, smart contracts might
be self-sufficient in their ability to marshal resourcesthat is, raising funds by providing
services or issuing equity, and spending them on needed resources, such as processing power
or storage. Third, smart contracts are decentralized in that they do not subsist on a single
centralized server; they are distributed and self-executing across network nodes.8

Take the case of a vending machine which has been encoded to follow a set of instructions.
When money is inserted into the machine and the product is selected, the machine follows the
code and executes the agreement between the buyer and seller, and releases an item. There is
no need for placing any trust here, as code is law in this case. The machine cannot feel like
not complying, or only partly complying. A smart contract works in a similar way, and does

7
Ibid
8
Ibid

14
not work on trust or any other human emotions, removing the need for enforcement via
traditional means.

An example of a basic smart contract on the blockchain is an inheritance gift that becomes
available on either the grandchilds eighteenth birthday or the grandparents day of death. A
transaction can be created that sits on the blockchain and goes uninitiated until certain future
events are triggered, either a certain time or event. To set up the first conditionthe
grandchild receiving the inheritance at age 18the program sets the date on which to initiate
the transaction, which includes checking if the transaction has already been executed. To set
up the second condition, a program can be written that scans an online death registry
database, prespecified online newspaper obituaries, or some other kind of information
oracle to certify that the grandparent has died. When the smart contract confirms the death,
it can automatically send the funds.9 Similarly, the technology can be applied to
crowdfunding companies such as Kickstarter, and when the Fund-raisers required amounts
are reached, it gets verified by the participants, the payment is released, and the transaction is
added to a blockchain.

2.3 Application to the Legal Field

Blockchain although in its nascent stage, has already had a successful first phase of
application to the legal industry. The legal industry is easy to Blockchain on many aspects,
primarily due to the existence of agreements and instruments based on trust and ownership
that can be shifted to a decentralized consensus platform easily, providing a proof of
ownership and trustless cryptographic execution.

Copyright

In the copyright industry, companies like Ascribe, provide a blockchain based IP registry.
The company is building what it calls an ownership layer for digital property in the form of
a service to register and transfer copyright. Although existing copyright law offers creators
protection against infringement and the right to commercialize, there is no simple, global
interface to register, license, and transfer copyright. The Ascribe service aims to address this,

9
S Asharaf and S Adarsh, Decentralized Computing Using Blockchain Technologies And Smart Contracts.

15
registering a digital work with the service hashes and timestamping it onto the blockchain.
The software as a pre-requisite, detects any prior-art similar to the one applied for
registration. The service handles digital fine art, photos, logos, music, books, blog posts,
tweets, 3D CAD files, and more.

Marriages

The first Blockchain marriage was recorded in Disneyland Florida on October 2014. The
marriage was submitted to the Bitcoin blockchain, using the Blockchains property of being
an online public registry. The vows were transmitted in the text annotation field, embedded
in a Bitcoin transaction of 0.1 Bitcoins ($32.50), to appear permanently in the blockchain
ledger.110 Liberty.me CEO Jeffrey Tucker officiated at the ceremony and discussed the
further benefits of denationalized marriage in the context of marriage equality, how marriage
can be more equitably and permissively recorded and recognized in a blockchain than in
many states and nations at present. 10

The problem of under-age marriages can be solved with a Blockchain based public registry,
which would not allow a marriage to officiate if either of the partners are underage, or the
decentralized users can invalidate one if it gets added to the block.

Dispute Resolution

PrecedentCoin is a dispute resolution project on the Blockchain. Polycentric decentralized

legal system makes it possible for individual users to pick the legal system and features they
like, emphasizing the ongoing theme of blockchain-enabled personalization of governance
and legal systems. The Precedent legal/dispute-resolution community is incentivized to
develop with the community coin, PrecedentCoin or nomos.11 In the same way that a
decentralized community of miners maintains the Bitcoin blockchain by checking,
confirming, and recording new transactions, so too functionally do dispute precedent
miners in the Precedent community by entering new disputes, resolved disputes, and
precedents on the dispute resolution blockchain. Although it needs to be noted that the

10
Ploshay, E. A Word from Jeffrey Tucker: Bitcoin Is Not a Monetary System. Bitcoin Magazine, January 3,
2014.
11
Supra Note 5

16
Precedent software is concerned only with justiciability of the dispute in question and is
agnostic with the fairness or justness of the outcome. 12

Blockchain Government

Many new and different kinds of governance models and services might be possible using
blockchain technology. Blockchain governance takes advantage of the public record-keeping
features of blockchain technology: the blockchain as a universal, permanent, continuous,
consensus-driven, publicly auditable, redundant, record-keeping repository. The blockchain
could become both the mechanism for governing in the present, and the repository of all of a
societys documents, records, and history for use in the futurea societys universal record-
keeping system. Not all of the concepts and governance services proposed here necessarily
need blockchain technology to function, but there might be other benefits to implementing
them with blockchain technology, such as rendering them more trustworthy, and in any case,
part of a public record.

One implication of blockchain governance is that government could shift from being the
forced one-size-fits-all greater good model at present to one that can be tailored to the
needs of individuals. Imagine a world of governance services as individualized as Starbucks
coffee orders. An example of personalized governance services might be that one resident
pays for a higher-tier waste removal service that includes composting, whereas a neighbor
pays for a better school package. Personalization in government services, instead of the
current one-size-fits-all paradigm, could be orchestrated and delivered via the blockchain.13

The application of Blockchain extends as far as mans imagination. The researcher will now
move on to examining the corporate restructuring process especially reverse mergers, and
apply a Blockchain based model to streamline and improve the process.

12
Ibid
13
Ibid

17
 3. Jurisprudence of Applying Blockchain to Transportation
Law

The idea behind applying Blockchain Technology to transportation law is to ensure the
enforcement of these laws. At any given point of time, such objective laws (for most part)
have difficulty in their rigid enforcement due to the fallible nature of society in itself. The law
starts hitting entropy, from the moment it is enacted. The nature of the Motor Vehicle Laws is
such that they tend to impose fines and sanctions on violators, thus working on the principles
of deterrence theory. They also have certain reformative aspects such as road safety education
courses and counselling, but as it is evident from the vast amount of such violations being
committed every day, there is a huge void between the law and its application.

Revisiting the deterrence theory, the same provides for the fact that crime rose from the
conscious, rational considerations of the individual.

Accordingly, a person contemplating the commission of a crime would undertake a cost-

benefit analysis and would execute the criminal plan only if potential benefits sufficiently
outweighed expected costs. Under this thesis, the task of law enforcement personnel and
lawmakers was clear: the risks, or costs, for a potential criminal had to be so great that he
would have far more to lose than to gain from committing a crime. Today, criminal
deterrence theorists continue to rely on this model, called the economic model of the rational
actor, to explain and predict criminal behaviour.14

The basic requirements of deterrence theory are the principles of certainty, severity, and
credible communication, none of which are uniformly applied due to the human limitations
faced in the process. Although this theory has long stood the test of time, its necessary that
we realise the fact that transportations laws are violated due to the general equilibrium of
comfort we as a society have reached to committing violations of these laws. The only ways
of reaching a solution is to make the crime impossible to commit. The removal of trust
based systems is the key to solving the problems in a domain that runs completely on trust,
and is thus inefficient.

14
C.Beccaria, On Crimes And Punishments (Bobbs-Merrill Ed. 1963) ; J. Bentham, Principles Of Penal Law
(1843)

18
The Situational Crime Prevention theory can be applied in this context to solve this
problem of continuous violations. Lets take the example of the New York Port Authority
Bus Terminal, where robberies, prostitution and a plethora of other crimes were committed at
a massive scale. By 1994, reported crimes had fallen 56 percent after the Port Authority
took steps that included reconfiguring public spaces to eliminate secluded areas in the
terminal, and improving the flow of foot traffic by removing architectural obstacles.15 As
eminent criminologist Roald Clark puts it for the purposes of crimes, but the same can be
applied to violation of motor-vehicle laws,-

Most criminologists say that people commit crimes because they are at the very least
pathological and disturbed for reasons such as poverty or bad upbringings. I think there is
something to that, of course. But these people still have to make the rational choice to commit
a crime, and I am convinced they wont unless given the opportunity.16

Some key features of the Situational Prevention Theory (of crime) that are applicable to
transportation law are:

Target hardening
Control access to facilities
Reducing anonymity
Disruption of market

Situational crime prevention seeks to reduce the number of crime events by focusing on
limiting the opportunities for crime to occur. The approach typically uses an action-research
model and assumes that offenders make decisions that are broadly rational. It is generally
designed so that individual offenders do not have to be identified for the measures to be
successful.

As Barbotton Woods put it in his argument on nature of cause:

The search for causal connections between associated phenomena simply resolves itself into
a long process of explaining one association in terms of another. If a person becomes ill
with what are known as diabetic symptoms, we measure the sugar-content of his blood. If this
is higher than that found in people not exhibiting such symptoms, we say that the high sugar

15
Ronald V Clarke, 'Opportunity Makes The Thief. Really? And So What?' (2012) 1 Crime Science.
16
Ibid

19
content is the cause of the illness. . this in turn is said to be explained by a failure of the
pancreas to function normally. And so on with one law of association following another.

This seems to have been broadly accepted by criminologists, most of whom like Sutherland
were also sociologists, but it flouted a fundamental principle of psychology: behavior is the
product of the interaction between environment and organism. In criminological terms, this
can be expressed as crime is the result of an interaction between a motivated offender and a
criminal opportunity. The importance of taking this principle seriously b had been brought
home to me by the results of a study of absconding from training schools (Clarke and Martin
1971). This found that absconding was better explained by the environments and regimes of
the training school, which facilitated and provoked absconding, than by absconders
personalities and backgrounds. The study therefore showed not just that situational
opportunities and provocations to abscond were important explanatory factors, but they
appeared to be more important than dispositional factors.17

Thus, the very approach of transportation law has proved redundant over the years. The
offender is indeed a rational person, as the nature of these violations is such that can be easily
be weighed, and in reality is weighed as a rational choice of owning a license or paying a
fine. The pure economic sanctions put by these laws makes a driver weigh his actions against
the risk of sanctions.

This is precisely why Blockchain is required, as a complete cut-off from the ability to violate
any laws. The cryptographic nature of the technology will allow for peer to peer decentralised
adherence to laws, by making everything transparent and automated. The idea is to provide
citizens everything- from licenses to transit systems on the Blockchain. This technology is the
perfect system to put an end to the flagrant violation of traffic laws, and increase efficiency in
the transportation network of India. For a very long time, states have formed policies on the
basis of the deterrence theory, but the same has been rationalised by the violator. They make
an economic assessment of breaking the law vs the following it, and in the due to the shoddy
nature of the systems enforcement, end up taking the risk of breaking the law. If the system
needs to move towards ending these violations, it is about time we stop putting our faith in
the functioning of the human psyche, and make systems that make it impossible to commit
such violations at all.

17
M. A Zwanenburg, Prediction In Criminology (1st edn, Dekker 1977).

20
 4. The Problems in the Indian Transportation System

The Indian transportation law system is governed by the Central Law- Motor Vehicles Act
1988, and the respective State legislated Rules. The subjects covered under the Act are
licensing of drivers, licensing of private and public vehicles, permits for goods and carriages,
taxi permits, and various other licenses. The Indian transportation system is vast, filled with
myriad vehicular types, roadways, and other systems in place that require a huge
infrastructure to maintain. Naturally flowing from the size of the structure, it gets difficult to
not have loopholes in the system, and often we face issue ranging from accidents on the road,
violation of motor-vehicle laws to regulatory issues in shipping and logistics industry. The
Blockchain has the capability to revolutionarily change the system. The major reason for this
is the objective nature of transport laws, wherein there is no question of intentions and not
much requirement for evidence. The problems in this arena usually stem from regulatory
challenges and ensuring adherence to laws. This chapter will examine the possible problems
the Blockchain can address in the transportation field, specifically its laws.

4.1 Licensing of Vehicles and Drivers

Driving licences in India are issued by individual states. Each state has a Regional Transport
Authority or a Regional Transport Office (RTO) that issues licences. Usually the licence
holder is authorized to drive within the state which issued it. However driving licence can be
transferred for driving in another state or some licences are issued with an "All India Driving
Permit". Minimum age limit is 18 years for all vehicles; however licence for motor cycle
having engine capacity below 50cc (cubic capacity) have a minimum age limit of 16.18

License related violations in India account for upto 43% of the total violations.19This is
majorly due to fake license and driving without a license. Further goods and carriage
vehicles, transport and non-transport often operate without licenses for their services, leading
to further increase in offences.

18
'Driving License | India Drive Safe' (Indiadrivesafe.com, 2017) <http://www.indiadrivesafe.com/2-general-
responsibilities-of-the-drivers/driving-license.html> accessed 13 April 2017.
19
Michael Grimm and Carole Treibich, 'DETERMINANTS OF ROAD TRAFFIC CRASH FATALITIES
ACROSS INDIAN STATES' (2012) 22 Health Economics.

21
The Blockchain can connect to a drivers mobile phone or Aadhar Card/Driving License, to
permit him to drive a vehicle at all. A peer to peer verification will not allow the vehicle to
start without the proximity of a license, permitting the driving of such a vehicle. OneName
and BitID are examples of blockchain-based digital identity services. They confirm an
individuals identity to a website. Decentralized digital verification services take advantage of
the fact that all Bitcoin users have a personal wallet, and therefore a wallet address. This
could speed access to all aspects of websites, simultaneously improving user experience,
anonymity, and security. It can also facilitate ecommerce because customers using Bitcoin-
address login are already enabled for purchase.20

On the surface, OneName is an elegant Bitcoin-facilitating utility, but in the background, it is

a more sophisticated decentralized digital identity verification system that could be extensible
21
beyond its initial use case. The Digital Identification Verification services can be used in
the licenses of a user. Further, the cryptographic function of confirming transactions can also
use data from camera feeds, to confirm/invalidate an action of driving.

4.2 Road Traffic Accidents

Honble Mr. Justice V. R. Krishna Iyer in one of his judgements, wrote:

More people die of road accidents than by most diseases, so much so the Indian highways
are among the top killers of the country. Parking of heavy vehicles on the wrong side,
hurrying past traffic signals on the sly, neglecting to keep to the left of the road, driving
vehicles criss-cross, riding scooters without helmets and with whole families on pillions,
thoughtless cycling and pedestrian gay walking with lawless ease, suffocating jam-packing of
stage carriages and hell-driving of mini-buses, overloading of trucks with perilous projections
and, above all, policemen, if any, proving by helpless presence that law is dead in this milieu
charged with melee such is the daily, hourly scene of summons by Death to innocent
persons who take to the roads, believing in the bona fides of the traffic laws.22

Rash or negligent act is an ingredient in all the sections of the Indian Penal Code dealing with
accidents and their culpability. A rash act is primarily an overhasty act, opposed to a

20
Swan M, Blockchain: Blueprint For A New Economy (2nd edn, O'Reilly 2015)
21
Ibid
22
Ratan Singh v State of Punjab [1979] Supreme Court of India, 1 SCR (Supreme Court of India).

22
deliberate act, but it also includes an act which, though it may be said to be deliberate, is yet
done without due deliberation and caution. In rashness, the criminality lies in running the
risk of doing an act with recklessness or indifference to consequences. Negligence means
breach of duty caused by omission to do something which a reasonable man guided by those
considerations which ordinarily regulate conduct of human affairs would do or doing
something which a prudent or reasonable man would not do. Culpable negligence is acting
without consciousness that illegal or mischievous effects will follow, but in circumstances
which show that the actor has not exercised the caution incumbent on him, and that if he had,
he would have had the consciousness.23

The researcher at this point emphasises a jurisprudential limitation of transportations law, that
the motor vehicles act and other similar laws can only lay a procedural framework and
provide for sanctions in case of violations. The researcher on the other hand aims to identify
the legal problems and try to redress the same via Blockchain. Cars will comprise many
sensors and devices that will intercommunicate within the car and this communication can be
added to the Blockchain. Cars will communicate in vehicle-to-vehicle and vehicle-to-
infrastructure modes. Although this requires a communication network in place, it will have a
direct effect on reduction of accidents to a very large extent. Further, disallowing drivers
without licenses will reduce the negligent acts on the roads by a set of unexperienced drivers.

4.3 Blockchains for efficiency in Transport and Taxation

The economic cost of traffic jams is colossal. During the period 2013-2030, the cumulative
cost for the combined economies of France, Germany, the U.S., and the UK, will reach the
astronomical amount of $4.4 trillion, predicts INRIX. The report concluded that The overall
economic impact is greatest in the U.S., where the estimated cumulative cost of traffic
congestion by 2030 is $2.8 trillion the same amount Americans collectively paid in U.S.
taxes last year.24. Blockchains are crucial in ensuring efficiency and streamlined application
of the law. The automatic deduction of taxes and payments, being validated by the nodes and
being added to the blockchain ensures transparency and authenticity. At the same time the
basic pace of flowing traffic is affected by this automation.
23
Law Commission of India, 'Legal Reforms To Combat Road Accidents' (Law Commission of India 2008).
24
Julio Gil-Pulgar, 'Fight Traffic Jams With Blockchain Technology - Bitcoin News' (Bitcoin News, 2017)
<https://news.bitcoin.com/fight-traffic-jams-blockchain-technology/> accessed 10 April 2017.

23
Source: World Economic Forum

The benefits include:

Automatic charging from users Blockchain-Bitcoin Wallet or credit card.

Access and identity tokens and P2P transactions will enable the easy, secure sharing
of not only vehicles but infrastructures such as toll roads, recharging stations and
parking lots.
The blockchain-enabled identity of each user will carry proof of identity, age,
insurance coverage and ability to pay while protecting the anonymity of the
passengers and information about their travels, as well as the security of their payment
mechanisms. The smart contracts governing such transactions will be based on
standard templates that assure accurate, instant collection of taxes and regulatory
reporting, wherever the trip takes place.25

25
Blockchain future?, 'Blockchain And Self-Driven Cars: Are We Ready To Welcome The Future?' (The Indian
Economist, 2017) <https://theindianeconomist.com/blockchain-self-driven-cars-ready-welcome-future/>
accessed 7 April 2017.

24
4.4 Insurance

Sections 140 to 144 of the MVA provides for interim compensation on a No Fault Basis.

The compensation under Section 140 is made payable if prima facie evidence of following is
available;

(1) Accident by the offending vehicle;

(2) Offending vehicle being insured;

(3) Death or grievous injuries have been caused.26

Under these provisions negligence does not require proving, and the socio-welfare aspect of
this legislation provides for compensation irrespective of negligence

Chapter 11 provides for compulsory third party insurance, which is required to be taken by
every vehicle owner. It has been specified in Section 146(1) that no person shall use or
allow using a motor vehicle in public place unless there is in force a policy of insurance
complying with the requirement of this chapter. Section 147 provides for the requirement of
policy and limit of liability. Every vehicle owner is required to take a policy covering against
any liability which may be incurred by him in respect of death or bodily injury including
owner of goods or his authorized representative carried in the vehicle or damage to the
property of third party and also death or bodily injury to any passenger of a public service
vehicle. According to this section the policy not require covering the liability of death or
injuries arising to the employees in the course of employment except to the extent of liability
under Workmen Compensation Act. Under Section 149 the insurer have been statutorily
liable to satisfy the judgment and award against the person insured in respect of third party
risk.27

The provisions of insurance in the MVA contain the following essentials:

A no fault basis payment of compensation;

Compulsory requirement of third party insurance;
Satisfaction of judgement/award against person insured

26
Motor Vehicles Act, 1988, Section 140
27
'An Analysis Of Law Relating To Accident Claims In India' (Legalserviceindia.com, 2017)
<http://www.legalserviceindia.com/articles/km.htm> accessed 8 April 2017.

25
Blockchain has the potential to eliminate the problems in the insurance system. The main
issues arising are the long procedures for filing for a claim, getting unexpected deductions,
and often realising that the loss incurred is not covered under the policy. Many a times
insurance companies indulge in mass-rejection of cases, as the cost of expected litigation is
lower than that of paying the claims. Blockchain can remove this problem altogether by
creating a decentralised database consisting of verified records of customers, their policies,
and their claims. Access and identity tokens and P2P transactions will enable the easy, secure
sharing of not only vehicles but infrastructures such as toll roads, recharging stations and
parking lots. In case of a no-fault liability payout, the damages can be automatically be
deducted from the account of the user and be paid as this insurance, in case of an accident
being detected by the car.

Another use case for Blockchain is parametric insurance. Instead of indemnifying the pure
loss, insurers would agree to pay a certain amount upon the occurrence of triggers within
preset smart contracts. For example, if an earthquake were to occur in a given region above a
magnitude of 5, the smart contract would automatically pay 20 percent of the insurance claim
to policy holders. Contracts require mutually trusted third-party administrators (TPAs) to
adjust. As parametric insurance becomes popular, its process will likely improve to play a
key role in the widespread adoption of smart contracts.28

Claims

The Supreme Court in various case laws over the years has debated upon the appropriate
compensation to be awarded and the proper multiplier to be used for deciding the appropriate
amount.

In Fazilka Dabwali Transport Co. Pvt. Ltd. V Madan Lal29, it was held that the driver was
negligent and so an award of Rs.7000 was ordered as damages; as there was loss of the
plaintiff where his left foot was amputated because of the injury from the accident. Appeal
was presented to the High Court and it further increased the amount of compensation to
Rs.12000 as there was an injury to the other leg which gave limp to child. The Supreme

28
Kevin Wang and Ali Safavi, 'Blockchain Is Empowering The Future Of Insurance' (TechCrunch, 2017)
<https://techcrunch.com/2016/10/29/blockchain-is-empowering-the-future-of-insurance/> accessed 8 April
2017.
29
Fazilka Dabwali Transport Co Pvt Ltd V Madan Lal [1977] Supreme Court of India, 2 SCC (Supreme Court
of India).

26
Court agreed with the judgment of the High court- as a transport company was running a bus
without insurance and were negligent.30

In United India Insurance Company Ltd V Lehru & Ors31, it was held that insurance
companies are liable to pay the compensation even if the driving license of the driver is fake;
the insurance company can recover from the insured if there is any breach in the terms of the
policy.32

It is evident from the various case laws that there is never a precise code for arriving at a just
compensation that is agreeable by all. Courts often face the challenge of assessing the
damages that should be paid to a victim in case of an accident, and have to consider a variety
of various factors to reach the appropriate amount. Blockchains can appropriately calculate
factors such as estimated income earned and estimated loss of livelihood, to come up with an
equilibrium point of compensations. As most disputes in the Claims Tribunal and other courts
are with respect to amount of damages, this is on huge burden that can be replaced by
technology.

4.5 The Ownership of Cars and Peer to Peer Ride Sharing

The concept of owning a car is a redundant one, and the same is being validated every day
with various studies. The cost of maintenance, insurance and the soaring initial costs are a
huge advantage to owning cars today. Car loans amount to as much as 1.6 trillion dollars in
debt in the USA.

Consider this one study conducted by AAA:

Recent data on the cost of auto ownership and use from AAA provide insight into the
financial implications of switching from auto ownership to car-sharing (AAA, 2013).
According to AAA, the average fixed annual costs of owning a mid-sized sedan that is driven
10,000 miles a year, for example, come out to $5,695, including $3,244 for depreciation,
$831 for finance charges, $1,020 for auto insurance, and $600 for registration and additional
fees. Vehicle operating costs add another 21 cents per mile, including about 15 cents for gas,

30
Ibid
31
United India Insurance Company Ltd V Lehru & Ors [2004] Karnataka High Court, I ACC (Karnataka High
Court).
32
Ibid

27
just under 5 cents for maintenance, and just over 1 cent for tires (note that the AAA data do
not include the costs associated with tolls and parking, as these vary considerably from one
region to the next). Based on these numbers, a household could save about $6,000 in fixed
annual costs by joining a car-sharing program rather than owning a vehicle.33

With new models such as that of Uber, Ola and other cab services, the concept of ownership
will dwindle away, and leasing cars will be the most optimum way of using a vehicle. Peer to
Peer ride sharing is another way in which the car ownership problem can be solved. The
concept behind P2P ride sharing is essentially that of carpooling with a monetary aspect to it.
The cab network company Uber is already in talks with the Indian Government to bring
amendments in the Motor Vehicles Act. A big push from a policy perspective is how we
make private ride-sharing legal. Commercial licence plate cars are a very small percentage of
the overall number of cars on the roads. What we need to do to solve some of the traffic,
pollution and congestion issues that are so endemic in Indian cities is how do you get more
people less cars and more people in private car ride sharing and reduce the number of cars on
the roads. That is the next push for us and we are fortunate to have a product that allows us to
help with that, Jain said in an interview.34

The problem lies with the laws of commercial licenses required to use such vehicles.

66. Necessity for permits-

(1) No owner of a motor vehicle shall use or permit the use of the vehicle as a transport
vehicle in any public place whether or not such vehicle is actually carrying any passengers
or goods save in accordance with the conditions of a permit granted or countersigned by a
Regional or State Transport Authority or any prescribed authority authorising him the use of
the vehicle in that place in the manner in which the vehicle is being used.

76. Application for private service vehicle permit-

33
RAND CORPORATION, 'Autonomous Vehicle Technology' (RAND CORPORATION 2015)
<http://www.rand.org/content/dam/rand/pubs/research_reports/RR400/RR443-2/RAND_RR443-2.pdf>
accessed 8 April 2017.
34
Sayan Chakraborty, 'Uber Lobbying With Govt To Allow Ride Sharing Using Private Cars In India'
(http://www.livemint.com/, 2017) <http://www.livemint.com/Companies/ZWMN3J1xSTNAlTkOKooSkJ/Uber-
lobbying-with-govt-to-allow-ride-sharing-using-private.html> accessed 9 April 2017.

28
(1) A Regional Transport Authority may, on an application made to it, grant a private
service vehicle permit in accordance with the application or with such modification as it
deems fit or refuse to grant such permit.

Provided that no such permit shall be granted in respect of any area or route to specified in
the application.

(2) An application for a permit to use a motor vehicle as a private service vehicle shall
contain the following particulars, namely-

(a) type and seating capacity of the vehicle;

(b) the area or the route or routes to which the application relates;

(c) the manner in which it is claimed that the purpose of carrying persons otherwise than for
the hire or reward or in connection with the trade or business carried on by the applicant
will be served by the vehicle; and

(d) any other particulars which may be prescribed.

(3) The Regional Transport Authority if it decides to grant the permit may subject to any
rules that may be made under this Act, attach to the permit any one or more of the following
conditions, namely-

(i) that the vehicle be used only in a specified area or on a specified route or routes;

(ii) the maximum number of persons and the maximum weight of luggage that may be
carried;

(iii) that the Regional Transport Authority may, after giving notice of not less than one
month-

(a) vary the conditions of the permit;

(b) attach to the permit further conditions;

(iv) that the conditions of permit shall not be departed from, save with the approval of the
Regional Transport Authority;

(v) that specified standards of comforts and cleanliness shall be maintained in the vehicle;

29
(vi) that the holder of the permit shall furnish to the Regional Transport Authority such
periodical returns, statistics and other information as the State Government may, from time
to time, specify and

(vii) such other conditions as may be prescribed35

Thus the major issues that are faced by the P2P ride sharing companies are the requirement of
a commercial license for the purposes of entering into a hire-purchase/ leasing agreement.
The legal limitation of a private vehicle being given out on rent is the requirement of an
Agency Contract and a Principal-Agent relationship. The Agent-Principal relationship entails
a very high liability due to the legally binding duties of both the parties. For example: the
principal can be liable for acts of the person who has rented his car under such a contract.

Paolo Tasca, a Director at the UCL Centre for Blockchain Technologies, and Mihaela Ulieru,
President of The Impact Institute have the following opinion on the future of Blockchain
technology-

Among the options presented in the paper, the possibility to route user-to-user services
through blockchain-based platforms on the top of open and decentralized networks seems
especially relevant. Open decentralized networks, of which the early phases of the internet
itself provide good examples, enable the creation of all sort of services at the edges. The
blockchain offers one service: securely time-stamped scripted transactions, note the
economists. Everything else is built on the edge-devices as an app. It allows any app to be
developed independently, without permission, on the edge of the network. A developer can
create a new app using the transactional service as a platform and deploy it on any
device.36

Eventually, centralized sharing economy platforms controlled by single owners could be

replaced by decentralized cooperatives that issue blockchain-based shares or crypto-equity
tokens to give ownership or membership rights to workers and stakeholders. In other words,
Uber without Uber, run by the people with their own private vehicles, which in trun reduce
the pollution levels of a state. Where all revenue after overhead costs goes to the members of
the co-op, who also control the platform and make decisions.

35
Motor Vehicles Act, 1988
36
'Move Over Uber: Blockchain Technology Can Enable Real, Sustainable Sharing Economy' (Bitcoin
Magazine, 2017) <https://bitcoinmagazine.com/articles/move-over-uber-blockchain-technology-can-enable-
real-sustainable-sharing-economy-1480629178/> accessed 12 April 2017.

30
In USA, Colorado was the first to regulate P2P rides via permits. Both states legalized P2P
ridesharing with a few basic requirements including:

Services must obtain permits issued by the Public Utilities Commission,

Drivers must undergo commercial background checks,

Vehicles must be inspected by a certified mechanic, and

Companies must carry a minimum $1 million in liability insurance.37

The Indian government needs to consider a viable model for allowing P2P ride sharing
market to come out of the grey area it is in right now. This ride sharing model is not only
efficient, but also helps in reducing environmental problems, traffic problems and be a
worthy substitute to the odd-even rule in the state of Delhi. Cheaper, decentralised and peer
to peer connected rides, can be enabled into a radical model, thanks to the Blockchain.

37
Wisconsin Briefs, 'Peer To Peer Ride Sharing' (Wisconsin Legislative Reference Bureau 2014).

31
4.6 Shipping Industry

The application of Blockchain in transportation industry has been most successfully carried
out in the shipping industry till date. This domain has been the early adopter of these laws
and are benefitting immensely from the same. The sheer scale of the process in the industry is
colossal. This further causes losses due to the inefficiencies present in each step.

The International Convention for the Safety of Life at Sea (SOLAS), 1974 requires the input
of a Verified Gross Mass (VGM). Gross mass means the combined mass of a container's
tare mass and the masses of all packages and cargo items, including pallets, dunnage and
other packing material and securing materials packed into the container (see also "Verified
gross mass")38

The provisions that require the verification of this Gross Mass are as follows:

Regulation 2- Cargo Information

"4 In the case of cargo carried in a container*, except for containers carried on a chassis or
a trailer when such containers are driven on or off a ro-ro ship engaged in short
international voyages as defined in regulation III/3, the gross mass according to paragraph
2.1 of this regulation shall be verified by the shipper, either by: .

1. Weighing the packed container using calibrated and certified equipment; or

2. Weighing all packages and cargo items, including the mass of pallets, dunnage and other
securing material to be packed in the container and adding the tare mass of the container to
the sum of the single masses, using a certified method approved by the competent authority of
the State in which packing of the container was completed.

If this VGM is not calculated properly, or is misdeclared, the damages can be enormous.
These include restowage of containers leading to delays, collapsed container stacks, cargo
liability, damage to ships, chassis damage, lost revenues and earnings, impaired vessel
efficiency and loss of revenue to customs authorities, to name a few.

Marine Transport International UK, was the first shipping company to embrace Blockchain
to comply with the VGM regulation. MTI is using the TrustMe public blockchain

38
International Convention for the Safety of Life at Sea (SOLAS), 1974, Definitions

32
technology and the services from predictive analytics expert Black Swan Data Limited. The
technology will be used within its SolasVGM product offering to enable the secure and open
dissemination of shipping container information. Using the TrustMe solution, VGM data is
stored on the global blockchain, providing permanent records visible to port officials,
shippers and cargo owners. This replaces cumbersome logs, spreadsheets, data intermediaries
and private databases. Previously, data has been deeply ingrained in old legacy systems. This
causes delays in the development of new capabilities, hindering the ability for carriers to
make rapid changes to services.39

The blockchain distributed ledger allows for transparency required in the VGM records, and
makes it available to all the stakeholders in the shipping system. This reduces the need for
reproduction of documents and tallying the same. Cryptographic functions allow protection
of this information, and decentralisation removes the need for a primary authority to oversee
all the operations. Thus, removing the trust aspect in pursuance of the SOLAS Convention
has made the shipping industry realise the scalability of Blockchain. What started as a regular
compliance to regulations, can very well change the face of the shipping industry and make it
more efficient by the day.

39
International Convention for the Safety of Life at Sea (SOLAS), 1974, Regulation 2

33
 5. Autonomous Vehicles: The Application of Blockchain to
Reduce Legal Hurdles and the Current Law

An autonomous vehicle is a motor vehicle equipped with autonomous technology that can
drive the vehicle without the active physical control or monitoring of a human for any
duration of time.40

The National Highway Traffic Safety Administration (NHTSA) has given 5 levels criteria to
autonomy:

Level 0: The human driver is in complete control of all functions of the car.

Level 1: One function is automated.

Level 2: More than one function is automated at the same time (e.g., steering and
acceleration), but the driver must remain constantly attentive.

Level 3: The driving functions are sufficiently automated that the driver can safely engage
in other activities.

Level 4: The car can drive itself without a human driver.41

Autonomous vehicles have often been the subject of legal debate. After all, law is not too
open to the idea of change via technology, especially in this scenario where the legal
implications are wide, ranging from tort liability to death of innocent bystanders. Googles
vehicles, operating fully autonomously, have driven more than 500,000 miles without a crash
attributable to the automation.42 Autonomous vehicles use sophisticated sensors combined
with algorithms to process a bulk of data in real time. In general, robotic systems, including
AVs, use a sense-plan-act design. In order to sense the environment, AVs use a
combination of sensors, including lidar (light detection and ranging), radar, cameras,
ultrasonic, and infrared. A suite of sensors in combination can complement one another and
make up for any weaknesses in any one kind of sensor.43

40
Sven A. Beiker and Ryan Calo, 'Legal Aspects Of Autonomous Driving' SSRN Electronic Journal.
41
RAND CORPORATION, 'Autonomous Vehicle Technology' (RAND CORPORATION 2015)
<http://www.rand.org/content/dam/rand/pubs/research_reports/RR400/RR443-2/RAND_RR443-2.pdf>
accessed 8 April 2017.
42
Ibid
43
Ibid

34
Traffic accidents are the leading cause of death among young adults 1529 years old, and the
second-highest cause of death for children 514 years old (World Health Organization,
2013).44 Other social costs include loss of livelihood, property loss, medical expenses,
workplace costs, legal costs, and loss of quality of life. Autonomous vehicles can completely
change that. But this domain is not free from its own set of legal problems. Various questions
arise for consideration such as-

Who will be held liable for the death of a passenger by an autonomous vehicle?

Who will the AV save in case of 2 pedestrian and 1 passenger or vice-versa?

Who will be held liable in case of some manufacturing defect and at what level?

What liability principle should be applied in case of negligence?

Another common problem faced by the proponents of AVs are the shift in responsibility
from the driver to the manufacturer may make no-fault automobile-insurance regimes more
attractive. While the victims in these circumstances could presumably sue the vehicle
manufacturer, product-liability lawsuits are more expensive to bring and typically take more
time to resolve than run-of-the-mill automobile-crash litigation. No-fault systems are
designed to provide compensation to victims relatively quickly, and they do not depend upon
the identification of an at-fault party45

It is a common prediction that once AV enter the market, accidents will reduce due to the
sophistication of the system. Autonomous vehicles will also improve the flow of traffic,
saving time and infrastructure spending. Interstate transport will become much cheaper and
safer.46 And the introduction of autonomous taxis may decrease the total amount of cars on
the road, benefitting both our cities and the environment. 47

44
'Driverless Cars: Optional By 2024, Mandatory By 2044' (IEEE Spectrum: Technology, Engineering, and
Science News, 2017) <http://spectrum.ieee.org/transportation/advanced-cars/driverless-cars-optional-by-2024-
mandatory-by-2044> accessed 9 April 2017.
45
Supra Note 41
46
'Self Driving: The New Auto Industry Paradigm' (Morgan Stanley LLC 2017)
<https://orfe.princeton.edu/~alaink/SmartDrivingCars/PDFs/Nov2013MORGAN-STANLEY-BLUE-PAPER-
AUTONOMOUS-CARS%EF%BC%9A-SELF-DRIVING-THE-NEW-AUTO-INDUSTRY-PARADIGM.pdf>
accessed 10 April 2017.
47
Ibid

35
But the question of what punishments to be applied in case of damage still stands. Is the
current legal system (such as tort law and product liability) capable of incorporating AV, or
will new laws have to be drafted. Calo succinctly identifies the problem with applying
products liability to robotics generally: products as understood by contemporary product
liability law are by definition tangibleintangible products do not generally give rise to
product liability actions. Calo argues that the software code conveyed to a consumer
necessarily cannot be defective for purposes of product liability because by definition, it is
not even a product.48

The solution to these problems lies to a very large extent in the Blockchain. The use of this
technology in supply chains will help identify the root of the problem in case of an accident.
Further, due to V2V connectivity, if the same is added to the Blockchain, there can be a peer
to peer validation of charted routes, thus creating a real time communication between cars
and invalidation of any chartered routes by peers. Further, Products liability law is
sufficiently advanced to assign liability for damages resulting from the failure of an
autonomous vehicle, whether by manufacturer negligence, design defect, manufacturing
defect, failure to warn, or breach of express or implied warranty. The law has been
expounded a large period of judicial interpretation, and is strong enough to incorporate AV in
its domain.

The researcher recommends the use of a strict-liability methodology, combined with the
Blockchain tech, to ensure the effective arrival of autonomous vehicles into the market.

Proponents of the loss-spreading rationale argue that strict liability can and should serve this
compensation function and that manufacturers could easily pass on the additional costs of tort
judgments to consumers by raising the prices of their products.49 Manufacturers would also
have the appropriate incentives to reduce the danger of their products. While this expansive
version of strict liability has not been adopted, the rationale of broad liability to spread costs
underlies strict tort liability as it actually functions today.50

48
Jessica Brodsky, 'Autonomous Vehicle Regulation: How An Uncertain Legal Landscape May Hit The Brakes
On Self-Driving Cars' (2016) 31 Berkeley Technology Law Journal.
49
Ibid
50
Florian Baumann, Tim Friehe and Kristoffel R. Grechenig, 'Switching Consumers And Product Liability: On
The Optimality Of Incomplete Strict Liability' SSRN Electronic Journal.

36
The definition of USA law for defective products can be incorporated in Indian laws, either
via the Motor Vehicles Act or Consumer Protection Act, to protect passengers and bystanders
from defects in the functions of the vehicle. The definition states:

8 2 of ALI (1998)

A product is defective when, at the time of sale or distribution, it contains a manufacturing

defect, is defective in design, or is defective because of inadequate instructions or warnings.
A product: (1) contains a manufacturing defect when the product departs from its intended
design even though all possible care was exercised in the preparation and marketing of the
product; (2) is defective in design when the foreseeable risks of harm posed by the product
could have been reduced or avoided by the adoption of a reasonable alternative design by the
seller or other distributor, or a predecessor in the commercial chain of distribution, and the
omission of the alternative design renders the product not reasonably safe; (3) is defective
because of inadequate instructions or warnings when the foreseeable risks of harm posed by
the product could have been reduced or avoided by the provision of reasonable instructions
or warnings by the seller or other distributor, or a predecessor in the commercial chain of
distribution, and the omission of the instructions or warnings renders the product not
reasonably safe.51

The concept of including a defective design is wide enough to incorporate the source code of
the AV to be included in case a liability arises. In case there is a structural incompatibility
with the AV, the company can be held liable for their negligence. This includes the ability to
make calculations and take a rational decision in case of such Sophies Choice questions.
Although the transition to AI and AV is going to be the most difficult one till date, and just
like the internet, there will be certain crimes, liabilities and claims that will face the judicial
forum for enunciation on the law, the current principles of liability are wide enough to see us
through this transition. There will remain questions of uncertainty of action, till we
understand and optimise the concept of artificial intelligence, but that does not in any way
stand as a hindrance to the benefits Autonomous Vehicles can provide to the society.

There is a need for a Special Committee for Transition in Technology to be established in

the light of recent advances. The current legal theories always try to overshadow the benefits
of the technology by speculation on the potential risks. They fail to understand the interplay

51
Restatement of the Law, Third, Torts: Products Liability Copyright (c) 1998, The American Law Institute

37
between law and technology towards a better society, and lack general foresight beyond the
pillars of the legal system. Thus, the researcher recommends the setting up of such an
aforementioned committee to oversee the transition, and set up a legal framework for the
same.

38
 6. Technology and Law: The Need to Join Hands

The study of law with technology is often compartmentalised to the needs of the subject at
hand, such as media law, communication law, Intellectual Property etc. This gives technology
a facilitating role and often governments approach them with caution in the form of
regulation. Various theories of law consider technology either as something that requires
compliance mechanisms or as technology being the limitation to freedom and liberty of man
(Marxist view). The nature of technology is such that it often faces conflicts with the law.
The development of technology does not flow in a linear or structured manner, but is rather
impulsive and the law cannot always keep up with it; on the other hand invasive laws might
cause hindrances in the development of the technology by passing stringent laws
prematurely. Law making is a very sluggish process whereas technology grows erratically.

When technological change undermines traditional interests that the law seeks to protect,
legal analysis would become more contextual and forward-looking, and less deferential to
traditional doctrine and precedents. The synthetic theory of law and technology simply
requires a more explicit consideration of the interplay between law and technology and the
ways technology can have a substantive impact on individuals and their legal interests apart
from the technologys initial intended use. In other words, legal analysis informed by
substantive theories can promote more just outcomes by taking a more critical examination of
the ways that technological developments may be subverting legal interests the law has
traditionally sought to protect.52

The synthetic theory of law suggest the following:

Determine whether the technological change is undermining traditional interests by:

A. Identifying the traditional interest protected by law (e.g., business certainty, protection of
innovators rights) by resorting to traditional doctrinal analysis applicable to the affected area
of technology law; and

B. Assessing whether the interest is being unduly disrupted by technology change.

If the first part of the analysis determines that technology change is disrupting traditional
interests, the next step is to use more contextual analysis that:

52
Arthur Cockfield Jason Pridmore, 'A Synthetic Theory Of Law And Technology' (2007) 8 Minnesota Journal
of Law, Science & Technology.

39
A. Scrutinizes the broader context of technology change and its potentially unanticipated
adverse outcomes for the traditional interest as well as for other protected interests the law
seeks to protect; and

B. Seeks to find legal solutions to protect the traditional interest that are less deferential to
precedent and traditional doctrine.53

This theory is the equilibrium that should be followed by regulators to enhance the law
making process in case of technology and to find legal solutions to protect conflicts of
interest and disruptions if any. For example: if the Btc currency is causing increase in illegal
transactions such as drug trade, the law enforcement should try and track the drug dealers and
bring reform to their criminal laws, in contrast to criminalising the usage of Btc. What
regulators and legislators fail to understand is that the technology is merely a means to an
end, and can be easily replaced. In case of AV if there is an increase in chances of accidents
or some other form of damage to pedestrians/users, traffic laws should be adopted or
guidelines should be released to control testing mechanisms, and optimise the production of
such cars.

A major rule that should be applied while accepting the usage of any technology should be
the protection of fundamental rights of the citizens, (because some elements of the Basic
Structure Doctrine may also prove to be a hindrance to this acceptance) and nothing
extending beyond that. Blockchains have the capability to destroy current systems, and
revamp them into a new decentralised, peer to peer controlled network of governance. While
accepting this transition, the only rights that should be protected are the Fundamental rights.

53
Ibid

40
 7. Ethical Issues and Limitations of Blockchain

No technology has ever entered the market without facing oppression from the society. This
scenario stands true for Blockchains also. Currently, the most successful application of
Blockchains is Bitcoin (Btc), however the response from the systems and public has not been
appreciative of it. This is largely due to the anonymous and private nature of Btc that protects
the identities of the users, and the same has been used for a lot of illegal transactions such as
drug trade, assassination hiring, selling of counterfeit goods, bank frauds, credit card frauds
etc. Public perception to this piece of technology is shaped by the daily news bulletin of some
teenager getting caught ordering drugs online and paying for them via Btc. This association
that has been built with the technology is a major hindrance to its acceptance. Bitcoin and
the blockchain are themselves neutral, as any technology, and are dual use; that is, they can
be used for good or evil. Although there are possibilities for malicious use of the blockchain,
the potential benefits greatly outweigh the potential downsides. Over time, public perception
can change as more individuals themselves have e-wallets and begin to use Bitcoin. Still, it
must be acknowledged that Bitcoin as a pseudonymous enabler can be used to facilitate
illegal and malicious activities, and this invites in-kind Red Queen responses (context-
specific evolutionary arms races) appropriate to the blockchain. Computer virus detection
software arose in response to computer viruses; and so far some features of the same
constitutive technologies of Bitcoin (like Tor, a free and open software network) have been
deployed back into detecting malicious players.54

The collapse of Mt-Gox, one of the biggest Btc Exchange in 2014 came as another push to
the Blockchain technology. An explanation is still needed for the confusing irony that
somehow in the blockchain, the worlds most public transparent ledger, coins can disappear
and still remain lost months later. The bug allowed malicious users to double-spend,
transferring Bitcoins into their accounts while making MtGox think the transfer had failed
and thus repeat the transactions, in effect transferring the value twice. Analysts remain unsure
if MtGox was an externally perpetrated hack or an internal embezzlement.55

54
Swan M, Blockchain: Blueprint For A New Economy (1st edn, O'Reilly 2015)
55
Ibid

41
Other such problems include- Moolah CEO disappeared with $1.4 million in Bitcoin,56 $2
million of Vericoin was stolen,57 and $620,000 was stolen in a Dogecoin mining attack.58

Government Regulations is another major problem faced by Btc proponents. The RBI on
February 1 released the following notice on Bitcoins-

The Reserve Bank of India advises that it has not given any licence / authorisation to any
entity / company to operate such schemes or deal with Bitcoin or any virtual currency. As
such, any user, holder, investor, trader, etc. dealing with Virtual Currencies will be doing so
at their own risk.59

This kind of uncertainty with the Btc market creates issues for possible application of
Blockchains. The governments around the world, and the biggest stakeholders, will always
fear the decentralised nature of this technology, as this directly means ousting them out of
power. They can create this negative association towards this technology by releasing such
notices, and even possibly criminalising Btc, thus creating a huge roadblock for application
of the technology.

Another issue surrounding Blockchains is the possible collapse of a network by causing

majority of users to be biased. The hard forking of a network involves bringing substantial
changes to the system, thus changing the essentials. This kind of change can only be brought
by a consensus of more than 50 percent of the users involved in the network. This kind of
change can allow two things- continuous brute force tests and development of software to
crack such systems, and the possibility of parallel governments running comprising of users
having stake in the Blockchain. Although the first change is inevitable and criminal law
enforcement will have to evolve along with the evolution of crime, the second issue is of
concern. The decentralised nature of any system will be futile if at the end of the day interest
groups are in the process of lobbying for controlling this system. The whole point is to create
a system without a central authority, but the same can be bypassed, especially with the initial

56
Collier, K. Moolah CEO Accused of Disappearing with $1.4 Million in Bitcoin. Daily Dot,
http://www.dailydot.com/politics/moolah-dogecoin-alexgreen- ryan-kennedy-ryan-gentle-millions-missing-
mintpal/.<accessed 10th April 2017>
57
Pick, L. Nearly $2 Million Worth of Vericoin Stolen from MintPal, Hard Fork Implemented. Digital
Currency Magnates, July 15, 2014. http://dcmagnates.com/ nearly-2-million-worth-of-vericoin-stolen-from-
mintpal-hard-fork-considered/./.<accessed 10th April 2017>
58
Greenberg, A. Hacker Hijacks Storage Devices, Mines $620,000 in Dogecoin.
Wired, June 17, 2014. http://www.wired.com/2014/06/hacker-hijacks-storage-devicesmines-
620000-in-dogecoin/<accessed 10th April 2017>
59
Reserve Bank of India Press Release, RBI Cautions users of Virtual Currencies, (Reserve Bank of India
February 1, 2017)

42
onset of this technology. If even in field this kind of consolidation of power occurs, the
Blockchain model will be redundant as it will allow other groups to follow suit, and to come
back to the traditional game of politics. These problems will have to be simultaneously need
to be addressed by legislators, to prevent the shelfing of this technology before its proper
infusion into the system. Thus, in such scenarios, the Blockchain needs the law as much as
the law needs Blockchain.

43
 8. Conclusion

It is necessary to consider the theory of Situational Prevention of Crime, and to reconcile with
technology, for the law to transcend a level of enforcement. We live far from the utopian
society free from crimes, violations, and far from efficiency and transparency. Blockchain,
just like its preceding revolution, the Internet, offers us an opportunity to reach there. The
progress has started, although small, it will reach a stage that places us in a decentralised
world, the reason being very simple- evolution would choose decentralisation for the growth
of a civilisation. When issues like transportation, shipping, and carriages are solved, only
then can this growth be achieved. The only question that remains to be answered is what side
will the Indian government take?

The transportation industry has an immense scope for growth, and as demonstrated a huge
chunk of it can be attained via Block-chaining its mechanisms. The researcher strongly
suggests that the committee set up by the Department of Economic Affairs of the Ministry of
Finance, considers a holistic growth approach model highlighting the possible benefits of
Blockchain and facilitating its use by first- declaring and reassuring the users that its legal,
and second- providing incentives to Blockchain based enterprises, such as tax benefits and
exemptions to promote research and development.

The committee should also look into the criminal aspect of Blockchains by isolating it from
the use of the technology, and tracing it to the root causes of such crimes. They should
seriously consider the fact that curbing the technology will not curb the crimes, but only push
us back by a few decades of R&D and efficiency models, which could otherwise be attained
by promotion of the Blockchain in its nascent (but exponentially growing) stage.

44
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48