NOTARIES VS BLOCKCHAIN: THE NEW WAVE OF AUTHENTICITY

Authenticity

BLOCKCHAIN : THE NEW WAVE OF AUTHENTICITY

Civil law countries make a distinction between professionals of law : lawyers and notaries. On the contrary, common law countries only know lawyers. Indeed, the American notary is not at all a lawyer, but a simple certificator of signatures, without special law skills. He cannot practice law at all. The civil law notary is invested of an authenticity mission.

I. UNDERSTAND WHAT A NOTARY IS IN CIVIL LAW COUNTRIES.

Notaries in civil law countries are law officers. They get their degree after eight years of difficult and selective studies. They act both as counsels and writers of acts. Their signature give authenticity to documents.

Article 1 of Ordinance No. 45-2590 of 2 November 1945 provides further details : – Notaries are public officers, established to receive all acts and contracts to which the parties must or wish to give the character of authenticity attached to acts of public authority, and to ensure the date, retain the deposit, deliver enforceable authentic copies.

Double quality of the notary. The notary is a public officer, who received a delegation of the official authority to confer authenticity to the acts and agreements of all persons, whether they are moral ou physical, private or public. However, the notary is not an official, because its functions are, for certain aspects, a liberal activity: he is paid directly by customers, on the basis of a tariff fixed by law.

Mission of « authenticity » for the notary: preventive justice. Authenticity is a special virtue for acts of the public authority. It confers a higher evidential value in the hierarchy of evidences and an enforceable value also, identical to that of a final court decision. The notary has received from the law a mission of authentificator. This legal mission which constitutes its essential mission is not only to confer the character of authenticity to the acts, but also to ensure effectiveness, through the exercise of his duty of advise. The notary is somehow “the public officer of proof “, the ” magistrate of the amicable.” In general, only notaries can note, authentically, the agreements between individuals and can receive acts, contracts to which the parties must or wish to give the character of authenticity attached to acts of public authority. This monopoly of notaries has a consequence. Authenticity cannot be given to any convention or private legal act if it was drawn up by a public officer other than a notary. It is primarily true in real estate matters.
Statistics. On the 1rst of January of 2016, France has 60,000 lawyers for under 9802 notaries : 7065 of them exercise as a partner in 3009 companies. Each year, notaries receive in France, (country of about 70 million people), more than 20 million people, and deal with capital amounting to 600 billion euros. They write more 3.8 million authentic acts and more than 320 000 succession declarations.
The turnover of the profession amounts to the sum of 6.5 billion euros, as follows :

  • Real estate, building sales, leases : 50.1 %
  • Credit-related Acts : 10%
  • Family Acts succession : 31.9 %
  • Real Estate Negotiation: 2.7 %
  • Corporate law, consulting, expertise, wealth advice : 5.3 %

II. AUTHENTICITY : A KEY CONCEPT OF THE CIVIL LAW COUNTRIES BUT UNKNOWN FROM COMMON LAW

Article 1317 of the Civil Code says that, the authentical act is one that has been received by public officials entitled to instrument in the place where the act was written, and with the solemnities required”. We did put into this category, notarial acts, judicial decisions and acts established in the administrative form by prefects and mayors relative to state property”.

Prove of the date. Unlike the private deed, the notarial act is a proof for the date of the act to the parties and third parties also.

Probative value. The probative force conferred to the deed/the authentic act, means that it ensures to third parties the facts that the notary recognized in the act. If for example it says that selling price was paid through the accounts of the notary, this fact is authentic; but if it is stated that the selling price was paid directly by the parties, it is only a declaration of the parties so this clarification has no evidentiary effect in respect of third parties.

Enforceability. The enforceability of an authentic act implies that if receivable money is found in the act, the creditor can directly pursue the execution of the commitment made in its favor, handing the enforceable copy of this act to the bailiff, without having to produce an execution judgment.

Practicality – The recognition by the law of the deed as enforceable, with the same effect as a judgment, is essential for the execution of debts of money. Indeed the enforcement allows saving time when an execution procedure is being conducted, since the first one to court is served without sharing with other later claimers.

III. NO NOTARY IN COMMON LAW COUNTRIES.

The notary does not exist as such in common law countries because of the absence of an authentic instrument concept which is the basis of preventive justice in the civil law countries. Thus, the legal system of common law provides no instrument publicly certified and issued by a neutral officer, granting a full evidentiary to its content and enforceable without further legal review. In English law there are public documents, but they are for official business of public agencies or other public officials, but in any case the statements made by private parties. A recent revision of the English procedural rules, “Civil Procedure Rules” acquires the signature of the “general notary” a probative value to certify private documents but not grant them the status of authentic deeds. This English notary essentially certificates the date and the identity of the signatories but assumes no responsibility for the contents. Moreover, common law ignores the concept of enforcement based on a notarial deed. Going through a court decision is imperative for any civil enforcement procedure for a private party. The “general notary ” is not authorized to create a binding document in respect of a debtor without first performing an action in the courts.

IV. BLOCKCHAIN VERSUS NOTARIES.

Often articles linking Notaries and Blockchain indicate that Blockchain, setting up a permanent, public, unalterable and accessible to all register of data, will put an end to the notary as it currently exists, and that authenticity will be conferred by the machine. Nevertheless, this statement seems to be limited to the notaries in common law countries. Otherwise it would be to misunderstand the concept of authenticity as we just present it. These articles usually embrace authenticity as a derivative from the concept of original and not as a singular virtue. Authenticity is shown as the situation in which an individual could use the blockchain to prove ownership of the document and its integrity. This is the concept of proof of existence.

The « proof of existence » system is not complex. A file, just as a human has a fingerprint of its own, that would be unique. By publishing on the blockchain, the user therefore would affirm he owns a document, that would be proof in case of subsequent disputes.

Thus, the blockchain reminds us of the caracteristics of the deed :

  • Proof of date: as the transaction is time stamped, it proves the date. The register is public, thus this date is binding, not only to the parties but also to third parties.
  • Limited probative force: Regarding the probative force, the question is more difficult. Indeed, this is not the document itself which is published on the blockchain , but the simple proof of its existence and its ownership by an individual. The consensus surrounding this transaction in the blockchain only confirms the existence of a document and it’s ownership by an individual, but does not guarantee the evidential value of the document’s content itself. However, the concept of « smart contracts » that we will discuss in later articles could quite overcome the difficulties of this relative probative value.
  • Lack of binding : Without legislative action, or adaption of our legal systems, a transaction published in the blockchain does not confer enforceability. Therefore, passing before the judge still is necessary.

     In the present circumstances, it is unlikely that the blockchain put an end to notaries as they exist in civil law countries. Only legislative intervention may confer binding to a transaction published in the blockchain. However, the notary system in common law countries, playing only a role of legalization of documents, does seem in danger … The blockchain could revisit the notion of authenticity. It is quite possible to imagine a private blockchain, whose members received a delegation of public authority, and whose transactions have « authentic force », with all the consequences known to it in civil law countries. Concrete applications of the blockchain for the notary world could revolutionize the real estate. This is the extension of the land registration system in common law countries.

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