DR.

RAM MANOHAR LOHIYA NATIONAL LAW UNIVERSITY

SUBJECT- TRANSPORTATION LAW

“FINAL DRAFT”

ON

TOPIC- “REGULATION OF THE TRANSPORTATION INDUSTRY WITH

BLOCKCHAIN TECHNOLOGY”

SUBMITTED TO: SUBMITTED BY :

Dr. Shashank Shekhar MANU PRATAP S INGH

Assistant Professor (Law) ENROLL NO: 140101075

Dr. RMLNLU, Lucknow SECTION A, SEM- 8TH

 ACKNOWLEDGMENT

Firstly, I would like to thank respected Dr. Shashank Shekhar sir for giving me such an excellent

opportunity to show my skills, through my project and enhance my knowledge on this topic.

The project is the result of extensive ultrapure study; hard work and labor, put into make it worth

reading and this was possible only with the heartiest support of my subject teachers. I wish to

acknowledge that in completing this project by receive help of my friends.

I wish to acknowledge that in completing this project I had full support of my library staff. This

project would not had been completed without the help of my university’s library Dr. Madhu

Limaye library that had various quality books on the chosen topic and the university’s internet

facility that helped me in making my research a success.

-Manu Pratap Singh

Enroll no - 140101075
 TABLE OF CONTENTS

INTRODUCTION……………………………………………………………………………….4

 The Blockchain Technology and its Application to the Legal Field .................................. 4

FEATURES OF A BLOCKCHAIN ............................................................................................ 5

Application to the Legal Field ...................................................................................................... 6

 Jurisprudence of Applying Blockchain to Transportation Law .......................................... 7

 The Problems in the Indian Transportation System ............................................................ 8

Licensing of Vehicles and Drivers ............................................................................................... 9

Road Traffic Accidents: ............................................................................................................. 10

 Technology and Law: The Need to Join Hands ................................................................ 12

 Ethical Issues and Limitations of Blockchain ................................................................... 14

CONCLUSION ........................................................................................................................... 16

BIBLIOGRAPHY ....................................................................................................................... 17
 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, schoolteacher 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, which 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. The new regulation puts the 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

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.

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

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.
2
'Blockchain Technology Beyond Bitcoin' (Berkeley University Sutardja Center for Entrepreneurship &
Technology 2015).
blockchain iceberg). Bitcoin is the most popular example of a Blockchain technology, and has
faced both appreciation and criticism since its inception. The crypto currency 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
Valley’s 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 bitcoin’s 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 ‘crypto currencies’. Bitcoin users gain access to their balance through a password
known as a private key. A network 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, validates transactions.5

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

3
Delloite LLP, 'Blockchain Enigma Paradox Oppurtunity' (Deloitte LLP 2016).
4
Nakamoto S, 'Bitcoin: A Peer-To-Peer Electronic Cash System' [2008] metzdowd.com
5
Ibid
 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 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.

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,
registering a digital work with the service hashes and time stamping 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.

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.

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, it’s 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.
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.

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.
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.”6

License related violations in India account for upto 43% of the total violations.7This 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.

The Blockchain can connect to a driver’s 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. “One Name and Bit
ID are examples of blockchain-based digital identity services. They confirm an individual’s
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.”8

On the surface, One Name is an elegant Bitcoin-facilitating utility, but in the background, it is a
more sophisticated decentralized digital identity verification system that could be extensible
9
beyond its initial use case. The Digital Identification Verification services can be used in the

6
'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.
7
Michael Grimm and Carole Treibich, 'DETERMINANTS OF ROAD TRAFFIC CRASH FATALITIES ACROSS
INDIAN STATES' (2012) 22 Health Economics.
8
Swan M, Blockchain: Blueprint For A New Economy (2nd edn, O'Reilly 2015)
9
Ibid
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.

Road Traffic Accidents:

Hon’ble 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.”10

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 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.”11

10
Ratan Singh v State of Punjab [1979] Supreme Court of India, 1 SCR (Supreme Court of India).
11
Law Commission of India, 'Legal Reforms To Combat Road Accidents' (Law Commission of India 2008).
 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 technology’s
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.”12

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
innovator’s 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.”

12
Arthur Cockfield Jason Pridmore, 'A Synthetic Theory Of Law And Technology' (2007) 8 Minnesota Journal of
Law, Science & Technology.
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:

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.”13

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.

13
Ibid
 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.”14

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 world’s 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.15

14
Swan M, Blockchain: Blueprint For A New Economy (1st edn, O'Reilly 2015)
15
Ibid
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 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.
 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 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.
 BIBLIOGRAPHY

BOOKS

 Gargi Rajvanshi, Transportation Law (1st edn, Lexis Nexis India, 2015)

 Grimm M and Treibich C, 'DETERMINANTS OF ROAD TRAFFIC CRASH FATALITIES

ACROSS INDIAN STATES' (2012) 22 Health Economics

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

Web articles

 Allison I and Lielacher A, 'Blockchain To Play Role In Future Of Transportation? UBS

Teams Up With ZF And Innology SE To Make It Happen' (Blockchain News, 2017)

 'An Analysis Of Law Relating To Accident Claims In India' (Legalserviceindia.com,

2017)

 Atzori M, 'Blockchain Technology And Decentralized Governance: Is The State Still

Necessary?' SSRN Electronic Journal
 Buxbaum P, 'First Shipping Use Of Public Blockchain Technology | Global Trade
Magazine' (Global Trade Magazine, 2017