25TH D.M.

HARISH MEMORIAL, GOVERNMENT LAW COLLEGE INTERNATIONAL MOOT COURT COMPETITION, 2024

TEAM CODE: R

25TH [Link] MEMORIAL, GOVERNMENT LAW COLLEGE

INTERNATIONAL MOOT COURT COMPETITION, 2024

BEFORE THE HON’BLE INTERNATIONAL COURT OF JUSTICE

IN THE MATTER OF:

THE REPUBLIC OF ZIMBLIA

(THE APPLICANT)

VS.

THE REPUBLIC OF AVENTARA

(THE RESPONDENT)

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENT

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TABLE OF CONTENTS

Index Of Authorities ....................................................................................................................4

Statement Of Jurisdiction ............................................................................................................8

Statement Of Facts ......................................................................................................................9

Statement of Issues .................................................................................................................... 11

Summary Of Arguments............................................................................................................. 12

Arguments Advanced ................................................................................................................. 14

I. THE REPUBLIC OF AVENTARA DID NOT VIOLATE THE PRINCIPLE OF STATE

RESPONSIBILITY AND THEY CAN EVADE LIABILITY FOR THE ACTS OF EAGLE

EYE ...................................................................................................................................... 14

1. Republic of Aventara did not violate the principle of State Responsibility under
International Law............................................................................................................... 14

2. Republic of Aventara can evade liability for the acts of Eagle Eye .............................. 15

2.1 EagleEye acted autonomously and its actions were unforeseen and not directly
commanded. ................................................................................................................... 16

2.2 Inarguendo, the Republic of Aventara is responsible for the acts of the EagleEye and
they were acts of self defense, countermeasure or arising out of necessity....................... 17

II. xDAO CANNOT BE CONSIDERED A SOVEREIGN STATE UNDER

INTERNATIONAL LAW. .................................................................................................... 19

1. xDAO DOES NOT MEETS THE CRITERIA LAID DOWN FOR STATEHOOD ........... 19

2. xDAO DOES NOT SATISFY THE MONTEVIDEO CONVENTION’S DEFINITION OF

BEING A STATE ................................................................................................................ 21

2.1 xDAO’s global population cannot be considered as permanent population .......... 21

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2.2 DAO’s blockchain cannot be considered as effective territory .............................. 21

2.3 xDAO’s smart contracts do not form a government under traditional definitions . 22

2.4 xDAO’s engagement with other DAO’s for mutual benefit cannot be considered
“making relations”......................................................................................................... 23

3. ECONOMICAL FACTOR IS NOT THE ONLY REQUISITE TO BE CONSIDERED A

STATE .............................................................................................................................. 23

III. THE REPUBLIC OF AVENTARA IS NOT OBLIGATED TO REIMBURSE THE

REPUBLIC OF ZAMBLIA FOR THE FINANCIAL LOSSES INCURRED DUE TO THE

DEVALUATION OF BITNERO AS A RESULT OF THE CYBER-ATTACK BY

EAGLEEYE. ........................................................................................................................ 25

1. EagleEye acted autonomously and independently........................................................ 25

2. Actions taken by EagleEye were a response to an imminent and severe threat posed by
the criminal use of Bitnero on Crimson Road ..................................................................... 26

3. There was no use of force and breach of Sovereignty .................................................. 28

4. EagleEye's actions were to prevent criminal activities ................................................. 29

5. There is lack of direct causation between the cyber-counter actions and the financial
losses ................................................................................................................................. 30

Prayer ....................................................................................................................................... 32

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INDEX OF AUTHORITIES

CASE LAWS

 Air Serv. Agreement (Fr. V. U.S.)

 Arbitral Trib., 3 U.N. Rep. Int'l Arb. awards 1905 (1941).

 Armed Activities On The Territory Of The Congo, (Congo, The Democratic Republic Of

The V Uganda), Judgment, Merits, Icj Gl No 116, (2005) Icj Rep 168,(Dec 19).

 Corfu Channel (U.K. V. Alb.), 1949 I.C.J. 4, 43 (Apr. 9) (Separate Opinion Of Judge

Alvarez)

 Factory At Chorzów, Germany V Poland, Judgment, Claim For Indemnity, Merits,

Judgment No 13, (1928) Pcij Series A No 17, Icgj 255 (Pcij 1928), 13th September 1928.

 Gabcikovo-Nagymaros (Hung. V. Slovk.), 1997 I.C.J. 7, At 55-56 (Sept. 1997)

 Military And Paramilitary Activities In And Against Nicaragua (Nicaragua V. United

States Of America), Merits, Judgment, I.C.J. Rep. 1986 (June 27), At 97-98

 Nauililaa (Port. V. Ger.), 2 R.I.A.A. 1011, At 1025-26 (1928)

 Tallinn Manual, (Manuscript R. 5, Para. 2)

ARTICLES

 Aaron Wright, The Rise Of Decentralised Autonomous Organisations: Opportunities And

Challenges, Stanford Journal Of Blockchain Law & Policy, 30 June 2021

 David J. Bederman, International Law Frameworks 52 (3d Ed. 2010

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 Feldman, Leonard C. “Redistribution, Recognition, And The State: The Irreducibly

Political Dimension Of Injustice.” Political Theory, Vol. 30, No. 3, 2002, Pp. 410–40. Jstor

 Feuer, Lewis S. “The Economic Factor In History.” Science & Society, Vol. 4, No. 2, 1940,

Pp. 168–92. Jstor, Http://[Link]/Stable/40399323. Accessed 12 Dec. 2023.

 Georgios Dimitropoulos, The Law Of Blockchain, 95 Wash. L. Rev. 1117 (2020).

Available At: Https://[Link]/Wlr/Vol95/Iss3/3

 Harv. Int’l L.J. 41, 50 (2002).

 Ilias Plakokefalos, “Causation In The Law Of State Responsibility And The Problem Of

Overdetermination: In Search Of Clarity”, 6 European Journal Of International Law 2

(May 2015)

 Jakobi, Anja P. “Global Networks Against Crime: Using The Financial Action Task Force

As A Model?” ,70 International Journal 3 (2015) , Pp. 391–407. Jstor

 Kelsen, Hans. “Recognition In International Law: Theoretical Observations.” The

American Journal Of International Law, Vol. 35, No. 4, 1941, Pp. 605–17. Jstor,

Https://[Link]/10.2307/2192561. Accessed 12 Dec. 2023.

 Litfin, Karen T. “Sovereignty In World Ecopolitics.” Mershon International Studies

Review, Vol. 41, No. 2, 1997, Pp. 167–204. Jstor

 Marcella Atzori, "Blockchain Technology And Decentralised Governance: Is The State

Still Necessary?" University College Of London - Center For Blockchain Technologies

(Dec. 1, 2015)

 Militarized Refugees, State Responsibility, And The Evolution Of Self-Defense, 25

Praxis: Fletcher J. Hum. Security 5, 9–10 (2010).

 Responsibility For The Torts Of An Independent Contractor.” ,39 The Yale Law Journal,

6,(1930), Pp. 861–73. Jstor, Https://[Link]/10.2307/790684.

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 Sean D. Murphy, Terrorism And The Concept Of “Armed Attack” In Article 51 Of The

U.N. Charter, 43

 Sklaroff, Jeremy M., "Smart Contracts And The Cost Of Inflexibility" (2018). Prize

Winning Papers. 9. Https://[Link]/Prize_papers/9

 Suckling J, Hoolohan C, Soutar I And Druckman A (2021), “Unintended Consequences:

Unknowable And Uavoidable, Or Knowable And Unforgivable? “Front. Clim. 3:737929.

Doi: 10.3389/Fclim.2021.737929.

 Usha R. Rodrigues, Law And The Blockchain, 104 Iowa L. Rev. 679, 707 (2019).

INTERNATIONAL REPORTS

 United States Diplomatic And Consular Staff In Tehran, 1980 I.C.J. 3

 White House, International Strategy For Cyberspace 10 (2011)

 Directorate-General For Communication (European Commission), The European Union -

What It Is And What It Does," (2022)

 A/56/10, U.N. Gaor, 56th Sess., Supp. No. 10 (2001).

 Rep. Of The Int’l Law Comm’n, 53d Sess., April 23–June 1, July 2–Aug. 10, 2001, At 80,

U.N. Doc

INTERNATIONAL TREATIES AND CONVENTIONS

 2225 U.N.T.S. 209: Council Of Europe, Convention On Cybercrime, 23 November 2001

Ets No. 185.

 International Law Commission, draft Articles On Responsibility Of States For

Internationally Wrongful Acts

 UN Charter

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BOOKS

 Schmitt, M. N. (2017) In tallinn Manual 2.0 On The International Law Applicable To

Cyber Operations. 2nd Edn. Cambridge: Cambridge University Press

ONLINE SOURCES

 "Sales Territory Management: The Ultimate Guide," Fit Small Business,

Https://[Link]/Sales-Territory-Management/

 Dao Smart Guide, Moralis, Available At Https://[Link]/Dao-Smart-Contract-Example-

Dao-Guide/, (6 Jan 2022)

 Marta Piekarska, The State Of Dao Security (11 November 2022)

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STATEMENT OF JURISDICTION

The Republic of Aventara (“Aventara”) and the State of Zimblia (Zimblia) respectfully submit

the present dispute to the International Court of Justice, pursuant to article 40, paragraph 1 of the

Statute of the Court. The Parties agree to accept as final and binding the Judgment of this Court

and shall execute it in its entirety and in good faith.

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STATEMENT OF FACTS

Background

The Republic of Zimblia, located in Central America has historically been facing ongoing political

and economic turmoil. This also led to a civil war between the Military Government, supported by

the Republic of Aventara, and various leftist rebel factions. xDAO is a global NGO based in the

Republic of Zimblia dedicated to Human Rights advocacy and is operating as a Decentralized

Autonomous Organization.

The Republic of Aventara operates as a Unitary One-party Socialist system under the leadership

of the AAA. Aventara consistently scores low in global evaluations conducted, relating to

Democracy and related issues, religion, and ethnic groups. While the Aventaran Constitution

proclaims to protect fundamental rights, these claims often fall short in reality, providing limited

defense against the State's punitive actions.

Unfolding of Events

In 2021, the President of Zimblia proposed the introduction of the Bitnero cryptocurrency as a

legal currency, which is a decentralized privacy-enhanced digital currency. Operating on the open-

source EtherX blockchain network, it’s a mathematically-driven peer-to-peer currency devoid of

any central governing body or overarching surveillance. The Bitnero Law was enacted by

Zimblia’s Legislative Assembly (“ZLA”) in June 2021 and Bitnero became a legal tender in

September of the same year.

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The Republic of Aventara has built and deployed EagleEye, an AI to detect, investigate, and

neutralize threats to national security. On 13th August, 2023, EagleEye detected that the operators

of Crimson Road, an online darknet market, were using Bitnero. EagleEye algorithms predicted

that there was a high probability that Bitnero was being misused by criminal entities for money

laundering and financing of terrorism at a global level. EagleEye launched a series of sophisticated

cyber-attacks and brought down the EtherX network and permanently corrupted all Bitnero data.

This attack also led to the de-anonymization of xDAO members’ data, identities & transactions of

Bitnero users.

Dispute

A week after the attack, the Government of Zimblia in an official social media post claimed that

Aventara had launched the sophisticated cyber-attack as a retaliation for the shutdown of Aventara

Mining Corporation's operations and reducing the reliance on the Aventara Dollar by making

Bitnero, a legal tender. The post claimed that Aventara must reimburse Zimblia for the losses they

incurred on the basis state responsibility, due diligence duty and prohibit the use of force. Two

days later, Aventara's Government issued an official social media post claiming that they were not

liable for the losses that Zamblia incurred, as acts of the AI were independent and autonomous and

they could take the shield of necessity, self-defense and countermeasures. Further, xDAO also

claims that it must be considered as a sovereign state on the grounds of Evolution of Statehood,

the criteria outlined in the Montevideo Convention.

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STATEMENT OF ISSUES

[Link] REPUBLIC OF AVENTARA DID VIOLATED THE PRINCIPLE OF STATE

RESPONSIBILITY AND CAN THEY EVADE LIABILITY FOR THE ACTS OF EAGLE

EYE?

[Link] xDAO CAN BE CONSIDERED A SOVEREIGN STATE UNDER

INTERNATIONAL LAW?

[Link] THE REPUBLIC OF AVENTARA IS OBLIGATED TO REIMBURSE THE

REPUBLIC OF ZAMBLIA FOR THE FINANCIAL LOSSES INCURRED DUE TO THE

DEVALUATION OF BITNERO AS A RESULT OF THE CYBER-ATTACK BY EAGLEEYE?

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SUMMARY OF ARGUMENTS

I. The Republic of Aventare did not violate the principle of State

Responsibility and they can evade liability for the Acts of EagleEye

It is humbly submitted that the Republic of Aventara did not violate the principle of State

Responsibility under the Responsibility of States for Internationally Wrongful Acts, 2001. The

cyber attack launched does not fall within the ambit of an “internationally wrongful act” and does

not entail attribution to the State and breach of an obligation that applies to the State. Further,

Aventara can evade liability as they were independent actions of the AI. Inarugendo, even if the

Republic of Aventara claims liability, the exceptions of countermeasure, necessity and self-defense

can be invoked as they were acts attributable to the State.

II. xDAO Should Not Be Considered A Sovereign State Under International

Law

The assertion that entities such as xDAO could evolve into non-territorial states in the digital era

poses challenges to traditional international law. Historically, statehood, firmly tied to territorial

control, has played a crucial role in stabilizing global governance. Deviating from this principle

may disrupt established norms and introduce uncertainties. The Montevideo Convention of 1933

did not foresee the complexities arising from decentralized digital entities, making it challenging

to define territory without a physical presence, especially with reliance on blockchain technology.

Moreover, giving priority to economic influence as a criterion for statehood might enable resource-

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rich entities to assert a state-like status, potentially undermining the distinctive nature of

recognized sovereign states.

III. The Republic of Aventara is not obligated to reimburse the Republic of

Zamblia for the financial losses incurred due to the devaluation of bitnero

as a result of the cyber-attack by EagleEye.

It is humbly submitted that the Republic of Aventara is not obligated to reimburse the Republic of

Zamblia for the financial losses incurred due to the devaluation of Bitnero as a result of the

counteraction by EagleEye and the grounds for it are fivefold : [3.1] EagleEye acted autonomously

and independently, [3.2] actions taken by EagleEye were a response to an imminent and severe

threat posed by the criminal use of Bitnero on Crimson Road, [3.3]There was no use of force and

breach of Sovereignty, [3.4] EagleEye's actions were to prevent criminal activities, [3.5] There is

lack of direct causation between the cyber-counter actions and the financial losses.

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ARGUMENTS ADVANCED

I. THE REPUBLIC OF AVENTARA DID NOT VIOLATE THE PRINCIPLE OF STATE

RESPONSIBILITY AND THEY CAN EVADE LIABILITY FOR THE ACTS OF

EAGLE EYE

The Republic of Aventara did not violate the principle of State Responsibility under the

Responsibility of States for Internationally Wrongful Acts, 2001 (herein referred to as “RSIWA”)

The cyber attack launched does not fall within the ambit of “internationally wrongful act” and does

not entail attribution to the State and breach of an obligation that is applicable to the State. Further,

Aventara can evade liability as they were independent actions of the AI. Inarugendo, even if the

Republic of Aventara claims liability, the exceptions of countermeasure, necessity and self defense

can be invoked as they were acts attributable to the State. he Republic of Aventara is not

responsible for the acts of the EagleEyet and can evade liability by claiming non-attribution and

invoking the defences.

1. Republic of Aventara did not violate the principle of State Responsibility

under International Law

EagleEye is not formally affiliated with the Republic of Aventara’s government. Prima facie, the

acts of a private individual are not attributable to the state under international law. 1Authorization

1
Commentary to Draft Articles at 103.

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requires acts to be done under the instruction, direction or control of the state. 2 A high degree of

association between the state and a private action is required to engage state responsibility. 3 In

certain circumstances, a state may take countermeasures against a state that would be unlawful

were they not in response to a prior violation by that State4. There was no breach of any obligation

on behalf of the State of Aventara nor was there any act attributable to the State. The acts carried

out by the AI were not acts by organs of State, directed or controlled by a State or entities

exercising elements of governmental authority.

2. Republic of Aventara can evade liability for the acts of Eagle Eye

The actions of the AI, EagleEye are autonomous actions as they were not conduct of organs of

State, conduct of persons exercising elements of governmental authority or conduct directed or

controlled by the State. Liability for non-state actions would attach to the state only if the non-

state actor is either a formal or de facto agent of the state5. The exceptions to state liability of

wrongful acts can be invoked, inarguendo, the Republic of Aventara is responsible for the acts of

the EagleEye and they were acts of self defense, countermeasure or arising out of necessity. States

may become responsible at customary international law for acts ex post facto. 6 Article 11 of the

2
International Law Commission, Draft Articles on Responsibility of States for Internationally Wrongful Acts,
November 2001, Supplement No. 10 (A/56/10), [Link].E.1, [Link]
[hereinafter Draft ARSIWA].
3
Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America), Merits,
Judgment, I.C.J. Rep. 1986 (June 27), at 97-98
4
Gabcikovo-Nagymaros (Hung. v. Slovk.), 1997 I.C.J. 7, at 55-56 (Sept. 1997); Nauililaa (Port. v. Ger.), 2 R.I.A.A.
1011, at 1025-26 (1928); Air Serv. Agreement (Fr. v. U.S.), 18 R.I.A.A. 416, at 443-46 (Mar. 1979); Draft Articles
on Responsibility of States for Internationally Wrongful Acts, supra note 26.
5
Rep. of the Int’l Law Comm’n, 53d Sess., April 23–June 1, July 2–Aug. 10, 2001, at 80, U.N. Doc A/56/10, U.N.
GAOR, 56th Sess., Supp. No. 10 (2001).
6
Draft RSIWA; United States Diplomatic and Consular Staff in Tehran, 1980 I.C.J. 3; Lighthouses Arbitration (1956)
R.I.A.A., xii, 155.

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International Law Commission's Draft Articles on State Responsibility (Draft Articles) recognizes

that acts of private persons shall be attributed to the state "to the extent that the State acknowledges

and adopts the conduct in question as its own."

2.1 EagleEye acted autonomously and its actions were unforeseen and not directly
commanded.
In Prosecutor v. Tadic, the International Criminal Tribunal for the Former Yugoslavia (“ICTY”)

adopted an “overall control” test. the ICTY found that the control would have to go “beyond “the

mere financing and equipping of such forces and involv[e] also participation in the planning and

supervision of military operations 7. Furthermore, the actions of private non-state actors are not

attributable to the state8. Here the actions by EagleEye, which is a private entity, cannot be

attributed to the state as it was an independent action. Under the Nicaragua standard, as mentioned

above, a state cannot be held responsible for the actions of a non-state actor merely because it had

general control over their operations. Even though Aventarra deployed the AI, the very act of the

cyber attack which led to the subsequent deanonymization of the users cannot be attributed to the

State. The courts have in various cases, have held that a State can only be held responsible under

circumstances where it was proved that the State nhad “effective control of the military or

paramilitary operations in the course of which the alleged violations were committed 9.” Therefore,

7
See Corfu Channel (U.K. v. Alb.), 1949 I.C.J. 4, 43 (Apr. 9) (separate opinion of Judge Alvarez); Military and
Paramilitary Activities in and Against Nicaragua (Nicar. v. U.S.), 1986 I.C.J. 14, para. 202 (June 27) (quoting Corfu
Channel, 1949 I.C.J. at 35); TALLINN MANUAL, (manuscript r. 5, para. 2); cf. Stephen Allen, Harboring or
Protecting? Militarized Refugees, State Responsibility, and the Evolution of Self-Defense, 25 PRAXIS: FLETCHER
J. HUM. SECURITY 5, 9–10 (2010).
8
See Rep. of the Int’l Law Comm’n, 53d Sess., April 23–June 1, July 2–Aug. 10, 2001, at 80, U.N. Doc A/56/10,
U.N. GAOR, 56th Sess., Supp. No. 10 (2001) (“Thus the general rule is that the only conduct attributed to the State
at the international level is that of its organs of government, or of others who have acted under the direction, instigation
or control of those organs, i.e. as agents of the State.”).
9
Military and Paramilitary Activities in and Against Nicaragua, 1986 I.C.J. 14, para. 115.

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in the present case merely because the AI was built by the Republic Aventara any and every act of

the AI cannot be said to be under the control of the State.

2.2 Inarguendo, the Republic of Aventara is responsible for the acts of the EagleEye and they
were acts of self defense, countermeasure or arising out of necessity.
The principle of sovereignty and territorial integrity as rights of a state do not exist in a vacuum,

but are balanced against the right of self-defense under international law 10. The criminal use of

Bitnero posed an immediate threat not just to Aventara but to the entire world and hence

EagleEye’s actions were a form of self-defense. Under Art 21 of the RSIWA, the wrongfulness of

an act of a State is precluded if the act constitutes a lawful measure of self defense taken in

conformity with the Charter of the United Nations. self-defence constitutes an exceptional right

which, when successfully invoked, does not constitute ‘even potentially’ a breach of the obligation

not to use force in international relations. It is an established principle that states will maintain the

right to exercise self-defense in the cyber domain, as in the domains of air, land, and sea 11. cyber

domain will not be any different from the other domains in which states have always maintained

the right to protect their security.

As established by the UN, determined to be necessary for their security, states may use force in

the cyber context as they would in other domains. In arguing that non-state actors are indeed

covered by Article 51 of the U.N. Charter, it accepts that an attack by a nonstate actor may

10
DAVID J. BEDERMAN, INTERNATIONAL LAW FRAMEWORKS 52 (3d ed. 2010) (“It used to be that States
were the only recognized subjects of international law, the only ‘real’ players on the international scene.”); see also
Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111, 119 (2nd Cir. 2010) (describing how, after the Nuremburg Trials,
states were no longer the sole focus of international law), cert. granted, 132 [Link]. 472 (2011); cf. U.N. Charter art. 3
(opening membership to states, not individuals or organizations).
11
In 2011, the U.S. government officially stated its position on a State’s right of self-defense in the cyber domain,
noting that, “[c]onsistent with the United Nations Charter, states have an inherent right to self-defense that may be
triggered by certain aggressive acts in cyberspace.” See WHITE HOUSE, INTERNATIONAL STRATEGY FOR
CYBERSPACE 10 (2011) [hereinafter 2011 INTERNATIONAL CYBERSPACE STRATEGY].

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constitute an “armed attack” regardless of whether a state is directly involved in any aspect of the

attack12 In support of this position, is the plain language of Article 51, which does not limit the

right of self-defense as applicable only to states. It makes no mention of any requirement of an

armed attack being committed by a state13. Therefor just because it is an “armed attack” does not

necessarily become attributable to the State. Transactions were exclusively handled using Bitnero,

ensuring further anonymity. EagleEye algorithms predicted that there was a high probability that

Bitnero was being misused by criminal entities for money laundering and financing of terrorism

at a global level. EagleEye launched a series of sophisticated cyber-attacks and brought down the

EtherX network and permanently corrupted all Bitnero data. This was done as a way of due

diligence and counter measures against the widespread misuse of the bitnero as the legal tender in

the black market. While the Draft Articles recognize only non-forcible measures, 14 the ICJ in

Nicaragua "suggested" that proportionate forcible countermeasures would be available in response

to acts involving the use of force. 15 Thus, even if EagleEye’s action is deemed a "use of force," it

is consistent with international law.

12
See JUTTA BRUNNÉE & STEPHEN J. TOOPE, LEGITIMACY AND LEGALITY IN INTERNATIONAL LAW
296 (2010) (“[I]nternational practice seems to have evolved both to allow self-defence against armed attacks by non-
state forces, and to loosen the required link between such forces and a state in which armed defence measures are
taken.”); DINSTEIN, supra note 182, at 224–30; Thomas M. Franck, Terrorism and the Right of Self-Defense, 95
AM. J. INT’L. L. 839, 840 (2001); Raphaël Van Steenberghe, Self-Defence in Response to Attacks by Non-State
Actors in the Light of Recent State Practice: A Step Forward?, 23 LEIDEN J. INT’L L.183, 184 (2010) (concluding
that recent State practice suggests that attacks committed by non-State actors constitute armed attack sunder Article
51).
13
Sean D. Murphy, Terrorism and the Concept of “Armed Attack” in Article 51 of the U.N. Charter, 43
HARV. INT’L L.J. 41, 50 (2002).
14
Supra Note 2.
15
Supra Note at 109-110.

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II. xDAO CANNOT BE CONSIDERED A SOVEREIGN STATE UNDER

INTERNATIONAL LAW.

It is contended that the assertion that entities like xDAO can evolve into non-territorial states in

the digital era poses challenges within traditional international law frameworks. The historical

foundation of statehood, deeply rooted in territorial control, has provided stability in global

governance. Departing from this principle may disrupt established norms and introduce

uncertainty into international relations. The Montevideo Convention of 1933 may not have

envisioned the complexities arising from decentralised digital entities. Challenges arise in defining

a clear and recognized territory due to the absence of a physical presence and reliance on

blockchain technology. Lastly, prioritising economic influence as a statehood criterion may

prompt entities with substantial resources to assert a state-like status, potentially undermining the

distinctiveness of recognized sovereign states.

1. xDAO DOES NOT MEETS THE CRITERIA LAID DOWN FOR

STATEHOOD

Unlike traditional states, xDAO exclusively operates in the digital realm and lacks a physical

presence in any specific geographic location. The conventional concept of statehood is usually

linked to a tangible territory with defined borders, a feature that is absent in xDAO owing to its

decentralised and blockchain-based structure.16

16
Marcella Atzori, "Blockchain Technology and Decentralised Governance: Is the State Still Necessary?" University
College of London - Center for Blockchain Technologies (Dec. 1, 2015), (last revised June 13, 2016).

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The European Union's supranational structure, while presenting an alternative model, emphasises

the ongoing relevance of territorial governance. The EU's influence over member states

necessitates an acknowledgment of territorial jurisdiction for coherent policy implementation and

effective governance. This perspective challenges the notion of states transcending traditional

territorial constraints.17

Furthermore, the potential transformation of states into non-territorial entities, exemplified by

entities like xDAO, introduces uncertainties into the international system. Real-world instances

reveal the intricate connections between territorial clarity and diplomatic relations, trade

agreements, and mutual defence pacts. Departing from this clarity raises legitimate concerns about

the enforcement of laws, citizen protection, and the preservation of national interests within a

tangible, physical space. 18

In practical terms, the importance of territorial governance is enforcing laws and safeguarding

citizens. It draws attention to the significance of tangible borders in addressing issues of

sovereignty, citizenship, and the preservation of national identity. In a world where geopolitical

realities continue to be shaped by physical spaces, there is the pragmatic necessity of maintaining

the traditional model of statehood anchored in territorial boundaries. 19

Amidst the ongoing discourse surrounding the potential recognition of decentralised autonomous

organisations (DAOs) such as xDAO as states, it is crucial to assert that these entities do not align

17
DIRECTORATE-GENERAL FOR COMMUNICATION (EUROPEAN COMMISSION), THE EUROPEAN
UNION - WHAT IT IS AND WHAT IT DOES," (2022).
18
Marta Piekarska, The State of DAO Security (11 November 2022).
19
LITFIN, KAREN T. “SOVEREIGNTY IN WORLD ECOPOLITICS.” Mershon International Studies Review, vol.
41, no. 2, 1997, pp. 167–204. JSTOR, [Link] Accessed 12 Dec. 2023.

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with the traditional criteria defining statehood. Despite the evolving landscape, there is a pressing

need to adhere to the conventional model of statehood, firmly anchored in territorial boundaries. 20

As the international system grapples with digital transformations, upholding the traditional

statehood model proves essential for addressing issues related to sovereignty, citizenship, and law

enforcement. Decentralised Autonomous Organizations (DAOs), functioning in the digital

domain, do not possess a physical presence within a specific geographic location. Despite their

interactions with blockchain platforms, these engagements fall short of the territorial control

typically associated with traditional states. Consequently, DAOs fail to fulfil the criteria for

statehood as defined by customary international law.

2. xDAO DOES NOT SATISFY THE MONTEVIDEO CONVENTION’S

DEFINITION OF BEING A STATE

2.1 xDAO’s global population cannot be considered as permanent population

xDAO's assertion of a permanent population among its global members draws a parallel with

cryptocurrency communities like Bitcoin and Ethereum. However, the fluid and diverse nature of

these communities raises questions about the stability and recognition of xDAO's claimed

permanent population, a key criterion in traditional statehood. DAOs are member-owned

communities without centralised leadership. Membership in a DAO is not tied to a physical

location and can be global. Members can join or leave the DAO at any time, making the population

fluid and not permanent.21

2.2 DAO’s blockchain cannot be considered as effective territory

20
Aaron Wright, The Rise of Decentralised Autonomous Organisations: Opportunities and Challenges, Stanford
Journal of Blockchain Law & Policy, 30 June 2021.
21
Usha R. Rodrigues, Law and the Blockchain, 104 Iowa L. Rev. 679, 707 (2019).

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The analogy between xDAO's defined territory on the Ethereum blockchain and the broader

acceptance of blockchain technology in various sectors may not confer recognized and sovereign

territorial legitimacy. Traditional states typically have well-defined geographic boundaries, and

the widespread use of blockchain in specific industries doesn't necessarily equate to territorial

recognition for entities like xDAO.22

An effective territory typically refers to a geographical area where an entity has clear-cut

boundaries and exercises control12. It involves managing operations based on attributes such as

geographic location, industry, product or service needs, or account size2. A blockchain, like the

one used by xDAO, is a digital ledger and does not have a physical presence. It cannot be defined

or controlled in the same way a geographical territory can be. 23

Blockchains are globally accessible and do not have boundaries that can be managed or controlled

in the traditional sense. Anyone with internet access and the necessary resources can interact with

the blockchain.

2.3 xDAO’s smart contracts do not form a government under traditional definitions
While xDAO's decentralised governance challenges traditional centralised structures, concerns

arise regarding accountability and responsiveness. The automated nature of smart contracts and

algorithms, while innovative, may lack the nuanced decision-making and adaptability found in

traditional governmental systems, potentially impacting effective governance. 24

22
Georgios Dimitropoulos, The Law of Blockchain, 95 Wash. L. Rev. 1117 (2020). Available at:
[Link]
23
"Sales Territory Management: The Ultimate Guide," Fit Small Business, [Link]
territory-management/.
24
SKLAROFF, JEREMY M., "SMART CONTRACTS AND THE COST OF INFLEXIBILITY" (2018). Prize
Winning Papers. 9. [Link]

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A traditional government is the system or group of people governing an organised community,

generally a state. It normally consists of legislature, executive, and judiciary. It is a means by which

organisational policies are enforced, as well as a mechanism for determining policy1. Smart

contracts, like those used by xDAO, are self-executing contracts with the terms of the agreement

directly written into code. They do not have the ability to enforce laws or determine policies in the

way a traditional government can. Smart contracts operate based on pre-set rules and lack the

human discretion that is often a key part of governmental decision-making.25

2.4 xDAO’s engagement with other DAO’s for mutual benefit cannot be considered “making
relations”
xDAO's claim to engage in international affairs through its program, protocol, and token prompts

questions about the nature and recognition of these engagements. While certain blockchain

projects may collaborate internationally, the acknowledgment and acceptance of digital entities

participating in diplomacy, trade, and humanitarian efforts equivalent to traditional states remain

unestablished and untested.

In conclusion, xDAO fails to make a convincing case for statehood, as it lacks parallels from real-

life examples that challenge traditional concepts of territorial recognition. Despite the growing

influence of digital entities on global dynamics, the lack of recognition for entities like xDAO in

international affairs underscores the persistent traditional norms of governance and collaboration.

3. ECONOMICAL FACTOR IS NOT THE ONLY REQUISITE TO BE

CONSIDERED A STATE

25
DAO Smart Guide, Moralis, Available at [Link] (6 Jan 2022).

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While the xDAO may assert significant economic influence, positioning itself on the international

stage, it'simperative to stress that economic strength alone should not be the exclusive determinant

for state recognition. Entities like the World Economic Forum, historically influential due to

economic clout, do not inherently possess the comprehensive attributes essential for statehood. 26

States recognized for economic prowess typically adhere to established frameworks covering

governance, diplomacy, and compliance with international law. Their responsibilities encompass

more than economic contributions, extending to citizen protection, law enforcement, and the

provision of public services—dimensions where the xDAO, operating on a decentralised

blockchain, might exhibit limitations.27

Moreover, state recognition involves nuanced geopolitical considerations, historical contexts, and

adherence to international norms. While economic strength can amplify global influence, its

effectiveness is intertwined with factors such as political stability, territorial control, and

diplomatic engagements. Traditional states, deeply rooted in the international system, grapple with

multifaceted challenges beyond the economic domain. 28

While acknowledging the xDAO's potential to instigate positive societal change through economic

means, the complexities of statehood mandate a thorough evaluation. Recognition as a state

demands a holistic scrutiny, encompassing political, legal, and social dimensions. Therefore, while

26
Feuer, Lewis S. “The Economic Factor in History.” Science & Society, vol. 4, no. 2, 1940, pp. 168–92. JSTOR,
[Link] Accessed 12 Dec. 2023.
27
Kelsen, Hans. “Recognition in International Law: Theoretical Observations.” The American Journal of International
Law, vol. 35, no. 4, 1941, pp. 605–17. JSTOR, [Link] Accessed 12 Dec. 2023.
28
Feldman, Leonard C. “Redistribution, Recognition, and the State: The Irreducibly Political Dimension of Injustice.”
Political Theory, vol. 30, no. 3, 2002, pp. 410–40. JSTOR, [Link] Accessed 12 Dec.
2023.

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economic strength can contribute, it should not overshadow the broader criteria traditionally

associated with statehood.

III. THE REPUBLIC OF AVENTARA IS NOT OBLIGATED TO REIMBURSE THE

REPUBLIC OF ZAMBLIA FOR THE FINANCIAL LOSSES INCURRED DUE TO

THE DEVALUATION OF BITNERO AS A RESULT OF THE CYBER-ATTACK BY

EAGLEEYE.

It is humbly submitted that the Republic of Aventara is not obligated to reimburse the Republic of

Zamblia for the financial losses incurred due to the devaluation of Bitnero as a result of the

counteraction by EagleEye and the grounds for it are fivefold : [3.1] EagleEye acted autonomously

and independently, [3.2] actions taken by EagleEye were a response to an imminent and severe

threat posed by the criminal use of Bitnero on Crimson Road, [3.3]There was no use of force and

breach of Sovereignty, [3.4] EagleEye's actions were to prevent criminal activities, [3.5] There is

lack of direct causation between the cyber-counter actions and the financial losses.

1. EagleEye acted autonomously and independently

The fundamental tenet of the "independent contractor defense" is that a state may not be held

responsible for, if an organization is truly functioning independently and not under the direction

or control of the state.29 The honourable Court held that in order for attribution to take place, the

state has to effectively control the non-state actor's actions and emphasized on the idea that

attribution may not always be satisfied by providing a non-state actor with support or assistance.

29
“Responsibility for the Torts of an Independent Contractor.” ,39 THE YALE LAW JOURNAL, 6,(1930), pp. 861–
73. JSTOR, [Link]

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States can only be held accountable if they control independent entities' actions or if they direct or

instigate certain conduct.30

EagleEye acted autonomously and independently, without direct instructions from the Aventaran

government. EagleEye is an the advanced nature of artificial intelligence system capable of

autonomous decision-making. The system can automatically deploy countermeasures in cyber

scenarios, such as isolating compromised networks or launching counter cyber-operations. 31Thus

it is an act of independent entity that impartially detected potential threats and neutralized them

.Therefore it’s humbly submitted that in the instant case, Aventara had no effective control over

EagleEye's actions as it functioned without supervision and its conduct were unforeseen and not

directly commanded by Aventara. Hence it can not be held obligated to reimburse the Republic of

Zamblia for the financial losses.

2. Actions taken by EagleEye were a response to an imminent and severe threat

posed by the criminal use of Bitnero on Crimson Road

The principle of self-defense provides for the states to use force in response to an armed attack32.

Although physical attacks are the focus of the traditional understanding, responses to cyber threats

are also included in the modern interpretation. A state may use force in self-defense against a cyber

operation if it becomes an armed attack, according to Rule 7 of the Tallinn Manual. 33

30
Armed Activities on the Territory of the Congo, (Congo, the Democratic Republic of the v Uganda), Judgment,
Merits, ICJ GL No 116, (2005) ICJ Rep 168,(Dec 19).
31
Compromis, ¶19.
32
Supra Note 3.
33
Schmitt, M. N. (2017) in Tallinn Manual 2.0 on the International Law Applicable to Cyber Operations. 2nd edn.
Cambridge: Cambridge University Press, Rule 7.

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It is contended that the severity of the threat emerging from the criminal use of Bitnero on Crimson

Road was significant. It is underlined that the possible repercussions of inaction may have caused

substantial harm to the nation's economy and international security. The existence of illicit

activities, such as the drug trade, the possession of weapons, and identity theft, shows a clear and

serious impact to global [Link] transactions enabled the criminal operations on

Crimson Road to spread quickly, posing an immediate threat that required immediate action.

Postponing action may have worsened the situation and jeopardized both international and national

security.

Furthermore, it is submitted that there is clear causality between the Bitnero cyberattack and the

possible harm to national and international security, as Bitnero's use for illicit purposes directly

fueled the perceived threat and supported the need for prompt, focused action. The illegal use of

Bitnero not only breached Aventara's digital space but also had wider ramifications for worldwide

security and the potential economic harm and security risks associated with the activities on

Crimson Road, facilitated by Bitnero, provide a clear basis for Aventara's actions in self-defense.

And lastly, the exceptional nature of the threat posed by Crimson Road justifies the presumptive

legitimacy of its actions.

Henceforth, It is humbly submitted that the actions taken by EagleEye were a response to an

imminent and severe threat posed by the criminal use of Bitnero on Crimson Road and the de-

anonymization and detection of potential money laundering and terrorism financing was an

34
Compromis, ¶23.

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absolute necessity for national security. 35 Since they were taken in self-defense and as lawful

countermeasures under international law 36, Aventara cannot be held obligated to reimburse.

3. There was no use of force and breach of Sovereignty

It is respectfully submitted that the actions taken by EagleEye, which resulted in the devaluation

of Bitnero and the subsequent economic impact on Zimblia, did not amount to the use of force

within the meaning of Article 2(4)37 of the Charter of the United Nations. EagleEye's actions were

not a direct use of force against Zimblia, but rather a targeted response to a specific cyber threat

posed by Crimson Road. This nuanced distinction is consistent with the Tallinn Manual on the

International Law Applicable to Cyber Warfare, which recognises the need for a substantial use of

force to trigger the prohibition. 38

It is further submitted that the cyber-attacks, while having an economic impact, did not rise to the

threshold of an armed attack, and thus the principle of non-intervention remains unviolated, as the

devaluation of Bitnero was an unintended consequence of neutralising the imminent threat posed

by Crimson [Link] doctrine of unintended consequences mitigates the attribution of

responsibility for unforeseen consequences 39. The Chorzów Factory case 40emphasises that states

35
Compromis, ¶ 25.
36
Responsibility of States for Internationally Wrongful Acts, G.A. Res. 56/83, art. 25, U.N. Doc. A/RES/56/83, Annex
(Dec. 12, 2001); [hereinafter RSIWA 2001].
37
U.N. Charter art. 2, ¶ 4.
38
Schmitt, M. N. (2017) in Tallinn Manual 2.0 on the International Law Applicable to Cyber Operations. 2nd edn.
Cambridge: Cambridge University Press, Rule 14.
39
Suckling J, Hoolohan C, Soutar I and Druckman A (2021), “Unintended Consequences: Unknowable and
Uavoidable, or Knowable and Unforgivable? “Front. Clim. 3:737929. doi: 10.3389/fclim.2021.737929.
40
Factory At Chorzów, Germany v Poland, Judgment, Claim for Indemnity, Merits, Judgment No 13, (1928) PCIJ
Series A No 17, ICGJ 255 (PCIJ 1928), 13th September 1928.

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are responsible for injuries caused by their actions only if those injuries were the direct and

foreseeable result.

In addition, Aventara invokes the inherent right of self-defence recognised in Article 51 of the UN

Charter41. The Caroline Affair 42 and the principles of customary international law derived from it

establish that a State may act in self-defence against an imminent threat, provided that the response

is necessary and proportionate, and EagleEye's actions are consistent with these principles as they

were undertaken to counter an imminent and serious threat to its national security. Aventara's

action in deploying EagleEye underscores its adherence to international norms and efforts to

combat cyber threats by citing the Budapest Convention on Cybercrime 43.

Thus, Aventara's position is rooted in the prohibition of the use of force, the doctrine of unintended

consequences, and the inherent sovereign right of Republic of Aventara to self-defend against

cyber threats. Aventara's actions were consistent with international norms and aimed at

neutralising a clear and imminent cyber threat, thereby protecting its sovereignty in the digital

domain, and that it cannot be held liable for financial losses.

4. EagleEye's actions were to prevent criminal activities

It is contended that EagleEye's prime motivation was the prevention of criminal activity,

particularly money laundering and terrorist financing. This approach is consistent with the broader

international interest in combating illicit activities facilitated by cryptocurrencies. Acknowledging

41
U.N. Charter art. 51.
42
Jennings, R. Y. “The Caroline and McLeod Cases.” ,32 THE AMERICAN JOURNAL OF INTERNATIONAL
LAW, 1 (1938), pp. 82–99. JSTOR, [Link]
43
2225 U.N.T.S. 209: Council of Europe, Convention on Cybercrime, 23 November 2001 ETS No. 185.

MEMORIAL ON BEHALF OF THE RESPONDENTS 29

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the global consensus to combat financial crime, it is submitted that EagleEye's actions are

consistent with the collective effort to maintain the integrity of the international financial system.

Reference to international instruments such as the Financial Action Task Force (FATF) standards

supports the argument that states have a shared responsibility to prevent and combat money

laundering and terrorist financing 44, justifying EagleEye's [Link] Aventara cannot be

held liable to pay compensation for EagleEye’s legitimate actions.

5. There is lack of direct causation between the cyber-counter actions and the

financial losses

This argument is based on legal principles that emphasize the need for a direct causal link between

the allegedly wrongful act and the alleged loss. 45 even if EagleEye's actions contributed to the

devaluation of Bitnero, there is no direct causal link between the cyber-attacks and the financial

losses claimed by Zimblia.

Market dynamics and various other factors may have influenced Bitnero's devaluation

independently of the cyber attacks. A ZCC survey in March 2023 showed that only 14% of local

traders had made at least one Bitnero transaction, and that Zimblia had purchased a large amount

of Bitnero to hold as a reserve. 46These facts clearly indicate that it is unlikely that EagleEye's

actions were the sole cause of the devaluation.

Jakobi, Anja P. “Global Networks against Crime: Using the Financial Action Task Force as a Model?” ,70
44

INTERNATIONAL JOURNAL 3 (2015) , pp. 391–407. JSTOR, [Link]

45
Ilias Plakokefalos, “Causation in the Law of State Responsibility and the Problem of Overdetermination: In Search
of Clarity”, 6 EUROPEAN JOURNAL OF INTERNATIONAL LAW 2 (May 2015), Pages 471–
492, [Link]
46
Compromis, ¶10.

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The Trail Smelter Arbitration case47 establishes that liability must be established through a clear

chain of causation, and Aventara contends that the financial losses suffered by Zimblia cannot be

attributed solely to the cyber counter-measures, but are subject to multiple market forces. It is

therefore respectfully submitted that Aventara is not liable to pay any compensation.

Therefore it is humbly submitted before the honourable court that with respect to all the above

contentions, the Republic of Aventara is not obligated to reimburse the Republic of Zamblia for

the financial losses incurred due to the devaluation of Bitnero.

47
Arbitral Trib., 3 U.N. Rep. Int'l Arb. Awards 1905 (1941).

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PRAYER

Wherefore in light of the issues raised, arguments advanced and authorities cited, it is humbly

prayed that this Hon’ble Court may be pleased to hold, adjudge and declare that;

1. The Republic of Aventara has not violated the principle of state responsibility and they can

evade liability for the acts of EagleEye.

2. xDAO cannot be considered a sovereign state under international law.

3. The Republic of Aventara is not obligated to reimburse the Republic of Zamblia for the

financial losses incurred due to the devaluation of Bitnero as a result of the cyber-attack by

EagleEye.

and pass any other order it may deem fit in the interest of justice, equity, and good conscience.

All of which is humbly prayed,

Counsel for the Respondent.

MEMORIAL ON BEHALF OF THE RESPONDENTS 32