Digital States, where nationalities are forged by ideology rather than geography.
The modern notion of statehood as we know it is rooted in the Treaty of Westphalia that concluded the European religious wars in 1648. Statehood is the core of the current international legal system, because the entire international legal system was originally conceived as a system of rules governing the relations of states.
However, the world has changed tremendously since 1648. We have gone through three industrial revolutions and the incoming fourth industrial revolution is already blurring the lines between the physical and digital worlds. Technological revolution today gives rise to a new concept of a “Digital State”, which is an idea of building states online which are not geographically demarcated. The idea is not entirely novel, but it has resurged recently given the advancement in our technological capabilities as well as the change in the political and environmental climate that the world is currently facing.
We are witnessing increasing movement of people across countries due to globalisation and humanitarian crises. It is estimated that there could be as many as 200 million climate-change refugees by 2050. At the same time, a substantial number of people are connected to each other via the internet. Hence, the question arises as to whether it is possible to build a state that is based on proximity of ideas on cyberspace instead of a traditional state that is build on proximity of distance?
Tech companies and sovereign nations alike are now exploring the idea of having such a digital state. Some of these movements are even going one step further by trying to do away with statehood or nation-states altogether. An example would be Bitnation which allows people to create and join virtual nations with the advantage of a decentralised nature of blockchain technology. Hence, this article shall attempt to examine how the concept of a“Digital State” fits into the concept of statehood under the rules of modern international law.
II. THE CASE OF ESTONIA: THE DIGITAL EUTOPIA
The key actor in this disruption is Estonia, a small Baltic country in Northern Europe which is heralded as the “most advanced digital society in the world”. The country is so technologically advanced that there are only three things which you cannot do online in Estonia—getting married, getting divorced and buying real estate. Although it is still not as technologically advanced as Marvel’s Wakanda nor is the country rich in vibranium, Estonia has made astounding strides in digitalising their entire country. Internet access was declared a basic human right in 2000, e-tax was introduced in the same year, voting for their national elections was conducted online beginning from 2005 and the country has been using blockchain technology since 2008, a year before blockchain was used to fuel the creation of bitcoin. That’s how ahead Estonia is in the digital curve.
Estonia now aims to build a borderless digital society through its e-Residency platform. The platform is open to foreigners from anywhere in the world regardless of citizenship. Anyone in the world can now apply to become an e-Resident of Estonia only by submitting an application online together with €100. You will be given a government-issued digital ID which allows you to tap into Estonia’s digital services just like any fellow Estonians from wherever you are located in the world. One of the main selling points of the e-Residency program is that it allows foreigners to establish and manage their business online while enjoying the benefit of the EU business environment, of which Estonia is a part.
Since the program’s launch in 2014, it has reached more than 54,000 e-residents from 162 different countries and it has an ambitious aim to reach 10 million virtual residents by 2025. These e-residents have set up 6000 businesses and have also contributed about €14 million through taxes to Estonia’s Gross Domestic Product (GDP).
Being a totally paperless nation, Estonia backs up the whole nation’s data in “data embassies” that are scattered around the world. These data embassies function like normal embassies and the data embassies will be fired up in the event of a national emergency. This means that if Estonia faces an attack or an invasion, the entire government or the entire country can simply go into hibernation and be rebooted when the time is right. The entire government and the country will still be able to continue to run without a hitch even when the country’s physical boundaries have been compromised.
III. CRITERIA FOR STATEHOOD UNDER INTERNATIONAL LAW
Under international law, states are the only entities that are considered subjects of international law par excellence. This means that states are the only subjects of international law that are fully capable of having all four of the main capacities of an international legal person. The four main capacities are: (1) the ability to make claims before international tribunals in order to vindicate rights given by international law; (2) to be subject to all of the obligations imposed by international law; (3) to have the power to make valid international agreements binding in international law; and (4) to enjoy the immunities from the jurisdiction of the national courts of other states.
A state automatically obtains all of the capacities above upon achieving statehood. However, there are no comprehensively accepted definitions of what constitutes a “state” under international law. The Arbitration Commission of the European Conference on Yugoslavia in its opinion declared that “the state is commonly defined as a community which consists of a territory and a population subject to an organised political authority” and that “such a state is characterised by sovereignty”.
The most widely accepted criteria for the creation of statehood is enshrined in the Montevideo Convention on Rights and Duties of States 1933. According to the convention, the following qualifications must be present for the creation of a state: (1) a defined territory; (2) a permanent population; (3) a government; and (4) the capacity to enter into relations with other states. These four qualifications are not conclusive on their own and there are other factors to be taken into account, such as recognition of other states, and whether the formation of the state is in accordance with principles of international law.
A. A Defined Territory
One of the necessary attributes of a State is that it needs to have physical presence. The focus here is on the requirement for a particular territory upon which the state is based to operate. A state is required to possess some independent physical territory although the minimum area of territory needed is not prescribed. Hence, states may occupy an extremely small area as their territory. An example of States with extremely small area would be Monaco with only 1.5 square kilometers of territory and Nauru which encompasses only 21 square kilometers of area.
In addition to that, claims over the extent of the territory of states do not affect the validity of statehood. States may exist even though there are disputes over the whole of the territory of the State or the extent of the boundaries of the State. This has been confirmed by the International Court of Justice (ICJ) in the North Sea Continental Shelf case. It was held that there are no rules that dictate that the land frontiers of a State must be fully delimited and defined. 
This requirement that States must possess an independent physical territory would be the main stumbling block for digital states, such as Bitnation, that exist solely in cyberspace to achieve statehood under the current rules of international law. It seems that only existing sovereign nations such as Estonia, which have physical territories will be able to fulfill this requirement.
B. A Permanent Population
There is no minimum limit prescribed for the requirement of a permanent population. There are countries with small populations such as Nauru which only has a population of around 6000 people when it gained independence in 1969.
Furthermore, in the Western Sahara case, the ICJ considered nomadic tribes as part of the population even though they roam freely without regard to land boundaries because of the nomads’ link with the territory in question.
Applying the observation of the ICJ in the Western Sahara case, it can be construed that the virtual residents of digital states, such as Estonia’s e-residency programme, will be able to fulfill the requirement of a permanent population. This is because these e-residents are able to access all of Estonia digital services like a fellow Estonian who physically resides in the country, even though they may have never stepped foot in Estonia’s physical territory before.
C. A Government
This criterion requires that an entity must have an effective government in place before it can be regarded as a state. This is important because the government is the primary body responsible for compliance with the international rights and duties of a state. An effective government refers to a government that is able to exercise control over its permanent population.
The effective government requirement will not pose as a problem to digital states like Estonia which already have political organs in existence which are responsible to govern the country. However, a possible issue may arise for digital states that run on the notion of self-managed individuals, such as a Bitnation, that does away with a governing entity.
D. Capacity to enter into relations with other states
This qualification requires that the entity will have to gain legal independence in a lawful manner. Capacity to enter into relations follows suit after the achievement of independence. Attainment of independence is also important to an entity wishing to become a state, because it is a formal statement to show that the entity is not subject to the sovereignty of other states. The manner in which legal independence is obtained must comply with the principles of international law, such as the prohibition of the use of force and the prohibition of racial discrimination. Otherwise, the entity will not be regarded as a state.
Hence, to satisfy this requirement, a digital state will have to show that it is independent, not subject to the influence of other states and is founded in line with the principles of international law, such as non-use of force and non-discrimination.
In addition to fulfilling all the above criteria for the creation of statehood, recognition of other states is also a relevant factor in the formation of statehood. The relationship between the role of recognition and statehood is, however, a complicated one. The two opposing main theories that deal with the legal effect of recognition—the constitutive theory and the declaratory theory—have been characterised as the “great debate” in international law. Based on the constitutive theory, recognition is status-creating which means that states will only be brought into existence upon recognition of other states. However, the declaratory theory states that recognition is merely status-confirming and that recognition has no legal effect.
Nevertheless, the predominant theory today is the declaratory theory which means that the recognition, or the lack of which, by other states will not affect the statehood of a particular state. The declaratory theory is also reflected in Article 3 of the Montevideo Convention which provides that the political existence of the states is independent of recognition by the other states.
Therefore, if a digital state fulfills all the four criteria above, recognition of other states will not pose as a problem against the validity of the statehood of a digital state. However, non-recognition may result in other states withholding optional relations from the digital state, such as the treatment given to states like North Korea.
The concept of statehood under international law as it stands now is grounded upon territorial effectiveness and this is reflected in the criteria of statehood which requires that states must have “a defined territory”. This requirement of an independent physical territory will be the major hurdle for digital states that exist fully on the cloud to be recognised as a “state” in the current international legal system.
The rise of these digital states in the coming years will force us to rethink the concept of statehood from one that is based on proximity of physical distance to one that is based on proximity of values and ideas. Furthermore, digital states built upon the notion of decentralised governance will reshape how we see governance by effectively removing the need for conventional government leaders.
As the adoption of digital states is still very much in its infancy, moving forward, it will be very interesting to see the development of digital states and its interaction with traditional states as well as international organisations, such as the United Nations.
Written by Yeap Yee Lin, final year law student of the Faculty of Law, University of Malaya.
Edited by Tan Jia Shen.
Disclaimer: The opinions expressed in this article are those of the author and do not necessarily reflect the views of the University of Malaya Law Review, and the institution it is affiliated with.
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 Opinion No. 1 of the Arbitration Commission of the European Conference on Yugoslavia.
 Shaw, Malcolm N., International Law, 8th Ed., (Cambridge: Cambridge University Press, 2017).
 165 LNTS 19.
 The Montevideo Convention on the Rights and Duties of States , opened for signature 26 December 1933, art(1)
 Crawford, J, “The criteria for statehood in international law”, 1977 48(1) British Yearbook of International Law 93-182.
 See footnote 14, p158.
 The proposition that a State exists despite claims to the whole of its territory was not challenged in the case of Kuwait and Mauritania. Husain Al Baharna, The Legal Status of the Arabian Gulf Status: A Study of Their Treaty Relations and Their International Problem, (United Kingdom, Manchester University Press: 1968) pp 250-258.
 An example would be Israel who refuses to put limits to her claim to territory as against Palestine.
 North Sea Continental Shelf Cases (Federal Republic of Germany v. Denmark; Federal Republic of Germany v. Netherlands), I.C.J. Reports 1969, p.3.
 Data: Nauru, The World Bank, 6 June 2019 and < https://data.worldbank.org/country/nauru >
 Western Sahara, Advisory Opinion 1975 I.C.J. 12 (Oct. 16)
 Crawford, J., The Creation of States in International Law, 2nd Ed., (United Kingdom: Oxford University Press, 2007)
 Cohen, R., “The Concept of Statehood in United Nations Practice”, (1961) 109 University of Pennsylvania Law Review 1127-1171.
 See Bitnation’s whitepaper. Tempelhof, S.T., et. al., “Pangea Jurisdiction and Pangea Aribtration Token (PAT): The Internet Sovereignty”, 1-42, April 2017, Bitnation, 6 June 2019 and < https://github.com/Bit-Nation/Pangea-Docs/raw/master/BITNATION%20Pangea%20Whitepaper%202018.pdf >
 Austro-German Customs Union case (1931) OCIJ, Series A/B, No. 41, pp. 41 (Court’s Opinion) and 57-8 (Separate Opinion of Judge Anzilotti)
 Charter of the United Nations art2(4). The independence of the Turkish Republic of Northern Cyprus (TRNC) which was obtained through the use of force by Turkey remains not recognized by the international community.
 The creation of Bantustan States in south Africa which were created as part of the apartheid policy in South Africa run afoul of the principle of non-discrimination under international law.
 Anthony Murphy and Vlad Stancescu, “State formation and recognition in international law”, (2017) 7(1) Juridical Tribune 6-14.
 Talmon, S., “The constitutive versus the declaratory theory of recognition: tertium non datur?”, (2005) 75(1) The British Year Book of International Law 101-181.
 The declaratory theory has also been affirmed in the cases of Tinoco Claims Arbitration (Great Britain v Costa Rica) 1 U.N. Rep. Int’l Arb. Awards 369 (1923) and Duetsche Continental Gas-Gesellschafts v Polish State (1929) 5 A.D. 11.