Electronic commerce

The enormous growth in the use of e-commerce over the last few years coupled with technical advances which are being made in this field has led the European Union to put forward a number of legislative proposals on e-commerce with a view to “creating a common and coherent legal framework by the year 2000”.  This has led to proposals for legislation dealing with a number of different aspects of electronic commerce, from the recognition and use of electronic signatures to encryption, distance selling, copyright and data protection.  These initiatives are being taken under the broad approach off removing obstacles to the proper functioning of the single market.  A number of areas are presently being considered and we should, within a relatively short period of time, see European legislation being implemented in Scotland dealing with these issues.

Electronic Signatures Directive

The EU adopted the Electronic Signatures Directive on 13 December 1999.  The purpose of the Directive is stated at article 1 as being to “facilitate the use of electronic signatures and to contribute to their legal recognition”, through the establishment of a legal framework for electronic signatures.  This is one of the EU initiatives (like the draft Electronic Commerce Directive and the draft Copyright Directive below) taken under the general auspices of article 95 of the Treaty on the approximation of laws to ensure the proper functioning of the single market.  The Directive deals with the legal effects of electronic signatures and specifies that Member States must ensure that such signatures cannot be denied enforceability on the ground that signature is in electronic form.  They would therefore be recognised in the same way as handwritten signatures and could be used as evidence in legal proceedings.  The Directive also provides that Member States may set up voluntary accredited schemes aimed at certification-service provision for the supply of electronic attestations linking the signature to the person and confirming the identity of that person.  The Society is involved with the body set up by the UK Notarial forum known as the CyberNotary Association.  The idea behind the scheme is to promote the use of notaries as suitable to provide the necessary authentication service by taking on the role of a certification service provider.

The Digital Signatures Directive will have to be transposed into national law by 19 July 2000.  However, in the UK, the Electronic Communications Bill is reaching the end of its passage through the Westminster Parliament.  Like the Directive, the Bill seeks to facilitate electronic commerce by providing for approval schemes for organisations providing cryptography services (forming the basis of electronic signatures).  The Bill also provides for the legal recognition of electronic signatures and gives Minister power to introduce secondary legislation providing for the removal of obstacles in other legislation to the use of electronic communications.

Draft Electronic Commerce Directive

This proposal is currently being considered by the European Parliament, the Council having adopted a Common Position on 28 February.  This Directive is, like the Electronic Signatures Directive, being promoted on the grounds of the removal of barriers from the single market.  Its stated aim is to contribute to the proper functioning of the Internal Market by ensuring the free movement of Information Society services between Member States.  It explicitly does not apply to taxation issues, data protection and competition law, amongst other things.  The provisions of the Directive regulate the information that must be provided by an electronic services provider (that is, according to Directive 98/34 any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services), deals with unsolicited commercial communications supplied by electronic mail and obliges Member States to ensure that contracts can be concluded electronically (with a number exceptions including contracts transferring land).  It also encourages the setting up of codes of conduct for service providers and the resolution of disputes (if possible, electronically) by means other than through the courts.

The proposed Brussels Regulation

The issue of how electronic commerce in cross-border transactions should be dealt with in the event of a dispute is also being considered in the context of jurisdiction in consumer contract disputes.  This area is currently governed by the 1968 Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters.  However, since the coming into force of the Treaty of Amsterdam, the EU has had the power to legislate directly in the area of civil jurisdiction and a Commission proposal has been put forward for a so-called Brussels Regulation which would replace the present Convention and be directly applicable in the EU Member States.

Article 13 of the present Convention, drawn up in an era when electronic commerce did not exist, provides that the relevant jurisdiction in consumer contracts is the consumer’s habitual country of residence if the conclusion of the contract was preceded by a specific invitation addressed to the consumer or by advertising, and the consumer took steps in his home state to conclude the contract.  The proposed Regulation, on the other hand, provides that the consumer’s home state will have jurisdiction if the provider by any means directs his commercial or professional activities to that state.  This provision would work in favour of consumers in situations where goods or services had been provided on-line, as the relevant jurisdiction would be the consumer’s home country.  However, the business community has lobbied the European Union claiming that these provisions would mean that anyone using electronic commerce to provide goods and services would potentially be obliged to litigate in any or all of the Member States.  Moreover, they claim that, although the Regulation deals with jurisdiction rather than applicable law as such, national courts have a tendency to prefer their own law and thus businesses may find themselves having to comply with the laws of 15 Member States.

There have been some calls for a moratorium for this provision pending the setting-up of an on-line dispute resolution service for consumer use. The fact remains that litigation under the Brussels Regulation will still be an extremely expensive matter which a consumer would probably have to think at least twice about before undertaking.  In a parallel move, the Portuguese Presidency of the EU has identified as a priority access for European citizens to faster systems of justice through alternative means of dispute resolution such as mediation and arbitration.  To this end, they have produced a working paper for discussion in the Council of Ministers and have also presented to the Council suggestions for improving judicial cooperation in civil cases.  The Commission has also announced that it would like to see the adoption of seven legislative proposals in the field of electronic commerce, including the establishment of an on-line dispute resolution mechanism, by the end of the year.

Draft Copyright Directive

The Commission produced in May 1999 an amended proposal for a Directive dealing with copyright issues in the “information society” (the original proposal dates from 1997 and had been the subject of much comment).  At the present time, it is being considered by the Council and the Portuguese Presidency has stated that it hopes that a common position will be reached during the first half of 2000.

Thereafter, it will be considered by the European Parliament and could be adopted by the end of this year or the beginning of 2001.

The purpose of the Directive will be to harmonise rules on rights of reproduction, the communication of protected material via the Internet and the protection of anti-copying and management systems designed to protect copyright material from devices designed to circumvent them.