The Society for Computers and Law
Internet Interest Group
Comments on the Draft Electronic Commerce (EC Directive) Regulations 2002 and on the Guidance Notes issued to explain them
[The draft Regulations are available at http://www.dti.gov.uk/cii/docs/regulations.pdf,the guidance for business is available at http://www.dti.gov.uk/cii/docs/guidance.pdf.]
Introduction
The Society for Computers and Law is the leading UK organisation for the encouragement and development of law-related IT and IT-related law. The Internet Interest Group (“IIG”) is a part of the Society which concerns itself in particular with legislation and other regulation affecting the on-line environment.
A meeting was held on 11 April 2002 at which around 25 members of the IIG reviewed and considered the following documents:
· The Draft Electronic Commerce (EC Directive) Regulations 2002 (“the Regulations”); and
· The Interim Guide for Business issued in conjunction with the Draft Regulations (“the Guidance Notes”).
This document sets out some of the key observations and comments made by members of the IIG during and after that meeting.
General
The IIG notes that the Government proposes a literal transposition of much of the Directive on Electronic Commerce (2000/31/EC) (“the Directive”). This approach will of course leave open many of the questions of interpretation and effect raised by respondents to the first consultation exercise.
Although the IIG shares many of the concerns raised by respondents to the earlier consultation exercise and anticipates that there will be considerable uncertainty as to the nature and effect of certain provisions of the Directive and the Regulations, we confine ourselves in these observations to:
· Significant matters arising from the drafting of the Regulations themselves where this differs from the wording of the Directive; and to
· Certain respects in which we feel that the Guidance Notes could be enhanced so as to be of increased value to UK businesses.
Scope and Definitions (Regulations 2-4)
The IIG considers that the scope of the definition of “Information Society Services” is something that the European Court of Justice is likely to have to determine in due course and that certain types of business will therefore operate in a state of uncertainty for the time being. Although the Guidance Notes are helpful in drawing attention to the potential width of the definition (paragraphs 2.13 and 2.14 of the Guidance Notes in particular), neither the Regulations nor the Guidance Notes refer specifically to recital 18 of the Directive. Recital 18 is, in the IIG’s view, an important supplement to Recital 17 in understanding the definition of “Information Society Services”. To minimise a potentially serious uncertainty, the IIG suggests that the fact that Information Society Services are not solely restricted to services giving rise to on-line contracting but also, in so far as they represent an economic activity, extend to services which are not remunerated by those who receive them (as per Recital 18) is specifically mentioned in the definition of “Information Society Services”.
The Internal Market (Regulations 2-7)
The IIG generally supports the qualified country of origin approach of the Directive but is concerned that it may not have been implemented as intended by the Regulations. Whilst Article 1(4) of the Directive states that the Directive does not establish additional rules on private international law, it is arguable that this Article should be narrowly interpreted as a technical statement of fact rather than an operative provision. During the course of negotiations on the Directive, suggested wording expressly excluding private law entirely from the country of origin principle was specifically not adopted. Instead, the Commission carefully specified in the Annex to the Directive the areas of private law to which the country of origin principle would not apply.
Whilst Regulation 5 is a word for word transposition of Article 1(4), its positioning in the Regulations suggests that it is an operative provision making the Regulations subject to private international law. Paragraphs 3.5 and 3.6 of the Guidance support this interpretation. Further, in Article 7, which deals with the applicability of English law to service providers established in England, the concept of enforcement authorities (which specifically exclude the courts) has been introduced. The implication may be that the country of origin principle only applies in the field of regulatory law.
In any event, the IIG considers that it may be difficult for businesses (other than those taking specialist legal advice) to be sure under the wording of the Directive itself as to the extent to which compliance with UK law will ensure that no action can be taken against them abroad.
Since businesses tend to address compliance risks by reference to specific commercial situations, the Guidance Notes could perhaps be supplemented so as to clarify the extent to which “country of origin” principles apply in relation to common on-line trading risks, for example:
· Data protection compliance
· Trading standards legislation
· Defamation litigation
· Telecommunications licensing
· Codes of self-regulation on advertising and marketing
· Prosecutions for unfair competition
· Copyright and/or trade mark infringement.
Some of the above risks (for example the last one) are clearly outside the scope of the Directive altogether. Others are within the scope of the Directive but might be subject to exceptional action under Article 3(4).
General Information to be provided
Paragraph 5.3 of the Guidance Notes contains some helpful observations on how businesses can deal in practice with the compliance problems raised by the limitations of certain technologies such as SMS and by the requirement applicable to all platforms to provide permanent access to information.
However, given that the Guidance Notes have no legal force, the IIG suggests that any significant derogation from the Regulations intended by the Government ought to be expressed within the Regulations themselves, and not simply exist as a note.
Given the importance of mobile technologies for the development of e-commerce (particularly in a wireless environment), the IIG in particular suggests that consideration be given for example to the possibility of including an additional sub-regulation which would specifically state that those providing Information Society Services would be able to rely on different (but coexisting) means to meet the requirements of Regulation 8.
Commercial Communications and Unsolicited Commercial Communications
The definition of “Commercial Communication” is wide and will encompass activities on a wide range of technology platforms, for example Web sites, e-mail, banner advertising, pop-ups and SMS text messages. The requirement for each commercial communication itself to provide the information referred to appears to rule out, for example, teaser campaigns in Web site banner advertisements. The Guidance Notes could be enhanced to contrast the requirements of Regulation 9 (by which information must appear in the commercial communication itself) with those of Regulation 8 (by which information may, so paragraph 5.3 of the Guidance Note suggests, be made accessible on a supporting Web site).
The Government has not transposed the provisions of Article 7(2) of the Directive concerning the adoption of measures to ensure regular consultation and use of opt-out registers, stating (in paragraph 5.10 of the Guidance Notes) that existing self-regulation and codes of conduct provide effective protection. Although the IIG is aware of, for example, the codes of practice of the Direct Marketing Association and of the service offered by the e-MPS (although at present this service appears to be provided by the Direct Marketing Association established in the USA – see http://www.e-mps.org/en/), it believes that awareness of these resources is low among businesses and suggests that the Guidance Notes might make specific reference to the relevant self-regulatory bodies and codes of practice. Furthermore, the IIG queries whether the existence of industry self-regulation and codes of conduct justifies the decision not to transpose Article 7(2) at all, since this Article is specifically aimed at encouraging businesses to abide by any such self-regulation and/or codes.
Contract formation
Regulations 11 and 13 are effectively literal transpositions of the corresponding wording of the Directive. Although no new issues are therefore raised on the drafting, the IIG anticipates that there will be considerable difficulties of interpretation in practice.
Remedies
Regulations 15 and 16 are new in the Draft Regulations and provide significant remedies for persons affected by breaches of Regulations 8, 9, 10, 11(1) and 13(1)(a).
These remedies appear to be available to persons acting in the course of a business (as opposed merely to consumers as is the case for example under the Consumer Regulations (Distance Selling) Regulations 2000). The scope for commercial disputes appears therefore to be significant and the potential sanctions flowing from a compliance failure could in some cases be disproportionate to the damage suffered by the aggrieved recipient. In particular the open ended right of contract cancellation appears to give to businesses greater remedies than those made available to consumers under the Distance Selling Regulations, in some cases for entirely technical breaches by the service provider. If a right of cancellation is appropriate in certain circumstances, the IIG suggests that consideration be given to limiting that right by time (for example, a limit of three months would be broadly consistent with the provisions of Regulations 11 and 12 of the Consumer Protection (Distance Selling) Regulations 2000).
Intermediary Service Provider Liability
Regulations 17 to 19 adopt the formulation that the intermediary service provider shall not be liable in damages in certain situations (our italics). The provisions of Articles 12 to 14 of the Directive are not restricted to damages claims, but appear to provide a wider ranging immunity subject only to the right of the courts to grant injunctions in appropriate cases.
It appears that intermediary service providers could potentially be liable in the UK to actions, for example, seeking declaratory relief and costs. Although the courts will typically have jurisdiction to consider such actions on their merits and punish unmeritorious claims with negative orders for costs, intermediary service providers will nevertheless have to deal with those claims as they are made. In this context, the IIG notes that the costs of litigation in the UK are frequently higher than those in other Member States and can form a significant part of a party’s overall liability at the conclusion of litigation.
In any event, and subject to the above questions in relation to costs, the IIG considers that it may continue to be appropriate for the Courts to grant Norwich Pharmacal [[1994] 1 AC 133] style orders even where the ISP has the benefit of the mere conduit, caching and hosting provisions of Regulations 17 to 19.
The IIG also notes that further legislation in this area will be necessary to implement the provisions of the Directive on Copyright in the Information Society.
Concluding Note
The IIG is grateful for the opportunity to provide these short comments on new issues arising from the draft texts published by the Government.
Eduardo Ustaran Ian Jeffery
IIG Chairman IIG Committee Member
Berwin Leighton Paisner Lewis Silkin
Adelaide House, London Bridge 12 Gough Square
London EC4R 9HA London EC4A 3DW
Tel: 020 7760 1000 Direct Tel: 020 7074 8042
Fax: 020 7760 1111 Direct Fax: 020 7832 1770
DX: 92 London DX: 182 Chancery Lane
e-mail: eduardo.ustaran@blplaw.com e-mail: ian.jeffery@lewissilkin.com
2 May 2002
