Electronic Commerce Directive

The Electronic Commerce Directive (aka e-Commerce Directive; Online Services Directive) 2000/31/EC allows an online intermediary to exempt themselves from liability if they are not responsible for content transmitted via their services because they are a "mere conduit" for the content, or if they are merely "caching" or "hosting" it.

The E-Commerce Directive (2000/31/EC)

e-Commerce offers tremendous opportunities for economic growth and employment and the potential for new information technology is enormous. The borderless nature of cyberspace caused a great amount of legal uncertainty pertaining to which laws apply to services provided over the internet. The legal uncertainty and divergence of national laws might result in traders being subject to a multitude of laws that could eventually discourage business conducted on the internet.

Taking these problems into account, in April 1997 the Commission issued a communication on ‘A European initiative in electronic commerce’, which was followed in 1998 by a proposal for a ‘Directive on certain legal aspects of electronic commerce in the internal market’. After hearing the opinion of the European Parliament, the Commission adopted an amended proposal in September 1999 and finally the ‘E-Commerce Directive’ was adopted on 8 June 2000. The directive came into force on 17 July 2000 and Member states had a deadline of 17 January 2002 for transposition.

The Directive applies to Member States of the European Economic Area (EEA) which includes the 27 Member States of the European Union plus Norway, Iceland and Lichtenstein.

Aim of the Directive

The Directive was introduced to clarify and harmonise the rules of online business throughout Europe. The aim of the Directive is to ultimately encourage greater use of e-commerce by tearing down barriers that exist across Europe and to boost consumer confidence by clarifying the rights and obligations of both consumers and businesses.

Scope of The Electronic Commerce (EC Directive) Regulations 2002

The Electronic Commerce (EC Directive) Regulations 2002 which came into force on 21st August 2002 transpose the main requirements of the E-Commerce Directive into UK law.

The Regulations apply to “information society services”. “These are defined as any service normally provided for remuneration at a distance, by means of electronic equipment for the processing (including digital compression) and storage of data, at the individual request of a recipient of a service”

This includes most types of online and information services such as:

• Advertisement of goods or services online (i.e. Via internet, email, interactive television, or mobile telephone)

• Sale of goods or services on the internet or by email, irrespective of whether the goods or services are delivered electronically

• Transmitting or storing electronic content or providing access to a communications network

Important points about specific exclusions and omissions

• There are either complete or partial exclusions from the Regulations relating to various areas including, taxation, gambling, lotteries, real estate, public notaries, court proceedings, data protection, cartel laws or conflict of laws. A practical example of this is if content is the subject of a complaint under the Data Protection Act, it could be a possibility that the host would not be able to enjoy the intermediary liability protection afforded by the E-Commerce Directive.

• The Regulations covers services provided to businesses and to consumers, but it is possible to contract out of some specific requirements regarding services provided to businesses.

• The requirement for an information society service to be “normally provided for numeration” is not restrictive in its scope to services giving rise to buying and selling online. It also extends to services that that are not directly remunerated by those who receive them such as those offering online information or commercial communications or by the provision of tools that allow for search, access and retrieval of data.

• The service must be provided “at the individual request of the recipient of the service” and as a result this excludes ordinary broadcast television, but instead will include many interactive television services.

What are the Regulations functions?

The provisions of the Regulations deal with the following issues:

• Establishment of an internal market for information society services

• Information requirements

• Online contracts

• Liability of online service providers

Establishment of an internal market for information society services

The Regulations apply a ‘country’ of origin principle in deciding whose laws apply in cross border transactions. This means that the provider of an information society service is subject to the laws in the Member State in which it was established rather than the laws of the States to which the services are delivered. Put simply, a UK business only needs to comply with UK law thus allowing them to ignore the laws of all the other Member States.

Exceptions to the country of origin principle:

The country of origin principle is subject to a variety of exceptions. The Regulations do not affect the rights of consumers in other Member States under laws concerning consumer contracts, or the ability to bring legal action in their own jurisdiction. Practically speaking, a UK based e-commerce site should have terms and conditions that comply with every Member State in which consumers are able to purchase its’ products. An example of this is if a site had to sell products to German consumers, then it would have to provide its set of terms and conditions in the German language and in compliance with German laws.

Further exceptions to the country of origin principle:

• The freedom of parties to choose the applicable law of the contract governing the provision of services

• Copyright and other intellectual property related issues

• The permissibility of unsolicited commercial emails (spam)

• E-money and Real Estate Transfers

A Member State also possesses the ability to override the Country of Origin principle and assert its own laws against a supplier in another Member State for the following reasons of:

• Public policy

• Protection of public health

• Public and national security

• Protection of consumers

Information Requirements:

The Information Requirements are divided into 3 categories:

• General information to be provided by any information society service provider

• Commercial communications

• Electronic contracting

General information requirements

This requires the information service provider to provide the recipient of the service with the following information in a form that is easily, directly and permanently accessible:

a) The name of the service provider (if it differs from the trading name then this should be explained)

b) The geographic address at which the service provider is established

c) Contact details that will facilitate direct and effective communication, including an e-mail address. It is insufficient to have a ‘Contact Us’ form without a valid e-mail address provided

d) If the service provider is registered on a public register, the registration number or equivalent details should be given

e) If the service provider exercises a regulated profession, details of the service provider’s professional body, title, Member State where the title was granted and information as to how to access the professional rules applicable to the service provider should be provided

f) If the company has a VAT number it should be provided irrespective of whether the website is being used for e-commerce transactions or not

Commercial Communications

Commercial communication being sent as part of an information society service by an information society provider must:

a) Be clearly identifiable as a commercial communication

b) Clearly identify that the communication is a promotional offer, or promotional competition or game, and make conditions clear, unambiguous and accessible

c) Clearly identify on whose behalf the communication is being sent

Online Contracting

A requirement of the Directive is that every member State must ensure that their legal system allows contracts to be concluded online and must also ensure that contracts are not deemed invalid merely on the grounds that it is electronic. When concluding contracts online an information service provider is required to provide the following information in a clear, comprehensive and unambiguous manner:

a) The technical steps to follow to conclude the contract in order for recipients to be aware at the point at which the commit themselves

b) Whether or not the contract will be filed by the service provider and whether it will be accessible

c) The technical means for identifying and correcting input errors prior to placing the order

d) Languages offered for the conclusion of the contract

e) Relevant codes of conduct to which the service provider subscribes and details of how these may be accessed electronically

Enforcement of Information Requirements

A breach of the various information requirements and related provisions of the Regulations may result in the following consequences:

• The recipient may be allowed to cancel the contract where there is a failure to provide a means to identify and correct input errors in relation to the online contract

• As of October 2002, the Director General of Fair Trading and certain consumer groups have the ability to apply for “Stop Now” orders to prevent infringements which harms the consumers’ collective interests

• The recipient of the service may be entitled to bring an action for damages for breach of statutory duty

Liability of Intermediaries

The Regulations provide exemptions from liability for damages and criminal liability for online service providers in the following circumstances:

• Mere Conduit

• Caching

• Hosting

Mere Conduit

The mere conduit exemption applies if the service provider plays a passive role as a conduit of information provided by others. The service provider will not be liable for damages or for any other pecuniary remedy or for any criminal sanction:

• Where the service of a business comprises of either a transmission in a communication network of information which has been provided by a recipient of the service (e.g. an ISP transmitting a customers e-mail) or where the service comprises of the provision to access to a particular communication network (e.g. an ISP or Telco)

• If the service provider did not initiate the transmission or select the receiver of the transmission

• If the service provider did not select or modify the information contained in the transmission (except for modifications of a truly technical nature)

No general obligation to monitor

Article 15 states that states may not impose a general obligation on providers to monitor the information they transmit or store.

1. Member States shall not impose a general obligation on providers, when providing the services covered by Articles 12, 13 and 14, to monitor the information which they transmit or store, nor a general obligation actively to seek facts or circumstances indicating illegal activity.

2. Member States may establish obligations for information society service providers promptly to inform the competent public authorities of alleged illegal activities undertaken or information provided by recipients of their service or obligations to communicate to the competent authorities, at their request, information enabling the identification of recipients of their service with whom they have storage agreements.

UK implementation

• The Electronic Commerce (EC Directive) Regulations 2002

See also

• wikipedia: Electronic Commerce Directive (EU)