Overview

The information technology (IT) revolution in the form of the Internet had an enormous impact on the means of conducting international commerce in the last decade of the last century. The use of electronic means for conducting sales was heralded as an economic boon to developed and developing nations alike. Suddenly, the commercial world had direct access to a global marketplace and they could exploit it in an efficient and economically advantageous manner. Politicians, policy makers and non-governmental organisations welcomed the Internet with open arms as providing an opportunity for raising the standards of living and providing a means of reducing the levels of poverty worldwide. Of course, the use of IT for conducting business and concluding contracts raises a number of legal issues – among them, the formation of contracts. A number of international organisations set out to iron out the legal uncertainties and difficulties with the intention to promote electronic commerce.

Chapter 3 highlights the policies of major trading partners – the US and the European Union (EU) – in respect of electronic commerce and the legal harmonisation brought about through the Model Law on Electronic Commerce formulated by the well-known international organisation United Nations Commission on International Trade Law (UNCITRAL). This chapter also considers, in brief, the EU Directive on E-Commerce and initiatives from other organisations, such as the International Chamber of Commerce (ICC) and the UN Convention on the Use of Electronic Communications in International Contracts.

Chapter 4 concerns itself with security issues relating to electronic transactions – the securing of an electronic transaction through the use of digital/electronic signatures and securing the electronic environment from external threats. The first half of this chapter examines digital signatures and UNCITRAL’s Model Law on Electronic Signatures. The second half considers international legislative developments in relation to computer crime.

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Chapter 3

Electronic Commerce – Legal Issues

and Harmonisation

Chapter Contents

Introduction

The mid-1990s was heralded by politicians, economists, law makers and commercial entities as ground-breaking for worldwide economic development. The reason, the opening of the Internet1 for public use. Information could now be freely circulated globally through computer networks provided people had the necessary skills and access to computer hardware and software to tap into information available on these networks. Creation of this open network imparted a new sense of living within a global community or a global village where people could be in constant touch, regardless of spatial and temporal differences. The Internet provided a ready platform for commerce to flourish – sellers could advertise their wares and services globally, and buyers, businesses and consumers alike2 had access to products at competitive prices. Sellers could provide product information, prices and delivery terms, and interested parties could negotiate terms and conclude contracts electronically. Direct access to a potentially large customer base meant that sellers did not have to opt for the traditional methods for selling their products – for example, use of agents to market their products in distant lands. Equally, buyers did not have to go through agents to find suitable manufacturers of products they required. The information and communications technology revolution was creating a new means of conducting business – namely, conducting commerce electronically or e-commerce.3

Emergence of any new technology raises interesting issues for policy makers, law makers and other stakeholders, more so where the technology is expected to have a wide economic impact and is readily embraced. The likely effects – social, moral and economic, among others – of the new technology must be assessed and decisions need taken on the extent to which its use must be regulated. It is a matter of striking a fine balance between the expected risks of the new technology and the opportunities created by it. The history of mankind is replete with instances of new technologies that have had enormous impact on society, and policy makers and law makers have stepped in to regulate the behaviour of those using the technology. The aviation industry is a good illustration where regulations were put into place early on to promote the development of the aviation industry and provide a minimum level of protection for air passengers.4

The Internet’s radical character is a challenge for policy makers and legislators. Lacking geographic containment, it knows no national boundaries. Information posted on a website in Borneo can be accessed within seconds from the United Kingdom (UK). As a truly global medium, it is a significant contributor to globalisation. As with globalisation, the logic of the Internet is economic.

This chapter highlights some US and EU policies in respect of electronic commerce (hereinafter ‘e-commerce’) and the legal harmonisation of specific issues relating to e-commerce at the UNCITRAL and EU levels, alongside the initiatives from international organisations, such as the ICC. It must be noted that the Internet raises a whole host of legal issues – for instance, the posting of pornographic and racist materials, data protection and intellectual property-related issues.5 These are not considered here, since they are outside the scope of this book.

1The Internet is a vast collection of interconnected computer networks that use a protocol known as TCP/IP. The Internet evolved from Advanced Research Projects Network ARPANET) – established by the US Department of Defense. It is a wide area

networking system that would survive nuclear attacks.

2 Of course, it must be stressed that online sales are equally affected by the export/import restrictions that affect offline sales. 3 Defined by the Organisation for European Co-operation and Development (OECD) thus: . . . [it] refers generally to all forms of commercial transactions involving both organisations and individuals, that are based upon the electronic processing and

transmission of data, including text, sound and visual images. It also refers to the effects that the electronic exchange of commercial information may have on the institution and processes that support and govern commercial activities (Electronic Commerce: Opportunities and Challenges for Governments, 1997, available at www.oecd.org).

4 See Chapter 10 for an international regulatory measure adopted widely in respect of carriage by air. 5 For further on this, see Lloyd, Information Technology Law, 6th edn 2011, OUP.