INITIAL COMMENTS OF

THE UNITED STATES COUNCIL FOR INTERNATIONAL BUSINESS

ON THE PROPOSAL FOR A EUROPEAN DIRECTIVE ON CERTAIN LEGAL ASPECTS OF ELECTRONIC COMMERCE IN THE INTERNAL MARKET

(March 16, 1999)

The U. S. Council for International Business commends and strongly supports the European Commission on its effort to harmonize legal aspects of electronic commerce within the European Union.  A patchwork of laws serves as a significant barrier to electronic commerce by imposing overly burdensome costs on businesses; especially small and medium sized enterprises.   Therefore, a minimal and predictable legal framework is a prerequisite for building consumer trust in the online environment. 

USCIB members do have comments regarding specific issues addressed in the Proposed Directive which are outlined below.

Establishment and Information Requirements: 

As defined, an established service provider, is one “who effectively pursues an economic activity using a fixed establishment for an indeterminate time.”   It also states that “the presence and use of the technical means and technologies required to provide the service do not constitute an establishment of the provider.”   This definition provides a first step in insuring that business, especially SMEs can engage in electronic commerce without subjecting them to numerous regulatory regimes.  The concern of our members is that such a definition, though it reduces uncertainty, may have extraterritorial effect.  The potential extraterritorial effect is that the Directive could subject websites of an information service provider established in Europe with servers located outside of Europe to its provisions irrespective of where the server is located.

Our members fully support the principle of non-authorisation and the principle of country-of-origin, though we believe that the principle of the country-of-origin should be applied without exception. The potential ramifications of the application of a "country-of-destination" principle in the context of choice of law and choice of forum would place significant burdens on electronic commerce both within the E.U. and globally.  An obligation of compliance with the laws of many different countries would impose tremendous costs on business and would be prohibitively expensive for small and medium-sized enterprises, thus resulting in many companies voluntarily restricting their territories of operation.  Electronic commerce will not be a viable medium for commerce if every on-line transaction were subject to each set of laws in the jurisdiction of every member state.

Finally, information requirements should not inhibit the use of new and emerging online business models.  In addition, it is necessary to recognize that certain online businesses negotiate prices individually.  Therefore, a requirement that “prices of information society services must be indicated accurately and unequivocally”, could prevent such practices which can ultimately benefit online consumers.

Commercial Communications:

The lines between commercial content and informational content may be blurred given that the interactive nature of the electronic medium creates new paradigms for defining commercial communications.  In that regard, the definition of commercial communications:  “any form of communication designed to promote, directly or indirectly, goods, services or the image of a company (with exception of a domain name or an email address) is overly broad in that its reach could include a corporation’s and individual’s website, a large part of which may include informational content rather than commercial communications.  Such informational content assists consumers in making informed decisions.

Furthermore, the definition of commercial communications could be interpreted to have extraterritorial reach; it could be interpreted to apply to websites hosted outside of the E.U. but accessible in the E.U.  This could act as a barrier for SMEs to engage in global electronic commerce in that it would be overly burdensome for them to remain abreast of the regulations of the E.U. and all of its member states, let alone comply with those regulations.   Such SMEs, as well as other businesses, may then choose to restrict their area of operations.

Electronic Contracting:

The USCIB applauds the Proposed Directive’s recognition of electronic contracts.  Giving legal effect to electronic contracts according to a minimalist and predictable legal framework is essential to ensure the continued growth of electronic commerce.  Such a legal framework should be based on objective criteria.  The USCIB supports the UNCITRAL Model Law on Electronic Commerce and encourages governments to implement it.  This Directive could facilitate adoption of the Model Law by the Member States.  In addition, our members support UNCITRAL’s  continued work on methods to facilitate electronic contracts.

One issue of concern is that the exceptions specified in Article 9(2) are overly broad and could exempt public authorities from implementing electronic contracting.  Public authorities should embrace electronic contracting and serve as a model user in order to increase trust in the online medium so as to continue its growth and the benefits that derive from it.

Liability of Intermediaries:

Again, the USCIB applauds the efforts of the Commission to develop a balanced approach between strong copyright protection and all efforts to prevent unauthorized, illegal and copyright infringing activities and the apportionment of accountability/liability for copyright infringements over the Internet.  Failure to adopt a balanced framework may prevent content providers from distributing their works over the Internet and intermediaries from carrying information over their networks.  In general, the Proposed Directive works toward the objective of establishing a balanced framework.  However, in order to preserve the balance stated above, an intermediary should not be pre-empted from liability protection if it selects or modifies information contained in a transmission.  Information service providers routinely translate or select information based on pre-determined rules.  Finally, the Proposed Directive should address the limitation of liability for search engines or service providers providing hyperlinks.

Implementation:

USCIB members are encouraged by the continued support of the European Commission for voluntary codes of conduct and alternative dispute resolution mechanisms.  Market-driven, industry-led solutions are the best means of ensuring flexible solutions in a rapidly changing environment such as electronic commerce.  Voluntary codes of conduct are an essential element of self-regulation and thus are driven by market forces, including consumer preferences. Business recognizes that consumer trust and satisfaction in the online medium is an essential factor in ensuring the continued growth of electronic commerce.  The specific reference in the Directive to the inclusion of consumer associations in the development of codes of conduct ignores the market-driven nature of self-regulation.

Derogations:

In order to ensure legal predictability throughout the European Union, USCIB members encourage the European Commission to limit the derogations as much as possible.  The derogations for “contractual obligations concerning consumer contracts” and “unsolicited commercial communications by electronic mail, or by an equivalent individual communication” do not appear to be warranted in this instance.  In addition, the derogations listed in Art. 22(3a) are very broad and could lead to inconsistent implementation of the Directive within Member States, thereby defeating the rationale for this Directive.  Any such derogation should be limited and should be applied in a manner that is most consistent with the harmonization of the issues addressed in the Directive.

Conclusion

The USCIB appreciates the opportunity to offer its views on the Proposed Directive and looks forward to working with the European Commission to create an environment that ensures the continued growth of electronic commerce and its resulting benefits to the global economy and society. 

Thank you for your consideration.