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[FYI] CEC proposes legal framework for EC


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Electronic commerce: Commission proposes legal framework

 DN: IP/98/999     Date: 1998-11-18

     TXT: FR EN
     PDF: FR EN
     Word Processed: FR EN


Brussels, 18 November 1998 

Electronic commerce: Commission proposes legal framework

A proposal for a Directive to establish a coherent legal framework for
the development of electronic commerce within the Single Market has
been put forward by the European Commission. The proposed Directive
would ensure that information society services benefit from the Single
Market principles of free movement of services and freedom of
establishment and could provide their services throughout the European
Union (EU) if they comply with the law in their country of origin.
Such services are defined as those provided normally against
remuneration, at a distance, by electronic means and in response to
the individual request of a customer. The proposed Directive would
establish specific harmonised rules only in those areas strictly
necessary to ensure that businesses and citizens could supply and
receive information society services throughout the EU, irrespective
of frontiers. These areas include definition of where operators are
established, electronic contracts, liability of intermediaries,
dispute settlement and role of national authorities. In other areas
the Directive would build on existing EU instruments which provide for
harmonisation or on mutual recognition of national laws. The Directive
would apply only to service providers established within the EU and
not those established outside. 

"The Single Market's legal framework, combined with the single
currency, provide the European Union with a unique opportunity to
facilitate the development of electronic commerce", commented Single
Market Commissioner Mario Monti. "Electronic commerce adds a new
dimension to the Single Market for consumers in terms of easier access
to goods and services of better quality and at lower prices.
Electronic commerce will promote trade, stimulate innovation and
competitiveness and create sustainable jobs. This proposal should
ensure that the Union reaps the full benefits of electronic commerce
by boosting consumer confidence and giving operators legal certainty,
without excessive red tape." 

The global electronic commerce market is growing extremely fast and
could be worth ECU 200 billion by the year 2000. Worldwide, 86 million
people were connected to the Internet by the end of 1996 and by 2000,
this is expected to reach 250 million individuals. Within the EU, it
is estimated that more than 400,000 jobs related to the information
society were created between 1995 and 1997 and that one in four news
jobs is derived from these activities. 


The proposal for a Directive, which was foreseen in the Commission's
April 1997 electronic commerce Communication (see IP/97/313), covers
all information society services, both business to business and
business to consumer services, including services provided free of
charge to the recipient e.g. funded by advertising or sponsorship
revenue and services allowing for on-line electronic transactions such
as interactive teleshopping of goods and services and on-line shopping
malls. Examples of sectors and activities covered include on-line
newspapers, on-line data-bases, on-line financial services, on-line
professional services (such as lawyers, doctors, accountants, estate
agents), on-line entertainment services such as video on demand,
on-line direct marketing and advertising and services providing access
to the World Wide Web. 


The proposal would define the place of establishment as the place
where an operator actually pursues an economic activity through a
fixed establishment, irrespective of where websites or servers are
situated or where the operator may have a mail box. This definition is
in line with the principles established by the EU Treaty (Article 52)
and the case law of the European Court of Justice. Such a definition
would remove current legal uncertainty and ensure that operators could
not evade supervision, as they would be subject to supervision in the
Member State where they were established. The proposal would prohibit
Member States from imposing special authorisation schemes for
information society services which are not applied to the same
services provided by other means. It would also require Member States
to oblige information society service providers to make available to
customers and competent authorities in an easily accessible and
permanent form basic information concerning their activities (name,
address, e-mail address, trade register number, professional
authorisation and membership of professional bodies where applicable,
VAT number). 

On-line contracts 

For electronic commerce to develop its full potential, it must be
possible for contracts to be concluded on-line unrestricted by
inappropriate rules (such as a requirement that contracts be drawn up
on paper). The proposal would therefore oblige Member States to adjust
their national legislation to remove any prohibitions or restrictions
on the use of electronic media for concluding contracts. In addition,
the proposal would ensure legal security by clarifying in certain
cases the moment of conclusion of the contract, whilst fully
respecting contractual freedom. These provisions would complement the
proposal for a Directive on electronic signatures (see IP/98/423). 

Liability of intermediaries 

To facilitate electronic commerce, it is necessary to clarify the
responsibility of on-line service providers for transmitting and
storing information from third party (i.e. when service providers act
as "intermediaries"). 

To eliminate existing legal uncertainties and to avoid divergent
approaches at Member State level, the proposal would establish an
exemption from liability for intermediaries where they play a passive
role as a "mere conduit" of information from third parties and limit
service providers' liability for other "intermediary" activities such
as the storage of information. The proposal strikes a careful balance
between the different interests involved in order to stimulate
co-operation between different parties and so reduce the risk of
illegal activity on-line. 

Commercial communications 

Commercial communications such as advertising and direct marketing,
which are an essential part of most electronic commerce services,
would be subject to clearly defined rules under the proposed
Directive. The proposal defines what constitutes a commercial
communication and makes it subject to certain transparency
requirements to ensure consumer confidence and fair trading. In order
to allow consumers to react more readily to harmful intrusion, the
proposal requires that commercial communications by e-mail are clearly
identifiable. In addition, for regulated professions (such as lawyers
or accountants), the proposal lays down the general principle that the
on-line provision of services is permitted and that national rules on
advertising shall not prevent professions from operating Web-sites.
However, these would have to respect certain rules of professional
ethics which should be reflected in codes of conduct to be drawn up by
professional associations. 


Rather than inventing new rules, the proposal would seek to ensure
that existing EU and national legislation were effectively enforced.
The development of a genuine Single Market based on mutual confidence
between Member States - is stimulated by strengthening enforcement
mechanisms. The proposal would seek to do so by encouraging the
development of codes of conduct at EU level, by stimulating
administrative co-operation between Member States and by facilitating
the setting up of effective, alternative cross-border dispute
settlement systems. The proposal would also require Member States to
provide for fast, efficient legal redress appropriate to the on-line
environment and to ensure that sanctions for violations of the rules
established under the Directive were effective, proportionate and

Mutual recognition/derogations 

The proposed Directive would clarify that the Single Market principle
of mutual recognition of national laws and the principle of control in
the country of origin must be applied to information society services
so that such services provided from another Member State are not
restricted for reasons falling within the scope of the proposal which
would not cover taxation, personal data (the free movement of which is
covered by Directive 95/46 see IP/98/925), the activities of notaries,
representation and defence of clients before a court, gambling
activities. Furthermore, the proposed Directive would not interfere
with the application of the Brussels Convention on jurisdiction,
recognition and enforcement of judgements in civil and commercial
matters and the Rome Convention on the law applicable to contractual

The proposed Directive would also allow Member States on a case by
case basis to impose restrictions on information society services
supplied from another Member State if necessary to protect the public
interest on grounds of protection of minors, the fight against hatred
on grounds of race, sex, religion or nationality, public health or
security and consumer protection. However, such restrictions would
have to be proportionate to their stated objective. Moreover, such
restrictions could only be imposed (except in cases of urgency) after:

  *  the Member State where the service provider was established had
  been asked to take adequate measures and failed to do
so and 
  *  the intention to impose restrictions had been notified in advance
  to the Commission and to the Member State where the
service provider was established. 

In cases of urgency, the reasons for the restrictions (and the
urgency) would have to be notified in the shortest possible time to
the Commission and to the Member State of the service provider. Where
the Commission considered proposed or actual restrictions were not
justified, Member States would be required to refrain from imposing
them or urgently put an end to them. 

The proposal for a Directive on a legal framework for electronic
commerce will be forwarded to the European Parliament and the EU's
Council of Ministers for adoption under the co-decision procedure. 

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