2 - 8 December 1999

The need to regulate e-commerce

by David Kelleher

One of the most amazing aspects of the Internet is the exponential rise in usage over the past few years. What one considers a change over a number of years in a particular sector is defined as months when referring to technology.

It is for this simple reason that regulating the Internet and its usage has become extremely difficult. Regulation e-commerce raises numerous issues that have to be tackled. However, the fact that no one owns the Internet makes life even more difficult for lawmakers.

The United States and the EU disagree completely on how the Internet and e-commerce should be regulated but both agree that some form of legislation must exist.

What is true however is that the law must follow fast on the heels of technological progress. The former Minister for Telecommunications, Dr Michael Frendo, in his presentation at the KMPG e-commerce conference said: "It (the law) has to move quickly to regulate, to ensure fairness, to set parameters, to combine justice and legal certainty, the foundations of a healthy and vibrant framework for commerce."

Dr Frendo said the further internationalisation of business through electronic commerce raises new questions, give new dimensions, to contractual legal relationships which span across more than one legal system.

Some of the questions asked are: Where did the transaction take place? What law regulates its formalities and its substantive clauses? Which choice-of-law rule apply? And ultimately, who has jurisdiction over the matter?

"The boundaries of electronic commerce are not defined by geographical or national borders, but rather by the information technology and the coverage of computer and telecommunications networks," Dr Frendo said.

He added that like Internet in general, e-commerce has the "distinctive feature" that it "knows no jurisdictional barriers".

"Electronic commerce operates in a fuzzy international environment that magnifies the problems that Conflicts of Law practitioners are familiar with, and further to that, adds the practical difficulty of applying Conflicts of Law rules to new technologies which have a bearing on the fundamentals of contractual legislation," Dr Frendo said.

Technology provides a medium which can be well used or abused. The electronic age makes it more and more easy to set up operations which defraud customers of their money, with companies closing down a website and opening others on new servers in other jurisdictions before being found out.

"The law needs to counter this vulnerability with tools which are effective and render it increasingly more and more difficult to carry out e-fraud, in order to protect the honest business operator and ordinary consumers," Dr Frendo said.

Dr Frendo said that haste is the order of the day, with countries, international organisations, regional entities rushing to fill the legislative gap. E-commerce does not wait for this because commerce internationally is the driver.

"Still, without the legal framework serious difficulties could ensue for the sector to develop even further.

The information superhighway will not wait for legislators to make the rules. It will continue to carry traffic and effect transaction: the law must not fail it. Worldwide commerce is finally available to all: its just and proper regulation would be a major contribution to world law.

"The regulation of e-commerce must develop as contribution to global commerce. The regulation of e-commerce therefore must not be an isolated, country by country exercise alone, but also regional and international in a way that it provides global coverage within a secure legal framework fostering the growth of e-commerce in the world marketplace," Dr Frendo said.