EC Directive on certain legal aspects of electronic commerceelectronic commerce

The Council and the Parliament adopted, in June 2000, a Directive¹²³ on

electronic commerce. The Directive justifies itself in its preamble by serving such needs as the elimination of legal obstacles to the proper functioning of the Internal Market caused by the divergences in legislation and the clarification of the legal uncertainty as to which national rules apply to information society

121 Although the introduction of GUIDEC states the legal framework to be the lex mercatoria, a reference to the applicable law is made.

122 On the US law building on the UNCITRAL Model Law, see Gabriel.

123 Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market, OJ L 178, 17.7.2000 p.1.

services Most parts of the Directive apply specifically to the provision of

information society services, which limits its relevance somewhat to this study.¹²⁴ Furthermore, in order to ensure legal certainty and consumer confidence, the Directive lays down rules to cover certain legal aspects of electronic commerce in the Internal Market. The Directive neither aims to establish additional rules on private international law relating to conflicts nor does it deal with the jurisdiction of courts.

The Directive approximates certain national provisions on information society services relating to the Internal Market, the establishment of service providers, commercial communications, electronic contracts, the liability of intermediaries, codes of conduct, out-of-court dispute settlement, court actions and cooperation between Member States. It is based on the ´Country of Origin´

principle affecting the role of authorities.¹²⁵ Attention will be paid here to those aspects more closely relating to contract law. Dispute settlement issues will be dealt with later.

Section 3 of the Directive concerns contracts concluded by electronic means.

Article 9(1) provides that Member States shall ensure that their legal system allows for contracts to be concluded by electronic means. Member States shall in particular ensure that the legal requirements applicable to the contractual process neither create obstacles for the use of electronic contracts, nor result in such contracts being deprived of legal effectiveness and validity on account of their having been made by electronic means. There are some exceptions to this obligation: contracts that create or transfer rights in real estate (except for rental rights), contracts requiring by law the involvement of courts, public authorities or professions exercising public authority as well as certain suretyship contracts and contracts governed by family law.

In order to meet this obligation, each Member State is to amend its legislation that contains requirements, in particular requirements as to form,

124 The Directive defines a ´service provider´ as any natural or legal person providing an information society service. ´Information society services´ are services within the meaning of Article 1(2) of Directive 98/34/EC as amended by Directive 98/48/EC. According to that definition, an ´information society service´ is:

“any Information Society service, that is to say, any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services.

For the purposes of this definition:

- ´at a distance´ means that the service is provided without the parties being simultaneously present,

- ´by electronic means´ means that the service is sent initially and received at its destination by means of electronic equipment for the processing (including digital compression) and storage of data, and entirely transmitted, conveyed and received by wire, by radio, by optical means or by other electromagnetic means,

- ´at the individual request of a recipient of services´ means that the service is provided through the transmission of data on individual request.”

An indicative list of services not covered by this definition is set out in Annex V of Directive 98/48/EC.

125 On the application of this principle, see Diana Wallis MEP, ´What Links European and International Law – beyond Country of Origin or Destination´, International Colloquium, Internet law: European and international approaches, 19-20 November 2001, Paris, http:/

/droit-internet-2001.univ-paris1.fr/ve/, visited on 9.3.2003.

which are likely to curb the use of contracts by electronic means, as stated in Recital 34 of the Directive. This recital mentions further that the examination of the legislation requiring such adjustment should be systematic and should cover all the necessary stages and acts of the contractual process, including the filing of the contract. The Directive does not go into detail, or refer for instance to the UNCITRAL Model Law on Electronic Commerce, in giving this task to the Member States.

As the predominant part of contract law, especially that relating to contract formation, is regulated by national law, Member States shall decide on their own which parts of their legislation need revision or amendments. At the least this would require having provisions such as those making electronic records admissible as evidence and that give them the same status as paper documents, unless these things were obvious from the outset. Each legal system may have its own approach. The result of this amendment should be to make contracts concluded electronically workable.

The focus of the Directive is on building consumer confidence. Therefore it lays down requirements for the service provider to give information about the conclusion of a contract clearly, comprehensibly and unambiguously, prior to the order being placed by the recipent of the service.¹²⁶ This information includes the technical steps to be followed in order to conclude the contract, whether or not the concluded contract will be filed by the service provider and whether it will be accessible, the technical means for identifying and correcting input errors prior to the placing of the order and the languages offered for the conclusion of the contract. Furthermore, the service provider shall indicate any relevant codes of conduct to which he subscribes and information on how those codes can be consulted electronically.

These rules are not applied when two parties who are not consumers agree otherwise. Neither do they apply to contracts concluded through the use of electronic mail.

In Article 10(3), however, there is a requirement which covers business-to-business relationships and the use of electronic mail: contract terms and general conditions provided to the recipient must be made available in a way that allows him to store and reproduce them. This concerns, like the above requirements, the contract between the service provider and the recipient of the information society services, and not the relationship between commercial partners using the Web to conclude their contracts. The parties may obviously need to use the services of an information society service provider to conclude a contract or to perform their obligations thereunder.

Article 11 of the Directive contains provisions¹²⁷ as to the placing of the order to obtain information society services. These provisions apply mainly to

126 Article 10 of the Directive.

127 The service provider has to acknowledge the receipt of the recipient´s order without undue delay and by electronic means. The order and the acknowledgement of receipt are deemed to be received when the parties to whom they are addressed are able to access them. The service provider must make available to the recipient of the service

appropriate, effective and accessible technical means allowing him to identify and correct input errors prior to the placing of the order. These provisions do not apply to contracts concluded exclusively by exchange of electronic mail.

consumers and do not have a direct bearing on contracts of sale of tangible goods concluded on the net. However, the Article is important because it establishes an

´accessibility´ requirement by stating that an order and the acknowledgement of receipt are deemed to be received when the parties to whom they are addressed are able to access them.¹²⁸

One of the provisions of great significance for the emergence of the new information services industry is Section 4 on the liability of intermediary service providers. Article 12 bears the straigthforward title ´Mere conduit´ to indicate the role that intermediary service providers have under this legislation. The Article states namely that where an information society service that consists of the transmission in a communication network of information provided by a recipient of the service or the provision of access to a communication network, Member States shall ensure that the service provider is not liable for the information transmitted, on condition that the provider does not initiate the transmission, does not select the receiver of the transmission, and does not select or modify the information contained in the transmission. Transmission and provision of access are said to include the automatic, intermediate and transient storage of the information transmitted in so far as this takes place for the sole purpose of carrying out the transmission in the communication network, and provided that the information is not stored for any period longer than is reasonably necessary for the transmission.

Neither is an intermediary service provider liable for ´caching´ - the automatic, intermediate and temporary storage of that information, performed for the sole purpose of making the information´s onward transmission to other recipients of the service upon their request more efficient (Article 13).¹²⁹ This exemption applies with a number of conditions.¹³⁰

Where an intermediary service provider stores information provided by a recipient of the service on a more permanent basis (´hosting´, Article 14), the service provider is not liable for the information stored at the request of a recipient of the service, on condition that the provider does not have actual knowledge of illegal activity or information and, as regards claims for damages, is not aware of facts or circumstances from which the illegal activity or information is apparent. Moreover, an intermediary service provider is not liable where the provider, upon obtaining such knowledge or awareness, acts expeditiously to

128 The Directive does not make any distinction between designated and non-designated systems as does the UNCITRAL Model Law, see supra.

129 Caching improves the performance of the network by reproducing the information in servers closer to the final user (therefore avoiding having to make the connection to the server where the original site is located every time a user request´s access) In view of increasing traffic and limited bandwidth availability, the Internet might effectively collapse without caching.

130 These conditions include the following assumptions: that the provider does not modify the information, that the provider complies with the conditions on access to the information, that the provider complies with rules regarding the updating of the information specified in a manner widely recognised and used by the industry, and that the provider acts expeditiously to remove or disable access to the information it has stored upon obtaining actual knowledge of the fact that the information at the initial source of the transmission has been removed from the network or access to it has been disabled or that a court or an administrative authority has ordered such removal or disablement.

remove or to disable access to the information. This exoneration does not apply when the recipient of the information society service is acting under the authority or the control of the provider.

The above provisions regarding an intermediary service provider´s liability concern liability for the information transmitted or stored. They do not deal other types of liability, for example liability for damage created by system malfunction.

As stated earlier, information carriers regularly limit or exclude their liability, at least in cases where there is no negligence on their side.

One of the most significant ideas of the Directive in my view is its emphasis on the role of codes of conduct.¹³¹ Article 16 obliges Member States and the Commission to encourage the drawing up of codes of conduct at Community level by trade, professional and consumer associations or organisations, designed to contribute to the proper implementation of the relevant articles of the

Directive. Article 16 contains, in addition, some practical duties to this end. In a rapidly evolving environment, private codes of conduct as well as private rules of reference and model contracts are a quick and flexible method to provide the regulation and guidance required by the business community.

One can conclude that perhaps the most significant contribution of the Directive may be the imperative to introduce functional equivalence between electronic and other, usually paper-based, contracts. Functional equivalence, i.e.

full equation, is not mentioned though, although one can infer it. The Community seems to refrain from producing the first ‘layer´ of technical communication legislation beyond electronic signatures.¹³² It would have apparently been impossible to reach agreement on the Directive should it have interfered with the sphere of private laws of the Member States. Member States evaluate what measures need be taken to implement the obligations of the Directive. It would be therefore useful to stress the importance of the attempts to reach unification on an international level under the auspices of UNCITRAL. This would especially entail attempts to create uniformity in the contract formation of electronic contracts, see infra. Could this become a milestone in the creation of harmonised civil law within the European Union? Most Member States already subscribe to Part II of the CISG.

131 Codes of conduct are typical instruments of ´soft law´, which has a recognised status in Community law and in public international law. For the origin of the concept and the role of soft law in Community law, see K.C.Wellens and G.M. Borchart, Soft Law in European Community Law, European Law Review, Vol 14 No 5 October 1989, p. 267-321. The term is increasingly used in the private law context; a recent ICC/UNIDROIT seminar ´Hard Law/Soft Law´ serves as an example; see also Wilhelmsson, Ole Landon kyydissä kohti eurooppalaista sopimusoikeutta, Defensor Legis No 3/2000, p. 449 regarding the UNIDROIT Principles for International Commercial Contracts as norms of soft law.

An example of codes of conduct is the ´European Code of Conduct for On-Line Commercial Relations´ adopted by EuroCommerce in April 2000. EuroCommerce is the European central organisation for the retail and wholesale industry and has its seat in Brussels. Another Trans-European code of conduct has been drafted for the insurance industry.

For codes of conduct and self-regulation generally, see Chapter X.1.4., post.

132 Recital 34 of the Directive makes a gesture in this direction by stating that it is possible that the acknowledgement of receipt by a service provider may take the form of the online provision paid for. This is still an infrastructural rather than a contractual matter.

IV.7.2 UNCITRAL draft convention on