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Creating Web Legislation In A New Economy
As government officials, business leaders and others grapple with how to adapt and harmonize domestic laws for e-commerce, they and their counterparts around the world face a much more daunting task at the international level.
Just as they worry about an inconsistent stream of state and local laws and regulations governing e-commerce, companies face similar, and sometimes more complex, problems internationally. Issues such as levying taxes, protecting consumers when problems occur with their transactions, and applying laws to online contracts and transactions are being debated and discussed by several international organizations. But few appear close to offering any answer.
"It's extremely complicated…especially since it cuts across everything," said Commerce Department General Counsel Andrew Pincus.
In areas such as consumer protection and privacy, business leaders are taking on the issue themselves, proposing third party mechanisms that circumvent the need to determine whether the laws of the consumers or merchants will apply to online transactions.
Recently, a coalition of leading high-tech companies including IBM, America Online and others, known as the Electronic Commerce and Consumer Protection Group, unveiled proposed guidelines for businesses when conducting online transactions with consumers. The proposal also calls for the use of a third-party alternative dispute resolution (ADR) mechanism for resolving disagreements between the parties.
"In certain respects, ADR (is) a way to avoid some of those issues," said Ron Plesser, a lawyer who specializes in e-commerce issues and served as coordinator for the e-commerce group. "If you can get a good ADR agreement, perhaps you don't have to reach (agreement on) all of those problems."
But on such issues as taxation and legal recognition of digital signatures, governments will have to grapple with which laws apply under what circumstances when conducting e-commerce.
Is Self-Regulation The Solution?
The U.S. business community has pushed lawmakers and Clinton administration officials to let industry take the lead in developing solutions to some of the issues that have emerged with the growth of e-commerce.
"I'll blame it on (former White House Internet adviser) Ira Magaziner when he said the 'private sector should lead,'" said one industry lobbyist. "It's not that easy. Sooner or later, we need to show something."
Industry has been aggressive in pushing self-regulation when it comes to privacy and consumer protection as a means of avoiding decisions on differing laws and regulations.
The United States successfully has negotiated a deal with the European Union that would allow U.S. companies to be deemed in compliance with the European Union's tough data privacy directive by adhering to a set of privacy principles detailed in a "safe harbor" privacy agreement. The directive bans the flow of personal information about EU citizens to third countries without "adequate" privacy protections.
While the agreement covers personal data about EU citizens transferred out of Europe, negotiators never resolved the issue of whether the European Union's data privacy directive would apply to U.S.-based Web sites that might collect personal information from users in Europe. Many observers, however, expect major U.S. Web sites will agree to abide by the safe harbor to avoid any potential problems.
Others also say the alternative dispute resolution approaches put forth by the e-commerce group, BBBOnline, the online arm of the Better Business Bureau, and others also may provide a means of dealing with conflicting consumer protection laws while still safeguarding consumer rights when conducting transactions online.
Pincus notes that there are three ways of dealing with issues such as consumer protection. Both parties involved can adhere to the laws of the country from where the transaction originated and the company resides. But this could lead to a race to the bottom, he said, where businesses seek out jurisdictions with the most lenient laws. The other option is for the parties to abide by the laws of the country in which the consumer resides, but this could cause some companies to resist doing business in some jurisdictions, Pincus said. The third option, which U.S. officials have advocated for the time being, is a third-party alternative dispute resolution backed up by consumer protection guidelines.
"We (industry officials) can't resolve the country of origin and country of destination issues. They need to be resolved, but it will take a while," said Scott Cooper, Hewlett-Packard's manager of technology policy. The company has been working with BBBOnline on its guidelines. "What [industry] can do is set up third-party mediation."
BBBOnline, which has established a third-party self-regulatory program for privacy, has been seeking support for ADR at the international level. The European Union is among those who have expressed interest in the group's ADR proposal, according to EU and industry sources. Now that BBBOnline has established guidelines for member companies to follow, the next challenge for the group is to put in place technology that would enable consumers and merchants to resolve disputes online quickly and easily, said BBBOnline Senior Vice President and Chief Operating Officer Russ Bodoff. BBBOnline is in discussions with some high-tech companies on developing such technology.
"I think in a global online environment it will be more and more difficult for local laws to apply," Bodoff said. "I don’t think anyone believes that governments can come together and establish international laws (for e-commerce). It will be up to the private sector" to deal with many issues.
Developing International Rules
But even industry officials acknowledge additional work needs to be done to clarify international rules "to solidify some gray areas," according to Rick Lane, director of congressional and public affairs at the U.S. Chamber of Commerce.
Several organizations have begun to tackle the thorny legal issues that have emerged with the growth of e-commerce.
Both the e-commerce group's guidelines and the BBBOnline's proposal are based in part on work that already has been done by the Organization for Economic Cooperation and Development (OECD) on consumer protection. The OECD also has studied how taxes should be applied to e-commerce. One of the OECD's technical advisory groups is expected to release a report on the issue following a July meeting.
Among the areas that successfully have been tackled internationally is copyright protection. The World Intellectual Property Organization concluded two 1996 treaties aimed at extending copyright protection to works online such as music or movies. Congress adopted implementing legislation in 1998.
The Hague Conference on Private International Law has been engaged since 1996 in trying to establish an international convention, or treaty, dealing with legal jurisdiction that would impact e-commerce. The convention originally was scheduled for final action in October 2000, but the United States persuaded the conference to delay that timeline for at least one year. U.S. officials have expressed concern that the conference was moving too quickly and may adopt a treaty that could have unintended consequences on e-commerce.
Congress also will soon weigh in on the issue of international jurisdiction in e-commerce. The House Judiciary Committee's Courts and Intellectual Property Subcommittee plans to hold a hearing Thursday on this issue, examining domestic and international jurisdictional issues. A House aide said among the questions that will be asked is if "you put up a Web site…are you subjecting yourself to every jurisdiction in the world?"
The Role Of The Private Sector
Private organizations including the American Bar Association also have begun to study the issue. The ABA plans to release a report in July at an ABA meeting in London that will detail how the rules of jurisdiction traditionally have operated, how the Internet has affected them and options for dealing with these changes in areas ranging from taxation to data protection. The group intends for the document to assist business leaders and governmental officials in developing ways to address jurisdictional issues, according to Thomas Vartanian, a Washington lawyer who heads the ABA's Cyberspace Law Committee.
"I thoroughly believe that government intervention should be the last" resort, Vartanian said. "The question will be how many of these problems of jurisdiction or otherwise can the private sector solve. Second, when does the government believe it needs to step in. In some cases, governments have stepped in too soon."
He said he thinks it's far more realistic and expeditious for major business leaders and government officials to try to work through some of these issues in a more informal manner.
"Electronic commerce is not waiting around for nine or 10 years for treaty organizations to decide what to do," Vartanian said.
Competing Viewpoints
Most e-commerce is still conducted within the United States and Europe and the laws both countries adopt may serve as a model for other nations.
But in two major areas, privacy and digital signatures, the United States and European Union have advocated different approaches. Vartanian and others have voiced concern that inconsistent rules could stifle e-commerce and efforts to deal with issues of jurisdiction.
The United Nations Commission on International Trade Law's e-commerce working group has tried for several years to come to an agreement on model rules for the legal recognition of electronic authentication. With no agreement in sight, both the United States and European Union have proceeded on their own.
Legislation passed earlier this month by Congress calls for the legal recognition of electronic signatures and contracts in a technology neutral manner. The European Union's more prescriptive directive approved in November 1999 calls for the legal recognition of electronic authentication methods that meet certain criteria.
The administration will continue to persuade other countries that have yet to adopt electronic authentication legislation of the benefits of the U.S. "technology neutral" approach. In fact, U.S. officials will attempt to push EU member states to include a party autonomy provision in their implementing legislation aimed at providing more leeway in what types of methods can be used by parties involved in e-commerce.
An EU official threw cold water on this approach, however, saying "the U.S. will not have any luck in encouraging member states" on this issue.
 | - by Juliana Gruenwald |
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