E-Commerce Law in the United Kingdom - Essay Example

E – Commerce Law in the United Kingdom The buying and selling of goods and services, by means of the internet, is termed as electronic commerce or e-commerce (Quader & Quader, April 2008). E-commerce has engendered many strategies to deal with the problems resulting from the absence of security; and the difficulty involved in ascertaining conclusively, the identity of the person being communicated with (H & Smith, 2007. P. 14). A few of these measures are digital signature and security devices. In the context of financial transactions, several reliable mediators have come forward, who perform the all important tasks of validating credit standing and identities, and conduct transactions by credit card. These intermediaries have significantly curtailed the risk involved in commercial transactions (H & Smith, 2007. P. 14). All along it had been assumed that e-commerce would develop along with technological innovations. Initially, in the 1970s, a few of the transactions had utilised computer media. There has been a vast change from the early 1990s, and now computer based technologies form the basis of trade relating to information, services and goods (Endeshaw, Web Services and the Law: A Sketch of the Potential Issues, 1 September 2003, P 11). Electronic Funds Transfer of the 1970s made it easier to transfer funds from one financial institution to another. Subsequently, in the 1980s, the Automated Teller Machines were introduced, which allowed customers of banks to withdraw funds from their account, or to perform other transactions of retail banking, by means of computer networks. These customers had no necessity to go to the bank for these transactions, and they could conduct these transactions, any time of the day or night. In addition, computer networks were increasingly employed for transmitting documents relating to commercial transactions and this process was termed as Electronic Data Interchange (Endeshaw, Web Services and the Law: A Sketch of the Potential Issues, 1 September 2003, P 11). Thereupon, the Internet came into existence. From its initial objective of assisting in the task of sharing computing power and data, it was transformed into a mode of conducting business procedures. A very important change wrought by Internet based business was the possibility to transact from anywhere in the world. The only proviso for conducting such business was the availability of the Internet (Endeshaw, Web Services and the Law: A Sketch of the Potential Issues, 1 September 2003, P 11). The growing usage of web services requires more consistent legal parameters for the collection, management and use of electronic data. Similarly, the availability and use of computing devices has increased, which has resulted in the frequent abuse of copyrights and trademarks. Moreover, the increasing sophistication of computer technology has resulted in an increase in the rate of infringements and violations of copyright and privacy (Endeshaw, 1 September 2003, P 11). Amidst this environment, operation of web services has become a difficult task. The protection of consumers’ private and financial information has emerged as a major challenge for the online service providers. It has also become extremely difficult to gain the trust of consumers (Endeshaw, 1 September 2003, P 11). In general, Web service providers, such as suppliers of goods and services regulate the front – end tasks of their services. The actual processing of their services is carried out in the back ground. The existing traditional rules of privity do not establish any contractual relationship for these back ground services within the actual contractual agreement. In fact, such back – office operations do not have any legal basis under the rules of privity (Endeshaw, 1 September 2003, P 11). Thus, the contractual agreement between the buyer and the service provider does not have any legal support, on account of the back – office operations of web – based service providers. Therefore, the front – end supplier should shoulder the responsibility for the acts of the back – office supplier. Under the existing legislation, the online contracts of Web Services cover the entire scope of the operation of the service and the risks that emerge out of the operations, irrespective of whether they pertain to back – office or front – office operations (Endeshaw, 1 September 2003, P 11). As such, the online market requires a large number of legal requirements and standards. At present, such legal requirements are very complicated. Legal commentators have contended that these requirements would become even more complex, in the near future, for the digital market (Endeshaw, 1 September 2003, P 11). Moreover, the global economy is heavily dependent on the digital marketplace. This is account of the fact that the number of web service providers and other participants has increased tremendously. Their operations, services and transactions have increased proportionately, at the global level, and there are a variety of commercial transactions online (Endeshaw, 1 September 2003, P 11). The digital relationships have expanded globally, and this ever expanding digital marketplace requires a much greater amount of legal standards. Consequently, the nature of online contracts, jurisdictional issues and dispute resolution, in the online context, stand to be affected to a significant extent (Endeshaw, 1 September 2003, P 11). The EU had issued several crucial Directives during the past decade. These Directives were aimed at establishing an improved regulatory mechanism for the e-commerce services. Some of the Directives that address the e-commerce sector are as follows. The 1995 Data Protection Directive, the 1997 Distance Contracts Directive, the 2000 E-Commerce Directive, and the 2002 Privacy and Electronic Communications Directive (Plotkin, Wells, & Wimmer, 2003. P. 14-60 to 14-63). Furthermore, the EU implemented rules that would help to engender electronic contracting and signatures, which would generate trust amongst business and the consumer, regarding e-commerce. All the Member States of the European Union are required to implement these Directives. Thus, a regulatory mechanism for e-commerce services was instituted throughout the EU (Plotkin, Wells, & Wimmer, 2003. P. 14-60 to 14-63). E-commerce contracts are dependent on electronic signatures of the parties to such contracts. The United Nations Commission on International Trade Law or UNCITRAL defines the concept of e-signatures in its Model Law on E-commerce. The majority of the nations of the world, as its signatories, have adopted this Model Law on E-commerce (INTERNET LAW - Electronic Signatures in U.K.). However, there are some variations to this Model law In the UK, the Electronic Communications Act 2000 and the Electronic Signatures Regulations 2002 (SI No. 318 of 2002) provide the legal basis for e-signatures. The UK incorporated the EU Directive 1999/93/EC into these two Acts. Under these Acts, electronic signatures are defined as electronic data that is attached to other electronic data. Electronic signatures constitute a means of authentication for e-commerce contracts. However, there are several countries that do not consider e-signatures as electronic data (INTERNET LAW - Electronic Signatures in U.K.). The 2002 Regulation introduced the Advanced Electronic Signature or AES. This electronic signature is characterised by four major qualities, and it is deemed to be a handwritten signature. The characteristics of an e-signature must distinguish the signatory. Furthermore, the e-signature should have an exclusive correlation with the signatory. In addition, the signatory should have only control over the e-signature. Finally, the e-signature is to be attached to the e-data, in a manner that any subsequent changes can be easily detected (The Electronic Signatures Regulations 2002 (SI No. 318 of 2002)). In the context of the AES, a Certification Authority has to be instituted. It will be the responsibility of this entity to provide qualified certificates for the AES. The stipulations specified by the 2002 Regulation have to be adhered to by these qualified certificates. In the UK, the list of such Certification Authorities is supervised by the Secretary of State (The Electronic Signatures Regulations 2002 (SI No. 318 of 2002)). Moreover, the Electronic Communications Act 2000 enables e-signatures to be accepted as evidence in court. However, in order to be admitted as evidence in court, two conditions have to be fulfilled. First, such e-signature must have been certified; and second, it must have been incorporated into an electronic communication. In addition to that, certified e-signatures, originating in other Member States of the EU, and which satisfy the aforementioned conditions, are valid in the United Kingdom (The Electronic Communications Act 2000). In the UK, e-signatures are electronic data, which are logically attached to other electronic data. Therefore, an e-signature can be appended to any type of electronic communication, including electronic mail (The Electronic Communications Act 2000). In PNC Telecom plc v Thomas, it was held by the court that an e-signature included in a facsimile was valid. The court also held that the transmitted facsimile message, with the e- signature, constituted a legal shareholder notification under the Companies Act 1985 and the Electronic Communication Act 2000 (PNC Telecom plc v. Thomas and another). Thus, the legality and validity of e-signatures in e-commerce transactions can be invoked in several complex settings. The validity of e-signature is not restricted to transactions between buyers and sellers, and is also to be found in much more complicated commercial situations that emerge in the area of e-commerce. This was witnessed in the above cited case of PNC Telecom v Thomas, wherein the court recognised the validity of a facsimile transmission of shareholder notification under the provisions of Section 368 of the Companies Act 1985 (PNC Telecom plc v. Thomas and another). The court in this case had analysed whether a fax transmittal comes under electronic communication. It had also determined that such electronic communication can be accepted under the existing legislation. As such, the court in this case had invoked the provisions of the Companies Law 1985. This ruling further established the validity of the e-signatures. According to the Companies Act 1985, a facsimile transmittal is an authorised electronic communication (INTERNET LAW - Electronic Signatures in U.K.). The Companies Act 1985 was amended to accommodate the principles of the Electronic Communication Act 2000. This case proved to be a landmark case in the area of e-commerce; and describes the implications of e-signatures in legal claims (INTERNET LAW - Electronic Signatures in U.K.). It has now become possible for the parties to e-commerce contracts to enforce their contractual rights. Thus, online contracts can be concluded, and the process is similar to that obtaining in real world contracts. Online contracts have been made viable due to the availability of sophisticated technology, which makes it possible to identify and authenticate the parties to online contracts. Moreover, electronic documents have become more reliable (Endeshaw, Web Services and the Law: A Sketch of the Potential Issues, 1 September 2003, P 11). As such, the authentication of parties and the increased reliability of electronic documents have provided sufficient measures for the successful conclusion of online contracts. Despite this, online contracts are still being subjected to scrutiny. There is still considerable doubt about the nature of online contracts. Moreover, online contractual terms are still considered to be not binding on the parties and have to be accorded legal status (Endeshaw, 1 September 2003, P 11). The United Kingdom as a member of the European Union has to implement the EU Directives. A major portion of the UK’s e-commerce legislation is the outcome of this requirement. In turn, the EU considers that the concept of e-commerce plays a vital role in its economic development. Moreover, effective e-commerce promotes better integration of the Member States, thereby making the EU a strong international economic body. On acquiring this status, the EU can establish optimal technological, commercial and legal standards at the international level. Thus the development of legislation relating to e-commerce was largely determined by the evolving technology and electronic commercial transactions. There was a novel charm associated with e-commerce, which time has only enhanced. A considerable amount of business is conducted by means of e-commerce and this is on account of the proliferation of the Internet. There are numerous online auction sites, for instance eBay; online sites that receive and make payments, like Paypal; and most of the renowned and traditional companies permit selection and purchases on websites. All this commercial activity has called for new laws to deal with volatile jurisdictions and electronic contracts. However, the UK has been successful in implementing a number of laws that have made online commercial transactions safe to a major extent, not only for business but also the consumer. List of References Endeshaw, A. (1 September 2003, P 11). Web Services and the Law: A Sketch of the Potential Issues. International Journal of Law & Information Technology , 251. H, G. J., & Smith, R. B. (2007. P. 14). Internet law and regulation. Sweet & Maxwell. INTERNET LAW - Electronic Signatures in U.K. (n.d.). Retrieved March 28, 2009, from http://www.ibls.com/internet_law_news_portal_view.aspx?s=latestnews&id=2082 Plotkin, M. E., Wells, B., & Wimmer, K. A. (2003. P. 14-60 to 14-63). E-commerce law & business. Aspen Publishers. PNC Telecom plc v. Thomas and another, (2002) EWHC 2848 (Ch). Quader, M. S., & Quader, M. R. (April 2008). The Utilization of E-Commerce by Traditional Supermarkets in the UK through Strategic Alliances with Internet Based Companies. Journal of Services Research , Vol.8, Iss.1, P.172. The Electronic Communications Act 2000. (n.d.). The Electronic Signatures Regulations 2002 (SI No. 318 of 2002). (n.d.). Read More