The Internet has clearly revolutionised the manner in which business and trade is carried out today, so that online transactions between businesses themselves (‘B2B’), and between businesses and consumers (‘B2C’) have become commonplace. Thus, in the digital age, the physical presence of the parties to the transaction is not necessary, rendering trade more efficient, footloose and global in nature.
In order for this to occur, however, the law must intervene in order to ensure that an online transaction can be considered as effective as a physical transaction, as well as to safeguard the interests of consumers who wish to make their purchases online. Within the European Union, the relevant enabling legislation is the Electronic Commerce Directive (Directive 2000/31/EC), transposed into Maltese legislation through the Electronic Commerce Act (Chapter 426 of the Laws of Malta) and the Electronic Commerce Regulations Act (Chapter 426 of the Laws of Malta). Other legislative models exist, providing ‘best practices’ for electronic commerce legislation, such as those drafted by the United Nations Commission on International Trade Law in relation to electronic commerce and electronic signatures.
In essence, all these legislative instruments have the same goals:
- provision of legal certainty for business and consumers;
- functional equivalence of electronic and paper contracts;
- requirements for online service providers;
- requirements for electronic signatures;
- commercial communications and limitations of liability of intermediary service providers.
A fundamental principle of electronic commerce (e- Commerce) legislation is the recognition of the validity of electronic transactions and electronic data; thus, any such legislation will always require that a transaction is not deemed to be invalid merely because it took place wholly or partly by means of electronic communications. As always, however, there will be exceptions and the legislation will prescribe the relevant requirements and the instances in which this general rule is not applicable.
In relation to electronic contracts, the law creates mechanisms to align, in the electronic world, the traditional physical world notions of ‘originality’, ‘authenticity’, ‘signature by the parties’ and ‘in writing’. It does so by considering the criteria necessary to replicate those functions in the electronic sphere and detailing the requirements which an electronic contract must possess in order for these essential elements of a contract to be met. Thus, in Malta, for instance, information which must be given ‘in writing’ can be given in electronic format, as long as it can be accessed and used for subsequent reference and provided that any specific requirements laid down by the recipient (in relation to the technology required and for the acknowledgement of receipt) have been adhered to.
The law will also lay down specificities with regard to acceptance and consent, such as the time when acceptance is considered as being received, in various situations, thereby sealing the conclusion of the contract.
Legislation regarding electronic commerce (e- Commerce) also prescribes the requirements which an electronic signature must possess for it to be considered as equivalent to a hand-written signature. In this regard, the requirements should be forward-looking and sufficiently technology-neutral so as to avoid excluding any new technologies which, though not falling strictly within the wording of the law, are nonetheless secure enough for the purposes for which a signature is required, namely, to identify the signatory and to indicate his/her approval of the information contained in the data message.
When transacting online, the parties do not meet as they do when transacting in the physical world; therefore, the law attempts to bridge that gap by mandating that the provider of an online service must provide certain information to the recipient. This ensures that the recipient knows who the provider of the service is and hence provides a level of security to the said recipient. This is particularly useful in the case of a consumer making a purchase from a website. The information which the service provider must produce must be easily, directly and permanently accessible, and such information would generally include, inter alia:
- the name, contact details (including email address) of the service provider and the geographic address at which it is established;
- any trade register where the service provider is registered and details of the registration;
- where the service is subject to VAT, the provider’s VAT registration number;
- clear indication of any prices, and whether these include tax and/or delivery costs.
As intermediary service providers (such as website hosting companies and price comparison sites) may only have a limited degree of knowledge about the data they transmit or store, electronic commerce laws generally discuss the limitation of liability of these intermediaries. In this vein, an intermediary would normally escape liability in the following scenarios:
Mere conduit service providers
This refers to service providers delivering network access services or network transmission services. This exemption applies only when the service provider is passively involved in the transmission of data, and does not apply if transmission is initiated, selected or modified by the service provider, or when the receiver of the data would be selected by the service provider.
This refers to a situation where providers temporarily and automatically store data in order to make the onward transmission of this information more efficient. The typical example of the caching service is a ‘proxy server’ which stores local copies of websites accessed by a customer, thus speeding up the delivery of that website when the customer accessed the same website at a later stage. For this exemption to apply, the local copy must be identical to the original information, the service provider must comply with the access conditions associated with the locally-stored information and the service provider must update the copy in the manner specified by the original website. The service provider must also remove or block the local copies when it obtains actual knowledge of the fact that the original data is removed, or access to the original data is blocked.
These intermediaries store data provided by the customer, where the data stored is chosen and uploaded by the customer. This exemption would apply when the hosting provider is not aware of facts or circumstances from which the illegal activity or information is apparent or they do not have actual knowledge of illegal activity or information. Furthermore, service providers must expeditiously remove, or block access to, such information once they are aware of their unlawful nature.
Equinox Advisory is able to assist all online service providers, ranging from online shops and auctions to internet service providers, hosting providers and other intermediaries.
Equinox can also assist governments and authorities to create e-Commerce policies in line with the country’s specific needs and to draft the relevant legislation which can bring the said policies into effect.
Equinox offers the following services:
- Advising a service provider/online trader in relation to its legal position in various scenarios;
- Advising a service provider/online trader in relation to jurisdictional issues;
- Drafting of terms and conditions for the online trader’s website, thus ensuring that the website is fully compliant with relevant law;
- Drafting of an online trader’s privacy policies;
- Drafting of the relevant contracts with payment service providers, hosting companies, website developers, software providers, end users and customers;
- Taking down of illegal data being hosted in the European Union, the United States and jurisdictions with similar legislation;
- Provision of tax advice as necessary;
- Assisting countries with e-Commerce policies and strategies;
- Carrying out of ‘gap-analyses’ of a country’s legal frameworks in relation to electronic commerce and electronic signatures;
- Drafting of legal frameworks in relation to electronic commerce and electronic signatures in accordance with international best practice.