Law of Electronic Commercial Transactions

Contemporary Issues in the EU, US and China

Faye Fangfei Wang

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781134115297
• Edition: 2
• Topic: Diritto
• Subtopic: Diritto commerciale internazionale

The development of new technologies places new challenges to the interpretation and implementation of legislation in the information society. The recent deployment of service-oriented computing and cloud computing for online commercial activities has urged countries to amend existing legislation and launch new regulations. With the exponential growth of international electronic commercial transactions, a consistent global standard of regulating the legal effects of electronic communications, the protection of data privacy security and the effectiveness of Internet-related dispute resolution are motivating factors to build users' trust and confidence in conducting cross-border business and their sharing information online.

The second edition of this book continues taking a 'solutions to obstacles' approach and analyses the main legal obstacles to the establishment of trust and confidence in undertaking business online. In comparing the legislative frameworks of e-commerce in the EU, US, China and International Organisations, the book sets out solutions to modernise and harmonise laws at the national, regional and international levels in response to current technological developments. It specifically provides information on the key legal challenges caused by the increasing popularity of service-oriented computing and cloud computing as well as the growing number of cross-border transactions and its relation to data privacy protection, Internet jurisdiction, choice of law and online dispute resolution. It considers how greater legal certainty can be achieved in cloud computing service contracts and other agreements resulted in service-oriented computing.

The second edition of Law of Electronic Commercial Transactions is a clear and up to date account of a fast-moving area of study. It will be of great value to legislators, politicians, practitioners, scholars, businesses, individuals, postgraduate and undergraduate students. It provides in-depth research into finding solutions to remove eight generic legal obstacles in electronic commercial transactions and offers insights into policy making, law reforms, regulatory developments and self-protection awareness.

Part IIntroduction

1 Introduction

DOI: 10.4324/9780203628812-1

1.1 Law of electronic commercial transactions: purpose and structure of this book

The customer pays his money and gets a ticket. He cannot refuse it. He cannot get his money back. He may protest to the machine, even swear at it. But it will remain unmoved. He is committed beyond recall. He was committed at the very moment when he put his money into the machine.

(Lord Denning, Thornton v. Shoe Lane Parking ¹ )

1 Thornton v. Shoe Lane Parking [1971] 2 QB 163 at 169.

Electronic commercial transactions have become increasingly important since the late 1990s. With the functional development of automated computing systems in recent years, decision-making regarding the sale of goods or services can be done automatically between two international trading companies with standard terms without any human interaction. These automated systems can design and offer a most favourable sale package to the buyer based on the information that the buyer gives, history of choice preferences and other data sources that the seller collects such as market prices, currency exchange rates and new modules, etc. Once the supply matches the demand (it usually takes a few seconds), an international contract of sale will be automatically concluded by the automated trading systems. Although business could benefit from such a system in terms of convenience and efficiency, there is potential legal uncertainty with regard to the validity of automated electronic contracts. The first part of this book discusses these challenges to business and proposes solutions to substantive contract law issues in the online environment such as the validity of offer and acceptance by electronic means, the incorporation of terms and conditions into electronic B2B and B2C sale/service contracts, error in electronic communications and the battle of forms. Electronic contracting is one of the core subjects in electronic commerce as legal certainty is the basis of building trust in doing business online. It compares the most current international legislation – the United Nations Convention on the Use of Electronic Communications in International Contracts 2005 – with relevant legislation in the EU, US and China.

In order to identify contracting parties and their affixed documents in the online environment, forms of encryption have been utilised. Electronic signatures, authentication and certificates are not only used as means to determine the identification and integrity of an electronic document but also help ensure online safety. When automated decision-making systems are used by individuals, it may further challenge personal data privacy protection. Automated agents can make decisions for individuals based on the collected data – models of individuals’ preferences. Under automated systems, personal data including a long history of individuals’ activities, behaviours and habits will be analysed and processed. Individuals may be more vulnerable to attack, because the system contains personal data of increased sensitivity. Moreover, the growing popularity of the use of cloud computing can further change the way we work, communicate with each other and share information as it makes data/information available and accessible anywhere. The benefits of cloud computing are the intended outcomes of cost savings, speed improvement and mobile accessibility. Nevertheless, the deployment of such technology may involve higher risk, consume more energy ² and cause legal complication. It is essential that the conduct of Certificate Authorities (CAs) is regulated as their services impact the quality and trust on electronic markets. In most countries both non-recognised and recognised CAs are allowed to provide electronic authentication services and even may have the same effects on certificates. The second main section of the book provides in-depth analysis of the valid forms of electronic signatures and authentication, the liability of CAs and the recognition of foreign certificates. It researches into best practices for data privacy protection taking into account the current regulatory development and the conditions of informed consent for processing personal data in the EU, US and China. It also provides primary research on key legal challenges faced by new technologies (such as cloud computing) and proposes possible solutions to establish greater legal certainty by recommending necessary legal measures on striking a balance among different rights and bringing consistency of protection in practice. It argues that international coordination and protocols may redress the balance between the free flow of data for stimulating economic globalisation and the protection of fundamental data privacy rights to expedite the process of increasing trust and confidence in doing business online. It argues that an appropriate ‘notice and takedown’ (NTD) mechanism may be an efficient means for the implementation of Internet-related rights protection prior to court litigation and out-of-court dispute resolution.

2 G. Cook (2012) ‘How clean is your cloud?’, April, Greenpeace International. Available at: http://www.greenpeace.org/international/Global/international/publications/climate/2012/iCoal/HowCleanisYourCloud.pdf (last accessed 30 June 2013).

In spite of the fact that there are modern Internet regulations, Internet-related disputes have unique characteristics that often challenge traditional legal concepts and procedural rules in court litigation and out-of-court dispute resolution. When digitised goods are delivered through electronic networks, the place of delivery is no longer physical, thus it is much more difficult to ascertain the place of delivery online than offline. Moreover, customers and users may not be able to choose or restrict the location of data centres prior to the conclusion of the Service Level Agreement (SLA) for cloud-computing services. Data centres may be relocated or added at any time and as a result they may be located in various jurisdictions which could contribute to the difficulty in identifying the location of infringement and determining the competent court and applicable law. This, leaving well alone other legal issues of cloud computing, furthers the existing challenges of Internet jurisdiction and choice of law for electronic commercial transactions which began in the early 2000s. The possibility of automated system-generated choice of court and choice of law agreements and online delivery of digitised goods may challenge the traditional principles of determining jurisdiction and applicable law. Subsequently it requires the interpretation or even amendment of the existing conflict of law rules so as to adapt to the contemporary information society in the transnational sphere. The third main part of the book investigates key factors for the determination of Internet jurisdiction and applicable law in the EU, US and China and examines general, special and exclusive jurisdiction rules accordingly. It attempts to find ways to remove obstacles to the determination of Internet jurisdiction and applicable law in cases of choice and in the absence of parties’ choice. It undertakes primary research providing an overview of what pressure the growing popularity of new technologies places upon the validity of jurisdiction and applicable law clauses for electronic commercial contracts, and how the legal barriers can be removed. It seeks for a harmonised interpretation of jurisdictional factors to ensure fairness and legal certainty at the international level. It also argues that online dispute resolution (ODR) can be developed as a tailor-made first resort for civil and commercial Internet-related (in particular cross-border) disputes before court litigation and traditional alternative dispute resolution. It analyses most successful examples of ODR services and discusses the United Nations Commission on International Trade Law (UNCITRAL) working group draft ODR procedural rules for cross-border electronic commerce transactions in comparison with the current legislative development in the EU (EU Regulation on Consumer ODR 2013), US and China. It concludes that ODR may become one of the possible and most efficient channels to enhance trust and confidence in doing business online, if there is a harmonised international standard (a well-drafted international regulation) which promotes core legal principles of party autonomy, technological-neutral, confidentiality and security, and implements fair and appropriate procedures.

Overall this book takes a ‘solutions to obstacles’ approach and evaluates various contemporary key legal issues of electronic commercial transactions by comparing current legislative frameworks in China, the EU, the US and international organisations. In response to continuous challenges to the legal certainty of online commercial activities due to the rapid development of information technologies, this second edition of the book continues and expands the author’s classical debate over the eight ‘obstacles encountered in electronic commercial transactions, and gives answers to those obstacles in a clear, yet concise language’. ³ The eight main legal obstacles to electronic commercial transactions are as follows:

3 P. Evans (2011) ‘Publication review: law of electronic commercial transactions: contemporary issues in the EU, US and China’, Communications Law, 16 (1): 41.

1. The determination of the effectiveness of offer and acceptance and the valid incorporation of terms and conditions in electronic contracts.
2. The legal barriers on errors in electronic communications and the battle of forms.
3. The recognition of the effectiveness of electronic signatures, authentication and foreign certificates.
4. The appropriate legal and technical measures for the protection of personal data privacy rights concerning online commercial activities.
5. The establishment of the balance of rights among different rights holders and the fairness to the liability of Internet service providers.
6. The determination of jurisdiction and applicable law concerning Internet-related disputes.
7. The determination of the validity of online dispute resolution agreements and the enforcement of online settlements.
8. The infrastructural building of trusted e-commerce platforms integrated with appropriate organisational, technical and legal measures.

1.2 Key concepts and features

1.2.1 Internet

The Internet, a base of connection for international electronic commerce, is a form of networks connected via electronic devices, i.e. computers. It can be accessed worldwide and uses the standardised Internet Protocol Suite (TCP/IP) to transport data and messages anywhere in the world and permit communications between parties over long distances.

Internet technology first began in the 1960s, and the first transatlantic computer networks were linked up in the early 1970s. ⁴ Between the 1960s and the early 1990s, the Internet was developed mainly for military, governmental and academic use. Beginning with the late 1990s, when Microsoft released Windows 98 marking the full-scale entry of the Internet browser and server, the Internet started to become truly popular for commercial use. In the 2000s, the Internet experienced enormous growth and more and more businesses set up websites to display product information and provide trading platforms for goods and services, while a large number of individuals began to use e-mail and instant messaging as well as shopping online. In the last ten years, businesses have been conducting their activities increasingly over the Internet, including international trade and domestic sales. Most recently, the Internet has been employed in various new industries known as technical-based services, for example, social networking, online banking, digital doorkeys ⁵ and online dispute resolutions. There are also new emerging technologies relying on networks such as service-oriented computing, beaming technology (virtual reality) and cloud computing.

4 An Atlas of Cyberspaces: Historical Maps of Computer Networks. Available at: http://personalpages.manchester.ac.uk/staff/m.dodge/cybergeography/atlas/historical.html (last accessed 30 June 2013). 5 ‘Digital doorkeys and more: meet New York’s latest start-ups’, BBC News, 3 May 2013. Available at: http://www.bbc.co.uk/news/business-22372102 (last accessed 30 June 2013).

1.2.2 Electronic commerce

The phrase of electronic commerce can be interpreted as ‘commerce conducted in a digital form or on an electronic platform’, or ‘selling or buying goods and services on the Internet’. ⁶ The Organisation for Economic Cooperation and Development (OECD) defines electronic commerce from an economic and social point of view as:

6 European Commission, Working Paper, eEurope, an Information Society for All. Available at: http://europa.eu/legislation_summaries/information_society/strategies/l24221_en.htm (last accessed 30 June 2013).

All forms of commercial transactions involving both organizations and individuals, which are based upon the electronic processing and transmission of data, including text, sound and visual images. It also refers to the effects that the electronic exchange of commercial information may have on the institutions and process that support and govern commercial activities. ⁷

7 Electronic Commerce: Opportunities and Challenges for Government (1997), at p. 11.

In the EU, the European Initiative in Electronic Commerce further describes electronic commerce as:

Any form of business transaction in which the parties interact electronically rather than by physical exchanges. It covers mainly two types of activity: one is the electronic ordering of tangible goods, delivered physically using traditional channels such as postal services or commercial couriers; and the other is direct electronic commerce including the online ordering, payment and delivery of intangible goods and services such as co...