Legal minefield spells danger for e-commerce

Series Title
Series Details Vol.7, No.7, 22.2.01, p11
Publication Date 22/02/2001
Content Type

Date: 22/02/01

EU FIRMS face a daunting of legal barriers when they do business over the Internet.

That is the chilling warning from experts as the Union addresses the rising tide of bankrupt traders now blighting European stock markets, consumer confidence and economic growth.

"E-commerce is the crowbar to open up the single market. But it's also a spotlight for all the places where the single market does not work," says Mike Pullen, single market expert at UK law firm DLA.

A landmark directive on e-commerce rushed through the European Parliament last year was meant to give companies legal certainty when they ventured onto the Web. Drafted during Mario Monti's reign as single market chief, it was heralded by industry as vital for the transition to the digital economy.

The code aims to apply the single market philosophy to the online world. Businesses selling their products over the Internet could do so legally anywhere in the EU if they follow laws in their own 'country of origin'.

The Union also adopted other rules to boost e-commerce, including a directive on distance selling and another ensuring that 'digital signatures' are as valid as those signed in ink.

But critics point to many other barriers- some already enshrined in law, others pending - that threaten to reverse the business-friendly single market blueprint Monti and his successor Frits Bolkestein have sought to build.

For example, member states agreed last year to give consumers the right to sue e-commerce traders in courts in their own country. Firms fear this would force them to fight costly cases across the Union.

But more worrying for industry is justice chief Antonio Vitorino's proposal to allow judges to apply the laws of the country closest to the plaintiff in disputed cross-border cases. Experts claim this could damage advertising or marketing campaigns over the Internet and drive publishers off the Web because they fear falling foul of foreign rules on everything from competition to defamation.

Whether or not firms are up to the legal challenges of doing business over the Internet depends on their attitude towards risk management. Big finance houses were given a boost last week when Bolkestein unveiled a paper highlighting the need for country-of-origin rules for financial services.

But for small companies without high-powered legal departments, the stark message is that e-commerce may be more trouble than it is worth. "If I was advising a small business wanting to do business over the Net, I would say move offshore," added Pullen.

EU firms face daunting legal barriers when they do business over the Internet.

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