Future Regulation of E-commerce and Commercial Communications in the EU

June 30, 1999

Iain G. Mitchell QC, a member of the Scottish Committee of theSociety for Computers and Law, Vice-Chairman of the Scottish Lawyers’ EuropeanGroup, and a Senior Counsel at the Scottish Bar with an extensive civilpractice, reports on a joint meeting of the Scottish Group and the ScottishLawyers’ European Group held in Edinburgh on Thursday 22 January 1999 at theLaw Society of Scotland.

This, the first joint meeting between the Scottish Group of SCL and the ScottishLawyers European Group, chaired by your Reporter, attracted an appreciativeaudience of well over a 100 participants – indeed the start was delayed by ashort period for extra chairs to be brought into the hall.

The talk was given by Jean Bergevin of DGXV – E4 (the Directorate Generalfor the internal market and financial services) of the European Commission,though the views expressed were those of Mr Bergevin as an individual and notthe views of the Commission.

Background and Context

Mr Bergevin started by setting out the background and context of the presentdraft Directive on electronic commerce and commercial communications in theEuropean Community. The underlying philosophy was to seek to facilitateelectronic commerce in the European Community by ensuring that there was anappropriate common approach amongst the Member States, whilst, at the same time,being mindful of the need for appropriate consumer protection.

There is a need for the Directive because, at the moment, the United Statesdominates the European electronic commerce market – the present estimatedvalue of electronic commerce in the European Union is approximately ECU 6Obillion of which five-sixths is with suppliers and providers based in the UnitedStates.

The primary disincentive to the development of European e-commerce byEuropean companies was the perceived lack of a coherent regulatory framework:for example, a number of Member States ban advertising of legal services andregard a Web site as a form of advertising. What is to happen if a law firmbased in a Member State which bans such advertising establishes a Web siteoffering to provide services in a Member State which does not, or, thecorollary, what happens when a law firm in a Member State which does not bansuch advertising sets up a Web site which may be accessed from a state whichdoes? Again, a similar problem arises in the commercial sphere in relation tothe German prohibition on promotional pricing.

These and another anomalies generate a climate of legal uncertainty which isultimately destructive of the development of e-commerce.

Thus it is, Mr Bergevin explained, that the fundamental principle of theDirective is to establish host-country control, with the host country beingdetermined upon the basis of the location of the provider of the service, andnot the Web server – ie the principle is to look at the location of the peoplebehind the service.

In essence it is sought to achieve a regulatory framework in the Unionwhereby service providers working in conformity with the regulations in theirhome country can provide their services to any client across the EU withouthaving to concern themselves about the regulatory framework of the Member Statein which their clients are found.

The benefits to commerce of such an approach are substantial. All of asudden, it is no longer necessary to rely upon bricks and mortar as an effectivevirtual presence can be created in all of the Member States at minimal cost –the market is thus opened to all sizes of enterprise and not just largemultinational companies. In the absence of such a regulatory framework, theuncertainties generated, combined with historically low PC usage and relativelyhigh telecommunications tariffs in the Union, operate together to cause afragmentation of the market – thus favouring investment in the United Statesrather than Europe.

The mechanism by which the one-stop shop of country of origin control isproposed to be created is, first, by settling clearly the issue of where anonline service is established, second, by examining each part of the economicvalue-added chain from commercial communications right through to contractingand liability, as it presently exists in the Member States and then onlyharmonising those areas where differences are too great to allow for mutualrecognition and which have not already been harmonised. Within this context itis necessary to provide for a possibility for Member States to imposerestrictions but to make such imposition conditional on a notification systemrather than exclusively relying on the slow and cumbersome infringement process.

In the final analysis it has to be ensured that European consumers ofe-commerce are all treated alike by each Member State. This will in turn createand improve the consumer trust which is necessary for e-commerce effectively totake off.

Text of the Directive

Against this background, Mr Bergevin then went on to consider the detailedprovisions of the text. He looked first at Article 3 (the internal marketclause), the definition of establishment in Article 2, and the establishmentconditions in Articles 4 and 5. He then went on to draw attention to the moredetailed provisions starting with Article 6 which imposes transparencyconditions as well as mutual recognition in the field of online salespromotions: for example, a consumer should be able to see clearly in whichMember State the provider of services is based (and therefore to whichmember-state control he is susceptible) and (the concern of Article 7) thereshould be appropriate tagging of unsolicited commercial communications so thatthe consumer can exercise the same choice as to whether or not to open thecommunication as he presently can with regard to unsolicited mail in paper form.

For professionals, Article 8 is of great importance as it ensures that allMember States will allow for the establishment of online services by theprofessions whilst leaving it to the professions to decide at European levelwhat the detailed limits on commercial communications used in such servicesshould be. As a long-stop, if insufficient progress is made in developing theappropriate codes by the professions themselves then the Commission leaves opento itself the possibility of harmonisation via the Advisory Committeeestablished by the Directive.

Articles 9 to 11 make detailed provision for contracting. Article 9establishes the principle that for most contracts no discrimination should bemade between online and offline contracts; Article 10 looks at the general stepsto be taken in contract formation whilst Article 11 seeks to establishdefinitively a mechanism for determining the point of time at which a contractis regarded, for legal purposes, to have been concluded.

Articles 12 to 15 harmonise the rules regarding liability by intermediaries– for the purposes of facilitating and encouraging e-commerce, these Articlesproceed upon the decision in principle that there should be no systematicmonitoring obligation imposed on intermediaries whose sole function is to actfor conduit, caching and hosting purposes.

The third chapter deals with implementation through the mechanism ofrequiring the drawing up of European codes accessible by electronic means in allthe community languages, encouraging the establishment of ADR systems which arecompatible with community law, together with, where necessary, rapid andeffective court remedies. Articles 19 and 20 require effective administrativeco-operation especially with regard to the establishment of contact pointsaccessible by electronic means.

Essentially, the philosophy of chapter 3 is to take the route of ‘soft’law (ie self-regulating codes) as a means of facilitation of e-commerce.

Article 22 first makes specific exclusions from the scope of application, forexample, in respect of taxation. Second, it sets out a list of exceptions tocountry of origin control; third it allows Member States to take measuresrestricting free movement of information services for public interest reasons,though only after following a detailed procedure involving both a request to theoriginating Member State and notification to the Commission.

Chapter 5 establishes the Advisory Committee and sets out the standard finalprovisions.


At the end of the day, all that the Directive can do is to set out aframework: it is for individual enterprises to take advantage of that framework.Within the legal sphere there are a number of potential gains to be enjoyed:

  • a fast track towards the one-stop shop allowing lawyers to develop online legal services across the community
  • an opportunity for lawyers to advise their clients who are interested in launching e-commerce services
  • a real opportunity to participate in the pan-European codes for the legal profession referred to above – the commercial advantages of such an approach are obvious as, indeed, are the dangers of missing the bus – if you do not act, then your competitors certainly will.

Finally, Mr Bergevin considered the extent to which the issues raised by thee-commerce draft Directive highlight a number of areas in which there is not yetfully developed the single market in ordinary offline commerce. As often happensin this frontier area of law, the problems which have to be confronted in thevirtual world themselves provide valuable catalysts to the solution of problemsin the real world.

A lively question and answer session followed, with the meeting runningbeyond its advertised finishing time.

Of course, the Directive is still in draft form and much remains to bedebated and resolved, but this is clearly a matter which no businessman and, a fortiori,no lawyer having any connection with information technology (therefore,effectively, the whole legal profession) can safely ignore.

Correspondence can be directed to and further informationobtained from: jean.bergevin@dg15.cec.be.