the Electronic Commerce (EC Directive) Regulations 2002

The E-Commerce Directive and the Electronic Commerce (EC Directive) Regulations 2002
 The E-Commerce Regulations apply to ‘information society services’ within the ‘co-ordinated
field’, which covers a wide range of on-line activities that are ‘normally provided for
remuneration’. This definition includes selling goods and services on-line, including offering
on-line information by subscription-based information providers and banner adverts on websites.
The DTI’s published its Guidance on the Regulations and it seems that the definition of
information society services covers a number of activities that are not normally paid for by the
receiver of the service, but where the service provider receives remuneration from a third party
(such as selling advertising space on-line).
The DTI states in the Guidance that the term ‘information society service’ will ‘also extend to
services (in so far as they represent an economic activity) that are not directly remunerated by
those who receive them, such as those offering on-line information or commercial communications
(e.g. adverts) or providing tools allowing for search, access and retrieval of data’.
Therefore, free website content about an organisation which is not directly targeting users, but
merely offers a passive advertisement about the organisation, will probably not fall under the
remit of the Regulations as it might not be classed as an ‘information society service’. However,
content which is actively targeting customers or advertising an organisation’s products or
services may be classed as an ‘information society service’ and will therefore be covered by the
Regulations.
 If an organisation is providing an information society service within the co-ordinated field by
providing on-line content or putting adverts onto its own website, a partial country of origin
principle will apply within the EU through the implementation of the E-Commerce Directive into
Member States’ laws. In principle, this should simplify the question of applicable laws and
jurisdiction over content provided on-line, at least within the EU.
Under English law and the implementation of the E-Commerce Directive through the E-Commerce
Regulations, regulation 4(1) states that information society services provided to a person in
another state in the European Economic Area (EEA) by a service provider from an establishment in
the UK must comply with any applicable UK law that falls within the co-ordinated field. Regulation
4(2) of the Regulations provides that any applicable UK law that falls within the co-ordinated
field may not be applied to an information society service provided by a service provider
established elsewhere in the EEA, if this would restrict the freedom to provide that service into
the UK. Accordingly, inbound information society services are subject to a restrictions test: UK
law may apply to the service provided it does not restrict the freedom to provide the service in
the UK.
It should be noted that this does not implement a pure country of origin principle as it does not
say that any provider of such services who is based outside of the UK will be entirely exempt from
the application of UK laws. There are a number of important exceptions to regulation 4(2) of the
Regulations, where enforcement authorities can take proportionate measures against a service
provider based outside of the UK on public policy grounds, for the protection of public health,
public security grounds or for the protection of consumers.
The E-Commerce Directive and the UK’s implementation of it through the E-Commerce Regulations
therefore only partially set up a ‘country of origin’ principle. The laws of other Member States
could still apply to the content of the website or the advertisement of goods or services on-line
if public policy or consumer protection grounds demand that the laws of another Member State
should apply. In addition, free website content which only provides information about an
organisation, without targeting or actively aiming it at customers, may not be covered by the
Regulations, which will mean that the question as to jurisdiction over the content of the website
will still remain.
Given all of the complexities and uncertainty surrounding jurisdiction of the Internet, and the
frightening prospect of being liable under all of the laws of the territories in which the website
can be accessed, what can an organisation do to minimise the risks involved with advertising its
goods and services on-line? Clearly, obtaining legal advice from all of the territories of the
world is not a practical or commercial reality.
There are however some practical steps which can be taken to attempt to lower the risk of
potential liability.
It is accepted practice for disclaimer wording to be added to a website to state that the website
has been put together to comply with the laws of a particular jurisdiction, such as English law.
The statement should then go on to state how any dispute arising out of the website will be dealt
with (for example, by the English courts, or by alternative dispute resolution (ADR)). By adding
such a statement or disclaimer to the website, the hope is that organisations will exclude the
application of laws from other territories.
In order to be valid under English law, the jurisdiction disclaimer will need to be prominent and
brought to the attention of users, in order that the statement regarding jurisdiction and dispute
resolution of the website becomes a term of a ‘contract’ governing use of the website between the
website owner and the user. From a risk minimisation perspective, disclaimers and statements such
as these should ideally be shown on the entry page to the website, with users having to click on
an icon saying ‘I agree’ before being allowed to enter the website. In practice, creative concerns
about the design and layout of the website may outweigh the desire to include such a legal
statement on the entry page. Therefore, a number of website owners have taken the view that an
icon from the home page of their website to a jurisdictional statement will suffice. Currently,
the validity of such disclaimers has never been tested in an English court and there is therefore
little indication at present as to how prominent a disclaimer needs to be in order to be validly
incorporated into the contract governing use between the website owner and the user. Best practice
would suggest that organisations are safer to include a jurisdictional disclaimer on their website
as prominently as possible rather than not having a jurisdictional statement at all. Above all,
however, this needs to be consistent with the actual content of the website itself and what
territories it is targeting in practice. Consumer websites will face particular difficulties.
The terms and conditions of a website could also attempt to disclaim potential liability which may
arise out of the content of the website. For example, the website may be linked to a third party’s
software which can be downloaded by the user, which carries with it a risk of viruses. The website
may also be hyperlinked to a third party’s website, over whose content the original website owner
does not exercise control, and which could lead to some other kind of liability. One practical
step which can be taken (subject to the usual caveats relating to limitation of liability) is to
attempt to disclaim potential liability arising out of third party software or content by stating
that the website owner will not be liable for any loss or damage caused by such third party
software or content. However, where the law restricts disclaimers of liability, website owners may
not be able to rely on the disclaimer to avoid all possible liability arising out of the use of
the website, for example, if such a term was unreasonable or unfair. It is therefore recommended
that audits as to the legality of third party content are carried out by the website owner and
virus checks be undertaken on any software made available for users to download from the website
from time to time in addition to using any legal disclaimers on the website.
 Wherever possible from a technology point of view, filters preventing visitors from problematic
jurisdictions from accessing the website in the first place should be used. In practice (and more
easily implemented) are safeguards (such as use of IPO addresses and addresses for credit
cardholders) to prevent transactions with customers based in particular jurisdictions.
However, even if risk minimisation steps are taken, there remains a possibility that an
organisation which advertises its goods or services over the Internet still runs the risk of
potential litigation or infringement of laws in any jurisdiction in the world