PROPOSED DIRECTIVE ON CERTAIN LEGAL ASPECTS
OF ELECTRONIC COMMERCE
A Memorandum on the Common Position by
the London Investment Banking Association (LIBA)
LIBA is the association which represents the views
of the major international investment banks and securities houses
which base their European and international operations in London.
A common position on the proposed Directive
on Certain legal aspects of Electronic Commerce was adopted by
the Council on 8 February 2000.
A Directive which gives clear effect to the
Single Market is vital if electronic financial services, and other
electronic business, are to thrive in Europe.
This memorandum sets out LIBA's views on two
aspects of the proposed Directive. We comment on those provisions
which it is most important be retained in the final text
in order to give clear effect to the Directive's central objective
of establishing a single market. We also explain the principal
remaining concerns about the common position text.
SUMMARY
LIBA's concerns focus particularly on certain
derogations from the Single Market principle, under which the
"State of Destination" could impose requirements on
incoming cross-border e-commerce. These derogations could compromise
the State of Origin principle, thereby inhibiting the development
of cross-border e-commerce in Europe. LIBA is also concerned about
the impact of the proposed Directive on financial services business
with customers who, while they fall within the Directive's definition
of "consumer", do not, because of their level of expertise,
want or need the level of protection which could be imposed on
business with them.
LIBA believes that the essential objectives
are:
— to retain the provisions in Articles
1(3), 1(4), 2(h), 3(l) and 3(2), and Recital 23, which form the
foundation of the Internal Market approach of the proposed Directive.
— To minimise the impact of the derogation
from the Internal Market State of Origin principle for contractual
obligations concerning consumer contracts (Annex, Recitals 55,
56).
— To clarify the limited applications
of the scope for derogation from the Internal Market principle
on consumer investor protection and other grounds (Article 3(4),
Recital 27).
We note that the definition of "consumer"
in Article 2(e) would include, in the context of financial services,
a category of expert individuals to whom the protections afforded
by the Directive to consumers are inappropriate. However, we are
aware that consideration is now being given to drawing an appropriate
distinction between retail and wholesale business in the context
of the ISD, and that the recent FESCO paper on categorisation
of investors in this context recognises the concept of expert
individuals. It will be necessary to ensure that these developments
are addressed in the forthcoming Green Paper on electronic commerce
in financial services, so that the overall framework of European
legislation on electronic commerce, as it applies to financial
services, treats expert individuals appropriately.
DETAILED COMMENTS
Provisions which should be retained
Article 1(3) and Recital 11—It is essential
that Article 1(3) be retained, as the
acceptability of some of the ambiguous provisions of the directive
hinges on it. It is important that it is the freedom to provide
Information Society services which prevails, thus supporting the
supremacy of the directive over sectoral measures. In particular,
it will be important to be clear that Article 1(3) governs the
relationship with other Directives described in Recital 11 (including
particularly the Investment Services Directive (ISD) and the proposed
distance marketing directive—see Recital 27), so that the
freedom to provide Information Society Services is paramount,
and Member States cannot invoke protectionist national provisions,
possibly permitted under earlier sectoral Directives, which are
more stringent than those which apply in the State of Origin of
the service. The Commission has stated that this is how the proposed
Directive is to be interpreted, but there should be no doubt about
the interpretation.
Article 1 (4) and Recital 23—It
will be important to retain the very helpful clarification
in Recital 23 that "provisions of the applicable law designated
by rules of private international law much not restrict the freedom
to provide Information Society services as established by this
directive". This provision makes clear that Member States
cannot sustain rules otherwise applicable by operation of private
international law which would constitute a restriction on the
Internal Market (it also reflects the Commission's Interpretative
Communication on the Freedom to Provide Services and the General
Good in the Second Banking Co-ordination Directive—the principles
of which the Commission has stated apply also to the Investment
Services Directive).
Article 3(1) and Article 3(2)—It is
essential that these provisions, which form the heart of the Internal
Market, State of Origin approach of the Directive, are retained.
Article 1(6) and Recital 63—It
will be important to ensure that the allowance for cultural and
linguistic diversity remains restricted to measures taken "in
respect of Community Law", to minimise the use of this
provision to justify protectionist restrictions.
Article 2(h)—The definition of
"co-ordination field" is broad and relatively clear,
and so supports the broad application of the Internal Market principle
to all aspects of electronic business. It is essential that
this definition is not narrowed or watered down.
Recital 58—The provision to allow
account to be taken in the future of the results of discussions
in international organisations is welcome, and should be retained.
Provisions which require changes to give full
effect to the proposed Directive
Article 2(e)—See our comments in the Summary
above on the need to ensure that the overall framework of European
legislation as it applies to financial services accords appropriate
treatment to "expert" individuals.
Article 3.4 and Recital 27—Article 3.4(a)(i)
contains a new provision for derogation on grounds of "protection
of consumers, including investors". This provision was considered
by the European Parliament at first reading, and we assume that
it was intended merely as a clarification that the definition
of consumers include consumers who are investors. A more important
issue is that the derogation is stated to be "in respect
of a given information society service". The press
release on the political agreement stated that the derogation
is intended to apply only to a particular service provided
by a particular service provider. Recital 27 does not clarify
the ambiguity in Article 3(5) about whether the derogation applies
to a particular service only, or whether it could apply to a category
of services. The derogation should be restricted to "a given
information society service provided by a particular service provider".
Annex and Recitals 55 and 56—The derogation
from Article 3 for contractual obligations concerning consumer
contracts is probably the most worrying remaining stumbling block
in the directive. It will be important to ensure that European
provisions on international private law cannot be used by Member
States to restrict the freedom to provide Information Society
services otherwise than in accordance with Community law.
Articls 5, 6, 7, 10 and 11—The exclusion
from detailed disclosure requirements for non-consumer disclosures
is still restricted to Articles 10 and 11 only. The application
of Article 5, 6 and 7 measures to non-consumers could be burdensome
(though the exclusion from the harmonisation measures of contracts
formed by exchange of e-mails is noted). This is a matter which
should be considered in the proposed Green Paper on electronic
commerce and financial services.
Articles 10 and 11—The exclusion for interprofessional
disclosure is subject to agreement between the parties. It would
be helpful to have clarification that "agreement" can
be implicit (ie if the other party does not object). Also, as
noted in the Summary above, it will be important in the framework
of European legislation as a whole to ensure appropriate treatment
of "expert" individuals in the context of financial
services.
17 February 2000
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