1.This proposed negative instrument would end the direct effect of Article 3 of the Electronic Commerce Directive (“eCD”) on certain parts of the Communications Act 2003 (“the 2003 Act”) which deal with information society services and which would otherwise become retained EU law after the end of the transition period.
2.Information society services, according to the Department for Digital, Culture, Media and Sport (DCMS), broadly cover online service providers. Article 3 of the eCD sets out “country of origin” rules which provide that these services must be regulated by the law of the European Economic Area (EEA) state in which the provider of the services is established, rather than the law of the EEA state in which the services are received. To get permission to derogate from the country of origin principle, Member States have to notify the Commission and other Member States. DCMS says that after the end of the transition period, UK businesses will no longer benefit from the country of origin principle when operating in the EEA and that retaining the country of origin principle unilaterally in the UK would give EEA-based businesses preferential market access. The instrument therefore proposes to remove the direct effect of the country of origin principle on sections 120–124 and 128–131 of the 2003 Act, which set out the enforcement powers of UK regulators (Ofcom and the Phone-paid Services Authority) in relation to premium rate telephone services and persistent misuse of telephone networks. As a result of these changes, the regulators would be able to enforce breaches of the relevant UK law by EEA businesses in the same way as they enforce breaches by UK and non-EEA businesses, and without applying for permission to derogate from the EU’s country of origin rules in this area. UK businesses would only have to comply with the law of the EEA state in which they provide the service and not UK law as well.
3.There is considerable uncertainty regarding the impact of the changes. The Explanatory Memorandum refers to a low level of impact per business, annual time-saving benefits to certain UK businesses and wider transition costs associated with moving away from the country of origin principle, resulting in a small annual net direct cost to business of £0.6 million over 10 years. The Department told the Committee that no data was available on how many of the 75,000 UK businesses that potentially fall into the scope of the instrument will be affected in practice, and that wider costs to UK businesses as a result of the UK becoming a third country in relation to the eCD will be a consequence of leaving the single market and customs union, rather than the instrument itself. These are issues that the House may wish to explore further. On balance, therefore, the Committee is of the view that given the uncertainty about the impact of the end of country of origin principle in this specific area, the instrument should be subject to the affirmative procedure.