sou · GQB3112 · 2003-01-01 00:00:00 — the medium or channel of communication used for conveying it to the recipient or on the in which the recipient obtains the service. In addition, technical progress is also bringing new types of services and phenomena and new possibilities of conducting telecommunications and media activities, whose subjection to the existing regulatory systems may not be very practical or conven- ient. This has to be viewed against the background of the regula- tory instruments of these sectors being framed on different prem- ises, with different underlying political motives and aims, and with different authorities in charge: The – more or less – unregulated IT sector, which, on the basis of business and consumer policy incen- tives, is governed by market legislation; the telecommunications sector, which is being liberalised in order to achieve effective competition for the achievement of particular aims of telecommu- nications policy; the media sector, which is governed by democ- ratic and cultural policy aims, and in which the State has taken upon itself a special public service responsibility in radio and tele- vision broadcasting. The effects which have now been described not only change the ability of existing regulatory instruments to serve their purpose, they also impact on the basic preconditions and assumptions of ex- isting law. For the market actors this, amongst other things, leads to dif- ficulties in identifying the regulatory framework and the legal obli- gations to which they are subject when carrying on their business. This problem is accentuated by the fact that these businesses find themselves in an environment which, instead of being, as previ- ously, characterised by a relatively simple value-chain, is becom- ing a market which is hard to define and is characterised by a highly complex value-system. The future success of these busi- nesses depend on their ability to adapt to these changes, be innova- tive and rethink in terms of customer loyalty, product development, market positioning, internationalising and pricing. From this perspective, the businesses acting within the converging sectors are highly dependent on a clear and foreseeable regulatory framework, which at the same time assures them of the necessary freedom of action to adapt to the changes that convergence brings about. The proper handling of these regulatory effects is therefore crucial, not only to the businesses affected, but also to national economies depending on these involved markets to be successful and innovative. A regulatory framework that is inappropriate and ineffective will hamper and negatively effect investment and strategy assessments, which in turn will hamper the development of new services and effective infrastructure solutions. There has been extensive work within the EU, both at na- tional and transnational level, for adjusting the legal framework to the progress of convergence. Since 1997 the Commission has issued a , a working document and a communication on convergence. The experience gained from this process and the 1999 review of the telecommunications regulations, forms the basis of the new regulatory framework for electronic communi- cations that was introduced in 2001/2002. In the so-called regula- tory package to govern the electronic communications sector, a more horizontal regulatory approach is adapted, i.e. the same rules are to apply to communication infrastructures regardless of the kind of infrastructure used and the type of service mediated. 4.1 The transforming character of ICT – a common denomina- tor The discussion in the preceding sections deals with the question of why the use of ICT engenders legal problems. The discussion shows that a basic explanation is to be found in the way the use of ICT affects the time, frame and space in which the transaction takes place and thus, in turn, affects the insight, understanding and perception of different kinds of transaction. In order to counteract and cope with the effects of the use of ICT, attention has to be focused on the use of legal criteria and concepts based upon the identification of the questions of who (party, culprit, subject for protection), what (object of, respec- tively, transaction and protection), where (direction, effect, estab- lishment, origin), when (legal obligation) and how (the various stages of implementation, pleading and evaluation of evidence). This must, furthermore, be seen in the light of the framing, wording and structure of a legal rule, its purpose and the balance sought between different interests and also with an awareness of the international perspective, with a variety of legal systems in- volved. The understanding of these effects as a common denomina- tor for the legal problems deriving from the use of ICT, not only provides for a better understanding of the nature of the problems, but also creates opportunities of problem-solving in a wider per- spective, in which the solution in one area can also furnish guid- ance for solutions in others. 4.2 Legislative techniques to handle the problem Various legal techniques for tackling the problems posed by the transforming character of ICT are discussed in IT Report 6/98.5 It is suggested that in certain respects greater flexibility is needed in legislation, which among other things could mean less distinctness and predictability. Not infrequently, how- ever, such legislation is criticised as providing scope for arbitrary decision-making, reducing predictability and creating uncertainty about the legal position. Basically I endorse this reflection. Generally worded state- ments of objectives and general must not be a cop out in situations where the legislator is working against the clock and with inadequate supportive documentation. This does not augur well for the quality of the result. The same goes for excessive re- liance on the analogical method of interpretation as sufficient means of solving ICT related problems within the scope of cur- rent legislation. On the other hand, this does not rule out the need for greater flexibility in legislation. To counteract the legal problems en- tailed with the use of ICT, it is often necessary to provide legisla- tive solutions that allow special circumstances in the concrete case to be taken into consideration and which at the same time afford scope for the development of more exact principles in the process of interaction between legislator, judicial practice and market. In this way the codified law can become more dynamic and can grow within given frames which at the same time ensure stability; the continuity of legislation will be promoted, at the same time as the problem of rapidly obsolescent norms out of tune with technical progress can be counteracted. It is immensely important, however, that more flexible legislation should provide clear and steady frames within which the freer assessment is to take place and which are based on the interests that the current legal rule is meant to balance or safeguard. For greater predictability and as a form of guidance, these frames can very well be supplemented by non-exhaustive examples and presumptions, i.e. Another approach is the, above-mentioned, horizontal ap- proach, based on the principle of technological neutrality, used in the EU new regulatory package governing electronic communi- cations. The horizontal approach in this context implies that the , op. cit. 25-28, 29-31. same rules are to apply to communication infrastructures regard- less of the kind of infrastructure being used and the type of ser- vice being mediated. This solution should be seen in the light of the convergence phenomenon and the regulatory implications that this development brings about, blurring the distinction be- tween the IT, telecommunications and media sectors. Basically, this seems to be a promising and necessary approach to dealing with many of the problems arising in this context. However, it is important within this legal framework, as well as in other situations, that the legislator should not blindly rely on the principle of technological neutrality – implying that regulation should focus on the transaction, irrespective of the technology being used to perform the transaction – to solve prob- lems relating to the use of ICT. The principle of technological neutrality is not, and should not be treated as, a goal in itself. In doing so there is an imminent risk of losing sight of the actual aim of the regulation in question and unintentionally altering the balance originally sought between different interests. 4.3 The wider perspective When facing the problems which ICT entails in the legal system, it is important that one should also consider the more fundamen- tal, overarching perspective: A transformation is taking place of the whole of the society, in which the legal system is one of the pillars on which the social order rests. In democratic states, the foremost task of the legal system is to manifest and maintain the democratic ideals, and legislation is framed in conformity with those ideals. One of the greatest risks here is that the complexity and ra- pidity characterising the development of the information society will result in prevailing ethical and moral values being under- mined and changed without any standpoints being consciously adopted (cf. the above discussion concerning the use of the prin- ciple of technological neutrality). This is not to say that there can be no reason for a revalua- tion of prevailing views, but this must be done on the basis of a deliberate standpoint concerning the consequences that this may have for both democracy and the individual. Among other things this has to take place within the democratic process and with an open, initiated debate in which everyone has an opportunity of taking part. Lawmaking and IT: Reflections on the for New Concepts and Categories of Thought Laws and regulations are normally built on legal concepts estab- long ago and influencing everyday life almost like laws of nature. These legal concepts may seem hard to apply in cyber- space where, normally, the main focus of attention is on the in- formation as such – irrespective of how it is stored and commu- nicated. This paper will discuss whether completely new con- cepts and categories of thought are needed or whether it will after all prove appropriate in the IT-environment to take advantage of the legal principles meant for the traditional world. 2 Electronic places and digital bearers in the legal sys- tem The development of (), Internet and World has radically changed our way of communi- cating, running business and doing research. This new environ- ment has normally been described in symbolic language derived from the traditional physical world. Take, for example, the elec- tronic equivalents of documents, archives, mailboxes, stores and marketplaces, where the use of metaphors such as electronic documents, electronic archives, websites and web shops reflects the need for understandable, user-friendly terms and descriptions. However, in the IT-environment, the legislator has limited the dimensions given by the physical world, which enables well- defined legal structures and delimitations. The main focus has been on processing of information and the title to information as such, c.f. data protection and intellectual property law. Laws and regulations founding their effects on the existence or location of a certain physical object or physical place have often been ig- nored, e.g. with bearing on electronic equivalents to locked rooms, closed places of storage, signed documents etc. Thus, it is unclear e.g. Per is a member of the IT . N when an electronic document sent to a public authority or to a private entity is deemed to be received according to procedural law or contract law, N whether electronic places and electronic handing over (traditio) will enjoy the same legal protection and legal effects as its traditional physical prototypes. The following survey outlines these issues with a starting point from digital bearers, such as electronic money (E-money), and from electronic places created to receive electronic documents, such as electronic mailboxes. 3 Immaterial tokens and absence of time and place? The lack of legal guidance in the field of electronic document and payment management, for example, may derive from the customary limitation to computer data as immaterial informa- tion. Electronic equivalents to physical places and objects, and the difference between rules and regulations applicable to imma- terial information on the one hand and a persons protected cus- tody of digital data and documentary evidence on the other hand are mentioned. The importance of this distinction is indi- cated even in our constitution. According to Chapter 1, Section 9 of the 1949 Freedom of the Press Act and Chapter 1, Section 12 of the 1991 Fundamental on Freedom of Expression anyone may be responsible and liable for damages with respect to his mode of obtaining the material if the method is unlawful, not- withstanding the constitutional right to obtain information for the purpose of publishing. Consequently, it is not an infringement of the constitution to ban methods based, for example, on unlawful pressure or intimidation, unlawful intrusion, breach of postal or telecommunication secrecy, intrusion into safe depositories etc. This dividing line is, however, unclear in the IT-environ- ment. It has been debated whether the penal provision regarding breach of data secrecy – consisting of unlawful access to a re- cording for automatic data processing – should be understood as a regulation regarding information as such or a criminalisation of certain methods to obtain information. This question may be of practical importance if, for example, a press reporter unlawfully hacks into a computer with a view to publishing data stored on it. the constitution exonerate him? Further, it is often stated that time and place have lost their meaning on the Internet. It is true that data in transit, e.g. repre- senting an offer or an acceptance, will reach their destination much faster in the IT-environment and may be communicated globally, but the same need to divide risks and responsibilities between and addressee will exist, if the item of mail is de- layed, mutilated or does not arrive. Thus, it is necessary to create clear borderlines for electronic places, e-mailboxes and the like and to elaborate distinct views on how to judge when these bor- derlines are reached and crossed. The same need exists to clarify when digital bit strings, designed to carry legal rights, will be ap- prehended as documents, coins or bills, the possession and trans- fer of which will be decisive of the parties legal rights. 4 Dematerialisation on different levels The dematerialisation of documents, archives, mailboxes, mar- ketplaces etc. described above has become especially apparent in the area of payments, where the changes brought about by IT could be seen as the last step in an evolution; N from physical goods as objects for barter to tokens repre- senting value and used as means of payment, N from certificates of deposit to instruments of debt and fi- nally to a monetary value in itself, N from the bearer of monetary value to an account-based system, and N from traditional physical objects to digital data. The first two kinds of changes have appeared without any con- nection to the computerisation and involved: N a transition from tangible goods (e.g. gold) which is con- sidered to have a certain value, to means of payment rep- resented by tokens which are generally considered to be bearers of a certain value, first backed up by, for exam- ple, the corresponding value in gold, but later accepted as a completely dematerialised means of payment; N a legal transition from certificate of deposit to a written debt note and finally to coins and bank notes, which are considered to have a certain value although no debt ex- ists tied to the coin or bill. When computers are taken into consideration, not only will the new technologys partly intangible character appear – i.e. transition from traditional physical objects to digital data – but also the shifting from physical of means of payments to account based transactions. As electronic registrations have been considered incapable of carrying rights, due to the risk of double spending it has been self-evident that payment services have to be account-based. However, when new systems for E-money, equivalent to the handling of cash, are introduced, the digital monetary units are transferred more or less anonymously from payer to payee, from virtual wallets to virtual cashboxes. The location and tradition of data representing the digital monetary units are of vi- tal importance in these systems as payments effected with digital monetary units work like transactions with coins and bills. The routines are characterised by an ambition to achieve N immediate settlement, N limitation of the payment risks, and N secure instruments that can be "transferred" electroni- cally. The payee should not have to check N who the payer is (the identity), N if the payer has the right of disposal with respect to the electronic monetary units (authority), or N if the payment is covered (balance on an account). Regulations regarding account-based transactions do not fit such digital instruments and payment services. The account-based ser- vices demand that the person who authorises the transaction must be identified and must have the right of disposal and that the payment must be covered. Further, this information must be se- curely stored to enable a party to contest an incorrect statement that the transaction was not duly authorised. As far as payments with coins and banknotes and other bearer-instruments are con- cerned, the possession of the instrument is intended to give enough protection. 5 Accounts versus digital bearers The transition to account-based transactions has been consistent with the lack of technical and administrative routines to hinder double spending and to recreate the functions based on posses- sion and tradition. The treatment of data is built on copying. The development of cryptographic and administrative routines mak- ing it possible to recreate bearer instruments protected against duplication in the IT-environment will in this connection serve as a breakthrough. IT and the market are developing monetary units in electronic form to be used as bearers of certain rights that are transferred between payer and payee. The question therefore arises whether the existing legal framework of private law, pro- cedural law, debt enforcement law, criminal law etc. is suitable and able to handle electronic monetary units. Clearly, the existing deep-rooted thinking based on accounts will have to face a major challenge. In some areas new legislation has been given to render central registers – accounts – the same legal effects as possession and transferral (traditio) of traditional instruments and these pro- visions are not built on the legal effects of possession and transferral. The following alternatives may serve as a starting point for considering the legal issues; N to bear in mind digital datas partly dematerialised char- acter and state that an account-based point of view has to be applicable, in the absence of any unique physical ob- ject such as a banknote, or N to focus on the functions which the digital monetary units will fulfil in an E-money system, functions replicat- ing those of traditional cash. If the first alternative is accepted, the result will be a kind of modernised thinking based on bankbooks. It is true that such ac- counts in electronic form should be kept decentralised to a disc- drive or chip-card etc. which the holder of the account would have in his possession or otherwise under his control, but this ap- proach would anyway imply that the payee will have to identify the payer, check his authority, document the transaction etc. Should the starting point instead be taken in the functions the electronic monetary units are meant to fulfil within the E- money system, the idea of E-money will be brought in with and subordinated to rules and regulations that fit into this technical and legal products way of functioning. Digital bearers which are protected against double spending and thereby given functions fully equivalent with cash make it possible to recreate the functions fulfilled by coins and banknotes. As a consequence of this approach, it will be feasible to recreate in the IT- environment nearly any bearer instrument, e.g. digital stock cer- tificates and negotiable electronic documents, without the long detour of central accounts. 6 A starting point from objects or functionality? The legal issues may be analysed from a variety of starting points. A study, based on IT and datas character together with descriptions of the digital instruments, may aim at considering whether the electronic monetary unit N is a physical object or something immaterial, and N is possible to hand over (traditio) in the same way as a traditional physical object. A similar angle of approach, taking the legal system and judicial classifications into different kinds of property as our starting point, is to ask whether an electronic monetary unit shall be considered to be N a claim, perhaps tied to an instrument, e.g. a bank note or a promissory note, which is carrying the monetary value, or a cheque or another generally accepted instrument evidencing a non-negotiable claim, or N another legal title. If E-money should be seen as one of these physical objects or categories of property, it could maybe be stated that the answer is more or less obvious: the laws and regulations for the traditional environment thereby pointed out should be applicable. Such a linguistic analysis of terms and legislation will, however, entail certain risks. Digital data and consequently also the electronic monetary units have a partly physical character (data exists), a partly immaterial character (data may flow in ways giving imma- terial dimensions). It may further be questioned whether any in- strument exists (in the meaning intended by the law), whether it has any spatial localisation, and whether traditional dividing in kinds of property is relevant in cyberspace. interpretation from the mentioned starting points – concealed in an analysis of terms and definitions – will probably reflect the interpreters own intent, not the legislators, regarding these legislative questions. The laws and regulations have usually not been adopted during the time computers have existed. Details in the formulation of laws and regulations and the legal technical solutions can therefore give any answers, and, any case law exists. An analysis beginning with the character of IT, the kind of property, the kind of instrument etc. may conse- quently produce misleading results. The functions the electronic instrument is intended to fulfil within the system will probably make a more fruitful starting point. The determining factor will then be whether the electronic monetary unit, the digital promissory note etc. can offer the same functionality within a system as for example traditional coins and banknotes (traditio) or if the payment functions created in elec- tronic forms should be seen as dispositions regarding account- based property. There is nothing new with such a functional starting point. Traditional physical objects have been suited to function within certain commercial patterns of transactions and, when these patterns have changed the legislature has adapted the objects functions to these new patterns. How the electronic monetary unit is constructed and represented and if it is tied to a card or is stored on a hard disk, if it is considered to be a physical object etc. will consequently have to come second.