Source: EURLEX
Language: en
Format: md

###### COMMISSION OF THE EUROPEAN COMMUNITIES Brussels, 04.02.1998 COM(1998) 50 final COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE EUROPEAN PAB&IAMENT, THE ECONOMIC AND SOCIAL COIVMTTEE AND THE COMMITTEE OF THE REGIONS

##### **TABLE OF CONTENTS**

_Page_

**1.** **INTRODUCTION: NEW POLICY CHALLENGES** **1**

**2.** PROGRESSING **TOWARDS THE GLOBAL ELECTRONIC MARKETPLACE** 2

2.1 The emergence of a global electronic marketplace 2

2.2 The need for interoperable technical solutions 4

2.3 Ensuring market access and competition 5

2.4 The need for a consistent legal framework 6

2.5 Conclusions: requirements for an international framework 9

3. **DEFINING THE** WAY **FORWARD FOR INTERNATIONAL COORDINATION** 9

3.1 Strengthening international coordination 9

3.2 Identifying the most urgent issues and ways to tackle them 10

3.3 Developing a method of coordination: An International Charter 11

**4. THE NEXT STEPS** **12**

**Glossary** **A3**

**1.** **INTRODUCTION:**

**The European Union has made substantial**
**progress in putting** **in** **place the necessary**
**framework conditions for the development**
**of the** **lnformatfôp*$ociety** **[1]** **wl%** **a** **% k** **to**
**unleashing its growth and employment**
**potential bringing benefits to** **all.** **The**
**dynamism of the Information Society is**
**putting pressure on both public and** **private**
**sectors to be more flexible and to rapidly**
**take up new challenges.**

**For this** **reason,** **the** **Commission has**
**recently launched a broad consultation to**
**explore** **the** **nature** **and** **regulatory**
**implications of convergence between the**
**telecommunications,** **media** **and**
**information technology sectors** **[2]** **.**

**The present Communication responds** to
**the need for strengthened international**
**coordination in order to create an enabling**
**framework** **for** **the** **global** **electronic**
**marketplace ("on-line" economy) which is**
**a fundamental element of the Information**
**Society.**

The European Union has begun to
formulate several policy lines on electronic
commerce by stimulating the development
of an internal market for those services
whilst safeguarding public interests (cf.
Communications on "A European Initiative
in Electronic Commerce" [3], "Harmful and
Illegal Content on the Internet" [4] and
"Ensuring Security and Trust in Electronic
Communication" [5], and the Green **Paper** on
"Protection of Minors and Human Dignity
in Audiovisual and Information Services [6] ).

In parallel, the European Union is
contributing to the development of
favourable conditions at international level

for electronic communications and
commerce, for instance through the WTO [7 ]

1 **See Rolling Action Plan** **(COM(96)607):**
**[wwwJspo.cec.be/infosoc/legreg.html](http://wwwJspo.cec.be/infosoc/legreg.html)**
**2** **COM** **(97)** **[623: www.ispo.cec.be/convergencegp](http://www.ispo.cec.be/convergencegp)**
**3** **COM(97)** **157:** **[www.ispo.cec](http://www.ispo.cec)** **be/ecommerce**
**.initiat.html**
_*****_ **COM(96)** **[487: www2.echo.lu/legal/](http://www2.echo.lu/legal/)**
**en./intemet/.communic.html**

_**•'**_ **COM** **(97)** **[503: www.ispo.cec.be/eif](http://www.ispo.cec.be/eif)**
15 COM(96) 483 finai

' wwv/.wto.org

agreement on basic telecommunication
services, the ITA agreement on tariffs for
information technology products, and the
**WIPO** **agreement** on the protection of
intellectual property. This policy is based
on the conviction that the Information
Society can only be a global one, with the
wide participation of the international
community, including developing
countries [8] .

Many of the Union's partners are actively
involved in building a framework for the
electronic marketplace. Worldwide there
are now numerous initiatives and
regulatory actions at national and regional
levels. These activities are not always
coordinated and sometimes reveal
divergent approaches. Ill-adapted or
fragmented regulation, however, will hinder
the development of the "on-line" economy
from which business and citizens have
much to gain. Decision makers in the
public and private sectors are becoming
aware of the fact that greater consistency
in these national and regional approaches
is needed and that this need is becoming
increasingly acute.

Against this background, there is a need
for the European Union and its Member
States to examine their policies with a view
to adapting or clarifying traditional
regulation to the requirements of the "online" economy. This does not mean
delaying legislative activities at Member
States or Union level until global rules are
settled in the respective fields. Equally it
does not mean surrendering national or
regional traditions and cultures. What it
does require, however, is to engage in an
open debate and awareness-raising
exercise about the implications of the
global electronic marketplace and its
particular characteristics on certain rules
and their application. Progress should be
made in parallel between technology
changes, national and European
regulatory actions, and cooperation at
international level on regulatory principles.

Provided it acts quickly and boldly, the
European Union has all the potential to
make a positive contribution to the shaping
of the new environment, drawing on its rich

**See Communication on "the Information** Society
**and** Development: **the** role of the EU": (COM(97)3£1:
[«-ww.ispo.cec.be/isad/isad.htnil](http://«-ww.ispo.cec.be/isad/isad.htnil)

scientific, cultural and social assets. The
Union should signal to the international
community that it is determined to
contribute its experience and vision to
building a framework based on fair
competition, private sector investments,
open markets, and social inclusion,
accompanied by appropriate safeguards
covering both the wider public interest and
the interests of the individual.

This Communication advances views on
how to define the key issues that require
strengthened international coordination. It
does not propose concrete solutions to
these issues as such, in particular it is not
suggesting thai there is a need for global
regulation of the Internet or for the creation
of new international organisations. The
Communication essentially argues that the
time is ripe to seek a better international
understanding on how to proceed in the
near future to achieve a "friction" free and
borderless marketplace while meeting
general public interest objectives.

in this way, the global community can work
together to maximise the potential of the
Information Society to stimulate growth
and innovation, to create new employment,
and to promote social and economic
cohesion.

To this end, it is proposed to invite experts
from industry and other involved parties to
a round table meeting in 1998, to initiate a
debate at Ministerial level, and to seek an
understanding on a method of coordination
in the form of an International Charter.

**2.** **PROGRESSING TOWARDS THE**

**GLOBAL ELECTRONIC**

**MARKETPLACE**

2.1 _Tha_ **emergence** of **a** global

electronic **marketplace**

Growth in trans-border traffic over the last
two decades has been a striking feature of
the communications landscape.
International telephone calls have risen
from under 4 billion minutes in 1975 to
over 80 billion (estimated [9] ) in 1997 - a
growth rate of 15 per cent a year. At the
same time, they have contributed over
8 per cent of telecommunications service
revenue worldwide. This growth is
forecast to continue.

**International telephone**

**traffic**

**(billions of minutes)**

80

60

40

## 20 — **^jllt**

**l** **|W** **|1** 1 _M_ _**\m \u**_ _M M_ **|B** **(1** i l il **[•** _M M M_ _**\m \m \m \m \m**_ il _M_ _m_ **(I** _M_ i l i l _M_

**m** **oo** ***-** **•*** **r*-**
**f—** **I*»** **oo** **oo** **oo**
_**O)**_ _**Oi**_ _**Oi**_ _**O)**_ _**O)**_

Source: ITU

More recently, digital mobile
communications, in particular through
GSM, are providing global mobility in
personal communications. Today, more
than 200 GSM networks are in live
commercial operation in over 100
countries worldwide serving 55 million

users.

In the future, new satellite systems will
have a major impact on the development
of global communications services. The
total addressable market for broadband
multimedia world-wide is expected to grow
steadily from 100 million users up to 330
millions in 2010 of which about 16 per cent
(i.e. 50 million users) are forecast to be
captured by satellite systems. The
cumulative service revenues for satellite

ITU

systems over the period 2000-2010 is
estimated to be around 110 billion ECU.

This considerable growth over recent
years has coincided with significant price
reductions driven by falling costs snd
increasing competition, and the expansion
of data networks, in particular the Internet,
which will account for a growing proportion
of international traffic in coming years.

Approximately 100 countries now enjoy
Internet access. Recent surveys [10] report
that there are around 20 million Internet
hosts worldwide, and the number of actual
internet users is currently estimated to be
in the region of 100 million [11] . It is forecast
that this figure will increase to a quarter of
a billion users by the year 200.0 [12] .

**Internet Hosts**

**(Thousands)**

Source: Network Wizards

Figure 1 below illustrates how the nature of
the communications environment is
changing. The scope of activities possible
(e.g. medical, educational, recreational,
commercial) and the number of different
actors concerned has expanded through
liberalisation and the development of new
multimedia products and services.

_**Example;**_ _**Electronic Commerce**_

_Electronic commerce definitions may differ and_
_estimates may_ _vary,_ _but nevertheless there are_
_clear_ _indications_ _of_ _strong_ _growth._ _Estimates_
_published in_ _July_ _199T*_ _Indicate that_ _business-_
_to-business_ commerce over _the Internet will_
_reach 7 billion ECU in 1997_ - a _tenfold increase_
_from_ _1996._ _In_ _2002,_ _It is forecast that the value_

10 [Network Wizards: www.nw.com](http://www.nw.com)
" [www.nua.ie/surveys](http://www.nua.ie/surveys)
12 [Global Internet Project: www.gip.org](http://www.gip.org)
'•' [Forrester Research: www.forrester.com](http://www.forrester.com)

_**of goods and services traded**_
_**companies over m ïnhmeiWU approach**_ _**300**_
_**billion ecu**_

These developments are giving rise to the
emerging electronic marketplace. Not only
is communication itself emerging as a
worldwide business, it is also underpinning
the globalisation and networking of
economic activities.

New business configurations are
appearing, particularly in informationbased sectors. Companies, including
SMEs, are establishing worldwide
networks linking research, production,
assembly and distribution. Services, in
particular information services (e.g.
consultancy, banking, insurance, travel,
publishing, marketing, sales, advertising,
etc.), can now be produced in one country
and exported to another via electronic
networks.

The wide range of activities now
technically possible can only be fully
exploited if an international enabling
framework emerges. International
agreements have always played an
important role in the development of the
communications industry. Figure 1 shows
how the character of these international
public and private sector arrangements is
being progressively extended from mainly
technical to commercial and increasingly
legal issues as the communications
environment evolves.

**Increasing**
**Scope of**

**Services**

**Interactive**

**Services**

(online '
multimedia)

**Enhanced**

**communications**

**services**
(video-conf., e-mail,
Internet)

**Basic**

**Telephony**
(voice, tax)

**Telegraphy**

**Increasing**

**Demand**

_'_ **Legal**

jurisdiction
liability
taxation

copyright
authentication

encryption
data protection

content

consumer

protection

**Technical**

interconnection

interoperability

frequencies

**Commercial**

market-access

competitive
framework

Past **Present** **Future**

**Figure** **1 :** **Enabling Framework for the global electronic marketplace**

**2.2 The** **need** **for** **Interoperable**

**technical solutions**

Historically, in telecommunications, a
number of international public bodies were
set up to oversee agreements on technical
issues, including the connection and
interoperability of national networks,
standards and frequencies (e.g. ITU [14],
ISO [15], ETSI [16], CEPT [17], etc.).

_Example:_ _International interconnection_

_The_ _first_ _telegraph_ _linos did not_ _cross national_
_frontiers because each country used a different_
_system_ _and_ _each_ _had its own_ _telegraph_ _code._
_Messages_ _had to be_ _handed_ _over at_ _frontiers_
_before_ _being_ _retransmitted_ _over the_ _telegraph_
_network_ _of_ _the neighbouring_ _country._ _Countries_
_than decided to conclude agreements to_
_interconnect national_ _networks._

The ability to offer users access to
personal communications facilities
wherever they travel in the world would not
have been possible had it not been for the
conclusion of international accords on
standards, frequencies, and "roaming".

14 [www.itu.int](http://www.itu.int)
,s [www.iso.ch](http://www.iso.ch)

"* [www.etsi.fr](http://www.etsi.fr)
!7 wv/w,ink.fi/cept/englanti/ceptinfo.htm

_**Example:**_ _**Global System far Mobile**_
_**Communication (GSM)**_

_The mobile phone scene in_ _the_ _eariySOs_ _was_
_akin to_ _**a**_ _car being driven freely around the_
_motorways_ _of_ _Germany,_ _but_ _stopping dead_ _on_
_crossing the border into France._ _The_
_introduction of GSM - the result of close_
_collaboration_ _between_ _industry,_ _governments_
_and users at an_ _international_ _level_ _(CEPT,_
_ETSI,_ _EU) -_ _opened_ _the way for_ _trans-border_
_mobility or_ _"roaming"_ _between different_
_networks, irrespective of their_ _geographical_
_location._

New technological developments are
giving rise to new needs. These are linked
to issues such as the development of
Internet architecture, the frequency and
technical requirements of the next
generation of mobile wireless
communications and new satellite and
navigational systems, including
reconciliation of requirements posed by
commercial and public interest
applications, as well as the legal protection
of user interfaces for multimedia services.

The speed of technological developments
combined with the changing role of the
actors concerned mean that
standardisation is beginning to follow a
different mechanism to that which has
operated historically in
télécommunications (public bodies) and in
the IT sector (agreements between "big"

players, proprietary systems leading
sometimes to de facto monopolies): a
more open and flexible consensus-building

process.

A particularly striking illustration is the
"Internet community" (e.g. IETF, W3C,
IANA). Unlike the international switched
telephone network, which has largely been
built up within a formal and institutionalised
framework agreed by governments, the
Internet has developed according to its
own unique user-driven model into a loose
federation of interconnected computer
networks worldwide. It is made up of
groups which are open and follow a more
spontaneous organisational model, but are
therefore more difficult to define.

_**Example:**_ _**the domain name system (DNS)18**_

_In_ _an_ _increasingly commercialised_ _Internet,_ _the_
_most coveted_ _domain_ _is_ _".com",_ _intended_ _for_
_commercial_ _organisations._ _But_ _".com"_ _is a_ _non-_
_country-specific generic_ _top level_ _domain_ _that_
_can be used by anyone in the world. The_
_availability_ _of_ _useful names_ _is_ _quickly running_
_out and_ _registering under_ _the_ _narrow confines_
_of_ _"._ _com"_ _cannot work_ _for_ _much_ _longer._ _In 1996_
_there were around 40,000 registrations._
_Today,_ _there_ _are over 4_ _million._ _In the_ _future,_
_questions_ _such as_ _who should_ _be_ _responsible_
_for_ _managing_ _the_ _funding,_ _administration,_ _and_
_assigning of_ _domain_ _names in generic Top_
_Level_ _Domains,_ _and how to_ _introduce_ _more_
_competition_ _into_ _the management_ _of_ _the_ _DNS_
_system,_ _will have to be_ _answered._

The Internet community is trying to build
on open standards that allow both
interoperability and competition. Open
standards are particularly important with
regard to hardware and software tools for
Internet use and access. Items such as
browser software are in a way the "entry
ramps" to the information superhighway,
and it is important that they be based on
open standards so that all users may have
equal access to the Internet. Otherwise
proprietary standards and their attendant
licensing schemes will control access to
content and electronic commerce
transactions, and will adversely influence
licensing and other market behaviour.

18 As many as 9 different organisations are directly
involved in decision-making for the Internet's Domain
Name System (IETF, IESG, IAB, ISOC, IANA, FNC,
NSF, InterNIC, NSI) and an international debate on
its future governance is underway.

Because of an open and flexible model,
Internet standardisation up to now is quick
and agile. Measures to facilitate the
continued growth of the Internet as an
important feature in global communications
will need to take this open, user-led
approach into account.

**2.3 Ensuring market access and**

**competition**

The electronic marketplace will reinforce
the ongoing trend towards globalisation,
which, as trade figures show, is gathering
speed. As a share of world output, trade
has more than tripled since 1950 - from 7
per cent to over 22 per cent. Investment,
too, has become a powerful force for
economic integration with cumulative
assets of foreign investment trebled since
1987 - to over 2.5 trillion ECU. A
significant proportion of trade in money
markets takes place on-line. The daily
volume of foreign exchange deals
worldwide exceeds 1,000 billion ECU [19] .

A number of agreements have given an
added impetus to these trends, notably
within the WTO, through the GATT, GATS
and TRIPS agreements, which will
continue to play an important role in
promoting trade liberalisation, including the
recent agreement on telecommunication
services.

One of the major obstacles for the
development of advanced communication
services which are at the basis of the "online" economy are high
telecommunications costs. Dramatic
reductions in the cost of computing power
together with competition are pushing
tariffs and giving rise to a global
infrastructure where distance becomes
meaningless.

_**The Irrelevance**_ _**of Distance**_

_A_ _transatlantic telephone_ _call now costs just_
_1.5_ _percent_ _of_ _what_ _it cost 60_ _years_ _ago._ _And_
_the_ _World Bank predicts_ _that by_ _2010_ _the cost_
_will_ _have_ _fallen by_ _another_ _two-thirds,_ _making_
_for_ _instance trans-Atlantic telecommunications_
_increasingly affordable_ _to all. This will allow_
_small_ _businesses_ _and_ _individuals_ _to_ _establish_
_remote presence, beyond the geo-political_
_borders_ _of_ _their physical_ _location._ _Doing global_

19 Financial Times - "The Banker", 27.11.97

_business_ _is already no longer_ _limited_ _to big_
_multi-national companies_ _but within reach of_
_everyone who, for instance by using the_
_Internet,_ _is_ _able_ _to set up a_ _global business_ _at_
_low_ _costs._

Falling tariffs will create further dynamism
in the electronic marketplace, notably
when broadband communications become

more affordable. The current limitations of

Internet access and also mobile
communications to relatively narrow
bandwidth needs to be overcome as
quickly as possible. In most cases, the
necessary incentives will be provided by
market demand and competition.
Therefore effective implementation of
agreed WTO rules are crucial.

**2.4** **Tho** **need for a** **consistent** **legal**
**framework**

As a principle, the legal frameworks of the
off-line world will be applied to the on-line
world and public interest will also need to
be safeguarded in a proportionate manner.
However the technical possibilities of open
networks like the Internet are already
beginning to put legal structures to the test
in various fields of existing law. In some
cases, the specific character of the
borderless electronic marketplace and the
transmissions which circulate within it may
therefore require clarification or adaptation
of existing legal frameworks and
enforcement mechanisms. The following
illustrative examples aim to demonstrate
the diversity of these issues.

The question of how taxes and tariffs
should be applied and implemented to
electronic commerce is a major issue in
this area. For instance, the impact of
electronic commerce in the area of indirect

taxation needs to be examined.

_**Example:**_ _**Value-Added Tax**_

_The musical content_ _of_ _CDs Is delivered on-line_
_from a_ _country_ _A to a Country B; i.e. no_
_physical goods_ _are_ _sent,_ _the_ _"music"_ _is_ _simply_
_downloaded_ _by the_ _customers._ _Unlike_ _a hard-_
_copy,_ _it_ _passes from supplier to_ _consumer_
_without being subject to customs controls._
_Country_ _8_ _is unable_ _to_ _collect the VAT unless_ _it_
_is voluntarily declared by the resident_
_consumer._ _Furthermore,_ _a supplier_ _in_ _country_
_3_ _wGuld be obliged_ _to_ _charge VAT on_ _all_ _sales,_
_iewing_ _him_ _ai a_ _disadvantage._ _To put both_
_suppliers_ _on an_ _equal_ _footing,_ _the tax_ _regime_

_would require modifications which might_
_involve charging VAT on the basis of the_
_location of the_ _customers._

In some cases, the on-line world is
beginning to expose differences in national
laws, even though such differences may
be entirely compatible with the markets
and activities for which those rules were
originally developed. A central legal issue
for users of open networks, such as the
Internet, is that of identifying which party
should be liable for legal violations in the
network environment. The current
situation is characterised by considerable
legal uncertainty to the detriment of some
parties.

Moreover, the increased use of open
electronic networks has also resulted in an
increasing number of jurisdictional conflicts
between States. The explosive growth in
networked communications means that
such jurisdictional conflicts are likely to
become more and more common.

_**Example: Jurisdiction**_

_A_ _company In Country_ _A_ _establishes_ _a site on_
_the_ _Internet_ _by_ _which_ _it sells_ _products._ _The_
_company's_ _site can be_ _accessed_ _by_ _Internet_
_users_ _in_ _Country_ _B,_ _but_ _it_ _sells no products and_
_otherwise transacts no business there. A_
_consumer in Country_ _B files suit against the_
_company in Country B, claiming that the_
_information_ _on its_ _web site_ _is_ _misleading under_
_the laws_ _of_ _that_ _country._ _The court_ _in_ _Country_
_B_ _asserts jurisdiction over the company based_
_on its_ _web_ _site_ _being accessible_ _there,_ _forcing_
_the_ _company to_ _defend a costly suit in_ _a_ _foreign_
_country wfth which H otherwise has no_ _ties._ 20

The networking of activities is encouraging
the "virtual" mobility of human resources
and is giving rise to a more global labour
market. Trans-national work in this
context is likely to have implications with
regard to the applicable law for labourrelated issues. Adequate mechanisms
which can soive disputes regarding transborder work and which can serve as
guidelines for the parties when transnational work is agreed upon may be
needed.

At the European level, jurisdiction in the field of
civil and commercial matters is regulated by the
Brussels and Lugano Conventions on Jurisdiction
and the Enforcement of Judgements in Civil and
Commercial matters (1968 and 1988. respectively)

_Example:_ _labour law_

_A_ _teleworicer_ _employee with residence in_
_Country_ _A,_ _works (or_ _a_ _company established_ _in_
_Country_ _B._ _What_ _'iito the legal implications?_

Technology allows intellectual property to
be copied and transmitted worldwide with
relative ease. As a result, different levels
of legal protection in different countries
become more relevant for rightholders and

users.

_Example:_ _copyright_

_Country_ _A_ _provides_ _for_ _a exception_ _to_ _the right_
_of_ _communication_ _to the public (on-line) for_
_teaching_ _and_ _scientific_ _research._ _Country_ _B_
_does_ _not._ _A_ _university_ _in_ _Country_ _A_ _includes,_
_on the basis of the_ _research/teaching_
_exception,_ _works protected_ _by_ _copyright in_ _its_
_site without the authorisation of_ _imp_ _right_
_holder._ _The_ _sip_ _is_ _accessible_ _in_ _Coynfry_ _B._
_The university therefore Infringes_ _rights_ _which_
_exist in country_ 8 _end_ _in any other_ _country_
_where it is_ _accessible._ _The_ _university_ _must_
_ensure that it has_ _authorisation,_ _if_ _necessary,_ _in_
_all_ _countries where the site_ _is_ _accessible._

Similarly, significant differences in data
protection regulation, or the absence of
data protection provided at regional and
national levels are likely to hinder crossborder electronic trade and deter citizens'

use of communications services.

_Example:_ _date_ _protection_ _[22 ]_

_An_ _individual hi ûout^ryA visits the_ !..
_a_ _company based_ _in_ _Country_ _B._ _the_
_before allowing_ _entry,_ _requires all users to_
_complete an_ _oh-Une questionnaire,_ ^ftftfafi
_requests_ _the_ _user's personal details ahdviher_

**21** **An improved international commercial and legal**
**framework for intellectual property is emerging**
**through the TRIPS agreement,** and **the** **WIPO**
**treaties of December** **1996** **on Copyright, and on**
**Performances and Phonograms. The Commission**
**has recently adopted a proposal for adirective on**
**copyright and related** rights in the Information Society
(COM(97)628fin). This directive will complement the
existing Community framework on copyright and
related rights, which addresses already certain
copyright issues related to the Information Society.
22 In the field of data protection, the EU has adopted
a directive on the protection of Individuals with
regard to the processing of personal data and on the
free movement of such data (Directive 95/46/EC) and
a Directive concerning the processing of personal
data and the protection of privacy in the
telecommunications sector (Directive 97/66/EC).
Data protection is also being tackled by the Council
of Europe (1981 Convention on Data Protection) and
the OECD.

_daté pà th0 user's We_ _style_ _preferences._ _No_
_lnfc^^0^$.^j^^4e^4rdkg_ |fte _likely uses_ _of_
_the^_ _:_ _^^>W0:'éànpany_ $en _sells on the_
//$$pi§ife ^#;ï- [-] ceÈ|6fe-. *>" _many other_
_cWipt$êè._ _The individual receives unsolicited_
_e-màtl_ _messages_ _and_ _telephone_ _calls from_
_companies wishing_ _to sell_ _their_ _products._ _The_
_individual knows that under legislation in_
_Country_ _A,_ _they have legal_ _right_ _to_ _object to_ _the_
_use of_ _personal_ _data for such purposes and_
_that there_ _is a_ _national scheme_ _to do so_ _easily_
_and without_ _charge._ _No_ _such_ _legal_ _right_ _exist_ _in_
_Country_ _B and the_ _individual therefore_ _has no_
_remedy to this_ _problem._

Trademark laws are also affected. Oniine
advertising with national or supranational
trademarks in the absence of agreed
principles may also not be without its risks.

For example, the limitations of the Internet
domain name system are giving rise to
legal battles involving national rightholders
sharing the same trade mark. Companies
are rapidly becoming aware of the great
value of easily memorable Internet domain
names. Trade marks are territorial, yet
names registered under the domain name
system are both unique and international.

_Example:_ _trade_ _marks**_

_Two_ _francophone companies_ _In two different_
_countries_ _have a national_ _Trademark_ _for two_
_different_ _products which_ _includes_ _the name_
_Vitfi&nf._ _Which company should_ _be_ _able_ _to_
_trade internationally_ _on the_ _internet_ _under the_
_[donSatnnattfa Vumont.com"?](http://Vumont.com)_

As well as challenging existing laws, the
technical characteristics of networks and
on-line commerce require new
agreements, for example in the field of
security and authentication. Measures will
need to provide legal security and trust in
the medium and prevent the appearance
of "weak links in the chain" in countries
where security guarantees are
insufficient [24] .

_Example:_ _authentication_

23 WIPO prepared in 1997 new dispute settlement
mechanisms and specific guidelines to solve
potential conflicts between, domain names and
trademarks.
24 The Telecommunications Council of 1/12/97 asked
the European Commission to propose a Directive on
"digital signatures". The OECD agreed on "Guidelines
for Cryptography Policy" in 1997.

_The absence of a_ _harmonised approach_ _to_
_Certification Authorities_ _(CA)_ _which_ _can verify_
_the_ _identity_ _and_ _authenticity_ _of_ _correspondents_
_could seriously undermine_ _the_ _development_ _of_
_cross-border_ _trust._ _Certificates issued_ _by_ _a_ _CA_
_in one country might not be_ _recognised_ _by a_
_CA_ _in_ _another_ _country,_ _especially_ _if_ _one country_
_has_ _foreseen_ _a_ _licensing scheme_ _for_ _CAs_ _and_
_the_ _certificate_ _has been issued by a foreign_
_unlicensed_ _CA._

Existing laws and mechanisms providing
consumer protection will also need to be
clarified. A major inhibitor to consumers is
the difficulty in locating the origin of
products, establishing liabilities where
these products fali short of the advertised
quality standards or prove to be unfit for
the intended use.

_**Example:**_ _**consumer protection**_

_In_ _th8 electronic market place, a customer_
_could be misled_ _into_ _thinking that he or she_
_was purchasing a product from a_ _firm_
_registered_ _in his or her own country_ _(thereby_
_subject_ _to its_ _laws_ _or_ _regulations) and using the_
_corresponding country code in its domain_
_name, only to find that the_ _product emanated_
_frcm another country, where In fact the_
_company is subject to a different regime of_
_controls._

There is also uncertainty concerning the
validity of contracts entered into over the
network, and the means of redress
available when undertaking transactions
via the Internet.

_Example:_ _terms_ _and conditions of contract_

_A_ _consumer in Country A desires to purchase_ _a_
_product from_ _s_ _company_ _in_ _Country_ _8_ _over the_
_Internet_ _As part of the on-line_ _offer,_ _the_
_consumer is_ _supposed to accept the_
_company's general terms and conditions,_
_which_ _are_ _quite_ _lengthy,_ _by_ _clicking_ _"OK"._ _The_
_consumer does click_ _OK",_ _but did_ _not read the_
_terms end conditions_ _as he_ _would have_ _had to_
_stay on-line too long._ _When the product_
_develops_ _a_ _defect,_ _the_ _company defends itself_
_based on the_ _disclaimer_ _of_ _liability_ _in the_ _on-_
_line_ _terms_ _and_ _conditions,_ _which_ _the_ _consumer_
_claims should not apply since the law of_
_Country_ _A_ _requires terms_ _and_ _conditions_ _to be_
_of_ _reasonable length and_ _complexity._ _25 26_

25 At the European level, applicable law to contractual
obligations is determined by the Rome Convention
on the Law applicable to Contractual obligations of
1980.

Networks can also be misused for criminal
purposes. Examples of such high-tech
crime include various forms of computer
manipulations, computer sabotage and
extortion, computer hacking, computer
espionage and software piracy. Fighting
hi-tech crime calls for more cooperation. [27 ]

The wide accessibility of content of all
kinds also raises issues of public interest
with numerous social and cultural, as well
as economic implications. Differences in
national or regional cultures and moral and
ethical codes also give rise to divergent
national laws. In the on-line economy, this
may lead to situations where a site may
contain what one nation regards as
indecent or unethical, whilst the same
content may be considered legal
elsewhere.

_**Example:**_ _**harmful and Illegal content**_

_In_ _an effort to prevent the spread of what it_
_regards_ _as_ _"unsuitable"_ _or_ _"offensive"_ _material_
_in its_ _jurisdiction,_ _Country A decides_ _to_ _make all_
_content_ _of_ _this kind_ _illegal._ _Country_ _B's_ _content_
_standards_ _are_ _incompatible_ _with_ _Country_ _A's._
_Should content, for example contained in_
_advertising_ _on_ _certain Internet sites emanating_
_from_ _Country_ _B, be_ _considered_ _"indecent"_ _by_
_authorities_ _in_ _Country_ _A,_ _it_ _may decide_ _to take_
_legal action against information service_
_providers originating_ _in_ _Country_ _B._ _Authorities_
_in_ _Country_ _8_ _might dispute_ _such_ a _charge_ _on_
_the_ _grounds_ _that._ _H_ _is an_ _infringement_ _of_ _their_
_citizens'_ _fundamental_ _rights to freedom of_
_expression._

2.5 Conclusions: Requirements for an
international framework

The global electronic marketplace requires
an appropriate framework covering
technical, commercial, and legal aspects.
This should foster interoperable technical
solutions, competitive business practices
and consistent rules. It does not need to

consist of detailed and harmonised rules
on all relevant aspects.

26 At the European level, such disclaimers of liability
are prohibited by the product liability directive
(85/374/EEC)
27 High tech crime was discussed at the G8 Summit
in Denver (1997) and at the ministerial meeting in
Boston in December 1997.

A number of obstacles needing to be
addressed by this framework have been
identified above. As to their priority, views
may differ, but some of the issues can
already be recognised today as requiring
the urgent and coordinated attention of the
international community. Among these
priorities there are issues such as
consensus on the Domain Name System,
agreement on binding data protection
rules, reducing communication costs,
providing certainty in taxation, and
agreeing on the legal implications of
electronic authentication.

Because of the fast-moving environment
which characterises electronic
communications and commerce, some of
the issues may be resolved relatively
soon, others may prove to be significant
bottlenecks, whilst others are yet to
emerge. The development of an
international framework must therefore be
based on a forward-looking and flexible
approach.

The above analysis makes it clear that
increasingly issues touch upon legal
frameworks. It is increasingly necessary
to examine them at a global level as
uncertainty surrounding different national
and regional responses to these
challenges will hamper the further
development of the electronic marketplace.

Therefore, a broad dialogue on the key
issues amongst public authorities,
industry, consumers and international
organisations should be envisaged.

**DEFINING THE WAY FORWARD**

**FOR INTERNATIONAL**

**COORDINATION**

**3.1** **Strengthening international**
**coordination**

Already, organisations at intergovernmental and private sector levels
have been mobilised into working towards
solutions within a variety of formal and
cooperative frameworks. A host of
conferences and events involving
governments, private sector and
international organisations have been held.

For example, electronic commerce-related
issues were discussed during the G7
ministerial conference in Brussels [28 ]

(February 1995), the Midrand conference
(May 1996), UNCITRAL adopted a "Model
Law" on electronic commerce in 1996, the
Bonn Ministerial conference (July 1997) [29],
the ITU "Telecom Interactive" event in
Geneva (September 1997), the ISO Global
Standards Conference in Brussels
(October 1997), the OECD [30] conference in
Turku (November 1997), the TABD in
Rome (November 1997), the Council of
Europe Ministerial conference on Mass
Media Policy (Thessaloniki, December
1997) and at the APEC (Vancouver
November 1997), EU-US (Washington,
December 1997), and EU-Japan (Tokyo,
January 1998) summits.

Much work has already been achieved
within the WTO, notably the GATT, GATS
and TRIPS Agreement, which will remain
an important motor of trade liberalisation.
The successful conclusion of the Uruguay
Round of multi-lateral trade negotiations
and the recent agreements achieved in
information technology products,
telecommunications and financial services,
have given a new impetus to global trade.
They have also demonstrated that many
countries share a strong mutual interest in
improving trade conditions.

As regards the provision of, and access to
new information services, however, the
trade community faces the challenge of
ensuring free access to the global

28 [www.i8po.cee.be/g7/g7main.html](http://www.i8po.cee.be/g7/g7main.html)
_26_ [www2.ectio.lu/bonn/conference.html](http://www2.ectio.lu/bonn/conference.html)
30 [www.oecd.org](http://www.oecd.org)

electronic marketplace through the
effective implementation of competition
rules. The WTO provides a basis to
address this challenge, in particular
through the GATS, in this respect, a
debate is currently emerging as to whether
there is a need to adjust those provisions
when they apply to services provided
electronically. The new round of services
negotiations scheduled to start before the
year 2000 could have implications for
further liberalisation. In addition, the WTO
working group on "trade and competition"
should eventually lead to the strengthening
of competition rules at world-wide level,
which would apply across sectors,
including electronic communication and

commerce.

Besides the work undertaken in the WTO,
ongoing discussions in other fora, such as
the OECD, WiPO, ITU, UNCTAD, etc., as
well as bilateral discussions with the
Community's major trading partners, such
as the United States and Japan, are widely
contributing to building consensus on
electronic commerce issues.

Although good progress has been
achieved, the understandings and
agreements arrived at within these fora
consist either of principles, which are not
necessarily compatible, or do not cover all
elements of a comprehensive framework.
Also, the process will now _need_ to
continue with as wide a participation of the
international community as possible,
including the developing countries. As
chapter 2 shows, there are a growing
number of urgent issues awaiting
solutions.

Since electronic commerce is adding
rapidly a new dimension to the global
economy, the international community
should define an appropriate mechanism,
which can help the different actors to
respond more quickly to new requirements
as they arise in a coordinated manner. In
this context, they need to answer two
questions:

_**Two questions**_

 - _**What are the**_ _most urgent obstacles_
_and what_ _**are the**_ _**most effective**_ _**means**_

_**to**_ _**remove them?**_

_**»**_ _**What method of**_ _**coordination**_ _is_ _**best**_
_**suited to respond rapidly and effectively**_
_**to**_ _**new**_ _**challenges?**_

**3.2 Identifying the** **most** **urgent issues**
**and ways to tackle them**

What is required is an urgent and detailed
examination of the problems and the
priorities, in order to allow the international
community to address them in a
substantive and coordinated manner.
There is growing experience amongst
industry, consumer groups, governments.
and international organisations, of the key
problems needing solutions in order to
foster the development of the global
electronic marketplace.

The difficulty lies in obtaining a consistent
approach in view of the number of different
groups engaged in parallel activities, which
are not always coordinated. One can
however observe in many areas an
emerging convergence of views on the
definition of problems. These include, for
instance, requirements from industry for
proportionate and technology neutral
regulations, from consumer groups
seeking adequate data protection, as weli
as consistent implementation of
competition rules.

Opportunities to exchange information can
help to identify and solve problems which
arise from a lack of sufficient knowledge
on applicable frameworks and help to
distinguish them from those problems
which will require the clarification or
adaptation of binding or non-binding
regulations.

The Commission will support such
activities where necessary and possible.
In particular, it will use its own fora and
planned events as opportunities to
contribute to the debate (e.g. expert group
meeting in Copenhagen on cryptography
in April 1998, Information Society Forum [31 ]

 - in which major business and social group
interests are represented -, the
consultation launched by the Green Paper
on convergence). Initiatives may also be
inspired by activities such as the
Memorandum of Understanding "Open

31 [www.ispo.cec.be/infoforum/isf.html](http://www.ispo.cec.be/infoforum/isf.html)

**10**

Access to Electronic Commerce for
European SMEs", signed by over 100
organisations [32] and open for membership.
Furthermore, it will seek to promote an
active EU contribution to the consensus
building process, both in the private and
public sectors.

Among the various groups, industry is
currently particularly active as it develops
new global business structures and
services. They are at this stage probably
most advanced in confronting the
drawbacks of existing rules.

For this reason, in the course of 1998, the
Commission will invite industry to
participate in a round table at expert level
(to which experts from Member States,
international partners and consumer
groups will also be invited), to provide an
opportunity for all to present their views in
a more coordinated manner and
encourage an exchange of information.

It is however also important that these
views are presented to public policy
makers at a global level. For this purpose,
it is proposed, in the course of 1998 or
early 1999 at the latest, to:

(i) either organise a specific International
Ministerial Conference;

(ii) take advantage of one of the already
planned international events at
Ministerial level.

The outcome of such a meeting could be
an understanding on priority issues and
how to tackle them.

**3.3** **Developing a method of**
**coordination:**

**An International Charter**

As shown in chapter 2, a number of
problems are already visible but, as the
global electronic marketplace develops,
one can expect many new issues to
appear, whilst others may change or even
vanish. In addition, there is a growing
constellation of actors and bodies
involved. Therefore, all actors should
examine how they could work together in
future. What is not required is to establish
an international supervisory authority or a

12 [www.eto.org.uk/ttrade/mou/](http://www.eto.org.uk/ttrade/mou/)

An International Charter would not
therefore define the key issues to be
solved as such, but contain an
understanding on how a process of
strengthened international coordination
should be organised, with as wide as
possible a participation of the international
community. The Charter could be agreed
by or in the course of 1999.

 - " The G7 Ministerial Conference in Brussels of
February 1995 established the Global Inventory
Project. This could develop into a suitable
international forum for the exchange of information
on legal issues and frameworks relating to the
[Information Society: www.gip.int](http://www.gip.int)

II

set of binding rules. They should,
however, reach a forward-looking
understanding on how best to develop
common approaches to problems and their
solutions, i.e. to develop a sustained
method of coordination in which public and
private sector interests are adequately
represented. This could be agreed multilaterally in an International Charter.

**An International Charter would:**

be a multi-lateral understanding on a
method of coordination to remove
obstacles for the global electronic
marketplace;

be legally non-binding

recognise the work of
international organisations

existing

promote the participation of private
sector and relevant social groups

contribute to
transparency [33] .

more regulatory

#### 4.';.fHii : iiiiiiiSï

This Communication sets out:

» the need for an international enabling
framework for the emerging global
electronic marketplace;

» a preliminary analysis of emerging
obstacles to this framework covering
technical, commercial and legal areas;

® a proposal for immediate action to
coordinate views on the key obstacles
and the most effective means to
remove them  - building on stronger
private sector (including consumer
groups) involvement;

- a proposai for an international Charter
through which parties would agree on a
method of coordination **between** all
**relevant parties.**

**As indicated, this Communication does not**
**attempt to propose solutions to the specific**
**issues identified nor does it set out to**
**define the** **respective** **roles of the relevant**
**international fora. It outlines how improved**
**multi-lateral** **coordination** **could** **be**
**developed. The next steps will therefore**
**depend upon the responses the European**
**Commission will receive to its proposals.**

_**The European Commission**_ _**will:**_

**(i)** _**Discuss with**_ _**Member**_ _**States**_ _**and seek**_
_**an**_ _**understanding**_ _**on the procedure.**_
_**Such opportunities**_ _**will arise in the**_
_**forthcoming**_ _**Telecom and**_ _**Gênerai**_
_**Affairs**_ _**Councils;**_

**(ii)** _**Take advantage of the**_ _**Commission's**_
_**mgufar**_ _**'**_ _**contacts**_ _**with international**_
_**partners to pursue an open**_ _**discussion**_
_**of**_ _**the**_ _**concept;**_

**(III)** _**foyfte**_ _**experts from industry**_ _**and**_ _**others**_
_**including**_ _**international**_ _**partners to a**_
_**round table meeting in**_ _**1998 to**_ _**obtain**_ _**a**_
_**more comprehensive**_ _**picture;**_

**(iv)seefc** **to** _**promote an active,**_ _**EU-wide**_
_**contribution**_ _**to the**_ _**consensus-building**_
_**process, by both private and public**_
_**sectors.**_

**(v)** _**Invite**_ _**all**_ _**interested parties**_ _**to send by**_
_**31 March 1998 their**_ _**comments**_ _**to the**_
_**following**_ _**e-mail**_ _**address:**_
_**[eif@bxl.dg13.cec.be.](mailto:eif@bxl.dg13.cec.be)**_

_**\2**_

APEC (Asia-Pacific Economie Cooperation)

ÂFWÊC (Asia Pacific Network Information Center)

APT (Asia-Pacific Tefecommunity)

_ARM_ (American Registry for Internet Numbers)

ASEAN (Association of Southeast Asian Nations)

BfAC (Business and industry Advisory Committee)

ChTEL (Comisiôn Interamericana de Telecommunicaciones)

DVB (Digital Video Broadcasting Group)

EFF (Electronic Frontier Foundation)

ETSI (European Telecommunications Standardisation Institute)

FNC (Federal Networking Council)

GIP (Global Internet Project)

gTLD-MoU ( Generic Top Level Domain Memorandum of Understanding)

IAE (Internet Architecture Board)

IANA (Internet Assigned Numbers Authority)

ICC (International Chamber of Commerce)

IESG (The Internet Engineering Steering Group)

IETF (Internet Engineering Task Force)

INTA (International Trademark Association)

InterNIC (Internet Network Information Center>

ISO (International Organisation for Standardisation)

ISOC (Internet Society)

ITU (International Telecommunications Union)

MERCOSUR (Mercado Comun del Sur)

NAFTA (North American Free Trade Agreement)

NCC-RIPE (RIPE Network Coordination Center)

NSF (National Science Foundation)

NSI (Network Solutions Incorporated)

OAS (Organisation of American States)

OECD (Organisation for Economic Cooperation and Development)

PANAFTEL (PanAfrican Telecommunications Network)

PATU (Pan-African Telecommunications Union)

POC (Policy Oversight Committee)

RASCOM (Regional African Satellite Communications Organisation)

RIPE (Réseaux IP Européens)

TABD (Trans-Atlantic Business Dialogue)

**13**

**UMTS - Forum** (Univeral Mobile Telecommunications System - Forum)

**UN** (United Nations)

**UN/ECA** (United Nations Economic Commission for Africa))

**UN/ECE** (United Nations Economic Commission for Europe)

**UNCITRAL** (United Nations Commission on International Trade Law)

**UNCTAD** (United Nations Conference on Trade and Development)

**UNDP** (United Nations Development Program)

**UNESCO** (United Nations Educational, Scientific and Cultural Organisation)

**W** **[S]** **C** (World Wide Web Consortium)

**WIPO** (World Intellectual Property Organisation)

**WRC** (World Radiocommunications Conference)

**WTO** (World Trade Organisation)

14

##### ISSN 0254-1475

### COM(98) 50 final

# DOCUMENTS

##### E N 16 11 15 Catalogue number : CB-CO-98-067-HN C ISBN 92-78-30888-9

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