Source: https://b-ok.xyz/book/635720/ce946e
Timestamp: 2019-06-26 05:52:08
Document Index: 388991711

Matched Legal Cases: ['art. 1108', 'art. 1163', 'art. 1164', 'art. 1316', 'art. 1369', 'art. 1369', 'art. 1382', 'art. 1383', 'art. 1991', 'art. 311', 'art. 311', 'art. 311', 'art. 689', 'art. 14', 'art. 16', 'art. 17', 'art. 17', 'art. 18', 'art. 19', 'art. 20', 'art. 21', 'art. 22', 'art. 25', 'art. 5', 'art. 7', 'art. 15', 'art. 5', 'art. 11', 'art. 14', 'art. 2', 'art. 6', 'art. 6', 'art. 7', 'art. 6', 'art. 5', 'art. 5', 'art. 3', 'art. 4', 'art. 5', 'art. 7', 'art. 8', 'art. 10', 'art. 14', 'art. 14', 'art. 15', 'art. 43', 'art. 47', 'art. 47', 'art. 49', 'art. 50', 'art. 56', 'art. 67', 'art. 95', 'art. 100', 'art. 153', 'art. 220', 'art. 293', 'art. 3', 'art. 4', 'art. 4', 'art. 4', 'art. 5', 'art. 5', 'art. 5', 'art. 5', 'art. 7', 'art. 19', 'art. 1', 'art. 1', 'art. 1', 'art. 1', 'art. 2', 'art. 2', 'art. 2', 'art. 3', 'art. 4', 'art. 4', 'art. 4', 'art. 6', 'art. 6', 'art. 6', 'art. 8', 'art. 15', 'art. 3', 'art. 3', 'art. 3', 'art. 3', 'art. 6', 'art. 8', 'art. 9', 'art. 11', 'art. 1', 'art. 1', 'art. 2', 'art. 3', 'art. 3', 'art. 3', 'art. 4', 'art. 4', 'art. 5', 'art. 8', 'art. 2', 'art. 11', 'art. 15', 'art. 4', 'art. 6', 'art. 7', 'art. 10', 'art. 11', 'art. 12', 'art. 14', 'art. 15', 'art. 17', 'art. 1', 'art. 2', 'art. 3', 'art. 3', 'art. 4', 'art. 5', 'art. 6', 'art. 6', 'art. 8', 'art. 8', 'art. 9', 'art. 1', 'art. 1', 'art. 1', 'art. 1', 'art. 4', 'art. 5', 'art. 5', 'art. 6', 'art. 6', 'art. 7', 'art. 9', 'art. 10', 'art. 13', 'art. 14', 'art. 15', 'art. 16', 'art. 17', 'art. 18', 'art. 21', 'art. 21', 'art. 21', 'art. 22', 'art. 22', 'art. 22', 'art. 22', 'art. 26', 'art. 26', 'art. 27', 'art. 28', 'art. 30', 'art. 30', 'art. 31', 'art. 47', 'art. 49', 'art. 51', 'art. 1', 'art. 1', 'art. 1', 'art. 1', 'art. 1', 'art. 1', 'art. 2', 'art. 2', 'art. 2', 'art. 2', 'art. 2', 'art. 3', 'art. 3', 'art. 3', 'art. 3', 'art. 3', 'art. 3', 'art. 3', 'art. 5', 'art. 6', 'art. 7', 'art. 7', 'art. 9', 'art. 9', 'art. 10', 'art. 10', 'art. 11', 'art. 19', 'art. 22', 'art. 13', 'art. 1', 'art. 2', 'art. 2', 'art. 2', 'art. 2', 'art. 3', 'art. 3', 'art. 3', 'art. 3', 'art. 4', 'art. 4', 'art. 4', 'art. 5', 'art. 5', 'art. 6', 'art. 6', 'art. 6', 'art. 7', 'art. 9', 'art. 13', 'art. 16', 'art. 21', 'art. 1', 'art. 13', 'art. 13', 'art. 13', 'art. 13', 'art. 13', 'art. 13', 'art. 13', 'art. 13', 'art. 13', 'art. 18', 'art. 19', 'art. 19', 'art. 19', 'art. 19', 'art. 19', 'art. 19', 'art. 19', 'art. 19', 'art. 21', 'art. 22', 'art. 25', 'art. 25', 'art. 28', 'art. 31', 'art. 70', 'art. 71', 'art. 2', 'art. 2', 'art. 5', 'art. 5', 'art. 5', 'art. 15', 'art. 15', 'art. 16', 'art. 16', 'art. 16', 'art. 17', 'art. 23', 'art. 23', 'art. 23', 'art. 3', 'art. 4', 'art. 5', 'art. 6', 'art. 7', 'art. 8', 'art. 8', 'art. 2', 'art. 10', 'EWCA ', 'EWCA ', 'EWCA ', 'art. 5', 'art. 14', 'art. 43', 'art. 3', 'art. 12', 'art. 49', 'sui generis']

Internet Banking and the Law in Europe: Regulation, Financial Integration and Electronic Commerce | Christian P. Robert, George Casella | download
Main Internet Banking and the Law in Europe: Regulation, Financial Integration and Electronic Commerce
I N T E R N E T B A N K I N G A N D T H E L AW
The European Union has long sought to create a single financial area
across Europe where consumers in one country benefit from financial
markets and activities in other countries. With the emergence of the
Internet as a platform for the provision of online banking services, the
creation of a pan-European market for banking services appeared a
realistic proposition. In practice, however, this has not happened. This
book asks why and argues that the creation of banking markets via the
Internet relies on both available technologies and appropriate laws and
regulations. The institutional and legal framework for online banking
services in the single European market are examined, as is the level of
legal harmonization achieved in the UK, France and Germany under
the influence of the EU Directives pertaining to online banking
a p o s t o l o s a t h . g k o u t z i n i s is an Associate in the Capital
Markets Group of the London oYce of the international law firm
Shearman & Sterling LLP. His practice includes providing legal advice
to investment banks and major corporate clients regarding equity and
debt securities oVerings and other complex capital market transactions,
exchange listings, corporate governance and other corporate matters.
Prior to joining the firm, he was Lecturer in Financial Law and Joint
Academic Director of the MSc Programme in Finance and Financial
Law at the School of Oriental and African Studies (SOAS), University
of London. He also held a Teaching and Research Fellowship at the
Centre for Commercial Law Studies at Queen Mary, University of
London. He is admitted to practise law in the State of New York,
England and Wales, and Greece.
T H E L AW I N E U RO P E
Regulation, Financial Integration and
A P O S T O L O S AT H . G K O U T Z I N I S
Information on this title: www.cambridge.org/9780521860710
© Apostolos Gkoutzinis 2006
ISBN-13 978-0-511-34861-7
ISBN-10 0-511-34861-4
StZ Déspoina,
Gia tiB óreB pou den Źmoun ekeí
part i Introduction to electronic finance and Internet
Internet banking in Europe: basic concepts and
The Internet as catalyst of international
The legal foundations of electronic banking
The banker–customer relationship
Electronic finance and credit
part ii Online banking and international market access: The
causes of incomplete financial integration and what
Legal barriers and necessary regulatory reforms
The causes of incomplete European integration in online
International governance of cross-border
EU policies aVecting electronic commerce in
The governance of the European market in cross-border
Institutional foundations of the single European market in
Mutual recognition of national laws as institutional
Mutual recognition beyond the EC Treaty: ‘home country’
control in various forms as institutional anchor of the
Minimum harmonization of national laws and
enforcement practices as prerequisites of mutual
recognition of national laws and ‘home country’
part iii EU harmonization and convergence of national laws
relating to electronic banking activities
Risks and regulatory concerns relating to electronic banking
activities and the convergence of national prudential
Convergence of national laws and the notion of ‘general
good’ in the single European market
Risks and prudential regulatory concerns caused by
Non-EU international initiatives of legal harmonization
concerning electronic banking activities
EU harmonization measures in the field of prudential
The prudential regulation of electronic banking activities in
EU measures of legal harmonization concerning electronic
commerce and distance marketing of financial services,
data protection, banking contracts and investor
E-commerce and distance marketing of
The harmonization of national laws of
Online bank loans and the Consumer
Credit Directive
Convergence of national laws regulating the provision of
Assessing the level of convergence of national
laws regulating Internet banking
part iv Applicable law and allocation of regulatory responsibility
in cross-border electronic banking activities
Cross-border Internet banking and the principle
of ‘home country’ control in the EU Financial
Cross-border Internet banking without the benefit of
‘home country’ regulation and supervision
Mutual recognition of national laws on the
basis of ‘home country’ control in the Banking
and Investment Services Directives
The notion of ‘general good’ in the Banking Consolidation
‘Host country’ powers to apply domestic laws in nonprudential matters
Mutual recognition of national laws under the principle
of ‘country of origin’ of the Electronic Commerce
Scope of application of the ‘country of origin’
The ‘coordinated field’
The implementation of the ‘country of origin’
The case-by-case derogation of Article 3(4)–(6)
The normative impact of the principle of ‘country of
Applicable law and jurisdiction in cross-border electronic
International contracts, conflicts of laws and European
Choice of law and choice of jurisdiction in cross-border
Choice of law and forum in consumer contracts
Choice of law and the impact of mandatory rules
1.1 Penetration of Internet banking and brokerage
1.2 Internet banking in the United Kingdom,
6.1 Information requirements under ECD and DMD
6.2 Coverage of Unfair Contract Terms Regulation in key
6.3 Coverage of Consumer Credit Regulation in key
6.4 National laws limiting party autonomy in consumer
This book is the culmination of a five-year long research project, which
was carried out initially at the Centre for Commercial Law Studies,
Queen Mary, University of London, then at Harvard Law School and,
at the final stages, during my sparse spare time as an attorney at the
London oYce of Shearman and Sterling (London) LLP. The book encapsulates my fascination with the Internet and my interest in how the
powers of electronic networks, information technology, advanced telecommunications and financial innovation are transforming national and
international financial markets in Europe and elsewhere. It is also a book
about international financial integration and cross-border trade in financial services and how the Internet can facilitate consumers’ access to
financial services and firms’ access to markets across national borders.
Artificial legal and structural barriers to cross-border financial services
seem so unreasonable when one realizes the human and economic cost of
policies and actions which purport to eliminate physical barriers. At the
time when we spend astronomical amounts of money to improve our
communications and systems of transportation by air, land or sea – thus
diminishing time and distance in the circulation of goods and services –
at the same time we are keen to maintain (or at least we tolerate)
artificial barriers which are no less eVective than distance and rough terrain in disturbing trade in goods and services, particularly financial
services. Thus the failure of the single European market project to
abolish all direct and indirect legal restrictions on the free movement
of financial services – which are suitable for circulating over computer
networks – in the era of the Internet was a reason for reflection and
I would never have completed this project had it not been for the
influence, support, encouragement, assistance and advice of a large
Chris Reed, Professor of Electronic Commerce Law and my research
supervisor during my formative years, guided me through this process
magnificently. To the best of my knowledge, Professor Chris Reed is
unique in his achievement to be an e-commerce expert and a financial
services expert. It was my privilege to work under his supervision. Dr
Rosa Maria Lastra, Senior Lecturer at the Centre for Commercial Law
Studies was my second doctoral supervisor and has now become a close
personal and family friend. She was immensely influential in many
respects. She contributed her world-class expertise in the law and economics of financial regulation and provided inspiration for key parts of
the thesis. She has oVered me unconditional support on various academic fronts and assisted in the development of this book with her
guidance and accuracy. I will always remain deeply indebted for the
opportunity to test my ideas teaching in her LLM course Regulation of
Financial Markets at the University of London in the academic year
The Greek government and the director and staV of the State Scholarships Foundation (Athens) enabled me to pursue my graduate studies
with the generous funding that I received as a Banking Law Scholar
1999–2003. Professor Dr Aristidis Chiotellis of the University of Athens
was my supervisor appointed by the State Scholarship Foundation and
supported me throughout this project. I must also thank the Central
Research Fund of the University of London for funding my research
expedition to Bonn, Paris and Brussels in the summer of 2002.
Professor Laurence Harris, Director of the Centre for Financial and
Management Studies, School of Oriental and African Studies, University
of London oVered me a unique working environment and unlimited
support to progress with this book as I was teaching and working as
Lecturer in Financial Law at the Centre. I also sincerely thank Professor
Joseph Norton for oVering me the opportunity to teach as a Fellow at the
International Financial Law Unit of the Centre for Commercial Law
Studies. Last but not least, I would like to thank the partners, lawyers
and support staV of Shearman and Sterling (London) LLP for providing
such a stimulating and resourceful working environment at the very last
stages of this project. The reader should kindly note, however, that
I wrote the book in a personal capacity and no views or arguments held
should be attributed to Shearman and Sterling LLP, its partners and
lawyers in any way whatsoever.
I owe deep gratitude to Eric Ducoulombier (European Commission),
Alain Duchateau (Commission Bancaire & Electronic Banking Group),
Peter Snowdon and Peter Parker (FSA), Stefan Czekay (Bundesanstalt für
Finanzdienstleistungsaufsicht), Sven Jongebloed and Magdalen Heid
(Deutsche Bundesbank) for sharing their views with me; the library staV
at the Institute of Advanced Legal Studies, Harvard Law School, Queen
Mary College, British Library, London School of Economics, University
of Bonn, University of Paris (Paris II) and Free University of Brussels for
their professionalism and quality of services.
I thank all my friends and family for their strong encouragement and
support, particularly Manolis and Christina Michaelidis, Kalliopi and
Vaggelis Spanos, Kostas Georgiadis, Athanasios Stogiannidis, Rosanna
M. Annan, Nikolaos Skoulas, Alexis and Niki Lappas, Marinos and Eleni
Kyriakopoulos, Antonios Patrikios, Nikolaos Koutsoupias and Georgia
Filitsopoulou. I owe special thanks and gratitude to Akis and Maria
Ioannidis for their love, support and warm hospitality in London over
I am extremely grateful to my editor Jane O’Regan, the production
editor Wendy Phillips and their dedicated teams at Cambridge University Press for turning my ideas into a book. Words cannot describe my
pride in publishing my first book with this prestigious institution.
My spiritual fathers in the Greek Orthodox Church, in Kavala, Mount
Athos and London I thank from my heart for praying for me, particularly
the Very Revs. Father Constantinos, Father Myron, Father Anthimos,
Father Georgios and Father Demetrius.
God blessed me with a caring family where no one is left to carry a
burden alone and everybody shares his joy with others. My beloved
brother the Very Reverend Arch. Father Sophronios Gkoutzinis has been
supporting me all my life. I thank him for his prayers, love and respect.
My parents, Athanassios and Maria, have always carried all the burdens
that I could not. This book is theirs more than it is mine. Maria,
Athanassios and Konstantinos, my lovely children, are supporting their
daddy in their own way.
My wife Despina is what makes all that interesting. She has been my
strongest supporter and a resourceful supplier of hope. She alone
deserves all the credit. This work is dedicated to her.
T A B L E S O F L E G I S L AT I O N
art. 1108(1) 187
arts. 1156–61 199
art. 1163 199
art. 1164 199
art. 1316(4) 187
art. 1369(1) 184
art. 1369(2) 188
art. 1382 173
art. 1383 173
arts. 1984–2010 46
art. 1991 221
Code de la Consommation (Consumer Code)
art. 311(1) 207
art. 311(2) 207
art. 311(3) 207
art. D 311(1) 207
art. D 311(2) 207
art. L 3(4) 260
art. L 121(1) 174, 260
arts. L 121 174
art. L 121(8) 174
arts. L 121(20)(8)–(16) 170
art. L 121(20)(12) 190
art. L 132(1) 199
art. L 133(2) 193
art. L 213(1) 174
art. L 311(2) 207
art. L 311(3) 42, 207
art. L 311(4) 207
art. L 311(8) 209
TA B L E S O F L E G I S L AT I O N
France (Continued )
art. L 311(15) 209
art. L 311(16) 209
art. L 311(29) 210
art. L 312(1) 196
art. L 311(9) 209
art. L 311(10) 209
art. R 311(6) 209
Code de la Procédure Pénale (Code of Criminal Procedure)
art. 689 260
Code du Commerce (Commercial Code)
art. L 132(1) 46
Code Monétaire et Financier (Monetary and Financial Code) 160
art. L 133(1) 202
art. L 311(1) 32, 41, 236
art. L 311(3) 32
art. L 312(1) 204
art. L 312(1)(1) 188
art. L 312(1)(2) 204
art. L 312(2) 31
art. L 312(3) 204
art. L 313(1) 41
art. L 321(1) 46, 236
art. L 341 174
art. L 342 174
art. L 343 174
art. L 351(1) 188
art. L 511(1) 32, 41, 236
art. L 511(9) 236
art. L 511(22) 238
art. L 511(33) 133
art. L 511(41) 161
art. L 531(1) 236
art. L 532(1) 236
art. L 532(18) 238, 256
art. L 533(1) 220
art. L 533(4) 221, 256
art. L 533(6) 220
art. L 533(7) 221, 222
art. L 533(8) 221
art. L 561(1) 133
art. L 562(1) 239
art. L 563(1) 189
art. L 611(1) 160
art. L 612(1) 160
art. L 612(2) 160
art. L 613(1) 161
art. L 621(1) 160
art. L 632(1) 133
art. R 312(3) 204
Code Pénal (Penal Code)
art. L 113(2) 260
Déclaration des Droits de l’Homme et du Citoyen 1789
Loi 2003-706 (Financial Security Act), 1 August 2003 160
Loi 2004-575 pour la Confiance dans L’Economie Numérique, 2004-575 281
art. 14 168, 281
arts. 14–28 168
art. 16(1) 281
art. 17(1) 281
art. 17(2)(1) 281
art. 18 286
art. 19 177
art. 20 177
art. 21 177
art. 22 174
art. 25 184
Loi 2004-801 (Data Protection Act) 182
art. 5 182, 184
Décret 84-708
Décret 96-880
art. 7 241
art. 15 241
Ordonnance 2000-1223, 14 December 2000 160
Ordonnance 2005-648, 6 June 2005 171
Règlement 86–13
Règlement 97–02
art. 5 161
art. 11 161
art. 14 161
Bundesdatenschutzgesetz (Data Protection Act) 182
} 1 Abs.5 182
Bürgerliches Gesetzbuch (BGB) (Civil Code)
} 126 Abs.3 187
} 126a 187
} 242 34
} 276 225
} 305 Abs. 2 193
} 305 Abs.1 196
} 309 198
} 312 170
} 312e 184, 188
} 312s 190
} 355 190
} 488 41
} 488–498 41
} 489 210
} 491 207
} 492 209
} 492 Abs.1 209
} 493 209, 210
} 507 207
} 667 45
} 675 45
} 676a 33
} 676a–676c 202
} 676f 31
} 823(3) 226
Elektronischer Geschäftsverkehr Gesetz (EGG) (E-Commerce Act) 167
Finanzdienstleistungaufsichtsgesetz (FinDAG) (Integrated Financial Services
Supervision Act) 162
Gesetz gegen den Unlauteren Wettbewerb (UWG) (Unfair Competition Act) 176
} 1 176
} 3 176
} 23 177
Gesetz über das Aufspüren von Gewinnen aus Schweren Straftaten (GwG) (Money
Laundering Act)
} 1 189
} 1 Abs.3 239
} 8 189
Gesetz über die Nutzung von Telediensten (TDG) (Teleservices Act)
} 4 Abs.1 280
} 4 Abs.2 280
} 5 286
Gesetz zur Änderung der Verschriften über Fernabsatzverträge bei
Finanzdienstleistungen (Distance Marketing Act) 170
Gesetz zur Regehung des Rechts der Allgemeinen Geschäftsbedingungen (Act on the
Regulation of the Law of General Business Conditions) 198
Grundgesetz (Constitution)
} 12(1) 14
Handelsgesetzbuch (HGB) (Commercial Code)
} 384 45
Kreditwesengesetz (KWG) (Banking Act)
} 1 31, 41, 238
} 1(1) 45
} 3 248
} 7 162
} 8 133
} 9 133
} 23a 248
} 24a 241
} 27 133
} 32 31, 41, 235
} 37 248
} 44 133
} 44c 248
} 49 248
} 50 248
} 53b 241
} 53b Abs. 3 248
} 53b Abs.2a 239
} 53b Abs.3 239
Strafgesetzbuch (StGB) (Criminal Code)
} 3 260
} 9 260
Teledienstengesetz (TDG) (Teleservices Act) 167
Germany (Continued )
} 1 168
} 2 Abs.1 168
} 2 Abs.2(1) 168
} 2 Abs.2(5) 168
} 3 Abs.3 168
} 3 Abs.4 168
} 6 177
Wertpapier-Handelgesetz (WpHG) (Securities Trading Act) 224
} 31 Abs.1(i) 225
} 31 Abs.1(ii) 225
} 31 Abs.2 225
} 31 Abs.2(ii) 226
} 31(3) 255
} 32(3) 255
} 33 224
} 34 224
} 154 189
Preisangabenverordnung (Disclosure of Price Information Regulation)
} 1 207
} 6 207
s. 8 207
ss. 8–20 207
s. 44 207
s. 46 174, 257
s. 61 208
s. 63 208
s. 65 208
s. 74 210
s. 94 210
s. 95 210
s. 189 207
Consumer Protection Act 1987 257
s. 20 175
Data Protection Act 1998 182
s. 5(1) 182
s. 15(1) 209
Financial Services and Markets Act 2000 30, 156
s. 2(3) 156
s. 5(2) 156
s. 19 30, 232, 235
s. 21(8)(a) 175
s. 22 233
s. 150 220
s. 165(1) 133
s. 169 133
s. 175(5) 133
s. 274(8) 133
ss. 348–354 133
s. 418 235
s. 418(5) 232
sch. 2(2) 46
sch. 2(3) 46
sch. 3 238
sch. 3 para 14 241
sch. 3 para 20 241
sch. 6 219
sch. 1 186
s. 11(2)(c) 257
s. 13 34
s. 4 174, 257
s. 11(1) 197
Consumer Credit Act (Electronic Communications) Order 2004 (SI 2004/3236) 208
Consumer Credit (Advertisements) Regulations 2004 (SI 2004/1484)
regs. 2-9 207
reg. 4 210
reg. 8 210
sch. 2 210
Consumer Credit (Agreements) Regulations 1983 (SI 1983/1553) 208
reg. 6(1) 208
sch. 6 208
(SI 1983/1557) 208
Consumer Credit (Rebate on Early Settlement) Regulations 2004 (SI 2004/1483) 210
Control of Misleading Advertisements Regulations 1988 (SI 1988/915) 174, 257
Cross-Border Transfers Regulations 1999 (SI 1999/1876) 202
Electronic Commerce Directive (Financial Services and Markets) Regulations 2002 (SI
2002/1775) 167, 278
reg. 3(4) 278
reg. 3(6) 278
reg. 6(1) 285
Electronic Commerce (EC Directive) Regulations 2002 (SI 2002/2013) 167, 278
reg. 5 286
reg. 5(2) 286
reg. 9 184
reg. 10 177
reg. 11 188
Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (SI 2001/
art. 2(1) 175
art. 6(b) 175
art. 6(c) 175
art. 7(3) 175
Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No 2)
Order 2002 (SI 2002/1776) 279
Financial Services (Distance Marketing) Regulations 2004 (SI 2004/2095) 170
reg. 9(1) 190
reg. 9(2) 190
Money Laundering Regulations 2003 (SI 2003/3075) 189
Unfair Contract Terms in Consumer Contracts Regulations 1999 (SI 1999/2083) 196
T A B L E O F E U L E G I S L AT I O N
art. 6(54), 88
Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and
Commercial Matters 1968, 293
Commercial Matters 1998, 249
art. 5(1), 249
art. 5(1)(b), 249
EC Treaty, 2
art. 3(1)(c), 11
art. 4, 86
art. 5, 85, 124
art. 7, 85
art. 8b, 88
art. 10, 131
art. 14, 85, 88
art. 14(2), 2, 84
art. 15, 86
art. 43, 2
art. 47(1), 88
art. 47(2), 85, 154
art. 49, 14, 84, 85, 270
art. 50, 263, 265
art. 56, 84
art. 67, 56
art. 95, 75, 85, 86, 125
art. 100b, 88, 126
art. 153, 75, 86,
TA B L E O F E U L E G I S L AT I O N
Treaties (Continued )
art. 220, 85
art. 293, 88
Rome Convention on the Law Applicable to Contractual Obligations 1998, 116, 249,
272, 276, 289, 291, 292–3
art. 3(1), 293
art. 4(1), 249, 294
art. 4(2), 294
art. 4(5), 295
art. 5, 293, 305, 306, 309
art. 5(1), 298
art. 5(2), 114, 302, 297, 299, 314, 316
art. 5(4)(b), 302
art. 7(2), 305, 306, 309, 314
Single European Act 1986, 88
art. 19, 88
84/450 Misleading and Comparative Advertising Directive [1984] OJ L250, 171
art. 1, 171
86/635 Bank Accounts Directive [1986] OJ L372, 155, 239
87/102/EEC Consumer Credit Directive [1987] OJ L42, 169
recital 3, 205
recital 5, 205
recital 6, 205
recital 7, 205
recital 9, 205
art. 1(2)(a), 145
art. 1(2)(c), 205
art. 1(a)(2), 206
art. 2(1)(e), 205
art. 2(1)(f), 205
art. 2(1)(g), 205
art. 3, 206
art. 4(1), 186, 206
art. 4(2), 206
art. 4(3), 206
art. 6(1), 206
art. 6(2), 206
art. 6(3), 207
art. 8, 206
art. 15, 207
Annex I, para. 2, 206
Annex I, para. 4, 206
88/361/EEC Directive for the implementation of Article 67 of the Treaty [1988]
OJ L178, 56
91/308/EC Money Laundering Directive [1991] OJ L166, 155–6
art. 3(1), 155
art. 3(2), 156
art. 3(8), 156
art. 3(11), 156
art. 6, 156
art. 8, 156
art. 9, 156
art. 11, 156
93/12/EEC Unfair Contract Terms Directive [1993] OJ L95, 194–9
recital 3, 194
recital 4, 194
recital 5, 194
recital 12, 195
recital 15, 195
recital 16, 194
recital 17, 195
recital 18, 195
art. 1(1), 194
art. 1(2), 194
art. 2(1), 214
art. 3(1), 194
art. 3(2), 194
art. 3(3), 194
art. 4(1), 195
art. 4(2), 195
art. 5, 195
art. 8, 196
93/13/EEC Unfair Terms in Consumer Contracts Directive [1993] OJ L95
art. 2, 298
93/22/EEC Investment Services Directive [1993] OJ L141, 169, 254
art. 11, 218, 216, 254
art. 15(4), 44
94/19/EC Deposit Guarantee Schemes Directive [1994] OJ L135, 139, 155
95/46/EC Data Protection Directive [1995] OJ L281, 179–82
recital 7, 179
recital 19, 182
art. 4(1)(b), 182
art. 6, 181
art. 7, 179
art. 10, 182
art. 11, 182
art. 12, 182
art. 14, 182
art. 15, 182
art. 17, 182
97/5/EC Cross-border Credit Transfers Directive [1997] OJ L43, 169, 200
recital 8, 201
art. 1, 200
art. 2(f), 200
art. 3, 201
art. 3(g), 201
art. 4, 201
art. 5, 201
art. 6(1), 201
art. 6(3), 201
art. 8(1), 201
art. 8(3), 201
art. 9, 201
97/9/EC Investor Compensation Directive [1997] OJ L84, 155, 239
art. 1(2), 263
98/48/EC Amending Directive 98/34/EC, 263
art. 1(2)(1), 265
Annex V para. 1, 265
Annex V para. 2, 265
2000/12/EC Banking Directive [2000] OJ L126, 154–5, 237
recital 1, 154
recital 3, 154
recital 7, 154, 240
recital 9, 237
recital 12, 155
recital 16, 242
recital 17, 155, 239, 240, 242
recital 22, 155
recital 34, 155
recital 35, 155
art. 1(6), 237
art. 1(a), 237
art. 4, 154
art. 5, 154
art. 5(1), 155
art. 6(1), 154
art. 6(2), 154, 237
art. 7, 154
art. 9, 154
art. 10, 154
art. 13, 154
art. 14, 154
art. 15, 154
art. 16, 154
art. 17, 154, 155
art. 18, 237, 238, 251
art. 21, 251
art. 21(1), 241, 244
art. 21(2), 241
art. 22(2)–(5), 241, 242
art. 22(5), 242
art. 22(9), 241
art. 22(11), 242, 257
art. 26, 239
art. 26(1), 240
art. 27, 241
art. 28, 154, 241
arts. 28–33, 133
art. 30, 154
art. 30(2), 154
art. 31, 154, 155
arts. 34–47, 154
art. 47, 155
arts. 48–50, 154
art. 49(4), 155
art. 51, 154
Annex I(7), 253
2000/31/EC E-Commerce Directive [2000] OJ L178, 76–7, 79–81, 106, 165–8, 172
recital 5, 262, 271
recital 6, 263, 264
recital 11, 166, 177, 206, 275
Directives (Continued )
recital 18, 166, 263, 264, 266
recital 19, 276, 277
recital 21, 267, 275
recital 22, 270, 271
recital 23, 269
recital 26, 284
recital 27, 81, 264
recital 34, 185
recital 35, 186
recital 38, 186
recital 55, 276
recital 56, 276
recital 60, 185
recital 63, 263
art. 1, 165
art. 1(1), 80
art. 1(3), 166, 177
art. 1(4), 271, 269
art. 1(5), 263
art. 1(6), 263
art. 2(a), 166, 263
art. 2(f), 172
art. 2(h), 266
art. 2(h)(i), 266
art. 2(h)(ii), 267
art. 3, 272, 286–7
art. 3(1), 166, 262, 273, 274
art. 3(2), 166, 262, 269, 273, 274, 287
art. 3(4), 270, 274, 309
arts. 3(4)–(6), 281–6
art. 3(4)(a)(i), 282, 286
art. 3(4)(a)(iii), 283
art. 3(4)(b), 284
art. 5(1), 177
art. 6, 166, 172, 177
art. 7, 166
art. 7(1), 172
art. 9(1), 185
art. 9(2), 185
art. 10, 182, 184
art. 10(3), 193
art. 11, 188
art. 19(3), 283
art. 22(1), 167
Annex, 270
2001/24/EC Directive on Reorganization and Winding Up of Credit Institutions [2001]
OJ L125, 155, 239
2002/58/EC Directive on Privacy and Electronic Communications [2002] OJ L201,
art. 13(1), 172
2002/65/EC Distance Marketing Directive [2002] OJ L271, 78–81, 105, 168–71
recital 6, 80, 170
recital 12, 169
recital 14, 169
recital 16, 169
recital 17, 169
recital 20, 179
recital 22, 169
recital 29, 169
art. 1(2), 169
art. 2(b), 168
art. 2(d), 145
art. 2(e), 169
art. 2(f), 179
art. 3, 169
art. 3(1), 178
art. 3(2), 178
art. 3(4), 177
art. 4, 177
art. 4(1), 169, 177
art. 4(3), 169
art. 5, 179, 193
art. 5(2), 178
art. 6(1), 190
art. 6(2)(a), 191
art. 6(2)(b), 191
art. 7, 191
art. 9(1), 172
art. 13, 169
art. 16, 80
art. 21, 170
2002/87 Financial Conglomerates Directive [2002] OJ L35, 155
2004/39/EC Directive on Markets in Financial Instruments [2004] OJ L145, 214–18
art. 1(2), 215
art. 13, 215
art. 13(2), 215
art. 13(3), 215
art. 13(4), 215
art. 13(5), 216
art. 13(6), 216
art. 13(7), 216
art. 13(8), 216
art. 13(10), 216
art. 18(2), 215
art. 19(2), 216
art. 19(3), 216
art. 19(4), 216
art. 19(5), 216
art. 19(6), 217
art. 19(7), 217
art. 19(8), 217
art. 19(10), 217
arts. 19–30, 216
art. 21(1), 217
art. 22(1), 217
art. 25(2), 217
art. 25(3), 218
art. 28(1), 218
art. 31(1), 218, 242
art. 70, 214
art. 71, 214
2005/29 Unfair Commercial Practices Directive [2005] OJ L149, 173
Regulation 44/2001/EC on jurisdiction and the recognition of judgments
in civil and commercial matters (Brussels Regulation) OJ 2001
No. L12/1 249, 289, 293–4
recital 13, 297
art. 2, 293
art. 2(1), 296
art. 5(1)(a), 296
art. 5(1)(b), 296
art. 5(3), 258
art. 15, 303
art. 15(1)(c), 299, 304
art. 16, 303
art. 16(1), 304
art. 16(2), 304
art. 17, 303
art. 23, 293
art. 23(1), 294
art. 23(2), 294
Regulation 2560/2001/EC on Cross-Border Payments in Euro 2001 OJ No. L344/34,
art. 3(2), 203
art. 4, 203
art. 5, 203
Regulation No 2006/2004/EC on Consumer Cooperation 2004 OJ No. L364/1, 133
art. 6, 134
art. 7, 134
art. 8, 134
T A B L E O F I N T E R N AT I O N A L C O N V E N T I O N S
art. 8 179
2nd Annex on Financial Services
art. 2(a) 101
Mine Ban Treaty 1997 130
Paris Convention for the Protection of Industrial Property 1883 171
art. 10bis 172
Dow Jones Inc. v. Joseph Gutnick [2002] HCA 56, 259
EC cases – numerical order
C-26/62 Van Gend en Loos v. Nederlandse Administratie der Belastingen [1963]
ECR 1, 85
C-6/64 Costa v. ENEL [1964] ECR 585, 85
C-2/74 Reyners v. Belgium [1974] ECR 631, 89
C-33/74 Van Binsbergen v. Bestuur Vande Bedrijfsvereniging voor de Metaalnijverheid
[1974] ECR 1299, 89
C-24/76 Estasis Salotti di Colanzi Aimo e Gianmario Colzani v. RUWA
Postereimaschinen GmbH [1976] ECR 1831, 293, 294
C-150/77 Bertrand v. Ott [1978] ECR 1431, 299
C-33/78 Somafer SA v. Saar-Ferngas AG [1978] ECR 2183, 277
Joined Cases C-110/78 and 111/78 Ministère public v. Van Wesemael [1979]
ECR 35, 140
C-120/78 Rewe-Zentral AG v. Bundesmonopolverwaltung für Branntwein (the ‘Cassis
de Dijon’ case) [1979] ECR 649, 90, 140, 143
C-130/78 Salumificio di Cornuda SpA v. Amministrazione delle Finanze dello Stato
[1979] ECR 867, 131
C-34/79 R v. Henn and Derby [1979] ECR 3795, 97
C-279/80 Webb (Criminal proceedings) [1981] ECR 3305, 241
C-53/81 Levin v. Staatsecretaris van Justitie [1981] ECR 1035, 199
C-96/81 Commission v. Netherlands [1982] ECR 1791, 273
Joined Cases C-115/81 and 116/81 Adoui v. Belgium [1982] ECR 1665, 282
C-286/81 Osthoek’s Uitgeversmaatschappij [1982] ECR 4575, 146
Joined Cases C-286/82 and 26/83 Luisi and Carbonne v. Ministero del Tesoro [1984]
ECR 377, 238
C-15/83 Denkavit Nederland BV v. Hoofproduktschap Voor Akkerbouqprodukten
[1984] ECR 2171, 125
C-71/83 Partenreederei ms Tilly Russ v. NV Haven- & Vervoerbedrijf Nova and NV
Goeminne Hout [1984] ECR 2417, 294
C-220/83 Commission v. France [1986] ECR 2663, 140, 251
C-54/84 Paul v. Emmerich [1985] ECR 915, 251
C-205/84 Commission v. Germany [1986] ECR 3755, 141, 277
C-89/85 Ahlstrom Osakeyhtio v. Commission [1988] ECR 5193, 58
C-352/85 Bond van Adverteerders v. The Netherlands [1988] ECR 2085, 264
C-407/85 Drei Glocken v. Kritzinger [1988] ECR 4233, 146
C-263/86 Belgium v. Humbel [1988] ECR 5365, 264
C-186/87 Cowan v. Tresor Public [1989] ECR 195, 94
C-382/87 Buet and EBS [1989] ECR 1235, 307
C-25/88 Ministère Public v. Buchara [1989] ECR I-1105, 128
C-362/88 GB-INNO-BM v. CCL [1990] I-667, 143, 192
C-198/89 EC Commission v. Greece (the ‘Tourist Guides Greece’ case [1991]
ECR I-727, 94
C-288/89 Stichting Collectieve Antennevoorziening Gouda v. Commissariaat voor de
Media (the ‘Mediawet I’ case) [1991] ECR I-4007, 140, 143
C-294/89 Commission v. France [1991] ECR I-3591, 144
C-76/90 Säger v. Dennemeyer & Co. Ltd [1991] ECR I-4221, 90, 115, 138
C-2/91 Opinion of the ECJ [1993] ECR I-1061, 131
Joined Cases C-267/91 and C-268/91 Keck and Mithouard (Criminal proceedings)
[1993] ECR 1-6097, 71
C-275/92 HM Customs and Excise v. Schindler [1994] ECR I-1039, 140
C-288/92 Customs Made Commercial Ltd v. Stawa Metallbau GmbH [1994]
ECR I-2913, 250
C-68/93 Shevill v. Press Alliance [1995] ECR I-415, 258–9
C-364/93 Antonio Marinari v. Lloyds Bank [1995] ECR I-2719, 258
C-384/93 Alpine Investments BV v. Minister van Financiën [1995] ECR I-1141, 2, 93,
140, 144, 240
C-412/93 Société d’Importation Edouard Leclerc-Siplec v. TFI Publicité SA [1995]
ECR 179, 240
C-484/93 Svensson and Gustavsson v. Ministre du Logement et de l’Urbanisme [1995]
ECR I-3955, 2, 93, 264, 298
C-55/94 Gebhard v. Consiglio dell’Ordine degli Avvocati e Procuratori di Milano
[1995] ECR I-4165, 138
C-101/94 Commission v. Italy [1996] ECR I-2691, 140
C-193/94 Skanavi and Chrissanthakopoulos (Criminal proceedings) [1996]
ECR I-929, 126, 241
C-233/94 Germany v. Parliament and Council [1997] ECR I-2405, 98, 139, 141, 240
C-238/94 Garcia v. Mutuelle de Prevoyance Sociale d’Aquitaine [1996] ECR I-1673, 240
C-3/95 Reisebüro Broede v. Sandker [1996] ECR I-6511, 139, 140
C-57/95 France v. Commission [1997] ECR I-1627, 246
C-222/95 Société Parodi v. Banque H. Albert de Bary et Cie [1997] ECR I-3899,
2, 91–3, 141–2, 264
C-315/95 Commission v. Italy [1996] ECR 5743, 131
C-210/96 Gut Springenheide GmbH and Tusky v. Oberkreisdirektor des Kreises
Steinfurt [1998] ECR I-4657, 146
Cour d’Appel (Appeal Court)
Colmar, 24.02.1999, 1999 ZIP 1210–1211, 298
Paris, 15th Ch. 05.10.1999, 35
Paris, D.2002, 259
Rennes 31.03.2000 JCP E 2000, no 48, 174
Cour de Cassation (Chambres Civiles)
08.01.1991 Schimmel Pianoforte D v. M. Bion (1991) IR 37, 258
09.10.1992, JCP 1993, II, 22024, 210
14.01.1997, 86 RCDIP 504–505, 259
09.02.1999, 44 RTD civ 836, 193
19.10.1999, 89 RCDIP [2000] 29–34, 298
19.10.1999, D. 2000 jur. 765, 307
19.10.1999, Dalloz Cahier Droit des AVaires [2000] 8–9, 297
15.05.2001, JDI 2001, 1121, 295
Cour de Cassation (Chambres Commerciales)
05.09.1991, RTD com 1992, 436, 222
Tribunal de Grande Instance (Court of First Instance)
Paris, 12 February 1999, 260
Paris, 26 February 2002, 260
Strasbourg, 02.04.2001, Recueil Dalloz Sirey, Cahier Droit des AVaires [2002]
2935, 298
Pinneberg (16 February 2001) AZ: 64 C 376/00, 225
Bundesgerichthof (Federal Court)
NJW 1962, 37, 259
NJW 1964, 2058, 34
WM 1976, 904, 35
NJW 1981, 1140, 35
NJW 1983, 1779, 33
NJW 1985, 2699, 31
WM 1989, 128, 31
XI ZR 275/89, 209
XI ZR 119/91, 209
ZIP 1991, 1413, 35
NJW 1992, 1232, 193
WM 1993, 2095, 31
WM 1994, 14, 1, 307
DtZ 1996, 51, 295
WM 1996, 906, 225
NJW 1997, 1697, 298, 306
RIW 1997, 875, 309
NJW 1998, 3114, 198
ZIP 1999, 103, 309
AZ:XI ZR 138/00 (12 December 2000), 198
NJW 2000, 3496, 209
XI ZR 164/00 (24 July 2001), 225
XI ZR 197/00 (13 February 2001), 199
XI ZR 329/00 (24 July 2001), 226
Berlin, MDR 2001, 391, 259
Braunschweig, MMR 1998, 272, 259
Hamburg, MMR 1999, 612, 259
Itzehoe (10 July 2001) AZ: 1 S 92/01, 225
Köln (1 December 1999) 26 0 79-1998, 198
Nürnberg-Fürth (19 May 1999) AZ: 14 O 9971/98, 225
Nürnberg-Fürth NJW/RR 2000, 1650, 224
Paderborn, MMR 2001, 710, 259
Oberlandesgericht (Court of Appeal)
Coblence WRP 1997, 874, 176
Düsseldorf NJW/RR 1997, 374, 47
Frankfurt MMR 1999, 427, 259
Köln RIW 1993, 1025, 295
Köln AZ: 6 U: 135/199 (14-4-2000), 198
München NJW-RR 1994, 190, 258
München RIW 1996, 330, 295
München ZIP 1998, 1954, 226
München CR 2000, 464, 259
Schleswig ZIP 2000, 1721, 224
Case Lotus (1927) PCIJ Rep Series A No. 10, 58
1-800 Flowers Inc. v. Phonenames Ltd [2000] ETMR 369, 257
Adamson v. Jarvis (1827) 4 Bing 66, 46
AIG Group (UK) Ltd v. The Ethniki [1988] 4 All ER 301, 295
Armstrong v. Stokes [1872] LR 7 QB 698, 46
Bank of New South Wales v. Laing [1954] AC 135, 33
Brooke v. Bool [1928] 2 KB 578, 46
Brown v. KMR Services Ltd [1995] 4 All ER 598 CA, 46
Compania Naveria Vascongado v. SS Cristina [1938] AC 485, 58
Clark Boyce v. Mouat [1994] 1 AC 428, 46
Cronos v. Palatin [2002] EWHC 2819 (Comm), 258
Director General of Fair Trading v. First National Bank Plc [2002] 1 AC 481 (HL), 197,
199, 297, 299
Euromarket Designs Inc. v. Peters [2000] ETMR 1025 (Ch D), 257
Foley v. Hill (1848) 2 HL Cas 28, 7
Greenwood v. Martins Bank [1933] AC 51 HL, 34
Huntpast Ltd v. Leadbeater [1993] CCLR 15, 307
Iran Continental Shelf Oil Co. and Others v. IRI International Corporation [2002]
EWCA Civ 1024, 296
Joachimson v. Swiss Bank Corpn [1921] 3 KB 110, 30
Libyan Arab Bank v. Bankers Trust Co. [1989] QB 728, 34
Lloyds Bank plc v. Lampert [1999] 1 All ER (Comm) 161, 41
London Joint Stock Bank Ltd v. Macmillan and Arthur [1918] AC 777, 34
Merrill Lynch Futures Inc. v. York House Trading Ltd, The Times 24 May 1984, 45
Morgans v. Launchbury [1973] AC 127, 188
Olley v. Marlborough Court Ltd [1949] I KB 532, 193
Parker v. McKenna [1874] LR 10 Ch App 96, 46
R v. Munton (1793) 1 Esp 62, 257
R v. Oliphant [1905] 2 KB 67, 257
RaiVeisen Zentralbank Osterreich AG v. National Bank of Greece SA [1999] 1 Lloyd’s
Rep 408, 295
Rayner (Andrew) v. Richard Davies [2002] EWCA Civ 1880, 300
Rothschild Ltd (N. M.) v. Equitable Life Assurance Society [2002] EWHC 1022, 298
Royal Products Ltd v. Midland Bank [1981] 2 Lloyd’s Rep 194, 33, 34
Samcrete Egypt v. Land Rover Exports Ltd [2001] EWCA Civ 2019, 296
Sierra Leone Telecommunications Co. Ltd v. Barclays Bank plc [1998] 2 All ER 821, 295
Thornton v. Shoe Lane Parking [1971] 2 QB 163, 193
Turner v. Reeve (1901) 17 TLR 592, 46
Victor Chandler International v. Customs and Excise Commissioners [2001] 1 WLR
1296, 177
Westminster Bank Ltd v. Hilton [1926] 43 TLR 124, 34
Bank of British North America v. Cooper, 137 US 473 (1890), 7
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AUTH (FSA)
BJIBFL
Gesetz zur Regelung des Rechts der Allgemeinen
Geschäftsbedingungen (Act on the Regulation of the
Law of General Business Conditions)
Autorité des Marchés Financiers (Financial Markets
(FSA Handbook) Authorisation
Bundesaufsichtsamt für das Kreditwesen (Federal
Banking Supervisory OYce)
Bundesaufsichtsamt für den Wertpapierhandel
(Federal Securities Supervisory OYce)
Bürgerliches Gesetzbuch (German Civil Code)
Verordnung über Informations- und
Nachweispflichten nach bürgerlichem Recht, BGBl
I 2002, 342, 2 January 2002
Butterworths Journal of International Banking and
Bundesamt für Sicherheit in der Informationstechnik
(Federal Agency for Security in Information
Court of Appeal (English); Cour d’Appel
(French Court of Appeal)
C.consom.
C.monét.fin.
COB (FSA)
C.proc.pen.
EBOL Rev
ECO (FSA)
Arrêts des Chambres Civiles de la Cour de Cassation
(Rulings of the French Court of Cassation in civil
Arrêts des Chambres Commerciales de la Cour de
Cassation (Rulings of the French Court of Cassation in
commercial matters)
Code du Commerce (French Commercial Code)
Code de la Consommation (French Consumer Code)
Conseil de Discipline de la Gestion Financière
Comité des Etablissements de Crédit et des Entreprises
Code Monétaire et Financier ([French] Monetary and
Financial Code)
Code Penal (French Criminal Code)
Code de la Procedure Penal (French Code of Criminal
Comité de la Réglementation Bancaire et Financière
Deutsch-Deutsche Rechtstzeitschrift
FSA Electronic Commerce Directive
Economic and Financial AVairs Council of the
ENF (FSA)
FATF (OECD)
Int’l Rev L &
JL & Econ
JLEcon & Org
Gesetz über Rechtliche Rahmenbedingungen für den
Elektronischer Geschäftsverkehr (German Electronic
Commerce Act)
Handbook Enforcement (FSA)
Financial Action Task Force on Money Laundering of
Fédération Bancaire Française (French Banking
Finanzdienstleistungsaufsichtgesetz
Consumer Complaints Network for Financial Services
Gesetz über das Aufspüren von Gewinnen aus
Schweren Straftaten (German Money Laundering Act)
ML (FSA)
NWUL Rev
PRU (FSA)
Règl. du CRBF
SUP (FSA)
Texas Int’lL.J
Kreditwesengesetz (German Banking Act)
Landesgericht (Court of First Instance)
(FSA Handbook) Mortgages Conduct of Business
Directive on Markets in Financial Instruments 2004
(FSA Handbook) Money Laundering
Neues Juristisches Wochenschrift
Rabels Zeitschrift für ausländisches und
Règlement du Comité de la Réglementation Bancaire
Strafgesetzbuch (German Criminal Code)
(FSA Handbook) Supervision
Gesetz über die Nutzung von Telediensten
(Teleservices Act)
Tribunal de Grand Instance (French Court of First
Gesetz gegen den Unlauteren Wettbewerb (Unfair
Competition Act)
Zeitschrift für Wirtschafts- und Bankrecht
Wertpapier-Handelsgesetz (German Securities Trading
Zeitschrift für Bankrecht und Bankwirtschaft
Zebtrum für Europäische Wirtschaftforschung
Zeitschrift für Rechtsvergleichung
Zeitschrift für das gesamte Handelsrecht und
Zeitschrift für Wirtschaftsrecht
Zeitschrift für Vergleichende Rechtswissenschaft
The liberalization of international trade in financial services is a significant component of global and regional economic cooperation. Modern
economies depend on well-functioning financial markets and financial
markets benefit from the flow of financial services across borders. Financial institutions may engage in transactions with non-residents either
directly from their headquarters or by establishing branches and subsidiaries overseas. This book focuses on services provided via the Internet by
commercial banks (or ‘credit institutions’ in the EC terminology) and
explores the potential contribution of electronic finance to meeting the
objectives of financial integration in the single European market.
The notion of ‘financial services’ essentially refers to the full array of
functions performed by financial institutions, including but not limited
to the acceptance of deposits, lending, payment services, securities underwriting and trading, asset management, financial advice, settlement and
clearing services.1 In conducting these activities with non-residents, a
financial institution engages in international trade in financial services.
The modes of providing financial services across borders are basically
four: first, the financial institution remains outside the territory of the
client and the client remains inside his territory of residence and the
service is supplied with the help of information and telecommunications
technology (cross-border services). Second, the client physically moves
from his country and receives the service in the location of the financial
institution (consumption abroad). Third, the financial institution supplies the service to non-residents through a foreign aYliate, branch or
subsidiary located in the country of the client (commercial presence).
Finally, the financial service is provided by natural persons (as opposed
to corporate entities) that move to the country of the client (presence of
natural persons).
See General Agreement on Trade in Services (GATS) (Marrakesh, April 1994) OJ 1994
No. L336/190, 23 December 1994, 2nd Annex on financial services, art. 5.
At the European level, the marriage of e-commerce and trade in
financial services is a primary objective of policy reforms pursuant to
the Financial Services Action Plan. With regard to international trade in
the context of the World Trade Organization (WTO), one key factor
driving the interest in the services component of the international trade
negotiations is the increasing number of services that can be traded
electronically without having to establish a physical presence in the
The EC Treaty2 requires the establishment of a single European market
comprising an area without internal frontiers in which the free movement of financial services and capital are guaranteed.3 The legal and institutional framework must safeguard the elimination of direct or indirect
trade restrictions in a diverse set of circumstances, including market
entry through the permanent establishment of an agency, branch or
subsidiary in the territory of another Member State;4 the temporary
presence of the bank’s agents and staV in another Member State;5 the
temporary movement of the customer to the territory where the bank is
established;6 and the provision of the service at a distance, via the
Internet or otherwise, with the bank and the customer being located in
diVerent Member States.7 This last mode of providing banking services
electronically is the subject of this book.
In chapter 1, the reader is introduced to the basic concepts and
services relating to electronic finance and Internet banking. We will also
discuss the importance of electronic finance for financial integration in
Europe and recent market developments in this sector. I will also discuss
my own survey of online banking activities in key European markets,
which demonstrates that the actual contribution of the Internet to
stimulating cross-border services has so far been limited, in contrast
with the substantial growth of purely domestic Internet banking.
In chapter 2, I will examine the legal concepts and foundations of
electronic banking activities in the three countries examined in the
present book, namely the United Kingdom, France and Germany. In
See Treaty Establishing the European Community (Rome, 25 March 1957); consolidated
text at OJ 2002 No. C325, 24 December 2002.
Ibid., art. 14(2).
Ibid., art. 43.
See Case C-222/95 Parodi v. Banque H. Albert de Bary et Cie [1997] ECR I-3899.
See Case C-484/93 Svensson and Gustavsson v. Ministre du Logement et de L’Urbanisme
[1995] ECR I-3955.
See Case C-384/93 Alpine Investments BV v. Minister van Financien [1995] ECR I-1141.
chapter 3, I will explain how excessive regulation and legal uncertainty
aVect the cross-border provision of banking services via the Internet.
There is a brief comparative survey of diVerent regulatory models internationally and an introduction to EU policies aVecting e-commerce in
financial services in the single European market.
My normative arguments in favour of mutual recognition and
‘home country’ control as the overarching institutional framework
for e-commerce in financial services are fully discussed in chapter 4.
There I will outline the ongoing policy debate regarding the virtues of
various alternative models of governance and I will explain why the
model of ‘home country’ control is more functional and eYcient than
the alternatives and which conditions must be met before those benefits
The ensuing chapters 5 and 6 are descriptive of the multifaceted
process of legal convergence in the single European market. To the extent
that mutual recognition of national laws and ‘home country’ control
cannot operate without the prior minimum convergence of national laws
around commonly accepted standards, it is expedient to examine the
attained level of legal convergence of national laws relating to electronic
banking activities. Chapter 5 discusses the convergence of prudential
regulatory and supervisory standards, while chapter 6 examines the
attained harmonization in the non-prudential legal requirements relating to marketing and advertising, consumer and investor protection and
certain key types of banking and financial contracts.
Moving from the question of harmonization of national laws, the
final chapters, 7, 8 and 9, examine in depth the applicable law and
allocation of regulatory responsibility in cross-border electronic banking
activities. More specifically, chapter 7 focuses on the implementation of
the principle of ‘home country’ control in prudential and investor
protection matters and examines the remaining regulatory, supervisory
and enforcement powers of the ‘host country’, which continue to disturb
cross-border financial services in Europe. The ensuing chapter 8 takes a
closer look at the implementation of the principle of ‘country of origin’
of the E-Commerce Directive8 and the extent to which this recent institutional reform safeguards the mutual recognition of non-prudential
national laws on the basis of ‘home country’ control. Finally, chapter 9
Council and EP Directive 2000/31/EC of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the internal market, OJ 2000
No. L178/1, 17 July 2000.
will examine the applicable law and jurisdiction in the contractual aspect
of cross-border electronic banking activities, which remains unaVected
by EU reforms in the field of financial services and electronic commerce
and still subject to the general law established under the Rome Convention9 and the Brussels Regulation on jurisdiction and enforcement of
judgments in commercial and civil matters.10
It should be noted that legal barriers in the single European market are
primarily imposed by national measures, while the eVectiveness of liberalization and integration policies is measured by the extent to which legal
restrictions embedded in national law are removed, particularly if market
integration is pursued by means of Directives whose eVectiveness relies
on the quality of national implementation. For that reason, existing legal
barriers and the political, economic and legal forces operating in the
single financial market cannot be understood outside the context of
applicable national laws. The book attempts to discuss and explain the
law of Internet banking in the single European market in direct and
constant dialogue with applicable national laws in England and Wales,
Germany and France. This was not a random choice. The three countries
are traditionally at the forefront of developments of new integration
policies and institutional reforms. Their special economic, financial
and political weight influences significantly the outcome of internal
market negotiations. They often represent competing views on markets,
regulation and free trade. They belong to diVerent legal traditions.
I concluded that a fair understanding of the interaction between EU
law and the national laws of the three jurisdictions is the appropriate
method of examining this still evolving area of financial law. The law is
stated on the basis of materials available to me at 15 October 2005.
Convention on the Law Applicable to Contractual Obligations (Rome, 19 June 1980);
consolidated version at OJ 1998 No. C27/34, 26 January 1998.
Council Regulation 44/2001/EC of 22 December 2000 on jurisdiction and the recognition
and enforcement of judgments in civil and commercial matters, OJ 201 No. L12/1, 16
Introduction to electronic finance and
Since the late 1990s the Internet and other technological advances in
telecommunications, information technology and computer software
and hardware have transformed the provision of financial services and
the structure of financial markets. By the end of the 1990s, electronic
finance applications had influenced most aspects of the business of
banking, with the exception perhaps of large-value corporate lending.
Similarly in the field of capital markets, the Internet has transformed the
financial landscape by enabling the seamless interaction among issuers,
investors and securities firms.
The Internet as catalyst of international financial integration
The concept of electronic finance may broadly be defined as the provision of financial services and the creation of financial markets using
information technology, telecommunications and computer networks.
Although the advent of electronic finance has rightly been associated
with the most recent application of advanced technologies in the financial services industry, in strictly technical terms e-finance predates the era
of the Internet by several decades: the first era of electronic banking in
the form of telegraphic fund transfers in the late 19th century gave rise to
legal problems that would appear familiar to electronic banking lawyers
The Internet and the banker–customer relationship
Electronic banking can be defined as the provision of banking services
and the initiation and performance of payments through the banking
system by electronic means and other advanced technologies. Electronic
See Bank of British North America v. Cooper, 137 US 473 (1890) (liability for negligent
performance of a transatlantic wire funds transfer).
INTERNET BANKING IN EUROPE: CONCEPTS AND TRENDS
Figure 1.1. Communication methods and access devices in electronic banking.
banking is a conceptually generic term, which denotes banking services
provided through a variety of access devices and links of communication
Internet banking refers to the provision of electronic banking services via the Internet, commonly through a personal computer (PC) or
other access devices with Internet capabilities. The concept of telephone
banking refers to services provided via the ordinary telephone or more
advanced screen-enabled terminals. Other terms are less technical.
Online banking and Internet banking are often used interchangeably.
Home banking would include any remote delivery channel, including
Internet banking gives customers the ability to access virtually any
type of banking services (except cash) in any place and at any time. From
an economic perspective, information technology and computer networks have enhanced the automation, speed and standardization in
communications and internal administration, increasing customer convenience and functionality and reducing costs in back-oYce and frontdesk banking functions.2
The same technological advances have stimulated financial innovation
and improved eYciency in financial markets by enabling the seamless
communication among issuers, investors, intermediaries and organized
See Allen Berger, ‘The Economic EVects of Technological Progress: Evidence from the
Banking Industry’ (2003) 35 Journal of Money, Credit and Banking 141.
I N T E R N E T A N D I N T E R N AT I O N A L F I N A N C I A L I N T E G R AT I O N
markets.3 Electronic trading, whether in organized markets or in alternative trading systems, can reduce costs, attract new investors and remove the physical limitations on how prices are discovered and trades
are performed, thus improving the functionality, transparency and
trading capacity of organized markets.4
Openly accessible and globally connected computer networks enable
the two-way transportation of information between the bank and the
customer. The basic function of the Internet Protocol (IP)5 is to receive
and transmit any information, which may take digital form. The primary
Internet code enables the transmission of data from one computer unit
to another, without it being necessary that the originator and the recipient of information share a direct network connection. Transmitted data
are transported through a sequence of available connections and routes
between otherwise unrelated servers and host computers. Crucially, no
particular server or local network is an essential component of that
chain. Although individual computers may be connected to the network
or disconnected, at the will of their administrators or because of disruptive events, data transmitted over the Internet always discover open
network routes through the remainder of available networks and servers.
As a result, the Internet enables the unimpeded circulation of data,
which may be retrieved by or transmitted to computers located anywhere
in the world, without the process being aVected by the territorial proximity, or the lack thereof, between the initial originator and the final
recipient of data.6
In the context of the banker–customer relationship, data transmitted
from the bank to the customer and vice versa may result in the establishment, alteration, exercise or termination of legal rights and obligations
in accordance with the contract between the bank and the customer. In
that respect, the Internet enables the initial establishment of the banker–
customer relationship and the electronic delivery and performance of
services thereafter, within the boundaries set by available technical and
legal mechanisms of authorization and access control.
See International Organization of Securities Commissions (IOSCO), Second Report on
Securities Activity on the Internet (Madrid, 2001).
See Committee on the Global Financial System, The Implications of Electronic Trading in
Financial Markets (Basel: BIS, 2001).
The Internet Protocol is the method or code by which data is sent from one computer to
See Preston Gralla, How the Internet Works (Indianapolis: Que, 2004), ch. 1.
Electronic commerce and international financial integration
The archenemy of market integration is geography, not law. Historically,
the most important causes of incomplete economic integration and
partition of local markets have been geography, distance and poor
networks of transportation and communications. Legal and regulatory
obstacles to the circulation of goods, services and capital became apparent only after the improvement of means of transportation, shipment
and communication provided a realistic setting for the expansion of international trade. In a similar way, the Internet eradicates the constraints
of geography and distance in the movement of digital data which do not
require storage facilities, packages, docks, motorways or airports to
circulate. It provides an aVordable medium for the circulation of any
type of content or speech which can take digital form, thus facilitating
communication and commercial relations across national borders. It was
rightly observed that the single European market for goods and services
could have been invented for electronic commerce and vice versa because
they share a common point: the Internet brings down physical barriers,
while the single market programme brings down legal barriers.7 Although the production, distribution, marketing, sale or delivery of goods
and services by electronic means are hardly new, on certain conditions
the contribution of electronic commerce to international economic integration could be substantial. This is particularly true for European and
international financial integration, because the intangible nature and
eVortless convertibility into digital data of cross-border capital flows
and financial services are especially suitable for exploiting the potential
of computer networks to break national boundaries in the circulation of
any content that may take digital form.
Financial integration in Europe and beyond
According to the Oxford English Dictionary, integration is the action or
process of integrating; the making up or composition of a whole by
adding together or combining the separate parts or elements; and,
crucially, the organization of economic activities so that national boundaries do not matter.8 It is the process or state of aVairs which involves the
See E. Crabit, ‘La Directive sur le Commerce Electronique. Le Projet Méditerranée’ (2002)
Revue du Droit de l’Union Européenne 749, at 753.
See Oxford English Dictionary (2nd edn, 1989).
amalgamation of separate economies into larger free trading regions.9 In
Europe, the integration of national economies is described by the term
‘internal market’, which is characterized by the abolition, as between
Member States, of obstacles to the free movement of goods, persons,
services and capital.10
The global process of economic integration comes close to the popular
notion of economic globalization. ‘Globalization’ can be defined as the
free movement of goods, services, labour and capital, thereby creating
a single market in inputs and outputs; and full national treatment for
foreign investors (and nationals working abroad) so that, economically
speaking, there are no foreigners.11 Lindsey makes a crucial distinction
between globalization as a political process, whereby government policies
eliminate barriers to free economic movement, and globalization as an
economic process, fuelled by developments in information technology
and telecommunications. The political process of globalization through
the reduction of legal barriers is the essential precondition for setting
in motion the economic process of globalization.12
The core elements of economic integration, whether global, regional
or bilateral, are two: first, the operation of economic and technological
forces that facilitate the flow of goods, services, capital and persons;
second, the operation of political forces that lead to elimination of legal
barriers and liberalization of capital flows, trade in goods and services
through internal reform and international legal agreements. In the long
run, the gradual elimination of economic and legal frontiers is expected
to result in the economies of independent states functioning as one
entity.13
Financial integration is a species of ‘economic integration’. It denotes
the economic integration of financial markets and activities, in other
words, first, the elimination of legal obstacles in the movement of capital,
financial services and financial institutions across borders and, second,
See generally Ali M. El-Agraa, ‘General Introduction’ in Ali M. El-Agraa (ed.), Economic
Integration Worldwide (London: Palgrave Macmillan, 1997).
See EC Treaty (Rome, 25 March 1957); consolidated Text at OJ 2002 No. C325, 24
December 2002, art. 3(1)(c).
See Martin Wolf, Why Globalization Works (New Haven: Yale University Press, 2004),
See Brink Lindsey, Against the Dead Hand: The Uncertain Struggle for Global Capitalism
(New York: Wiley, 2002), p. 275.
See Willem Molle, The Economics of European Integration: Theory, Practice and Policy
(4th edn, Aldershot: Ashgate, 2001), at p. 8.
the economic and technological forces that facilitate cross-border financial activities so that, with respect to finance, there are no ‘foreigners’
within the integrated area. The political component, i.e. the elimination
of artificial legal barriers obstructing financial flows, services and institutions, is an essential but not suYcient condition of international
financial integration. Advances in information processing, transportation and telecommunications and, of course, commercial and economic
justifications and competitive forces are all significant determinants of
In the perfect form of international integration, national financial
markets are entirely fused into a truly global market, thus rendering
the distinction between residents and non-residents with regard to
financial flows and services meaningless. For example, in perfectly integrated markets, the transfer of capital in exchange for primary securities
is unrelated to the residence of the parties. Moreover, trading of marketable securities in secondary markets is also unconnected to the location
of the market and the residence of parties and their intermediaries. In
addition, financial intermediaries may receive funds from savers, transfer
funds to borrowers and provide other financial services across national
borders, or set up a physical presence in another country facilitating
financial flows overseas. In short, financial institutions and their customers are able to engage in financial activities with non-residents without
impediments, delays, higher risk and cost when compared to the same
transaction executed domestically.
The Internet and the single European market
The diVusion of personal computers to large segments of the population,
the creation of innovative software and the availability of dial-up
modems connected to a global telephone network were technological
breakthroughs that all came together in the late 1980s and early 1990s to
create the basic infrastructure for the emerging digital economy. Thomas
Friedman sees in that process the genesis of a flat global order, a truly
‘flat world’, where the digitization of content and the ability to access
this content via an inexpensive Internet browser from any location in
the world have connected people, businesses and governments, within
and across borders, as never before.14 People and businesses suddenly
See Thomas L. Friedman, The World Is Flat, A Brief History of the Twenty-First Century
(New York: Farrar, Straus and Giroux, 2005).
realized that in a market place flattened by advanced technologies all
analogue content and processes – everything from photography to entertainment to communication to bank accounts to financial information –
can be digitized and therefore can be shaped, stored, processed and
transmitted over computers, the Internet, satellites or fibre-optic cable,
at high speed, with total convenience and ease and very high standards of
security. The net result of that process was the creation of a global,
Internet-enabled market place that allows for multiple forms of exchanging information and content in real time, without regard to geography
If one takes a hard look at the various subsectors of the services
economy as classified by international standards, the majority of those
services could be traded electronically without a commercial presence in
the recipient country; and that class of services is constantly increasing
due to technological developments and institutional reform. Whereas
certain services are more amenable to electronic delivery than others, the
distinction between the two is diminishing and what was non-tradeable
yesterday without a commercial presence will not be tomorrow.15
Because in their basic form financial transactions involve the creation,
transfer and settlement of claims which, being intangible in nature, do
not rely on paper to circulate, the power of the Internet to create an
integrated global market for financial services and financial flows is
substantial. Most financial transactions and services can be reduced to
a sequence of contractual claims, which can be stored, processed, transmitted and distributed in the form of data, which are initially accounted
in computer-based and electronically administered databases and subsequently transferred or settled by appropriate book entries, in response
to messages transmitted electronically. In a perfectly integrated global
market based on the power of computer networks, national financial
markets may interconnect. Intermediaries connect with other intermediaries. They also connect with any financial market. Investors, depositors
or borrowers acquire direct access to any financial service and market.
Financial services and capital are distributed at the point of demand.
Demand is directed straight into the ultimate source of capital. This is
done at a distance, regardless of physical location or time zones, at an
unprecedented speed, from unlimited sources of demand towards
unlimited sources of supply.
See generally Sacha Wunsch-Vincent and Joanna McIntosh, WTO, E-Commerce and
Information Technologies (New York: Markle Foundation, 2005), p. 123.
This vision of electronic finance as catalyst of international financial
integration does not portray the current state of the world. Strong
mechanisms of social, legal and technical control still aVect the electronic
circulation of content across national borders. National legal institutions
and regulatory standards, cultural diVerences, technical mechanisms of
access control, are all potential impediments of cross-border financial
activities over the Internet. An essential condition for converting the
potential for market integration into real opportunities for financial
institutions and their customers is to settle the inherent antagonism
between ‘free movement’ (i.e. the unimpeded flow of financial data,
capital and services) and ‘control’ (i.e. the many layers of legal, regulatory and technical control aiming to promote plausible societal values).
In addition, the success of the Internet as a widely-used technology
for delivering financial services depends on the broader acceptance and
use of the Internet by a sizeable portion of the population. In that
respect, the signs are encouraging. Electronic commerce has already
grown at a steady pace, which is likely to accelerate.16 The volume and
value of transactions increases in tandem with lower computer prices,
lower cost of Internet access, more Internet access opportunities per
inhabitant and improvement in information technology (IT) skills.17
In Europe, electronic commerce in financial services could be a driving force towards deeper and better financial market integration. The
benefits of electronic financial markets and services at a distance are
symmetrical and correlated to the benefits of the single European market
for financial services in general. The former cannot be seen in isolation
from the latter. The end objective is the emergence of open and transparent financial markets where the cost and supply of capital and the
quality of financial services will be unrelated to restrictions posed by
geography, distance, politics or law. Internet banking in its widest sense
is simply one of many routes to achieve the overriding objective.
One of the fundamental values of political and economic liberalism,
enshrined in national constitutional traditions18 and the EC Treaty19
is the individual liberty to engage in economic activities and the
See Organization for Economic Cooperation and Development, Measuring the Information Economy (Paris, 2002).
Ibid., pp. 27–40.
See the German Constitution (Grundgesetz), art. 12(1); see also the French Déclaration
des Droits de l’Homme et du Citoyen de 1789 (Declaration of the Rights of Man 1789),
arts. 1 and 4.
See EC Treaty, art. 49.
requirement that legal and institutional impediments to economic liberties, including restrictions on international trade, be justified on worthy
grounds relating to the public interest. Notwithstanding the constitutional foundations of economic liberalism in Europe, the project of
creating a single European market sought to reverse a deeply-rooted
tradition of economic protectionism and pervasive legal barriers to international trade in goods and services. It is therefore appropriate to
remind the reader of the benefits of financial liberalization so as to place
the discussion regarding cross-border electronic banking against its
proper socio-economic context.
The basic idea is that the Internet may function as a potential catalyst,
alongside other macroeconomic and legal developments, towards ‘freer’
and more vibrant financial markets and a better performing single
financial area in Europe. For financial institutions, computer networks
provide access to new markets and, for customers, access to new services
and capital. For eYcient firms it creates vital market opportunities. For
savers, borrowers and investors it enlarges the pool of available capital
and increases choice in diverse and innovative services not available
in less eYcient markets. The need for those services, particularly in the
area of pensions, savings and life assurance is likely to increase in
the light of demographic developments which will probably erode the
generosity of the welfare state.
Services at a distance enable customers to spread their risk and diversify their credit, savings and investment portfolios with potential gains
for performance and growth. It empowers the active recipient of services
to seek better financial solutions in other, probably more eYcient,
financial markets from the comfort of her desk. Further, the elimination
of structural barriers to cross-border electronic transfers of funds will be
beneficial for merchants and suppliers of services by lowering the cost
and improving the quality of cross-border payments.
To date, consumers have enjoyed the benefits of the single financial
market only when they have travelled abroad to sign up for services
overseas or when a foreign financial institution has established a commercial presence in their country. The Internet renders the single market
more approachable and useful for consumers by enabling individuals
who are less likely to travel abroad and residents in Member States which
fail to attract foreign financial firms to sign up electronically for financial
services in another EU country.
Furthermore, legal protectionism is in eVect a subsidy to local firms,
at the expense of foreign firms competing in the same market segment.
Although the attempted protection of national financial institutions
from foreign competition may help to create a relatively stable financial
market, there is often a substantial price to pay: lack of foreign competition often results in complacency and concentration of power in a
handful of local market leaders at the expense of innovation and quality
of service for local borrowers, savers and investors. Vibrant financial
markets and open borders place domestic institutions under the pressure
of international competition, destroy complacency and unleash dormant
forces. As a result, ineYcient financial centres or individual firms are
forced to undertake reform or decline, and eYcient ones are obliged to
prove themselves again and again by raising the quality of service and
spreading finance opportunities to larger segments of the population.
By oVering a ubiquitous access point and raising awareness of products
and services available abroad, the Internet forces ineYcient local banks
to improve the quality of their services or perish.
On the Internet, the high volume, quality and convenience in the
discovery of available information about financial institutions, services
and prices improve the transparency of the market. The size of the
market precludes any particular player from dominating. Automation,
standardization of services and the metamorphosis of the customer into
the bank’s data entry clerk trim down the costs of market entry for new
ventures. The ability to provide services from within a single location to
many diVerent markets creates economies of scale and reduces costs.
In that respect, the adoption of the single European currency eliminated
duplication in bank internal and front-desk operations, enhanced transparency of prices of financial services and products and stimulated
consumer interest and confidence in cross-border financial services.
Evidence now suggests that in markets less susceptible to legal barriers,
notably the inter-bank money and debt markets, the contribution of the
euro to full integration has been substantial.20
Taken together, the foregoing qualities may potentially level the
playing field of financial competition with potential gains for customers,
including lower commissions for online securities trading, more competitive rates of interest for credit and savings and innovative electronic
financial services and products.21
See Jean Dermine, ‘European Banking: Past, Present and Future’ (paper presented at the
2nd ECB Central Banking Conference, Frankfurt, October 2002), pp. 3–19.
See T. Granier and C. JaVeux, Internet et Transactions Financières (Paris: Economica,
2002), ch. 3; see also www.halifax.co.uk (last visited 3 August 2005) where Halifax, a UK
For customers and banks in smaller Member States the benefits may
go even further. Imported competition will unleash dormant domestic
forces towards reform and modernization. Local savers, borrowers or
investors will benefit from a far greater supply and a better quality of
services than domestic institutions are able to oVer. Perhaps they may
enjoy for the first time the convenience of Internet banking which poorly
performing domestic firms have failed to provide.
Furthermore, Internet banking may contribute to economic growth
and development. It may enlarge the pool of aVordable credit for entrepreneurs living in remote and isolated communities by facilitating access
to liquid but distant financial centres. It may provide investors with
direct access to overseas financial markets and dynamic local businesses
with access to wider pools of capital and better performing or innovative
financial services. It may oVer an alternative strategy to those financial
institutions that have been reluctant to take advantage of the single
European market deterred by the high cost of entry by way of establishment. It may encourage businesses from wealthier Member States to
invest in less developed Member States, creating jobs and tax revenue,
in the assurance that the trusted services of banks in their home country
are available electronically. A similar argument can be made with regard
to the movement of natural persons for purposes of employment, education or retirement to a country other than their own. They can now
enjoy their new lifestyle in the country of their choice without forgoing
the long and trusted relationship with their financial adviser, bank or
The network architecture of the Internet is deliberately minimalist. Its
protocols are indiVerent to the geographical origins or destination of the
data, their content, the purpose of their transportation or whether the
originator or the recipient of data has a legitimate claim upon them. It
was originally intended for research, not regulated commercial and
financial activities, and therefore its technical specifications reflect the
conscious decision to disable control and stimulate speed and eYciency
in the circulation of digital data. To the server, where the bank website is
bank, oVers lower rates of interest for online personal loans, not available in branchbased transactions.
hosted and towards which the customer transmits her request for the
delivery of data, the Internet Protocol reveals only the Internet Protocol
address of the customer’s computer and nothing else. On that information alone, the Internet Protocol ensures that sensitive financial and
account data will be delivered.
Although ingenious for facilitating the free circulation of content, this
minimalism is useless for purposes of social control and a major source
of risk in the business of banking. For that reason, users and financial
institutions impose control of access or content peripherally, without
the core Internet Protocol being otherwise aVected. Having been disabled for the sake of simplicity and speed, barriers to the free flow of
information may easily be reinstated in the form of access control and
Clearly the romantic description of the Internet as a sui generis social
environment, the cyberspace, where availability and exchange of information is unimpeded, anonymity is guaranteed, identities do not matter
and the location of data does not aVect their accessibility, refers solely
to the properties of the core Internet Protocol. It does not accurately
reflect the tiered layers of control that the decentralized network may
permit over transportable data of diVerent content, value and economic
purpose. Those mechanisms of control lend a new shape to the opensource Internet structure and redefine the actual (as opposed to the
potential) value of network technology for breaking the boundaries of
distance, geography or time.
Banking lies at the heart of the tension between ‘free flow of data’ and
‘control’ in a paradoxical way. Few data-intensive activities could benefit
more from the open-source structure of the Internet architecture; and
hardly any other activity is subject to so many layers of control which
must be implemented by public regulatory authorities and the banks
themselves through self-imposed mechanisms of access control and
network security. The normative argument on how best to reconcile
the two competing claims is not easy to settle. For the single European
market in financial services, this key question lies at the heart of the
controversies and antithetical claims which have burdened the single
market project from its inception.
The properties of the core Internet Protocol facilitate economic integration but cannot conceal the many political, institutional and legal
forces that point towards the opposite direction. The gap between the
promising qualities of network technology and the essential technical
and legal infrastructure required to actually deliver financial services
across national borders can be wide. To date, customer acceptance and
industry investment have primarily been driven by claims of eYciency,
lower prices and rates of interest and convenience.22 Less attention has
been given to the potential scope for increased profitability or customer
choice, let alone cross-border market expansion. To reverse this trend,
particularly at the consumer end of the market, diYcult battles must be
won on various fronts. The legal front is one of them.
Olson demonstrated that when sound legal institutions such as contract laws and enforcement mechanisms are lacking, commercial transactions tend to concentrate in spot markets (e.g. oriental bazaars) where
personal trust and confidence replace law enforcement in safeguarding
that the undertaken obligations will be honoured.23 Conversely, the
absence of personal relationships in transactions at a distance, between
parties in diVerent countries or cities, leaves a gap which must be filled
by the parties’ confidence in the quality of the legal framework or
(perhaps) by the high benefits of the project which render high legal
Cross-border Internet banking upsets the international legal framework in two respects. First, online banking as a form of international
trade in financial services is inherently diVerent from the traditional
mode of entering foreign markets by way of establishment of commercial presence locally and therefore it is not fully compatible with the
prevailing principle of territoriality which determines the application of
national law to cross-border transactions and activities. Second, as a
form of banking service, online banking relies upon a delivery channel
that presents a new range of risks. Unless these issues are fully understood and financial institutions and their customers are assured that
the departure from the familiar local markets will not be penalized
by unacceptable levels of legal risk, the prospects of using the Internet
as a means for engaging in financial activities across borders are
Regardless of the unique legal and operational risks associated with
online banking, the objective of improving the institutional framework
of the single European market for the benefit of financial institutions
and users of financial services is subject to the dynamics of European
See Laura Bradley and Kate Stewart, ‘A Delphi Study on the Drivers and Inhibitors of
Internet Banking’ (2002) 20 International Journal of Bank Marketing 250.
See Mancur Olson, Power and Prosperity: Outgrowing Communist and Capitalist Dictatorships (New York: Basic Books, 2000), at p. 186.
political and economic integration. For example, the debate concerning
the optimal institutional framework for online financial activities raises
the same old antagonism between ‘de-regulation’ in the form of elimination of restrictive layers of legal control and ‘regulation’ as a means of
addressing unacceptable risks and achieving worthy social, economic and
political objectives. EU countries do not hold identical views and preferences regarding the objectives of European integration and how the
tension between ‘liberalization’ and ‘regulation’ should be reconciled.
Moreover, electronic commerce in financial services is subject to further
uncertainty and institutional transition because national policies are
likely to be in tentative mode and subject to frequent revision insofar
as the legal and regulatory implications of electronic commerce in
financial services have just begun to emerge.
Internet banking and online securities brokerage have achieved significant market penetration in most developed countries and key emerging
markets and demonstrate potential for further growth (see table 1.1).
It appears that higher income and higher market acceptance of electronic finance are strongly correlated. This probably reflects the link between high income and good IT resources and skills. According to the
directory of European banks maintained by Qualisteam,24 over nine
hundred depository institutions across Europe perform services over
the Internet. Customer acceptance of the business model is also high
and still rising. One in five bank customers performs transactions over
the Internet and the figure rises to one in four among Internet users.25
The growth of Internet brokerage has also been considerable, with over
five million investors already trading online as of the end of 2001. The
service is particularly popular in the Scandinavian and Nordic countries.26 In the Mediterranean countries, the market is less developed but
grows rapidly. The annual growth of the market in Spain is in excess of
10 per cent27 and all major financial institutions in Greece have launched
See http://www.qualisteam.com/Banks/Europe/index.html (last visited 23 May 2005).
See Centre for the Study of Financial Innovation (CSFI) (ed.), The New World of
European E-Finance (London, 2002), p. 47.
Ibid., pp. 129–33.
Ibid., pp. 146–50.
Table 1.1. Penetration of Internet banking and brokerage (end of 2000)
(% of total bank
Industrial country average
Income group/economy
Source: S. Claessens et al., Electronic Finance: A New Approach to Development
(Washington, DC: World Bank, 2002)
fully interactive and transactional services.28 It appears that education,
age and profession are the most influential demographic variables,
alongside income, of customer acceptance:29 the typical user is profiled
as a degree holder, aged between twenty-three and forty-six, urban,
professional and with a relatively high income.
See Hellenic Bankers’ Association, E-Banking: New Horizons in Banking Enterprise
(Athens, 2001).
See Hans Christiansen, Electronic Finance: Economics and Institutional Factors (Paris:
OECD Financial AVairs Division, 2001), pp. 8–9.
Market trends in key European countries
In the United Kingdom, it is estimated that eight million bank customers
perform their financial transactions on the Internet.30 The acceptance of
the Internet as a channel for delivering banking services is high in France
as well. The number of customers is estimated at ten million, whereas
one in four transactions in the Paris Stock Exchange is initiated by
market orders routed via the Internet.31 The size of the German market
is even larger. With nearly sixteen million bank account holders and over
four million investors, Germany accounts for one half of all bank customers in Europe who perform banking transactions over the Internet.32
To identify and understand business practices and, primarily, to check
whether the Internet has facilitated the process of European financial
integration, I surveyed 148 banks operating in the United Kingdom,
France and Germany. This survey examined the available online services
of commercial banks that satisfied the definition of ‘credit institution’.
To confirm the regulatory status of ‘credit institution’, I relied on the
supervisory records maintained by national supervisory authorities.
I aimed to classify the services available, the method of accepting new
customers and the content of standard form contracts. Last but not least,
I checked whether services were made available to customers in other
Member States, thus indicating the extent to which online financial services have facilitated further financial integration in Europe. A summary
of the survey is made available in table 1.2, which indicates that the
Internet has yet to emerge as a dominant medium for the delivery of
banking services across national borders. Not many firms are prepared to
accept non-resident customers and even fewer seem actively to solicit
Available services and transactions in most Internet banking applications fall into three broad categories:
(a) core banking activities which include the acceptance of deposits, the
performance of fund transfers, which may be sole or perpetual by
way of a standing order, and the availability of statements of account
and transaction history;
See CSFI, European E-Finance, p. 96.
See Commission des Operations de Bourse (COB), Les Courtiers en Ligne (Bulletin COB
No. 348 July/August 2000), pp. 13–46.
See CSFI European E-Finance, pp. 139–46.
Table 1.2. Internet banking in the United Kingdom, France and Germany
Cross- Core
border Internet Online Online online
surveyed services banking trading credit trading
(b) the use of the Internet to accept customer applications for loans and
credit for consumer or business purposes by way of a direct loan or
an overdraft credit facility linked to a current account; and
(c) online brokerage and securities trading whereby the customer transmits and the bank receives via the Internet orders for the purchase or
sale of securities for the account of the customer.
In some cases, only interest-bearing savings accounts are oVered, with
very little potential for interactivity and performance of electronic
banking functions. The customer may view statements, pay funds in and
withdraw funds out of the account through a ‘linked’ current account kept
with another institution. But the service cannot be used for making
electronic funds transfers to third parties.
Online securities trading is a service which many banks advertise but
the service is occasionally performed by a separate legal entity, which is
typically admitted to the organized securities markets where the trades
are agreed upon and executed. This entity is either an aYliated member
of the banking group or a third party operating in joint venture with
The granting of consumer credit via the Internet is often conditional
upon the applicant holding a bank account with the same institution. In
some cases, new customers are also encouraged to apply. The application
process is completed at a distance but not entirely via the Internet. An
application form is submitted electronically and, upon reception, the
bank decides whether to make an oVer or reject the application. If
satisfied, the bank sends by post a copy of the credit agreement which
the customer must sign and return. The funds are released by cheque or
by way of a funds transfer to a designated bank account.
A number of ancillary facilities and functions are also available: access
to statements of account and information on individual transactions;
access to current valuations of investment portfolios and online information on index, individual stock and corporate performance; and
purely administrative functions, such as management of personal security devices, for example, Personal Identification Numbers (PINs) and
passwords and ordering cheque books and similar consumables.
From a business organization perspective, Internet banking services
are typically oVered by either (a) established banks providing services to
existing customers; or (b) established banks using a separate brand for
Internet banking but without creating a separately incorporated and
authorized entity; or (c) new business ventures, duly incorporated
and authorized, which provide services via the Internet without maintaining branch networks (Internet-only banks). This last model is rarely
used. From a technical standpoint, the service requires the real-time
availability of data. The data are stored on secure operational systems
and special software applied by the bank enables customers to obtain
access through an ordinary web browser.
Measuring the impact of the Internet on cross-border
According to Schüler and Heinemann, there are a variety of direct and
indirect methods to measure the level of integration between two or
more national financial markets.33 Under the direct method, measuring
financial integration is limited to identifying barriers to cross-border
activities such as the existence of capital controls, regulatory impediments and information and transaction costs. It is an assessment of the
extent to which financial integration as a political process creates the
potential for cross-border financial operations. The eVects of eliminating
the various barriers are not examined.
In contrast, the indirect methodologies aim to examine the actual
eVects of opening up national borders to cross-border financial flows.
The earlier literature on the process of international financial integration looked at the actual links between national financial markets and
measured the actual flows of funds from savers in one country to
See Martin Schüler and Friedrich Heinemann, How Integrated Are the European Retail
Financial Markets? A Cointegration Analysis (ZEW Discussion Papers, Mannheim: ZEW,
2003), available at http://opus.zbw-kiel.de/volltexte/2003/875/pdf/dp0222.pdf (last visited
10 August 2005).
borrowers in another. The underlying hypothesis of that method is
intuitive: the elimination of barriers would no doubt result in higher
volumes of cross-border flows. The key objection to that hypothesis,
however, is that if perfect integration among diVerent nations means
that all opportunities for cross-border financial flows have been exhausted, it is conceivable in theory that even a small flow of funds would
signal complete integration when all opportunities for gainful transactions among residents and non-residents have been used. For that
reason, more sophisticated approaches tend to disregard the actual flow
of funds focusing instead on the flow of information as reflected in
market expectations, reactions and asset prices and the relationship
between domestic savings and investment.34
The relationship between savings and investment is methodologically
based on the assumption that in perfectly integrated markets A and B,
the sum of total investment in country A is not limited by the sum total
of savings in that country. Country A should be able to raise the level
of domestic investment regardless of the low level of savings by simply
borrowing from country B. Studies usually find evidence that the level
of domestic savings is very close to the level of domestic investment
and therefore indicate a low degree of financial market integration.35
A variation of this approach measures the relationship between domestic
savings and domestic consumption (as opposed to investment) with
similar results.36
Arguably the most popular criterion for measuring the actual state
of financial integration is the law of one price or one rate of interest of
equivalent financial assets which are both mobile and perfectly substitutable for one another. The basic idea behind price measurement as a
proxy for financial integration is that in a perfectly integrated financial
market the prices or rates of interest of identical financial assets traded
in diVerent national markets should be equal.37 It therefore suYces
to examine the prices of perfectly substitutable assets as an indirect
indication of the level of financial integration.
See generally Lars Oxelheim, International Financial Integration (New York: Springer,
1990), p. 2.
See Schüler and Heinemann, Retail Financial Markets.
See generally Giovanni P. Olivei, ‘Consumption Risk-Sharing Across G-7 Countries’
(2001) New England Economic Review (March/April) 3.
See generally Peter B. Kenen, Capital Mobility and Financial Integration: A Survey
(Princeton Studies in International Finance 39, 1976); Schüler and Heinemann, Retail
For our purposes, it suYces to note that the various quantitative
methods assume that, when national borders do not matter, the volume
of cross-border transactions rises. On that premise, quantitative methods
endeavour to measure the frequency and volume of cross-border services. Economists convincingly argue that in measuring financial integration the distinction between wholesale and retail banking and
financial markets becomes crucial. Price-related methods are generally
diYcult to apply in the retail sector where fully substitutable financial
services and products do not exist across diVerent countries, primarily
because diVerences in taxation, consumer protection rules and customer
preferences preclude the development of identical financial products.
The quantity-related approach was employed by the 2002 Gyllenhammar
Report,38 the first comprehensive account of the benefits of a functioning European retail market for financial services. My own survey of
Internet banking in Europe sought to examine the extent to which
financial services are provided across borders via the Internet. In that
respect, I focused on the logically prior question of whether European
banks are prepared to provide online services to non-residents in the