Legal Issues in e-Commerce - Homepage | UNECE

1 Hangzhou Forum: Cross-border e-CommerceOrganized byUnited Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT) Legal Issues in e-CommerceBy:Saifullah Khan - Managing Associates Corporate & Legal Consultants (Islamabad Pakistan)Today s presentersContent Cross-border Ecommerce Legal Issues in Ecommerce Identity Management Jurisdiction Privacy and Data Protection Taxation Contract Intellectual Property Rights Online Advertisement Consumer Protection Liability Way ..international online trade sale or purchase of products via online shops across national borders. Buyer and seller not located in the same country not ruled by the same jurisdiction, use different currencies, and speak different , it can be characterized as follows: Online ordering, sale, communication and, if applicable, payment, Cross-border transactions/shipments, Physical (tangible) goods, and Destined to consumer/buyer (commercial and non-commercial).

2 3 CROSS-BORDER providingbusinessesanabundanceofopportun ities,buttherearemanyrisksandchallengesi n thecross-bordere- commercemarket: Market-entry Lawsandregulations Logisticsandreverselogistics Localization Understandinglocaltaxation Fraud Cross-borderpayment lackof Standardizedandharmonizedprocedures4 RISK AND CHALLENGES IN CROSS-BORDER e-CommerceLegal Issues in EcommerceIDENTITY MANAGEMENT6 Identity asetof attributesassociatedto a is Digital Identity? Digitalidentityis theinformation,comprisinga setofattributes,usedbycomputersystemstor ecognizetheentity. It is a wayforanindividualora businessto provewhotheyareonlinewitha certainlevelof trust. Themorereliablea digitalidentity,themorecomplexonlinetran sactionstheuserwillbeableto ?Identity issuesFraudHigher incidences of Identity theftWidespread use of fictitious identities in online transactionsGreater difficulty of authenticating the other transacting party8 These are few of the real life Issues we are facing currently concerning identity.

3 With the increase in sensitivity and value of the transaction, the availability and reliability of accurate information about the identity of the remote party in order to make a trust-based decision increases as Issues :Reliability of proof of the identityHowtoverifytheidentityofremotepa rtiessuchasdetermining: whois seekingaccessto anonlinedatabaseof sensitiveinformation, whois tryingtodoanonlinetransferoffundsfromana ccount, whosignedanelectroniccontract, whoremotelyauthorizeda shipmentof product,or issue OF IDENTITY: Theproblemofmistakenidentity(Incorrectid entification,Faultyauthentication,Misuse of personaldata)ine- commercetransactionsbringstogetherseemin glyunrelatedissuesconcerning:Identity TheftPrivacyNetwork SecurityDigital signaturesContract Law Further,ifanidentityprovidermakesanincor rectonlinestatementtoa relyingpartyabouttheidentityofa subject,applicablelawmighttreatissuingth atincorrectidentityassertionasa breachof a warranty,asa tortofnegligentmisrepresentation,orasanu nfairbusinesspractice.

4 Thescopeoftheidentityprovider'sliability foranydamagessufferedbytherelyingparty(w hichmaygrantaccesstoorenterintoanunautho rizedtransactionwithanimporterasa result)maywelldependonwhichjurisdiction' slawandwhichlegaltheoriesapply. UNCITRAL hasrightlyrecognizedthatidentitymanageme ntisabasicrequirementforelectronicsignat ures, Legal Issues THAT IDENTITY THEFT MAY ARISE:Althoughthecriticalimportanceofide ntitymanagementsystems(Identification,Au thenticationandAuthorization)iswellrecog nizedinpromotionofsecureecommercesystems butthesesystemsarealsofacingcertainchall enges: CyberSecurity Lackofstandardizationandinteroperability LackofUser scontrol RegulatoryUncertainty11 CHALLENGES IN IDENTITY MANAGEMENT SYSTEMS Needtofurtherincreasetrustin IdentityManagementsystemsin thebeliefthatsomethingis reliable IdentityManagement- specificlawsneedto addressriskallocation: Clarifyparties obligations Allocateliability, , throughPresumptions; Exemptionsandlimitationsofliability.

5 Mandatoryinsurance. Establishing an enabling environment for identity management Clarify the Legal status of Identity management Prepare adequate Legal tools to facilitate mutual recognition Identify Legal obstacles in cross border identity management systems12 WHAT CAN BE DONE: Legal Defineandgovernthelegalrights,responsibi lities,andliabilitiesoftheparticipantswi threspectto thespecificidentity. Clarifythelegalriskspartiesassumebyparti cipatingintheidentitysystem( ,warranties,liabilityforlosses,risksto theirpersonaldata). Provideremediesin theeventof disputesamongtheparties,includingmethods of disputeresolution,enforcementmechanisms, terminationrights,andmeasuresofdamages,p enaltiesandotherformsof liability. IDENTITY MANAGEMENT Numerousintergovernmentalgroups(OECD,ISO ,ITU),states,privateinternationalgroups, andcommercialentitiesareactivelyexplorin gidentitymanagementissuesandopportunitie s,developingtechnicalstandardsandbusines sprocesses,andseekingwaysto implementviableidentitysystems.

6 UnitedNationsCommissiononInternationalTr a deLaw(UNCITRAL)hasbegunworkona projectthatmayleadto thedevelopmentof internationallegalrulesin identitymanagement. UNCITRAL(modellaw)asandwhenfinalizedwoul dservetoaddresstheseissues/risksandto ,biometricsandArtificialIntelligencecanh elptodeliversecureidentityservices,inpar ticularbygovernmentsandfinancialinstitut ions, ON IDENTITY MANAGEMENTJURISDICTION15E- commerce Platform (Country A)Customer (Country B)Ware House / Store (Country C)Bank / Payment Service Provider (Country D)16 JURISDICTION issue IN E- commerce Ecommerce exists in a borderless environment. Hence, create concern Whose jurisdiction? Where to take action? What test and laws to be followed? When individual resides outside jurisdictional area?

7 Laws of which country applies on a particular e- commerce transaction? Courts/Authorities of which country are to be approached for enforcement of rights? Themorebusinessconducted,themorelikelya court/ authoritywillbeto usealong-armstatute. Theexerciseofjurisdictionacrossnationalb ordersis Issues IN JURISDICTIOND eterminationof jurisdictionabouta transactionis primary& fundamentalquestioninmattersrelatedto: Enforcementof Rightsof theParties DisputeSettlement IntellectualPropertyRights ConsumerProtection DataProtection Taxation18 JURISDICTION: WHY NECESSARYT hereis a direneedfora AND DATA PROTECTION20 Inanonlineenvironment,useofinnovativetec hnologiesandlackofsecuresystemsmakesit easytoobtainpersonalandconfidentialinfor mationaboutindividualsandlackofsecuresys temsmakesit easytoobtainpersonalandconfidentialinfor mationaboutindividualsandorganizations.

8 ,financialandpersonalrecordsof individualsandorganizations; (unsolicited)e-mails; consumersbyusingwebcookies; 'sactivities, AND DATA PROTECTION Issues The affirmative answer to Issues below leads to TRUST building: Are consumers comfortable in sharing their personal information with Platforms? Is the information, so shared, safe? Whether the information is only used for the given purpose? Are remedies available to consumers against any data breach?More TRUST means more e-Trade22 WHY PRIVACY AND DATA PROTECTION MATTERS?InthisbackgroundEUhasenforcedthe GeneralDataProtectionRegulation(GDPR)inM ay2018, salientfeaturesof theGDPRare: EnrichedRightsto thedatasubject(naturalpersons) Strictobligationsonthepersonsprocessingt hepersonaldata(datacontrollers& dataprocessors) Lawfulnessof thepurposeof personaldataprocessing Stringentmonitoring&enforcementthroughin dependentauthorities Administrativepenalties23 PRIVACY AND DATA PROTECTIONC ross-BorderApplicabilityofGDPR TerritorialScopeGDPR appliestotheprocessingofpersonaldataofda tasubjectswhoareintheEUbyacontrollerorpr ocessornotestablishedintheEU, wheretheprocessingactivitiesarerelatedto : theofferingofgoodsorservices,irrespectiv eofwhethera paymentofthedatasubjectis required,to suchdatasubjectsin theEU.

9 Or themonitoringof theirbehaviorasfarastheirbehaviortakespl acewithintheEU Dueto itsterritorialscope,GDPR,is applicableevenoutsidetheEU e- CommercePlatforms,outsideEU,thereforenee dscompliancewithGDPR Otherjurisdictions(countries)arealsolike lyto enactdataprotectionlaws24 PRIVACY AND DATA PROTECTIONTAXATION25 Difficultiesin taxinge- commercetransactions: Determinationofeconomicactivity(toavoidd oubletaxation) Identificationoftheexistenceofpermanente stablishment Tracingcommencingandendpointof transaction e- Issues DoubletaxtreatiesarebasedeitheronOECDorU Nmodeltreaties. Appropriateinsertions/ amendmentsarerequired,aboute- Commercetransactionswithrespectto determinationof placeof economicactivity,in thesemodels. TheCountriesthenmayincorporatetheseinser tions/ amendmentswithintheirrespectivetreatiess ignedwithdifferentcountries.

10 H o w e v e r,themoreappropriatesolutionistohavesame setofrules/definitionsapplicableacrossth eboardframedbyinternationalforums(likeUN or WTO).27 HOW TO AVOID DOUBLE TAXATIONCONTRACT28 Capacity of Customer When an offer is said to be made? When an acceptance has been communicated back to the offeror? whether the website advertisement is an invitation to treat" or an offer? When a contract is actually formed? Establishment of time and place of contract. Electronic Signatures Evidential weight of electronic signatures The conflicts of jurisdiction29 Legal Issues IN CONTRACTS IN E-COMMERCEINTELLECTUAL PROPERTY RIGHTS30 TheInternetisaboundlessandunregulatedmed iumandthereforetheprotectionofintellectu alpropertyrights("IPRs")is a challengeanda growingconcernamongstmoste- businesses.