GLOBAL LEGAL ISSUES OF E-COMMERCE - 1

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E-COMMERCE IT430

Lesson 44

GLOBAL LEGAL ISSUES OF E-COMMERCE

The jurisdiction to try offences under the ETO is vested with the session courts in Pakistan. It may not be

out of place to mention here about the hierarchy of courts in Pakistan (see Fig. 1 below). Law is broadly

divided into two classes on the basis of nature of wrong, namely, civil law and criminal law. Civil law deals

with the private rights of the parties, whereas the object of criminal law is to punish the wrong-doer. Civil

wrongs such as breach of contract are deemed to violate only the rights of individuals and not the society in

general. On the other hand, a criminal wrong (crime) is an act deemed by law to be harmful to the society in

general such as theft or murder etc. and the state itself is a party in such matters.

At the bottom of hierarchy, the court having jurisdiction to try civil wrongs is the civil court and the one

having jurisdiction to try crimes is the court of magistrate. Appeal against the decision of a civil court or

magistrate, in many cases, can be filed in the District court (in civil matters) and in the Session court (in

criminal matters), respectively. Further, an appeal can be filed in the High court, in most cases, against the

decision of the district/session court.

Likewise, the decision of the High court can be challenged in most cases before the Supreme Court of

Pakistan, which is the apex court (the court at the top of the hierarchy). It may be noted that High Court in

certain matters has an extraordinary jurisdiction to entertain cases under Article 199 of the Constitution of

Pakistan, which is called the writ jurisdiction of the High Court. For instance, where a government body has

breached any law, a writ can directly be filed in the High court against such a body.

Hierarchy of Courts

Suprreme

Supeme

Courrt

Cout

High

Courrts

Couts

Dissrrcc//Sesson

Di tti i ttSessi ion

Courrss

Coutt

CivvlilCourrss/

Ci i Coutt /

Courrtsoff

Couts o

Magissrrates

Magi ttates

Fig. 1

Most of the countries have, by now, made laws providing recognition to electronic documents and

electronic signatures. They have basically followed a model law on e-commerce proposed by a U.N. body

called UNCITRAL (United Nations Commission on International Trade Law) in 1996. On analysis, it

appears that ETO has certain deficiencies. For instance, difference between an electronic signature and an

advanced electronic signature is not clear. Sections dealing with the offences of violation of informational

privacy and damage to information/informational systems are too broadly worded, which may lead to

confusion. International aspects of e-commerce such as recognition of the foreign certificates and electronic

signatures etc. are missing. Difference in the role of accredited certification service providers and non-

accredited ones has not been logically defined in the ETO. Above all, the rules (to be made by the Federal

Government) and regulations (to be made by the Certification Council) under the ETO are not in place

after so many years have elapsed since its enforcement.

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Let us now examine some major global legal issues of e-commerce. They are listed as follows:

Territorial jurisdiction

Online contracts

in cyberspace

Domain name and trademark conflicts

Online defamation

Online privacy

Issues of taxation on internet

Cyber crimes

Territorial Jurisdiction

There are different forms of jurisdiction. Territorial jurisdiction refers to the competence of a court to

decide a case on the basis of certain geographical area/territory. So, if a dispute arises in Karachi, the courts

in Karachi would only have territorial jurisdiction, and the case cannot be filed in Islamabad or Lahore.

Ordinarily, territorial jurisdiction lies where the defendant resides or carries on business or the cause of

action has wholly or partly arisen or the immoveable property is situated (in case the matter relates to land

etc.).

Note that the person who files a lawsuit is called plaintiff and the person against whom it is filed is called

defendant. Thus, if a contract is signed at Lahore under which Mr. Ali has to deliver certain goods to Mr.

Imran at Karachi and Mr. Ali resides at Rawalpindi, then Mr. Imran can file a suit against Mr. Ali for his

failure to deliver the goods. This suit can be filed at any of the three places, that is, Lahore, Karachi or

Rawalpindi.

Note that there is no question of any conflict of laws in this scenario since laws all over Pakistan are almost

the same. However, things get complicated when we talk of a legal dispute in cyberspace because of the

nature of the internet which transcends any geographical boundaries. Here, different countries, having

different set of laws, may come into picture having certain linkage with the internet transaction. The issue of

territorial jurisdiction becomes complicated when we try to find that the court of which country has the

lawful jurisdiction to decide the internet dispute.

For example, an Australian firm having web site in English doing ecommerce does not indicate to its

customers that it is an Australian firm. The web server hosting its site may be located in Canada, and people

maintaining this site may be the residents of England. Assume a Pakistani buys certain goods from this

Australian firm and is, later, unhappy with the goods received. He might want to file a lawsuit against the

Australian firm. The border/boundary based system of jurisdiction in the physical world does not help this

Pakistani in determining where to file the case. He may consider filing the case in any of the countries which

have linkage or connection with the transaction, namely, Australia, England, Canada or Pakistan. Another

example is of a defamatory message sent from England defaming a Canadian. The web site may be hosted

in Sweden, and the ISP providing services may be located in Brazil. Again, four different countries having

different set of laws are emerging in this transaction, that is, England, Canada, Sweden and Brazil.

In all such matters the plaintiff has an option to choose the country/forum for filing his case. Obviously,

the plaintiff would choose the forum whose laws are more favorable to him as compared to the defendant.

The relative ease with which the plaintiff in cyberspace can drag the defendant to the forum of the

plaintiff's choice is called forum shopping. So, if the law of evidence in Singapore suits the plaintiff and he

can also establish cause of action or linkage of the internet transaction with Singapore, then the case may be

legitimately filed there. One of the key tests that the courts have prescribed to determine territorial

jurisdiction in cyberspace is to examine the level of interactivity, commercial nature and effects of the

exchange of information.

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Online contracts

In the physical world three elements must be satisfied in order to make a valid contract, namely, offer,

acceptance and consideration. The same three elements must also be present in case of a valid online

contract. An offer is a commitment with certain terms made to another party such as willingness to buy or

sell certain product.

A contract is formed when a party accepts the offer of another party for consideration. Consideration is the

agreed exchange of something valuable for both the parties such as money, property or services. For

example, Mr. `A' offers to buy a basket of apples for Rs. 200, which is accepted by Mr. `B' and thus a lawful

contract comes into existence between them. Here, consideration for Mr. `A' is the basket of apples he is

getting, and for Mr. `B', Rs. 200 in exchange of his apples. In most cases when you click `I accept' or `I

agree' button on a web page, it indicates your acceptance to the terms of a certain offer, and this can give

rise to a lawfully binding contract (also known as a click wrap agreement).

It is not necessary to have a written contract. The contract can be made orally or by conduct or through

correspondence. So, offers and acceptances can occur in the cyberspace when parties exchange email

messages, engage in EDI, fill out web forms or download a web page. An offer can be revoked as long as

no payment, delivery of service or other consideration has been accepted. Note where a seller advertises

goods for sale on a web site, it is not making an offer but is inviting offers from potential buyers.

Normally, by looking at a web ad, the buyer can send an order, which in fact is an offer the seller can

accept, to form a contract. If the seller cannot supply the ordered items it has an option to reject the offer

or make a counter offer. Then the buyer has the option to accept or reject the counter offer

(See Fig. 2 below to understand the concept).

Offer and Acceptance

Unconditional

Valid

Statement of

Contract

Acceptance

Offer

Acceptance

Conditional

Rejection of

Becomes

Statement of

Offer

Counter Offer

Acceptance

Offer

No Contract

Rejection

Terminates

Fig. 2

In online environment acceptances may be issued by an imposter/cheater that does not have authority to

bind the online business. To overcome this problem companies and individuals can use digital signatures to

establish identity in online transactions.

It is particularly desirable that where a contract is of significant amount, parties should require each other

to use digital signatures to establish identity and to confirm that person making an acceptance has the

authority to bind the company. Where due to the failure of a company to protect the passwords stored with

it, an imposter is able to enter company's system and accept an offer; a court might find such negligent

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company to be responsible for the breach of a contract. In such circumstances the company may be

directed to fulfill the terms of the contract or pay compensation to the aggrieved party.

in cyberspace

is a huge area of concern in cyberspace due to the nature of internet technology. A is

an exclusive right granted by law to the author or creator of a literary or artistic work to reproduce, print,

publish or make copies of such work. Creations or works that can be ed include books, music,

artwork, audio and video recordings, computer software, architectural drawings, product packaging etc.

Note that there is no in ideas. Only, a particular form or expression of the idea can be

ed. If an idea cannot be separated from its expression, the work cannot be ed. Thus, in

most cases, mathematical calculations cannot be ed. Most web pages are likely to be protected by

because words, graphics and html tags are arranged in such a manner that it may give rise to an

original work. Naturally, it causes a problem. Each time an http request is made by a client, a copy of the

html document can be made on the client machine. Similarly, where ISPs are engaged in caching, an extra

copy of the web page is made/stored in cache memory on the system of the ISP. Some people had argued

that law could not be enforced on the internet in the above circumstances.

There is a concept of `fair use' or `fair dealing' in law that provides legitimate exceptions to

violation. Generally, fair use of a ed work includes copying it for use in criticism,

comment, news reporting, teaching, scholarship or research. Experts draw support from this concept of

`fair use' to deal with the problem of over the internet. It is also argued that in cases where the

author of a work has himself provided a hyperlink leading to his work, he should be regarded as giving the

implied authority or license to download or make copies of his work. In such an eventuality, the issue of

should not arise according to an opinion.

Generally, the protection under `fair use' may be sought on the following basis:

Nature of use:- the work has been used for educational and/or non-profit purposes only;

Nature of work:- if the copied work contains factual information then it may be more effectively covered

under the fair use clause as opposed to some creative work;

Extent of the work copied:- if the amount of work copied is insignificantly small then the courts might take

a view favorable to the accused;

Effect on the market value of the work:- A person alleged with the violation may escape any

liability arguing that the work has not been circulated to many people and there has not been any negative

impact on the value of actual work due to the circulation.

When you make fair use of a ed work you should provide citation to the original work to avoid

any charge of plagiarism. The charge of plagiarism can be leveled against a person who tries to copy the

expression of the original author presenting it be his expression in order to obtain credit for the academic

work. Academic institutions can take serious action against students/persons who are found guilty of

plagiarism.

It may be interesting to refer to the famous `Napster case', here. The company, Napster, had a web site. It

used to provide software and a network to millions of people using which they could exchange music files

on internet that they had copied and compressed into MP3 format. Many music recording companies sued

Napster for facilitating violations of their . Napster argued that it only provided the way or

machinery but was not directly involved in violation. Disagreeing with that the courts in America

found that Napster was guilty of vicarious or contributory infringement, as it was capable of

supervising infringing activity and was obtaining a financial benefit for such an activity. Eventually, the

court ordered that Napster site should be shut down. Napster agreed to pay 26 million dollars in damages

for infringement to a group of music companies and agreed to pay holders for the

music that would be downloaded in future.

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World Intellectual Property Organization (WIPO) is a U.N. sponsored body. In 1996 it proposed two

international treaties on which were signed by many countries of the world. Those who signed

these treaties agreed to adopt or amend laws in their respective countries to ensure protection to

ed work of the author of a signatory country in view of the new infrastructure or technological

developments in respect of digital information exchange.

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