Barrister Tureen Afroz

ELECTRONIC commerce is the most sensational current topic of the information age that we are living in. The e-commerce mania not only brings in information revolution in the competitive world of business, trade and commerce, but also shapes up the overall financial market scenario of the domestic and global economy.

E-commerce is not an entirely new phenomenon in the financial market. Indeed within the twenty years of appearance of the world's first programmable computer in 1946, the computer had found its way into the Bank of America and beyond as a data storing machine and by the 1970s was being used as a means of communication information between businesses via their own private networks through the use of Electronic Data Exchanges (EDI). Internet strategy and technology is shaping up to be a very serious issue for banks in many ways. Major banks, all over the world, are constantly developing new technological features which ultimately should lead to many improvements. Substantial new and important features are appearing. Also, some internet/virtual banks have already started emerging in the USA and the UK. Moreover, with the advent of e-commerce, the securities trading activities are also affected by the contemporary reality of global village. Distance no longer insulates any one securities market from another. Screen trading in securities has made the securities trading market place to become intangible and to exist in virtual reality of telephone lines and computers. Not only does this make the size and scope of the national and international securities market 'hard to see'; it also makes regulation extremely difficult, if not impossible.

Defining electronic commerce

According to articles 1 and 2 of the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Electronic Commerce, electronic commerce is information generated, stored or communicated by electronic, optical congruous means, including electronic data interchange (EDI) and email, used in the context of commercial activities. A more discursive definition is the European one - Electronic Commerce is about doing business electronically. In Australia, the Attorney General's Expert Group, in its report, "Electronic Commerce: Building the Legal Framework" defines electronic commerce as any trade or computer transaction that is effected via electronic means; this would include such means as facsimile, telex, EDI, internet or the telephone.

Challenges to the regulators

The brave new electronic world is exciting as well as challenging to the regulators who have so far been dealing with paper-transactions. Under the electronic era, the regulators face a basic choice between whether the market should be left open for automatic correction or there is necessarily a need for guiding regulation to ensure safe, efficient and fair financial market. More importantly, the new age of electronic commerce gives rise to a series of important legal issues, the solution of which is a must for the smooth functioning of any particular economy.

Regulators of the world, be of a small nation or that of a big one, are posed with new challenges to deal with certain legal issues raised by electronic commerce. The major ones are discussed as follows:

a. Should data messages be legally recognizable? : Most of the countries of the world has no law which either explicitly recognizes or denies the general principle that information, records and signatures in an electronic form should not be denied legal effect. The prevalent laws of many countries have not yet been updated to take account of such changes in technology.

b. Should information be in writing? : In a paper based environment, laws require documents to be in written form for various reasons, such as to ensure tangible evidence, reduced disputes, legibility, non-alterability, authenticity, acceptability, etc. Also, writings facilitate control and subsequent audit for accounting, tax or other regulatory purposes. However, under the electronic era, the essential question is whether date messages that are the core of electronic commerce constitute writing. The existing law of most of the countries is silent on such issue.

c. Is electronic signature sufficient, reliable and authentic? : Generally, a signed document denotes legal authenticity. It confers clearly defined legal rights and responsibilities on the parties who have signed it. It also represents a solid foundation upon which a commercial relationship can be sustained. However, most of the countries do not have any law as to whether an electronic signature, particularly a signature generated "cryptography", constitutes a signature.

d. Are the originality and the integrity of the electronic messages legally assessable? : The nature of electronic data transmissions means that every transmission of a data message is actually a copy of that message. It is not possible, therefore, for an electronic message to be an original one in the strict sense. However, the term original can be interpreted in a way to refer to a document that is in its unchanged, original form. Even following the later interpretation it is very difficult under the present legal regime to assess the informational integrity of the electronic messages as they are subject to "accidental corruption" as well as "deliberate manipulation". Consequently, the binary code data streams that comprise the elements of an electronic transaction fall outside the present legal regime.

e. Is electronic data admissible as evidence in courts? : Almost all developed countries of the world have legal rules which are at least adequate to permit the use of computer records as evidence and to permit the court to make the evaluation necessary to determine the proper weight to be given to the data or document. For example, the Uniform Electronic Evidence Act 1997 of Canada, the Civil Evidence Act 1968 and the Police and Criminal Evidence Act 1984 of the United Kingdom, the new amendments brought by the Singaporean Evidence Act 1996, the Commonwealth Evidence Act 1995 of Australia etc. The core objective of all these laws is to further the fundamental principle that electronic records should not be discriminated against solely based on the medium chosen. However, they do not mandate the admissibility of an electronic record or an electronic signature in the event of other proper objections such as hearsay, lack of authenticity, and so on. Also, there is a question of cross-jurisdictional admissibility of electronic evidences as countries differ in rules and regulations.

f. How can electronic data messages satisfy the legal record retention requirements? : Certain times, the rule of law requires that a record be retained. The purpose of retaining records is generally to allow them to be produced upon demand to be used as evidence of the information contained therein, sometimes to demonstrate compliance with statutory requirements and sometimes to justify claims entitlements. Again for this purpose, the integrity of the information contained in the record is very crucial. Now, the case of electronic data messages poses two questions: firstly, the storage of information as it is contained in a particular data message; and secondly, storage of transmittal information associated with that data message. Legal solutions to the above mentioned problems are not very easy, as more often than not electronic messages are decoded, compressed or converted in order to be stored. Moreover, in practice, storage of information and especially storage of transmittal information may often be carried out by someone other than the originator or the addressee, such as an intermediary.

g. Will there arise contractual problems in using electronic commerce? : Legally there is no general requirement that a contract be always in written form. But where a data message is used in the formation of a contract, should that be a valid one and hence, legally enforceable in the court of justice? This problem becomes acute in case of international security trading where one transaction encompasses several different legal regimes. Regulators are then required to find a solution not only from their national viewpoint but also from a global perspective. In addition, there may also be a question as to what extent a party may be bound by an electronic message sent by an unauthorised person (the problem of hacking). Can the principle of "promissory estoppel' be invoked in such a situation? In addition, the conclusion of contracts without human intervention refers to contracts formed by either two electronic agents or one electronic agent and a person. At times, the process by which a contract is concluded may even be automated, such as by reference to predetermined rules of computer program. How can a court then find 'consensus ad idem'-one of the essential elements of a valid contract- in such a case?

h. Should the electronic payment and settlement system be regulated? : CHIPS, Fedwire and Swift have become the foundation of international and domestic funds transfer. However, the security measures to protect these systems from misuse have not been satisfying so far. Rather there have been identified weaknesses in each of these systems. Therefore, the policy makers and financial philosophers from all over the world do feel that the lack of regulatory control over the electronic payment and settlement system may cause market disruption and eventually, systemic collapse. But, question remains how and to what extent the new regulatory regime be operative?

I. What will be the jurisdictional coverage of the regulation? Making regulation is one thing and enforcement of the same is quite other, especially when, national regulations are targeted to bring in changes to a phenomenon which is essentially of global nature. Electronic commerce bridged the gap between geographic distances but the regulations are still territory specific. Therefore, conflict of laws is inevitable which results in legal uncertainty. By its very nature, the electronic commerce has the propensity to ignore sectoral, regional and national boundaries and hence, regulators will have to find out a suitable rule of the game to be applied domestically as well as globally.

Published at Daily Star, Dhaka