Legal Framework for E-Commerce in ECOWAS

Ouagadougou 19 December, 2006

Dayo Ogunyemi Attorney and Consultant

Counsel Advisory Group/EMC Matrix

dayo@counseladvisory.com

Economic Community Of West African States The Economic Commission for Africa

2

ECOWAS E-Commerce Project Objectives

•  Develop a harmonized legal framework for e-commerce at the sub-regional level

•  Formulate policies to promote E-commerce as facilitator and driver of regional economic integration

3

Process

•  Desk research to identify global best practices •  Beginning in September 2004, meetings with

ICT policy makers from ECOWAS (Secretariat and ICT Task Force), UEMOA, Niger, Ghana, and Nigeria to conduct the situational assessment

•  Analysis and assessment write-up

4

Findings & Recommendations

•  No appreciable e-commerce policy or legislation in ECOWAS, UEMOA or member states

•  Complete greenfield opportunity to develop harmonized e-commerce framework

•  Capacity building necessary for policymakers •  Need for an inclusive policy and legislative

development process

5

Findings & Recommendations (cont.) •  States and REC need to address infrastructure and platform

access issues •  Core E-Commerce laws to be developed with REC-wide

needs in mind •  Need to tackle corollary legal issues (consumer protection,

data and network security, IPR, etc.) •  Enabling environment critical; REC best suited to provide

•  Private sector leadership necessary to spur e-commerce adoption

•  Enabling environment for E-government and E-commerce linked

6

Findings & Recommendations (cont.) •  Discreet, evolutionary approach unless sufficient resources to

successfully implement a “big bang approach” are available •  Initial phase with substantive focus on creating equivalence

between traditional and electronic signatures and contracts •  Follow-up phase addressing cyber-crime, data and network

security and protection, judicial, legal and law enforcement capacity building

•  Tertiary phase addressing e-payment regulation, online consumer protection, implementing awareness campaign

•  Address corollary issues (electronic records, evidence, etc) on a rolling basis

7

Threshold Issues •  Infrastructure and access

–  Literacy –  Network quality and reach –  Affordable access to network –  Affordable access to devices (computers, mobiles, point

of sales units)

•  Electronic payment systems •  Enabling environment - legal and regulatory

framework

8

E-payments •  Beyond scope of project, but crucial factor: No e-

commerce without e-payment •  Monetary Union (Eco launch postponed from 2005) •  Opportunity to utilize and enhance existing intra-

regional mechanisms such as WAUA, but will require political will for further reform

•  Significant private sector progress since report written in deploying electronic payment networks

9

Does E-Commerce bring new legal challenges ?

•  Mere application of regular commercial principles to online service? –  Courts capable of applying existing principles to applications of new

technology once it is explained

•  Unique 21st century business form that requires legislation? •  Reality lies somewhere between:

–  Task is to provide sufficient certainty for real issues (whether immediate or potential) raised by e-commerce within resource and capacity constraints.

–  Litigation can be more expensive option to society than legislation for establishing ground rules

10

E-Commerce Law Challenge

•  Evolutionary but forward-looking enabling policies to generate market confidence; – Market-responsive –  Inclusive - with significant user input – Technology-neutral – Flexible, compatible with international practice

11

What does E-Commerce law entail?

•  E-transaction? •  E-signature ? •  Authentication &

Security ? •  Cyber-crime ? •  Online consumer

protection ? •  Online Privacy ? •  Data protection ?

•  Trademark Law ? •  Copyright Law ? •  Patent Law ? •  Database protection ? •  Domain name law ? •  Competition law?

12

What legal issues are at the core of E-commerce?

•  Electronic contracting •  Assent, formation, termination •  Click-on contracts and problems of contracts of adhesion

•  Jurisdiction/choice-of-law •  In absence of valid contractual provisions, do default laws make sense in

online world? –  Place of business (ccTLD where applicable, address listed on web site,

location of servers, location of office(s) where applicable, –  Significant contacts/Nexus (where buyer seeks out seller via web)

13

What legal issues are at the core of E-commerce? (cont.)

•  Admissibility/evidence –  Electronic records - data preservation –  Statute of frauds issues

14

Approaches to tackling legal issues

•  Omnibus internet/ICT law: –  Big Bang approach, well-suited to raising awareness and interest; –  Exhaustive, resource and time intensive; –  Lumps disparate areas of law together unnecessarily; –  Sometimes prematurely addresses issues.

•  Discrete, tailored approach: –  Flexible, gives room to address real rather than imagined

controversies; –  Can be perceived as piecemeal.

15

Narrowing the scope of e-commerce legislation

•  Although e-commerce legislation should be placed in the context of a legal framework revised to reflect the networked economy, it should not be used to address lacuna in off-line legislation;

•  With resource constraints and lack of wide-spread use, sensible to initially restrict scope of legislation to fairly non-controversial areas, expanding according to demand with user input;

•  Legislative efforts shouldn’t crowd out private law (contractual) solutions where volume of transaction and sophistication of parties justifies that approach.

16

Defining legislative scope

•  Divide into rough categories of core and related issues:

•  Core issues: – E-contracting/transaction – E-signature

•  Related issues –  Laws Protecting Parties, Transactions, Systems and Data

17

Core Issues •  E-contracting/transaction

– Create equivalency between paper and electronic documents (in private and public laws).

•  E-signature – Create equivalency between electronic and

ordinary signature as to effect in determining consent

18

Related Issues

•  Laws Protecting Parties, Transactions, Systems and Data –  These are laws that seek to create confidence among parties engaging

in electronic transactions by addressing the rights and interests in the underlying exchange of goods and services;

–  Include cyber-crime laws, intellectual property laws (expanded to include database protection and domain name law), privacy frameworks and other enabling laws such as consumer protection.

19

Related issues (cont.)

•  Consumer protection •  Fraud-prevention -(offline equivalents and uniquely online -

phishing, spoofing) •  Spam •  Malware - viruses, worms, etc. •  Online privacy •  Intellectual Property •  Database protection •  Data protection

20

Underlying Principles for Legislation

•  Market-responsive •  Inclusive - Stakeholder input •  Technology neutral •  Flexible, compatible with international

practice

21

Sample Legislation

•  UNCITRAL model E-Commerce law (1996) •  UNCITRAL model E-signature law (2001) •  UNCITRAL Electronic contracting preliminary draft

convention (2003) •  National Conference of Commissioners on Uniform State

Laws(NCCUSL) Uniform Electronic Transaction Act (1999) •  EU Electronic Signature Directive (1999) •  US E-Sign Act (2000)

22

UNCITRAL Model E-Commerce Law (1996)

•  Establishes rules and norms that validate and recognize contracts formed through electronic means

•  Sets default rules for contract formation and governing electronic contracts

•  Pre-emptive (developed ahead of real, practical controversies)

•  Global leaders in e-commerce have implemented laws that diverge in important ways

23

Uniform Electronic Transactions Act (1999)

•  Formally validates transactions arising out of any electronic communication between parties

•  Accord electronic documents and signatures the same legal effect as written documents and handwritten signatures

24

EU Electronic Signature Directive (1999) •  Prohibits discrimination against an e-

signature solely on the basis of its electronic nature

•  Establishes that as long as an e-signature meets a set of specific requirements, it is equally valid with a handwritten signature.

25

US E-Sign Act (2000)

•  Most recently enacted e-commerce legislation by major trade player;

•  Created to pre-empt non-uniform implementation in state legislation of the Uniform Electronic Transactions Act;

•  Core thrust is that an electronic transaction may not be denied legal effect just because it was created electronically or was consummated by an e-signature.

26

US E-Sign Act (Cont.)

•  US E-Sign Act applies to two fundamental e-commerce components –  The electronic records that comprise the transaction –  The e-signature that consummates it.

•  Act only applies where the parties have agreed to conduct business electronically or to accept an e-signature.

27

UNCITRAL Model E-Signature Law (2001) •  Intended to build upon the principles of the Model Law on

E-Commerce of 1996. •  Extends the provisions of article 7 of the Model Law on E-

Commerce in order to promote reliance on electronic signatures.

•  Goes beyond the basic principle that signatures should not be denied effect simply because they are electronic.

•  Instead, in Article 6, its main operative provision, prescribes circumstances under which a legal requirement of a signature for commercial transactions would be met by an electronic signature.

28

Adoption of E-Commerce & Related Laws in Africa

•  Mauritius, passed an Electronic Transactions Act in 2000, closely modeled after the UNCITRAL Model E-Commerce law of 1996.

•  In 2000, Tunisia adopted the Electronic Exchanges and Electronic Commerce Bill covering the use of electronic contracts, signatures and establishing a certification authority and process.

•  Likewise, Cape Verde passed an act in 2000 covering the use of e-contracts, signatures and the admissibility of electronic evidence in courts.

29

Adoption of E-Commerce & Related Laws in Africa (cont.)

•  Also, in 2002 South Africa passed its Electronic Communications and Transactions Act, an omnibus act that covered e-commerce in addition to other ICT related issues.

•  Finally, Egypt adopted an E-Signature Law in 2004. •  In addition, at least one REC, SADC, has adopted a

model e-commerce law as a guide for its member states.

30

Broader legislative framework

•  Adapting national laws to reflect e-commerce –  Inventory necessary to capture practices that adversely affect e-commerce:

•  Taxation; •  Paper-bias - Stamp duties, etc.; •  Importation rules (particularly for intangible goods/services); •  Currency exchange controls; •  Evidentiary standards, admissibility.

•  Enacting ancillary ICT or internet related legislation

31

Conclusion •  ECOWAS states have a strong opportunity to

improve economic efficiency and competitiveness by implementing the electronic delivery of services – both in commerce and government

•  This requires an enabling environment including laws concerning core and secondary e-commerce issues as well as ancillary issues

•  Special efforts must be made to meaningfully include the private sector (particularly merchants, the legal profession, and the financial services and IT industries) and civil society in the policy and legislative formulation process

32

Conclusion •  Governments must go beyond creating laws by

actively utilizing electronic delivery platforms for both its commercial interactions with business and fundamentally for the delivery of government services through e-government

•  Many of the issues relating to e-commerce – from data security, privacy, cyber--crime to e-payment solutions and electronic records – are equally relevant for e-government

•  Finally, efforts should be made to identify and facilitate the private sector development of e-commerce projects with high impact potential in the region