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| Working notes of the E-Commerce Focus Group, Wednesday, 21 February 2001 Focus Group |
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Welcome and apologies The Chairman welcomed those present and thanked everyone for attending. The apologies were noted. Working notes of previous meeting The working notes of the meeting held on 1 February 2001 were adopted without amendment. Paper by Gary Moore of Hofmeyr Herbstein & Gihwala Inc. The Chairman requested Leon Louw to lead the discussion on the paper by Gary Moore on the E-Commerce Green Paper that had been commissioned and tabled by the FMF. The fundamental thesis of the paper is that there is no need for special legislation on e-commerce and that any legislative changes that need to be made should be made in existing legislation. In addition, the paper contends that the responsibility for any changes that may be necessary lies with the Department of Justice and the Department of Trade & Industry. The paper makes the following points: The Green Paper prematurely anticipates that special legislation is necessary to regulate e-commerce. Taxpayer’s money should not be used to favour one type of technology over another. The Green Paper correctly asserts that barriers to commerce should be removed. Transactions between parties located in different countries is not an internet innovation. The South African common law is not tailored to any particular method of entering into transactions and is therefore not tailored for paper-based transactions as asserted in the Green Paper. When existing legislation requires transactions to be documented the legislation may have to be adjusted to include documentation in electronic form. Internet-based crimes do not require extensive new legislation. The volume of the transactions does present a problem. The jurisdiction in respect of a crime is another problem, e.g. the prosecution of creators of viruses who cause damage outside their own countries. These are problems that the law has to grapple with – they are not specific to e-commerce. Where crimes such as the distribution of pornography are committed there is a notion developing that the owner of the server should be held responsible. Service providers have as yet not been held responsible. Whatever may be happening, the law relating to the particular offence will have to be strengthened to cover the problem. Unless there is a treaty, a crime committed in another country is not a crime in South Africa. The law relating to money laundering does cover this type of issue. The Coase Theorem should apply, e.g. that the party who should insure against fire damaged caused by trains should be the farmer and not the railroad company. Perhaps the Law Commission should consider the issue of cross-border crimes if it is not already doing so. The Green Paper contradicts itself on whether a totally new legal framework is required for e-commerce. The South African common law is sufficiently flexible and capable of addressing most of the issues presented by electronic commerce (as stated by the legal auditors commissioned by the Department). Does a problem not arise when computers talk to each other? The paper points out that any transactions concluded between computers would rest on prior agreement between the contracting parties and therefore do not present a problem. The legal audit was incorrect, however, where it asserted that road traffic rules were introduced only when the motor vehicle arrived and that it was these rules that enabled the motor industry to develop. There is no legal uncertainty about a commercial transaction effected electronically by telephone or fax (contrary to the assertion in the Green Paper). Ill-considered legislation will contribute to uncertainty and legal expense. The only legislation that is strictly necessary is the amendment of existing pieces of legislation that require certain transactions to be documented. The UNCITRAL Model Law on electronic commerce (mentioned in the Green Paper) is primarily intended to supplement legislative measures that require transactions to be documented and is not intended to supplement common law. Rather than adopt the Model Law the responsible government departments may prefer to amend each specific legislative measure e.g. alienation of land, credit agreements or formalities in respect of contracts of suretyship. Most of the relevant pieces of legislation are administered by the Department of Justice or by the Department of Trade & Industry and it appears that they will be addressing these questions rather than the Department of Communications. Having regard to the particular objects of each separate piece of legislation, it seems probable that these departments may well prefer to amend each separate piece of legislation that they administer one by one. The South African law of evidence already covers the admissibility and evidential weight of electronic messages which the Model Law proposes to regulate. Finally, the UNCITRAL Model Law contains some provisions which unnecessarily seek to codify the law of contract. The Model Law itself concedes that these provisions are not essential, by allowing parties to contract out of them. The accompanying Guide to Enactment states that in certain countries a legislative provision on these lines might be regarded as merely stating the obvious. There is a risk, in codifying common-law rules unnecessarily, that the codification as worded might introduce some unintended injustice. This is the case with the provision of the UNCITRAL Model Law which states that a recipient of an electronic message shall be entitled to regard the message as having been sent by the originator even if it was sent by a person who exploited his relationship with the originator to gain access to the originator’s message-identification methods. The Guide to Enactment states that the intention is to make the originator responsible where he was negligent, but the wording in the Model Law does not support this intention. |
Discussion The courts should decide on the question of digital signatures – the matter should not be legislated. There is a danger of legislation locking people into old technology. In the U.S. and the U.K. the various government departments are very conscious of their respective responsibilities for updating government practises and policies regarding IT advances – there is no notion of passing omnibus legislation cutting across the departments. There is no doubt that common law is the answer – perhaps proposals can be made as to how government can deal with IT crimes such as sending out viruses. There is a danger that unnecessary legislation can be interpreted in unintended ways. The Model Law deals with transaction by email, telegrams or faxes. Codifying these matters in legislation would unbalance our law of contract. It would be undesirable to enact legislation for contracts entered into by these means, and not also for contracts entered into by means of ordinary letters hand-written or typed and sent by ordinary mail. As the Green Paper itself states, South African law is already likely to give legal effect to an offer and acceptance in electronic format. It is doubted if it is “extremely critical” to address various pieces of legislation which require documents. Because the entering into of important contracts such as sales of land, credit agreements and suretyships is regarded by the contracting parties as a significant and deliberative act, there would appear to be no need that the legislation governing these transactions should be altered urgently. Negotiating parties might exchange drafts of their intended contract by email, but the contracts themselves are usually printed out into physical form and signed on paper. Taxation laws should be neutral between different forms of commercial transaction, and should be simple to understand. The observation in the Green Paper that company directors having a teleconference is a relevant issue is incorrect. This matter is not directly related to electronic commerce, and issues about the seat of management of companies pre-existed the Internet, as when the two directors of a company conduct a meeting on the telephone. Laws requiring the recipients of products that are delivered electronically to pay VAT and customs duties are probably unenforceable. So-called cyber cash or network money does not pose more tax-collection problems than ordinary cash. The Green Paper is incorrect when it states that businesses with websites are not physically located anywhere. General Discussion One of the issues is easy and affordable access to information – a decision will have to be made as to whether and how the comment will deal with it. The difference between policy and legislation must constantly be borne in mind in preparing the submission. The submission must stress that the countries that do best in e-commerce are those where government intervenes least. It is important that the submission should not just be critical – it should be packaged in a positive way. Further matters to be dealt with in the submission The benefits of economic freedom. Privacy and security of information. Comment: The existing law is adequate. South Africans have an absolute constitutional right to privacy – information must be used only for the purpose for which it was gathered – this right is not being respected and nothing is being done about it – a law of general application is required to address the issue – it is not an e-commerce issue. Certificates of authenticity. Consumer protection. Comment The notion of a special division of the police force is something government can do – one of its most important tasks is to enforce the law. This can be extended to giving special training to the judiciary on IT issues and crimes. Government should not attempt to control encryption – what government can encrypt it can unencrypt – this should be a matter between providers and their customers. Banks are looking at encrypting e-mailed bank statements. Where this has been done some customers have complained and requested unencrypted statements. The cost of security is huge and for several reasons government cannot perform this function. Enhancing information communication infrastructure. As far as infrastructure is concerned, ending the Telkom monopoly is critical – the department must be made aware that the removal of barriers to entry is the most important function that it can perform. Domain names. Electronic payment systems. The privately owned STRATE system is a good example of what the private sector can do. Giving the entire population access to e-commerce. E-government. Change in technology? The form of the submission The FMF will prepare a submission and attach the Hofmeyr opinion as an addendum. It will use examples from the opinion, quote from it, and perhaps provide a summarised version. The submission will cover the matters not dealt with in the Hofmeyr opinion and will also provide economic arguments. A first draft will be made available before the next meeting. On completion the submission can either become a joint submission of all the parties who subscribe to it or an independent FMF submission. The Hofmeyr opinion can be made available to other interested parties. If several submissions received by government contain the same general view but with various nuances the case will be stronger. There is consequently no objection to others borrowing the ideas. Next meeting of the Focus Group The next meeting will be held at the FMF offices at 16h00 on Wednesday, 14 March 2001. Subjects for discussion at the meeting are: The meeting closed at 18h00. |
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