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1 IN ECOM 1 we noted that no single definition of the term“electronic commerce” had attained universal approval.33 We said:
Electronic Commerce is a generic name given to business transactions which are entered into through electronic rather than paper-based means . . . For the purposes of this paper, the term “electronic commerce” means the use of electronic communications technology (instead of paper, telephone or face-to-face meetings) for business purposes in the widest sense. Electronic commerce is not limited to the purchase and sale of goods or services on the internet: rather, it extends to cover a number of primary and support activities which include electronic publishing, intra-organisational communications (eg, through intranets), computer-supported meetings and communications with other businesses. In this paper the word “internet” is used as shorthand for interconnected computer networks; it is not intended to denote any particular form of computer network.
2 We adopt the same approach to electronic commerce in this report. From time to time, we will refer to some more general issues arising out of the use of electronically generated information. Our references to such matters will pertain to the need for a holistic approach by the law to all aspects of electronic technologies, which can assist in the growth of the New Zealand economy. Such an approach necessitates discussion of both civil and criminal law.
3 The benefits of electronic commerce were set out in ECom 1 by reference to Viehland’s summary as being:34
4 This report must be read in conjunction with ECom 1. Where legal issues have been discussed in detail in ECom 1 we simply refer back to that discussion rather than repeat it in this report.
5 We recommend that a basic legal framework be established by an overarching Electronic Transactions Act. The Act should be confined to electronic transactions conducted “in trade”, as that term is broadly defined by the Fair Trading Act 1986,35 to avoid the need to list individually many of the legal requirements we wish to exempt from the Act’s application. The need for such legislation is discussed in chapter 2. Generally, enactment of our proposed Electronic Transactions Act will facilitate electronic commerce by removing barriers to conducting business in this way.
6 We recognise that in building a legal framework it is necessary to have regard to the international nature of the internet and the ease with which electronically generated transactions can cross borders. In formulating the principles to underpin our proposed Electronic Transactions Act we have, so far as possible, adopted provisions of the Model Law which are based on internationally accepted norms. In cases where the Model Law does not appear to have gained universal approval, we have been more cautious in adopting its terms. Where work is continuing at an international level on issues on which there is not currently consensus, but which may lead ultimately to consensus, we think it right to await those developments before recommending legislation for New Zealand. Ultimately, the business people of the world will determine the direction which they wish to take. The challenge for sovereign governments is to accommodate business needs by removing barriers to the extent to which they can, both properly and necessarily, consistent with the public policy of the sovereign State concerned.
7 In chapter 2,36 we express our view that legal barriers to electronic commerce can be reduced to six generic categories: writing, signatures, originals, service of documents, physical presence or attendance, and negotiability. So far as is practicable at the present time, we believe that our proposed Electronic Transactions Act will meet the needs of the business community in removing, or at least reducing the effect of, those barriers.
8 Generally speaking, we take the view that our proposed Electronic Transactions Act should operate to amend existing domestic laws which act as barriers to electronic commerce. This should be achieved in the same way that the requirement for “writing” has been overcome through the enactment of section 29 of the Interpretation Act 1999.37 In effect, the Electronic Transactions Act will be applicable to all such transactions and its terms will have precedence over other statutes.
9 The discussion in ECom 1 was guided by four principles: choice, adaptation, technological neutrality, and compatibility,38 as well as a commitment to the functional equivalent approach advocated by the Model Law.39 The four guiding principles and the functional equivalent approach received widespread support from those who made submissions. Substantial support was also voiced in favour of the not dissimilar recommendations made by the Australian Electronic Commerce Expert Group’s Electronic Commerce: Building the Legal Framework in which the Expert Group recommended (amongst other things):40
10 General support for a further principle emerged from the submissions: private sector leadership. The tenor of the suggested principle is that the online market should be driven by the private sector, with legislation only being warranted when it produces a more efficient outcome than self-regulation. In essence, a “wait, see, assess and intervene only when necessary” approach. This principle is consistent with the emphasis on party autonomy in the Model Law.41 We agree with it and adopt it for use in our work.
11 Mindful of the need for Government to inform business of its approach to electronic commerce, the Ministry of Commerce published Electronic Commerce: The Freezer Ship of the 21st Century. The purpose of that statement was to “. . . provide a framework for ongoing initiatives by bringing existing policy together and outlining the Government’s overall policy approach”.42 That policy approach is
one of minimal intervention and encouragement of self-regulation, consistent with the Government’s overall policy framework. Government intervention will only be considered if it is necessary to address clearly identified market failures, or in order to maintain certainty for business and protection for consumers. Any intervention should consist of simple, predictable regulation that is technology-neutral . . . and able to respond to the pace of change in the electronic environment.43
This approach, in effect, endorses the principle of private sector leadership and the Law Commission’s four guiding principles.
12 In order to coordinate work being done in the public sector, Cabinet directed the Ministry of Commerce, in conjunction with other government agencies, to develop a work programme on electronic commerce issues aimed at “maximising potential benefits and minimising potential pitfalls”.44 Coordination between departments was essential to avoid duplicity of effort. Responsibility for information industries crosses a number of government departments. However a number of interdepartmental interest groups were evident. As a result, five areas of public interest were identified:
Five Sector Committees were formed. Each Sector Committee has responsibility for one of the areas listed above. Representatives from each Committee make up the Electronic Commerce Steering Committee. The Steering Committee reports directly to the Minister for Information Technology and its brief is to assist Government in formulating policy on electronic commerce issues.45 Appendix A sets out the structure and membership of these Committees.
13 Recent reports issued by this Commission have noted some wider issues arising out of electronically generated communications.46 The sorts of issues which need further consideration include:
There is a need to take an holistic approach to technologies which operate without respect for sovereign boundaries. The Model Law is a starting point for the civil law. In a paper presented to an APEC/WTC meeting in September this year,53 the President of the Law Commission stressed the need for a global, systematic, and co-ordinated approach to criminal law issues in the electronic environment. The President noted that the borderless nature of computer crimes, and their potential to cause vast economic loss and physical damage, cry out for international measures to be taken against them. In his paper the President set out a number of ways in which computer crimes could be attacked; including a model criminal law akin to the Model UNCITRAL civil law, multilateral treaties and recognition of computer hacking as a crime at international law. The criminal law issues will be considered further over the next year by this Commission. Some introductory comments on the issues are made later in this report.54
14 New Zealand has encouraged development of global solutions to electronic commerce issues through its membership of APEC, OECD and the World Trade Organisation. At the APEC Leaders meeting in Vancouver (November 1997) APEC Leaders agreed:
that electronic commerce is one of the most important technological breakthroughs of this decade.
An APEC Electronic Task Force was established to manage APEC’s work programme on electronic commerce, as set out in the APEC Blueprint for Action of Electronic Commerce.55 The blueprint provides:
The role of Government is to promote and facilitate the development and uptake of electronic commerce by
• Providing a favourable environment, including the legal and regulatory aspects, which is predictable, transparent and consistent.
• Providing an environment which promotes trust and confidence among electronic commerce participants . . .
• Working with UNCITRAL and other international fora in moving forward work on legal foundations, where appropriate, for a seamless system of cross-border electronic commerce . . .
15 The leaders of APEC economies directed Ministers to establish a programme on electronic commerce for their region that will recognise the leading role of the business sector and promote a predictable and consistent legal and regulatory environment to reap the benefits of electronic commerce.
The New Zealand Government has taken up the challenge. These issues were explored further at a meeting of the Electronic Commerce Steering Group of APEC held in Auckland in June 1999.56
16 Similarly, the OECD is developing policies to deal with electronic commerce at a global level, particularly in the areas of consumer protection57 and taxation.58 The object is to provide a set of principles by which members of the OECD can regulate conduct within their territorial boundaries.
17 At UNCITRAL, the Working Group on Electronic Commerce is endeavoring to finalise uniform rules to deal more specifically with issues of “signature” in the electronic environment. A report is expected to be put before the full Commission meeting of UNCITRAL in mid 2000. These issues are discussed later in this report.59
18 The Hague Conference on Private International Law is in the process of developing a more sophisticated framework to deal with conflict of laws issues. As part of its work the Hague Conference held, in conjunction with the University of Geneva, a seminar from 2–4 September 1999 on private international law issues raised by electronic commerce. As a result of his contributions to the Hague Conference session in June 1999, Mr David Goddard, New Zealand’s representative at that session, was invited to act as a co-rapporteur at the Geneva seminar. That appointment was recognition of New Zealand’s role in raising electronic commerce issues at the June 1999 Hague Conference session. The work of the Hague Conference is discussed later in this report.60
19 The current Secretary of UNCITRAL, Dr Gerold Herrmann, has visited New Zealand on two occasions this year. His ideas on the way in which international trade laws can be harmonised are worthy of the greatest respect. He has identified obstacles to harmonisation and unification of international trade law as:
20 As Dr Herrmann has suggested, these obstacles must be addressed by using the combined experience of experts from diverse regions and legal systems, with a view to preparation of a uniform text which can be expressed in plain terms in the six United Nations’ languages: Arabic, Chinese, English, French, Russian and Spanish.62
21 In 1992 Shapira, a senior lecturer in law, identified a need for New Zealand to be involved in helping to shape the form of Model Laws and conventions which emerge from UNCITRAL’s work.63 In our view, the observations made by Shapira are even more relevant today. The development of the internet, and the ability to enter into international agreements through it, mean that now more than ever it is necessary for countries such as New Zealand to be represented at bodies such as UNCITRAL. As we may have little choice but to adopt many internationally developed Model Laws or Conventions, it makes sense that we are represented when both the agenda and content of such “laws” are being shaped.
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