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Executive summary

E1 THE TRANSACTION OF BUSINESS through electronic means isgrowing rapidly. There is public interest in facilitating that type of trade (in this report, termed electronic commerce). Unless there are good reasons to the contrary, it seems clear that legal impediments to electronic commerce should be removed.

E2 In determining whether it is necessary to enact legislation to remove barriers to electronic commerce we have applied the four guiding principles identified in ECom 1. Those principles are:

• The right to choose whether to do business through the use of paper documentation or by electronic means without avoidable uncertainty arising out of the use of electronic means of communication (the choice principle).
• Ensuring that the fundamental principles underlying the law of contract and tort remain untouched save to the extent that adaptation is required to meet the needs of electronic commerce (the adaptation principle).
• Expression of any laws enacted to adapt the law of contract or the law of torts to the use of electronic commerce in a technologically neutral manner (the technological neutrality principle).
• Compatibility between principles of domestic and private international law as applied in New Zealand and those applied by our major trading partners (the compatibility principle).

E3 All of those principles rest on the functional equivalence principle on which the UNCITRAL Model Law on Electronic Commerce (the Model Law) is based. Submissions made to us in response to ECom 1 emphasised a further principle: private sector leadership. It is suggested that the private sector should lead development in this area and that the Government’s role should be confined to the removal of barriers to electronic commerce and to the general facilitation of trade which is carried on through electronic means. We adopt that principle as a fifth principle in relation to the facilitation of electronic commerce. Adoption of this principle is wholly consistent with the emphasis on party autonomy to be found in article 4 of the Model Law and with the desirability of employing contractual solutions in preference to those imposed by legislation. But, equally, it does not displace the need for the State to enact appropriate consumer protection laws.

E4 The Commission recommends enactment of an Electronic Transactions Act along similar lines to the Electronic Transactions Bill currently before the Federal Parliament in Australia (the Australian Bill). Our reasons for recommending statutory intervention are set out in chapter 2. In general terms, enactment of an Electronic Transactions Act will provide a basic legal framework to facilitate trade and to remove barriers to trade being carried on electronically. We have deliberately restricted our recommended legislation to “trade” related transactions for the reasons given at paragraph 34.

E5 It is important that, so far as practicable, New Zealand’s Electronic Transactions Act should accord with the Australian version to reduce (if not completely minimise) conflict of laws problems when trans-Tasman trade is involved.¹⁰It would also have the advantage of general consistency. In general terms our proposed statute would adopt articles 4 (Party autonomy), 5 (Non-discrimination), 5 bis (Incorporation by reference), 6 (Writing), 7 (Signature), 10 (Retention of electronically generated messages) and 15 (Time and place of dispatch and receipt of electronically generated documents) of the Model Law. For reasons given later in this report it is proposed to defer consideration of remaining issues involving electronic signatures,¹¹ allocation of risk through default rules dealing with attribution of messages (article 13 of the Model Law)¹² and provisions of the Model Law dealing with transportation documentation (articles 16 and 17 of the Model Law) until further work being carried out in international forums has matured. The Commission proposes to publish a third electronic commerce report in late 2000 which will address these issues and make recommendations as to whether any additions are needed to the basic legal framework which we now recommend. The deadline for submissions on this report has been extended considerably so that progress of that work will be available to those who wish to make submissions.

E6 We do not recommend that article 14 of the Model Law (which deals with acknowledgement of receipt)¹³ should be adopted for reasons detailed at paragraphs 60–61.

E7 Articles 8 and 9 of the Model Law deal primarily with evidential issues.¹⁴ On 24 August 1999 the Commission published its final report on its Evidence reference: Evidence: Reform of the Law (NZLC R55). We recommend that the Evidence Code set out in the second volume to that report be enacted at the same time as the Electronic Transactions Act – to remove all barriers of an evidential nature. We set out the reasons why we believe the Evidence Code is sufficient to remove all barriers in chapter 7.¹⁵

E8 The mandate of UNCITRAL is to consider international trade law issues; the Model Law states that it is not intended to override any rule of law intended for the protection of consumers.¹⁶ Work is still being done on consumer issues at OECD. New Zealand is being represented at OECD by the Ministry of Consumer Affairs. It may be necessary to revisit certain consumer protection issues in our next report.¹⁷ But, in the meantime, we recommend that our proposed Electronic Transactions Act apply to all consumer transactions conducted “in trade”.¹⁸

E9 Remaining parts of this report focus debate on options for reform as a result of submissions made to us on ECom 1 and as a result of debate which has occurred since publication of that report. This is particularly true of the law of torts,¹⁹ conflict of laws,²⁰  electronic signatures²¹ and questions of attribution.²²  Some new banking issues are also raised for consideration.²³ Other chapters simply inform readers of the government agency responsible for administration of those parts of the law and outline the type of issues which are being addressed by bodies other than the Law Commission.²⁴ Submissions on these issues should be made directly to the agencies concerned.

E10 In our conclusions,²⁵ we refer to the need for further work. We propose that the further international work on electronic signatures, conflict of laws and consumer transactions be monitored and followed up by further recommendations to be made in our next electronic commerce report. At that stage it can be decided whether an expanded legal framework is necessary.

E11 We also discuss wider issues; in particular the interrelationship of the criminal law²⁶ and the law of torts.²⁷  So far as the criminal law is concerned, we have adopted, with one significant addition, the recommendations made in our Computer Misuse²⁸ report. That addition recommends the creation of a fifth offence and explains the reasons for it.²⁹ So far as the law of torts is concerned, we have made specific recommendations about Internet Service Providers both generally and in the context of defamation law and have raised a number of further questions for submission.³⁰

E12 It is important to stress that our proposed Electronic Transactions Act will not create a perfect world for those who wish to engage in business through electronic means. But, it will create a better environment than currently exists by removing immediate barriers. Other barriers to which our attention has been drawn are equally applicable to the physical world and, hence, unnecessary to deal with in the context of a report restricted to electronic commerce.

E13 For ease of reference, appendix A to this report contains a summary of the structure of the government committees established to consider electronic commerce.³¹ Appendix B to this report replicates the Model Law with its Guide to Enactment. This avoids the need to repeat extensively reasons for and against particular Model Law provisions which are summarised in the Guide. While our text concentrates specifically on the need (or otherwise) for the adoption of Model Law provisions in New Zealand, our comments should be read in conjunction with the Guide to Enactment. Appendix C is a reproduction of the Australian Bill. Appendix D reproduces relevant provisions of the Evidence Code recommended by the Commission in its August 1999 report. Appendix E is a summary of recent overseas legislation concerning electronic signatures.

E14 A summary of questions raised for further debate is set out later in this report.³² The Commission awaits submissions on those issues.