Specifically, the AA considers that the UK’s interpretation of
the Directive’s provisions on the “country of origin” principle is
flawed. This principle, in its purest form, says that a business
needs only comply with its domestic laws when selling abroad – i.e.
it can ignore the laws of the countries into which it is selling.
The Directive itself dilutes the principle to an extent; the AA
argues that the UK Government is, perhaps inadvertently, diluting
it much further.
Under the Directive, there are exceptions to the country of
origin principle. It does not apply to copyright, electronic money,
certain insurance laws and other carve-outs; but perhaps most
significantly, the Directive says that it does not apply to
“contractual obligations concerning consumer contracts.”
In practice, this means that a UK-based web site selling to
consumers, on the Directive’s wording, would need to make sure that
its terms and conditions comply with the laws of the country in
which the consumer is based. However, the remainder of that site
would only need to observe UK laws. In the UK, retailing rules are
less stringent than in some other Member States, which potentially
gives UK traders an advantage.
However, the AA believes that the UK Government has used wording
in its draft law that defeats the advantage of this country of
origin proposal.
The Government’s draft Electronic Commerce (EC Directive)
Regulations 2002 do repeat the country of origin principle, with
the same exceptions. The AA believes that the wording applied
introduces new exceptions which do not come from Brussels and which
contradict the Government’s stated intentions.
The AA states that the Government’s choice of wording:
"appears to reduce the country of origin
principle to a mere supervisory and enforcement rule and thus
undermine the intention that UK information society services are
submitted only to UK law for their e-commerce activities."
When the Government released its draft Regulations it also
released a “Guide” on interpreting the wording of the proposed law.
The AA points to a section of this that attempts to explain the
meaning of the exclusion for “contractual obligations concerning
consumer contracts.”
The Guide explains that this covers “requirements to do certain
things before entering into a contract (e.g. provide information
about cancellation rights under the provisions of timeshare
legislation” and “essential information that has a determining
influence on the decision to contract, which must be provided in
accordance with the requirements of the consumer’s Member
State.”
The AA considers this explanation a step too far. In its
comments, submitted to the Government this week, it writes:
"The Directive was clear that in other areas
such as non-contractual liability, defamation, unfair competition
or misleading advertising, these would fall under the country of
origin control. During the European Parliament and Council
negotiations leading up to agreement over the Directive, the UK
remained steadfast in its position that derogations in the area of
Private International Law to cover pre-contractual obligations
would not be extended. The current draft document incorrectly
interprets the Directive."
The AA gives an example of the risks that it perceives if this
draft becomes law:
“A UK company carrying out an on-line
advertising campaign offers a DVD for £1. This is permitted in the
UK, however, a Belgian distributor of DVDs brings an action in the
UK courts on the basis that the UK company is engaging in unfair
competitive practices which are prohibited in Belgium, i.e. selling
below cost. The courts could apply Belgian law on the basis of the
Private International Law Act. This destroys the essence of the
E-Commerce Directive.”
The AA does acknowledge that the Government’s rhetoric on
implementing the Directive is not consistent with any such risk.
The Department of Trade and Industry’s report said of the country
of origin principle:
"This has the benefit of allowing UK
providers of online services to comply with only one national
legislation - that of the UK - in most matters, wherever they do
business in the EC. It removes the need to track and comply with up
to 15 national legislations when providing such services within the
EC".
Phil Murphy, European Public Affairs Manager at the AA
concluded:
"This Government is currently drifting away
from both the spirit and indeed the letter of the original
Directive and this is a cause for much concern. The AA is unaware
of any policy shift by Government towards discouraging UK companies
from participating in cross-border trade over the internet - indeed
the Association had been of the opinion that the reverse was in
fact the case."
