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Geo-blocking rules apply to cross-border cloud contracts

Geo-blocking rules set to take effect later this year apply to cross-border cloud computing contracts between businesses, the European Commission has confirmed.24 Sep 2018

The details were contained in new Commission guidance on its Geo-blocking Regulation.

Geo-blocking refers to practices used by online sellers to restrict online cross-border sales based on nationality, residence or place of establishment. EU law makers moved to prohibit unjustified geo-blocking, finalising the Geo-blocking Regulation earlier this year. However, the rules do not take effect until 3 December this year.

The Commission's new 'question and answer' paper provides clarity on how the Regulation will apply in practice.

According to the document, business-to-business (B2B) transactions will be subject to the new rules where they "take place on the basis of general conditions of access (i.e. they are not individually negotiated) and the transaction is for the sole purpose of end use (i.e. made without the intention to re-sell, transform, process, rent or subcontract)".

The Commission gave an example of how those provisions would apply in practice to cloud computing.

It said: "A Finnish law firm is looking for a new provider for back-up and cloud storage services and has found an attractive offer from an Estonian provider. This transaction would be covered by the Geo-blocking Regulation."

The Commission also confirmed the circumstances in which online marketplaces will be subject to the geo-blocking rules.

"Online marketplaces, where for example goods or services are sold by third parties, are subject to the provisions of the Geo-blocking Regulation when they act as traders within the meaning of the Regulation," the guidance said. "In certain cases online marketplaces might not act as traders themselves, but rather in the name of or on behalf of another company that qualifies as a trader. In those cases it is the other company that is subject to the rules of the Regulation, and not the online marketplace directly."

The Commission also confirmed that businesses remain free to select which payment methods to accept.

"Article 5 of the Regulation applies to payment transactions made by means of an electronic transaction by credit transfer, direct debit or a card-based payment instrument of the same brand and category of card, where the authentication requirements are met and the payment transactions are in a currency that the trader accepts," the guidance said. "However, once this choice has been made traders should not discriminate against customers within the EU by refusing transactions or applying different conditions of payment based on the customers’ nationality, place of residence or establishment or in relation to the location of the payment account, the establishment of the payment service provider or the place of issue of the payment instrument."

The geo-blocking rules do not apply to the provision of transport, financial, gambling or audiovisual services.

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