E-commerce and its effects in Ireland

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3 Business Environment

E-commerce is a business issue. It will affect all businesses in Ireland, and in particular those engaged in international trade. It will also affect businesses previously sheltered from international competition in home markets. It can make a significant contribution to the achievement of national social and economic objectives. It also offers significant new enterprise and inward investment opportunities. A supportive and adaptive business environment is essential to realise this potential.

The changes being brought about by e-commerce at enterprise level require new frameworks for conducting business: government policies relating to commerce need to be re-examined, as most were formed with a very different image of commerce in mind. Reform is needed in legal and regulatory areas, such as trusted third parties, contract law and tax collection. However, action is also required in other policy areas that influence enterprise competitiveness including logistics, skills, awareness, training, and international marketing.

This section sets out the key actions required on the part of government, the development agencies, and the enterprise sector. A partnership approach is required to speedily implement the required changes.

3.1. Legal and Regulatory Framework

The development of a secure and conducive legal environment for e-commerce could establish a first mover advantage for Ireland as an e-commerce business jurisdiction. The legal framework for traditional forms of commerce has developed over the centuries, but e-commerce is giving rise to fundamentally new forms of commerce, for which the legal framework remains to be determined. A number of the key aspects of the legal framework are being discussed at EU level, but Ireland must also introduce domestic measures to provide a clear, certain and secure environment for e-commerce transactions.

3.1.1 Certification and Trusted Third Parties

Trust is essential to all commercial undertakings. In e-commerce, trust is particularly important as the parties to the transaction may never meet - the identity of partners is therefore a serious issue. The buyer wants assurance that the seller (a) exists, and (b) is worth doing business with. The seller likewise wants to know that the buyers are who they say they are, and that the payment is secure.

A system whereby organisations are accredited to certify the existence of individuals and companies in Ireland is required. Such organisations should interact with their counterparts around the world so that the same identification information, on potential suppliers and customers, can be made available to Irish companies and individuals trading internationally. It is proposed that accreditation should be on a voluntary basis.

The provision of assurances that individuals and companies are worth doing business with should be left to the market. Financial and other organisations may decide to provide such information.

An Post, through its subsidiary PostGem, and the Chambers of Commerce of Ireland have both launched certification services for enterprises in the first half of 1999, which are welcomed.

A draft consultation paper1 has been prepared on a proposed future approach. It is expected to form the basis for a Bill, to be published in the final quarter of 1999. The consultation paper proposes mechanisms to ensure legal recognition of secure electronic transactions and will also include outline legislative provisions on electronic contracts, electronic signatures, electronic writing as well as certification service providers and related matters. It advocates providing:

* Legislative recognition of electronic signatures

* A legal basis for accrediting certification service providers

* Recognition of advanced electronic signatures, with defined characteristics

* Recognition for "certificates" linking signature verification data to a person and confirming the identity of that person, and "qualified certificates", which meet the requirements of the accreditation authority and are provided by a certification service provide (Trusted Third Party).

The Accreditation Scheme2 envisaged is already at an advanced stage of development in other European countries. However, the accreditation criteria against which certification service providers might be assessed are still being developed. A first mover advantage could accrue to Ireland by providing such an accreditation service in advance of international developments. The characteristics of the scheme to be applied in Ireland are becoming clear:

* Provision of certification services will not be subject to prior authorisation by a Minister

* Accreditation of these certification services will be voluntary in nature

* "Evidential weight" will be given to both electronic signatures and advanced electronic signatures, but by implication, chain of evidence requirements will be more rigorous for signatures associated with non-accredited certification service providers

The following actions are required:

Government Action

* Bring forward, as a matter of urgency, the Bill to provide a framework for voluntary certification. (Department of Public Enterprise and Department of Enterprise, Trade and Employment

Agency Actions

* Develop and administer a national voluntary scheme for accrediting organisations to certify that individuals and organisations in Ireland exist. The accreditation scheme should be put in place quickly and prior to the enactment of legislation. (National Accreditation Board)

Enterprise Actions

* Encourage trade and other organisations to establish self-regulating standards of approval for use by companies engaging in e-commerce.

3.1.2 Copyright

Copyright protection is fundamental to e-commerce and digital distribution of content. A Copyright Bill is being brought forward by the Department of Enterprise, Trade and Employment to be passed into legislation by the end of 1999. It accommodates all outstanding EU and World Trade Organisation (WTO) Directives, and is intended to provide international protection for copyright material in Ireland. Ideally, the legislation should enable the promotion of Ireland as the most secure place from which to do digital business.

A number of actions are required including:

Government Action

Ensure that the new copyright legislation:

* Makes it an offence to post copyright material on public web sites without the copyright owner's consent, even if not downloadable

* Includes protection for technical designs posted on the Internet

* Enhances the enforcement powers and penalties for electronic breach of copyright

(Department of Enterprise, Trade and Employment)

3.1.3 Electronic Contracts

A Directive on certain legal aspects of electronic contracts is under discussion at EU level, but it could be 2001 before an agreed directive is implemented. Ireland should move in the interim to provide a framework of legal certainty. Ireland should set out a legislative framework for e-commerce contracts, specifically addressing the point of creation and conclusion of contracts.

Businesses must ensure that in making offers for the sale of goods or supply of services on their websites, they notify to customers the "contract agenda" of relevant jurisdiction and applicable laws.

The following actions are required:

Government Action

* Enact legislation to ensure the legitimacy and enforceability of e-commerce contracts. The legislation should also ensure certainty on the applicable jurisdiction. Pending agreement at EU level this legislation should be based on a contractual model which has been development the United Nations.

* Ensure contracts made and signed electronically have the same force in law as if they had been made and signed physically.

* Establish a resource on the Internet to provide information for businesses on electronic contracts. (Departments of Enterprise, Trade and Employment and Public Enterprise)

Enterprise Action

* Specify on websites and in e-commerce transactions the legal jurisdiction that will apply to contracts with clients and, where possible, the key legal provisions or a link to a resource setting out the relevant provisions.

3.1.4 Electronic Evidence and Dispute Resolution

There are two key issues relating to the use of electronic evidence. The first is its admissibility, and the second is the weight assigned to it and the parameters for its use. Legislation is required to provide for electronic evidence in civil proceedings and to set out the parameters for its use. This can be done through an amendment to the Criminal Evidence Act, 1992.

Once these issues have been addressed, guidelines will be required as to what procedures are necessary (in respect of storage of data etc.) in order that computer records are considered sufficient in evidential terms.

There is an opportunity for Ireland to develop as an international centre for the arbitration of disputes on electronic transactions. Countries such as the Netherlands and the UK have previously developed as leading international centres for the settlement of copyright disputes. Training of arbitrators should cover the domestic, European and international legal framework pertaining to e-commerce, and in particular, the proposed legislative changes. A pool of arbitrators, who are internationally recognised experts, is essential to the promotion of Ireland as a centre for dispute resolution.

There is also an opportunity to develop as a leading international location for the settlement of small claims. In the medium-to-long term, an electronic fast track/ small claims court could be developed.

The following actions are required:

Government Action

* Update the Criminal Evidence Act, 1992 to provide for electronic evidence in civil proceedings.

* Promote arbitration as a suitable dispute resolution mechanism for e-commerce transactions.

* Encourage national courts to develop e-commerce expertise.

* Consider the establishment of an online international arbitration mechanism, which companies can use to resolve disputes, regardless of their country of origin.

* Publish guidelines as to the procedures necessary (in respect of storage of data etc.) in order that computer records are considered sufficient in evidential terms.

* Consider the establishment of an online Small Claims Court to deal with disputed e-commerce transactions.

(Department of Justice and Law Reform, Department of Enterprise, Trade and Employment and the Department of Public Enterprise)

Agency/Enterprise Action

* Encourage Encourage the development of a pool of arbitrators to deal with disputes on e-commerce transactions. (Law Society/Bar Council/Enterprise Ireland/IDA Ireland)

3.1.5 Liability in Respect of the Sale of Goods and Services

The number and characteristics of intermediaries involved in e-commerce transactions differ from those in traditional commerce, in particular for digitally delivered services. The liability of intermediaries must be clarified, specifically, the application of the 'mere conduit' rule.

Legislation dealing with the sale of goods and services needs to be amended to cater for goods and services offered, sold or distributed electronically. The liability of intermediaries requires to be clarified. The new legislation should apportion liability for loss or damage between the provider of the goods or services, distributors and those intermediaries that act as 'mere conduits'. Intermediaries that simply facilitate or provide access between one party and another should not incur liability for the sale of a product or service.

Uncertainty on this issue can deter the establishment of intermediaries in Ireland and they are an important element in developing an e-commerce economy. The product liability regime for unsafe products also requires examination.

Enterprises engaging in e-commerce should agree with intermediaries the terms of business in advance including delivery, quality, reliability, standards expected, and liability in event of loss or damage. Existing enterprise insurance cover in respect of physical delivery should also be assessed where new modes of delivery are being used.

The following actions are required:

Government Action

* Update the body of legislation relating to the sale of goods and services to recognise goods and services offered, sold, or distributed electronically. The legislation should apportion liability for loss or damage between the provider of the goods or services, and any intermediaries or distributors.

* Clarify that intermediaries operating as 'mere conduits' or simply as access providers should not incur liability.

Joint Government/Agency Action

* Develop Develop a guide for businesses on relevant consumer protection legislation in key US, European and other markets. (Department of Enterprise, Trade and Employment, Enterprise Ireland and Shannon Development)

Enterprise Actions

* Agree in advance with intermediaries the terms of business for delivery (electronic and physical), quality, expected reliability standards, and liability in event of loss or damage.

* Review existing enterprise insurance cover where new modes of delivery, such as courier parcel delivery, are being used to fulfil e-commerce purchases.

3.1.6 Defamation

In theory, defamation cases on foot of defamatory material posted on the Internet can be taken in any country in which it can be viewed. From Ireland's perspective, the liability of companies hosting such material on mirror sites or acting as mere conduits for such material, requires clarification. This is particularly important in attracting the major information and news services to locate here. The regulations should set out the parameters for determining negligence in respect of such material.

3.1.7 Unsolicited Commercial E-mail

Spamming is the practice of sending unsolicited commercial material, such as mass mail shots, to communities or individuals across the Internet. This abuse of Internet capabilities is causing problems for Internet Service Providers (ISPs) and others and disrupts the provision of efficient services to business. National codes of practice need to be developed, differentiating between direct marketing activities and spamming to encourage customer relationship marketing activities from Ireland and to encourage global ISPs to locate here.

Government Action

* Encourage Encourage the development of codes of practice in respect of unsolicited commercial communications via e-mail. (Department of Enterprise, Trade and Employment)

3.1.8 Encryption

One obstacle facing companies involved in e-commerce is controls on the export of encryption products. Encryption essentially scrambles information in a way that can only be undone by users with proper authorisation. The level of security afforded by encryption is related to the size of the authorisation key. This is measured in bits.

Ireland along with most industrialised countries is subject to the Wassenaar Arrangement treaty and relevant EU legislation that regulates the export of products with encryption software built in. The US government exempts the export of products that contain weak encryption of up to a maximum of 56 bits but controls the export of higher-bit products. The affect for e-commerce is that whereas US companies may be permitted to use standard commercial systems with 128-bit encryption within the US, those outside using the same software for e-commerce may be restricted to using products at weaker levels.

Ireland needs to ensure that any regulations of encryption do not create unnecessary barriers to growth of e-commerce and should seek to achieve a relaxation of export controls on encrypted products. One method of achieving this would be to permit the export of products that met set criteria under an open licence after a one-time review.

The following actions are required:

Government Action

* Discuss with the US authorities the options for easing restrictions on trade of high-bit encryption software

* Introduce fast track procedures for licensing encryption products for export or the introduction of an Open General Export Licence. (Department of Enterprise, Trade and Employment)

3.1.9 Hacking

Unlawful interference with the business resources of Irish e-commerce users (hacking) can be a serious problem for companies, particularly where confidential information is involved. Hacking should be deterred by penalties, with a strong enforcement regime.

The following actions are required:

Government Action

* Ensure appropriate regulatory provisions and penalties are in place to deter 'hacking' of e-commerce resources. (Department of Enterprise, Trade and Employment)

* Ensure that skilled resources are made available for investigation of hacking and enforcement. (Department of Justice and Law Reform)

3.1.10 Consumer Protection

There is a need for a clear legal framework relating to consumer protection, both to encourage the take-up of e-commerce among consumers and to provide certainty for enterprises. Enterprises engaging in e-commerce with European and North American consumers should understand in advance their obligations under country-specific consumer protection regulations.

Irish consumer protection law includes EU directives and domestic legislation, and provides substantial certainty and protection for consumers. However, consumer protection regulations are not yet fully harmonised in the EU. A Distance Selling Directive, applicable to e-commerce contracts, is being developed at EU level. This Directive will give consumers the right to prior information on the identity of suppliers, on the characteristics of goods and services being offered, on price and delivery costs, the duration of offers, and the right to withdraw within seven days, (possibly 30 days for financial services contracts and mortgages).

From an enterprise perspective, developing business-to-consumer e-commerce within the existing and proposed framework of consumer protection legislation will require careful management by business firms. Businesses will need to be aware of the consumer protection requirements in markets in which they are trading over the Internet. Specifically, unlike business-to-business contracts, there are limitations to businesses imposing choice of law and jurisdiction clauses on consumers. Under Common Law the jurisdiction where the consumer habitually resides generally prevails. This could have implications for the remote digital delivery of goods and services, such as software and music as referred to in section 2.11 above.

Enterprise Actions

* Clarify the rights and protection afforded to consumers in different countries when engaging in business-to-consumer e-commerce.

3.2 Skills

The emergence of skills shortages is a major issue that could constrain the development of the Irish economy. It is receiving a high priority in other work carried out by Forfás and is not, therefore, dealt with in great detail in this report. Success in tackling skills and the telecommunications infrastructure will, more than any other issues, determine the rate of progress in e-commerce.

The Expert Group on Future Skills published its recommendations in respect of the needs of the IT sector in late 1998. In April 1999, the Government committed h95million to the full implementation of the Expert Group's report. This includes an additional 5,400 places over the next four years in technical, vocational and degree level courses. These places will go a long way towards addressing the high skill needs of the information technology sector into the future.

However, all sectors of the economy will increasingly require multidisciplinary staff and graduates with information and communication technology (ICT) skills combined with other business-related skills if they are to compete in the e-commerce business environment.

Multi-Disciplinary Skills

E-commerce requires ICT expertise, coupled with strong business applications. There will also be a requirement for specialists in e-commerce operations, production management, logistics, graphic design, and multimedia disciplines.
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The Expert Group on Future Skills should build on its work for the IT sectors and examine the e-commerce skills needs of the other major sectors of the economy.

A high proportion of the future skills needs could be addressed through the introduction of ICT modules in existing courses, in particular in business, legal and international marketing disciplines. The third level sector will need to integrate ICT/ e-commerce modules into all courses, to ensure graduates are capable of working in an e-commerce environment.

Multimedia/IT

There is a need for a significant expansion ...

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