What laws apply in cyberspace? That is the question the American Bar Association (ABA) set out to answer two years ago when it began the ABA Global Cyberspace Jurisdiction Project.
The report, released Monday, describes a borderless frontier in need of a set of multinational rules that are not dependent upon physical location.
Project chair Thomas Vartanian said, “It’s as if we’ve landed on Mars and we’re constructing a commercial and business setting. We have to establish new rules of engagement and we have to get people used to dealing with those new rules.”
The study, “Achieving Legal and Business Order in Cyberspace: A Report on Global Jurisdiction Issues Created by the Internet,” examines consumer protection, privacy, intellectual property, banking, securities, taxes and gaming — and makes recommendations as to how regulatory agencies in the United States and abroad can adapt to the new world of electronic commerce.
Which Laws To Obey?
Vartanian said, “Anyone doing business in cyberspace needs to know what laws to obey, whether it be a question of what taxes are due and where, or what consumer protections apply to the sale of their products or services.”
Determining who has jurisdiction over an Internet-based dispute can be difficult, as illustrated when Yahoo! was sued in a French court for allowing French citizens to access auctions of Nazi memorabilia on the Web giant’s U.S. site.
Selling or displaying any items that incite racism, including Nazi artifacts, is strictly illegal in France. The judge in the case decreed in May that Yahoo! had to take action to block French citizens from viewing the auctions, even though the servers carrying the offensive material were located in the United States.
The ABA believes that international law already provides a basis for solving problems concerning jurisdiction over illegal acts committed online. What is needed, according to the ABA, is greater cooperation to develop international rules for regulating issues that remain vague or problematic.
The study notes that even though consumer choice is greatly expanded through the Internet, it also makes consumers less powerful in some ways because important contract terms may be buried beneath multiple mouse clicks.
The report says, “Traditional aspects of jurisdiction over consumer protection and advertising practice are difficult to apply to the Internet. The primary reason is that countries throughout the world have in place numerous different regimes to protect their consumers based on the ‘old world’ presumption that consumers will shop in proximity to where they live and will not give up their sovereignty in applying these laws.”
Vartanian suggests that electronic agents may eventually be employed to protect consumers. He said, “Technology should be used to solve the issues that technology creates. Cyber-robots, or ‘bots,’ can give consumers powerful tools to assimilate the enormous amounts of information on the Internet. These intelligent electronic agents can be programmed to electronically communicate jurisdiction rules, thus enabling these preprogrammed agents to do business with each other.”
The report also recommends that new online forms of dispute resolution be developed to solve conflicts.
New Rules of Engagement
New rules are needed for cyberspace in order to maximize the efficiency of electronic commerce, according to the study. Vartanian points out that individual governments cannot write and approve laws fast enough to keep up with the changing technology. He said the study underscores the limited ability that any one state or nation may have in bringing greater certainty to cyberspace.
One solution to the problem, according to the study, is the establishment of a multinational Global Online Standards Commission that could work with governments to establish rules for cyberspace.
The report also includes a set of suggestions for improving the state of the law in cyberspace. Among the suggestions:
- Governments should encourage the creation of cyber-tribunal and voluntary industry councils to develop private sector mechanisms to resolve e-commerce disputes.
- Any use of intermediaries (“choke points”) in the flow of electronic information, commerce and money — such as Internet Service Providers and payment systems — requires careful exploration before being proposed.
- Global regulatory authorities of highly regulated industries should be encouraged to reach agreement regarding how laws will be applied to financial products and services offered in an electronic environment.
- Safe harbor agreements among nations should be encouraged to resolve jurisdictional conflicts in cyberspace.
- Buyers and sellers should be encouraged to identify the state in which they reside.
- Personal or prescriptive jurisdiction should not be asserted based solely on the accessibility of a passive Web site.
- Good faith efforts to prevent access by users to a site or service through the use of disclosures, disclaimers, software and other technology blocking should insulate the sponsor of the site from assertions of jurisdiction.
Not Yet Policy
The conclusions in the report, conducted by the ABA Section of Business Law, have not been adopted by the ABA’s policy-making House of Delegates and do not represent policy of the association. Industry leaders will offer formal comments on the report on July 17th at the London session of the ABA Annual Meeting.