29. LEGAL ASPECTS OF ELECTRONIC COMMERCE
Letter from Michael Wills MP, Parliamentary
Under-Secretary of State for Small Firms, Trade and Industry,
Department of Trade and Industry, to Lord Tordoff, Chairman of
In your letter of 18 March
you asked me to explain the extent of any overlap between our
proposed legislation on electronic commerce and the EU proposal
for a Directive of Certain Legal Aspects of Electronic Commerce
in the Internal Market. The Government has published the draft
Bill today, so I can now give you the definitive answer promised
in my letter to you of 1 April.
The UK Electronic Communications Bill and the
EU Directive are both aimed at promoting the development of electronic
commerce, within the United Kingdom and within the EU internal
market respectively. However, there is no specific overlap, on
detail, between the Bill and the current draft of the Directive.
As you know, the Government has set out the ambitious goal of
developing the UK as the world's best environment for electronic
trading by 2002. I regard e-commerce as an essentially global
phenomenon and in drafting our domestic Bill, I can assure you
that we have taken account of the Directive and other international
developments. In the remainder of this letter I should like to
clarify a number of areas where you might have expected to see
more of an overlap.
Article 7 of the draft Directive is intended
to regulate unsolicited commercial communications by e-mailusually
known as "spam". In consulting on the Electronic Communications
Bill, we asked whether respondents thought the solutions being
developed by industry to combat spam were likely to be effective,
or whether the Government should take further steps to regulate
the use of spam. The majority of respondents argued that the Government
should take a "watching brief" for the moment, which
is what we have decided to do. The Government is supporting the
work of the Direct Marketing Association (DMA) with its US counterpart
to develop a world-wide e-mail preference scheme. The DTI will
also be consulting on the implementation of the EU Distance Selling
Directive (97/7/EC) which contains provisions enabling consumers
to register their objection to receiving unsolicited e-mails sent
for the purposes of distance selling, and to have their objections
Article 9 of the draft Directive deals with
the treatment of electronic contracts, in particular the present
draft says that "Member States shall ensure that their legislation
allows contracts to be concluded electronically". The UK
fully supports the intention behind this. However, the Government
believes that it does not need to introduce specific legislation
in this area. Our system of common law does not impose general
requirements for contracts to be in writing (or indeed in any
other form). Our law is already sufficiently flexible to allow
contracts to be concluded electronically; indeed more and more
people are making use of this flexibility. The Bill should accelerate
this process as clause 7 specifically provides for the legal admissibility
of electronic signatures. We have asked for article 9 of the Directive
to be redrafted to read "member states shall ensure that
contracts may be concluded by electronic means" to recognise
the position in common law, but also to ensure that those Member
States with civil law systems are obliged to amend their legislation
to allow electronic contracting.
For completeness, I should add that there are
some specific requirements in our law for contracts to be in writing.
A noteworthy example is section 53 of the law Property Act 1925
(c.20), which provides that contracts for sale of land should
be in writing, signed by the person conveying the land. The Electronic
Communications Bill provides for a general power (clause 8) which
would allow existing statutory requirements to be extended to
electronic communications. The Government intended to use this
power, on a case-by-case basis after due consideration, to update
the law to allow the use of electronic communications more generally
except in those few instances where it would be inappropriate
to do so.
On a related topic, I should add that we have
also taken steps to ensure that the draft Bill is consistent with,
where appropriate, the current articles of the draft Electronic
Signatures Directive, which I know you have also been studying.
Although the Directive is still to be finally agreed (it will
return to the European Parliament later in the year for a second
reading) we have ensured that the current measures it contains
concerning the legal recognition of electronic signatures and
the accreditation of Certification Service Providers are implemented
in the draft Bill.
I hope you find this letter helpful, and I am
sure you will not hesitate to contact me if you have further questions
about either the draft Bill or the Directive.
23 July 1999
Letter from Patricia Hewitt MP, Minister
for Small Business and E-Commerce, Department of Trade and Industry,
to Lord Tordoff, Chairman of the Committee
The proposal for a Directive on certain legal
aspects of electronic commerce was discussed by the Commons European
Scrutiny Committee following an explanatory memorandum submitted
by the Department of Trade and Industry on 8 February. The Committee
considered the Directive to be both legally and politically important,
and wished to have a scrutiny debate on it in conjunction with
a parallel debate on the Copyright Directive. This has been arranged
for 27 October.
In its comments on the proposal contained, the
Committee asked the Minister to provide initial responses to the
consultation and a draft Regulatory Impact Assessment. These are
enclosed. The Committee also asked for responses to a number of
(a) "Does the draft achieve a satisfactory
balance between the needs of industry and the rapid growth of
the sector, and those of the consumer for basic standards of protection?"
Industry and consumers have a common interest
in measures which provide necessary protection and contribute
to consumer confidence in e-commerce. The country of origin approach
proposed in Article 3 of the draft directive has advantages for
industry in so far as it would reduce the number of different
national rules to which the trader would be subject. By introducing
consistency and certainty into the legal framework for e-commerce,
the directive will encourage innovation and investment leading
to growth in e-commerce and European competitiveness. This approach
has advantages for consumer protection, because enforcement action
would normally be expected to be taken by the authority within
whose jurisdiction a trader was established. The Commission intend
that he Directive helps to maintain a high standard of consumer
protection and the Government places importance on this objective.
However, the Government believes that if a country
of origin control is to be effective, consumers will need to be
well informed about how the system works and the implications
of the differences between Member States' national regimes. It
is also necessary to address these differences directly. The Government
would like to see further harmonisation of certain key pieces
of EC consumer legislation which at present provides for a minimum
level of harmonisation of Member States' rules. In addition, alternative
forms of dispute resolution, for which Article 17 provides, and
co-operation between national enforcement authorities in cross-border
cases, for which Article 19 provides, will be increasingly important.
(b) "Is the proposal sufficiently `light'
or could it, as some fear, encourage E-commerce, such as electronic
shopping, to remain with, or shift to service providers based
in the United States or elsewhere outside the EC, as the Directive
will not, of course, be applicable to third countries?"
The draft Directive is intended to put in place
a framework within which electronic commerce can operate within
the internal market. In order to do this, there is a need to balance
a variety of different interests: those of electronic traders,
consumers, rights holders and rights users, for example. Nonetheless,
it should be remembered that we aim to facilitate electronic commerce,
not to prevent it. Therefore the Directive aims to cover only
those aspects where greater legal clarity is vital for the development
of electronic commercenot those where it might be useful
at some (unspecified) date in the future. It should also be noted
that business-to-business traders can opt out of certain of the
provisions of the Directive, where both parties agree. The draft
Directive includes a series of arrangements for monitoring and
reviewing market, legal and technological developments in order
to adapt the framework as necessary in the future.
The suggestion that the existence of this Directive
may drive electronic traders to bases outside Europe appears unlikely.
In order to provide goods or services from outside the EEA to
a Member State, the trader must fulfil the provisions of the national
legislation of the Member State concerned. It follows that electronic
traders wishing to provide goods or services to the UK, and seeking
to avoid legislation by being based outside the EEA, would nonetheless
need to comply with the UK's legislation. Given this situation
and the level of requirements included in the Directive, it is
unlikely that a significant number of traders will change their
country of establishment as a result of the Directive alone. It
will remain highly important to give traders established in the
EEA the confidence to develop strong e-commerce services.
(c) "Article 3, which establishes the
principle of home state control is, as the Commission makes clear,
a key element of the proposal. It is founded on the principle
that service providers are to be regulated by the Member State
in which they are established, the `country of origin'. The Member
State in which they provide services may interfere only on certain
defined grounds. Application of this principle pre-supposes that
the `country of origin' can be clearly established in law. We
see a number of difficulties with this aspect of the proposal."
I would agree that Article 3, read in isolation,
is unclear. However, it must be read in conjunction with Recital
9, which clarifies the meaning of Article 3 by stating that "the
competent Member State shall be the one in which the supplier
has the centre of his activities", as opposed to the one
in which the website is based. This should allow the establishment
in law of the country of origin.
(d) A second major area of difficulty arises
in the provisions in Articles 12 to 15 where derogations for contracts
concluded by electronic means allow for limited liability of intermediaries.
These provisions appear to be a departure from current legal practice
and we ask the Minister to explain to what extent privileged treatment
of information service providers is justified. We also ask whether
service providers believe these provisions, and those on country
of origin, are workable";
The effect of Articles 12-14 of the Draft E-Commerce
Directive is broadly speaking to exclude or limit the liability
of information service providers, other than for injunctive relief,
in relation to certain types of activity ("mere conduit",
caching and hosting) involved in the transmission of information,
provided that the conditions outlined in those Articles are fulfilled.
The aim is to limit the liability of information society service
providers where illegal activity is initiated by third parties
on-line in relation to the transmission of information. In such
circumstances, the information society provider is said to be
acting as an "intermediary".
It is difficult to find off-line situations
analogous to those of on-line intermediary service providers.
Carriers of goods and broadcasters can immediately be distinguished
in law for the degree of control or knowledge they may have over
what is carried or broadcast. It is claimed that information service
providers are not in a position to exercise such control or knowledge
in relation to the information they carry unless the contents
of a particular website are brought to their attention and they
are put on notice with regard to the illegal activity. Furthermore,
current legal practice does provide for limited liability in some
areas, such as defamation. There continues to be a debate about
the implications of the requirement in the directive that the
service provider should take down information when he has "actual
knowledge" of its illegality. However, service providers
generally support both these provisions and those regarding the
country of origin principle. Their primary reason for supporting
the provisions of Articles 12-14 is that unlimited liability for
actions which may be beyond their control would discourage both
potential new market entrants and those already operating, whilst
the country of origin approach is supported because it offers
a more practical approach to compliance with European legislation
than separate compliance with national regulations.
(e) "A third major issue is that of
the moment at which a contract is concluded. The Government needs
to explain whether the application of the relevant provision will
give a clear result on the question of whether the application
of the relevant provision will give a clear regular on the question
of where the contract is made. The Minister says that the result
will differ from that which derives from ordinary contract law.
We ask him to explain the intentions of the provision which appears
to offer a recipient of a service grounds for claiming that he
has not concluded a contract, which would not be available to
him under ordinary contract law. Can the Minister justify the
Under English law, all that is required for
the conclusion of a contract is offer and acceptance. Under Article
11 there is a third stepthe acknowledgement of receipt
of the acceptanceknown as the third click. A website could
either be (a) an offer capable of being converted into an agreement
by the offeree (customer), or (b) an invitation to treat, which
is an advertisement that promotes the sale of products or services
and is not an offer. The customer makes an offer to the supplier,
who can then accept or reject the offer. In both (a) and (b) above,
no acknowledgment of receipt of the acceptance is required. Under
Article 11 the contract will not be concluded until acknowledgement
of the receipt.
The aim of this "third click" is to
ensure that contracts are not concluded accidentally. Although
this exceeds current contracts law, there is a case for it to
ensure that an adequate balance is maintained between the providers
and the recipients of a service. Nonetheless, it is uncertain
whether the final Directive will maintain this approach. Member
States are currently discussing a different approach to the conclusion
of contracts, where the principles which should underlie the formulation
of contracts would be laid down rather than specifying the time
at which the contract is concluded.
It will also be helpful for the Committee to
be aware of the direction which discussions are taking in working
group meetings. To this end, details of the individual articles
|Commission's Amended Proposal (COM(99) 427 final)
||Summary of Member States' discussions to date
|Article 1: Objective and Scope||
|Sets out the aims and scope of the Directive. Unchanged from the original proposal.
||Exclusions from scope now in new 1.4. Other exclusions have been suggested for financial services, pharmaceuticals, regulated professions, reasons of public security. A new recital will also be added specifying that the Directive cannot affect the principles of freedom of expression and freedom of the press. Some confusion remains about the application of the Directivedoes it refer only to on-line activities, or is its scope wider?
|Article 2: Definitions||
|The amended proposal contains an additional definition of "consumer", and refers to the definition of Information Society Services in the Transparency Directive.
||No major developments. A number of Member States have requested further definitions, notably of "intermediary" and "electronic commerce".
|Article 3: Internal Market||
|The Commission's text remains identical to the original proposal.
||The Presidency propose to cut the comitology role of the Commission and puts the exclusions from the country of origin approach in 3.5. They propose that the list of possible derogations includes the "permissibility of unsolicited commercial communications . . .". The ability to take action against service providers which direct most of their activity at a MS but are established outside it would be stressed in a new recital.
|CHAPTER II: PRINCIPLES||
|Article 4: Principle excluding prior authorisation|
The Commission's amended proposal is unchanged from the original, and ensures that information society services cannot be made subject to prior authorisation.
|Section 1: Establishment and Information requirements|
Proposed new recital in recognition of Portugal's hybrid post/e-mail system. This Article is intended to outlaw compulsory authorisation procedures rather than voluntary procedures such as that envisaged in the draft directive on electronic signatures.
|Article 5: General Information to be provided
|The Commission's amended proposal makes two substantive changes from the original, stressing that this is without prejudice to the Distance Selling Directive (DSD) and giving more precise details of the information to be provided.
||Likely to agree that this Directive is additional to other information requirements in Community law, rather than referring directly to the DSD. It will also be made clearer that these are minimum requirements, which can be made more stringent at a national levelalthough the Council Legal Service has indicated that a separate minimum harmonisation clause would be necessary to give this force.
|Article 6: Information to be provided|
The Commission's amended proposal again stresses that this is without prejudice to DSD, and is reworded to make clear that the applicable jurisdiction is that of the Member State in which the service provider is established.
As for the previous article, the Presidency wants to clarify that this is additional to other community law, and that these are minimum requirements. The word "authorised" may be replaced by "permitted" in an attempt to stress that an authorisation procedure is not required for promotional offers and competitions.
|Article 7: Unsolicited commercial communication
|The Commission's amended proposal contains a provision put forward by the European Parliament requiring direct marketers to consult registers for unsolicited commercial communications by e-mail
||Some Member States have requested a Community-wide ban on "spamming", whilst others prefer the opt-out approach already established in Directives 97/7 and 97/66 (minimum harmonisation on the basis of an opt-out). The Presidency incline to make clear that this is additional to other Community law (and hence the opt-out registers as above), and, as for the previous article, replace "authorised" with "permitted".
|Article 8: Regulated Professions
|The Commission has not amended its original proposal.
||As in the previous two articles, "authorised" may be replaced with "permitted". In addition, the Commission's powers under 8.3 are likely to be reduced considerably. To provide a definition of "regulated profession", the definition from Directive 89/48 (recognition of higher education diplomas) may be moved from the recitals to the main text. Separately, there has been some support for the deletion of 8.2, and six Member States suggest the deletion of 8.3.
|Article 9: Treatment of contracts|
The Commission's amended proposal was only altered in terms of a decrease in comitology.
|Contracts concluded by electronic means|
The Presidency propose slightly extending the list of areas to which this Article need not apply, taking in "contracts that create or transfer rights in real estate, except for rental rights" and "contracts of suretyship granted and collateral furnished by natural persons". The UK would prefer not to lengthen the list of exclusions, and would currently envisage implementing the Directive without recourse to any of these. However, some other Member States disagree, with further exemptions being suggested for contracts requiring the involvement of a court or others with a public function, contracts concluded under oath, employment contracts and contracts requiring the physical presence of the parties. The Presidency would also extend the reporting requirements on Member States who choose not to allow the conclusion of contracts electronically in these areas.
|Article 10: Information to be provided
|The Commission's amended text has not seen any alterations to this Article from the original.
||General approach is one of clarification, excluding e-mail from this area (analogous to postal contracts) and more precision as regards the details of the information to be provided.
|Article 11: Moment at which the contract is concluded
|Commission text tries to amalgamate two approaches; it identifies the moment of conclusion of a contract and sets out the principles which underlie contract formation.
||Tendency towards setting out the principles rather identifying moment of conclusion of contract. Again, e-mail contracts likely to be excluded.
|Liability of Intermediary Service Providers
|Article 12: Mere conduit||
|Commission text unchanged.||Much discussion, few changesnew Recital including stressing that injunctions can still be taken out. A number of MSs want the conditions to be tighter.
|Article 13: Caching||
|Commission text unchanged.||As above, but with a few minor changes (eg recognising that courts might not be sole enforcing body). Some MSs want this to be merged with Article 12. Addition of 13.2 allowing for injunctions.
|Article 14: Hosting||
|Commission text unchanged.||A few clarifying changes likely. Again, some support for tightening up conditions. Addition of 14.2 allowing for injunctions.
|Article 15: No obligation to monitor
|Now covers Article 13, as well as 12 and 14.
||Addition of "general" to title. Moves 15.2 into recital.
|Article 16: Codes of conduct|
Commission draft involves consumer associations in drawing up codes of conduct and adds more topics for codes.
Has been suggested that this should be removed from the Directive entirely, since all is voluntary. Support for referring to special needs of the blind and disabled.
|Article 17: Out of court dispute settlements
|Unchanged.||More of this may be put on a voluntary basis. Still some concern about the amount of information which MSs might need to transfer to the Commission. Also some concern at the detail of 17.2; eg, adversarial techniques don't fit well with ombudsmen.
|Article 18: Court Actions||
|Unchanged.||18.2 MSs appear content with the principle.
|Article 19: Co-operation between authorities
|Unchanged.||Much concern from MSs at the scope and potential burden of this article, although the powers of the Commission likely to be reduced.
|Article 20: Electronic Media||
|Unchanged.||Likely to be deleted, with agreement from all MSs and the Commission.
|Article 21: Sanctions||
|Unchanged.||Some reduction in notification requirements. MSs generally content with this, but some linguistic work is still required.
|CHAPTER IV: EXCLUSIONS SCOPE AND DEROGATIONS FROM
|Article 22: Exclusions and derogations
|Slight expansion.||Deleted (moved into Articles 1 and 3).
|CHAPTER V: ADVISORY AND FINAL PROVISIONS COMMITTEE
|Article 23: Committee||
|Article 24: Re-examination||
|More detail of what reports must contain.
||Hardly discussed, but unlikely to change significantly.
|Article 25: Implementation||
|Unchanged.||Wide support for implementation period of 18 months or more.
|Article 26: Entry into force||
|Article 27: Addresses||
|18 October 1999||
Letter from Lord Tordoff, Chairman of the Committee,
to Michael Wills Esq MP, Parliamentary Under Secretary of State
for Small Firms, Trade and Industry, Department of Trade and Industry
Sub-Committee E considered the Commission's revised proposal
for a Directive regulating certain legal aspects of electronic
commerce at its meeting on 27 October. The Sub-Committee would
welcome clarification of two points in the amended version.
First, Article 5 sets out the general information to be provided
to any recipient of Information Society services. Under Article
5(2), if service providers refer to prices or other essential
terms and conditions, then these must be indicated "accurately
and unequivocally" and include "all additional costs".
The obligation in Article 5(2) would seem to fall short of a mandatory
requirement to provide the essential terms and conditions at the
pre-contract stage. Article 11 determines the moment at which
a contract is concluded. Under Article 11(2), there is an obligation
to make certain information available before concluding a contract.
It is not clear that this obligation extends to the final sentence
of Article 11(2) on contract terms and conditions. Article 5,
but not Article 11, is made expressly subject to the obligations
created by the Distance Selling Directive. Does the draft Directive
or any other Community legislation, such as the Distance Selling
Directive, require the service provider to disclose essential
terms and conditions before a contract is concluded, or is this
determined solely by the domestic law of the place in which the
service provider is established?
Secondly, the amended text of Article 7(2) precludes service
providers from sending by e-mail unsolicited commercial communications
(electronic junk mail) to individuals who have "opted-out"
by registering their objection. You state in your Explanatory
Memorandum that this provision "allows for the creation of
an opt-out register for those not wishing to receive such communications".
The Commission's commentary on the text states that Article 7(2)
"establishes the obligation for Member States to ensure that
opt-out registers are made available to consumers". Recital
11, to which the Commission also refers, would seem to fall short
of an obligation to create an opt-out register if one does not
already exist. The Sub-Committee would welcome your views on the
effect of Article 7(2), in particular whether the reference to
the Distance Selling Directive is such as to require Member States
to establish opt-out registers.
The Sub-Committee notes that no changes have been proposed
to the country of origin principle in Article 3. It would seem
from various press reports that the precise scope and effects
of Article 3 have given rise to some confusion. Article 22(2)
states that Article 3 does not apply, inter alia, to contractual
obligations in consumer contracts. This would suggest that Article
3 might contain a choice of law rule in relation to non-consumer
transactions. Yet Recital 7 states that the Directive "does
not aim to establish specific rules on private international law
relating to conflicts of law or jurisdiction and is not a substitute
for the relevant international conventions". It would seem
then that the Brussels and Lugano Conventions on jurisdiction
and enforcement of judgements and the Rome Convention on applicable
law would continue to apply.
The Sub-Committee would be grateful for a fuller explanation
of the intended scope and effects of the country of origin principle
in Article 3. In particular, what are the implications of Article
3(1) and (3) for determining the applicable law in consumer and
non-consumer electronic transactions, and does Recital 7 mean
that rules on jurisdiction and enforcement of electronic contracts
will continue to be governed by the Brussels and Lugano Conventions?
The Committee is content, subject to clarification of the
above points, to clear the draft from scrutiny but wishes to be
kept informed of further developments.
28 October 1999
Letter from Patricia Hewitt MP, Minister for Small
Business and E-Commerce, Department of Trade and Industry, to
Lord Tordoff, Chairman of the Committee
Thank you for your letter of 28 October concerning the Sub-Committee's
consideration of the above revised proposal for a Directive, in
which you raised further questions in three areas, namely the
manner in which Article 5 and 11 of the Directive relate to each
other and to other Community legislation on disclosure of essential
terms and conditions; the relationship between Article 7(2) and
the Distance Selling Directive on opt-out schemes for unsolicited
e-mails; and the relationship between Article 3 of the Directive
and private international law.
Article 5(2) of the Directive provides for Member States'
legislation to require service providers to ensure that information
supplied electronically with regard to prices and other essential
terms and conditions relating to the provision of services is
"indicated accurately and unequivocally". This is a
requirement about the content of such information. Article 11(2),
on the other hand, requires contract terms and conditions to be
provided in a way that allows them to be stored and reproduced.
This is a requirement about the form of the information. These
requirements are all additional to those contained in other Community
instruments, particularly the Distance Selling Directive and the
draft Directive on the Distance Selling of Financial Services,
insofar as electronic commerce falls within the scope of those
Directives. (I should point out that Article 5 of the draft Directive
on Electronic Commerce is not subject to but without prejudice
to the Distance Selling Directive.) The additional nature of the
requirements of the Directive has been considered at some length
in Council Working Group, and the Commission and Presidency are
assessing ways in which this can be made more clear in future
texts. Discussions in the Council Working Group have now moved
away from attempting to identify the moment of conclusion of a
contract, however, in favour of an approach which specifies the
principles to be applied in national law which governs the conclusion
of the contract. This would result in the moment of conclusion
of the contracts being determined by the governing Member State
law. The same principle is applied to the rules of pre-contractual
disclosure about which you ask; where Article 3 results in the
governing law being the law of the service provider's home state,
the law will determine whether terms and conditions need to be
disclosed before conclusion of the contract. Since, however, Article
4 of the Distance Selling Directive requires the consumer to be
provided with certain information in a clear and comprehensible
way prior to the conclusion of any distance contract, the same
rules will apply in the law of all Member States, irrespective
of which law applied in the particular case.
Article 7(2) requires Member States to take measures to ensure
that service providers consult and respect the opt-out registers
in which people can register. The requirement to set up opt-out
registers stems from Article 10.2 of the Distance Selling Directive,
which requires that means of distance communications which allow
individual communication, other than faxes and automated calling
machines (where opt-in is required), should only be used where
there is no clear objection from the consumer; this requires at
least opt-out and permits opt-in. We will shortly be consulting
on the question of opt-in or opt-out in the context of the implementation
of the Distance Selling Directive, and we shall take account of
the views of interested parties before coming to conclusions.
Article 7(2) of the E-Commerce Directive does not in itself require
the operation of an opt-out register within the UK. The majority
of Member States seem to be taking the line in Working Group that
the proposed Article 7(2) is unnecessary, and that it is better
to rely on the provisions of the Distance Selling and the Telecoms
Data Protection and Privacy Directives (97/7/EC and 97/66/EC)
without further provision.
The third issue you raised was that of the relationship between
Article 3 and the Conventions on applicable law and jurisdiction.
Much of the public comment by third parties and press reporting
has been confused or inaccurate. The Government is still in the
process of establishing its policy on this area. It has been assisted
in this process by a seminar which took place on 15 October, and
by the Commission hearings on the topic on 4-5 November. However,
we have taken a position in negotiations on the Directive that
supports the Commission's view that paragraphs 1 and 2 of Article
3 do not affect the designation of competent courts, express choice
of the law applicable to the contract or the law applicable to
consumer contracts, and that where provisions of the applicable
law designated by rules of private international law in other
cases are incompatible with the law of the service provider's
home state, the provisions of that law will take precedence.
22 November 1999
Letter from Patricia Hewitt MP, Minister for Small
Business and E-Commerce Department of Trade and Industry, to Lord
Tordoff, Chairman of the Committee
1. It appears increasingly probable that a common position
on the above Directive will be reached at the Internal Market
Council on 7 December. In the light of this, and given that a
text of the Directive will not be produced until after COREPER
on the evening of 1 Decemberthe same day as the Commons
Committee holds its final meeting before the IMC, I am writing
to inform you of amendments to the Directive which have been made
since the texts were debated in European Standing Committee C
of the House of Commons on 27 October.
2. Three Explanatory Memoranda on the Directive have
been submitted and cleared. The most recent two, submitted on
18 October 1999 and 20 September 1999 were cleared in the Commons
by the debate referred to above, and in the Lords by a letter
from Lord Tordoff of 28 October as regards the EM of 20 September,
which cleared the EMs subject to a response to further questions,
which I provided on 2 November.
3. I had hoped to provide a further Explanatory Memorandum
on the text to be discussed, and probably voted on, at the Internal
Market Council. However, the earliest that such a text will be
available is 2 December, which would not allow sufficient time
for the Committees to consider and clear it. In this letter, I
therefore aim to provide a summary of the amendments which have
been agreed to the Directive since the texts on which the scrutiny
debate was based were produced, and indication of what we might
expect to result from the discussions of COREPER and an indication
of the UK's intentions in the event of a vote.
4. Article 1 of the Directive remains largely unchanged.
A further provision has been added in Article 1.5, which states
that this Directive does not affect measures taken in order to
promote cultural and linguistic diversity. Such measures must
be "in the respect of" (ie in conformity with) Community
law, and hence must not act as a restriction to the freedom to
provide services. Article 2 is also largely unchanged. At the
request of the UK, a definition of "regulated professions"
has been added (in order to clarify Article 8); a further amendment
has been made to the definition of "coordinated field",
which gives a much clearer indication of what is and what is not
covered by the Directive. The text of Article 3 is similar to
that contained in the Presidency's amended proposal.
5. Articles 4 and 5, concerning establishment and information
requirements, have remained unchanged in substance, although the
wording has been altered slightly. Article 6 falls into the same
category, whilst Article 7 closely follows the amended proposal
put forward by the Commission. Article 8 is also similar, although
the Commission's powers here are reduced somewhat. Article 9,
covering treatment of contracts, has seen a number of technical
amendments, but the main changes here have been to the list of
areas in which Member States are allowed not to permit the formation
of electronic contracts, which have been narrowed somewhat. As
a counterbalance to this, Member States are required regularly
to produce a report justifying why they continue to disallow the
formation of such contracts. Article 10 remains close to the original
text, but its requirements have been increased slightly, such
that service providers must now indicate the languages offered
for the conclusion of the contract; they must also make terms
and conditions available in a way which enables the recipient
to store and reproduce them. A further exclusion has seen e-mail
contracts excluded from these requirements. Article 11 has been
retitled "Placement of the order", in recognition of
the fact that it no longer seeks to identify the moment of conclusion
of a contract. The text follows that of the amended Presidency
text, with the only differences involving the deletion of some
text in the interests of clarity.
6. Articles 12-15, limiting the liability of intermediary
service providers, have changed little. It is anticipated that
these will be discussed further in COREPER, and possibly at the
Internal Market Council. Substantive change has been made to Article
15, however. The reference to the permissibility of monitoring
requirements has been moved into a Recital, whilst a new 15.2bis
attempts to allay the concerns of some Member States by making
clear that Member States may establish obligations for Information
Society service providers promptly to inform the competent public
authorities of alleged illegal activities undertaken by recipients
of their service.
7. Provisions regarding codes of conduct, out-of-court
dispute settlements, court action and sanctions (Articles 16,
17, 18, 21/20) have remained largely unchanged. Article 19 (Co-operation)
has been amended, with a commensurate reduction in the Commission's
powers. Article 22, laying down a Committee procedure, has been
deleted, pending COREPER discussion of this. The remaining Articles
8. In general terms, the most recent text of the Directive
is very close to the amended Commission and Presidency drafts.
It continues to follow the original approach of regulating only
where necessary and aiming to ensure that existing frameworks
are amended to fit with electronic commerce, rather than attempting
the reverse. The points likely to be discussed in most detail
in COREPER revolve around three issues:
the country of origin principle;
the inclusion of criminal liability within the
scope of the Directive;
the proposal to exclude some or all Financial
Services from some or all of the Directive.
9. On the country of principle, a minority of Member
States continue to call for a clause making the Directive "without
prejudice to private international law". This would have
a far-reaching and damaging effect on the country of origin rule.
While the text of the Directive has an effect on the application
of the Brussels and Rome Conventions for consumer contract obligations,
the addition of a "without prejudice to private international
law" clause would allow the law on non-contractual obligations
to override the internal market principle of the Directive. These
non-contractual obligations include unfair competition laws, negligent
statements in advertising and libel. The current text envisages
a scenario where, in the event of a cross-border dispute where
private international law indicates that host state law should
apply, any rule of that law will be disapplied if it is more disadvantageous
to the service provider than the equivalent home state rule. A
"without prejudice to private international law" clause
would result in service providers being subject to a range of
different national rules of law within the EU more disadvantageous
than rules of their own law. There is a recognition that in some
instances it is necessary to apply all the rules of the host state
law, and this is covered by Annex I of the Directive. These instances
are clearly defined, however, such that service providers will
be aware of the application of all relevant rules of the law of
the countries to which they are selling. I believe that this approach,
which aims to give businesses legal certainty and thus safeguard
the Single Market, whilst also ensuring that consumers are protected
adequately, is appropriate, and the UK will continue to support
10. As already mentioned, Article 12-14 limit the liability
of intermediary service providers. This limitation applies both
to civil and to criminal law. Concerns have been expressed about
the competence of the Commission to put forward legislation in
the field of criminal law, since this is an area where Member
States retain competence. The UK requested an opinion on this
from the Council Legal Service, which concluded that criminal
law is only covered to the extent necessary to ensure the functioning
of the single market, which is the objective of the Directive.
Furthermore, a new Recital to the Directive makes clear that the
aim of the Directive is solely to stimulate free movement of cross-border
information society services and does not harmonise criminal law
by setting specific rules on offences, sanctions or procedures.
I believe that it is indeed necessary for the Directive to affect
criminal law to the extent that it does currently, and therefore
do not wish these Articles to be amended.
A further proposal supported by some Member States is the
inclusion of a knowledge test in Article 12 for "mere conduit"
service providers. This proposal appears to represent a faulty
understanding of the technological processes involved in such
provision of services, and the safeguards for Member States' existing
powers in Article 15.2bis and Article 3.5. It would not normally
be technically possible for a provider to have such knowledge.
If he did, as a result of deliberate collaboration with a recipient
of the service, in order to undertake illegal activities, the
third recital indicates that he would be excluded from the exemption.
The UK will continue to oppose moves to exclude criminal law from
the effect of the Directive.
11. A number of Member States continue to press for the
ability to take measures for "investor protection" within
the Directive. An initial request for a complete exclusion from
the scope of the Directive has now been moderated to being a request
for an ability to derogate under Article 3.5. The ability to derogate
on consumer protection grounds already exists here however, and
the greater scope that "investor protection" would offer
to those wishing to derogate could have serious implications for
the single market in financial services. The UK will therefore
continue to oppose this proposal, but we will support an expected
parallel proposal for a declaration asking the Commission to consider
this question in its Green Paper on E-Commerce and Financial Services,
publication of which is expected in April 2000.
12. Europe has a great opportunity to increase its competitiveness
through the use of electronic commerce. Provided that the text
of the draft E-Commerce Directive presented to the Internal Market
Council continues to reflect Europe's wish to make the most of
this opportunity, we intend, in the event of a vote, to support
agreement on the Directive.
30 November 1999
Letter from Lord Tordoff, Chairman of the Committee,
to Patricia Hewitt MP, Minister for Small Business and E-Commerce,
Department of Trade and Industry
Thank you for your letter of 22 November clarifying a number
of points raised by Sub-Committee E in relation to the Commission's
amended Electronic Commerce Directive. The Committee considered
your response and an unofficial Presidency draft of the Directive
at its meeting on 1 December. The Committee also had before it
your letter of 30 November explaining that the Internal Market
Council on 7 December is likely to reach a common position on
the Directive. As a text of the Directive to be agreed at the
Council will not be available until shortly before that meeting,
your letter provides a summary of recent amendments and the key
The Committee only received a copy of your letter shortly
before its meeting on 1 December and so had little opportunity
to consider its content and implications. The Committee acknowledges
that the pressure for agreement is particularly intense at the
end of a Presidency and it does not wish to impose unnecessary
obstacles to securing a common position on an important Single
Market initiative. If, however, the Committee is to continue to
perform an effective scrutiny function it must have sufficient
time to examine proposals thoroughly.
The Committee notes, first of all, that the unsigned Explanatory
Memorandum accompanying the unofficial Presidency draft highlights
amendments affecting both the form and substance of the Directive.
It would seem, however, that this text has been superseded and
no longer reflects the current state of negotiation. Your letter
of 30 November states that, in general terms, the most recent
text of the Directive is very close to the amended Commission
and Presidency drafts. Yet there are, in the Committee's view,
some important differences between these two drafts. One example
is the re-drafting of Article 11 to establish general principles
for the formation and conclusion of electronic contracts rather
than the specific steps required to conclude a contract.
Secondly, the Committee has expressed concern that the intended
scope and effects of the country of origin principle in Article
3 of the Directive remain unclear. Your letter of 22 November
states that the Government is still in the process of establishing
its policy in this area. Your later letter of 30 November provides
helpful clarification of the relationship between rules of private
international law and the law of the "home" State in
which the service provider is established. It would seem, however,
that not all Member States subscribe to the view that home State
rules which are favourable for the service provider should (except
in the case of consumer transactions) prevail over provisions
of the applicable law designated in accordance with the rules
of private international law. As you acknowledge, the implications
of the country of origin principle have generated much confusion.
The Committee believes that the intended application of the principle
must be evident from the text of the Directive and wishes, for
this reason, to have the opportunity to consider the latest text.
You also refer in your letter of 30 November to concerns
that provisions in the Directive limiting the liability in civil
and criminal law of intermediary service providers might represent
an extension of the Community's competence into the criminal law
field. I understand that the criminal law aspects of the draft
Directive are to be considered at the Justice and Home Affairs
Council on 2-3 December. You suggest that the provisions fall
short of harmonisation, as they do not prescribe specific rules
on offences, sanctions or procedures, and that the effect of the
provisions on criminal law is the minimum necessary to ensure
the functioning of the Single Market.
The Committee notes that the relevant provisions, Article
12-14 of the Directive, would prevent Member States from imposing
criminal liability in respect of certain conduct by intermediary
service providers. It would welcome your opinion on the possible
distinction between a "negative" power of prohibition
and a "positive" power to create criminal liability.
In particular, does the Government accept that if the Community
has the power under Article 47(2), 55 and 95 (the proposed legal
base) to prohibit making certain conduct criminal, it must also
have a power to require that certain conduct be made criminal?
The Committee would be grateful for details of precedents for
including criminal law provisions in Single Market measures.
In the light of the Committee's observations above and the
importance of the issues still to be resolved, notably the application
of the country of origin principle and the criminal law aspects
of the Directive, the Committee intends to hold the Presidency
draft Directive under scrutiny. The Committee would note, in this
regard, that the Presidency draft has not cleared scrutiny, as
is suggested in paragraph 2 of your letter of 30 November.
The Committee looks forward to receiving your response to
the points raised above and expects to have early sight of the
latest revised draft of the Directive. It would also welcome a
prompt account of the outcome of discussions on the criminal law
aspects of the draft Directive at this week's Justice and Home
2 December 1999
Letter from Patricia Hewitt MP, Minister for Small
Business and E-Commerce, Department of Trade and Industry, to
Lord Tordoff, Chairman of the Committee
Thank you for your letter of 2 December regarding the above
document, in which you posed a number of questions. Firstly, you
emphasised the Committee's need to have sufficient time to examine
proposals thoroughly. Secondly, you expressed concern that the
intended scope of the country of origin principle in Article 3
remains unclear. Thirdly, you raised a number of questions on
criminal liability and asked my opinion on the possible distinction
between a "negative" power of prohibition and a "positive"
power to create criminal liability.
I regret that it was not possible to give the Committee earlier
notice of these texts. As you know, the final meeting of COREPER
took place on 1 December, and the text for the Internal Market
Council was not made available until 3 December. In these circumstances,
I understood that it would be most helpful for the Committee to
have a commentary taking account of decisions up to the end of
The question of the application of the country of origin
principle has been discussed in the working group negotiations
in the run up to the Internal Market Council. It may be helpful
in this context to consider first the scope of the Directive.
Its general scope, and hence the scope within which the country
of origin principle applies, is defined in terms of the Directive's
"co-ordinated field". This refers to "requirements
laid down in Member States' legal systems applicable to Information
Society service providers or Information Society services, regardless
of whether they are of a general nature or specifically designed
"The co-ordinated field concerns requirements with which
the service provider has to comply in respect of:
the taking up of the activity of an Information
Society service, such as requirements concerning qualifications,
authorisation or notification schemes;
the pursuit of the activity of an Information
Society service, such as requirements concerning the behaviour
of the service provider, requirements regarding the quality or
content of the service including those applicable to advertising
and contracts, or requirements concerning the liability of the
The co-ordinated field does not cover requirements such as:
requirements applicable to goods as such;
requirements applicable to the delivery of goods;
requirements applicable to services not provided
by electronic means."
Such is the most recent text of Article 2(g), which merely
serves to clarify the understanding previously held by Member
Within this general field, the country of origin principle
covers all aspects of the provision of services not referred to
in Annex I. As you correctly observe, contractual obligations
concerning consumer contracts fall within Annex I, and hence outside
the country of origin principle. Article 3(2) has the effect that
if, in respect of any contractual or non-contractual obligation
not falling within Annex I, the rules of Private International
Law point to a law other than that of the service provider's home
state and a rule of that law is more disadvantageous to the service
provider than his home state law, his home state law will prevail
over that rule of the other law. Not all Member States agree that
this should be the effect of the Directive; but all are agreed
that this is the effect. I do not think therefore that there is
a lack of clarity in the current text as regards the effect of
the country of origin principle.
You also posed a number of questions relating to the criminal
liability provisions in Article 12-14 of the Directive. In particular,
you invited my opinion on the distinction between a "negative"
power of prohibition and a "positive" power to create
criminal liability, and asked whether the Government accepts that
if the Community has the power under Article 47(2), 55 and 95
to prohibit making certain conduct criminal, it must also have
a power to require that certain conduct be made criminal. You
also requested details of precedents for including criminal law
provisions in Single Market measures.
The purpose of Articles 12 to 15 is to ensure that diverging
national provisions and case-law on the extent of liability do
not prevent economic operators from enjoying the freedoms guaranteed
by Community law and do not produce distortions of competition
in the internal market. In view of the fact that the legal systems
of Member states do not distinguish in the same way between actions
which may carry civil liability and those which may carry criminal
liability, the proposals contain rules regarding the limitation
of liability in both civil and criminal proceedings.
This explanation, which is drawn from the Opinion of the
Council Legal Service on the Directive, makes a distinction between
the negative competence to affect criminal law in order to protect
the freedom to provide services in compliance with Community law
and any positive competence to determine what is a criminal offence.
The ECJ has stated that "although in principle criminal legislation
is a matter for which the Member States are responsible, the Court
has consistently held that Community law sets certain limits to
their power, and such legislation may not restrict the fundamental
freedoms guaranteed by Community law" (Calfa, 1 January 1999).
The Government thus concedes that, in respect of the provisions
in Articles 12-14, the granting of some immunity is within Community
competence to the extent that a rule of criminal law presents
a barrier to the functioning of the internal market. There is
a substantial difference between an obligation to remove barriers,
which may include the removal of criminal offences, and an obligation
to provide effective sanctions for the enforcement of harmonised
provisions, where it is for each Member State to decide upon how
the sanctions are to be imposed (choice of criminal, civil and
administrative) and the only Community obligation (sometimes,
but not always set out in the Community instrument) is that the
sanctions be effective, proportionate and dissuasive. The Government
therefore does not accept that the Community has the power under
Articles 47(2), 55 and 95, to require that certain conduct be
One example of a precedent for a single market measure including
criminal law provisions is to be found in Article 9 of Directive
91/308/EEC (prevention of the use of the financial system for
the purpose of money laundering). This provides for an exemption
from liability ("liability of any kind") for employees
or directors of financial institutions and for specific actions.
This is not an exact parallel of the E-Commerce Directive, however,
since its primary effect on criminal law concerns the imposition
of a positive obligation with sanctions for non-compliance, rather
than a limitation liability. A further example is to be found
in Directive 92/59/EEC on general product safety, transposed into
UK law through the General Product Safety Regulations 1994, which
inter alia disapplied the provisions of section 10 of the
Consumer Protection Act 1987 to the extent that it imposed general
safety requirements. Most single market measures, however, contain
provisions requiring the removal of restrictions, and this applies
as much to restrictions enforced by criminal law as to others.
You also requested an account of the outcome of discussions
on the criminal law aspects of the Directive at this week's Justice
and Home Affairs Council. Some Member States asked questions about
the legal base and effect of the criminal law provisions. The
Commission explained that the Directive is not intended to harmonise
criminal law, but to fix a clear framework of responsibility:
the conditions under which Information Society service providers
benefit from the limits on liability were well defined and restricted.
It was agreed that Member States should co-ordinate their positions
on the Directive.
As you know, e-commerce holds a particularly important place
in the UK's economic policy. The Government made a commitment
in its 1998 Competitiveness White Paper to make the UK "the
best environment in the world for e-commerce", and the development
of a common legal framework is a vital part of that approach.
The framework must be effective, and it must be in place rapidly
if the UK and Europe are not to cede further ground to the USA
in this swiftly developing field. It is unfortunate that scrutiny
procedures could not be completed, but I wish to inform the Committee
that the UK will vote in favour of political agreement on the
Directive, assuming it remains largely unchanged, for special
reasons, notably that we wish the provisions of the Directive
to come into force as quickly as possible, and that we are unlikely
to achieve a package of measures as favourable to UK interests
if agreement is delayed.
8 December 1999
Letter from the Rt Hon Helen Liddell MP, Minister of
State for Energy and Competitiveness in Europe, Department of
Trade and Industry, to Lord Tordoff, Chairman of the Committee
On 7 December, I represented the Government at the Internal
Market Council, which reached political agreement on this directive.
I am therefore writing to you at the earliest possible opportunity,
before the meeting of your Committee this afternoon, to inform
you of the outcome of the Council, and to follow up your correspondence
with Patricia Hewitt on the Parliamentary scrutiny of this measure.
She wrote to you on 22 November, responding to points raised by
Sub-Committee E; on 30 November explaining that the Internal Market
Council of 7 December was likely to reach a political agreement
on the directive; and on 8 December replying to your letter of
2 December containing some further questions.
In your letter of 2 December, you acknowledged that there
was a balance to be struck between, on the one hand, the intense
pressures to secure a common position on an important Single Market
initiative and, on the other hand, the thorough examination of
proposals in order to discharge the important requirement of effective
scrutiny. I hope that Patricia's letter of 8 December has gone
some way to assure you that the Government takes the Committee's
scrutiny role very seriously and is committed to the objective
of completing scrutiny well in advance of political agreement,
a common position or final agreement on a proposal.
Exceptionally, this uncleared proposal reached the decision
stage after an unforeseen rapid burst of progress. In the event,
no formal voting took place on the agreement of the draft directive.
It was the subject of unreserved approval by 14 delegations, with
Belgium indicating that it wished to record its abstention.
I should like to outline the special reasons why I gave the
UK's approval to political agreement and report the main issues
discussed at the Council. Patricia Hewitt has already mentioned
the economic advantages to the UK, and to Europe generally in
a global setting, of putting in place an effective legal framework
for e-commerce as rapidly as possible. The main effect of any
delay would have been a sense that Europe was losing its commitment
to this goal, and the loss of confidence among business and consumers.
The negotiations to date had produced a text that met our objectives
and we judged that it should be crystallised before the end of
a particularly determined and helpful Finnish Presidency. We are
confident that any further round of negotiations would not have
improved the text significantly from the UK's point of view, and
could well have given the opportunity for other Member States'
narrower interests to be pressed further, to the disadvantage
of the overall balance of the proposal.
There were no changes agreed at Council which alter the substance
of the directive. I have set out in the attached note the main
points of discussion which led to changed wording of any significance
in the text. I regret that, at the moment, there is no final text
of the directive showing exactly what was agreed.
The Presidency concluded the discussion by indicating that
the directive would come forward for the formal adoption of a
common position at a future Council meeting as an "A"
point. I shall write to the Committee again if, for some reason,
the proposal has been amended substantively in the meantime. The
directive will then undergo a further reading in the European
I would, of course, be happy to give any further written
or oral statement to the House if the Committee so requests.
Finally, I should apologise for the error in Patricia's letter
of 30 November, which suggested that your Committee had given
clearance to an unofficial Presidency draft of the directive,
which was placed on the DTI website for consultation purposes
and made the subject of an unnumbered Explanatory Memorandum dated
18 October 1999.
8 December 1999
The Council agreed, as an additional basis for case-by-case
exemptions in Article 3(5)(a)(i), the insertion of ". . .
and violations of human dignity concerning individual persons."
The Presidency circulated proposals during the discussion
for two new recitals, one relating to Articles 12 and 13 clarifying
the activities involved in the transmission and temporary storage
of information and the other to Article 15 clarifying the conditions
under which intermediary service providers can be expected to
co-operate with national authorities in the detection and prevention
of crime. All reflected the Commission's reassurance that the
Directive would not hinder the fight against cyber-crime. In addition,
the package contained the addition of "crime prevention"
in Article 23 as a matter to be kept under review. The words "Member
States shall provide in their legislation" was replaced with
"ensure" in Articles 12.1, 13.1 and 14.1, to reflect
conventional drafting and changes already made elsewhere in the
draft. Also agreed was the reinstatement of a clause in the Recital
to Article 14.3 to make clear that Member States may establish
specific requirements to be fulfilled prior to the removal of
The draft directive includes in Articles 6 to 8 some provisions
harmonising commercial communications. A Joint Commission and
Council declaration was agreed, under which the Commission is
to bring forward within a year further initiatives to build on
Internal Market policy on commercial communications.
It was agreed to leave in the directive wording allowing
national laws to block unsolicited e-mail, but to include the
issue in the review clause (Article 23).
It was agreed that the directive should be implemented 18
months after formal adoption.
At the Internal Market Council on 7 December 1999, a number
of outstanding issues were resolved. The main changes are set
The Commission proposed that only certain specific financial
services should benefit from an exemption from the Internal Market
Principles established in Article 3 of the text. The Council added
to the "case by case" exemptions envisaged in Article
3(5)(i), 4th indent of the text "the protection of consumers
3 AND ANNEX
I) WITH INTERNATIONAL
The objective of Article 3(1) and (2) of the draft Directive
is to ensure that Information Society services provided by a service
provider established in a Member State are subject to the legal
requirements of that Member State, regardless of whether his services
are limited to the territory of that Member State or are also
received in other Member States. This means that the Member State
of origin has to apply its national rules and a Member State of
destination cannot restrict the free movement of Information Society
services. A number of delegations had expressed concern about
the relationship of these principles with existing rules of international
private law concerning conflicts of law and jurisdiction.
The compromise agreed by the Council included a new paragraph
to make clear that the directive does not establish additional
rules on private international law, nor deal with the jurisdiction
of Courts; a recital to reflect this and make clear that provisions
of applicable law designated by private international law shall
not restrict the freedom to provide Information Society services
as established in the Directive; and a Council Declaration on
developing consumer confidence in Information Society services
based on a resolution adopted by the Consumer Council on 19 January
A number of delegations expressed concerns about the impact
of this draft Directive (and in particular Articles 12-15 on the
liability of intermediaries) on some areas of criminal law. It
was decided to widen the justifications for Member State measures
taken under Article 3(5) and to make it clear in the text that
the procedural conditions for such measures do not apply to acts
carried out in a criminal investigation. A new recital explains
that the Directive does not seek to harmonise the field of criminal
law as such. Also agreed was a statement (based on that which
accompanies the Money Laundering Directive) according to which
the Member States undertake, without prejudice to Community law,
to ensure that their criminal legislation does not obstruct the
internal market principles of the Directive.
Letter from Lord Tordoff, Chairman of the Committee,
to Patricia Hewitt MP, Minister for Small Business and E-Commerce,
Department of Trade and Industry
Thank you for your letter of 8 December clarifying the intended
application of the country of origin principle in the draft E-commerce
Directive and the competence of the Community in relation to criminal
law. The Committee has noted the distinction you draw between
the Community's power to act to remove obstacles to the functioning
of the internal market and its power to require effective sanctions
for the enforcement of harmonised rules. While the Community may,
it seems, require Member States to disapply rules of criminal
law, it may not also require that certain conduct be made criminal.
The choice of an effective sanction, whether administrative, civil
or criminal, remains with the Member States. You mention the Community's
Money Laundering Directive as an example of an internal market
measure including criminal law provisions. As amended version
of the Directive is currently under scrutiny and the Committee
will pay particular attention to the criminal law aspects of the
The Committee took note of your intention to achieve a political
agreement on the draft Directive at the Internal Market Council
on 7 December. Your colleague, Mrs Liddell, has since written
to inform the Committee of the outcome of that Council and the
broad terms of the agreement reached by Ministers. I very much
welcome Mrs Liddell's assurance that the Government takes the
Committee's scrutiny role seriously and is committed to the objective
of completing scrutiny well in advance of political agreement.
The Committee is grateful for your endeavours to keep it informed
of progress on the Directive and recognises the importance of
establishing a common legal framework for electronic commerce
in the European Union. The Committee nevertheless regrets that
you have been unable to provide a draft text of the Directive
containing the main elements on which political agreement would
be sought. A commentary by your officials, while helpful as an
indication of the Government's approach to the negotiation, is
not a satisfactory substitute for a text. However, in view of
the fact that political agreement has now been reached, the Committee
has decided to clear the unofficial Presidency text from scrutiny.
16 December 1999
Printed in Correspondence with Ministers, 17th Report,
Session 1998-99, HL Paper 94, p 74. Back