Select Committee on European Union Written Evidence

Memorandum by the Corporation of the City of London

  1.  The Corporation is committed to ensuring that the City of London maintains its pre-eminent position as an international competitive environment. Crucial to the attractiveness of the City as a base for trading by e-commerce will be the maintenance of a favourable regulatory climate.

  2.  The regulatory framework must not impede the European Internal Market. The proposed Directive on certain legal aspects of electronic commerce contains various derogations which could undermine the State of Origin principle under which the laws that apply to a transaction are those of the state from which the provider provides the service. In particular, the Directive contains a derogation in respect of contractual obligations concerning consumer contracts. There must at least be a distinction between transactions involving those engaged in the wholesale markets as against those involving retail consumers. The guiding principle for the former should be equivalence of treatment and caveat emptor. Such an approach would recognise that they are in a fundamentally different position from "ordinary" consumers, whose interests prompted the adoption of such a regulatory regime.

  3.  In addition there is concern that the Commission's approach in updating the Rome and Brussels Conventions governing jurisdiction and applicable law is not being properly co-ordinated with the Directive and other European legislative initiatives. The Directive should make it clear that the State of Origin principle applies to all aspects of the provision of an e-commerce service, overriding any mandatory provisions which might be invoked under the Rome Convention. The European legal framework must be clear and unambiguous.

  4.  It is to be welcomed that DTI Ministers have recorded their recognition of the State of Origin principle [for example in the response of Lord Sainsbury to the Lord Levene, Official Report [Lords] 19 October 1999, column 933] and that the principle is enshrined in the Electronic Communications Bill now before Parliament.

  5.  However, the Financial Services and Markets Bill [clause 19 of Bill 32], which deals with the regulation of financial promotions does not presuppose the application of the "State of Origin" principle, but instead confers a much broader entitlement. Treasury Ministers have said that the application of the State of Origin principle can be achieved by secondary legislation, but they have also indicated a disinclination to commit themselves to the adoption of State of Origin as the principle of regulation for such promotions. In responding to debate during the Report Stage of the Financial Services and Markets Bill, the Financial Secretary to the Treasury, Stephen Timms, commented [Official Report, 19 February 2000 column 277], "we support the principle of `home state' regulation in the draft European e-commerce directive although its application is limited in the financial services sector, but we are not currently convinced by the argument for applying solely the `home state' regulatory principle to financial promotions in advance of appropriate European legislation". It is hoped that the UK Government will present a more robust position than such comments indicate, particularly in the context of the proposed revision of the Brussels and Rome Conventions.

  6.  e-Commerce presents a global challenge and it is vital that European legislation does not hinder EU businesses from competing effectively against competitors.

15 March 2000

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