The European Commission (EC) published a plan on Friday aimed at developing e-commerce in the financial services sector.
The plan addresses the harmonization of national consumer and investor protection laws and the establishment of a system for alternative dispute resolution, as well as measures designed to build trust in Internet payments.
“The steps outlined today represent a change of gear toward the establishment of an integrated European market in retail financial services,” said internal market commissioner Frits Bolkestein.
Bolkestein added: “Updating our legislative framework to harness the benefits of the new knowledge economy is essential if the benefits are to feed through to the European consumer in terms of increased choice, competition and lower prices.”
Another goal of the e-commerce initiative is to provide European businesses with an environment in which they can remain competitive in the global economy, Bolkestein said.
What Laws Govern?
One of the issues tackled in the report is whether cross-border Internet transactions should be governed by the rules in the country where the transaction originated or where it was completed. The Commission is recommending that the rules of the country of origin govern such transactions.
Applying a country-of-origin rule would “ensure a level playing field between online and more traditional modes of distance trade,” the proposal stated.
“Progress toward a fully functioning Internal Market in financial services must be made in a surefooted manner, ensuring that consumers and retail investors are fully protected,” Bolkestein said.
Building Cross-Border Trade
Recognizing that there may be instances where rules governing financial transactions may vary significantly between member countries in the European Union, the EC said it would conduct an analysis this year to determine what laws the Member States may apply to incoming Internet-based financial services.
The ultimate goal is for the laws of the various countries to be harmonized as much as possible. According to the EC report, the convergence of international laws would “pave the way for a country of origin approach to work in practice covering all financial services sectors and distance trading modes.”
The EC also recommended that alternative methods of dispute resolution be developed for the “effective and rapid out of court redress on a cross-border basis.” The alternative dispute resolution procedures, however, would not limit consumer access to the courts, which the EC said is often “a last resort” because of the high cost.
Problematic Either Way
The question of which rules apply in cross-border transactions is one of the most hotly debated issues in cyberspace.
Although the EC is coming down in favor of the rules in the country of origin governing such transactions, a report issued by the U.S. Federal Trade Commission (FTC) in September pointed out that this approach could result in a “race to the bottom” to find the countries that have the most lax consumer protection laws.
The other approach, allowing the rules of the country of destination to govern, is also not without complications. As the FTC pointed out, that course could conceivably make online merchants responsible for complying with hundreds of laws in hundreds of countries.
Yahoo! Case Continues
No case has demonstrated the difficulties of governing cyberspace as clearly as the international battle currently raging over Yahoo! auctions of Nazi memorabilia. In November, a Frenchjudge ordered the Santa Clara, California-based Web giant to find a way to bar French residents from auctions of Nazi memorabilia at its U.S.-based site.
Yahoo! responded by filing a suit in a U.S. court in December askingfor a ruling that the French court had no jurisdiction over the company’s U.S. operations.
The latest legal volley was fired Thursday when one of the groups involved, the France-based International League Against Racism and Anti-Semitism (LICRA), filed a motion askingthe judge to dismiss Yahoo’s case.