European Commission changes tack on e-commerce law

Officials at the European Commission have made a spectacular turnabout on a proposed law governing cross-border Internet commerce in Europe, deciding to seek input and considering abandoning a long-held position on a key legal question.

Officials at the European Commission have made a spectacular turnabout on a proposed law governing cross-border Internet commerce in Europe, deciding to seek input and considering abandoning a long-held position on a key legal question.

Justice and home affairs experts drafting a law dubbed "Rome II" will seek consultations with industry and consumer groups, after saying in April that to do so would be a waste of taxpayers money. The authors of the draft regulation further are contemplating abandoning the long-held legal position on the question of which national law to apply in a cross-border dispute.

Until now, the officials have advocated applying the laws in the country where a consumer is situated, provoking criticism from industries, including fast-moving consumer goods, e-commerce merchants and publishers, that such an approach will smother e-commerce with legal obligations.

"We are not sure whether to set up a special regime for e-commerce or to remove the country-of-destination principle altogether. This has yet to be clarified," says David Seite, one of the authors of the draft regulation.

"We have been given clear instructions from (Commissioner for Justice and Home Affairs Antonio) Vittorino that Rome II should not prejudice e-commerce," Seite says.

Vittorino is believed to have come under pressure from other commissioners and from leading European parliamentarians, including Anna Palacio, Spain's Member of the European Parliament, to change Rome II.

By applying a country-of-origin approach to cross-border online disputes, the regulation will be reinforcing, rather than contradicting existing European legislation such as the e-commerce directive, said an official inside another Commission department. However, he was wary of giving his full

support to his justice and home affairs colleagues. "I'll reserve judgment until I see what they come up with," he says.

"If the Rome II regulation does abandon the country-of-destination approach, then that is definitely a step in the right direction," says David Fares, director in charge of electronic-commerce issues at the United States Council for International Business.

As Europe grapples with this awkward legal technicality, a court in California is assessing a real-life example of how the country-of-destination principle does not work.

Internet portal Yahoo has appealed to the court to examine the legality of a French court's decision to force yahoo.com to remove Nazi memorabilia from its online auction site, on the grounds that it breaches France's anti-racism laws. Yahoo.fr, the French portal, was spared because it conforms

with the local law.

The California court will decide whether France has the right to impose its laws on a US internet portal. If, as is expected, it applies the country-of-origin principle it will overturn the French court ruling.

A similar debate has been at the center of protracted talks on an international level that failed to conclude last week. The Hague Convention is trying to establish worldwide rules on jurisdiction for cross-border disputes, but there remain wide differences of opinion among the delegates, Fares said.

"No concrete decisions were made concerning the jurisdiction question. There are many proposals being discussed," he says.

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