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CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer and Copyright Details
Electronic
Transactions Bill 1999
Date Introduced: 30 June 1999
House: House of Representatives
Portfolio: Attorney-General
Commencement: On a date to be fixed by
proclamation or 6 months and a day after it receives Royal
Assent.
Purpose
The Electronic Transactions Bill 1999 aims to
remove any existing legal impediments to the use of electronic
transactions. The Bill is designed to ensure that a transaction is
not invalid simply because it took place by means of an electronic
form of communication. It is intended that the Bill should provide
a framework which will:
- facilitate the use of electronic transactions
-
- promote business and community confidence in the use of
electronic transactions, and
-
- enable business and the community to use electronic
communications in their dealings with government.(1)
Background
The Growth of Electronic
Commerce
Electronic commerce (e-commerce) is a broad
concept that has been used to cover any trade or commercial
transaction that is effected via electronic means.(2) Increasingly,
it is used to refer to transactions carried out over the Internet.
According to the Australian Bureau of Statistics, 650,000
Australians used the Internet to purchase goods for private use in
the 12 months to May 1999, up from 409,000 in the 12 months to May
1998.(3)
In December 1997, in the 'Investing for Growth'
policy statement, the Prime Minister committed the Government to
promoting e-commerce by working to 'foster business and consumer
confidence through a light touch regulatory framework'.(4)
Following this undertaking, the Attorney-General
appointed an Electronic Commerce Expert Group (ECEG) in July 1997.
The ECEG was asked to explore 'the need for legislation to support
the national implementation of electronic commerce transactions
within a framework of international standards'.(5) In particular,
the ECEG was required to examine the Model Law on electronic
commerce prepared by the United Nations Commission on International
Trade Law (UNCITRAL).(6)
The focus of the ECEG was on legal impediments
to electronic transactions. In March 1998, the group recommended
that no special 'cyberlaw' was needed and that the Commonwealth
should enact electronic commerce framework legislation based on
UNCITRAL's Model Law. In addition, the ECEG said that a detailed
legislative electronic signature regime was not required.
The principal difference between the Bill and
the ECEG recommendation is that the Government has decided to
develop a uniform model law for enactment in all Australian
jurisdictions rather than a single piece of Commonwealth
legislation. The Attorney-General has expressed doubts about the
constitutionality of a Commonwealth Law which applied to the
States.
There are real concerns about the validity of
the Bill if we attempt to use it interpret State Laws. It is likely
that this could be seen as directly governing the interpretation
and effect of State legislation, which may be contrary to section
107 of the Constitution which preserves the powers of the
States.(7)
In October 1998, the Standing Committee of
Attorneys-General agreed to the development of national uniform
electronic commerce legislation for enactment in the Commonwealth,
States and Territories.(8) In January 1999, the Attorney-General
released a draft Electronic Transactions Bill for public
comment.
Why is legislation needed?
Legislative requirements for writing, signing
and originals in relation to documents may create uncertainty in
commercial dealings conducted electronically.
The definition of 'writing' varies between
Australian jurisdictions. While at common law there is no general
requirement for writing under the law of contract, there is some
legislation which requires certain transactions to be in writing
and signed. An example is legislation in all states and territories
based on the Statute of Frauds 1677 which requires writing for
transfers of interests in land. In some States, contracts for the
sale of goods must be in writing to be enforceable. One commentator
has noted that there are over 90 requirements for writing or signed
communications in the Life Insurance Act 1995.(9)
The ECEG noted that there are many rules of law,
which require signatures. For electronic commerce to flourish a
necessary foundation is a secure means of authenticating electronic
communication. Overseas jurisdictions have enacted technology
specific electronic signature legislation.(10) The Government
accepted the ECEG's recommendation that technology specific
legislation might operate to stifle innovation and lock in
inefficient or less effective technologies. The approach of the
Bill in clause 10 is described as technology neutral.
Main Provisions
The Bill has been described as an interpretation
style law. Its central purpose is to state that electronic
communications can satisfy the requirements of Commonwealth Law in
relation to writing, signature, the production of original
documents and the electronic retention of records.
Clause 8 states a general rule
that, for the purposes of a law of the Commonwealth, a transaction
is not invalid because it took place wholly or partly by means of
one or more electronic communications. The expression 'law of the
Commonwealth' is given a restricted meaning by clause
5. Until 1 July 2001, the phrase will refer to a law of
the Commonwealth specified in the regulations. The effect of the
provision is to allow a phased application of the Bill. In
particular, it will allow government departments and agencies time
to make arrangements to meet the Government's undertaking to
deliver all appropriate Commonwealth services on the Internet by
2001.(11)
Clause 8(2) provides that the
general rule will not apply where a more specific provision of Part
2 of the Bill applies. In addition, regulations may be made under
subclauses 8(3) and (4) specifying that the
general rule does not apply in relation to certain transactions or
laws.
The term 'electronic communication' is broadly
defined in clause 5. It is not restricted to
Internet transactions but encompasses any communication in the form
of data, text, image or speech by means of guided (e.g. optic fibre
cables and telephone lines) and/or unguided (e.g. radio waves and
microwaves) electromagnetic energy. Speech will only fall within
the definition if it is processed at its destination by an
automated voice recognition system. That is, a system that will
allow the information provided by voice to be reproduced in written
form. It will not include a simple telephone call or a message left
on an answering machine or voicemail.(12)
Clause 9(1) deals with
requirements under Commonwealth law that information is
given in writing. Such requirements will be taken to have been
satisfied where the information is provided by electronic means
if:
-
- at the time the information was given, it was reasonable to
expect that the information would be readily accessible so as to be
useable for subsequent reference; and
-
- where the information is required to be given to a Commonwealth
entity (defined in clause 5) or a person acting on behalf of the
Commonwealth, the information meets that entity's technological
requirements for communication and verification or
-
- where the information is required to be given to a
non-Commonwealth entity, the recipient must consent to the
information being given by way of electronic communication.
Subclause 9(2) covers the
situation where Commonwealth law permits information to be
given in writing. It provides that in such cases the information
may be given in an electronic form if essentially the same criteria
in subclause 9(1) are met.
Subclause 9(3) makes it plain
that the Bill is not intended to override other Acts which specify
the way electronic communications are to be made. The example
provided by the Explanatory Memorandum is the provisions
of the Income Tax Assessment Act 1936 that cover the
electronic lodgement of the tax return.(13)
Clause 9 will not require electronic
communication to be used in any circumstances but will permit it
where the requirements are met.
The purpose of clause 10 is to
establish that electronic signatures are functionally equivalent to
handwritten signatures.
The clause does not mandate any particular
technological standards for the acceptance of digital signatures
but instead lists a broad set of criteria. A requirement of a
personal signature may be met under a law of the Commonwealth
if
-
- a method is used to identify the person and to indicate the
person's approval of the information communicated; and
-
- having regard to all the relevant circumstances the method was
appropriately reliable.
Different rules then apply depending upon
whether the signature is required by a Commonwealth entity or
another person. In the case of a Commonwealth entity, the signature
must meet the entity's technological requirements. If a signature
is required to be given to another person, that person must consent
to the use of a particular method.
Clause 10(2) expresses the
intent that other Commonwealth laws governing 'electronic
signatures' continue to have effect.
Subclause 11(1) provides that a
person will be taken to have met the requirement under a law of the
Commonwealth to produce a document if:
-
- in the circumstances, the method of generating the electronic
document assured the integrity of information contained in it,
and
-
- at the time it was sent, it was reasonably expected that the
information in the electronic document would be readily
accessible.
As with the provisions pertaining to writing and
signatures, different rules apply depending upon whether the
document is to be produced to a Commonwealth or
non-Commonwealth entity. In the case of a Commonwealth entity, the
electronic document must meet the entity's technological
requirements and its requirements for verifying receipt. In the
case of any other person, the person requiring the document must
have consented to the document being produced in electronic
form.
Subclause 11(2) sets out
substantially similar requirements which will apply where a law of
the Commonwealth permits a person to produce a document in the form
of paper, article or material, and they produce an electronic form
of the document.
Subclause 11(3) states that
integrity is only maintained if no material changes have occurred,
apart from the addition of an endorsement.
Subclause 11(4) ensures that
clause 11 does not affect the operation of Commonwealth laws which
provide for the production of electronic documents according to
certain technological requirements.
Clause 12 deals with
requirements under Commonwealth law for the recording of
information and the retention of written documents or electronic
communications.
Under subclause 12(1) a
requirement for the recording of information will be met if
information is recorded in an electronic form and:
-
- at the time of recording it was reasonable to expect that the
information would be readily accessible and
-
- if the regulations specify the use of a particular form of data
storage device, that requirement has been met.
A 'data storage device' is defined in clause 5
to mean an article or material (e.g. a disk) from which information
is capable of being reproduced, with or without the aid of another
article or device.
Clause 12(2) provides that
requirements under Commonwealth law to retain a document that is in
the form of paper or other material may be met if an electronic
form of the document is retained provided that:
-
- at the time of generation, the method of generating the
electronic form of the document provided a reliable means of
assuring the maintenance of the integrity of the information
contained in the document and
-
- at the time the electronic document was generated, it was
reasonable to expect that the information would be readily
accessible and
-
- the electronic form of the document is retained on a particular
type of data storage device if the regulations require it.
Subclause 12(4) specifies
requirements for the retention of electronic communications which
are similar to those in clause 12(2). However, in addition
paragraph 12(4)(c) requires the retention of
information that will identify the origin and destination of the
electronic communication as well as the time it was sent and
received.
Clause 13 provides that
regulations may be made exempting specified requirements,
permissions or laws from clauses 9-12. The rules
of courts and tribunals are specifically exempted from the Bill. It
is intended that they have the power to prescribe their own
procedures for the filing and service of documents. Commonwealth,
State and Territory, evidence legislation is also exempt.
Clause 14 and 15 impose a set
of rules which govern electronic transactions for the purpose of
Commonwealth Law.
Pursuant to subclause 14(1),
the time of dispatch will, unless otherwise agreed between the
originator and the addressee, be when a communication enters an
information system outside the control of the originator.
'Information system' is defined in clause 5 as 'a
system for generating, sending, receiving, storing or otherwise
processing electronic communications'. For instance, in the case of
a home user of e-mail, the time of dispatch would be when the
communication leaves the sender's information system and reaches
the Internet Service Provider.
The time of receipt is defined by clause
14(3). If the addressee has designated an information
system for receiving electronic communications (for example an
e-mail address) the time of receipt will be the time when a message
enters a receiver's information system. This presumption can be
rebutted if the parties make an alternative arrangement, for
example that it is received when read or when a reply acknowledging
receipt is sent.
In the event that the addressee has not
nominated an information system (e.g. an e-mail address) and no
alternate agreement has been made, the time of receipt will be
deemed to be when the electronic communication comes to the
attention of the addressee (subclause 14(4)).
For the purposes of Commonwealth law, dispatch
and receipt are subject to a rebuttable presumption that they took
place at the relevant place of business.
The regulations may exempt specified electronic
communication or laws from these deeming provisions
(subclauses 14(7) and (8)).
Clause 15 of the Bill differs
from the UNCITRAL model law on the subject of attribution. Whereas
the model law contains a rebuttable presumption that the purported
originator is in fact the originator, clause 15
provides that the purported originator is only bound by a
communication if the communication was sent by them or with their
authority. As with the receipt and dispatch, agreement between the
parties can supplant this assumption. However the law in relation
to agency is preserved by clause 15(2). The
decision to reject the UNCITRAL model follows a recommendation made
by the ECEG. The ECEG argued that the UNCITRAL proposal favoured
electronic commerce over paper-based communication. It noted that
the use of signatures on paper for commerce at a distance (by mail
or facsimile) involves the risk of forged or unauthorised
signatures but there is no general legislative rule that entitles
the addressee to presume that the signature is genuine. If the
UNCITRAL proposal were accepted, addressees of electronically
signed data messages would be better placed than those that
received manually signed paper based messages.(14)
Concluding Comments
Critics of the Bill have focused on its limited
scope.(15) It only applies to laws of the Commonwealth. The
Government has taken a cautious view of the Commonwealth
constitutional powers and has opted for a uniform national scheme
instead of a single piece of Commonwealth legislation as
recommended by the EGEC. It is worth noting that the Government
took a far more expansive view of Commonwealth power in dealing
with another e-commerce issue - Year 2000 disclosure. Section 12 of
Year 2000 Information Disclosure Act 1999 invokes (amongst
others) the corporations power, the trade and commerce power and
the territories power.(16)
While there was initially some concern that some
States may depart from the uniform framework, in May 1999, the
States agreed at a meeting of the Standing Committee of
Attorneys-General to draft complementary laws based on the
Commonwealth Bill. Nevertheless it is possible that there may be
lengthy delays until identical State and Territory legislation is
enacted which may stifle the development of e-commerce in
Australia.(17)
A second limitation is that only certain
Commonwealth laws will be captured by the Bill. Until July 1 2001,
it will only apply to laws made subject to the Bill by regulation.
After that date Commonwealth laws may be exempted by
regulation.
The Bill has also come under criticism that it
will do little to solve the uncertainty of electronic commerce.(18)
For example, clause 10 provides that if there is a requirement for
a signature under a Commonwealth Law an electronic communication
may met this requirement if amongst other things the method used
was 'reliable'. The recent announcement by the Government of the
establishment of the National Electronic Authentication Council
(NEAC) may go some way towards solving this problem. NEAC will
oversee the development of a national framework for electronic
authentication of online activity. It will not require that a
particular form of digital signature be used, but will oversee the
development of technical standards and code of practice. The
Government has argued that measure will add to consumer
confidence.(19)
Commentators have also argued that the enactment
of a legislative framework for electronic commerce also requires
the enactment of data protection legislation to ensure privacy.(20)
In December 1998, the Minister for Communications, Information
Technology and the Arts and the Attorney-General announced the
Government's intention to develop legislation to support a
self-regulatory regime for privacy protection. The Government is
currently engaging in a program of consultation. According to the
Attorney- General:
The legislation will support businesses that
self-regulate to strengthen privacy protection and provide a
default legislative framework. Self-regulatory privacy codes will
be able to be approved by the Privacy Commissioner and have the
same force as the legislation. Where there is no approved privacy
code default legislative principles and a complaint handling regime
will apply.(21)
It has been argued that such a measure is needed
to facilitate e-commerce with members of the European Union in the
wake of the Data Protection Directive in October 1998.(22) The EU
directive prohibits the release of personal information online into
jurisdictions that do not have adequate data protection
arrangements.
This Bill has been through an extensive
consultation process. A draft bill was released for comment in
January 1999, however the principles underlying it have been in the
public arena for much longer. The Bill does not favour or advantage
electronic commerce over paper. Rather the intent is that
electronic commerce is promoted by the removal of legal obstacles
to its use.
Endnotes
-
- See clause 3 of the Bill.
- Electronic Commerce Expert Group, 'Electronic Commerce:
Building the Legal Framework' March 1998, p. 194.
- Australian Bureau of Statistics, Use of the Internet by
Householders, ABS Cat 8147.0, May 1999.
- The Hon. John Howard, 'Investing for Growth', Press
Release, December 8, 1997.
- Electronic Commerce Expert Group, op cit, p. 181.
- The full text of the Model Law can be found at http://www.uncitral.org 22 September
1999.
- The Hon. Daryl Williams, 'Speech by the Attorney-General to
Gilbert and Tobin Industry Leader Breakfast on the Digital Agenda
Copyright Bill and the Electronic Transactions Bill', 12 March
1999.
- The Hon. Daryl Williams, 'Agreement on National Laws for
Electronic Commerce', News Release, 30 October 1998.
- Mark Sneddon, Electronic Transactions, Seminar Paper,
http://www.claytonutz.com.au/fr-ecomm.htm
22 September 1999.
- An example of such legislation is the Utah Digital Signature
Act 1995. See Electronic Commerce Expert Group, op cit, p
117-121.
- Senator The Hon. Richard Alston, Speech to Online Australia
Western Australia Luncheon, 15 September 1999.
- Explanatory Memorandum, p. 17.
- Explanatory Memorandum, p. 23.
- ECEG, op cit p. 173.
- Robert McClelland MP, 'Stronger Stand Needed on E-commerce',
Media Release, 29 January 1999.
- See Communications Law Bulletin, January 1999, p. 3.
- Electronic Frontiers Australia, 'EFA Criticises Electronic
Transactions Bill - Too little, Too slow', Media Release,
7/2/1999.
- Helen Meredith, 'Lawyers condemn net transactions bill',
Australian Financial Review 10 May 1999, p. 32.
- Senator Alston, 'Boosting Confidence in electronic commerce',
Media Release, 23 June 1999.
- Robert McClelland MP, 'Stronger Stand Needed on E-commerce',
Media Release, 29 January 1999. Shane Barber, 'E-commerce
Law Taking Shape', Australian Communications, April 1999,
p. 52.
- The Hon. Daryl Williams MP, 'National Privacy Legislation
Forum', News Release,
4 September 1999.
- Shane Barber, 'E-commerce Law Taking Shape', Australian
Communications, April 1999, p. 52.
Mark Tapley
22 September 1999
Bills Digest Service
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ISSN 1328-8091
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