Bills Digest No. 64 1999-2000 Electronic Transactions Bill 1999


Numerical Index | Alphabetical Index

WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer and Copyright Details

Passage History

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

  1. See clause 3 of the Bill.

  2. Electronic Commerce Expert Group, 'Electronic Commerce: Building the Legal Framework' March 1998, p. 194.

  3. Australian Bureau of Statistics, Use of the Internet by Householders, ABS Cat 8147.0, May 1999.

  4. The Hon. John Howard, 'Investing for Growth', Press Release, December 8, 1997.

  5. Electronic Commerce Expert Group, op cit, p. 181.

  6. The full text of the Model Law can be found at http://www.uncitral.org 22 September 1999.

  7. 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.

  8. The Hon. Daryl Williams, 'Agreement on National Laws for Electronic Commerce', News Release, 30 October 1998.
  9. Mark Sneddon, Electronic Transactions, Seminar Paper,
    http://www.claytonutz.com.au/fr-ecomm.htm 22 September 1999.

  10. An example of such legislation is the Utah Digital Signature Act 1995. See Electronic Commerce Expert Group, op cit, p 117-121.

  11. Senator The Hon. Richard Alston, Speech to Online Australia Western Australia Luncheon, 15 September 1999.

  12. Explanatory Memorandum, p. 17.

  13. Explanatory Memorandum, p. 23.

  14. ECEG, op cit p. 173.

  15. Robert McClelland MP, 'Stronger Stand Needed on E-commerce', Media Release, 29 January 1999.

  16. See Communications Law Bulletin, January 1999, p. 3.

  17. Electronic Frontiers Australia, 'EFA Criticises Electronic Transactions Bill - Too little, Too slow', Media Release, 7/2/1999.

  18. Helen Meredith, 'Lawyers condemn net transactions bill', Australian Financial Review 10 May 1999, p. 32.

  19. Senator Alston, 'Boosting Confidence in electronic commerce', Media Release, 23 June 1999.

  20. 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.

  21. The Hon. Daryl Williams MP, 'National Privacy Legislation Forum', News Release,
    4 September 1999.

  22. Shane Barber, 'E-commerce Law Taking Shape', Australian Communications, April 1999, p. 52.

Contact Officer and Copyright Details

Mark Tapley
22 September 1999
Bills Digest Service
Information and Research Services

This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.

IRS staff are available to discuss the paper's contents with Senators and Members
and their staff but not with members of the public.

ISSN 1328-8091
© Commonwealth of Australia 1999

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Published by the Department of the Parliamentary Library, 1999.

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