Major legal problems arising from the use of electronic data as the form of document in international trade
INTRODUCTION
For many years, companies have been using paper and the traditional mail system for communicating and transferring information with other companies or individuals by mailing purchase orders, shipping documents, et cetera. But due to the rapid development of technology in the past decade, paper documentation is no longer the only means of carrying information. Electronic interchange of information is becoming popular globally and may soon become the primary means of transferring information due to its numerous advantages over paper documents, the most obvious ones would be it saves time and money and reduces repetitive tasks. However, its use does create some other problems, especially legal ones that hinder it from replacing paper documents and becoming the only mode for companies to communicate quickly, efficiently and accurately. In this article, I will focus on the several main legal problems and in the end, I will also consider what is being or what can be done to resolve the problems.
LEGAL PROBLEMS
CAUSE OF THE PROBLEMS
It would be helpful to consider the cause behind the problems before going on at this point. In short, the law is not well adapted to suit the needs of electronic commerce; in fact, the formulation of law to deal with the legality of electronic documents is still in its infancy. When we look around the basic norms and notions of law today, they have been created through the historical development of law and have been expressed by paper documents. Therefore the rapid increase of electronic transactions and technologies leads to legal problems on a global scale because the legislatures? machinery just cannot keep pace with the changes. We must bear in mind that we are now in the 21st century and electronic commerce is becoming popular and has the ability to create a global digital economy in the future. Therefore, new legal concepts have to be introduced so that the law corresponds to the needs of technology.
Here are the several main legal problems arising from the use of electronic data as the form of document in international trade : -
A. Signature / Authentication
Written signatures have long been considered legally valid to demonstrate the signatory?s identity and his or her intention to be bound by the contents of the document. It has an important purpose for authentication and it is used as a method to bind the signatory. The concept of authentication is very important in the way that the unauthorized users can be separated from the authorized ones and so can stop somebody from ?spoofing? the identity of another person.
Eliminating paper eliminated the authorizing signature and currently there is nothing existed that is able to take the place of that all-important signature. Therefore, the problem of using electronic data is that the signature cannot be transferred electronically so that the recipients of the information or document will receive data without authentication. There are many provisions of legislation or international treaties that require certain contracts or other documents be in written form and signed.
With the advent of electronic communications, the written signature is being displaced by electronic alternatives such as passwords, transaction numbers, PINS, encryption et cetera and the most popular one among which would be electronic or digital signature. It operates like this – it uses public key cryptography which employs an algorithm using two different but mathematically related keys. One for creating a digital signature while another for verifying a digital signature. Although many people may know the public key of a given signatory and use it to verify that signatory?s signature, they cannot discover that signatory?s private key and use it to forge digital signature. The process of creating and verifying a digital signature provides a very high level of assurance that the digital signature is genuinely the signatory?s. Digital signatures have been accepted in some international standards developed in co-operation with and accepted by many banks and companies around the world. In Hong Kong, the first newly-enacted legislation of the millennium, Electronic Transactions Ordinance expressly recognizes the legal effect of electronic signatures as identical to that of written signatures provided that the signature is supported by a recognized certificate issued by a certificate authority.
B. Storage of Electronic Data / Reliability
Due to the fundamental difference between the nature of paper and electronic data, the duration the data is stored is distinctively different and that in turn generates a vital legal problem that one needs to think about before engaging in electronic commerce. First, let us consider the characteristics of paper documents when compared with electronic data. They are much more durable and will remain unchanged for long period of time. And the documents can be kept stored for records from one to may be to a maximum of fifty years. Finally, any alteration to the records can be detected much more easily. On the contrary, electronic data lacks the ?immutability? of a paper-based writing. Thus, it follows that the electronic data may be altered without detection. However, this problem is diminishing due to the rapid development in electronic security system.
Another problem arises as to the reliability of the electronic documents and therefore the legality of the electronic transactions. There are in total three perspectives concerning about the question of reliability. Firstly, the recipient of a message or document needs to be certain that what he has received is exactly the same as what was sent by the sender and that there is no fraudulent or unauthorized access during the transmission. Secondly, the sender needs to be certain that the recipient has received what he sent with no delay and there has been no duplication during the transmission. Finally, both of them need to be certain that their network service provider is reliable and provides a stable and error-free service. Nevertheless, the reliability seems not be a big one because uncertainties do exist in the traditional mail system as well and comparatively, electronic system can be regarded as an even more reliable carrier of information than traditional mail.
C. Admissibility of Computer Records as Evidence in Courts
Another aspect that is affected most by introducing paperless trade is that of evidence. When two companies engage in electronic commerce by entering into a contract, both parties would want to make sure that the printouts or records generated from the computer can be used as evidence in case dispute arises between them and one party must go to the court. Admissibility of evidence is thus an important issue that should not be overlooked. A written document is of tangible nature while an electronic generated document is intangible and this explains why the admissibility of the latter is questionable. In fact, this question largely depends on in which legal system the conflict is raised and the attitudes the lawmakers and the courts in that legal system have regarding this issue. In some legal systems, for instance Hong Kong and Greece, an exhaustive list of items that may be accepted as evidence is provided while all means of evidence can be admitted as evidence in continental legal systems. Section 9 of Hong Kong Electronic Transactions Ordinance expressly recognizes the admissibility of electronic records in Hong Kong courts.
D. Offers and Acceptances in Contracts
Detailed rules have been developed in Common Law to assist the courts in determining if an offer is in existence, an acceptance is effective and when a revocation extinguishes the power to accept an offer. These rules distinguishes between instantaneous communications, e.g., telex and fax, and delayed communications, e.g., traditional mails. The ?Postal Rule? has been developed to overcome the inherent delays in written communications. Under this rule, an acceptance is effective when sent and the offeree is bound from that moment. A revocation is only effective when received. A contract will have been formed if a person sends an acceptance before receiving a revocation. On the other hand, the offer and acceptance are effective when reached the other party for instantaneous communications. The problem of electronic documents is that it combines the features of both instantaneous and delayed communications because though the message is transferred instantaneously but there may be delay or error during the transfer and it is sent to a mailbox and is stored there hence not received by the recipient at once. It is doubtful whether the contract should be deemed to be legal at the moment at which the offer is sent or the other way round. The time and place at which the contract is concluded as well as the legal system of the country that will be applied would be different under the two circumstances.
CONCLUSION
It may seem that the numerous aforementioned legal problems may slow down or even make the widespread of electronic commerce come to a halt. However, the reality is not the case at all as some of them have been resolved and the legal profession is trying their best to resolve the rest of them. I will say that nearly all fields of law will undergo a transition that reflects the underlying movement towards electronically based information and communication system. The technology and computer revolution is going on and a new era is close!
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Total : 1529 words
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Jason Leung