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Issue Date: May 2002 (es)

Considering the legal implications of e-business

1 May 2002

Following the advent of the Internet, the advantages of doing business online have quickly become apparent. A couple of minutes and a few clicks of the mouse is all it takes to finalise a transaction with another party located anywhere in the world. But, while purchasing and selling goods and services online may be quick and easy, few organisations have paid heed to the legal ramifications involved in e-commerce.
"Many companies are keen to electronically transfer funds to organisations across the globe in exchange for goods or services rendered, but most fail to first determine whether the transaction they are carrying out is legal and valid," declares Peiro Grobler, senior business development manager of CS Holdings. "The truth is that the business world is still caught up in the e-commerce bubble, and is so focused on how wonderful it is and what can be achieved with it that the legalities involved have never really received due consideration."
As with most legal issues, e-commerce law is fraught with grey areas, Grobler says. "For example, are electronic signatures valid and if so, how are they authenticated? Is the use of biometric identification legal? What legal recourses are available to a company or individual should they be defrauded in an electronic transaction? What if that transaction was done across international borders?"
These and other issues will hopefully be addressed in the Electronic Communications and Transaction Bill, which is currently being promulgated in Parliament and is due to passed within the first half of this year. The bill aims to define a process which companies will have to adhere when engaging in e-commerce, and to provide a legal recourse if something goes wrong. Countries such as the US, UK, Ireland, Canada and Australia already have similar legislation in place.
"According to the draft Bill, the legal requirements for e-commerce are an electronic transaction between parties, as well as authentication between them," Grobler explains. "This is the equivalent of signing a document. Additionally, the integrity of the information contained in the transaction must remain complete and unaltered.
"The three main role players in e-commerce include government, certification service providers (CSPs) and the user (company or individual)," he continues. "The government is responsible for providing legal, regulatory and policy frameworks (such as the Electronic Communications and Transaction Bill) to support an electronic authentication. CSPs must comply with applicable laws and technical standards and are responsible for facilitating cross-certification agreements, and providing identification procedures and authentication services. For their part, the user must ensure that no unauthorised party has access to any secret components."
Grobler says the draft Bill also makes provision for the certification of CSPs, making them a legal entity. "Consequently, if a user engages in electronic traffic, irrespective of its nature, he does so via a CSP. In this way, he not only ensures that he is engaging in a legal transaction, but that he is not placing himself at risk. If one of the parties cannot be authenticated for some reason, the transaction will be prevented from taking place. If something does go wrong with the transaction, the user then has a legal recourse because the transaction took place through a legal entity.
"The draft Bill is specifically geared to limiting the liability of the service provider," he continues. "The service provider should not be held liable for the transactions because he is merely providing a service by facilitating the transaction between two parties."
The Bill also deals with corporate issues such as the use of company time and resources to surf pornographic websites. "In these cases, the most common issues raised are whether the employee is constitutionally entitled to indulge in such actions, and whether the company can bill the employee for the time and use of their equipment," says Grobler. "A matter such as this cannot be dealt with without taking the Labour Relations Act into consideration as well."
Although organisations will not have to wait long before the Bill is passed, Grobler strongly recommends that they ensure that they are legally 'comfortable' with any electronic transactions they engage in in the meantime, and that there are as few legal pitfalls as possible. "It is imperative that organisations and individuals doing business over the Web take cognisance of e-commerce law and thoroughly investigate the degree of legal risk they are exposed to. No company should post anything on the Internet without first running it past their legal advisers, who should verify that it is as watertight as possible. At this stage, it's the only form of protection they have," he concludes.
CS Holdings

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