The City of London welcomes the proposed bill. It is agreed that the law needs to be modernised to take account of electronic communications and electronic documentation. The bill has the potential to build confidence in electronic commerce, an objective shared by the City, and we would like to see it introduced without delay.
The Corporation of London has worked with the Worshipful Company of Information Technologists in bringing together a group to discuss electronic commerce issues with representatives from various financial sector institutions. The breadth of this representation enables us to claim to take a strategic view of the implications of legislation on the financial services industry. The representations we have received on this issue have been conveyed to the Select Committee on Trade and Industry as part of their inquiry into electronic commerce. In addition we are also making representations at a European level in connection with the draft EU directive on electronic commerce.
Financial services, together with the associated professional services industries, are of vital importance to the UK. As well as being one of the largest sectors of the economy, and a major employer, they make by far the greatest positive contribution to the UK balance of payments. The unique combination of attributes that come together in the City of London are the reason for this success, which must be protected in an environment which is ever-more global and ever-more competitive.
These industries are also subject to an accelerating rate of technical change. Electronic Commerce is the term generally used to express this change. This definition has however been criticised as it implies that the technology only affects financial transactions. In fact, technology is transforming all aspects of the way that business is done, and we prefer the term ‘Electronic Business’ as expressing this more holistic approach.
The challenge for the City, then, is to maintain our pre-eminence in an era of technology-led global competition, and to take further advantage of the opportunities of the increasingly global marketplace. The Government can help by legislating to make the UK the best country in which to conduct electronic business. There are considerable risks if the legislation fails in this objective.
The unusually short period allowed for responses has prevented us from consulting on the detailed questions asked, however the City view on the more general points is outlined below. It is hoped that the government keep open the dialogue on the detailed proposals and the Corporation and the City are keen to play a part in that process.
The paper recognises that e-commerce is global. This has various implications which should be paramount in framing the UK legislation. Firstly, the UK should co-operate in international initiatives to formulate rules and guidance, bring such provisions into effect quickly and take action against countries which fail to do so. Only by these means can we ensure a level playing field. Technical change is leading rapidly to the "death of distance" as either a cost factor or constraining influence, and international borders are of little relevance in this context. UK legislation must not impose conditions on the providers or users of e-commerce that are not imposed in other countries, unless it can be clearly demonstrated that they will have a positive effect in bringing business to the UK. Over-regulation will undermine competitiveness and drive business overseas.
We are not aware of other legislative changes that are needed. We would recommend a "light touch" with legislation generally, as there is a risk that action may be taken to counter a perceived problem which may be temporary or is best dealt with by other means. An example of this may be unsolicited e-mail; we expect the industry, the market or public opinion to find solutions if this becomes a problem and it is possible that legislation could then get in the way of the pragmatic approach. Similarly on the role of intermediaries, legislation should not disallow any of the roles set out in the paper, but nor should it be prescriptive. It is impossible to predict what business models will emerge over coming years.
In this part of the Consultation Paper, as elsewhere, an underlying assumption is being made that the legislation is solely concerned with business-to-consumer transactions. Currently the great majority of e-commerce is business-to-business and the considerations (for example, the issue of confidence) can be quite different. Business to business ecommerce is growing rapidly without this legal framework in place. Unless "light touch" regulation is adopted there is a risk that existing e-commerce could face restrictions. Whilst it is recognised that regulation of e-commerce must seek to protect the interests of consumers, at the same time regulation should not be so burdensome as to curtail the development of business transactions which are taking place to the satisfaction of all concerned. Such provisions may be needed but are best governed by codes of practice, which unlike legislation, can be changed rapidly as new services and technologies emerge.
The proposal not to require key escrow or third party key recovery as a condition of licensing confidentiality services (paragraph 37) is welcomed and strongly supported. Similarly we would be opposed to an "all or nothing" licensing regime (as described in paragraph 39) for the reasons stated. While we recognise that voluntary licensing may have a role to play in promoting confidence, the use of codes of practice and accreditation schemes may be just as effective, depending on the type of business and the type of transaction. It is, as yet, too early to judge what, if anything, is needed to build consumer confidence and to protect the consumer. Again, we would caution against over-legislating at this stage; what is needed is a flexible regime which can change rapidly in response to real rather than perceived needs.
On the issue of liability, we would favour the minimalist approach (paragraph 43) for business-to-business transactions. As stated in our previous paragraph, we think it is too early to say what the consumer will expect or need by way of liability cover.
The Government’s concerns that criminal activity should not be protected by cryptography is shared by the financial services sector, which is particularly concerned about fraud. All responsible service providers would wish to work with the authorities to establish appropriate mechanisms which do not at the same time put an undue burden on legitimate business. The issue of confidence is important here - financial services providers can choose whether to base their business in the UK or elsewhere. The UK will not be chosen if the impression is given that law enforcement agencies are more intrusive here than in other countries. This impression has been created by all the recent publicity on the key escrow issue. A concerted effort will now be needed to establish the UK as the best place to do e-commerce.
We believe that the way forward should include an on-going dialogue between the Government, technology and service providers and the user community. We welcome the setting-up of the Task Force but regret that this was not done more openly and does not include user representation. The Corporation and the Worshipful Company of Information Technologists would be pleased to assist will continue the dialogue with the financial services sector. Our working group (referred to in the Introduction above) will continue in existence and we are planning a major electronic business seminar in the City in May, "Grasping the Nettle - Embracing the Global Opportunity for Growth".
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Last Revised: April 21 1999