E-Compatible Legal & Financial Framework - Legal Aspects of E-Commerce | E-Commerce - B Com PDF Download

AN INDIAN APPROACH

All over the world, globalization and the new information and communication technologies that are restructuring the commercial distribution circuits are reinforcing the linkages between internal and external trade. Even developing countries like India, therefore, can no more treat the internal and external sectors in isolation. The legal and financial framework for one sector directly affects the other sector. While the regulations and rules which govern commercial operations remain mostly local or national in scope, the growth of e-commerce will increasingly call into question the ability of public authorities to impose their prerogatives on national markets and international trade by their companies and citizens.

Legal framework

Legal issues encompass two basic areas—those of regulation, and those of making legal systems compatible to and for e-commerce. The latter, though perceived as being facilitator in content, requires the former for it to be effectual. There are in fact many things that governments might reasonably want to regulate on the Internet. These include not just serious affronts to human values such as child pornography and incitement to racial hatred, but also consumer protection, the defence of intellectual property rights,  and taxation. These are all issues on which countries legislate already. The existing rules and laws would and should apply to the Internet and e-commerce. The problem is not whether the Internet should be regulated, but how. This entirely new sort of communication poses several entirely new sorts of problem for regulators. A legal framework for e-commerce has been provided by the Information Technology Act, 2001, making India only the twelfth country worldwide which has such a comprehensive legislation for e-commerce in place. This Act also effects consequential amendments in the Indian Penal Code, the Indian Evidence Act, 1872, and the RBI Act, 1934 to bring them in line with the requirements of digital transactions. (Similar amendments are being planned for the Companies Act, 1956 to also facilitate e-commerce and e-governance.)

The IT Act essentially seeks to address three areas or perceived requirements for the digital era:

a. to make possible e-commerce transactions—both business to business and business to consumer

b. to make possible e-governance transactions—both government to citizen and citizen to government

c. to curb cyber crime and regulate the Internet.

Rules under the IT Act have been formulated and a national controller for enforcing the Act appointed. This controller will regulate the certifying authorities that will issue the digital signatures and the systems for authentication. These steps need to be matched by sorting out the issues of security and payments. Security and authentication arrangements need to be recognized and accepted globally. On the first, though governments (such as the US government) have taken several steps, countries like India are yet to develop reliable technologies. (US companies developing them are presently restricted by their Government from the export of such technologies and that is an issue that needs to be addressed at the international level.)

Security and control provisions in the IT Act, especially those relating to cyber-crime, have been criticised by the media and free-speech advocates. After all, the right of freedom of speech and the right to information are fundamental to democracy and attempts to control IT and e-commerce must not seem to be attempts to curb the growth  of the Internet (as some countries in the Middle East and China are attempting to do). The broad and sweeping powers given to the Police (without a warrant or judicial overview) have been criticised by several experts as well as by NASSCOM. The Government needs to be extremely careful in this area as attempts at controlling pornography should not be seen as, or result in, creating hindrances to the growth of the Internet in India.

With the advent of new security mechanisms such as electronic/digital signatures, certificates, etc., the future of electronic commerce rests on confidentiality. Another facet of security is privacy, which is closely related to data collection, interpretation, dissemination, and circulation. Standards are required to govern the way in which personal information is acquired, disclosed, and used on-line. One of the criticisms levelled against the IT Act is that it does not have any clause ensuring security and protection of the on-line consumer. Legal opinion is divided on this point, with some experts arguing that the existing Consumer Protection Act, 1986 is quite comprehensive and can be extended to cover on-line consumers also, as, after all, on-line shopping is just another way of transacting business. However, even if this be the case there are several aspects peculiar to digital transactions such as electronic payments, confidentiality, transaction data, etc. that lead to problems arising in cyberspace.

An international consensus on privacy protection is developing around the OECD guidelines on the protection of privacy and trans-border flows of personal data, which embodies well-established principles of fair information practices. These guidelines could form the basis of establishing privacy and confidentiality in the Indian e-commerce environment. Much of the IT Act as promulgated, deals with citizen interaction with government. Certainly a proper and far-reaching mission towards e-governance. But there are several hurdles before this becomes a reality. The main being that government departments not only lack the hardware for electronic transactions but will also need to reorient their systems and procedures before they are ready to interact through electronic documents.

E-Governance

E-governance implies action and commitment of the state and its agencies at two levels:

a. It involves the promotion of the information and communication technologies  and, especially, e-commerce, on the one hand, and

b. The adopting of these technologies and all they involve in the matter of a completely new type of commitment, open systems and use of the medium of the Internet for government business, citizen interaction, and most important, for development.

Fortunately today several e-governance projects are underway in several states of India. The introduction of e-governance could turn out to be one of the most farreaching and progressive steps in India. Not only does it signal a commitment of government to the use and introduction of IT for efficiencies in government services and citizen interface but it could also be the most potent weapon against the emerging and growing digital divide.

Some of the challenges in this regard are:

• Handling the feudal mindset—information is seen as power and those having it do not wish to give it up.
• Implementation requires change management and re-engineering of government agencies, and not so much of technology.
• Transparency, i.e. the issue of making government dealings (including procurement) transparent and thereby reducing corruption.
• Labour and Union problems in government (as these are perceived to be a threat  to established procedures and vested interests).

Implementation of e-governance is quite obviously not going be very easy or smooth. There is still a great deal of confusion among implementing agencies at various levels as to what exactly e-commerce and e-governance are and how to go about it. Part of the problem is that some of these organisations have inadequate internal computer personnel who have their own limitations in understanding and implementing e-governance schemes or in serving as a bridge between the organisation and professional external organisations. There is also the need for integration and convergence of services offered by different departments so that a truly single point service can evolve. Extensive coverage of rural areas is also going to take time.

Despite these constraints, the initiatives here are crucial. By using the Internet as a tool for ‘electronic governance’, the environment for e-commerce development itself would  be furthered and strengthened. The premise here is that in promoting business on-line, governments will facilitate the delivery of information, goods, and services. This will  then deliver more traffic across data networks, which, in turn, will serve to provide the revenues and investment rationale needed to encourage further infrastructure 
development.

Financial framework

One of the main concerns of developing countries are the perceived dangers foreign exchange outflow on account of e-commerce, i.e. through the purchase of goods abroad. In order, therefore, to encourage e-commerce development, banking procedures within developing countries need to be aligned and made compatible with digital trade transactions, so that consumers and buyers can easily make purchases locally through the 
Internet.

Along with changes in contract and company law, e-commerce would also require a financial and banking framework that allows for electronic payments and transfers. This would include requirements for certification of documents, electronic signatures, confidentiality, and privacy. Therefore, India needs to put in place both the electronic network (between financial institutions) as well as the regulatory framework to allow for such transactions. Banking regulations (and rules as a result of the changes in the RBI Act) thus need to be adjusted to the new formats and requirements. The IT Act thus needs matching implementation at the fiscal regulatory level. Payment gateways for ecommerce transactions are one of the most essential requirements for establishing and developing e-commerce. These need to be well established and strengthened in India. Today some of the banking institutions are offering this service with international collaboration, but for this to truly make a mark, electronic fund transfers and a credit card culture must evolve and set in India.