Fundamentals of IT Law: E-commerce Features and Regulation

UNIVERSITÀ POLITECNICA DELLE MARCHE - Facoltà di Economia "Giorgio Fuà"

1 SI CNICA UN E DELL RC UNIVERSITÀ POLITECNICA DELLE MARCHE - Facoltà di Economia "Giorgio Fuà" Fundamentals of IT LAW Prof. Roberto Ruoppo www.univpm.it2

E-commerce Features

Commercial Transactions and Contractual Relationships

ARSITA PO UNIVERS ECNICA DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE E-commerce features Commercial transactions concluded through online means Which are the features linked to these contractual relationships:

• Transnational: they are naturally addressed to actors deriving from different countries, usually a consumer coming from a certain State and a company established in another State; it also implies the use of a different language than that of the State of the consumer's nationality
• Dematerialization of contractual relationships: contract is concluded on a virtual stage; this particular modality of conclusion of the agreement could not place the consumer in the best position to understand the legal implication of the contract: why? Which are the problems linked with the virtual conclusion of the contract?3

Contract Conclusion and Applicable Law

ARSITA PO UNIVERS ECNICA DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE E-commerce features Commercial transactions concluded through online means When the contract is concluded? What are the general terms of the latter? It is not easy to understand which is the applicable law: necessary application of conflict of laws rulesERSITA PO UNIVERS ECNICA DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE

E-commerce Contracts

Business to Consumer (B2C) Contracts

4 A particular kind of contract is usually concluded Contracts stipulated with online platforms are Business to Consumer contract (B2C) . Very often rules governing the contract are established only by the internet service provider: contract's general conditions . There is a unilateral framework provided by only one party and imposed to the consumerERSITA PO UNIVERS ECNICA DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE

Risks in B2C Contracts

5 A particular kind of contract is usually concluded Contracts stipulated with online platforms are Business to Consumer contract (B2C) . There is a unilateral framework provided by only one party and imposed to the consumer . Therefore a risk of abuse arises from the strongest contractual party: a) time limit for the right of withdrawal; b) safeguards provided for the consumer; c) if some obligations are hidden in the contractERSITA PO UNIVERS ECNICA DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE

National Legal Rules and Connection Criteria

6 How are these contracts regulated? What is the NATIONAL legal rule applicable to the contract? . Importance of connection criteria provided for by International Private Law rules (by virtue of indirect function of these rules): e.g. nationality of the buyer; place of establishment of the company · What do we mean when we talk about connection criteria? This concept identifies a specific aspect of the single case or the specific relationship that is defined by the international private law rule as the link with the applicable law: they are the bridge between the specific case and the applicable law7

E-commerce Regulation: EU Regulation Rome I

Main Goal of Rome I Regulation

ARSITA PO UNIVERS ECNICA DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE E-commerce regulation EU Regulation Rome I . The most important private international law provision is the EU Regulation n. 593/2008, so called Rome I: it is the Regulation useful in order to determine the law applicable to international contracts What is the main goal pursued through the Rome | Regulation? . it is to realize a uniform application of contract law in the European market, allowing parties to predict what the legal framework of their contractual relationship is (wherever the contract is concluded or the good delivered) . To avoid the so called forum shopping: the choice of jurisdictional authorities and legal framework applicable in the single case by the most powerful contractual actor8

Balancing Interests in Rome I Regulation

ARSITA PO UNIVERS ECNICA DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE E-commerce regulation EU Regulation Rome I . To avoid the so called forum shopping: the choice of jurisdictional authorities and legal framework applicable in the single case by the most powerful contractual actor · Through this regulation a balance is found between conflicting interests: a) improvement of economic growth (particularly of online nature) and b) protection of consumers9

Article 3 of Rome I: Freedom of Choice

ERSITA PO UNIVERS ECNICA DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE E-commerce regulation Which are the most important provisions of EU Regulation Rome I: · Art. 3 of Reg. Rome I Article 3 Freedom of choice «1. A contract shall be governed by the law chosen by the parties. The choice shall be made expressly or clearly demon- strated by the terms of the contract or the circumstances of the case. By their choice the parties can select the law applicable to the whole or to part only of the contract».10

Rationale for Contractual Autonomy

ERSITA PO UNIVERS ECNICA DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE E-commerce regulation Which are the most important provisions of EU Regulation Rome I: . Art. 3 of Reg. Rome I: the law chosen by the parties should be applied. Which is the reason of this link? The aim pursued by the EU institutions is to protect and safeguard contractual autonomy of the parties involved in the conclusion of international contracts. Because by enhancing contractual autonomy the fundamental aim is to encourage economic international relationships: contractual freedom is considered to be the engine of economic relationships11

Article 6 of Rome I: Consumer Contracts

ERSITA PO UNIVERS ECNICA DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE E-commerce regulation · Other important provisions of EU Reg Rome I: · Art. 6: Consumer contracts «a contract concluded by a natural person for a purpose which can be regarded as being outside his or trade or profession (the consumer) with another person acting in the exercise of his trade or profession (the professional) shall be governed by the law of the country where the consumer has his habitual residence»12

Definition of Consumer and Applicable Law

ERSITA PO UNIVERS ECNICA DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE E-commerce regulation · Other important provisions of EU Reg Rome I: . Pursuant to art. 6, para. 1 concerning contracts concluded by consumers, the law applicable to the contract is the law of the State where the consumer has his or her usual residence . What does the EU Reg. means when talking about consumer? A consumer is a natural person concluding a contract for a purpose different than its professional or commercial activity. It is not an evaluation depending on the degree of education or wealth in general of the person involved. It is rather a conclusion based on the specific contract that has been stipulated by that subject13

Rationale of Article 6: Consumer Protection

ERSITA PO UNIVERS ECNICA 900 DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE What is EU Reg Rome I art. 6 rationale: · The logic reason behind the law determined through article 6 of EU Reg. Rome I is to grant the application of a foreseeable law for the weakest part of the contract, i.e. the consumer . Protection of consumers, as the weakest part of the contract, is a common feature of many provisions (Italian rules of law, such as consumers' code and several EU Law regal rules, including directives and regulations)14

Article 6, Paragraph 2: Choice of Law and Consumer Safeguards

ERSITA PO UNIVERS ECNICA DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE E-commerce regulation Art. 6, para. 2 EU Rome I Regulation «Notwithstanding paragraph 1, the parties may choose the law applicable to a contract which fulfils the requirements of paragraph 1, in accordance with Article 3. Such a choice may not, however, have the result of depriving the consumer of the protection afforded to him by provisions that cannot be derogated from by agreement by virtue of the law which, in the absence of choice, would have been applicable on the basis of paragraph 1»15

Implications of Article 6, Paragraph 2

ERSITA PO UNIVERS ECNICA DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE E-commerce regulation Pursuant to art. 6, para. 2 of Rome I Regulation, contractual parties can determine as the law applicable to the contract the law chosen by them (if the enterprise or the professional exercises its activity in the State where the consumer has its residence) [the same freedom of Art. 3 for normal contracts is provided] An important exception: in any case this choice cannot deprive the consumer of the safeguards and means of protection provided for by the law that should be applicable by virtue of art. 6, para. 1. It means that these standards of protection provided by the law of the State of consumer's residence cannot be disapplied or derogated16

Limits to Contractual Autonomy

Overriding Mandatory Provisions and Public Order

ERSITA PO UNIVERS ECNICA DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE Limits applicable to contractual autonomy Even though contractual autonomy represents one of the cornerstones of Private International Law, there are some limits that cannot be ignored by the parties when choosing the applicable law to the contract (to protect superindividual and general values):

• Overriding mandatory provisions: it is a positive (requiring the application of certain domestic provisions) and a preventive (since it prevents the application of foreign law) limit
• Public order: it is a negative and subsequent limit17

CJEU VKI v. Amazon EU Case

Risks of Standard Contractual Conditions

ARSITA PO UNIVERS ECNICA DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE CJEU VKI v. Amazon EU Risks connected to the choice of law mechanism: often contractual regulation is contained in standard of rules unilaterally established by only one of the parties (so called contractual general conditions, or general terms) that are accepted by the other party because obliged . Consumers when dealing with internet service providers feel obliged to accept contractual general conditions: does anyone really read the content of contractual provisions? . There is a widespread feeling that or these conditions are accepted or the good or service cannot be buyed . This is particularly harmful when there is a very strong contractual asymmetry between contractual partiesR SITA PO UNIVERS ECNICA 900 DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE

Relevant Facts of the VKI v. Amazon EU Case

CJEU VKI c. Amazon EU 18 Relevant facts of the case:

• VKI was an Austrian association for consumers' rights protection
• VKI brought an action against Amazon EU (established in Luxembourg) because of the inclusion in the contract general conditions of a provision allowing Amazon to share consumers' data and informations with other enterprises
• The action was brought before Austrian courts in order to ask an injunction to not share those data in the absence of a specific consent provided from the consumers interested in the conclusion of the contract