Intellectual Property Law

Liability of Service Providers under the European Directive on Electronic Commerce

By Martha L. Arias

Directive 2000/31/EC of the European Parliament and of the Council is the European Directive on Electronic Commerce (?the E-C Directive?).  This Directive was issued on June 8th, 2000 with the objective of creating a ?legal framework to ensure the free movement of information society services between Member States.?    The E-C Directive expressly states that it does not intent to harmonize the field of criminal and taxation law among the Member States.  It also clarifies that it does not cover any privacy or related issues encountered in e-commerce transactions; these are covered in other European Union directives.  Thus, the E-C Directive merely establishes the European legal framework of communications in e-commerce transactions.  As years pass, the precepts of this Directive gain relevance given the increase of companies offering telecommunication services, the augment of Internet Service Providers (?ISP?) and the use of the Internet to conduct commerce among the Member States.  This article presents a summary of the most relevant parts of what is considered the legal framework of Service Providers in the European Union; their definition, liability, obligations, and benefits under European Union law.      

Definitions of Information Society Services & Service Provider

The E-C Directive adopts the definition of Information Society Services (?ISS?) found in Article 1(2) of Directive 98/34/EC  (?Directive 98?) as amended by Directive 98/48/EC.  Directive 98 defines ISS as any services provided for remuneration, at a distance (parties are not simultaneously present), by electronic means (through the use of electronic equipment, including digital compression, conveyed and received by wire, by radio, by optical means or by other electromagnetic means) and at the recipient?s request for service (data is transmitted upon the individual?s request).  This definition does not apply to radio broadcasting and television broadcasting services.  

Under the E-C Directive, Service Provider (?SP?) is any natural or legal person providing an information society service. 

Right to Offer Services in the Member States

According to the E-C Directive, European Member States may not restrict the freedom to provide ISS from another Member State. Indeed, prior authorization requirements or similar are forbidden by the E-C Directive.  A Member State may ban ISS from another Member State if this is required for public policy reasons to prevent criminal offenses, to protect public health, for public and national security reasons and to protect consumers and investors.  Banning of ISS from another Member State requires following a specific process contemplated in the E-C Directive.   Thus, under this Directive a Member State may ban SP from another Member State when that SP is engaged in criminal activity, including violation of the community law. 

SP must ?easily, directly and permanently? provide the following information to the users of the service and the competent authorities in the Member States:

(i) the name of the service provider;
(ii) the geographic address where the SP is established;
(iii) e-mail address and any other information on the SP that allows a rapid contact;
(iv) if the SP is registered under a trade or similar public register, the SP must provide that registration number or its identification in that register;
(v) if the SP requires authorization for its activity, it must provide the relevant supervisory authority for that activity;
(vi)  when the SP relates to specific regulatory professions, it must provide the name of the institution or regulatory body where the SP is registered, the professional title and Member State that granted it, reference to the applicable professional rules;
(vii) if the SP undertakes activities subject to VAT, it must provide the respective identification number according to Article 22(1) of the Sixth Council Directive 77/388/EEC (1977). 

Liability of Service Providers

European Member States must ensure that within their states, a SP is not liable for the information transmitted when the SP is only a ?mere conduit? of that information.  A SP is a ?mere conduit? of the information when the SP ?(i) does not initiate the transmission; (ii) does not select the receiver of the transmission; and (iii) does not select or modify the information contained in the transmission.?  Storage of the information for a reasonable period necessary for the sole purpose of carrying out the transmission in the communication network does not make the SP liable.    This specific provision is in harmony with the United States position on liability of ISPs. 

Under the E-C Directive, SPs are not liable for ?caching.?  This means, SP are not liable for the ?automatic, intermediate and temporary storage of information? when this is done with the sole purpose of being efficient in the transmission of the information and provided that:

(i) The SP does not modify the information;
(ii) The SP complies with the conditions on access to the information;
(iii) The SP updates the information according to the existing industry rules;
(iv) The SP does not interfere with the lawful use of the technology used by the specific industry; and
(v) The SP expeditiously remove the information or disable access to that information upon knowing that the information has been removed from the original source, from the network or has been removed by order of an administrative authority. 
 
SPs providing hosting services are not liable for the information stored by the recipient of the service. Yet, the hosting SP may be liable if it knows of any illegal activity or is aware of circumstances leading to illegal activity, and does not remove or disable access to that information 

Monitoring

Member States cannot impose on SP any obligation to monitor the information they transmit or store.  Additionally, under the E-C Directive, SPs are not obliged to seek facts or circumstances indicating illegal activity.  Nevertheless, Member States may set rules requiring SP to provide to the competent authorities, upon request, any information related to the identification of the recipients of the service with whom they have storage agreements.   Likewise, this European provision is similar to its U.S. counterpart.  In the U.S., authorities may subpoena SPs and these must provide the information requested when required in the advance of a criminal investigation. 

Dispute Settlement Mechanisms

The E-C Directive requires that Member States make available out-of-court dispute settlement mechanisms, including electronic mechanisms, for disputes between the recipients of the service and the SPs.  Domestic bodies providing these alternative dispute mechanisms should have appropriate procedural guarantees for the parties concerned and the Members States are required to encourage the establishment of these guarantees.  This is an important tool for users who may not be able to afford expensive litigation costs in another Member State. 

Full post as published by IBLS Internet Law Blog on February 12, 2008 (boomark / email).