EU accused of subterfuge in e-commerce law-making

The European Commission has opened itself up to criticism from consumers and industry alike over its handling of a proposed law governing cross-border online disputes within the 15-nation European Union.

Justice and home affairs officials charged with drafting the new law, dubbed Rome II, have been accused of ducking out of a heated public debate on this law by withdrawing a discussion document on the code and re-submitting the code on a fast-track procedure that requires virtually no public debate.

"The green paper has been removed from the agenda but when it returns it will go straight to draft regulation, rather than discussion document," said Joaquim Nunes di Almeida, a political adviser to justice and home affairs commissioner Antonio Vitorino.

The draft regulation will be presented to commissioners for approval after the August recess and before the end of the year, Almeida said, but he would not say exactly when the proposed law would come out.

The code is expected to favor the laws of the country in which a consumer is based, rather than those that apply where the Web site is run from, in the case of a cross-border dispute.

The justice and home affairs officials have justified their consumer-based approach by saying that without this focus consumers won't have the confidence to go online, and e-commerce will therefore never take off in Europe.

But now that they have withdrawn Rome II from open discussion, even consumer groups are criticizing them.

"It would be unfair if the Commission just imposed this regulation. There is a need for consultation. We'd prefer there to be a green paper first and only then, once comments had been heard, should the Commission draft a regulation," said Victoria Villamar, legal officer at Europe's biggest consumer lobby group, BEUC.

"This looks like subterfuge," said Thomas Vinje, a partner in the Brussels office of U.S. law firm Morrison & Foerster. "The justice and home affairs officials realized that a public consultation process on Rome II would get ugly, so they have sought to escape that and push it through with the minimum consultation possible."

Spokesman on justice and home affairs issues Leonelo Gabrici said Thursday at a Commission press briefing that the EU executive body should "not waste taxpayers' money" by holding additional consultations. "We believe we should go straight for a practical instrument," he said.

Gabrici said that the officials drafting the Rome II code "have already taken into account the views of others during consultations over the Brussels I regulation," a related piece of legislation that was adopted by justice ministers amid a similar outcry late last year.

The organizations most affected by this new piece of legislation will be small and medium-sized companies looking to take advantage of the Internet. The legal burden of having to cover themselves for lawsuits under 15 different rules of law will be prohibitive, argue lawyers following e-commerce law-making in Europe.

"The mere threat of Rome II, and the legal uncertainty it promises, is already deterring some companies from opening European e-commerce operations," said Vinje. His firm represents numerous internet companies including Yahoo.

Gabrici stressed that whatever form the draft Rome II regulation will take, it will not clash with the e-commerce directive.

"That's true in theory," said Mike Pullen, a partner at U.K. law firm DLA. "But in commercial realitythere is a direct conflict, and this in itself will create legal uncertainty for any organization distributing its goods or services online."

The e-commerce directive, as with numerous other internal market laws, rules that a cross-border dispute should be settled under the law of the country where the supplier or Web site is based. Rome II, in the form it has taken until now, argues the exact opposite. It favors the country of destination,rather than the country of origin.

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