EU proposal to the WTO on modernising e-commerce rules

Despite the rapid growth of international e-commerce, there are currently no multilateral rules regulating digital trade. On 3 May 2019, the EU made public its Communication to the World Trade Organisation ("WTO"), suggesting negotiating proposals for a series of WTO disciplines and commitments relating to e-commerce and telecommunications services ("Proposal").

The Proposal is in response to the Joint Statement issued by the EU and 49 other WTO members on 29 January 2019, which recognises the need for modernisation, and confirms their intention to commence negotiations on trade-related aspects of e-commerce.

The EU Proposal seeks to establish an ambitious set of WTO commitments, aiming to enhance regulatory predictability and improve market access conditions. The Proposal includes suggestions for new rules in relation to:

• Guaranteeing the validity of e-contracts and e-signatures;
• Enhancing e-commerce consumer protection;
• Adopting measures to effectively combat spam;
• Banning customs duties on electronic transmissions;
• Prohibiting mandatory source code disclosure (subject to certain exceptions);
• Facilitating cross-border data flows;
• Ensuring the protection of personal data and privacy; and
• Adhering to the principle of open internet access.

In addition, the Proposal suggests revision of the decades-old WTO reference paper on telecommunications services to reflect modern e-commerce. This includes proposals for preventing anti-competitive practices, improving interconnection and access for public telecommunications services, and making publicly available certain information regarding public telecommunications services. The Proposal also calls on all WTO members to join the WTO Information Technology Agreement and its expansion, and make commitments to improve market access in telecommunication and computer related services. The Information Technology Agreement and its expansion aim to eliminate all taxes and tariffs on IT products.

The Proposal makes a number of suggestions which may not fully align with the current legislative frameworks of some WTO members. For instance, the EU suggests adopting high standards of privacy safeguards and recognising the protection of personal data privacy as a “fundamental right”. This may not be welcomed by US technology companies who rely on the controversial 2017 US-EU Privacy Shield to enable the legal transfer of personal data between American and European companies. Jake Colvin, vice president at the US National Foreign Trade Council said, “the EU’s privacy language isn’t exactly what U.S. industry would propose, but that’s why you have a negotiation.”

With this in mind, the EU Proposal is a welcome step towards negotiating modern e-commerce rules. In a press release, the EU noted that "the negotiations should result in a multilateral legal framework that consumers and businesses, especially smaller ones, could rely on to make it easier and safer to buy, sell and do business online."

Hayley Brady, Head of Media and Digital (UK) at HSF, commented:

"We are currently seeing a range of calls for proposed regulation to deal with the rapid growth of e-commerce, often cross-border.  The current patchwork of rules in place which varies from country to country has led to a variety of issues for both businesses and consumers operating in e-commerce. Watch this space for how this area develops!”

The EU Proposal will be discussed along with proposals from other participating WTO members during negotiations from 13 to 15 May 2019 in Geneva.