The e-Business Act of 2000
The International Companies (E-Commerce Amendment) Act No. Of 2000
Companies (E-Commerce Amendment) Act No. Of 2000
A plain
English explanation
by Hon. Prime Minister Barak T. Sope Maautamate, MP
There has been a revolution in communications. First the telephone and then the fax machine changed the way people could do business and communicate with each other.
Then, in the early 1990’s, computers began to be used by businesses everywhere to write letters, keep accounts, and store information. As the computer industry grew, big companies linked their computers together to form computer networks that could share information from one office to the next.
In 1994, the people in the universities got the idea of connecting computers in the public domain together using the telephone lines, and only a year later a university group in Europe set up a system to allow people with small computers in their homes and offices to connect to a big computer by the telephone and the big computers were permanently connected to each other over special high speed phone lines.
This network of computers is now world wide and is known as the world wide web, or the Internet.
Now, instead of people sending faxes or making phone calls, they use their computers to call up the network of large computers that will connect them to other computers. Computers that are connected all the time allow people who call them to look at the information stored on them. The storage files became known as Internet sites, or web sites.
At first the system would only show text, but now the files stored on the computers have pictures, video, music, and these are artistically designed to look like magazines and even rooms that people can see from anywhere in the world.
Starting in 1997 the Internet started to be used for buying and selling. Now, three years later, there are catalogues and order forms to buy just about anything you can think of. Businesses and governments now order most of their supplies using the Internet and, because it is all done from one computer to another, it is fast and it saves them a huge amount of time and money.
Today there are more than 200 million computers linked together, and the number is growing rapidly, with millions of more computers linking up every year. Soon every household in America and Europe and Australia and many Asian countries will have access to the Internet. People can look up information on any subject and can buy or sell goods and services, send messages or hold meetings where people can talk to each other on the computer screens. Because this is done electronically, they use e to designate that the activity is done over the Internet. So there is e-business, people doing business over the Internet, and e-commerce people selling things over the Internet, and e-mail people sending messages over the Internet.
The Internet has become central to education in all developed countries and all school children, even in primary school, are taught how to obtain information over the Internet. It is also used for medicine for example, is someone gets sick in the Marshall Islands, the local hospital can go on the Internet and discus the case with experts in Hawaii or in other participating medical centers around the world.
The good thing about the Internet, from Vanuatu’s standpoint, is that it does not matter where in the world you are so long as you have access to a telephone, you are in the middle of the world. Distance is no longer a barrier to trade, to knowledge, to working together. We already are using the Internet for our email here in Vanuatu, and all the major resorts and our tourism people are using the Internet to bring new business to Vanuatu. Real Estate Companies, Accountants, Lawyers, the One Smol Bag Theatre, everyone is excited about the prospects of entering a global trade and information network. It is the pathway to our future development and our long term financial success.
Doing business over the Internet requires some changes in our legislation. At the moment, for example, there is no legal basis for making a legally binding contract using only digital records. Other countries, such as Australia, the United States, and other island countries such as Bermuda have already taken steps to assure they have the required legal foundation for their long-term participation in the electronic age.
Recognizing this need, I introduced two legislative acts. The first one, called the Electronic Transactions Act, sets out the rules for making a legal contract using digital records. We have, in this legislation, followed the extensive work done by the Commonwealth of Bermuda, and our legal staff has done an excellent job of re-drafting it so it is in plain language and is directly applicable to Vanuatu.
The second Act, called the E-Business Act, is essentially a law that will allow people from anywhere in the world to set up an electronic business here in Vanuatu to conduct International trade from our islands. The objective here is to establish an Internet Free Trade Zone where businesses can conduct legitimate trading activities over the Internet and take advantage of Vanuatu’s low tax structure to earn greater profits. The point is that whereas the Internet provides a "level playing field" in terms of distance from markets, Vanuatu has an advantage over many other countries by being able to offer a low tax regime as a way of attracting funds to our shores. Vanuatu will benefit from this in a number of important ways;
- By attracting top level experts in the Internet and computer technology that will be locally available for us to improve our own Internet capability.
- By requiring that transactions pass through our National Bank of Vanuatu we can give new life and a substantial boost in revenue to our National Banking Institution.
- By charging government registration fees for establishing Internet sites in the Vanuatu Internet Free Trade Zone.
It is vital to bring more money into the Government. The registration fees will offer immediate direct funding to the Government. The current estimates indicate that within two years there will be about $300,000 a year in revenue from these fees. But the real value of developing our e-commerce and e-business capability will come from increasing the flow of capital into the National Bank of Vanuatu.
Our National Bank is a vital asset for our development. As money flows through the bank from e-business and e-commerce activities, the amount of capital in the bank at any one time will increase dramatically and the bank itself will become wealthy through the application of normal bank fees. If estimates are correct, there will be bank fees of nearly 2 billion Vatu a year, and this will increase dramatically depending on the success of the initial projects.
The goal is to make the National Bank of Vanuatu a modern, first class bank with the ability to do banking business anywhere in the world using the Internet. The National Bank of Vanuatu should be the leading bank in Vanuatu; it should have a large asset base that comes from completely legitimate e-commerce and e-business trading. This will be a critical foundation for the long-term sustainable development of our country.
Let us review these Acts.
The Electronic Transactions Act.
This is a necessity for Vanuatu to be able to do any kind of valid business dealings over the Internet. We have to have legal rules on what is a valid contract and how it will be made. The problem, of course, is that people are making legal agreements without ever meeting face to face. How do you know the person making the agreement is really who they say they are? And once the agreement is made, what if the person backs out by saying, "Oh, that wasn’t really me saying that."
Part 1, Clause 1 gives the definitions of electronic contracts. For example, an "Accredited Certificate" is a computer file that is encrypted like an electronic fingerprint. Each person can have one that is completely unique and only that person will be able to use it. So it is kind of an electronic signature that nobody can forge or steal. These signatures are issued and kept by a company called a "authorized certification service provider."
Further down the definitions list you will find, "electronic signature" and you can see an Accredited Certificate is only one of several possible ways to identify that somebody making the contract is really who they say they are.
"electronic signature product" is defined because the means for making an electronic signature is always going to be a computer program working on a computer.
Objective of the Act
Clause 2. We need this law to be able to say, "this is how we in Vanuatu are going to establish a legal contract made between people over the Internet. Especially what kind of electronic identification is needed to make a transaction and where, exactly, the transaction takes place." Otherwise people are going to worry that maybe their agreements will be invalid or unreliable or unsafe.
Regulatory Policy
Clause 3. To make the Internet business grow, we need to encourage free market forces and allow the greatest possible use of industry self-regulation. This is important because the Internet is based on the idea of free trade of information and open business and commerce policy. It is also important because regulation costs money and the objective is to get the Internet to develop in Vanuatu at the least possible cost and most possible gain to the government.
Clause 4. The Act does not require that the government use electronic records until we feel ready to do so.
Clause 5. Most governments in the developed world and nearly all industries now produce and accept electronic documents and this saves them huge amounts of money in annual on-going operational costs. From ordering supplies to recording and collecting taxes, electronic transactions can save our government money.
Clause 6. Under General exclusions. Some kinds of documents, like a will and testament, will still require a real hand written signature with witnesses and so on.
Clause 7. The Minister may exclude other kinds of documents if required.
Part 2 Legal Requirements for Electronic Records.
Clauses 8 and 9. Here we set out that people can rely on electronic records as a means of documenting their communications and that these records will be just as legal as something written on paper.
Clause 10. If we must be sure the communication was actually delivered, the law says that if the person sending the message asks for a reply and the person getting the message says, yes, they got the message, then the message was legally delivered and received.
Clause 11, sets out the requirement for identifying the person sending or receiving the message. Basically it says that the method for identifying the people involved can be different depending on the nature of the particular transaction. This can be as simple as establishing a code word or phrase that the two people agree on as a method of identification or it can require an accredited certificate depending on what the issue is.
Clause 12 looks at the problem of being sure that the electronic document has not been changed. It is much easier to change an electronic document than one written on paper. There are many ways to assure a document has not been altered. Most documents have dates and specific information about their formation encoded within the files themselves. If the file is changed, the date is also changed.
Clause 13 carries on from Clause 12 by setting out rules for storing electronic documents in their original form. It also rules that if a document is important it can be sent to a third party for safekeeping in its original form.
Clause 14 allows electronic records to be entered into evidence in legal proceedings, taking into account the history of the electronic records.
Part 3. Communication of Electronic Records.
Clause 15. If two or more people want to make an agreement over the Internet, they can do so if they clearly state that they are making an agreement or contract with each other and there is a clear offer and acceptance of the offer.
Clause 16. A person can be said to have made the offer or acceptance if there is evidence that they actually sent the message. The importance of the contract will dictate what kind of security procedures need to be applied to assure the identity of the person sending the message.
Clause 17. Here we set out the rules for establishing that an electronic message has been received. Mostly it involves getting the person to actually respond in some way so it is clear they got the electronic message.
Clause 18. It is often important to be able to say when and where an agreement was reached. Here we set out the rules for identifying the time and place. Basically, a record is sent when and where it leaves the person’s computer and enters the Internet. It is received when and where it leaves the Internet and is recorded on the recipient’s computer. We also say that the location of the sender and the receiver will be the place of business of those people or the place where they ordinarily reside.
Part 4. Electronic Signatures
Clause 19. For important contracts and transactions, people can obtain accredited certificates to identify who they are. A certification service provider will use the normal processes of identification (passport, ID, or personal identification) to determine the actual identity of an individual and once they are assured the person is who they say they are, the certification service provider will issue a special, electronic identification certification that can only be used by that individual.
Clause 20. Here we set out rules for licensing a person to become a provider of accredited certificates in Vanuatu.
Clause 21. Here the government agrees to recognize certification providers and methods from other jurisdictions. Most of the certification systems are done by large International corporations, such as Microsoft, and we need to accept these certificates because the people who will be doing business over the Internet may never come to Vanuatu.
Clause 22. Allows for the use of pseudonyms providing that the certification service provider agrees to reveal the true identity of the person in the event of a legal investigation.
Clause 23. This sets out the liability of an authorized certification service provider to people who rely on the validity of the certificate for electronic transactions.
Part 5. Encryption and data protection
Encryption means changing an original message that can be read by anyone and putting it into a code that can only be understood by people who have the appropriate password to decode the message again.
This lets people protect their data and also helps guarantee that the identity of the person sending and the person receiving the message. For example if a message is encrypted and only the person who is supposed to receive the message can read it, the sender can be sure that any reply from that person citing information in the message can only be a reply from the person it was intended for.
Clause 24. We agree, in this section, to let people use encryption programs to guarantee the security of their data.
Clause 25. It is vital that electronic records that contain people’s personal data be protected against theft or misuse. For example if somebody gives their credit card Clause and address to order something over the Internet, that information has to be protected from somebody trying to steal it.
So people can be sure that Vanuatu is a safe place to do business over the Internet we set out rules here to have a registry showing how the people in charge of looking after the electronic data are going to protect their information. This registry will be available over the Internet on a Government web site and anyone can check up to see if the company they want to do business with has registered and has a good program to protect the data.
Part 6. Intermediaries and E-Commerce Service Providers
Clause 26. An intermediary is someone who handles or stores electronic data for someone else. This includes, for example, somebody who sets up an Internet site on behalf of somebody else. They are just doing a service to protect or store the information in its original form. Here we set out the rules for such a person and make it clear what that person’s liabilities and responsibilities are.
Clause 27. If an intermediary discovers that the information they are holding or that they have put on the Internet is unlawful, defamatory or otherwise irregular the have to take it off the Internet right away and notify the Minister of appropriate law enforcement agency of the relevant facts. So long as the intermediary acts responsibly, they will not be held liable for the illegal information or actions of the person who hired them.
Clause 28. The intermediaries and e-commerce service providers are encouraged to set up an organization to represent themselves and to develop a code of conduct for their activity. They should make that code of conduct available to the Minister who may approve it and publish it in the Gazette.
If they don’t do it, the Minister has the authority to write and publish a code of conduct for them.
Clause 29. If an intermediary or e-commerce service provider violates the code of conduct they can be made to comply with the code by changing their practices or, it that fails, they can be fined for each day on which they violate the code of conduct.
Part 7 General, clauses 30 and 31 set out the ability for the Minister to regulate the provisions of this Act, set out a penalty for violating the Minister’s regulations and sets commencement for the day the Act is published in the Gazette.
This act sets forth a new idea for conducting International business from Vanuatu.
Basically, it will allow people from anywhere in the world to select Vanuatu as a place to set up their Internet sites for business to business activities such as negotiating wholesale business contracts between companies in different nations and for e-commerce activities such as buying or selling software or other goods and services to the world public.
Providing our Government is open and inviting and encouraging, we hope many people will elect to set up their Internet sites here. This will result in many benefits to Vanuatu, including government registration fees, more and improved Internet technology and training, and especially a flow of legal capital through Vanuatu Banks. Business over the Internet is something everyone can see and understand. It is not money laundering or dealing with narcotics or anything illegal. The origin and destination of any money that comes from this enterprise to our banks will be clear to anyone and we will take all necessary precautions to assure that Internet trade done from Vanuatu is honest and moral according to our Laws.
It will also bring improved Internet capacity and training for the People of Vanuatu so we can advance our own international trading practices based on a reputation for being a nation dedicated to advancing e-commerce and e-business.
The Act allows foreign people or companies to set up a Vanuatu based web site and conduct business from that web site without setting up an International Corporation with directors, shareholders, and registered office. Instead, the Act creates an Internet Free Trade Zone with virtual office spaces called Cybersuites. The Cybersuites come with a range of services, including design and maintenance of the web sites, and handling financial transactions on behalf of the people who rent the Cybersuites, who are called Cybersuite Proprietors.
There are, therefore, two central aspects to the Act. It enables a Vanuatu International Company to set up Cybersuites and rent these. Secondly, it provides the legal basis for Cybersuite Proprietors to conduct business over the Internet.
Part 1 of the Act gives definitions of the terms used in the Act. The key players defined include an International Vanuatu company that provides Cybersuites for cybersuite proprietors. The Cybersuite is an Internet site located on a computer or on computers. Its assets are held in an account managed by a contractual arrangement between the Vanuatu International Corporation and the Cybersuite proprietor.
Clause 2 clarifies the legal status of a cybersuite and says that it is treated as a separate legal entity from the Vanuatu International Corporation that is hosting it. Cybersuites can make legally binding contracts just as a corporation can.
Clause 3 clarifies the nature of the contract between the company and the cybersuite proprietor.
Part 2 of the Act sets out the terms of operation of the parent company and the Cybersuite Proprietors.
Clause 4. The parent Vanuatu International company is given the ability to conduct electronic business activities and may contract with any person to set up a Cybersuite.
Clause 5. says that if a Cybersuite proprietor is not a resident of Vanuatu they do not have to be licensed under other Vanuatu laws to carry on their web site activities. If the Cybersuite proprietor is a resident of Vanuatu or a local company their web site activities are subject to the normal laws and regulations of any local enterprise.
Numbers 6 and 7 state that electronic contracts made by the company or the Cybersuite proprietor are legal and are taken to be formed in Vanuatu. This is important because it domiciles agreements made by the contractual parties over the Internet in Vanuatu and solves the problem of where, in hyperspace, a contract is settled.
Part 3 of the Act concerns the way accounts must be handled.
Numbers 8, 9 and 10 state that the parent company will keep accurate and separate records for their own affairs and for the business transactions of the cybersuites. The company must hold the assets of any Cybersuite on trust for the Cybersuite proprietors. Further, the Act assures that the assets of a Cybersuite are under the ownership and control of the Cybersuite Proprietor.
Numbers 11 and 12 of the Act sets out how funds are credited to and debited from accounts and assures that the assets of the company are held separate from those of the Cybersuites.
Clause 13 and sets out also how Cybersuites are terminated and guarantees that any credit balance belongs to the Cybersuite proprietor.
Clause 14 sets conditions on how securities are issued by the company.
Part 4 of the Act deals with miscellaneous matters.
Clause 15 assures that the company will take adequate steps to protect the electronic data in its care and sets out requirements for adhering to code of conduct and the security of data (such as personal credit card details of customers) described in the Electronic Transactions Act of 2000. The Minister is given authority to make regulations relevant to the implementation of this Act.
Clause 16 protects the assets of the cybersuites in the event the International Company hosting the cybersuites is wound up for any reason.
Clause 17 sets a fee of for registering a cybersuite with the Vanuatu Financial Service Commission. The parent company is responsible for paying this fee on an annual basis.
Clause 18 Requires that all companies hosting cybersuites must keep their accounts in the National Bank of Vanuatu. This is necessary so the Government can, through the National Bank of Vanuatu, keep track of the transactions being made via the cybersuites and take necessary steps if there is evidence of money laundering or any other illegal activity. It will also help move our National Bank into the electronic age of e-commerce and e-business considerably expanding its revenue flow. This will require considerable capacity building and dynamic and proactive leadership on the part of the National Bank of Vanuatu.
Clause 19 allows the Minister to make regulations required for the implementation of the Act and
Clause 20 states the act commences on the day it is published in the Gazette.
The International Companies (E-Commerce Amendment) Act Of 2000
The Electronic Transaction Act and the e-Business Act require some amendments to Section 10 of the International Companies Act No. 32 of 1992 to include mention of doing business over the Internet.
After Paragraph (2)(a) the following paragraphs were added:
(ab) offers goods or services:
(i) electronically from a place of business in Vanuatu; or
(ii) through an internet or other electronic service provider located in Vanuatu; or
(ac) makes it known by way of advertisement or by any statement on a web-site or by an electronic record as defined in the Electronic Transactions Act No. of 2000 that it may be contacted at a particular address in Vanuatu or it uses a Vanuatu domain address;".
Companies (E-Commerce Amendment) Act No. Of 2000
There must also be a mention of e-commerce in the Companies act.
Amendment of section 378
Section 378 of the Companies Act [CAP 191] is amended by inserting after subsection (1) the following subsection:
"(1A) Nothing in subsection (1) is to be construed so as to prohibit an exempted company from:
offering goods or services electronically from a place of business in Vanuatu or through an internet or other electronic service provider located in Vanuatu; or
making it known by way of advertisement or by any statement on a web site or by an electronic record as defined in the Electronic Transactions Act No. of 2000 that it may be contacted at a particular address in Vanuatu or uses a Vanuatu domain address.".