The European Union’s new electronic commerce directive, approved last week by its legislature, will become national law within all fifteen member states during the next eighteen months.

Among its several aims, the directive will remove promotional anomalies. In example: video clips from a UK soccer website being banned in France because they show [currently illegal] alcohol advertising in the background. Or the infraction of German retail law by European online booksellers offering large promotional discounts.

The directive also establishes a key principle which the EU intends to apply to other e-commerce legislation: if a company complies with the rules set in its home country, it can offer its services online throughout the EU without running the risk of breaking another country's laws. Explained an EC official: "For small companies, the home country principle is a really key issue. The internet is at last an affordable means of promoting themselves across borders, but the legal search costs of finding out what they could and couldn't say in each country are formidable."

Another requirement of the directive is that online vendors must comply with the law in the country where they locate their main support services for a website – not necessarily in the country where the vendor is headquartered. A newspaper, for example, may be registered in the UK but operate its website operation from Germany. In which case the operator must comply with German as opposed to UK rules.

But the directive excludes consumer contracts, and the Commission has yet to clarify the applicable law covering these. At present, consumer contracts are covered by the Brussels and Rome regulations – controversial rules now under discussion by the European Parliament.

"The directive is a good first attempt in an environment where none of us can predict what happens in the next couple of years, but there are still lots of issues to be cleared up," said Elizabeth Crossick, an e-commerce lawyer at Freshfields Deringer in Brussels.

The directive also requires that websites must display any sponsorship. Additionally sites must give details of where the provider is based. There are also guidelines on how an electronic contract is agreed, and how consumers must positively confirm their intention to order, obviating the problem of a mistaken mouse-click.

In another important principle, the directive states that telecoms companies acting as conduits for information on the internet cannot be held liable for content of websites.

Certain financial services rules are also omitted from the scope of the directive, and these will be addressed in a green paper due for publication later this year.

Sourced from: Financial Times