August 20, 2005

The ordinance promulgated to facilitate e-commerce is in limbo today. More than two years have passed since its promulgation, but the required steps have yet to be taken.

COMPUTERS HAVE dramatically changed the way we live. Everyday the world becomes more dependent on computers and the internet, as financial institutions, businesses, public utilities, governments and individuals increasingly use computer technology in their routine activities.

The ever-growing contribution of e-commerce to the world economy is a well-documented phenomenon. Computer networks have become fundamental units of the international economic infrastructure. Entities are increasingly making use of the latest IT tools to create, transmit, exchange and store information in electronic form, rather than using the conventional paper documents. The reason is simple: with computers and the internet, transfer of information and data becomes easy and fast.

Though transactions using computer technology are faster and cost-effective, they raise following legal concerns:

— Are agreements made over the internet recognized and enforceable?

— When a document is required to be signed, how is this requirement satisfied in an electronic environment?

— Do electronic documents and records enjoy the same status regarding admissibility, etc., as do paper documents?

— Can documents and records be solely maintained in electronic form?

— What are the standards for establishing the authenticity and integrity of electronic documents and records?

— For which types of transactions is computer technology allowed?

Before we proceed further, however, it must be clarified that though electronic transactions generally signify communications and transactions via the internet, “electronic means” potentially comprise all kinds of telephone services, telefax and other forms of electronic communication. Similarly, though e-commerce primarily focuses on commercial communications via the internet, commercial communications via other electronic means are included.

Electronic transactions are based on documents and signatures that are created, communicated and stored in electronic form. These transactions are mostly exchanged through the internet and are normally stored on a computer readable device. In many cases, the rules governing electronic transactions are derived by extending to them the rules prescribed for conventional dealings and business. There are cases, however, in which electronic transactions raise problems that are not solved simply by extending to them the rules set for traditional transactions.

In order to address the problems raised by electronic transactions, more than 55 countries have taken a variety of legislative steps. According to the nature of the provisions contained in them, these legislative measures can be divided into three general categories:

— Laws granting recognition to electronic transactions and documents executed or made using specified technologies;

— Laws granting recognition to all electronic transactions and documents, while allowing additional legal benefits or presumptions upon transactions and documents executed or made using specified technologies, and;

— Laws granting recognition to all electronic transactions and documents.

In September 2002, Pakistan joined the growing circle of countries legalizing electronic transactions, documents, signatures, etc., by promulgating the Electronic Transactions Ordinance 2002, which comprises nine chapters and a schedule. The formulation of the ordinance was entrusted to the Information Technology Law Forum, headed by Dr Tariq Hasan, adviser to the federal finance minister.

Some of the important features of the ordinance are:

— The ordinance was promulgated on Sept 11, 2002, and it came into force the same day.

— Regarding its scope and reach, Section 1(2) declares that the ordinance extends to the whole of Pakistan. Section 32 provides that the provisions of the ordinance are applicable to acts, matters, or issues occurring outside the country, if they are directly or indirectly connected to or have an effect on or bearing on persons, information systems or events within the territorial jurisdiction of Pakistan.

— All documents, records, information, communication and transactions made, conducted, executed and retained in electronic form have been declared to have the same legal status as those in conventional forms.

— The ordinance has granted recognition to all kinds of electronic signatures. Examples of electronic signatures are: a name typed at the end of an email message by the sender; digitized image of a handwritten signature that is attached to an electronic document; a secret code or a PIN; a unique biometrics-based identifier, such as a retinal scan or a fingerprint; and, a digital signature, etc.

However, where legitimacy has been accorded to all electronic signatures, the ordinance declares that an advanced electronic signature is more authentic than others. A digital signature fulfils the requirements specified for advanced electronic signatures.

The ordinance does not make it mandatory for the authorities to accept, issue, create, retain or preserve documents in electronic form or conduct monetary transactions in electronic form. The authorities are at liberty to opt for the conventional methods of documentation and transactions.

Under the Stamp Act of 1899, stamp duty is to be paid and affixed on certain documents. An electronic document, under Section 10, is exempt from payment of stamp duty for longer of the following durations:

— A period of two years from the date of commencement of the Electronic Transactions Ordinance, 2002, or;

— Until the time the provincial governments devise and implement appropriate measures for the payment and recovery of stamp duty through electronic means. As the provincial governments have not been able to devise the required measures, the exemption prevails.

According to Section 11, all electronic documents are exempt from attestation and notarization for the longer of the following durations:

— A period of two years from the date of commencement of the Electronic Transactions Ordinance, 2002, or;

— Until the time the appropriate authority devises and implements measures for the attestation and notarization of the electronic documents. As the required measures have not been devised, the exemption prevails.

Sections 34, 35, 36 and 37 describe various offences under the ordinance. Though names have not been specified, the provisions of Sections 36 and 37 adequately address hacking, denial of service attacks, worms and viruses, etc.

It must be mentioned that the draft of the Electronic Crimes Act also contains provisions addressing the same issues. If enacted, it will repeal Sections 36 and 37 of the ordinance.

All offences under the ordinance are non-bailable, compoundable, and cognizable. The Court of Sessions has been specified as the court of lowest grade competent to try the offences. The Electronic Transactions Ordinance 2002 belongs to the class of laws granting recognition to all electronic transactions and documents, while allowing additional legal benefits or presumptions upon transactions and documents executed or made by methods having certain specified features.

The ordinance was promulgated in order to promote and facilitate e-commerce in the country. Unfortunately, more than two years have passed and most of the required measures have not been taken. It seems that there is a deliberate negligence on the part of the authorities.

Delayed constitution of the Certification Council; lack of methods for the notarization and attestation of electronic documents and the payment of stamp duty on these documents; non-existence of a training programme for judges, lawyers, investigators and other concerned persons so as to make them capable of handling, understanding and evaluating the various novel issues raised by electronic transactions; and several other grave ambiguities and deficiencies simply show that the authorities are not keen to perform their duties.

All these legal issues need to be immediately addressed, resolved or clarified if we really want e-commerce to flourish in the country.

The private sector must also stress upon the authorities to discharge their duties and, where needed, assist the authorities. After all, private business concerns will have a huge stake in e-commerce.

The writer is a research associate in the department of law and policy of the Lahore University of Management Sciences, Lahore

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