Public FTAA ecom inf 126 February 27 2002 Original English

Public FTAA. ecom/inf/126 February 27, 2002 Original: English E-commerce and consumer protection legal aspects ALCA –XII MEETING OF THE JOINT GOVERNMENT AND PRIVATE SECTOR EXPERTS COMMITTEE FOR ELECTRONIC COMMERCE February 13 -15, 2002 Panama RICARDO BARRETTO CARVALHO DE FREITAS E FERREIRA ATTORNEYS AT LAW ON BEHALF OF C MARA BRASILEIRA DE COMÉRCIO ELETRÔNICO (Brazilian Chamber of Electronic Commerce)

MISSION The mission of the Brazilian Chamber of Electronic Commerce is to discuss, take a stand, promote, represent and defend the collective interests of companies, entities and users involved in electronic commerce activities.

• Fostering of electronic commerce • Discussions on regulatory initiatives a) Regulation of electronic commerce; b) Certification and validity of digital documents; c) Postal Bill of Law; d) Specific taxation of electronic commerce; e) Electronic Government actions. • Dialogue with political leaders • Digital inclusion Promotion of initiatives by the business community • Catalyst and Synergic agent for the promotion of electronic commerce

ELECTRONIC FEVER x-COMMERCE • e-commerce • g-commerce • m-commerce WAP PORTALS m-banking

WORLDWIDE - INTERNET USERS At-home users, July 2001 Current Internet Active Internet Universe, July Estimate 2001 Sessions per Month Time Spent per Month Global 426, 491, 303 236, 258, 612 18 9: 36: 12 United States 165, 180, 807 102, 077, 288 20 10: 19: 06 Japan 45, 659, 923 20, 061, 849 19 9: 27: 04 Germany 27, 914, 911 15, 144, 455 17 7: 49: 23 South Korea 26, 590, 004 13, 098, 235 13 19: 20: 17 United Kingdom 23, 870, 341 13, 098, 235 13 6: 22: 21 Italy 18, 697, 197 8, 321, 314 12 5: 48: 17 Canada 14, 445, 047 8, 754, 653 19 9: 36: 12 Brazil 11, 937, 559 6, 038, 867 13 8: 10: 48 Taiwan 11, 602, 523 5, 021, 109 13 8: 04: 21 France 11, 107, 974 5, 468, 447 15 6: 58 9, 674, 157 5, 640, 427 13 7: 41: 43 Australia Source: Nielsen//Net. Ratings

ALCA REGION- INTERNET USERS Nation Population Internet Users (Source) Active Users (Nielsen//Net. Ratings) Argentina 37. 4 million 2. 0 million (D'Alessio IROL) 1. 9 million Brazil 174. 5 million 6. 1 million (e. Marketer) 6. 0 million Canada 31. 6 million 14. 2 million (Media Metrix Canada) 8. 8 million Chile 15. 3 million 1. 8 million (Int'l Telecom. Union) NA Colombia 40. 3 million 700, 000(IDC) NA Mexico 101. 8 million 2. 3 million (e. Marketer) 1. 7 million United States 278. 0 million 168 million (Nielsen//Net. Ratings) 102. 0 million (organized by Cyber. Atlas)

GROWING OF B 2 B (Source: IDC)

Billings from E-Commerce in Latin America 2001 (U. S. Dollars) Brazil $906 mi Mexico $134 mi Argentina $119 mi Chile $45 mi Source: Boston Consulting Group

DATAFOLHA: 23 million users in Brazil (September 2001)

BRAZIL AS A REFERENCE IN BANK SOLUTIONS ØHome/office banking transactions 1999 -2000: increase of 46% ØE-banking transactions 1999 -2000: increase of 192% Ø 74% of the banking transactions are automated Ø 23% of the population have bank accounts 30 MILLION Source: CNAB, 2000

BARRIERS • LOW SPEED CONNECTIONS • DEFICIENT INCOME DISTRIBUTION • INVESTMENT DIFFICULTIES POSITIVE ASPECTS • POTENTIAL MARKET • GREATEST INCREASE IN USERS • INCREASED PC SALES • ECONOMIC STABILITY • EXPANSION OF NETWORKS – DEVELOPMENT OF TELECOMMUNICATIONS

PAPER SOCIETY PAPERLESS SOCIETY ELECTRONIC CONTRACTS • NO SPECIFIC LEGISLATION IN BRAZIL (only on the validity of electronic documents – MP 2200) • FLEXIBLE PROVISIONS OF THE CIVIL CODE NOT DEFENDED FORM LAWFUL OBJECT CAPACITY OF THE AGENT

ELECTRONIC CONTRACTS INTERNATIONAL TRANSACTIONS SPECIFIC LEGAL ISSUES PLACE OF TRANSACTION APPLICABLE LAW • PRIVATE INTERNATIONAL LAW ØBRAZIL – LICC q. BETWEEN PARTIES ABSENT – Domicile of offeror q. BETWEEN PARTIES PRESENT – Place obligation constituted Chats and similar e-mail Clickwrap Present Absent

ELECTRONIC CONTRACTS INTERNATIONAL TRANSACTIONS SPECIFIC LEGAL ISSUES PLACE OF TRANSACTION APPLICABLE LAW DEFINITION OF APPLICABLE LAW THE LAW OF THE COUNTRY IN WHICH THE OBLIGATION IS CONSTITUTED APPLIES NEED FOR DEFINITION ON THE PLACE/MOMENT OF THE CONSTITUTION OF A CONTRACT

ELECTRONIC CONTRACTS SPECIFIC LEGAL ISSUES DIGITAL SIGNATURE + CRYPTOGRAPHY THE E-COMMERCE LAWS ADDRESS THIS SUBJECT (CERTIFICATION, CRYPTOGRAPHY TECHNOLOGIES, ETC. . . ) ICP - BRASIL (Brazilian Public Keys Infrastructure): MP 2. 200/2001

ICP- Brasil Brazilian Public Keys Infrastructure • Provisional Executive Act (MP) 2200 -2/2001 MANAGEMENT COMMITTEE AC-RAIZ AC AC AC

ICP- Brasil Brazilian Public Keys Infrastructure • Provisional Executive Act 22002/2001 • DOCUMENTS ARE PRESUMED AUTHENTIC IN RELATION TO THE SIGNATORIES • OTHER CERTIFICATION METHODS ARE ADMITTED, BUT THE PARTIES OR PERSONS OCCASIONALLY INVOLVED WITH THE DOCUMENT SHALL CONSENT BEFOREHAND • PRIVATE KEYS ARE OF THE EXCLUSIVE KNOWLEDGE AND RESPONSIBILITY OF THEIR OWNERS • REGULATION : 9 RESOLUTIONS OF THE MANAGEMENT COMMITTEE REGULATING THE TECHNICAL ASPECTS, SUCH AS SECURITY, CONTINGENCY PLAN, MINIMUM REQUIREMENTS, ETC • ORDINANCE N. 1 - PRIVATE AND PUBLIC AC-RAIZ KEY ISSUED • FIRST AC : POST OFFICES

CONSUMER RELATIONSHIP - Consumer Protection Code (CDC) Art. 2 - A consumer is any natural person or legal entity that purchases or uses a product or service as the end user. Art. 3 - A vendor is any public or private, Brazilian or foreign natural person or legal entity, as well as non-incorporated entities, that develop production, assembly, creation, construction, transformation, import, export, distribution or commercialization activities of products or services rendering. Paragraph 1 - Product is any movable or immovable, material or immaterial asset Paragraph 2 - Service is any activity supplied in the consumer market, subject to remuneration, including those of a banking and financial, nature and credit and insurance-related, except for those resulting from relationships of a labor nature.

ECONOMIC PROCESS II CIRCULATION III DISTRIBUTION I PRODUCTION IV – CONSUMPTION End user INDIVIDUAL THAT FULLY OR PARTIALLY USES THE GOODS

VENDOR CONSUMER

CONSUMER PROTECTION IN INTERNATIONAL TRANSACTIONS Public Order Rule – art. 17 LICC Art. 101, CDC – Action brought in the plaintiff´s domicile RE – 63981 – SP “CONSUMER LAW. MOVIE CAMARA PURCHASED ABROAD. RESPONSIBILITY OF THE BRAZILIAN COMPANY OF THE SAME MAKE (“PANASONIC”). GLOBALIZED ECONOMY. ADVERTISING. CONSUMER PROTECTION (. . . )” • GLOBALIZED ECONOMY • BENEFIT OF INTERNATIONALLY KNOWN BRAZILIAN COMPANIES – CORRESPONDING ONUS

CDC IN BANKING OPERATIONS Art 3, Paragraph 2 - Service is any activity supplied in the consumer market, subject to remuneration, including those of a banking and financial nature, and credit and insurance-related, except those resulting from relationships of a labor nature. BANKING SERVICES = BANKING OPERATIONS • FINANCIAL RESOURCES ARE NOT FOR END USE

CDC IN BANKING OPERATIONS SUPPLIER CASE BY CASE BANK CUSTOMER CONSUMER: HYPOSUFFICIENT

IN RELATION TO THE OPERATIONS OFFERED TO THE PUBLIC IN GENERAL, THERE WAS CONSENSUS THAT THE CDC WOULD APPLY FOR SAVINGS –STJ DECISION MJ ORDINANCE/SDE No. 3, OF 03. 15. 2001 Clauses in bank, financial and credit card contracts that consider the silence of the individual consumer as tacit acceptance of the amounts charged, of the information presented in statements or acceptance of modifications of indices or of any contractual amendment are invalid.

IN RELATION TO OPERATIONS OFFERED TO THE PUBLIC IN GENERAL, THERE WAS CONSENSUS THAT THE CDC APPLIES NATIONAL CONFEDERATION OF THE FINANCIAL SYSTEM DIRECT UNCONSTITUTIONALITY ACTION QUESTIONING OF THE APPLICATION OF THE CDC IN BANKING, FINANCIAL CREDIT AND INSURANCE-RELATED SERVICE RELATIONSHIPS ARTICLE 192, FC - ONLY COMPLEMENTARY LAW CAN REGULATE THE NATIONAL FINANCIAL SYSTEM CDC - Statutory Law Precedent - AGU Opinion on CADE’s authority to judge concentration acts of financial institutions

CDC: BASIC CONSUMER RIGHTS OBJECTIVE LIABILITY OF THE VENDOR (independently from culpa) • • ACTION OF CRACKERS • UNAUTHORIZED USE OF PASSWORDS SYSTEM FAILURES ASSISTANCE FROM HIGH TECHNOLOGY SECURITY COMPANIES ACTS OF GOD / FORCE MAJEURE

CDC: BASIC CONSUMER RIGHTS LIABILITY • IF THE OFFENSE HAS MORE THAN ONE PERPETRATOR, ALL WILL BE HELD JOINTLY AND SEVERALLY LIABLE FOR THE COMPENSATION OF DAMAGES. THE PARTY IMPUTED LIABILITY IS ONLY ENTITLED TO SUE WHO ACTUALLY CAUSED THE DAMAGE. REVERSAL OF BURDEN OF PROOF • CONSUMERS ARE NOT OBLIGED TO PROVE WHAT THEY ALLEGE - IT IS UP TO THE VENDOR TO PROVE THE LACK OF GROUNDS OF THE ALLEGATIONS DIFFICULTY OF THE FILING OF INFORMATION TRANSITED VIA INTERNET X MAINTENANCE OF A RELIABLE DATA HOSTING SYSTEM: RECOMMENDABLE concrete proof for unfounded allegations

CDC: BASIC CONSUMER RIGHTS • OBLIGATION TO INFORM • ADEQUATELY INFORM THE CONSUMER IN RESPECT TO THE IMPORTANT CHARACTERISTICS OF PRODUCTS ON THE INTERNET: CLARITY IN RELATIONTO THE RISK OF ACCESS BY THIRD PARTIES AND MANIPULATION OF THE USER’S DATA • OBLIGATION OF PRECAUTION AND SAFETY • VENDOR IS RESPONSIBLE FOR OFFERING SAFE PRODUCTS AND SERVICES RISK: ACTION OF HACKERS AND VIOLATIONOFPERSONAL INFORMATION

ABUSIVE CONTRACTUAL PRACTICES • TIE-IN SALE • UNBALANCED CONTRACTS • OTHER SPECIFIC CLAUSES WITH NO LEGAL EFFECT • LIMITATION OF LIABILITY • Home broker – brokers may not disclaim liability ADHESION CONTRACTS PROVISIONS SHALL BE PREVIOUSLY KNOWN CONTRACTS REGISTERED IN NOTARY PUBLICS “HYPERLINKED INSTRUMENTS / CONTRACTS NOT EXPRESSED OR IDENTIFIED

CDC: BASIC CONSUMER RIGHTS RIGHT OF RETRACTION CONSUMERS MAY RETRACT FROM A CONTRACT WITHIN THE PERIOD OF 7 DAYS, WHENEVER A CONTRACTING FOR THE SUPPLY OF PRODUCTS OR SERVICE OCCURS OUTSIDE THE COMMERCIAL ESTABLISHMENT • CORRECT, CLEAR AND COMPLETE INFORMATION OBJECTIVE AND SOLIDARY LIABILITY OF SUPPLIERS PUBLICITY AND ADVERTISING - THE RIGHT TO INFORMATION AND MISLEADING ADVERTISING

DATA PROTECTION “VIRTUAL MARKET” SITUATION • Expansion of Web • Increase in electronic transactions • Lack of specific regulation on the circulation of data, security and privacy LEGAL INTEREST IN THE MATTER

INVASION OF THE INTIMACY AND PRIVACY OF PERSONS TECHNOLOGICAL DEVELOPMENT EXPANSION OF DATA EXCHANGE AND DIFFUSION CAPACITY

J There is no specific legal provision of data protection in the Brazilian legal system, as there is in the UK and EC data protection law. However, the combination of different alternatives of control set forth in the Brazilian Constitution, specific laws (including the General Telecommunications Law, Consumer Protection Code, Law 9507/97 on “Habeas Data”, Law 4595/64, which guarantees Bank Confidentiality, and others), and agreements can be considered to achieve a certain level of protection. J The Federal Constitution carries general principles that protect the privacy and confidentiality of data communication.

“ART. 5 OF THE FEDERAL CONSTITUTION (. . . ) X - the privacy, private life, honor and image of persons are inviolable, and the right to compensation for pecuniary damage or pain and suffering resulting from their violation are guaranteed. XII - the confidentiality of correspondence and telegraphic, data and telephone communications are inviolable, except in the latter case, by court order, and in the events and in the manner established by the law for purposes of criminal investigation or criminal procedural discovery. ” The data transmitted via Internet are included in the data communication concept.

CDC (Consumer Protection Code) rules applicable to consumer relationships arising out of the Internet consumers will have access to information contained in files, records and registrations, and to the personal and consumer-related data filed on them, as well as to the respective sources of such information. òthe opening of any file, card, record and personal and consumer-related data shall be communicated in writing to consumers, when not requested by them.

consumers may avail themselves of the constituional “Habeas Data” remedy to ensure knowledge of information that relates to them, as well as to rectify their data. • • violation of consumer rights can characterize crime against consumer relationships typified in the CDC, as well as give rise to actions for damages for pecuniary damage or pain and suffering.

PRIVACY POLICY Inform consumers on the destination of their data; òObtain their consent to use such data; òGuarentee the security, integrity and privacy of the data; òGuarantee consumers access to their data. IN PRACTICE, SUCH PRIVACY POLICIES DO NOT WORK OR ARE NOT TOTALLY GUARANTEED COMMERCE AND UNAUTHORIZED USE OF DATA, SPAMS, COOKIES, HACKERS, ETC.

Who is liable on the Internet? • PRODUCTION OF INFORMATION • HOSTING OF INFORMATION • ACCESS TO INFORMATION INTERNET • Access providers are obliged to look out for the security of the data supplied to them, informing the protection methods employed. • They are not liable for the content of the information, like telephony service providers.

Who is liable on the Internet? • PRODUCTION OF INFORMATION • HOSTING OF INFORMATION • ACCESS TO INFORMATION INTERNET • Servers generally host the confidential data of users of various content providers, “portals” and sites. In case of violation, unauthorized use or disclosure of data, and without the consumer’s consent, the consumer may file a lawsuit against the content provider, site or “portal” in which the transactoin contracted occurred and that caused him or her damage. The party imputed liability merely has the right of recourse against the party truly liable for the security of the information.

Who is liable on the Internet? • PRODUCTION OF INFORMATION • HOSTING OF INFORMATION • ACCESS TO INFORMATION INTERNET • However, the content providers, or “portals” and sites are responsible for the services rendered and/or for the quality of the products supplied to users, since an electronic transaction is no different to a purchase made in a shop, the only difference being the medium used.

• If the offense has more than one perpetrator, all will be held jointly and severally liable for the compensation of damages as set forth in the consumer laws. • The reversal of the burden of provided for in the CDC may be applied in consumer relationships. All sites, content providers and access providers shall provide clear information on the security and purchasing instruments and mechanisms, and the payment and delivery terms, etc.

OTHER RELEVANT ASPECTS • COPYRIGHT • TAX LAW • TRADEMARK LAW • JURISDICTION • PRIVACY PROTECTION

Ricardo Barretto Ferreira da Silva_barretto@cff. com. br www. camara-e. net www. carvalhodefreitaseferreira. com. br XII meeting of the joint government and private sector experts committee for electronic commerce THIS PRESENTATION IS OF A MERELY INFORMATIVE NATURE AND SHOULD NOT, UNDER ANY CIRCUMSTANCE, BE CONSIDERED AS THE LEGAL OPINION OF THE AUTHORS AND THE OFFICE THAT THEY REPRESENT WILL NOT BE RESPONSIBLE FOR THE USE OF THIS MATERIAL FOR LEGAL PURPOSES, WHETHER AS A LEGAL OPINION, FOR THE SOLUTION OF CONCRETE CASES OR ANY OTHER PURPOSE. THE REPRODUCTION OF THIS MATERIAL IS AUTHORIZED, PROVIDED THAT IN ITS ENTIRETY AND WITH DUE MENTION OF THE SOURCE.