Directive on Information Society Services

The EU Directive on e-commerce facilitates the sale of goods and supply of services over the internet within the EU. It is designed to contribute to the proper functioning of the internal EU market by ensuring free movement of “information society services” between member states.  The Directive covers online activity such as online information, advertising, online shopping and online contracting.

It approximates/harmonises laws on information society services, the establishment of service providers, commercial communications, electronic contracts, codes of conduct, out of court dispute settlements and the liability of intermediaries.

The Directive covers a wide range of activities which may take place online. It applies to services provided without the parties being present together at the time the goods are supplied, or in the case of services, at the time when the services are supplied.

The Directive does not cover data protection, taxation, competition matters or legal services.  It does not apply to gambling unless and until it is so extended.  It does apply to certain promotional competitions and games.  It does not affect legal requirements in member states such as safety standards, labelling, liability for goods and requirements relating to delivery of transport of goods.  The Directive does not apply to the activities of notaries, lawyers, gamblers or bookies.

The sale of goods online is covered but the delivery of the goods or the provision of the services is not covered. The use of e-mail in itself is not sufficient to constitute an information society service.

Nature of Information Society Services

“Information society services” are economic activities which take place online.  The sale of goods online is covered by the Directive but the delivery of the goods and provision of off-line services will not be covered. The use of email by itself would not constitute an “information society service”.

“Information society services” are defined as services normally provided for remuneration at a distance by electronic means at the individual request of the recipient of the services.  “At a distance” implies that the services provider and the customer are not simultaneously present at any stage. “Electronic” means that the service is sent initially and received at its destination by electronic equipment for the processing and storage of data.  This does not cover radio or broadcasting services.

Services such as ATM, car parking networks, off-line services, distribution of CDs, voice telephony services, telephone conversations with a service provider (e.g. a lawyer) are deemed not to be by electronic means.   Television and radio broadcasting (e.g. t.v. marketing) will not generally be “information society services” because they are not provided at individual requests. By contrast, services which are transmitted point to point such as video on demand and provision of commercial communications by email, are information society services.

Scope of Directive

The Directive applies to laws and requirements made by States in relation to certain information service providers and information society services, whether applicable specifically or in general.  It applies to requirements which a service provider has to comply with, in respect of taking up the relevant activity, such as qualifications, authorisations or notification.

It also applies to requirements

  • applicable to the pursuit of the activity,
  • concerning the behaviour and conduct of the trader,
  • regarding the quality and content of the service,
  • regarding advertising
  • regarding contracts and the liability of the service provider.

Exclusion from Scope

The Directive does not apply to requirements applicable to goods as such or requirements applicable to services not provided by electronic means.  The provisions do not apply to legal requirements such as safety standards affecting goods, labelling, liability for goods, and requirements for delivery and transport.  It applies only to requirements relating to online activities, such as online information, online advertising, online shopping and online contracting.

The Directive does not cover the use of equipment on-site in a trader’s premises.  It does not apply to radio and broadcasting services.  It does not apply to services which are provided to a material extent through automatic cash or ticket dispensing machines, access to road networks or car parks, even if there are electronic devices present.

The Directive does not apply to services which are not provided through electronic processing, such as telephone systems, teleconferences, telefax and marketing provided at the request of the recipient individually.

Regulated in State of Establishment Only

The Directive provides that information society services are to be regulated in the State in which they are established.  States may not, for reasons falling within the “coordinated field”, restrict the freedom to provide information services from another State.

The co-ordinated field covers legal requirements applicable to the information society service provider, regardless of whether they are general or are specifically designated. The requirements do not apply to

  • intellectual property rights;
  • the emission of electronic money where States have applied one of the derogations in the relevant directive
  • life insurance, non-life insurance, investments in collective investment schemes;
  • freedom to choose the applicable contractual law;
  • obligations concerning consumer contracts;
  • the formal validity of contracts
  • the transfer of rights in real property where they are subject to formal requirements of the law where the property is situated;
  • prohibitions on unsolicited commercial communication by e-mail.

In several of the above cases, there exists separate EU legislation in relation to the matter concerned.

Information Society Services Provider Comply with own State Law

Each EU state must ensure that information society services provided by a service provider within its state, comply with its own internal laws relating to the services.  This covers requirements laid down in the member state applicable to information society services. These are the requirements that a service provider has to comply with in respect of the taking up of the activity of an information society service.

These requirements include such things as qualifications, authorisation, notification, requirements concerning behaviour, requirements regarding quality and contents of the service including those applicable to advertising and contracts and requirements concerning the liability of the service provider.

Member states cannot impose an obligation on a service provider to apply for authorisation in the recipient state before commencing to provide services.

Exceptions Where Regulation in Recipient State Permitted

Member states may only regulate information society services based in another member state in limited circumstances only. States may regulate a particular type of information society service based in another state, where the regulation is necessary for one of the following reasons.

  • public policy reasons, including the prevention, investigation, detection of criminal offences;
  • the protection of minors and the incitement to hatred legislation;
  • the protection of health;
  • public security, including national security and defence;
  • consumer protection measures, including investor protection.

There must be cogent reasons and a serious risk under the above grounds, in order to justify an exception to the general EU wide freedom to provide information society services. Before taking a measure or imposing a requirement, the states must request the other state in which the service provider is based, to take action and have received no adequate response.

Notification must be sent to the Commission and the state where the service provider is based, save in an emergency. The Commission is to examine the compatibility of the measure as quickly as possible.  Where it comes to the conclusion that it is incompatible with EU law, the state of receipt of the services must refrain from taking measures or must immediately terminate them.

Prior Authorisation Not Required

States cannot require service providers to apply for authorisation before commencing to provide information society services.  The taking of and pursuit of the activity of an information service provider is not to be made subject to prior authorisation, or any other requirement having an equivalent effect.  This does not affect authorisations that are not specifically and exclusively targeted at information society services.

Information society service providers must set out certain information which is easily, directly and permanently accessible to the service recipients and the authorities.  The information is to include

  • the name of the service provider, together with a physical and an electronic address;
  • details of any registration in a trade register;
  • where the scheme is subject to authorisation, particulars of the relevant supervisory authority;
  • where the service is provided by a member of a regulated profession, details of the body or institution with which it is registered, together with the professional title granted, reference to the applicable professional rules of the state and the means of access to them;
  • where service providers are subject to VAT, the VAT number.

Service providers must ensure that where there is a reference to price in relation to information society services, that it is indicated clearly and unambiguously. It must indicate whether it includes tax or delivery costs.

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