3 Business Environment

E-commerce is a business issue. It will affect all businesses in Ireland, and in particular those engaged in international trade. It will also affect businesses previously sheltered from international competition in home markets. It can make a significant contribution to the achievement of national social and economic objectives. It also offers significant new enterprise and inward investment opportunities. A supportive and adaptive business environment is essential to realise this potential.

The changes being brought about by e-commerce at enterprise level require new frameworks for conducting business: government policies relating to commerce need to be re-examined, as most were formed with a very different image of commerce in mind. Reform is needed in legal and regulatory areas, such as trusted third parties, contract law and tax collection. However, action is also required in other policy areas that influence enterprise competitiveness including logistics, skills, awareness, training, and international marketing.

This section sets out the key actions required on the part of government, the development agencies, and the enterprise sector. A partnership approach is required to speedily implement the required changes.

3.1. Legal and Regulatory Framework

The development of a secure and conducive legal environment for e-commerce could establish a first mover advantage for Ireland as an e-commerce business jurisdiction. The legal framework for traditional forms of commerce has developed over the centuries, but e-commerce is giving rise to fundamentally new forms of commerce, for which the legal framework remains to be determined. A number of the key aspects of the legal framework are being discussed at EU level, but Ireland must also introduce domestic measures to provide a clear, certain and secure environment for e-commerce transactions.

3.1.1 Certification and Trusted Third Parties

Trust is essential to all commercial undertakings. In e-commerce, trust is particularly important as the parties to the transaction may never meet – the identity of partners is therefore a serious issue. The buyer wants assurance that the seller (a) exists, and (b) is worth doing business with. The seller likewise wants to know that the buyers are who they say they are, and that the payment is secure.

A system whereby organisations are accredited to certify the existence of individuals and companies in Ireland is required. Such organisations should interact with their counterparts around the world so that the same identification information, on potential suppliers and customers, can be made available to Irish companies and individuals trading internationally. It is proposed that accreditation should be on a voluntary basis.

The provision of assurances that individuals and companies are worth doing business with should be left to the market. Financial and other organisations may decide to provide such information.

An Post, through its subsidiary PostGem, and the Chambers of Commerce of Ireland have both launched certification services for enterprises in the first half of 1999, which are welcomed.

A draft consultation paper¹ has been prepared on a proposed future approach. It is expected to form the basis for a Bill, to be published in the final quarter of 1999. The consultation paper proposes mechanisms to ensure legal recognition of secure electronic transactions and will also include outline legislative provisions on electronic contracts, electronic signatures, electronic writing as well as certification service providers and related matters. It advocates providing:

• Legislative recognition of electronic signatures
• A legal basis for accrediting certification service providers
• Recognition of advanced electronic signatures, with defined characteristics
• Recognition for “certificates” linking signature verification data to a person and confirming the identity of that person, and “qualified certificates”, which meet the requirements of the accreditation authority and are provided by a certification service provide (Trusted Third Party).

The Accreditation Scheme² envisaged is already at an advanced stage of development in other European countries. However, the accreditation criteria against which certification service providers might be assessed are still being developed. A first mover advantage could accrue to Ireland by providing such an accreditation service in advance of international developments. The characteristics of the scheme to be applied in Ireland are becoming clear:

• Provision of certification services will not be subject to prior authorisation by a Minister
• Accreditation of these certification services will be voluntary in nature
• “Evidential weight” will be given to both electronic signatures and advanced electronic signatures, but by implication, chain of evidence requirements will be more rigorous for signatures associated with non-accredited certification service providers

The following actions are required:

Government Action

• Bring forward, as a matter of urgency, the Bill to provide a framework for voluntary certification. (Department of Public Enterprise and Department of Enterprise, Trade and Employment

Agency Actions

• Develop and administer a national voluntary scheme for accrediting organisations to certify that individuals and organisations in Ireland exist. The accreditation scheme should be put in place quickly and prior to the enactment of legislation. (National Accreditation Board)
• Enterprise Actions
• Encourage trade and other organisations to establish self-regulating standards of approval for use by companies engaging in e-commerce.

3.1.2 Copyright

Copyright protection is fundamental to e-commerce and digital distribution of content. A Copyright Bill is being brought forward by the Department of Enterprise, Trade and Employment to be passed into legislation by the end of 1999. It accommodates all outstanding EU and World Trade Organisation (WTO) Directives, and is intended to provide international protection for copyright material in Ireland. Ideally, the legislation should enable the promotion of Ireland as the most secure place from which to do digital business.

A number of actions are required including:

Government Action

Ensure that the new copyright legislation:

• Makes it an offence to post copyright material on public web sites without the copyright owner’s consent, even if not downloadable
• Includes protection for technical designs posted on the Internet
• Enhances the enforcement powers and penalties for electronic breach of copyright

(Department of Enterprise, Trade and Employment)

3.1.3 Electronic Contracts

A Directive on certain legal aspects of electronic contracts is under discussion at EU level, but it could be 2001 before an agreed directive is implemented. Ireland should move in the interim to provide a framework of legal certainty. Ireland should set out a legislative framework for e-commerce contracts, specifically addressing the point of creation and conclusion of contracts.

Businesses must ensure that in making offers for the sale of goods or supply of services on their websites, they notify to customers the “contract agenda” of relevant jurisdiction and applicable laws.

The following actions are required:

Government Action

• Enact legislation to ensure the legitimacy and enforceability of e-commerce contracts. The legislation should also ensure certainty on the applicable jurisdiction. Pending agreement at EU level this legislation should be based on a contractual model which has been development the United Nations.
• Ensure contracts made and signed electronically have the same force in law as if they had been made and signed physically.
• Establish a resource on the Internet to provide information for businesses on electronic contracts. (Departments of Enterprise, Trade and Employment and Public Enterprise)

Enterprise Action

• Specify on websites and in e-commerce transactions the legal jurisdiction that will apply to contracts with clients and, where possible, the key legal provisions or a link to a resource setting out the relevant provisions.

3.1.4 Electronic Evidence and Dispute Resolution

There are two key issues relating to the use of electronic evidence. The first is its admissibility, and the second is the weight assigned to it and the parameters for its use. Legislation is required to provide for electronic evidence in civil proceedings and to set out the parameters for its use. This can be done through an amendment to the Criminal Evidence Act, 1992.

Once these issues have been addressed, guidelines will be required as to what procedures are necessary (in respect of storage of data etc.) in order that computer records are considered sufficient in evidential terms.

There is an opportunity for Ireland to develop as an international centre for the arbitration of disputes on electronic transactions. Countries such as the Netherlands and the UK have previously developed as leading international centres for the settlement of copyright disputes. Training of arbitrators should cover the domestic, European and international legal framework pertaining to e-commerce, and in particular, the proposed legislative changes. A pool of arbitrators, who are internationally recognised experts, is essential to the promotion of Ireland as a centre for dispute resolution.

There is also an opportunity to develop as a leading international location for the settlement of small claims. In the medium-to-long term, an electronic fast track/ small claims court could be developed.

The following actions are required:

Government Action

• Update the Criminal Evidence Act, 1992 to provide for electronic evidence in civil proceedings.
• Promote arbitration as a suitable dispute resolution mechanism for e-commerce transactions.
• Encourage national courts to develop e-commerce expertise.
• Consider the establishment of an online international arbitration mechanism, which companies can use to resolve disputes, regardless of their country of origin.
• Publish guidelines as to the procedures necessary (in respect of storage of data etc.) in order that computer records are considered sufficient in evidential terms.
• Consider the establishment of an online Small Claims Court to deal with disputed e-commerce transactions.

(Department of Justice and Law Reform, Department of Enterprise, Trade and Employment and the Department of Public Enterprise)

Agency/Enterprise Action

• Encourage Encourage the development of a pool of arbitrators to deal with disputes on e-commerce transactions. (Law Society/Bar Council/Enterprise Ireland/IDA Ireland)

3.1.5 Liability in Respect of the Sale of Goods and Services

The number and characteristics of intermediaries involved in e-commerce transactions differ from those in traditional commerce, in particular for digitally delivered services. The liability of intermediaries must be clarified, specifically, the application of the ‘mere conduit’ rule.

Legislation dealing with the sale of goods and services needs to be amended to cater for goods and services offered, sold or distributed electronically. The liability of intermediaries requires to be clarified. The new legislation should apportion liability for loss or damage between the provider of the goods or services, distributors and those intermediaries that act as ‘mere conduits’. Intermediaries that simply facilitate or provide access between one party and another should not incur liability for the sale of a product or service.

Uncertainty on this issue can deter the establishment of intermediaries in Ireland and they are an important element in developing an e-commerce economy. The product liability regime for unsafe products also requires examination.

Enterprises engaging in e-commerce should agree with intermediaries the terms of business in advance including delivery, quality, reliability, standards expected, and liability in event of loss or damage. Existing enterprise insurance cover in respect of physical delivery should also be assessed where new modes of delivery are being used.

The following actions are required:

Government Action

• Update the body of legislation relating to the sale of goods and services to recognise goods and services offered, sold, or distributed electronically. The legislation should apportion liability for loss or damage between the provider of the goods or services, and any intermediaries or distributors.
• Clarify that intermediaries operating as ‘mere conduits’ or simply as access providers should not incur liability.

Joint Government/Agency Action

• Develop Develop a guide for businesses on relevant consumer protection legislation in key US, European and other markets. (Department of Enterprise, Trade and Employment, Enterprise Ireland and Shannon Development)

Enterprise Actions

• Agree in advance with intermediaries the terms of business for delivery (electronic and physical), quality, expected reliability standards, and liability in event of loss or damage.
• Review existing enterprise insurance cover where new modes of delivery, such as courier parcel delivery, are being used to fulfil e-commerce purchases.

3.1.6 Defamation

In theory, defamation cases on foot of defamatory material posted on the Internet can be taken in any country in which it can be viewed. From Ireland’s perspective, the liability of companies hosting such material on mirror sites or acting as mere conduits for such material, requires clarification. This is particularly important in attracting the major information and news services to locate here. The regulations should set out the parameters for determining negligence in respect of such material.

3.1.7 Unsolicited Commercial E-mail

Spamming is the practice of sending unsolicited commercial material, such as mass mail shots, to communities or individuals across the Internet. This abuse of Internet capabilities is causing problems for Internet Service Providers (ISPs) and others and disrupts the provision of efficient services to business. National codes of practice need to be developed, differentiating between direct marketing activities and spamming to encourage customer relationship marketing activities from Ireland and to encourage global ISPs to locate here.

Government Action

• Encourage Encourage the development of codes of practice in respect of unsolicited commercial communications via e-mail. (Department of Enterprise, Trade and Employment)

3.1.8 Encryption

One obstacle facing companies involved in e-commerce is controls on the export of encryption products. Encryption essentially scrambles information in a way that can only be undone by users with proper authorisation. The level of security afforded by encryption is related to the size of the authorisation key. This is measured in bits.

Ireland along with most industrialised countries is subject to the Wassenaar Arrangement treaty and relevant EU legislation that regulates the export of products with encryption software built in. The US government exempts the export of products that contain weak encryption of up to a maximum of 56 bits but controls the export of higher-bit products. The affect for e-commerce is that whereas US companies may be permitted to use standard commercial systems with 128-bit encryption within the US, those outside using the same software for e-commerce may be restricted to using products at weaker levels.

Ireland needs to ensure that any regulations of encryption do not create unnecessary barriers to growth of e-commerce and should seek to achieve a relaxation of export controls on encrypted products. One method of achieving this would be to permit the export of products that met set criteria under an open licence after a one-time review.

The following actions are required:

Government Action

• Discuss with the US authorities the options for easing restrictions on trade of high-bit encryption software
• Introduce fast track procedures for licensing encryption products for export or the introduction of an Open General Export Licence. (Department of Enterprise, Trade and Employment)

3.1.9 Hacking

Unlawful interference with the business resources of Irish e-commerce users (hacking) can be a serious problem for companies, particularly where confidential information is involved. Hacking should be deterred by penalties, with a strong enforcement regime.

The following actions are required:

Government Action

• Ensure appropriate regulatory provisions and penalties are in place to deter ‘hacking’ of e-commerce resources. (Department of Enterprise, Trade and Employment)
• Ensure that skilled resources are made available for investigation of hacking and enforcement. (Department of Justice and Law Reform)

3.1.10 Consumer Protection

There is a need for a clear legal framework relating to consumer protection, both to encourage the take-up of e-commerce among consumers and to provide certainty for enterprises. Enterprises engaging in e-commerce with European and North American consumers should understand in advance their obligations under country-specific consumer protection regulations.

Irish consumer protection law includes EU directives and domestic legislation, and provides substantial certainty and protection for consumers. However, consumer protection regulations are not yet fully harmonised in the EU. A Distance Selling Directive, applicable to e-commerce contracts, is being developed at EU level. This Directive will give consumers the right to prior information on the identity of suppliers, on the characteristics of goods and services being offered, on price and delivery costs, the duration of offers, and the right to withdraw within seven days, (possibly 30 days for financial services contracts and mortgages).

From an enterprise perspective, developing business-to-consumer e-commerce within the existing and proposed framework of consumer protection legislation will require careful management by business firms. Businesses will need to be aware of the consumer protection requirements in markets in which they are trading over the Internet. Specifically, unlike business-to-business contracts, there are limitations to businesses imposing choice of law and jurisdiction clauses on consumers. Under Common Law the jurisdiction where the consumer habitually resides generally prevails. This could have implications for the remote digital delivery of goods and services, such as software and music as referred to in section 2.11 above.

Enterprise Actions

• Clarify the rights and protection afforded to consumers in different countries when engaging in business-to-consumer e-commerce.

3.2 Skills

The emergence of skills shortages is a major issue that could constrain the development of the Irish economy. It is receiving a high priority in other work carried out by Forfás and is not, therefore, dealt with in great detail in this report. Success in tackling skills and the telecommunications infrastructure will, more than any other issues, determine the rate of progress in e-commerce.

The Expert Group on Future Skills published its recommendations in respect of the needs of the IT sector in late 1998. In April 1999, the Government committed h95million to the full implementation of the Expert Group’s report. This includes an additional 5,400 places over the next four years in technical, vocational and degree level courses. These places will go a long way towards addressing the high skill needs of the information technology sector into the future.

However, all sectors of the economy will increasingly require multidisciplinary staff and graduates with information and communication technology (ICT) skills combined with other business-related skills if they are to compete in the e-commerce business environment.

Multi-Disciplinary Skills

E-commerce requires ICT expertise, coupled with strong business applications. There will also be a requirement for specialists in e-commerce operations, production management, logistics, graphic design, and multimedia disciplines.

The Expert Group on Future Skills should build on its work for the IT sectors and examine the e-commerce skills needs of the other major sectors of the economy.

A high proportion of the future skills needs could be addressed through the introduction of ICT modules in existing courses, in particular in business, legal and international marketing disciplines. The third level sector will need to integrate ICT/ e-commerce modules into all courses, to ensure graduates are capable of working in an e-commerce environment.

Multimedia/IT

There is a need for a significant expansion of the national third-level multimedia infrastructure, in particular of the facilities in the Dublin Institute of Technology, Trinity College Dublin, the Senior College Ballyfermot and FÁS. An important part of the third-level infrastructure will be the establishment of a dedicated national college for multimedia. Multimedia education should allow students to work closely with companies, both through research project and through work placement assignments.

Consideration requires to be given to the introduction of conversion courses to allow students from other sectors to pursue a career in multimedia. Strong links between multimedia and other educational institutions should be encouraged.

In summary, the creative and technical skill base needs to be developed in the following ways:

• The expansion of existing multimedia activities, particularly in the Dublin Institute of Technology, Trinity College Dublin, Senior College Ballyfermot and FÁS
• The introduction of conversion courses to allow students from other disciplines to pursue a career in digital business
• The development of courses that include modules where students would learn the business benefits of advanced applications
• The establishment of a higher-level dedicated National College of Multimedia
• Distance Learning

The NUI, NCEA and other professional bodies need to establish systems for the accreditation of courses delivered online to students. The distance learning university Oscoil and other education and training institutes need to enhance their distance learning provision.

Migration

The inward migration of skills is now a key part of the development plans of a range of companies. While high proportions of inward migrants are returning emigrants and EU nationals, the import of skills for the technology sectors from non-EU countries is increasing. There were an estimated 44,000 inward migrants in 1998, 23,200 of which were returning Irish emigrants, 14,100 were EU nationals and 6,700 were non-EU that would need work permits. To support the development of high-technology companies, relevant government departments need to ensure that applications for work permits are dealt with in an expedient manner and that increasing resources are allocated to processing these applications as the numbers increase over the coming years.

The following actions are required:

Government Action

• Examine the multi-disciplinary and e-commerce skills needs of major sectors. (Expert Group on Future Skills) Encourage the introduction of ICT/e-commerce modules in all third level courses. (NCEA, NUI and CHUI)
• Promote the establishment of a National College of Multimedia (Departments of the Taoiseach and Education and Science)
• Develop the creative and technical skills base through expanding existing multimedia activities and through the introduction of conversion courses

Enterprise Actions

• Examine the operational and marketing skill sets required to compete in an e-commerce environment and prepare in-company skills development programmes.
• Encourage networks of enterprises to develop and undertake e-commerce training programmes at local level.

3.3 Research and Technological Innovation

• There needs to be a deeper commitment to research and technological/innovation (RTI) by industry in Ireland, including much deeper and wider collaboration with institutions of higher education. The innovative and commercial sharing and use of technological research among the research community and industry have fuelled the leadership of the US in e-commerce. It has also been based on the continuous flow of new developments and applications in telecommunications and information technology arising from research programmes.
• A greater awareness by industry in Ireland of the potential impact of telecommunications and IT research is required. This should include an understanding of the benefits of deeper collaboration between third-level colleges and industry. The Irish Council for Science, Technology and Innovation (ICSTI), under the auspices of Forfás, has proposed, as part of a “Technology Foresight” exercise, the development of the research base in information and communications technologies to world class standards. It is vitally important that progress is made to implement core foresight actions by the end of 1999.
• The National Development Plan, 2000-2006 should give priority to a new Research, Technology and Innovation Sub-Programme with a focus on advanced communication research and supporting e-commerce applications.
• One of the core recommendations arising from Foresight is the need to develop a Centre for Advanced Informatics. It is envisaged that this would play the leading role in encouraging research teams to address technological opportunities seen to be vital to the national interest. It would provide the natural link to global excellence in key ICT areas, attracting top level professionals from other locations worldwide. It will act both as a resource and an exemplar to all Ireland-based enterprises.
• The criteria for approval of R&D support require to be assessed to ensure that they are accessible for research on e-commerce developments and applications. Criteria that concentrate on supporting capital expenditure as part of the proposal rather than on action and qualitative research on the strategic, economic, social and organisational impacts of e-commerce are barriers to development and must be changed. The Department of Enterprise, Trade and Employment and the agencies need to develop a national mechanism that would support companies and third level institutes in the commercialisation of research. Web techniques can contribute substantially to this effort.
• The origins of the Internet and its early development lie in research networks. The future of the Internet will also be closely related to the work carried out in third level institutions and advanced research laboratories. Ireland needs to monitor and be involved in the development of Internet II and Next Generation Internet (NGI), and examine the options for participation.
• The UCAID project (University Cooperation for Advanced Internet Development) should be used as the stimulus for Irish researchers to contribute to both international and enterprise-based Internet research projects.
• The level of research on the development and implications of e-commerce for Ireland and the enterprise sector in particular requires to be rapidly increased. To ensure a strategic orientation this research needs to be jointly funded by industry, the third-level sector and government. This research is essential to the policy/strategy making process at both national and enterprise level. Specifically, research is required in the following broad areas:
• Facilitators and barriers to e-commerce diffusion within Ireland
• Strategic and operational implications of e-commerce for Irish industry
• Management of e-commerce within SMEs
• Economic and social implications of e-commerce for Ireland

The EU Fifth Framework programme has actions targeted specifically at e-commerce related actions. Irish enterprise must be actively encouraged to avail of the opportunity to participate in partnerships where it will contribute to their strategic goals.

The following actions are required:

Government Action

• Implement the recommendations of Technology Foresight in order to make Ireland a centre of world-class research in information and communications technologies.
• Ensure that the National Development Plan includes an Information Society sub-programme (within the RTI provisions) with a focus on e-commerce applications and content.
• Ensure Ireland is appropriately involved internationally in initiatives to develop Internet. (Department of Enterprise, Trade and Employment)

Agency Actions

• Ensure that the criteria used to evaluate e-commerce projects for funding are appropriate to the nature and risk inherent in them. (Enterprise Ireland and Shannon Development).
• Re-emphasize, among client companies, the e-commerce related research opportunities in the EU Fifth Framework Programme that offers part funding on a competitive basis to successful consortia. (Enterprise Ireland/Shannon Development)

Enterprise Actions

• Use the results of research and development studies to help develop new, innovative e-commerce related products and services.
• Use web technologies to improve relationships among research groups and industry.

3.4 Tax

The taxation regime has a major impact on all forms of commerce. How it is adapted to e-commerce, and how well it facilitates rather than hinders such commerce, will be to central to development. The general principle that the tax system should not distort trade between electronic and traditional means should prevail.

3.4.1 Value Added Tax

Under current rules, the supply of digital services such as software and music, to business and private customers within the EU is subject to Value Added Tax (VAT). However, services from non-EU suppliers to EU consumers are not directly subject to VAT in the EU, due to collection and monitoring issues. As the main e-commerce trade is west to east, this VAT ‘loss’ is a legitimate concern for the EU. As trade shifts from business to end-user, the transaction is more difficult to track, and hence the VAT harder to account for.

At present, companies must register in each member state if supplying goods or services in that State. The EU is, however, considering amendments and aims to have a single place of VAT registration for all electronic traders. Under these proposals the VAT rate applicable in the country of registration would be applied to all business-to-consumer transactions. As Ireland’s VAT rate of 21% is higher than some other EU countries, companies will have an incentive to register in and digitally distribute products from the countries with the lower VAT rates, such as Germany with a 16% VAT rate or the UK with a 17.5% VAT rate. Companies will also consider differences in other costs, such as corporation tax.

It would be more in keeping with the basic principles of VAT to have the VAT on digitally supplied services to consumers levied at the rate applicable in the country of residence of the consumer and remitted back to that member state. Ireland should push for the adoption of this solution by the EU.

A number of actions are required:

Government Action

• Seek EU approval for services to be taxed at the VAT rate in the country in which they are consumed. (Department of Enterprise, Trade and Employment, Finance and Revenue Commisioners)

Agency Actions

• Examine the issues and options relating to the development of a VAT regime in Ireland that will best facilitate the growth of e-commerce, including the option of reducing the standard rate. (Forfás)

3.4.2 Withholding Tax

The European Patent Office is proposing that European rules on software patenting be altered to conform to agreements negotiated through the WTO. This could lead to a dramatic increase in the patenting of software in Europe. In these circumstances, software developed in Ireland could benefit from the patent royalty exemptions, and Ireland could become the European centre for patenting software for non-EU companies supplying software in the EU.

Up to now, the software industry has not opted to take out patents on software, given the short product life cycles, and the ability to register and protect copyright on intellectual property. However, this may be about to change, as companies in the US are increasingly patenting e-commerce-related software and processes. The EU is likely to follow this lead.

Through Ireland’s series of negotiated tax treaties, the remittance of royalties on patents from Ireland are subject to zero or reduced withholding tax. Reduced rates of 10 per cent apply to treaty countries such as Australia, Japan, New Zealand and Israel, all of which have strong ICT sectors. The rate of withholding tax for non-treaty countries is 24 per cent and the implications of this for attracting investment from non-treaty countries requires to be kept under review as the new patenting regime emerges.

3.4.3 Business Development Capital

While the availability in Ireland of seed and venture capital for high technology start-ups has significantly increased over the past three to four years, there is an increasing need among e-commerce start-ups and entrepreneurs for early stage capital of between £50,000-£100,000. The expansion of existing funds to support technology start-ups related to e-commerce and increased competition between the funds in the technology area should be encouraged by Enterprise Ireland. The following action is recommended:

Agency Actions

• Encourage the expansion of seed and venture funds to support e-commerce related start-ups. (Enterprise Ireland)

3.4.4 Benefit in Kind

The Benefit-in-Kind tax regime must be kept under review to ensure that teleworking is facilitated and encouraged, as it evolves. This should include exemptions from BIK for personal computer equipment and peripherals, and for advanced communications infrastructures, such as ISDN telephone lines.

3.4.5 Profit Sharing and Share Options

Emerging skill shortages and increasing competition on wage levels in parts of the information and communications technology labour market are making it difficult for new and emerging companies to retain high-skilled staff. Encouraging profit sharing and employee share option schemes through the tax system could significantly increase the incentives for entrepreneurship, improve the survival rates of new IT start-ups through retention of staff, and restrain high-skill wage inflation.

The following action is required:

Government Action

• Consider the options and bring forward proposals to encourage alternative forms of remuneration to encourage enterprise in the ICT sector, including the possibility of a reduced income tax rate for income from profit sharing schemes. (Department of Enterprise, Trade and Employment, Department of Finance, Forfás and Enterprise Ireland)

3.5 Performance Indicators

Accurate and timely statistics will be vital for effective policy development in the digital age. The speed of change is such that web technologies themselves must be used for information interchange and dissemination.

There is also a need to continuously benchmark against international best practice the development of electronic commerce in key enterprise sectors of the Irish economy. This work is already underway within the development agencies through Forfás telecommunications benchmarking.

The Department of Enterprise, Trade and Employment, Forfás and Enterprise Ireland have also been involved in a number of benchmarking initiatives at EU level. These included a pilot benchmarking project for the EU Industry Council during 1998 on Information and Communications Technology and Organisation for which Forfás provided the research on Ireland. The industry benchmarking work ongoing in Enterprise Ireland requires to specifically address the development of e-commerce at a sectoral level.

Other countries are moving ahead on addressing this need. The five Nordic countries have developed an initiative to measure ICT usage across 18 indicators. The US is to create a new industry code recognising electronic shopping establishments and trade that will be in place by 2002.

For Ireland, there is a need for data across a range of indicators including:

• The number and classification of e-commerce companies/operations in the country
• Turnover and volumes of online transactions
• International e-commerce trade
• Investment in ICTs in the economy
• Employment and occupation trends in e-commerce industries
• E-commerce sub supply, consumer purchases and so on

The following actions are required:

Government Action

• Assess Ireland’s e-commerce statistical requirements and undertake a review of relevant indicators. (Department of Enterprise, Trade and Employment, the CSO, Revenue Commissioners, Forfás and Enterprise Ireland)

Agency Actions

• Include e-commerce indicators in agency surveys where appropriate. (Forfás, Enterprise Ireland, Shannon Development, IDA Ireland)
• Develop the Forfás annual Irish Economy Expenditures Survey to track e-commerce trade in the manufacturing and internationally traded service sectors. (Forfás)
• Co-ordinate and develop sectoral benchmarking to incorporate appropriate measures on e-commerce (Forfás, Enterprise Ireland, Shannon Development)

3.6 Competition Policy

Competition policy will have to address new types of anti-competitive behaviour. Many e-commerce products benefit from non-rivalry (one person’s consumption does not limit or reduce the value of the product to other consumers), network externalities (each additional user of a product increases its value to other users), and increasing returns to scale (unit costs decrease as sales increase).

These factors create an environment where producers may seek to engage in practices that permit them to establish themselves as the, or part of the, de facto standard. Similarly leading companies in related sectors are developing their e-commerce capabilities through acquisitions in converging markets. Such developments can hinder innovation and competition.

As the Competition Authority’s enforcement of competition law is typically reactive the issue of introducing proactive regulatory guidelines to prevent this development becomes an issue of concern. The EU has issued the following principles regarding an e-commerce regulatory framework:

• No regulation for regulations sake
• Any regulation must be based on all Single Market freedoms
• Any regulation must take account of business realities
• Any regulation must meet general interest objectives effectively and efficiently

Thus legislation in this complex industry will have to be designed not only to prevent anti-competitive behaviour, but also to take into account the need for globally harmonised policies.

The Competition Authority will need to continue to develop its understanding and expertise in technology markets, monitor changes in ICT industry structures as they emerge, and take appropriate action to ensure that innovation and competitive markets are encouraged as e-commerce develops.

3.7 North South

There is a long tradition of successful industrial development in Northern Ireland, with many key technology-intensive firms located there. As a later- developing region, the South has perhaps made more recent progress in the ICT field. In recent years, the cross-border flow of graduates with ICT and software skills and spill-overs of research and knowledge have been mutually beneficial to the development of knowledge sectors both North and South.

A recent survey³ identified a number of difficulties in developing North-South trade. For Northern firms these included currency issues, political/cultural factors and networking. For Southern companies the main difficulties included payments, the need for sales representatives and local councils. The Internet could make a major contribution to eliminating these difficulties, with associated economic and social benefits to all involved.

E-commerce and information sharing could be encouraged as a means of increasing networking through the development of extranets linking the key development and marketing agencies, industry groups and community development actions in the North and South. These should provide links to encourage subsupply opportunities and should also act as forums for market intelligence, case studies and demonstration projects. Public procurement projects could also be featured on these extranets.

Several smaller co-operation efforts with the universities/institutes/RTD base in North are now underway. These include for example the Nortel research centre, the Belfast software R&D infrastructure and the Northern Ireland Nerve Centre. The Technology Foresight report noted the benefits that a Radian style initiative could have for the building of teams around US based opportunities.

The Internet also requires to be used to increase the infrastructural linkages between North and South and ensure optimal use of the installed infrastructure. Airports, ports and logistics centres in the northern half of the island have major contributions to make to cross-border trade and should be facilitated by using Internet technologies to promote the services provided and enable enterprises plan their route and access strategies in a more efficient way.

Co-operation in leisure, tourism and cultural fields already underway should be reflected by portal-style web presence for both marketing and development agencies.

The following action is recommended:

Summary of Key Business Environment Actions

Government Action

• Bring forward, as a matter of urgency, the Bill to provide a framework for voluntary certification. (Department of Public Enterprise and Department of Enterprise, Trade and Employment)
• Ensure that the new copyright legislation:
• Makes it an offence to post copyright material on public web sites without the copyright owner’s consent, even if not downloadable.
• Includes protection for technical designs posted on the Internet.
• Enhances the enforcement powers and penalties for electronic breach of copyright. (Department of Enterprise, Trade and Employment)
• Enact legislation to ensure the legitimacy and enforceability of e-commerce contracts. The legislation should also ensure certainty on the applicable jurisdiction. Pending agreement at EU level this legislation should be based on a contractual model which has been developed by the United Nations.
• Ensure contracts made and signed electronically have the same force in law as if they had been made and signed physically.
• Establish a resource on the Internet to provide information for businesses on electronic contracts.
• Update the Criminal Evidence Act, 1992 to provide for electronic evidence in civil proceedings.
• Promote arbitration as a suitable dispute resolution mechanism for e-commerce transactions.
• Encourage national courts to develop e-commerce expertise.
• Consider the establishment of an online international arbitration mechanism, which companies can use to resolve disputes, regardless of their country of origin.
• Publish guidelines as to the procedures necessary (in respect of storage of data etc.) in order that computer records are considered sufficient in evidential terms.
• Consider the establishment of an online Small Claims Court to deal with disputed e-commerce transactions.
• Update the body of legislation relating to the sale of goods and services to recognise goods and services offered, sold, or distributed electronically. The legislation should apportion liability for loss or damage between the provider of the goods or services, and any intermediaries or distributors. (Department of Justice and Law Reform, Departments of Enterprise, Trade and Employment and the Department of Public Enterprise)
• Clarify that intermediaries operating as ‘mere conduits’ or simply as access providers should not incur liability. (Department of Enterprise, Trade and Employment)
• Encourage the development of codes of practice in respect of unsolicited commercial communications (spam) via e-mail. (Department of Enterprise, Trade and Employment)
• Discuss with the US authorities the options for easing restrictions on trade in high-bit encryption products. (Department of Enterprise, Trade and Employment)
• Introduce fast track procedures for licensing encryption products for export or the introduction of an open general export licence. (Department of Enterprise, Trade and Employment)
• Ensure appropriate regulatory provisions and penalties are in place to deter ‘hacking’ of e-commerce resources. (Department of Enterprise, Trade and Employment)
• Ensure that skilled resources are made available for investigation of hacking and e-enforcement. (Department of Justice and Law Reform)
• Examine the multi-disciplinary and e-commerce skills needs of major sectors. (Expert Group on Future Skills)
• Encourage the introduction of IT modules in all third level courses. (NCEA, NUI and CHUI)
• Promote the establishment of a National College of Multimedia. (Departments of the Taoiseach and Education and Science)
• Develop the creative and technical skills base through expanding existing multimedia activities and through the introduction of conversion courses. (Department of Education and Science)
• Implement the recommendations of Technology Foresight in order to make Ireland a centre of world-class research in information and communications technologies.
• Ensure that the National Development Plan includes an Information Society sub-programme (within the RTI provisions) with a focus on e-commerce applications and content. (Department of Enterprise, Trade and Employment)
• Ensure Ireland is appropriately involved internationally in initiatives to develop the Internet. (Department of Enterprise, Trade and Employment)
• Seek EU approval for services to be taxed at the VAT rate in the country in which they are consumed. (Departments of Enterprise, Trade and Employment, Finance and Revenue Commissioners)
• Consider the options and bring forward proposals to encourage alternative forms of remuneration to encourage enterprise in the ICT sector, including the possibility of a reduced income tax rate for income from profit sharing schemes. (Department of Enterprise, Trade and Employment, Department of Finance, Forfás and Enterprise Ireland)
• Assess Ireland’s e-commerce statistical requirements and undertake a review of relevant indicators. (Department of Enterprise, Trade and Employment, the CSO, Revenue Commissioners, Forfás and Enterprise Ireland)

Agency Actions

• Develop and administer a national voluntary scheme for accrediting organisations to certify that individuals and organisations in Ireland exist. The accreditation scheme should be put in place quickly and prior to the enactment of legislation. (National Accreditation Board)
• Encourage the development of a pool of arbitrators to deal with disputes on e-commerce transactions. (Law Society/Bar Council/Enterprise Ireland/IDA Ireland)
• Develop a guide for businesses on relevant consumer protection legislation in key US, European and other markets. (Department of Enterprise, Trade and Employment, Enterprise Ireland and Shannon Development)
• Encourage networks of enterprises to develop and undertake e-commerce training programmes at local level. (Enterprise Ireland, Shannon development, Údarás)
• Ensure that the criteria used to evaluate e-commerce projects for funding are appropriate to the nature and risk inherent in them. (Enterprise Ireland and Shannon Development)
• Re-emphasise among client companies, the e-commerce related research opportunities in the EU Fifth Framework Programme that offers part funding on a competitive basis to successful consortia. (Enterprise Ireland/Shannon Development)
• Examine the issues and options relating to the development of a VAT regime in Ireland that will best facilitate the growth of e-commerce including the option of reducing the standard rate. (Forfás)
• Encourage the expansion of seed and venture funds to support e-commerce related start-ups. (Enterprise Ireland)
• Include e-commerce indicators in agency surveys where appropriate. (Forfás, Enterprise Ireland, Shannon Development, IDA Ireland).
• Develop the Forfás annual Irish Economy Expenditures Survey to track e-commerce trade in the manufacturing and internationally traded service sectors. (Forfás)
• Co-ordinate and develop sectoral benchmarking to incorporate appropriate measures on e-commerce. (Forfás, Enterprise Ireland, Shannon Development)
• Promote the Belfast-Dublin and Armagh-Monaghan digital corridors as effective channels for trade and information sharing. (Enterprise Ireland and IDA Ireland)

Enterprise Actions

• Encourage trade and other organisations to establish self-regulating standards of approval for use by companies engaging in e-commerce.
• Specify on websites and in e-commerce transactions the legal jurisdiction that will apply to contracts with clients and, where possible, the key legal provisions or a link to a resource setting out the relevant provisions.
• Agree in advance with intermediaries the terms of business for delivery (electronic and physical), quality, expected reliability standards, and liability in event of loss or damage.
• Review existing enterprise insurance cover where new modes of delivery, such as courier parcel delivery, are being used to fulfil e-commerce purchases.
• Clarify and understand the rights and protection afforded to consumers in different countries when engaging in business-to-consumer e-commerce.
• Examine the operational and marketing skill sets required to compete in an
• e-commerce environment and prepare in-company skills development programmes.
• Encourage networks of enterprises to develop and undertake e-commerce traing programmes at local level.
• Use the results of research and development studies to help develop new, innovative e-commerce related products and services.
• Use web technologies to improve relationships among research groups and industry.

Footnotes

1 Outline Legislative Proposals on Electronic Signatures and Certification Service Provision, Department of Public Enterprise, April 1999.

2 The essential concept of Accreditation is an independent and authoritative assessment of the competence of the Certification Service Provider to carry out its work.

3 Border barriers to Trade, Technology Ireland, UCD, 1999.