Trade Agreements to Promote Electronic Commerce

Commercial Law Reform

Commercial law almost always follows commercial practice. Businesses innovate and the law tries to catch up, validating some practices and regulating others.

It is risky for law reform to get out in front of commercial practice, for a number of reasons. The rules may fail to have their desired effect, because business can be more complex than legislation. The rules may restrict innovation, because the methods by which they grant legal effectiveness channel practices into known and safe directions. The rules may simply be wrong, because the rule-makers have not appreciated the dynamics at play among the parties or not foreseen the direction that technology takes or its impact in practice..

The law of electronic commerce is an example. First came the transactions – electronic data interchange, interactive web sites, e-signatures – and then came the laws to encourage and to validate the best practices.

International E-commerce Law Reform

The ease with which electronic communications cross borders has from the start pushed e-commerce law onto the international plane. Thus the early law-making was at the United Nations Commission on International Trade Law (UNCITRAL), which recognized the issues in the mid-1980s and which set the basic international legal standard in its Model Law on Electronic Commerce in 1996. UNCITRAL has added several texts since, and next month should put the final touches on a legal regime for electronic transferable records.

Other international bodies have joined the effort. Notable work has been done by standards organizations both public and private. Some of the public bodies operate under the United Nations banner – the Centre for Trade Facilitation (CEFACT), for example – and some not, such as the Organization for Economic Co-operation and Development (OECD). Private bodies with global ambitions include OASIS (Organization for the Advancement of Structured Information Standards) and the Kantara Initiative.

The novelty of the business practices reflected in e-commerce have always given such work a dual character of innovation and harmonization. The UN in particular has often been first in the field with legislative models, rather than trying to find common elements in existing bodies of law. But to some extent harmonization can be even more important than innovation: it may not matter what the law is, so long as everybody is doing the same thing. (Such a statement is more justifiable for laws governing business-to-business transactions than in other fields, so long as the legislated outcome approximates current best practices.)

International Trade Agreements

The push for harmonization has recently begun to influence a different kind of international agreement: trade treaties. Such treaties – instruments affecting public law rather than private law – have traditionally dealt with the levels of tariffs and the establishment of fair trade and investment practices. Driven as they are by a desire to facilitate trade, they aim to remove barriers of any kind. Out-of-date and inconsistent laws are such barriers.

As more international trade becomes electronic and not just a matter of shipping goods or shifting money from country to country, the laws governing electronic transactions attract the attention of the makers of trade treaties. How are they doing so far?

Trans-Pacific Partnership

A recent example of a trade treaty making rules for e-commerce legislation is the Trans-Pacific Partnership (TPP) among 17 Pacific Rim countries, including Canada. While the ratification of the TPP is currently subject to political debate in some places, the e-commerce provisions have not yet aroused controversy and may turn out to be a model for future agreements.

Chapter 14 of the TPP contains the e-commerce provisions. They promote adoption of the current UN standard e-com texts, either the Model Law of 1996 or the E-Communication Convention of 2005 (paragraph 14.5). They require that party choice of authentication (signature) methods be effective and that parties be allowed to prove attribution if it is put in doubt – but countries are allowed to require specific authentication methods for specified sectors or transactions (14.6).

The TPP requires member states to have laws that apply to e-transactions on consumer protection (14.7), privacy (14.8) and spam (14.14), though the description of those laws is at a general enough level that many varieties of statute would satisfy the obligation.

Some specific practices are targeted: customs duties on electronic products (14.3); restrictions on cross-border data flow (14.11); requirements that computer facilities be located in a state where business is done (14.13); and mandatory disclosure of or access to source code by destination states (14.17). While the treaty says that these practices are prohibited, the prohibition is usually subject to exceptions in the national interest. The usual trade treaty limitations are stated, that the restrictive practices not be discriminatory in effect or any more restrictive than required to achieve their permissible objective.

Whether a business or a state party could complain effectively (under the dispute resolution provisions of Article 28) about such measures remains to be seen. Besides the in-chapter limits to the rules, all the obligations are subject to some other overrides set out in paragraph 14.2 and elsewhere in the agreement. Thus government procurement and rules about financial institutions are excluded. All the obligations are subject to member states’ declarations of “non-conforming measures” that they have a right to maintain if stated in a timely way.

The TPP “recognizes the benefits” of certain actions, such as the open and flexible access of people to the Internet (14.10), without imposing any obligation to attain the benefits.

The parties agree to share information on experience and best practices on many of the points covered in the article (14.15) and to cooperate on cybersecurity in undefined ways (14.16).

More detailed analyses of the provisions and their impact have been published by various authorities, such as this one by a U.S law firm.


The TPP has been said by its supporters to be a model of a modern trade agreement. The e-commerce provisions may therefore also be a model for future agreements. A few observations may be made about this prospect.

Requiring the adoption of the basic UN legislative texts on e-commerce will help harmonize the grounds on which e-communications can be given legal effect among commercial parties. The 2005 Convention will be particularly helpful in this respect, because it allows for less local variation than the 1996 Model Law. Most active trading nations already have some rules for this effect, so the TPP rules will improve consistency rather than open new doors.

The obligations to deal with other barriers to e-commerce are useful markers for legislation, but the TPP gives little guidance to content in some areas (privacy, spam) and significant exceptions to enforceability in others (location of facilities, source code disclosure.)

In short, the resulting text is more aspirational than directive. There is little or nothing in the TPP text on e-commerce that will cause any discomfort to Canada.

A few words of caution may be offered, however. The negotiators of trade agreements tend to come from different parts of government than the experts in e-commerce legislation and regulation. Different countries will have different ways of ensuring that their trade negotiators have effective access to the expertise within their governments. Possibly with more active application of such expertise, some of the obligations could be made more precise. On the other hand, the e-commerce rules are not the principal focus of trade negotiations and may not be thought to merit the time and effort to deepen the agreement on the topic.

Further, much of the lobbying that is traditionally been done to government about trade deals focuses on specific sectors of the economy, and there may be little input on a generic topic like electronic communications.

Finally, the process of negotiating trade agreements is very different than the focused expert approach in bodies such as UNCITRAL, where sound and fair business practices are the primary objective. General trade negotiations involve intensive cross-sectoral bargaining, and provisions can be dropped or modified in ways inappropriate for e-commerce as part of a trade-off on unrelated issues.


On balance, including e-commerce provisions like those in the TPP will benefit international trade and also trade within the member countries, since the rules are often likely to spill over into national legislation. As a result, specialists in e-commerce law would do well to pay attention to agreements as they are negotiated and ensure that their governments have access to the appropriate expertise and policy analysis in formulating national positions.


  1. Reciprocal enforcement of civil judgements is necessary to make these international treaties of any value to real businesses especially small business. This is the jurisdiction of provincial legislation and in BC at least, only UK judgements will be enforced here.
    What that means is if for example a BC business want to sue a european vendor
    or supplier for breach of contract, they have to do it in the european court.
    The european country will not enforce a Canadian judgement because the Canadian
    judgement creditor cannot demonstrate reciprocity of enforcement.

    So, this is an example of how badly drafted legislation can seriously impede economic development despite all the efforts being done at the federal level.

  2. Enforcement is an interesting issue.

    Trade agreements tend to be enforced either by state action, e.g. officially calculated counter-measures to offset the trade impact of non-compliance, or by private action. The latter, generally done by the arbitration of complaints by foreign investors against the non-compliant state. This arbitration procedure has been very controversial for a number of reasons. It was the last major barrier to the recent Canada-EU Comprehensive Trade Agreement, for example, and it is a serious concern of Canada’s about the operation of NAFTA.

    So it is not clear how one should best enforce rules in trade treaties about the legal framework for e-commerce. Maybe such provisions would be only encouragement and not law.

    I believe Mr. Semenoff is wrong in saying that a Canadian provincial court would enforce only U.K. civil judgments (because of the Canada-UK Reciprocal Enforcement Convention from the 1980s, legislated into effect in all the common-law provinces.) The common law also requires the enforcement of a foreign civil judgment where there is a real and substantial connection between the subject matter of the litigation and the foreign court. Parties and lawyers who thought otherwise discovered their error in the Supreme Court in Beals v Saldhana in 2003.