The Internet and Telecommunications
Bills of Law
Brazil appears to be a country with great potential for the development of the Internet, not only in terms of business but also for governmental and educational purposes.
Brazil's marketing potential is impressive. The size of its consumer market, the average age of its population, its economic growth and various cultural features contribute to making Brazil one of the most attractive areas for the implementation of e-business. Moreover, the denationalization, liberalization and new regulatory environment of the telecommunications sector have contributed to the installation of a modern infrastructure capable of supporting the growth in data transmission capacity that is essential for the development and expansion of the world wide web.
According to Net Ratings there are about 10 million internet users in Brazil, of which 52% are active users. Many of the users (about 26%) are between 35 and 49 years old. They go online for about six hours per month. The 25-34 age group goes online for about 10 hours per month.
Although only between 10% and 15% of the Latin American population has the means to make purchases online, the growth rates of the Internet and electronic commerce are explosive(1)).
Outlays on electronic commerce reached $167 million in 1999 (361% higher than in 1997). According to data from the International Data Corporation they are expected to reach $8 billion soon. Brazil accounts for more than 60% of the Latin American e-commerce industry(2)).
The federal government has a particular interest in the development of the Internet. One of the targets of the E-govern Project is the development of online services for the public. In addition, the government is preparing a regulatory framework for official documents whereby the exchange of administrative documents is undertaken electronically.
Other initiatives justify the attention the government has been giving to the Internet (eg, the connection of government data networks and the online bidding procedures).
The Internet and Telecommunications
In Brazil, neither the Internet nor internet access are classified as telecommunications services. It is apparent from Rule 4/95 of the Communications Ministry and the General Telecommunications Law (Law 9472/97) that internet access is a distinct value added service. The telecommunications service merely provides support for internet access. As a result, access to and the content of the Internet are not subject to the control or regulation of the National Telecommunications Agency. In fact, e-commerce is not subject to one specific law, but rather to various laws that govern business as a whole, such as the Civil Code, the Commercial Code and the Consumer Protection Code.
Domestic law is relatively flexible with regard to the manner of contracting. The capacity of the agent, a lawful and possible purpose and a special form are sufficient for a valid agreement (Civil Code, Articles 82 and 129).
To enter into an electronic agreement individuals use their computer as a means of communication. However, although the expression of will via the computer is acceptable, the legislation is not clear as to the validity of electronic contracts as evidence. From the Commercial Code, the Civil Code and the Civil Procedure Code it can be concluded that there are grounds for legal validity of the electronic contract executed between competent parties that have manifested their will and identified themselves (either by digital signature or by other accepted means). Nevertheless, the issue lies in whether the references to 'signature' in the current legislation cover electronic signatures and whether their authenticity can be certified.
To solve some of the above issues, several bills of law focusing on e-commerce have been sent to the Legislative. The most important are Bill 1589/99 and Bill 672/99
Bill 1589/99 refers to the Bar Association Draft Bill. It is the most comprehensive bill on the subject of e-commerce to date. The bill regulates the following:
- electronic documents and certificates;
- certification entities;
- competent authorities; and
- administrative and criminal sanctions.
According to the bill the offer of goods and services must be made in a certifiably secure environment. The electronic systems of the offeror will then transmit an automatic electronic reply with the transcription of the message and confirmation of its receipt.
Electronic commerce is subject to consumer protection and defence regulations. Consumers may use the same channel adopted for contracting to serve extrajudicial notifications and summons, and the offeror may provide specific areas for these purposes in its website.
In order for an electronic document to be considered valid it should be signed by its author via a public key cryptographic system and certified by a registered certification entity.
The certification of a public key by a notary public generates a presumption of authenticity before third parties. Electronic certificates may be revoked by the notary public at the request of the owner, ex officio or by determination of the judiciary branch.
The Registry of Deeds and Documents is authorized to perform the transcription and registration of private electronic documents, and the judicial branch may authorize the use of electronic documents in other notary activities.
Bill 672/99 is based on the UNCITRAL Model Law on electronic commerce of 1996. The bill provides for the structuring and use of databases. Also it regulates the procedural sequence for the presentation of data, covering the legal requisites of data messages, the communication of messages, and the time and place of the dispatch and receipt thereof.
The bill acknowledges electronic messages as satisfying the requisites of written information for legal purposes, provided that the information is accessible for future reference.
The legal determination in respect to the maintenance of certain documents, records or information is fulfilled by the maintenance of electronic documents, provided that they comply with specific requirements.
The offer and acceptance of a contract may be expressed by electronic messages, and manifestations of will and any other statements made by means of electronic messages will be acknowledged as valid. Electronic messages will be deemed to have originated from the sender when sent by the sender or a person authorized to act on his behalf, and when sent automatically by a system programmed by the sender.
The sending of an electronic message will take place when the message enters an information system beyond the sender's control. The time of receipt is defined as the moment the message enters the recipient's information system (or the moment it is retrieved, if sent to an undesignated information system). The places of dispatch and receipt are considered the establishments of the sender and recipient.
All provisions of the Consumer Protection Code are applicable to consumer relationship electronic transactions. The code is considered to ensure a high level of protection.
In addition, the jurisprudence is clearly favourable to consumer rights and most of the lawsuits relating to the Consumer Protections Code have been judged in favour of consumers.
Some of the most important provisions of the Consumer Protection Code applicable to the online transactions concern:
- objective and joint liability of the suppliers;
- prevention of abusive practices;
- protection of adhesion contracts; and
- distance contracts and the right of retraction.
Another question is to determine whether the intermediaries, as the providers of internet connection, information transmission and file storing services, are liable for the content of the information transmitted. This matter is still under discussion and it is not possible to set a general rule. Each case must be analyzed individually in order to identify suppliers liability.
The first of many governmental regulatory initiatives in relation to electronic transactions was Regulatory Instruction 156 of December 22 1999 of the Federal Revenue Department. This instruction creates the registries of natural and artificial persons before the department, enabling taxpayers to deal with the department electronically. Taxpayers may send and receive documents electronically through an asymmetric cryptographic electronic signature system. Further information about business-to-government initiatives related to the Internet can be obtained at Electronic Auctions Excite Suppliers.
The protection of privacy is a common problem when dealing in the virtual environment, where various entities (eg, banks, portals and online stores) request the registration of customers as a prerequisite for access to the services supplied.
There are no specific regulations to address privacy and the protection of information provided by users of the Internet. However, some of the bills of law (including those described above) regulate this issue, taking into account the technological development of information and communication systems, principally in respect to the repercussions and implications resulting from electronic commerce, including those relating to the protection of personal data.
Despite the lack of specific legislation on the protection of data on the Internet, the Federal Constitution of 1988 carries general principles protecting the privacy and confidentiality of data communication.
Article 5(10) of the Constitution determines that the privacy and image of persons are inviolable, ensuring the right to compensation for pecuniary damage or pain and suffering that results from their violation. On the basis of the respective constitutional provision, any individual who has his or her privacy invaded or violated may request indemnification for the damage he or she may suffer, whether pecuniary damage or pain and suffering.
Article 5 also determines that the confidentiality of correspondence and telegraphic data and telephone communications is inviolable except in specific cases (Item 12). This protection includes data transmission via the Internet(3).
Data protection is also established in other laws such as the Consumer Protection Code, the General Telecommunications Law and Law 4595/64, which guarantees bank confidentiality. Although these laws do not provide specific rules for data protection on the Internet their provisions are applicable in the virtual environment(4).
Concepts which are firmly established in tax legislation and which are sufficient to bring legal security to commercial relationships processed in the 'real world' are debatable when applied to electronic transactions. Examples include the definition of goods, the question of the supervision of transactions conducted electronically in the face of the right to privacy and intimacy and, principally, the taxation of electronic operations.
One of the principal ongoing controversies relates to the taxation of internet access provision services. The public finance authorities aim to collect ICMS (similar to European value added tax on these services). The municipal treasury intends to charge ISS, a tax levied on the provision of certain services. Internet access providers argue that no taxes should be levied, considering that the service they provide is a value added service, in accordance with Article 60(1) of the General Telecommunications Law. Case law has not yet provided a satisfactory solution.
Controversy also surrounds issues involving the taxation of transactions relating to intangible goods (eg, transactions involving downloading MP3 files(5)).The problem is that there is no definition as to whether such activities constitute the circulation of goods or the rendering of services, or neither. Also under dispute is the taxation of advertisements on internet sites. These issues are far from being resolved and require the attention of the legislators.
For further information on this topic please contact Ricardo Barretto, Eduardo Gonçalves, Barbara Lameirão, Kátia Madeira Kliauga, Camilla Pardini or José Leça at Barretto Ferreira, Kujawski, Brancher e Gonçalves – Sociedade de Advogados by telephone (+55 11 3066 5999) or by fax (+55 11 3167 4735) or by e-mail ([email protected], [email protected], [email protected], [email protected], [email protected] or [email protected]).
(1) Source: Gazeta Mercantil newspaper, June 29 2000, page A-3, article 'The frontiers of e-commerce' by Silvio Ribas.
(2) Source: O Estado de São Paulo newspaper, February 7 2000, page B-12, article 'Brazil leads e-commerce in LA' by Leda Beck.
(3) Source: For example, Ordinary Appeal in Habeas Corpus 8,493 - São Paulo (99/0024439-7) of August 1999, lodged by the company Mobitel S/A Telecomunicações, deals with the confidentiality of registration information that could only be disclosed by means of judicial authorization. Also the provision in Article 2(8) of the Information Technology Law (Law 7,232/84) protects the confidentiality of data stored, processed and transmitted in the interests of privacy and the security of persons.
(4) For further information on the issue of data protection, see 'Virtual Banking and Consumer Protection' (a study presented in the International Bar Association 2000 Conference in September 2000) by Ricardo Barretto, Eduardo Gonçalves Damião and José Leça.
(5) Moving picture experts group layer - 3 audio.
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