This material is published by the Philippine Exporters Confederation, Inc. (PHILEXPORT) to presentvarious insights on a pa...
CONTENTS                                Introduction                                      3    Declaration of Policy and P...
Republic Act No. 8792                    Implementing Rules and Regulations                      of the Electronic Commerc...
PART I                    Golez and Dante Liban. Other           was prompted by concerns that                            ...
the Office of the President for      Secretary where only minor re-        certification authority was oper-signing.      ...
the state of law would at best be       all resources will be devoted to       try with relevant governmentin a state of f...
Electronic Commerce will be       tries may become a deterrent           added, sales and other appro-Private Sector Led. ...
nymity (because everyone knew         development programs.                   the expertise and infrastructureeach other) ...
ings, transactions, arrangements,     taken electronically nor proven              Non-commercial activities in-agreements...
Consistent with the Model           terconnected which, by electronic,       ate Bill No. 1556 otherwiseLaw, the Act shoul...
of Court). It is clear, therefore,    ning. What was once a paper            the definition of “information sys-that the p...
latter would be considered an          This is an important point which       electronic data message or elec-electronic s...
an electronic document not for           company may be considered a                   Fundamental to the Act. Thistransmi...
references thereto. For example,       on-line retailer would not have           required to conform to any othera standar...
while, in contrast, these at-          sess the integrity and reliability     recent mishap. The electronictributes are di...
a) There exists a reliable as-     might be eroded. For example,          under Best Evidence Rule is notsurance as to the...
tracts or agreements but docu-       soon since the ability to have          provision using the ETA as aments of all kind...
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
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The Electronic Commerce Act and its Implementing Rules and Regulations

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Atty. Jesus M. Disini Jr. wrote this guide for the Philippine Exporters Confederation Inc. (PhilExport) with Janette Toral providing legislative history.

Atty. Rodolfo Noel S. Quimbo also gave inputs on the Senate deliberation with respect to the Senate deliberation on Senate Bill 1523.

More info on the E-Commerce Law legislative history can be found at http://www.scribd.com/doc/11306151/Philippine-Internet-Review-10-Years-of-Internet-History-19942004

Full text of the E-Commerce Law can be found at http://www.digitalfilipino.com/the-philippines-e-commerce-law-republic-act-no-8792

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Transcript of "The Electronic Commerce Act and its Implementing Rules and Regulations"

  1. 1. This material is published by the Philippine Exporters Confederation, Inc. (PHILEXPORT) to presentvarious insights on a particular subject relevant to the export industry. The articles, papers, and otherreadings presented here were gathered from various sources and the views expressed do not necessarilyreflect those of PHILEXPORT, USAID, or The TAPS Project.Atty. Disini is Managing Partner in the law firm of Disini & Disini, and is the principal drafter of theImplementing Rules and Regulations of Republic Act 8792, otherwise known as the E-Commerce Law.Ms. Toral is the founder of the Philippine Internet Commerce Society and was actively involved inlobbying for the passage of the E-commerce Law.The authors wish to acknowledge the use of materials prepared by Atty. Rodolfo Noel S. Quimbo on theSenate deliberation with respect to the Senate deliberation on Senate Bill 1523.THE ELECTRONIC COMMERCE ACT
  2. 2. CONTENTS Introduction 3 Declaration of Policy and Principles for Electronic Commerce Promotion 4 Electronic Commerce in General 10 Electronic Commerce in Carriage of Goods 28 Electronic Transactions in Government 31 Final Provisions 342 THE ELECTRONIC COMMERCE ACT
  3. 3. Republic Act No. 8792 Implementing Rules and Regulations of the Electronic Commerce Act Annotations by Atty. Jesus M. Disini, Jr. Legislative History by Janette C.Toral Introduction.T he Electronic Commerce Act (Republic Act No. 8792; the “Act”) is by all means a significant piece of legislation for the Philippines. As intended, the passage of the Act has spurred investments in Information Technology projects and even a number of back-door listingsin the Philippine Stock Exchange. Interest in electronic commerce is at an all-time high and companies havebeen forced to deal with the changes brought about by the New Economy. It has been said, time and again, that in this new age, success will depend less upon the size of anorganization but the speed by which it can implement its plan and take the first-mover advantage. Andy Groveof Intel has also been quoted as saying that in five years all companies will be Internet companies or not becompanies at all. From all indications, the Act has had the effect of driving these ideas into local companies whohave begun to examine themselves and their role in the New Economy. It should be stressed that the passage of the Act is but the first step in the government’s efforts to secure thecountry’s place in the New Economy. Other contentious legal issues such as jurisdiction, digital signatures,intellectual property, privacy, consumer issues, domain names, and others, were intentionally excluded from theAct’s purview and rightly so. If Congress were to discuss these issues and attempt legislation, it might undulydelay the passage of the Act. Besides, many if not all of these issues remain unresolved even in developedcountries. To discuss them would only result in the same deadlock seen elsewhere. More importantly, to delaythe Act’s passage would be to deny meeting its express goal — the establishment of a secure legal frameworkfor electronic commerce.THE ELECTRONIC COMMERCE ACT 3
  4. 4. PART I Golez and Dante Liban. Other was prompted by concerns that co-authors include Sen. Vicente since the Philippine judicial sys- DECLARATION OF POLICY Sotto III, Franklin Drilon, Fran- tem frequently adopts US case AND PRINCIPLES cisco Tatad, Raul Roco, Aquilino law, conflicting Singaporean ju- FOR ELECTRONIC Pimentel Jr., Miriam Defesor- risprudence on the ETA might COMMERCE PROMOTION Santiago and Reps. Herminio unduly confuse the issues on Teves, Magtanggol what is already considered a Chapter I - Guinigundo, Rolando complex area of the law. Declaration of Policy Sarmiento, Orlando Fua, Joey It is significant to point out Salceda, Oscar Moreno, and that all debates in the Senate Section 1. Declaration of Ignacio Bunye. respecting the Act referred to SBPolicy. The State recognizes the Senate Bills. This first bill on 1523 not SB 1902. Hence, forvital role of information and com- electronic commerce was filed in those interested in performingmunications technology (ICT) in 1992. It was called the Elec- research on the Senate delib-nation-building; the need to create tronic Data Interchange (EDI) bill erations, they should refer to thean information-friendly environ- and was re-filed as Senate Bill discussions on SB 1523. SBment which supports and ensures No. 10 (SB 10) during the 11th 1902 was approved on April,the availability, diversity and Congress. However, when the 2000.affordability of ICT products and United Nations Commission on House Bills. Reps. Angpingservices; the primary responsibil- International Trade Law and Liban filed EDI Bills in theity of the private sector in contrib- (“UNCITRAL”) Model Law on House in 1998. Rep. Golez like-uting investments and services in Electronic Commerce (“Model wise filed a bill which coveredICT; the need to develop, with ap- Law”) was adopted, the EDI bill diverse areas such as copyrightpropriate training programs and was abandoned in favor of the and cybercrimes, as well as EDI.institutional policy changes, human Model Law framework. Besides, When Committee Report No. 34resources for the information age, the EDI bill was considered tech- and SB 1523 were filed in thea labor force skilled in the use of nology-specific and if passed, Senate, Reps. Punzalan andICT and a population capable of might inadvertently promote the Verceles filed separate billsoperating and utilizing electronic use of a declining technology, which were copies of SB 1523.appliances and computers; its ob- EDI. In addition, it was felt that In March, 2000, both bills wereligation to facilitate the transfer given the long and tedious leg- merged into HB 9971 which wasand promotion of technology; to islative process in the Philip- presented and deliberated uponensure network security, connec- pines, a technology-neutral law by the House in May 2000. HBtivity and neutrality of technology would provide more stability in- 9971 was approved by thefor the national benefit; and the asmuch as it can adapt to and House on June 6, 2000.need to marshal, organize and de- withstand advances in technol- Bicameral Conference Com-ploy national information infra- ogy. mittee. The Bicameral Confer-structures, comprising in both The Model Law was thus in- ence Committee, tasked withcommunications network and stra- corporated in Committee Report reconciling the provisions of HBtegic information services, includ- No. 34 and Senate Bill No. 1523 9971 and SB 1902, conveneding their interconnection to the glo- (SB 1523). In addition, the Elec- on June 7, 2000 in Manila Ho-bal information networks, with the tronic Transactions Act of tel. As a rule, any provision ap-necessary and appropriate legal, fi- Singapore (“ETA”) was consid- pearing in one version whichnancial, diplomatic and technical ered as suggested by several does not appear in the other, isframework, systems and facilities. participants in the technical adopted in the final report. In- working group. The ETA, at that terestingly enough, since HB History of the Electronic time, had just been passed in 9971 did not abandon the provi-Commerce Act. The Electronic Singapore and it was believed sions of the ETA (as distin-Commerce Act (Republic Act No. that innovations in that statute guished by SB 1902), these8792; the “Act”) is the merged would prove beneficial in the found their way back to the finalversion of House Bill No. 9971 Philippine setting. After the con- version of the Act. In the case(HB 9971) and Senate Bills No. clusion of interpellations for SB of conflicting provisions in both1902 (SB 1902). The primary 1523, the bill was referred back HB 9971 and SB 1902, theseauthors and sponsors were Sen. to the Committees on Trade and were resolved through discus-Ramon Magsaysay, Jr., Reps. Industry and Science and Tech- sion. The report of the Bicam-Leandro Verceles, Jr. and nology where it was replaced by eral Conference Committee wasMarcial Punzalan, Jr. Co-Au- SB 1902. SB 1902 departs from issued on June 7, 2000 and ap-thors of the Act who filed elec- SB 1523 in that provisions of the proved by the House later thattronic commerce bills were Sens. ETA were minimized and the bill evening. On June 8, 2000, theJuan Flavier, and Blas Ople and reverted back to the framework Senate approved the same re-Reps. Harry Angping, Roilo of the Model Law. This revision port and the Act was referred to4 THE ELECTRONIC COMMERCE ACT
  5. 5. the Office of the President for Secretary where only minor re- certification authority was oper-signing. visions were incorporated. ating in the country at that time. The Inter-Agency Task Force. The IRR was digitally signed The Necessity for the Act. InThe Electronic Commerce Act on July 14, 2000 by Secretaries the months leading to the pas-(Republic Act No. 8792; the Manuel A. Roxas II (DTI) and sage of the Act, members of the“Act”) was signed into law on Benjamin E. Diokno (DBM) and legal profession debated the ne-June 14, 2000. On that day, an Governor Rafael B. cessity of passing legislation oninter-agency task force con- Buenaventura (BSP) during the electronic commerce. On thevened for the purpose of draft- plenary session of the Global In- one hand, there were those whoing the Act’s Implementing Rules formation Infrastructure believed that such legislationand Regulations (“IRR”). The Commission’s (“GIIC”) Asia Re- would be useful to fill in sometask force was co-chaired by the gional Conference held in Makati gaps in Philippine law requiringDepartment of Trade and Indus- City, Manila. certain contracts be in “writing”try (“DTI”), Department of Bud- Origins. The Act traces its (e.g., the Statute Of Frauds) orget and Management (“DBM”), roots to the United Nations Com- that some documents beand the Bangko Sentral ng mission on International Trade “signed” (e.g., negotiable instru-Pilipinas (“BSP”). Representa- Law (“UNCITRAL”) Model Law ments). At the other end of thetives from the following govern- on Electronic Commerce spectrum were those who didment agencies likewise sat as (“Model Law”) and Singapore’s not see the necessity for the Actmembers of the task force and Electronic Transactions Act and argued that since the law al-participated in the deliberations: (“ETA”). The Model Law was ready recognizes verbal or oralCommission on Audit (“COA”), drafted and adopted by agreements, there should be noDepartment of Science and UNCITRAL on December 16, reason why electronic contractsTechnology (“DOST”), Depart- 1996 with the intention of achiev- should be denied validity.ment of Transportation and ing a harmonized legal frame- What could not be denied,Communications (“DOTC”), Na- work for electronic commerce however, was the unsettled le-tional Telecommunications Com- across multiple borders. The gal question: do electronic docu-mission (“NTC”), Bureau of In- Model Law, as the name implies, ments and signatures enjoy theternal Revenue (“BIR”), Intellec- was drafted with the intention of same legal status as papertual Property Office (“IPO”), Bu- being adopted as legislation in documents and manually signedreau of Product Standards various countries around the signatures, respectively? Phil-(“BPS”), National Development world. Hence, it was written with ippine jurisprudence had not cat-Corporation (“NDC”), Board of a view to maximize acceptabil- egorically validated electronicInvestments (“BOI”) and Na- ity in various legal systems while evidence. In a recent case, thetional Computer Center (“NCC”). minimizing any adverse incon- Supreme Court declared elec-Members of the private sector sistencies in the international tronic mail inadmissible – but thiswho provided their inputs were, arena. The driving force behind was due to the fault of the offer-among others: Ayala Corpora- the Model Law was the convic- ing party who merely printed outtion, Disini & Disini Law Office, tion that a secure legal environ- the said messages and failed toEquitable Card Corporation, ment supportive of e-commerce have them authenticated or cer-Globe Telecoms, Philippine would lead to its promotion and tified as accurate (IBM Philip-Internet Commerce Society, growth. pines, Inc. v. NLRC, 305 SCRASGV & Co. (Arthur Andersen), Singapore’s ETA is likewise 592 [1999]). Under these cir-and the TAPS Project of based upon the Model Law. The cumstances, even if the evi-PHILEXPORT and USAID. ETA was used as a reference for dence were in the form of paper The author drafted the IRR the Act largely because of its documents, they would be inad-and presented the first version provisions on digital signatures, missible for lack of proper au-at the task force’s second meet- regulation of certification au- thentication.ing on June 20, 2000. After col- thorities, and service provider li- To make matters worse, itlaborating on the draft IRR, the ability. However, the provisions was universally acknowledgedtask force presented the same on digital signatures and the that the settlement of the legalat a public hearing held at the regulation of certification au- issues respecting electronic con-Board of Investments on July 3, thorities were abandoned in tracting and evidence would take2000. The task force assembled Congress. This was deemed years, if not decades, if left in thefor the last time on July 4, 2000 necessary since the complexity hands of the Philippine judiciary.to discuss the concerns raised of the underlying issues relating Notably, the only source of bind-at the public hearing and to to asymmetric cryptosystems ing case law in the Philippinessettle pending issues leading to threatened to delay the passage are the decisions of the Su-the final draft. Thereafter, the of the Act. It was also recognized preme Court. Meanwhile, ab-drafting of the IRR was coordi- that digital signature legislation sent any existing legal frame-nated by the DTI’s Office of the would be premature since no work for electronic commerce,THE ELECTRONIC COMMERCE ACT 5
  6. 6. the state of law would at best be all resources will be devoted to try with relevant governmentin a state of flux and may very sustain the favored technology. agencies, without prejudice to thewell be a hindrance to the pro- To avoid this, the Act was writ- provisions of Republic Act. 7653motion of electronic commerce ten with an overriding concern (Charter of Bangko Sentral ngin the country. to embrace the full range of elec- Pilipinas) and Republic Act No. Hence, the brewing debate tronic technology without bias or 8791 (General Banking Act).among lawyers and judges only prejudice. Thus, the Act doeshighlighted the fact that there not discriminate among any type Authority of DTI to Set Forthwas at least a doubt respecting of electronic document or signa- Policies. This provision of the Actthe validity of e-commerce trans- ture utilizing a particular technol- was placed in this section of theactions. Unfortunately, the ab- ogy. At most, the Act specifies IRR in order to establish the au-sence of a clear consensus standards and criteria but the thority of the DTI, DBM and BSPamong legal experts only cre- same are written in a neutral to lay down the policies for theated an atmosphere of uncer- manner. For example, the Act promotion of electronic com-tainty especially among those in admits all types of security mea- merce set forth in Chapter II.the business community. Such sures and the parties are free touncertainty in turn brought fear determine the type and level of Chapter II -which stifled investment and en- security needed for their trans- Declaration of Principlestrepreneurship as businessmen actions and to select and use or for Electronic Commerce Promo-readily dismissed e-commerce implement appropriate techno- tionas an all-too risky endeavor. The logical methods that suit theironly solution to the conundrum needs. Section 3. Principles. Pursu-therefore, was to pass the Act A necessary adjunct to tech- ant to the mandate under Sectionand expressly recognize, in no nology neutrality is the principle 29 of the Act to direct and super-uncertain terms, that doing busi- of media neutrality which is like- vise the promotion and develop-ness electronically is legal, valid wise ingrained in the Act. In ment of electronic commerce in theand binding. sum, the Act will recognize elec- country, the following principles Guiding Principles of the Act. tronic documents and signatures are hereby adopted as Govern-The primary guiding principle in whatever media they may be ment policy on electronic com-behind the Act is the “functional found. For example, if an elec- merce:equivalent” approach. In simple tronic message is received bothterms, the functions of say, a as an electronic mail and fax, Source of the Policies. Thedocument or a signature is ana- both of them will be considered policies in Chapter II were basedlyzed, and if an equivalent ex- an electronic data message or on the Global Action Plan forists in electronic form, then it will electronic document. Electronic Commerce publishedbe adopted. For example, a sig- Role of the Act vis-à-vis Phil- by the Alliance for Global Busi-nature performs the function, ippine Law. The Act is not in- ness (AGB).among others, of identifying the tended nor designed to supplantsigner and indicating his consent any substantive law, particularly a) Role of the Government.to a document. If an electronic on contracts. Activities which Government intervention, whenmethod performs the same func- were lawful (or unlawful) prior to required, shall promote a stabletions, then such method would the passage of the act generally legal environment, allow a fair al-be considered an electronic sig- retain their status. This is, of location of scarce resources andnature. course, excepted by the new protect public interest. Such inter- Apart from the “functional crimes which are defined in the vention shall be no more than isequivalent” approach, the Act is Act. essential and should be clear, trans-likewise technology neutral – It is important to remember parent, objective, non-discrimina-that is, it does not favor any par- that the Act only affects the form tory, proportional, flexible, andticular technology. It has long of transactions and activities and technologically neutral. Mecha-been recognized that if laws are not their underlying legal valid- nisms for private sector input andnot technology-neutral, they ity. In other words, Philippine involvement in policy making shallwould have an adverse impact substantive law will continue to be promoted and widely used.against competing technologies. apply b) Role of the Private Sector.A technology-specific statute The development of electronicwould encourage the private Section 2. Authority of the De- commerce shall be led primarily bysector to support only that tech- partment of Trade and Industry the private sector in response tonology which consequently es- and Participating Entities. The De- market forces. Participation intablishes it as a single or sole partment of Trade and Industry electronic commerce shall be pur-standard. If this persists, it will (DTI) shall direct and supervise sued through an open and fairinevitably result in a dearth of in- the promotion and development of competitive market.novation and inventiveness as electronic commerce in the coun-6 THE ELECTRONIC COMMERCE ACT
  7. 7. Electronic Commerce will be tries may become a deterrent added, sales and other appro-Private Sector Led. The devel- against electronic commerce priate taxes shall be collected onopment of electronic commerce companies wishing to operate E-commerce transactions by theshould be driven by market on a global basis. central and local governmentsforces with minimal government In this regard, it is desirable concerned.intervention. Government’s role to have laws on electronic com- It was determined, however,is nonetheless important insofar merce which are consistent that since tax laws do apply withas it must provide and sustain a throughout the world in order to equal force upon electronicsecure legal environment and a promote the growth of these “glo- transactions, the above-quotedcompetitive business environ- bal” e-businesses. provision was unnecessary andment for electronic commerce. Jurisdiction. Initially, SB 1523 was therefore abandoned during and HB 9971 contained the fol- the Bicameral Conference Com- c) International Coordina- lowing provision on jurisdiction: mittee meeting.tion and Harmonization. Elec- Section 26. Jurisdiction - An Taxation of Electronic Com-tronic commerce is global by na- electronic contract dealing with merce. There are to date, noture. Government policies that the use of a key management explicit Philippine tax laws onaffect electronic commerce will be system shall indicate the juris- electronic commerce and it ap-internationally coordinated and diction whose laws apply to that pears that no law will be passedcompatible and will facilitate system or whose law shall ap- on this subject matter in the nearinteroperability within an interna- ply to the contract. In the ab- future. However, it is undeni-tional, voluntary and consensus- sence of such indication, juris- able that many of the activitiesbased environment for standards diction over the contract shall be involving electronic commercesetting. acquired in accordance with ex- are subject to existing tax laws. isting laws (HB 9971). For example, the retail of goods Harmonization of Laws. Elec- During the interpellation pe- over the Net would attract value-tronic commerce, especially riod at the Senate, Sen. Juan added taxes (VAT). Additionally,those conducted over the Ponce Enrile raised the question all electronic commerce entitiesInternet, are necessarily global as to what existing law deter- located in the Philippines wouldin nature. This means the com- mined the jurisdiction of elec- be subject to some form of in-panies engaged in electronic tronic commerce transactions. come taxation, indirect taxes,commerce will be required to He gave the example of a Fili- and even local government taxa-comply with the laws of each pino surfer who purchases an tion. The goal of the policy is tocountry where they can poten- item from Amazon.com and encourage the taxing authoritiestially close transactions. asked where the sale consum- to treat electronic commerce On the one hand, inconsis- mated. In addition, which law entities no different from thetent laws in varying jurisdictions (US or Philippine) would apply to bricks-and-mortar counterparts.can be exploited by any e-com- the transaction in case of a dis- Again, this is viewed as promot-merce company. Hence, coun- pute. ing the growth of electronic com-tries with lax rules or enforce- In recognition of the complex merce.ment may find themselves used and unresolved issues concern- e) Protection of Users. Theas a “safe harbor” for e-busi- ing jurisdiction over electronic protection of users, in particularnesses performing acts or ren- and Internet commerce transac- with regard to privacy, confiden-dering services otherwise illegal tions, the Bicameral Conference tiality, anonymity and content con-or immoral in their home coun- Committee decided to drop this trol shall be pursued through poli-tries. For example, a New York- provision from the Act. cies driven by choice, individualbased on-line gambling website empowerment, and industry-ledoperates out of a casino in d) Neutral Tax Treatment. solutions. It shall be in accordanceAntigua where the servers are Transactions conducted using elec- with applicable laws. Subject tolocated – this despite the fact tronic commerce should receive such laws, business should makethat gambling is illegal in New neutral tax treatment in compari- available to consumers and, whereYork. son to transactions using non-elec- appropriate, business users, the On the other, dissimilar laws tronic means and taxation of elec- means to exercise choice with re-can also pose problems for the tronic commerce shall be adminis- spect to privacy, confidentiality,e-commerce venture. Take the tered in the least burdensome man- content control and, under appro-case of a certificate authority ner. priate circumstances, anonymity.which must comply with varyingaccreditation rules in different Taxation in the Bills. SB 1902 Internet Consumer Trust Is-countries. In some cases, the contained the following provi- sues. When the Internet wasfailure to comply may expose sion: developed, the academics de-them to criminal liability. Hence, SEC. 27. Taxes on E-Com- signing the same were not par-burdensome laws in some coun- merce Transactions. - Value- ticularly concerned about ano-THE ELECTRONIC COMMERCE ACT 7
  8. 8. nymity (because everyone knew development programs. the expertise and infrastructureeach other) and confidentiality i) Government as A Model to handle complex disputes in a(because they all trusted each User. Government shall utilize new virtual environment. Such cen-other). Neither did they envision electronic means to deliver core ters would have arbiters with thethe Net to become universally public services in order to demon- necessary technical and legalaccessed by millions of users. strate the benefits derived there- expertise to dispense justice inThey instead focused their ef- from and to promote the use of an even-handed manner.forts on making the Internet the such means. In this regard, the This vision has to date be-efficient, robust and reliable net- Government will be a pioneer in come a reality. Initiatives by thework we find today. The end using new technologies. In particu- Internet Corporation on As-result is an Internet where elec- lar, the Government Information signed Names and Numberstronic mail enjoys the same pri- System Plan (GISP), which is ex- (ICANN) have established an ar-vacy as postcards and users can pected to include, but not be lim- bitration process for handlingeasily mask their identity or even ited to, online public information domain name cybersquattingassume the identity of another. and cultural resources, databases cases which has so far beenIn addition, emerging technolo- for health services, web sites at successful at curbing this insidi-gies empowered users to collect local, regional and national levels ous practice. For more informa-vast amounts of personal infor- and public libraries and databases, tion, visit www.icann.org.mation which, in electronic form, where appropriate, will be imple-can more easily be sold or dis- mented in accordance with the pro- Chapter III -closed to third parties. This is a visions of the Act and RPWEB. Objective and Sphereclassic case where the technol- j) Convergence. Conver- of Applicationogy outpaced the law leaving gence of technologies is crucial tofertile ground for unscrupulous electronic commerce and will be Section 4. Objective of thepersons to abuse the vacuum. supported by appropriate govern- Act. The Act aims to facilitateHence, the policy espouses ment policies. Government will domestic and international deal-market-led solutions to these work closely with business in pre- ings, transactions, arrangements,controversial Internet issues. paring for and reacting to changes agreements, contracts and ex-This is deemed to be necessary caused by convergence. changes and storage of informationgiven that neither the passage k) Domain Name System. through the utilization of elec-of laws nor the adjudication of The Government supports initia- tronic, optical and similar medium,disputes by courts would be ad- tives to ensure that Internet users mode, instrumentality and technol-equate either to solve existing will have a sufficient voice in the ogy to recognize the authenticityproblems or to keep pace with governance of the domain name and reliability of electronic docu-the rapidly changing environ- system. ments related to such activities andment. l) Access to Public Records. to promote the universal use of f) Electronic Commerce Government shall provide equal electronic transactions in the gov-Awareness. Government and the and transparent access to public ernment and by the general pub-private sector will inform society, domain information. lic.both individual consumers and m) Dispute Mechanisms.businesses, about the potentials of Government encourages the use of Objective. The primary objec-electronic commerce and its impact self-regulatory extra-judicial dis- tive of the Act is to provide aon social and economic structures. pute settlement mechanisms such secure legal framework and en- g) Small and Medium-Sized as arbitration and mediation as an vironment for electronic com-Enterprises. Government will pro- effective way of resolving electronic merce. This is pursuant to thevide small and medium-sized en- commerce disputes. (n) notion that such an environmentterprises (SMEs) with information will promote electronic com-and education relevant to oppor- Alternative Modes of Dispute merce. In the case of the Philip-tunities provided by global elec- Resolution. While the Philippine pines, this has come to pass astronic commerce. Government will Judicial Academy is in the pro- investments into electronic com-create an environment that is con- cess of educating members of merce ventures have beenducive to private sector investment the judiciary on Internet and steadily rising following the pas-in information technologies and en- electronic commerce legal is- sage of the Act.courage capital access for SMEs. sues, the pace of technology will h) Skills Development. Gov- outstrip the ability of courts to Section 5. Sphere of Applica-ernment shall enable workers to become an effective venue for tion. The Act shall apply to anyshare in the new and different em- the resolution of electronic com- kind of electronic data messageployment generated by electronic merce disputes. Hence, elec- and electronic document used incommerce. In this regard, the Gov- tronic commerce players would the context of commercial and non-ernment shall continue to promote be better served by privately-run commercial activities to includeboth formal and non-formal skills- dispute resolution centers with domestic and international deal-8 THE ELECTRONIC COMMERCE ACT
  9. 9. ings, transactions, arrangements, taken electronically nor proven Non-commercial activities in-agreements, contracts and ex- using electronic evidence. This clude, among others, acts, trans-changes and storage of informa- creates a double standard that actions and documents relatingtion. fosters even more confusion. to national security, criminal of- For instance, a person accused fenses, marriage, paternity and Unique Feature of the Act. of sending threatening e-mails filiation, adoption, parental au-Unlike similar legislation in other (e.g., “I’m going to kill your dog!”) thority, donations, quasi-delicts,countries, the Act applies might argue that since the com- labor and employment, labor re-equally to commercial and non- munication was personal and lations, elections, suffrage,commercial activities. Note that not commercial, the e-mails are agrarian reform, immigration,the Model Law was intended to inadmissible and invalid under and protection of the environ-govern electronic commercial the Act. But if the threats were ment.transactions only. Hence, the directed at the commercial inter-bills considered by both houses ests of the victim (i.e., “I’m going PART IIof Congress were likewise lim- to burn down your store!”), theited and excluded non-commer- Act may be said to apply. ELECTRONIC COMMERCEcial transactions. However, dur- At any rate, the foregoing il- IN GENERALing the House deliberations, the lustrates that a limited applica-authors and co-lead sponsor of tion of the Act to commercial Chapter I -the bill, Rep. Leandro Verceles transactions only gives rise to General Provisions(Lone District, Catanduanes), more legal problems.shared the view that the law In other situations, such a lim- Section 6. Definition ofshould have universal applica- ited application can cause injus- Terms. For the purposes of the Acttion. Hence, amendments were tice. An illegitimate child for ex- and these Rules, the followingintroduced to expand the scope ample would not be permitted to terms are defined, as follows:of the Act to cover non-commer- submit an admission of filiation (a) “Addressee” refers to acial transactions. by his putative father if the same person who is intended by the The principal reason behind were contained in an e-mail originator to receive the electronicthe expanded coverage was message. In such decidedly data message or electronic docu-simple: unlike the Model Law, non-commercial activities, the ment, but does not include a per-the Act deals with decidedly electronic evidence would be son acting as an intermediary with“non-commercial” electronic ac- useless to the party-litigant. respect to that electronic data mes-tivities such as the performance Finally, a limited application sage or electronic document.of government functions and the would make the Act static anddefinition of hacking as a crimi- inflexible to adapt to the rapid Who is an Addressee. Undernal offense. Furthermore, there pace of technology. It is unde- Philippine law, natural and juridi-seemed to be no reason why niable that new technologies will cal persons have the capacity tonon-commercial events and introduce changes in all aspects act with legal consequences.transactions should be excluded of modern living. Already there They are therefore the subjectfrom the law’s application when are web-enabled refrigerators of laws and are the parties toa substantial portion of the that keep track of their contents; contracts and transactions.Internet traffic in the Philippines automatically suggest what Hence, under the Act an “ad-was not business-related. Fi- dishes to cook; and place online dressee” must always be a natu-nally, it was also believed that a orders to the store for groceries. ral or juridical person.limited application of the Act Inevitably, electronic documents In addition, intent plays a rolewould create confusion and un- and signatures will find wide- in determining the addressee ofintended consequences. For spread application, commercial electronic data messages.example, a person accused of as well as non-commercial. It is, Hence all persons who mighthacking a charitable site for fun therefore, with a measure of chance upon the data messagecould argue that since the act foresight that the Philippine Con- or play a role in its transmissionwas not done for commercial gress decided to adopt a univer- are excluded from the term ad-purposes, none of the electronic sal application for the Act. dressee. This also takes intoevidence would be admissible. Non-Commercial Applica- consideration the possibility thatIf upheld, that would, of course, tions. By expanding the scope data messages are handled byallow him to evade prosecution. of the Act, electronic documents assistants or employees of the The question would then and signatures may now be intended addressee whoarise as to what transactions are used in all types of transactions oftentimes have direct access tocommercial and what are not. and acts. More importantly, elec- say, the addressee’s electronicThe distinction would be of ut- tronic evidence is now admis- mailbox.most importance because the sible in all types of civil, criminallatter could neither be under- and administrative actions.THE ELECTRONIC COMMERCE ACT 9
  10. 10. Consistent with the Model terconnected which, by electronic, ate Bill No. 1556 otherwiseLaw, the Act should not be mis- electro-mechanical, optical and/or known as the Convergence Bill.interpreted as allowing for a magnetic impulse, or other meanscomputer to be made the sub- with the same function, can re- (e) “Electronic data message”ject of rights and obligations ceive, record, transmit, store, pro- refers to information generated,(¶35, UNCITRAL Model Law on cess, correlate, analyze, project, re- sent, received or stored by elec-Electronic Commerce with trieve and/or produce information, tronic, optical or similar means,Guide to Enactment; the data, text, graphics, figures, voice, but not limited to, electronic data“Guide”). For example, comput- video, symbols or other modes of interchange (EDI), electronic mail,ers which are programmed to expression or perform any one or telegram, telex or telecopy.automatically match buy and sell more of these functions. Throughout these Rules, the termorders are not the parties to the “electronic data message” shall betransaction. In such cases, the What is a Computer. Note equivalent to and be used inter-parties are the persons in whose that the above definition is changeably with “electronic docu-behalf the data messages (i.e., merely an elaboration of the ment.”the electronic buy and sell or- term “Information and Commu-ders) were sent. This empha- nications System” which in- Origin. The definition of “elec-sizes that networks and comput- cludes computers. The definition tronic data message” was baseders are merely conduits or tools is likewise broad enough to in- on the Model Law’s definition ofby which transactions are facili- clude all types of electronic “data message”. The Act how-tated. A computer is no less a equipment including desktop ever deleted the final phraseparty to a contract as a fax ma- and mobile computers, fax ma- which enumerated examples butchine or other office tool. chines, scanners, printers, com- this was restored in the IRR. Note that the terms “person” puter monitors, card readers, Interchangeability with “Elec-and “intermediary” which are smart cards, credit cards, ATM tronic Document.” The final sen-used in this Section are sepa- cards, mobile phones, pagers, tence relating to the term’s in-rately defined in the IRR. radios, VCRs, video equipment, terchangeability with “electronic audio equipment, personal digi- document” was called for be- (b) “Commercial Activities” tal assistants (“PDAs”), answer- cause the technical workingshall be given a wide interpreta- ing machines and telephones. group of the Bicameral Confer-tion so as to cover matters arising In the near future, even ordinary ence Committee intended thefrom all relationships of a commer- household appliances such as terms to be equivalent. Note thatcial nature, whether contractual or the refrigerator and washing the Senate version of the Actnot. The term shall likewise refer machine may be deemed com- defined the term “electronic datato acts, events, transactions, or puters as devices allowing them message” while the House ver-dealings occurring between or to communicate over the sion of the Act adopted the termamong parties including, but not Internet, among others, are de- “electronic document.” In orderlimited to, factoring, investments, veloped. to simplify the merging of theleasing, consulting, insurance, and both versions, both terms wereall other services, as well as the (d) “Convergence” refers to adopted.manufacture, processing, pur- technologies moving together to- It is submitted, however, thatchase, sale, supply, distribution or wards a common point and elimi- the term “electronic data mes-transacting in any manner, of tan- nation of differences between the sage” is broader in scope thangible and intangible property of all provisioning of video, voice and “electronic document.” The in-kinds such as commodities, goods, data, using digital and other terchangeability of the termsmerchandise, financial and bank- emerging technologies; the coming therefore allowed the Act to em-ing products, patents, participa- together of two or more disparate brace a wider set of electronictions, shares of stock, software, disciplines or technologies; the documents.books, works of art and other in- ability of different network plat- Electronic Data Message. Antellectual property. forms to carry any kind of service; electronic data message is com- and the coming together of con- posed of its contents – the Act Origin of Provision. This pro- sumer devices such as, but not lim- uses the word “information.” Thisvision is lifted from a footnote ited to, the telephone, television is consistent with the functionalappearing in the Guide. Note and personal computer. equivalent approach because inthat the definition of “non-com- the real world, documents aremercial activities” is merely those Origin of the Definition. The relevant only in terms of the in-which are excluded from the definition of convergence was formation held within their fourabove-definition. deemed necessary because of corners. In fact, the Rules of Section 28 of the Act relating to Evidence state that documents (c) “Computer” refers to any RPWEB. The above-definition are “offered as proof of their con-device or apparatus singly or in- was based primarily upon Sen- tents” (Sec. 2, Rule 130, Rules10 THE ELECTRONIC COMMERCE ACT
  11. 11. of Court). It is clear, therefore, ning. What was once a paper the definition of “information sys-that the paper or medium con- document is now transformed tem” in the Model Law. The de-taining the information is irrel- into an electronic data message fined term “computers” is sub-evant even in real world docu- even though its final destination sumed under “information andments. In rare instances where is an optical CD-ROM disk. communications systems.”they are relevant – such as those It is submitted that the output Scope. The definition is in-involving treasury certificates, of devices directly connected to tended to cover the entire rangeland titles and legal tender, the computers are electronic data of technical means used forpaper itself is considered object messages. These will include transmitting, receiving and stor-evidence, not documents. print outs from such devices as ing information (¶40, Guide). It Generally, the term “elec- laser, inkjet, and dot-matrix print- includes local area networks,tronic data messages” should be ers. These are undeniably pa- wide area networks, the Internet,understood to mean any elec- per documents and seem to be as well as wireless networkstronic file. What differentiates an excluded from the definition of such as GSM.electronic data message from its electronic data messages. Butreal world counterpart, however, what cannot be denied is that (g) “Electronic signature” re-is the manner in which the un- such electronic data messages fers to any distinctive mark, char-derlying information is handled. are either generated or stored by acteristic and/or sound in elec-The Act provides that such in- electronic means. tronic form, representing the iden-formation is “generated, sent, As an analogy, think of the tity of a person and attached to orreceived or stored by electronic, electronic data message as wine logically associated with the elec-optical or similar means.” These contained in a bottle. The wine tronic data message or electronicterms may be best understood may be poured into a glass or a document or any methodology orby giving the following examples: flask but all times, it retains its procedures employed or adopted • “Generated by electronic character as wine separate and by a person and executed ormeans” – This includes word pro- distinct from its containers. One adopted by such person with thecessing and other computer should never confuse the wine intention of authenticating or ap-files, electronic mail, SMS (short with the bottle. Hence, one proving an electronic data messagemessage service) messages, should not think of an electronic or electronic document.and other documents which are document merely as a computercreated through electronic de- file but the information contained Origin. The above-definitionvices. therein. Even if it is printed out was based on Section 2 of the • “Sent or Received by on paper, it retains its character ETA. The Model Law did notelectronic means” – Since only as an electronic data message have a separate defined term forthe mode of transmission is rel- so long as the information has electronic signature becauseevant, the output generated can not been altered. under that framework, an elec-now be considered an electronic Similar Means. The use of the tronic signature is merely a formdata message. In other words, words “electronic, optical or simi- of data message – one that per-a fax, telegram, or telex mes- lar means” is intended to reflect forms the function of a real worldsage would be included be- the fact that like the Model Law, signature.cause these were transmitted the Act was intended to cover Electronic Signatures. Con-through telecommunications not only existing communica- trary to popular belief, an elec-networks – as would transaction tions systems but technological tronic signature is not necessar-receipts for credit card, debit developments which could not ily a digitized image of a hand-card, ATM card and other simi- reasonably be foreseen at this written signature – although itlar point of sale transactions. time (¶31, Guide). would qualify as an electronic • “Stored by electronic signature. To better understandmeans” – This contemplates a (f) “Information and Com- the definition, one must applysituation where the electronic munications System” refers to a the functional equivalent ap-data is not sent by the creator system for generating, sending, proach to electronic signatures.thereof but merely stored. It nec- receiving, storing or otherwise A signature is used, amongessarily includes computer files processing electronic data mes- others, to identify a person. Ap-which are not intended for trans- sages or electronic documents and plying the functional equivalentmission but mere storage. Such includes the computer system or approach, anything in electronicelectronic files therefore enjoy other similar device by or in which form which identifies a user canthe same protection under the data is recorded or stored and any be said to be his signature if it isAct. procedures related to the record- logically attached to an elec- This likewise refers to situa- ing or storage of electronic data tronic data message. For ex-tions where paper documents message or electronic document. ample, if Bill Gates identifiesare transformed into paperless himself in his e-mail messagesform by digital imaging or scan- Origin. This term is based on as follows: “bill gates”, then theTHE ELECTRONIC COMMERCE ACT 11
  12. 12. latter would be considered an This is an important point which electronic data message or elec-electronic signature. Alterna- has consequences which will be tronic document.tively, he could file attach a digi- discussed below in relation total image of his handwritten sig- Section 13 of the IRR. Source. This was basednature to an encrypted data upon the same defined term inmessage and it, too, may be (h) “Electronic document” re- the Model Law.considered as an electronic sig- fers to information or the repre- Intermediary. Note that the in-nature. Yet another example of sentation of information, data, fig- termediary is excluded from thean electronic signature is the ures, symbols or other modes of definition of addressee and origi-name of a person appearing in written expression, described or nator precisely because the Actthe “From” field on an e-mail. Be- however represented, by which a intends that only the latter arecause it identifies a particular right is established or an obliga- the parties to electronic transac-person and is logically affixed on tion extinguished, or by which a tions. Still, the role of intermedi-an electronic data message, it fact may be proved and affirmed, aries in electronic communica-may qualify as a signature. which is received, recorded, trans- tions is undeniably important. A signature can also be used mitted, stored, processed, re- Such intermediaries may beto indicate a person’s consent to trieved or produced electronically. Internet Service Providers, tele-the contents of or to authenticate Throughout these Rules, the term phone companies, or value-a document. In these situations, “electronic document” shall be added network services provid-the electronic signature will not equivalent to and be used inter- ers. Note also that the defini-simply be the distinctive mark but changeably with “electronic data tion relates to a particular elec-will include other information message.” tronic data message thus recog-contained in the electronic docu- (i) “Electronic key” refers to a nizing that the same personment. For example, if Bill Gates secret code, which secures and de- could be the originator or ad-wanted to approve an e-mail pro- fends sensitive information that dressee of one electronic dataposal, he might write a reply e- crosses over public channels into message but an intermediarymail with nothing but the word a form decipherable only by itself with respect to another (¶39,“accepted” plus the usual mark or with a matching electronic key. Guide).“bill gates”. The entire reply e- This term shall include, but not bemail would then constitute the limited to, keys produced by single (k) “Non-Commercial Activi-electronic signature. key cryptosystems, public key ties” are those not falling under Another form of electronic cryptosystems or any other simi- commercial activities.signature under the definition is lar method or process, which may (l) “Originator” refers to aa method employed by the hereafter, be developed. person by whom, or on whose be-signer to authenticate a data half, the electronic data messagemessage. This refers to a digi- Relevance of Definition. The or electronic document purports total signature but it also contem- above-definition is relevant only have been created, generated and/plates a situation where a per- in the context of lawful access or sent. The term does not includeson signifies his consent to an and the obligation to maintain a person acting as an intermedi-online contract by filling up a reg- confidentiality referred to in Sec- ary with respect to that electronicistration form and clicking on the tions 31 and 32 of the Act or 46 data message or electronic docu-“I Accept” button. In such cases, and 47 of the IRR. Note that ment.the entire methodology (i.e., the the definition of this term in thecontents of the form plus the fact Act (Sec. 5[g]) states that the key Originator. During the Sen-of clicking) will be considered as is “decipherable only with a ate interpellation on SB 1523the electronic signature of the matching key.” This implied that (later SB 1902), Sen. Defensor-person. This is true also in the only electronic keys used within Santiago set forth a scenariocase of digital signatures where the context of a public key where a computer is pro-the signature is not merely the cryptosystems were included. grammed to accept electronicperson’s public key or his digital Therefore, the definition in the offers automatically. She asked,certificate but the entire authen- IRR was expanded to include is the computer the party to thetication method utilized. keys used in single key or sym- contract? Under this provision, Definition can be misleading. metric cryptography. the party to the agreement is theNote that while electronic signa- person in whose behalf the elec-tures are defined in the Act, only (j) “Intermediary” refers to a tronic acceptance was sent.those which comply with the person who in behalf of another Note that as with the Model Law,stringent requirements of Sec- person and with respect to a par- the originator and the addresseetion 8 of the Act or Section 13 of ticular electronic data message or are “persons”, i.e., natural per-the IRR, rise to the level of and electronic document sends, re- sons or juridical entities.are given the same legal protec- ceives and/or stores or provides Note also that an originatortion as handwritten signatures. other services in respect of that also includes one who creates12 THE ELECTRONIC COMMERCE ACT
  13. 13. an electronic document not for company may be considered a Fundamental to the Act. Thistransmission but only for storage service provider. The same is provision embodies the funda-(¶37, Guide). true for telephone companies in mental principle that electronic (m) “Person” means any natu- relation to their transmission of documents should not be dis-ral or juridical person including, electronic data messages such criminated against but should bebut not limited to, an individual, as faxes or voice messages. given the same legal status ascorporation, partnership, joint their paper-based counterparts.venture, unincorporated associa- Chapter II - Note that the first sentencetion, trust or other juridical entity, Legal Recognition states the rule in the negative toor any governmental authority. of Electronic Data Messages and emphasize that the law validates (n) “Service provider” refers Electronic Documents or confirms the legality of theto a provider of - form of the electronic document, i. Online services or net- Section 7. Legal Recognition not its contents per se. In otherwork access, or the operator of of Electronic Data Messages and words, the law does not auto-facilities therefore, including enti- Electronic Documents. Informa- matically state that the informa-ties offering the transmission, rout- tion shall not be denied validity or tion in the electronic documenting, or providing of connections for enforceability solely on the ground is legal or valid – it might veryonline communications, digital or that it is in the form of an electronic well be criminal. But such infor-otherwise, between or among data message or electronic docu- mation shall not be denied rec-points specified by a user, of elec- ment, purporting to give rise to ognition or effect solely becausetronic data message or electronic such legal effect. Electronic data it is contained in an electronicdocuments of the user’s choosing; messages or electronic documents document.or shall have the legal effect, validity Sub-paragraphs (a) to (d) ii. The necessary technical or enforceability as any other merely elaborate upon the rulemeans by which electronic data document or legal writing. In par- enunciated in the provision.message or electronic documents ticular, subject to the provisions of Subparagraph (d) applies to re-of an originator may be stored and the Act and these Rules: quirements under different lawsmade accessible to a designated or a) A requirement under law for the posting of notices (suchundesignated third party. that information is in writing is as in extra-judicial foreclosures) Such service providers shall satisfied if the information is in the or the delivery of documentshave no authority to modify or al- form of an electronic data message (such as the service of sum-ter the content of the electronic or electronic document. mons).data message or electronic docu- b) A requirement under law The entire Section should bement received or to make any en- for a person to provide informa- read in conjunction with Sectiontry therein on behalf of the origi- tion in writing to another person 10 of the IRR which specifiesnator, addressee or any third party is satisfied by the provision of the additional requirements beforeunless specifically authorized to do information in an electronic data the electronic document can beso, and shall retain the electronic message or electronic document. considered a “writing” under Phil-data message or electronic docu- c) A requirement under law ippine law.ment in accordance with the spe- for a person to provide informa-cific request or as necessary for the tion to another person in a speci- Section 8. Incorporation bypurpose of performing the services fied non-electronic form is satisfied Reference. Information shall notit was engaged to perform. by the provision of the information be denied validity or enforceabil- in an electronic data message or ity solely on the ground that it is Service Provider. This defi- electronic document if the informa- not contained in an electronic datanition is relevant in relation to tion is provided in the same or sub- message or electronic documentSection 30 of the Act on the li- stantially the same form. but is merely incorporated by ref-ability of service providers. It is d) Nothing limits the opera- erence therein.immediately clear that VANs and tion of any requirement under lawISPs are included in the term for information to be posted or Relevance of this Provision.service provider. However, it displayed in specified manner, time This Section was separated fromalso includes application service or location; or for any information the latter portion of Section 6 ofproviders, web hosting compa- or document to be communicated the Act to emphasize the impor-nies, domain name registries by a specified method unless and tance of the provision as well asand registrars, online ex- until a functional equivalent shall to harmonize the structure withchanges, websites hosting dis- have been developed, installed, and the Model Law. It is expectedcussion groups and perhaps, implemented. that many of the electronic docu-any conceivable web-based ments and data messages thatonline service company. In the Source. Section 6 of the Act will be used in electronic com-case of SMS texting or even merges Articles 5 and 5bis of the merce will no longer contain allvoice messaging, a cellphone Model Law. relevant information but mereTHE ELECTRONIC COMMERCE ACT 13
  14. 14. references thereto. For example, on-line retailer would not have required to conform to any othera standard e-mail contract might the option to force the e-tailer to requirement such as that relat-have a hyperlink to the standard a paper-based transaction ing to unalterability or reliability.terms and conditions applicable against the latter’s will. This is consistent with the ideato the agreement instead of a full Exception. As an exception to that since not all paper-basedrecital in the same message. this rule, however, the conduct documents are free from unau-This practice not only simplifies of a person may be used as evi- thorized alteration and forgery,transactions but also saves sys- dence of his consent to enter the same should not be imposedtems and network resources. into an electronic contract. For upon electronic documents.Additionally, much of electronic example, if a person purchases Hence, forged or fraudulentcommerce occurs through a book through an on-line re- electronic documents shouldcoded messages that are intelli- tailer, the purchaser will not be enjoy the evidentiary benefits ofgible when related to information heard to deny the validity of the admissibility and legal effect asoutside the said message. Un- electronic transaction. It is obvi- their paper-based counterparts.der this provision, the coded ous that his consent to the elec- From another perspective, itmessage may be considered a tronic transaction can be inferred may be said that the integrity andcontract or a valid document. from his conduct. reliability of electronic “writings” should be presumed as with Section 9. Use Not Manda- Section 10. Writing. Where paper documents. Any doubttory. Without prejudice to the ap- the law requires a document to be relating to their authenticityplication of Section 27 of the Act in writing, or obliges the parties should be established by clearand Section 37 of these Rules, to conform to a writing, or pro- and convincing evidence andnothing in the Act or these Rules vides consequences in the event in- not upon the mere allegation orrequires a person to use or accept formation is not presented or re- speculation by the party againstinformation contained in electronic tained in its original form, an elec- whom such electronic documentdata messages, electronic docu- tronic document or electronic data is presented.ments, or electronic signatures, but message will be sufficient if the lat- Hence, under the Model Lawa person’s consent to do so may ter: where the law provides that cer-be inferred from the person’s con- a) maintains its integrity and tain information must be “in writ-duct. reliability; and, ing” or be embodied in a “written b) can be authenticated so as document” (e.g., the Statute of Freedom to Opt Out. The to be usable for subsequent refer- Frauds), an electronic “writing”principle embodied in this provi- ence, in that - will suffice.sion is implied in Section 16(1) (i) It has remained complete A “writing” however is to beof the Act (Section 21 of the IRR) and unaltered, apart from the ad- distinguished from an “original.”where it provides (in the open- dition of any endorsement and any “Original” electronic documentsing phrase thereof) that parties authorized change, or any change are important in the context ofare free to provide that their con- which arises in the normal course say, bills of lading, certificates oftract or agreement will not be in of communication, storage and dis- deposits and negotiable instru-electronic form. Despite such play; and ments in which the notion ofimplicit recognition, the above (ii) It is reliable in the light of uniqueness of an original is par-provision was included in the the purpose for which it was gen- ticularly relevant (¶63, Guide).IRR to assuage concerns erated and in the light of all rel- For example, the original of aamong those not ready nor will- evant circumstances. negotiable bill of exchange musting to engage in electronic com- be presented to the drawee formerce. Hence, if a person re- Classes of Electronic Docu- acceptance. In the context of anceives an e-mail offer to enter ments in the Model Law. Under electronic bill, a higher degreeinto an electronic contract, such the Model Law, there are two (2) of authenticity is required in or-person is free to ignore the same major classes of electronic docu- der to preserve faith in these in-and request the counter-party to ments – “writings” and “originals.” struments. Applying the func-conduct the transaction off-line. All electronic data messages are tional equivalent approach, theIn fact, many on-line retailers ad- considered “writings” so long as Model Law requires electronicvertise their toll-free numbers as they are “accessible so as to be “originals” to possess “a reliablean alternative method of con- usable for subsequent refer- assurance as to the integrity ofducting business with their cus- ence” (Article 6, Model Law). In the information” (Article 8[1][a],tomers. other words, for “writings” the Model Law) and the ability to be The reverse of the rule is like- Model Law only focused upon displayed to the person to whomwise true in that parties may not the basic notion of the informa- it is to be presented (Articlecompel others to conduct busi- tion being reproduced and read 8[1][b], Model Law).ness in a paper-based environ- (¶49, Guide). Apart from the Evidently, reliability and integ-ment. Hence, a purchaser of an foregoing, “writings” were not rity are essential to “originals”14 THE ELECTRONIC COMMERCE ACT
  15. 15. while, in contrast, these at- sess the integrity and reliability recent mishap. The electronictributes are dispensable for “writ- required of “writings,” the elec- document is not a “writing” be-ings.” In the hierarchy of docu- tronic document will not rise to cause it is not required by law toments under the Model Law, the same status as a written be in written form. There is like-therefore, “writings” possess a document. wise no legal necessity to keeplower degree of authenticity and The more stringent require- the same in some “original” form.genuineness than “originals.” ments of Section 10 vis-à-vis But the Act nonetheless givesThis is permissible because of electronic “writings” will have an legal significance to the e-mail’sthe peculiar demands made adverse impact upon the follow- contents and authorizes its ad-upon “original” electronic docu- ing documents which are re- mission into evidence. It is sub-ments. quired to be in “writing”: mitted that a large number of Classes of Electronic Docu- (a) Those falling under the electronic documents will fallments in the Act. The hierarchy Statute of Frauds (Art. 1403[2], under this category.of documents under the Model Civil Code); Integrity. Under Section 10 ofLaw finds ready application un- (b) Negotiable instruments the IRR, an electronic “writing”der Philippine law. However, the (Sec. 1, Negotiable Instruments must maintain its integrity. ThisAct did away with the clear dis- Law); is established by showing thattinction between “writings” and (c) Donations of personal “(it) has remained complete and“originals.” Note that under Sec- property with value in excess of unaltered, apart from the addi-tion 10 of the IRR, “writings” must 5,000 pesos (Art. 748, Civil tion of any endorsement and anymaintain their integrity and reli- Code); authorized change, or anyability. Under Section 11 of the (d) Contract of antichresis change which arises in the nor-IRR, the same requirements where the amount of the princi- mal course of communication,must be met. pal and interest must be in writ- storage and display” (Section The effect of the blurring of ing (Art. 2134, Civil Code ); 10[b][i], IRR). Hence, the addi-this distinction is that where Phil- (e) Stipulation to pay inter- tion of message headers, digitalippine law requires something to est on loans (Art. 1956, Civil signatures, and other marks tobe in “writing,” the electronic data Code); the electronic document will notmessage or electronic document (f) Power of attorney to sell detract from its status as a “writ-must have some measure of in- land or any interest therein (Art. ing.” Real world counterpartstegrity and reliability. Otherwise, 1874, Civil Code); would be “received” or “sent”it will not be considered a “writ- (g) Assignment of copyright stamps which are affixed on pa-ing.” In practical terms, if an in whole or in part during the life- per documents in the course ofelectronic document fails to meet time of the author (Section delivery.the standards under Section 10 180.2, Intellectual Property Reliability. Note that the stan-above, it cannot be used to sat- Code); dard of reliability is determinedisfy the requirements of say, the (h) Marriage Settlements by the surrounding circum-Statute of Frauds which requires (Art. 77, Family Code); and, stances. In other words, eachthe sale of goods valued at more (i) Stipulations limiting a situation must be examined tothan five hundred pesos common carrier’s liability to less determine the reliability of elec-(P500.00) to be in writing. From than extraordinary diligence (Art. tronic documents. If a personthe standpoint of a party-litigant 1744, Civil Code) usually employs encryption towho wishes to impugn that elec- The blurred of the distinction all his e-mails, an unencryptedtronic document of sale, the lat- between electronic “writings” e-mail which purports to origi-ter can now raise issues of in- and “originals” likewise had the nate from him may be consid-tegrity and reliability in order to effect of creating another class ered unreliable whereas, thedeny the electronic document of electronic documents under plain e-mail may be consideredthe status of a written document. the Act. These are electronic reliable vis-à-vis ordinary users.This is a unique defense which documents which are not re- It will be observed that the reli-would not otherwise have been quired by law to be “in writing” ability analysis is subjective inavailable if the Act had adopted for their validity and likewise free nature and reliance upon cir-the less stringent rule in the from the constraints of being pre- cumstances which are deemedModel Law that electronic data sented or displayed in their “origi- relevant may change from per-messages are “writings.” nal” form. Instead, they are son to person. That is not to say, however, merely evidence of the informa-that the electronic document is tion contained therein – nothing Section 11. Original. Whereentirely useless – its contents more. the law requires that a document(i.e., information) has legal effect An example would be an e- be presented or retained in itsand may still be referred to and mail which contains an admis- original form, that requirement ispresented as evidence in court. sion of a particular fact say, of met by an electronic document orHowever, because it fails to pos- the writer’s negligence during a electronic data message if -THE ELECTRONIC COMMERCE ACT 15
  16. 16. a) There exists a reliable as- might be eroded. For example, under Best Evidence Rule is notsurance as to the integrity of the an electronic negotiable instru- required to prove either its integ-electronic document or electronic ment would lose its status as an rity or reliability.data message from the time when “original” if there existed no reli- However, the above conclu-it was first generated in its final able assurance of its integrity. sion should be interpreted withinform and such integrity is shown Integrity. The standard for the context of Sections 6 and 7by evidence aliunde (that is, evi- integrity for “original” electronic of the Act. While an electronicdence other than the electronic documents differ slightly from data message is by itself thedata message itself) or otherwise; electronic “writings.” For “origi- best evidence, it must still inde-and, nals”, the integrity must be pendently qualify as being either b) The electronic document shown to exist “from the time a “writing” or an “original” underor electronic data message is ca- when it was first generated in its Sections 11 and 12 of the IRR,pable of being displayed to the per- final form.” This is intended to respectively. In the case of theson to whom it is to be presented. include the situation where the latter documents, evidence of re- c) For the purposes of para- document was first composed liability and integrity must also begraph (a) above: on paper and later transferred to presented. Otherwise, the elec- (i) The criteria for assessing the computer. In such a situa- tronic data message or docu-integrity shall be whether the in- tion, the Act is to be interpreted ment will merely be taken asformation has remained complete as requiring assurances that the evidence of its contents but notand unaltered, apart from the ad- information remained complete be considered a “writing” or andition of any endorsement and any and unaltered from the time it “original” under Philippine law.change which arises in the normal was composed as a paper docu- Note finally, that the last para-course of communication, storage ment onwards, and not merely graph of Section 11 only dealsand display; and from the time it was translated with the Best Evidence Rule and (ii) The standard of reliability into electronic form (¶66, Guide). not upon the admissibility ofrequired shall be assessed in the Originals and the Best Evi- electronic documents in generallight of the purpose for which the dence Rule. The Best Evidence – a matter which is discussed ininformation was generated and in Rule states that when a docu- Section 18 of the IRR (supra).the light of all relevant circum- ment is the subject of inquiry, no Briefly, an electronic documentstances. evidence shall be admissible is considered the functional An electronic data message or other than the original document equivalent of a written docu-electronic document meeting and itself (Section 3, Rule 130, Rules ment. Hence, the electroniccomplying with the requirements of Court). If taken in the context document will have to complyof Sections 6 or 7 of the Act shall of the Act, it would appear that with the same rules governingbe the best evidence of the agree- all electronic documents to be the admissibility of written docu-ment and transaction contained presented in evidence must ments.therein. comply with the requisites of an “original” (i.e., maintain their in- Section 12. Solemn Contracts. What are “Originals.” “Origi- tegrity and reliability under Sec- No provision of the Act shall ap-nal” electronic documents are tion 11, IRR). ply to vary any and all require-legally relevant and significant The final paragraph of the ments of existing laws and relevantonly if they retain their unique- above section however, implies judicial pronouncements respect-ness. The real word equivalents that this is not the case. It states ing formalities required in the ex-of “original” electronic docu- that with respect to electronic ecution of documents for their va-ments are, among others, nego- data messages and electronic lidity. Hence, when the law re-tiable instruments (bills of ex- documents, the mere fact that quires that a contract be in somechange and promissory notes), they comply with Sections 6 and form in order that it may be validnegotiable instruments of title, 7 of the Act will render them the or enforceable, or that a contractstock certificates, deposit certifi- best evidence of the agreement is proved in a certain way, that re-cates, and treasury instruments. or transaction contained therein. quirement is absolute and indis-With these, the presentation of This means that electronic data pensable.the physical document itself es- messages by themselves aretablishes the right of the holder considered an original document What are Solemn Contracts.and his authority to perform for purposes of complying with Solemn contracts are thosetransactions relating to them. the Best Evidence Rule. In this which are valid only if the formHence, the integrity of the “origi- regard, the electronic document prescribed by law is observed.nal” must be established before need not comply with the re- For example, the agreementsit can be considered as such. quirements of Section 11 of the under the Statute of Frauds mustOtherwise, the faith in and com- IRR relating to “originals”– that be in writing or they will be un-mercial reliance upon such is, the party presenting the elec- enforceable. However, the pro-documents in electronic form tronic document as an original vision applies not only to con-16 THE ELECTRONIC COMMERCE ACT
  17. 17. tracts or agreements but docu- soon since the ability to have provision using the ETA as aments of all kinds which must be electronic notarization will go a starting point. Concerns werein writing to be valid. long way in promoting the use raised regarding the ease by Notarized Documents. In of electronic means for conduct- which electronic signatures maysome instances, the law requires ing business. be forged or falsified. Hence, itthat documents be acknowl- was deemed necessary to re-edged before a notary public Legal Recognition quire integrity and reliability frombefore they are considered valid. of Electronic Signatures electronic signatures. Further-An example is a notarial will more, the ability to indepen-which must not only be in writ- Section 13. Legal Recognition dently verify electronic signa-ing but must also be signed by of Electronic Signatures. An elec- tures gives comfort to those whoat least three (3) witnesses and tronic signature relating to an elec- may be required to rely uponacknowledged before a notary tronic document or electronic data them. Independent verificationpublic. Otherwise, it is invalid message shall be equivalent to the was also intended to encourageand the decedent is deemed to signature of a person on a written individuals to conduct their ownhave died intestate. document if the signature: due diligence respecting the Under Philippine law, nota- a) is an electronic signature identity of the signer and authen-rized documents enjoy a higher as defined in Section 6(g) of these ticity of the signature.degree of acceptability largely Rules; and, The Recognition of Electronicbecause the Rules of Court con- b) is proved by showing that Signatures under the Model Lawsiders them public documents a prescribed procedure, not alter- and the ETA. The Model Lawwhich are easier to present in able by the parties interested in the adopted all types and kinds ofevidence (Section 19[b], Rule electronic document or electronic electronic signatures provided132, Rules of Court). In fact, no- data message, existed under which: the latter constituted the func-tarized documents may be pre- (i) A method is used to iden- tional equivalent of manuallysented into evidence without fur- tify the party sought to be bound signed signatures. Hence, Ar-ther proof because the notarial and to indicate said party’s access ticle 7 of the Model Law merelyacknowledgement is prima facie to the electronic document or elec- requires that the electronic sig-evidence of the execution of the tronic data message necessary for nature utilize a method to iden-document (Section 30 Rule 132, his consent or approval through tify a person and to indicate thatRules of Court). the electronic signature; person’s approval of the informa- This is distinguished from the (ii) Said method is reliable and tion contained in the electronictreatment of private documents appropriate for the purpose for data message. The samewhich are admissible only after which the electronic document or wholesale validation of elec-their authenticity and due execu- electronic data message was gen- tronic signatures also appears intion are established (Section 20, erated or communicated, in the Section 8 of the Singapore ETA.Rule 132, Rules of Court). As a light of all circumstances, includ- This approach is consistentresult, many transactions are ing any relevant agreement; with the aim of the Model Law toevidenced by notarized agree- (iii) It is necessary for the be technology-neutral. It like-ments so much so that in the party sought to be bound, in or- wise embodies the application ofminds of many, a contract is in- der to proceed further with the the functional equivalent ap-valid until notarized. This is, of transaction, to have executed or proach. Hence, there exists nocourse, largely untrue. provided the electronic signature; discrimination as to any type of Given this widespread use of and, electronic signature.notarized documents, the Act (iv) The other party is autho- The Limited Recognition ofprovides that the Supreme Court rized and enabled to verify the Electronic Signatures under themay adopt authentication proce- electronic signature and to make Act. The Act, however, does notdures including electronic nota- the decision to proceed with the embrace all types of electronicrization systems (Section 11, transaction authenticated by the signatures adopted under theAct). Originally, the Act was sup- same. Model Law. In fact, the Act im-posed to include provisions The parties may agree to adopt poses strict requirements beforeregulating electronic notarization supplementary or alternative pro- an electronic signature qualifiesand the licensing of cedures provided that the require- as a handwritten signature.“cybernotaries.” However, it was ments of paragraph (b) are com- These are set forth in para-feared that the ensuing debate plied with. graphs (i) to (iv) above and inon the issue might delay the For purposes of subparagraphs Section 8 (a) to (d) of the Act.passage and approval of the act. (i) and (ii) of paragraph (b), the It is submitted that these re-Hence, the responsibility was factors referred to in Annex “2” quirements were put in place inpassed on to the Supreme may be taken into account. an attempt to ensure that onlyCourt. It is hoped that the High Rationale. The Senate tech- reliable electronic signatures areCourt will issue its regulations nical working group crafted this recognized under Philippine law.THE ELECTRONIC COMMERCE ACT 17

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