The Electronic Commerce Act and its Implementing Rules and Regulations

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

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

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

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

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 authentication.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

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

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

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

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

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 inon 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

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

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

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

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

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

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 intion, 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

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

Obviously, this was borne out by the fear surrounding the reliabil- articles of a limited partnershipthe lack of trust in electronic sig- ity and integrity of electronic sig- and amendments thereto (Arts.natures in general. This lack of natures should not have pre- 1844 and 1865, Civil Code); atrust can be traced to the ease vented the application of the waiver of an incontestabilityby which an electronic signature functional equivalent approach clause in group life insurancemay be forged or falsified. For in the Philippines. Congress policies (Sec. 228, Insuranceexample, the Act defines a voice should have realized that even Code); and, articles of incorpo-print attached to an electronic real world signatures can be ration and by-laws of a corpora-data message as an electronic forged. In fact, these “real world” tion (Secs. 14 and 46, Corpora-signature. However, anyone – forgeries enjoy the presumption tion Code). These documentseven an inexperienced computer of validity until proven otherwise. may only be signed by an elec-user – can merely file attach the They may even be admitted into tronic signature complying withsame file to another electronic evidence and become the basis the requirements of Section 13data message and give the lat- of court decisions. Electronic above or Section 8 of the Act.ter the appearance of having signatures should have enjoyed Failing that, the foregoing willbeen “signed” by the owner of the same treatment – the pre- either become invalid, infirm orthe voice print. Hence, in the sumption of validity until the pre- suffer from some other adverseeffort to ensure that only reliable sentation of clear and convinc- legal consequence.electronic signatures are recog- ing evidence to the contrary. In- Additionally, no documentnized under the Act, Congress stead, Congress introduced pre- will be considered “signed” un-abandoned the functional requisites before validating an der Philippine law unless it alsoequivalent approach. electronic signature under the complies with the afore-men- The functional equivalent ap- Act which in effect, discriminates tioned provisions of the Act andproach dictates that all electronic against electronic signatures vis- the IRR. These include all typessignatures should have been à-vis handwritten signatures. of signed documents such asmade to enjoy the benefits of What are Valid Electronic Sig- contracts, agreements, deeds,handwritten signatures. In other natures under the Act. It appears affidavits, application forms,words, electronic signatures that given the requirements re- pleadings and waivers. The ab-should enjoy the presumption of lating to electronic signatures, sence of any signature on thesevalidity until this is overcome by the Act validates only digital sig- documents may not necessarilycontrary evidence. There should natures which exist within the affect the underlying transaction.likewise be no obstacle to their context of public key infrastruc- Note that contracts under Phil-admissibility in evidence and ture (PKI). Evidently, only these ippine law need not be embod-should be relied in the absence signatures are given the same ied in any particular form norof contrary proof. More impor- legal status as handwritten sig- signed.tantly, the presumption favoring natures. While there may be However, the absence of athe reliability, integrity and au- other types of electronic signa- valid electronic signature cer-thenticity of electronic signatures tures in existence or may here- tainly raises issues as to the in-should be overcome by clear after be developed which like- herent validity of the electronicand convincing evidence. The wise comply with the Act, it is document itself or of its contents.party assailing the electronic sig- submitted that these are not in An admission of a particular factnature should not be permitted widespread use and are there- contained in an electronic docu-merely to raise doubts or specu- fore largely irrelevant to the Act. ment may, for example, be de-late upon the ease of electronic Effect of Limited Recognition. nied legal effect if it is unsigned.forgery, it should be firmly and It is the intent of the Act to allow For example, a person may ad-clearly established if such is the electronic signatures to comply mit his paternity of a child in acase. with any law requiring docu- word processing file and for this Sad to say, this was not the ments to be “signed” or “sub- purpose, may affix a digitizedapproach taken by Congress scribed” or that a person supply image of his manual signature.and as a result, all of the elec- his “signature” thereto. The lim- The electronic signature wouldtronic signatures commonly ited recognition therefore is rel- certainly be invalid under the Actused at this time do not enjoy evant and affects the execution and the document will be con-the legal status of a handwritten of the following documents: ne- sidered “unsigned” under Philip-signature. In other words, the gotiable instruments (promissory pine law. In such a case, it isaverage or common e-mail sig- notes, bills of exchange and uncertain if the contents of thenatures, digitized images of sig- checks; Section 1, Negotiable In- electronic document may be re-natures, voice prints, distinctive struments Law); holographic lied upon say, by the child in amarks and others are not by wills (Arts. 810, 812, and 813, suit to establish paternity. On thethemselves considered valid sig- Civil Code); the written inventory one hand, it may be said thatnatures under the Act. attached to an articles of part- an unsigned document is a mere It is submitted however that nership (Art. 1773, Civil Code); scrap of paper; upon the other,18 THE ELECTRONIC COMMERCE ACT

it may be equally said that the poses of entering into transac- identical then this could meanmere lack of the signature does tions however there will still be that an error occurred duringnot necessarily invalidate the concerns regarding the accu- transmission or the messagecontents thereof or the informa- racy of the information in such was altered.tion contained therein. directories. Hence, the need for The use of the hash function Introduction to Cryptograph a trusted third party to attest to on the message and its compari-and Digital Signatures. Since the relationship between a pub- son with the message digestthe only electronic signature rec- lic key and its owner. This third decrypted from the Pepe’s pub-ognized under the Act is a digi- party is called a certification au- lic key enables the Pilar to verifytal signature, it is important to thority or “CA”. Typically, the CA any alteration in the messagediscuss cryptography and pub- issues the public and private during transit. This ensureslic key infrastructure. keys but only after the person to message integrity. In addition, Cryptography is generally un- whom such keys are issued pre- since the message digest wasderstood to encompass encryp- sents himself personally at the decrypted using the Pepe’s pub-tion and decryption. Encryption CA’s offices to prove his identity. lic key, it denotes that it was en-is the transformation of data Once the CA has verified his crypted using the Pepe’s privatesuch as plaintext, into an unin- identity, it will then issue a digi- key that is in his possession – atelligible format called cipher text tal certificate identifying him to fact certified to by the Pepe’s CAthat cannot be read without the the public key. The creation of which issues a digital certificate.appropriate “key”. Decryption is an open and public crypto- This proves that the messagethe opposite of encryption and graphic system has been called was sent by Pepe and by no onerenders unintelligible data read- the public key infrastructure – else — thus establishing theable by the application of the PKI for short. source of the same. Taken to-“key”. There are two popular Of particular interest are “digi- gether, message integrity andtypes of cryptographic systems: tal signatures” which are essen- identity form the basis for non-secret key and public key. tial in e-commerce transactions repudiation by Pepe. Such non- In secret key cryptography, because of the role they play in repudiation authenticates elec-also known as symmetric cryp- the creation, validity and en- tronic documents to a degreetography, the same key is used forcement of electronic con- sufficient to make parties liablefor encryption and decryption. tracts. Digital signatures are not thereon.However, the use of secret keys digitized or scanned images of The ease by which electronicproved to be inconvenient and a person’s signature. It is, in- transactions can be proven us-entailed unnecessary expense. stead, a method by which a ing PKI can only spur the growthIn response to these issues, person’s communication of an of e-commerce. As demon-public key cryptography was de- offer or consent (whether by e- strated, PKI raises electronicveloped. In this system, also mail or through a click of an “I contracts to the same level asknown as asymmetric cryptog- Accept” button on an on-line ses- physical contracts as a methodraphy, algorithms are used to sion) can be independently veri- of proving the electronic trans-create two mathematically-re- fied for authenticity and integrity. action. Coupled with CAs of un-lated keys. One key is kept by Here’s how it works: if Pepe questioned integrity, PKI has theits owner and undisclosed (the were to affix a digital signature potential to enable transactions“private key”) while the other is to his e-mail contract, he must between total strangers withoutpublished and made easily avail- initially use a “hash” function to depriving them of remedies inable on the network (the “public create a compressed form of the case of breach. In the contextkey”). Under this system, the e-mail called the “message di- of an open system such as thesender can use his private key gest.” Pepe then applies his pri- Internet, this would be invalu-to encrypt a message and the vate key to the message digest able.receiver can use the sender’s to encrypt the same. Thereaf-public key to decrypt the same. ter, he sends the message di- Section 14. Presumption Re-For ease of access, public keys gest and the e-mail to Pilar who lating to Electronic Signatures. Inare published together with the then decrypts the message di- any proceeding involving an elec-names of their owners in elec- gest using Pepe’s public key. tronic signature, the proof of thetronic directories readily acces- Pilar then applies the same hash electronic signature shall give risesible over the Internet. A party function to the e-mail which gen- to the rebuttable presumption that:to an electronic contract need erates a second message digest a) The electronic signature isonly refer to the directory to re- and determines if the latter di- the signature of the person tolate a particular public key to the gest is identical with the mes- whom it correlates; and,identity of its owner. sage digest decrypted using b) The electronic signature Although the directories pro- Pepe’s public key. If they are was affixed by that person with thevide a name or identity associ- identical, then Pepe’s signature intention of signing or approvingated with a public key, for pur- is authenticated. If they are not the electronic data message or elec-THE ELECTRONIC COMMERCE ACT 19

tronic document unless the person appropriate security procedure, Note that the enumeration ofrelying on the electronically signed when applicable was adopted and the modes of authentication iselectronic data message or elec- employed for the purpose of veri- not exhaustive. Parties present-tronic document knows or has no- fying the originator of an electronic ing such evidence therefore aretice of defects in or unreliability of data message or electronic docu- free to authenticate the same inthe signature or reliance on the ment, or detecting error or alter- any other manner.electronic signature is not reason- ation in the communication, con-able under the circumstances. tent or storage of an electronic Section 16. Burden of Au- document or electronic data mes- thenticating Electronic Documents Presumptions. Note that the sage from a specific point, which, or Electronic Data Messages. Theabove presumptions will apply using algorithm or codes, identi- person seeking to introduce anonly if the electronic signature fying words or numbers, encryp- electronic document or electronichas been shown to have com- tions, answers back or data message in any legal proceed-plied with the requirements of acknowledgement procedures, or ing has the burden of proving itsSection 13 above or Section 8 similar security devices. authenticity by evidence capable ofof the Act. In other words, the supporting a finding that the elec-signature and the “method” Authentication. The authen- tronic data message or electronicspecified under the Act must be tication referred to under this document is what the personproven before the presumptions Section should be understood in claims it to be.arise. relation to the authentication of private documents under the Authentication. In response Modes of Authentication Rules of Court. For the purpose to a question posed by Sen. of their presentation in evidence, Loren Legarda-Leviste as to Section 15. Method of Au- documents are either public or who will perform the function ofthenticating Electronic Docu- private (Section 19, Rule 132, authentication, Sen. Magsaysayments, Electronic Data Messages, Rules of Court). Public docu- replied that the parties them-and Electronic Signatures. Elec- ments are among others, nota- selves may do so or in the alter-tronic documents, electronic data rized documents and public native, engage the services ofmessages and electronic signa- records. As a rule, public docu- third-party authenticators suchtures, shall be authenticated by ments need not be authenti- as credit card companies, cer-demonstrating, substantiating and cated as a condition to their ad- tificate issuers and service pro-validating a claimed identity of a mission in evidence (Section 23, viders.user, device, or another entity in Rule 132, Rules of Court).an information or communication In contrast, before private Modes for Establishingsystem. documents are allowed into evi- Integrity Until the Supreme Court, by dence, their due execution andappropriate rules, shall have so authenticity must be established. Section 17. Method of Estab-provided, electronic documents, This is done either by the testi- lishing the Integrity of an Elec-electronic data messages and elec- mony of a witness to the execu- tronic Document or Electronictronic signatures, shall be authen- tion of the document or by evi- Data Message. In the absence ofticated, among other ways, in the dence of the genuineness of the evidence to the contrary, the integ-following manner: signature or handwriting of the rity of the information and com- a) The electronic signature document’s maker (Section 20 munication system in which anshall be authenticated by proof [a] and [b], Rule 132, Rules of electronic data message or elec-that a letter, character, number or Court). tronic document is recorded orother symbol in electronic form The above-quoted Section stored may be established in anyrepresenting the persons named in provides suggestions as to the legal proceeding, among otherand attached to or logically asso- manner in which electronic evi- methods -ciated with an electronic data mes- dence may be authenticated. It a) By evidence that at all ma-sage, electronic document, or that would not be unreasonable to terial times the information andthe appropriate methodology or suppose that if the electronic communication system or othersecurity procedures, when appli- document qualifies as a public similar device was operating in acable, were employed or adopted document, it need not be au- manner that did not affect the in-by a person and executed or thenticated as provided above. tegrity of the electronic documentadopted by such person, with the This would be consistent with or electronic data message, andintention of authenticating or ap- the provisions of the Rules of there are no other reasonableproving an electronic data message Court. Therefore, the above grounds to doubt the integrity ofor electronic document; provision would be applicable the information and communica- b) The electronic data mes- mostly to electronic data mes- tion system;sage or electronic document shall sages which are private docu- b) By showing that the elec-be authenticated by proof that an ments. tronic document or electronic data20 THE ELECTRONIC COMMERCE ACT

message was recorded or stored by municated, the reliability of the useful guide as regards the as-a party to the proceedings who is manner in which its originator was sessment of the evidentialadverse in interest to the party identified, and other relevant fac- weight of an electronic datausing it; or, tors shall be given due regard. message (¶71, Guide). c) By showing that the elec-tronic document or electronic data Origin. This provision is based Section 19. Proof by Affidavitmessage was recorded or stored in primarily upon Article 9 of the and Cross-Examination. The mat-the usual and ordinary course of Model Law. ters referred to in Section 12 of thebusiness by a person who is not a Admissibility. The Act pro- Act on admissibility and eviden-party to the proceedings and who vides that electronic documents tiary weight, and Section 9 of thedid not act under the control of the are the functional equivalent of Act on the presumption of integ-party using the record. paper documents for evidentiary rity of electronic signatures, may purposes. In plain terms, this be presumed to have been estab- Necessity for establishing in- means that the provisions of the lished by an affidavit given to thetegrity. This Section establishes Rules of Court on documentary best of the deponent’s or affiant’sa manner by which the integrity evidence apply with equal force personal knowledge subject to theof an electronic data message in the presentation of electronic rights of parties in interest to cross-or signature may be proven. documents. examine such deponent or affiantNote that integrity is an essen- As discussed above (in rela- as a matter of right. Such right oftial element of an electronic tion to Section 15 of the IRR), cross-examination may likewise be“original” or “writing” under Sec- the Rules of Court categorizes enjoyed by a party to the proceed-tions 10 and 11 of the IRR. documents as public or private. ings who is adverse in interest to The methods listed in this Public documents are: (a) official the party who has introduced theprovision are by no means ex- government records; (b) nota- affidavit or has caused the affida-clusive – other ways may be re- rized documents; and (c) public vit to be introduced.sorted to prove such integrity. records of private documents re- Any party to the proceedingsOn one extreme, this provision quired by law to be entered has the right to cross-examine amay altogether be ignored when therein (Section 19, Rule 132, person referred to in Section 11,proving the integrity. Rules of Court). All other docu- paragraph 4, and sub-paragraph ments are private (Ibid.). (c) of the Act. Admissibility From the standpoint of pre- and Evidential Weight senting evidence, the main dif- Recommended Mode of Pre- ference between public and pri- senting Evidence. By this provi- Section 18. Admissibility and vate documents is that the sion, all matters relating to theEvidential Weight of Electronic former need not be authenti- admissibility and evidentialData Messages and Electronic cated and are immediately ad- weight of electronic evidenceDocuments. For evidentiary pur- missible (Section 23, Rule 132, may be set forth in an affidavit.poses, an electronic document or Rules of Court). Private docu- This simplifies the presentationelectronic data message shall be the ments, on the other hand, must of electronic evidence in that thefunctional equivalent of a written be authenticated in the manner party presenting or offering thedocument under existing laws. In provided for in Section 20, Rule same is freed from the drawn outany legal proceeding, nothing in 132 of the Rules. process of the direct examina-the application of the rules on evi- As applied to the Act, elec- tion of witnesses since the affi-dence shall deny the admissibility tronic documents which qualify davit performs this function.of an electronic data message or as public documents would From the standpoint of a per-electronic document in evidence: therefore be readily admissible son who or entity which pro- a) On the sole ground that it and need no authentication. The cesses or handles largeis in electronic form; or, reverse is true for electronic amounts of electronic data and b) On the ground that it is not documents which are private – are therefore more likely to bein the standard written form. they need to be authenticated hailed into court as witnesses to The Act does not modify any either in accordance with the establish a particular fact withstatutory rule relating to the ad- Rules of Court or Section 15 of respect to such data, this provi-missibility of electronic data mes- the IRR. As noted above, the sion can save them precioussages or electronic documents, ex- provisions of the IRR are not ex- manhours as standardized affi-cept the rules relating to authenti- haustive as to the modes of au- davit forms may be used. All thatcation and best evidence. thenticating electronic docu- remains then would be the In assessing the evidential ments. cross-examination on the affida-weight of an electronic data mes- Evidential Weight. The final vit. It is therefore advisable forsage or electronic document, the paragraph of Section 18 is culled such entities to formulate andreliability of the manner in which from paragraph (2), Article 9 of draft such standard forms for fu-it was generated, stored or com- the Model Law. It provides a ture use and reference.THE ELECTRONIC COMMERCE ACT 21

Retention of Electronic Data Retention. By this provision, Chapter III - Message and Electronic Docu- all private individuals and enti- Communication of Electronic ment ties will be allowed to keep gov- Data Messages and ernment records in electronic Electronic Documents Section 20. Retention of Elec- forms. This refers, among oth-tronic Data Message and Elec- ers, to invoices and financial Section 21. Formation andtronic Document. Notwithstand- records required to be kept pur- Validity of Electronic Contracts.ing any provision of law, rule or suant to the Tax Code. Pursu- Except as otherwise agreed by theregulation to the contrary: ant to the Act, businesses may parties, an offer, the acceptance of a) The requirement in any now digitize (i.e., either by scan- an offer and such other elementsprovision of law that certain docu- ning or manual data encoding) required under existing laws forments be retained in their original such information and keep them the formation and perfection ofform is satisfied by retaining them in electronic form. Filing cabi- contracts may be expressed in,in the form of an electronic data nets will now be replaced by CD- demonstrated and proved bymessage or electronic document ROMs and computers. This is means of electronic data messagewhich: expected to spur the growth of or electronic documents and no (i) Remains accessible so as to businesses offering digital imag- contract shall be denied validity orbe usable for subsequent reference; ing and encoding as companies enforceability on the sole ground (ii) Is retained in the format in move to reclaim precious office that it is in the form of an electronicwhich it was generated, sent or re- space now occupied by bulky fil- data message or electronic docu-ceived, or in a format which can ing cabinets. ment, or that any or all of the ele-be demonstrated to accurately rep- In relation to the Philippine ments required under existing lawsresent the electronic data message eGovernment. Paragraph (c) for the formation of the contractsor electronic document generated, was inserted into the IRR in or- is expressed, demonstrated andsent or received; and, der to harmonize this with the proved by means of electronic (iii) Where applicable, enables provision mandating the Philip- documents.the identification of its originator pine government to conduct itsand addressee, as well as the de- business electronically (Sec. 27, Philippine Contract Lawtermination of the date and the Act). It is expected that the gov- (Spiritual System). It has beentime it was sent or received. ernment will not meet the two (2) said that the main objective of b) The requirement referred year deadline set by the Act. the Act is to legalize electronicto in paragraph (a) is satisfied by In the meantime, the above contracts and transactions.using the services of a third party, provision on retention is imme- However, under Philippine law,provided that the conditions set diately effective and private en- “a contract is a meeting of mindsforth in subparagraphs (i), (ii) and tities will be allowed to keep gov- between two persons whereby(iii) of paragraph (a) are met. ernment records in electronic one binds himself, with respect c) Relevant government form. Obviously, such records to the other, to give somethingagencies tasked with enforcing or are important to the government or to render some service” (Art.implementing applicable laws re- agencies because the records 1305, Civil Code). Contracts arelating to the retention of certain allow them to conduct audits and consensual in nature and there-documents may, by appropriate is- other investigations. If the enti- fore perfected upon the absolutesuances, impose regulations to en- ties under regulation adopt con- acceptance of a definite offersure the integrity, reliability of such flicting or different standards in (Asuncion v. Court of Appeals,documents and the proper imple- storing its records electronically, 238 SCRA 602 [1994]).mentation of Section 13 of the Act. it may seriously impair the In addition, the Philippine government’s ability to perform Civil Code adheres to the spiri- Source of Provision. This pro- its regulatory functions as it tual system where contracts arevision is based on Article 10 of might become difficult to deal valid if made in any way that in-the Model Law. with such conflicting standards. dicates that the party wished to Additional language (i.e., the As a result, it is more reason- be bound. In contrast, a formal-words “where applicable”) was able to allow such agencies to ist system considers contractsinserted in subparagraph (iii) of issue rules and regulations gov- non-binding if they fail to com-paragraph (a) in order to align erning the manner in which such ply with prescribed ceremonialthe provision with the Model Law. records are kept in electronic requirements. Article 1356 ofThe task force deemed this to form. the Civil Code states thatbe a valid interpretation consis- Meanwhile, it is suggested “(c)ontracts shall be obligatory,tent with Section 37 of the Act that if a private entity wishes to in whatever form they may havewhich mandates that all statu- digitize its records, it should in- been entered into, provided alltory construction must give due quire with the relevant govern- the essential requisites for theirregard to the Act’s international ment agency to ensure compli- validity are present.” On the ba-origin. ance with such agency’s plans. sis of the foregoing, the High22 THE ELECTRONIC COMMERCE ACT

Court has repeatedly upheld the ment necessary for the growth Banks. Electronic transactionsvalidity of contracts evidenced of electronic commerce. Incon- made through networking amongonly by testimonial evidence sistent jurisprudence may even banks, or linkages thereof with(Thunga Chui v. Que Bentec, 2 have a destabilizing effect and other entities or networks, and vicePhil 561; Alcantara v. Alineo, 8 inadvertently lead to a decline in versa, shall be deemed consum-Phil. 111; Peterson v. Azada, 8 electronic commerce. This has, mated under rules and regulationsPhil. 432). Generally, therefore, of course, become academic issued by the Bangko Sentral un-a contract under Philippine law with the passage of the Act. der the succeeding paragraphwill be valid in whatever form it Validity of Electronic Con- hereunder, upon the actual dis-may be found whether it be oral, tracts. This provision explicitly pensing of cash or the debit of onepaper-based or for that matter, validates electronic contracts account and the correspondingelectronic. under Philippine law. Note, how- credit to another, whether such Recognition of Electronic ever, that the Act does not transaction is initiated by the de-Contracts. There is also some amend the law on contracts but positor or by an authorized collect-basis to say that Philippine law merely allows the requisite ele- ing party; Provided, that the obli-recognizes electronic contracts ments thereof to be expressed gation of one bank, entity, or per-in the absence of the Act. Ar- in electronic form. Under Philip- son similarly situated to anotherticle 17 of the Civil Code pro- pine law, the external manifes- arising therefrom shall be consid-vides that the forms and solem- tation of a contract is the meet- ered absolute and shall not be sub-nities of contracts shall be gov- ing of the offer and the accep- jected to the process of preferenceerned by the laws of the country tance upon the thing and the of credits; Provided, however, thatwhere the contract was ex- cause which are to constitute the the foregoing shall apply only toecuted. By codal provision, contract (Art. 1319, Civil Code). transactions utilizing the Auto-therefore, the Philippines follows The external elements are there- mated Teller Machine switchingthe lex loci contractus rule. In fore the offer and acceptance. network.this regard, the Supreme Court It should also be emphasized Without prejudice to the fore-has had occasion to rule that a that the Act covers not merely going, all electronic transactionspower of attorney executed in the cases in which both the of- involving banks, quasi-banks, trustGermany, must be tested as to fer and the acceptance are com- entities, and other institutionsits formal validity by the laws of municated electronically, but which under special laws are sub-that country and not the Civil also cases in which only the of- ject to the supervision of theCode (German & Co. v. fer or only the acceptance is Bangko Sentral ng Pilipinas shallDonaldson, Sim & Co., 1 Phil 63 communicated electronically be covered by the rules and regu-[1901]). In other words, if the law (¶78, Guide). In other words, lations issued by the same pursu-where the electronic contract an e-mail acceptance to a hand- ant to its authority under Sectionwas entered into recognizes written offer can be used as the 59 of Republic Act No. 8791 (Thesuch form of agreements, those basis to prove the existence of General Banking Act), Republicelectronic agreements are ex- the contract. Act No. 7653 (the Charter of thetrinsically valid in the Philippines. Contract Law – Intrinsic Va- Bangko Sentral ng Pilipinas) andAssuming further that such lidity. Nothing in this provision Section 20, Article XII of the Con-agreements are likewise intrin- of the Act or IRR should be stitution.sically valid, then those elec- deemed to have amended thetronic contracts would be valid law on contracts insofar as in- Backgrounder on the Provi-in all respects under Philippine trinsic validity is concerned. Con- sion. This provision appeared inlaw. tracts are either valid or invalid the House version of the Act and In light of this conclusion, based on the Civil Code provi- was adopted by the Bicameralsome are of the view that Philip- sions on Obligations and Con- Conference Committee. It waspine law did not need any new tracts. In addition, illegal provi- suggested by an Automatedlegislation to accommodate sions such as pactum Teller Machine (“ATM”) networkelectronic commerce. Any issue commissorium, and other terms group to address a specific prob-respecting the applicability of contrary to law, morals, public lem they had encountered withexisting law to electronic docu- order or public policy will receive respect to a bank which recentlyments and signatures could equal treatment even though ap- closed. For convenience, weproperly be resolved by the pearing in an electronic docu- shall refer to such bank as Bankcourts as cases on electronic ment. As mentioned elsewhere, A.commerce come before them. the Act intends only to amend Bank A’s Board of Directors On the other hand, the limi- the law with respect to the form declared it closed as of 6:00 p.m.tations of the judicial system of documents and transactions. of a particular day. However,should also be taken into con- Bank A’s ATM machines weresideration. It may be unable to Section 22. Consummation of operational until 10:00 p.m.create a stable legal environ- Electronic Transactions with Hence, its depositors were ableTHE ELECTRONIC COMMERCE ACT 23

to withdraw not only from Bank tiated by the depositor or by an tion 22 above. In short, they lim-A’s ATMs but those of other authorized collecting party: Pro- ited the application of the provi-banks which were members of vided, that the obligation of one sion only to ATM networks andthe same ATM network. Cash bank, entity, or person similarly stressed the BSP’s authority vis-was actually dispensed and the situated to another arising there- à-vis banks and other financialaccounts of these cardholders from shall be considered abso- institutions – leaving open thewith Bank A were duly debited. lute and shall not be subjected possibility that the BSP will is-Meanwhile, Bank A was in no to the process of preference of sue circulars to prevent the po-position to settle its obligations credits.” tential abuse of Section 16(2) ofwith the members of the ATM The provision achieved the the Act.network citing its closure. goal of excluding Bank A’s obli- A corresponding issue arose gations from the insolvency pro- Section 23. Recognition bywith respec to the nature of Bank ceedings by declaring the obli- Parties of Electronic Data Mes-A’s liability to the other banks. gation to pay absolute and free sage. As between the originatorOn the one hand, Bank A held from the process of preferences and the addressee of an electronicthat the other banks merely of credits. However, the provi- data message or electronic docu-stood as unsecured creditors sion inadvertently provided for ment, a declaration of will or otherand pursuant to the Philippine modes of perpetrating fraud statement shall not be denied legalinsolvency law, such creditors through electronic banking. effect, validity or enforceabilitystand as one of the lowest in the In sum, the provision states solely on the ground that it is inhierarchy of creditors. Hence, that the obligation of a bank to the form of an electronic data mes-the banks had very little chance pay upon an electronic transac- sage or electronic document.of recovery. The ATM network tion or order is absolute. Hence,banks, however, believed that if a depositor sends an electronic Source. This is based on Ar-since Bank A’s depositors re- authorization to pay a certain ticle 12 of the Model Law.ceived cash and their accounts amount to a third party, the bankwere debited, Bank A benefited is in no position to resist the ob- Attribution of Electronic Datafrom the transaction. It should be ligation to pay. Since it is abso- Message and Electronic Docu-noted that under Philippine law, lute, it may be countermanded mentbank depositors are deemed to only by the person giving suchbe creditors of a bank. In short, instruction – third parties who Section 24. Origin of Elec-when the total deposits of Bank may be prejudiced thereby tronic Data Message. An electronicA were decreased by the ATM would have no recourse. data message or electronic docu-withdrawals, its total liabilities to Problems with this provision ment is that of the originator if itdepositors were likely de- were apparent from the begin- was sent by the originator himself.creased. In which case, the ning. Consider a situation involv-ATM network lawyers held the ing an insolvent company. The Section 25. Origin of Elec-position that Bank A was unjustly bankrupt company could send tronic Data Message Not Person-enriched and the sums due electronic instructions to the ally Sent by an Originator. As be-them from Bank A were held by bank to make payments to for- tween the originator and the ad-the latter in trust for them. If that eign accounts of its principal dressee, an electronic data messagewere the case, then the banks shareholders or of preferred or electronic document is deemedwould be immediately entitled to creditors. If the company closes to be that of the originator if it wasthe remittance of the sum due after sending the electronic in- sent:them and the sum held by Bank struction and files for insolvency, a) by a person who had theA in trust for them would no the unpaid creditors and even authority to act on behalf of thelonger be the subject of insol- the insolvency court would be originator with respect to that elec-vency proceedings. unable to stop the payment by tronic data message or electronic Unfortunately, the provision the bank because the Act pro- document; orwhich appeared in Section 16(2) vides that its obligation to remit b) by an information andof the Act was as follows: the funds is absolute and shall communications system pro- “Electronic transactions not be subjected to the process grammed by, or on behalf of themade through networking of preferences of credits. The originator to operate automati-among banks, or linkages provision of the Act may there- cally.thereof with other entities or net- fore be used to facilitate fraudworks, and vice versa, shall be with the unwitting and involun- Section 26. When an Origina-deemed consummated upon the tary participation of the banks. tor May Be Bound By an Elec-actual dispensing of cash or the Realizing this, the Bangko tronic Data Message. As betweendebit of one account and the cor- Sentral ng Pilipinas (“BSP”) the originator and the addressee,responding credit to another, moved to insert the amend- an addressee is entitled to regardwhether such transaction is ini- ments which now appear in Sec- an electronic data message or elec-24 THE ELECTRONIC COMMERCE ACT

tronic document as being that of Source. This is based on Ar- tronic document was a duplicate.the originator, and to act on that ticle 13 of the Model Law.assumption, if: Attribution. The provisions on Section 29. Error on Elec- a) in order to ascertain attribution were intended to im- tronic Data Message or Electronicwhether the electronic data mes- pose liability upon originators Document. The addressee is en-sage was that of the originator, the and addressees with respect to titled to regard the electronic dataaddressee properly applied a pro- electronic data messages. This message or electronic document re-cedure previously agreed to by the liability rests on the principle that ceived as that which the origina-originator for that purpose; or, a party is entitled to rely (or not tor intended to send, and to act on b) the electronic data mes- to rely) upon the contents of an that assumption, unless the ad-sage or electronic document as re- electronic data message and dressee knew or should haveceived by the addressee resulted has the authority to take the ap- known, had the addressee exer-from the actions of a person whose propriate action. cised reasonable care, used therelationship with the originator or For example, if the e-mail of appropriate procedure or appliedwith any agent of the originator Bob authorized Alice to pur- an agreed procedure:enabled that person to gain access chase shares of stock in say, a) That the transmission re-to a method used by the originator Apple and the situation falls sulted in any error therein or into identify electronic data messages within Section 26 above, then the electronic data message or elec-or electronic documents as his own. Bob will be liable for Alice’s sub- tronic document when the latter The provisions of this Section sequent purchase of the shares enters the designated informationdo not exclude other instances or even though Bob meant to buy and communications system; or,circumstances when an originator shares in Snapple. But if the b) That electronic data mes-may be bound by the reliance and situation fell within Section 27, sage or electronic document is sentconsequent action of an addressee Alice will have to bear the loss to an information and communi-respecting an electronic data mes- as Bob will be able to disown the cations system which is not so des-sage, which purports to have been electronic instructions. ignated by the addressee for thethat of the originator. It should be noted that the purpose. parties are free to stipulate upon Section 27. When an Origina- terms other than those set forth Source. This is based on Ar-tor May Not Be Bound By an Elec- in the above sections. Further- ticle 13 of the Model Law.tronic Data Message. As between more, even in the absence of Rules are not Exhaustive.the originator and the addressee, such an agreement, the situa- The rules set forth in Sectionsan addressee is not entitled to re- tions set forth in the said sec- 28 and 29 are not exhaustive.gard an electronic data message as tions are by no means exhaus- They are guideposts as to howbeing that of the originator, and to tive. There may be other in- these issues are resolved but doact on that assumption: stances or circumstances in not exclude other circumstances a) as of the time when the ad- which a party may incur (or be or rules that may evolve in thedressee has both received notice absolved from) liability pursuant future. The courts and commonfrom the originator that the elec- to an electronic data message. usage are therefore expected totronic data message or electronic enhance these rules.document is not that of the origina- Separate Receipt of and Errortor, and has reasonable time to act on Electronic Data Message and Dispatch and Receiptaccordingly; or Electronic Document of Electronic Data Message and b) in a case within paragraph Electronic Document(b) Section 26 of these Rules, at any Section 28. Assumption Re-time when the addressee knew or garding Receipt of Separate Elec- Section 30. Agreement on Ac-should have known, had it exer- tronic Data Messages. The ad- knowledgment of Receipt of Elec-cised reasonable care or used any dressee is entitled to regard each tronic Data Messages or Electronicagreed procedure, that the elec- electronic data message or elec- Documents. The following rulestronic data message or electronic tronic document received as a shall apply where, on or beforedocument was not that of the origi- separate electronic data message sending an electronic data messagenator. or electronic document and to act or electronic document, the origi- The provisions of this Section on that assumption, except to the nator and the addressee havedo not exclude other instances or extent that it duplicates another agreed, or in that electronic docu-circumstances when an originator electronic data message or elec- ment or electronic data message,may not be liable for the reliance tronic document and the addressee the originator has requested, thatand consequent action of an ad- knew or should have known, had receipt of the electronic documentdressee respecting an electronic it exercised reasonable care or or electronic data message be ac-data message, which purports to used any agreed procedure, that knowledged:have been that of the originator. the electronic data message or elec-THE ELECTRONIC COMMERCE ACT 25

a) Where the originator has not nator and the addressee, the dis- to an information and communi-agreed with the addressee that the patch of an electronic data message cations system of the addresseeacknowledgment be given in a par- or electronic document occurs that is not the designated informa-ticular form or by a particular when it enters an information and tion and communications system,method, an acknowledgment may communications system outside the receipt occurs at the time when thebe given by or through any com- control of the originator or of the electronic data message or elec-munication by the addressee, au- person who sent the electronic data tronic document is retrieved by thetomated or otherwise, or any con- message or electronic document on addressee.duct of the addressee, sufficient to behalf of the originator. c) If the addressee has notindicate to the originator that the designated an information andelectronic data message or electronic Source. This is based on Ar- communications system, receiptdocument has been received. ticle 15 of the Model Law. occurs when the electronic data b) Where the originator has Dispatch. This provision message or electronic documentstated that the effect or significance states that dispatch occurs when enters an information and commu-of the electronic data message or the electronic data message nications system of the addressee.electronic document is conditional enters an information and com- These rules apply notwith-on receipt of the acknowledgment munications system outside the standing that the place where thethereof, the electronic data mes- control of the originator. This ap- information and communicationssage or electronic document is plies readily to Internet e-mail system is located may be differenttreated as though it has never been where the time of dispatch would from the place where the electronicsent, until the acknowledgment is be the time of its transmission data message or electronic docu-received. from the sender’s ISP. However, ment is deemed to be received. c) Where the originator has not the time of dispatch of an e-mail Source. This is based on Ar-stated that the effect or significance sent to an addressee within a lo- ticle 15 of the Model Law.of the electronic data message or cal area network or for that mat- Time of Receipt . In the caseelectronic document is conditional ter the same ISP, is uncertain of subparagraph (a), time of dis-on receipt of the acknowledgment, because it may be said that the patch and receipt may occur atand the acknowledgment has not e-mail never enters a system the same time.been received by the originator outside the control of the origi- Retrieve. There is some lee-within the time specified or agreed nator. It is therefore suggested way to interpret the word “re-or, if no time has been specified or that internal e-mail and other trieve”. Some hold that it refersagreed, within a reasonable time, communications systems con- to the time when the e-mail isthe originator may give notice to form to a set of rules which will downloaded by the addresseethe addressee stating that no ac- determine the time of dispatch from the server even though theknowledgment has been received of electronic data messages. messages remain unread.and specifying a reasonable time Section 32. Time of Receipt of Meanwhile, others claim “re-by which the acknowledgment Electronic Data Message or Elec- trieve” should refer to the timemust be received; and if the ac- tronic Document. Unless otherwise the mail is actually read orknowledgment is not received agreed between the originator and opened by the addressee.within the time specified, the origi- the addressee, the time of receipt Significance. Time of receiptnator may, upon notice to the ad- of an electronic data message or has legal significance in somedressee, treat the electronic docu- electronic document is as follows: instances such as when a no-ment or electronic data message as a) If the addressee has desig- tice is required to be servedthough it had never been sent, or nated an information and commu- within a particular time limit.exercise any other rights it may nications system for the purpose Should there be a dispute, thesehave. of receiving electronic data mes- provisions may provide some sage or electronic document, re- guidance. Source. This is based on Ar- ceipt occurs at the time when theticle 14 of the Model Law. electronic data message or elec- Section 33. Place of Dispatch Note. This provision applies tronic document enters the desig- and Receipt of Electronic Dataonly in instances where the par- nated information and communi- Message or Electronic Document.ties have either agreed or the cations system; Provided, however, Unless otherwise agreed betweenoriginator has requested an ac- that if the originator and the ad- the originator and the addressee,knowledgment of receipt. In the dressee are both participants in the an electronic data message or elec-absence of either, then the fol- designated information and com- tronic document is deemed to belowing provisions will apply. munications system, receipt occurs dispatched at the place where the at the time when the electronic data originator has its place of business Section 31. Time of Dispatch message or electronic document is and received at the place where theof Electronic Data Message or retrieved by the addressee. addressee has its place of business.Electronic Document. Unless oth- b) If the electronic data mes- This rule shall apply even if theerwise agreed between the origi- sage or electronic document is sent originator or addressee had used26 THE ELECTRONIC COMMERCE ACT

a laptop or other portable device agreement of the parties inmessage or electronic documentto transmit or receive his electronic volved. security needed, and to select anddata message or electronic docu- Relevance of the Provision. use or implement appropriatement. This rule shall also apply to This provision is important in the technological methods that suitdetermine the tax situs of such context of legal requirements their needs.transaction to the extent not incon- respecting the service or presen-sistent with Philippine situs rules tation of documents at a particu- Source. This provision wasand the regulations which may be lar location. For example, sub- inspired by the Organisation forpromulgated by the Bureau of In- stituted summons may be Economic Cooperation andternal Revenue (BIR) relating to served at the defendant’s place Development’s (OECD) Guide-the tax treatment of electronic of business. Assuming elec- lines for Cryptography Policycommerce transactions. tronic summons were accept- (Paragraph 2, Part 5) adopted For the purpose hereof - able, then the place of service on December 19, 1997. It was a) If the originator or the ad- may be established in accor- suggested for inclusion intodressee has more than one place dance with this provision. Committee Report No. 34 by theof business, the place of business Private International Law. The Philippine Internet Commerceis that which has the closest rela- final sentence was inserted to Society (PICS) and made its waytionship to the underlying trans- clarify that the provision is not into SB 1523.action or, where there is no under- intended to determine which law Freedom of Choice. This pro-lying transaction, the principal will apply to a particular elec- vision allows parties to utilize anyplace of business. tronic data message. This arises security or authentication b) If the originator or the ad- from the simple fact that the ap- method appropriate to suit theirdressee does not have a place of plication of the rule usually re- needs. This refers primarily tobusiness, reference is to be made veals two (2) locations – the public key encryption technolo-to its habitual residence; or place of dispatch and the place gies or the use of digital signa- c) The “usual place of resi- of receipt. For example, an e- tures. Other than that, partiesdence” in relation to a body cor- mail from a Philippine corpora- may use other information secu-porate, which does not have a place tion to a US corporation may be rity measures such as firewalls,of business, means the place where said to have been dispatched in intruder detection systems andit is incorporated or otherwise le- Manila and received in Seattle. virtual private networks. Anothergally constituted. Given this information, it is im- example would be technologies Nothing in this Section shall be possible to determine which law to determine the exact time ofdeemed to amend the rules of pri- applies to either the electronic receipt and dispatch of electronicvate international law. data message or the underlying data messages. Source. This is based on Ar- transaction. During the Senate interpella-ticle 15 of the Model Law. Tax Situs. The provision on tion of SB 1523 (later SB 1902), Presumption as to the Place tax situs appears in this Section Sen. Magsaysay, in response toof Receipt and Dispatch. This but it is submitted that it is dead a question from Sen. Robertprovision was based on Article letter law. As stated above, the Jaworski, stated that parties may15(4) of the Model Law. It was application of this provision al- use encryption technologies torecognized that given the distrib- ways reveals at most two (2) ensure the integrity and unalter-uted nature of the Internet, it places – the place of receipt and ability of the terms and condi-would not be proper to deter- the place of dispatch. This in- tions of electronic contracts.mine the place of receipt and formation does not reveal either Government Regulation. Thisdispatch of electronic data mes- the jurisdiction of the transaction serves as the basis for the DTIsages based upon the location nor tax situs thereof. In fact, it or other government agency toof the servers where the said points to alternative national issue rules and regulations overmessage was first sent by the laws that may apply but the rule the use of encryption technolo-originator or retrieved by the ad- will not determine tax situs. gies particularly, public key en-dressee. Since originators and cryption technologies. The DTIaddressees can easily change Security Methods for example could issue rules onthe location of said servers, it the accreditation of certificatewould only create further confu- Section 34. Choice of Security authorities or CAs and deter-sion. Hence, the above rule sets Methods. Subject to applicable mine the liability of different par-the place of receipt and dispatch laws and/or rules and guidelines ties for such things as lost pri-to the party’s place of business promulgated by the Department of vate keys and stale revocationor failing that, his habitual resi- Trade and Industry and other ap- certificates. Although these mat-dence. This way, the location of propriate government agencies, ters could have been includedthe servers becomes irrelevant. parties to any electronic transac- in the Act, it was deferred given Note further that this provi- tion shall be free to determine the the complexity of the issues andsion may be subject to the type and level of electronic data the urgent need for the law. In-THE ELECTRONIC COMMERCE ACT 27

stead, the authority was vested (iv) confirming that right or obligation must be con-with the DTI to fill in the gaps by goods have been loaded; veyed to that person by the trans-issuing the appropriate rules and (b) (i) notifying a person fer, or use of, a paper document,regulations when needed. of terms and conditions of the con- that requirement is met if the right Limits. This freedom is lim- tract; or obligation is conveyed by usingited by rules and regulations of (ii) giving instructions one or more electronic data mes-government agencies. Security to a carrier; sages or electronic documents:methods typically utilize encryp- (c) (i) claiming delivery Provided, That a reliable methodtion technologies which, if they of goods; is used to render such electronicare to be effective, are (ii) authorizing re- data messages or electronic docu-computationally infeasible to lease of goods; ments unique.crack. The usage of these en- (iii) giving notices of (4) For the purposes of para-cryption technologies raise na- loss of, or damage to goods; graph (3), the standard of reliabil-tional security issues since it re- (d) giving any other notice or ity required shall be assessed in thestricts the ability of government statement in connection with the light of the purpose for which theto take certain defensive actions performance of the contract; right or obligation was conveyedagainst threats. For example, a (e) undertaking to deliver and in the light of all the circum-militant group could utilize en- goods to a named person or a per- stances, including any relevantcryption to maintain a secure son authorized to claim delivery; agreement.and private communications net- (f) granting, acquiring, re- (5) Where one or more elec-work via the Internet. Their mes- nouncing, surrendering, transfer- tronic data messages or electronicsages may include instructions ring or negotiating rights in goods; documents are used to effect anyor orders to commit acts of ter- (g) acquiring or transferring action in subparagraphs (f) and (g)rorism that lead to destabiliza- rights and obligations under the of Section 25 of the Act, no papertion. The irony is that these contract. document used to effect any suchgroups would be using telecom- action is valid unless the use of elec-munications facilities provided Section 36. Transport Docu- tronic data message or electronicunder franchise from the Philip- ments. (1) Subject to para- document has been terminated andpine government. Different graph (3), where the law requires replaced by the use of paper docu-countries are considering vari- that any action referred to in the ments. A paper document issuedous ways to address this issue. immediately preceding Section be in these circumstances shall con-The US Government for a time carried out in writing or by using tain a statement of such termina-advocated a key escrow a paper document, that require- tion. The replacement of electronicwhereby access to keys were ment is met if the action is carried data messages or electronic docu-given to law enforcement agen- out by using one or more electronic ments by paper documents shall notcies immediately upon the data messages or electronic docu- affect the rights or obligations of thegovernment’s procurement of a ments. The transport documents parties involved.warrant. This was heavily op- referred to herein shall include, but (6) If a rule of law is compul-posed until later abandoned. not be limited to, those enumerated sorily applicable to a contract of in Annex “1” hereof. Concerned carriage of goods which is in, or is PART III agencies such as, but not limited evidenced by, a paper document, to, the DTI, Department of Fi- that rule shall not be inapplicable ELECTRONIC COMMERCE nance, DOTC, Philippine Ports to such a contract of carriage of IN CARRIAGE OF GOODS Authority and other port authori- goods which is evidenced by one ties, shall, within their respective or more electronic data messages Section 35. Actions Related to mandates, issue appropriate rules or electronic documents by reasonContracts of Carriage of Goods. and guidelines with respect to of the fact that the contract is evi-Without derogating from the pro- transport documents as provided denced by such electronic datavisions of Part Two of the Act, this herein. message or electronic document in-Part of the Rules applies to any (2) Paragraph (1) applies stead of a paper document.action in connection with, or in whether the requirement therein ispursuance of, a contract of car- in the form of an obligation or Source. This entire chapterriage of goods, including but not whether the law simply provides is almost a reproduction of Ar-limited to: consequences for failing either to ticles 16 and 17 of the Model (a) (i) furnishing the carry out the action in writing or Law.marks, number, quantity or weight to use a paper document. Comments. For this purpose,of goods; (3) If a right is to be granted the following paragraphs from (ii) stating or declar- to, or an obligation is to be ac- the Guide containing commentsing the nature or value of goods; quired by, one person and no other on the said provisions of the (iii) issuing a receipt person, and if the law requires Model Law are hereby repro-for goods; that, in order to effect this, the duced for reference:28 THE ELECTRONIC COMMERCE ACT

109. The adoption of a spe- non-negotiable, without exclud- the transfer of a document of titlecific set of rules dealing with spe- ing any specific document such representing the goods.cific uses of electronic com- as charter-parties. It was pointed 114. The reference to “onemerce, such as the use of EDI out that, if an enacting State did or more data messages” in para-messages as substitutes for not wish chapter I of part two to graphs (1), (3) and (6) is not in-transport documents does not apply to a particular kind of tended to be interpreted differ-imply that the other provisions of document or contract, for ex- ently from the reference to “athe Model Law are not appli- ample if the inclusion of such data message” in the other pro-cable to such documents. In par- documents as charter-parties in visions of the Model Law, whichticular, the provisions of part two, the scope of that chapter was should also be understood assuch as articles 16 and 17 con- regarded as inappropriate under covering equally the situationcerning transfer of rights in the legislation of an enacting where only one data messagegoods, presuppose that the State, that State could make use is generated and the situationguarantees of reliability and au- of the exclusion clause con- where more than one data mes-thenticity contained in articles 6 tained in paragraph (7) of article sage is generated as support ofto 8 of the Model Law are also 17. a given piece of information. Aapplicable to electronic equiva- 112. Article 16 is of an illus- more detailed wording waslents to transport documents. trative nature and, although the adopted in article 17 merely toPart two of the Model Law does actions mentioned therein are reflect the fact that, in the con-not in any way limit or restrict the more common in maritime trade, text of transfer of rights throughfield of application of the general they are not exclusive to such data messages, some of theprovisions of the Model Law. type of trade and could be per- functions traditionally performed xxx xxx xxx formed in connection with air through the single transmission 110. In preparing the Model transport or multimodal carriage of a paper bill of lading wouldLaw, the Commission noted that of goods. necessarily imply the transmis-the carriage of goods was the [References omitted] sion of more than one data mes-context in which electronic com- Article 17. Transport docu- sage and that such a fact, in it-munications were most likely to ments self, should entail no negativebe used and in which a legal [Section 36 of the IRR] consequence as to the accept-framework facilitating the use of ability of electronic commerce insuch communications was most 113. Paragraphs (1) and (2) that area.urgently needed. Articles 16 and are derived from article 6. In the 115. Paragraph (3), in com-17 contain provisions that apply context of transport documents, bination with paragraph (4), isequally to non-negotiable transit is necessary to establish not intended to ensure that a rightport documents and to transfer only functional equivalents of can be conveyed to one personof rights in goods by way of written information about the ac- only, and that it would not betransferable bills of lading. The tions referred to in article 16, but possible for more than one per-principles embodied in articles also functional equivalents of the son at any point in time to lay16 and 17 are applicable not performance of such actions claim to it. The effect of the twoonly to maritime transport but through the use of paper docu- paragraphs is to introduce a re-also to transport of goods by ments. Functional equivalents quirement which may be referredother means, such as road, rail- are particularly needed for the to as the “guarantee of singular-road and air transport. transfer of rights and obligations ity”. If procedures are made Article 16. Actions related to by transfer of written documents. available to enable a right orcontracts of carriage of goods For example, paragraphs (1) and obligation to be conveyed by [Section 35 of the IRR] (2) are intended to replace both electronic methods instead of by 111. Article 16, which estab- the requirement for a written using a paper document, it islishes the scope of chapter I of contract of carriage and the re- necessary that the guarantee ofpart two of the Model Law, is quirements for endorsement and singularity be one of the essen-broadly drafted. It would encom- transfer of possession of a bill tial features of such procedures.pass a wide variety of docu- of lading. It was felt in the prepa- Technical security devices pro-ments used in the context of the ration of the Model Law that the viding such a guarantee of sin-carriage of goods, including, for focus of the provision on the ac- gularity would almost necessar-example, charter-parties. In the tions referred to in article 16 ily be built into any communica-preparation of the Model Law, should be expressed clearly, tion system offered to the trad-the Commission found that, by particularly in view of the difficul- ing communities and woulddealing comprehensively with ties that might exist, in certain need to demonstrate their reli-contracts of carriage of goods, countries, for recognizing the ability. However, there is also aarticle 16 was consistent with the transmission of a data message need to overcome requirementsneed to cover all transport docu- as functionally equivalent to the of law that the guarantee of sin-ments, whether negotiable or physical transfer of goods, or to gularity be demonstrated, for ex-THE ELECTRONIC COMMERCE ACT 29

ample in the case where paper unique” should be interpreted as to “drop down” to paper commu-documents such as bills of lad- referring to the use of a reliable nications should also be subjecting are traditionally used. A pro- method to secure that data mes- to the agreement of all interestedvision along the lines of para- sages purporting to convey any parties. Otherwise, the origina-graph (3) is thus necessary to right or obligation of a person tor would be given the power topermit the use of electronic com- might not be used by, or on be- choose unilaterally the means ofmunication instead of paper half of, that person inconsistently communication. Alternatively, andocuments. with any other data messages enacting State might wish to pro- 116. The words “one person by which the right or obligation vide that, since paragraph (5)and no other person” should not was conveyed by or on behalf of would have to be applied by thebe interpreted as excluding situ- that person. bearer of a bill of lading, it shouldations where more than one per- 118. Paragraph (5) is a nec- be up to the bearer to decideson might jointly hold title to the essary complement to the guar- whether it preferred to exercisegoods. For example, the refer- antee of singularity contained in its rights on the basis of a paperence to “one person” is not in- paragraph (3). The need for se- bill of lading or on the basis oftended to exclude joint owner- curity is an overriding consider- the electronic equivalent of suchship of rights in the goods or ation and it is essential to ensure a document, and to bear theother rights embodied in a bill of not only that a method is used costs for its decision.lading. that gives reasonable assurance 120. Paragraph (5), while ex- 117. The notion that a data that the same data message is pressly dealing with the situationmessage should be “unique” not multiplied, but also that no where the use of data messagesmay need to be further clarified, two media can be simulta- is replaced by the use of a pa-since it may lend itself to misin- neously used for the same pur- per document, is not intended toterpretation. On the one hand, pose. Paragraph (5) addresses exclude the reverse situation.all data messages are necessar- the fundamental need to avoid The switch from data messagesily unique, even if they duplicate the risk of duplicate transport to a paper document should notan earlier data message, since documents. The use of multiple affect any right that might existeach data message is sent at a forms of communication for dif- to surrender the paper docu-different time from any earlier ferent purposes, e.g., paper- ment to the issuer and startdata message sent to the same based communications for ancil- again using data messages.person. If a data message is sent lary messages and electronic 121. The purpose of para-to a different person, it is even communications for bills of lad- graph (6) is to deal directly withmore obviously unique, even ing, does not pose a problem. the application of certain laws tothough it might be transferring However, it is essential for the contracts for the carriage ofthe same right or obligation. Yet, operation of any system relying goods by sea. For example, un-all but the first transfer might be on electronic equivalents of bills der the Hague and Hague-Visbyfraudulent. On the other hand, if of lading to avoid the possibility Rules, a contract of carriage“unique” is interpreted as refer- that the same rights could at any means a contract that is coveredring to a data message of a given time be embodied both in by a bill of lading. Use of a bill ofunique kind, or a transfer of a data messages and in a paper lading or similar document of titleunique kind, then in that sense document. Paragraph (5) also results in the Hague and Hague-no data message is unique, and envisages the situation where a Visby Rules applying compulso-no transfer by means of a data party having initially agreed to rily to a contract of carriage.message is unique. Having con- engage in electronic communi- Those rules would not automati-sidered the risk of such misin- cations has to switch to paper cally apply to contracts effectedterpretation, the Commission communications where it later be- by one or more data message.decided to retain the reference comes unable to sustain elec- Thus, a provision such as para-to the concepts of uniqueness tronic communications. graph (6) is needed to ensureof the data message and 119. The reference to “termi- that the application of thoseuniqueness of the transfer for the nating” the use of data mes- rules is not excluded by the merepurposes of Article 17, in view sages is open to interpretation. fact that data messages areof the fact that the notions of In particular, the Model Law used instead of a bill of lading in“uniqueness” or “singularity” of does not provide information as paper form. While paragraph (1)transport documents were not to who would effect the termina- ensures that data messages areunknown to practitioners of tion. Should an enacting State effective means for carrying outtransport law and users of trans- decide to provide additional in- any of the actions listed in Ar-port documents. It was decided, formation in that respect, it might ticle 16, that provision does nothowever, that this Guide should wish to indicate, for example, deal with the substantive rulesclarify that the words “a reliable that, since electronic commerce of law that might apply to a con-method is used to render such is usually based on the agree- tract contained in, or evidenceddata message or messages ment of the parties, a decision by, data messages.30 THE ELECTRONIC COMMERCE ACT

122. As to the meaning of ted, issue permits, licenses or cer- ments;the phrase “that rule shall not be tificates of registration or ap- Provided, That the Act shall byinapplicable” in paragraph (6), a proval, or provide for the method itself mandate any department ofsimpler way of expressing the and manner of payment or settle- the government, organ of state orsame idea might have been to ment of fees and other obligations statutory corporation to accept orprovide that rules applicable to to the government, shall: issue any document in the form ofcontracts of carriage evidenced a) accept the creation, filing electronic data messages or elec-by paper documents should also or retention of such documents in tronic documents upon the adop-apply to contracts of carriage the form of electronic data mes- tion, promulgation and publicationevidenced by data messages. sages or electronic documents; of the appropriate rules, regula-However, given the broad scope b) issue permits, licenses, or tions, or guidelines. Nothing in theof application of Article 17, which approval in the form of electronic Act or the Rules authorizes anycovers not only bills of lading but data messages or electronic docu- person to require any branch, de-also a variety of other transport ments; partment, agency, bureau, or in-documents, such a simplified c) require and/or accept pay- strumentality of government toprovision might have had the un- ments, and issue receipts acknowl- accept or process electronic datadesirable effect of extending the edging such payments, through messages; conduct its business; orapplicability of rules such as the systems using electronic data mes- perform its functions by electronicHamburg Rules and the Hague- sages or electronic documents; or means, until the adoption, promul-Visby Rules to contracts to which d) transact the government gation and publication of the afore-such rules were never intended business and/or perform govern- mentioned appropriate rules, regu-to apply. The Commission felt mental functions using electronic lations or guidelines. Such rules,that the adopted wording was data messages or electronic docu- regulations or guidelines as well asmore suited to overcome the ob- ments, and for the purpose, are au- the underlying technologies uti-stacle resulting from the fact that thorized to adopt and promulgate, lized in the implementation of thethe Hague-Visby Rules and after appropriate public hearing Act and these Rules shall conformother rules compulsorily appli- and with due publication in news- the principles set forth in the im-cable to bills of lading would not papers of general circulation, the mediately succeeding section.automatically apply to contracts appropriate rules, regulations, orof carriage evidenced by data guidelines, to, among others, specify Source. This provision ismessages, without inadvertently - based on Section 47 of the ETA.extending the application of such (1) the manner and format in Sen. Magsaysay suggested therules to other types of contracts. which such electronic data mes- two (2) year deadline to highlight [References omitted] sages or electronic documents shall the urgent need for government be filed, created, retained or is- to implement or adopt electronic PART IV sued; means of performing its func- (2) where and when such elections. ELECTRONIC tronic data messages or electronic The Philippine eGovernment. TRANSACTIONS documents have to be signed, the If this provision is strictly com- IN GOVERNMENT use of a electronic signature, the plied with, the entire Philippine type of electronic signature re- government should be able to Chapter I - quired; perform all its functions electroni- Government Use of Data Mes- (3) the format of an electronic cally within two (2) years. It is sages, Electronic data message or electronic docu- widely recognized however that Documents and Electronic ment and the manner the electronic the two (2) year deadline set by Signatures signature shall be affixed to the the Act is unrealistic. Therefore, electronic data message or elec- it is unlikely that the same will Section 37. Government Use tronic document; be strictly enforced.of Electronic Data Messages, Elec- (4) the control processes andtronic Documents and Electronic procedures as appropriate to en- Section 38. Principles Gov-Signatures. Notwithstanding any sure adequate integrity, security erning Government Use of Elec-law to the contrary, within two (2) and confidentiality of electronic tronic Data Messages, Electronicyears from the date of the effectiv- data messages or electronic docu- Documents and Electronic Signa-ity of the Act, all departments, bu- ments or records or payments; tures. The following principlesreaus, offices and agencies of the (5) other attributes required shall govern the implementation ofgovernment, as well as all govern- of electronic data messages or elec- Section 27 of the Act and shall bement-owned and-controlled corpo- tronic documents or payments; mandatory upon all departments,rations, that pursuant to law re- and bureaus, offices and agencies of thequire or accept the filing of docu- (6) the full or limited use of the government, as well as all govern-ments, require that documents be documents and papers for compli- ment-owned and-controlled corpo-created, or retained and/or submit- ance with the government require- rations:THE ELECTRONIC COMMERCE ACT 31

a) Technology Neutrality. sions and requirements of the Act, 7, 1997 (AO 332) and the aboveAll solutions implemented shall RPWEB and these Rules. provision should be read in re-neither favor a particular technol- lation to the same. Hence, theogy over another nor discriminate GISP. The GISP is the Phil- following matters referred to inagainst or in favor of particular ippine government’s blueprint for the AO are relevant:vendors of technology. introducing information technol- (a) All government agencies b) Interoperability. All ogy to every aspect of its opera- may use their savings to pur-implementation of technological tions. For more information, chase hardware and softwaresolutions shall ensure the please visit www.neda.gov.ph. necessary for Internet connec-interoperability of systems form- tion (Sec. 5, AO 332);ing part of the government net- Chapter II - RPWEB (b) All ISPs servicing gov-work. ernment offices should be con- c) Elimination of Red Tape. Section 40. RPWEB To Pro- nected to a local Internet ex-Government processes shall be re- mote the Use Of Electronic Docu- change (Sec. 3[a], AO 332); and,examined and if appropriate, sim- ments and Electronic Data Mes- (c) Telecommunications car-plified or re-engineered to maxi- sages In Government and to the riers should give priority to themize the functionality of technol- General Public. Within two (2) needs of ISPs for leased lines,ogy and to eliminate unnecessary years from the effectivity of the dial-up lines and trunking facili-delays in the delivery of govern- Act, there shall be installed an elec- ties (Sec. 3[b], AO 332).mental services. tronic online network in accor- d) Security Measures. Gov- dance with Administrative Order Section 41. I m p l e m e n t i n gernment shall implement appropri- 332 and House of Representatives Agencies. To facilitate the rapidate security measures to guard Resolution 890, otherwise known development of the governmentagainst unauthorized access, un- as RPWEB, to implement Part IV information infrastructure, thelawful disclosure of information, of the Act to facilitate the open, Department of Transportation andand to ensure the integrity of speedy and efficient electronic Communications, National Tele-stored information. online transmission, conveyance communications Commission and e) Auditability. All systems and use of electronic data messages the National Computer Centerinstalled shall provide for an audit or electronic documents amongst shall in coordination with eachtrail. all government departments, agen- other, promulgate the appropriate cies, bureaus, offices down to the issuances in accordance with their Principles. The task force rec- division level and to the regional respective mandate to aggressivelyognized the need to set down and provincial offices as practi- formulate, promote and implementgeneral guidelines or principles cable as possible, government- a policy environment and regula-to aid individual government owned and -controlled corpora- tory or non-regulatory frameworkagencies with respect to their tions, local government units, that shall lead to the substantial re-plans to comply with Section 27 other public instrumentalities, uni- duction of costs of including, butof the Act, i.e., to perform their versities, colleges and other not limited to, leased lines, land,functions electronically. Perhaps schools, and universal access to the satellite and dial-up telephone ac-the most noteworthy of the general public. cess, cheap broadband and wire-above principles is paragraph (c) The RPWEB network shall less accessibility by governmenton the elimination of red tape. serve as initial platform of the gov- departments, agencies, bureaus,Essentially, it was feared that ernment information infrastruc- office, government-owned and -without the re-examination of ture to facilitate the electronic controlled corporations, local gov-government processes, there is online transmission and convey- ernment units, other public instru-a danger of computerizing red ance of government services to mentalities and the general public,tape and inefficient processes. evolve and improve by better tech- to include the establishment of aHence, paragraph (c) autho- nologies or kinds of electronic government website portal and arized individual government online wide area networks utiliz- domestic internet exchange systemagencies to streamline their pro- ing, but not limited to, fiber optic, to facilitate strategic access to gov-cedures to adapt to the technol- satellite, wireless and other broad- ernment and amongst agenciesogy and to maximize efficiency band telecommunication mediums thereof and the general public andin the delivery of essential gov- or modes. for the speedier flow of locally gen-ernment services. erated internet traffic within the RPWEB. RPWEB is a strat- Philippines. Section 39. Government In- egy requiring all agencies andformation System Plan (GISP). It offices of the Philippine govern- Implementation. Note that theis hereby mandated that the GISP ment to connect to the Internet. DOTC, NTC and NCC are man-shall be adjusted, modified and It is embodied in Administrative dated to formulate and imple-amended to conform to the provi- Order No. 332 dated November ment, among others, a regula-32 THE ELECTRONIC COMMERCE ACT

tory framework that will lead to Notably, the recording busi- Chapter III -substantial reduction of telecom- ness has been expressly ex- Delineation of Functionsmunications costs not only for cluded from the Constitutionalgovernment but for the general prohibition via a Presidential Section 43. Delineation ofpublic. Pursuant to this author- Memorandum signed in 1994 Functions and Coordination by theity, the three (3) agencies are (Memorandum dated May 5, DTI. In the implementation of theexpected to issue separate 1994). Act, the following governmentimplementing rules and regula- Limitations. As a result of the agencies shall have the functionstions to implement Section 28 of mass media limitation, no foreign stated hereunder:the Act. equity is allowed in broadcast or a) The Department of Trade cable companies. However, and Industry shall: Section 42. Cable Television convergence is expected to blur (i) Supervise and coordinateand Broadcast as Telecommunica- the distinction between these the full implementation of Sectiontions. The physical infrastructure companies and telephone com- 27 of the Act. For this purpose,of cable and wireless systems for panies as they will all be enabled all government agencies intendingcable TV and broadcast excluding to carry not only images and to comply with the said provisionprogramming and content and the sound but data and voice. Al- of law shall coordinate with themanagement thereof shall be con- ready, cable companies are of- DTI in order to ensure adherencesidered as within the activity of fering high-speed Internet ser- with the principles provided for intelecommunications for the pur- vices or broadband over their Section 38 of these Rules. Obser-pose of electronic commerce and networks. In addition, existing vance of all laws and regulationsto maximize the convergence of technologies would allow them on public bidding, disbursementsICT in the installation of the gov- to offer voice services. However, and other restrictions, includingernment information infrastruc- these developments are ham- COA policies, shall be mandatory.ture. pered by the Constitutional limi- (ii) Install an online public in- tations on foreign ownership formation and quality and price Mass Media. The Constitu- because it is believed that foreign monitoring system for goods andtion provides that the ownership investments and expertise are services aimed in protecting theand management of mass me- needed for growth in this sector. interests of the consuming publicdia shall be limited to citizens of Spin Off. In order to address availing of the advantages of thethe Philippines, or to corpora- this limitation, the above provi- Act.tions, cooperatives or associa- sion was enacted to allow either (iii) Establish a voluntary list-tions, wholly-owned and man- a broadcast or cable company ing system for all businesses oraged by such citizens. to spin-off into two (2) compa- entities involved in electronic com- For purposes of this provision nies. One will provide content merce including, but not limited to,(which likewise appeared in the and programming either in the value-added service (VAS) provid-1973 Constitution), the Depart- form of licensed foreign pro- ers as this term is understood inment of Justice (DOJ), citing gramming or locally produced Republic Act No. 7925, banks, fi-Webster’s, defined mass media shows. This will continue to be a nancial institutions, manufacturing“as a medium of communication mass media company and sub- companies, retailers, wholesalers,(as the newspapers, radio, mo- ject to the Constitutional limita- and on-line exchanges. The list oftion pictures, television) that is tion against foreign ownership electronic commerce entities shalldesigned to reach the mass of and management. be maintained by the DTI andthe people and that tends to set The other company will hold made available electronically to allthe standards, ideals and aims the physical infrastructure mean- interested parties.of the masses” (DOJ Op. No. ing in the case of broadcast (iv) Review, study and assess163, S. 1973). In the same opin- companies, the broadcast all legal, technical and commercialion, the DOJ likewise relied upon equipment, licenses, and towers. issues arising in the field of elec-the definition prepared by the This company would now be tronic commerce which may beMedia Advisory Council, to wit: considered a telecommunica- directed to the DTI and if neces- “x x x the gathering, transmis- tions company and therefore sary, convene the appropriate gov-sion, of news, information, mes- under the Constitution, may ad- ernment agencies in order to dis-sages, signals and forms of writ- mit up to forty percent (40%) di- cuss, deliberate on and resolve theten, oral and all visual commu- rect foreign equity. This “physi- same and in the proper cases, pro-nication and shall embrace the cal infrastructure” company can mulgate additional rules and regu-print media, radio, television, now offer voice, data, broadband lations to implement the Act.films, movies, wire and radio and other services provided, of b) The Bangko Sentral ngcommunications services, ad- course, it secures the necessary Pilipinas shall exercise and per-vertising in all its phases, and permits and licenses from Con- form such functions as mandatedtheir business management” gress and the National Telecom- under the Act including the pro-(Ibid.). munications Commission. mulgation of the rules and regula-THE ELECTRONIC COMMERCE ACT 33

tions to implement the provisions tronic commerce, it will host a list lawful act of another person orof the Act with respect to banks, of companies engaged in elec- party;quasi-banks, trust entities, and tronic commerce. Registration Provided, further, That nothingother institutions which under spe- in the list is purely voluntary. in this Section shall affect-cial laws are subject to the Bangko a) Any obligation founded onSentral ng Pilipinas supervision PART V contract; c) The Department of Bud- b) The obligation of a serviceget and Management shall identify FINAL PROVISIONS provider as such under a licensingthe fund source for the implemen- or other regulatory regime estab-tation of Sections 37, 39 and 40 of Section 44. Extent of Liability lished under written law;the Rules, consistent with the proof a Service Provider. Except as c) Any obligation imposed un-visions of the annual General Ap- otherwise provided in this Section, der any written law; or,propriations Act, and in its capac- no person or party shall be sub- d) The civil liability of anyity in managing the budget execu- ject to any civil or criminal liabil- party to the extent that such liabil-tion and accountability processes ity in respect of the electronic data ity forms the basis for injunctiveof government, shall be responsible message or electronic document relief issued by a court under anyfor putting such core processes on- for which the person or party act- law requiring that the service pro-line. ing as a service provider as defined vider take or refrain from actions in Section 6(n) of these Rules necessary to remove, block or deny Delineation of Functions. As merely provides access if such li- access to any material, or to pre-mandated, each and every ability is founded on: serve evidence of a violation of law.agency of the government is a) The obligations and liabili-tasked with the implementation ties of the parties under the elec- Source. This provision isof the Act in accordance with tronic data message or electronic based on Section 10 of the ETAtheir respective areas of author- document; and §512(c)(1) of the U.S. Digi-ity. In other words, the Bangko b) The making, publication, dis- tal Millennium Copyright Act ofSentral Ng Pilipinas will regulate semination or distribution of such 1998 (“DMCA”). This provisionelectronic banking while the Se- material or any statement made in did not appear from SB 1902 butcurities and Exchange Commis- such material, including possible was carried over because of HBsion will issue the rules on elec- infringement of any right subsist- 9971. At the Senate, it was re-tronic stock trading and virtual ing in or in relation to such mate- moved when Sen. Raul Rocostock exchanges. rial: Provided, That suggested a return to the Implementation of Section (i) The service provider: (1) UNCITRAL Model Law frame-27. The Department of Trade does not have actual knowledge, or work.and Industry (“DTI”) however is (2) is not aware of the facts or cir- Basis. The above-provisiontasked with coordinating the cumstances from which it is appar- is the codification of jurispru-implementation of Section 27 of ent, that the making, publication, dence in other countries, nota-the Act respecting the mandate dissemination or distribution of bly, the United States. In Cubbyto government to conduct its such material is unlawful or in- v. Compuserve, (776 F.Supp 135business electronically. In this fringes any rights subsisting in or [SDNY 1991]), it was held thatregard, DTI will monitor the in relation to such material, or (3) Compuserve’s lack of editorialprogress by individual govern- having become aware, advises the control over content locatedment agencies and ensure com- affected parties within a reason- within its servers absolved it frompliance with the principles set able time, to refer the matter to the liability for defamation. The courtforth in Section 38 of the IRR. appropriate authority or, at the opin that case determined that One Stop Shop. Section tion of the parties, to avail of al- Compuserve was a mere dis-43(a)(iv) was included in the IRR ternative modes of dispute resolu- tributor of information and wasin order to address concerns tion; no more liable for defamationrelating to electronic commerce (ii) The service provider does than a bookseller or librarywhere the party is unsure which not knowingly receive a financial would with respect to the booksgovernment agency to ap- benefit directly attributable to the found therein. In contrast, theproach. In such cases, the party unlawful or infringing activity; Supreme Court of New York incan go to the DTI which will take and, Stratton Oakmont, Inc. v. Prodigythe appropriate action regarding (iii) The service provider does Services Co. (23 Media L. Rep.such concerns. For its part, the not directly commit any infringe- [BNA] ¶ 1794, 1995 N.Y. Misc.DTI is currently studying the es- ment or other unlawful act and LEXIS 229, 1995 WL 323710tablishment of a One Stop Shop does not induce or cause another [N.Y. Sup. Ct. May 24, 1995]),or help desk to perform this func- person or party to commit any in- held Prodigy liable as a publishertion and address these issues. fringement or other unlawful act because it held itself out as con- Voluntary List. As part of and/or does not benefit financially trolling the content of its bulletinDTI’s efforts to promote elec- from the infringing activity or un- boards. Editorial control there-34 THE ELECTRONIC COMMERCE ACT

fore was critical in determining or unlawful violation of the rights verse action against any partya service provider’s liability for of a third party. It was believed, and instead gives the parties thecontent. however, that if the provision full opportunity to ventilate their In the realm of copyright, the were to remain unchanged or dispute before the proper forum.District Court of the Hague held modified, it may be used to workin Church of Scientology v. an injustice against persons with Lawful AccessDataweb et al., (Cause No. 96/ legitimate rights.1048 [Dist. Ct. of the Hague, For example, if A’s website Section 45. Lawful Access toHolland, June 9, 1999]) that is hosted by service provider X Electronic Documents, ElectronicInternet Service Providers could and the latter receives notice Data Messages, and Electronicnot be held liable for infringe- from B that A’s site contains in- Signatures. Access to an electronicment because their activities are fringing material (something file, or an electronic signature oflimited to providing information which is untrue), X would be an electronic data message or elec-from and/or to its users and the forced to take down or remove tronic document shall only be au-storage of this information. In A’s site based on B’s notice. This thorized and enforced in favor ofaddition, the service providers is due largely to the fact that un- the individual or entity having ado not select the information and der the Act, once the service legal right to the possession or thedo not process it either. They provider X becomes aware of an use of the plaintext, electronic sig-only provide the technical means infringement, it may become li- nature or file and solely for the au-to enable publication by others. able therefor. Consider for the thorized purposes.Hence, in these circumstances moment the fact that B’s noticethe service providers do not do was incorrect – A was not com- Source. The above was in-the publishing themselves, but mitting infringement. Yet despite spired by the ETA provisionsonly provide the opportunity for such false information, A’s site authorizing the government topublication. was taken down and the latter conduct investigations requiring Liability. The liability of the suffers the consequences access to computers and data.service provider herein is limited thereof. Lawful Access. Apart fromnot only to that arising from It was suggested that the IRR persons authorized by the indi-copyright infringement but to a instead adopt the “notice and vidual having possession of thewhole range of offenses against take down” provision appearing electronic document or signa-third parties. It includes libel, in the DMCA. Under §512(c)(1) ture, the appropriate govern-defamation, threats, pornogra- of the DMCA, a service provider, ment agency or entity (includingphy, as well as, the illegal con- in order to avoid liability, must police officers) may have accessduct of its clients. remove the infringing material to the same provided they com- During the Senate interpella- after it has received an infringe- ply with the Constitutional pro-tion of SB 1523 (later SB 1902), ment notice. In order to avoid or tection against unreasonableSen. Gregorio Honasan inquired minimize the injustice referred to searches and seizures (Sectionif service providers should be in the preceding paragraph, the 2, Article III, Constitution). Lawheld liable for pirated or infring- DMCA mandates that the in- enforcement agencies musting material even though they fringement notice be made un- therefore procure a search war-are unaware of the same. Sen. der penalty of perjury, among rant before conducting a searchMagsaysay expressed the opin- other requirements. of a computer containing elec-ion that absent any active in- The task force was of the tronic evidence.volvement by the service pro- opinion however that the protec- Lawful Search. A number ofvider, it should not be liable for tion under the DMCA might be issues will arise once searchpiracy or infringement. If the law ineffective in the Philippine set- warrants are issued respectingwere to provide otherwise, ser- ting since the threat of perjury is electronic signatures and docu-vice providers would be con- not enough of a deterrent ments. The Constitution pro-strained to monitor all electronic against false infringement no- vides, among others, that thetraffic in order to avoid suit. This, tices. While perjury is a criminal search warrant must particularlyof course, might constitute an offense under Philippine law, describe “the place to beinvasion of privacy and result in there is a perception that it is not searched and the persons orother unintended harms. adequately enforced. things to be seized.” In the con- Modification in the IRR. Sub- Hence, the rule was adopted text of a computer, this may besection (3) in subparagraph (b)(i) which gives the service provider interpreted to mean that thewas introduced to the IRR by the the opportunity to refer the mat- search is limited only to a par-task force. The original provision ter and the parties to the proper ticular folder or sub-directory. Ifappearing as Section 30(b)(i) of government agency or to arbi- so, questions will arise if the lawthe Act imposed liability upon the tration. After receiving an in- enforcement officer can seizeservice provider when it be- fringement notice, the service the entire computer – CPU,comes aware of the infringement provider need not take any ad- Monitor and all. A seizure of thatTHE ELECTRONIC COMMERCE ACT 35

nature may be considered be- tronic key in any proceeding shall server or information and commu-yond the bounds allowed by the be limited by the Constitutional nication system; or any access inConstitution. right against self-incrimination. order to corrupt, alter, steal, or Other novel issues are likely destroy using a computer or otherto arise relating to established Self-incrimination. The last similar information and communi-doctrine such as that upholding sentence of the provision was cation devices, without the knowl-plain view searches. Under that added into the IRR to address edge and consent of the owner ofdoctrine, so long as the law of- the situation where law enforce- the computer or information andficer has a right to the view, if ment officers in the course of in- communications system, includinghe detects contraband that item vestigation compel witnesses to the introduction of computer vi-may be seized and the pos- disclose their encryption keys. It ruses and the like, resulting in thesessor charged appropriately. is expected that much of the in- corruption, destruction, alteration,This is true despite the fact that formation contained in comput- theft or loss of electronic data mes-the item was not specified in the ers will be encrypted. It is there- sages or electronic document shallsearch warrant. The rule like- fore important to establish that be punished by a minimum fine ofwise applies in instances where the right against self-incrimina- one hundred thousand pesosthere is no search warrant at all tion can be used by the person (P100,000.00) and a maximum– so long as the officer has a under investigation to resist the commensurate to the damage in-right to the view, it would be a compulsion to disclose the elec- curred and a mandatory impris-valid search. Applying the rule tronic key. The only other alter- onment of six (6) months to threeto computer searches, a law native to law enforcement agen- (3) years.officer may, for example, have a cies is to use “brute force” tosearch warrant for a particular decrypt the information. (i.e., Love Bug. This provisionfile but in the course of the com- use every possible key until find- gained media attention beforeputer search, he discovers a pi- ing one that works; depending the Act was signed into law be-rated copy of a software appli- upon the computer used, this cause of the I Love You Viruscation. In such cases, the plain process may take weeks or even incident. It was alleged that aview search rule may be used years for power encryption). Filipino created and released theto justify charging the owner of virus, nicknamed the Love Bug.the computer with copyright in- Section 47. Obligation of Con- However, the absence of any lawfringement. On the other hand, fidentiality. Except for the pur- on the subject of viruses causedthe search may be considered poses authorized under the Act, the dismissal of the all criminalillegal and the application of the any person who obtained access to actions filed by the National Bu-rule assailed. any electronic key, electronic data reau of Investigation (“NBI”) with It is therefore suggested that message, or electronic document, the Department of Justice.the Department of Justice issue book, register, correspondence, in- It was observed that had theguidelines regarding the search formation, or other material pur- Act been passed before theand seizure of computers and suant to any powers conferred Love Bug incident, then its pro-computer files. In this regard, under the Act, shall not convey to visions penalizing the release ofthey can examine similar rules or share the same with any other viruses could have been used toissued by the U.S. Department person. charge the accused. Addition-of Justice. ally, it would have allowed the Criminal Liability. Section Source. This is based upon United States to request the ex-33(d) of the Act (Section 51 of Section 48 of the ETA. tradition of the suspect. The ab-the IRR) penalizes “other viola- Application. This provision is sence of any criminal liability fortions of the provisions” of the Act also addressed to law enforce- such things as hacking raisedwith a fine or imprisonment. It ment officers who, through the concerns that the Philippinesmay be said therefore that the service of search warrants, would be a safe harbor for cyber-failure to comply with this provi- come into the possession or ac- criminals. As a result of the Lovesion and Sections 46 and 47 of quire access to electronic keys Bug incident, public attentionthe IRR constitutes a criminal and evidence. It may be said over the passage of the law wasoffense under the Act. that the violation of this obliga- heightened and hastened the tion is a criminal offense under passage of the Act. Section 46. Lawful Access to Section 33(d) of the Act. Hacking. Note that variousElectronic Keys. The electronic key acts are punished under the lawfor identity or integrity shall not Penal Provisions and these may be categorizedbe made available to any person as follows:or party without the consent of the Section 48. Hacking. Hack- (a) Unauthorized accessindividual or entity in lawful pos- ing or cracking which refers to into a computer system;session of that electronic key. The unauthorized access into or inter- (b) Interference in a com-testimonial disclosure of an elec- ference in a computer system/ puter system/server or informa-36 THE ELECTRONIC COMMERCE ACT

tion and communication system; it would constitute hacking. cation network” for purposes of (c) Authorized access in Penalty. The penalty for hack- this provision.order to corrupt, alter, steal, or ing includes a mandatory impris- The provision also covers alldestroy without the knowledge onment. Hence, even though types of intellectual propertyand consent of the owner of the the term of imprisonment would rights including patents andcomputer or information and otherwise have qualified the trademarks. It is not inconceiv-communications system; and, convict to apply for probation, able for one to interpret this pro- (d) The introduction of the same would be disallowed. vision as being applicable to acomputer viruses and the like, In addition, note that there is case of cybersquatting of a reg-resulting in the corruption, de- no ceiling for the fine that will be istered trademark. The plaintiff-struction, alteration, theft or loss imposed. If the Love Bug inci- trademark holder may claim thatof electronic data messages or dent had occurred after the Act the registration of the domainelectronic document had been passed, the convict name constitutes an unautho- Note that all types of unau- would presumably have paid a rized “use.”thorized access will constitute fine equal to US$9 billion – the The Intellectual Property Of-hacking while only certain types total worldwide damage wrought fice suggested the addition ofof authorized access will be pun- by the virus. It is submitted that the final sentence to clarify thatishable. For authorized access under these circumstances the the criminal liability under the Actto rise to the crime of hacking it penalty may be declared uncon- is separate and independentmust be done “in order to cor- stitutional for being a cruel and from the criminal liability underrupt, alter, steal, or destroy” data. unusual punishment. the Intellectual Property Code.The destruction or corruption ofdata through authorized access Section 49. Piracy. Piracy or Section 50. Other Penal Of-say, by disgruntled employees the unauthorized copying, repro- fenses. Violations of the Consumerwill likewise constitute hacking. duction, dissemination, distribu- Act or Republic Act No. 7394 andProving the “stealing” or theft of tion, importation, use, removal, other relevant or pertinent lawsdata may prove difficult because alteration, substitution, modifica- through transactions covered by orunlike tangible objects, when tion, storage, uploading, down- using electronic data messages ordata is stolen, it remains in the loading, communication, making electronic documents, shall be pe-possession of its owner – but the available to the public, or broad- nalized with the same penalties asthief likewise obtains posses- casting of protected material, elec- provided in those laws.sion. tronic signature or copyrighted Interference with a computer works including legally protected Rationale. This was added insystem includes the Distributed sound recordings or phonograms order to explicitly provide for theDenial of Service (DDoS) At- or information material on pro- application of the Act to existingtacks which crippled well-known tected works, through the use of law. The special reference to thesites such as eBay, Yahoo!, telecommunication networks, such Consumer Act was prompted byAmazon and CNN. as, but not limited to, the internet, concerns from various sectors In addition, while the release in a manner that infringes intellec- relating to the protection af-of viruses is punished, it seems tual property rights shall be pun- forded to Filipino consumersthat the perpetrator is not sepa- ished by a minimum fine of one transacting over the Internet.rately liable for the subsequent hundred thousand pesos In particular, Sen. Gregoriotransmission or spread of the (P100,000.00) and a maximum Honasan asked during the Sen-virus. This is in contrast with the commensurate to the damage in- ate interpellation of SB 1523Computer Fraud and Abuse Act curred and a mandatory impris- (later SB 1902) if online buyersof the United States where a onment of six (6) months to three were clearly protected by law. Inperson who knowingly causes (3) years. The foregoing shall be response, Sen. Magsaysay an-the transmission of the virus is without prejudice to the rights, li- swered that the Act would, at thecriminally liable (U.S.C. Title 18 abilities and remedies under Re- very least, provide assurance to§1030[a][5][A]) for every in- public Act No. 8293 or Intellectual aggrieved parties that their elec-stance of infection. Property Code of the Philippines tronic evidence of the transac- Finally, it should be noted that and other applicable laws. tion would be admissible inthe crime of hacking may occur court. But admissibility is to beeven if the computer system is a Piracy. This is a new form of distinguished from the weightstand-alone machine which is piracy which is done through the and sufficiency of the electronicnot part of a network or even use of “telecommunication net- evidence which is addressed toconnected to the Internet. works” such as the Internet. It the sound discretion of the court.Hence, if a word processing file remains to be seen however, ifis password-protected and a a local area network (LAN) orperson defeats the password some other private network willwithout the consent of the owner, be considered a “telecommuni-THE ELECTRONIC COMMERCE ACT 37

Section 51. Other Violations to agree, for example, that with approval of this Act to oversee itsof the Act. Other violations of the respect to their transaction, no implementation. The DTI, DBM,provisions of the Act, shall be pe- electronic document or signa- Bangko Sentral ng Pilipinas, andnalized with a maximum penalty ture would be valid or admissible. other government agencies as mayof one million pesos In other words, Section 38 be determined by the Congres-(P1,000,000.00) or six-(6) years seemed to give contracting par- sional Committee shall provide aimprisonment. ties the wholesale right to defeat quarterly performance report of the expressed provisions of the their actions taken in the imple- Miscellaneous Provisions Act. mentation of this Act for the first After consulting with mem- three (3) years. Section 52. Statutory Interpre- bers of the technical workingtation. Unless otherwise expressly group of the Bicameral Confer- Source. This provision wasprovided for, the interpretation of ence Committee, it was ex- suggested by Rep. Verceles tothese Rules and the Act shall give plained that an agreement to ensure the proper implementa-due regard to the Act’s interna- vary the terms of the Act may tion of the Act particularly Sec-tional origin - the UNCITRAL only involve the generation, tion 27 (on the government rec-Model Law on Electronic Com- sending, receiving, storing or ognition of electronic docu-merce - and the need to promote otherwise processing of an elec- ments).uniformity in its application and tronic data message or elec- Section 56. DTI’s Continuingthe observance of good faith in in- tronic document. This interpre- Authority to Implement the Act andternational trade relations. The tation is parallel to the provision Issue Implementing Rules. Amonggenerally accepted principles of in- in the Model Law. But to stress others, the DTI is empowered toternational law and convention on the point further, the final sen- promulgate rules and regulations,electronic commerce shall likewise tence was added into the IRR to as well as provide quality stan-be considered. clarify that nothing in the Act dards or issue certifications, as the authorizes anyone to defeat the case may be, and perform such Section 53. Variation by Agree- legal recognition of electronic other functions as may be neces-ment. - Any provision of the Act documents and signatures. sary for the implementation of thismay be varied by agreement be- Section 54. Reciprocity. All Act in the area of electronic com-tween and among parties; Pro- benefits, privileges, advantages or merce.vided that such agreement involves statutory rules established underonly the generation, sending, re- this Act, including those involving Section 57. Separability. If anyceiving, storing or otherwise pro- practice of profession, shall be en- provision in these Rules or appli-cessing of an electronic data mes- joyed only by parties whose coun- cation of such provision to any cir-sage or electronic document. Noth- try of origin grants the same ben- cumstance is held invalid, the re-ing shall authorize contracting par- efits and privileges or advantages mainder of these Rules shall not beties to agree upon stipulations or to Filipino citizens. Inasmuch as affected thereby.covenants, which defeat the legal the Act merely contemplates therecognition, validity and admissi- legal recognition of electronicbility of electronic data messages, forms of documents and signatureselectronic documents, or electronic and does not amend any law gov-signatures. erning the underlying substantive validity of acts or transactions, this Source. This provision was provision shall be subject to exist-based on Article 4 of the Model ing Constitutional and statutoryLaw. Notably, that provision lim- restrictions relative to activitiesited the right to vary the Model which are reserved to PhilippineLaw only to matters relating to citizens or juridical entities par-electronic contracts, attribution tially or wholly-owned by Philip-of data messages, pine citizens.acknowledgement of receipt, Section 55. Oversight Commit-and time and place of dispatch tee. There shall be a Congressionaland receipt of data messages. Oversight Committee composed of Scope. Section 38 of the Act the Committees on Trade and In-implies that any provision thereof dustry/Commerce, Science andmay be varied by the agreement Technology, Finance and Appro-of the parties. This was identi- priations of both the Senate andfied by the task force as a po- House of Representatives, whichtential problem because a blan- shall meet at least every quarterket authority to vary the terms of the first two years and every se-of the Act would enable parties mester for the third year after the38 THE ELECTRONIC COMMERCE ACT

The Electronic Commerce Act and its Implementing Rules and Regulations

by Janette Toral

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The Electronic Commerce Act and its Implementing Rules and Regulations Document Transcript