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This material is published by the Philippine Exporters Confederation, Inc. (PHILEXPORT) to present
various insights on a particular subject relevant to the export industry. The articles, papers, and other
readings presented here were gathered from various sources and the views expressed do not necessarily
reflect 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 the
Implementing 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 in
lobbying 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 the
Senate 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
                                     34




2                                                       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 listings
in the Philippine Stock Exchange. Interest in electronic commerce is at an all-time high and companies have
been 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 an
organization but the speed by which it can implement its plan and take the first-mover advantage. Andy Grove
of Intel has also been quoted as saying that in five years all companies will be Internet companies or not be
companies at all. From all indications, the Act has had the effect of driving these ideas into local companies who
have 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 the
country’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 the
Act’s purview and rightly so. If Congress were to discuss these issues and attempt legislation, it might unduly
delay the passage of the Act. Besides, many if not all of these issues remain unresolved even in developed
countries. To discuss them would only result in the same deadlock seen elsewhere. More importantly, to delay
the Act’s passage would be to deny meeting its express goal — the establishment of a secure legal framework
for 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 SB
Policy. The State recognizes the            Senate Bills. This first bill on   1523 not SB 1902. Hence, for
vital role of information and com-      electronic commerce was filed in       those interested in performing
munications 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 the
an information-friendly environ-        and was re-filed as Senate Bill        discussions on SB 1523. SB
ment 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. Angping
services; the primary responsibil-      International Trade Law                and Liban filed EDI Bills in the
ity 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 covered
ICT; the need to develop, with ap-      Law”) was adopted, the EDI bill        diverse areas such as copyright
propriate 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. 34
resources for the information age,      the EDI bill was considered tech-      and SB 1523 were filed in the
a labor force skilled in the use of     nology-specific and if passed,         Senate, Reps. Punzalan and
ICT and a population capable of         might inadvertently promote the        Verceles filed separate bills
operating 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 were
ligation to facilitate the transfer     given the long and tedious leg-        merged into HB 9971 which was
and promotion of technology; to         islative process in the Philip-        presented and deliberated upon
ensure network security, connec-        pines, a technology-neutral law        by the House in May 2000. HB
tivity and neutrality of technology     would provide more stability in-       9971 was approved by the
for 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 with
communications network and stra-        corporated in Committee Report         reconciling the provisions of HB
tegic information services, includ-     No. 34 and Senate Bill No. 1523        9971 and SB 1902, convened
ing 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 which
nancial, diplomatic and technical       ered as suggested by several           does not appear in the other, is
framework, 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), these
8792; the “Act”) is the merged          would prove beneficial in the          found their way back to the final
version 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 both
1902 (SB 1902). The primary             1523, the bill was referred back       HB 9971 and SB 1902, these
authors 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 was
Marcial 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 that
tronic commerce bills were Sens.        ETA were minimized and the bill        evening. On June 8, 2000, the
Juan 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 to

4                                                                                 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. In
The 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 on
inter-agency task force con-         Buenaventura (BSP) during the         electronic commerce. On the
vened for the purpose of draft-      plenary session of the Global In-     one hand, there were those who
ing the Act’s Implementing Rules     formation           Infrastructure    believed that such legislation
and Regulations (“IRR”). The         Commission’s (“GIIC”) Asia Re-        would be useful to fill in some
task force was co-chaired by the     gional Conference held in Makati      gaps in Philippine law requiring
Department 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) or
get and Management (“DBM”),          roots to the United Nations Com-      that some documents be
and 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 the
tives from the following govern-     on Electronic Commerce                spectrum were those who did
ment agencies likewise sat as        (“Model Law”) and Singapore’s         not see the necessity for the Act
members 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 oral
Commission on Audit (“COA”),         drafted and adopted by                agreements, there should be no
Department of Science and            UNCITRAL on December 16,              reason why electronic contracts
Technology (“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 the
ternal Revenue (“BIR”), Intellec-    was drafted with the intention of     same legal status as paper
tual Property Office (“IPO”), Bu-    being adopted as legislation in       documents and manually signed
reau 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 electronic
Investments (“BOI”) and Na-          ity in various legal systems while    evidence. In a recent case, the
tional Computer Center (“NCC”).      minimizing any adverse incon-         Supreme Court declared elec-
Members of the private sector        sistencies in the international       tronic mail inadmissible – but this
who 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 out
tion, Disini & Disini Law Office,    tion that a secure legal environ-     the said messages and failed to
Equitable 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 SCRA
SGV & Co. (Arthur Andersen),              Singapore’s ETA is likewise      592 [1999]). Under these cir-
and the TAPS Project of              based upon the Model Law. The         cumstances, even if the evi-
PHILEXPORT and USAID.                ETA was used as a reference for       dence were in the form of paper
    The author drafted the IRR       the Act largely because of its        documents, they would be inad-
and presented the first version      provisions on digital signatures,     missible for lack of proper au-
at the task force’s second meet-     regulation of certification au-       thentication.
ing on June 20, 2000. After col-     thorities, and service provider li-       To make matters worse, it
laborating on the draft IRR, the     ability. However, the provisions      was universally acknowledged
task force presented the same        on digital signatures and the         that the settlement of the legal
at 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 take
2000. The task force assembled       Congress. This was deemed             years, if not decades, if left in the
for 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 Philippines
settle 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 government
in a state of flux and may very         sustain the favored technology.        agencies, without prejudice to the
well be a hindrance to the pro-         To avoid this, the Act was writ-       provisions of Republic Act. 7653
motion of electronic commerce           ten with an overriding concern         (Charter of Bangko Sentral ng
in 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 does
highlighted the fact that there         not discriminate among any type            Authority of DTI to Set Forth
was at least a doubt respecting         of electronic document or signa-       Policies. This provision of the Act
the validity of e-commerce trans-       ture utilizing a particular technol-   was placed in this section of the
actions. 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 BSP
among legal experts only cre-           same are written in a neutral          to lay down the policies for the
ated 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 to
uncertainty in turn brought fear        determine the type and level of                   Chapter II -
which stifled investment and en-        security needed for their trans-           Declaration of Principles
trepreneurship as businessmen           actions and to select and use or       for Electronic Commerce Promo-
readily dismissed e-commerce            implement appropriate techno-                         tion
as an all-too risky endeavor. The       logical methods that suit their
only 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 Section
and 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 the
and 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 both
terms, the functions of say, a          as an electronic mail and fax,            Source of the Policies. The
document or a signature is ana-         both of them will be considered        policies in Chapter II were based
lyzed, and if an equivalent ex-         an electronic data message or          on the Global Action Plan for
ists in electronic form, then it will   electronic document.                   Electronic Commerce published
be 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 supplant
signer 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, when
method performs the same func-          were lawful (or unlawful) prior to     required, shall promote a stable
tions, 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 and
nature.                                 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 is
equivalent” 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, and
ticular 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 and
not technology-neutral, they            ity. In other words, Philippine        involvement in policy making shall
would 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 electronic
would encourage the private                Section 2. Authority of the De-     commerce shall be led primarily by
sector to support only that tech-       partment of Trade and Industry         the private sector in response to
nology which consequently es-           and Participating Entities. The De-    market forces. Participation in
tablishes 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 fair
inevitably 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 on
opment of electronic commerce         companies wishing to operate           E-commerce transactions by the
should be driven by market            on a global basis.                     central and local governments
forces 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 with
as it must provide and sustain a      throughout the world in order to       equal force upon electronic
secure legal environment and a        promote the growth of these “glo-      transactions, the above-quoted
competitive business environ-         bal” e-businesses.                     provision was unnecessary and
ment 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, no
ture. Government policies that        the use of a key management            explicit Philippine tax laws on
affect 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 passed
compatible and will facilitate        system or whose law shall ap-          on this subject matter in the near
interoperability 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 activities
based environment for standards       diction over the contract shall be     involving electronic commerce
setting.                              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 entities
Internet, are necessarily global      as to what existing law deter-         located in the Philippines would
in 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 to
country where they can poten-         item from Amazon.com and               encourage the taxing authorities
tially 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 the
tent 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. The
as a “safe harbor” for e-busi-        ing jurisdiction over electronic       protection of users, in particular
nesses 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, individual
based on-line gambling website                                               empowerment, and industry-led
operates out of a casino in              d) Neutral Tax Treatment.           solutions. It shall be in accordance
Antigua where the servers are         Transactions conducted using elec-     with applicable laws. Subject to
located – this despite the fact       tronic commerce should receive         such laws, business should make
that gambling is illegal in New       neutral tax treatment in compari-      available to consumers and, where
York.                                 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 varying
accreditation 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 was
failure 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 infrastructure
each 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 the
the Net to become universally         public services in order to demon-      necessary technical and legal
accessed by millions of users.        strate the benefits derived there-      expertise to dispense justice in
They 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 the
work 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 Numbers
tronic 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 handling
easily mask their identity or even    ited to, online public information      domain name cybersquatting
assume the identity of another.       and cultural resources, databases       cases which has so far been
In 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 Sphere
classic case where the technol-           j) Convergence. Conver-                      of Application
ogy outpaced the law leaving          gence of technologies is crucial to
fertile ground for unscrupulous       electronic commerce and will be              Section 4. Objective of the
persons to abuse the vacuum.          supported by appropriate govern-        Act. The Act aims to facilitate
Hence, 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 information
given 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 authenticity
problems 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 and
ment.                                     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 a
on 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 the
vide small and medium-sized en-       commerce disputes. (n)                  notion that such an environment
terprises (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 as
tronic 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 been
ducive 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 any
share in the new and different em-    the resolution of electronic com-       kind of electronic data message
ployment generated by electronic      merce disputes. Hence, elec-            and electronic document used in
commerce. 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 include
both 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 relating
tion.                                 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 II
of Congress were likewise lim-        to burn down your store!”), the
ited and excluded non-commer-         Act may be said to apply.                ELECTRONIC COMMERCE
cial transactions. However, dur-          At any rate, the foregoing il-            IN GENERAL
ing 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          of
should have universal applica-        ited application can cause injus-       Terms. For the purposes of the Act
tion. Hence, amendments were          tice. An illegitimate child for ex-     and these Rules, the following
introduced 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 a
cial 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 electronic
the 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 and
definition of hacking as a crimi-     inflexible to adapt to the rapid            Who is an Addressee. Under
nal 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 to
non-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 subject
from the law’s application when       are web-enabled refrigerators           of laws and are the parties to
a 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 role
would create confusion and un-        and signatures will find wide-          in determining the addressee of
intended consequences. For            spread application, commercial          electronic data messages.
example, a person accused of          as well as non-commercial. It is,       Hence all persons who might
hacking a charitable site for fun     therefore, with a measure of            chance upon the data message
could argue that since the act        foresight that the Philippine Con-      or play a role in its transmission
was 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 into
evidence would be admissible.             Non-Commercial Applica-             consideration the possibility that
If upheld, that would, of course,     tions. By expanding the scope           data messages are handled by
allow 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 who
arise as to what transactions are     used in all types of transactions       oftentimes have direct access to
commercial and what are not.          and acts. More importantly, elec-       say, the addressee’s electronic
The distinction would be of ut-       tronic evidence is now admis-           mailbox.
most importance because the           sible in all types of civil, criminal
latter could neither be under-        and administrative actions.

THE ELECTRONIC COMMERCE ACT                                                                                     9
Consistent with the Model           terconnected which, by electronic,       ate Bill No. 1556 otherwise
Law, 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 means
computer 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 term
orders are not the parties to the                                               “electronic data message” shall be
transaction. 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 based
ers are merely conduits or tools       is likewise broad enough to in-          on the Model Law’s definition of
by 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 phrase
party to a contract as a fax ma-       and mobile computers, fax ma-            which enumerated examples but
chine 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 working
shall 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 the
from all relationships of a commer-    household appliances such as             terms to be equivalent. Note that
cial nature, whether contractual or    the refrigerator and washing             the Senate version of the Act
not. The term shall likewise refer     machine may be deemed com-               defined the term “electronic data
to 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 term
among parties including, but not       Internet, among others, are de-          “electronic document.” In order
limited to, factoring, investments,    veloped.                                 to simplify the merging of the
leasing, consulting, insurance, and                                             both versions, both terms were
all other services, as well as the        (d) “Convergence” refers to           adopted.
manufacture, processing, pur-          technologies moving together to-             It is submitted, however, that
chase, 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 than
gible 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 terms
merchandise, 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 electronic
tions, shares of stock, software,      disciplines or technologies; the         documents.
books, works of art and other in-      ability of different network plat-           Electronic Data Message. An
tellectual 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.” This
vision is lifted from a footnote       ited to, the telephone, television       is consistent with the functional
appearing in the Guide. Note           and personal computer.                   equivalent approach because in
that the definition of “non-com-                                                the real world, documents are
mercial 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 four
above-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, Rules

10                                                                                 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 and
ments. 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 range
land titles and legal tender, the     computers are electronic data          of technical means used for
paper 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 networks
tronic file. What differentiates an   excluded from the definition of        such as GSM.
electronic data message from its      electronic data messages. But
real 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 or
received 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 electronic
terms may be best understood          may be poured into a glass or a        document or any methodology or
by 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 or
means” – This includes word pro-      distinct from its containers. One      adopted by such person with the
cessing 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 message
message service) messages,            should not think of an electronic      or electronic document.
and other documents which are         document merely as a computer
created through electronic de-        file but the information contained         Origin. The above-definition
vices.                                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 not
electronic means” – Since only        as an electronic data message          have a separate defined term for
the mode of transmission is rel-      so long as the information has         electronic signature because
evant, 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 form
data 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 world
sage 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 it
lar point of sale transactions.       time (¶31, Guide).                     would qualify as an electronic
    •     “Stored by electronic                                              signature. To better understand
means” – This contemplates a             (f) “Information and Com-           the definition, one must apply
situation 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, among
essarily 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 equivalent
mission but mere storage. Such        includes the computer system or        approach, anything in electronic
electronic files therefore enjoy      other similar device by or in which    form which identifies a user can
the same protection under the         data is recorded or stored and any     be said to be his signature if it is
Act.                                  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 identifies
are transformed into paperless                                               himself in his e-mail messages
form by digital imaging or scan-         Origin. This term is based on       as follows: “bill gates”, then the

THE 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 to
tal image of his handwritten sig-      Section 13 of the IRR.                    Source. This was based
nature to an encrypted data                                                   upon the same defined term in
message 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 the
an 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 Act
the “From” field on an e-mail. Be-     however represented, by which a        intends that only the latter are
cause 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 be
to 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 person
ment. 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 data
posal, he might write a reply e-       crosses over public channels into      message but an intermediary
mail 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 be
mail 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 a
a method employed by the               hereafter, be developed.               person by whom, or on whose be-
signer to authenticate a data                                                 half, the electronic data message
message. This refers to a digi-           Relevance of Definition. The        or electronic document purports to
tal 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 include
son 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 electronic
istration 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 the
contents 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 1523
the 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 scenario
case 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 electronic
person’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 the
tication 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 the
Note 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 addressee
tion 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 originator
tion as handwritten signatures.        other services in respect of that      also includes one who creates

12                                                                               THE ELECTRONIC COMMERCE ACT
an electronic document not for           company may be considered a                   Fundamental to the Act. This
transmission 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 be
but not limited to, an individual,       as faxes or voice messages.               given the same legal status as
corporation, partnership, joint                                                    their paper-based counterparts.
venture, unincorporated associa-                    Chapter II -                   Note that the first sentence
tion, trust or other juridical entity,           Legal Recognition                 states the rule in the negative to
or any governmental authority.           of Electronic Data Messages and           emphasize that the law validates
    (n) “Service provider” refers              Electronic Documents                or confirms the legality of the
to a provider of -                                                                 form of the electronic document,
    i. Online services or net-               Section 7. Legal Recognition          not its contents per se. In other
work 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 document
ing, or providing of connections for     enforceability solely on the ground       is legal or valid – it might very
online 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 because
tronic data message or electronic        such legal effect. Electronic data        it is contained in an electronic
documents 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 rule
means 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 laws
made accessible to a designated or           a) A requirement under law            for the posting of notices (such
undesignated 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 documents
have 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 be
ment received or to make any en-         for a person to provide informa-          read in conjunction with Section
try therein on behalf of the origi-      tion in writing to another person         10 of the IRR which specifies
nator, addressee or any third party      is satisfied by the provision of the      additional requirements before
unless specifically authorized to do     information in an electronic data         the electronic document can be
so, 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 by
purpose of performing the services       fied non-electronic form is satisfied     Reference. Information shall not
it 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 data
nition is relevant in relation to        tion is provided in the same or sub-      message or electronic document
Section 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 law
ISPs 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 from
also includes application service        or location; or for any information       the latter portion of Section 6 of
providers, 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 as
and registrars, online ex-               until a functional equivalent shall       to harmonize the structure with
changes, websites hosting dis-           have been developed, installed, and       the Model Law. It is expected
cussion groups and perhaps,              implemented.                              that many of the electronic docu-
any conceivable web-based                                                          ments and data messages that
online 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 all
voice messaging, a cellphone             Model Law.                                relevant information but mere

THE ELECTRONIC COMMERCE ACT                                                                                        13
references thereto. For example,       on-line retailer would not have           required to conform to any other
a 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 idea
to the agreement instead of a full         Exception. As an exception to         that since not all paper-based
recital 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 imposed
tems and network resources.            into an electronic contract. For          upon electronic documents.
Additionally, much of electronic       example, if a person purchases            Hence, forged or fraudulent
commerce occurs through                a book through an on-line re-             electronic documents should
coded messages that are intelli-       tailer, the purchaser will not be         enjoy the evidentiary benefits of
gible when related to information      heard to deny the validity of the         admissibility and legal effect as
outside 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, it
message may be considered a            tronic transaction can be inferred        may be said that the integrity and
contract 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 doubt
tory. Without prejudice to the ap-     the law requires a document to be         relating to their authenticity
plication of Section 27 of the Act     in writing, or obliges the parties        should be established by clear
and Section 37 of these Rules,         to conform to a writing, or pro-          and convincing evidence and
nothing in the Act or these Rules      vides consequences in the event in-       not upon the mere allegation or
requires a person to use or accept     formation is not presented or re-         speculation by the party against
information contained in electronic    tained in its original form, an elec-     whom such electronic document
data 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 Law
a 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 be
of 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 documents
ing phrase thereof) that parties       authorized change, or any change          are important in the context of
are free to provide that their con-    which arises in the normal course         say, bills of lading, certificates of
tract 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 of
implicit 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 a
among those not ready nor will-        evant circumstances.                      negotiable bill of exchange must
ing to engage in electronic com-                                                 be presented to the drawee for
merce. Hence, if a person re-              Classes of Electronic Docu-           acceptance. In the context of an
ceives an e-mail offer to enter        ments in the Model Law. Under             electronic bill, a higher degree
into 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, the
In fact, many on-line retailers ad-    considered “writings” so long as          Model Law requires electronic
vertise their toll-free numbers as     they are “accessible so as to be          “originals” to possess “a reliable
an alternative method of con-          usable for subsequent refer-              assurance as to the integrity of
ducting 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 whom
wise true in that parties may not      the basic notion of the informa-          it is to be presented (Article
compel 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 electronic
tributes 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 to
ments 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 keep
lower 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 gives
This is permissible because of         electronic “writings” will have an     legal significance to the e-mail’s
the 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 fall
ments 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 of
Law 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. This
Act did away with the clear dis-       Law);                                  is established by showing that
tinction 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 any
maintain their integrity and reli-     Code);                                 authorized change, or any
ability. 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, digital
ippine law requires something to       est on loans (Art. 1956, Civil         signatures, and other marks to
be in “writing,” the electronic data   Code);                                 the electronic document will not
message 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 counterparts
tegrity 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 of
electronic 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 determined
isfy 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, each
the sale of goods valued at more           (i) Stipulations limiting a        situation must be examined to
than 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 person
the standpoint of a party-litigant     1744, Civil Code)                      usually employs encryption to
who wishes to impugn that elec-            The blurred of the distinction     all his e-mails, an unencrypted
tronic 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, the
deny the electronic document           of electronic documents under          plain e-mail may be considered
the 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 in
available 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 deemed
Model 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. Where
entirely 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 its
and may still be referred to and       mail which contains an admis-          original form, that requirement is
presented as evidence in court.        sion of a particular fact say, of      met by an electronic document or
However, 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 not
surance 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 within
form and such integrity is shown           Integrity. The standard for        the context of Sections 6 and 7
by evidence aliunde (that is, evi-     integrity for “original” electronic    of the Act. While an electronic
dence other than the electronic        documents differ slightly from         data message is by itself the
data 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” under
or 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 the
son 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 be
graph (a) above:                       on paper and later transferred to      presented. Otherwise, the elec-
    (i) The criteria for assessing     the computer. In such a situa-         tronic data message or docu-
integrity shall be whether the in-     tion, the Act is to be interpreted     ment will merely be taken as
formation has remained complete        as requiring assurances that the       evidence of its contents but not
and unaltered, apart from the ad-      information remained complete          be considered a “writing” or an
dition 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 deals
and 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 of
required shall be assessed in the          Originals and the Best Evi-        electronic documents in general
light of the purpose for which the     dence Rule. The Best Evidence          – a matter which is discussed in
information 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 document
stances.                               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 electronic
complying with the requirements        of Court). If taken in the context     document will have to comply
of Sections 6 or 7 of the Act shall    of the Act, it would appear that       with the same rules governing
be 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 relevant
only 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 some
change and promissory notes),          they comply with Sections 6 and        form in order that it may be valid
negotiable instruments of title,       7 of the Act will render them the      or enforceable, or that a contract
stock 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 are
tablishes 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 those
transactions relating to them.         the Best Evidence Rule. In this        which are valid only if the form
Hence, 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 agreements
it can be considered as such.          quirements of Section 11 of the        under the Statute of Frauds must
Otherwise, 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 a
ments of all kinds which must be     electronic notarization will go a       starting point. Concerns were
in 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 may
some instances, the law requires     ing business.                           be forged or falsified. Hence, it
that documents be acknowl-                                                   was deemed necessary to re-
edged before a notary public                 Legal Recognition               quire integrity and reliability from
before 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 who
at least three (3) witnesses and     tronic signature relating to an elec-   may be required to rely upon
acknowledged before a notary         tronic document or electronic data      them. Independent verification
public. Otherwise, it is invalid     message shall be equivalent to the      was also intended to encourage
and the decedent is deemed to        signature of a person on a written      individuals to conduct their own
have 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 Electronic
because the Rules of Court con-          b) is proved by showing that        Signatures under the Model Law
siders them public documents         a prescribed procedure, not alter-      and the ETA. The Model Law
which are easier to present in       able by the parties interested in the   adopted all types and kinds of
evidence (Section 19[b], Rule        electronic document or electronic       electronic signatures provided
132, 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 manually
sented 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 merely
acknowledgement 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 that
Rules 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 electronic
treatment of private documents       appropriate for the purpose for         data message. The same
which 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 in
tion 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 consistent
result, many transactions are        ing any relevant agreement;             with the aim of the Model Law to
evidenced 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 of
minds 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 no
course, 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 of
provides that the Supreme Court      rized and enabled to verify the         Electronic Signatures under the
may adopt authentication proce-      electronic signature and to make        Act. The Act, however, does not
dures including electronic nota-     the decision to proceed with the        embrace all types of electronic
rization systems (Section 11,        transaction authenticated by the        signatures adopted under the
Act). 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 before
regulating electronic notarization   supplementary or alternative pro-       an electronic signature qualifies
and       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 in
on 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 in
passed on to the Supreme             may be taken into account.              an attempt to ensure that only
Court. It is hoped that the High         Rationale. The Senate tech-         reliable electronic signatures are
Court will issue its regulations     nical working group crafted this        recognized under Philippine law.

THE ELECTRONIC COMMERCE ACT                                                                                   17
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations
The Electronic Commerce Act and its Implementing Rules and Regulations

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The Electronic Commerce Act and its Implementing Rules and Regulations

  • 1.
  • 2. This material is published by the Philippine Exporters Confederation, Inc. (PHILEXPORT) to present various insights on a particular subject relevant to the export industry. The articles, papers, and other readings presented here were gathered from various sources and the views expressed do not necessarily reflect 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 the Implementing 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 in lobbying 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 the Senate deliberation with respect to the Senate deliberation on Senate Bill 1523. THE ELECTRONIC COMMERCE ACT
  • 3. 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 34 2 THE ELECTRONIC COMMERCE ACT
  • 4. 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 listings in the Philippine Stock Exchange. Interest in electronic commerce is at an all-time high and companies have been 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 an organization but the speed by which it can implement its plan and take the first-mover advantage. Andy Grove of Intel has also been quoted as saying that in five years all companies will be Internet companies or not be companies at all. From all indications, the Act has had the effect of driving these ideas into local companies who have 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 the country’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 the Act’s purview and rightly so. If Congress were to discuss these issues and attempt legislation, it might unduly delay the passage of the Act. Besides, many if not all of these issues remain unresolved even in developed countries. To discuss them would only result in the same deadlock seen elsewhere. More importantly, to delay the Act’s passage would be to deny meeting its express goal — the establishment of a secure legal framework for electronic commerce. THE ELECTRONIC COMMERCE ACT 3
  • 5. 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 SB Policy. The State recognizes the Senate Bills. This first bill on 1523 not SB 1902. Hence, for vital role of information and com- electronic commerce was filed in those interested in performing munications 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 the an information-friendly environ- and was re-filed as Senate Bill discussions on SB 1523. SB ment 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. Angping services; the primary responsibil- International Trade Law and Liban filed EDI Bills in the ity 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 covered ICT; the need to develop, with ap- Law”) was adopted, the EDI bill diverse areas such as copyright propriate 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. 34 resources for the information age, the EDI bill was considered tech- and SB 1523 were filed in the a labor force skilled in the use of nology-specific and if passed, Senate, Reps. Punzalan and ICT and a population capable of might inadvertently promote the Verceles filed separate bills operating 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 were ligation to facilitate the transfer given the long and tedious leg- merged into HB 9971 which was and promotion of technology; to islative process in the Philip- presented and deliberated upon ensure network security, connec- pines, a technology-neutral law by the House in May 2000. HB tivity and neutrality of technology would provide more stability in- 9971 was approved by the for 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 with communications network and stra- corporated in Committee Report reconciling the provisions of HB tegic information services, includ- No. 34 and Senate Bill No. 1523 9971 and SB 1902, convened ing 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 which nancial, diplomatic and technical ered as suggested by several does not appear in the other, is framework, 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), these 8792; the “Act”) is the merged would prove beneficial in the found their way back to the final version 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 both 1902 (SB 1902). The primary 1523, the bill was referred back HB 9971 and SB 1902, these authors 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 was Marcial 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 that tronic commerce bills were Sens. ETA were minimized and the bill evening. On June 8, 2000, the Juan 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 to 4 THE ELECTRONIC COMMERCE ACT
  • 6. 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. In The 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 on inter-agency task force con- Buenaventura (BSP) during the electronic commerce. On the vened for the purpose of draft- plenary session of the Global In- one hand, there were those who ing the Act’s Implementing Rules formation Infrastructure believed that such legislation and Regulations (“IRR”). The Commission’s (“GIIC”) Asia Re- would be useful to fill in some task force was co-chaired by the gional Conference held in Makati gaps in Philippine law requiring Department 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) or get and Management (“DBM”), roots to the United Nations Com- that some documents be and 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 the tives from the following govern- on Electronic Commerce spectrum were those who did ment agencies likewise sat as (“Model Law”) and Singapore’s not see the necessity for the Act members 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 oral Commission on Audit (“COA”), drafted and adopted by agreements, there should be no Department of Science and UNCITRAL on December 16, reason why electronic contracts Technology (“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 the ternal Revenue (“BIR”), Intellec- was drafted with the intention of same legal status as paper tual Property Office (“IPO”), Bu- being adopted as legislation in documents and manually signed reau 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 electronic Investments (“BOI”) and Na- ity in various legal systems while evidence. In a recent case, the tional Computer Center (“NCC”). minimizing any adverse incon- Supreme Court declared elec- Members of the private sector sistencies in the international tronic mail inadmissible – but this who 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 out tion, Disini & Disini Law Office, tion that a secure legal environ- the said messages and failed to Equitable 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 SCRA SGV & Co. (Arthur Andersen), Singapore’s ETA is likewise 592 [1999]). Under these cir- and the TAPS Project of based upon the Model Law. The cumstances, even if the evi- PHILEXPORT and USAID. ETA was used as a reference for dence were in the form of paper The author drafted the IRR the Act largely because of its documents, they would be inad- and presented the first version provisions on digital signatures, missible for lack of proper au- at the task force’s second meet- regulation of certification au- thentication. ing on June 20, 2000. After col- thorities, and service provider li- To make matters worse, it laborating on the draft IRR, the ability. However, the provisions was universally acknowledged task force presented the same on digital signatures and the that the settlement of the legal at 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 take 2000. The task force assembled Congress. This was deemed years, if not decades, if left in the for 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 Philippines settle 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
  • 7. the state of law would at best be all resources will be devoted to try with relevant government in a state of flux and may very sustain the favored technology. agencies, without prejudice to the well be a hindrance to the pro- To avoid this, the Act was writ- provisions of Republic Act. 7653 motion of electronic commerce ten with an overriding concern (Charter of Bangko Sentral ng in 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 does highlighted the fact that there not discriminate among any type Authority of DTI to Set Forth was at least a doubt respecting of electronic document or signa- Policies. This provision of the Act the validity of e-commerce trans- ture utilizing a particular technol- was placed in this section of the actions. 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 BSP among legal experts only cre- same are written in a neutral to lay down the policies for the ated 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 to uncertainty in turn brought fear determine the type and level of Chapter II - which stifled investment and en- security needed for their trans- Declaration of Principles trepreneurship as businessmen actions and to select and use or for Electronic Commerce Promo- readily dismissed e-commerce implement appropriate techno- tion as an all-too risky endeavor. The logical methods that suit their only 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 Section and 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 the and 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 both terms, the functions of say, a as an electronic mail and fax, Source of the Policies. The document or a signature is ana- both of them will be considered policies in Chapter II were based lyzed, and if an equivalent ex- an electronic data message or on the Global Action Plan for ists in electronic form, then it will electronic document. Electronic Commerce published be 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 supplant signer 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, when method performs the same func- were lawful (or unlawful) prior to required, shall promote a stable tions, 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 and nature. 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 is equivalent” 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, and ticular 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 and not technology-neutral, they ity. In other words, Philippine involvement in policy making shall would 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 electronic would encourage the private Section 2. Authority of the De- commerce shall be led primarily by sector to support only that tech- partment of Trade and Industry the private sector in response to nology which consequently es- and Participating Entities. The De- market forces. Participation in tablishes 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 fair inevitably 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
  • 8. 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 on opment of electronic commerce companies wishing to operate E-commerce transactions by the should be driven by market on a global basis. central and local governments forces 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 with as it must provide and sustain a throughout the world in order to equal force upon electronic secure legal environment and a promote the growth of these “glo- transactions, the above-quoted competitive business environ- bal” e-businesses. provision was unnecessary and ment 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, no ture. Government policies that the use of a key management explicit Philippine tax laws on affect 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 passed compatible and will facilitate system or whose law shall ap- on this subject matter in the near interoperability 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 activities based environment for standards diction over the contract shall be involving electronic commerce setting. 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 entities Internet, are necessarily global as to what existing law deter- located in the Philippines would in 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 to country where they can poten- item from Amazon.com and encourage the taxing authorities tially 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 the tent 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. The as a “safe harbor” for e-busi- ing jurisdiction over electronic protection of users, in particular nesses 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, individual based on-line gambling website empowerment, and industry-led operates out of a casino in d) Neutral Tax Treatment. solutions. It shall be in accordance Antigua where the servers are Transactions conducted using elec- with applicable laws. Subject to located – this despite the fact tronic commerce should receive such laws, business should make that gambling is illegal in New neutral tax treatment in compari- available to consumers and, where York. 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 varying accreditation 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 was failure 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
  • 9. nymity (because everyone knew development programs. the expertise and infrastructure each 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 the the Net to become universally public services in order to demon- necessary technical and legal accessed by millions of users. strate the benefits derived there- expertise to dispense justice in They 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 the work 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 Numbers tronic 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 handling easily mask their identity or even ited to, online public information domain name cybersquatting assume the identity of another. and cultural resources, databases cases which has so far been In 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 Sphere classic case where the technol- j) Convergence. Conver- of Application ogy outpaced the law leaving gence of technologies is crucial to fertile ground for unscrupulous electronic commerce and will be Section 4. Objective of the persons to abuse the vacuum. supported by appropriate govern- Act. The Act aims to facilitate Hence, 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 information given 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 authenticity problems 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 and ment. 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 a on 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 the vide small and medium-sized en- commerce disputes. (n) notion that such an environment terprises (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 as tronic 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 been ducive 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 any share in the new and different em- the resolution of electronic com- kind of electronic data message ployment generated by electronic merce disputes. Hence, elec- and electronic document used in commerce. 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 include both formal and non-formal skills- dispute resolution centers with domestic and international deal- 8 THE ELECTRONIC COMMERCE ACT
  • 10. 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 relating tion. 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 II of Congress were likewise lim- to burn down your store!”), the ited and excluded non-commer- Act may be said to apply. ELECTRONIC COMMERCE cial transactions. However, dur- At any rate, the foregoing il- IN GENERAL ing 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 of should have universal applica- ited application can cause injus- Terms. For the purposes of the Act tion. Hence, amendments were tice. An illegitimate child for ex- and these Rules, the following introduced 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 a cial 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 electronic the 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 and definition of hacking as a crimi- inflexible to adapt to the rapid Who is an Addressee. Under nal 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 to non-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 subject from the law’s application when are web-enabled refrigerators of laws and are the parties to a 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 role would create confusion and un- and signatures will find wide- in determining the addressee of intended consequences. For spread application, commercial electronic data messages. example, a person accused of as well as non-commercial. It is, Hence all persons who might hacking a charitable site for fun therefore, with a measure of chance upon the data message could argue that since the act foresight that the Philippine Con- or play a role in its transmission was 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 into evidence would be admissible. Non-Commercial Applica- consideration the possibility that If upheld, that would, of course, tions. By expanding the scope data messages are handled by allow 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 who arise as to what transactions are used in all types of transactions oftentimes have direct access to commercial and what are not. and acts. More importantly, elec- say, the addressee’s electronic The distinction would be of ut- tronic evidence is now admis- mailbox. most importance because the sible in all types of civil, criminal latter could neither be under- and administrative actions. THE ELECTRONIC COMMERCE ACT 9
  • 11. Consistent with the Model terconnected which, by electronic, ate Bill No. 1556 otherwise Law, 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 means computer 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 term orders are not the parties to the “electronic data message” shall be transaction. 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 based ers are merely conduits or tools is likewise broad enough to in- on the Model Law’s definition of by 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 phrase party to a contract as a fax ma- and mobile computers, fax ma- which enumerated examples but chine 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 working shall 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 the from all relationships of a commer- household appliances such as terms to be equivalent. Note that cial nature, whether contractual or the refrigerator and washing the Senate version of the Act not. The term shall likewise refer machine may be deemed com- defined the term “electronic data to 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 term among parties including, but not Internet, among others, are de- “electronic document.” In order limited to, factoring, investments, veloped. to simplify the merging of the leasing, consulting, insurance, and both versions, both terms were all other services, as well as the (d) “Convergence” refers to adopted. manufacture, processing, pur- technologies moving together to- It is submitted, however, that chase, 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 than gible 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 terms merchandise, 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 electronic tions, shares of stock, software, disciplines or technologies; the documents. books, works of art and other in- ability of different network plat- Electronic Data Message. An tellectual 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.” This vision is lifted from a footnote ited to, the telephone, television is consistent with the functional appearing in the Guide. Note and personal computer. equivalent approach because in that the definition of “non-com- the real world, documents are mercial 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 four above-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, Rules 10 THE ELECTRONIC COMMERCE ACT
  • 12. 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 and ments. 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 range land titles and legal tender, the computers are electronic data of technical means used for paper 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 networks tronic file. What differentiates an excluded from the definition of such as GSM. electronic data message from its electronic data messages. But real 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 or received 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 electronic terms may be best understood may be poured into a glass or a document or any methodology or by 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 or means” – This includes word pro- distinct from its containers. One adopted by such person with the cessing 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 message message service) messages, should not think of an electronic or electronic document. and other documents which are document merely as a computer created through electronic de- file but the information contained Origin. The above-definition vices. 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 not electronic means” – Since only as an electronic data message have a separate defined term for the mode of transmission is rel- so long as the information has electronic signature because evant, 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 form data 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 world sage 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 it lar point of sale transactions. time (¶31, Guide). would qualify as an electronic • “Stored by electronic signature. To better understand means” – This contemplates a (f) “Information and Com- the definition, one must apply situation 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, among essarily 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 equivalent mission but mere storage. Such includes the computer system or approach, anything in electronic electronic files therefore enjoy other similar device by or in which form which identifies a user can the same protection under the data is recorded or stored and any be said to be his signature if it is Act. 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 identifies are transformed into paperless himself in his e-mail messages form by digital imaging or scan- Origin. This term is based on as follows: “bill gates”, then the THE ELECTRONIC COMMERCE ACT 11
  • 13. 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 to tal image of his handwritten sig- Section 13 of the IRR. Source. This was based nature to an encrypted data upon the same defined term in message 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 the an 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 Act the “From” field on an e-mail. Be- however represented, by which a intends that only the latter are cause 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 be to 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 person ment. 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 data posal, he might write a reply e- crosses over public channels into message but an intermediary mail 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 be mail 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 a a method employed by the hereafter, be developed. person by whom, or on whose be- signer to authenticate a data half, the electronic data message message. This refers to a digi- Relevance of Definition. The or electronic document purports to tal 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 include son 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 electronic istration 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 the contents 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 1523 the 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 scenario case 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 electronic person’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 the tication 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 the Note 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 addressee tion 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 originator tion as handwritten signatures. other services in respect of that also includes one who creates 12 THE ELECTRONIC COMMERCE ACT
  • 14. an electronic document not for company may be considered a Fundamental to the Act. This transmission 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 be but not limited to, an individual, as faxes or voice messages. given the same legal status as corporation, partnership, joint their paper-based counterparts. venture, unincorporated associa- Chapter II - Note that the first sentence tion, trust or other juridical entity, Legal Recognition states the rule in the negative to or any governmental authority. of Electronic Data Messages and emphasize that the law validates (n) “Service provider” refers Electronic Documents or confirms the legality of the to a provider of - form of the electronic document, i. Online services or net- Section 7. Legal Recognition not its contents per se. In other work 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 document ing, or providing of connections for enforceability solely on the ground is legal or valid – it might very online 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 because tronic data message or electronic such legal effect. Electronic data it is contained in an electronic documents 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 rule means 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 laws made accessible to a designated or a) A requirement under law for the posting of notices (such undesignated 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 documents have 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 be ment received or to make any en- for a person to provide informa- read in conjunction with Section try therein on behalf of the origi- tion in writing to another person 10 of the IRR which specifies nator, addressee or any third party is satisfied by the provision of the additional requirements before unless specifically authorized to do information in an electronic data the electronic document can be so, 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 by purpose of performing the services fied non-electronic form is satisfied Reference. Information shall not it 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 data nition is relevant in relation to tion is provided in the same or sub- message or electronic document Section 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 law ISPs 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 from also includes application service or location; or for any information the latter portion of Section 6 of providers, 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 as and registrars, online ex- until a functional equivalent shall to harmonize the structure with changes, websites hosting dis- have been developed, installed, and the Model Law. It is expected cussion groups and perhaps, implemented. that many of the electronic docu- any conceivable web-based ments and data messages that online 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 all voice messaging, a cellphone Model Law. relevant information but mere THE ELECTRONIC COMMERCE ACT 13
  • 15. references thereto. For example, on-line retailer would not have required to conform to any other a 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 idea to the agreement instead of a full Exception. As an exception to that since not all paper-based recital 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 imposed tems and network resources. into an electronic contract. For upon electronic documents. Additionally, much of electronic example, if a person purchases Hence, forged or fraudulent commerce occurs through a book through an on-line re- electronic documents should coded messages that are intelli- tailer, the purchaser will not be enjoy the evidentiary benefits of gible when related to information heard to deny the validity of the admissibility and legal effect as outside 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, it message may be considered a tronic transaction can be inferred may be said that the integrity and contract 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 doubt tory. Without prejudice to the ap- the law requires a document to be relating to their authenticity plication of Section 27 of the Act in writing, or obliges the parties should be established by clear and Section 37 of these Rules, to conform to a writing, or pro- and convincing evidence and nothing in the Act or these Rules vides consequences in the event in- not upon the mere allegation or requires a person to use or accept formation is not presented or re- speculation by the party against information contained in electronic tained in its original form, an elec- whom such electronic document data 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 Law a 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 be of 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 documents ing phrase thereof) that parties authorized change, or any change are important in the context of are free to provide that their con- which arises in the normal course say, bills of lading, certificates of tract 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 of implicit 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 a among those not ready nor will- evant circumstances. negotiable bill of exchange must ing to engage in electronic com- be presented to the drawee for merce. Hence, if a person re- Classes of Electronic Docu- acceptance. In the context of an ceives an e-mail offer to enter ments in the Model Law. Under electronic bill, a higher degree into 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, the In fact, many on-line retailers ad- considered “writings” so long as Model Law requires electronic vertise their toll-free numbers as they are “accessible so as to be “originals” to possess “a reliable an alternative method of con- usable for subsequent refer- assurance as to the integrity of ducting 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 whom wise true in that parties may not the basic notion of the informa- it is to be presented (Article compel 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
  • 16. while, in contrast, these at- sess the integrity and reliability recent mishap. The electronic tributes 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 to ments 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 keep lower 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 gives This is permissible because of electronic “writings” will have an legal significance to the e-mail’s the 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 fall ments 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 of Law 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. This Act did away with the clear dis- Law); is established by showing that tinction 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 any maintain their integrity and reli- Code); authorized change, or any ability. 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, digital ippine law requires something to est on loans (Art. 1956, Civil signatures, and other marks to be in “writing,” the electronic data Code); the electronic document will not message 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 counterparts tegrity 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 of electronic 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 determined isfy 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, each the sale of goods valued at more (i) Stipulations limiting a situation must be examined to than 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 person the standpoint of a party-litigant 1744, Civil Code) usually employs encryption to who wishes to impugn that elec- The blurred of the distinction all his e-mails, an unencrypted tronic 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, the deny the electronic document of electronic documents under plain e-mail may be considered the 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 in available 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 deemed Model 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. Where entirely 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 its and may still be referred to and mail which contains an admis- original form, that requirement is presented as evidence in court. sion of a particular fact say, of met by an electronic document or However, because it fails to pos- the writer’s negligence during a electronic data message if - THE ELECTRONIC COMMERCE ACT 15
  • 17. a) There exists a reliable as- might be eroded. For example, under Best Evidence Rule is not surance 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 within form and such integrity is shown Integrity. The standard for the context of Sections 6 and 7 by evidence aliunde (that is, evi- integrity for “original” electronic of the Act. While an electronic dence other than the electronic documents differ slightly from data message is by itself the data 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” under or 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 the son 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 be graph (a) above: on paper and later transferred to presented. Otherwise, the elec- (i) The criteria for assessing the computer. In such a situa- tronic data message or docu- integrity shall be whether the in- tion, the Act is to be interpreted ment will merely be taken as formation has remained complete as requiring assurances that the evidence of its contents but not and unaltered, apart from the ad- information remained complete be considered a “writing” or an dition 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 deals and 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 of required shall be assessed in the Originals and the Best Evi- electronic documents in general light of the purpose for which the dence Rule. The Best Evidence – a matter which is discussed in information 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 document stances. 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 electronic complying with the requirements of Court). If taken in the context document will have to comply of Sections 6 or 7 of the Act shall of the Act, it would appear that with the same rules governing be 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 relevant only 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 some change and promissory notes), they comply with Sections 6 and form in order that it may be valid negotiable instruments of title, 7 of the Act will render them the or enforceable, or that a contract stock 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 are tablishes 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 those transactions relating to them. the Best Evidence Rule. In this which are valid only if the form Hence, 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 agreements it can be considered as such. quirements of Section 11 of the under the Statute of Frauds must Otherwise, 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
  • 18. tracts or agreements but docu- soon since the ability to have provision using the ETA as a ments of all kinds which must be electronic notarization will go a starting point. Concerns were in 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 may some instances, the law requires ing business. be forged or falsified. Hence, it that documents be acknowl- was deemed necessary to re- edged before a notary public Legal Recognition quire integrity and reliability from before 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 who at least three (3) witnesses and tronic signature relating to an elec- may be required to rely upon acknowledged before a notary tronic document or electronic data them. Independent verification public. Otherwise, it is invalid message shall be equivalent to the was also intended to encourage and the decedent is deemed to signature of a person on a written individuals to conduct their own have 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 Electronic because the Rules of Court con- b) is proved by showing that Signatures under the Model Law siders them public documents a prescribed procedure, not alter- and the ETA. The Model Law which are easier to present in able by the parties interested in the adopted all types and kinds of evidence (Section 19[b], Rule electronic document or electronic electronic signatures provided 132, 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 manually sented 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 merely acknowledgement 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 that Rules 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 electronic treatment of private documents appropriate for the purpose for data message. The same which 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 in tion 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 consistent result, many transactions are ing any relevant agreement; with the aim of the Model Law to evidenced 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 of minds 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 no course, 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 of provides that the Supreme Court rized and enabled to verify the Electronic Signatures under the may adopt authentication proce- electronic signature and to make Act. The Act, however, does not dures including electronic nota- the decision to proceed with the embrace all types of electronic rization systems (Section 11, transaction authenticated by the signatures adopted under the Act). 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 before regulating electronic notarization supplementary or alternative pro- an electronic signature qualifies and 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 in on 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 in passed on to the Supreme may be taken into account. an attempt to ensure that only Court. It is hoped that the High Rationale. The Senate tech- reliable electronic signatures are Court will issue its regulations nical working group crafted this recognized under Philippine law. THE ELECTRONIC COMMERCE ACT 17