Electronic Communications & Transactions Bill: deliberations

Meeting report

COMMUNICATIONS PORTFOLIO COMMITTEE
22 May 2002
ELECTRONIC COMMUNICATIONS AND TRANSACTIONS BILL: DELIBERATIONS

Chairperson:

Electronic Communications and Transactions Bill [B8-2002]
Summary of Submissions

Representatives present from the State Law Advisor's office: Hala Sangoni, Karin Booyse, Regina Mosianga and Otto Kellner

SUMMARY
Morning session
The state law advisors were present for the deliberation of the ECT Bill for the first time. Chapters One, Two and Three were dealt with during this session. The following main concerns were raised:
- Whether the word "communications" should feature more prominently in the Bill;
- Clause 2(m) related to a set of standards that were unclear;
- Clause 2(r) was unclear and possibly inappropriate;
- Whether the Department of Communications should be the only department concerned with the ECT Bill;
- Whether the protection of National interest would not more appropriately be the province of the National Intelligence Agency;
- Whether the ECT Bill was not duplicating the work done by the justice committee on the Interception and Monitoring Prohibition Act;
- The fact that the Department of Communications was responsible for an e-strategy in its widest sense could lead to frivolous litigation;
- That incorporation by means of reference in an electronic contract could unfairly prejudice an unsophisticated user;
- That electronic site should not be able to use a blanket disclaimer of liability when contracting with consumers;
- That the definition of signatures differs from the UNCITRAL model law for no apparent reason;
- Who would follow up the other pieces of legislation that ought to be revised in the light of electronic commerce?
- That the "voluntary" decision of an accreditation authority deciding to be registered was "ridiculous" as without accreditation the advanced electronic signatures would not be recognised by law.

The following points were clarified:
- The Bill is intended as an enabler and not a solution to every outdated statute;
- The e-strategy is a moving target and needs to be updated regularily;
- "Obligations" in a policy clause are not enforceable as this is policy not law;
- That incorporation by reference in a contract was currently an old and accepted part of South African law;
- Incorporation by reference in Clause 11 actually protects the consumer more in the electronic world than in the physical world;

It was agreed that:
- The period of five years was too lengthy for the development of an e-strategy;
- The justice committee should be approached to clarify whether the work done by this committee is not in conflict with that committee.

Afternoon session:
Clauses 14-18, 20-23, 25-27 and 29 were generally agreed to by Members.

The discussion on Clause 13 raised concerns with whether this clause allows the parties in an electronic transaction to identify each other with certainty, requested clarity on the position in this clause should only one party agrees to use the Advanced Electronic Signature (AES), the effect of this clause and the AES on those laws requiring the written signature of the parties and the effect of the European Union UNCITRAL model law here. It was decided that this clause would be passed, subject to the understanding that it would receive further consideration.

The effect of Clause 19 on the Civil Procedure Act was discussed, as it pertains to the compression of the serving, filing and provision of several court documents into a single data message is concerned.

The discussion on Clause 24 raised concerns with how this clause would prove that the intended recipient of the electronic communication has in fact received and read the communication, the fact that there is no reliable way to prove this in relation to e-mails, the presumption that the communication has been received and thus placing the onus on the recipient to prove that s/he has not received it, the contention that SPAM constitutes nothing less than a theft of the time, dial-up costs, disc space and bandwidth of the recipient and the need for a strong argument to outlaw SPAM as it appears to be an important direct marketing tool. This clause was passed by the Committee, but it would be considered further.

Under Clause 28 it was decided that the effect of the national e-government strategy would be left to the Minister of Communications to decide upon.

MINUTES
The Chair requested that concise statements from interested public groups be heard first. He then referred to a United States ruling in 1991 which indicated that raw data cannot be owned and protected under copyright law. This ruling raises the issue of property rights in intellectual property. In this connection the Internet is redefining the notion of 'theft'. Specifically this challenges the music and film industry's whole ownership structure. It also leads on to the question of what exactly is a "critical database".

The Chair read out a British newspaper article which indicated that the information on smart cards was now able to be gleaned using a simple camera flash. This was put forward as a point of interest.

The Chair indicated that the English within the Electronic Communications and Transactions Bill is "very simple", and expressed the desire to ensure that the Bill was in line with the Constitution. He noted that the one point that every submission agreed upon was that there was a need for the ECT Bill and that there was currently legal uncertainty in the area of electronic communications and transactions. He added that all the public submissions were taken seriously by the committee.

Finally he emphasised that the committee was committed to the passing of the ECT Bill and having it debated by 7 June 2002. However in spite of the time constraints the ECT Bill would not be rushed. He noted that the committee would be sitting on the 23, 24 and 27 May 2002.

Deliberations on the Bill
The Chair chose to move past Clause 1 (Definitions) and to begin with Clause 2.

Clause 2: Objects of Act
 

The Chair indicated that he was interested to note that Clause 2(1) of the ECT Bill did not include the word "communications" in spite of the fact that this was the Electronic Communications and Transactions Bill. The Chair asked for any comments on this clause.

Ms M Smuts (DP) noted that Clause 2(g) of the Bill referred to "public and private bodies". She stated that the phrase was clumsy and only relevant in relation to critical databases. She suggested that this section be amended to refer only to public bodies.

Ms S Vos (IFP) indicated that subclauses 2(r), 2(m), 2(n), 2(o), 2(p), and 2(q) should be flagged as being in contention.

Ms M Smuts (DP) said that if all that was being done was to "flag" the contentious sections she wished to flag subclause 2(r) as being an issue. Specifically she wished to know how the national interest would be compromised through electronic transactions? Perhaps this would refer to the export of encryption tools, but surely that would fall under the export of armaments and not within the scope of this Bill.

Mr Kellner (State law advisor) indicated that the committee could do whatever it wished with the section. If the committee wanted to put the "protection of national interest" within the Bill the committee could do so.

Ms S C Vos referred to 2(m) (ensure compliance with technical standards) and said that it was not within the scope of legislation to be obtrusive.

Telkom was asked to comment on its proposal that "communications" be left out of the ECT Bill. They indicated that originally the word "communications" was indeed left out of the Bill, and that this was appropriate as this Bill should not usurp the functions of the Telecommunications legislation.

On the other hand the Post Office submitted that the word "communications" should occur more within this Bill.

Telkom submitted that electronic communications did not equate with telecommunications. They submitted that the object of the Bill was electronic transactions and not communications.

The Chair asked for the parameters of the act to be stated by the Deputy Director General.

The DDG, Mr P Pongwana, indicated that the Bill was originally named the "E-commerce Bill". However it subsequently became clear that the two main elements of this Bill were that the transactions happen in an electronic environment and that this involves communications.

Mr. Kellner was asked about the definition of the concept of "communications". Mr. Kellner replied that "transaction" along with "electronic" as well as "electronic communication" are defined by the act, and therefore by means of extrapolation the meaning of "communications" could be derived.

Mr Wim Mostert, while at this point acting in his private capacity, indicated that he was part of the team that had drafted the legislation before the committee today. He pointed out that the medium is data messages and that an emphasis is placed on transactions and messages. He submitted that there was nothing in the substantive law that would interfere with Telkom.

The Chair looked at the words "digital or non-tangible form" before referring to the earlier question by Ms Smuts referring to "public and private bodies" in subclause (2g).

Ms Smuts said that this Bill deals with government and government departments and as such does not have a connection with private bodies. It was submitted that it was not possible to have "egovernment" with a private body.

The Director General (DG) of the Department of Communications pointed out that the government functions with private bodies and is concerned with improving services to the private sector.

Ms Smuts suggested that the sentence in 2(g) should end after the words "electronic transactions".

The DG replied that that the section involves public and private bodies and institutions as well as citizens.

The Chair asked what problems were present with subclause 2(m).

Ms Vos indicated that the clause was intrusive, as there was no need to ensure compliance with standards by the public.

The Chair indicated that it was normal to have an ICASA or SABS stamp of approval on various goods that were available to the public and so the concept seems to be acceptable. There was a question as to whether there should be a particular technical standard on the Internet.

The Chair turned to subclause 2(r) that refers to ensuring that national interests are not compromised through electronic communications. The Chair was interested to know how electronic communications could affect the national interest?

The DG responded by alluding to the events of the 11 September 2002 in America and indicated that the Department of Communications was actually far-sighted in its approach to the legislation.

Ms Smuts indicated that she did not believe that the DG had answered the question and the DG elaborated by indicating that terrorism might be furthered through the use of electronic communications. There was the hope that electronic communications would not be negative in terms of the "ethos" of the country.

Ms Smuts indicated that she still felt this was an unsatisfactory answer.

Ms Vos suggested that perhaps "national interest" as it stands in the section would be best left to the National Intelligence Agency.

Ms Smuts clarified her question regarding 2(r) by asking exactly how this Bill ensures that the national interests are not compromised?

Mr. Kellner indicated that he was unsure as to how this Bill protects the national interest.

The Chair indicated that if any other Act protected the national interest regarding electronic communications, subclause 2(r) could perhaps be omitted from the Bill.

The DG pointed out that Clause 2 was an objects clause and as such was not law, simply policy.

Mr. M Lekgoro (ANC) pointed out that if the object of the Bill was to protect the national interest that object should be realised in some part of the Bill.

Ms Smuts indicated that the Interception and Monitoring Prohibition Act (which is to be amended soon) deals with the concept of "national interest" and that it may be more appropriate for that Bill that is currently being debated by the Justice Committee to deal with that question.

Mr. Mostert pointed out that the "national interest" was protected by means of Chapter 5, which dealt with cybercrime.

Ms Smuts indicated that this was exactly what she feared might be the case.

Clause 3 Interpretation of the Bill
It was submitted by Ms Versveld that that the interpretation section was intangible and that the Committee might be well advised to revisit it later after considering the rest of the Bill. The Chair agreed with this suggestion.

Ms Smuts pointed out that this Bill was intended to "clean up" a number of other Acts. However Acts such as the Stamp Duties Act were specifically excluded from the operation of this Bill. Ms Smuts wanted to know who was going to "clean up" these other acts in the light of the fact that they had been excluded from the scope of this Bill. Specifically Ms Smuts referred to the fact that the Department of Trade and Industry was of the opinion that electronic stamps would be advantageous in South Africa. Ms Smuts also asked who would be dealing with the concept of tax on electronic products?

The Chair pointed out that the overloading of this Bill could stop the Bill from being passed, which would not be of help to anyone bearing in mind how urgent the Bill is. He pointed out that the object of the Bill was to try to deal with electronic communications and transactions and not to replace everything else.

The DG pointed out that this Bill was intended to be an enabler. He referred to the Edward Nathan and Friedlander study that was done on legislation that would be affected by electronic communications. It was intended that the bill would not replace all other legislation, simply enable the legislation to be updated.

Mr. Gore (DP) asked whether other people would do work on the Bills.

The DG indicated that this was not within the scope of the Department of Communications and that other departments should amend their legislation if appropriate.

Chapter 2: Maximising Benefits and Policy Framework
Ms Vos referred to Clause 5 (National e-strategy) asked if the development of a national e-strategy should only be under the auspices of the Department of Communications?

Ms Smuts indicated that five years was far too much time within which to develop an e-strategy and that it would be more appropriate to have the period of six months. She also noted that there was a strange treatment of the separation of powers in the Bill. In terms of the Bill the Committee would be entitled to haul in the DG so that they could question him about the national e-strategy. As the official opposition, she would be delighted if she would be able to bring in the DG to answer questions regarding the national e-strategy.

The DG stated that he had no objection to speaking to Cabinet about the national e-strategy.

The Chair wanted to know what the term "e-strategy" meant?

The DG replied that the e-strategy changes very rapidly and must be updated regularly. The DG used smart cards and EFT (Electronic Funds Transfer) as examples of the rapid change in the area of electronic communications and transactions.

The Chair pointed out that the period for the e-strategy would be more appropriate if it were to be three years since this was the period for which the medium term budget is determined.

Mr. Gore referred specifically to Clause 5(3) (b) and stated that the "roles and obligations of each person" must be defined in this Bill.

Mr. Kellner replied that in spite of the fact that the Bill referred to an "obligation" there was in fact no obligation created by this section as it dealt with policy and not law.

Ms Smuts took issue with Clause 9 that dealt with SMMEs and indicated that it may in fact be more appropriate for the Department of Trade and Industry to handle this point. Moreover he suggested that it might not be efficient for there to be separate e-strategies for the regions and the nation itself.

A member (ANC) referred to Clause 5 (4) (a) and indicated that consultation with the public was required by this clause. This was in line with the ISPA submission that the private sector be consulted.

The DG indicated that it was every department's job to help SMME development. He indicated that SMMEs and not large corporations would drive growth in the area of electronic commerce.

Ms Clarissa Mack (Multichoice) pointed out that it would be wise for the government to consider the impact of frivolous litigation. In particular is it the duty of the Department of Communications to develop an e-strategy for the Department of Health for example? If it were to be the duty of the Department of Communications to develop such an e-strategy, the Department might be sued for not developing such a strategy.

Mr. Keller indicated that he had not considered the Bill from that angle and that he would consider that point.

Ms Vos considered Clause 6 and wanted there to be public consultation with regard to this clause. The Chair indicated that that was not important, as public consultation was already present.

Mr. A Maziya (ANC) referred to Clause 10(4) that states that "The minister may not publish policy guidelines that impose obligations on any person". He found this to be an illogical. He pointed out that the minister imposed obligations on the government and the country and not on persons. Further he indicated that this subclause would make interpretation difficult. In essence it was tautologous.

The Chair agreed that this was tautologous since policy cannot impose obligations on persons.

Chapter 3: Facilitating Electronic Transactions
Ms Smuts referred to Clause 11 and considered this clause to be akin to the "fine print" of a contract. In short, incorporation by reference within a contract should not necessarily be seen as desirable in electronic commerce.

Mr. Mostert responded - from a drafting point of view - and said that the section must necessarily be in the form of a negative statement. The point was that an electronic message was free to be interpreted as a valid message and should not be excluded simply because it is an electronic message. However if the clause was put in a positive manner, an electronic message would automatically be regarded as being valid which was an undesirable situation.

Mr. Kellner clarified this point somewhat by stating that the idea is that you cannot discriminate simply because the message is in the form of a data message.

Mr Mike Silber from Namespace.ZA indicated that there was no compulsion to uphold electronic agreements. He indicated that if another contract was incorporated by reference (by means of a mouse click) this is acceptable, and not difficult to do.

The Chair expressed grave reservations about incorporation by means of reference within a contract.

Mr. Mostert indicated that the purpose of the section was to deal with the concept of hyperlinks within an electronic contract. Moreover he indicated that this section protected the consumer more than the same contract which was in a physical form would have protected the consumer.

Mr Mpho Masimane (MCell) took the floor and indicated that they supported the incorporation by means of reference. In particular they used the example of contracting by means of a cell-phone where the terms and conditions might well be incorporated by reference.

Mr Alan Barrett of Cequrux, an Internet security company, clarified the position of come contracts that were agreed to over the Internet. Specifically he used the example of data messages that were abbreviated and could agree to something in the form of "if line 7 includes the number 3 such and such will happen". In short without incorporation by reference there would be a terrific burden on electronic contracts.

Ms Smuts however was still concerned about unsophisticated people being caught by the incorporation by reference.

Mr. Barrett indicated that this was indeed a problem.

Mr. M Lekgoro (ANC) differentiated between being able to find the reference on the Internet as opposed to the document that is incorporated by reference being difficult to obtain.

Ms Smuts agreed with his point and said that in spite of this apparent inequity it would seem that the current legal position is to incorporate a contract by reference even if it were difficult for the contractee to obtain.

Mr. Barrett drew the committee's attention to the point that Clause 11(3) was only of interest when the information was not in the public domain - in other words when the information was not freely available on the Internet.

Ms Versveld took the floor and wanted to know the committee's position on voice messages in connection with the issue of incorporation by reference.

Mr Silber indicated that Clause 11(3) was a consumer protection provision.

Mr. Mostert amplified Mr. Silber's point by stating that Clause 11(3) provided more protection for the man on the street in electronic communications than in normal paper-based contracts. If a person was able to place the terms that are referenced to on the Internet that person must do so. He also suggested that the terms "public domain" and "reasonableness" could perhaps be redrafted.

The Chair gave the example of a shopping mall where there is a disclaimer in two lines as you enter the mall. He indicated that it would be undesirable to be able to disclaim all liability.

Ms Smuts considered Clause 13 (Signatures). Ms Smuts referred specifically to lines 39-44 of the UNCITRAL model law where the four requirements of a signature are stated. She questioned why the Bill only dealt with advanced electronic signatures and did not take other forms of signatures into account. She pointed out that the concept accreditation being "voluntary" was ridiculous as it was only once the company had been accredited that its signatures would be regarded as being valid. She questioned the reasons for the departure from the UNCITRAL model law and indicated that this would place an unfair burden on foreign accreditation authorities.

Mr Lance Michaelson for the Post Office indicated that a signature is not a requirement for a contract to be concluded. Indeed a contract can be concluded by means of telephone or email.

A point was made that perhaps signatures should be defined in Clause 1 and not Clause 39.

Mr. Kellner indicated that this would be inappropriate, as "signatures" was not only a definition but also included substantive provisions.

Ms Mack said that she did not see the need for an advanced digital signature within various contracts, such as in an ante-nuptial contract.

Afternoon Session
Clause 13: Signature
The Chair stated that this portion of the Bill is key if the South African public are to communicate electronically. The matter to be clarified here is whether this provision allows the person on one side of the electronic communication or transaction to ascertain, with certainty, the identification of the person on the other end of the electronic communication or transaction. If this matter is not resolved in this clause, Internet users would not be able to identify with certainty the person they are communicating or transacting with, and this could cause any number of problems with identification, such as those being experienced in the chatrooms.

This clause currently provides that if two consenting parties agree to conclude a transaction or communication electronically and they decide to use an Advanced Electronic Signature (AES) to attest to this, the agreement would be valid. Yet Mr Otto Kellner, from the Office of the State Law Advisor was requested to explain whether this clause then provides that should the parties decide not to use the AES, the electronic communication or transaction would still be recognized as valid in South African law.

Mr Kellner replied that he knew of no provision in this Bill that would regard such a communication or transaction as ineffective.

The Chair stated that the reason for this question is that many have argued that this effect would stop or severely inhibit electronic transactions. Yet there does not seem to be any problem should the two consenting parties to the transaction agree on the use of an AES.

Mr Wim Mostert, Senior Manager: E-Law at Deloitte & Touche, stated that Clause 25 would be relevant to the question whether the AES is necessary here, and it emphasizes that the Bill does not state that an AES is needed for the conclusion of a valid contract. Clause 13(1) does however provide that where the relevant statute governing the particular transaction requires the written, physical signature of the parties, the AES will not be sufficient to render the contract valid. Clause 13(3) provides that should the parties not agree on the type of signature to be used to effect the transaction but ultimately use an ordinary Electronic Signature (ES), the court would then employ a test to determine whether the ES is indeed valid.

Ms M Smuts (DP) acknowledged this, but questioned the need for the introduction of an Accreditation Authority (AA) if Clause 13(1) only applies to certain categories of transactions and statues that require written signature. Furthermore, the Schedule to the Bill excludes those laws that require written signature of the parties, and the question then arises as to which laws remain that need physical signature if this presumably shortlist is provided by the Bill.

Secondly, Clause 41 deals with foreign accreditation, but clarity is requested on which foreign jurisdictions do provide accreditation services as most have a consumer-type mechanism that advises consumers that the items in its catalogue are approved. It does not seem as though the Minister of Communications (the Minister) would be able to have these accredited from foreign jurisdictions.

The Chair informed Ms Smuts that her question seems to be more of a practical than a legal nature, whereas Mr Mostert is saying that the parties would communicate electronically in any event and in whatever form, and could even employ an ordinary ES. In years gone by South Africans had to use a bank book to withdraw and deposit funds from their bank accounts, and these were replaced by the Automatic Teller Machines (ATMs). The ATMs now require account holders to use and enter an electronic pin number, which is essentially that person's signature. If this Bill does not provide sufficient certainty and security by preventing a stranger or any other unauthorized person from intervening in the user's transaction with his/her bank, then this Committee will not pass such a law as it would be stopping a legitimate transaction between the user and his/her bank.

The same principle therefore applies to electronic banking or transactions, where hackers can gain access to the user's personal and confidential information, such as banking and credit details. Should parties to such electronic transactions desire a more advanced form of signature than is currently being offered then this law has to facilitate such advancement, but it cannot change those methods that are already being used successfully. It is ironic that the ES providers have not participated in the public hearings process, nor have they made any input to date.

Ms Clarissa Mack, from Multichoice, replied that Clause 13 does not prevent electronic transactions, but Clause 13(1) does recognize that there is a certain body of transactions for which an ES is insufficient and an AES would be needed for the law to recognize the validity of these transactions. These include a higher purchase agreement, as required by the Credit Agreements Act. A few of these laws are not contained in the Schedule such as the Copyright Act, as mentioned earlier by the South African Post Office delegation, as well as the law relating to Antenuptial Contracts.

Ms Annemarie Versfeld, from Versfeld & Associates representing AfricaBio, added that the laws relating to Commissioners of Oaths, sureties, notaries and conveyancers and long-terms leases are also not included, and the list is therefore not as short as presently contained in the Schedule to the Bill.

Mr Calvin Browne, from Uniforum SA, suggested that the word "statute" in Clause 13(1) be replaced with "law", in an attempt to clarify matters.

Mr Alan Levin, from the Cape Telecommunications Users Forum (CTUF), questioned whether the issue being raised pertained more to the entire Chapter 3 rather than to Clause 13(1) specifically.

The Chair stated that the important points in Clause 13(1) are the precise meaning of the word "law", which refers to regulations as well and could thus be clarified and spelt out further via regulations, as well as the term "data message" which has been defined in Clause 1.

Mr Lance Michalson, from Michalsons Information Technology, Internet and E-Commerce Law Attorneys representing the South African Post Office (SAPO), stated that most jurisdictions distinguish between digital signatures and digital certification, as dealt with in Clauses 13 and 39 respectively, yet the two are so closely linked that they cannot be dealt with in isolation. A distinction also has to be made between the function and the form of the signature because it is used, on the one hand, to sign an agreement, but is also used to authorize the identity of the other party to the transaction in the electronic environment. In this regard SAPO suggests that the truest form of such authorization is the face-to-face protocol which it currently employs at Post Offices.

The certification authority under Clause 39 must realize the different types of regulatory models employed in the various foreign jurisdictions, and it is therefore not unique in its approach. Clause 39 is however more moderate, as opposed to the German Root Certification Authority law which stipulates that the German government is the sole certification authority. The current Clause 39 formulation seems to contain elements of the Singaporean and Indian Certification Authority and Digital Signature legislation. Clause 13 therefore does not adversely affect E-Commerce and is not an inhibitor at all. Should this Committee decide to separate digital signatures from the certification authority, a workable system would be implemented and would ensure the survival of E-Commerce, together with the face-to-face protocol.

The Chair stated that the relevant question here is whether Clause 13(1) applies, practically, to the situation where a person wishes to purchase a motor vehicle via a hire purchase agreement via en electronic transaction. However, the comments raised regarding the certification issue are noted.

Mr Mostert informed the Committee that 99% of all electronic transactions are concluded via a user-id and pin system, and it is debatable whether this constitutes an ES. Deciding whether this contract is validly concluded under Clause 25 of the Bill does not take the discussion anywhere. The remaining 1% of electronic transactions entail the situation where the parties to the contract themselves want to know the identity of the person they are contracting with. Yet this type of transaction is not covered by the UNCITRAL model law because the European Union sought to standardise legislation across all sectors as it saw fit, but failed to consider and recognise the technological advancements, which this Bill has acknowledged. The question which then arises is the reason for the need for an AES, and the answer is to afford standardisation via a model which all South African Internet users can use, and one which the government accepts and recognises.

The Chair requested clarity on the position should the parties not desire to conclude their electronic transaction via an AES.

Mr Mostert replied that this situation is an uncertainty as it has not yet been tested before the courts, because some argued a written signature is needed whereas others suggested that an ES would suffice. The legislature thus has to step in here and resolve this matter via this Bill.

Mr Mpho Masimane, from MTN, reminded the Committee that some of the submissions received during the public hearings stated that the one cannot be achieved at the expense of the other, but that an attempt should instead be made to ensure standardisation in both environments. Perhaps Clause 13 could include a provision to the effect that an AES would be needed for communications or transactions with the government or for official purposes, and the term "official purposes" could then be defined in the definitions clause. It would deter economic growth should an AES be required for each and every process. The advice of the State Law Advisor is needed here.

The Chair contended that it cannot only be a requirement for communications and transactions with government.

Ms Mack stated that in the normal contractual environment, transactions can be concluded in the following two ways: orally or by methods on which both parties agree, but the law provides that certain contracts here need the written signature of the parties and the level of sophistication of the signature depends on the corresponding degree of sophistication or complexity of the contract. This is the essence of the distinction between an ordinary ES and as AES in the online environment. The difficulty is that certain laws contained in Schedule 1 of the Bill require an AES and are thus taken out of the scope of this Bill, yet others remain. The rationale for this decision is not clear.

Ms Smuts inquired whether the establishment of an Accreditation Authority (AA) would delay the coming into operation of Clause 13(1) until the AA is up and running. If so, users would have to wait for a link between the AES and the AA, and it is not certain what the position would be in the interim.

The Chair referred to the submission received from the Banking Council of South Africa (BCSA) in this regard, which questioned the effect this would have on the common law, and this is "exactly the point here". This Committee should agree to recognise and adopt the ES, as it is an important tool and has found success in foreign jurisdictions. A decision should also be taken not to create other electronic transactions that are otherwise already covered by the common law or existing legislation.

Ms Versfeld stated that she agreed with the current formulation of Clause 13.

The Chair contended that there are few companies in the global market that offer AES services, and these include Verisign. He stated that he was under the impression that an AES implied some level of encryption above the normal level, and this raises the standards of the ordinary ES.

Mr V Gore (DP) informed the Chair that there is a distinction between encryption and an electronic signature, as the former is used to ensure that the contents of an electronic communication are not divulged to a third party, whereas the latter is a means of identifying the other party to the communication or transaction and to associate the content with that person. These are there two different concepts.

Mr A Maziya (ANC) stated that it was resolved during the ANC study group that the AES will be accredited, and an ordinary ES can be authorised by an authentication process. The input received during this session from the various legal minds present seem to agree with Clause 13.

The Chair referred to the submission received from KPMG "has hit the nail on the head", as it calls for the phrase "required by law" in Clause 13(1) to be narrowly interpreted.

Ms Versfeld contended that there are certain degrees of authenticity with a written signature, beginning with the face-to-face component, then the use of witnesses to verify the legitimacy of the signature, even the use of Commissioners of Oaths and the highest level of authenticity would be the use of government officials as notaries. The question that arises here is at which of these levels of authenticity can the Clause 13(1) requirement properly be placed, because if the ordinary ES applies to all electronic transactions and communications then the all these levels of sophistication would be reduced to the most basic standard of authenticity.

Mr Michalson informed the Chair that the biometrics service providers also provide AES, such as retina scans etc. Thus Verisign is not the only provider.

Mr Mostert wished to correct the general misconception of the phrase "required by law" by suggesting that the Committee could substitute the word "law" with "statute", and then define that word in the definitions clause in the same manner in which the Interpretations Act does. The alternative relates to the question raised by KPMG whether Clause 13 should include an ES as well because, if not, the entire Clause 13 would be invalid. Clause 13 does not only provide that the signature requirement is affected, because it is left to the individual piece of legislation to resolve this matter. Therefore Clause 13 deals with the specific issue and does not intend to affect those Acts like the Credit Agreements Act etc.

Ms Smuts agreed with Mr Mostert and the earlier suggestion by Mr Browne that the word "law" be substituted with "statute", and the concept of invalidity should be introduced here, as suggested by Mr Mostert.

Mr Gore stated that the purpose of Clause 13 is to create an environment in which the average consumer would feel safe to contract via the Internet. The drafters of the Bill and the Department of Communications (the Department) referred earlier to the UNCITRAL model law and the European Union position, yet the European Union directives, although they provide that individual member states "supervise" the accreditation procedure, also provide for voluntary accreditation. This means that private bodies can now provide accreditation services. The Department is requested to comment on this position.

Secondly, the conflict between the United States and the European Union resulted in a trade embargo with the United States, because the United States disagreed with the European Union's policy of voluntary accreditation. Safe harbours then had to be established in the United States to deal with this problem.

Mr Mostert stated that he had forgotten to mention the submissions from the Johannesburg Stock Exchange (JSE) and other regulators, which suggest that this option can be accommodated should parties want to prescribe certain types of signature in their own legislation. This can be effected via Clause 13(1), and the legislation could then qualify in which situations the signature would satisfy the legislative requirements.

With regard to Mr Gore's questions, the general approach is that the European Union directives leave it up to the individual member states to setup their own regime for a regulatory authority, with two options: it could either be state controlled, or made voluntary without any state control or intervention. A safe harbour was established in the United States, because it had no definitive policy on this matter.

The Chair stated that the Due Diligence Report provided by the Department does contain a comprehensive evaluation of comparative law on this matter, and Members should consult it. This Committee should agree to pass Clause 13 with the understanding that there is a need to further clarity the phrase "required by law", and it has to be interpreted in such a manner that it does not conflict with existing laws within the Republic. This approach should be adopted, and in principle an AES "should be what it is".

Ms Versfeld supported Mr Mostert's sentiments, and contended that the drafters of the Bill have not done sufficient comparative analysis on this matter. This is supported by the submission by the South African Law Commission (SALC) which suggests that the Department failed to engage in insufficient consultation before drawing up the Bill. In this regard it is suggested that a Senior Counsel should perhaps be appointed to address this matter.

The Chair stated that "this would be the most unusual step to take, as the legislature". He reminded the Committee that this stage of the deliberation process is not intended to effect amendments to the Bill, but only to clarify matters and provisions in an attempt to simplify the Bill as much as possible.

Ms Smuts requested Mr Kellner to provide "crystallised" drafting options to Clause 13, as raised during this discussion.

Mr Maziya stated that one of the submissions received calls for the deletion of Clause 13(5), and thus the need for Clause 13(4) is questioned as it already provides "unless the contrary is proved".

The Chair noted this proposal and stated that this Committee has thus decided that both the ES and AES would be acceptable, but their roles would be clarified further. Clause 13 is therefore generally accepted.

Clause 14: Original
Ms Versfeld contended that the term "integrity" in Clause 14(1)(a) should be clarified further in terms of the stage at which the electronic document is no longer regarded as changeable. It is suggested that the phrase "on being sent" be inserted after "data message", as a possible solution. This would accord with Clause 17(1).

The Chair noted this concern, and stated that the Committee agrees to this clause.

Clause 15: Admissibility and evidential weight of data message
Ms Smuts informed Members that several submissions called for the Computer Evidence Act to be repealed in its entirety. The State Law Advisor was requested to comment on this matter.

The Chair suggested that Members first be supplied with a copy of that Act so that they might study it before any decision is taken to simply repeal a statute. This clause is generally agreed to.

Clause 16: Retention and Clause 17: Production of document or information
These clauses were agreed to by Members.

Clause 18: Notarisation, acknowledgement and certification
Ms Smuts stated that some submissions received suggested a certification of digital display be provided by a certain date.

The Chair contended that this matter be flagged.

Mr Michalson referred the Committee to the SAPO submission on Clause 18(3) to the effect that it creates a lacuna.

Clause 19: Other requirements
Ms Mack expressed her approval of this clause, but contended that is assumes an ideal world in which all South Africans have access to the Internet. This provision thus prevents access to information to rural communities, and the clause should thus not be interpreted so broadly that it ensures that those persons who this Bill actually trying to reach do have access, especially those in Clause 19(2).

Mr Michalson referred the Committee to the SAPO submission that it be recognised as the provider of E-Registered post.

Ms Versfeld suggested that this provision has implications on the Civil Procedure Act, as it suggests that all the hard copy documents which are generally required under that Act may now be taken care of via a single data message. This could change the South African legal system as far as the court system and court procedure is concerned. Furthermore, the Civil Procedure Act is not contained in the list provided in the Schedule to the Bill. Mr Andile Ncgaba, the Director General (DG) of the Department, is requested to respond.

The Chair stated that the DG would not be called on to respond at this time. There are people who feel safe knowing that there is a hard copy of the police docket, and the Chair stated that it has not yet been reported that the South African Police Service (SAPS) have effected E-environment changes. It is clear that any environment that requires its system to adapt to keep up with changes and advancements has to do so. Unless the clause affects the current legal system to such an extent that it becomes impossible to work with the change, it will not be effected. Should the change be desired, however, it has to be effected, especially in view of the E-government drive.

Ms Versfeld agreed with the Chair, but questioned the implications of the clause in the following example: two attorneys are engaged in a legal dispute, the court documentation is sent electronically but the one does not receive the documents of the other. How does Clause 19 deal with this situation?

Mr Mostert replied that the answer is to be found in Clause 4(a)(b) and also in Clause 20.

Ms S Vos (IFP) inquired as to the position should one of the attorneys not desire to communicate or transact electronically.

The Chair replied that Clause 20 would be employed.

Mr Mostert contended that the Bill does not specify, in exact detail, the precise manner in which people are to transact.

Clause 20: Certain other legislation not affected
The Chair suggested that this is the most important clause for the interpretation of the Bill, and can therefore not be removed.

Clause 21: Automated transactions
Ms Vos stated that the JSE submission does not agree with Clauses 21(d) and (e) as the ambit of this provision is too wide, and consequently call for the provisions to be deleted.

The Chair suggested that this issue be flagged for further discussion.

Ms Smuts contended that some submissions argued that the use of the phrase "electronic agent" is not a good idea because an agent, in the strict legal sense of the word, is authorised to contract on behalf of the principal.

The Chair stated that the BCSA submission is similar, and stated that the Committee has passed Clause 21 with the understanding that these matters need to be evaluated further.

Clause 22: Variation by agreement between parties and Clause 23: Formation and validity of agreements
These clauses were agreed to.

Clause 24: Time and place of communications, dispatch and receipt
The Chair stated that the BCSA submission on this clause is important here, as far as the impact of this clause on SMS's is concerned.

Ms Versfeld suggested that a simple solution to this problem may be found in requiring the receiver of the electronic communication to prove that s/he has in fact received the communication by downloading it. This is especially pertinent if one considers that fact that many people have more than one e-mail account, and if they do not regularly check these mailboxes they might never actually receive and read important documentation that is communicated to them electronically. They would then fall foul of the law if they do not actually receive and check these communications.

Mr Browne informed Members that there is no reliable net protocol to conclusively prove that an e-mail message has in fact been delivered to the desired recipient.

The Chair contended that there are two stages in the communication of an SMS message: it is sent to the recipient and then delivered to his/her mailbox. Once sent, it remains in the recipient's mailbox for a limited period of time only until it is actually read by the recipient. But if it has not been delivered to the recipient's mailbox the sender will actually receive a message stating such a failure to deliver. Can this not be done with e-mail?

Mr Browne replied that this cannot be done with e-mail.

Mr Masimane stated that an SMS, like an e-mail message, is delivered to an inbox and can also be ignored or deleted without having been read by the recipient. There is thus no way to prove that the recipient has read or even received the communication. The message is delivered once the cellular phone is activated, but this does not ensure that the message has been read by the recipient.

Mr Maziya contended that even after sending the message it cannot be proven conclusively that the message has been received, unless it is saved, in which case the time at which the message was received and by whom will be registered.

The Chair stated that if the recipient does not read his/her messages but they have been delivered to him/her, this would bear the same consequences as the system with registered mail where the signature serves as an acknowledgement of delivery.

Mr Masimane suggested that a message should be sent back to the original sender acknowledging the fact that the recipient has in fact received and read the message.

Ms Versfeld contended that Clause 29 should only be relied upon is a single domicilium citandi address has been designated by the recipient, which serves the address to which all documentation and mail should be sent.

Mr Alan Barrett, from Cequrux Technologies, stated that the law does not currently explain how the actual reception of a message or communication can be proven, conclusively. Furthermore, the use of the term "addressee" in Clause 24 refers to the intention of the sender, because if the communication is received by a person other than the intended recipient, that communication is not regarded as having been received.

Mr R Pieterse (ANC) suggested that there are several assumptions in the paper system that, as with registered mail, the recipient has signed in acknowledgement of both delivery and receipt. A possible solution may be found to the current online problem by providing for a paper printout stating that the recipient has in fact received the communication.

Mr Mostert stated that this gave rise to the UNCITRAL model law and the difficulty in this regard is that different technologies have resulted in different ways or practical implementations of a single protocol. Clause 24 serves to create an objective test for reasonableness, which provides that as long as a situation of control is maintained the communication is deemed to have been sent. The sender is not required to do anything more than this. There are three questions which arise for discussion: firstly, is this really that bad an option in view of technological advancements, secondly, this practice is in line with international practice and thirdly the law must create a certain fall-back, which is the reasonableness or control criterion mentioned earlier. The results provided by the research committee indicated that the UNCITRAL model is most appropriate here, but it will never be foolproof.

Ms Mack contended that there is, however, one aspect that the UNCITRAL model law does not recognise, and that is that the electronic communication must be addressed to the person the sender intends reach. This creates the problem that if the communication is sent to the wrong person, it is still presumed to have been sent, despite the fact that the intended recipient has not received it.

The Chair suggested that is has to be proven that the electronic communications was sent both to the intended address as well as to the intended recipient.

Ms Safiyya Patel, from Cheadle, Thompson and Haysom Inc., stated that Article 15 of the UNCITRAL model law provides that if the communication is designated as addressed, then it is deemed as having been sent to the intended address.

The Chair agreed that Clause 24 has to be tightened to introduce the notion of the proper address.

Mr Neil Dundas, Legal Officer: Uniforum SA, informed the Committee that there is a presumption that a data message has been received and the onus of proof lies with the recipient to prove that s/he has in fact not received the communication. The presumption is therefore in favour of the sender, to afford him/her certainty.

Mr Barrett contended that an option to designate an alternate location should be included in Clause 24(c).

The Chair replied that this would be considered.

Mr Michalson suggested that the usual place of business be included to ensure certainty in terms of physicality.

Mr Masimane referred to the point raised earlier by Ms Versfeld by contending that domicilium should be defined as an internal network as well, and not only an "information system" as contained in Clause 24(b). Another important question which arises here is how Clause 24 caters for the reception of SPAM e-mails, which are disguised as having been sent from someone you know.

Mr Gore stated that replied to the suggestion by Mr Michalson and stated that the Australian jurisprudence on this point should be evaluated, as it distinguishes between sending, dispatching and receiving of electronic communications. It also caters for more than one place of business or when none have been designated at all.

The Chair noted Mr Gore's suggestion. The reason for the outcry to ban SPAM is not clear, as it is a legitimate business activity. The following analogy best illustrates this position: if someone comes knocking at your door, you can check through the peephole whether it is someone you know and would allow to enter, or whether it is someone you would rather turn away. In addition to this, you could install other precautionary and safety measures, such as an alarm system, fences and even a watchdog, to prevent such person gaining access to your home. If you decide to allow this person in, it is your responsibility. The same can be said for SPAM. Should you see a suspicious looking electronic message or one from a sender you do not recognise, you do not have to open it. But once you do, you have done so voluntarily and you alone are to be faulted should it be an unsolicited communication. There seems to be no reason, therefore, to blame people who are not responsible, and it comes at no added cost to the recipient.

Mr Masimane informed the Chair that it does take time to download all one's messages, as the SPAM often clogs up the inbox.

Mr Browne added that SPAM amounts to nothing less than theft of one's resources, as they often provide fraudulent personal details to acquire an account at a bank, for example, use this portal to gain access to people's personal information, and use this to inundate you with unsolicited mail. This is nothing less than a theft of resources.

The Chair questioned whether the call to ban SPAM is attributable to that fact that it overloads one's computer, or because of the costs that have to be borne by the recipient.

Mr Browne replied that it is essentially a theft of resources both from the institution from which the information was acquired and also from the recipient, as it negatively affects the bandwidth and disc space.

Ms Versfeld contended that the problem with SPAM is that it has acquired an element of bad faith.

The Chair maintained that he is yet to be convinced that SPAM should be outlawed, as he himself has no problem with SPAM because he "knows how to deal with it".

Mr Gore contended that there is a distinction between direct marketing and SPAM, with the former entailing a knock at the door, yet SPAM is distributed in bad faith, and it has to be properly identified, defined and dealt with.

Mr Barrett stated that the problem lies with the ratio of the costs involved, as in all marketing costs are incurred by both parties. In the case of bulk print advertising the cost lies with the advertiser, yet with SPAM the reverse holds true, because the sender is able to distribute huge loads in bulk at low cost. The significant costs lay with the recipient, as s/he has to spend time, disc space and bandwidth to access his/her mailbox.

The Chair maintained that these arguments are not convincing, as SPAM appears to be an entirely legitimate marketing tool. At most SPAM seems to be an inconvenience, but there is no strong case to support its abolition. Furthermore, SPAM can be prevented via the measures suggested earlier. Those opposed to it should build up a case, and have one week before they have to submit it to this Committee.

Mr Michalson agreed with the Chair and stated that direct marketing is a huge business worldwide, and if SPAM is to be regarded as unsolicited mail in need of abolition then how on earth will those involved on the net get more people involved without this important tool.

Clause 25: Expression of intent or other sentiment; Clause 26: Attribution of data messages to originator and Clause 27: Acknowledgement of receipt of data message
These clauses were agreed to.

Clause 28: Acceptance of electronic filing and issuing of documents
Mr Michalson referred the Committee to the SAPO submission in which it requests to be designated as the authentication service provider.

Ms Versfeld suggested that a uniform standard be devised and applied here.

The Chair replied that Clause 5 does provide a standard as well.

Mr Mostert stated that the E-Government gateway is important here, and is aimed at standardisation and harmonisation, and submission by the JSE recommends that the signature technology should be done by the industry after or in consultation with the Sector Education and Training Authority (SETA).

The Chair suggested that the clause dealing with the E-Strategy be consulted to deal with this issue, and it should be left to the Minister to decide upon. This Committee cannot make the clause "so tight" that those who "get in cannot get out".

Mr P Pongwane, the Deputy Director General (DDG) of the Department, stated that the E-Strategy was introduced by a few government departments, but it has now become the sole responsibility of the Department of Public Service and Administration.

The Chair stated that Clause 5(3)(1)(a) is a general provision and if a formulation that is more specific is required, it could be included after the word "matters" in that clause. This has to be considered further.

Mr Levin informed the Committee that he is personally involved in the Department of Public Service and Administration process, and a handbook on interoperability standards has been published as part of the process.

Clause 29: Requirements may be specified
There were no objections to this clause.

No further questions or comments were raised, and the meeting was adjourned.