By Adeniji Kazeem

Opportunities from E-commerce
The following are some of the opportunities that can be realised from E-commerce:

-Changes in production costs. E commerce allows Firms to extend just in time processes to reduce inventories and other input costs. It may also streamline purchasing and order processing systems.

-Changes in the value added change. E-commerce makes it possible to have much greater interaction with the supply chains. Thus, the supply-chain becomes a greater value-added business network and one that is not linear. E-commerce allows buyers and sellers to cut out the margins through intermediation.

-International competitiveness. The internet can provide businesses with new market access at lower costs. Also, as a Country becomes a more open market for foreign business then costs of goods locally will tend to come down in response to the competition.

-New products and new ways of doing things. E-commerce may result in new forms of products and new ways of doing things.

Legal Infrastructure
In order for any Country to realize the great potentials from E-commerce it must create the appropriate legal infrastructure that will allow this unique form of commerce to thrive.

It has been said that the legal infrastructure needed to support e-commerce must include the following:

-           Electronic transaction legislation

-           Digital rights protection

-           Appropriate consumer protection policy

-           Provision of electronic procurements and e-payments

-           Development of open and fair competition

-           Establishment of Public Key infrastructure

-           Adequate privacy protection

-           Law enforcement in Cyberspace-Cybercrime legislation

-           Online Content regulation

-           Domain name establishment

Interestingly the recent Nigerian ICT policy thrust has mirrored the above criteria.

Chapter 12 of the Nigerian National Policy for Information Technology states that the Government through the Federal Ministry of Justice, in collaboration with NITDA, and after due deliberation with IT and sectoral experts, will frame appropriate legislation in the following areas namely:

 - Computer crimes

-  Digital signature

- tele-Medicine

- Tele- Education

- Intellectual Property/Copyright

-Consumer Protection

-Media Convergence

-Electronic Government

-Electronic Commerce

Time will not permit me to analyze all that is needed to legally galvanize E-commerce in Nigeria but I will speak on some key requirements that are needed to get us going.

Legislation
In many countries, policymakers seeking to promote E-commerce and E-government have given priority to enactment of laws intended to create a legal basis for E-commerce. Over the last five to seven years, approximately 50 countries have adopted laws or executive decrees on Electronic Commerce, and others have them under consideration.

Conducting business and offering e-government services in the global digital environment present important questions of the legal validity of electronic documents and complex issues of trust and authentication. Governments and policy experts have grappled with ways to provide certainty and trust to businesses and citizens engaging in transactions online.

The most important step in creating the legal structure is enactment of enabling Laws. Enactment of laws to back E-commerce need not be a herculean exercise. This is because in more advanced jurisdictions there have been such laws enacted fairly easily. The challenge is fashioning the right kind of law for our environment. The United Nations through UNCITRAL has been in the forefront of creating model laws to assist E-commerce. As far back as 1996 the UNCITRAL model law on e-commerce was adopted with the goal of encouraging the use of modern means of communications and storage of information, such as electronic data interchange (EDI), electronic mail and telecopy with or without the use of such support as the Internet. This law has served as a template for E-commerce legislation in several countries.

Equally important has been the model law on Electronic Signatures adopted in 2001 which is intended to bring additional legal certainty regarding the use of electronic signatures. This law establishes the presumption that where they meet certain criteria of technical reliability, electronic signatures shall be treated as equivalent to hand written signatures. This law anticipates complicated systems of “public key infrastructures” and “certificate authorities” that are expected to manage the technology for creating cryptographically-based digital signatures. Some involve government licensing. Some provide that only signatures made with government-approved technology will be recognized as binding.

The most recent U.N initiative is the United Nations Convention on the Use of Electronic Communications in International Contracts adopted by the General Assembly on 23 November 2005. The Convention aims to enhance legal certainty and commercial predictability where electronic communications are used in relation to international contracts. It addresses the determination of a party's location in an electronic environment; the time and place of dispatch and receipt of electronic communications; the use of automated message systems for contract formation; and the criteria to be used for establishing functional equivalence between electronic communications and paper documents -- including "original" paper documents as well as between electronic authentication methods and hand-written signatures.

Nigeria’s record on legislating in tandem with the advances in the international community has not been good.  I have seen no clear evidence of major legislative activity on the trinity of laws that I have I just mentioned. If we are to move forward, an active effort must be made to champion and enact these laws immediately.

As important as legislation is for the creation of an enabling environment for E-commerce, there are other criteria which any Country seeking to provide a proper legal environment must address. In fact it has been argued that the best E-commerce laws will not make E-commerce flourish if other legal reforms have not been instituted.  For example the E-commerce and Development Report 2001 of UNCTAD notes that restrictive regulations such as Exchange controls, protection of telecommunication monopolies, restrictive trade practices, limits on encryption and prohibitions on Internet telephony are more of concern to enterprises in less developed countries than whether or not E-commerce laws are in place. Let me proceed to analyze a few of the other key criteria:

Telecommunications
First and foremost among these is telecommunications reform. To conduct e-commerce requires access to the Internet, which, for most users in most contexts, requires access to telecommunications. It has been shown that the policies of “liberalization” (i.e., the introduction of competition, the privatization of state-owned telecommunications operators and the establishment of independent regulators capable of effectively managing spectrum and enforcing competition) will best foster investment, innovation and infrastructure development, leading to increased access at lower prices, and thus contributing to the growth of ICT.

Nevertheless it is important to stress that liberalization does not mean non-regulation. Telecom liberalization requires the establishment of an independent regulator that can enforce competition. Furthermore, liberalization is important but not sufficient to foster widespread diffusion of IT systems and the development of e-commerce. Studies on national systems of innovation and diffusion have shown that innovation and diffusion need more than a free market system; governments and other institutions play a significant role.

Happily this is one area I can say that Nigeria has made strides. The activities of the NCC and the revolution of the Nigerian Telecom industry are quite plain for everybody to see. The NCC’s universal access drive and other initiatives are commendable and must be encouraged.

Business Start –Up
In order to aid E-commerce a bold step must be taken at further eliminating legal barriers for the start-up of business. The last time any serious law was enacted on foreign investment was 1995 when the Nigerian Investment promotion Act and the Foreign Exchange  (Monitoring &Miscellaneous Provisions) Act were enacted. Equally worrisome is the implementation of the Companies and Allied Matters Act by the Corporate Affairs Commission. It is very disturbing that up till now the CAC has been unable to devise a workable method to transact online business with the Commission. This inability does not encourage E-commerce in that a lot of third party verification is impossible online. Give example of due diligence exercise where I was able to verify online the status of a company registered in Atlanta.

I must add that the streamlining of regulatory burdens is especially important to e-commerce, where speed, innovation and flexibility are often key determinants of market success.

In other words I will still rate Nigeria’s E-Government indices as low and more must be done to promote G2C (Government to Consumer) transactions.

Banking Laws
There is no gainsaying that people who do not have access to credit cards or non cash money will have no means of engaging in e-commerce.

It is true that a considerable amount of progress has been made in developing non-cash forms of money i.e. ATM cards. However a lot more has to be done for transactions to freely occur on the Internet.

Smart Cards which are digital purses can be used as a credit card, debit card, as means to execute account transfers or as something more secure than the magnetic strip card. In Australia for example in order to promote the use of smart card technology, the industry has developed a smart Card Code of Conduct. This Code provides minimum standards, which among other things: provides for a system of dispute resolution; requires the card holders be issued with clearly expressed terms and conditions of use ; mandates that this information could be distinguished from marketing promotions and be provided prior to use by the consumer; provide information about fees, access, notice procedures and cardholder’s rights; and provide protection to the cardholder in the case of fraudulent or negligent conduct of card subscriber employees or agents. This type of Industry code needs to be developed into substantive law in Nigeria for E-commerce to thrive.

The closest I have seen in form of regulation regarding online transactions and smart card technology is the CBN Guidelines on Electronic Banking in Nigeria 2003

The CBN Technical Committee on E-Banking report which gave rise to these guidelines has very succinctly analyzed the various legal and regulatory issues which need to be addressed in the emerging electronic banking/E-commerce scenario. The report had this to say:

Privacy
That under Section 37 of the 1999 Constitution, privacy is constitutionally guaranteed. It however recommended, that in the penal provision of the proposed e-banking legislation, stiff penalties should be imposed on hackers and unauthorized intruders into the system to act as deterrent to others.

The banking regulatory authorities should be able to immediately make regulations or formulate code of conduct for the providers of electronic banking services, so as to ensure the privacy of customers and encourage the patronage of electronic banking.

Evidence Act
That section 93 of the Evidence Act should be amended to admit computer generated documents as primary evidence as recommended by the Law Reform Commission in their proposed “Evidence Act 1998", which is yet to be considered and enacted by the National Assembly.

Contract Laws
That electronic banking legislation must take cognizance of issues relating to encryption and digital signature to ensure that the legality and admissibility of such documents in the law court are not taken for granted. It further notes that the evidence Act must be amended to allow for the admissibility of electronically executed document as primary evidence. It suggests E-banking documents must guarantee the following:

Authentication, Integrity, Non-repudiation and Confidentiality. Encryption takes care of confidentiality while digital signature ensures authentication, Integrity and non-repudiation.

Criminal Liability
The report observes that paper-based transactions involving cheques, persons may be forged but in electronic banking there are no papers or written signatures that can fit into the definition of documents or writing under sections 463 or 464, of the criminal code especially as computer information does not exist in writing, and the customer’s PIN is not a written document.

It concludes that a person who engages in an unauthorized transaction in electronic banking may not be successfully tried and convicted for forgery especially as the provisions of the criminal code were not designed to deal with electronic banking. .It therefore suggests that the proposed legislation should identify offences that are peculiar to electronic banking and provide for punishment accordingly and regulatory authorities should be empowered by the legislation to enforce relevant provisions of the Act and issue appropriate guidelines on e- banking.

Consumer Protection
The report observes that a common feature of e-banking environment in Nigeria is the absence of statutory or regulatory provisions to protect the consumer of the products/services. That the bank’s customer is made to sign or execute standard forms of contract or agreements prepared by the bank, or non-bank financial institutions with its attendant risks to consumers. These may include risk of financial loss, malfunction of cards/terminals or merchant acceptance and unauthorized disclosure of information without customers consent.

In my opinion this CBN is on the right path with this regulation but it needs additional legal backing.

Legal Enforcement & Cybercrime
We are all ware of Cybercrimes. Online obtaining by false pretences (419), Phishing, identity theft and other nefarious activities by what are popularly called the Yahoo boys.

As has been noted above any Country that seeks to promote E-commerce without a corresponding Law that punishes e-commerce transgressions is bound to fail.

In the same vein since E-commerce presupposes entering into contracts which can sometimes be across jurisdictions an efficient means of enforcing failure of those contracts must be put in place.

In respect of Cybercrimes legislation should address this area and of course the subsequent enforcement of such laws. In some Countries police forces now have Cybercrime Units with state of Art technology backed by enabling law. In Nigeria I am aware that the EFCC have made some attempts to enforce such crimes and have been working actively with the private sector to combat these crimes. However the Cybercimes Act is yet to be passed into law to give further teeth to the efforts of the law enforcement Agencies.

As regards civil enforcement through law Courts; Legislation and judicial education is the fastest way to address the problem.

The judiciary must be independent and free from corruption and must function without delay. Even a traditional handwritten signature on a paper contract is unreliable if the contract can be breached knowing that an effort to enforce it will be delayed in court for years. The Lagos State Government has trailblazed in this area b y its establishment of Commercial Courts and its fast track system. However this is not enough an online E-commerce Court is the best way to go to achieve the trust and speed required for transactions of this nature.

Conclusion
Nigeria must realize that commerce will increasingly take place in an electronic world as opposed to a physical one. The most obvious development is the growth of business on the Internet where according to an IBM advert, every month 53,000 new servers connect to the Internet. That’s 1.2 servers per minute going on-line.

As the world of commerce changes the law as we traditionally know it is struggling to keep up. It is therefore in the interest of Nigerian business that the government moves quickly to establish the legal infrastructure which will achieve the appropriate balance between promotion of e-commerce and sufficient regulation to satisfy concerns about consumer protection, privacy and Security.

I believe what the Nigerian Government must do  as was done in Australia and other Countries is to set up an Electronic Commerce Expert Group (ECEG) to report on the need for legislation to support the regulation of e-commerce transactions.

There is no way I can fully exhaust this topic within the given time but I hope I have given an insight into what is required to create an enabling legal environment for e-commerce in Nigeria.

• ·       Adeniji Kazeem esq (nkazeem@adenijikazeem.com)., Managing Partner, Adeniji Kazeem & Co Barristers & Solicitors (www.adenijikazeem.com), made this presentation at the "Internet for Job" initiative organised by the Nigeria Internet Group on Thursday, 22nd May 2008 at Golden Gate Restaurant, Ikoyi, Lagos.