The growth of e-commerce, or business transacted over the Internet, has prompted a series of initiatives designed to ensure that commercial arrangements made online are legally valid and therefore enforceable in the Courts.

New initiatives are necessary because the laws of contract and evidence evolved long before the use of the Internet as a commercial tool. For that reason, electronic transactions often fall outside established legal principles.

Further complicating matters, physical locations and borders are irrelevant in cyberspace. That creates the issue of which country's laws apply to a transaction. For example, if a consumer in the United States purchases a product online from a company in Europe, where does that transaction occur? Which country's laws govern the transaction?

To date, there is no universally accepted and consistent body of law that applies to such situations. The United Nations, through its commercial organisation, UNCITRAL, has formulated a model code for local governments to adopt into law. Other groups such as the World Intellectual Property Organisation have also circulated model codes for their particular areas of law. Neither code has been universally embraced, however.

That has created opportunities for offshore jurisdictions such as Bermuda to create a local variant to facilitate the market demand for commercially enforceable electronic transactions, and thereby boost its economy.

Bermuda enacted the Electronic Transactions Act 1999, which came into force in the summer of 1999. The Act establishes the legal principles for the conduct of e-commerce and the processing of electronic transactions. While the Act sets out a comprehensive framework for electronic transactions, it expressly provides that any of its provisions governing legal requirements or communication of electronic records may be varied by agreement of the parties involved.

The Act addresses the critical issue of whether an electronic record of an agreement between parties - in contrast to a traditional written contract - is admissible as evidence in court proceedings. The legislation provides that electronically generated information will not be denied legal effect, validity, admissibility or enforceability merely because of its form. Further, where an electronic record of a transaction is the best evidence available, it will not be denied admissibility on the ground that it is not in original (paper) form. Of course, the validity of the contract, and its admissibility before a court, may still be challenged on any other relevant grounds.

The Act also addresses the evidentiary weight to be given to electronic records. Relevant factors to be considered include the reliability of the manner in which the electronic record was generated, stored or communicated, the reliability of the manner in which the integrity of the information was maintained and the manner in which the sources of the information were identified.

The location of Bermuda together with its infrastructure, commercially facilitative government and telecommunications network place us in a strong position to take advantage of e-commerce based trade.

The Act continues to provide benefits to business owners and individuals seeking the convenience of Internet-based commerce, while being careful to ensure that their transactions are legally enforceable.

Attorney Marco Montarsolo is a member of the Corporate and Commercial Practice Group at Appleby Spurling Hunter. Copies of Mr. Montarsolo's columns can be obtained on the Appleby Spurling Hunter web site at www.applebyglobal.com.

This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.