http://biz.yahoo.com/rf/000717/9692491.html

Monday July 17, 2:56 pm Eastern Time

Internet may need new cyber-borders-U.S. legal body

By Richard Meares

LONDON, July 17 (Reuters) - The Internet makes such light work of geographical frontiers that new cyber-borders may be needed instead, top U.S. lawyers said on Monday as they presented a two-year report into preventing global online chaos.

Enthusiasts may love the Internet's scant regard for authority and borders but it presents a major headache for business, government and also consumers.

If a French customer buys a rug from Turkey via a website hosted in the United States and with a Swiss credit card, for example, there are risks all round -- the rug might be a dud, the payment might be faulty and taxes might not be paid -- but where should such matters be settled?

``It's as if we've landed on Mars and we're constructing a commercial and business setting,'' said Thomas Vartanian, who chaired the American Bar Association's Committee on the Law of Cyberspace, which compiled the document.

The 184-page report, presented at the Association's annual convention being held in London this year, urged the creation of a global standards commission to help set the rules. It also said the simplest answers were not the best.

Many courts currently rule that jurisdiction in any Internet dispute belongs to the country of destination, where the buyer or Websurfer lives -- but this means a business or website can be liable to the laws of every country on earth, an impossible burden.

Others say jurisdiction should go to the country of origin, where the business or Internet site is based -- but that leaves consumers with the task of finding out if they are protected by the laws of a far-off land, and might tempt businesses to jump offshore to unregulated island havens.

A third way could be for buyer and seller to agree between them which country's laws apply to their deal -- but governments may not be happy with this, especially if highly regulated areas such as drugs or medical treatment are concerned.

FLEXIBLE FRONTIERS

Lawyers from the world's largest professional body mooted new ``cyber-borders'' as a step towards a solution of a complex and evolving issue.

``Borders are being erased by cyberspace -- but you never really erase a border, you replace it,'' Vartanian said in an interview.

Determining whose cyber-territory a deal falls in could be settled using highly complex criteria -- such as whether a website was deliberately targeting the residents of a certain country, or they just happened to stumble across it.

It is not just e-commerce that is involved, but also the content on a website, which in some countries may be illegal.

In one case of international disagreement, a French judge has ordered that U.S. portal Yahoo Inc (NasdaqNM:YHOO - news) must block French access to any parts of its U.S. website on which third parties auction off Nazi memorabilia.

Yahoo general counsel John Place told the conference the company argued this site was not intended for France, which has its own local www.yahoo.fr site, and that blocking it would be practically impossible.

If the idea of cyber-borders takes off, drawing them up looks set to be every bit as contentious as the real border disputes of the 19th and 20th centuries.

Vartanian said one solution could be to let technology help solve the problems it has created, by employing intelligent electronic agents, or ``cyberbots'' that would negotiate issues of jurisdiction for each particular transaction, based on the complex rules set down by a global standards commission.

He said the first rule was that the buyer and seller should have to prove to each other where they are. Currently, they don't have to, especially if, as with music downloads or pornography, no goods have to be physically delivered.

The report -- a recommendation by the cyber-committee rather than official policy of the Bar Association -- said taxation should closely follow jurisdiction.

``This of course is the most controversial section, as the Internet has the possibility of reallocating tax revenues,'' Vartanian said.

-- (Reuters@news.story), July 18, 2000