DUE DILIGENCE PROCESS FOR E-COMMERCE TRANSACTIONSTO: Australian Treasury Expert Group on E-commerce "Building Consumer Sovereignty in Electronic Commerce: Review Australian Best Practice Model for Business" FROM: Colin HARDING DATE: 19 Dec 2003 Chair - E-Governance Committee HASLISA INTERNATIONAL NETWORK This is a submission for a Due Diligence process for National and International E-commerce Transactions. This is a submission from a network of Small and Medium-Size Businesses that have been the Stakeholders in the development of the RUBAC [Relational Universal Business Automation Code] Electronic Information Management Methodology, which was researched in Australia from 1985-1988 As Stakeholders we have been more than a little mystified as to why the RUBAC EII Methodology has received little Journalistic or State or Federal Government support particularly after: 1 15 letters of endorsement were received from EDI Proponents in 1988 including UK Customs, Maritime Cargo Processing, Lloyds of London Press and International Network Services. These letters supported a technical evaluation by Gordon MARKWART of ATUG - Australian Telecommuniucations User Group 15 Dec 1987. 2 winning the "IT for SME" Category of the prestigious Global Bangemann Challenge in Jun 1999 3 development of an XML & E-commerce template for Government tenders in 2000 and submitting it to ebXML Australia in 2001 There are also concerns that a leading Australian Intellectual Property [IP] lawyer who was consulted in 1986/1987 over IP Issues for the RUBAC methodology may be using his influence to affect support for this methodology. In 1986/1967 Australian IP law could not provide the protection required and IP Lawyers in London provided the copyright in 1987. We understand that this IP protection was addressed in the Australian Trade Marks Act 1995. However this lawyer is now recognised as one of the leading E-commerce lawyers in the world and has been invited to represent Australia on the World Intellectual Property Organsiation [WIPO] The Submission is: A Management Summary B Understanding Brief for the Expert Group on Electronic Commerce C Background to the Expert Group on Electronic Commerce D Due Diligence process for E-commerce Transaction A MANAGEMENT SUMMARY 1 The Brief should be reviewed to include International Trading. It is not in the interest of the consumers to limit the protection to Australia 2 It is difficult to comprehend why there is such a predominance of Legal people involved E-commerce while the issues are technical issues to ensure that E-commerce applications are functional 3 There needs to be consumer protection in place with a clearly defined E-commerce process support by the appropriate resolution framework 4 There are several world-wide networks that could provide an International electronic resolution process for E-commerce disputes as the current legal processes are unable to cope with the issues involved 5 It will be faster and less expensive if these disputes are reviewed and settled by panels of inquisitorial E-commerce experts rather than the adversarial legal process through the Courts B BRIEF FOR THE EXPERT GROUP ON ELECTRONIC COMMERCE Prior to submitting this document we reviewed the brief and the background to the brief "The Government's objective is to build a world-class consumer protection environment for electronic commerce in Australia. To promote this objective, in 2003 the Parliamentary Secretary to the Treasurer, Senator the Hon Ian Campbell reactivated the Expert Group on Electronic Commerce to advise him on all aspects of consumer protection in e-commerce." http://www.ecommerce.treasury.gov.au/html/expert.htm The Brief seems surprisingly limited and restrictive for a Country that: 1 Was at the forefront of financial de-regulation in 1983 - Keating elected World's Best Treasurer by International Bankers in 1984 2 that has promoted International Trade since 1984 through Austrade 3 reduced it own Trade Barriers much to the financial detriment of its own SMEs In addition given that 8 of the 11 members of the Expert Group represent International Organisations perhaps the brief to the Expert Group on Electronic Commerce should be reviewed. C THE EXPERT GROUP ON ELECTRONIC COMMERCE The Minister for the Treasury - The Hon Peter COSTELLO BA, LLB (Hons) (Monash). Barrister. Tutor in Law, Economics and Politics faculties, Monash University On the Web Page it states that Senator the Hon Ian CAMPBELL is the Parliamentary Secretary to the Treasurer of the Commonwealth of Australia. Senator the Hon Ian CAMPBELL Commercial and industrial property consultant. Company director. The Expert Group on E-commerce did not operate during Senator CAMPBELL tenure as Parliamentary Secretary to the Treasurer from 11.11.96 to 21.10.98 and from 26.11.01 to 7.10.03. However the link is to the Hon Ross Cameron, MP, Parliamentary Secretary to the Treasurer of the Commonwealth of Australia http://parlsec.treasurer.gov.au/rac/default.asp BEc, LLB (Syd). THE MINISTERS EXPERT GROUP ON E-COMMERCE - 11 - 4 lawyers Clare BARRETT-LENNARD General Counsel and Company Secretary of the ERG Group Keith BESGROVE Chief General Manager of the Regulation and Analysis Group in the National Office of the Information Economy (NOIE). Patrick FAIR In 1997 he was President of the Law Society of New South Wales. He was responsible for that association's online services strategy including the creation of www.lawsocnsw.asn.au. Subsequently he has been appointed by the Law Council of Australia to serve on the Australian Institute of Judicial Administration's Technology 2000 Committee and the Electronic Filing Committee of the Federal Court of Australia. Outside the legal community, Patrick is a member of the Federal Government's Electronic Commerce Expert Group and the NSW State Government's Information Industry Advisory Board. Patrick was a instrumental in the formation of the Internet Industry Association in Australia and has been Chairman of the IIA since 1998. In 1999 he appeared before the Australian Senate Legal and Constitutional Affairs Committee to represent the Australian Internet Industry in relation to the proposed regulation of content on the Internet. He joined Baker & McKenzie on 1 January 2000 after 10 years as a partner in another major Australasian law firm. Paul GEASON Telstra's data solutions and sales managing director Geoffrey JAMES LEWIS Managing Director and Chief Executive Officer Daniel MAURICE Program Director at Colonial First State Daniel PETRE Daniel Petre had joined PBL (Publishing & Broadcasting Limited)) in March of 1997 reporting to James Packer and was appointed to the Board of PBL in May of 1998 Martin REES Partner in charge - KPMG Consulting in Tasmania Mark SNEDDON Partner in Clayton Utz's Melbourne office, specialising in Electronic Commerce and privacy. Louise SYLVAN Vice-President of Consumers International and the Chief Executive of the Australian Consumers' Association David WARNER Managing Director of Flight Centre Technology Pty. Ltd. D ELECTRONIC COMMERCE DUE DILIGENCE PROCESS Members of the Halisa International Network developed this Due Diligence process for Electronic Commerce transactions during 1991-1993 discussions with the British Standards Institute, London Transport International, the Institution of Electrical Engineers and the European Areospace Association The process was implement with a joint venture for Electronic Committee Management [ECM] with the Australian Information Technology Society [AITS] in 1993 However the real difficulties arose after the joint venture was terminated and the Courts appeared to be unable to provide rulings on business processes. This joint venture was terminated by AITS when one of the Directors of AITS was requested to provide a response to an allegation of mis-appropriation by that Director when he was Chairman of another Computer Society. The response to that request gave cause for concern about what was going on in the Computer Societies within Australia In 1994 a Statement of Claim was issued by Halisa International against two of the Directors of AITS for 1 Breach of Contracts 2 Management Negligence 3 Theft of Intellectual Property The minutes and the accounts were subpoenaed. The Minutes were quickly provided. These minutes confirmed that the two Directors had acted "Ultra Vires" and that the members of the Management Committee of the Australian Information Technology Society Pty Ltd had not been informed by the two directors of the agreements signed by AITS hence AITS should not be a defendant. There were 16 subpoena Court hearings over 30 months from Feb 1995 - Aug 1997 for the accounts. These accounts were never provided. AITS Pty Ltd was de-registered on 07 Oct 1997 by the Australian Securities Commission for failing to lodge Accounts. On 04 Nov 1997 the District Court decided that AITS should have been the defendant not the Directors. The Judgment did not include any mention of Management Negligence or Theft of Intellectual Property We are still trying to work out how a company can be liable for the theft of Intellectual Property particularly as both Directors have developed applications that appear to use the Intellectual Property. Since the Judgment in Nov 1997 those Directors of AITS have conducted a malicious and vindictive campaign against Australian Small, Medium and Large Business prepared to work together to develop E-commerce applications for ITOL and other Government funding initiatives. There has been little protection by the Courts when those SMEs endeavoured to obtain injunctions or lodge complaints over breaches of the Trades Practices Act with the Australian Consumers & Competition Commission [ACCC] More interesting to note is that: 1 the two Directors, having left one Computer Society in 1991 due to an allegation of misappropriation and set up a rival Association subsequently de-registered in 1997 for failing to provide accounts, are now working very closely with most of the senior members of that Society's Management Committee as part of the 10th annual award contest to Australian IT Journalists 2 The new company,although it is "Australian only Industry Award Specialist", works with a number of Program Partners who "can provide a range of vital support services such as legal services and intellectual property protection, venture and equity capital raising, media and pubic relations, export and overseas venture partner facilitation and more." 3 There appears to be, from a consumer and IT users point of view, a long and unhealthy relationship between the Australian IT Press and key members of the prominent Computer Society in Australia, which may influence how issues are reported in the Australian press. NEXT STEPS As Small & Medium size Enterprises, we are concerned about the legal implications with E-commerce and avoiding long debilitating legal confrontations hence the develop of the E-commerce Due Diligence process which records and indexes each stage in the e-Business cycle. In this era of Business Process re-engineering for Internet E-commerce the current adversarial legal process with decisions based on precedent provides a very inhospitable background to "Build Consumer Confidence in E-commerce". The Consumer and Small Business will be very reluctant to become involved with E-commerce because of the potential risk of fraud and expensive protracted legal argument. In the light of our own experience in an E-commerce dispute perhaps the Australian Government Treasury should call for volunteers to participate on E-commerce Legal Resolution Juries. The issue of payment for serving on these Juries could be by Electronic credits.