Legal Issues in Electronic Banking

by Horn, Norbert

ISBN13: 9789041198914

ISBN10: 9041198911

Format: Hardcover

Pub. Date: 2001-01-01

Publisher(s): Kluwer Law Intl

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Summary

Although electronic banking is rapidly overtaking direct bank-to-customer and bank-to-bank contact and seems to be moving forward without serious problems the law governing this telecommunication-based business is not always clearly defined in relation to certain issues that arise with ever-greater frequency, especially in cross-border transactions. This is the first book to investigate and present the applicable legal consensus for each of these important issues, based on existing legislation and relevant judicial decisions. The legal issues in question arise from such events, activities, and actualities as the following, all of which are treated in this book: determination of local jurisdiction applicability of contractual obligations; probative value of digital documents electronic evidence electronic money protection of privacy day-trading facilities web marketing of lending services electronic bills of lading Internet stock offerings electronic determination of title outsourcing of electronic banking functions Eighteen outstanding authors, bankers, lawyers, and academics contribute their expertise to elucidate the issues and their implications. They draw their legal analyses from international norms such as the UNCITRAL Model Law, relevant EC directives and draft directives, The United States Uniform Electronic Transaction Act (UETA) and E-Sign Act and other national laws, As well as from numerous court decisions in Europe And The United States. The essays are based on papers originally presented at a conference sponsored by the Law Centre for European and International Cooperation (R.I.Z.) and held at Cologne in April 2001. Legal Issues in Electronic Banking will be of great value to anyone involved in banking or financial services. it could be said that what it sets forth is nothing less than the future mode of financial transactions.

Foreword

Contents

vii

List of Abbreviations

xix

I. Introduction: Economic and Legal Aspects of Electronic Banking

Banking in the Electronic Age. Legal Issues

(26)

Norbert Horn

The Evolution of Electronic Banking

(3)

Where the Winds of Change Blow

(2)

A Challenge for Banking Law

(1)

E-banking Transactions and the B2C-Relationship

(13)

General E-commerce Legal Requirements

(1)

Applicable Law

(2)

Forum

(1)

Formation of Contracts and EU Consumer Protection

(1)

Right of Revocation or Withdrawal under EC Consumer Law?

(1)

Electronic Signature

(2)

Impact on E-banking Transactions

(1)

Legal Issues in Specific B2C E-banking Transactions

(1)

Online Banking: Admission, Transaction Safety, and Liability

(2)

Investment Advice and Execution-only Business

(1)

Consumer Credits and Secured Loans

(1)

Day trading

(1)

Electronic Cash

(1)

E-banking and the New Organisation of Banking Enterprises: The Virtual Bank

(3)

Changes in Banking Supervisory Laws

(1)

Extraterritorial Effects of Banking Supervisory Laws with Respect to E-banking?

(1)

Outsourcing of Banking Functions

(2)

E-banking and the Markets for Capital and Financial Services

(4)

Improvements and Restraints of Competition

(1)

Initial Public Offerings in the Internet

(1)

Stock Exchanges and Alternative Trading Systems

(1)

Electronic Transactions of Stock Exchanges

(1)

Alternative Tradings Systems

(1)

Concluding Remarks

(3)

Banking in the Electronic Age. A Banker's View

(10)

Rolf E. Breuer

Introduction

(1)

The Importance of the Internet

(2)

Challenges for Banks

(2)

Globalisation

(1)

Disintermediation

(1)

Deconstruction

(1)

Strategic Responses of Banks

(3)

The Future of Banking

(1)

Conclusion

(1)

The Localisation of Electronic Banking Transactions. The German Perspective

(16)

Georg Borges

Introduction: Territorial Links of Internet Banking Transactions

(1)

The Country in Which an Offer is Made, § 1 Prospectus Act

(9)

Internet-IPO's and the Prospectus Act

(1)

The Announcement of the Bundesamt

(4)

The `Disclaimer-Concept'

(1)

Advantages and Potential Danger of Misuse of a Disclaimer

(1)

Appropriate Means Preventing Subscriptions From Within Germany

(1)

The Concept of Content-Direction

(1)

Conclusion

(1)

The State in Which a Service is Provided, § 31 (3) WpHG

(4)

German Rules of Conduct and International Financial Transactions, §§ 31, 32 WpHG

(1)

The Country in Which Services are Provided

(1)

General Rule

(2)

Electronic Banking

(1)

Conclusion

(1)

Localising a Website by its Content

(2)

The Localisation of Electronic Banking Transactions. EU, WTO and Tax Considerations

(18)

Marc Dassesse

Where is a Financial Service Located? Regulatory Implications

(12)

Introduction

(1)

The Localisation Rules Applicable to Financial Services at an EU Level

(1)

Scope of the EU Rules: Applicable Only to EC Incorporated Financial Services Providers

(2)

A Growing Divide in Terms of Prudential Localisation Rules Between Banking and Investment Services and Insurance Services

(5)

The Localisation Rules Applicable to Financial Services in a WTO Context

(1)

Difficult Cohabitation Within the European Union of EU Localisation Rules and of GATS Commitments

(1)

Scenario Number 1

(2)

Scenario Number 2

(1)

Tax implications of the localisation of financial services

(6)

Applicable Law and Jurisdiction in Electronic Banking Transactions

(18)

Herbert Kronke

Factual Backdrop

(1)

Problem Areas

(13)

Bank-Customer Relationship

(1)

The Lexicon: Online Banking -- Home Banking

(1)

Law Governing the Contract

(1)

Pre-Existing Contract

(1)

Formation of a Contract

(1)

EU-Directive on E-Commerce

(1)

Consumer Protection

(2)

Scope of the Applicable Law

(1)

(Other) Mandatory Rules

(1)

Non-Contractual Issues

(1)

Jurisdiction

(1)

Relationship Bank -- Third Parties

(1)

Electronic Payment

(2)

Inter-Bank Relationship

(1)

Securities Transactions

(1)

Banks as Brokers: The Law Governing the Contract

(1)

Banks as Securities Depositories, Custodians etc.: The Law Governing the Proprietary Aspects

(1)

Other Issues

(1)

Conclusions

(4)

II. General Legal Problems with Internet Transactions by Banks

Transaction Safety in Electronic Banking. Legal Aspects

(30)

Thomas Hoeren

Conclusion of Contracts on the Internet

(2)

Avoidance, Authorization and Receipt of Electronic Declarations of Intent

(2)

Legal Situation According to the BGB

(2)

The Directive on Electronic Commerce

(1)

Written Form and Digital Signature

(4)

Pre-History of the Form-Reforms

(1)

Directive on E-Commerce, Electronic Signature Directive and Written Form

(2)

Probative Value of Digital Documents

(6)

Free Evaluation of the Evidence

(1)

Evidential Stipulation

100

(1)

Amendment of Laws

100

(1)

Directive on Electronic Signatures

101

(2)

Digital Signature: Technical Conversion

103

(1)

The Symmetric Encryption

103

(1)

The Asymmetric Encryption

104

(1)

The Law of the General Conditions of Trade

105

(2)

Means of Payment Within the Electronic Business

107

(3)

Consumer Protection on the Internet

110

(11)

Questions of Legal Interference

111

(2)

Verbraucherkreditgesetz (Consumer Credit Act)

113

(3)

Das Fernabsatzgesetz (Distance Selling Act)

116

(2)

Directive on Financial Services

118

(1)

Scope of Application and Information Model

118

(1)

The `Durable Medium'

119

(1)

Right of Revocation

119

(2)

Rules of Evidence and Electronic Transactions

121

(42)

Clifford Larsen

Introduction

121

(1)

Traditional Evidentiary Rules and Electronic Evidence

122

(13)

The Hearsay Rule

123

(5)

The Authentication Requirement

128

(3)

The Best Evidence Rule

131

(2)

The Statute of Frauds

133

(2)

Recent American Legislation and its Effect on These Evidentiary Rules

135

(16)

Introduction

135

(1)

Federal Legislation (E-SIGN)

136

(1)

Basic Rule of Equality Between E-Signatures and Documents Versus Paper-and-Ink Signatures and Documents

136

(1)

Effect of E-SIGN on Rules of Evidence Analysis

137

(2)

Scope of E-SIGN

139

(3)

State Legislation

142

(1)

UETA: General Substantive Principles

142

(4)

Scope of UETA

146

(1)

State Digital Signature Laws

147

(1)

`Hybrid' State Laws

148

(1)

Relationship of State Law to E-SIGN

149

(2)

European Union Initiatives

151

(3)

Contractual Approaches to Electronic Commerce and Rules of Evidence

154

(2)

Further Development of Electronic Evidence Law

156

(7)

Legal Aspects of the Bank-Customer Relationship in Electronic Banking

163

(26)

Wolfgang Wiegand

Preliminary Remarks on Topic and Title

163

(1)

Legal Aspects of the Bank-Customer Relationship

164

(4)

Structure and Variety of Bank Services

164

(1)

The Corresponding Variety of Customers

164

(1)

The Legal Framework

165

(1)

The Simple Pattern `One Transaction -- One Contract'?

165

(1)

The Construct of the `General Banking Contract'

166

(1)

The Regulatory Environment

167

(1)

Legal Aspects of Electronic Banking

168

(6)

E-Banking as a Part of E-Commerce

168

(5)

Specific Problems of E-Banking

173

(1)

Accumulation and Interaction of Duties in the Electronic Bank-Customer Relationship

174

(12)

The Pre-Contractual Phase

174

(1)

Accumulation of Duties of Disclosure and Information

174

(1)

Duty to Give Advice or Warnings?

175

(2)

Customer's Obligations

177

(1)

Conclusion of Contract

177

(3)

Opening of a New Account

180

(1)

General Contract Conditions

180

(1)

Performance Phase

181

(1)

Traditional and New Duties of the Bank

181

(1)

The Allocation of Risk and the General and Special Contract Conditions

182

(3)

A Distant View

185

(1)

Summary and Perspective

186

(3)

III. Individual Banking Transactions on the Internet

Electronic Payment Systems. Legal Aspects

189

(22)

Robert C. Effros

Introduction

190

(1)

Is Electronic Money Legal Tender?

191

(1)

Is There an Analogous Instrument to Which Electronic Money May be Likened?

192

(3)

Does Electronic Money Give Rise to Deposits?

195

(5)

What are the Salient Points of the New EU Directives Regulating the Business of Electronic Money Institutions?

200

(3)

What Legal Issues are Presented by the Creation of Electronic Money?

203

(1)

What Legal Issues are Presented by the Transfer of Electronic Money?

204

(1)

What Legal Issues are Presented by the Discharge and Settlement of Electronic Money?

205

(2)

What Legal Issues are Posed by Concerns for the Protection of Privacy?

207

(1)

Some Additional Considerations

208

(3)

Legal Issues in Day-Trading

211

(20)

Gunnar Schuster

Introduction

211

(1)

Definition of Day-Trading

212

(1)

Risks of Day-Trading

213

(3)

Legal Aspects of Day-Trading in Germany

216

(12)

Licensing of Day-Trading Facilities

216

(3)

Particular Obligations of Firms Offering Day-Trading Facilities

219

(3)

The Enforceability of Day-Trading Contracts

222

(1)

The Hamburg Day-Trading Case

222

(1)

Legal Analysis Under Current Civil Law

223

(2)

Day-Trading After the Repeal of the Contract for Differences Defence

225

(3)

Conclusions

228

(3)

Legal Aspects in Direct Banks Securities Business. A German Law Perspective

231

(22)

Peter Balzer

Introduction

231

(1)

Direct Bank's Duties to Inform and Give Advice

232

(7)

Distinction Between Duty to Inform and Duty to Give Advice

232

(1)

Content and Reduction of the Direct Bank's Duties to Inform Pursuant to § 31 (2) 1 No. 2 WpHG

233

(2)

Direct Bank's Contractual Duties to Give Advice

235

(1)

Contract to Give Advice

235

(1)

Duty to Give Advice in Case of Sending Information Material to the Customer

236

(1)

Conclusion of a Contract to Give Advice in Case of an Advisory Talk

237

(1)

Legal Control of the Exclusion to Give Advice Pursuant to AGBG

237

(2)

Duties of Direct Banks in Executing Securities Orders

239

(3)

Legal Aspects of the Bank -- Customer Relationship in Securities Transactions

239

(1)

Duty to Protect the Customer's Interests in Executing Securities Orders

240

(2)

Duty to Keep Records

242

(1)

Liability of Direct Banks in Case of Non-Availability

242

(8)

Organisational Duties of Direct Banks Pursuant to § 33 (1) No. 1 WpHG

243

(1)

Aspects of Direct Bank's Liability in Case of Non-Availability

244

(1)

Liability in Case of Violation of the Organisational Requirements Pursuant to § 33 (1) No. 1 WpHG

244

(1)

Availability as a Direct Bank's Duty of Contract

245

(2)

Prerequisite for a Direct Bank's Liability in Relation to the Customer

247

(1)

Direct Bank's Fault as a Prerequisite for the Customer's Claim for Damages

247

(1)

Extent of the Damages to be Replaced by the Direct Bank

248

(1)

Legal Control of General Business Conditions Concerning the Direct Bank's Non-Availability

248

(1)

Burden of Proof in Case of the Direct's Bank Non-Availability

249

(1)

Concluding Remarks

250

(3)

Electronic Credit Transactions. Legal Aspects

253

(18)

Jane K. Winn

Introduction: Life Cycle of a Bank Credit

253

(1)

Origination

254

(10)

Web Marketing of Lending Services

254

(1)

Authentication

255

(2)

Profiling and Rating of Loan Applicants

257

(2)

Credit Management: New Accounts and Reversibility of ACH Deposits

259

(1)

Signature and Writing Requirements

260

(3)

Virtual Goods

263

(1)

Credits as Assets

264

(3)

Securitization and Participation

264

(1)

Revised Art. 9 Assistance

265

(2)

Enforcement

267

(2)

Expanded Scope of Revised Art. 9

267

(1)

Remotely Disable Software

267

(2)

Conclusion

269

(2)

Electronic Letters of Credit. The Limits of the Present Initiatives

271

(16)

Adam Johnson

Introduction

271

(2)

General

271

(1)

Bills of Lading

272

(1)

Relevant Legal Incidents of the Bill of Lading

273

(1)

Characteristics of the Bill of Lading

273

(1)

Document of Title

273

(1)

Vehicle for the Transfer of Contractual Rights

274

(1)

The Issues

274

(2)

The Role of Mercantile Law and Practice

274

(1)

Mercantile Law and Practice and Electronic Documents

275

(1)

Possible Structures

276

(1)

Open and Closed Systems

276

(1)

Trading in Paper: An Open System

276

(1)

Electronic Trading: Closed Systems

276

(1)

Bolero: Outline

277

(1)

Organisational Structure

277

(1)

A Bolero Transaction

277

(1)

Bolero's Contractual Framework

278

(2)

The Bolero Rulebook

278

(1)

The Key Contractual Obligations

279

(1)

Bolero: Critique

280

(4)

The Elements of the Bolero Framework

280

(1)

Bolero As a Contract

280

(1)

Bolero and Third Parties

281

(1)

Title to Goods and the Bolero System

281

(2)

Transfers of Contractual Rights and the Bolero System

283

(1)

Conclusion

284

(3)

Assessment

284

(1)

Technical Issues

284

(1)

Legal Issues

284

(3)

Electronic Bank Guarantees and Stand-By Letters of Credit

287

(22)

Stefan Kroll

Introduction

287

(1)

The Status Quo and Potential for Improvement in the Context of Indirect Bank Guarantees

288

(1)

Communications Between the Banks

289

(1)

Request to Open a Bank Guarantee

290

(5)

Possible Advantages of Electronic Applications

291

(1)

Existing Reservations

291

(1)

Legal Situation

292

(3)

Electronically Issued Bank Guarantee

295

(7)

Requirements for the Creation of a Bank Guarantee

296

(1)

Offer

296

(1)

Acceptance

297

(1)

Form Requirements

298

(1)

Statutory Form Requirements for Bank Guarantees

299

(1)

Application of the Statutory Form Requirements for Sureties

300

(1)

Contractual Form Requirements

301

(1)

Return of the Guarantee Document

301

(1)

Calling of the Guarantee

302

(2)

Electronically Created Offer to Issue a Bank Guarantee

304

(1)

Conclusion

305

(4)

IV. Capital Market Transactions on the Internet

US Securities Regulation and the Use of the Internet in Registered Offerings

309

(36)

Joseph J. Norton

Hansjorg J. O. Heppe

Introduction

309

(3)

The Backdrop

312

(5)

The Basic Principles of US Securities Regulation

312

(2)

How the Internet Comes into Play

314

(1)

Websites

314

(1)

Hyperlinks

315

(1)

Audio and Video-Streaming

315

(1)

E-mail

316

(1)

Registered Stock Offerings and the Use of the Internet and Other Electronic Media

317

(22)

Electronic Delivery of SEC Documents

320

(1)

Consent to Electronic Delivery

321

(1)

The Envelope Theory

322

(2)

Website Content

324

(1)

Issuer Responsibility for Hyperlinked Information

325

(1)

Issuer Communications During a Registered Offering

326

(4)

Electronic Road Shows

330

(6)

Regulation FD

336

(3)

The SEC Approach Towards Fraud and the Internet

339

(4)

Conclusion

343

(2)

Electronic Trade in Negotiable Instruments

345

(14)

Jane K. Winn

The Creation of Electronic Negotiable Instruments

345

(2)

The Switch from Paper to Electronic Media in Various Markets

347

(3)

Efficiency Gains through Electronic Determination of Good Title

350

(4)

The Future of the Transferable Record

354

(5)

V. Outsourcing of Banking Functions: The Virtual Bank

Outsourcing of Banking Functions. Company Law Aspects

359

(10)

Hans Diekmann

Introduction

359

(2)

Reasons for Outsourcing Banking Functions

359

(1)

Legal Means for Outsourcing Banking Functions

360

(1)

Examples

361

(1)

Corporate Law Restrictions

361

(6)

Section 25a German Banking Act

362

(1)

Object of the Company

363

(1)

Principle of Self-Dependent Leadership

364

(1)

Restrictions Pursuant to the Holzmuller Decision

365

(1)

Risk Management

366

(1)

Intragroup Outsourcing Projects

366

(1)

Conclusions

367

(2)

Outsourcing of Banking Functions. Supervisory Law Aspects

369

(24)

Michael Kunz

Introduction

369

(4)

What is Outsourcing of Banking Functions?

370

(1)

Why Sourcing Out Banking Functions?

371

(1)

Which Functions are Outsourced by Banks?

372

(1)

Problems with Sourcing out E-Banking Functions

373

(6)

Problems with Sourcing out Banking Functions in General

373

(1)

Selection of a Qualified Outsourcing Provider

373

(1)

Data Protection and Data Security

374

(1)

Sourcing Out Banking Functions Abroad / Cross-Border Outsourcing

375

(1)

Control and Management of Outsourcing Risks

375

(1)

Specific Problems of Sourcing Out E-Banking Functions

376

(3)

Regulation of Sourcing out E-Banking Functions

379

(12)

International Regulation of Sourcing Out E-Banking Functions

379

(1)

Basel Committee's Report on Risk Management of E-Banking and E-Money

379

(2)

Basel Committee's Risk Management Principles for E-Banking

381

(3)

The Role of Supervisory Authorities

384

(1)

Rules and Regulations at the National Level

384

(1)

Germany

385

(1)

Switzerland

385

(3)

Canada

388

(3)

Conclusion

391

(2)

Index

393

Legal Issues in Electronic Banking

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