The Government acknowledges the need for a competitive, responsive and technologically first-rate telecommunications infrastructure. Without this basic foundation the development of the sector is impossible. Furthermore, the ability to grow with projected demand will require significant new investment. The two most important areas are likely to be the need for readily available bandwidth at competitive pricing and the desirability of establishing further routing options for international traffic to and from Gibraltar. The Government is committed to pursuing a link to a cable operating from Morocco.

Inevitably linked to this issue is the requirement, arising from EU directives, to liberalise the Gibraltar telecoms market. The Government is committed to introduce the legislation to give effect to the directives in the very near future and to create at the same time a regulatory authority to oversee the new arrangements. At that stage exclusivity rights afforded to current operators will end and liberalisation of the market will be commenced. It should be noted that certain aspects of liberalisation will be delayed for reasons outside the control of Gibraltar (e.g. the difficulties Spain is creating in blocking the expansion of our numbering plan). However, the Government does not envisage insurmountable obstacles to e-commerce development since this is not necessarily "number dependent".

In line with the position taken by other jurisdictions, the Government does not intend to amend or in any way affect the regulatory or licensing requirements of any commercial activity.

The position under the Trade Licensing Ordinance should be mentioned. Under Section 3 the requirement to license arises in respect of any trade or activity undertaken "in" Gibraltar. As is the case therefore of companies currently trading from but not in Gibraltar, an e-commerce operation targeting an exclusively international clientele will not be licensable under the Ordinance. This position should be contrasted with that prevailing under the various financial services Ordinances that cover activities undertaken either in or "from within" Gibraltar.

The Government will continue to monitor the moves that are likely to be taken by individual countries and on a supranational basis to tackle the taxation implications of e-commerce. This area is recognised to be potentially of immense significance to national budgets. Similarly it is widely acknowledged that the taxation of electronic business is not susceptible to the usual enforcement regime applicable to less mobile and geographically more permanent business activities.

The need to retain jurisdictional competitiveness should effect downward pressure on attempts to tax this sector by individual countries. There may be moves by multi-national organisations (particularly the OECD and the EU) to establish a common taxation policy to tackle this area. Whilst the danger of such moves must be recognised in the medium to longer term it is unlikely to become a major factor in the near future. Firstly the difficulties in agreeing any measure of harmonisation in the area of taxation has been continuously highlighted in the last few years. The sensitivities raised by this matter are likely to remain for some time yet. Furthermore, and more importantly, there would appear to be a very broad consensus that the development of e-commerce is an economic revolution with the potential to become a major contributor to greater levels of global prosperity. Given this prospect the immediate international priority is more likely to become the active encouragement of this sector rather than an early attempt to extract tax revenues.

The Government of Gibraltar will seek to continue to provide e-commerce operators with a fiscally attractive environment. The need to remain tax competitive in this area will be a factor taken into account in the tax review process on which the Government is embarked. The treaty exemption from VAT enjoyed by Gibraltar may become of increasing importance, especially in the provision of services and non-physical products.

Attached as an annex to this Paper is a draft of the proposed Gibraltar bill. The legislation is aimed at "facilitating the use of electronic means for transmitting and storing information" and affords legal recognition to transactions effected electronically. It also provides a framework for the accreditation of electronic signatures and determines the activities and liability of service providers.

In summary the main parts of the Bill provide as follows:

This part contains important definitions that are pivotal to the legislation. In particular definitions are provided for service provider", "commercial communication", "established service provider" and "information society services".

This part is drawn heavily from the EU Directive on E-Commerce and sets out the general requirements for service providers; commercial communications and provides that contracts can be concluded by electronic means.

Section 5 allows for various exclusions relating to wills and conveyances of land.

Part III is drawn heavily from the electronic signatures directive. This is inevitably a more complex and technical Part as it lays down the framework for the authorisation and recognition of certification of service providers. Applications for authorisation are to be made to the Minister for Trade, Industry and Telecommunications in the manner prescribed. The recognition of overseas providers or classes of such providers is dealt with through notice in the Gazette. The Minister will not recognise an overseas provider or class of such provider, unless it is established either within the EU and the body giving the authorisation is designated for that purpose in accordance with the relevant law of a Member State, or in a territory and by a body that for the time being are prescribed for the purposes of this Part. In determining whether to prescribe a territory or body regard will be had to whether they meet criteria equivalent to those prescribed in relation to the authorised certification service providers.

The civil liability of approved certification providers is also dealt with. Subject to certain qualifications, the section imposes a duty of care on approved certification providers in favour of any person who reasonably relies on the accuracy of the accreditation certificate and provides for an action in damages in respect of any loss or damage suffered by reason of a breach of this duty.