JILT: New Rules for Anonymous Electronic Transactions? An Exploration of the Private Law Implications of Digital Anonymity

R. A. Hettinga rah@shipwright.com
Fri, 24 Jan 2003 07:53:05 -0500


http://elj.warwick.ac.uk/jilt/01-2/grijpink.html 
 


Contents

Abstract

1. Introduction
2. Key Question
   2.1 Explanation
3. Anonymity: A Question of Degree
4. The Social Significance of Anonymity
5. The Legal Implications of Absolute Anonymity Under Private Law
   5.1 Absolute Anonymity Under Contract Law
       5.1.1 Absolutely Anonymous Electronic Contracts
       5.1.2 Problems Concerning the Implementation of an
             Absolutely Anonymous Contract
   5.2 Absolute Anonymity Under the Law of Property
6. Semi-Anonymity
   6.1 Semi-Anonymity Under Contract Law
       6.1.1 Semi-Anonymous Contracts
       6.1.2 Problems Concerning the Implementation of the
             Semi-Anonymous Contract
   6.2 Semi-Anonymity Under Property Law
7. Are New Legal Structures Desirable?
   7.1 Prevention or Cure
   7.2 Legislation or Self-Regulation
   7.3 Renovation or Building From Scratch
 8. Conclusion
Notes and References
Download

New Rules for Anonymous Electronic Transactions? An Exploration of the
Private Law Implications of Digital Anonymity [1]

Dr Jan Grijpink
Principal Adviser,
Dutch Ministry of Justice
jgrijpin@best-dep.minjus.nl

Professor Dr Corien Prins [2]
Professor of Law and Informatisation,
Tilburg University, The Netherlands
J.E.J.Prins@kub.nl


Abstract

For various reasons, most prominently privacy considerations, consumers on
the Internet become reluctant to reveal their true identity. Different
techniques and services have recently been developed which make Internet
activities, such as surfing, anonymous. Facilities are also available to
provide individuals with a pseudo-identity. This article explores the
status of anonymous electronic transactions under the Dutch private law
system and analyses whether new legal rules are required to protect
consumer interests.

Keywords: Anonymity, Semi-anonymity, Pseudo Identity, Private Law, Privacy,
Smartcards, International Regulation, Intermediary, Self-regulation,
Legislation, Consumer Protection.

This is a Refereed article published on 2 July 2001.

Citation: Grijpink J H A M and Prins J E J , 'New Rules for Anonymous
Electronic Transactions? An Exploration of the Private Law Implications of
Digital Anonymity', 2001 (2) The Journal of Information, Law and Technology
(JILT) . <http://elj.warwick.ac.uk/jilt/01-2/grijpink.html>


1. Introduction

Lately, anonymous communications on the Internet have gained considerable
attention. A New Jersey state court judge ruled in November 2000 that a
software company is not entitled to learn the identities of two 'John Doe'
defendants who anonymously posted critical comments on a Yahoo message
board[ 3]. Fall 2000, Ian Avrum Goldberg's dissertation on A Pseudonymous
Communications Infrastructure for the Internet received world-wide
publicity[ 4].Ongoing concerns of digital privacy stimulate the debates
about possible ways to avoid being 'profiled' on the Net and communicate
anonymously.

Anonymous communication raises various (legal) questions. What exactly do
we mean by anonymity? Why would people want to communicate and transact on
an anonymous basis? What are the practical and legal restraints upon
anonymity when communicating and transacting with others? In other words:
aside from the ad-hoc problems that now arise under case law, what is the
larger landscape of the legal consequences of anonymity? This article sets
out the most important conclusions of the first stage of a study into the
dimensions of digital anonymity. It is intended to set out the problem,
make people aware of the intricacies of the problem and thus stimulate the
debate on useful legal structures for anonymity. The article focuses on the
private law dimensions, addressing situations where consumers want to
purchase anonymously on the Internet.

With the purpose of directing the key question towards future developments
in information technology, the study is based on a picture of the future in
which the large scale use of anonymous electronic transactions occupies an
important position. We hereby take the chip card as an illustrative example
and focus on the Dutch legal situation. Finally, it should be mentioned
that this study forms part of a broader search for sustainable legal and
organisational transformation processes arising from new information and
communication technology[ 5].

The article is laid out as follows. Section 2 provides an outline of the
key question into new law for digital anonymity and some background
information. Anonymity is a concept that is subject to multiple
interpretations, an issue that is discussed in section 3. The key question
is only worth addressing if absolutely anonymous electronic legal
transactions are technically feasible, and we can put forward a plausible
case supporting the practical significance of anonymity in electronic legal
transactions. We will set forth that case in section 4. Section 5 outlines
the status of an absolutely anonymous contract under private law, contract
law and property law. This provides an idea of the room that current
private law offers for anonymous legal transactions, which is a good
starting point for answering the question of whether these provisions will
be adequate when it comes to the widespread anonymous use of chip cards. In
section 6 we look into the legal status of less absolute forms of anonymity
in legal transactions (semi-anonymity). To answer the question concerning
the desired legal development, in section 7 we address the role that the
law will have to play if a situation arises in which anonymous electronic
legal transactions dislocate vulnerable legal relationships. We will then
examine two alternatives for the development of new law: based on our own
Dutch law or derived from foreign law. These considerations lead in section
8 to conclusions regarding the extent to which the risks of anonymous
electronic legal transactions will in the future necessitate the
introduction of new legal rules.

Given that legal development takes so much more time than the introduction
and distribution of new technology, it is of great importance to gain early
insight into the direction in which the law can best develop in response to
new technology. That is the underlying motive behind this part of the
overall study and the justification for directly reporting on the first
preliminary results, in the hope that this will set in motion a discussion
that offers prospects for timely legislation should the need arise.

<Snip...>

8. Conclusion

In this paragraph we formulate our preliminary response to the question of
the extent to which the risks of anonymous electronic legal transactions
will in the future necessitate new private law structures, what these
structures will probably relate to and the direction in which this
development of law could occur.

Our legal culture places prevention above a distribution of incurred
losses, so that we anticipate that digital anonymity will be regulated as
much as possible rather than compensated for in insurance constructions. In
the case of absolutely anonymous and semi-anonymous contracts we have noted
that the space for these legal transactions is limited (contract law), or
is completely absent (property law). In a nutshell, it can be said that
knowledge of a person's identity is not a legal requirement under contract
law. Parties that knowingly take the risk of entering into a contract with
an absolutely anonymous or semi-anonymous party bear the risk of the
adverse consequences of a shortcoming. If the identity of the other party
cannot be determined, the party in question will face the same situation as
he would in the physical world: he will receive neither what the other
party was obliged to provide, nor any compensation for damages. A
consequence of this nature is acceptable and its implications are kept
within reasonable limits if people only act semi-anonymously to a modest
extent. The question remains, however, of whether this will be the case if
widespread use is made of the possibility to surf, order and pay absolutely
anonymously or spontaneously semi-anonymously in an electronic environment.
We feel that widespread anonymous actions are accompanied by so many new
risks to the various parties involved that this will lead to imbalances in
the legal relationships, which will give the legislator cause to seek
solutions to protect vulnerable parties and interests. Cases in point
include suppliers demanding full payment in advance in an electronic
contract entered into at a distance, stringent exoneration clauses and
unfavourable proof stipulations.

With regard to the content of the possible new legal structures, it is
likely that in our Dutch legal culture we will first be induced to search
for ways of extending existing formal regulations that limit the possible
use of absolute anonymity. In order to respond to a growing need for
anonymity in legal transactions, the regulations for organised
semi-anonymity could also be extended (e.g. under property law), so that it
will be possible to break through a person's anonymity retrospectively if
necessitated by court order or by the law. Organised semi-anonymity (or
pseudonymity) in legal transactions is therefore a useful weapon against a
number of disadvantages of acting absolutely anonymously or spontaneously
semi-anonymously, while retaining the envisaged protection of privacy. It
is only with the guarantee of this organised protection of a person's true
identity without that being abused, that identity fraud can be kept under
control and that pseudonyms can provide anonymity towards third parties
without damaging the legal order. That is not to say that this form of
anonymous legal transaction is easy to organise[ 25 ]. Beyond private law,
it will require extra regulations under administrative law, such as an
extension of the obligation of public and private bodies to check their
clients' identity, of the duty of people to provide proof of identity and
public-private co-operation in verifying people's identities and in testing
the soundness of general and contractual proofs of identity. Apart from
political and social issues that will have to be solved in an international
context, bringing about the information infrastructure needed for this
purpose will also take a lot of time and money. But balancing the interests
of protecting privacy and the need for anonymity in the future information
society on the one hand, and those of the legal order on the other, makes
extending organised semi-anonymity in our legal culture an attractive
course to take for vulnerable transactions.

Because both of the above solution directions under Dutch law will
reinforce already existing tendencies towards 'juridification' of our
society without internationally achieving the envisaged legal protection
under Dutch law, we feel that it is desirable to look into how more space
can be created for reliable legal transactions on an absolutely anonymous
basis, perhaps under our property law as well. This relates in the first
place to absolutely anonymous transactions that are of less social
importance and whose disadvantages can easily be insured. It also concerns
socially important, vulnerable transactions that already tend to be settled
on an absolutely anonymous basis world-wide. By way of making a first move
in that direction, we feel that it seems in any event desirable to look
into the extent to which already existing foreign legal structures such as
the agency are suitable for this purpose, and whether this could be
incorporated into legal systems that are not familiar with these
structures, such as the Dutch legal system.

At issue here are the trust in anonymous electronic transactions, consumer
protection, combating identity fraud and, let us not forget: the issue of
legal certainty when border-transgressing anonymous transactions are
involved. Given that the development of law takes so much more time than
the introduction and distribution of new technology, it is of great
importance to gain early insight into the direction in which Dutch law can
best develop in response to more digital anonymity. The importance of new
concepts and rules for digital anonymity in legal transactions makes it
desirable to discuss and perform research into the directions proposed
here, paying attention to the effect that derivation from foreign law has
on the key principles of private law systems that are not familiar with
such directions.

Notes and References

1.The Dutch version of this article has been published in: Nederlands
Tijdschrift voor Burgerlijk Recht [Dutch Journal of Private Law], NTBR
2001-4, Kluwer, Deventer. The article is also due to be published in the
Computer Law & Security Report, July/August 2001.

2. Dr. J.H.A.M. Grijpink is Principal Adviser at the Dutch Ministry of
Justice <jgrijpin@best-dep.minjus.nl >. Prof. Dr. J.E.J. Prins is Professor
of Law and Informatisation at Tilburg University, the Netherlands <
J.E.J.Prins@kub.nl >. The authors are highly grateful for the contribution
of Chris Nicoll, University of Auckland (New Zealand) to paragraph 7.3.

3. The court's decision is available at: <
http://www.citizen.org/litigation/briefs/dendrite.pdf >.

4. Available at: <http://www.isaac.cs.berkeley.edu/~iang/thesis.html >.

5. This research programme is an initiative of the Expertise Centre
'Globalization and sustainable development' at Tilburg University <
http://globus.kub.nl >. The part of the research discussed here was
conducted in collaboration between the Centre for Law, Public
Administration and Informatisation at Tilburg University and the
Directorate of Strategy Development of the Dutch Ministry of Justice.

6. An isolated (without personal details) person-related biometric
characteristic, from which one can derive that the person acting is the
right one, but not precisely who he is. For a more detailed discussion of
biometrics, reference is made to: van Kralingen, R, Prins J E J and
Grijpink, J H AM (1999), 'Het lichaam als sleutel. Juridische beschouwingen
over biometrie' ('The body as the key. Legal considerations on biometrics')
in Van den Berg & Schmidt (eds) National Programme for Information
Technology and Law (IteR), No. 8 (Alphen aan de Rijn: Samson) and Grijpink
J.H.A.M. (1999) 'Biometrie als anonieme bewaker van uw identiteit'
('Biometrics as an anonymous guard of your identity'), Beveiliging no. 5,
May 1999 pp.22 ff. (Amsterdam: Keesing Bedrijfsinformatie).

7. See: van Klink, B, Prins, J E J, and Witteveen W J, (2000), 'Het
conceptuele tekort' ('The conceptual gap') (The Hague: Infodrome <
http://www.infodrome.nl >).

8. Grijpink J H A M (1998), 'Justitiebrede scenario's voor het jaar 2010'
('Scenarios for the Ministry of Justice in the year 2010') (Den Haag:
Ministerie van Justitie).

9. See the report of the Scientific Council for Governmental policy 'Staat
zonder Land' ('State without Country') V 98 (The Hague 1998); the
ministerial paper 'Internationalisering en recht in de
informatiemaatschappij' ('Internationalisation and law in the information
society') TK '99-'00, 25880, no. 10 <
http://www.minjust.nl/c_actual/rapport/irinfomy.pdf > and the comparative
study accompanying the ministerial paper into the views of various foreign
governments on internationalisation and law: Koops, B J, Prins, J E J and
Hijmans, H (2000), 'Internationalisation and ICT Law' (The Hague/Boston:
Kluwer Law International). See also: <
http://www.minjust.nl/c_actual/rapport/overcrbi.pdf >.

10 . See earlier on a distinction: A.M. Froomkin, 'Anonimity and Its
Enmities', 1995 J. Online L. art. 4 <
http://www.wm.edu/law/publications/jol/froomkin.html >.

11 . A biometric number is a number that is derived using a formula from a
physical characteristic (e.g. a fingerprint, the geometry of a finger or
hand, or the characteristic movements when signing a document). A biometric
number yields a person- related pseudonym. All sorts of other numbers and
codes used to verify a person's identity are not person-related. Someone
can give a PIN number to somebody else, for example; the electronic
signature (code for encrypting data) is computer-related and can be used by
another user of that computer. See: van Kralingen R, Prins, J E J and
Grijpink J H A M, 'Het lichaam als sleutel. Juridische beschouwingen over
biometrie' ('The body as the key. Legal considerations on biometrics') in
Van den Berg & Schmidt (eds) National Programme for Information Technology
and Law (IteR), No. 8 (Alphen aan de Rijn: Samson); Grijpink J.H.A.M.
(1999) 'Biometrie als anonieme bewaker van uw identiteit' ('Biometrics as
an anonymous guard of your identity'), Beveiliging no. 5, May 1999 pp. 22
ff. (Amsterdam: Keesing Bedrijfsinformatie BV) and Grijpink J.H.A.M. (2001)
'Biometrics and Privacy' in The Computer Law and Security Report
March/April 2001 (Oxford, UK: Elsevier Science Ltd).

12 . Verification is generally not sufficient for the application of
criminal law. The police are therefore expected to irrevocably establish
the identity of a suspect when investigating a criminal offence. If errors
are made at this stage, the legal intervention will go wrong further on in
the criminal law enforcement chain. After all, it will generally not be
possible to rectify a faulty identification retrospectively by means of
verification because, for instance, the suspect can no longer be located or
because the available data are contradictory. If the police have made a
successful identification at the beginning of the criminal law enforcement
chain, other partners in this chain will be able to make do with
verifications further on in the legal proceedings.

13 . For examples of the various forms, see: Prins, J E J (2000), 'What's
in a name? De juridische status van een recht op anonimiteit' ('What's in a
name? The legal status of a right to anonymity') in Privacy & Informatie
vol. 3 no. 5 (Th Netherlands: Koninklijke Vermande).

14 . For a discussion of this link between privacy protection and
anonymity, reference is made to: Grijpink, J H A M (1999), 'Werken met
keteninformatisering' ('Working with chain computerisation'), Section III
Privacy and anonymity pp. 133 ff. (The Hague: Sdu Uitgevers).

15 . Goods can already be collected at 7-11 shops of this type in Japan.      

16 . This subscriber does not necessarily have to be registered under his
own name. In practice, the identity of a subscriber is seldom verified, and
in the Netherlands an ISP is not authorised to ask for proof of identity
other than on a voluntary basis. Neither is he legally or practically able
to verify the soundness and validity of a proof of identity because of the
lack of authority and information infrastructure.

17 . Supreme Court: HR 15 November 1957, NJ 1958, 67.

18 . See however: HR 24 January 1997, NJ 1997, 339. The Supreme Court ruled
that the provisions of article 2:93, paragraph 1 and article 203, paragraph
1 of the Dutch Civil Code concerning the possibility of the ratification by
a company limited by shares or a private limited company, after its
foundation, of legal transactions that were performed on behalf of the
company being founded is applicable mutatis mutandis to other legal
persons. See also HR 11 April 1997, NJ 1997, 583 and furthermore the
extensive case law on a subpoena for anonymous people that break into and
occupy empty houses.

19 . See however: Ballon, G 'Ik gaf mijzelf geen naam'('I gave myself no
name') Tijdschrift voor Privaatrecht, no. 3 pp. 557-592.

20 . See HR (Supreme Court) 15 November 1957, NJ 1958, 67.

21 . See for example: <
http://www.anonymizer.com/docs/legal/agreement.shtml > (stipulations 9 and
11) and  <
http://www.xs4all.nl/freedom/Freedom_files/content/voorwaarden.html >
(stipulation 5.4).

22 . Directive 1999/93/EC of the European Parliament and of the Council of
13 december 1999 on a Community framework for electronic signatures, OJ L
013/12, 19 january 2000.

23 . See also the report of the Scientific Council for Governmental policy
'Staat zonder Land' ('State without Country') V 98 (The Hague 1998); the
ministerial paper 'Internationalisering en recht in de
informatiemaatschappij' ('Internationalisation and law in the information
society') TK '99-'00, 25880, no. 10 <
http://www.minjust.nl/c_actual/rapport/irinfomy.pdf > and the comparative
study accompanying the ministerial paper into the views of various foreign
governments on internationalisation and law: Koops, B J, Prins, J E J and
Hijmans, H (2000), 'Internationalisation and ICT Law' (The Hague/Boston:
Kluwer Law International). See also: <
http://www.minjust.nl/c_actual/rapport/overcrbi.pdf >.

24 . See the three proposed Directives, published on 12 July 2000, in which
the importance of a high level of consumer protection is expressly put
forward as a reason for introducing the new rules: Proposal for a Directive
of the European Parliament and of the Council concerning the processing of
personal data and the protection of privacy in the electronic
communications sector, COM(2000) 385;  
 Proposal for a Directive of the European Parliament and of the Council on
universal service and users' rights relating tot electronic communications
networks and services, COM(2000) 392;  
 Proposal for a Directive of the European Parliament and of the Council on
a common regulatory framework for electronic communications networks and
services, COM(2000) 393.

25 . Grijpink, J H A M (1999), 'Werken met keteninformatisering' ('Working
with chain computerisation'), Section III Privacy and Anonymity pp. 133 ff.
(The Hague: Sdu Uitgevers).

 

 

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