Bermuda’s Dot.Com Laws and Infrastructure
Article © 2007 Marshall Diel & Myers (http://www.law.bm/), All Rights Reserved.
Print Article Download PDFE-commerce has never been, contrary to popular media belief, limited to a group of computer savvy individuals in Silicon Valley unleashing the latest dot.com company on the world. Going to the local ATM and direct debit shopping are both examples of the daily ways people engage in e-commerce without knowing they are engaging in e-commerce. Clearly, through the public's general usage of the term refers to the use of the Internet by individuals and companies for the completion of purchase and sale transactions. This form of transaction is executed in clicks but its viability depends in part on the application of legal principles and concepts.
Increasingly, lawyers are required and expected to provide advice for their clients on conducting business through the Internet. Virtually all e-commerce companies penetrate international borders and, therefore, lawyers must think globally. One of the important issues faced by a lawyer is advising which jurisdiction to incorporate and locate the client's e-commerce business.
An important consideration for any client looking to conduct e-commerce from an offshore jurisdiction is the jurisdiction's legislation. The legislation must provide the users of the e-commerce applications; the security they and their clients need to conduct their transactions through the Internet.
Bermuda's Electronic Transactions Act, 1999 (the "Act") was created to protect parties using electronic means to enter into, complete or assist in commercial transactions. The Act was one of the first pieces of legislation passed in the world and remains, along with the proposals and guidelines adopted by the EU, OECD and the UN, a model for other jurisdictions' legislation. The rapid speed with which the issue has arisen means that most jurisdictions have now passed or are in the process of passing some form of legislation in regard to electronic transactions. The important component of these acts is the legal recognition and approval, in conjunction with the common law, of the electronic agreement, record and signature. Clients can now rely on the Act to ensure the enforcement and protection of their transactions.
The benefits to operating one's e-commerce business, be it as a new subsidiary of an already existing business or as a new entity, range in importance depending on the needs of each client. The following are important legal considerations to take into account when deciding which jurisdiction is the best fit for your client: local corporate law, local tax law, data protection and privacy law and the local regulatory framework.
As one of the premier offshore jurisdictions, Bermuda offers numerous advantages to individuals looking to locate their businesses in Bermuda. Increased tax planning options are one of the major enticements to locating offshore. One of the benefits to a company located in Bermuda is that income generated by a Bermuda company is free from taxation by the Bermuda government, as are the transactions that take place in Bermuda. The benefits of e-commerce in Bermuda can quickly be explained by noting that Internet commerce can be structured such that the transactions take place in Bermuda even if the purchaser is not physically located in Bermuda. This is normally accomplished by creating a local presence in Bermuda by incorporating a company, locating the computer server in Bermuda and locating the credit card processing in Bermuda. While the future of taxation on the Internet is in flux and difficult to predict, increased flexibility derived from creative corporate structures can be achieved to minimize the clients' business costs.
Tax considerations should not be ones' primary reason for locating in Bermuda. While Bermuda is attempting, without damaging its international competitiveness, to fit within the recently proposed OECD international tax regulations, the benefits for a company operating out of Bermuda can go above and beyond the real and potential tax advantages. Bermuda has developed a premiere reputation in the international community through the professionalism consistently exhibited by its service providers. The legal profession in Bermuda has embraced e-commerce opportunities by developing the specific expertise required to meet the expectations of dot.com clients and their overseas advisors.
For the client looking to develop its e-commerce business the important compliment to quality professionals is a telecommunications infrastructure to support the business. Unlike traditional "bricks and mortar" businesses, a key to quality e-commerce service is the telecommunications structure's reliability and capacity available in any jurisdiction. Bermuda's unique and strategic position in the Atlantic makes it an essential telecommunications hub for international telecommunications companies, thus ensuring ample capacity for e-commerce businesses on a choice of interconnected fibre optic and satellite networks.
With predictions of exponential growth in e-commerce business over the next few years, the companies and individuals with an early e-commerce strategy and structure are the ones that will prosper. Bermuda is well positioned to assist and promote these e-commerce ventures.
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