The EU Directive on Information Society Services, also called the Electronic Commerce Directive, was enacted in June last year. Before it can become effective, it needs to be enacted by the UK and other member states, which is scheduled for next January.

However, Dai Davis, a consultant at law firm Nabarro Nathanson, said broadly worded exceptions render the legislation virtually useless for protecting fair competition in Europe.

"The EU has failed to harmonise anything of consequence. The exception for criminal law causes a great lacuna. Most products and services are governed in some way by criminal sanctions, which means the harmonising effect of the legislation is blunted," he said.

The Directive aims to ensure that member states cannot arbitrarily prevent the delivery of online services or products from other member states which are 'targeted' at their own citizens.

However, it sets a wide range of exceptions for national criminal law, protection of public health and public security. Countries can ignore the Directive and bar online transactions which compete with their own national market, by saying it interferes with national criminal laws.

"The Directive tries to cover a lot of ground and ended up doing this ineffectively. It tries to harmonise the whole of Europe, but would have achieved more if it had tried a lesser goal, such as defining a guide for how you do business online," Davis said.

No guarantees

Davis explained his view with an example from German law which treats certain customer guarantees in contracts as a criminal offence.

"In theory, you should have one law or directive that allows UK e-tailers to sell their products in any European country without worrying about a ridiculous German law. The way the EU directive is worded, UK e-tailers would risk committing a criminal offence in Germany by offering their customers a guarantee," he said.

He argued that countries had already prosecuted companies whose ebusiness transactions breached criminal laws and would continue to do so under the new directive.

The Directive recommends that member states take measures that are "proportionate" to the objectives stated, which gives them a wide discretion. A country must indicate its areas of concern, while other members need to take steps to prevent prohibition.

In criminal law, members do not have to follow this course, which will result in them ignoring the Directive's consultation mechanism.

An advertisement which is unlawful in the UK will continue to be unlawful under the Directive, and the UK Government can continue to threaten internet service providers (ISPs) so long as it hides behind the facade of a 'criminal' act.

"Many readers may have sympathy when a government states it will take action against those advertising children on the internet. But in UK law, advertisements for products such as Viagra are a far more serious offence," said Davis.

"Medicinal products like Viagra may be lawfully advertised in most other member states, but difficulties will continue for UK ISPs," he added.