1. COMPETITION - McCarthy Tétrault

Click on a table of contents entry to go directly to the desired title.
To return to the table of contents use Ctrl + Home or Ctrl + End. SEPT. – OCT. 2003
NEWS .................................................................. 1
1. COMPETITION.............................................................. 1
FINLAND FICORA issues regulation on mobile phone No portability 1
MEXICO Antitrust concerns: implementing sound regulation ............ 2
TURKEY Dominance in the mobile telecoms market......................... 2
2. COMPUTER CRIME...................................................... 3
BRAZIL Law powers up piracy combat weapons............................... 3
3. CONSUMER PROTECTION.......................................... 3
AUSTRIA New rules on unsolicited commercial communication ....... 3
UK Persistent misuse of electronic communications.......................... 4
4. DIGITAL SIGNATURES ................................................ 4
MEXICO New regulations on electronic signature ............................. 4
5. DOMAIN NAMES .......................................................... 5
FINLAND New act on Finnish domain names.................................... 5
6. ELECTRONIC COMMERCE ......................................... 5
CANADA Enforceability of webwrap agreements .............................. 5
7. FINANCIAL SERVICES ................................................ 5
LUX New law fostering IT outsourcing in the financial sector ............ 5
8. INTELLECTUAL PROPERTY ....................................... 6
BRAZIL Legal protection for software ................................................ 6
EU Regulation on enforcement of intellectual property rights ............ 6
INDIA India grants first exclusive marketing rights............................. 6
INDIA New IP laws enter into force .................................................... 7
INDIA Supreme Court clears telecast of Karishma ............................ 8
9. MARKET ACCESS........................................................ 9
BRAZIL Anatel announces creation of a new public service.............. 9
CANADA Foreign ownership in the communications sector .............. 9
10. MEDIA ........................................................................... 9
INDIA MIB revises uplinking guidelines.............................................. 9
11. PRIVACY..................................................................... 10
ARGENTINA Courts address the use of labor e-mail accounts....... 10
ITALY New Code for privacy protection ........................................... 10
12. TARIFFS...................................................................... 11
UK Policy statement following review of two-part charging.............. 11
13. TAX.............................................................................. 11
BRAZIL ISS on IP-related services .................................................. 11
INDIA Maintenance of PCs not subject to service tax...................... 11
INDIA Server held to constitute permanent establishment .............. 12
INDIA Service tax to BPO companies .............................................. 12
INDIA Task force examines issue of taxing foreign clients .............. 13
MEXICO Special telecom tax upheld ............................................... 13
14. TELECOMMUNICATIONS .......................................... 13
AUSTRIA New Telecommunications Act 2003 ................................ 13
CHILE WI-FI technology is now a reality.......................................... 13
HK Regulation of change of shareholdings of telecom companies.. 14
HK Telecom service operators' access to private buildings ............. 14
ITALY The Telecommunications Code............................................. 15
MEXICO Strenghtening of COFETEL's authority............................. 15
NEW ZEALAND Commerce commission recommends LLU............ 15
UK Government decision released on use of GSM Gateways......... 15
COMMENTARY .................................................16
FRANCE Use of personal data for marketing purposes................... 16
EDITOR / EDITORIAL BOARD .........................18
TABLE OF CONTENTS BY COUNTRY ............19
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NEWS
1. COMPETITION
FINLAND
FICORA ISSUES REGULATION
ON MOBILE PHONE NO PORTABILITY
On 28th May 2003, the Finnish Communications Regulatory Authority
("FICORA") issued a regulation requiring mobile phone number portability.
The regulation was issued in connection with Finland's new
Communications Market Act, which, together with the regulation, came into
force on 25th July 2003. Previously, only fixed network numbers and
national premium service numbers were portable in Finland.
Portability allows customers to change operators without having to change
their mobile phone number. In Finland, FICORA grants mobile operators a
3-digit operator prefix such as 040, 050, or 044. This prefix manifests to the
calling party that the called number is a mobile number on a specific
operator's network, and that the call charge will apply to that operator's
charges. Where the operator-specific prefix is also included in the ported
number, Finland's unique retail segment pricing could be in jeopardy. This
is because the calling party will not know the operator's network to which
the called number is connected, and thus what the call charge will be.
Consequently, operators will be required to set up a toll-free service
number from which callers can receive information identifying the network
to which the called mobile phone number is connected.
ISSUE 22 SEPTEMBER – OCTOBER 2003 1

The objective for implementing number portability is to facilitate the
process for customers to switch from one operator to another. This, in turn,
should enhance competition in the market. Under the newly implemented
regulations, a mobile number is ported when a customer enters into a
subscriber agreement with a new operator and receives a new SIM-card.
The old subscriber connection remains operable until the new connection
with the new operator is activated. Any additional services requested by
the customer must be agreed to separately with the new operator, as the
existing services will not transfer with the number. In practice, the
subscriber is not charged for porting a number, since the law prohibits the
former operator from charging the customer for the change. The former
operator may, however, collect from the new operator a one-off payment
equivalent to the costs of porting the phone number if the technical
process of porting the number generates one-off costs. At the same time,
the one-off payment cannot be so high as to deter the use of the service.
While the new operator can pass on the costs of the port to the customer,
in practice the new operator does not do so.
According to the regulation, any delay in providing a connection to a new
subscriber when the number is ported may not exceed five working days.
The regulation further provides that the so-called "black-out" period
between closing the old subscriber connection and opening a new
connection may not exceed ten minutes. Customers' eagerness to change
operators has caught most mobile phone operators by surprise, and has
lead to severe delays in the time limits set for the change. FICORA has
repeatedly emphasized the operators' duty to attend to their obligations
and has issued a deadline for the operators to comply with the regulations.
After the deadline of 6th October 2003, FICORA may consider imposing a
conditional fine to those operators that still fail to meet the time limits.
For more information visit:
http://www.ficora.fi/englanti/tele/puhelinnumeron_siirrettavyys.htm
or contact: craig.thompson@roschier.com
MEXICO
ANTITRUST CONCERNS:
IMPLEMENTING SOUND REGULATION
Many problems faced by the telecommunications sector today derive from
the incumbent's abuse of power. Previously, we discussed the reasons
why the Dominance Rules imposed on TELMEX a couple of years ago
failed and were overturned. We have not discussed, however, what the
qualifications of any regulatory agency in charge of governing antitrust
matters in this sector should be, so that its resolutions can both withstand
the test of judicial tribunals and afford legal certainty to all players in the
Mexican market.
Two agencies are involved in the process of determining the existence of
substantial power in the relevant market and imposing specific obligations
on the incumbent. On the one hand, the Mexican Federal Antitrust
Commission (the "COFECO") is in charge of implementing the Mexican
Federal Antitrust Law (the "LFCE") by determining the relevant markets
and substantial power of the economic agent. Once COFECO makes such
a determination, the Mexican Federal Telecommunications Commission
(the "COFETEL") is in charge of imposing specific obligations against the
incumbent.
Deficiencies have arisen in the past precisely in the determination of the
relevant market and substantial power. Under current regulations,
COFECO has broad powers to interplay with different economic variables
to determine what the relevant market is and what products, if any, may
serve as adequate substitutes thereof. This discretionary power affects the
"incumbent" insofar as it is unable to know beforehand the elements that
will be considered by COFECO in its analysis, thus leaving it in a state of
judicial uncertainty. A lack of clear and specific regulations as to the
powers of the authorities, and of the standards for imposing penalties or
other administrative sanctions, have been recurring deficiencies that were
brought before Mexican courts to combat administrative resolutions and
the constitutionality of the laws. If COFETEL will be in charge of imposing
specific obligations, and if COFETEL is the agency that is most likely to
have the necessary elements to make a thorough analysis in the
determination of the relevant market and the substantial power, antitrust
matters in the telecomm sector should be vested primarily in the hands of
COFETEL, even if the administrative act through which the antitrust activity
is condemned is made by COFECO. Naturally, this would require an
amendment to the current antitrust and telecom regulation to include
specific testing parameters and broaden COFETEL's powers participate in
the analysis of the markets and the relevant market.
The current draft of the new Federal Telecommunications Law aims to
amend some of the deficiencies listed above by including specific criteria to
determine the existence of a dominant player in the relevant market.
However, COFETEL's actions are still limited to merely advisory activities
to COFECO, which the latter may disregard with or without cause.
For more information visit: www.cfc.gob.mx
or contact: aam@bstl.com.mx
TURKEY
DOMINANCE IN THE MOBILE TELECOMS MARKET
In a landmark decision, published in the Official Gazette on 22nd July
2003, the Competition Authority (the "Authority") imposed a 7 trillion TL
(approximately eur 4.5 million) fine on Turkcell, a major GSM services
provider in Turkey. The Authority found that Turkcell was abusing its
dominant position in the market to prevent the growth of other companies.
The decision was rendered upon complaints made to the Authority by
Basari Electronic ("Basari"), one of the former largest cell phone
distributors, and Telsim, another GSM services provider that felt subject to
Turkcell's domination from 1994 to 2000.
The companies' complaints were based on Turkcell's dominance in the
GSM services market. Basari claimed that Turkcell had applied dissimilar
conditions to equivalent transactions. Turkcell placed Basari at a
competitive disadvantage both by requesting a fee for the line and the sale
of a SIMcard with a cellular phone, and by not paying the "sale support
bonus" that they formerly paid to Basari. Turkcell had continued to pay this
bonus to other distributor companies, which thus caused an increase on
the prices of phones sold by Basari as compared to those of other
companies. Telsim claimed that the major owner of Turkcell, Cukurova
Holding, wrongly perceived the two separate GSM operating market and
GSM devices market as one, which made it impossible for Telsim to enter
into the market.
The Authority provided a detailed analysis of how dominance in the
relevant market should be determined. First, it pointed out that market
share is a strong indication, but is not itself determinative, of dominance in
the given market. On the other hand, evidence that market shares are
consistently much higher than those of competitors' for a prolonged period
strongly suggests dominance. Additionally, in a market where competitors
are also trying to increase their subscribers' use of data and voice
communication, the total values of such use should be considered to
determine whether a company is in a dominant position. Accordingly, the
fact that Turkcell had 8,037,000 subscribers, where, as of July 2000,
ISSUE 22 SEPTEMBER – OCTOBER 2003 2

Telsim had 3,633,398 subscribers, demonstrates Turkcell's 6 years of
constant leadership in the market, and indicates an overwhelming
dominance of market share alone. Turkcell's dominance over Telsim is
further established by the fact that an average Turkcell customer spoke for
more than 125 minutes per month, where an average Telsim customer
used only 45 minutes of speaking time.
A company's dominance in a market also depends on the existence of
barriers to market entry, such as a license that must be obtained from
relevant authorities. This is the case for the GSM services market. Turkcell
and Telsim were the first companies to obtain GSM licenses, followed by
Aria and Ay-cell. However, obtaining a GSM license only secures the legal
entry into the market, where achieving notable strength in the market
requires substantial costs, such as infrastructure, marketing, sales and
distribution expenses. Two of the most significant barriers to entry are
"brand recognition" and "network externalities". Turkcell effectively
maintains and increases its customer-base due a widespread use of its
network, which naturally creates a difficulty for Telsim to maintain or
increase its own market share.
Another major barrier to entry was identified as the vertical integration of
Turkcell that enables Turkcell to have an active role in the GSM devices
market through exclusive relationships established between Turkcell and
Turkcell Activation Centers and Turkcell Subscription Spots. Furthermore,
3,700 newspaper kiosks are selling pre-paid lines through A-Tel, a
subsidiary of Turkcell's major shareholder.
In light of the foregoing, Turkcell was found to have a dominant position in
the relevant market, since it has the power to apply its very own strategies
to determine variables that affect the demand in the market (such as
discounts and rebates) "independent of its customers and other
competitors".
As a result, with regard to the dealers working exclusively for Turkcell, the
Authority decided that there was no noncompliance with the competition
rules if these dealers are not working as cell phone distributor dealers at
the same time. On the other hand, if these dealers work exclusively for
Turkcell, it would be impossible for other operators to secure dealers, and
hence, competition would be seriously restricted in the market.
As per the Sim-Lock application, the Authority decided that Sim-Locks
cannot be used unless the price of the device is partially paid for by the
operator in return for a certain subscription period within the scope of a
promotion. If the aforesaid condition is present and the device is sold with
a Sim-Lock, the consumer should be notified that the device is being sold
with a lock, and that the expiration date of the lock will be removed free of
charge upon the consumer's request. Further, the consumer should be
informed of certain advantages that will be maintained if the consumer
decides to continue with his subscription. The consumer must also be
notified that s/he is free to have the lock removed anytime s/he desires in
return for a fee, which will be calculated depending on the remaining time
for the promotion.
For more information visit: http://www.rekabet.gov.tr/english.asp
or contact: dpolat@hbo-law.com.tr
2. COMPUTER CRIME
BRAZIL
LAW POWERS UP PIRACY COMBAT WEAPONS
Brazilian Law No. 10695 (the "Law"), published on 2nd July 2003,
amended the provisions of both the Penal Code and the Code of Criminal
Procedure by broadening piracy prevention measures. The Law extends
the minimum prison sentence for infringers of copyrights, who infringe with
a view to obtain direct or indirect profits, to two years. It maintains the
maximum prison sentence of four years.
Under the Law, it is also a crime to market third-party copyrighted work
without a license by means of cable, satellite, wave, or any other nonmechanical
methods (the so-called "cyberpiracy"). Further, the Law now
allows the police to seize counterfeit products, as well as the machinery
and equipment used to manufacture them, without a search warrant.
The Law establishes that reproduction of a work for personal and not-forprofit
use is not considered a crime.
For more information please contact: rapdecunto@pinheironeto.com.br
3. CONSUMER PROTECTION
AUSTRIA
NEW RULES ON UNSOLICITED COMMERCIAL
COMMUNICATION
On 20th August 2003, the Austrian Telecommunications Act (the
"Telekommunikationsgesetz 2003," or the "TKG 2003") implemented new
rules on unsolicited commercial communication via electronic mail and
SMS.
Austria was one of the world's first countries to enact a general ban on
such communication in 1999 by amending § 101 of the then-effective
Telecommunications Act. Sending e-mail in bulk or for advertising
purposes required prior consent from the recipient, and, once given, that
consent was revocable at any time. In addition, the old Act granted
protection against commercial e-mail under both competition law, as unfair
competition, and civil law, as a violation of privacy or property.
While drafting the new Telecommunications Act, the legislature gave in to
concerns raised by the Chamber of Commerce that this rule could affect
the development of electronic commerce in Austria, and it thus restricted
the scope of the ban. Under § 107 para. 2 TKG 2003, sending e-mail and
SMS in bulk (to more than 50 recipients) or for the purpose of direct
marketing is impermissible without prior consent only if the recipient is a
consumer. Moreover, § 107 para. 3 TKG 2003 provides that such prior
consent is not required where the following conditions are met:
• the sender received the contact details for such messages in the
context of the sale of a product or service to his or her clients;
• the message is for the direct marketing of his or her own similar
products and services; and
• the client is clearly and distinctly given the opportunity to object, free of
charge, and in an easy manner to such use of their contact details
when they are collected and on the occasion of each further sent
message.
ISSUE 22 SEPTEMBER – OCTOBER 2003 3

Sending such communication to recipients other than consumers is
permissible without prior consent if the recipient is explicitly given the
opportunity to object to receiving further messages (§ 107 para. 4 TKG
2003). By its clear wording, the legislature emphasized that sending
commercial communication to recipients other than consumers can no
longer be considered unfair competition or a violation of privacy or
property.
In any event, sending commercial e-mail or SMS is impermissible if the
identity of the sender, on whose behalf the communication is made, is
disguised or concealed, or if no valid address is provided to which the
recipient may send a request that such communication cease (§ 107 para.
5 TKG 2003). According to § 109 para. 3 TKG 2003, a violation of these
rules may warrant an imposable fine of up to $37,000.
The question remains whether the distinction between consumers and
non-consumers will assist the development of electronic commerce in
Austria. However, it is evident that Austria failed to accurately implement
Directive 2002/58/EC, which grants protection against the use of e-mail for
the purpose of direct marketing without prior consent to each recipient that
is a natural person (Art 13 para 1). The rights granted by Art 13 may not be
restricted by the Member States according to Art 15 para 1 of the Directive.
For more information please contact: thomas_fraiss@yahoo.de
UK
PERSISTENT MISUSE OF
ELECTRONIC COMMUNICATIONS
The Communications Act 2003 ("the Act") includes provisions aimed at
empowering OFCOM to deal with behaviour which amounts to a 'persistent
misuse' of an electronic communications system or network, but which falls
short of constituting a criminal offence. The relevant powers of
enforcement are provided to OFCOM in sections 128 & 131 of the Act.
Under section 131, OFCOM is required to publish a statement outlining its
general policy toward the exercise of its powers under the Act dealing with
the persistent misuse of a relevant network or service. OFCOM published
its policy statement in this regard on 28 August 2003.
The Act defines "persistent misuse" as behaviour that has the effect, or
likely effect, of causing someone to suffer annoyance, inconvenience or
anxiety. The new rules are a consumer protection measure designed to
protect consumers. OFTEL has stated that it considers that conduct will
have the "likely effect" of causing annoyance, inconvenience or anxiety if
such an effect is "probable", but not necessarily proven. In considering
whether a person has "persistently" misused a network, OFTEL will look at
the number, frequency and regularity of the alleged behaviour. It is not
necessary that the conduct involve the same network or service on each
occasion or that the same person be the target of the conduct in order for
behaviour to be persistent.
OFTEL has identified six general areas in which the persistent misuse of
networks is most likely to occur: the misuse of automatic calling equipment
to undertake short duration calls, recorded messages or fax messages
without the consent of the recipient; silent or short duration calls (where the
caller hangs up before the recipient has time to answer); number scanning
to determine whether telephone numbers are in service or not; misuse of
calling line identification (CLI) technology, such as the forwarding of
misleading or inauthentic CLI information; dishonest or fraudulent activities
such as directing consumers misleadingly to premium rate numbers; and
misuse of allocated telephone numbers.
For more information please contact: colin.long@olswang.com
4. DIGITAL SIGNATURES
MEXICO
NEW REGULATIONS ON ELECTRONIC SIGNATURE
On 29th August 2003, the Federal Official Gazette ("Diario Oficial de la
Federación") published several amendments to the Federal Commercial
Code (the "Code") on electronic commerce to regulate electronic
signatures. The amendments aim to give more sustenance to prior
amendments of May 2000, where several provisions on Data Messages,
their implications in contract formation, and their validity as courtroom
evidence were incorporated into the Code, the Federal Civil Code, and the
Federal Law on Consumer Protection. Critics of the May 2000
amendments claim they did not adopt all provisions of the UNCITRAL
model law on Electronic Commerce. The amendments of 29th August 2003
should remedy this deficiency by establishing rules that consider the
delivery and receipt of data messages and the preservation of said
messages.
The main principles adhered to in the new amendments are: technological
neutrality, contractual freedom of the parties, international compatibility,
and functional equivalence of data messages, with respect to the
information contained therein and the electronic signature vis à vis the
handwritten signature. While the May 2000 amendments had simply
mentioned the notion of an electronic or digital signature, the new
amendments elaborate on this idea by adopting the provisions of the
UNICTRAL Model law on Electronic Signatures. The new amendments
thus give regard to public key infrastructure models and seek to grant the
same validity to electronic signatures as that afforded to handwritten
signatures. Under the amendments to the Code, the electronic signature
will be deemed reliable if:
• the data related to the creation of the signature is exclusive of the
signatory;
• the data related to the creation of the signature is under the exclusive
control of the signatory;
• it is possible to detect any alteration on the electronic signature after
its signature; and
• as to the integrity of data messages, it is possible to detect any
alterations thereto after signature.
As was the case with the UNCITRAL Model law on Electronic Signatures,
the amendments imposed a series of obligations on:
• the issuer of the message;
• the providers of certification services (a concept that is also adopted in
this amendment); and
• the recipient of the message.
Among said obligations, the signatory is bound to act diligently to establish
reasonable means to avoid the non-authorized use of the data related to
the creation of the signature, while the recipient is bound to verify the
reliability of the electronic signature or of the validity of the certificate
issued to support the corresponding signature.
Notary publics and private entities will be able to apply to become
certification service providers before the Ministry of Economy under certain
rules to be enacted by the Ministry within 90 days from the publication of
the amendments. The amendments will become enforceable on that date.
Among other responsibilities, certification service providers must verify the
identity of any applicant and any other relevant circumstances for the
ISSUE 22 SEPTEMBER – OCTOBER 2003 4

issuance of a certificate; provide to the signatory the necessary means to
create and verify an electronic signature; maintain a registry of all
certificates issued by it; and establish a system that will ensure the integrity
of the certificates. In an effort to foster the use of electronic signatures with
other countries, the Code recognizes and gives validity to certificates or
electronic signatures issued in other countries, as long as such certificate
or electronic signature has an equivalent degree of reliability to the
certificates and electronic signatures issued in Mexico.
For more information visit: www.camaradediputados.gob.mx
or contact: aam@bstl.com.mx
5. DOMAIN NAMES
FINLAND
NEW ACT ON FINNISH DOMAIN NAMES
Finland's new Act on Domain Names ("Act")entered into force on 1
September 2003. On the day the new act entered into effect, the Finnish
Communications Regulatory Authority (FICORA) received over 18,000
domain name applications for ".fi" top level domain names. By September
18th, FICORA had received more than 26,000 applications. Before the
new act, only some 42,000 Internet names had been registered in Finland.
Under the new Act applicants have greater freedom of choice in choosing
domain names because, previously, Internet names had to correspond to
the name of their business, organization or to trademarks and registration
of common names or acronyms was forbidden. Certain restrictions still
apply under the new Act. For instance, an Internet name cannot be
indecent. It is also forbidden to register domain names that violate
someone else's protected mark or name. Applicants for an Internet name
are responsible for the legality of names they apply for. Furthermore
registration of personal names remains prohibited and private individuals
still may not register Finnish domain names unless they are private
entrepreneurs. Foreign companies may apply for domain names if they
have a branch entered in the Finnish Trade Register.
Internet names may not be registered for the purpose of resale. One case
has already been instituted by FICORA against a potential domain name
squatter. Under the new Act FICORA can deregister unlawfully registered
Internet names.
For more information visit: http://www.ficora.fi/englanti/index.html
or contact: craig.thompson@roschier.com
6. ELECTRONIC COMMERCE
CANADA
ENFORCEABILITY OF WEBWRAP AGREEMENTS
In "Canadian Real Estate Association (the "CREA") v. Sutton (Québec)
Real Estate Services Inc.", Montreal, 500-05-074815-026, 10th April 2003,
the Quebec Superior Court granted an interlocutory injunction against
Sutton, ordering Sutton to cease downloading listings from the www.mls.ca
website for the purpose of reposting the information on its own website.
The Court found that Sutton's actions violated the "terms of use"
agreement as posted on the mls.ca website. Such terms were subject to a
webwrap approach to online contract formation rather than a clickwrap
approach. While Sutton argued that it was not bound by CREA's terms of
use because it had not clicked on an "I Agree" button, or had not otherwise
manifested its consent, the Court held that CREA had an apparent right in
the integrity of its website, and it granted the interlocutory injunction.
This ruling's significance involves its place among other rare Canadian
decisions that address the enforceability of webwrap terms of use
agreements. The Court granted an interlocutory injunction here even
though it held that the enforceability of the website terms of use should be
determined on final judgment. The Court appears to have been influenced
by the fact that Sutton "knew what it was doing". Further, despite there
having been no clickwrap, the Court found evidence that Sutton knew that
it was subject to CREA's terms of use by the fact that Sutton had posted its
own "terms of use" agreement using a webwrap approach on its own
website. The Court agreed that CREA had made a sufficient case of
owning proprietary rights in its website listings, irrespective of the fact that
such listings were posted by various third parties, including Sutton.
The decision is also a relatively rare Canadian instance of judicial
consideration and treatment of Internet technology, where the Court
discusses Sutton's technological attempts ("stealthing") to sidestep CREA's
technological attempts to block Sutton's ability to download and repost the
MLS listings on its own website.
For more information visit:
http://www.canlii.org/qc/jug/qccs/2003/2003qccs11838.html
or contact: cmorgan@mtl.mccarthy.ca
7. FINANCIAL SERVICES
LUX
NEW LAW FOSTERING IT OUTSOURCING
IN THE FINANCIAL SECTOR
Outsourcing, or the use of third party provider, is a business strategy that is
being considered more and more by financial institutions as they face
increasing competition. Indeed, financial institutions view outsourcing as a
valuable tool that enables them to focus on their core competencies while
reducing their operating costs.
Against this background, the Luxembourg Government has decided to
foster the development of outsourcing services in the finical sector and, to
this end, the Parliament adopted on 2nd August 2003 the Act No 5085 (the
"New Law") amending the law of 5th April 1993 on the financial sector. The
New Law entered into force on 1st October 2003.
The main purpose of the New Law is to create new categories of
professionals of the financial sector (the "PFS") subject to strict
requirements (including, for example, professional secrecy) and to the
permanent supervision of the financial sector regulatory authority, the
"Commission de Surveillance du Secteur Financier".
One such new category of PFS covers "IT systems and communication
networks operators of the financial sector" (the "EDP Operator").
Thus, EDP Operators are defined by the New Law as professionals
responsible for the functioning of computer systems and communication
networks of financial institutions, PFS, undertakings for collective
investment (the "UCI") or pension funds.
The scope of services which may be offered by EDP Operators includes
data processing or data transfer as well as computer systems
implementation and maintenance. However, pursuant to the New Law,
ISSUE 22 SEPTEMBER – OCTOBER 2003 5

EDP Operators may only provide such services to financial institutions,
PFS , UCIs or pension funds set up under Luxembourg or foreign laws.
Pursuant to the New Law, EDP Operators will have, amongst other
obligations, to obtain a license from the Ministry of Finance and to justify a
share capital of at least one million and five hundred thousand euro.
For more information visit:
http://www.etat.lu/legilux/DOCUMENTS_PDF/MEMORIAL/memorial/a/200
3/a1121408.pdf
or contact: LE_GOUEFF@vocats.com
8. INTELLECTUAL PROPERTY
BRAZIL
LEGAL PROTECTION FOR SOFTWARE
On 30th June 2003, a decision of the 3rd Panel of Superior Court in
Special Appeal No. 443.119/RJ extended to software the same protection
that the law previously afforded to other intellectual works. The notable
case marks the first time that the highest court recognized the
copyrightable nature of software, which had already been expressly
granted under Law 9609/98 (the "Software Law"). This decision is also
notable for the penalty assessed - the infringer was penalized with
damages in an amount equal to 3,000 copies of the counterfeit product.
The Copyright Law provides for this amount of damages whenever
identifying the number of counterfeit copies would be impossible task.
For more information please contact: rapdecunto@pinheironeto.com.br
EU
REGULATION ON ENFORCEMENT OF
INTELLECTUAL PROPERTY RIGHTS
On 30th January 2003, the Council of the European Union proposed a
regulation on the enforcement of intellectual property rights.
The proposed directive (the "Directive") concerns customs action against
goods that are suspected of infringing intellectual property rights. The vote
on this Directive has been delayed to November because of the European
Institution. The European Parliament member responsible for guiding the
proposal has not yet produced the report on the draft legislation.
Criticism of the proposal is significant, which is being compared to a
controversial U.S. law. On the one hand, the Directive has drawn
dismayed reaction from copyright holder lobbyists, in particular from the
International Federation of the Phonographic Industry (the "IFPI").
Copyright holders seek alternative measures by which to develop the
regulation. They argue that more than 1 billion pirated music CDs have
been sold; thus, where one in every three CDs is illegal, the IFPI has lost
$4.6 billion due to piracy. Conversely, such large earning potential has
garnered support for the Directive from certain large high-tech companies,
such as Microsoft.
On the other hand, civil liberties groups criticize the Directive on the
ground that it poses a threat to civil liberties, innovation and competition
policy.
According to critics, large multinationals stand to reap the greatest benefit
from such enforcement of intellectual property rights. Indeed, the Directive
bans reverse engineering practice. Moreover, an analysis of the Directive's
implementation predicts that the law would both damage European
scientific research and limit consumers' rights.
Finally, although the Directive permits modification of the patentability of
computer-implemented inventions, according to computer scientists and
developers, it would increase the grip of multinational companies on the
software industry.
For more information please contact: LE_GOUEFF@vocats.com
INDIA
INDIA GRANTS FIRST EXCLUSIVE
MARKETING RIGHTS
On 5th September 2003, India's Controller General of Patents, Designs
and Trade Marks granted the first ever exclusive marketing right (the
"EMR") in India to United Phosphorous for sale of its fungicide, which is
sold under the brand "SAAF." The few applications, which were filed earlier
by various companies, were not approved by the Controller on various
grounds.
EMR entitles the EMR holder to have the exclusive right by himself, his
agents, or licensees to sell or distribute in India the article or the substance
on and from the date of approval granted by the Controller for a period of
five years or until the date of grant or rejection of patent application,
whichever is earlier.
The provisions for the grant of EMR were introduced in the Patents Act,
1970 by the Patents (Amendment) Act, 1999, to bring the Patents Act,
1970 in compliance with Agreement on Trade Related Aspects of
Intellectual Property Rights (the "TRIPS"). TRIPS required insertion of
EMR provisions with effect from 1st January 1995 pending introduction of
the product patent regime in the developing countries. The product patent
regime is scheduled to come into effect on 1st January 2005.
EMRs can be granted with respect to substances intended for use or
capable for being used as medicine or drug. However, no EMR can be
granted with respect to chemical substances that are ordinarily used as
intermediates in the preparation or manufacture of any of the medicines or
substances.
Under the amendment of 1999, Patent Offices are required to accept the
product patent applications and keep them in what is known as the "Black
Box" until 1st January 2005, when such applications will be examined for
the grant of patent. In the meantime, the applicant can apply to obtain an
EMR, which is granted if the following requirements are satisfied:
For inventions made in India or outside of India if:
• before filing an Indian application, applicant has filed an application for
the same invention in a convention country on or after 1st January
1995;
• the approval to sell or distribute the article or substance in the basis of
appropriate test conducted on or after 1st January 1995 is granted in
such convention country; and
• applicant has received the approval to sell or distribute the article from
the authority specified in this behalf by the Central Government.
For inventions made in India:
• before filing an Indian application, applicant has filed an application on
or after 1st January 1995 for method or process of manufacture for
that invention relating to identical article or substance and has been
granted the patent on such application; and
• applicant has received the approval to sell or distribute the article from
the authority specified in this behalf by the Central Government.
ISSUE 22 SEPTEMBER – OCTOBER 2003 6

United Phosphorous had already received a process patent for SAAF in
2001 while the product was introduced in the market and had been gaining
market share. This first approval of an EMR, paves the way for more
favorable EMR decisions till the start of 2005 when the "black box" will be
opened and pharmaceutical patents will gain momentum.
Delhi makes Trade Mark search mandatory before granting manufacturing
license.
In a move to curb the spread and sale of counterfeit drugs, the Drugs
Control Department of the National Territory of Delhi has made search
reports from the Registrar of Trade Marks mandatory before approving any
drug-manufacturing license under a particular brand name.
This initiative by the Delhi Drugs Authority was made pursuant to
observations in the Supreme Court decision of Cadila Health Care Ltd. v.
Cadila Pharmaceuticals Ltd. (decided 26th March 2001). In paragraph 41
of the said judgment, the Supreme Court observed as follows:
"Keeping in view the provisions of Section 17-B of the Drugs and
Cosmetics Act, 1940 which inter alia indicates an imitation or resemblance
of another drug in a manner likely to deceive being regarded as a spurious
drug it is but proper that before granting permission to manufacture a drug
under a brand name the authority under that Act is satisfied that there will
be no confusion or deception in the market. The authorities should
consider requiring such an applicant to submit an official search report
from the Trade Mark office pertaining to the trade mark in question which
will enable the drug authority to arrive at a correct conclusion."
This provision of requiring search reports of trade marks if adopted in the
other States in India will eliminate the chances of approval of a deceptively
similar and look-alike brand of drugs. The Government of India has
appointed Mashelkar Committee to study the various aspects of the
growing threat from spurious drugs and give its report thereon. The
committee has submitted its interim report. The drug regulatory officials
have echoed their feelings and hope to get a positive response from the
report in this regard.
For more information please contact: vaibhav@nishithdesai.com
INDIA
NEW IP LAWS ENTER INTO FORCE
On 15th September 2003, the Indian government effectuated the Trade
Marks Act, 1999 (the "TM Act") and the Geographical Indications of Goods
(Registration and Protection) Act, 1999 (the "GI Act"). India's induction of
these laws fully complies with the Agreement on Trade Related Aspects of
Intellectual Property Rights (the "TRIPS"). While the TM Act replaces
earlier legislation - namely, the Trade and Merchandise Marks Act, 1958 -
the GI Act is a new law that grants statutory protection to the Geographical
Indications of Goods.
Also on 15th September 2003, the government established the Intellectual
Property Appellate Board in Chennai with benches at Ahmedabad, Delhi,
Mumbai, and Kolkata. Now the Appellate Board will hear appeals from the
decisions of the Registrar of Trade Marks and Geographical Indications.
Trade Marks appeals that are currently pending before various High Courts
stand to be transferred to the Appellate Board.
TM ACT
Among other salient features, the TM Act expands the definition of the
term "Trade Mark" to cover the shape of goods, their packaging, and their
combination of colors. It also introduces the registration of both Service
Marks and Collective Marks, granting statutory protection to such marks.
Service Marks were not registrable under the 1958 legislation. Therefore,
prior protection available for Service Marks was through an action of
"passing off." Entries 35 to 42 in the Fourth Schedule of the Trademark
Rules, 2002, list the classes of services. The classification complies with
the Nice Classification of Goods and Services. Collective Marks will be
owned by associations, including those representing accountants,
engineers, or architects. The members of such associations will be allowed
to use the Collective Mark to identify themselves with a level of quality and
other requirements as set by the association.
Additionally, the TM Act:
• permits the filing of multi-class applications.
• increases the term of registration and renewal from seven to ten years.
• recognizes the concept of "well-known Trade Mark," thus prohibits the
registration of a mark that is merely a reproduction or imitation of a
well-known mark, even with respect to different goods or services.
• recognizes offenses relating to falsification of Trade Marks and
application of false trade descriptions - i.e., police may take
cognizance of the complaint without obtaining order from the
magistrate. Police are empowered to search and seize goods or other
instruments involved in committing an offense. However, it will be
mandatory for police to obtain the opinion of the Registrar as to facts
involved in the offense relating to the Trade Mark. This requirement is
likely to delay the search and seizure procedure.
• widens the scope of the definition of the term "infringement." For
instance, use of a registered Trade Mark as a part of a corporate name
or use of a mark in comparative advertising if such advertisement is
contrary to honest practices or is detrimental to its distinctive
character, amounts to infringement.
• obliterates the "disclaimer" provision.
• increases, considerably, the application fees in the Trademarks Rules,
2002. For example, the registration fee has been increased from Rs.
300/- to Rs. 2500/-.
GI ACT
The GI Act was passed with the objective of providing protection to a
Geographical Indication, including any agricultural, natural, or
manufactured goods, or any goods of handicraft or industry, including
foodstuff. Geographical Indications identify a good as originating in a place
where a given quality, reputation, or other characteristic of the good is
essentially attributable to its geographical origin. Among well known
examples of Geographical Indications are "Champagne," "Bordeaux," and
"Chianti." Each region is famous for its wine - the first two are regions in
France and the third is a region in Italy. Examples in the Indian context are
"Banarasi Saris," "Kolhapuri Chappals," "Lakhnowi Kurta," and "Darjeeling
Tea."
A Trade Mark that consists exclusively of marks or indications that serve to
designate the geographical origin of goods or services cannot be
registered under the TM Act. The purpose of a Trade Mark is to denote the
origin of the goods from a particular trader. In the case of a geographical
name, the name would lead the consumer to believe that the goods
originate from that place and thus cause confusion and even deception.
To be recognized as a Geographical Indication, a product must satisfy both
the territorial aspect and that a given quality, reputation, or other
characteristic should be essentially attributable to its geographical origin.
All goods have been categorized in different classes in accordance with the
International Classification of goods for the purposes of registration of
Geographical Indications.
ISSUE 22 SEPTEMBER – OCTOBER 2003 7

The GI Act provides for registration of a Geographical Indication and the
authorized user thereof who is able to bring an action based on the
registration.
Registration of a Geographical Indication entitles the registered proprietor
and authorized users to the exclusive right to the use of the Geographical
Indication in relation to the goods in respect of which Geographical
Indication is registered, the right to obtain relief in respect of the
infringement of the Geographical Indication. Two or more authorized users
of a registered Geographical Indication have co-equal rights.
The registration of Geographical Indication is valid for a period of ten
years, and may be renewed thereafter for further periods of ten years. The
registration of an authorized user is valid for the earlier of ten years or on
the date when registration of Geographical Indication, with respect to
which the authorized user is registered, expires.
The GI Act prohibits assignment, transmission, licensing, pledge,
mortgage, or any such other agreement with respect to a Geographical
Indication. The Act also provides for infringement and passing off actions,
thus recognizing the common law right in a Geographical Indication, and
includes civil as well as criminal remedies. Infringement has been defined
to include unfair competition. Available remedies in a civil suit include an
injunction, discovery of documents, damages or accounts of profits,
delivering-up of the infringing labels, and indications for destruction or
erasure.
For more information please contact: vaibhav@nishithdesai.com
INDIA
SUPREME COURT CLEARS
TELECAST OF KARISHMA
Originally scheduled to be launched on 12th May 2003, Rupees One
Billion, mega-serial Karishma: The Miracle of Destiny (the "Karishma") was
telecast on Sahara Manoranjan after a 105-day delay on 25th August
2003.
Sahara Media Entertainment Ltd.'s (the "Sahara") 12th May launch of
Karishma was brought to an unexpected halt just four days before its
telecast. On 7th May 2003 - in a suit in which best selling romance novelist
Barbara Taylor Bradford alleged copyright infringement of her book "A
Woman of Substance" (© 1979) - the Single Judge Bench of the Calcutta
High Court issued an ex-parte injunction order prohibiting the telecast of
Karishma. The allegation of copyright infringement was based on an
alleged statement by the film's producer, made during an interview, that
Karishma was inspired by "A Woman of Substance."
On Monday, 12th May 2003, flurries of appeals were brought. The Single
Judge Bench refused Sahara's application for vacating the injunction. On
the same day, on appeal by Sahara, the Division Bench of the High Court
allowed the telecast of Karishma. Later that day, on Bradford's appeal, the
Vacation Bench of the Supreme Court stayed the airing of Karishma by an
ex-parte order. In the next hearing, the Supreme Court stayed the
proceedings that had been brought before the High Court and restrained
airing of Karishma until a decision was made as to Bradford's Petition. On
19th May 2003, the Supreme Court remanded the matter to the Single
Judge Bench of the High Court.
Thereafter, in the High Court, Sahara contended that Karishma was based
on a work entitled "parajita," by Sachin Bhaumick. Furthermore, he said
that, apart from the rags-to-riches theme, there was no similarity between
Karishma and Bradford's novel, and that only substantial similarity of
thought, sequence, and expression could be termed as infringement and
not mere similarity in idea, concept, or central theme.
On 30th June 2003, the Single Judge Bench vacated the injunction granted
on 7th May 2003, with a direction to begin the telecast on 7th July 2003.
Bradford promptly challenged this order before the Division Bench, which
ruled to extend the injunction until further hearings could take place, and
directed Bradford to submit a copy of her book.
Sahara submitted to the Division Bench that one of its business rivals was
instrumental in filing suit against Karishma. Producer Akashdeep Sabir's
counsel contested that during an interview his client had stated that the plot
of Karishma had been copied from Bradford's book.
On 21st July 2003, after considering the evidence, the Division Bench
permitted the telecast of Karishma: A Miracle Of Destiny, dismissed
Bradford's appeal, and refused to grant a stay of operation on its order as
prayed for by Bradford. The Division Bench observed that the interview
conducted by Pammi Somal shows, by its internal evidence, that
Akashdeep Sabir, had not read the book by Bradford. Rather, in the
interview Sabir had admitted to borrowing only the plot and some
characters. Therefore, the Division Bench observed, "Copyright
infringement cannot be established on this alone. No prima facie case has
been made. Infringement can be established only by comparing and
showing similarity of details, events, situations, expressions of language,
and imagination. Learned leading Counsel of both sides had not even read
the book. How can infringement be established when even the book had
not been read" (RG Anand v/s Deluxe Films, decided by the Supreme
Court was relied upon). The Division Bench also observed the balance of
convenience and considered Sahara's contention that they had spent over
Rupees One Billion and taken Rupees One Hundred and Ten Million from
advertisers. The Division Bench observed "plaintiffs will hardly suffer any
loss of value of their book; if an injunction is obtained after 15/20 episodes
(assuming there is going to be an infringement), the plaintiffs will get
practically their full relief, and the respondents will be in almost equal
problems as not starting at all. The balance of convenience heavily favors
the respondents." The Division Bench further observed that Bradford's
interlocutory application was premature. Bradford was ordered to pay
heavy costs to Sahara.
If after watching Karishma, Bradford can in fact establish infringement, it
appears from the order of Division Bench that she is free to move the High
Court once again to pray for an injunction. The Division Bench observed
that "If 15-20 episodes are shown, then details of similarity can be
established; the plaintiffs might, "have a prima facie case then; they have
none now."
On 21st July 2003, Bradford moved the Supreme Court challenging the
High Court order. On 4th August 2003, the Supreme Court dismissed
Bradford's Petition, but set aside the order imposing heavy costs and
damages on her.
Perhaps the tortuous destiny of Karishma might have been curtailed if the
two stories had been read sooner to determine whether there was in fact a
copyright infringement.
In suits based on copyright infringement, rival works should be examined at
the earliest possible opportunity to ascertain whether a prima facie case for
infringement is established. Since copyright exists in the expression of an
idea and not in the idea itself, close comparison of "expression" is
necessary to ascertain whether at least a prima facie case is made out.
Balance of convenience and comparative hardship are also factors to be
taken into consideration while granting or refusing interim injunction.
In India, where civil litigation can take approximately 10 to 12 years to be
final, the fate of parties in intellectual property infringement matters is
ISSUE 22 SEPTEMBER – OCTOBER 2003 8

decided at the interim stage itself, since after time passes intellectual
property often loses its value. Therefore, a practice has developed in
intellectual property infringement matters where detailed evidence on
affidavits is led at the interim stage and interim injunction matters are
heard at length, sometimes for weeks, where the merits of the matter are
argued in detail with the support of case law.
It may or may not come to light whether the Karishma saga was
orchestrated by a rival channel, as Sahara claimed, or whether it was just
the unhappy result of a misdirected but genuine attempt to bring to book
pirate Bollywood script writers, but the travails of "Karishma: The Miracle of
Destiny" have clearly provided a considerable amount of publicity to the
work itself.
For more information please contact: vaibhav@nishithdesai.com
9. MARKET ACCESS
BRAZIL
ANATEL ANNOUNCES CREATION
OF A NEW PUBLIC SERVICE
On 21st August 2003, ANATEL announced the creation of a new public
service of electronic data communication, which will last until the end of
2004. ANATEL's objective is to introduce public access to the Internet. Any
company that is interested in rendering such service may participate on the
bid.
For more information please contact: rapdecunto@pinheironeto.com.br
CANADA
FOREIGN OWNERSHIP IN THE COMMUNICATIONS
SECTOR
Recently, two House of Commons Standing Committees predicted
radically different futures for foreign ownership restrictions of
telecommunication and broadcasting sector companies.
In an April 2003 report, entitled "Opening Canadian Communications to the
World", the Standing Committee on Industry, Science and Technology
noted that foreign ownership restrictions had impeded raising capital in the
past decade, and that these restrictions fell hardest on newer telecom
companies. The Industry Committee recommended that the Canadian
government remove the minimum ownership requirements, including the
requirement of Canadian control applicable to telecommunications
common carriers. The Industry Committee further recommended that a
special parliamentary committee undertake a comprehensive review of the
governance structure of both telecommunications and broadcasting
sectors in Canada. The review should, at minimum, examine both the
regulatory framework governing the telecommunications and broadcasting
sectors, and the approaches that the federal government could adopt to
continue to facilitate broadband deployment in rural and remote
communities. Lastly, the committee should also examine the federal
department organization of these industries, and review the jurisdiction,
role, and mandate of the Canadian Radio-television and
Telecommunications Commission (the "CRTC").
By contrast, in a June 2003 study of the Canadian broadcasting industry
entitled "Our Cultural Sovereignty: the Second Century of Canadian
Broadcasting," the Standing Committee on Canadian Heritage
recommended that existing foreign ownership limits for broadcasting and
telecommunications be maintained. The Heritage Committee held the view
that broadcasting is an essential preserve of Canadian culture and
imagination, and that, should Canadians give up control of their cultural
sovereignty, they may never get it back. The Heritage Committee proposed
fundamental reforms to the structure and composition of the CRTC. It
called on the government to consider that a single Communications Act be
administered by a single department of communications. The new
Communications Act would replace the Telecommunications Act, the
Broadcasting Act, and the Canadian Radio-television and
Telecommunications Act. The Committee further recommended revamping
the current support programs for Canadian broadcasting; creating a new
institution - a broadcasting monitor - that would report to Parliament on the
health of the broadcasting system; and launching a local initiative fund to
promote community and local broadcasting. The Heritage Committee also
showed strong concerns with respect to cross-media ownership.
For more information visit: www.parl.gc.ca/infoCom/CommitteeReport.asp
or please contact: cmorgan@mtl.mccarthy.ca
10. MEDIA
INDIA
MIB REVISES UPLINKING GUIDELINES
On 26th March 2003, the Indian Government, in its Guidelines for Uplinking
of News and Current Affairs TV Channels from India (the "Guidelines"),
imposed a 26% cap on the foreign direct investment (the "FDI") in
television news companies desirous of uplinking from India. This was on
par with the FDI cap prevalent in the print medium relating to newspapers
and periodicals dealing in news and current affairs.
The Government has now revised the Guidelines issued on 26th March
2003 by amending the eligibility criteria for uplinking. As per the revised
Guidelines, the applicant company desirous of uplinking news and current
affairs channel(s) from India is considered eligible, if it fulfils the following
criteria:
OWNERSHIP
FDI should not exceed 26% of the Paid-up Equity of the applicant
company. While calculating the 26% FDI, the foreign holding component, if
any, in the equity of the Indian shareholder companies of the applicant
company will be duly reckoned on pro rata basis so as to arrive at the total
foreign holding in the applicant company.
Equity held by the largest Indian shareholder should be at least 51% of the
total equity (excluding the equity held by Public Sector Banks and Public
Financial Institutions) in the New Entity.
The term largest Indian shareholder includes any or a combination of the
following:
• in the case of an individual shareholder: (i) the individual shareholder;
(ii) a relative of the shareholder within the meaning of Section 6 of the
Companies Act, 1956; (iii) a company/ group of companies in which
the individual shareholder/HUF to which he belongs has management
and controlling interest.
• in the case of an Indian company: (i) the Indian company (i.e. a
company having a resident Indian or a relative/HUF, either singly or in
combination holding at least 51% of the shares); (ii) a group of Indian
companies under the same management and ownership control.
Provided that in case of a combination of all or any of the entities
ISSUE 22 SEPTEMBER – OCTOBER 2003 9

mentioned above, each of the parties should have entered into a
legally binding agreement to act as a single unit in managing the
matters of the applicant company.
To prevent control by foreign companies and to ensure that the spirit of the
uplinking norms is maintained the following requirements have also been
brought in:
DISCLOSURES
At the time of filing of application, the applicant is required to make full
disclosure of Shareholders Agreements, Loan Agreements, and such other
Agreements that are finalized or proposed. Any subsequent changes
having bearing on these agreements must be disclosed to the Ministry of
Information and Broadcasting (the "I&B") within 15 days.
The applicant is required to provide the names and details of (i) proposed
directors who are not resident Indians, (ii) any foreigners/NRIs to be
employed or engaged by the company as either consultants (or in any
other capacity) for more than 60 days in a year, or as regular employees.
Prior permission for alteration of shareholding pattern and agreements:
Company must obtain prior permission from I&B before effecting any
alteration in the foreign shareholding patterns and the shareholding of the
largest Indian shareholders, or any alteration in any other Agreements.
THOSE IN CONTROL SHOULD BE RESIDENT INDIANS
At least 3/4th of the Directors of the company and all key Executives and
Editorial staff, CEO of the applicant-company, and/ or head of the channel
are required to be resident Indians.
REPRESENTATION ON BOARD
The representation on the Board of Directors of the company should as far
as possible be proportionate to the shareholding.
Applicant company to retain control:
• all appointments of key personnel (executive and editorial) are to be
made by the applicant company without any reference from any other
company, Indian or foreign.
• the applicant company should have complete management control,
operational independence and control over its resources and assets
and must have adequate financial strength for running a news and
current affairs TV channel.
These safeguards appear to have been considered, in the wake of a
controversial uplinking application, by STAR News. STAR News and its
group companies are facing allegations that a foreign company is using
"shell companies" and "dummy investors" to exercise proxy editorial and
financial control. STAR News, whose application is pending approval, has
been given time until 28th September 2003 to comply with the new
Guidelines. Currently, Star is negotiating with prospective local partners to
finalize the dominant Indian partner as required by the new Guidelines and
have sought an extension of the compliance deadline.
The Government has also decided in principle to rework the print medium
FDI norms, so as to bring them at par with the electronic medium,
wherever necessary.
For more information please contact: vaibhav@nishithdesai.com
11. PRIVACY
ARGENTINA
COURTS ADDRESS THE USE
OF LABOR E-MAIL ACCOUNTS
The Secretariat of Communications, relying upon its Executive Power, is
currently working on a project bill identified as Legal Protection of E-mails
(the "Project"). Section 3 of the Project establishes that:
• e-mail accounts provided by an employer for an employee as a
consequence of a labor relation shall be considered to be the
employer's property, and
• the employer shall have the right to access and control the information
of such e-mail accounts, if the terms and conditions of use and access
have been notified to the employee.
Two labor courts recently addressed the issue of e-mail accounts provided
by an employer for an employee, and ruled under the same line of
reasoning as the Project. However, the courts arrived at different results
due to the particular facts and evidence of each case.
In the first case, Labor Court of Appeals 9 held that the termination of the
labor relation of an employee who had used the labor e-mail account for
personal benefits was not a reasonable cause to fire the employee. The
court took into account the fact that the employer had not notified or
communicated to the employee the terms and conditions of use and
access of the labor e-mail, as suggested by the Project. Accordingly, the
employee's use of the e-mail account for personal matters was not
sufficient to warrant a termination of employment.
On the other hand, in a separate case, a First District Labor Court held that
reasonable use of labor e-mail did not include receiving and forwarding
pornographic texts or images. Here, the Court affirmed that the employee
had been advised on several occasions about the labor e-mail policies,
which opposed the employee's conduct.
In spite of the different results, both courts coincided on the need to notify
or communicate labor e-mail policies to employees, while emphasizing the
validity and enforceability of those policies, as well as the employer's right
to control the e-mail accounts.
For more information please contact: gonzaloz@mille.com.ar
ITALY
NEW CODE FOR PRIVACY PROTECTION
On 30th June 2003, the Italian Council of Ministers finally approved a new
personal data protection code (the "Code") that will take effect on 1st
January 2004.
The new text unifies fragmented provisions from amended and integrated
Law 675/1996, the Italian framework on personal data protection, which
introduced several innovations in line with the Personal Data Protection
Authority case law ("Garante per la protezione dei dati personali"), and
European Directive 2000/58, regarding privacy and the Internet. The body
of rules maintains an opt-in regime. However, the notification system
represents an important innovation. While the current regime requires
every party that is not specifically exempted to provide notice to the
Authority, the new Code reverses the approach by enumerating specific
cases that will require notification. Further, the Code, in line with the
European trend, reduces to thirty months the maximum conservation term
ISSUE 22 SEPTEMBER – OCTOBER 2003 10

of phone traffic data for use in crime assessment and prevention and
introduces new dispositions concerning the privacy of the parties to a legal
proceeding.
Finally, the Code includes a regime of detailed new safety measures
intended to safeguard databanks. The different measures are divided into
three categories: dispositions applicable to processing with electronic
instruments; dispositions to protect sensitive information or judicial acts;
and minimum measures for all kinds of data processing.
For more information visit: www.garanteprivacy.it
or please contact: f.cugia@lexjus.com
12. TARIFFS
UK
POLICY STATEMENT FOLLOWING REVIEW OF TWO-
PART CHARGING
The Director General of Telecommunications has concluded his review
into the feasibility of establishing a system of two-part charging for
wholesale interconnection and issued his final statement on 1st September
2003.
The Director General has concluded that the introduction of two-part
charging is not appropriate in light of the costs and uncertain benefits it
offers.
Two-part charging involves the levying of separate tariffs for the setting up
of a call (call set-up) and the maintaining of the connection for the duration
of the call (call duration). Currently, BT averages the cost of both of these
elements of call interconnection and charges a single, blended rate, levied
on a pence per minute (PPM) basis.
The issue of two-part charging has been considered by OFTEL on a
number of occasions during the period since 1999. It was argued that twopart
charging provided a more efficient means of aligning cost recovery for
each call against its cause.
In the consultation document, Policy review of two-part charging, issued in
January 2003, the Director General indicated that he would only consider
adopting two-part charging if the benefits of the approach significantly
exceeded the direct costs of implementation.
However, the Director has determined that, in fact, the potential costs of
developing, implementing and maintaining a system to account for two-part
charging would exceed the benefits likely to result to consumers, and
would add a further burden on OFCOM at a time of considerable
regulatory change.
The Director General also considered that several of the proposed benefits
of two-part charging were uncertain, including whether any resulting
benefits would flow through to the retail level and uncertainty about the
proper split between the call set up and duration components of the
charge.
For these reasons, the Director General concluded that it was not clear
that any potential benefits of two-part charging, which would be derived at
the wholesale level, would outweigh the costs of setting up and monitoring
this approach, which BT estimated at approximately £5 million over the
next five years.
For more information please contact: colin.long@olswang.com
13. TAX
BRAZIL
ISS ON IP-RELATED SERVICES
On 1st August 2003, Supplementary Law No. 116 came into force in Brazil,
and amended the current regulations on the Tax on Services (the "ISS").
Besides adding several services to the list of ISS triggering events,
Supplementary Law 116/03 establishes that the ISS will be levied on all
services rendered to Brazilian entities, even if such services are fully or
partially provided abroad. Where services are rendered abroad, the ISS will
be paid by the principal instead of the service provider.
Accordingly, the ISS may be assessed at a rate of up to 10% on services
rendered by a foreign entity to a Brazilian company in the following areas,
among others: information technology; licensing and assignment of rights
to use software or trademarks; agency of industrial property, artistic, and
literary rights; photographic, phonographic, and cinematographic work;
technical and administrative assistance, even where it involves the
assignment of personnel or technicians to Brazil; franchising; press
agency, journalism and public relations; and art work.
For more information please contact: rapdecunto@pinheironeto.com.br
INDIA
MAINTENANCE OF PCS NOT SUBJECT TO SERVICE
TAX
The Ministry of Finance (the "Ministry") has issued a series of notifications
to clarify the scope and taxability of some of the new services that have
been brought within the service tax net. The Indian industry had been
anxious about the scope of these new services, and hence representations
were made to the Ministry to obtain clarity on the same. Some of the
important clarifications are discussed hereunder.
From 1st July 2003, maintenance or repair services under contracts
became subject to service tax at the rate of 8%. Pursuant to the bid made
by Indian corporations, the Ministry has, in public interest, exempted
maintenance and repair of computers, computer systems, and computer
peripherals from the levy of service tax by Notification No. 20/2003, dated
21st August 2003. Clearly all IT companies engaged in maintenance and
repair services will benefit from this decision.
Additionally, the Ministry has also made it clear in Circular No. 62/11/2003,
dated 21st August 2003, that maintenance or repair services (other than
maintenance and repair of computers, computer systems, and computer
peripherals) rendered prior to 1st July 2003 will not be taxable irrespective
of when the bills are raised or payments are made.
The Ministry clarified under a separate Notification No. 19/2003, dated 21st
August 2003, that in the case of the new category of service
"commissioning or installation of plant, equipment, or machinery," where
there is a turnkey contract - involving commissioning or installation along
with supply of plant, machinery, or equipment - the assessee will have the
option to pay the service tax either on 33% of the gross amount charged,
or on the actual amount of service fee billed to the client.
The Ministry also clarified by Notification No. 20/2003, dated 21st August
2003, the scope of IT service under business auxiliary service. Thus, any
service of back office processing that primarily relates to the operation of a
computer system will be considered as IT services and will be exempt from
ISSUE 22 SEPTEMBER – OCTOBER 2003 11

service tax. However, services such as pay roll processing, account
management, etc., rendered even through the use of computer programs,
cannot be termed as activities that primarily relate to computer systems,
since the use of a computer in these services is secondary while the
primary activity is that of business-related work. Accordingly, such services
will attract a service tax of 8%. The mere fact that a computer or a laptop
has been used for providing the service does not, ipso facto, make the
service an IT service. IT service essentially means any service related to
designing, developing, or maintaining computer software, or computerized
data processing, system networking, or any other service primarily related
to the operation of computer systems.
For more information please contact: vaibhav@nishithdesai.com
INDIA
SERVER HELD TO CONSTITUTE
PERMANENT ESTABLISHMENT
A recent resolution between the U.S. competent authority and its Indian
counterpart as regards VISA's obligation to pay taxes in India does not
provide good news to this credit card major. VISA will now be required to
shell-out the taxes demanded by the Indian revenue authorities, as the
U.S. competent authority has concurred with the views of the Indian
revenue authorities that VISA is liable to tax in India.
The Indian revenue authorities had held that the revenues attributed to
VISA operations carried out in India were taxable in India because VISA
had a fixed place of business in India. The revenue authorities reckoned
that the server through which business was transacted constituted a
Permanent Establishment (the "PE") of VISA in India.
Under Article 5 of the Indo-U.S. Double Taxation Avoidance Agreement
(the "Treaty"), a PE means a fixed place of business through which an
enterprise operates either wholly or partly, and includes a place of
management, a branch, an office, a factory, a workshop, etc. Furthermore,
as per Article 7 of the Treaty, the business profits of a U.S. company can
be taxed in India only if it has a PE in India and such profits can be taxed
only to the extent that these are attributable to the PE in India.
The Indian revenue authorities had sought to tax VISA for that portion of its
profits that could be attributed to its Indian operations by concluding that
the server located in India constituted a PE of the company in India. VISA
had contested the income tax demands raised on it and had approached
the competent authority of the U.S. as per the Mutual Agreement
Procedure (the "MAP") prescribed under the Treaty.
The U.S. competent authorities have now settled the issue in favor of the
Indian revenue authorities by holding that that VISA has a PE in India. The
U.S. authorities have sought a reassessment of income tax demand raised
on VISA, based on acceptance of the fact that the company has a PE in
India.
MAP proceedings are confidential in nature and, therefore, the details of
the same are not published for public reference.
For more information please contact: vaibhav@nishithdesai.com
INDIA
SERVICE TAX TO BPO COMPANIES
The 2003-2004 budget has increased the service tax rate from 5% to 8%,
and has brought ten new services within the tax net.
Among the new taxable services is one "provided by a commercial concern
in relation to business auxiliary service."
The phrase "business auxiliary service" has been defined as any service in
relating to:
• "promotion or marketing or sale of goods produced or provided by or
belonging to the client; or
• promotion or marketing of service provided by the client; or
• any customer care service provided on behalf of the client; or
• any incidental or auxiliary support service such as billing, collection or
recovery of cheques, accounts and remittance, evaluation of
prospective customer or public relation services, and includes services
as commission agent, but does not include any information technology
service."
Thus, the definition for "business auxiliary service" encompasses a wide
range of activity. Services like client query processing, billing, accounting,
payroll, telemarketing, etc. are now in the ambit of service tax.
Furthermore, Notification 2/2003, dated 1st March 2003, has withdrawn an
earlier notification that exempted from service tax activity involving
payments received in foreign exchange. The combined effect would mean
that most of the services that are typically rendered by BPO companies
and call centers to their foreign or Indian clients could attract a service tax
of 8%.
Services rendered by BPO companies will not be subject to service tax if
the services can be classified as "information technology services." An
explanation provides: "For the removal of doubts, it is hereby declared that
for the purposes of this clause 'information technology service' means any
service in relation to designing, developing or maintaining of computer
software, or computerized data processing or system networking, or any
other service primarily in relation to operation of computer systems."
Analysis of the above explanation reveals that the phrase "information
technology service" has been defined in a very restrictive manner, and thus
would cover only those services that relate to the design, development,
maintenance, and operation of computer software/computer systems and
system networking. Most of the above-mentioned categories do not apply
to services provided by BPO companies; computerized data processing is
the only exception that could be pertinent to BPO operation. However,
several services of a BPO company, like medical transcript, billing, etc.,
may not fall within the category of computerized data processing and
hence the service tax may be applicable.
The Budget's explanatory memorandum, however, seems to indicate
otherwise. The relevant portion of the memorandum reads: "Business
promotion and support services including customer care services. These
services include launching of products, customer education programmes,
conduct of seminars, help desk services, managing front offices, enquiry
bureaus, etc. however computer enabled services, namely, data
processing, networking, back office processing, computer facility
management shall not be subjected to service tax."
The language of the explanatory memorandum suggests that government's
intention was to exclude computer enabled data processing, as well as
computer enabled back office processing services, from the service tax.
However, the definition of "business auxiliary services" covers most of the
back office processing services as taxable services except the services
that are computerized data processing services. The phrase "computerized
data processing" is more restrictive than the phrase "computer enabled
data processing." Furthermore, computer enabled back office processing is
absent from the section altogether. This leads one to deduce that the
action does not match the intention.
In conclusion, keeping in mind the tremendous growth potential of this
industry and the desire of Indian government and industry to be hub of
back office services, it is necessary for the Government to clarify whether
ISSUE 22 SEPTEMBER – OCTOBER 2003 12

its intention as expressed in the explanatory memorandum, but
inadvertently not contained in section, applies.
For more information please contact: vaibhav@nishithdesai.com
INDIA
TASK FORCE EXAMINES ISSUE OF TAXING
FOREIGN CLIENTS
The Indian Government recently set up a task force to examine whether a
foreign company, which has outsourced some of its business operations to
a BPO service provider in India, would be subject to tax in India.
Incidentally, the Indian BPO service provider itself is generally eligible for a
tax holiday benefit up until 31st March 2009.
This issue has become relevant in light of the recent amendment to the
meaning of the term "business connection" in the Finance Act, 2003,
wherein the relationship between an Indian agent and a foreign entity can
be termed as a business connection. Therefore, under certain
circumstance, it is possible to subject the foreign company to tax in India.
There does not seem to be any cause for worry among BPO service
providers that provide services to a large number of clients, as such
providers are unlikely to constitute "dependent agents" of their clients.
However, the task force is examining whether clients of captive BPO
service providers could be brought within the Indian tax net. Transferpricing
norms will likely also be examined, and rules for transactions
between the captive BPO service provider in India and the foreign parent
may be tightened.
In their meetings with the task force, industry representatives have strongly
suggested a cautious approach to any amendment in the tax regime to
ensure that the Indian BPO sector does not lose out to competitors in other
jurisdictions.
For more information please contact: vaibhav@nishithdesai.com
MEXICO
SPECIAL TELECOM TAX UPHELD
In 2002, Congress passed a tax known as Special Tax on Product and
Services (the "Impuesto Especial sobre Productos y Servicios", or the
"IEPS") for the main purpose of taxing certain products and services that
were deemed to be luxury products or services. Among the services to be
taxed, at a 10% tax rate, were telecommunications services, excluding
basic telephony and Internet access and use. As expected, hundreds of
"amparo" proceedings were initiated by telecom companies before Federal
courts seeking determinations of the inapplicability of such tax and arguing
that the tax is unconstitutional where it discriminates between services.
In June 2003, the Federal Supreme Court upheld the constitutionality of
the IEPS on telecommunications service providers. It upheld a license to
install, operate and exploit telecommunications services, finding that the
exemption given to basic telephony and Internet was justified as those
services are fundamental to the country's development.
In light of the decision, cable operators and other telecom providers are
pushing Congress to pass a resolution to repeal the IEPS on telecomm
services. Among other arguments, the cable companies say that they have
lost significant revenue as a direct result of the tax. Until now, only paging
companies have been able to obtain an exemption on the tax.
For more information visit: www.canieti.com.mx
or please contact: aam@bstl.com.mx
14. TELECOMMUNICATIONS
AUSTRIA
NEW TELECOMMUNICATIONS ACT 2003
On 20th August 2003, the new Austrian Telecommunications Act 2003 (the
"TKG 2003," or the "Act") came into force to implement the new EU
regulatory package. The Act's most significant change to the former regime
involves the new significant market power (the "SMP") definition and
market analysis-procedure. The TKG 2003 departs from the prior sectorspecific
definition of SMP and instead applies the respective definition of
general EU competition law. Furthermore, the NRA must determine
operators having such SMP in the course of a market analysis, which the
NRA must conduct for every identified relevant market. Such relevant
markets will be defined by an NRA regulation that is based on the
Commission's Recommendation on Relevant Product and Service
Markets.
Another major change to the former regime is the abandonment of
individual licenses. As a result, all telecommunication services may be
provided on the basis of a general authorization. The prospective service
provider must merely notify the NRA of the intended commencement of its
services. The NRA has installed a specific web interface for this purpose.
Communication parameters and frequency spectrum continue to be
allocated individually by the NRA since they are considered to be scarce
resources.
One issue that the EU Directives left to the Member States is that of
whether to allow frequency spectrum trading. The TKG 2003 chose to
facilitate frequency spectrum trading under NRA supervision. The transfer
of frequency spectrum from one operator to another is therefore only
legitimate with the regulator's consent. In assessing the admissibility of
frequency trading, the NRA must take into account the effects of such
transfer on competition in the relevant market. This regulatory consent
requirement is designed to prevent the undesired strengthening or creation
of dominant positions by the hoarding of frequency spectrum.
The text of the TKG 2003 is accessible at the website of the regulatory
authority, (http://www.rtr.at).
For more information visit: http://www.rtr.at
or please contact: Stephan.polster@dbj.at
CHILE
WI-FI TECHNOLOGY IS NOW A REALITY
The Chilean Undersecretary of Telecommunications (the "Subtel") now
permits use of wireless fidelity (the "Wi-Fi") equipment, according to the
Chilean Official Gazette Exempt Resolution N°991 (the "Resolution"),
published on 26th August 2003. Wi-Fi technology allows laptops and
handheld computers to access broadband speed Internet within a limited
distance from an access point or "hot spot".
The new regulation:
• provides that bands subject to Wi-Fi equipment can operate within real
estates (not open areas);
• sets forth the maximum radiation emissions allowed for Wi-Fi
equipment; and
• provides that certain bands shall be limited for use within closed areas
such as houses, buildings, offices, factories and warehouses, etc.
ISSUE 22 SEPTEMBER – OCTOBER 2003 13

It should be noted that while the Resolution does not require a telecom
permit for use of Wi-Fi equipment, importers or manufacturers of such
goods must obtain a certificate from Subtel attesting that they sufficiently
comply with Chilean technical requirements.
Subtel's Resolution is concordant with its policies to encourage new
technologies and to increase free competition among different operators in
the market. Additionally, Subtel has indicated that it is evaluating the use of
Wi-Fi technology in open areas.
As a result of the Resolution, five companies to date are providing Wi-Fi
services in Chile, and many others are expected to soon follow.
For more information please contact: asilva@carey.cl,
msanhueza@carey.cl or nbakovic@carey.cl
HK
REGULATION OF CHANGE OF
SHAREHOLDINGS OF TELECOM COMPANIES
The Telecommunications Ordinance has been amended to give the
Telecommunications Authority (the "Authority") power to regulate the
change of carrier licensees' shareholdings. The amendment was passed
on 18th July 2003, but its principal provisions will take effect at a later date
as determined by the Secretary for Commerce, Industry and Technology.
The Authority also issued draft guidelines on 4th August 2003 to explain
how it will enforce the amended provisions. The guidelines are available
for public consultation until 29th September 2003.
Once the new rules enter force, any person who intends to own a
significant equity share in a telecom carrier will need to consider both the
effects on competition in the telecom market and whether consent from the
Authority is required.
For more information visit: http://www.ofta.gov.hk/report-paperguide/paper/consultation/cp20030804.pdf
or please contact: dae@jsm.com.hk
HK
TELECOM SERVICE OPERATORS'
ACCESS TO PRIVATE BUILDINGS
TELECOM OPERATORS' RIGHT OF ACCESS
Telecom operators may access private buildings only to install and
maintain facilities that are necessary to provide services to building
residents. Operators may access only the common parts of buildings, and
may not carry on marketing and promotional activities in buildings.
Before entering a building, a telecom operator should obtain prior
permission from building management. Without such permission, building
management may take action against the telecom operator for
unauthorized entry and/or nuisance. If building management refuses to
grant access upon request, the telecom operator can:
• approach the Office of the Telecommunications Authority for
mediation;
• apply to a magistrate for an order requiring building management to
comply; or
• apply to the Telecommunications Authority for a certificate certifying
that it has a statutory right of access.
TELECOM OPERATORS' OBLIGATIONS
The telecom operator is required to:
• cause as little damage as possible to the building;
• pay the full cost of installation; and
• pay the electricity bill for the power supply to their equipment (unless
building management agrees otherwise).
COORDINATOR FOR TELECOM OPERATORS
In the event that there is more than one telecom operator interested in
accessing the same building, one of these telecom operators should be
appointed as a coordinator to lease with building management.
The coordinator's main responsibilites are to:
• work out a consolidated proposal;
• coordinate installation work to minimize disruption to residents; and
• act as one contact point among the Office of the Telecommunications
Authority, building management, and the telecom operators involved.
Points to note by the building's incorporated owners and office of building
management
Although telecom operators are entitled to access the common parts of
buildings, those parts remain the property of land managed by building
management. Accordingly, as long as the telecom operators' statutory right
of access is not curtailed or inhibited, building management may, in good
faith, negotiate with telecom operators as to the technical and operational
details of the access. Guidelines suggest the following:
Before commencement of installation or maintenance work, building
management should:
• provide relevant building drawings and layout plans of the common
parts, if available, to the telecom operator;
• respond promptly to the telecom operator's request for site visits within
14 days upon receipt of a written request from the telecom operator,
and give at least 5 working days advance notice to the telecom
operator of the agreed date of the site visit;
- obtain a consolidated proposal which contains all the requirements of
the telecom operator;
• review the proposal by considering the date and time for carrying out
the relevant work, the arrangement for workmen to access the
building, the installation method and location of the equipment, and the
arrangement for operation and maintenance of the equipment in
future; and
• confirm with the telecom operator the acceptance of the proposal, and
provide a start-date for the relevant work.
After installation or maintenance work is commenced, building
management should:
• permit and assist the telecom operator to access the common parts of
the building and the in-building telecommunications system in order to
install the required equipment; and
• make available space in the common parts and the in-building
telecommunications system to the telecom operator.
Overall, building management should NOT:
• impose any fees, deposit, or access charge on the telecom operator
for access to the building or the use of the common parts of the
building;
• demand that the telecom operator employ the contractor or company
nominated by building management to install the telecom operator's
antenna, cable and/or equipment; or
• limit the choice of technology to be used or predetermine the access
method of the telecom operator.
For more information please contact: dae@jsm.com.hk
ISSUE 22 SEPTEMBER – OCTOBER 2003 14

ITALY
THE TELECOMMUNICATIONS CODE
On 31st July 2003, the Italian Government approved the
Telecommunications Code, implementing the EU regulatory framework for
electronic communications.
Among the Code's important innovations are:
• simplification of the licensing regime, thus aligning it with the simplified
general authorization procedure as provided by the Authorization
Directive; in this respect, the operator shall obtain authorization, where
the Ministry does not expressly deny it, and can immediately execute
the telecommunications activity.
• introduction of spectrum trading; this will assist those operators who
are already experiencing financial difficulties.
• a process for identifying and notifying additional markets under the
market analysis procedure;
• simplification of the administrative procedures in order to guarantee
the implementation of non-discriminatory and transparency principles,
including those procedures affecting the release by local entities of
rights of way and installation of communications networks on and/or
under public and private properties;
• measures for the development of broadband services; and
• a provision of convergence and interoperability between networks and
services of electronic communication.
For more information visit: www.comunicazioni.it
or please contact: f.cugia@lexjus.com
MEXICO
STRENGHTENING OF COFETEL'S AUTHORITY
We have previously reported on the failed process to enact a new federal
telecommunications law for more than one year. Among the most
important changes sought by such reform were to define the scope of
authority that the Mexican Federal Telecommunications Commission
("COFETEL") would have vis-à-vis the Ministry of Communications and
Transportation ("SCT") on telecom topics.
About a month ago, the Minister of Communications and Transportation
indicated that he would seek to amend the SCT's internal regulations to
clarify the respective powers of the Undersecretary of Communications
and Transportation and COFETEL. The amendment should address the
complaints of the industry with respect to an overlapping of authority
between the SCT and COFETEL on issues such as the granting of
licenses to install, operate and exploit a public telecommunications
network. This is one of the reasons why some argue COFETEL has lacked
importance in the sector and has become a silent witness to the many
obstacles faced by the industry in the recent year.
The industry may view the initiative at the SCT's website
(http://www.sct.gob.mx) in the weeks prior to its enactment. The initiative is
expected to vest COFETEL with the authority to regulate the radio electric
spectrum while the corresponding licenses will be granted by the SCT.
International matters that had been dealt with by COFETEL will now
become SCT's responsibility.
For more information visit: www.sct.gob.mx
or please contact: aam@bstl.com.mx
NEW ZEALAND
COMMERCE COMMISSION
RECOMMENDS LLU
The Commerce Commission has recommended unbundling the local loop
of Telecom New Zealand Limited ("Telecom"), which is the incumbent
telecommunications operator in New Zealand.
The Telecommunications Act 2001 (the "Act") established a
telecommunications-specific regulator (known as the Telecommunications
Commissioner) within New Zealand's anti-trust regulatory body, the
Commerce Commission. The Act provides for access seekers or access
providers of a "designated service" or "specified service" to apply to the
Commerce Commission for a determination of the terms on which the
service must be supplied. Determinations on designated services can
include both price and non-price terms, whereas designations on specified
services can only include non-price terms.
Section 64 of the Act requires the Commerce Commission to undertake a
review of whether unbundling Telecom's local loop is desirable and to
deliver a final report to the Minister of Communications by 20th December
2003. In the draft report, released on 18th September 2003, the Commerce
Commission has recommended:
• designating unbundling of Telecom¿s local loop networks;
• designating unbundling of Telecom¿s fixed Public Data Network;
• designating access to co-location and backhaul services;
• applying benchmarking and cost-based pricing as the applicable
pricing principles.
The Commerce Commission is seeking submissions on the draft report by
16th October 2003 and intends holding a public conference on it from 28th
to 31st October 2003 in Wellington.
For more information visit:
http://www.comcom.govt.nz/telecommunications/llu/draft18sept2003.pdf
or please contact: david.boswell@bellgully.com
UK
GOVERNMENT DECISION RELEASED
ON USE OF GSM GATEWAYS
On 18th July 2003 the Government released its final decision on the status
of end-user equipment connected to mobile networks, including so-called
"GSM gateways". These devices enable fixed telephone networks to
connect to the mobile network by using a fixed device to mimic a mobile
handset and access mobile network operators' base stations in the same
way as a normal mobile customer, thus utilising the GSM radio frequency.
It has long been a contentious area as to whether the commercial use of a
GSM gateway to carry third-party traffic is a breach of the Wireless
Telegraphy Act 1949 ("the WTA"). As the gateways use GSM frequencies,
which are only licensed to GSM operators, the gateway operators may fall
outside the scope of the WTA. Section 1(1) of the WTA requires all
wireless telegraphy apparatus to be licensed, or specifically exempted from
the need for a licence. To this end, the Wireless Telegraphy (Exemption)
Regulations 1999 were enacted to authorise network customers to use
their mobile handsets without the need for individual licences.
Following a consultation process, the Government has now confirmed that
the private use of GSM gateways will continue to be protected by the
exemption. This will also extend to protect, for example, parties who install
ISSUE 22 SEPTEMBER – OCTOBER 2003 15

gateways as extensions to their PABX systems or where companies' selfprovide
termination services for their staff. However, other than for private
use, the provision of GSM gateway services to third parties will remain
unlawful under the WTA.
The Radiocommunications Agency, which is the agency responsible for
enforcing the WTA requirements until the new super-regulator, Ofcom,
takes over at the end of 2003, has suggested that commercial GSM
gateway providers come to a suitable, pragmatic arrangement with mobile
operators allowing them to continue to provide the services, under the
authority of the mobile operator's licence. There would appear to be little
commercial likelihood of mobile operators consenting to this activity.
Indeed, the gateway service provider, Floe Telecom Ltd, lodged a
complaint with Oftel on 7 August 2003 against Vodafone, after the mobile
operator periodically suspended Floe's access on the grounds that its
gateway activities were unlawful. Floe has alleged that it has a valid
contract in place with Vodafone that makes its gateway activities legal.
Floe alleges that Vodafone's actions amount to an unlawful refusal to
supply.
For more information please contact: colin.long@olswang.com
COMMENTARY
FRANCE
USE OF PERSONAL DATA
FOR MARKETING PURPOSES
By S. LIPOVETSKI (slipovetsky@kahnlaw.com)
and F. PERBOST (fperbost@kahnlaw.com)
The principal source of legislation regulating data protection in France is
Law No. 78-17 of 6 January 1978 known as "Loi Informatique et Libertés"
(the "Law"). The Law is expected to be amended to comply with the
provisions of European Directive 95/46/EC of October 24, 1995 (the "EU
Data Protection Directive"). The draft law implementing the EU Data
Protection Directive (the "Draft Law") passed its first reading on 1st April
2003.
At present, personal data may be used for marketing purposes if the
purpose is identified in the filing with the French data protection authority
(the "CNIL") and if the persons whose data are collected are informed or
gave their consent.
The Law only requires the consent of the data subject (i.e. opt-in) when
automatic processing of sensitive personal data (as indicated above) is
involved.
In parallel, the Law provides for a general opt-out principle: the data
subject may oppose the collection of his or her personal data for legitimate
reasons.
To enable the individual to exercise his or her right to object to the
collection of personal data, the Law requires that persons whose data are
being collected receive the following information:
• whether their responses are mandatory or optional;
• the consequences of their failing to provide a response;
• persons (both individuals and legal entities) which will receive their
data; and
• their right to access their data and to obtain the correction of incorrect
data.
This information must be provided to the data subject at the time of
collection of data and at a later date if the information changes. If the data
subject is not informed of the persons who will receive his or her data at
the time of collection of the data, he or she must be provided with this
information prior to the transfer of the data to another person.
The major innovation of the Draft Law is to establish a general opt-in
system where all individuals must give their consent to the collection of
data relating to them.
Under the Draft Law, the following information shall be provided to the
persons on whom the data are collected:
• identity of the data controller,
• purpose of the processing,
• whether their responses are mandatory or optional;
• the consequences of failing to provide a response;
• persons (both individuals and legal entities) who will receive their data;
• the right to access their data and to correct incorrect data, and the
right to to oppose to the collection of such data; and
• to prevent the transfer of personal data to any country that is not a
State member of the European Community, if any.
Often companies wish to use personal data to send to its customers
unsolicited information about products or services. Most of the claims
received by the CNIL deal with the exercise of the rights specified in the
Law by persons on whom data are collected, and in particular, with the
right to oppose receiving unsolicited mails.
According to the terms of Article L 33-4-1 of the Posts and
Telecommunications Code (inserted by Order n° 2001-670 of 25 July
2001, Article 16), it is prohibited to directly canvass, using automatic calling
machines or fax machines, telecommunications network subscribers or
users who have not consented to receiving such calls. It is also provided
that operators or their distributors shall provide free of charge to those
subscribers or users who so wish, the means to give their consent to
receiving calls referred to in the above subparagraph. They shall make
available to any person who so requests the list of these subscribers or
users.
At present, the means to give such consent are not determined.
In addition, Article L121-20-5 of the Consumer Code (inserted by Order no.
2001-741 of 23 August 2001 art. 5 and art. 12) specifies that direct
canvassing by a professional, by means of automatic calling machines or
faxes, of consumers who have not expressed their agreement to receive
such calls is prohibited. Distance communication methods other than those
mentioned in the previous paragraph, involving personal communication,
may only be used where the consumer has not raised an objection. The
conditions under which the consumer expresses his/her agreement to
receive the calls mentioned in the first paragraph, information that the
professional must supply to the consumer regarding his opportunity to raise
an objections as well as the conditions under which objection registers are
kept are to be prescribed by a Council of State decree. Such Council of
State decree has not been adopted.
The sending of unsolicited e-mail is subject to the opt-out principle at
present but should be subject to the prior consent of the persons who are
solicited as soon as a French draft law ("Projet de loi sur l'économie
numérique") is adopted. The last version of the draft law is a version dated
June 26, 2003, modified by the French Senate and transmitted to the
French National Assembly for its second reading. This draft law specifies
that the use of automated calling systems without human intervention
(automatic calling machines), facsimile machines (fax) or electronic mail for
the purposes of direct marketing may only be allowed to subscribers who
ISSUE 22 SEPTEMBER – OCTOBER 2003 16

have given their prior consent. Regarding electronic mail, the requirement
to obtain prior consent applies if the person is registered with the Registry
of Commerce and Companies.
However the Projet de loi sur l'économie numérique provides that where a
natural or legal person obtains from its customers their electronic contact
details for electronic mail in the context of the sale of a product or a
service, the same person may use these contact details for direct
marketing of its own products or services provided that customers clearly
and distinctly are given the opportunity to object, free of charge and in an
easy manner, to such use of contact details both when they are collected
and on the occasion of each message in case the customer has not initially
refused such use.
A use of personal data for marketing purposes without informing the
person on whom the data are collected of this use and not for the purposes
specified in the data controller's filing with the CNIL, may give rise to
criminal sanctions. According to the terms of Article 226-18 of the Criminal
Code, the collection of data by fraudulent, unfair or unlawful means, or the
processing of personal information relating to a natural person despite this
person's opposition, where this objection is based on legitimate grounds, is
punished by a fine of 1 500 000 euros (for companies). More specific
sanctions should be adopted with respect to unsolicited communications by
way of a decree.
The Projet de loi sur l'économie numérique specifies that the CNIL will
receive, by any means, including by electronic mail, claims relating to non
compliance with the provisions regarding electronic advertising.
At present, the CNIL can only give warnings or denounce to the
prosecution department any violation of the Law. Its powers will be
extended as it will be possible for the CNIL to order any person to stop
unlawful processing or to order the interruption of the data processing for a
three-month-duration.
The CNIL will probably be entitled to impose fines not to exceed 150,000
euros (300,000 euros without exceeding 5% of the turnover in case of
repeated breach within a five years period from the date of the previous
fine).
ISSUE 22 SEPTEMBER – OCTOBER 2003 17

EDITOR / EDITORIAL BOARD
EDITOR IN CHIEF: Stephan LE GOUEFF,
, Luxembourg
MANAGING EDITOR: Neil I. JACOBS, NI Jacobs & Associates, New York
Country Firm Contact E-mail Site
Argentina Estudio Millé Gonzalo ZORRILLA gonzaloz@mille.com.ar www.reis.com.ar/estudiomille
Austria Dorda, Brugger & Jordis Stephan POLSTER Stephan.polster@dbj.at www.dbj.at
Belgium Altius Herman DE BAUW herman.debauw@altius.com http:///
Brazil Pinheiro Neto - Advogados Raphael de CUNTO rapdecunto@pinheironeto.com.br www.pinheironeto.com.br
Canada
McCarthy Tétrault
Michel RACICOT (Montreal)
Charles MORGAN (Toronto)
mracicot@mccarthy.ca
cmorgan@mtl.mccarthy.ca
www.mccarthy.ca
Chile Carey y Cía. Ltda. Alfonso SILVA asilva@carey.cl www.carey.cl
China Lehman, Lee Xu Blaine TURNACLIFF bturnacliff@lehmanlaw.com www.lehmanlaw.com
Colombia Cavelier Abogados Daniel PEÑA cavelier@cavelier.com www.cavelier-abogados.com
Egypt Kamel Law Office Mohamed KAMEL kmlaw@kamelaw.com www.ie-eg.com/kamellaw
Finland Roschier Holmberg Attorneys Ltd Craig THOMPSON Craig.thompson@roschier.com www.roschier.com
France Kahn & Associés Sabine LIPOVETSKY slipovetsky@kahnlaw.com www.kahnlaw.com
Germany Wessing Jürgen A. HEILBOCK j.heilbock@wessing.com www.taylorwessing.com
Hong Kong Johnson Stokes & Master David ELLIS dae@jsm.com.hk www.jsm.com.hk
India Nishith Desai Associates Vaibhav PARIKH vaibhav@nishithdesai.com www.nishithdesai.com
Ireland McCann Fitzgerald Damian COLLINS
Mccann-
Fitzgerald@pophost.eunet.be
www.mccann-fitzgerald.ie
Israel Soroker-Agmon, Advocates&Patent Attorneys Jonathan AGMON mail@ip-law.co.il www.ip-law.co.il
Italy LexJus Fabrizio CUGIA f.cugia@lexjus.com http:///
Lebanon Alem & Associates Leila LAILA leila@alemlaw.com www.alemlaw.com
Luxembourg LE_GOUEFF@vocats.com Stéphan LE GOUEFF LE_GOUEFF@vocats.com www.vocats.com
Malaysia Zaid Ibrahim & Co. Julian DING julian.ding@my.zaidibrahim.com http:///
Mexico Barrera, Siqueiros y Torres Landa, S.C. Andrés ACEDO aam@bstl.com.mx www.bstl.com.mx
Netherlands Kennedy Van der Laan Martine DE KONING martine.de.koning@kvdl.nl www.kvdl.nl
New Zealand Bell Gully David G. BOSWELL david.boswell@bellgully.com www.bellgully.com
Norway Thommessen Krefting Greve Lund Arne RINGNES Arne.ringnes@tkgl.no www.tkgl.no
Portugal Vieira De Almeida & Associados Margarida COUTO mc@vieiradealmeida.pt http:///
South Africa Webber Wentzel Bowens Peter GREALY peterg@wwb.co.za www.wwb.co.za
Spain Gomez Acebo & Pombo Almudena ARPON de MENDIVIL Aam@gomezacebo-pombo.com www.gomezacebo-pombo.com
Sweden Advokatfirman Lindahl Erik BERGENSTRÄHLE erik.bergenstrahle@lindahl.se www.lindahl.se
Switzerland Bär & Karrer Michele BERNASCONI m.bernasconi@baerkarrer.ch www.baerkarrer.ch
Turkey Hergüner, Bilgen & Özeke Kayra UCER kucer@hbo-law.com.tr http:///
UAE Afridi & Angell Antony WATSON aaadh@emirates.net.ae www.afridi.com
UK Olswang Colin LONG colin.long@olswang.com www.olswang.co.uk
ISSUE 22 SEPTEMBER – OCTOBER 2003 18

TABLE OF CONTENTS BY COUNTRY
NEWS ITEMS
Country Title Category
ARGENTINA Courts address the use of labor e-mail accounts PRIVACY
AUSTRIA
BRAZIL
CANADA
New rules on unsolicited commercial communication
New Telecommunications Act 2003
Law powers up piracy combat weapons
Legal protection for software
Anatel announces creation of a new public service
ISS on IP-related services
Enforceability of webwrap agreements
Foreign ownership in the communications sector
CONSUMER PROTECTION
TELECOMMUNICATIONS
COMPUTER CRIME
INTELLECTUAL PROPERTY
MARKET ACCESS
TAX
ELECTRONIC COMMERCE
MARKET ACCESS
CHILE WI-FI technology is now a reality TELECOMMUNICATIONS
EU Regulation on enforcement of intellectual property rights INTELLECTUAL PROPERTY
FINLAND
HONG KONG
INDIA
ITALY
FICORA issues regulation on mobile phone No portability
New act on Finnish domain names
Regulation of change of shareholdings of telecom companies
Telecom service operators' access to private buildings
India grants first exclusive marketing rights
New IP laws enter into force
Supreme Court clears telecast of Karishma
MIB revises uplinking guidelines
Maintenance of PCs not subject to service tax
Server held to constitute permanent establishment
Service tax to BPO companies
Task force examines issue of taxing foreign clients
New Code for privacy protection
The Telecommunications Code
COMPETITION
DOMAIN NAMES
TELECOMMUNICATIONS
TELECOMMUNICATIONS
INTELLECTUAL PROPERTY
INTELLECTUAL PROPERTY
INTELLECTUAL PROPERTY
MEDIA
TAX
TAX
TAX
TAX
PRIVACY
TELECOMMUNICATIONS
LUXEMBOURG New law fostering IT outsourcing in the financial sector FINANCIAL SERVICES
ISSUE 22 SEPTEMBER – OCTOBER 2003 19

Country Title Category
MEXICO Antitrust concerns: implementing sound regulation COMPETITION
MEXICO
New regulations on electronic signature
Special telecom tax upheld
Strenghtening of COFETEL's authority
DIGITAL SIGNATURES
TAX
TELECOMMUNICATIONS
NEW ZEALAND Commerce commission recommends LLU TELECOMMUNICATIONS
TURKEY Dominance in the mobile telecoms market COMPETITION
UK
Persistent misuse of electronic communications
Policy statement following review of two-part charging
Government decision released on use of GSM Gateways
CONSUMER PROTECTION
TARIFFS
TELECOMMUNICATIONS
COMMENTATY
FRANCE
Use of personal data for marketing purposes
Contact “the l.i.n.k.” at: editor@the-link.lu
© opyright: Stephan LE GOUEFF, , Luxembourg
This newsletter may be reproduced and distributed in full, with no edits or changes, free of charge.
The posting of the newsletter on a web site requires the consent of the Editor in Chief.
ISSUE 22 SEPTEMBER – OCTOBER 2003 20