Japanese Virtual Currency Transaction Law System – with “Payment Services Act” as the Core
In recent years, because of the uncertainty of the positing of virtual currency under law, the issues of transparency and security etc. arising out in connection therewith are emerging, and the incidents of money-laundering, terrorist attack and investor fraud involving therewith lead to concerns of various countries.
Therefore, the new change in Japanese legislations relating to virtual currency exchange service providers falls mainly in the effect of amended contents of “Payment Services Act” and “Act on Prevention of Transfer of Criminal Proceeds”. The reasons for amendment to the legislations are such that virtual currency transaction involves the exchange with statutory currency, and is the outlet/ inlet of the existing financial system; therefore it is necessary to have the virtual currency exchange service providers be supervised[1]. Essential points involving the amendments are stated as follows:
1. Payment Services Act
The keys to the amendment to Payment Services Act (hereinafter referred to as the “Act”) are the Act recognizes that virtual currency has the nature of property and inputs the registration system for the exchange service providers, and provides relevant supervisory regulations.
(1) Definition of virtual currency
As defined in items 1 and 2 of Paragraph 5 of Article 2 of the amended Payment Services Act, virtual currency can be divided into two kinds, but is limited to that which is recorded on an electronic device or any other object by electronic means, and excludes the domestic (Japanese) currency, foreign currency and currency-denominated assets[2].
① It has 3 elements as follows:
It can be used in relation to unspecified persons for the purpose of payment consideration for the purchase or leasing of goods or the receipt of provision of services.
It can be purchased from and sold to unspecified persons.
Its property value can be transferred by means of an electronic data processing system.
② Its property value can be mutually exchanged with other virtual currency and can be transferred by means of an electronic data processing system.
In addition, some authors[3] consider that virtual currency is equivalent to the use of blockchain technology. However, according to the definition after the amendment to laws in Japan, the definition of virtual currency is based the judgment of the above elements rather than the use of blockchain technology.
(2) Input of registration system for virtual currency exchange service providers
Pursuant to Paragraph 7 of Article 2 of the Payment Services Act, “Exchange Service” is defined as the operation of exchange, agency or management activities. No person may engage in the virtual currency exchange service unless the person is registered[4] with the competent authority (Article 63-2 of the Act). A person who has conducted the virtual currency exchange service without obtaining the registration is subject to imprisonment for not more than three years or a fine of not more than three million yen or both based on Subparagraphs 2, 5 of Article 107 of the Act.
(3) Mechanism of users protection:
The purpose of the amendment is to take countermeasures for the risks generated from virtual currency exchange, such as pecuniary loss caused by insufficient information, the loss incurred in the custody of users’ property, and disclosure of personal information of users）[5]. Discussions are divided into 4 points.
① Information security management
A virtual currency exchange service provider must take necessary measures for information security management (Article 63-8 of the Act)
② Measures for users protection
A virtual currency exchange service provider must take relevant protective measures for users, including the provision of explanation for misunderstood transaction and information about contents of transaction (Article 63-10 of the Act)
③ Separate management of property
A virtual currency exchange service provider must manage its own property separately from the money or virtual currency of the users, and must retain a certified public accountant or an audit corporation to periodically conduct the external financial audit (Article 63-11 of the Act)
④ Designated Dispute Resolution Organization
Referring to financial ADR system, the complaint or dispute matter of users shall be concluded by the Designated Dispute Resolution Organization (Article 63-12 of the Act)
(4) Supervision over virtual currency exchange service providers:
As regulated by Articles 63-13 ~ 63-20 of the new Payment Services Act, essential contents of supervisory requirements for virtual currency exchange service providers are stated below:
①The obligation to prepare and maintain books and documents
②Annual financial reports
③The authority of the Prime Minister to inspect relevant business
④The Prime Minister orders a virtual exchange service provider to conduct business improvement.
⑤The Prime Minister may revoke the registration of a virtual currency exchange service provider who has obtained the registration through illegal or wrongful means.
(5) Penalty for violation of obligations
The existing penalties under articles 107~109 and articles 112~117 of the Payment Services Act also apply to virtual currency exchange service providers. The causes of violation of obligations and corresponding penalties are summarized as follows:
① Any person who has not obtained registration or has obtained registration through wrongful means or by use of other’s name is subject to imprisonment for not more than three years or a fine of not more than three million yen, or both (Article 107 of the Act)
② An exchange service provider who has violated the separate management of property or has violated the disposition of suspension of operation is subject to imprisonment for not more than two years or a fine of not more than three million yen, or both (Article 108 of the Act).
③ Any person who has failed to prepare or has falsely prepared books, reports, attachment and documents or has refused to answer the questions or has refused to accept or has hindered the business inspection is subject to imprisonment for not more than one years or a fine of not more than three million yen, or both (Article 109 of the Act)
④ A person who fails to take necessary measure for improving its operation is subject to a fine of not more than one million yen.
2. Act on Prevention of Transfer of Criminal Proceeds
In order to prevent from money-laundering, the legitimacy of fund sources must be assured. The amended “Act on Prevention of Transfer of Criminal Proceeds” (hereinafter referred to as the “Act”) incorporates the virtual currency exchange service providers as “specified business operators” and imposes them with the following main obligations:
(1) The obligation to confirm user identification (Article 4 of the Act)
(2) The obligation to confirm and preserve transaction records (Articles 6 & 7 of the Act)
(3) The obligation to report suspicious transactions (Article 11 of the Act)
The above are major contents of the amendments to legislations in relation to virtual currency exchange service providers in Japan. The purposes of the amendment are to promote the innovation of virtual currency operators and the balanced development with consumer protection. Therefore, they are included in the Payment Services Act and are subject to similar supervision as with electronic bill and Funds Transfer Service[6]. The reorganization of virtual currency system in Japan has stepped forward. However, the application of actual operation needs continual follow-up and observation, so as to be used as reference for the relevant law system of our country.
[1]Financial System Council, The Working Group on Payments and Transaction Banking of the Financial System Council, P27.
[2]Currency-Denominated Assets, Assets denominated in currency refers to the “Currency-Denominated Assets” in Japanese and defined in the Payment Services Act: as used in this Act means assets which are denominated in the Japanese currency or a foreign currency, or for which performance of obligations, refund, or anything equivalent thereto (hereinafter referred to as "performance of obligations, etc." in this paragraph) is supposed to be made in the Japanese currency or a foreign currency. In this case, assets for which performance of obligations, etc. is supposed to be made by means of Currency-Denominated Assets are deemed to be Currency-Denominated Assets.
[3] ＜Improvement System of Virtual Currency＞, Daiwa Institute of Research, see website:, http://www.dir.co.jp/research/report/law-research/financial/20160520_010904.pdf#search=%27%E4%BB%AE%E6%83%B3%E9%80%9A%E8%B2%A8+%E8%B3%87%E9%87%91%E6%B1%BA%E6%B8%88%E3%81%AB%E9%96%A2%E3%81%99%E3%82%8B%E6%B3%95%E5%BE%8B+%E3%83%96%E3%83%AD%E3%83%83%E3%82%AF%E3%83%81%E3%82%A7%E3%83%BC%E3%83%B3%27 (Ｌast browse date: 12/07/2017)
[4]Article 63-2 of the Payment Service Act provides the registration with the Prime Minister; however, in practical operation, the operators shall apply for registration with the local financial bureau.
[5]Financial System Council, The Working Group on Payments and Transaction Banking of the Financial System Council, P29.
[6]In the Payment Services Act of Japan, it is specified that the remittance business engaged by a non-banking provider was officially named as “Funds Transfer Service”, in which business contents aim at the third payment works. Financial Research Development Funds Management Committee, “Study of the industrial development and management between international non-financial institution payment services”, written by Kuo Chen-Chung and Hsu Shih-Chin, pp60~61(2015).
I. Preamble 1. Current Situation of E-Commerce Along with rapid developments of the information and the Internet, what follows in suit is inevitably the electronicalization in general industries. Nowadays, countries around the world accelerate exploitation of information technologies and management methods to enhance their capability of competition. Developments in digitalization have brought traditional business concerns to face rigorous challenge as regards both the nature of the business and the context of same, as well, in more recent years incidents such as Internet data exposition and on-line fraud have happened over and over again. Contentions of on-line transaction have also increased a great deal while some illegal websites proclaimed themselves to be legal ones. All these situations point to the importance of building up legislation on e-commerce and cyber environment. No less important is the buildup of more reliable environments friendly to electronic trades as to which the government should take into account the needs voiced from both suppliers and buyers in an effort to put into effects relevant implementations conducive to benignant developments of e-commerce. In the meantime, the entire B2C e-commerce market is going through unprecedented fusion, ongoing merging and cross application is seen in varied on-line transactions including TV shopping, Internet shopping, mobile shopping, e-mail shopping and so on, growing more tense than ever are integration in the context of http://bilingualdb.rdec.gov.tw/BilingWeb/bl_showworddetails.asplogistics,cash flow, exchange of information, and transactions, in addition, interchange of platforms and horizontal consolidation of varied equipments are indication enough that looking into the future, what looms ahead is a service-oriented, attention-intensive era of economy; by taking into good account consumers' actual needs, convenience and economies, these supplemented with customized service delivery, the intending party can realize phenomenal profits well beyond estimation; considering that the B2C business world is continually renovating its latest technology or application (the Skype, for example) better yet management model is required to strike profits (such as diggings of killer APs, Killer access Devices, Killer channels, Killer business models and their applications), and therein lies the orientation for efforts to be spent in so far as the future of the B2C e-commerce is concerned. By the outcome of the B2C Business Strategy Conference closing as of both 2004 and 2005,the current B2C e-commerce of Taiwan is fighting hard to cross the gap of lag in family Internet shopping rates (13% in 2003, grown up to 19.6% by 2005), if relevant technology matures and breaks various obstacles against B2C e-commerce, it is safe to say that by 2007 will come the mainstream epoch for Internet shopping vogue, and that is good enough for what one could envision for the B2C e-commerce. Reliable survey conducted for relevant projects indicates that the on-line shopping market over the year 2005 is estimated at approx. NT$51,073,000,000, reflecting a growth of 47% over the correspondent field of NT$34,720,000,000 realized in 2004, hopefully the growth may hit around 43% by the year 2006, estimation: NT$73,146,000,000; in the year 2005 the overall retail market realized a revenue of approx. NT$3,090,297,000,000 of which roughly 1.65% was due to contribution from on-line retail sales, estimation shows that by the year 2009 the on-line shopping market will expand to around NT$154,475,000,000. All of the survey digits clearly show that there is still much to expect of our domestic electronically subordinated markets, for which a growth potential always exists. 2. Implementation strategies and policy directions Over the nearly twenty years in the past the US has been strategically employed varied technologies associated with e-commerce at large, for the promotion of e-commerce and that has fetched a hit over Japanese business industry that was long-timed noted for their high quality struck at relatively low-profile cost image, and at the same time switched the fading stage of the US economy up to the rosy side. What makes e-commerce so much a marvel? Well, the secret is in fact simple enough, for in the wake of contemporary atmosphere for competition centering on internationalization and globalization, the only recipe for success and survival for any business is simply the triplicate: “Speed”, “Flexibility” and “Creativity”; e-commerce not only timely satisfied these needs, it plays a key role in this respect all at once, such that any responsive and responsible business executive would but have to admit that “Without getting electronic, you can expect no more orders”. In awe of this wake trend going for entrepreneurial electronic synonymous with e-commerce, our government has been keeping a keen eye on the position of modern e-commerce around the world. In addition, it has charged relevant departmental agencies to attend to the development and planning of domestic e-commerce to begin with the Ministry of Economic Affairs firstly accomplished Electronic Commerce Model System recommended for Business-to-Business (B2B) in the Informative Segment, the indicial system for electronic industry for our country is thereby established, and this by and by has extended to other kinds of industry; in the meantime, efforts have been shed to expel lots of bottlenecks facing the electronic of all and sundry industries as regards the environmental nods and the institutional node. Years of governmental efforts in this concern have seen results in the context of our domestic industries vying one another in the startup of getting involved in electronic operation. It is safe and fair to say that up to this date the e-commerce development in this country, already soundly founded, and is still growing avidly and rapidly. Because of the application of information has already become a sharp tool for advanced countries in upgrading their competitive margin in global markets, the premise being as such, countries have one by one promulgated their national information expertise development projects with a view to get going infrastructures information and communication constructions on a national scale. Here in this country relevant constructions have begun as early as back in the year 1994, the Executive Yuan has ratified the “National Information/Communication Infrastructure Implementation Plan” in the year 1997; in June 1999 the “Industrial Automation Plan” ratified previously was upgraded to a combined “Industrial Automation and Electronicalization Plan” for the purpose of promoting industrial competition margin. By the year 2001 our government, in view of societal need for general information as well as technical renovation that comes as a result of advances in information/communication technology, and through collective consultation and resource consolidation, founded a National Information and Communication Initiative Team (NICI Team) whose mission is to implement NICI Projects, while the priory founded Industrial Automation and Electronicalization Plan continued to function in the name of the “Industrial Electronic” Work Group under said NICI Project, in addition, a consensus has been reached that the implementation of information/communication know-how be regarded as playing a key role in the promotion of overall national competitive competency. II. Legislative Demands for the Development of e-Commerce in Taiwan 1. Trend of international legislation Under the ongoing trend of globalization and internationalization, transnational communication and transaction blooms fervently, a universal expectation shared by nations around the world is that concrete and clear-cut legislations be adopted to rule out obstacles to developments of electronic transactions due to inadequacy of statutory provisions or proscriptions. Whatever the contents of legislation from one state to another, the primary object is unexceptionally to promote developments of electronic transactions by the institutional introduction and intervention in all respects concerned. Phrased otherwise, the key role played by laws governing electronic transactions lies in presentation as enabling or supplemental laws to serve as legal basis with respect to issues where conventional institution fails to see or proves inept; whereas issues or legal interactions facing common transactions equivalent to traditional trades will still abide by conventional statutes, still, the ongoing trend respecting the same electronic trades on international communities calls not for the creation of new laws, but in installing legislation on issues not being covered in currently enforced statutes. Other countries facing issues relating to electronic transactions will not reason with reference exclusively to traditional civil or commercial codes by ignoring electronic trade codes or vice versa, instead they will rely upon both traditional codes and relatively regulations related to electronicalization, at the same time. 2. Legislation of e-commerce: Necessity and Orientation for Deliberation Speaking of legal concerns possibly facing application of electronic trades, with legal effects to the extent acknowledged according to laws governing transactions executed by “Electronic Signatures ACT” with respect to electronic documents being excepted, party autonomy and the principle of freedom to contract will prevail, still, contractual contentions otherwise occurring in the course of transaction will be subjected to relevant civil or commercial codes all the same, and that having nothing to do with pertinent electronicalization legislations. Considering the practical aspects, competency of legal intervention in the course of concluding of contracts involving electronic transactions deserves deliberation in the context of practical needs. Apart from relevant issues seen in a contract, matters such as competency of law respecting trades of digitalized merchandises, respecting protection of consumers in respect of which the law is already there, and respecting privacy protection, are all of vital interest to parties in executing any electronic transactions. Other issues which warrant close inspections considering a piece of electronic trade include; legislation with respect to cash flow, to material flow and practices, to whatever affects the proper rights of parties to a trade, to attempts to use the Internet as a criminal means, to situations where violation of safety of trade or order of trade arises; to issues relevant to competency of proof considering electronic documents, electronic signatures in the event of dispute out of a piece of electronic trade; and eventually, responsibilities on the part of ISP who forms a part of a piece of electronic trade, as well as electronic jump mail (spam), because all of them could undermine the development of electronic transactions. III. Taiwan Legislation on Electronic Commerce: the Status Quo and the Outlook in the Future The arrival of digital era has broken down the fence by which the world for ages has been defended, the e-commerce is taking up the place of traditional marketing scheme and outlets in giant strides, and has virtually become the focus of economy in the current era, Still, new fangled trade modes emerging from day to day in step with electronic modern business operators are impinging upon existent legal systems here in this country and that without any letup, such that the traditional philosophy of legislation is compelled to reorient itself to meet the impending challenge of our times. The most important of interest to a wholesome development of e-commerce lies in the creation of a benignant legislation structure. However, it is a pity that the creation of electronic commercial codes is a very complicated institutionalized project, considering that apart from electronic documents and electronic signature, the electronic transaction by and large will involve legislation specific to civil, criminal and otherwise legal fields, encompassing key issues including: contractual relationship, electronic taxation, electronic cash flow, network jurisdiction and protection extended to consumers. Given the foregoing disclosure, it is rightly with a view to attend to smooth developments of electronic trades, to secure a wholesome transaction environment, and to safeguard the proper interests of network users, that the importance of a wholesome legislation structure is set off all the more obviously. Seeing that the crucial key to nationwide practicing of so-called electronic transaction or trade and to the meaningful functioning of an electronic government lies indispensably in the creation of a safe and reliable network environment, so that information in the process of internet transmission is ensured against falsification, fabrication or theft, will allow for identifying of the identity of both parties to the transaction, and henceforth, preclusion of denying by either party of the transaction afterwards, that therein lies the key to the universality of an electronic government and of the implementation of electronic transaction, as a matter of fact here in Taiwan the “Electronic Signature Act” was ratified in 2001, and the same put into practice in April, the year next to 2001, This code accords electronic documents and e-signatures which fulfill prescribed requirements the same legal effects as would be granted to traditional paper documents or signatures, and specifies certifying agents based on low-profile control means. Next in both 2003 and 2004 respectively, the competent authorities have put into effect subordinating statutes including: “The Enforcement Rules of Electronic Signature Act”, “Regulations on Required Information for Certification Practice Statements” and “Regulations Governing Permission of Foreign Certification Service Providers”, with a view to comprehensive coverage of codes specifying control of electronic signatures, to the safeguarding of environments for credible electronic signatures, and all these meant for access with international counterparts. The Electronic Signature Act specifies essentially “electronic documents” which carry information specified as electronic transactions (the specification includes what is known as electronic government), and “electronic signatures” produced by parties thereto and as appearing thereon. Electronic transaction is based on computerized network and electronic technology bear advantages over traditional commences in terms of convenience, effectiveness, scope of coverage, low-profile trade costs, among other considerations, for all these reasons will better meet the information age that is ours today and the challenge for globalization of trade and economy everywhere, that is why they develop so fast and find wider and wider application from day to day. Legislation of electronic transaction is not meant to establish a rule of regulations that will totally replace correspondent laws erected earlier in years bygone, it starts out in the beginning to address unique legal complications that arose because of substantial change having taken place as regards means and manner of transaction. The newly arisen legal problems originated from the unique feature of electronic transaction itself, what comes in suit is the global, universal, international, technical and inter-territorial nature of codifications governing electronic commences, Currently legislation of e-commerce around the world is classifiable into those which relates to promotion or macroscopically policy of electronic transactions, synoptic codification of electronic transactions, codification of electronic signatures, codification of environments friendly to electronic commences. (Comprising: protection of consumers, protection of privacy) After reviewing different specifications of electronic transactions from international sources, one is convinced that differentiation in legislation of electronic trades from one state to another is much more a result of policy election than that of pure legislates. Notwithstanding that over the last decade legislation of electronic commerce that is seen globally ran fast, every state tries hard to bring up a full set of codes on electronic commerce/transaction in the shortest possible period so as to effect timely control of electronic transactions which themselves are renovating with no less fast a speed, however, it is a pity that electronic commerce goes deep into a number of specific fields, crossing legal, scientific and technical realms, and its application extends deep into varied day-to-day layer, such that the scope of legislation of electronic commerce/transaction has run afar to limits beyond imagination, forcing international organizations and economic entities to issue model codes and directives for their member states to adopt as norms for comparable legislations. Nevertheless, after being cut into effect for several years, problems emerged one after another with electronic commerce/transaction codes, including electronic signatures act; the situation is the same in countries all over the world, in Hong Kong, where Electronic Transactions Ordinance as amended have been promulgated in 2004, in Singapore, where triplicate-phased public inquiry in written form have been proffered successively in 2003 and 2005, whereby public suggestions are solicited as references to subsequent revisions; whereas on the other hand, the United Nations have erected protocols addressed to issues arising in the course of concluding of international electronic contracts to complement the “UNCITRAL Model Law on Electronic Commerce of 1996” and the “UNCITRAL Model Law on Electronic Signatures of 2000”. A common guideline for legislation at Legislature Agency is: “Adequate Regulation, Leaving Leverage, Conducing to Development”, in order to provide suitable legislation frame as soon as possible, a Legislature Agency would but offer sketchy outline to allow for space appropriate for future development of the newly emerging e-commerce world. So there is little wonder that Taiwan's electronic signature relevant rules have been cited as the most succinctly structured electronic signature code anywhere on the globe, as such, its contents are restricted but to controls of electronic signatures, failing largely to deal with the highly mutable electronically transacted business activities and trades. Four years have elapsed since the implementation of the electronic signature code, in view of the ever-changing environments of e-commerce, statutes currently in force have proved inadequate or behind time, if only present status and future demands of e-commerce are to be taken into account in step with emerging trends in global legislation as well as newly arisen commercial modes, it is truly time to review and amend current codes. To build a wholesome environment for the e-commerce industry, local competent authorities have already effected general review of current electronic signature rules by taking into account: how the current regulations have been working, international developmental trends, the latest development of relevant technology, and put forth recommendations on amendments of current codes after reviewing ongoing trends of legislation seen in Singapore, Hong Kong and the United Nations. Their amendments to their existent codes included, underway are our amending of scope of application of current codes so that a good match is possible with practical reality, such that the code is renamed to read as “Electronic Signature and Transaction Act”, the keynote being to enlarge scope of application of both electronic documents and electronic signatures, inclusion of regulations relevant to electronic trades and strengthening of currently existent authentication agencies in terms of their management capabilities, Also, to lay firm practice of electronic signature and transaction norms, amendments where necessary of relevant by-laws are being prosecuted at the same time, in this connection drafts in progress includes: “Amendments of The Enforcement Rules of Electronic Signature Act (Draft)”, “The Regulations for the Examination of Eligibility of Executive Agencies Exempt from the Application of Electronic Signature Act (Draft)”, “The Regulations on Certification Authority Agency (Draft)”, and “The Regulations of Guidance to Electronic Signatures and Transactions (Draft)”. So in short competent governmental agencies by now have begun to earnestly review current laws, drafting amendments thereto or considering legislation of new laws, whilst comprehensive planning addressed to future trends of our electronic transaction codes is also on the agenda. Without touching the prime framework of the Electronic Signatures Act that is currently in force, we are working on amendments of that code, for the reason that such is a way that incurs the least possible costs, so to say, all issues which electronic trades will or might face are titleogether included in the codification process, this serving to rule out overlapping of statutory provisions, what is made possible all at once is elucidation as to any amendment or draft incurred on the basis of current codes, backed with policy directive or de facto needs, and that effort conducive to collateral correlation with international reality. Issues as to which and what topics should be included in the scope of protocol for amendment of the Electronic Signature Act, including, for example, exemption eligibility and periodical review, as to those that would warrant enactment of dependent codes by competent authority authorized pursuant to said protocol, those which should be left to competent authorities in charge of other object enterprises to exercise their options as to erection of new laws or more preferably, amendment of current laws, ISP relevant provisions, for example, would have to be jointly deliberated and coordinated by and among experts representing respectively the government, the industry concerned, the academic circle, and the researching elites, that being a necessary requisite procedure to the setup of a milestone marking the structuring of an irreproachable electronic transaction mechanism here in this country. Up to the present day, trailing tight behind the development of electronic trade industry this country is equipped with substantially adequate codes, in the foreseeable future, current laws will still be reviewed with reference to the many unique features of the electronic trade industry to make amendments where justifiable, so as to make our codes more perfect. The orientation for future efforts can roughly be summed up in 7 points outlined below: 1. Guideline of Legal Mechanism to Resolve Electronic Transaction/Commerce Issues The legislation theme considering the electronicalized dominant reality today in our country is set on the keynote of the electronic signature codes,in so far as a legal action is committed by reason of electronic operation, to the extent that what is provided in currently enforced law is thus involved, then any jurisprudent discussion in that context will honor as principal the freedom to contract as provided in civil codes, and regard as exceptional legally required act, this being the premise, in the process of law enactments, principles that must be met include: Firstly, the market oriented principle, it seems that the leading position ought to be taken by private enterprises where the matter relates to development of e-commerce, that business need not be a constrained industry; Secondly, refraining from imposing any restraint on the e-commerce transaction, what a government must do is to participate an seldom as possible, and to refrain from meddling to the extent appropriate, it follows then that it should avoid imposing additional or unnecessary restriction upon commercial activities prosecuted via world wide web or electronic trades, considered as such are; troublesome procedures or formalities, tax duties additionally levied or additional fees; Thirdly, the sole reason for governmental intervention would be; to reinforce and back up a predictable, a most simple, easy, and contextually consistent environment in which to legally bind electronic commercial activities; Fourthly, understanding the unique features that characterize electronic commerce, effect earnest review and amendment where justified, of that part of current laws or ordinances susceptible of obstructing development of electronic trades, or titleernatively effect new order or scheme, regulation to adapt to possible development of electronic trades; Lastly, implementation of electronic trade activities are globally motivated, the establishment of a globally unified unique code to govern electronic trade activities to put aside traditional legal systems varying from one country to the next, will boost up confidence on the part of those engaged in electronic trade activities. 2. Legislation be concerned with International Paralleling As having been stated hereinabove, a guideline for legislation is: adequate regulation, leaving leverage, conducing to development. Since after having been put into practice for years, multiple problems emerged one by one, is almost a rule for many nations where legislation of electronic commerce/transaction or electronic signature codes was introduced, and that evidenced by the publication of the amended Electronic Transactions Ordinance, 2004, Hong Kong; open invitation to the public for suggestions, 2003 and 2005, Singapore, for reference for amendments; the UN Protocol drafted to deal with interrelated problems arising out of the processes of concluding of international electronically related contracts. A common keynote in the institutionalizing of electronic transaction codes among international communities is that in addition to the legal status invested upon electronic documents, electronic signatures, provisions are made to protect fair trade principle, fair competition, consumer’s proper interests, intellectual proprieties and privacy, paralleled with means and measures to encourage supervision, effective mediation and discourage criminal undertakings, while the governmental policy tends to assume a non-restrictive, market-oriented tune, to keep to the minimum any governmental intervention, and unwarranted constraints, the same is, just as it should be the guideline for the instituting of electronic transaction codes here in this country so as to keep abreast with international realities, and that conducive to making out the utmost of advantages possible out of electronic transaction activities on the worldwide stage. 3. Deliberation of the Electronicalized Dominance Legalization be in Parallel with Newly Emerged Applications and Development of Transaction Modes Due to the technology involved in striking a deal executed electronically, one piece of electronic trade on the point of conclusion is not as simple as traditional modes of transaction by virtue of the preclusion of both time and space restrictions, so to speak, application of electronic mode of transaction may very well result in situations beyond restriction through traditional legal constraints or theoretic reasoning. Such trade modes, by reason of its unique transaction feature, gave way to contention as to incompatibility with traditional statutory constraints, this is briefly a common dilemma facing all the nations around the world, and they all betake themselves in the working for whatever is possible to regulate and control electronic transactions through legislative means and innovations. Not to mention the complexity of legal intervention in case of transnational transactions prosecuted electronically, again, by reason of the unique feature characterizing electronic transaction, so a basic tune for the working toward the formulation of electronic trade legislation is the buildup of consensus so as to being domestic effort in alignment with international reality. 4. Studies on the Topics of Digitalized Merchandise Any trade of digitalized goods, without regard to whether such is taken as a commodity pursuant to civil codes, would hardly quality for being categorized as sort of authorization or anonymous contract, they would more appropriately be ascribed as like purchase vs. sale and be detitle with accordingly. Given that on-line delivery or downloading, albeit differing from the transfer delivery that is specified in civil codes, still, want of material delivery would not necessarily mean want of legally deemed transfer or delivery. That intangible network transmission would grant the purchaser de facto control of the object in question, then ascertaining of the point of time of transfer of risk, may very well be prosecuted in accordance with provisions in the civil code. As regards assumption of responsibility for flaw, trade of commercial software against on-line payment may reasonably be regarded as categorized debt against which buyer is entitled to delivery of flawless commodity; as to reinstatement of obligations upon dissolution of contract, the point lies not with returning of the object as received, but with returning of the right to use the software concerned, In the event of virus being entrained with the purchase which is an object in question, damage incurred to the buyer is usually in the form of damaged hardware or falsification, deletion of files, that of loss of inherent interests, as to such forms of damage or loss buyer may exercise multiple means of indemnifications, still, the legal status of filed date and principle to quantify such loss in view of indemnification will have to be defined commensurate with evolution of both theory and practice. Overall, as far as transactions of software against on-line payment are concerned, civil law as is still adequate without much ado. As to the question whether digitalized commodities qualify for postal trades where Consumer Protection Law applies, to balance the proper interests claimable to both consumers and the entrepreneur, and to rule out consumer's abuse of rights where ethics is at risk, it is fit and proper to restrict or rule out the transaction of certain commodities under specified categories, For one thing, considering the risks of digital date or digitalized commodities containing digitalized information, in respect of which copying or reproduction is as easy an pie, as to which it is not easy to ascertain whether the consumer has indeed returned the utility right, there is reason to doubt the suitability of granting unilaterally the consumer the right of rejection. Still, in so far as the digitalized commodity remains unopened, or that it is supplied with copying or reproduction procedures, product initiation means, then the risk of copying or reproduction is ruled out and in this instance Consumer Protection Law should apply notwithstanding. 5. Topics Relating to Consumer Protection and Privacy Protection The latest amendment to Consumer Protection Law with respect to electronic trades by including postal purchase on the Internet under Article 2 Section 10, and by the addition of Article 19-1 to allow for the application of the Hesitation Period respecting postal purchase trades, means more comprehensive protection for on-line consumers all right, still, due to the riddling complexity of the operation of electronic commerce at least a portion of the contents of transaction hardly fit the latest provisions in Consumer Protection Law, such that conflict seems to have emerged between protection for the consumers and reasonable risks borne by the entrepreneur. It is therefore suggested that the competent authorities consult the “Distance Marketing of Consumer Financial Services Directive (Directive 97/7/EC)” issued by the European Union with regard to the exclusion of contractual obligations, and conduct a comprehensive review of contents possible for inclusion in a piece of electronic transaction so as to delete commodities or services inappropriate for stipulation under Article 19 and article 19-1 by amendments to existent legislation, both administration and legislature ought to reinforce efforts in relevant protection mechanism to meet the challenging the Internet Age of our times paralleled with efforts to go in line with ongoing trends for consumer's protection on the international scenario. Next, responding to the point of key interest to consumers regarding protection of personal date entangled in B2C electronic transactions, the Ministry of Justice has publicized the protocol of amendments to Personal Date Act, whereby the scope of coverage extend to overall latitudes without discrimination, incorporating the obligation to serve notice respecting the collection and use of data, restriction on the collection of children's data and of sensitive data, group litigation, and increase of indemnity amounts. Upon legislative ratification of amendments to Personal Data Protection Act in the future, operators of electronic trades will have to face certain restrictions collecting data on websites in addition to being charged with duty of notice, so that without securing consent from the person whose data is being solicited for collection, the operator may not engage in inappropriate use, let alone selling of personal data in question, it is anticipated that our existent on-line marketing mode would hence go through substantial change. To prevent operators of electronic transactions in this country from frustrations adapting to the forthcoming statutory amendments, it is suggested that the competent authorities upon legislation of said amendments prepare models of policy for protection of personal privacy confronting operation of electronic transactions. 6. Topics Relating to Cash Flow titlehough respecting electronic transactions, safe payment scheme has already been established for the market; further to that, the Banking Bureau of the Financial Supervisory Commission, Executive Yuan, has published aimed at web banking operations “Pattern Contracts for Personal Computerized Banking Services and Web Banking Service” and stipulated “Criterion for Banking Institution's Operation and Safety Control of Electronic Banking Services”, to ascertain safeguarding of web payments; as regards petty payments amendment has been made to Banking Law by the introduction of Article 42-1, whereby cash buildup cards derive their legality basis, along with Procedures governing Bank's issue of cash buildup cards implemented such that such cards are available for on-line transactions, these are much in the promotion phase, yet distant to universal application. In practice, it is common and popular for credit cards to be used in on-line transactions, still, such form of payment could strike a potential risk for the card owners, to effectively protect card owners' safety at consumption and proper interests, it is suggested that the competent authorities promptly institute “Pattern Contract Terms Respecting Web Transactions Using Credit Cards” to meet inadequacies of stipulation on credit card operation over on-line transactions. Concurrent with the increased frequency of cash flow via the internet, there may develop more of payment tools in the foreseeable future, and more funds may come and go via the Net, however, the existent legislation respecting electronic transfer of funds currently is far from adequate, it is appealed that the competent authorities institute relevant legislation in time to help build a sound and wholesome environment for out net financial industry as well. 7. Tax Related Topics Internationally there has not reached, to this day, unified consensus respecting complicated net taxing policy, since that taxation with respect to on-line transactions is not as simplistic as would suffice the notion that “as long as there is income, there is duty”, it involves by and large concerns such as development of the Internet industry, fairness of taxation and even national competition, so in so far as net taxation is concerned, the concern should extend to deliberation of complementally measures apart from just reviewing if existent taxation laws are adequate for exploitation and in the negative case, if ad hoc stipulation is required
Legal Aspects and Liability Issues Concerning Autonomous ShipsLegal Aspects and Liability Issues Concerning Autonomous Ships All sectors of business and industry are transforming into digital society, and maritime sector is not out of the case. But the new thing is the remote control ships or fully automatics ships are becoming a reality. Remote control ships and autonomous ships will be a tool to reach safety, effectiveness, and economical goal. However, as it intends to take over human element in the maritime industry, the implement of remote control ships or autonomous ships brings new legal issues and liability considerations. This study aims to highlight some critical legal issues of autonomous ships to reader, but will not try to solve them or give clear answers. I. The Approach of International Maritime Organization In order to solve issues from the deployment of autonomous ship, International Maritime Organization Maritime Safety Committee (MSC) has taken first steps to address autonomous ships. In the meeting of MSC 100, the committee approved the process of assessing IMO instruments to see how they may apply to ships with various degrees of autonomy. For each instrument related to maritime safety and security, and for each degree of autonomy, provisions will be identified when: apply to MASS and prevent MASS operations; or apply to MASS and do not prevent MASS operations and require no actions; or apply to MASS and do not prevent MASS operations but may need to be amended or clarified, and/or may contain gaps; or have no application to MASS operations. The degrees of autonomy identified for the purpose of the scoping exercise are: Degree one: Ship with automated processes and decision support: Seafarers are on board to operate and control shipboard systems and functions. Some operations may be automated and at times be unsupervised but the seafarers on board are ready to take control. Degree two: Remotely controlled ship with seafarers on board: The ship is controlled and operated from another location. Seafarers are available on board to take control and to operate the shipboard systems and functions. Degree three: Remotely controlled ship without seafarers on board: The ship is controlled and operated from another location. There are no seafarers on board. Degree four: Fully autonomous ship: The operating system of the ship is able to make decisions and determine actions by itself. The initial review of instruments under the purview of the Maritime Safety Committee will be conducted during the first half of 2019 by a number of volunteering Member States, with the support of interested international organizations. MSC working group is expected to meet in September 2019 to move forward with the process with the aim of completing the regulatory scoping exercise in 2020. The list of instruments to be covered in the MSC’s scoping exercise for MASS includes those covering safety (International Convention for the Safety of Life at Sea, SOLAS); collision regulations (The International Regulations for Preventing Collisions at Sea, COLREG); loading and stability (International Convention on Load Lines, Load Lines); training of seafarers and fishers (International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, STCW); search and rescue (International Convention on Maritime Search and Rescue, SAR); tonnage measurement (International Convention on Tonnage Measurement of Ships, Tonnage Convention); Safe Containers (International Convention for Safe Containers, CSC); and special trade passenger ship instruments (Special Trade Passenger Ships Agreement, STP). IMO will also develop guidelines on MASS trial. The guideline include ensuring that such guidelines should be generic and goal-based, and taking a precautionary approach to ensuring the safe, secure and environmentally sound operation of MASS. Interested parties were invited to submit proposals to the next session of the Committee for the future development of the principles. II. Other Legal issues concerning Autonomous Ships In March 2017, the (Comité Maritime International, CMI) Working Group on Unmanned Ships circulated a questionnaire. The questionnaire aimed to identify the nature and extent of potential obstacles in the current international legal framework to the introduction to (wholly or partly) unmanned ships. The questionnaire can be summarized into the following legal issues. The legal definition and registration of the remote control ship and autonomous ship The definition of remote control or autonomous ship is based on the purpose of each individual convention. Current international conventions regulating ships do not generally contain recognized definition of the “Ship” and “Vessel”. However, due to its geographical feature, countries tend to have different safety requirement for ships; therefore, even the definition of remote control or autonomous ships given by international regulations, may not be accepted by national register of ships. For example, according to the reply to the questionnaire from Argentina association of maritime law, Argentina Navigation Act prescribes that in order to register a ship in the Argentine Register, regulatory requirements regarding construction and seaworthiness must be fulfilled. However, there are no rules regarding the registration of remote control ships or autonomous ships, as current act are based on the existence of crew on board. The unmanned ships would not be registered by Argentina Registry of ships. At present, the fragmentation of the definition and registration of ships can affect the deployment and application of remote control ships or autonomous ships. Due to the feature of shipping, which is related to the global transportation network, the definition and registration issue had better be solved at international level by International Maritime Organization (IMO). Legal issue of the seafarer International Convention on Standard of Training Certification and Watchkeeping (STCW) 1978 sets minimum qualification standard for masters, officers and watch personnel on seagoing merchant ships and large yachts. In the sight of replacing human operator on board with machine, will the convention find no application to remotely controlled or autonomous unmanned ships? The research of CMI points out the maritime law associations of Finland, Panama and United State assume that the STCW convention would likely apply to shore-based personnel as well in excepted circumstances where there is no new specific legislation. And the British maritime law association states that regardless of whether STCW would apply to unmanned operation or not, it is clear that certain provisions on training and competence would not apply to shore-based controller and other personnel. Japanese maritime association also states that although the convention does not find application to a remotely controlled unmanned ship, certain rules requiring watchkeeping officers to be presented may nevertheless arguably be interpreted to render an unmanned ship in breach of STCW and to that extent be applicable to unmanned ships. Therefore the amendment of convention seems inevitable. Standing on the other side, the Institute of Marine Engineering Science & Technology recommended that pairing human with machine effectively to enhance human intelligence and performance rather than totally replacing human is an area that should not be overlooked. Even if the application of unmanned ships comes in reality, seafarer skill will still remain an essential component in the long term future of the shipping sector. The minimum qualification of masters, officers and watch personnel may not need to be changed. Human error has been used to create a blame culture towards the workforce at sea, and it also results from poor implementation/ introduction/ preparation for new technology. Many studies show that seafarers are worried about the impact of autonomous ships. If the development of autonomous ships means replacing all the human elements on ships, people who work in marine sector will not accept those novel technologies easily, and this won’t lead to a safer future of maritime industry. Safety requirement of the remote control ship and autonomous ship Rule 8 (a) and rule 5 of the international regulation for preventing collisions at sea, 1972(COLREGS) require the operation of ships to comply with the duty of “good seamanship”, “proper lookout”. These rules are based on the operation by human, thus, leading to the following two questions: (1) Would the operation of unmanned ship contrary to the duty of “good seamanship”? The duty of good seamanship emphasizes the importance of human experiences and judgments in the operation of a vessel, and the adaptability of responses provided by good seamanship. Whether an autonomous ship would be able to reach this level of adaptive judgment would depend on the sophistication of its autonomous system. According to CMI’s research, the maritime law associations of countries including Argentina, British, Canada, China, German, Japan and Panama emphasize the requirement that autonomous ship must be at least as safe as ships operated by a qualified crew. (2) Would the proper lookout sets in rule 5 satisfied by camera and aural censoring equipment? COLREG rule 5 has two vital elements. First, crew on the bridge should pay attention to everything, not just looking ahead out of the bridge windows but looking all around the vessel, using all senses and all personnel equipment. Second, use all information continuously to assess the situation your vessel is in and the risk of collision. In this context, if the sensors and transmission equipment are sufficient to enable an appraisal of the information received in a similar manner available as if the controller was on board, then Rule 5 should be considered satisfied. However, it is unlikely that fully autonomous ship could comply with rule 5. It depends on the sophistication of its autonomous system. If the technology is unlikely at present to provide as equivalent spatial awareness and appreciation of the vessel’s positon as there are human on board, then rule 5 would not be considered fulfilled. Liability Liability is an important issue which is frequently mentioned in the area of autonomous ship. According to the study of MUNIN in 2015, liability issue of autonomous ship might arise under the following situations: (1) Deviation Suppose a ship was navigating autonomously, and the deviation of the system caused collision damage, how might liability be apportioned between ship-owner and the manufacturers? According to the research of CMI, 10 maritime law associations stated that under its domestic law, the third party may have a claim against the manufactures. (British, Canada, China, Croatia, Dutch, French, Germany, Italy, Spain, Malta) They may do so in tort if negligence on the part of manufacturers can be proved and if this can be shown to be causative of the damage. In European Union, third parties may also claim under Council Directive 85/374/EEC of 25 July 1985 on the approximation of the laws, regulations and administrative provisions of the Member State concerning liability for defective products. (2) Limitation of liability Article 1 of the 1976 convention on limitation of liability of owner of ships provides that ship-owner may limit their liability to all claims arising from any incident. The size of limitation is based upon the tonnage of the ship. Within the convention, the term ship-owner is held to include the ship’s owner, charterer, manager or operator. International conventions dealing with limitation of liability are phrased in neutral terms with regard to the presence of a master or crew; therefore, circumstances in which a ship has no person on board do not appear to undermine the operation of those conventions. (3) Bill of lading Bill of lading is a written document signed on behalf of the owner of ship in which goods are embarked, and the ship-owner acknowledges the receipt of the goods, and undertakes to deliver them at the end of voyage. Typically, the shipper will sign the bill of lading along with the owner of the cargo at the point that shipper takes carriage of the cargo in question. The bill of the lading will then be signed by the cargo’s recipient once it has reached its destination. In other words, the document accompanies the cargo all the time, and is signed by the owner, shipper and recipient. It will generally describe the nature and quantity of goods being shipped. A question arises as in the absence of a master or any crew on board the ship, how will the bill of lading be signed by ship’s master? III. Conclusion The shipping industry is a rich, highly complex and diverse industry, which has a history of both triumph and tragedy in its adoption of technology. In light of the potential for the remote and autonomous ship, and for the sake of contributing to the assurance of safe and efficient operation, it is better to understand the impact on the industry. The taxonomy of automation between human and machine is vast and complex, especially in the sector of law. Therefore, before the system can reach fully autonomy and undertake independent, our law should be ready. IV. Reference [1] Comité Maritime International, Maritime Law for Umanned Ships, 2017, available at https://comitemaritime.org/work/unmanned-ships/ (last visited Dec. 25, 2018) [2] MUNIN, D9.3: Quantitative Assessment, Oct. 10, 2015, available at http://www.unmanned-ship.org/munin/news-information/downloads-information-material/munin-papers/ (last visited Dec. 25, 2018) [3] Martime Digitalisation & Communication, MSC 100 set to review MASS regulations, Oct. 23, 2018, available at https://www.marinemec.com/news/view,msc-100-set-to-review-mass-regulations_55609.htm (last visited Dec. 25, 2018) [4] IMAREST, Autonomous Shipping-Putting the human back in the headline, April. 2018, available at https://www.imarest.org/policy-news/institute-news/item/4446-imarest-releases-report-on-the-human-impact-of-autonomous-ships (last visited Dec. 25, 2018) [5] Danish Martime Authority, Analysis of regulatory barriers to the use of autonomous ships(Final Report), Dec. 2017, available at https://www.dma.dk/Documents/Publikationer/Analysis%20of%20Regulatory%20Barriers%20to%20the%20Use%20of%20Autonomous%20Ships.pdf (last visited Dec. 25, 2018)
A Brief Introduction to Taiwan’s Legislations to Promote Industrial Innovations of the Digital EconomyA Brief Introduction to Taiwan’s Legislations to Promote Industrial Innovations of the Digital Economy 2023/05/15 I. Background To encourage the development of digital industries in communications, information, cybersecurity, networking and communication, to centralize digital governance and digital infrastructure development and to assist in digital transformation of public and private sectors in Taiwan, the Ministry of Digital Affairs (“the MODA”) was created on August 27, 2022 to spearhead the national digital development policy, communications and digital resources; the development of digital technology use cases and the environment for innovations and talents; policies and regulations governing digital economy industries, national cybersecurity, the government’s digital services, open data and data governance, digital infrastructure, international exchange and cooperation and competence standards for the government’s professional personnel in IT and informational security. The Administration for Digital Industries (ADI) and the Administration for Cyber Security (ACS) have been established as the MODA’s subordinate agencies, to address challenges on all fronts in the digital wave. As the central competent authority on the industrial development of the digital economy, the MODA may subsidize, incentify or support innovative activities of digital economy industries in accordance with Paragraph 1, Article 9 of the Statute for Industrial Innovation and determine relevant matters in accordance with Paragraph 2 of the same article. Hence, the MODA promulgated the Subsidy, Reward and Assistance Regulations for Promoting Industry Innovation (“the Regulations”) on December 23, 2022, to encourage innovation and R&D on software, services, integration and application in telecommunications, information, cybersecurity, networking, and communication. The purpose is to enhance the industry environment and to boost the industry competitiveness. These Regulations serve as the MODA’s flagship efforts in promotion of industrial innovations and highlights Taiwan’s emphasis on digital economy industries. Below is a summary of the Regulations. II. Scope As stated in the overview described in Article 2, the Regulations aim to assist in the development of software products, digital services and infrastructure, system integration and vertical use cases in telecommunications, information, cybersecurity, networking and communication, so as to encourage innovations in digital economy industries such as ecommerce, digital contents, new types of digital services, communications and network deployment, to improve the industry environment and enhance the industry competitiveness. In sum, the “digital economy industries” mentioned in the Regulations refer to software, digital services or digital infrastructure sectors in telecommunications, information, cybersecurity, networking and communication. III. Policy measures According to Paragraph 1, Article 3 of the Regulations, the MODA or its subordinate agencies may provide subsidies, rewards and assistance to the activities in digital economy industries such as promotion of innovation or R&D, supply of technologies and support in upgrade. This may involve the encouragement of creation of innovation of R&D centers by companies; assistance to establishment of innovation or R&D institutions; fostering of cooperation among industries, academia and research organizations; promotion of corporate engagement in talent development at schools and development of human resources in industries; support to innovations by local industries; advocacy of corporate use of big data and the government’s open data; enhancement of communications network resilience and network infrastructure prevalence and other relevant matters. Moreover, the Regulations provide details of the policy measures for subsidies, rewards and support as follows: 1. Subsidies The relevant details are provided from Article 4 to Article 17 of the Regulations. (1) Eligibility According to Paragraph 1, Article 4 of the Regulations, subsidy recipients in principle shall be engaged in activities of digital economy industries, shall be either a sole proprietorship, partnership, limited partnership, or corporation registered in accordance with domestic laws or a natural person who is national of the R.O.C., a natural person from Hong Kong or Macau or a foreign national with permanent residency and has never been listed as a refusal account by any bank. Flexibility can be granted in accordance with Paragraph 2 of the same article. If required for the development of digital economy industries, the MODA or its subordinate agencies may establish separate eligibility criteria for subsidy recipients. However, such eligibility criteria only take effect via public announcement and publication on the Executive Yuan Gazette. Finally, according to Article 13 of the Regulations, no subsidy application may be submitted in event of violation of laws related to environmental protection, labor safety and health or food safety and hygiene during the most recent three years, as determined to be serious by central competent authority. (2) Subsidy limits According to Article 5 of the Regulations, different programs come with different ceilings measured in percentage. In principle, the subsidized amount shall not exceed 50% of the program budget if it is for promotion of industry innovation or R&D or encouragement of corporate use of big data and the government’s open data to develop and innovate commercial applications or service models. However, this does not apply to specific policy considerations or subsidy schemes above the budget and approved by the MODA or its subordinate agencies. For example, the subsidized amount shall not exceed 50% of the course fees for corporate engagement in talent development on campus or enhancement of talent resources for industries. However, this limit does not apply to subsidies to indigenous people, persons with disabilities, low-income households, or the special circumstances approved by the MODA or its subordinate agencies. Support schemes such as assistance to industrial technology and upgrade; encouragement of creation of innovation of R&D centers by companies; assistance to establishment of innovation or R&D institutions; fostering of cooperation among industries, academia and research organizations; support to innovations by local industries; enhancement of communications network resilience and network infrastructure prevalence and other projects shall be announced by the MODA or its subordinate agencies and published on the Executive Yuan Gazette. (3) Subsidy programs According to Articles 6 of the Regulations, there are no specific restrictions on subsidy categories, with two exceptions: (1) promotion of industry innovation or R&D – Subsidies are limited to six categories, i.e., innovation or R&D personnel expenses for approved projects; costs for consumables and raw materials; access and maintenance expenses for innovative or R&D equipment; introduction of intangible assets; commissioning and verification fees of research; and travel expenses. (2) advocacy of corporate use of big data and the government’s open data to develop and innovate commercial applications or service models or enhancement of communications network resilience and network infrastructure prevalence - Subsidies are limited to three categories, i.e., fees for commissioned services; training & education fees; and promotional campaign expenses. (4) Application submission According to Article 7 of the Regulations, an applicant should submit the application form, the project plan and relevant data to the MODA or its subordinate agencies. If the contents of the project plan or documents fail to meet requirements, the MODA or its subordinate agencies may request missing materials before a deadline of up to one month. The MODA or its subordinate agencies may not accept applications without missing materials supplied before deadlines. (5) Acceptance and review According to Article 8 of the Regulations, the MODA or its subordinate agencies shall convene review meetings to review applications, changes and irregularities in the execution of subsidy programs. Applicants may be asked to provide explanations or Personnel may be sent to conduct on-site inspections. If necessary, relevant authorities or institutions may be commissioned assist in financial reviews. Additionally, according to Article 9 of the Regulations, the period from document readiness by an applicant to notification of the completed review to the applicant may not exceed three months. This may be extended by one month if necessary. Finally, according to Article 17 of the Regulations, subsidized projects, subsidy recipients, approval dates, subsidized amounts (including cumulative amounts) and relevant information shall be announced on the websites of the MODA or its subordinate agencies each quarterly unless the disclosure should be restricted or is not provided according to Article 18 of the Freedom of Government Information Law. (6) Contract signing Once reviewed and approved, the applicant must sign the subsidy contract with the MODA or its subordinate agencies within the time period specified by Article 10 of the Regulations. Unless extension has been agreed by the MODA or its subordinate agencies, the approval of the application loses validity if a contract is not signed before the deadline. (7) Matters of adherence by subsidy recipients Once the subsidy contract has been signed, an applicant becomes a subsidy recipient under the Regulations and must abide by relevant terms and conditions. First, the recipient shall establish a separate account for subsidy funds and maintain a separate account book, according to Article 11 of the Regulations. All of the interest generated from the subsidy account and any balance remaining after the project completion shall be fully returned to the national treasury via the MODA or its subordinate agencies. Meanwhile, to examine whether there are any duplications of application, the use of subsidy funds and the effectiveness of project implementation, the MODA or its subordinate agencies may dispatch personnel or commission a fair and just organization to inspect the relevant documents, account books and status of project execution. The subsidy recipient shall not refuse such an examination, is obligated to respond and shall submit work reports and details about the use of funds by following the agreed-upon schedule. In event of breach, the disbursement of subsequent funds may be suspended, under the terms and conditions of the subsidy contract. Second, according to Article 12 of the Regulations, if a recipient fails to execute the subsidized project as planned or the project experiences a significant delay in progress, or there is an overly large gap between the project results and the business plan, or the project fails to pass the review, inspection or acceptance by the MODA or its subordinate agencies and no improvement has been made before the specified deadline, or there is a breach of the Regulations Governing Procurements for Scientific and Technological Research and Development if the subsidized amount exceeds 50% of the recipient’s procurement and it meets the threshold for public announcements under the Government Procurement Act, the MODA or its subordinate agencies may suspend the next disbursement in accordance with the terms and conditions of the subsidy contract, claw back the disbursed subsidy and even stop any subsidy to the recipient for one to five years, depending on the severity of the circumstances. Third, according to Article 14 of the Regulations, the MODA or its subordinate agencies must conduct a comprehensive assessment of effectiveness of subsidized projects and the recipient shall cooperate by providing data required for the assessment. Fourth, according to Article 16 of the Regulations and unless otherwise specified by laws, if the subsidized amount exceeds 50% of the total budget for a technology project, the ownership and utilization of R&D results shall comply with the Government Scientific and Technological Research and Development Results Ownership and Utilization Regulation. In event of breach by the recipient violates, the MODA or its subordinate agencies may terminate the subsidy contract and shall refuse to accept any subsidy application from the recipient for five years from the date of completion of the innovation or R&D. If the reason is attributable to the recipient, the subsidy contract shall be canceled and the subsidies shall be refunded. (8) Subsidy applications According to Article 17 of the Regulations, a subsidy applicant shall declare to the MODA or its subordinate agencies the following: 1) No significant default in the execution of any government-sponsored science and technology projects during the past five years. 2) No suspension currently in force as a result of disciplinary actions in relation to execution of a government-sponsored science and technology project. 3) No tax incentives, rewards or subsidies for the same matter under other laws granted to the same subsidized project. 4) No taxes owed during the past three years. However, individuals who apply for the subsidy under Subparagraph 5 or 6, Paragraph 1, Article 3 are exempted. 5) No violation of laws related to environmental protection, labor safety and health or food safety and hygiene or the People with Disabilities Rights Protection Act during the most recent three years, as determined to be serious by central competent authority. However, this does not apply to circumstances that occurred prior to the enforcement of the Statute. If the applicant refuses to declare the above, the MODA or its subordinate agencies may not accept the application. If any false statement is identified, the application may be rejected, or the subsidy may be withdrawn, the contract may be canceled and the disbursed funds shall be returned. 2. Rewards According to Paragraph 1 of Article 18 of the Regulations, the MODA or its subordinate agencies will announce reward programs for digital economy industries with details on recipients, eligibility criteria, evaluation standards, application procedures, approving agencies and other related matters. Moreover, reward applications are not accepted according to Paragraph 2 of Article 18 and the provisions of Article 13 and Article 15 shall apply mutatis mutandis. Article 17 regarding announcement of government information on subsidy applications shall also apply to reward applications. 3. Assistance Relevant rules are primarily prescribed from Article 19 to Article 21 of the Regulations. (1) Eligibility According to Paragraph 1 of Article 19 of the Regulations, the rules prescribed in Subparagraph 1, Paragraph 1 of Article 4 also apply to the eligibility criteria for assistance to digital economy industries. In other words, assistance recipients in principle shall engage in activities of digital economy industries, either a sole proprietorship, partnership, limited partnership, or corporation registered in accordance with domestic laws or a natural person who is national of the R.O.C., a natural person from Hong Kong or Macau or a foreign national with permanent residency and has never been listed as a refusal account by any bank. Flexibility can be granted outside the aforesaid limitations and in accordance with Paragraph 2 of Article 19. If required for the development of digital economy industries, the MODA or its subordinate agencies may establish separate eligibility criteria for assistance recipients via public announcement and publication on the Executive Yuan Gazette. (2) Oversight of commissioned organizations According to Article 20 of the Regulations, the MODA or its subordinate agencies may evaluate and assess the effectiveness of the assistance services provided by the commissioned organization(s) for recipients as an important basis for reviewing assistance projects. (3) Establishment of a single contact window The assistance unit may establish a single contact window to provide assistance and counseling services, according to Article 21 of the Regulations. 4. General provisions In addition to specific rules, the general provisions prescribed from Article 22 to Article 25 shall apply to subsidies, rewards or assistance provided by the MODA and its subordinate agencies. First, all the funds required for policy measures shall come from the budgets allocated by the MODA or its subordinate agencies, according to Article 25 of the Regulations. Second, the MODA or its subordinate agencies may commission a legal person or a group to handle the application acceptance, review, approval, inspection, subsidy disbursement and claw-back, rewards, assistance and other relevant matters, according to Article 22 of the Regulations. Furthermore, according to Article 23 of the Regulations, the incoming and outgoing of funds for subsidy, reward and assistance projects are managed as follows: 1) The same project applying for subsidies with two or more organizations should list the details of all expenses and the breakdowns and amounts of subsidies, rewards and assistance under application with each government agency. The subsidy, reward and assistance program shall be canceled and the disbursed funds shall be returned in event of concealment or false statements. 2) If the review by each government agency on the use of funds identifies poor results, utilization not consistent with the subsidy purposes, or inflated or dishonest numbers, the subsidy, reward or assistance recipient shall return the disbursed funds. Meanwhile, no subsidy shall be granted to the subsidy, reward or assistance recipient in question for one to five years, depending on the severity of circumstances. 3) If procurement is involved in the subsidy, reward or assistance budget, the subsidy, reward or assistance recipient shall adhere to the Government Procurement Act. 4) When reporting on expenses, the subsidy, reward or assistance recipient shall enumerate in detail the utilization of expenditures and the total amount of spendings. The same project subsidized by two or more organizations shall list the actual sum of subsidies, rewards and assistance. Finally, according to Article 24 of the Regulations, the approval, disbursement and reimbursement of subsidies, rewards and assistance are processed as follows: 1) Disbursement based on project progress: The number of instalments, the method, the amount (percentage) are specified in the contract by the MODA or its subordinate agencies, depending on the project and the timetable. 2) Reimbursement shall be based on the Management Guidelines for the Disposal of Government Expenditure Vouchers, the Matters of Attention Regarding Budget (Donation) Implementations by Central Government Agencies for Private Groups and Individuals and relevant contractual provisions. IV. Conclusions To accelerate the innovation and development of digital economy industries in Taiwan, the MODA has promogulated the Subsidy, Reward and Assistance Regulations for Promoting Industry Innovation in accordance with Paragraph 1, Article 9 of the Statute for Industrial Innovation. It is hoped that the subsidies, rewards and assistance provided by the MODA helps to enhance the competitiveness of digital economy industries and the effectiveness of the digital economy development in addition to the Statute. The Regulations set out detailed rules on policy measures e.g., subsidies, rewards, and assistance. Key matters such as eligible recipients, application procedures, review mechanisms, responsibilities and obligations are clearly defined but certain flexibility is reserved by exceptions. A contract-centric approach provides manoeuvrability in practice specific to project circumstances. It is hoped that the MODA and its subordinate agencies can utilize these Regulations once in force, to enhance the business environment of the digital economy industries and continue to drive industry innovations.
An Introduction to Taiwan’s Regulations Regarding the Security Maintenance and Administration of Personal Information Files in in Digital Economy IndustriesAn Introduction to Taiwan’s Regulations Regarding the Security Maintenance and Administration of Personal Information Files in in Digital Economy Industries 2023/11/29 I. Preface The Personal Data Protection Act (below, the “Act”), Article 27, paragraph 3 authorizes all central government authorities in charge of specific industries to formulate regulations regarding security standards and maintenance plans for their concerned industries. Beginning August 27, 2022, Taiwan transferred authority over information services, software publishers, businesses that do retail sales of goods purely via the Internet, third-party payment providers, and other businesses in digital economy industries from the Ministry of Economic Affairs to the newly-established Ministry of Digital Affairs (MODA). Businesses in the digital economy industries collect, process, and use large amounts of important personal data, and therefore bear a relatively heavy responsibility for maintaining the security of personal data. In light of this, and in accordance with the Act, Article 27, paragraph 3, the MODA therefore promulgated the Regulations Regarding the Security Maintenance and Administration of Personal Information Files in in Digital Economy Industries (below, the “Regulations”) on October 12, 2023. These Regulations specify the standards for digital economy industries’ personal data file security maintenance plans and rules governing the handling of personal data following a business termination (below, “security and maintenance plans”, or “SMPs”). These regulations apply to all businesses in the digital economy industries. In order to reinforce responsibility for personal data security maintenance in the digital economy industries, tiered management is applied to businesses at different scales. The key points of these Regulations are introduced below. II. Where the Regulations apply As stipulated in the Regulations, Article 2, the “digital economy industries” that these Regulations apply to refer to any natural person, private juridical person, or other group, that engages in any of the following business operations: 4871 Retail Sale via Internet (industries that engage in retail sales to others via the Internet, but not including television, radio, phone, or other electronic means, nor postal sales); 582 Software Publishing; 620 Computer Programming, Consultancy and Related Activities; 6312 Data Processing, Hosting and Related Activities (industries that engage in processing customers’ data, server & website hosting, and other related services, but not including online audio/video streaming services); 639 Other Information Service Activities; or 6699 Other Activities Auxiliary to Financial Service Activities Not Elsewhere Classified (third-party payment industries, but not including other fund management activities). For the specific industries covered, see Attachment 1 of the Regulations. III. Security maintenance and management measures The relevant measures are stipulated in Articles 3 to 17 of the Regulations. In consideration that the businesses so regulated may collect, process, or use large amounts of personal data as part of their business activities, they bear a larger responsibility for maintaining the security of personal data than does the average enterprise. In compliance with the Regulations, every such enterprise is required to formulate an SMP, the content of which shall comply with the specifications in Articles 5 to 17. This includes putting in place management personnel and relevant resources; defining and inventorying the scope of personal data; risk assessment; putting internal management procedures in place; and other such matters. These Regulations also adopt tiered management for businesses based on their capital levels, in order to reinforcement the frequency at which security maintenance measures are performed. The specific regulations for security maintenance measures are introduced below. 1. Formulating an SMP In accordance with the Regulations, Article 3, and in order to maintain the security of personal data, each enterprise shall, within three months of the date the Regulations take effect, plan and formulate their SMP. Every enterprise shall also cause all staff members to understand and fully implement the SMP. In order to monitor implementation, the MODA may require that each enterprise submit its implementation of SMP; the enterprise shall then submit their implementation status information in written form within the specified time limit. 2. Making the protection policy known internally In accordance with the Regulations, Article 4, and to make sure that everyone in the enterprise comprehends and implements personal data protection, each enterprise shall make its personal data protection policies known to all personnel within the enterprise. Matters that must be explained include Taiwan’s legal regulations and orders on personal data protection; how personal data may only be collected, processed, and used for specific purposes and in a reasonable, secure way; that protective technology must be at a level of security that could be reasonably expected; points of contact for rights relating to personal data; personal data contingency plans; and proper monitoring of outsourced service providers to whom personal data is outsourced. All of this must be done to make sure that every enterprise carries out their duty for comprehensive, continuous SMP implementation. 3. SMP content (1) Putting in place management personnel with relevant resources In accordance with the Regulations, Article 5; in accordance with both the Regulations as a whole and other laws and orders regarding the protection of personal data; and in order to implement personal data protection, each enterprise shall do the following things: Weigh the size and characteristics of their business to reasonably allocate operating resources; take responsibility for the personal data protection and management policy; and formulate, revise, and implement their SMP. Also, the enterprise’s representative or the representative’s authorized personnel shall carry out formulation and revision, in order to make sure that the SMP’s content is fully carried out. (2) Establishing the scope of personal data In accordance with the Regulations, Article 6, in order to define the scope of personal data to be included in the SMP, each enterprise shall periodically check the status of personal data that is collected, processed, or used. (3) Risk assessment and management mechanisms for personal data In accordance with the Regulations, Article 7, in a timely manner, and in accordance with their already-established personal data scopes and the processes in which their business involves the collection, processing, or use of personal data, each enterprise shall evaluate risks that may arise within their scope and processes. Based on the risk evaluation results, each enterprise shall then adopt appropriate security management and response measures. (4) Incident prevention, reporting, and response mechanisms In accordance with the Regulations, Article 8, and in order to reduce/control damages to data subjects resulting from personal data theft, tampering, damage, destruction, leakage, or other such security incidents, each enterprise shall formulate response, reporting, and prevention mechanisms: 1. Response mechanism: Methods to be followed after a security incident has occurred, to reduce/control damages to data subjects, and appropriate ways to notify data subjects after an incident investigation, as well as what such notifications shall contain. 2. Notification mechanism: Post-incident notifications to data subjects, in a form (such as email, text message, phone call, etc.) that makes it convenient for such subjects to learn what has occurred and what the incident handling status is; also, providing data subjects with a hotline or other way of seeking information later on. 3. Prevention mechanism: A post-incident mechanism for discussing and adjusting the prevention measures. Within 72 hours after an enterprise learns that a personal data security incident has occurred, the enterprise shall use Attachment 2, the Enterprise Personal Data Leak Reporting Form, to notify the MODA of matters such as: A description of what caused the incident; an incident summary; the damage status; possible results from the personal data leakage; proposed response measures; proposed method and time for notifying data subjects; etc. Alternately, the enterprise may notify the special municipality or county/city government to then notify the MODA. If the enterprise is unable to report the incident within the time limit or is unable to supply complete reporting information all at once, the enterprise shall attach explanation of the reasons for the delay, or provide the information in stages. After the MODA or the special municipality or county/city government receives a report, they may implement reasonable handling in accordance with Articles 22 to 25 of the Act. (5) Internal management procedures for personal data collection, processing, and usage In accordance with the Regulations, Article 9, in order to ensure that their collection, processing, and use of personal data complies with the laws and orders regarding the protection of personal data, each enterprise shall do the following: Formulate internal management procedures; assess whether the use, processing, or collection of special categories of personal data are involved; assess data subjects’ consent has been obtained; assess whether the legal circumstances create an exemption from the obligation to inform; etc. The internal management measures shall also include providing data subjects with information on their rights in accordance with the Act, Article 3; putting in place mechanisms for ensuring the accuracy of and inquiring regarding personal data; and periodically reviewing whether the specific purposes for collecting personal data still exist or have expired. (6) Limits, notifications, and monitoring for international transfers In accordance with Article 10 of the Regulations and Article 21 of the Act, when an enterprise’s transfer of personal data across a national border affects data subjects to the extent that there is a major national interests concern, the enterprise shall assess whether MODA restrictions apply to the transfer. The enterprise shall also notify the data subjects of the region(s) that the data is transferred to; perform appropriate monitoring of the data recipient; and provide the data subjects with information on their rights in accordance with the Act, Article 3. (7) Data, personnel, and equipment security management measures 1. Data security management measures: In accordance with the Regulations, Article 11, and when personal data is backup, kept confidential, or transferred by various means based on the risk assessment results, each enterprise shall put in place protective measures against abnormal access behaviors. When an enterprise provides information/communication technology services, the enterprise shall also put in place and regularly monitor intrusion countermeasures, abnormal access monitoring and contingencies, anti-malware mechanisms, account password verification, system testing, and other such data security management measures. 2. Personnel security management measures: In accordance with the Regulations, Article 12, each enterprise shall contractually specify the obligation to maintain confidentiality with all staff members; identify personnel who job duties involve collecting, processing, or using personal data; and periodically assess the appropriateness and necessity of personnel’s permissions to access personal data. 3. Equipment security management measures: In accordance with the Regulations, Article 14, and to prevent personal data being stolen, tampered with, damaged, destroyed, or leaked, each enterprise shall put in place appropriate media protection for personal data storage devices. The protection requirements include management measures such as technology, equipment and secured environments that meet a specific level of security. (8) Education and training In accordance with the Regulations, Article 13, each enterprise shall periodically use education and training to ensure that all staff members understand the following things: The laws and regulations pertaining to personal data protection; their personal duties and roles within their scopes of responsibility; and the requirements for all SMP management procedures, mechanisms, and measures. For any enterprise that engages in retail sales via the Internet, their SMP shall include user training and education regarding personal data protection and management; and the enterprise shall also formulate personal data protection rules for compliance. (9) Continuous audit, recording, and improvement mechanisms 1. Data security auditing mechanisms: In accordance with the Regulations, Article 15, each enterprise shall periodically do internal audits of personal data, then put the audit results into an evaluation report that reviews improvements to the enterprise’s protection policy, SMP, etc. If there are any deficiencies, the enterprise shall make corrections. 2. Use of records, tracking data, and retention of evidence: In accordance with the Regulations, Article 16, and as part of carrying out its SMP, each enterprise shall retain a minimum of five years of records on the collection, processing, and use of personal data; tracking data for automated machinery; and evidence of having implemented the SMP. After an enterprise’s operations cease, it shall retain records of the destruction, transfer, or other deletion of personal data for a minimum of five years. 3. Comprehensive, continuous improvement for personal data security maintenance: In accordance with the Regulations, Article 17, any time an enterprise’s SMP is not implemented, the enterprise shall adopt corrective and preventive measures. Also, based on the SMP’s implementation status, its handling methods/implementation status, developments in data technology, adjustments to the enterprise’s business, and changes in the law and regulations, each enterprise shall periodically review and amend its SMP. 4. Tiered management In accordance with the Regulations, Article 18, and to prevent relatively small businesses having to take on excessive personal data management costs, tiered management is applied. For an enterprise with a specific business scale (having capital of NT$10 million or more, or holding 5,000 or more personal data records), stronger security measure implementation is required, namely, the personal data security measures shall be implemented, reviewed, and improved at least once every twelve months. If an enterprise reaches NT$10 million or more in capital after the Regulations take effect, or if an enterprise’s number of personal data records held reaches 5,000 or more as a result of direct or indirect data collection, then within six months of meeting those conditions, the enterprise shall implement and review the improvement measures at least once every twelve months. 5. Outsourced personal data Commercial outsourcing in the digital economy comes in many forms. In light of this, and in order to make clear each enterprise’s security management obligations with regard to the collection, processing, and use of personal data, Article 19 of the Regulations clearly spells out what duties shall be carried out with regard to any outsourcing that touches on personal data. When an enterprise outsources the collection, processing, or use of personal data, it is considered equivalent to the enterprise’s own activity. Thus, the enterprise shall understand and follow the legal orders and regulations on personal data set by the central government authorities in charge of the outsourcing party’s industries. Any oversight responsibilities arising from outsourcing the collection, processing, or use of others’ personal data shall be clearly stipulated in the outsourcing contract or other such documents. IV. Conclusion The Regulations Regarding the Security Maintenance and Administration of Personal Information Files in in Digital Economy Industries are designed to balance development for Taiwan’s digital economy industries with comprehensive, continuous improvement of personal data security maintenance. In pursuit of those goals, the Regulations clarify what each enterprise must do: Plan, formulate, and carry out security maintenance plans for personal data that falls within the bounds of the enterprise’s business; ensure that all staff members receive training on personal data protection; provide personal data subjects with channels to file complaints and seek consultation on their rights; and inform the government authorities in charge of the digital economy about the enterprise’s SMP, including the status of any personal data security incidents. All this is done in hopes that the security measures will continuously improve the security of personal data in Taiwan’s digital economy industries.
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