11. Technology and the Law

Technology and Jurisdiction

While the slow pace of updates of laws to meet the rapidly changing business technology environment is a big issue, the reality is that we already have a number of laws which could address many online legal situations. For example, slander/defamation laws exist and could be used to take action against someone for their online activities. The challenge is that with the internet, traditional national borders are crossed largely unimpeded.  So, the question becomes which countries laws apply on the internet and where should an action be brought?

Let’s deal with the easy question first: Do Canadian’s need to follow Canadian laws while doing business abroad, either with technology or not? The simple answer is yes! All Canadian citizens must adhere to Canadian law despite the jurisdiction, even if that jurisdiction allows the activity. The best example of this is bribery. In many jurisdictions, this is a common practice and may be an expected part of business operations. However, bribery is an offence under Canadian law so, as a Canadian citizen, you can still face consequences here in Canada.

That is easy, but do Canadians need to follow other jurisdiction’s laws? The challenge is that each jurisdiction has its own set of laws and regulations. Since each jurisdiction is different, then how do we know as businesses which laws to follow?  Let’s say we sell cannabis online which is legal in many parts of Canada; how can we prevent selling to jurisdictions that prohibit cannabis use? Or, in the event someone from those prohibited jurisdictions does purchase our product online; what is the risk to our organization? These are complicated questions, without easy answers which probably explains why governments struggle with developing laws to address the rapid importance of technology in business.

Why does this matter?  Well, it has to do with the concept of long-arm statutes and extra-territorial reach.

Long-Arm Statutes

A long-arm statute is a law that one jurisdiction enacts and can be enforced against a business or organization operating outside that jurisdiction but could come in contact with that jurisdiction. For example, if one jurisdiction outlaws cannabis but drafts the legislation to include ‘anyone in the world’, and not just residents of the jurisdiction, this would convert the law from a single jurisdiction to a long-arm statue.

This is not just some hypothetical situation. BODOG.com, a Canadian gambling site, operating legally in Canada, was indicted in the USA for violating its state laws (https://www.cbc.ca/news/world/bodog-gambling-site-shut-down-canadian-owner-indicted-1.1159011).  It is highly risky for organizations or individuals to ignore or disregard another jurisdiction’s laws because these can be enforced in other jurisdictions.

Extra-Territorial Reach

Extra-territorial reach is where one jurisdiction has an ability to exercise authority beyond its jurisdiction. In reality, any jurisdiction can do this, but if the other jurisdiction does not allow for the effect of the law in that jurisdiction, it is difficult to apply the law and take action against the business.  Ideally, the goal is to have both jurisdictions agree to the law and apply it. This is common in criminal cases.

A recent interesting situation is where the US department of revenue has been actively targeting American citizens overseas to collect taxes owed: IRS Cracking Down on US Expat Taxpayers.

These two are similar, so the easiest way to understand their difference, is that long-arm statues are to enforce laws on people or businesses that reside outside the jurisdiction; whereas extra-territorial laws focus on individuals and businesses who are ‘residents’ of the jurisdiction but are operating outside the jurisdiction.

Foreign Actions

One of the new developments of technology is the ease with which individuals and businesses can be exposed to foreign government actions. As an example, foreign governments have used technology to track and monitor the activities of individuals.  (https://www.washingtonpost.com/investigations/interactive/2021/nso-spyware-pegasus-cellphones/). Businesses should take precautions to protect their interests in a rapidly changing world.


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Business Law and Ethics Canadian Edition Copyright © 2023 by Craig Ervine is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.

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