ECO 1.1 Application and purpose

ECO as a whole operates against the background of a key element of the E-Commerce Directive, namely the freedom of ECA provider from one EEA State to carry on an electronic commerce activity freely into another EEA State. An incoming ECA provider has to comply with the applicable laws in the country of origin from which the service is provided, and not the laws in the place where the consumer is located, subject to derogations from that principle. The applicable UK rules under those derogations are set out, or referred to, in this chapter.

This freedom is conferred on incoming ECA providers by the ECD Regulations, and is carried forward by this chapter and other provisions of the FSA's Handbook to which this chapter refers. However, this freedom is qualified by certain other rules in this chapter. These rules are based either on the 'consumer contract derogation' or on the 'insurance derogation', which give Host States continuing responsibility for consumer protection in certain areas. Both derogations are set out in the Annex to the directive.

This chapter applies only in relation to electronic commerce activities provided to a UK ECA recipient. ECO 1.2 (Provision of essential information to consumers) applies in relation to electronic commerce activities supplied to a UK ECA recipient who is a consumer. ECO 1.3 (Provision of insurance services) applies in relation to relevant services provided to a UK ECA recipient, whether or not the recipient is a consumer.

The E-Commerce Directive also allows the EEA State where the recipient is based to restrict the freedom to provide an electronic commerce activity from another EEA State on a case by case basis, where certain conditions are met. This derogation is implemented in the United Kingdom through provisions of the ECD Regulations. EG 195 outlines the derogation power and the FSA's policy on its use in relation to incoming ECA providers.

Notwithstanding the provisions of the E-Commerce Directive, an incoming ECA provider's Home State (when different from its country of origin) will continue to have certain responsibilities, such as prudential supervision of that provider and its branches and ensuring that it has the appropriate compensation scheme as required by Community law. As such, an incoming ECA provider, that is an authorised person, is subject to the relevant parts of the Handbook. This means that an incoming ECA provider that is an EEA branch of a UK firm is subject to, for example, IPRU and COMP continues to be relevant to its activities.

The FSA has a range of investigation and enforcement powers available to it where an incoming ECA provider appears to be in breach of rules to which it is subject under ECO 1. These include powers to seek injunctions , to apply to a court for restitution and, in the case of authorised persons, to order restitution and take disciplinary action (see EG and DEPP)5.

The market abuse regime and misleading statements and practices offences are not affected by the E-Commerce Directive. The FSA's enforcement powers in this regard are described in EG.5 The FSA's Code of Market Conduct (MAR 1) contains guidance on whether or not behaviour amounts to market abuse.