Labyrinth of laws could lead to a Net loss

Earlier this month, CompuServe, the online service provider, was forced by the threat of federal prosecution in Germany to withdraw access for all its subscribers to about 200 Internet news groups. The move illustrates the Internet's undefined legal status, which might prove to be a minefield of potential liabilities.

At the national level, the approach to the legal issues raised is fragmented and inconsistent. In the UK, Oftel and the Independent Television Commission are both claiming jurisdiction over services to be provided on the networks of the future. The ITC has an elaborate regulatory regime for the control of broadcast programmes, evolved over many years. Oftel, in contrast, has generally exhibited a much lighter regulatory touch in policing telephone services, which is more in keeping with the ethos of the Internet. The eventual outcome of this tussle will have a significant impact on the development of Internet services in the UK.

Another important issue is the liability of service providers for libellous statements posted by users. The Defamation Bill, published last July, attempts to deal with this by exempting service providers only if they have taken "all reasonable care" and had no reason to suspect that they were carrying a defamatory statement. Unfortunately, the definition of reasonable care appears to require service providers to identify potential troublemakers who are users and monitor their messages. This would impose an intolerable burden on service providers.

A further layer of complexity is emerging at the international level. The perceived wisdom has been that the law of the country where the computer is located is likely to be the governing law. But which computer - the client or the server? Either or both? There is no settled law to help to answer this question and the precedents that are emerging are not comforting. CompuServe has more than 4 million subscribers around the world and is widely regarded as a responsible company. It recently announced that it will be developing the technical capability to black out Internet content where required by an individual country's law, while preserving full access to the rest of its subscribers.

The fact remains, however, that German law has denied CompuServe users in every other country in the world direct access to some news groups for a period. The solution - withdrawing access on a country-by-country basis - could fragment the Internet and so erode one of its main benefits. In another case, Virgin Atlantic Airways has been fined $14,000 by the US Department of Transportation for violating the department's advertising regulations on the Internet.

There is a danger that as each country takes action to enforce its own national, cultural and political values against service providers, there will be a drift towards "highest common denominator" regulation, as service providers comply with the most rigorous rules in the world for each type of legal liability. In other words, a potent cocktail of the toughest standards in the world will prevail online: to German obscenity legislation and US advertising rules add, for instance, Chinese rules on political debate and the UK's tough libel laws. A pale reflection of today's flourishing Net culture will result.

The only long-term answer is an international convention on Internet regulation, to agree the legal framework for deciding the law that governs each site. Until this happens, service providers are likely to get an increasing number of nasty surprises from the authorities in countries with strong regulation, and they will have either to modify their operations to anticipate these or, like CompuServe, react quickly and decisively when the regulator swoops.

The writer is a partner at Garrett & Co, a London law firm.