UK: Internet Security

Last Updated: 31 July 2001
Article by Jonathan P. Armstrong

The public’s lack of faith in the internet as a secure place for commerce has been one of the most limiting factors for e-commerce growth. Sites need to feel secure to end-users to allow them to trade on line. There are also however legal considerations, which should not be overlooked.

The first starting point should be the Data Protection Act 1998 which came into force in UK law on the 31st March 2000. Most people will be familiar with the Act and the 8 principles of good practice which form the cornerstones of a data protection policy. Of particular relevance is the 7th data protection principle which says:

"Appropriate technical and organisational measures shall be taken against unauthorised or unlawful processing of personal data and against accidental loss or destruction of, or damage to, personal data."

Most readers will be aware that the definition of ‘processing’ is a wide one as defined by s.1 of the Act:

""processing", in relation to information or data, means obtaining, recording or holding the information or data or carrying out any operation or set of operations on the information or data, including-

(a) organisation, adaptation or alteration of the information or data,

(b) retrieval, consultation or use of the information or data,

(c) disclosure of the information or data by transmission, dissemination or otherwise making available, or

(d) alignment, combination, blocking, erasure or destruction of the information or data;"

s.4 of the Act makes it a duty of a data controller to comply with the data protection principles in relation to all personal data with respect to which he is the data controller.

As well as the Data Protection Act 1998 there may also be additional regulation for certain types of internet activity which will be relevant to a business’s e-commerce security policy. As an example in the UK it has been reported that the FSA have said that they intend to keep a close eye on the security practices of e-banking sites and they will call e-banks to account for any breaches.

All of this means that every organisation must have regard to the state of the art in technology and consider on a regular basis whether, given the nature of the data held, additional security measures should be brought into place. A data controller must also take reasonable steps to ensure the reliability and compliance of employees who have access to personal data and, as a result, an employee policy, properly policed, is likely to be mandatory. If data is processed on an organisation’s behalf by a third party, or transmitted outside the EEA then additional measures must also be put in place.

The UK Act is mirrored by legislation in other jurisdictions. One high profile case this Autumn concerned the Spanish version of Big Brother. In Spain, like in the UK thousands of applicants sent their details in to the TV company with the hope of taking part. Some of the personal details of around 1,700 applicants appeared on a fanclub website after an attack on the TV company's server. In Spain, as in the UK, an attack like this offends against data protection legislation. It was reported that as a result the programme makers might face a fine up to $4m for its breach, together with civil actions from the unlucky contestants whose details appeared on the fan club site.

As well as the potential criminal liability that a breach of the 1998 Act brings an insecure website could also lead to civil liability. We have already seen the press activity surrounding the recent problems experienced by financial institutions with their online security and it is easy to imagine an aggrieved customer bringing proceedings against a bank for breach of the duties they owe to their customers. Potentially substantial civil damages could result if the customer concerned can prove loss. Even the frantic alteration of online banking terms which many banks have been engaged in may not stand up to judicial scrutiny. In the one recent incident a company reportedly offered £50 per customer to compensate for its security problems – a potentially tidy sum given that one customer claimed he could access 5,000 client details.

Customers could also start proceedings if they are unable to access a site. By way of illustration we can look at the reports from Sweden in December 1999 when a Swedish bank updated its system to cope with the Y2k change. BBC News reported that 'millions of people' might have had trouble shopping online or checking their bank accounts because of the problem.

As well as the problems faced from outsiders getting in in the US two cases have shown us that data must be kept secure, even perhaps from the purchasers of a company’s assets. The most high profile case concerned the collapse of the online retailer

Toysmart had published a privacy policy on its site saying how it intended to deal with customer information. Its policy said that personal information voluntarily submitted by visitors to the site (such as name, address, billing information and shopping preferences) was never shared with third parties. In the UK a policy like this is effectively mandatory since the Data Protection Act 1998 came into force in March. Toysmart was sued by the US Federal Trade Commission (FTC) for attempting to sell customer information in breach of its privacy policy. This happened after Toysmart went down and attempted to sell its assets, including the personal data collected.

In the aftermath of the prosecution two US senators have called for legislation to deal with this specific type of complaint. Senators Patrick Leahy, (D-Vermont) and Robert Torricelli, (D-New Jersey) attached the proposal to a broader piece of legislation that seeks to reform bankruptcy laws. In a letter seeking support for their new Bill they said: "Customers have a right to expect a firm to adhere to its privacy policies, whether it is making a profit or has filed for bankruptcy. Our bill closes this loophole in the bankruptcy code and ensures that online and offline firms keep their promises to protect personal privacy."

The case has also caused embarrassment to the majority owner of Toysmart, Walt Disney Company. Reports in the US say that it offered to purchase the customer list to ensure that the data remains confidential. This led to the FTC agreeing to a sale, subject to stringent conditions which are likely to significantly affect the value of Toysmart’s assets.

The FTC’s concerns in the Toysmart case were echoed by the collapse of another US internet retailer, announced that it had entered into a settlement agreement with the Texas Attorney General regarding any future sales or transfers of's customer list. The settlement still requires the final approval of the court but under the terms of the proposed settlement the court-appointed bankruptcy trustee will oversee the destruction of customer personal financial data such as credit card and bank account details. While the bankruptcy trustee may then sell or transfer the customer list excluding those details she must first give notice to all of's customers and give them the chance to opt-out of the proposed sale. The settlement also requires the bankruptcy judge to approve the notice and opt-out form sent. Clearly as a result of the intervention the value realized by the sale of's assets is likely to be severely reduced.

All of these developments show us that security and personal privacy are likely to be key-stones of an organisations’ development on the internet. Every organisation needs to think carefully when it changes its site and to have a properly drafted access agreement to regulate its liability with its customers. E-commerce companies who disregard security or give it a low priority will find themselves in trouble, in prison or out of business.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions