It is one of a raft of cross-border rules aimed at protecting consumers and boosting electronic commerce.

The new legislation sets down some ground rules designed to spur an industry in which the European Union is lagging behind the US.

Recent figures suggest that in Europe there are just 2,000 companies conducting business online in 1998, compared with nearly 7,000 in America.

Spam opt-out agreed

In a move welcomed by the industry, it was agreed that companies selling goods online across borders will now be regulated by the European Union country in which they are based.

Uncertainty over whether the trade laws of the country of origin of e-shipments should apply elsewhere had acted as a deterrent to some companies selling outside their domestic market.

Members of the European Parliament (MEPs) were voting on a proposal drawn up by the European Commission.

Although general responsibility rested with the country of origin, under pressure from consumer groups the European Commission had proposed that disgruntled buyers should be allowed to invoke their own national consumer protection laws.

But the parliament decided that exemption was too broad and proposed that it apply only if the consumer transaction was not protected by EU-wide rules.

MEPs also agreed that consumers should be able to sign registers to opt out of receiving junk - or so-called spam - e-mail.

But they rejected a plea from British Liberal Democrat MEP Graham Watson to ban unsolicited junk e-mails completely, saying instead that countries should be able to ban unsolicited spam even if their EU partners allow it.

Libel rights disagreement

They also adopted amendments expanding the responsibility of Internet Service Providers to combat illegal acts such as copyright violations or libel.

However, it rejected a requirement that would have required them to "keep all information necessary for the purpose of tracing and identifying providers of illegal content".

The legislation now goes to the 15 European Union governments.

The text also aims to ensure that "intermediaries", such as phone companies and ISPs, are not liable for transmitting or temporarily storing illegal material, provided they did not initiate or modify the transmission.

The MEPs added a few requirements, such as obliging them to accommodate "accepted industry standards used for the identification and protection of transmitted material".