The move is seen as a major step forward for e-commerce.

The initiative, agreed in Brussels, is based on the idea that such business can be provided anywhere in the 15 nation bloc, as long as it is legal in the country of origin.

European Commission: providing legal framework

"Now we have a more clear legal framework for the shopping mall of the future," said Finnish foreign trade minister Kimmo Sasi.

"The directive means operators will be able to sell good sense services all over the EU from whatever member state."

Mr Sasi said the directive would come into force after a second reading in the European Parliament and formal EU adoption.

Finland currently holds the rotating presidency of the EU.

Mr Sasi said the directive laid down a minimum set of rules for consumer protection so that online sellers would not have to deal with 15 different national legal systems.

He said it gave legal security to service providers so that they would not be liable for transmissions over their networks as long as they met certain conditions.

"It does not mean we are soft on cybercrime. We believe we have safeguards on this," he said.

Consumer gains

The directive does not decide which court has jurisdiction over consumer complaints, but does include some change from the normal internal market rules for dealing with consumer contracts.

"There are lots of things in favour of consumers," said a Finnish spokesman.

He said the directive also dealt with unsolicited e-mail, known as spamming, under which consumers have the right to opt out of receiving this mail.

Diplomats said the directive had been agreed unanimously but that Belgium abstained because of concerns over its coverage of financial services.

They said the main points discussed by ministers had dealt with criminal liability of service providers and the coverage of financial and medical services.

"It's the minimum provisions in the directive which should encourage electronic commerce in the EU, with greater levels of business and consumer confidence," one UK diplomat said.

Reviews

The directive includes scope for individual member states to act to protect consumers and investors, and to deal with financial services on a case-by-case basis.

A statement issued by the UK Department of Trade and Industry said the directive would be reviewed every two years in the light of technical, economic and legal developments.

Helen Liddell: "Must come into force soon"

Barring unforeseen hitches, EU member states will have until mid-2001 to adopt legislation to implement the directive, but Mr Sasi said he expected governments to move quickly.

"The sooner we have legislation in place, the better for our competitiveness, especially in relation to the Americans."

This year, e-commerce is expected to produce $16.8bn in revenues in Europe - way behind the $71.4bn forecast in the US - according to data compiled by Microsoft Corporation.

The UK European Competitiveness Minister, Helen Liddell, said the rules would give confidence to both consumers and businesses.

"This directive must come into force as soon as possible," she said.

"We all know that technology is rapidly developing. This progressive legislation is about giving Europe a competitive advantage."