The Isle of Man Electronic Transactions Act, which received Royal Assent in June 2000 and was effective from November 2000, is based on Australian legislation, which is in turn based on the model issued by the United Nations Commission on International Trade Law. Its purpose was to enable electronic commerce to be put on the same legal footing as paper-based commerce, as well as removing any legal impediments to the use of electronic communications with public authorities.
The Act ensures equality of electronic transactions with paper ones, subject to precautions to ensure that electronic communications are authentic and accessible, and is technology neutral. As a general rule, electronic communications are treated as being sent from the originator's place of business and received at the recipient's place of business. It incorporates the common law principle that a communication which appears to be from a person can only be treated as such if it was sent with their authority.
Electronic signatures are given parity with written ones, and there is provision for a system of Certification Service Providers to verify the authenticity of communications.
Internet Service Providers and telecommunications operators are not required to monitor the content of communications, and will not be liable for such communications provided they take appropriate action when they are brought to their attention.
Although the Isle of Man is within the European Union in some respects, applies its Common External Tariff, and imposes EU VAT in common with the UK, it does not partake of much other EU legislation, and will not need to implement the EU's or the UK's e-commerce legislation, which is notably more restrictive than the Act which has been passed by Tynwald.
During 2001 the Department of Home Affairs progressed first the primary and then the secondary legislation to legalise the operation, from the Isle of Man, of well regulated on-line gambling sites. The primary legislation, the On-line Gambling Regulation Act, came into force in May 2001. Four sets of Regulations were approved by Tynwald in June of that year, and the first three licenses under the regulations were issued that November.
A further three licenses were issued in the following year. However, after this initial success, the Isle of Man saw a steady exodus of prominent online gambling firms in 2003, a situation that many in the industry blamed on an inflexible regulatory environment.
In August, 2003, it emerged that following an amendment to the Isle of Man's 1970 Betting Act, from September 1, Betinternet.com would be permitted to advertise to potential customers in the United Kingdom. Previously, because Manx duty rates paid by the company were lower than those levied in the UK, Betinternet was treated as an overseas bookmaker, and was therefore not permitted to advertise in the UK, which as the world's third largest gaming market represented a significant loss.
However, following the legislative change, from September of that year, the firm paid the same amount of tax on UK bets as British bookies, but continued to levy the Manx rate on bets from elsewhere in the world.
By May, 2004, it was becoming clear that changes in the regulatory structure of the e-gaming sector in the Isle of Man had been successful in attracting some big name players to the jurisdiction.
“The recent reduction in our licensing fee together with revisions that allow peer-to-peer gaming and pooled jackpots have removed significant barriers to e-gaming business,” observed Trade and Industry Minister Alex Downie at the time.
In September, 2004, the Isle of Man government said it had been actively pursuing measures that could propel the Island towards assuming the mantle of the world’s IT disaster recovery hub in the field of financial services.
In a bid to achieve this, the Island’s authorities sought to agree memoranda of understanding (MOU) with multiple offshore jurisdictions which would allow firms using an Island-based disaster recovery service to operate under the same regulations as in their home jurisdictions. Legislation was passed with the aid of the Financial Supervision Commission, and it was said that the measures were the first of their type anywhere in the world.
In April, 2006, meanwhile, the Isle of Man government's head of e-gaming Bill Mummery told the London Stock Exchange that new regulations governing online gaming had been introduced in an attempt to establish the Island as an "e-gaming centre of excellence."
"In the past year the Island has become a significant recognised force in global gaming – the industry is increasingly dynamic," Mr Mummery told a conference, which included potential investors, as he outlined changes to regulations in three key areas: software testing, disaster recovery provision and advertising and marketing.
The change to software testing aim to improve the process for testing online gambling technology, such as the fairness of Random Number Generators used to deal cards or spin a roulette wheel, and implements a need for continuous monitoring of the operators' systems to ensure fairness is maintained.
Under the new regulations, operators who are licensed and regulated in other jurisdictions can use the Island to provide disaster recovery and off-line data storage facilities to support their global operations.
Rules governing advertising and marketing were also established on how Island-based online gaming businesses in this regard can support their clients.