For a prospective communications provider, the Principality of Sealand is tough to contact.

Directory enquiries puts you through to Maersk Sealand, an unrelated Danish shipping and sea-platform group. And the so-called nation state's UK address is a post office box in Felixstowe. The self-styled 'principality' is actually a redundant military fortress about six miles off the Suffolk coastline, however, in the North Sea near Felixstowe.

But in a digital echo of the pirate radio ships of the 1960s and 1970s, the family that inhabits the base said this week that it plans to offer internet services from the island. The aim is to avoid UK government regulations such as the Regulation of Investigatory Powers (RIP) Bill and taxes on ecommerce.

"European states, during disputes involving Sealand, have stated that they have no rights or authority in Sealand, and the major European states have repeatedly given de facto recognition to the existence and the sovereignty of Sealand," says the principality's website, which can be found at www.fruitsofthesea.demon.co.uk.

But the UK government begs to differ. "The UK does not recognise Sealand as an independent state, and isn't aware of anyone else who does," says a spokesman for the Home Office, the department responsible for the RIP Bill. When law, the Bill will regulate how the security services tap UK internet traffic.

"If Sealand was to become a communications service provider, then RIP would apply to it. In the event of non-compliance, the bill does allow for action to be taken through the courts. We hope that won't be necessary," he adds ominously.

Choppy waters
The UK's territorial waters extend 200 miles from its shores, unless that infringes on another country's area - in which case the oceans are divided straight down the middle.

Although there are some rights that cease after six and 12 miles respectively, and others such as fishing that are shared between all European Union states, the North Sea is hardly a legal free-for-all.

But what if some kind of platform or boat that was genuinely situated in international waters such as the north Atlantic, started providing internet services - or in effect, became the pirate ship of web surfing?

For example, plans are already in place to build a cruise ship for the unfeasibly rich, which will act as a tax-free country. Plutocrats are buying permanent berths and will be able to abandon their nationalities (and tax liabilities) because they never need go ashore again.

According to Dai Davis, a consultant for law firm Nabarro Nathanson, which has looked extensively at the implications of offshore ecommerce, a platform or boat in international waters could be both tax and regulation free - but why bother?

"You don't have to do anything like Sealand when you can go off to the Bahamas," he argues. "It's the US equivalent of the Channel Islands, and the result is good IT infrastructure, English-speaking people, and it has a good internet backbone."

And on top of tax and legal-haven advantages, vendors in the Bahamas would benefit from an established legal system, which would not be the case on a platform or ship. "What's going to happen with a trademark dispute - is the captain going to sort it out?" Davis asks.

He adds that a platform or boat would probably have just one or two internet pipes, making it vulnerable to failures. Servers would also be connected to generators rather than a country's national grid and the nearest large pool of IT labour would be, by definition, at least 200 miles away.

And by choosing their territory carefully, firms can quite easily avoid whatever aspect of government regulation they wish, without needing to become some kind of ISP Caroline.

Take gambling. The UK levies a nine per cent tax on having a flutter - a situation that the country's tax havens have cause to be grateful for. Alderney, one of the Channel Islands, plays host to Sportingbet.com, now its biggest single employer, which takes bets from all over the world. The US, which has banned online gambling, is a particularly lucrative source of punters - and by avoiding the nine per cent tax, Sportingbet can offer much better odds.

As a result, several of the major UK bookmakers have also been looking at adopting a similar model for their online or telephone operations.

The European loophole
Another option for firms wishing to cut their tax liability while selling to UK customers is to make their sales from outside the European Union (EU), before importing the goods through EU countries that levy the lowest sales taxes. (This does not apply to the Channel Islands, which are officially outside the EU.)

As the EU is a free-trade area, the UK cannot top up its VAT charges on imported goods because the action of importing took place when the goods entered the EU.

What about other legislation though? If a company wanted to avoid data protection laws, such as those that exist throughout the EU, then it could choose to move offshore - to the US, for example, where there is very little control over the use of personal data. (In the EU, all states have legislation similar to the UK's, which gives citizens the right to view their personal data for a small fee.)

The laxness of US regulations has led to complaints about firms building up profiles of users' surfing and shopping habits, with DoubleClick, for one, suffering adverse publicity from allegedly becoming involved in such activities. Such data gathering is not illegal in the US, however, although that may change in future.

But what about snooping - the issue that Sealand says it hopes to exploit? The UK's RIP Bill, in its current form, is said by its opponents to be among the most intrusive in the world. But if a firm really wants to avoid peeping toms, it could connect to the internet using an ISP in Ireland or elsewhere because no other EU country is likely to introduce such tight regulations.

To explain, Nabarro's Davis outlines a possible optimal scenario for internet businesses wanting to sell goods to UK customers.

The company could locate its trading desk in the UK, but ensure that it only broke even so that there would be no profits that the government could tax. Its call centre could be contracted out to Ireland and, to avoid EU data protection legislation, the firm could also locate its database outside the EU.

The head office, server and all back-office functions would be located in the British Virgin Islands (yet another tax-haven connected with the UK) and this office would do much of the company's work. Otherwise, the UK Inland Revenue would be able to declare it a sham and start chasing after tax.

While sticking a server and a nameplate on an old oilrig just would not do, building an ISP centre in genuinely international waters would enable businesses to avoid other kinds of internet regulation - if all the countries in the world co-ordinated their legislation, that is.

Seeing as this is, to say the least, a long way off, perhaps Sealand should consider an alternative business. Anyone for Tony Blackburn?