The concept of jurisdiction is commonly referred to include two main legal aspects: (i) to what extent a court or tribunal is legally competent to know about a cross-border dispute and apply the laws of the place where they are located; and (ii) when should a court or tribunal is entitled to assert jurisdiction as a result of a dispute arising between private parties. The issue of jurisdiction and its approach by common law and civil law jurisdictions differs significantly between both systems. Furthermore, the fact that the Internet represents numerous advantages to businesses and consumers such as the execution of a contract with the instant click of a mouse; the facility to transfer payments and receive digital goods and services without physically being present in a specific territory, make the two afore-mentioned legal aspects a rather difficult issue to address, particularly in the context of online activity and cross-border transactions occurring in the business to consumer (B2C) marketplace. The issue of jurisdiction has been addressed and contested in a number of different areas of Internet regulation, such as business and consumer contracts, privacy, gambling, hate speech and defamation and intellectual property rights such as trademarks, domain names and copyright.
Countries around the world have diverse approaches to consumer protection policy, and therefore, have in place different consumer protection laws. When a dispute arises between a consumer and a foreign company or vendor, two important yet complicated questions arise and are commonly subject of a wide debate: (i) which country’s law should govern the transaction (“applicable law”); and (ii) which country’s courts or tribunals should have jurisdiction to adjudicate the dispute (“competent jurisdiction”).
Common law courts around the world have applied different criteria to determine whether they have jurisdiction over Internet disputes. Some courts have simply applied existent traditional rules, while others have tried to develop new criteria to accommodate the uniqueness of the electronic commerce. As a result, it is difficult to find consistency in the application of rules to determine whether a particular court has jurisdiction over an Internet dispute.
In the United States, the rules on applicable law and jurisdiction are based on notions of “reasonableness” and “fundamental fairness” to both plaintiffs and defendants and are determined on a flexible case by case basis rather than by only applying straight codified rules. The fairness of subjecting a defendant to a particular country’s jurisdiction and laws is determined by applying a variety of factors to the concrete facts of a particular case. As a general matter, jurisdiction for cases brought by consumers is determined as follows: (i) in the absence of a choice of forum clause in a contract, businesses are subject to specific personal jurisdiction in places where they target and sell goods to consumers; (ii) many American courts have refused to uphold choice-of forum clauses in consumer contracts on the ground that they are unfair and unreasonable. In addition, US courts have generally held that consumer protection authorities can assert jurisdiction over foreign businesses harming American consumers.
Europe has specific rules relating to jurisdictional issues arising of e-commerce activity. The Brussels Convention on Jurisdiction and Recognition of Enforcement of Judgements in Civil and Commercial Matters (known as “the BrusselsConvention”) and the EC Convention on the Law Applicable To Contractual Obligations (known as “the Rome Convention”) govern the issue of jurisdiction and applicable law for consumer contracts concluded over the Internet, respectively. Under these conventions, jurisdiction and applicable law for consumer contracts are based on whether consumer is “active” or “passive”. The consumer is considered “passive” when he executes a contract where he is domiciled, and such contract was preceded by a specific invitation or by advertising. A passive consumer can bring a lawsuit arising out of that contract in his or her country and the laws of the consumer’s country would apply. A choice of forum clause in a contract would not change this result and a choice of law clause in a contract could not override the mandatory protections afforded in a consumer’s country. Likewise, the Brussels Convention contains special rules, which provide that in the case of consumer contracts, a relevant criteria should be met, consisting on whether an online vendor “address or directs activities” in the consumer’s home state. Furthermore, European Member States have in place consumer protection laws pursuant to European Directives, which ensures that all consumers are adequately protected by the legislation of the country of origin.
The issue of jurisdiction policy for Internet consumer transactions has been considered in the sphere of international organisms. For instance, the Organization for Economic Cooperation and Development (OECD) Consumer Protection Guidelines in the Context of Electronic Commerce, which is considered a soft and non-binding regulation, contains a provision on jurisdiction and applicable law in the area of B2C transactions, which makes the following recommendation: “Business-to-consumer cross-border transactions, whether carried out electronically or otherwise, are subject to the existing framework on applicable law and jurisdiction. Electronic commerce poses challenges to this existing framework. Therefore, consideration should be given to whether the existing framework for applicable law and jurisdiction should be modified, or applied differently, to ensure effective and transparent consumer protection in the context of the continued growth of electronic commerce. In considering whether to modify the existing framework, governments should seek to ensure that the framework provides fairness to consumers and businesses, facilitates electronic commerce, results in consumers having a level of protection not less than that afforded in other forms of commerce, and provides consumers with meaningful access to fair and timely dispute resolution and redress without undue cost or burden”.
Furthermore, the Hague Conference on Private International Law (HCPIL) has issued a Convention on Exclusive Choice of Court Agreements concluded in Civil and Commercial Matters, which aims to create an international legal regime that ensures the effectiveness of exclusive choice of court agreements concluded by private parties in civil and commercial transactions. However, consumer contracts have been excluded from the scope of this Convention.
NACPEC has specifically created this section with the purpose to provide our visitors with some of the most relevant sources of information, documents, legislation, organizations and links on jurisdiction and applicable law on the Internet.