Obstacles and Solutions to Internet Jurisdiction A Comparative Analysis of the EU and US laws
Author | Dr Faye Fangfei Wang |
Position | Lecturer in Law, Bournemouth University fwang@bournemouth.ac.uk |
Pages | 233-241 |
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This article was first published in Kierkegaard, Sylvia, (2008) Business and Law: Theory and Practice. IAITL. pp.112 - 123.
Page 233
In the era of information technology, any computer, anywhere in the world, connected to the Internet can access a website. Businesses, through the use of the Internet, can enter into electronic contracts with other businesses located in different countries. The potential for cross-border disputes in web contracts is, obviously, much greater than in a paper-based environment, where a high degree of commercial contracts are domestic in nature. Businesses fear that the determination of Internet jurisdiction could be uncertain because unlike paper based contracts, online contracting is not executed in one particular place. Therefore, nations want to be able to ensure the protection of local businesses.
Currently, there are no specific rules in the model laws and conventions dealing with Internet jurisdiction. The UNCITRAL Model Law on Electronic Commerce and the UN Convention on the Use of Electronic Communications in International Contracts do not contain any jurisdiction provisions. However, they determine the time and place of dispatch and receipt of data messages or electronic communication1 and the location of the parties2, giving the connecting factors such as "the place of business", "the closest relationship to the relevant contract, the underlying transaction or the principal place of business", or "habitual residence", which may help to analyse parties' business location to ascertain jurisdiction.
This paper will analyse the EU and US approaches for determining jurisdiction in e-contracting cases, explain the differences, and discuss whether there is need to propose specific jurisdiction rules for online contracts or whether they can simply apply the general jurisdiction rules that are used in ordinary contracts.
In the EU, the EC Directive on Electronic Commerce neither establishes additional rules on private international law nor deals with the jurisdiction of courts.3 Since the E-commerce Directive does not cover Internet jurisdiction, the Brussels I Regulation,4 which is based on the old Brussels Convention, performs its role in the absence of thePage 234 relevant legislations. However, Article 23(2) of the Brussels I Regulation is the only rule that explicitly acknowledges agreements with electronic means. It provides that "any communication by electronic means which provides a durable record of, the agreement shall be equivalent to writing".5 It means that a contract stored in a computer as a secured word document (i.e. a read-only document or document with entry password), or concluded by email and click-wrap agreement falls within the scope of Article 23(2) of the Brussels I Regulation. Then, courts will determine jurisdiction of the online contract according to three main types of jurisdiction rules in the Brussels I Regulation: general jurisdiction, special jurisdiction and exclusive jurisdiction.
The general jurisdiction rule under the Brussels I Regulation is that defendants, who are domiciled in one of the Contracting states, shall be sued at the place of their domiciles.6 One of the key objectives of the Brussels Regime is the harmonization of jurisdictional bases in cases involving proceedings brought against defendants domiciled in the states concerned.7
A well-drafted contract, which has factual links with more than one country, will contain a choice of jurisdiction or court clause. This is often referred to as an "exclusive" clause, providing that all disputes between the parties arising out of the contract must be referred to a named court or the courts of a named country.8 Article 23 of the Brussels I Regulation authorises parties to enter into an agreement designating the court or courts to determine such disputes. However, Article 23(1) applies when at least the party, one or more of whom, is domiciled in a member state have agreed that the courts of a member state are to have jurisdiction over disputes arising in connection with a particular legal relationship. Parties can choose courts or specific courts of a country. For example, Company A (in Italy) and Company B (in Germany) have agreed a jurisdiction clause "disputes must be referred to the courts of Germany" in their electronic contracts of sale. Under these circumstances, German courts are designated to have jurisdiction over A and B's disputes. However, if later on, A and B made another distribution contract without jurisdiction clause (the sales contracts and the distribution agreement are different legal relationships), then the original jurisdiction clause in the sale contract does not confer jurisdiction with regard to a dispute arising under the distribution contract.9 If the jurisdiction clause includes a choice of a particular court, Article 23 is to confer jurisdiction on that court, but not on other courts in the same country. However, A and B can also choose the other courts, for instance the French court, instead of the Italian or German courts to hear the case, because Article 23 does not "require any objective connection between the parties or the subject matter of the dispute and the territory of the court chosen".10 Moreover, A and B can also conclude a further exclusive jurisdiction agreement varying the earlier agreement, because Article 23 is based on the principle of party autonomy and it does not prevent parties from changing their decisions.11
However, Article 23(3) includes an exemption to parties, none of whom is domiciled in a member state. In this situation, the chosen courts have discretion to determine the existence and exercise of their jurisdiction in accordance with their own law.12 The courts of the other members shall have no jurisdiction over the disputes unless the chosen court or courts have declined jurisdiction.
In the e-contracting cases, to insert a choice of jurisdiction clause in the standard terms and conditions on the website can avoid further ambiguity about which court has jurisdiction when disputes arise. For example, the website owner can incorporate a choice of jurisdiction clause into an interactive click-wrap agreement that the buyerneeds to click the "I agree" button to assent to it.13
Under Article 2 of the Brussels I Regulation, persons domiciled in a member state shall, whatever their nationality, be sued in the courts of that state. Furthermore, domicile rules within the Brussels I Regulation govern the domicile of individuals14 and domicile of corporations 15. With contracts made over the Internet, it is difficult to determine where the party is domiciled, even though the plaintiff can identify the party and locate the transaction.16 Article 59(1) of the Brussels I Regulation provides that, as regards natural persons, in order toPage 235determine whether a party is domiciled in a particular member state, the court shall apply the law of that sate. Article 60(1) lays down that for the purposes of the Brussels I Regulation a company or other legal person or association of natural or legal persons is domiciled at the place where it has (1) its statutory seat or (2) its central administration or (3) its principal place of business.
On the Internet, since the decision of the e-transaction might be made following discussion via video conferencing between senior officers who reside in different states, it has become more difficult to ascertain the location of the central administration.17 According to the UN Convention on the Use of Electronic Communications in International Contacts (the UN Convention), "the location of the parties"18 is defined as "a party's place of business"19. If a natural person does not have a place of business, the person's habitual residence should be deemed as a factor to determine jurisdiction.20 The UNCITRAL Model Law on Electronic Commerce is the same as the UN Convention, providing that "if the originator or the addressee does not have a place of business, reference is to be made to its habitual residence"21. In my view, the person's habitual residence on the Internet occasion should be treated the same as the traditional off-line rule that general jurisdiction should be connected to the habitual residence of the defendant but not the claimant.
Furthermore, according to the UN Convention, if a party does not indicate his place of business and has more than one place of business, then the place of business is that which has the closest relationship to the relevant contract.22 The closest connecting factors are those that occur before or at the conclusion of the contract.23 In my opinion, these factors have no difference from the off-line world, which should also relate to statutory seat, central administration or principal place of business. As a person or legal person doing electronic commerce, his/ her statutory seat, central administration or principal place of business can be checked by the claimant, and the result can be found according to some connecting factors such as the registration of the defendant's business, licenses, electronic payments and places of delivery of goods or services. This would lead to the following issue: special jurisdiction.
Article 5 of the Brussels I Regulation derogates from the general principle contained in Article 2, which gives the claimant the opportunity to proceed against the defendant in a member state in which the defendant is not domiciled. Under this provision, it contains seven...
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