disputes arising from international e-commerce contracts, where to resolve them jonathan kish adamu...

DISPUTES ARISING FROM INTERNATIONAL DISPUTES ARISING FROM INTERNATIONAL E-COMMERCE CONTRACTS,E-COMMERCE CONTRACTS,

WHERE TO RESOLVE THEMWHERE TO RESOLVE THEM

JONATHAN KISH ADAMUJONATHAN KISH ADAMU

[email protected]@linkserve.com

FOCUS OF DISCOURSEFOCUS OF DISCOURSE

INTRODUCTIONINTRODUCTION CLASSIFICATION OF DISCOURSECLASSIFICATION OF DISCOURSE NATURE OF JURISDICTIONNATURE OF JURISDICTION FORUM IN E-COMMERCE DISPUTESFORUM IN E-COMMERCE DISPUTES THE POSITION IN THE EUTHE POSITION IN THE EU OTHER PLACESOTHER PLACES CHOICE OF FORUM CLAUSESCHOICE OF FORUM CLAUSES CONCLUSIONCONCLUSION

INTRODUCTIONINTRODUCTION

The advent of the internet has moved businesses from the usual The advent of the internet has moved businesses from the usual brick and mortar environment to an electronic platform, where brick and mortar environment to an electronic platform, where contracts are consummated at a distance without physical contact contracts are consummated at a distance without physical contact between the contracting parties. This practice is referred to as e-between the contracting parties. This practice is referred to as e-commerce and has been variously defined as commerce and has been variously defined as

““The practice of buying and selling goods through on-line The practice of buying and selling goods through on-line consumer services on the Internet”consumer services on the Internet”[1][1]

““A transaction formed by electronic messages in which the A transaction formed by electronic messages in which the messages of one or both parties will not be reviewed by an messages of one or both parties will not be reviewed by an individual as an expected step in forming a contract’individual as an expected step in forming a contract’[2][2]

““Any form of business transaction in which the parties interact Any form of business transaction in which the parties interact electronically rather than by physical exchanges or direct physical electronically rather than by physical exchanges or direct physical contact”contact”[3][3]

INTRODUCTION (contd)INTRODUCTION (contd)

It follows from the various definitions that e-commerce involves the It follows from the various definitions that e-commerce involves the sale of goods and services, and has the following featuressale of goods and services, and has the following features

It is mediated by an electronic platform rather through It is mediated by an electronic platform rather through conventional means of communication.conventional means of communication.

It is conducted at a distance such that goods are delivered and It is conducted at a distance such that goods are delivered and services provided without the parties necessarily getting to meet services provided without the parties necessarily getting to meet one another face to face. one another face to face.

Undoubtedly this has increased the pace of commerce and enhanced Undoubtedly this has increased the pace of commerce and enhanced efficiency with a resultant reduction in cost of doing business. “In efficiency with a resultant reduction in cost of doing business. “In becoming a medium used by hundreds of millions of people, the becoming a medium used by hundreds of millions of people, the Internet has become an essential tool for commerce. The United Internet has become an essential tool for commerce. The United States (“U.S.”) Supreme CourtStates (“U.S.”) Supreme Court[1][1] provided its impressions of the provided its impressions of the Internet in 1997, labeling the Internet “a unique medium – known Internet in 1997, labeling the Internet “a unique medium – known to its users as ‘cyberspace’ – located in no particular geographical to its users as ‘cyberspace’ – located in no particular geographical location but available to anyone, anywhere in the world.”location but available to anyone, anywhere in the world.”[2][2]


It is this very lack of a “particular geographical location” or its It is this very lack of a “particular geographical location” or its borderless nature that has brought the issue of the appropriate borderless nature that has brought the issue of the appropriate forum to resolve online disputes arising from e-commerce across forum to resolve online disputes arising from e-commerce across physical borders to the front burner.physical borders to the front burner.

This problem is further exacerbated by the fact that e-commerce This problem is further exacerbated by the fact that e-commerce deals with two types of products; physical goods and services and deals with two types of products; physical goods and services and electronic material such as software, images, voice and text etc.electronic material such as software, images, voice and text etc.

In the former case the internet mediates and provides the In the former case the internet mediates and provides the platform to conclude the contract while in the later case it platform to conclude the contract while in the later case it becomes the place of performance of the contract.becomes the place of performance of the contract.

Also in the first case performance takes place outside the Also in the first case performance takes place outside the electronic environment, while in the latter, the whole transaction electronic environment, while in the latter, the whole transaction is initiated and concluded on the internet. is initiated and concluded on the internet.


The internet does not really bring any thing new. The internet does not really bring any thing new. It does not a change the people neither does it It does not a change the people neither does it change the law. What it does however change is change the law. What it does however change is the way we do things and how long established the way we do things and how long established principles of law are applied to new situations principles of law are applied to new situations arising from the peculiar nature of the internet. arising from the peculiar nature of the internet. “…the questions raised by [Internet] conduct are “…the questions raised by [Internet] conduct are indeed different, and more difficult, than the indeed different, and more difficult, than the analogous questions raised by its real space analogous questions raised by its real space counterpart, and … we [cannot] resolve the counterpart, and … we [cannot] resolve the jurisdictional dilemmas … by applying the jurisdictional dilemmas … by applying the ‘traditional legal tools’ developed for similar ‘traditional legal tools’ developed for similar problems in real space”problems in real space”[1][1]


““For most paper based contracts the rules are For most paper based contracts the rules are clear and the applicable law is certain. This is not clear and the applicable law is certain. This is not so for e-contracts which are conducted over so for e-contracts which are conducted over distances. Thus the certainty necessary for distances. Thus the certainty necessary for smooth business relationship is lacking. This is not smooth business relationship is lacking. This is not helped by the fact most web-based businesses will helped by the fact most web-based businesses will normally specify which law will apply to the normally specify which law will apply to the transaction using hyperlinks which are often not transaction using hyperlinks which are often not read by the consumer of online goods and read by the consumer of online goods and services. The consumer is therefore most often left services. The consumer is therefore most often left in the dark as to what law will govern the in the dark as to what law will govern the transaction. For even when such laws are specified transaction. For even when such laws are specified the parties are not too sure that the courts will the parties are not too sure that the courts will honor such choice of law or choice of forum”honor such choice of law or choice of forum”[1][1]. .


The internet, however, due to its borderless nature The internet, however, due to its borderless nature creates a problem of appropriate forum in an e-commerce creates a problem of appropriate forum in an e-commerce transaction. For instance in what country will a case be transaction. For instance in what country will a case be tried when it involves a Nigerian national resident in the tried when it involves a Nigerian national resident in the USA who downloads software from a Japanese registered USA who downloads software from a Japanese registered company from a website placed on a server in Australia company from a website placed on a server in Australia while on a business trip to England. The issue of forum while on a business trip to England. The issue of forum takes on a different dimension when a dispute arises from takes on a different dimension when a dispute arises from this transaction. What will be the this transaction. What will be the forum conveniensforum conveniens[1][1] “for dealing with this issue? What law will apply? “for dealing with this issue? What law will apply?

[1][1] Blacks law dictionary supra pg 665, defines it as the Blacks law dictionary supra pg 665, defines it as the court in which an action is most appropriately brought, court in which an action is most appropriately brought, considering the best interests and convenience of the considering the best interests and convenience of the parties and witnesses. parties and witnesses.

CLASSIFICATION OF E-COMMERCECLASSIFICATION OF E-COMMERCE

Generally e-commerce can be classified into 4 categoriesGenerally e-commerce can be classified into 4 categories[1][1].. Business to Business (B2B) transactions involving Business to Business (B2B) transactions involving

performance against payment or performance against performance against payment or performance against performance.performance.

Business to Consumers (B2C) transactions involving the Business to Consumers (B2C) transactions involving the purchase of products by individuals outside their trade or purchase of products by individuals outside their trade or profession or E- retailing.profession or E- retailing.

Business to Administration. This involves commercial Business to Administration. This involves commercial activities between companies and public bodies.activities between companies and public bodies.

Consumer to Administration. The consumer to Consumer to Administration. The consumer to administration category has only recently emerged e.g. administration category has only recently emerged e.g. welfare payments or tax matters. welfare payments or tax matters.

CLASSIFICATION OF E-COMMERCE (CONTD)CLASSIFICATION OF E-COMMERCE (CONTD)

The most important are the first two. US retail E-The most important are the first two. US retail E-commerce sales for the fourth quarter 2005 show commerce sales for the fourth quarter 2005 show a figure of $22.9 billion, an increase of 3.3% from a figure of $22.9 billion, an increase of 3.3% from the third quarter 2005 figure. Compare this to a the third quarter 2005 figure. Compare this to a 0.3% rise for retail sales for the same period. 0.3% rise for retail sales for the same period.

The fourth quarter figure for 2005 represent an The fourth quarter figure for 2005 represent an increase of 23.0% against the corresponding increase of 23.0% against the corresponding period in 2004 compared to a growth figure of period in 2004 compared to a growth figure of only 6.0% for retail salesonly 6.0% for retail sales[1][1] in the sane period. in the sane period. The corresponding statistics for the EU and other The corresponding statistics for the EU and other regions may show similar growth patterns. regions may show similar growth patterns.

CLASSIFICATION OF E-COMMERCE (CONTD)CLASSIFICATION OF E-COMMERCE (CONTD)

For most B2B contracts the transaction is consummated For most B2B contracts the transaction is consummated over time and may involve a series of correspondence over time and may involve a series of correspondence leading to the formation of a contract where you have leading to the formation of a contract where you have performance against performance or performance against performance against performance or performance against payment. payment.

Here parties will generally have a physical presence in a Here parties will generally have a physical presence in a particular place and identifying their domicile for the particular place and identifying their domicile for the purpose of applying the rules as to forum is not too difficult.purpose of applying the rules as to forum is not too difficult.

Again in such cases most parties will have well in advance Again in such cases most parties will have well in advance agreed on forum and the law to govern the transaction. agreed on forum and the law to govern the transaction. Later on we shall look at the issue of choice of forum and Later on we shall look at the issue of choice of forum and see whether the courts will respect such choice of law see whether the courts will respect such choice of law agreements. Unlike B2B transactions deciding the right agreements. Unlike B2B transactions deciding the right forum for adjudication of a B2C dispute; which involve forum for adjudication of a B2C dispute; which involve consumers ordering for goods and services online becomes consumers ordering for goods and services online becomes a lot more complex. a lot more complex.

NATURE OF JURISDICTIONNATURE OF JURISDICTION

The rules of jurisdiction can be divided into the following The rules of jurisdiction can be divided into the following categoriescategories[1][1]::

the jurisdiction to prescribe (or ‘legislative’ jurisdiction); the jurisdiction to prescribe (or ‘legislative’ jurisdiction);

the jurisdiction to adjudicate (or ‘judicial’ jurisdiction); andthe jurisdiction to adjudicate (or ‘judicial’ jurisdiction); and the jurisdiction to enforce (or ‘enforcement’ jurisdiction).the jurisdiction to enforce (or ‘enforcement’ jurisdiction). For court in a country to exercise jurisdiction over a case, that For court in a country to exercise jurisdiction over a case, that

country must have the capacity to legislate on the issue, it country must have the capacity to legislate on the issue, it must have the capacity to adjudicate or try the matter and must have the capacity to adjudicate or try the matter and thirdly it must the power to enforce its decision. It is trite thirdly it must the power to enforce its decision. It is trite law that a court must not act in vain. This is why courts law that a court must not act in vain. This is why courts decline jurisdiction on the basis of “forum non conveniens” decline jurisdiction on the basis of “forum non conveniens” where it concludes that it is not the right forum to where it concludes that it is not the right forum to adjudicate.adjudicate.

FORUM IN E-COMMERCE DISPUTESFORUM IN E-COMMERCE DISPUTES

Generally, especially in the commonwealth and common Generally, especially in the commonwealth and common law countries, forum is determined by the place of law countries, forum is determined by the place of performance of the contract and the domicile of the performance of the contract and the domicile of the defendant. In Nigeria under the uniform procedure rules defendant. In Nigeria under the uniform procedure rules which apply in most parts of the country the rules provide which apply in most parts of the country the rules provide for forum as follows:for forum as follows:

““All suits for specific performance, or breach of contract, All suits for specific performance, or breach of contract, shall, where the contract ought to have been performed, or shall, where the contract ought to have been performed, or where the defendant resides or carries on business in the where the defendant resides or carries on business in the Federal Capital Territory, be commenced and determined in Federal Capital Territory, be commenced and determined in the High Court of the Federal Capital Territory, Abuja”the High Court of the Federal Capital Territory, Abuja”[1][1]

[1][1] Order 9 Rule 3 High Court of the Federal Capital Order 9 Rule 3 High Court of the Federal Capital Territory Abuja Civil Procedure Rules 2004Territory Abuja Civil Procedure Rules 2004

FORUM IN E-COMMERCE DISPUTES (CONTD)FORUM IN E-COMMERCE DISPUTES (CONTD)

Thus forum in Nigeria is determined by the following;Thus forum in Nigeria is determined by the following; Where the contract was made orWhere the contract was made or where the contract ought to have been performed or where the contract ought to have been performed or Where the defendant resides.Where the defendant resides.Under these provisions however, it is difficult in an Under these provisions however, it is difficult in an

international e-commerce transaction to decide the venue international e-commerce transaction to decide the venue to try a dispute. to try a dispute.

- How do you determine the place of formation of contract in - How do you determine the place of formation of contract in cyberspace? cyberspace?

- What is the place of performance in the case of a software - What is the place of performance in the case of a software download as in the example given above? download as in the example given above?

Therefore a Nigerian court will only assume jurisdiction if the Therefore a Nigerian court will only assume jurisdiction if the domicile of the defendant can be shown to be Nigeria. It is domicile of the defendant can be shown to be Nigeria. It is expected that the draft Electronic transactions Bill when expected that the draft Electronic transactions Bill when passed into law will address some of this jurisdictional passed into law will address some of this jurisdictional problems. problems.


In most commonwealth and common law countries jurisdiction In most commonwealth and common law countries jurisdiction to enforce is dependent on the courts ability to bring a to enforce is dependent on the courts ability to bring a defendant within its boundaries. In Nigeria, a defendant defendant within its boundaries. In Nigeria, a defendant outside jurisdiction (outside Nigeria) can be served a writ of outside jurisdiction (outside Nigeria) can be served a writ of summons or notice of a writ of summons in a commercial summons or notice of a writ of summons in a commercial dispute under the following circumstances.dispute under the following circumstances.

the subject matter is land within jurisdictionthe subject matter is land within jurisdiction the defendant is domiciled or ordinarily resident in Nigeria the defendant is domiciled or ordinarily resident in Nigeria the contract is made within jurisdictionthe contract is made within jurisdiction the contract was made by an agent trading or residing the contract was made by an agent trading or residing

within jurisdiction on behalf of a principal residing out of the within jurisdiction on behalf of a principal residing out of the jurisdiction jurisdiction

the contract is governed by Nigerian lawthe contract is governed by Nigerian law[1][1]


Under Order 21 a defendant in a foreign nation who meets Under Order 21 a defendant in a foreign nation who meets the above criteria can be brought within the jurisdiction of the above criteria can be brought within the jurisdiction of the court if it is a “convention country”. Under the Foreign the court if it is a “convention country”. Under the Foreign Judgments (Reciprocal Enforcement) Act, Nigeria accords Judgments (Reciprocal Enforcement) Act, Nigeria accords recognition to judgments obtained in foreign countries on a recognition to judgments obtained in foreign countries on a reciprocal basisreciprocal basis[1][1]. .

Applying this ruling in a typical e-commerce transaction a Applying this ruling in a typical e-commerce transaction a Nigerian court will assume jurisdiction where it can Nigerian court will assume jurisdiction where it can establish the domicile of the defendant as Nigeria. It will establish the domicile of the defendant as Nigeria. It will however be difficult to establish the place of formation of however be difficult to establish the place of formation of the contract or the place of performance. It can be argued the contract or the place of performance. It can be argued that the courts here may assume jurisdiction under the that the courts here may assume jurisdiction under the “minimum contacts” rule. bb“minimum contacts” rule. bb


This was the test applied in This was the test applied in McBee v. Delica McBee v. Delica Co.,Co., No. 02-198-P-C (D. Me. 2003) No. 02-198-P-C (D. Me. 2003)

Three Maine residents purchased "Cecil McBee" Three Maine residents purchased "Cecil McBee" merchandise over the Internet. McBee brought merchandise over the Internet. McBee brought the suit under theories of trademark dilution and the suit under theories of trademark dilution and unfair competition. The court determined that unfair competition. The court determined that three transactions with Maine residents three transactions with Maine residents constituted purposeful minimum contacts constituted purposeful minimum contacts sufficient to support jurisdiction by a court in sufficient to support jurisdiction by a court in Maine. The court also determined that Delica Co. Maine. The court also determined that Delica Co. had purposefully availed itself of conducting had purposefully availed itself of conducting business in Maine by using the name of a Maine business in Maine by using the name of a Maine resident on its clothingresident on its clothing[1][1]. .


Also inAlso inFenn v. MLeads Enterprises, Inc.,Fenn v. MLeads Enterprises, Inc., 103 103 P.3d 156 (Utah Ct. App. 2004) P.3d 156 (Utah Ct. App. 2004) where a Utah where a Utah appellate court held that sending one email to a appellate court held that sending one email to a resident of Utah was a sufficient "contact" to resident of Utah was a sufficient "contact" to satisfy the long-arm statute and minimum satisfy the long-arm statute and minimum contacts requirement of due process for a claim contacts requirement of due process for a claim arising from the email. The appellate court found arising from the email. The appellate court found that MLeads purposely directed its activities at that MLeads purposely directed its activities at Utah residents and should have reasonably Utah residents and should have reasonably anticipated being hailed into court wherever its anticipated being hailed into court wherever its emails were received. Moreover, the court emails were received. Moreover, the court determined the interests of Utah and Fenn determined the interests of Utah and Fenn outweighed the burden on MLeads of defending in outweighed the burden on MLeads of defending in the state the state


Compare this with the decision in Compare this with the decision in Graduate Management Graduate Management Admissions Council (GMAC) v. Raju,Admissions Council (GMAC) v. Raju, No. 02-581-A (E.D. No. 02-581-A (E.D. Va. 2003) Va. 2003) The court determined that although Raju did not The court determined that although Raju did not have the required minimum contacts with the State of have the required minimum contacts with the State of Virginia, the court could still exercise personal jurisdiction Virginia, the court could still exercise personal jurisdiction under Fed.R.Civ.P. 4(k)(2). Rule 4(k)(2) which authorizes under Fed.R.Civ.P. 4(k)(2). Rule 4(k)(2) which authorizes personal jurisdiction over any defendant if (a) that exercise personal jurisdiction over any defendant if (a) that exercise is consistent with the Constitution and US law, (b) the claim is consistent with the Constitution and US law, (b) the claim arises under federal law and (c) the defendant is not arises under federal law and (c) the defendant is not subject to the jurisdiction of the courts of general subject to the jurisdiction of the courts of general jurisdiction of any state. The court determined that jurisdiction of any state. The court determined that exercising personal jurisdiction under Rule 4(k)(2) was exercising personal jurisdiction under Rule 4(k)(2) was appropriate because the defendant does not reside in the appropriate because the defendant does not reside in the US, lacks sufficient minimum contacts with any single state, US, lacks sufficient minimum contacts with any single state, but has enough contacts with the United States as a whole but has enough contacts with the United States as a whole to satisfy due process to satisfy due process

THE POSITION IN THE EUTHE POSITION IN THE EU

In the EU under the Brussels convention of 1968 on Jurisdiction and In the EU under the Brussels convention of 1968 on Jurisdiction and the Enforcement of Civil and Commercial Judgments, the general the Enforcement of Civil and Commercial Judgments, the general rule is that; rule is that;

“…“…persons domiciled in a member state shall, whatever their persons domiciled in a member state shall, whatever their nationality, be sued in the courts of that member state”nationality, be sued in the courts of that member state”[1][1]..

A consumer may choose to bring a suit against the other party in A consumer may choose to bring a suit against the other party in the court of his domicile or in the court of the counter parity’s the court of his domicile or in the court of the counter parity’s domicile if it is:domicile if it is:

““(1) a contract for the sale of goods on installment credit terms (1) a contract for the sale of goods on installment credit terms (article 13.1); or(article 13.1); or

(2) a contract for loans repayable by installments, or for any other (2) a contract for loans repayable by installments, or for any other form of credit, made to finance the sale of goods (article 13.2); orform of credit, made to finance the sale of goods (article 13.2); or

(3) any other contract for the supply of goods or services, a (3) any other contract for the supply of goods or services, a consumer is entitled to bring an action in the country of his own consumer is entitled to bring an action in the country of his own domicile, upon condition that the conclusion of the contract was domicile, upon condition that the conclusion of the contract was preceded by a specific invitation addressed to the consumer or by preceded by a specific invitation addressed to the consumer or by advertising carried out in the state of consumer’s domicile24 and advertising carried out in the state of consumer’s domicile24 and the consumer took in that state the steps necessary for the the consumer took in that state the steps necessary for the conclusion of the contract itself (article 13.3).”conclusion of the contract itself (article 13.3).”

THE POSITION IN THE EU (CONTD)THE POSITION IN THE EU (CONTD)

From a narrow perspective, the Brussels From a narrow perspective, the Brussels convention gave jurisdiction to the place of convention gave jurisdiction to the place of domicile of the consumer on these conditions domicile of the consumer on these conditions

That the contract is predicated or a “specific That the contract is predicated or a “specific invitation addressed to the consumer”invitation addressed to the consumer”

That he acted in response to an “advertisement That he acted in response to an “advertisement carried out in the state of the consumers domicile carried out in the state of the consumers domicile

That he “took steps in that state necessary for That he “took steps in that state necessary for the conclusion of the contract itself self “the conclusion of the contract itself self “


These provisions while they could work in the brick and These provisions while they could work in the brick and mortar environment are faced with difficulty of application mortar environment are faced with difficulty of application with online business. with online business.

- How do you interpret the term “addressed to him? Is it when - How do you interpret the term “addressed to him? Is it when an e-mail enters the consumer’s inbox or when he an e-mail enters the consumer’s inbox or when he downloads it? downloads it?

- What if he downloads the e-mail from a server that is not - What if he downloads the e-mail from a server that is not located in his country of domicile? located in his country of domicile?

Secondly the expression “advertisement carried out in the Secondly the expression “advertisement carried out in the state of the consumers domicile” is difficult to apply when state of the consumers domicile” is difficult to apply when dealing with e-commerce. This is because of the nature of dealing with e-commerce. This is because of the nature of the World Wide Web. An advertisement on the internet the World Wide Web. An advertisement on the internet could be placed by a company in the U.S on a server in could be placed by a company in the U.S on a server in Germany and accessed by a consumer surfing the internet Germany and accessed by a consumer surfing the internet in the UK. How would such a provision assist a consumer in in the UK. How would such a provision assist a consumer in determining the right forum to sue? determining the right forum to sue?


Thirdly how would you apply the phrase “took Thirdly how would you apply the phrase “took steps in that state necessary for the conclusion of steps in that state necessary for the conclusion of that contract”?that contract”?

- How do you determine steps taken in an online How do you determine steps taken in an online transaction for the purpose of determining the transaction for the purpose of determining the appropriate forum?appropriate forum?

- For while a consumer may be domiciled in a For while a consumer may be domiciled in a particular state all the steps he may take to particular state all the steps he may take to conclude a contract may take place outside his conclude a contract may take place outside his state (this is typical of contracts for the sale of state (this is typical of contracts for the sale of intangible material such as software which could intangible material such as software which could be downloaded from any where and paid for from be downloaded from any where and paid for from any where in the world).any where in the world).


The Brussels convention of 1968 fails to address the The Brussels convention of 1968 fails to address the challenges posed by the internet and the challenges posed by the internet and the determination of forum for the purpose of resolving determination of forum for the purpose of resolving international e- commerce disputes.international e- commerce disputes.

Having identified this mischief, how has the EU Having identified this mischief, how has the EU lawmaker addressed the problem? lawmaker addressed the problem?

The Council Regulation on Jurisdiction and the The Council Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil Recognition and Enforcement of Judgments in Civil and Commercial Matters (Brussels I Regulation)and Commercial Matters (Brussels I Regulation)[1][1] under Article 16 has given the consumer the right to under Article 16 has given the consumer the right to take legal action either in the domicile of the plaintiff take legal action either in the domicile of the plaintiff or in the domicile of the defendant. Undertakings on or in the domicile of the defendant. Undertakings on the other hand may bring action against consumers the other hand may bring action against consumers only in the court of the consumer’s domicile only in the court of the consumer’s domicile


However for a party to enjoy the benefits of Article 16, the However for a party to enjoy the benefits of Article 16, the contract must fall within the ambit of under Article 15(1) © contract must fall within the ambit of under Article 15(1) © which provides thatwhich provides that

““In all other cases In all other cases the contact has been concluded with a the contact has been concluded with a person who pursues commercial or professional activities in person who pursues commercial or professional activities in the member state of the consumers domicile or, by any the member state of the consumers domicile or, by any means, directs such activities to that member state or to means, directs such activities to that member state or to several countries including that member state, and the several countries including that member state, and the contract falls within the scope of such activities.”contract falls within the scope of such activities.”

So in the EU under this provision the most important So in the EU under this provision the most important

consideration for assuming jurisdiction is the domicile of the consideration for assuming jurisdiction is the domicile of the consumer. It can be safely assumed that in the EU once it consumer. It can be safely assumed that in the EU once it can be established that there is some activity directed at can be established that there is some activity directed at the consumers’ place of domicile then the court in the the consumers’ place of domicile then the court in the consumers domicile can still assume jurisdiction to try. consumers domicile can still assume jurisdiction to try.


Article 15(2) states that Article 15(2) states that ““Where a consumer enters into a contract with a party who Where a consumer enters into a contract with a party who

is not domiciled in the Member State but has a branch, is not domiciled in the Member State but has a branch, agency or other establishment in one of the Member States, agency or other establishment in one of the Member States, that party shall, in disputes arising out of the operations of that party shall, in disputes arising out of the operations of the branch, agency or establishment, be deemed to be the branch, agency or establishment, be deemed to be domiciled in that State”domiciled in that State”

Furthermore, examples exist where a person’s tenuous Furthermore, examples exist where a person’s tenuous connections to a state have given rise to the jurisdiction of connections to a state have given rise to the jurisdiction of the courts of that state. In the courts of that state. In South India shipping v Bank of South India shipping v Bank of KoreaKorea, the defendant Korean bank had a small branch , the defendant Korean bank had a small branch located in England. This branch, while having no connection located in England. This branch, while having no connection with the legal dispute that had arisen between its parent with the legal dispute that had arisen between its parent (the Bank of Korea) and South India Shipping, was (the Bank of Korea) and South India Shipping, was nonetheless served with an English writ. nonetheless served with an English writ.


On appeal, Lord Ackner held that the bank had On appeal, Lord Ackner held that the bank had “established a place of business within Great “established a place of business within Great Britain and it matters not that it does not Britain and it matters not that it does not conclude within the jurisdiction any banking conclude within the jurisdiction any banking transitions or have any banking dealings with the transitions or have any banking dealings with the general public as opposed to other banks or general public as opposed to other banks or financial institutions.”financial institutions.”

In contrast, under the Brussels regulation, In contrast, under the Brussels regulation, jurisdiction over the branch of a company only jurisdiction over the branch of a company only arises out of the activities of the branch. This is a arises out of the activities of the branch. This is a more sensible approach, and prevents plaintiffs more sensible approach, and prevents plaintiffs from forum shopping (in situations where the from forum shopping (in situations where the defendant has multiple branches) defendant has multiple branches)


This provision accords with the ruling in a US case,This provision accords with the ruling in a US case,Unknown v. Sharman Networks Ltd.,Unknown v. Sharman Networks Ltd., (C.D. Cal. 2003). (C.D. Cal. 2003). Kollmorgen Corp. v. Yaskawa Electric Corp.,Kollmorgen Corp. v. Yaskawa Electric Corp., 1999 U.S. 1999 U.S.

Dist.. LEXIS 20572 (W.D. Va. 1999) Dist.. LEXIS 20572 (W.D. Va. 1999)

For the purposes of Article 15(2) a service provider will be For the purposes of Article 15(2) a service provider will be considered to be domiciled in a member state if it has a considered to be domiciled in a member state if it has a branch, agency or some other establishment in the member branch, agency or some other establishment in the member state. So undertakings stand a clear possibility of being state. So undertakings stand a clear possibility of being sued in the EU no mater how low the activity directed at the sued in the EU no mater how low the activity directed at the EU state may be. A question that arises is how the courts EU state may be. A question that arises is how the courts will deal with a service provider whose website is basically will deal with a service provider whose website is basically passive in view of the above provision. passive in view of the above provision.

A US court seems to be of the view that jurisdiction cannot A US court seems to be of the view that jurisdiction cannot be assumed in such a case. be assumed in such a case.


In Zippo’s caseIn Zippo’s case[1][1] a Pennsylvanian court ruled as follows; a Pennsylvanian court ruled as follows;““This sliding scale is consistent with well developed personal This sliding scale is consistent with well developed personal

jurisdiction principles. At one end of the spectrum are jurisdiction principles. At one end of the spectrum are situations where a defendant clearly does business over the situations where a defendant clearly does business over the Internet. If the defendant enters into contracts with Internet. If the defendant enters into contracts with residents of a foreign jurisdiction that involve the knowing residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the and repeated transmission of computer files over the Internet, personal jurisdiction is proper. E.g. Internet, personal jurisdiction is proper. E.g. Compuserve, Compuserve, Inc. v. PattersonInc. v. Patterson, 89 F.2d 1257 (6th Cir. 1996). At the , 89 F.2d 1257 (6th Cir. 1996). At the opposite end are situations where a defendant has simply opposite end are situations where a defendant has simply posted information on an Internet Web site which is posted information on an Internet Web site which is accessible to users in foreign jurisdictions. A passive Web accessible to users in foreign jurisdictions. A passive Web site that does little more than make information available to site that does little more than make information available to those who are interested in it is not grounds for the those who are interested in it is not grounds for the exercise personal of jurisdiction. E.g. exercise personal of jurisdiction. E.g. Bensusan Restaurant Bensusan Restaurant Corp., v. KingCorp., v. King, 937 F.Supp. 296 (S.N.D.Y. 1996). , 937 F.Supp. 296 (S.N.D.Y. 1996).


The middle ground is occupied by interactive Web sites where a user The middle ground is occupied by interactive Web sites where a user can exchange information with the host computer. In these cases, can exchange information with the host computer. In these cases, the exercise of jurisdiction is determined by examining the level of the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information interactivity and commercial nature of the exchange of information that occurs on the Web site. E.g. that occurs on the Web site. E.g. Maritz, Inc. v. CybergoldMaritz, Inc. v. Cybergold, Inc., , Inc., 1996 U.S. Dist. Lexis 14976 (E.D.Mo. Aug. 19, 1996).1996 U.S. Dist. Lexis 14976 (E.D.Mo. Aug. 19, 1996).[2][2]

Apart from the necessity for uniformity of law, the Brussels Apart from the necessity for uniformity of law, the Brussels

Regulation I, is influenced by the formation of new technologies not Regulation I, is influenced by the formation of new technologies not existing under the former legal regime in 1968.existing under the former legal regime in 1968.

The Brussels Regulation I maintains the rule that allows a The Brussels Regulation I maintains the rule that allows a defendant in one of the member states can be sued in his place of defendant in one of the member states can be sued in his place of domicile. (Article 2).It also goes further for contracts outside a domicile. (Article 2).It also goes further for contracts outside a trade or profession as in consumer contracts to give the plaintiff trade or profession as in consumer contracts to give the plaintiff the choice of suing either in the defendants domicile or the the choice of suing either in the defendants domicile or the domicile of the plaintiff. What the Brussels Regulation I appears to domicile of the plaintiff. What the Brussels Regulation I appears to do is to give more protection to the consumer, such that do is to give more protection to the consumer, such that jurisdiction in the EU is determined by the domicile of the jurisdiction in the EU is determined by the domicile of the consumer. consumer.


A problem that arises is how to determine the domicile of the A problem that arises is how to determine the domicile of the defendant. Where the defendant is domiciled in a third country, defendant. Where the defendant is domiciled in a third country, say outside the EU, then the domicile of the plaintiff becomes the say outside the EU, then the domicile of the plaintiff becomes the appropriate forum (Article 4?).appropriate forum (Article 4?).

Article 60 establishes the jurisdiction of the domicile of a company Article 60 establishes the jurisdiction of the domicile of a company or legal entity as where “it has its statutory seat, central or legal entity as where “it has its statutory seat, central administration or principal place of business”. This offers little administration or principal place of business”. This offers little comfort, as it is quite difficult sometimes to establish this for web-comfort, as it is quite difficult sometimes to establish this for web-based companies. It appears that a way out of this is resorting to based companies. It appears that a way out of this is resorting to the country code top level domain name e.g. .de, .uk etcthe country code top level domain name e.g. .de, .uk etc

The new rules make no special provision for B2B Contracts. As The new rules make no special provision for B2B Contracts. As such the old rules still apply and in such cases whatever the such the old rules still apply and in such cases whatever the nationality of the defendant, he shall be sued in his place of nationality of the defendant, he shall be sued in his place of domicile (Article 2). Where he is domiciled in a third country, then domicile (Article 2). Where he is domiciled in a third country, then the national rules of jurisdiction of the state concerned is applied. the national rules of jurisdiction of the state concerned is applied. For companies, Article 60 will apply in defining its domicile.For companies, Article 60 will apply in defining its domicile.


Article 5 provides for alternative rules whereby adjudication is Article 5 provides for alternative rules whereby adjudication is based on the place of performance. Secondly, where it is a based on the place of performance. Secondly, where it is a contract for the sale of goods or the provision of services, it will be contract for the sale of goods or the provision of services, it will be courts in the state where the goods are delivered or should have courts in the state where the goods are delivered or should have been delivered or where the services were provided or ought to been delivered or where the services were provided or ought to have been provided.have been provided.

For electronic materials, the place of performance still provides a For electronic materials, the place of performance still provides a dilemma. “Is it the place where the supplier enters the data in the dilemma. “Is it the place where the supplier enters the data in the hardware or the place where the data is downloaded, what if, in a hardware or the place where the data is downloaded, what if, in a contract between two companies, one Dutch and the other contract between two companies, one Dutch and the other English, the electronic material is being downloaded from a laptop English, the electronic material is being downloaded from a laptop while the person responsible for this activity is on a business trip while the person responsible for this activity is on a business trip to Greece? Will this mean that the court of the latter state can try to Greece? Will this mean that the court of the latter state can try a conflict arising from such a contract?”a conflict arising from such a contract?”[1][1]

In the case analyzed above, the only solution may be choice of In the case analyzed above, the only solution may be choice of forum clause agreed to by both parties, especially where the forum clause agreed to by both parties, especially where the domicile of at least one party can be determined in advance. See domicile of at least one party can be determined in advance. See Article 33Article 33

OTHER PLACESOTHER PLACES

In China, forum is determined by the place of formation of the In China, forum is determined by the place of formation of the contract. contract.

““The place of effectiveness of an acceptance shall be the place of The place of effectiveness of an acceptance shall be the place of the establishment of the contract. the establishment of the contract.

If the contract is concluded in the form of data-telex, the main If the contract is concluded in the form of data-telex, the main business place of the recipient shall be the place of establishment. business place of the recipient shall be the place of establishment. If no main business place, its habitual residence shall be If no main business place, its habitual residence shall be considered to be the place of establishment. Where the parties considered to be the place of establishment. Where the parties agree otherwise, the place of establishment shall be subject to agree otherwise, the place of establishment shall be subject to that agreement”that agreement”[1][1]

Thus is an international e-commerce dispute it is the domicile of Thus is an international e-commerce dispute it is the domicile of the service recipient that is paramount. A court in China will the service recipient that is paramount. A court in China will assume jurisdiction if it can be shown that the service recipient assume jurisdiction if it can be shown that the service recipient has its “main place of business” or “its habitual residence” has its “main place of business” or “its habitual residence” (ordinarily resident in other jurisdictions) is in China. (ordinarily resident in other jurisdictions) is in China.

CHOICE OF FORUM CLAUSESCHOICE OF FORUM CLAUSES

““Indeed, it is common for international business contracts Indeed, it is common for international business contracts to specify both the choice of court and law that will apply in to specify both the choice of court and law that will apply in the event of a legal dispute arising out of the contract. the event of a legal dispute arising out of the contract. Where an exclusive jurisdiction clause is provided for in a Where an exclusive jurisdiction clause is provided for in a contract, common law courts have tended to exercise their contract, common law courts have tended to exercise their discretion strongly in favour of giving effect to the contract discretion strongly in favour of giving effect to the contract agreed by the parties. It can, therefore, be argued that agreed by the parties. It can, therefore, be argued that persons that enter into international business transactions persons that enter into international business transactions either: either: (i) have a degree of control over where (i) have a degree of control over where potential litigation may arise out of a contract (via potential litigation may arise out of a contract (via the use of choice of court/law clauses); and/or (ii) the use of choice of court/law clauses); and/or (ii) are able to discern, with a level of certainty, the are able to discern, with a level of certainty, the potential jurisdictions within which they may be potential jurisdictions within which they may be “hailed into court”. States that a person has no “hailed into court”. States that a person has no connection with, for example, are unlikely to take connection with, for example, are unlikely to take jurisdiction in a dispute concerning such a jurisdiction in a dispute concerning such a person”person”[1][1]

CHOICE OF FORUM CLAUSES (CONTD)CHOICE OF FORUM CLAUSES (CONTD)

The Brussels I Regulation gives recognition to choice of The Brussels I Regulation gives recognition to choice of forum clauses contracts. The Hague Conference on Private forum clauses contracts. The Hague Conference on Private International Law has come out with the Convention on International Law has come out with the Convention on choice of court agreements dated 30th June 2005. Under choice of court agreements dated 30th June 2005. Under the convention, signatory countries have clear rules for the convention, signatory countries have clear rules for dealing with choice of forum issues in International e-dealing with choice of forum issues in International e-commerce disputes. commerce disputes.

Under Article 1.2 the convention defines international Under Article 1.2 the convention defines international transactions as follows;transactions as follows;

““For the purpose of chapter II, a case is international unless For the purpose of chapter II, a case is international unless the parties are resident in the same contracting state and the parties are resident in the same contracting state and the relationship of the parties and other elements relevant the relationship of the parties and other elements relevant to the dispute, regardless of the location of the chosen to the dispute, regardless of the location of the chosen court, are connected only with the state” court, are connected only with the state”

CHOICE OF FORUM CLAUSES (CONTD)CHOICE OF FORUM CLAUSES (CONTD)

Article 2 defines domicile of undertakings to include its Article 2 defines domicile of undertakings to include its statutory seat, the place of incorporation or formation, its statutory seat, the place of incorporation or formation, its place of central administration or where it has its principal place of central administration or where it has its principal place of business.place of business.

Article 4 obligates courts of the state chosen the right to Article 4 obligates courts of the state chosen the right to assume jurisdiction, while the state not chosen is obligated assume jurisdiction, while the state not chosen is obligated to decline jurisdiction.to decline jurisdiction.

It also makes provision for the enforcement of decisions It also makes provision for the enforcement of decisions given in accordance with the convention (Article 8)given in accordance with the convention (Article 8)

Under Article 19, a state not chosen as forum may refuse to Under Article 19, a state not chosen as forum may refuse to determine disputes to which an exclusive choice of court determine disputes to which an exclusive choice of court agreement applies if, there is no connection between that agreement applies if, there is no connection between that state and the parties or the dispute. Similarly a court will state and the parties or the dispute. Similarly a court will refuse to enforce the decision of another state in the same refuse to enforce the decision of another state in the same circumstances. circumstances.

CONCLUSIONCONCLUSION

The issue of enforcement also needs to be addressed. While The issue of enforcement also needs to be addressed. While a court may have the power to prescribe and adjudicate on a court may have the power to prescribe and adjudicate on a dispute, it may lack the power to enforce its judgment a dispute, it may lack the power to enforce its judgment against a non resident. against a non resident.

It is for this reason that nations have to address the issue of It is for this reason that nations have to address the issue of forum on multilateral basis. Most jurisdictional problems in forum on multilateral basis. Most jurisdictional problems in e-commerce disputes will be avoided if parties insert choice e-commerce disputes will be avoided if parties insert choice of forum clauses in their agreements.of forum clauses in their agreements.

For domain name disputes ICAANN has given the World For domain name disputes ICAANN has given the World Intellectual Property Organization (WIPO), the jurisdiction to Intellectual Property Organization (WIPO), the jurisdiction to adjudicate on domain name disputes.adjudicate on domain name disputes.

Finally most jurisdictions respect and enforce arbitration Finally most jurisdictions respect and enforce arbitration clauses as alternative means of dispute resolution and clauses as alternative means of dispute resolution and online contracts are not excluded.online contracts are not excluded.

THANK YOU FOR YOUR THANK YOU FOR YOUR ATTENTIONATTENTION

disputes arising from international e-commerce contracts, where to resolve them jonathan kish adamu...

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