E-commerce and the Internet in general give new significance to an old problem in international law: when does a citizen of one country or a corporation with its place of business in one country fall under the jurisdiction of the courts of another country? For example, can a trademark holder in France sue a company using the same trademark in Germany for infringement because the German company has established a Web site that is available to French consumers? And which law of trademark applies — the German law or the French law?

Jurisdiction issues are getting more and more attention as governments try to control online content and conduct originating beyond their borders. Examples include the French Yahoo! case, Saudi Arabia’s blocking 200,000 Web sites, claims by Italian and German courts of authority over sites abroad, the Chinese claiming rights to all Chinese language domain names, the EU proposing to have non-EU firms collect taxes for digitally delivered goods that come into the EU, and the US’s efforts on Internet gambling and prescription drugs.

These issues, with implications for privacy, freedom of expression and consumer protection, are being discussed in several forums.

The Hague Conference on Private International Law has been drafting an international convention in an effort to set international rules for determining the court in which foreign parties can be sued and when countries must recognize the judgments of foreign courts.

Some argue that crafting a convention to address jurisdictional issues will take too long and that alternative dispute resolution may provide an interim solution. The World Intellectual Property Organization helped craft a policy instituted in late 1999 by the Internet Corporation for Assigned Names and Numbers, the organization charged with managing the Internet’s domain name system, for resolving trademark disputes involving domain names. Others complain, however, that the ICANN process is one-sided in favor of business interests.

WIPO has launched other initiatives aimed at addressing some of the questions surrounding applicable law and jurisdiction raised by the Internet, including draft guidelines for how the same trademarks in different countries can coexist on the Internet.

Hague Convention

In October 1999, delegates to the Hague Conference adopted the Preliminary Draft Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters (the Hague Convention). If ratified, the convention would provide a mechanism by which plaintiffs could have a court judgement issued in one country enforced in another country: It would require domestic courts of signatory countries to enforce foreign judgments meeting the treaty’s standards.

Such an agreement is important because in a world where business transactions are increasingly global companies and individuals want a trans-border mechanism for redress when their contract or tort rights are violated. Consider the following situation:

Company X has its home office and the majority of its assets in Sweden. However, X sells its products in South Korea. Some of these products prove defective, injuring many people. Those people win a lawsuit against Company X in South Korea. However, because Company X has no significant assets in South Korea, the plaintiffs ask the Swedish courts to enforce their South Korean judgement and order Company X to pay. Under the proposed Hague Convention, the system for enforcing foreign judgments in such situations would be standardized, increasing the possibility that the plaintiffs would be able to collect their foreign award.

The draft convention has a dual focus: (1) enforcement in the courts of one country of judgments issued by the courts of another country, and (2) jurisdiction – which country has initial jurisdiction over a dispute. The US was interested in mutual enforcement of court decisions. (The US believes that its courts are generally amenable to enforcing foreign judgments, but that foreign courts are generally not amenable to enforcing decisions from US courts.) The EU wanted the convention to focus on jurisdiction.

However, the October 1999 draft generated considerable opposition. The issues proved so difficult that further formal meetings on the draft were deferred until June, 2001. In the interim, however, there were a great deal of behind-the-scenes discussions and exchange of proposals

Many American companies in particular are worried about foreign courts levying judgments against them which, under American law, they would not be obliged to pay and which otherwise American courts would be unwilling to enforce.

Consumer groups were worried that large companies could use the treaty to pick the most favorable jurisdiction and force consumers to litigate in inconvenient forums. For example, US law recognizes the “fair use” exemptions to copyright law. Most other countries have more restrictive exemptions. If approved, the Hague Convention would allow IP rights holder to determine the forum in which their disputes are heard – potentially subjecting US consumers to restrictive international regimes.

A major issue is whether the convention should cover copyright issues at all. Even some companies, especially ISPs, are concerned, on several grounds: (1) The treaty would make ISPs more vulnerable to liability for content they carry. This is an issue that was highly contested when the US adopted its Digital Millennium Copyright Act, and there is concern that the convention would undermine the delicate balance between content owners and service providers hammered out in that law. (2) It would compound the problems by forcing ISPs to take down material on Web sites when distribution couldn’t be limited to one area. Thus, deciding what to do about IP pits content providers and copyright holders against consumers and network providers (including ISPs). But even content providers worry about the enforcement of foreign judgements restricting their content.

It is important to note that the Hague Convention draft does not provide which country’s law would apply in any given dispute – the Convention only defines the jurisdiction in which the proceeding takes place. However, it is a not unreasonable assumption to imagine that US courts will prefer to apply US law, French courts French law, etc, so the choice of forum can determine the outcome of a case, even if both parties have the resources to show up.

The June 2001 negotiating session produced a voluminous document — one with so little consensus that some questioned whether to proceed with the Convention drafting process at all. Representatives of key governments and and the EU met bilaterally during 2001-02 on whether to scale the convention down to cover only business-to-business (B2B) contracts with choice-of-forum clauses and not consumer issues, Washington Internet Daily reported on April 15, 2002. Early in 2002, the Hague Convention Secretariat released documents outlining e-commerce problems with the treaty project and the benefits of restricting the treaty to choice of forum clauses. Negotiators were scheduled to meet again April 22-24, 2002.

Difficult issues include:

  1. Consumer protection. Consumer groups want consumers to be able to sue in the court where the consumer resides (the EU model), while business groups want to be able to use contract terms to require consumers to sue in the jurisdiction convenient to the business (the US model).
  2. Intellectual property.
  3. ISP liability.

Given the complexity of the issues and the lack of agreement, the negotiators are exploring whether the treaty can be pared back to focus on jurisdiction for traditional civil suits (products liability, etc) without trying to resolve issues associated with the Internet.

The latest draft of the Hague Convention and other relevant documents can be found at http://www.hcch.net/e/workprog/jdgm.html

The Consumer Project on Technology has a good collection of resource documents at: http://www.cptech.org/ecom/jurisdiction/hague.html

The American Bar Association has a good, if somewhat legalistic site, with information on international jurisdiction generally at: http://www.abanet.org/buslaw/cyber/initiatives/jurisdiction.html

See also http://www.ilpf.org