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Statement of the
Internet Law & Policy Forum

Meeting of Experts on Electronic Commerce and International Jurisdiction, Ottawa Preliminary Statement for the Ottawa Meeting

26 February - 2 March 2001
regarding the

HAGUE CONFERENCE ON PRIVATE INTERNATIONAL LAW
Preliminary Draft Convention on Jurisdiction and Foreign Judgments
In Civil and Commercial Matters
Adopted by the Special Commission on 30 October 1999
Amended version (new numbering of Articles)

The Internet Law & Policy Forum (the "ILPF") respectfully submits the following Statement to the Second Ottawa Meeting on the Preliminary Draft Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters of the Hague Convention on Private International Law (the "Draft Convention").

Introduction

The ILPF is a not for profit organization of twenty-five member companies engaged in Internet-related businesses. Its members are headquartered in Europe, the United States, Canada, and Japan. Although many of the member companies are multinational, others are Internet entrepreneurs. As a voice and resource for the practicing Internet lawyer, the group's perspective is the development of legal rules for the Internet to foster the growth of cross border electronic commerce and communications.

Among other activities, the ILPF sponsors international fora and expert groups. Two of its annual conferences, Jurisdiction: Building Confidence in a Borderless Medium, Montreal, Canada, 26-27 July 1999 (the "Montreal Conference") and Global Networks/Local Rules, San Francisco, United States, 10-11 September 2000 (the "San Francisco Conference") have addressed a range of jurisdictional issues. The San Francisco Conference specifically focused on issues raised by this Draft Convention. A copy of the program is attached to this paper. The various presentations1 and a full transcript2 of the proceedings are available on the ILPF web site. In addition, on 5 February of this year, the ILPF convened a one-day meeting of members and other experts to consider various positions on these important issues.

The purpose of this Statement is to direct attention to portions of the San Francisco Conference discussions and to summarize ILPF's views as follows:

  1. Electronic networks are a highly efficient, cost effective communication medium of global reach. The ILPF respectfully submits that any convention that seeks widespread acceptance and lasting certainty of interpretation must by necessity address those issues raised by the growing use of this new medium.

  2. The concept of party autonomy or freedom of contract, that is, legal deference to parties' choice of applicable law and forum, is fundamental to traditional concepts of private international law and trade. This Draft Convention should continue to strengthen that concept by allowing national laws in support of party autonomy to develop and to continue to operate.

  3. Proposed jurisdictional rules for cross border consumer transactions (Article 7), including the application of any "activity-based" tests, must be allowed to evolve further under national law before being "hardwired" into an international convention that seeks widespread acceptance and certainty of interpretation.

  4. The proposed all-encompassing tort provisions of Article 10 in its current form will not work for an age of globally-accessible information.

Clearly, these are very detailed, very complex issues. The Experts Group has raised and discussed many of the details. The ILPF offers this Statement with the greatest respect for the expertise represented at this Second Ottawa meeting and the work that the group has accomplished thus far. Because of the increasing importance of international transactions to the world economy, international efforts in fora such as the Hague Conference will become increasingly important.

Main Points

  1. Electronic networks are a highly efficient, cost effective communication medium of global reach.

    Electronic networks are a medium, not a definable variety of commerce. In last year's Preliminary Statement, the ILPF joined others in urging that the "Rules for e commerce should not be carved out for separate consideration." This year's view is more refined and fundamental: the Internet and other electronic networks are but a medium of communication and, in some cases, of delivery. In either case, it is difficult if not impossible to carve anything called "e commerce" out of the provisions of the Draft Convention. Furthermore, a growing number of national governments have announced a commitment to the continued growth of this new medium for use by their citizens, businesses and governments.

    Appropriately addressing the issues raised by this new electronic medium -- or leaving appropriate room for the further development of rules under national law -- will contribute to widespread acceptance of a convention and enduring certainty of interpretation of its language.

  2. Party autonomy, a fundamental principle of private international law and trade, should be emphasized and strengthened.

    International trade has flourished and sovereigns have avoided unnecessary conflict by honoring the legally-enforceable right of parties to a transaction to choose the applicable law and forum. Even though the degree to which individual countries allow consumers to exercise that right varies to a great extent, this Draft Convention should continue to strengthen the concept of party autonomy by allowing national laws in support of party autonomy to continue to operate and to develop further.

  3. Proposed jurisdictional rules for cross border consumer transactions (Article 7), including the application of any "activity-based" tests, must be allowed to evolve further under national law before being "hardwired" into an international convention that seeks widespread acceptance and certainty of interpretation.

    The ILPF respectfully recommends that the rules for jurisdiction over suits in contracts involving "consumers" (however that term may be defined) be substantially narrowed, or, if an acceptable consensus between relevant parties cannot be reached, the article should be deleted from the Draft Convention, to allow further evolution of national rules.

    a. The importance of consumer protection: The ILPF has formally stated its views that real, effective levels of consumer protection and coordinated, multifaceted solutions, including but not limited to alternate dispute resolution mechanisms, are essential to build consumer confidence in the Internet as a cross border commercial medium.3 Allowing the tests for appropriate fora to develop over time, and perhaps even moving towards harmonization, is by no means a denial of consumer protection.

    b. Discussions at the San Francisco Conference: While identifying textual issues in Article 7, participants on an experts panel focused on two more fundamental issues. First, the proposed definition of a "consumer" is problematic. It is difficult if not impossible for a merchant to know with any legal certainty whether the party at the other end of a transaction is in fact acting in his or her capacity as a "consumer." In addition, panelists noted fundamental differences in approach, not only to the level and quality of activity necessary to create jurisdiction, but also to the most effective means to assure consumer protection in general. David Goddard, active in these expert meetings, offered the following summary:

    I'd just like to …endorse …paying attention to the detail, paying attention to the complexity of the issues, moving beyond the easy rhetoric of freedom on the one side, and promoting confidence and protecting consumers on the other. These are difficult issues, there are very different approaches and I suspect that, in a year or two, none of us are going to persuade people from other cultures that theirs was actually wrong all the time and ours is right. We have to work at how to accommodate the possibility that we might not be right, that our assumptions may be refined over time by experience. 4

    In the panelists' view, trying to achieve a consensus that would ensure widespread acceptance seemed a daunting challenge but one which required progress where it could be made. Those aspects for which consensus may not be possible may need to be set aside for future discussions.

    c. Jurisdictional Avoidance: "Jurisdictional avoidance" refers to the ability of a business to refrain from doing business with a consumer or consumers within a national boundary if the business does not wish to be subject to the jurisdiction of that sovereign authority. Jurisdictional avoidance has been mentioned by some as the means by which businesses can avoid any convention set consequences of engaging in transactions with consumers within a national boundary.

    The implications of the rules on consumer privacy and "jurisdictional avoidance" have not been adequately addressed in the context of delivery over electronic networks. For contracts for traditional goods, delivered by traditional means - air freight, boat, etc. - it is possible to block or avoid shipments to certain countries. In contrast, however, means of "jurisdictional avoidance" for delivery of commercial content, for example, downloadable software, music or information, is more problematic. Technological identifiers are increasingly possible but promise a balkanized Internet and create incentives (and costs) for prolonged storage of consumer data. Self-disclosures by consumers may only invite fraud. The legal impact of online merchant disclaimers is uncertain, particularly if the merchant does not take reasonable technological steps to ensure that it is operating within the bounds of its own disclaimers.

    In the ILPF's view, legally recognized means of jurisdictional avoidance will be important to both businesses and consumers. At present, the technological possibilities and implications for consumer privacy are not sufficiently understood.

  4. The all-encompassing tort provisions of Article 10, in its current form, simply will not work in an age of globally accessible information.

    There is a serious question whether the jurisdictional rules proposed for torts and non-contractual duties, designed for cases involving tangible products and product liability, should be extended to the full range of torts.

    a. Discussions in San Francisco: Article 10 of the Draft Convention was the subject of a second panel discussion in San Francisco. According to that panel:

    • Torts and non-contractual duties form a very broad and elastic category of causes of action such that substantive standards may differ substantially around the globe. Information available on web sites or transmitted across borders via the Internet may therefore be alleged to cause damage, literally around the globe.
    • For many torts, there is often no contractual relationship within which to limit choice of law or forum.
    • For web sites, global accessibility, and arguably global exposure for damage, may be found to be foreseeable.
    • For business interests that use the Internet, the associated risks from the Draft Convention jurisdictional rules on tort outweigh any of the other associated benefits.

    The panel members, representing an Internet perspective, suggested that Article 10 should simply be deleted.

    b. Information-based torts:

    The ILPF wishes to emphasize that, given the advent of global electronic networks and global accessibility to information, the rules developed for one kind of tort, primarily tangible products and product liability, should not be automatically extended to all torts. The potential for unmanageable legal risk for claims based on information (or content) under Article 10 is quite real. Additional ways to find a narrower applicability for Article 10 -- for example, rules to allow claims and enforce judgments for physical harm to natural persons -- can and should be explored.

    Note: Torts involving intellectual property rights form yet another category of torts for which the all encompassing coverage of the Draft Convention is premature if not inappropriate. The ILPF joins those interests which urge deference to the World Intellectual Property Organization and other substantive experts on the exercise and protection of intellectual property rights across national boundaries.

    Conclusion

    The Internet is a new medium of spectacular efficiency. Web sites offer information accessible from literally anywhere on the globe. Information can be exchanged, delivered, and distributed across national borders with little regard to geographic distance. Much has been written on the impact that such a medium might have upon traditional notions of sovereignty and rules for jurisdiction.

    This Draft Convention has provided the first concrete opportunity for an in depth and detailed examination of the implications of this new medium. The Hague Conference is to be commended for undertaking a thorough examination of these important and complex issues.

    The Internet Law & Policy Forum wishes to emphasize the importance of finding those areas of consensus while allowing an appropriate evolution of national laws and, indeed, our own understanding. This may require the narrowing of some of the Draft Convention's provisions, or, if consensus cannot be reached, their deletion. At the same time, the ILPF sees value in a convention, which at the very least addresses disputes between businesses and which black-lists certain forms of so-called exorbitant jurisdiction. We urge the delegates to find as many areas of consensus as possible without jeopardizing the growth of the Internet.

    Respectfully submitted,

    Masanobu Katoh
    Chair, ILPF
    General Manager, Fujitsu Limited.

    Denis Henry
    Vice President Regulatory Law, Bell Canada

    Ruth Day
    Executive Director, Internet Law & Policy Forum

Endnotes

  1. http://www.ilpf.org/events/jurisdiction2/presentations/.
  2. http://www.ilpf.org/events/jurisdiction2/.
  3. ILPF Statement for the Public Hearing of the European Commission, Electronic Commerce: Jurisdiction and Applicable Law, Brussels, Belgium 4-5 November 1999, http://www.ilpf.org/events/ec-hearings-stmt.htm. This Statement reflects general themes regarding consumer protection from ILPF's Montreal Conference, http://www.ilpf.org/events/jurisdiction/.
  4. http://www.ilpf.org/events/jurisdiction2/, pages 308-309.


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