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Harmonization of Web law sparks heated haggling


Thursday, March 1, 2001

Given the global nature of many cyberlaw issues, the national Internet laws of many countries often come into conflict with one another. Many believe that the ideal solution to Internet policy conflicts is the harmonization of law through international treaties. If all countries adhere to the same legal standard, the specific country's law that applies becomes less of a concern.

Negotiating international standards is a difficult process, however. The enormity of the challenge has been evident this week in Ottawa at the Hague Conference on Private International Law's expert meeting on e-commerce and international jurisdiction.

The Hague Conference is an international organization dedicated to crafting international conventions on matters of private law. The organization has been negotiating a controversial draft convention on jurisdiction and foreign judgments that has raised the ire of e-commerce companies worldwide.

The draft convention's laudable goal is to create legal certainty. It prescribes where a party may be sued in the event of a dispute and provides assurances that judgments obtained in foreign courts can be enforced locally with ease.

For example, if a Canadian company sues a Belgian company in an Ontario court for failing to perform the terms of a contract, the Ontario court may or may not be willing to hear the case. Even if the Ontario court rules on the matter, the Canadian company still often faces the daunting prospect of travelling to Belgium to convince a Belgian court to enforce its judgment.

Once enacted, the convention would inform the Canadian company whether it is entitled to sue in a Canadian court. It would also assure it that the Belgian court would be obliged to enforce its judgment.

While these rules have obvious benefits for business-to-business commerce, the draft convention provides an exception for consumer contracts. It states that consumers may always bring their claim in the court of the country in which they habitually reside. In other words, consumers can sue in their local courts while simultaneously taking advantage of the convention's enforcement provisions to ensure that a foreign court will enforce their award.

Before the rise of e-commerce, this provision would have been relatively uncontroversial since consumers did not commonly enter into contracts with foreign companies. E-commerce has changed this, giving consumers millions of new choices. Purchasing chocolate from a Belgian seller has become as easy as purchasing it from the corner store.

E-commerce advocates fear that the draft convention will discourage companies, particularly small- and medium-sized businesses, from embracing the potential of e-commerce. They are concerned that rather than viewing the Internet as a global marketplace, these businesses will instead see it as the source of significant legal risk with the prospect of being sued in countless jurisdictions worldwide.

Although often camouflaged by legal terminology such as "the enforceability of forum selection clauses," the question at the heart of this issue is how to apportion the risk inherent in e-commerce transactions between business and consumers. Many business groups favour a "rule of origin" approach that would force consumers to travel to the habitual residence of the business in order to sue. In addition, business favours the use of contracts between businesses and consumers to determine which jurisdiction's rules will govern, should a dispute arise.

Consumer advocates respond that the solutions advocated by business would effectively eliminate consumer protection in e-commerce transactions, destroying consumer confidence and resulting in e-commerce growth grinding to a halt. They instead favour a "rule of destination" approach that would ensure that consumers always have the right to sue in their own local jurisdiction, regardless of what a contract might say.

In fact, both business and consumers must seek to find a middle ground. A rule-of-origin approach would indeed undermine consumer confidence, while also creating a race to the bottom by encouraging business to relocate to low regulation jurisdictions. The rule of destination approach is also not a panacea for consumers, however, since they must still travel to the businesses' jurisdiction in order to enforce their award.

A contract-based approach has some merit, though courts should rightly refuse to enforce jurisdiction clauses where they provide for a jurisdiction with no connection to either party or where they create onerous obligations. In fact, two recent U.S. cases refused to enforce such clauses in service contracts involving AOL. In those cases, the courts ruled that it was unfair to expect a consumer to travel across the country to Virginia, AOL's home jurisdiction, in order to litigate over a few hundred dollars of damages.

If enacted, the Hague Conference draft convention would unquestionably enhance legal certainty for business and consumers worldwide. Whether it can fairly apportion the risk between business and consumers for e-commerce transactions may well decide if it moves beyond the draft stage.
Michael Geist is a law professor at the University of Ottawa Law School and director of e-commerce law at the law firm Goodmans LLP.

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