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Moves Afoot to Give Consumers E-commerce Legal Certainty

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With recent polls showing that Canada ranks a paltry 11th internationally for on-line shopping, experts ponder why a nation that ranks second for high-speed Internet service, boasts wired schools from coast-to-coast and enjoys one of the world's cheapest Net access rates, has yet to see a boom in consumer e-commerce.

At the root of the problem may lie the "chicken or egg" dilemma as both consumers and businesses wait for much needed legal certainty before fully embracing e-commerce.

For consumers, legal rules are needed to ensure that they enjoy the same protections on-line as they do off-line. For businesses, rules are needed to ensure that their liability is both foreseeable and limited, since the prospect of being hauled into court is enough to make many think twice about investing in a sophisticated on-line operation.

Canada has taken steps to address consumer e-commerce privacy concerns, but until recently the jurisdictional questions posed by the Internet created uncertainty. That may be about to change as the Consumer Measures Committee (CMC) has just released a draft proposal on jurisdictional rules for consumer e-commerce transactions.

The CMC, a federal-provincial-territorial working group that brings together consumer ministers to develop harmonized consumer laws in Canada, first stepped onto the e-commerce stage in May, 2001, when it developed a country-wide template for consumer e-commerce protection.

The template, or a group of standard clauses, addressed issues such as credit-card chargebacks, contract formation, as well as information provision. It is now ready for implementation at the provincial and territorial level. On the heels of the template, comes the CMC jurisdiction draft, which advocates the implementation of a targeting-based approach as a method of balancing the need for business certainty while also providing consumers with effective protection.

Consumer jurisdictional issues actually raise two concerns. First, the question of choice of forum, or which court should assert jurisdiction in disputes between consumers located in one province and sellers situated in another. Second, the question of choice of law, or which law should be applied to such disputes. Although the two issues are distinct, the draft correctly notes that both raise many of the same considerations.

Many business groups support a "rule of origin" approach that would establish the laws and courts of the business as those that would hear the dispute. But this would require consumers to travel to the jurisdiction where the business is located in order to sue, thereby undermining consumer protection and confidence.

Consumer groups favour a "rule of destination" approach that would ensure that consumers always have the right to sue in their own local jurisdiction under their own laws. Businesses object to this approach because they would be forced to respond to lawsuits worldwide without the ability to limit their potential liability.

Between these two perspectives, several alternatives have emerged. Some have argued for contractual clauses to determine the governing law or jurisdiction, while others have suggested that a rule of origin approach should apply, so long as the law provides consumers with an adequate level of protection. A third alternative is the targeting-based approach, which assumes that if a seller specifically targets a consumer in their home jurisdiction, the consumer's jurisdiction should govern.

The CMC favours the targeting approach, citing growing support for it worldwide. It notes that the European Union has adopted targeting within its consumer jurisdiction policies as has the Hague Conference on Private International Law. Targeting has also found favour in Canada as similar rules are found in the Quebec Civil Code and this approach was the chief recommendation in a jurisdictional study completed for the Uniform Law Conference of Canada last year.

If approved (comments on the proposal are due by Sept. 6), the rules would provide Canadian businesses and consumers with much needed e-commerce jurisdictional certainty. Businesses would be able to identify their risks in advance and govern themselves accordingly. Similarly, consumers would enjoy consistent protection both on-line and off-line. While the new rules do not assure Canada of a consumer e-commerce spending boom, failure to establish uniform standards is certain to leave us lagging behind.

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