e-retailing legalities

8/14/2019 E-Retailing Legalities

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Prof. D. ChoudhuryProf. D. Choudhury

DISPUTES ARISING FROM INTERNATIONALDISPUTES ARISING FROM INTERNATIONAL

E-COMMERCE CONTRACTS,E-COMMERCE CONTRACTS,

WHERE TO RESOLVE THEMWHERE TO RESOLVE THEM


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INTRODUCTIONINTRODUCTION

The advent of the internet has moved businesses from the usualThe advent of the internet has moved businesses from the usualbrick and mortar environment to an electronic platform, wherebrick and mortar environment to an electronic platform, wherecontracts are consummated at a distance without physical contactcontracts are consummated at a distance without physical contactbetween 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 ascommerce and has been variously defined as

The practice of buying and selling goods through on-lineThe practice of buying and selling goods through on-lineconsumer services on the Internetconsumer services on the Internet[1]

[1]

A transaction formed by electronic messages in which theA transaction formed by electronic messages in which themessages of one or both parties will not be reviewed by anmessages of one or both parties will not be reviewed by anindividual as an expected step in forming a contractindividual as an expected step in forming a contract[2]

[2]

Any form of business transaction in which the parties interactAny form of business transaction in which the parties interactelectronically rather than by physical exchanges or direct physicalelectronically rather than by physical exchanges or direct physicalcontactcontact[3]

[3]


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INTRODUCTION (contd)INTRODUCTION (contd)

It follows from the various definitions that e-commerce involves theIt follows from the various definitions that e-commerce involves thesale 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 throughIt is mediated by an electronic platform rather throughconventional means of communication.conventional means of communication.

It is conducted at a distance such that goods are delivered andIt is conducted at a distance such that goods are delivered andservices provided without the parties necessarily getting to meetservices 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 enhancedUndoubtedly this has increased the pace of commerce and enhancedefficiency with a resultant reduction in cost of doing business. Inefficiency with a resultant reduction in cost of doing business. Inbecoming a medium used by hundreds of millions of people, thebecoming a medium used by hundreds of millions of people, theInternet has become an essential tool for commerce. The UnitedInternet has become an essential tool for commerce. The UnitedStates (U.S.) Supreme CourtStates (U.S.) Supreme Court[1]

[1] provided its impressions of theprovided its impressions of the

Internet in 1997, labeling the Internet a unique medium knownInternet in 1997, labeling the Internet a unique medium knownto its users as cyberspace located in no particular geographicalto its users as cyberspace located in no particular geographicallocation but available to anyone, anywhere in the world.location but available to anyone, anywhere in the world.[2]

[2]


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It is this very lack of a particular geographical location or itsIt is this very lack of a particular geographical location or itsborderless nature that has brought the issue of the appropriateborderless nature that has brought the issue of the appropriateforum to resolve online disputes arising from e-commerce acrossforum to resolve online disputes arising from e-commerce acrossphysical borders to the front burner.physical borders to the front burner.

This problem is further exacerbated by the fact that e-commerceThis problem is further exacerbated by the fact that e-commerce

deals with two types of products; physical goods and services anddeals with two types of products; physical goods and services andelectronic 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 theIn the former case the internet mediates and provides theplatform to conclude the contract while in the later case itplatform to conclude the contract while in the later case itbecomes the place of performance of the contract.becomes the place of performance of the contract.

Also in the first case performance takes place outside theAlso in the first case performance takes place outside theelectronic environment, while in the latter, the whole transactionelectronic environment, while in the latter, the whole transactionis initiated and concluded on the internet.is initiated and concluded on the internet.


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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 itIt does not a change the people neither does itchange the law. What it does however change ischange the law. What it does however change isthe way we do things and how long establishedthe way we do things and how long establishedprinciples of law are applied to new situationsprinciples 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 arethe questions raised by [Internet] conduct areindeed different, and more difficult, than theindeed different, and more difficult, than theanalogous questions raised by its real spaceanalogous questions raised by its real spacecounterpart, and we [cannot] resolve thecounterpart, and we [cannot] resolve the

jurisdictional dilemmas by applying thejurisdictional dilemmas by applying thetraditional legal tools developed for similartraditional legal tools developed for similarproblems in real spaceproblems in real space[1][1]


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For most paper based contracts the rules are clearFor most paper based contracts the rules are clearand the applicable law is certain. This is not so for e-and the applicable law is certain. This is not so for e-contracts which are conducted over distances. Thuscontracts which are conducted over distances. Thusthe certainty necessary for smooth businessthe certainty necessary for smooth businessrelationship is lacking. This is not helped by the factrelationship is lacking. This is not helped by the fact

most web-based businesses will normally specifymost web-based businesses will normally specifywhich law will apply to the transaction usingwhich law will apply to the transaction usinghyperlinks which are often not read by the consumerhyperlinks which are often not read by the consumerof online goods and services. The consumer isof online goods and services. The consumer istherefore most often left in the dark as to what lawtherefore most often left in the dark as to what lawwill govern the transaction. For even when such lawswill govern the transaction. For even when such laws

are specified the parties are not too sure that theare specified the parties are not too sure that thecourts will honor such choice of law or choice ofcourts will honor such choice of law or choice offorumforum[1][1]..


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The internet, however, due to its borderless nature creates aThe internet, however, due to its borderless nature creates aproblem of appropriate forum in an e-commerce transaction. Forproblem of appropriate forum in an e-commerce transaction. Forinstance in what country will a case be tried when it involves ainstance in what country will a case be tried when it involves aNigerian national resident in the USA who downloads software fromNigerian national resident in the USA who downloads software froma Japanese registered company from a website placed on a servera Japanese registered company from a website placed on a serverin Australia while on a business trip to England. The issue of forumin Australia while on a business trip to England. The issue of forum

takes on a different dimension when a dispute arises from thistakes on a different dimension when a dispute arises from thistransaction. What will be thetransaction. What will be the forum conveniensforum conveniens[1][1] for dealing withfor dealing withthis issue? What law will apply?this issue? What law will apply?

[1][1] Blacks law dictionary supra pg 665, defines it as the court inBlacks law dictionary supra pg 665, defines it as the court inwhich an action is most appropriately brought, considering the bestwhich an action is most appropriately brought, considering the best

interests and convenience of the parties and witnesses.interests and convenience of the parties and witnesses.


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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 performanceBusiness to Business (B2B) transactions involving performance

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

Business to Consumers (B2C) transactions involving theBusiness to Consumers (B2C) transactions involving thepurchase of products by individuals outside their trade orpurchase of products by individuals outside their trade orprofession or E- retailing.profession or E- retailing.

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

Consumer to Administration. The consumer to administrationConsumer to Administration. The consumer to administration

category has only recently emerged e.g. welfare payments orcategory has only recently emerged e.g. welfare payments ortax matters.tax matters.


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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 2009 showcommerce sales for the fourth quarter 2009 showa figure of $22.9 billion, an increase of 3.3% froma figure of $22.9 billion, an increase of 3.3% fromthe third quarter 2008 figure. Compare this to athe third quarter 2008 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 2009 represent anThe fourth quarter figure for 2009 represent an

increase of 23.0% against the correspondingincrease of 23.0% against the correspondingperiod in 2008 compared to a growth figure ofperiod in 2008 compared to a growth figure ofonly 6.0% for retail salesonly 6.0% for retail sales[1][1] in the same period.in the same period.

The corresponding statistics for the EU and otherThe corresponding statistics for the EU and otherregions may show similar growth patterns.regions may show similar growth patterns.


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

For most B2B contracts the transaction is consummated overFor most B2B contracts the transaction is consummated overtime and may involve a series of correspondence leading totime and may involve a series of correspondence leading tothe formation of a contract where you have performancethe formation of a contract where you have performanceagainst performance or performance against payment.against performance or performance against payment.

Here parties will generally have a physical presence in aHere parties will generally have a physical presence in aparticular place and identifying their domicile for the purposeparticular place and identifying their domicile for the purpose

of applying the rules as to forum is not too difficult.of applying the rules as to forum is not too difficult. Again in such cases most parties will have well in advanceAgain in such cases most parties will have well in advance

agreed on forum and the law to govern the transaction. Lateragreed on forum and the law to govern the transaction. Lateron we shall look at the issue of choice of forum and seeon we shall look at the issue of choice of forum and seewhether the courts will respect such choice of lawwhether the courts will respect such choice of lawagreements. Unlike B2B transactions deciding the rightagreements. Unlike B2B transactions deciding the right

forum for adjudication of a B2C dispute; which involveforum for adjudication of a B2C dispute; which involveconsumers ordering for goods and services online becomes aconsumers ordering for goods and services online becomes alot more complex.lot more complex.


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NATURE OF JURISDICTIONNATURE OF JURISDICTION

The rules of jurisdiction can be divided into the followingThe rules of jurisdiction can be divided into the followingcategoriescategories[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, thatFor court in a country to exercise jurisdiction over a case, that

country must have the capacity to legislate on the issue, itcountry must have the capacity to legislate on the issue, itmust have the capacity to adjudicate or try the matter andmust have the capacity to adjudicate or try the matter and

thirdly it must the power to enforce its decision. It is trite lawthirdly it must the power to enforce its decision. It is trite lawthat a court must not act in vain. This is why courts declinethat a court must not act in vain. This is why courts declinejurisdiction on the basis of forum non conveniens where itjurisdiction on the basis of forum non conveniens where itconcludes that it is not the right forum to adjudicate.concludes that it is not the right forum to adjudicate.


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FORUM IN E-COMMERCE DISPUTESFORUM IN E-COMMERCE DISPUTES

Generally, especially in the commonwealth and commonGenerally, especially in the commonwealth and commonlaw countries, forum is determined by the place oflaw countries, forum is determined by the place ofperformance of the contract and the domicile of theperformance of the contract and the domicile of thedefendant. In Nigeria under the uniform procedure rulesdefendant. In Nigeria under the uniform procedure ruleswhich apply in most parts of the country the rules providewhich apply in most parts of the country the rules providefor 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, orshall, where the contract ought to have been performed, orwhere the defendant resides or carries on business in thewhere the defendant resides or carries on business in theFederal Capital Territory, be commenced and determined inFederal Capital Territory, be commenced and determined inthe High Court of the Federal Capital Territory, Abujathe High Court of the Federal Capital Territory, Abuja[1][1]

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


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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 orwhere the contract ought to have been performed or Where the defendant resides.Where the defendant resides.

Under these provisions however, it is difficult in anUnder these provisions however, it is difficult in an

international e-commerce transaction to decide the venueinternational e-commerce transaction to decide the venueto 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 incyberspace?cyberspace?

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

Therefore a Nigerian court will only assume jurisdiction if theTherefore a Nigerian court will only assume jurisdiction if thedomicile of the defendant can be shown to be Nigeria. It isdomicile of the defendant can be shown to be Nigeria. It isexpected that the draft Electronic transactions Bill whenexpected that the draft Electronic transactions Bill whenpassed into law will address some of this jurisdictionalpassed into law will address some of this jurisdictionalproblems.problems.


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In most commonwealth and common law countries jurisdictionIn most commonwealth and common law countries jurisdictionto enforce is dependent on the courts ability to bring ato enforce is dependent on the courts ability to bring adefendant within its boundaries. In Nigeria, a defendantdefendant within its boundaries. In Nigeria, a defendantoutside jurisdiction (outside Nigeria) can be served a writ ofoutside jurisdiction (outside Nigeria) can be served a writ ofsummons or notice of a writ of summons in a commercialsummons or notice of a writ of summons in a commercialdispute 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 Nigeriathe 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 residingthe contract was made by an agent trading or residing

within jurisdiction on behalf of a principal residing out ofwithin jurisdiction on behalf of a principal residing out ofthe jurisdictionthe jurisdiction the contract is governed by Nigerian lawthe contract is governed by Nigerian law[1][1]


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Under Order 21 a defendant in a foreign nation who meetsUnder Order 21 a defendant in a foreign nation who meetsthe above criteria can be brought within the jurisdiction ofthe above criteria can be brought within the jurisdiction ofthe court if it is a convention country. Under the Foreignthe court if it is a convention country. Under the ForeignJudgments (Reciprocal Enforcement) Act, Nigeria accordsJudgments (Reciprocal Enforcement) Act, Nigeria accords

recognition to judgments obtained in foreign countries on arecognition to judgments obtained in foreign countries on areciprocal basisreciprocal basis[1][1]..

Applying this ruling in a typical e-commerce transaction aApplying this ruling in a typical e-commerce transaction aNigerian court will assume jurisdiction where it canNigerian court will assume jurisdiction where it canestablish the domicile of the defendant as Nigeria. It willestablish the domicile of the defendant as Nigeria. It will

however be difficult to establish the place of formation ofhowever be difficult to establish the place of formation ofthe contract or the place of performance. It can be arguedthe contract or the place of performance. It can be arguedthat the courts here may assume jurisdiction under thethat the courts here may assume jurisdiction under theminimum contacts rule. bbminimum contacts rule. bb


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This was the test applied inThis was the test applied in McBee v. DelicaMcBee v. DelicaCo.,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 broughtmerchandise over the Internet. McBee broughtthe suit under theories of trademark dilution andthe suit under theories of trademark dilution andunfair competition. The court determined thatunfair competition. The court determined thatthree transactions with Maine residentsthree transactions with Maine residentsconstituted purposeful minimum contactsconstituted purposeful minimum contactssufficient to support jurisdiction by a court insufficient to support jurisdiction by a court inMaine. The court also determined that Delica Co.Maine. The court also determined that Delica Co.

had purposefully availed itself of conductinghad purposefully availed itself of conductingbusiness in Maine by using the name of a Mainebusiness in Maine by using the name of a Maineresident on its clothingresident on its clothing[1][1]..


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Also inAlso inFenn v. MLeads Enterprises, Inc.,Fenn v. MLeads Enterprises, Inc., 103103P.3d 156 (Utah Ct. App. 2004)P.3d 156 (Utah Ct. App. 2004) where a Utahwhere a Utahappellate court held that sending one email to aappellate court held that sending one email to aresident of Utah was a sufficient "contact" toresident of Utah was a sufficient "contact" tosatisfy the long-arm statute and minimumsatisfy the long-arm statute and minimum

contacts requirement of due process for a claimcontacts requirement of due process for a claimarising from the email. The appellate court foundarising from the email. The appellate court foundthat MLeads purposely directed its activities atthat MLeads purposely directed its activities atUtah residents and should have reasonablyUtah residents and should have reasonablyanticipated being hailed into court wherever itsanticipated being hailed into court wherever its

emails were received. Moreover, the courtemails were received. Moreover, the courtdetermined the interests of Utah and Fenndetermined the interests of Utah and Fennoutweighed the burden on MLeads of defending inoutweighed the burden on MLeads of defending inthe statethe state


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THE POSITION IN THE EUTHE POSITION IN THE EU

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

persons domiciled in a member state shall, whatever theirpersons domiciled in a member state shall, whatever theirnationality, be sued in the courts of that member statenationality, be sued in the courts of that member state[1][1]..

A consumer may choose to bring a suit against the other party in theA consumer may choose to bring a suit against the other party in thecourt of his domicile or in the court of the counter paritys domicile ifcourt of his domicile or in the court of the counter paritys domicile ifit is: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 otherform 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 consumer(3) any other contract for the supply of goods or services, a consumeris entitled to bring an action in the country of his own domicile, uponis entitled to bring an action in the country of his own domicile, uponcondition that the conclusion of the contract was preceded by acondition that the conclusion of the contract was preceded by aspecific invitation addressed to the consumer or by advertising carriedspecific invitation addressed to the consumer or by advertising carriedout in the state of consumers domicile24 and the consumer took inout in the state of consumers domicile24 and the consumer took inthat state the steps necessary for the conclusion of the contract itselfthat state the steps necessary for the conclusion of the contract itself(article 13.3).(article 13.3).


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

From a narrow perspective, the BrusselsFrom a narrow perspective, the Brusselsconvention gave jurisdiction to the place ofconvention gave jurisdiction to the place ofdomicile of the consumer on these conditionsdomicile of the consumer on these conditions

That the contract is predicated or a specificThat the contract is predicated or a specific

invitation addressed to the consumerinvitation addressed to the consumer That he acted in response to an advertisementThat he acted in response to an advertisement

carried out in the state of the consumers domicilecarried out in the state of the consumers domicile That he took steps in that state necessary forThat he took steps in that state necessary for

the conclusion of the contract itself self the conclusion of the contract itself self


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These provisions while they could work in the brick andThese provisions while they could work in the brick andmortar environment are faced with difficulty of applicationmortar environment are faced with difficulty of applicationwith 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 whenan e-mail enters the consumers inbox or when hean e-mail enters the consumers inbox or when hedownloads 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 notlocated in his country of domicile?located in his country of domicile?

Secondly the expression advertisement carried out in theSecondly the expression advertisement carried out in thestate of the consumers domicile is difficult to apply whenstate of the consumers domicile is difficult to apply whendealing with e-commerce. This is because of the nature ofdealing with e-commerce. This is because of the nature ofthe World Wide Web. An advertisement on the internetthe World Wide Web. An advertisement on the internetcould be placed by a company in the U.S on a server incould be placed by a company in the U.S on a server inGermany and accessed by a consumer surfing the internetGermany and accessed by a consumer surfing the internetin the UK. How would such a provision assist a consumer inin the UK. How would such a provision assist a consumer indetermining the right forum to sue?determining the right forum to sue?


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Thirdly how would you apply the phrase tookThirdly how would you apply the phrase tooksteps in that state necessary for the conclusion ofsteps in that state necessary for the conclusion ofthat contract?that contract?

- How do you determine steps taken in an onlineHow do you determine steps taken in an online

transaction for the purpose of determining thetransaction for the purpose of determining theappropriate forum?appropriate forum?

- For while a consumer may be domiciled in aFor while a consumer may be domiciled in aparticular state all the steps he may take toparticular state all the steps he may take toconclude a contract may take place outside hisconclude a contract may take place outside his

state (this is typical of contracts for the sale ofstate (this is typical of contracts for the sale ofintangible material such as software which couldintangible material such as software which couldbe downloaded from any where and paid for frombe downloaded from any where and paid for fromany where in the world).any where in the world).


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The Brussels convention of 1968 fails to address theThe Brussels convention of 1968 fails to address thechallenges posed by the internet and thechallenges posed by the internet and thedetermination of forum for the purpose of resolvingdetermination of forum for the purpose of resolvinginternational e- commerce disputes.international e- commerce disputes.

Having identified this mischief, how has the EUHaving identified this mischief, how has the EU

lawmaker addressed the problem?lawmaker addressed the problem? The Council Regulation on Jurisdiction and theThe Council Regulation on Jurisdiction and the

Recognition and Enforcement of Judgments in Civil andRecognition and Enforcement of Judgments in Civil andCommercial Matters (Brussels I Regulation)Commercial Matters (Brussels I Regulation)[1][1] underunderArticle 16 has given the consumer the right to takeArticle 16 has given the consumer the right to takelegal action either in the domicile of the plaintiff or inlegal action either in the domicile of the plaintiff or in

the domicile of the defendant. Undertakings on thethe domicile of the defendant. Undertakings on theother hand may bring action against consumers only inother hand may bring action against consumers only inthe court of the consumers domicilethe court of the consumers domicile


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However for a party to enjoy the benefits of Article 16, theHowever for a party to enjoy the benefits of Article 16, thecontract 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 casesIn all other cases the contact has been concluded with athe contact has been concluded with aperson who pursues commercial or professional activities inperson who pursues commercial or professional activities inthe member state of the consumers domicile or, by anythe member state of the consumers domicile or, by anymeans, directs such activities to that member state or tomeans, directs such activities to that member state or toseveral countries including that member state, and theseveral countries including that member state, and thecontract falls within the scope of such activities.contract falls within the scope of such activities.

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

consideration for assuming jurisdiction is the domicile ofconsideration for assuming jurisdiction is the domicile ofthe consumer. It can be safely assumed that in the EU oncethe consumer. It can be safely assumed that in the EU onceit can be established that there is some activity directed atit can be established that there is some activity directed atthe consumers place of domicile then the court in thethe consumers place of domicile then the court in theconsumers domicile can still assume jurisdiction to try.consumers domicile can still assume jurisdiction to try.


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Article 15(2) states thatArticle 15(2) states that Where a consumer enters into a contract with a party whoWhere 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 Memberagency or other establishment in one of the MemberStates, that party shall, in disputes arising out of theStates, that party shall, in disputes arising out of theoperations of the branch, agency or establishment, beoperations of the branch, agency or establishment, be

deemed to be domiciled in that Statedeemed to be domiciled in that State

Furthermore, examples exist where a persons tenuousFurthermore, examples exist where a persons tenuousconnections to a state have given rise to the jurisdiction ofconnections to a state have given rise to the jurisdiction ofthe courts of that state. Inthe courts of that state. In South India shipping v Bank ofSouth India shipping v Bank ofKoreaKorea, the defendant Korean bank had a small branch, the defendant Korean bank had a small branch

located in England. This branch, while having no connectionlocated in England. This branch, while having no connectionwith the legal dispute that had arisen between its parentwith 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, wasnonetheless served with an English writ.nonetheless served with an English writ.


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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 beFor the purposes of Article 15(2) a service provider will beconsidered to be domiciled in a member state if it has aconsidered to be domiciled in a member state if it has abranch, agency or some other establishment in thebranch, agency or some other establishment in themember state. So undertakings stand a clear possibility ofmember state. So undertakings stand a clear possibility ofbeing sued in the EU no mater how low the activity directedbeing sued in the EU no mater how low the activity directedat the EU state may be. A question that arises is how theat the EU state may be. A question that arises is how thecourts will deal with a service provider whose website iscourts will deal with a service provider whose website isbasically passive in view of the above provision.basically passive in view of the above provision.

A US court seems to be of the view that jurisdiction cannotA US court seems to be of the view that jurisdiction cannotbe assumed in such a case.be assumed in such a case.


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In Zippos caseIn Zippos case[1][1] a Pennsylvanian court ruled as follows;a Pennsylvanian court ruled as follows;

This sliding scale is consistent with well developed personalThis sliding scale is consistent with well developed personaljurisdiction principles. At one end of the spectrum arejurisdiction principles. At one end of the spectrum aresituations where a defendant clearly does business over thesituations where a defendant clearly does business over theInternet. If the defendant enters into contracts withInternet. If the defendant enters into contracts withresidents of a foreign jurisdiction that involve the knowingresidents of a foreign jurisdiction that involve the knowing

and repeated transmission of computer files over theand repeated transmission of computer files over theInternet, 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 theopposite end are situations where a defendant has simplyopposite end are situations where a defendant has simplyposted information on an Internet Web site which isposted information on an Internet Web site which isaccessible to users in foreign jurisdictions. A passive Webaccessible to users in foreign jurisdictions. A passive Web

site that does little more than make information availablesite that does little more than make information availableto those who are interested in it is not grounds for theto those who are interested in it is not grounds for theexercise personal of jurisdiction. E.g.exercise personal of jurisdiction. E.g. Bensusan RestaurantBensusan RestaurantCorp., v. KingCorp., v. King, 937 F.Supp. 296 (S.N.D.Y. 1996)., 937 F.Supp. 296 (S.N.D.Y. 1996).


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A problem that arises is how to determine the domicile of theA problem that arises is how to determine the domicile of thedefendant. 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 thesay outside the EU, then the domicile of the plaintiff becomes theappropriate forum (Article 4?).appropriate forum (Article 4?).

Article 60 establishes the jurisdiction of the domicile of a companyArticle 60 establishes the jurisdiction of the domicile of a company

or legal entity as where it has its statutory seat, centralor legal entity as where it has its statutory seat, centraladministration or principal place of business. This offers littleadministration or principal place of business. This offers littlecomfort, 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 tobased companies. It appears that a way out of this is resorting tothe 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. AsThe new rules make no special provision for B2B Contracts. As

such the old rules still apply and in such cases whatever thesuch the old rules still apply and in such cases whatever thenationality of the defendant, he shall be sued in his place ofnationality of the defendant, he shall be sued in his place ofdomicile (Article 2). Where he is domiciled in a third country, thendomicile (Article 2). Where he is domiciled in a third country, thenthe 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.


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Article 5 provides for alternative rules whereby adjudication is basedArticle 5 provides for alternative rules whereby adjudication is basedon the place of performance. Secondly, where it is a contract for theon the place of performance. Secondly, where it is a contract for thesale of goods or the provision of services, it will be courts in the statesale of goods or the provision of services, it will be courts in the statewhere the goods are delivered or should have been delivered orwhere the goods are delivered or should have been delivered orwhere the services were provided or ought to have been provided.where the services were provided or ought to have been provided.

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

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


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OTHER PLACESOTHER PLACES

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

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

If the contract is concluded in the form of data-telex, the mainIf the contract is concluded in the form of data-telex, the mainbusiness 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 beIf no main business place, its habitual residence shall beconsidered to be the place of establishment. Where the partiesconsidered to be the place of establishment. Where the partiesagree otherwise, the place of establishment shall be subject toagree otherwise, the place of establishment shall be subject tothat agreementthat agreement[1][1]

Thus is an international e-commerce dispute it is the domicile ofThus is an international e-commerce dispute it is the domicile of

the service recipient that is paramount. A court in China willthe service recipient that is paramount. A court in China willassume jurisdiction if it can be shown that the service recipientassume jurisdiction if it can be shown that the service recipienthas its main place of business or its habitual residencehas 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.


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CHOICE OF FORUM CLAUSESCHOICE OF FORUM CLAUSES

Indeed, it is common for international business contracts toIndeed, it is common for international business contracts tospecify both the choice of court and law that will apply in the eventspecify both the choice of court and law that will apply in the eventof a legal dispute arising out of the contract. Where an exclusiveof a legal dispute arising out of the contract. Where an exclusivejurisdiction clause is provided for in a contract, common law courtsjurisdiction clause is provided for in a contract, common law courtshave tended to exercise their discretion strongly in favour of givinghave tended to exercise their discretion strongly in favour of givingeffect to the contract agreed by the parties. It can, therefore, beeffect to the contract agreed by the parties. It can, therefore, beargued that persons that enter into international businessargued that persons that enter into international business

transactions either:transactions either: (i) have a degree of control over where(i) have a degree of control over wherepotential litigation may arise out of a contract (via thepotential litigation may arise out of a contract (via theuse of choice of court/law clauses); and/or (ii) are ableuse of choice of court/law clauses); and/or (ii) are ableto discern, with a level of certainty, the potentialto discern, with a level of certainty, the potentialjurisdictions within which they may be hailed intojurisdictions within which they may be hailed intocourt. States that a person has no connection with, forcourt. States that a person has no connection with, for

example, are unlikely to take jurisdiction in a disputeexample, are unlikely to take jurisdiction in a disputeconcerning such a personconcerning such a person[1][1]


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

The Brussels I Regulation gives recognition to choice ofThe Brussels I Regulation gives recognition to choice offorum clauses contracts. The Hague Conference on Privateforum clauses contracts. The Hague Conference on PrivateInternational Law has come out with the Convention onInternational Law has come out with the Convention onchoice of court agreements dated 30th June 2005. Underchoice of court agreements dated 30th June 2005. Underthe convention, signatory countries have clear rules forthe convention, signatory countries have clear rules fordealing 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 internationalUnder Article 1.2 the convention defines internationaltransactions as follows;transactions as follows;

For the purpose of chapter II, a case is internationalFor the purpose of chapter II, a case is internationalunless the parties are resident in the same contractingunless the parties are resident in the same contracting

state and the relationship of the parties and other elementsstate and the relationship of the parties and other elementsrelevant to the dispute, regardless of the location of therelevant to the dispute, regardless of the location of thechosen court, are connected only with the statechosen court, are connected only with the state


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

Article 2 defines domicile of undertakings to include itsArticle 2 defines domicile of undertakings to include itsstatutory seat, the place of incorporation or formation, itsstatutory seat, the place of incorporation or formation, itsplace of central administration or where it has its principalplace of central administration or where it has its principalplace of business.place of business.

Article 4 obligates courts of the state chosen the right toArticle 4 obligates courts of the state chosen the right toassume jurisdiction, while the state not chosen is obligatedassume jurisdiction, while the state not chosen is obligated

to decline jurisdiction.to decline jurisdiction. It also makes provision for the enforcement of decisionsIt 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 refuseUnder Article 19, a state not chosen as forum may refuse

to determine disputes to which an exclusive choice of courtto determine disputes to which an exclusive choice of courtagreement applies if, there is no connection between thatagreement applies if, there is no connection between that

state and the parties or the dispute. Similarly a court willstate and the parties or the dispute. Similarly a court willrefuse to enforce the decision of another state in the samerefuse to enforce the decision of another state in the samecircumstances.circumstances.


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CONCLUSIONCONCLUSION

The issue of enforcement also needs to be addressed. WhileThe issue of enforcement also needs to be addressed. Whilea court may have the power to prescribe and adjudicate ona court may have the power to prescribe and adjudicate ona dispute, it may lack the power to enforce its judgmenta dispute, it may lack the power to enforce its judgmentagainst a non resident.against a non resident.

It is for this reason that nations have to address the issueIt is for this reason that nations have to address the issueof forum on multilateral basis. Most jurisdictional problemsof forum on multilateral basis. Most jurisdictional problemsin e-commerce disputes will be avoided if parties insertin e-commerce disputes will be avoided if parties insertchoice of forum clauses in their agreements.choice of forum clauses in their agreements.

For domain name disputes ICAANN has given the WorldFor domain name disputes ICAANN has given the WorldIntellectual Property Organization (WIPO), the jurisdictionIntellectual Property Organization (WIPO), the jurisdictionto adjudicate on domain name disputes.to adjudicate on domain name disputes.

Finally most jurisdictions respect and enforce arbitrationFinally most jurisdictions respect and enforce arbitrationclauses as alternative means of dispute resolution andclauses as alternative means of dispute resolution andonline contracts are not excluded.online contracts are not excluded.


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Prof D ChoudhuryProf D Choudhury

THANK YOU FOR YOURTHANK YOU FOR YOURATTENTIONATTENTION

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