Australian and regional regulatory responses to the key challenges of consumer protection in electronic commerce (March 2008)

4.5. Jurisdiction

[ Galexia Dots ]

4.5.1. International developments

It is widely acknowledged that in order for e-commerce to flourish both businesses and consumers need to be confident in relying on online technologies to complete a transaction. A key component in developing this confidence is creating a predictable legal environment in which electronic transactions can take place including addressing the complicated issue of jurisdiction, which is all important in disputes arising from cross-border electronic transactions.

International law in the field of cross-border jurisdiction for e-commerce is still developing and is quite immature. A consistent approach to dealing with jurisdiction issues arising from online commerce has not yet emerged. Some conclusions that can be drawn on the state of online jurisdiction at an international level are:

  • The breakdown of negotiations on the proposed Hague Convention on International Jurisdiction and Foreign Judgments in Civil and Commercial Matters and the subsequent settling on a Convention on Choice of Court Agreements indicates that international consensus on jurisdiction and choice of law rules is unlikely to occur for a long time;
  • Considering the divergent approaches adopted in domestic law to resolving jurisdiction and choice of law rules, a consistent international approach can only be reached through international agreement or a treaty. In light of the recent failure of the Hague Judgments Convention it will be a while before efforts at producing an international jurisdiction convention are renewed;
  • Where a plaintiff obtains a judgment in their favour they may face difficulty in enforcing that judgment in a foreign jurisdiction (such as jurisdictions where the defendant has their assets) if the judgment is in conflict with the public policy of that jurisdiction. See, for example, UEJF and LICRA v Yahoo! Inc (2006).
  • Superior courts in some countries are reluctant to develop new and separate rules for the Internet, finding that traditional legal principles can be easily adapted to address legal issues raised by the Internet. With this in mind the place of publication for material published online and offline is the place where the material is accessible and comprehended. For the Internet, this is where the information is downloaded and read. See, for example, Dow Jones v Gutnick (2002); and
  • In America it is widely accepted that the test for determining whether a court can exercise personal jurisdiction over a defendant whose contacts with a forum occur solely via the Internet is based on a “sliding scale” test on the interactivity of the website (see Zippo Manufacturing Co v Zippo Dot Com Inc (1996). The Zippo test is supported by a vast body of case law interpreting how and when the test should be applied. However, the value of the Zippo test as an international authority is somewhat limited as it does not appear to be applied outside the United States. The test also does not address problems experienced by parties in enforcing foreign judgments.

Self-management and mitigation of jurisdictional issues in cross-border commerce remains one of the most effective ways to avoid the problems associated with the uncertain state of international law. Choice of forum clauses are the most obvious example of these. Guidance on the use of these clauses can be gleaned from the Hague Convention on Choice of Court Agreements 2005.

4.5.2. Hague Conference on Private International Law

The Hague Conference on Private International Law is an international body dedicated to developing unified rules of private international law and has created many conventions directed at this goal[62]. In 1992 the Conference began work on a convention on jurisdiction and the recognition and enforcement of foreign judgments. However, the development of this Convention was abandoned in 2002 after it was clear that international consensus could not be reached. If a convention on international jurisdiction was formed it would have been a momentous development in private international law, greatly unifying the exercise of jurisdiction by national courts and paving the way for greater legal certainty in enforcing cross-border transactions. Instead the Hague Conference adopted in June 2005 a Convention on Choice of Court Agreements. It is too soon to determine the impact of this Convention, however it is not likely to be significant if it is not widely adopted by states.

The Failed Convention – the Proposed Convention on International Jurisdiction and Foreign Judgments in Civil and Commercial Matters

Negotiations for the proposed Hague Convention on International Jurisdiction and Foreign Judgments in Civil and Commercial Matters began in 1992 following a request from the United States. The impetus for the Convention was noted by the Hague Conference in 2002:

There is little doubt that one of the factors which has recently attracted so many new Member States to the Organisation is their interest in this project [the proposed Convention on International Jurisdiction and Foreign Judgments in Civil and Commercial Matters]. The ongoing globalisation of trade and commerce, and the exponential growth of the use of the Internet and e-commerce continue to add to the need for a global framework for jurisdiction and the recognition and enforcement of judgments.[63]

In October 1999 the Conference prepared a preliminary draft convention, which was further revised in June 2001. The proposed Convention would apply to most civil and commercial transactions including consumer transactions, however it was not to apply to arbitration proceedings. Some of the matters addressed in the draft Convention included:

  • Whether a defendant may be sued in a court where they are habitually resident;
  • Provisions on the making of exclusive choice of court agreements;
  • With regard to contracts, the proposed Convention provided that the plaintiff may bring an action in the state where the defendant conducted or directed frequent or significant activity if it was reasonable to do so;
  • For consumer contracts, the consumer may generally bring proceedings in the state where the consumer is habitually resident if the contract was concerned with activity the other party conducts in that state or directs at that state; and
  • Judgments based on an exercise of jurisdiction under the Convention or consistent with the Convention shall be recognised and enforced subject to some conditions specified in the proposed Convention. One of the grounds for not recognising a foreign judgment includes where it is manifestly contrary to public policy.

As deliberations progressed, it became clear that international agreement on the form of the Convention would not be reached and the proposed Convention was abandoned. The disagreement primarily arose from the United States who found that they could not sign the Convention which too closely reflected the provisions of the EU Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters 1968 and was not adequately tailored to the international context or the method used in other countries to determine jurisdiction and recognition and enforcement issues.[64]

The narrower Convention on choice of court agreements was instead negotiated and was adopted by the Hague Conference in June 2005. The failure to reach international consensus on jurisdiction and recognition and enforcement of foreign judgment issues does not bode well for the future of international Internet law. The failed negotiations indicate that it will be some time before international consensus can be reached. In the meantime the fate of cross-border litigation is in a state of limbo: each country will apply its own domestic law to resolve jurisdiction issues, which will make international consensus even more difficult to achieve as countries are given time to develop and refine their own principles for dealing with cross-border jurisdiction.

The failure to negotiate a Convention on jurisdiction and enforcement of foreign judgments is perhaps unsurprising considering the limited impact of the 1971 Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters.[65] The Convention aims to establish a common framework on principles for the mutual recognition and enforcement of judicial decisions in member states. This Convention is also plagued with its own problems. The Convention is only in force in Cyprus, Kuwait, the Netherlands and Portugal. Its application in private international law is inhibited by its limited adoption by states. It does not create rights in favour of contracting states but acts as a guideline for bilateral enforcement agreements between contracting states by providing conditions in which foreign judgments should be recognised. The Convention does not specify the circumstances in which the courts of a contracting state can exercise jurisdiction over a foreign defendant. This obviously is a significant limitation on its application to cross border jurisdiction issues.

Convention on Choice of Court Agreements 2005

On 30 June 2005, the Hague Conference finalised its Convention on choice of court agreements.[66] The Convention sets out rules for parties wishing to enter into an international choice of court agreement that indicates the court which is to have exclusive jurisdiction over the parties in the event of a dispute.

The Convention aims to promote international trade and investment through enhanced judicial cooperation and increased uniformity and certainty on the legal rules surrounding jurisdiction and the recognition of foreign judgments where the parties have entered into a choice of court agreement. The Convention is in essence a compromise following the failure to reach sufficient international consensus to form a Convention on international jurisdiction and foreign judgments in civil and commercial matters.

As yet the Convention on Choice of Court Agreements has not been signed by any country or regional economic integration organisation, and is not yet in force.[67] It is expected that that the Hague Conference will publish a draft report on the Convention and member states will consider ratifying the Convention after this report is released and they have had time to consider ratification issues.

The Hague Conference on Private International Law has not been able to procure international consensus on jurisdiction and recognition and enforcement of foreign judgment issues. States, for the moment, are left to their own devices to develop rules to regulate these issues. However the problem with the continuation of the status quo is that states will continue to develop their own principles and methods for resolving jurisdiction issues and as the inconsistencies grow and become more entrenched in domestic law bridging the gap through international agreement and consensus will become harder.

The Hague Convention on Choice of Court Agreements is a compromise among states when considering a broader convention on jurisdiction could not be reached. While it aims to afford parties with greater legal certainty in cross-border contracts by entering into exclusive choice of court agreements, it only applies where the states of the contracting parties have adopted the Convention.

[62] <>

[63] Permanent Bureau, Some Reflections on the Present State of Negotiations on the Judgments Project in the Context of the Future Work Programme of the Conference, Hague Conference on Private International Law, February 2002, <>, p5.

[64] See Jeffrey Kovar’s (Assistant Legal Adviser, Unites States Secretary of State) letter to Alasdair Wallace (Head of International and Common Law Services Division, Lord Chancellor's Department, United Kingdom) on the negotiations on the Hague Draft Convention, 10 September 2000, <>.

[65] <>

[66] Convention on Choice of Court Agreements 2005 <>.

[67] Article 29 gives regional economic integration organisations made up of sovereign states have the power to sign the convention, at which point has the same rights and obligations as a contracting state.