Throughout the last century and a half, the world’s developed nations have witnessed an unprecedented rate of technological innovation that has dramatically changed how people live and communicate, and how they transact business. The age-old model of two parties meeting face-to-face to negotiate and reach an agreement has been substantially altered. Over the years, in-person communication has given way to more impersonal methods such as the telegram, the telephone, facsimile machines, and most recently email and other instruments of electronic commerce, such as the Internet.
With each advancement, the speed, efficiency and scope of commerce has significantly expanded, so much so that today, any average consumer with a credit card and access to the Internet can almost instantaneously enter into a contract with businesses anywhere in the world. Parties most often do not meet in person, and in many circumstances, parties may not actually know exactly with whom they are transacting. Physical documents are frequently not used, and parties may simply review terms on a Web site, and indicate their assent to those terms by a single click on a virtual button. As with all relationships, disputes are inevitable, and traditional means to deal with these disputes need to be reevaluated to be sure that predictable notions of choice of law, jurisdiction and forum selection are available to the parties.
The Challenges of a Virtual World
E-commerce developments have generated some complex legal issues for businesses and consumers alike. Much of the framework of existing commercial law is conceptually rooted in the physical world, while e-commerce transactions typically take place in a virtual domain, such as on the Internet. The lack of physical documents and settings exposes gaps in much of the jurisprudence that guides businesses and courts when they attempt to apply existing laws to virtual scenarios.
For example, many laws require contracts to be physically signed by the parties. Physical documents often don’t exist in online transactions, so actual signatures are impossible to obtain. Legal frameworks are emerging to accept various forms of “electronic signatures” to take the place of physical ones. (More on electronic signatures later.)
Two primary approaches have emerged in response to the legal uncertainties of e-commerce. One group of legal theorists has proposed new laws to specifically address the problems posed by electronic commerce, overlooking the inevitable need for further change as technology continues to advance. Constant changes such as these can lead to a complicated and uncertain platform for doing business. The second group of theorists try to extrapolate existing laws to new virtual environments whenever possible, proposing new laws only when absolutely necessary to fill the gaps. Consistency, this group says, will preserve confidence in the legal system and the framework underpinning daily business.
1.1 Seamless Globalization
A more complex issue is posed by the borderless nature of cyberspace. Commercial laws remain solidly grounded within the physical boundaries of each country. Online, however, parties can engage in seamless transactions that cross multiple national borders, often without the parties intending to leave the security of their own laws and courts. Businesses and consumers can inadvertently expose themselves to significant legal risks when they wander into the borderless shopping center of virtual transactions.
For example, when a company builds a Web site to advertise or offer its services, it can generally be accessed anywhere in the world. In theory, a company risks being deemed to be doing business in any country in which a visitor accesses or can access the web site. A similar problem exists for a consumer who enters into a contract through a Web site of a company located in a foreign country, while the Web site may be hosted in a third country. Consumers can be left wondering where to go to seek remedies if the transaction goes awry.
For businesses seeking to identify their legal risks (much less manage them), such seamless global commerce can create great confusion. It’s impossible to track and understand the substantive laws of every nation in which one might be deemed to transact business online, even knowing where the other parties are located. Also, the laws of various nations are often contradictory, resulting in situations where a transaction is perfectly legal in one country, but might create legal liability in another. It is critical for anyone involved in online commerce to be able to identify the jurisdictions in which it could be subject to suit, and which laws will govern the dispute.
For a real-world example of the dangers, just consider Yahoo! Inc. v. La Ligue Contre Le Racisme et L’Antisemitisme.1 In 2000, two French human rights groups, the Union of Jewish Students and the International Anti-Racism and Anti-Semitism League, sued Yahoo! over the online auction of Nazi memorabilia. It is against French law to offer any Nazi-related items for sale in France. At the time, Nazi memorabilia was listed for auction on Yahoo! Web sites, including yahoo.fr, its site directed toward French customers. After a French court ruled that Yahoo! had to block all Nazi-related items for French Internet users, Yahoo! removed the Nazi content from yahoo.fr. However, the Nazi material was available for sale on other Yahoo! Web sites, including yahoo.com, its site directed toward American customers, where there is no similar law. The French courts were not pleased, pointing out that French Internet users were still able to access Yahoo! Web sites aimed at users in other countries that still offered the Nazi materials for sale. The French court levied a fine of $13,000 per day against the company, and in a separate action pursued criminal charges against its CEO.
Yahoo! brought suit in federal court in California, claiming protections on free speech grounds. However, the district court ruled against Yahoo!, commenting that it had assumed the risk of exposure to international law by doing business online. Although the Ninth Circuit Court of Appeals reversed the decision on a jurisdictional basis, Yahoo! ultimately decided to adopt a policy to universally block hate-based content, including Nazi artifacts, from all of its sites to remove the risk of further unforeseen liability. Still, the Yahoo! case is a prime example of the unanticipated risks of exposure to international laws that businesses face in online commerce.
1.2 The Need for Certainty
E-commerce is a significant component in global commerce, likely worth trillions of dollars. The growth of e-commerce also shows no sign of slowing down. Businesses continue to invest in new technologies to take advantage of the efficiencies offered by electronic commerce, and consumer use of the Internet for business transactions continues to rapidly increase. Indeed, many business customers demand that business be done electronically.
A stable and predictable legal framework for e-commerce is crucial to the global economy and its growth. Otherwise, electronic transactions will be slowed by a need to supplement virtual documentation with more traditional forms, and if the benefits are lost, electronic commerce could decline. In a 2004 Survey on Global Internet Jurisdiction sponsored by the American Bar Association and the International Chamber of Commerce, 75 percent of North American respondents cited that they were concerned over the risks of Internet jurisdiction, as did 55 percent of Asian respondents and 47 percent of European respondents.2
A consistent platform can best be established by the cooperative effort of the international community, including governments and industry. This cooperation is necessary to develop the series of treaties, model laws and voluntary standards that make up private international law.
This article examines the current state of affairs of the legal parameters governing international e-commerce, with an emphasis on whether a cohesive approach to private international law among developed countries exists or is likely, and analyzes the emerging trends in changes to e-commerce laws.
We also examine the organizations leading the efforts to establish private international law and model frameworks for regulating electronic commerce, with particular attention to the United States, the European Union and the United Nations. We analyze the contributions of each entity to the current framework and provide details of the proposed laws or model rules that each advocates, in an attempt to see if they tame or accentuate the chaos.
We examine the legal issues that relate to the formation, interpretation, and enforcement of electronic commerce contracts, including:
Finally, we look at whether we can expect a unified international law for electronic commerce any time soon, and where we think electronic commerce law is headed.
2 Organizations and Their Efforts
2.1 What Law Applies?
A look at a typical, relatively simple transaction of a French company entering an informal online contract to purchase goods from an American company will help put into context the roles of the various international organizations. Much of the current effort is focused on answering this simple question: if a dispute arises, what is the applicable law?
Frequently, the answer is in the contract itself. In a perfect world, the contract would contain a choice of law provision to indicate the parties’ choice for what rules will govern the agreement. They might choose to be bound by the law of a particular jurisdiction with an interest in the case, or they might select some agreed-upon model rule to govern the agreement. Quite often, however, the issue is not that simple.
In many instances, especially in business-to-consumer transactions, the contract may be silent as to choice of a governing law. In other situations, no formal contract may exist between the parties. In such cases, the parties look to one of two basic sources to provide the legal framework. The first would be to apply a particular national law. In our sample transaction, the most likely choices would be either the law of France, since it is the purchaser’s jurisdiction, or the United States, since it is the seller’s jurisdiction. As an alternative, and particularly when dealing with agreements between parties from different countries, they might look to some form of private international law.
Private international law is in itself an abstract concept. It differs dramatically from national laws in the sense that no global sovereign can impose its will as the rule of law. International law is more correctly viewed as a voluntary collective agreement among interested parties that gets its power from the assent of the parties that a particular set of rules should apply. In some cases, international law may take the form of a formally adopted treaty, such as the United Nations Convention on Contracts for the International Sale of Goods (CISG),3 which can govern the actions of any parties residing in any state that is a signatory to the treaty. In other cases, international law can take the form of model laws, such as the United Nations Commission on International Trade Law Model Law on Electronic Commerce,4 which are not themselves directly binding but which may be adopted by individual nations, or collected sets of principles, such as the UNIDROIT Principles of International Commercial Contracts,5 which are generally only applicable either upon the agreement of the parties or as they may be interpreted as a basis for common law analysis. Other notable examples of private international law include the Hague Convention on the Enforcement of Judgments and standards set forth by the International Chamber of Commerce. For each of these, the submission to and enforceability of decisions under their rules are subject to standards under the laws and public policy of the domicile of the parties.
2.2 Specific International Organizations and Laws
2.2.1 United Nations Commission on International Trade Law
Some of the most accomplished work in international e-commerce law has been done by the United Nations Commission on International Trade Law (UNCITRAL), a subsidiary of the United Nations General Assembly. The essential element of the work of UNCITRAL is the modernization of laws to adapt to the needs of international commerce and economic development. In particular, it has been tasked by the United General Assembly with:
The e-commerce initiatives at UNCITRAL are spearheaded by the Working Group on Electronic Commerce, one of six working groups within UNCITRAL. The Working Group has already completed two model laws specifically covering electronic commerce – (i) the Model Law on Electronic Commerce,6 and (ii) the Model Law on Electronic Signatures,7 and it is developing a third convention that is to govern international contracts that are created electronically.
According to UNCITRAL, the Model Law on Electronic Commerce is “intended to facilitate the use of modern means of communications and storage of information, such as electronic data interchange (EDI), electronic mail and telecopy, with or without the use of such support as the Internet. It is based on the establishment of a functional equivalent for paper-based concepts such as “writing,” “signature” and “original.” The Model Law on Electronic Signatures is “intended to bring additional legal certainty regarding the use of electronic signatures” by supplementing the earlier provisions of the Model Law on Electronic Commerce. Traditional substantive laws require physical documents and actual signatures to evidence an agreement, but the Model Law on Electronic Signatures would override traditional form requirements and expressly recognize the validity of electronic elements.8 The underlying principle of both model laws is that electronic transactions should not be denied legal effect, validity or enforceability solely because of the electronic form of the agreement.9
In addition to these two model laws, the Working Group is developing a third major proposal for regulating international contracts. According to the October 2004 Report of the Working Group,10 a preliminary proposal has been prepared, titled the Draft Convention on the Use of Electronic Communications in Electronic Contract (UECEC).11 Unlike the two model agreements, the UECEC will be a convention, which will be binding on those states that choose to become parties to it.12 It builds on the foundation laid by the model laws and is aimed at clearing further obstacles to the enforceability of electronic transactions. As with other U.N. Conventions, the current draft of the UECEC would allow the parties to opt out of being governed by the convention, and it would exclude contracts entered into for personal, family or household purposes.13
2.2.2 United Nations Convention on Contracts for the International Sale of Goods
UNCITRAL also is responsible for developing the CISG. This treaty is the only formally adopted, binding body of international law applicable to electronic transactions. More than 65 countries have signed on to be parties to the treaty. Although not directly related to e-commerce, CISG is an important component in international law. It applies to contracts for the sale of goods among parties who reside in different countries and whose countries are signatories to the convention. It does not apply to contracts for services, or if one of the parties to the contract does not reside in a member state, unless the parties contractually elect to be governed by the convention. Also, as with the UECEC, CISG excludes international sales of goods that are bought for personal, family or household use, which means that this convention applies principally to business-to-business transactions.
For companies that are headquartered in countries that are signatories to CISG, its provisions directly apply. However, Article 6 of CISG allows parties to opt out from having its provisions apply, either in whole or in part. This can be accomplished either by specifying in a contract that all or certain terms of CISG shall not apply to the transaction, or by providing that other terms will govern.
The International Institute for the Unification of Private Law, also known as UNIDROIT, is an independent intergovernmental organization that is “studying the needs and methods for modernizing, harmonizing and coordinating private and in particular commercial law as between States and groups of States.” UNIDROIT was established in 1926 as an auxiliary organ of the League of Nations, the predecessor to the United Nations, and reemerged in 1940 after the League of Nations dissolved, based on a multilateral agreement called the UNIDROIT Statute. A total of 59 member states are in UNIDROIT, including the United States, France, Germany, the United Kingdom and various other developed countries.14
Although UNIDROIT has a long and successful history of contributions to the international community, the most relevant one to this discussion is its Principles of International Commercial Contracts originally published in 1994. UNIDROIT proposed principles that parties can use to guide their contracts. The principles cover all topics of international contracting, ranging from general provisions, to formation, validity, interpretation, content, performance and non-performance of a contract. UNIDROIT also convened a Working Group in 1997 to review the principles and propose modifications to keep up with industry developments.15 Closely monitored by representatives from UNCITRAL, the International Chamber of Commerce and global legal systems, UNIDROIT overhauled its principles and published an updated 2004 version of them. UNIDROIT significantly expanded the principles by adding five new chapters, and adapting the existing principles to the changing electronic marketplace. For example, references to “writings” were modified to allow for electronic formats, as were references to communication mechanisms to allow for the inclusion of electronic messages.16
The UNIDROIT principles have arguably been very successful over the last 10 years. According to the Centre for Comparative and Foreign Studies, the UNIDROIT principles have been relevant in over 87 decisions on international disputes. While 69 of those are arbitration awards, 18 found their place in courtrooms, showing that the principles can become relevant in case law. Note that these figures only include records of disputes recorded by the Centre for Comparative and Foreign Studies, and does not take into account their frequent use in undisputed contracts.
2.2.4 International Chamber of Commerce
The International Chamber of Commerce (ICC) is a trade group representing the interests of the global business community. Its membership includes thousands of companies of every size, spanning over 130 countries. It is actively involved in developing its own internal guides and provisions for the voluntary regulation of international business transactions, and it publishes a variety of materials that are used within the business community. While not specific to electronic commerce, one notable example of the influence of the ICC is the widespread use of its publication – Incoterms 2000. As described by the ICC, ICC Incoterms are standard international trade definitions used every day in countless thousands of contracts. ICC model contracts make life easier for small companies that cannot afford big legal departments.
ICC also lists the following as successful contributions to international law:
The ICC has gained the attention of international policy makers who look to it for insight regarding industry problems and practices. The ICC has worked with the United Nations since the 1940s, and has worked closely many times with UNCITRAL to assist in the development of policy.17
2.2.5 Hague Conference on Private International Law
The Hague Conference on Private International Law also has contributed significantly to the effort to draft a global law of jurisdictions and judgments. In 1992, this conference began to work on the codification of rules of recognition and enforcement of foreign judgments, and in December 2004, it published a preliminary draft of the Proposed Convention on Exclusive Choice of Court Agreements.18 Since then, the convention has been modified and was released in June 2005 as the future Convention on Exclusive Choice of Court Agreements and Arbitration.19 Taking the form of a treaty, as opposed to a model law, the convention would be directly binding upon parties of countries that become signatories.
The objective of the convention is to make exclusive choice of court agreements as effective as possible in the context of international business. It would impose three obligations on the courts of contracting states: (i) the chosen court must be obliged to hear the dispute; (ii) all other courts must be obliged to decline jurisdiction; and (iii) the judgment rendered by the chosen court must be recognized and enforced by courts in other contracting states.
Consumer contracts are excluded from the scope of this convention, since many legal systems have mandatory rules to protect consumers including rules on exclusive jurisdiction. While these systems would govern business-to-business agreements, they would not give effect to a choice of court agreement that required proceedings under a consumer contract to be brought in a foreign state.
The Hague Conference also has been a leader in framing the international debate and disseminating information on the latest efforts to unify private international law. For example, in October 2004, the Hague Conference on Private International Law, together with the ICC and the Dutch Ministry of Economic Affairs, sponsored an International Conference on the legal aspects of an e-Commerce Transaction. The conference hosted speakers from academia, government and the private sector from all over the world. Speakers covered all aspects of topics ranging from online contract information and delivery of services to intellectual property and international taxation. The Hague Conference promises a conference containing papers related to these presentations will be released in 2005.20
2.2.6 Organization for Economic Co-Operation and Development
The Organization for Economic Co-Operation and Development (OECD) is the successor group to the Organization for European Economic Co-Operation, which was formed in the wake of World War II and tasked with the administration of foreign aid to rebuild Europe. After fulfilling its founding goals, the group transformed into the OECD in 1961. Since then, it has committed itself to promoting democratic ideals and the market economy around the globe. Today, the OECD includes 30 member countries,21 and maintains working relationships with more than 70 others.22
The OECD’s widespread relationships in the international community positions it well to influence private international law. Like the ICC, however, it is not a legislative or rule-making body, and it has no enforcement authority. Instead, the OECD’s strength comes from the recognition of its membership for the value of working together to develop unified positions on policy initiatives, and from their collective recognition for the OECD’s extensive experience in global, highly detailed policy analysis.
To promote its agenda, the OECD membership meets to establish formal “Action Plans,” which lay out the general goals that they hope to attain. Then, the group sponsors a series of conferences, working groups, committees and other activities to discuss its goals and develop consensus and international cooperation for mutually productive solutions and best practices. Specific to electronic commerce, the OECD’s contributions include the Emerging Market Economy Forum on Electronic Commerce (2001) and the OECD Guidelines for Consumer Protection in the Context of Electronic Commerce (1999).
In addition to its internal programs, the OECD plays a role influencing the other players in the international regulatory market. For example, the OECD has worked with the Digital Opportunity Task Force, set up by the G8 Summit in 2000. Such programs do not result in direct legislative or rule making initiatives, but rather influence the policies and approaches taken by other organizations and governments.
2.2.7 Summary of International Law
Without doubt, international organizations are working diligently to develop broad-based responses to the legal challenges posed by transnational commerce, and electronic commerce in particular. Collectively, the assortment of proposals, model laws, treaties and conventions put forth by the ICC, the OECD, the United Nations and many other entities can be considered international law, even if many are not directly binding. The framework created by these forms of international law creates a reliable source of compromise and understanding between parties on which they can base transactions.
Despite these benefits, the current system is not comprehensive, and its evolution is not without risk. The majority of initiatives, for example, are aimed at business-to-business scenarios, generally leaving business-to-consumer transactions to the laws of consumers’ individual domicile. Any efforts to develop private international consumer law needs to overcome well-entrenched existing consumer protection laws of many jurisdictions. At the same time, business-to-business relationships are arguably less dependent on private international law, since these relationships are often well structured through sophisticated, individually negotiated contracts. To be truly successful, private international law will have to bring together national representatives who have the power to create binding, uniform laws for the governance of all types of contracts.
A second major risk is the increasing number of organizations working to develop new initiatives. While the increased attention to developing uniform solutions to transnational commercial transactions may appear beneficial, it ignores the larger potential problem. As more independent organizations introduce proposals for “uniform” systems, and attempt to implement them in their small circles of influence, the risk of confusion and conflict increases. True uniformity requires the cooperation of many organizations on a world stage. Centralized discussions are needed to prevent the business and legal landscapes from being littered with disparate initiatives,23 and disparate organizations seeking to lead the way.
2.3 National Laws
Despite the various forms of international law discussed above, traditional national laws remains the primary source of regulation of transnational commerce. Given the significant volume of commerce, including electronic transactions, between the United States and the European nations, it is critical to a stable international market that parties understand the commercial laws of these two regions. Unfortunately, such an effort is complicated by the complex legal systems of each market.
Transactions involving parties within the United States often involve a complex mixture of regulations from one or more of the more than 50 independent state and territorial legal systems, as well as the federal legal system. Europe has fewer instances of multiple legal systems within one country, but there are several dozen independent legal systems among the European states. As discussed below, each of these problems has been eased slightly by organizations attempting to bring more order and predictability to the legal markets.
In the United States, several organizations are working to develop uniform state laws and model codes. In Europe, many countries are working in concert as the European Union to streamline both the legal and economic systems among themselves to make for a stronger Europe in the world markets.
2.3.1 United States Laws and Organizations
In the United States, although laws are directly passed by the state and territorial legislatures and also by the federal Congress, drafts are often provided or heavily influenced by various academic, professional and lobbying groups. In an attempt to have legal balance among the jurisdictions in the American legal system, a number of organizations have done extensive work to promote the creation of a uniform statutory framework, including in the sphere of electronic commerce. Three organizations stand out in this regard – the National Conference of Commissioners on Uniform State Laws (NCCUSL), the American Law Institute (ALI) and the American Bar Association (ABA). These organizations have worked extensively, and generally in collaboration, to develop some of the most influential American laws of the last century.
2.3.2 National Conference of Commissioners on Uniform State Laws
The NCCUSL is an organization of “commissioners” appointed by each state and the various territories of the United States.24 Collectively, the commissioners, who are all members of the bar, are referred to as the National Conference, and they discuss where standardized regulation would be beneficial, and draft uniform laws that are presented to the various states and territories for adoption. Since the NCCUSL has no direct rule-making authority, states are free to accept or reject, in whole or in part, any uniform law that is proposed. However, by that time, consensus and agreement with the final form is usually reached due to the extensive deliberation and cooperation that goes into each proposal. This results in broader adoption with less modification. Among the NCCUSL’s prominent projects are the Revised Article 2 of the Uniform Commercial Code, the Uniform Electronic Transactions Act, and the Uniform Computer Information Transactions Act, each discussed more fully below.
2.3.3 The American Law Institute
The ALI was founded in 1923 to address the increasing complexity and resulting lack of certainty in American law. ALI’s charter says its purpose is “to promote the clarification and simplification of the law and its better adaptation to social needs, to secure the better administration of justice and to encourage and carry on scholarly and scientific legal work.”
The ALI has 3,000 elected members, who are all licensed attorneys from a wide variety of backgrounds, including practicing lawyers, judges, elected officials and academics.25 They are chosen for membership based upon their achievements in the advancement of the law, and they are required to contribute to the ongoing projects of the ALI.
The ALI, which is most prominently known for its restatements of the American common law, has been an active participant in the development of uniform laws and a principal collaborator with the NCCUSL, and, indeed, its approval is required with that of the NCCUSL, before any modifications of the Uniform Commercial Code (UCC) are put forth to the states for adoption. It was an active contributor to the development of the UCC, and it continues to work jointly with the NCCUSL to amend it. The ALI also was an early contributor to UCITA, and a principal architect of UETA.
2.3.4 The American Bar Association
The ABA is a national professional organization of dues-paying members, who are licensed attorneys from every U.S. jurisdiction. The organization serves as a central hub for professional education, ethics guidance, and information distribution to the membership. It also diverts a portion of its effort to working with other organizations to influence the development of laws in the United States. The ABA is not itself a rule-making body, and is not generally as directly involved in drafting legislation as the NCCUSL or the ALI. Instead, through the efforts of some of its committees, the ABA voices the interests and the insights of its membership, performs studies, makes policy recommendations, and lobbies the legislatures or other groups who draft the legislation.
2.4 Specific U.S. Initiatives
2.4.1 Revised Article 2
One of the most prominent and most successful projects undertaken by the NCCUSL and the ALI has been the Uniform Commercial Code.26 Interstate commerce in the United States once faced the same standardization needs that are now prominent in the international market place. In response, the NCCUSL worked with the ALI and other organizations to develop the UCC, which has since been adopted with minor changes in Washington D.C. and in 49 states.27 This development has given the U.S. commercial markets the stability and the predictability they needed to fuel the economic growth of the last century.
As the market has shifted toward electronic transactions, the NCCUSL has continued its work to promote uniformity. One effort has involved the modification of Article 2 of the UCC regarding sales of goods, to adapt to changes in the market. Among other things, the revised Article 2 focuses on the definition of “goods” in electronic transactions to address complications posed by hybrid products that are part goods and part information.
2.4.2 Uniform Computer Information Transactions Act
Not all of the recent attempts at uniform laws have met with great success. In 1999, the NCCUSL finished the Uniform Computer Information Transactions Act,28 or UCITA, which was touted as the first comprehensive approach to regulating electronic contracting. UCITA, however, has only been adopted in two states, Maryland and Virginia, and has been all but abandoned as a viable option for standardization.
UCITA started out as a joint project with the ALI as a proposed Article 2B of the UCC. After several years of discussion and of crafting language to meet the emerging issues in electronic transactions, the ALI remained concerned about the viability of the project and the specific language that was being drafted. The NCCUSL realized that since modification of the UCC would require joint approval by the NCCUSL and the ALI, passage of the model law was unlikely.
Believing in the merit of the legislation, the NCCUSL removed the act as a proposed modification of the UCC, and instead proposed it on its own as an independent uniform law, eliminating the need for ALI approval. However, UCITA was unable to overcome the lack of support from the ALI and a number of industry groups, and was not well-received by state legislatures. Today, UCITA is still relevant since it has been adopted by Maryland and Virginia, but it has been counterproductive to standardizing the electronic marketplace.
2.4.3 Uniform Electronic Transactions Act (UETA)
UETA was completed by the NCCUSL 1999, and approved by the ABA. It has since been adopted in 46 states, Washington D.C., and the U.S. Virgin Islands. UETA was designed to make electronic transactions more reliable by giving legal effect to electronic records and digital signatures. UETA has been fairly successful to date, having been adopted by 48 U.S. jurisdictions.
2.4.4 Electronic Signatures in Global and National Commerce Act
In the United States, not all laws governing commerce are passed by the states, and the federal government legislates on matters of interstate commerce. In the context of e-commerce, Congress used that power to pass the Electronic Signatures in Global and National Commerce Act (E-SIGN) in June 2000. As a federal law, E-SIGN is by default binding on all parties transacting between states, as well as foreign transactions coming within U.S. jurisdiction. E-SIGN does not apply to contacts or other records to the extent that they are governed by the UCC, or more expansive state laws,29 and is secondary in states that have adopted UETA. The more expansive provisions of state laws, so long as nothing in them conflicts with E-SIGN, govern the transactions.
2.5 European Union Initiatives and Directives
European Union (EU) regulations on Internet transactions are more analogous to an international law than to a national system. The EU is not a federal system like the United States, but it is more than an international organization. Through treaties, member states have delegated some sovereignty to institutions so that decisions on matters of joint interest, such as e-commerce regulations, are unified.30
In 1957 the EU consisted of just six countries. Currently, it is composed of 25 countries,31 with expectations that Romania and Bulgaria will join in 2007. Collectively, EU nations create the world’s third largest economy, and one of the biggest consumer markets. Decisions by the EU not only affect the 453 million people under its domain, but also have a significant impact on international law.
EU laws take two principal forms: directives32 and regulations.33 Directives are put forth by member states and passed by the Council of the EU and Parliament. Once a directive is passed, member states must enact legislation in their own country to meet the directive’s goals. Regulations are directly binding on member states and do not require further legislation to take effect.
The EU has passed numerous pieces of legislation addressing transnational commerce – particularly e-commerce – in the hopes of establishing a consistent economic platform that allows member states to grow in fiscal strength and world influence. Three directives are particularly worthy of note: Distance Selling Directive; Electronic Signature Directive; and Electronic Commerce Directive.
2.5.1 Distance Selling Directive
The increase in online transactions has highlighted the need for common rules among EU nations. EU institutions observed that “some member states have already taken different or diverging measures to protect consumers in respect of distance selling, which has had a detrimental effect on competition between business in the internal market.” Adopted on May 20, 1997, the Distance Selling Directive aims for consistency among laws, regulations and administrative provisions of EU member states concerning distance contracts, including e-commerce transactions, between consumers and suppliers.
2.5.2 Electronic Signature Directive.
The Electronic Signature Directive was adopted in 1999 “… to facilitate the use of electronic signatures34 and to contribute to their legal recognition” by establishing a legal framework for signatures and certain certification services to ensure proper functioning of the internal market. The directive does not seek to harmonize national rules concerning general contract law – it simply gives legal effect to electronic signatures.
2.5.3 Electronic Commerce Directive.
The Electronic Commerce Directive is designed to ensure the free movement of “information society services” between member states. According to Article 1 of the directive, it “approximates … certain national provisions on information society services relating to the internal market, the establishment of service providers, commercial communications, electronic contracts, the liability of intermediaries, codes of conduct, out of court dispute settlements, court actions and cooperation between member states.” The directive also requires, per Section 3 of Chapter 2, that member states “…ensure that their legal system allows contracts to be concluded by electronic means.”
3 Substantive law issues
Perhaps the most complicated and pervasive issue presented by the emergence of e-commerce is the determination of where parties can be subject to the jurisdiction of various courts of law. Given the almost limitless variety of the world’s civil and criminal laws and their often contradictory nature, parties must know and understand where liability can arise. Activities considered legal in one country, may be considered criminal activity in another.
Parties to a transaction must understand the benefits and risks of their bargain to properly negotiate pricing and terms. Contracting parties could be subject to suit under the agreement itself (specific jurisdiction), and activities relating to the contract could subject them to suit for other matters (general jurisdiction). If contracting parties’ jurisdictional exposure is too broad or unpredictable, markets may be adversely affected – either through prices as companies to offset risk and allow for unanticipated costs, or through an unwillingness to engage in e-commerce as a whole or with residents of certain countries.
Jurisdictional issues in e-commerce often arise from Internet sales. Other forms of e-commerce, such as direct computer-to-computer transactions between established vendors, are less problematic since they are analogous to telephone transactions – areas of law previously settled in the global marketplace. Use of the Internet, however, leads to new and unique issues.
In typical market and non-Internet, electronic transactions, companies can control factors that may subject them to personal jurisdiction by controlling: (i) where the business entity is formed, (ii) where offices and stores are located, and (iii) which geographic markets they enter (physically or electronically). If a company does not want to be subject to the laws of a certain country, it can avoid activities in that country.
Managing Internet geography is more complicated. By hosting a Web site, a company essentially enters a global marketplace. Barring specific efforts by governments or online service providers to block access to certain Web sites, or actions by a company to filter access to its site,35 a Web site can be accessed by anyone in the world with an Internet connection and basic software. In theory, such commercial activity can expose these businesses to the jurisdiction of a myriad of courts. Understanding how concepts of personal jurisdiction are handled around the globe may help businesses measure exposure to litigation.
3.1.1 The U.S. Approach
In the United States, there are two types of personal jurisdiction – (i) specific jurisdiction, in which a court exercises jurisdiction over a party only to the extent that the dispute directly relates to the activities in question, and (ii) general jurisdiction, where a court can exercise jurisdiction over a party for all disputes, including those with no relation to the activity in question.
U.S. courts use a two-step analysis to determine jurisdiction. First, the court determines if there is an express statutory grant of authority that would allow it to exercise jurisdiction. For example, does the state where the suit is filed have a “long-arm” statute?36 Second, courts determine whether the exercise of jurisdiction would violate due process under the Fourteenth Amendment. The type of jurisdiction the court is seeking to exercise, specific or general, will determine the level of activity required for such exercise to be constitutional.
Under U.S. constitutional analysis, the court will use the “minimum contacts test” to determine whether it can exercise specific jurisdiction over that particular matter.37 The test requires sufficient minimum contacts in the forum state so that maintaining suit there does not “offend traditional notions of fair play and justice.” The defendant must commit an act whereby he “purposefully avails” himself of the privilege of conducting activities in the forum state.38 The defendant’s conduct in the forum state must lead to the conclusion that the defendant should reasonably anticipate being haled into court there.39 Personal jurisdiction must be reasonable in view of factors such as: the burden imposed on the defendant of having to litigate in a foreign state, the forum state’s interest in adjudicating the dispute, the plaintiff’s interest in obtaining convenient and effective relief and the interstate judicial system’s interest in achieving the most efficient resolution.40
If a U.S. court wishes to exercise general jurisdiction, a much higher threshold of scrutiny must be met. A plaintiff must show that the defendant’s contacts with the forum were continuous and systematic to establish general jurisdiction.41 Factors such as the forum being the party’s domicile or corporate headquarters have been used to find general jurisdiction. Without showing continuous and systematic activity, a party can only be subject to specific jurisdiction. To date, the authors are unaware of a court finding a party subject to general jurisdiction solely for its activities on the Internet, so this discussion addresses specific jurisdiction.
When dealing with Internet transactions, the courts face the complicated determination of what is considered “minimum contacts” to support personal jurisdiction. In the early years of the World Wide Web, U.S. courts took a broad approach to what would be considered purposeful availment of doing business in the forum state. In Inset Systems v. Instruction Set,42 federal courts decided took an extremely broad view and found minimum contacts solely on the availability of defendant’s website to citizens in the forum state. The court reasoned that the defendant had purposefully availed itself of the privilege of doing business in the state by hosting a web site (out of state) that was accessible to citizens within the state, regardless of the level of interaction of the site. This approach was widely criticized as being over-inclusive, and the analysis was later replaced.
In 1997, another U.S. federal court reviewed Zippo Manufacturing v. Zippo Dot Com Inc,43 a case that presented a widely regarded analysis. In Zippo, the court set forth a sliding scale test referred to as the “Zippo Continuum,” which marginalized the Inset decision.44 The court found that the likelihood that specific personal jurisdiction can be constitutionally exercised is directly proportional to the nature and quality of commercial activity that an entity conducts over the Internet.45
In categorizing the nature and quality of commercial activity online, the court divided websites into three groups: (i) commercial, (ii) passive and (iii) interactive.
Commercial sites are those used by a defendant to enter into contracts with residents of foreign jurisdictions that involve the knowing and repeated transmission of computer files over the Internet. Defendants use commercial web sites to transact business over the Internet and personal jurisdiction in the foreign jurisdiction is proper.46
Passive sites are those where the defendant simply posts information that is available to residents of foreign jurisdictions. Having a passive site alone is not enough to establish personal jurisdiction.47
When a defendant’s web site allows users to exchange information with a host computer, the site is considered interactive. Exercise of personal jurisdiction is fact-based, depending on the level of interactivity and the commercial nature of the site’s information.48
Web sites can increase their chances of being categorized as interactive - and thereby decrease their likelihood of being subject to jurisdiction - if they contain large portions of information, as opposed to focusing largely on transactions. Companies with websites that unquestionably allow for contract formation online are unlikely to limit the exercise of jurisdiction, and should instead attempt to limit their exposure through the use of forum selection and choice of law clauses in contracts. Arbitration clauses may also help avoid costly litigation in potentially hostile jurisdictions. Site operators concerned about submitting to jurisdiction in certain territories should include a mechanism to determine whether a visitor is located in those territories, and restrict such users to informational portions of the site. Site operators who would like users to be subject to suit in the site operator’s jurisdiction should have an express provision which submits users to jurisdiction in the foreign territory.
In 2002, the U.S. Fourth Circuit narrowed the application of personal jurisdiction. In ALS Scan v. Digital Service Consultants,49 the court focused its analysis on whether the web site was targeting or directing its activities toward the jurisdiction in question. Under ALS Scan, the court asked: did the defendant (1) direct electronic activity into the state (2) with the manifest intent of engaging in business or other interactions within the state, and (3) does the activity create, in a person within the state, a potential cause of action cognizable in the state’s courts?
3.1.2 The EU Approach
In the European Union, jurisdiction to adjudicate a dispute is largely governed by the Brussels Convention,50 which is only binding to member states. Under the original Brussels Convention, a consumer could choose to bring suit in its own nation, or in the nation of the domicile of the merchant.51 Merchants were allowed only to bring suit in the consumer’s jurisdiction.
The Convention was expanded in March 2002 with the adoption of Brussels I, which is directly binding on EU members. While consumers maintained the ability to choose litigation jurisdiction, Brussels I also expressly provided for jurisdiction over contracts completed on interactive web sites. In addition, Brussels I stipulated that if a website directed its activities toward an EU member state, it thereby submitted to that state’s jurisdiction.
Additionally, the proposed Hague Convention on Exclusive Choices of Court Agreements impacts the exercise of jurisdiction by requiring that when parties elect the jurisdiction of a specific court through a contractual choice of court provision, such jurisdiction shall hear the dispute unless the agreement is null and void under the laws of that state.52 The Hague Convention would not allow a court to decline to hear a matter on the grounds that another state has a closer connection to the dispute.
As a jurisdiction limitation, Article 19 of the Hague Convention permits a state to make a declaration at adoption that its courts will not apply Article 5 of the Brussels Convention to cases that are wholly foreign. Upon ratification, acceptance, approval or accession, a state may declare that its courts may refuse to determine disputes covered by an exclusive choice of court agreement if there is no connection between that State and the parties or the dispute, except for the location of the chosen court.
Parties sometimes choose neutral state courts – courts in which neither they nor the facts of the case have any connection – to avoid going to court in the other party’s state. While some countries welcome this, others feel that it imposes an undue burden on their judicial system. Article 18 accommodates states in the latter category.
3.2 Choice of Law
Once the question of jurisdiction is settled, parties must address what laws or rules apply to the matter. Parties may include a governing law provision in a contract that stipulates what law, set of rules, or principles should guide a dispute. Parties can agree to be bound by a particular nation’s laws, or by something more neutral, such as the UNIDROIT Principles.
When an agreement is silent regarding governing rules, courts will look to one of three places for the applicable law – (i) international law; (ii) the law of the domicile of the seller or (iii) the law of the domicile of the buyer. Often, the issue is settled by applying the state law where the contract was formed. This exercise can be particularly difficult with online contracts because it is often difficult to determine where a contract is formed.
In Europe, the Rome Convention53 provides much of the relevant guidance. Under Section 4(1), the law of the country that is most closely connected to the dispute shall be applied.54 In contract terms, since the buyer is providing money and the seller is doing the major portion of the performance, the seller’s country is typically interpreted as being the law that is more closely connected to the dispute. This changes when the buyer is a consumer.
Under Section 5(2) of the Rome Convention, the choice of law may not deprive a consumer of the protections of the laws of its domicile, even if the contract includes a choice of law provision to the contrary. Thus, when a consumer enters a contract, regardless of whether the parties elect to apply the laws of the seller or of another country, the courts are to apply the protections of the consumer’s home country to the dispute.
When a contract is between merchant parties that reside in any of its 60 member states, the U.N. Convention on Contracts for the International Sale of Goods applies to the sale of goods, unless the parties have chosen that it should not apply by either (a) stating that the laws of another jurisdiction shall apply, or (b) expressly stating that the CISG shall not apply. The CISG does not apply to consumer transactions, or where either party does not reside in a country that is a signatory to the CISG.
3.3 When and Where Is the Contract Made?
In simplest terms, a standard contract forms when one party tenders an offer and another party manifests its acceptance. The offeror can be either the seller of the good or service, or the purchaser. A contract generally is formed at the moment of acceptance. Disputes often arise over whether a contract was formal, and if so, when and where the formation took place. These factors affect the determination of obligation between parties, when it arose, and what court has jurisdiction or what law applies.
In the United States, physical world contracts are largely settled under the Uniform Commercial Code, which has a specific set of rules that define offer and acceptance in contracts for the sale of goods, with the common law of each state or other statutes governing service contracts. American common law for service contracts is aggregated in the Restatement (Second) of Contracts, although actual laws vary from state to state.
The “mailbox rule” is applied to determine when an offer has been accepted and a contract formed. Under this rule, a contract has been formed once the offeree sends acceptance. Thus, if the offeror makes an offer, and the offeree accepts and sends a letter to that effect, once the letter is in the mailbox and the acceptance is beyond his control, the offer is deemed accepted and a contract is formed.55 This is true even if the other party tries to revoke its offer before receipt of the letter.
A British case, Entores Ltd. v. Miles Far East Corp56 developed an alternative approach, which states that a contract is not deemed to have been formed until the acceptance is received by the offeror. Under Entores, when dealing with instantaneous communication mechanisms, acceptance of an offer is not deemed to be effective until it is received by the offeror. The case involved the formation of a contract between parties in the United Kingdom and Amsterdam, who communicated by facsimile, and laid the foundation for applying the rule to other instantaneous communication methods, such as e-commerce. It has been upheld by subsequent cases.57
A third approach is provided for in Article 11 of the EU’s Electronic Commerce Directive. Under Article 11, unless the parties agree to an alternate arrangement, a contract is formed when the offeror receives an acknowledgement of receipt of his acceptance from the offeree. This provision is intended to provide consumer protection when dealing electronically. Consumers may interact with a service provider via a web site, and proceed through a series of web pages he considers as still exploring the transaction. But it is possible that a consumer may be unaware that he accepted an offer, or that service provider accepted an offer he tendered. In confusion, or if he is unaware of that the first transaction went through, the consumer may inadvertently enter one or more unintended agreements, either with that same vendor or with another service provider.
Under the Electronic Commerce Directive, the contract is not formed until the consumer receives an acknowledgement from the service provider that the parties are in agreement. Merchant parties may agree to other terms between themselves via a provision of the offer or in a separate agreement, but as a consumer safeguard, service providers cannot induce consumers to agree otherwise. Note also that this provision would only apply among parties from EU member states and is not applicable in international transactions governed by the laws of another country.
3.4 Opportunity to Correct Mistakes
Another e-commerce consumer safeguard requires that providers of goods and services who process orders online provide an opportunity for consumers to review and correct the deal’s terms prior to acceptance. Such protection can be seen in most online shopping experiences. Typically, when a consumer interfaces with a web site, they explore a variety of available products and services. Often, even technology savvy consumers may add products or services to their “virtual shopping cart” without realizing it. They may agree to certain terms, waive warranty options, or select or alter important transaction terms without full awareness of what comprises the deal.
Similar situations occur in the physical world when consumers fail to read purchase agreements, warranties and other sale documents prior to purchase. Electronic transactions, however, pose a distinct problem. Consumers at a physical store rarely discover at checkout that they have accidentally purchased two refrigerators, or leave the store without realizing what they paid. And most consumers would not engage in a major purchase without obtaining a receipt, especially when they are not receiving the good or service at the point of sale. There is a distinct difference in a situation where a consumer has had the opportunity to review the transaction and opts not to do so, versus one where the consumer is never given a complete picture of the deal, and not given the opportunity to correct mistakes. One might question whether a valid agreement exists if the parties have different conceptions of what they have agreed to.
To protect against the uncertainty caused by such scenarios, and to protect consumers both from their own mistakes and potentially unscrupulous vendors, legislators are passing pro-consumer laws to regulate Internet interactions. While similar protection may be read into the commercial codes of various national laws, initiatives expressly directed at e-commerce have also developed. For example, the EC Electronic Commerce Directive requires providers of goods and services to include a mechanism in electronic transactions whereby the consumer can review the major terms of the transaction (i.e. items, price and quantity), allowing them an opportunity to correct mistakes before it is processed. The Electronic Commerce Directive also mandates that the terms and conditions be presented to the consumer in a way that allows them to make a record of the deal. Vendors need to be mindful of and conform to such requirements to be sure their transactions are given legal effect.
3.5 Electronic Signatures
In standard contracts, parties use signatures to identify themselves and to evidence their intent to be bound by the agreement’s terms and conditions. Signatures are accepted in court as evidence of a party’s intent to be bound, and guidelines exist for establishing a signature’s validity.
In e-commerce, signatures are more troublesome since no physical signature is obtained. The marketplace has looked to both the legal and technology sectors to find solutions in order to obtain the commercial reliability (i) that a party is who it says it is and (ii) that the law will give effect to electronic signatures58 as identifying a party, enforceably representing its assent to be bound by an agreement. Although the technological and legal solutions are inter-related, they must be examined separately.
3.5.1 The Technology of Electronic Signatures
Early electronic signature initiatives involved the literal use of electronic signatures. People would make an electronic copy of their signature and then digitally embed the image into an electronic transaction document. This method was not secure and posed a risk since electronic copies of signatures could be found and used by other parties. As such, cut and paste signatures failed to fulfill one of the underlying requirements of a useful signature – that only the person whose signature it is be able to produce and apply it. This method also failed to give any indication of the integrity of a document. Once signed, documents should not be changed, but it is easy to modify an electronic document, even after the signature has been applied.
Technologists have addressed both concerns by employing password and encryption technologies to develop a new generation of electronic signatures. There are various kinds of encryption technology, but a process called public key encryption is one of the most secure.
Recognized as a reliable electronic signature method, this process involves the use of a password known only to the signatory, a “private key,” and encryption software that analyzes the document and scrambles it using mathematical algorithms to “encrypt” it, ensuring that the document is not changed. The document is sent to the other party who uses a public password provided by the signatory and the encryption software, which then verifies that the document was signed by the signatory and unscrambles the document.59 In response to concerns that signatories might share private key passwords, newer technologies integrate biometric methods, such as finger prints or retinal scans, that are unique to individuals into passwords. An interface using a digital pen to sign a digital screen also is being explored. Such a process would not only consider the signature for security, but it would also include biometric factors unique to a signatory, such as the acceleration of certain pen strokes, when and where in the formation of certain letters the signatory lifts the pen from the screen, and the time for each stroke.
3.5.2 Legal Implications of Electronic Signature
Separate from the questions of an electronic signature’s technical feasibility has been the issue of legal effect. Due to ambiguities in the language of many existing statutes, fear arose over whether courts would consistently approach electronic signatures. It was unclear whether courts would view electronic signatures in the same manner as signatures by seal, which are not valid in a number of contexts.60 Legislators responded by formally recognizing electronic signatures. The United States initially responded with the Utah Digital Signature Act of 1996, which has since been pre-empted by E-SIGN. This statute, however, influenced similar provisions in the 1996 version of UNCITRAL’s Model Law on Electronic Commerce, which gave effect to digital signatures wherever a signature is required if (i) a method is used to identify the signatory and the signatory’s approval of the applicable document or data, and (ii) the method used was as reliable as was appropriate for the purpose for which it was generated, accounting for all circumstances.
Since 1996, over 100 laws or proposals have been put forth to address electronic signature issues, including revisions to UNCITRAL’s Model Law on Electronic Commerce in 2001, the EU’s Electronic Signatures Directive in 1999, and the Uniform Electronic Transaction Act and the federal E-SIGN, or Electronic Signatures in Global and National Commerce Act of 2000 in the U.S. Countless other initiatives have been undertaken around the globe, and the approaches are far from uniform. Over time, laws are requiring more formalized, verifiable methods for secure signatures. There also is an increase in the use of certification authorities that will act as intermediaries, issuing and verifying digital certificates for formal signature requirements.
Certain agreements are required to be in writing to be enforceable contracts – a requirement that poses an issue for electronic transactions. In such instances, legislators have adopted what is termed a “statute of frauds.” Courts require the writing to prevent fraud, as many of the relevant agreements are susceptible to fraud.
Many common law jurisdictions, including the United States and the United Kingdom have a statute of frauds that requires written evidence of certain types of contracts. In the United States the following require written documents to be enforced: (i) contracts that cannot, by their own terms, be completed within one year from the date the contract is formed; (ii) contracts for the sale of real property or interests therein, such as leases and mortgages, lasting more than a year; (iii) the promise to answer for the debt of another; (iv) contracts for the sale of goods in excess of $500.61 The writing must have tangible form, although it does not always need to be an official contract.
Electronic contracts pose an issue regarding what is acceptable as writing. In some instances, an email may suffice, but in others, courts want to ensure that the document is unaltered. For example, the requirements for writings to record the sale of real estate are subject to a high degree of scrutiny due to the potential for fraud. In instances where an equally high degree of scrutiny is called for, courts require that a more permanent, unaltered record be provided. An email would be insufficient – a verifiably secure, unaltered, digitally-signed record would be called for.
3.7 Contracting Through Electronic Agents
As discussed in Section 3.3, a contract is generally formed when one party manifests acceptance of another party’s offer. Implicit in that scenario is that the bound parties have the same understanding of the deal and have a “meeting of the minds.”
An increasing number of electronic transactions are concluded through the use of electronic agents.62 Examples of such services include ex24.com which is a “fully regulated self clearing broker/dealer that operates an alternative training system where investors can buy and sell widely held stock… [S]ecure stock trading orders are matched and settled in real time, 24 hours a day, 7 days a week.”63
When ex24.com or other electronic agents are used, it is questionable whether the buyer and seller fully agreed to the same deal. Neither may be aware that a deal has been struck at the time the contract is formed. This problem is exacerbated when the electronic agent not only facilitates the transaction, but also becomes involved in the negotiations. As the buyer and seller become less directly involved, the basis of mutual agreement becomes more tenuous.
Legislative solutions have been enacted to address this concern. UETA expressly validates contracts that are concluded through electronic agents, even if no individual reviewed the agents’ actions. Enforcement is rooted in the view that each party effectively consented when they set the transaction in motion, and should have known that use of the electronic agent would lead to the formation of an agreement.
3.8 Intermediary Liability
As the World Wide Web has grown, it has become more difficult to locate specific information or products and services online. Perceiving a market-opportunity, a number of companies have positioned themselves as Web intermediaries and are developing businesses to bring parties together online. ex24.com, the automated broker/dealer discussed in Section 3.7 is considered an intermediary.
Playing the intermediary role comes with certain risks. Intermediaries can be confused with the company providing the good or service, and brought in as a co-defendant when disputes arise. An intermediary's exposure to liability correlates to the degree of visibility of the role it performed in the process, and the likelihood that a third party would be confused about whom they are dealing with.
For example, if a company decides to launch a web hosting business, it may make a vendor’s web site available on the Internet, run the software that process customer orders, and potentially designed the site. However, a customer would typically be unaware of the intermediary, who controls the site’s availability, but not its content.64 Consumers would not associate it with the business because in most instances, they would be unaware of the hosting company’s role. In such a case, the intermediary has little risk of liability to the customer.
Companies who are more visible and take an active role in bringing buyers and sellers together online increase their risk of liability by controlling more functions of the interaction. If the intermediary acts as a hub, bringing the parties together but not playing a more involved role, it should be free from liability.
However, if the intermediary not only facilitates bringing the parties together, but also exercises control over the transaction, such as negotiating the deal or controlling the vendor’s presentation of products or information, greater liability can occur.65
Just as the quantity of commercial transactions continues to increase, so does the number of disputes arising from those transactions. With court dockets already overburdened, creative minds have developed alternative dispute resolution mechanisms using technology. To supplement traditional arbitration, online dispute resolution systems take into consideration the specificity of cyberspace. Use of these new services is growing, although not yet common. As evidence of anticipated growth and utility to the market, article 17 of EU Directive 2000/21/EC encourages member states to develop legislation that allows for out of court dispute settlement, including appropriate electronic means.66
Before analyzing the mechanisms for online transactions, we will examine why, with the explosion of the number of Internet transactions, there has been a need for ODR.
3.9.1 The Adaptation of Traditional Alternative Dispute Resolution to the Cyber World
Resolving cross-border disputes takes money, time and effort. The increase in e-commerce means there are now more transnational transactions, many of which are not monetarily significant enough to justify the effort and costs litigation should a dispute arise. Due to the quantity of small transactions, it is also not feasible to pursue only the largest claims and concede the smaller ones. This has led the market to seek cost-effective alternative dispute resolution.
Traditional arbitration is not always the best alternative to resolve transnational conflicts. Although it allows parties to avoid complex jurisdiction issues, it can be expensive, and it is not always convenient for parties to meet in person. Long distance telephone is an option, but may not be cost-effective if the dispute arises over a small transaction. If these were the only options, many parties would forego resolution rather than invest time and money to achieve a settlement.
Online mediation and arbitration help fill the void for not e-commerce but also physical world disputes.67 Online dispute resolution can save attorney’s fees, travel and communication expenses, and can be more convenient since parties can negotiate without traveling. Communications via email and online are fast, efficient and low cost, and offer flexibility since parties can write at any time, allowing more opportunity for reflection and less room for impulse to guide negotiation.
These methods are not without drawbacks. As the complication or financial significance of a dispute increases, so do the costs of arbitration. Litigation may be necessary to achieve a sophisticated solution. Also, since online resolutions are mostly aimed at reaching a financial settlement, they may not be appropriate in situations where other types of resolutions are desired. Finally, despite the flexibility and ease of online communication, there are situations where the subtleties of verbal and body language call for face-to-face meetings and protracted discussion.
3.9.2 Mechanisms for Online Dispute Resolution
As online dispute resolution has evolved, many arbitration services have been created. Examples of online mediation can be found on the Internet and take a variety of forms. They do not all use the same mechanisms, but there are three main categories: (i) fully automated computer systems; (ii) a combination of software and a neutral third-party facilitator; and (iii) traditional mediation using online technologies.
3.9.3 Fully Automated Systems
Fully automated mediation systems are software-based systems that do not use human interaction outside of the parties. Cybersettle is a good example.68 It generates high-speed settlements by matching offers and demands via an online, double-blind bidding system. According to the web site, parties can settle disputes instantly, 24 hours a day, seven days a week via the Internet. Cybersettle and systems like it are geared solely toward reaching financial resolutions, and the parties interact by submitting offers and counteroffers to the system with neither party knowing the other’s offer. The software compares offers to determine if a settlement has been reached. The system is completely automated, convenient and confidential. If the parties cannot reach agreement, offers remain confidential, but the process can become expensive.69 The web site operator claims that the system has handled 100,000 transactions in its six years of operation and that 21,000 attorneys have used Cybersettle to facilitate settlement of client cases.70
3.9.4 Software and Neutral Third Party Facilitators
A second system uses a combination of computers and neutral third party facilitators. Facilitators work with the parties and use software to develop desirable settlement packages. The parties may engage a common facilitator or each have their own. The case is set up online and parties work together and with the facilitators. The software generates suggestions based on party preferences and concessions. If the parties accept the same package, the settlement is done. Smartsettle71 is a good example of this service.
3.9.5 Traditional Mediation Using Online Technologies
The final category of online dispute resolution is a technologically savvy form of traditional mediation, incorporating online technologies such as email, chat rooms, listservs or videoconferencing to facilitate negotiation. An example of such a service is Squaretrade.com.72 A case begins when parties agree to use the service, and file the matter with the service. After the preliminary setup is configured, the parties can negotiate directly online. At this stage, there is no charge for the service, and it remains free if the parties are able to reach an agreement. If an agreement cannot be reached, the parties can request the assistance of a mediator, at which point a fee is required.
This third type of online arbitration is the most likely to gain a solid foothold in the market. Formal arrangements can be reached whereby parties agree to submit to the arbitration process, whether in an initial contract or by a separate agreement signed after the dispute arose. It is one of the most efficient forms of ADR and parties can be bound by the decision of the arbitrator.
The American Arbitration Association has (AAA)73 created a tool that allows for arbitration proceedings to be conducted and resolved exclusively via the Internet. The system is similar to that of Squaretrade.com, but it brings the recognition and market force of the AAA. Within thirty days of the proceeding’s closure, parties receive a decision based on the communications, facts and documents the parties provided on the web site. This process is likely to be used in situations where the claim amounts are not significant or where the parties are geographically distant and the cost of travel would make a hearing prohibitively expensive.
3.9.6 The Future of Dispute Resolution
Online dispute resolution tools are still in formative stages. Although some sites suggest that they are achieving commercial success, the growth and acceptance of such services is slow, and many service providers have disappeared from the market.
Still, there is a role that these services can play, especially given the increasing prevalence of cross-border disputes and the number of individuals engaging in commerce with each other. Impersonal electronic systems, such as the fully automated services, may be a way for unsophisticated parties to resolve minor grievances that are best addressed financially.
As more companies integrate video conferencing and voice systems with computers and web sites, a hybrid approach is likely to find success, even with the sophisticated issues faced in complex commercial transactions. Combining video conferencing technologies and online data rooms74 with the marketing force and name recognition of AAA and other organizations could lead to the acceptance and assurance that the online ODR market needs to use its technology to the fullest.
Obtaining judgment in an international e-commerce issue is difficult – but it is also just the first step. Enforcement is needed if the judgment is to have any material effect. Since transactions concluded over the Internet are often international, the court that has to enforce the judgment might be located in a different country than the one that handed down the ruling.
Presently, no unified international rule exists governing enforcement of international transactions’ judgments. Therefore, jurisdictions asked to enforce a foreign judgment must look to their own national laws and regulations. Due to the lack of homogeneous rules, it is difficult to predict if a court will enforce the decision.
Yahoo! Inc. v. La Ligue Contre Le Racisme et L’Antisemitisme75 shows the dangers accompanying the global reach of the Internet and enforcement of the ruling was an issue. Even though the French Court ordered Yahoo! to block French surfers from viewing Nazi items on the Yahoo web site, a U.S. Court, upholding freedom of speech, ruled that the French order was unenforceable in the United States.
The international community is in the process of finding a remedy to the enforcement gap. Already, the European Community has its own law on personal jurisdiction and on judgment enforcement. The Lugano Convention76 and Brussels Regulation77 regulate these issues. These conventions apply only among Western European countries.
In 1992, the Hague Conference on Private International Law discussed issuing rules of recognition and enforcement of foreign judgments in order to seek a harmonization and efficiency of the national and regional rules already existing. The Hague Conference has a much larger impact than the European Community, since it includes 65 member states,78 including the United States. Chapter III, Articles 8 and 9 of the latest preliminary draft convention on exclusive choice of court79 deals more specifically with the enforcement issue. Article 8, Recognition and Enforcement, which is addressed to the court in which recognition is sought, provides that a judgment given by the court of a contracted state designated in an exclusive choice of court agreement must be recognized and enforced. The first and most important condition for recognition and enforcement is, therefore, the existence of an exclusive choice of court agreement80 designating the court of origin.
To be more specific, the court of enforcement cannot review the merits of the judgment given by the court of origin. The former is bound “by the findings of fact on which the court of origin based its jurisdiction, unless the judgment was given by default.” Nevertheless, after laying down the principles of recognition and enforcement, Article 9 of the proposed convention sets out seven exceptions by which the court of enforcement does not have to recognize or enforce the judgment. It has to be noted that the court addressed still has the ability to recognize or enforce the judgment despite the existence of these waivers, as the first sentence of Article 9 states that there are certain exceptions to a court’s obligation to recognition and enforcement of a judgment.
The first exception occurs when the agreement is “null and void under the law of the States of the chosen court…unless the chosen court has determined that the agreement is valid,” which indicates that the court addressed cannot rule on a matter the chosen court already ruled on. This is to avoid conflicting rulings on the validity of the agreement between the States.
The second exception allows the court addressed to refer to its own law to determine whether or not the parties had the capacity to enter in the agreement if “a party lacked the capacity to conclude the agreement under the law of the requested State.”
The third exception concerns the notification of “the document which instituted the proceedings or an equivalent document.” This exception ensures that the defendant was properly notified and had the ability to defend itself in front of the chosen court.
The fourth exception occurs when, by deliberate act from one of the parties, “the judgment was obtained by fraud in connection with a matter of procedure.” For example, a fraud waiver might be sought if one party gave wrong information, or tried to conceal evidence.
The fifth exception applies if “recognition or enforcement would be manifestly incompatible with the public policy of the requested State.” While leaving the possibility of using this broad exception, the convention intends to focus attention on procedural failings specifying that it include “situations where the specific proceedings leading to the judgment were incompatible with fundamental principles of procedural fairness of [the requested] State.” This does not intend to limit the use of the exception of public policy that can also be invoked where the foreign judgment conflicts with a provision of the substantive law of the requested State.
If “the judgment is inconsistent with a judgment given by the requested States in a dispute between the same parties,” then the sixth exception applies. It is concerned with a case where inconsistent judgment was granted by a court in the requested States. In such a situation, that judgment prevails, regardless of whether it was given first. The court addressed is permitted to give preference to a judgment from its own states, even if that judgment was given after the judgment under the choice of court agreement.
The seventh exception is in the continuity of the sixth exception. It applies when “a judgment is inconsistent with an earlier judgment given in another State between the same parties and involving the same cause of action, provided that the earlier judgment fulfills the conditions necessary for its recognition in the requested State.”
When the proposed convention is finally enacted, a judgment should be enforced almost everywhere. For the moment, only regional solutions exist and enforcing a judgment is an international problem. Moreover, even with the promulgation of the convention, the issue regarding consumer contracts will still exist since the convention applies mainly to business-to-business transactions. Therefore, alternative dispute resolutions will become more popular to resolve conflicts arising through Internet.
4. The Future of E-Commerce Law?
We anticipate that the future of e-commerce law will see the same patterns of similar but non-uniform growth as have been seen in recent years. Multiple, generally uncoordinated efforts to establish a transnational jurisprudence will continue, but it is doubtful that such efforts will lead to a unified international law for e-commerce.
Without question, the marketplace, legislatures and courts of developed countries have become sensitized their increasing interdependence on other nations and the important role that e-commerce plays in national economies. This self-interested need to exert stability and control over markets outside of their national borders will foster continued cooperation in the quest for uniformity. International organizations and industry interest groups will advance their views within their respective spheres of influence and thus continue to help mold the views of legislators and push for enactment of similar national laws between jurisdictions. At the same time, multinational organizations and international agencies – such as the United Nations – will continue to develop the same sort of treaties and model laws that have been enacted over the last decade. The ongoing growth, stabilization and integration of the European Union may also promote a consistent jurisprudence in major markets.
While an international equivalent to the Brussels and Rome Conventions would be helpful, it is unlikely. Countervailing interests and the nature of the political process will prevent a truly uniform international law from becoming a reality. So long as parties are able to take advantage of the benefits of one jurisdiction over another and be rewarded for forum shopping, there will be pressures against reform. Coordinating uniform laws across the world stage is a staggering proposition. One need only look to the United States and the lack of true uniformity among the states’ adoption of the “Uniform” laws put forth by the ALI and the NCCUSL, or to the European Union and the incomplete adoption of its Model Laws among its Member countries to appreciate the difficulty of attempting to unify laws on a much broader scale.
1 Yahoo!, Inc. v. La Ligue Contra Le Racisme et L'Antisemitisme, 145 F.Supp.2d 1168 (N.D.Cal.2001); Yahoo! Inc. v. La Ligue Contre Le Racisme Et L'Antisemitisme, 379 F.3d 1120, 2004 U.S. App. LEXIS 17869 (9th Cir. Cal., 2004). Note, however, that in February 2005, certain judges have recused themselves from this case and a majority of the nonrecused judges stated: “The three-judge panel opinion shall not be cited as precedent by or to this court or any district court of the Ninth Circuit, except to the extent adopted by the en banc court.” 399 F.3d 1010; 2005 U.S. App. LEXIS 2166.
2 American Bar Association, Global Internet Jurisdiction: The ABA/ICC Survey April 2004, available at http://www.abanet.org/buslaw/newsletter/0023/materials/js.pdf.
3 The CISG has been adopted by 60 nations, including the United States and 12 of the 15 members of the European Union. It should be mentioned however that not all major industrial nations are a party to the CISG. Most notably, England, Ireland and Portugal are not parties to the treaty.
4 UNICTRAL is discussed more fully in Section 2.2.1 UNCITRAL is not a formal treaty like the CISG. UNICTRAL Model Law on Electronic Commerce with Guide to Enactment (1996), available at http://www.uncitral.org/English/texts/electcom/mlecomm.htm.
5 UNIDROIT Principles of International Commercial Contracts (1994), revised (2004), available at http://www.unidroit.org/English/principles/princ.htm.
6 UNCITRAL Model Law on Electronic Commerce with Guide to Enactment (1996), with additional article 5 bis as adopted in 1998, available at http://www.uncitral.org/uncitral/en/uncitral_texts/electronic_commerce.html.
7 UNCITRAL, Model Law on Electronic Signatures (2001), available online at http://www.uncitral.org/uncitral/en/uncitral_texts/electronic_commerce.html.
8 Henry D. Gabriel, The Fear of the Unknown: The Need to Provide Special Procedural Protections in International Electronic Commerce, 50 Loy L. Rev. 307 (Summer 2004).
9 Jochen Zaremba, International Electronic Transaction Contracts Between US and EU Companies and Customers, 18 Conn. J. Int’l. L. 479 (Spring 2003).
10 Report of the Working Group on Electronic Commerce on the work of its forty-fourth session (Vienna, 11-22 October 2004), A/CN.9/571, available at http://www.uncitral.org/en-index.htm, last visited February 2005.
11 The draft convention is available in UNCITRAL document A/CN.9/WG.IV/WP.109, paras. 5-34.
12 Id. As discussed further in later sections, while model laws are put forth to be adopted by the member statutes in similar form, conventions are directly binding on member countries.
13 This is the same approach that is taken in the U.N. Convention for Contracts for the Sale of Goods, discussed below in section 2.2.2. See also UN Releases New International Convention on Electronic Contracting, Galexia Consulting (January 2005), available at http://consult.galexia.com/public/research/assets/galexia_uncitral_draft_convention_v4_20050104.pdf.
14 UNIDROIT’s full membership includes: Argentina, Australia, Austria, Belgium, Bolivia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Cuba, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Germany, Greece, Holy See, Hungary, India, Iran, Iraq, Ireland, Israel, Italy, Japan, Luxembourg, Malta, Mexico, Netherlands, Nicaragua, Nigeria, Norway, Pakistan, Paraguay, Poland, Portugal, Republic of Korea, Romania, Russian Federation, San Marino, Serbia and Montenegro, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Tunisia, Turkey, United Kingdom, United States of America, Uruguay, Venezuela. Membership, UNIDROIT, available at http://www.unidroit.org.
15 UNIDROIT, Principles of International Commercial Contracts – Study L, available at http://www.unidroit.org/english/workprogramme/study050/main.htm.
16 Michael Joachim Bunell, UNIDROIT Principles 2004 – The New Edition of Principles of International Commercial Contracts adopted by the International Institute for the Unification of Private Law, Uniform L. Rev., pages 5-40 (2004), available at http://www.unidroit.org/English/principles/contracts/main.htm (citing data in the UNILEX database, available at www.unilex.info).
17 International Chamber of Commerce, Working with the United Nations: Joint Activities and Projects linking ICC and the United Nations System (January 2004), available at http://www.iccwbo.org/home/intro_icc/Working_with_the_UN.pdf.
18 See Masato Dogauchi and Trevor C. Hartley, Draft Report: Preliminary Draft Convention on Exclusive Choice of Court Agreement, (December 2004) available online at http://www.hcch.net/upload/wop/jdgm_pd26e.pdf.
21 Member countries include: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States, Ratification of the Convention on the OECD, Organisation for Economic Co-Operation and Development, available online at http://www.oecd.org/document/58/0,2340,en_2649.201185_1889402_1_1_1_1.00.html.
22 Nonmember countries include: China, India, Russia and many South and Central American countries. The OECD Convention stipulates that it will contribute to sound economic expansion in both member and nonmember countries. See A Strategy for Enlargement and Outreach, a Report by the chair of the Heads of Delegation Working Group on the Enlargement Strategy and Outreach, Ambassador Seiichiro Naborv, May 13, 2004, available online at http://www.oecd.org/dataoecd/6316/32036418.pdf.
23 For an example of what happens when cooperative discussions break down and organizations forego unified plans for model laws, see infra Section 2.4.2 regarding the history of UCITA. As is discussed, UCITA began as a joint project between the NCCUSL and the ALI. When consensus could not be reached, the NCCUSL spun off an independent project and proposed the legislation to a divided market. In the last five years, only two states have adopted UCITA and to complicate matters further, several states have undertaken legislative initiatives to prevent the application of UCITA to transactions occurring within their borders. This result clearly indicates the confusion and lack of predictability that can arise when so-called uniform laws are not agreed upon and are adopted piece-meal.
24 National Conference of Commissioners on Uniform State Laws, Organization, available at www.nccusl.org.
25 The role call of the ALI also includes an extensive ex officio membership which includes the Chief Justice and Associate Justices of the United States Supreme Court, the Chief Judges of each United States Court of Appeals, the Attorney General and Solicitor General of the United States, the Chief Justice of the highest court of each state, and a number of heads of law schools and state bar associations. The elected membership also does not include those members who have been active contributors for 25 years and are then made life members. See American Law Institute, Membership, available at http://www.ali.org/ali/thisali.htm.
26 It should be noted, however, that even the Uniform Commercial Code is not uniformly enacted in every state.
27 Louisiana has not directly adopted the UCC into its state law, although certain provisions of the model law have made their way into other Louisiana statutes.
28 UCITA is available at the University of Pennsylvania Law Library, http://www.law.upenn.edu/library/ulc/ucita/citam99.htm.
29 Other than Sections 1-107, 1-206 and Articles 2 and 2A. E-SIGN also does not override states laws addressing the creation or adoption of certain testamentary instruments (e.g., wills, codicils and testamentary trusts) or matters of family law (e.g., adoption or divorce), and further requires that certain notices be sent on paper (i.e., court orders and insurance or mortgage cancellations). Electronic Signatures in Global and National Commerce Act, Public Law 106-229 (June 30, 2000).
30 For a deeper discussion of how the European Union works, see European Union, How the EU Works, available online at http://europa.eu.int/comm/publications/booklets/eu_documentation/06/en.pdf.
31 The current members are Belgium, France, Germany, Italy, Luxembourg, the Netherlands, Denmark, Ireland, the United Kingdom, Greece, Spain, Portugal, Austria, Finland, Sweden, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia. European Union, The EU at a Glance, available online at http://europa.eu.int/abc/index_en.htm#.
32 Like regulations, directives bind member states, but members have more flexibility in their enactment. According to the article 249 of the Treaty Establishing the European Community, “a directive shall be binding, as to the result to be achieved, upon each Member State to which it is addressed, but shall leave to the national authorities the choice of form and methods.” When a directive is issued by the European Institutions, member states have a certain time to translate the directive in their legislation. If they do not do so, European courts have ruled that a person from a member state can successfully assert the directive before the courts of the member state which did not enact the directive, which means that the directive is applicable in the member state as binding.
33 Article 249 of the Treaty Establishing the European Community explains the different forms of European Laws. It specifies that “in order to carry out their task and in accordance with the provisions of this Treaty, the European Parliament acting jointly with the Council, the Council and the Commission shall make regulations and issue directives, take decisions, make recommendations or deliver opinions.”
34 The directive defines electronic signatures as data in electronic form which are attached to or logically associated with other electronic data and which serve as a method of authentication.
35 Note that this is not always an effective means to avoid jurisdiction. In the Yahoo! case, the auction site maintained a separate site aimed at the French market, yahoo.fr. However, French courts held that Yahoo! could be liable, even though the company removed Nazi artifacts from the yahoo.fr site because French citizens could still access the materials on other sites, including yahoo.com.
36 This is a law that enables a court of one state to exercise jurisdiction over a party who is not from that state, but who causes some harm to a party from that state. These statutes are subject to constitutional analysis to make sure that the out of state party’s rights are not violated. However, they are often drafted in such a way that they allow for jurisdiction to fullest extent allowed by the due process clause of the 14th Amendment, which effectively reduces the analysis to one step.
37 See International Shoe v. Washington, 326 U.S. 310 (1945).
38 Hanson v. Denckla, 357 US 235 (1958).
39 Worldwide Volkswagon Corp. v. Woodson, 444 US 286 (1980).
40 Burger King v. Rudzewicz, 471 US 462 (1985).
41 Helicopteros Nacionales de Columbia v. Hall, 466 US 408, 415-416 (1984).
42 Inset Systems v. Instruction Set, 937 F. Supp. 161 (D. Conn. 1996)
43 Zippo Manufacturing v. Zippo Dot Com Inc. 952 F. Supp. 1119 (W.D. Pa. 1997)
44 Since 1997, the sliding scale test has been adopted by US courts in the 2nd, 3rd, 4th, 5th, 6th, 7th, 8th, 9th, 10th, 11th, and DC Circuits.
45 Zippo Manufacturing 952 F. Supp. at 1119.
49 ALS Scan v. Digital Service Consultants, 293F.3d 707 (4th Cir. 2002).
50 Brussels Convention, C 189 of 28 July 1990.
51 Id. at art. 14.
52 See Article 5.2 of the proposed Convention. The “null and void” provision is intended to refer primarily to generally recognized grounds of invalidity like fraud, mistake, misrepresentation, duress and lack of capacity.
53 Rome Convention, OJ 1980 L. 266/1.
54 Id at art. 4(1).
55 There are exceptions such as revocation before received by the other party.
56 Entores Ltd. v. Miles Far East Corp  2 all ER 493.
57 Brinkbon Ltd. v. Stahag Stahl and Stahlwaren handed GMBH  1 All ER 293.
58 See Chris Reed, Internet Law: Text and Materials 180-201 (2nd ed. 2004) for a discussion of electronic signatures and related technologies.
59 For more detailed explanation of public key encryption, see Klaus Schmeh, Cryptography and Public Key Infrastructure on the Internet 1 (2003).
60 For example in the United Kingdom seals are not valid as signatures on wills because they are too easy to forge. It is more likely that such restrictions be on their use in the deed and will context, two areas less likely to be using electronic signatures, as opposed to in the course of commercial transactions.
61 For unless specially manufactured for the buyer and the seller cannot use in the ordinary course of business.
62 See Reed, supra note 58 at 210-212 for a discussion of the use of electronic agents.
63 See Ex24.com online at http://www.ex24.com/glo_learnmore.jsp? Section Id=why account.
64 Reed, supra note 61 at 206-212.
65 Id. at 207-208.
67 See OneAccordInc.com’s website (www.oneaccordinc.com) for a list of situations in which Smartsettle.com can be used. It is broader than e-commerce: it includes family, insurance, workplace, community, real estate, e-commerce, internal affairs, strategic planning, supply agreements and labor-management contract negotiations.
68 See http://www.cybersettle.com.
69 Cybersettle.com, Pricing, available online at http://www.cybersettle.com.
70 The success of such sites will require some marketing force or association with a recognized organization. While statistics are not available, we have noted that a number of similar services have been launched and disappeared from the market over the last two years. For example Clicknsettle.com (http://www.clicknsettle.com), an example that we were going to cite when we began this project, appears to no longer be in existence.
72 SquareTrade.com, Online Dispute Resolution, available online at https://www.squaretrade.com/cnt/jsp/odr/overview_odr.jsp.
74 These can be facilitated more easily as businesses move toward paperless offices.
76 Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters. It was originally opened for signature on September 1988. It contains similar provisions to the Brussels Convention, but the two conventions are not identical. The contracting States to the Lugano Convention are the fifteen “old” EU Members States and certain other States in Europe such as Iceland, Norway, Poland and Switzerland.
77 Council Regulation (EC) No 44/2001 of 22 December 2000 on Jurisdiction and the Rand enforcement of Judgments in Civil and Commercial Matters. It applies among all the EU member States and replaces the Brussels Convention in the mutual relations between those states to which it applies.
78 See The Hague online for a listing of all member states, at http://www.hcch.net/index_en.php?act=states.listing.
79 The latest draft was released in June 2005.
80 The proposed convention gives a definition of the exclusive choice of court agreements in its Article 3.
James D. Rosener and Shawn P. McAveney
This paper is a draft form of an ongoing research project. Please direct comments or questions relating to this article to the authors.
The authors would like to recognize the efforts of Justine Frizon, and express their gratitude for her contributions to this project. Ms. Frizon is a member of the Lyon Bar Association, is a graduate of University Lyon 3, with a post-graduate degree in business law, and received a visiting exchange student degree from Boston University.
This article is informational only and should not be construed as legal advice or legal opinion on specific facts.