July 26-27, 1999
Montreal, Canada

New Directions for International Projects in the Coming 2000's

Agne Lindberg
Attorney
Delphi & Co. Lawfirm
Stockholm, Sweden

1. INTRODUCTION

The European Union integration is based on the principles of free movement of goods, services, people and capital. In addition to the four principles, the member states of the European Union did already in 1968 ratify the Brussels convention on the free movement of judgments. The convention was completed in 1988 by the Lugano convention, which in addition to the EU member states applies to the EFTA states and a few other European states. The free movement of judgments has been considered as a major pillar in the European integration process and has in 1990 been completed by the Rome convention on the applicable law to contracts.

Recently, the above-mentioned conventions have been completed by several directives, which contain provisions regarding jurisdiction or applicable law. Furthermore the Brussels and Lugano conventions are being revised i a with regard to jurisdictional rules concerning Internet consumer transactions. European law is mainly developed by means of statutory law (conventions, regulations and directives) since a uniform application and interpretation of law in the different major state is an absolute necessity in order to further integrate the European Union. The Court of Justice mainly serves as an interpretative organ.

The common denominator of the new directives and the proposed amendments is that they include consumer protection provisions as regards jurisdiction and applicable law in relation to Internet transactions. As regards jurisdictional rules concerning business to business transactions, no amendments have been proposed which are directly aimed at the jurisdictional problems with regard to the Internet.

JURISDICTION

1.1. proposed amendments in the brussels / lugano conventions

The Brussels convention, which at the present is binding upon the Member States as an instrument of international law, will most likely be converted into an EU regulation with direct effect to all member states. The main principles of the convention will remain in their present form. However, a ministerial working group has proposed amendments i a in articles 13 and 14 of the convention which regulates jurisdiction over consumer contracts.¹ According to the proposal, member states court shall have jurisdiction at the domicile of the consumer if i a the seller has directed its activities to the State where the consumer is domiciled. A seller would i a direct its activities towards a member state by enabling Internet transactions to consumers domiciled in that member state.

1.2 The directive on injunctions for the protection of consumers' interests

In June 1998, the European Parliament and Council issued a directive on injunctions for the protection of consumers' interests.² Since foreign judgments and injunctions regarding advertising and marketing according to international law is considered as a matter of public law, such injunctions and judgments will normally not be enforced by foreign courts. On the other hand will national consumer agencies normally not engage themselves in matters relating to consumers domiciled in another member states. Hence, the consumers’ interests might end up in a legal vacuum. Thus, the Council and Parliament has adopted the injunction directive which provides that the courts in one member states shall enforce the judgments and injunctions issued in another member state. The directive is expected to have particular impact on Internet advertising since consumer agencies and consumer organizations will now be able to act towards advertising, marketing and unfair sales terms on a cross-border basis.

1.3 the proposal for a directive on financial services

The proposed financial services directive³ contains jurisdictional provisions in article 12 (4A) according to which the consumer is granted the possibility to bring actions either in the country where he is domiciled or in the country where the seller is domiciled without prejudice to the specific jurisdictional provisions of the Brussels convention. Furthermore the proposal stipulates that consumers may only be brought before the courts of the State of their domicile. Finally the directive stipulates that the referred jurisdictional rules may only be derogated from after the emergence of the dispute which makes it impossible to enter into agreements on jurisdiction with consumers.

1.4 the proposal for a directive on electronic commerce

In November 1998, the Commission issued a proposal for a directive on legal aspects of electronic commerce.⁴ (the electronic commerce directive). The directive applies to "Information society service providers" which concept comprises virtually all on-line transactions, such as online sales of goods, on-line sales of services such as newspapers, estate agents, professional services and entertainment services. The definition is not limited to on-line deliveries of immaterial goods, but also applies to physical goods deliveries.⁵

In the directive, article 3(1) the Commission has taken the rather controversial standpoint that the authorities of the state from which the service originates will be the only competent authorities in case of disputes. The standpoint has been criticized, i a by consumer protection organizations and the standpoint will most likely be subject to discussion as the proposed directive goes through the European legislative process. The main reason for the Commission to use the principle of origin approach to the jurisdictional issue is to ensure that the companies in the various member states are free to establish services and to ensure the free circulation of services within the union.

It is important to observe that the principle of origin only applies to the jurisdiction of the member states authorities, such as consumer protection agencies, which supervise that the trade is carried out on fair provisions. The proposed directive also proposes that the parties should be able to use electronic means in the correspondence with courts and that the parties shall be entitled to communicate with the court in a language other than that of the member state.

Following the first reading of the Parliament, a recital has been added to the proposal whereby other Member States than the Member State where the Information Society Service is established are entitled to restrict the service, provided that the service is restricted in order to achieve public interest objectives such as i a consumer protection. Thus, the principle of origin has been modified with regard to consumer transactions.

As far as civil law jurisdictional provisions are concerned, the proposed directive leaves it to the internal international law of the member state to decide which courts are competent to resolve disputes. Furthermore the proposed directive encourages out-of-court settlements of on-line disputes and requires the member states to adjust their legislation as to allow such settlements.

2. CHOICE-OF-LAW

2.1 The distance-selling directive and the proposed directive on financial distance services

The European Union has considered cross-border Internet transactions potentially dangerous to consumers since legal redress is slow, difficult and expensive. Hence, consumer protection provisions have been inserted in the distance selling directive and the proposed financial services directive. According to the distance selling directive article 12 (2) and the financial services directive article 11 (3), the Member states are required to take measures as to ensure that the consumers do not lose the protection granted by the directive by virtue of prorogatory agreements which establish the law of a non-member country as the applicable law to the contract. The directive and the proposal furthermore provide that consumers may not waive the rights conferred upon them. The above provisions are stricter than the consumer protection provisions provided in article 5 of the Rome Convention, since the consumer cannot waive his rights according to the directive and the proposal. The Commission has furthermore declared that electronic marketing via e-mail constitutes such a specific invitation, which, according to the Rome Convention, makes the law of the residence of the consumer applicable to the contract.⁶

3. GENERAL REMARKS REGARDING THE DOMICILE STATUS OF A WEBSITE

In European legal doctrine, it has been discussed what will serve as the basis of the legal establishment of an electronic service provider. It has been suggested that a web-site or an Internet server could constitute an establishment according to article 5(5) of the Brussels and Lugano conventions on jurisdiction and according to article 4 (2) of the Rome convention on applicable law.⁷ The proposed electronic commerce directive however clarifies⁸ that a website or cannot constitute the establishment of a company, meaning that a company will not be able to conduct "forum-shopping" within the European Union by establishing the server in a suitable member state. Instead, the legal establishment will be based on where the economic activities are actually carried out.

4. CONCLUSIONS

As evident from the analysis of the proposals and new directives above, the main driving force behind the drafting of jurisdictional rules in the EU is consumer protection. It is furthermore obvious that that the jurisdictional approach is partly different in the different texts, whereas the proposed electronic directive stipulates the country of origin principle, whereas all other directives and the proposed amendments of the Lugano / Brussels conventions stipulates the effect principle.

However, Internet actors who directs Internet trade towards consumers domiciled member states of the European union should be aware of the fact that they avail themselves to the jurisdiction of European courts and that European law will be applied to the contract. In relation to consumers any agreement on jurisdiction or applicable law designating the courts or law of another country than the country of domicile of the consumer will likely be declared void by a European court.

Finally as regards jurisdictional rules and rules on the applicable law with regard to business to business transactions the proposals and directives do not solve that issue. However the Hague Conference⁹ is drafting a new convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters and will hold a diplomatic conference in June 1999. A first draft convention is to be expected during year 2000.

Endnotes

1. DG H III, 7700/99, http://register.consilium.eu. int/scripts/isoregisterDir/WebDriver.exe?MIlang=EN&rel=%272%3A1%27&key=REGIS TER&ff_COTE_DOCUMENT=7700%2F99&ff_TITRE=&ff_SOUS_COTE_MATIERE=&dd_DATE_DOCUM ENT=&dd_DATE_REUNION=&dd_FT_DATE=&fc=REGAISEN
   &srm=5&md=100&ssf=&rc=1&nr=1&MI val=detail

2. Directive 98/27/EC of the European Parliament and of the Council of 19 May 1998 on injunctions for the protection of consumers' interests. OJ L 166 11.06.1998, pages 51 - 55 [http:// europa.eu.int/eur-lex/en/lif/dat/1998/en_398L0027.html]

3. Proposal for a Directive of the European Parliament and of the Council concerning the distance marketing of consumer financial services and amending Council Directive 90/619/EEC and Directives 97/7/EC and 98/27/EC, Brussels, 14.10.1998, COM(1998) 468 final,. The proposal has been been considered by the Parliament (Report A4-0190/99) at its first reading and has been returned to the Commission. The report is available at [http://www2.europarl.eu.int /omk/omisapir.so/pv2?PRG=QUERY&APP=PV2&LANGUE=EN&TYPEF=A4&
   FILE=BIBLIO99&NUME RO=190&YEAR=99]
4. Proposal for a European Parliament and Council Directive on certain legal aspects of electronic commerce in the internal market, Brussels 18.11.1998 COM(1998) 586 final [http://www.europa.eu.int/comm/dg15/en/media/eleccomm/999.htm]. The proposal has been been considered by the Parliament (Report A-0074/98) at its first reading and has been returned to the Commission. The report is available at [http://www2.europarl.eu.int /omk/omisapir.so/pv2?PRG=QUERY&APP=PV2&LANGUE=EN&TYPEF=A4&
   FILE=BIBLIO99&NUME RO=248&YEAR=99]
5. The electronic commerce directive, page 14-15
6. Page 20 of the Commission proposal for an electronic commerce directive
7. Bogdan, Svensk Juristtidning, 1998, s 825ff
8. The electronic commerce directive, article 2 c, see also page 20 of the Commission proposal
9. http://www.hcch.net/e/index.html