Jurisdiction: Building Confidence in a Borderless Medium
ILPF 1999 Annual Conference - Transcript
INTERNET LAW & POLICY FORUM 1999 ANNUAL CONFERENCE
JURISDICTION: BUILDING CONFIDENCE IN A BORDERLESS MEDIUM
JULY 27, 1999 - CONSUMER PROTECTION
QUEEN ELIZABETH HOTEL, MONTRÉAL, CANADA
JEAN RIOPEL, O.C.R.
TABLE OF CONTENTS
Ms. RUTH DAY:
Good morning, welcome back to our second day.
You know, for at least the last decade, probably fifteen (15) years,
twenty (20) years, the U.S. Department of Commerce has taken an activist
role in fostering the growth of international trade. In the last maybe five
years, a little bit more than that, the efforts have included international
trade moving from technology into E-Commerce. So right now, the Department
actively fosters that kind of growth of trade, and they're lucky to have
Andy Pincus, the General Counsel, in the legal role to support that.
Andy is a graduate of Columbia University. He tells me he was safely and
happily ensconced in private practice, at his desk, doing appellate work,
when he received the call from Secretary Daley to serve as General Counsel
at Commerce. And since that time, he's given Daley advice on the full range
of issues that touch on E-Commerce, including E-Commerce itself,
international trade, telecom, intellectual property rights and export
controls and technology.
We're very glad he's here to give us a key note this morning and to start
our second day in Consumer Protection. Andy?
Mr. ANDREW J. PINCUS:
Thank you, thank you very much for inviting me here, it's a pleasure to
see so many friends whom I've been with at other discussions relating to
E-Commerce, and to meet a lot of new people who are involved in this very
I thought I would begin today by looking at the issue that's posed by the
title for this conference. Building Confidence in a Borderless Medium,
clearly, I think we all recognize that's critical for E-Commerce to realize
its potential, and I think we all recognize the confidence as a two-way
street. For buyers, they have to know that it's safe to engage in
E-Commerce, that they will be able to get what they bargain for; for
sellers, they have to know that it's possible to engage in E-Commerce
legally, they have to know that the rules that apply are rules that allow
one to do business, not rules that are so complex, so unknowable, so
multi-layered that it's impossible to operate one's business in a practical
The part of the title on the other side of the column, Jurisdiction,
seems to me to be one means to this end. As lawyers, we're always
interested in it. I think it's the basis for application of a nation's
rules, whether in the form of judicatory jurisdiction, whether one can be
held before a court or legislative jurisdiction, what rules will apply when
one is before that forum. And we're taught in law school, at least in U.S.
law schools, that the first part of every legal problem is to answer the
jurisdictional questions, that they have to be resolved at the outset.
But I think in this context, we have to ask some questions about whether
the jurisdiction part of the title is the best way to answer the challenge
that's posed on the other side of the title.
Are jurisdictional standards the most effective way to achieve the end of
confidence, are they likely to be the fastest way of promoting confidence,
and is pressing for speedy resolution of jurisdictional issues likely to
lead to confidence promotion as a result? And I submit that at least in the
short term, the answers to each of these questions is no.
As interesting as jurisdictional rules are for us as lawyers, they're not
necessarily meaningful for everyone else, and I know it's often hard for
lawyers to believe that other people aren't as fascinated with legal
conundrums as they are. But as someone said yesterday, it's the rare
consumer who buys a product or service knowing the jurisdictional rules that
are associated with that transaction. The most the consumer wants to know
is whether or not he or she is going to be safe; can they be sure that they
get what they bargained for.
Also, going the jurisdictional route seems to me very unlikely to be
quick. Someone who's been in the private sector, and now has been in
government for approaching two and a half years, our governments don't move
that quickly in adopting new rules, especially rules for a medium such as
this, that have to be different if they're going to be effective. It's just
hard for governments to grapple with that; it's hard for us to understand
the realities of the technology, the realities of the market place and to
translate that in a venue where one has to achieve consensus, at least in
the United States, really, to move ahead with anything of significance in
our legal system.
And I think it's also true that a fast solution is much more likely to be
a conventional one. I guess a corollary of what I've just said is, if one
is going to move ahead speedily, the easiest thing to do is to say: well,
we'll just apply the same rules that we've applied everywhere else, and slap
them on top of this new medium, and hope it all works out. It's much harder
to quickly say we're going to trash or discard rules that have been
developed over many many years and come up with an entirely new system, and
to do that on anything that approaches the Internet time at which business
is evolving on the Internet.
Ultimately, as people said yesterday, and I think will continue to say
today, harmonisation is going to be a key element of the solution to the
conundrums that we're discussing here, but that is going to be something
that takes a lot of time.
The fact of the matter is, within the United States even, and certainly
across the world, different solutions have been developed to the problems of
consumer protection, privacy, and other things that go to consumer
confidence. And those different solutions will take time - are routed in
different countries' legal systems. And so, figuring out how to harmonise
them in a way that's acceptable to people across borders is a project that
will be quite a difficult endeavor. I think we just have to recognize that
that will take time, not only to do as a matter of substance, but also to
sell, if you will, to the governments and people of different countries as a
reasonable solution to this problem because one part of the harmonisation is
solving the substantive problems - how do we create rules that actually
protect people across borders.
But another problem is convincing people that those rules should be
acceptable to them in light of their very different cultural and legal
traditions. And that, as I said, seems to me something that's going to take
a lot of time.
I don't mean to say that the discussion of jurisdiction is unimportant.
Ultimately, of course, it's very important. Ultimately we do have to resolve
these legal issues. We have to have a bedrock of principle, legal principle
on which this systems rests. And it's important to engage in the discussion
from the beginning, to educate people about what the issues are, to begin to
debate the issues, and frankly, to stop bad things from happening, because
there is immediate reaction in governments across the world to regulate.
There's a new thing, let's figure out what rules should apply, and apply
them. And I think in our country, the President made a conscious decision
in 1997 to take a different approach and to let the private sector lead, as
we've said, to be minimalist in regulation and to stop, look and examine
before going down the road of government regulation. But that instinct is
not necessarily uniform around the world, and it's important to debate it.
But, as I say, I think in the short term the best way to build confidence
is to live with some ambiguity rather than pressing hard for some solutions.
For example, I know there's a debate about across-the-board rule of
origin rules, across-the-board rule of destination rules. It seems to me,
and I think Bob Pitofsky talked a little bit about this yesterday; each of
those extremes probably doesn't work, certainly in the consumer context,
putting aside for the moment business-to-business transactions. I don't
think it's possible for our government or any government to say everything
should be governed by the rule of origin because that clearly is going to
promote a race to the bottom. On the other hand, as a matter of pragmatics,
a standard that says the rule of destination applies to everything creates
something that an environment where doing business is probably impossible.
So, we're to have to figure out something in the middle, and I guess
figuring out what that something in the middle is, is going to take time.
But I think a key ingredient of reaching an acceptable solution is to
have some real working models out there of what those alternatives might be
because governments, like other conservative institutions, and they're
basically conservative ,I think, are very reluctant to buy a pig in a poke,
they're very reluctant to sign up to some system that they haven't seen
working. I think one example of that may be, in another area of confidence,
in the privacy area, when our discussions with the European Union started
about how the United States would deal with the privacy directive, I think
many commentators, and even many people in the Commission thought it was
extremely unlikely that the Commission ever would accept a regime of
self-regulation as something that was adequate in terms of satisfying the
But we've clearly come a long way, although we haven't come all the way,
we've come a long way toward that goal, and I think that's because
self-regulation got up and running. In the United States it was really, you
could touch it, you could see what the rules were. Companies were
implementing it, and I think that gave some assurance to people on the
Commission that this wasn't some kind of a dodge to avoid real privacy
protection. It really was what we said it was, which is another method of
having real privacy protection, but one that was more consistent with our
legal traditions, and one we thought frankly would provide better privacy
protection than simply passing a law.
So, I think here too, the discussion about jurisdiction is important and
has to continue, we need an essential second track; we have to develop
alternate means of promoting consumer confidence; we have to develop
self-regulation, self-regulatory approaches and we have to show that they
So, my basic message here is a simple one. There's been a lot of
discussion here, and I think in other forums like this, about jurisdictional
rules, self-regulation, what are the different possibilities, and I think
it's important really to get on with the nitty-gritty, hard work of creating
something that is self-regulation, really drilling down to the next level
and constructing a system, putting them in place, having a level of detail
so that as part of the continuing debate there's something concrete, real,
that can be pointed to, that can be touched, that shows that self-regulation
isn't just something that people talk about at conferences when it comes to
consumer protection, but it's something that actually can be implemented,
that can work, and that can provide consumers with real protection.
Let me suggest briefly a few elements of how such a system might be
constructed, or at least some things that might be important to take into
The first step, it seems to me, in thinking about consumer protection, is
to separate out the very different elements of what falls under the rather
large umbrella that is consumer protection, and I know the next panel is
going to talk a little bit about that. But it seems to me, advertising
regulation, fraud prevention, disclosure rules, remedies, credentialing of
people to provide particular kinds of services, all of those things fall
under consumer protection, but different approaches may be appropriate for
different elements of that. For example, probably ensuring a home court for
real garden variety fraud for consumers is going to be important to consumer
protection regulators around the world, and important to consumers too. On
the other hand, in the world of disclosure, and there may be a lot of room
I think another element that's very important in constructing a system
like this is to show how the technology allows more protection for
consumers, more real-life protection for consumers, because part of the
debate is going to be about, caricatured perhaps, taking away people's
remedies: why are you taking away the remedies that I have in the physical
world? And while one answer to that is: it's not true, we're not taking
away remedies, we're supplying different remedies in the self-regulatory
system. But another answer is: in cyberspace we can do things differently.
And differently means that, for example, with respect to disclosure, the
ability to click continually and get more information means much more
disclosure can be provided for consumers because the technology allows a
multi-level disclosure system.
It means that you can create an online dispute resolution system that's
quick and easy and cheap, and it allows through contractual obligations real
remedies in a way that may not be possible for cross-border transactions in
a world where all we do is rely upon courts.
And I think in that context it's important to look at advertising rules,
disclosure rules, cooling-off periods, and try and come to some
harmonisation of what are, call it best practices, call it good practices,
but rules that provide an adequate level of consumer protection and not just
adequate in terms of the lowest common denominator, but adequate in terms of
something that everyone; governments, companies, consumer advocates can sign
onto as something that provides real protection for consumers.
I think this two-track approach, continuing to talk about jurisdiction
but really making a major push to develop a real-life self-regulatory system
has two benefits.
First of all, I think it actually will promote consumer confidence, I
think if companies that are doing business on the Web are in a
self-regulatory system that consumers can identify through use of a seal or
other kind of signal, consumers are going to be more willing to do business
with those websites. And while brand name websites may not have a problem
with consumer concern about safety, I think less well-known websites
probably do, and to the extent they can be in a program that gives consumers
confidence, that's probably going to enhance business.
The second, and I think just as important a factor, is the creating of
this kind of self-regulatory system that's up and running, as I said, will
tremendously inform the jurisdictional debate. It will provide a real
alternative to point to in discussing what rules there may be in the
mid-point of that spectrum that I was talking about between complete rule of
origin on the one hand, and complete rule of destination on the other.
Now, I recognize that going down this road and not having a clear
concrete resolution to the jurisdictional conundrums does prolong
uncertainty, and as some people were saying yesterday, lawyers don't like
uncertainly. But I guess the short answer to that is it can't be helped,
and I think since the alternative to uncertainly probably is in the short
term bad rules rather than good rules, it seems to me uncertainty is
definitely the lesser of two evils here.
So, I think it does require companies to take a leap of faith to go down
this road, but I think it requires consumer advocates and governments to do
the same thing as well and I hope that we're all willing to take that leap
of faith together.
One question is where this kind of work can be done. There are some
preliminary discussions in other places. It does seem to me, although as I
said we believe in private sector leadership, that the ILPF, which is a
neutral form, and a forum that's been committed to self-regulation, may have
a real role to play in facilitating these discussions, bringing people
together to, as I say, really begin to do the nitty-gritty work of putting
these systems together.
So my message is simple. We have to get the second track moving and I
think moving quickly. I think it's essential to building the kind of
confidence in this medium that we all want and that will allow it to realize
its tremendous potential. And I hope next year, at the third annual
meeting, we'll be able to have some real systems under construction and
we'll be able to debate the pros and cons of them together and continue to
move this process forward. Thanks very much.
I think we have some time, I'd be happy to answer questions on this or
anything else that people have questions about. We can actually be ahead
as opposed to yesterday.
Ms. PHILIPPA LAWSON:
Hi, I'm Philippa Lawson with the Public Interest Advocacy Centre. I
meant to ask you, and I can say right at the beginning, that one of the
reasons I'm here is because I'm excited about the idea of trying to find
some compromise to the issues where business and consumers are quite wide
apart on. The key one versus the country of origin and the country of
But I really have trouble with the idea that -- and a number of people
suggested that it's just impossible for business to live with the country of
destination rule. I mean, businesses are doing that to some extent right
now, and it seems pretty obvious to me that you can limit your website, you
can limit your business to the countries that you are comfortable doing
business with. If you're interacting digitally with people, you can ask
them where, for instance, you're not delivering the product to a geographic
address, you can at least rely on the consumers' attestation of their
location and you can see what is going on, and that's a different issue,
we'll deal with that one when it comes up.
But it seems to me that business is going online, and this idea that
suddenly they should accept to be able to sell in every country in the
world, simply because that's what the Internet permits, is a bit much. I
mean, you're already getting a tremendous increase in your coverage, in your
marketing by going online, even if it's simply within the same jurisdiction
that you started out in.
So I guess, I don't accept that it's impossible for business to live with
the country of destination rule. I do accept that it's not the most
desirable outcome from a business perspective, but I appreciate your
Mr. ANDREW J. PINCUS:
Yes, I don't know that I can cast a vote between impossible or really
difficult. It seems to be that one of the great potential benefits of the
Internet is enhancing cross-border commerce. It really allows that to be
done in a way it's never been done before, and especially allows it to be
done by small and medium-sized companies which really before didn't have a
real opportunity to trade outside their limited geographic area or certainly
outside the borders of whatever jurisdiction they're in because they
couldn't afford the distribution network, the outreach network and all the
things that large companies had to promote that kind of distant trade.
So my concern is that for large companies, it probably is possible to
figure out what the rules are in different jurisdictions to either tailor
website so that you enter where you are and then various -- whatever the
rules are for the country in which the consumer is located pop up, but my
concern is that assuming for the moment that that's possible for large
companies to do, it's probably not for small and medium size companies. And
so I think we shouldn't be -- given the Internet's potential to really
expand that commerce, and I think with those kinds of cross-border
interactions come not just economic benefits, but all kinds of social
benefits, and the benefits of having a world that's more closely tied
together, we should really look closely at figuring out how we can promote
that kind of trade.
And I think promoting that kind of trade requires that we figure out
whether there's another way to deal with these issues. And I think, to me,
that's part of the Internet realizing its potential, and we shouldn't, just
at the outset, say, we're so committed to rules of destination that we don't
even want to engage in the exercise. Because I think with respect to a lot
of these rules we will find out, as I say, we have to start to do the work,
but it seems to me that they're may be ways, relatively easy ways to
harmonise them. And as I say, provide consumers with real remedies that may
be much more realistic than just the disclosures with respect to doing
business in country X aren't much good if you're a consumer in that country
and you have no practical way to bring a lawsuit or to get redress if you're
If someone is part of a contractual system, and you have online dispute
resolution, that's a real benefit to consumers, and so, if you can construct
a system that has those real benefits, getting them may be worth some trade
offs on the other side because ultimately, not only are consumers better off
because they actually have real redress, but we've gone farther to realizing
the benefits of the Internet as a truly global medium for commerce.
Mr. BILL POULOS:
The GBD is discussing the very issues that you talked about, and we
certainly see the value in quick, easy, cheap remedy, the focus on remedy
for consumers. So we strongly support those views that you've just
Now, while we're trying to figure out how to do that, and the ILPF, and a
number of other organisations are engaged into discussion about how to
provide remedies to consumers, quick, easy, cheap from any place in the
world, would you comment on how these private groups and business groups are
going to be able to interact with governments and international
organisations, some of which are moving to judgement to put in place laws
and to put in place the results of regional conventions, which in fact have
made the choice between country of destination and country or origin.
We're quite concerned about the quick implementation that is going on in
a number of areas. Could you comment how are we're going to work with these
Mr. ANDREW J. PINCUS:
Oh, we're concerned also. As I said, we're very concerned about rushing
to judgement in any of these areas, and I think what we can do is to, you
know, use our seat at the table to say that studying these issues, looking
at alternative solutions, makes a lot more sense than rushing down the road
to put in place rules that may have quite a stifling effect, and in
addition, as I said, may not be the best way to protect consumers.
I truly believe that one of the saddest things about a rush to judgement
is that the technology provides a lot of new ways to protect consumers and
dispute resolution is only one, and to put in place rules that just
reflexively apply physical world standards to the Internet doesn't allow for
the possibility of developing those, and I think that's a real loss.
So, all we can do is say, in our view, rushing is not the right result,
that it's not the way to best protect consumers, it's not the best way to
develop commerce on the Internet and try and convince other countries that
going slow and looking at alternatives makes sense. So we're trying to do
that. Anything else?
Okay, well thank you very much.
COMPARATIVE OVERVIEW OF CONSUMER PROTECTION LAWS:
SCOPE, ENFORCEMENT, JURISDICTION
Mr. RONALD PLESSER:
We are two minutes ahead of schedule so far, and we will use it up in
this extremely substantiative panel.
My name is Ron Plesser, and I'm with a Washington law firm, and I have a
background in privacy and jurisdiction Internet issues, and have done a fair
amount in self-regulatory activities, if that's the right word, for
companies and organisations, and I've written several codes and enforcement
schemes over the last couple of years, and it is just fascinating for me to
be here at ILPF to work on these issues.
We really have an extraordinary panel, an international panel to talk
about consumer protection laws and the kind of comparative analysis. I've
asked each of them and including myself, to try to keep our initial comments
somewhat limited. I know, everyone has come from far places and has a lot
to say, but we would like to have a discussion among ourselves and with the
audience at the end. We do have an hour and a half for this panel. I'd
like to quickly introduce the panel. We have Roger Tassé, who's a
partner with Gowling Strathy and Henderson in Ottawa, and he is, I think, a
lawyer with much general experience but has worked a great deal with
Industry Canada on electronic commerce issues and we look forward to his
The second presentation is going to be very interesting, we're going to
see two speakers work together. I don't know if it's going to be a soft
shoe or go back and forth, but we have Sven-Erik Heun who's a partner with
Clifford Chance, in Frankfurt, with wide experience in telecommunications
and Internet law, and a main contact for telecommunications law. I've
worked a great deal with the Clifford Chance office in London, and they
certainly have a lot of expertise in this area. He's co-author of a
standard legal treaty on cross-border data flows and published numerous
articles on legal questions of telecommunications.
Kai Westerwelle is an associate in the Frankfurt office of the law firm
of Bruckhaus Westrick Heller and Löber. He concentrates his practice
in the area of intellectual property, in multi-media law, including Internet
law, and has done a lot of publishing on those issues as well.
Ching-Li Liu is an assistant professor of law at the Graduate Institute
of Industrial Economics at the National Central University in Taiwan. She is
starting in the summer of 1999, so I guess congratulations are in order.
Prior to joining the interdisciplinary institute, she has toured as an
assistant professor of law at Tangshan University for two years.
And then finally, we have Michael Geist, he's a law professor at the
University of Ottawa, specializing in law and technology area with a
particular focus on Internet law.
One of the two things that I've been working on the last several months
has been the ABA Project that's been mentioned a great deal, and some of the
some work, some of the focusing that we do here will be from that. And
also, we have been working with a group of eight multi-national companies in
the U.S. that is trying to find the right answers and solutions to this, and
let me say that I think that it's not just about industry self-regulation or
industry action. This area is a little bit different than privacy and other
areas, the mutuality of interest between the consumer and the company is
very close. Companies will only do well on the Net if consumers have
confidence in the Net, if they feel that they're protected on the Net, and
so that Net activities. If you go back to the catalogue days, there was a
lot of resistance and people did business by mail, and certain industry
leaders like L.L. Bean took on policies that, if you're ever unhappy with
the goods, you could return it. In fact, I think, you can even return a
shirt five years later that you've worn once a week, if you think that it
faded not quite the way you thought it should or are not happy with it. And
that's a policy, that's the price of their doing business so the people have
confidence in dealing with catalogues and buying through the mail. And it's
worked. Catalogue sales, I think, are somewhere in the trillion dollar
range in the United States, it's a major element of retail sales.
So consumer satisfaction, consumer protection,is very much in the
interest of industry.
What we don't want to happen, and which we'll show a little bit is, in
the early 1930's in the United States, there was some commerce clause cases
where one state, North Carolina ,required different size mud flaps; as you
drove your truck through the state, you had to stop, and truck drivers had
to stop and change those mud flaps to a different size. There was no, the
court felt, legal reason, there was no recognizable reason why the State of
North Carolina could really do that other than to interfere with commerce,
and under the commerce clause, the U.S. Constitution held those laws
So, while we want to protect consumers, we want to resist the development
of mud flap laws around the world so that commerce will be interfered with
for non-legitimate reasons. States can enforce gross tonnage laws, they can
protect their roads, they can do legitimate things in protecting traffic,
but they can't do things that simply block trade. And that's what I think
we want to focus on.
I want to acknowledge Stu Ingis who's worked with me at the law firm on
all of these projects and has been very helpful in working with us. Again,
he's learned under Hank Perritt, and he's continuing the process. What I
also very strongly support what Chairman Pitofsky said yesterday. I think
the idea that there are some alternatives here in the approach is not right.
I think we have to look at legal convergence, we have to look at treaty
possibilities, and we have to look at self-regulatory activities, and again,
self-regulatory activities have to be done very closely with consumers to
come up with a consistent approach.
The scope of consumer protection (Andy did some of this that we're
talking about), is fraud is at one end, and we'll talk about that a little
bit, advertising which has some fraud elements in it, but also has trade and
fairness issues; disclosure, billings, chargebacks are all consumer
protections. We'll talk about the chargeback process, but how you can use
the credit card company or your payment mechanism, in the nature of this
dispute is something that I think has not been spoken about and which is a
consumer protection law worth talking about.
Other regulated services, professional licences is perhaps the most
important in this area. A major element of consumer protection is
professional licences and you know, the obvious, the question that many
people have been discussing is, you know, can an architect in New York
deliver plans through the Internet to a client in Istanbul? Now, this is
not consumer protection -- well, it is consumer protection, the licensing
laws apply for everybody. It doesn't make any sense to say that architects
have to be licensed always in the place of residence. You have to get a
building permit so that at some point those plans will have to be
acceptable, but if an architect is sending renderings or plans to a client,
do they also always have to be licensed by the law of residence of the
In the U.S., there's state licensing of doctors, doctors are tested on a
national basis but licensed on a state basis. Does the Internet force us to
look at such fundamental issues as state licensing of doctors?
Traditional Bases of Personal Jurisdiction in the U.S., and I want to go
through this extremely quickly, because I think a lot of this has been
Two-step analysis; is defendant amenable to suit under state's law
long-arm statute? Is exercise of jurisdiction consistent with the
constitutional due process requirements?
They have a concept of minimum contacts which essentially get into the
area of fair play and substantial justice. Certainly the purposeful
availment of privilege of conducting business in a forum gets you there
immediately. The problem sometimes relates if you're dealing in a forum in
the related activities but not the direct activities, and of course the
nexus between the acts and the forum such as the exercise of business in a
The Sliding Approach in Internet Jurisdiction, it's interesting to me,
yesterday these two words passive and active have, really didn't come up
much in the conference. But when we're talking about jurisdiction, often
the word, particularly in Internet application, is that passive activity;
simply having a website there often is not enough to bring in the
jurisdiction of the recipient. But certainly active, as you go into
actively conducting business in the jurisdiction, it gets you over and
there's always the grey area of intermediate.
This, I think is the framework that I'd like to talk about and maybe have
some questions on for the panel. We have strong argument for the law of the
consumer, and then we have the weak argument for the law of the consumer.
And I think fraud is a strong argument, and I think the discussion before
of, is it always one way or is it always the other, is neither helpful nor
realistic because I think there's gradations here of the interest.
So if we look at fraud, I think we would all agree that the local
jurisdiction of the recipient of the consumer almost would always have a
jurisdiction if they can pass those active passive thresholds we discussed,
that I just discussed. Not only theoretically, but politically, we're never
going to get attorneys general at the state and federal level to agree that
they can't protect their consumers against fraud. I think it's an issue
that we live with, and probably will be fine.
Then we have the issue of disclosures which, after all, is somewhat
related to fraud. When you have a disclosure requirement like cigarette
notice or security disclosures, that's really a regulation that's making
sure that the consumer kind of knows everything that the consumer needs to
know. It's kind of prescriptive anti-fraud, it's preventive, so make sure
that things have to be disclosed so that argument kind of goes a little bit
toward a strong argument.
As you get into advertising and particularly issues of advertising that
deal with things like comparative advertising we heard about yesterday, that
has very little to do with fraud or disclosure, it has maybe more to do with
protecting markets. And so, if you prescribe comparative advertising which
is truthful, comparative advertising is legal in the United States, it's not
legal in the UK and Germany. What happens to a website that says that the
Chevy, the Chevy website that says: we have a better engine than the Ford
car; that's certainly legal in the United States. There are some rules that
they have to demonstrate that they tested it, that they looked at it, that
there's a substantiation for those claims, but as long as they can do that,
it's not only legal, in fact I think it's somewhat encouraged by public
policy. But it's illegal in another country. Does Ford not put that
website up knowing that a German or somebody from the U.K. can get access to
it? I think that's where the argument gets weaker for the law of the
consumer. And then I think as we get into content, professional licensing
and other activities, indeed we get weaker still.
This slide I want everybody to look at, because this is what this whole
discussion is about, this is done with the permission of IBM, but this is a
very good, a very reasonable approach by IBM under current law. If you want
to go on to IBM home site to buy products, you have to identify your region
and country of origin, you then click that -- I'm not, this is Powerpoint,
I'm not, can't go through it, but you then click on and they will talk to
you in the consumer protection language of about 20 countries, the
compliance costs are very expensive. So here's a very well-known product
the company that is selling, but they are selling strictly to the country
We had a discussion over this the other day, the ABA project and the
security lawyers in the group thought this was great, and said: "You know,
if you're going to sell securities, this is the way it should be."
Well maybe that's true, maybe if you're going to sell securities, this
kind of approach is good. I think, to me this is a nightmare if you're
talking about global and economic commerce. I think this really destroys
the promise and technology of the Net, and this is what -- I don't say that
in negative -- IBM, I think IBM did the right thing in terms of its
compliance, but if all of these discussions in five years forces everybody
doing business on the Net to have a screen like that, I think we've lost the
battle, in my view.
I've just put up some websites, here's the Amazon in the U.K. with a 50%
discount on U.K.'s best sellers. Whose rules apply in terms of how that 50%
issue is determined; here's the Drugstore Online which Professor Geist
wrote; we talk here about some pornography online, and you can see my
associates who helped put this together did a little censorship of
themselves on this. We were somewhat humored by that and leave the screen
In the ABA project, and this is a work in progress, this is not in any
sense finished, we're talking about consumer variables, merchant variables
in making a jurisdiction issue, this goes to -- we just collapsed here in
Anyway, let me finish in saying that we have hand outs. I've some copies
of this and it will be on the website. But if you look at the variables on
the left and the variables on the top, the merchants, and then we're trying
to develop a system of grading the answers from a scale of one to five or
maybe from color, somebody made a suggestion, colors from blue to red to get
a sense of the intensity of the answer. I think we all go into this knowing
that there's no kind of ultimate answers but there are gradations that we
have to deal with.
One of the last consumer protection laws that I had up on the screen, and
somehow I can't, is the Fair Credit Billing Act, and I wanted just to talk
about that for a second because it talks about a concept of chargeback which
we really have not talked about before. The Fair Credit Billing Act in the
United States requires prompt written acknowledgement of billing complaints,
investigating billing errors by the credit card or payment mechanism;
prohibits creditor action adversely affecting consumer credit standing until
completed investigation. It requires creditors to promptly oppose payments
to consumer's accounts and refund or credit overpayments, and it also has
This is not a system that is in place, really, I think any place other
than the United States. Sally can correct me, Cowan, from American Express,
but I think chargebacks is really kind of a unique U.S. consumer protection
issue, but I know American Express, and I think other card companies, Visa,
they're structured slightly different, but are extending this to Internet
sales globally so that if a consumer has a complaint, if they haven't gotten
a good, if the good wasn't described correctly, there is a mechanism to go
back and to challenge that. They don't have to go to court, they don't have
to go to seek law enforcement, the charging mechanism itself gives them some
Well, I'm going to complete on that conversation and hear the panel, and
hopefully we'll have a little time left for some questions. Thank you.
Mr. ROGER TASSÉ:
Thank you very much, Ron. Let me first say how much I'm grateful for the
opportunity come and speak to you on some aspects of Canadian law relating
to advertising on the Net. But before I do, I have a little story that I
want to tell you, it's a lawyer's story.
There was a man in a hot-air balloon who had lost his compass, and he
didn't really know where he was. So he climbed down, if I may use that
expression, and there he saw a man working in his garden and he said: "Hey
man, I have a question for you." - "Sure, please, ask your question, I'll
see whether I can help." - "Well, would you please tell me where I am?" And
the man said: "Well, you're in a hot-air balloon." The response was:
"Well, you must be a lawyer." - "Well how come, how would you know that I am
a lawyer?" - "Well, you're absolutely right, and too, you're absolutely
I don't pretend that I'll be absolutely right, but I hope that my remarks
will be helpful, of interest in your consideration of some of these issues.
I think that Ron has provided the conceptual framework that will suit
well the remarks that I'm about to leave with you. I propose first to
discuss the substantive provisions of the Competition Act dealing with false
or misleading advertising. The Act is not the only one that we have in
Canada relating to false and misleading advertising, there is legislation as
well at the provincial level, but that will not be the focus of my remarks
Looking at the substantive provisions of the Competition Act, I will
examine whether these provisions apply to Internet service providers. I will
first deal with the prescriptive jurisdiction that Dean Perritt referred to
yesterday. And then I will, in the second part, deal with the conditions
under which our courts will affirm their jurisdiction with respect to those
provisions. That's the adjudicative jurisdiction, or the courts
So the provisions of the Competition Act, as I said, prohibit advertising
that is false or misleading, as well as a number of other marketing
practices, for example, pyramid selling. Now, pursuant to amendments that
were adopted by Parliament in March of 1999, the Act now contains two
streams by which to combat misleading advertising. There is first the
traditional criminal misleading advertising provision. The second stream,
which is new, creates reviewable matters by which the Competition Bureau,
that's the equivalent of the FTC in the USA, can counter misleading
advertising by requiring corrective action without criminal sanction. I
underline that this is the exclusive prerogative of the Commissioner to
Now the first stream creates an offence for anyone who, for the purpose
of promoting directly or indirectly the supply or use of a product or for
the purpose of promoting directly or indirectly any business interest by any
means whatever, knowingly or recklessly - these are the words that make it a
criminal offence - do make a representation to the public that is false or
misleading in a material respect.
The second stream contains the same description of reviewable matters,
except that the reviewable conduct need not to be engaged in knowingly or
Now, there is a section in the Act that provides that the making of a
representation includes 'permitting' a representation to be made in the case
of both criminal or civil matter. I'll come back to that question of
'permitting' and try to see what consequences of that new provision might be
for ISPs. Advertising is not otherwise defined in the Act. As you can see,
the provisions address the substance of advertising and not the means by
which advertising is carried out.
The March amendment was specifically meant to apply to electronic
commerce; it was meant to apply to general misleading advertising - I'd say
- in the paper world. The question I would like to discuss is whether these
provisions are likely to apply to the Internet.
First, let me note that there's nothing in the Act that limits the
application of these provisions to persons located in Canada. A plain
reading of the Act suggests that these provisions apply to anyone, whether
located in Canada or not. I'd add, subject to adjudicative jurisdiction
rules that I will deal with later. In the result, foreign vendors that come
to Canada and make representations in Canada about the products they sell in
Canada would be caught by these provisions.
Are ISPs covered by these provisions? In general, as we all know, there
are two types of ISPs, those hosting contents and others acting merely as
conduits, basically allowing customers or consumers to access content.
In Canada, the Criminal Code supplements the Competition Act by virtue of
the offence of aiding and abetting the commission of a crime, and in
addition, as I've just mentioned, the Competition Act provides that making a
representation includes 'permitting' representations to be made.
So the question arises as to whether an ISP by providing online access
could be viewed as permitting a vendor to engage in misleading advertising.
The answer to that question I must say, is not clear although a more
plausible interpretation of "permitting" in the context of the provisions
I've mentioned, would rather cover a situation where it is the vendor that
permits, not an intermediary like an ISP.
In any event, in light of the high degree of intent envisaged under the
Criminal Code and the criminal deceptive marketing provisions of the
Competition Act, it seems unlikely that a passive ISP that acts as a mere
conduit of information would be caught by these provisions.
The position of the ISP that hosts the content is likely to be different.
In hosting a representation an ISP might become a party to the prohibited
conduct depending on its role in the development of the information.
In the case of a reviewable conduct, it's interesting to note that an ISP
would benefit from a publisher's defense which provides that the reviewable
conduct provisions do not apply to a person who prints or publishes or
otherwise disseminates a representation on behalf of another person in
Canada, if the publisher obtained and recorded the name and address of that
other person and accepted the representation in good faith in the ordinary
course of the business of that person.
That defense would likely apply to an ISP if they complied with the
provisions I've just mentioned. However, this defense only applies in
relation to information received from a person in Canada, thus placing a
higher onus on the publisher of the ISP to ensure accuracy when the
information is received outside Canada.
So thus overall, I'd say that there are a number of issues that remain
unclear and will need to be addressed eventually by our courts, particularly
as to how these provisions would apply to ISPs. Judicial developments in
other jurisdictions particularly, but not only, in the USA are likely to
influence jurisprudential developments in our country.
There are questions as to whether our courts will, or under what
conditions will our courts affirm, assert their jurisdiction in cases
involving a vendor from another country.
In the case of penal legislation, our courts have adopted what I would
call a relatively liberal approach to asserting their jurisdiction. For
example, in the context of the application of the Criminal Code, there is a
section, Section 6(2) that provides that subject to the Act, or any other
Act, no person shall be convicted of an offence committed outside Canada.
Well, that needs to be better circumscribed, what is an offence committed
outside of Canada, and where will an offence be committed in Canada?
These questions have been the subject of an important decision of the
Supreme Court in 1985. The accused had been charged with fraud. Persons
located in Ontario phoned residents of the United States and under false
pretences induced them to send money to addresses in Panama and Costa Rica.
The accused argued that Parliament could not have intended the Criminal
Code to apply to an activity that occurred primarily outside the country.
Well, the court didn't agree, didn't accept that argument and I quote
here from Mr. Justice La Forest, he said that: "(...) all that is necessary
to make an offence subject to the jurisdiction of Canadian courts is that a
significant portion of the activities constituting the offence took place in
Canada. As it is put by modern academics, it is sufficient that there be a
"real and substantial link" " - or connection - "between an offence and this
country, a test well known in public and private international law (...)"
And later he said: "(...) in considering whether a transaction falls
outside Canadian territory, we must (...) take into account all relevant
facts that take place in Canada, that may legitimately give this country an
interest in prosecuting the offence."
The application of this test to the Internet would, in appropriate
circumstances, allow for the assertion of our courts' jurisdiction over a
foreign vendor. This test, by the way, has also been accepted in contract
and tort cases by other Supreme Court decisions. Would mere access by a
Canadian resident to a foreign website not conforming to the provisions of
the Competition Act be sufficient for the purpose of meeting the real and
substantial connection test? I wouldn't think so. But the test might
however be met, for example if the vendor's goods were sold or were serviced
in Canada or if the vendor had a physical presence in Canada. So it's not
entirely clear how our courts will apply these provisions to the Internet.
So my conclusion is that generally speaking, the Competition Act will not
generally present significant problems in its application to online
transactions where the vendors or the websites are located in Canada. And
the effective application and enforcement of these provisions in Canada will
bring benefits both to Canadian and foreign consumers when transacting with
Canadian vendors as it would help to create an atmosphere of confidence.
Problems would occur however with respect to our courts' jurisdiction and
enforcement when the vendors are located outside Canada.
I hope that these remarks will be helpful, of assistance in your
deliberations. Thank you.
Mr. SVEN-ERIK HEUN:
Thank you very much, Mr. Chairman, as we said before, we are drawing
together, this is not a law firm merger. Nevertheless, we will revert back
and forth, hopefully create an atmosphere of movement. What we'll be trying
to do is talking a little about consumer protection laws from Germany, in
particular from two angles, one from the contractual side and mandatory laws
from Germany as well as the tort law side on the other hand. And that
should be it for the beginning, and I'd like to correctly move over to Kai
to go on.
Mr. KAI WESTERWELLE:
Yes, thank you for inviting me to this conference, and I'd like to take a
word from Agne Lindberg, he said yesterday that Europeans love regulations,
and he said: "What truth is not very good to repeat." Let me show you why.
So, consumer protection laws in Germany, what you see in red is mandatory
law. I'd like to just fly over the laws to give you a brief overview.
First of all there's the General Civil Code which is interesting for us in
the electronic commerce case, the requirement of the statutory written form,
which of course the electronic commerce did not meet because it's requiring
a signature which we cannot do. But right now there is a draft of the
"Adjustment of Form Requirements in the Civil Code to the Modern Legal
Transactions", this is the name of the law.
Our Ministry of Justice of May 19 this year to prevent the electronic
forum which will be the electronic signature, that we don't know when that
will be law in Germany.
The second part is the Section 138 saying that unlegal activity which
highlights general stand truth (...) of policies is void on business
activity, the strongest in consumer protection you have in the Civil Code.
The second part of the General Civil Law is the Act on Standard Terms,
and you will find in Section 10 and 11 of the (?) of Germany, along with
clauses which are void within German law. And if all those clauses are not
enough, we have Number 9 which is the general clause saying that clauses not
abetting loyalty and good faith are void and null.
So there's a very long list of laws on activity to offer freedom such as
EC directives, but there will be, I guess, a speech afterward on these
The next part is Consumer Credit Act. Consumer Credit Act is not only
for loan agreements but also for periodically delivering of goods of the
same kind which is for example newspapers, online newspapers delivery.
And also for any contract obligation that the consumers buy regularly if
the value is more than 400 DM, which is not very much.
If this law is applicable, you have to face a right to withdraw for the
consumer for one week, as well as some disclosures: you have to inform the
consumer of any substantial facts of the deal, including his right to
withdraw. And again if a problem, the consumer has to countersign that
information. And that again does not meet the requirements of electronic
commerce, but it's a mandatory law.
The next one is the Act on Door to Door Transactions which I wanted to
show you, but I'm not too sure, and to solve an ongoing argument I'm going
to show you, whether this act is applicable to electronic commerce because
the scope of that law is to prevent the customer from being taken by
surprise by typical door to door protections.
We need to look at the electronic commerce, the consumer is going to pay
any time he wants to have to look at the page, to look at the offer which is
not comparable to the classic door to door selling. Nevertheless, there are
policies in Germany saying that this is applicable to electronic commerce as
well, and again, the consumer has the right to withdraw within one week, and
he has to be informed of a lot of details on the contract.
The next is the Competition Law, and that's all about advertisement. I
have prepared, I'm just going through that, Section 3 of this Unfair
Competition Act, and that's what Roger just told us about Canada. It's the
same in Germany: any person who, in the course of business activity for
purposes of competition makes deceptive statements, and there's a long list
right now, may be enjoined from making such statements.
This is a very wide range you have in Germany to forbid any
advertisement, false advertisement or misleading advertisement.
May I just correct one thing. We've just heard that, in Germany,
comparative advertisement is not allowed. We just changed that or we're
about to change this according to EC Directive, to start two months ago. We
are inventing it in Germany because the Federal Court of Germany, ruling out
that even though EC Directive is not valid, is not chanceworthy to German
law until now. We have to obey it. So if you want to comparative advertise
in Germany, you're allowed to if the advertisement is true, and you have to
give the consumer any details allowing him to make his own comparison. So
it's not just to compare one point of the advertisement, you have to give
all details of the deal.
And, I'll just go back. We have as well the Data Protection Law, as you
see on the right side, I don't want to talk a lot about it because it's a
public law, but if you collect consumer data, you have to obey very strict
rules especially when you pretend to transfer the data from a German
collector to outside the E.U., but that's again a point, we will hear about
it later in the day.
Last but not least, I want to show you the EC Directive on the
Protection, just to tell you that this will have a big influence on German
law as well, that since we've got, I think, the most very strong protection
of consumers in Germany, we don't have to change a lot. But there is the
Long Distance Selling Act, right now we have a draft from February this
year, I guess, or March, changing some laws. But basically the laws we have
will stay the same and that should be it about an overview, and I give the
ball back to Sven-Erik.
Mr. SVEN-ERIK HEUN:
Thank you very much. We have seen the acts which are mandatory law, now
what does that mean when it comes to German territorial jurisdiction and
when it comes to the issues of choice of law. With regard to consumer
protection, it actually means a lot. Even though there's a principle, when
we look at the jurisdiction rules as to what law is applicable, we would
have the laws of the seat of the supplier, which usually where, that's
according to the German law of conflicts, and that is more or less the
general rule as far as I know. And we even have the possibility of a choice
of law including a choice of law in consumer contracts and even in general
terms and conditions. You have heard that our German law and German terms
and conditions are very restrictive.
Just to give you maybe a very short idea of how restrictive, but I don't
want to elaborate on that too much, is you have, for example, no right to
any price increases whatsoever; and what is even worse, and that's most of
the time very surprising for Americans, there's practically no limitation of
warranties or liability in general terms and conditions. Which means that
if you actually want to sell your goods, and that is applicable under German
law, if you do have a problem, you cannot really restrict your liability.
So coming back to what that means for the mandatory law question, it is
pretty clear that even though we may have the possibility materially of a
choice of law, it does not work when it comes to consumer contracts. You
clearly have the country of destination rule for the choice of law question
in Germany, which means that wherever the consumer lives and has received an
offer, and wherever he ordered basically, so more or less the clicking in
front of his screen, that's where the Consumer Protection Law of Germany,
whenever it's mandatory, will apply. And it's easy to say, being a maximum
regulation country as has been said before, that almost the entire set of
consumer protection laws in Germany apply. No matter what choice of law has
been taken, the law is mandatory and therefore we don't really have a
choice, in that case, those laws have to be obeyed, and if not, then these
clauses will be void and there will be other kinds of remedies.
And before we talk about choice of law issues, I'd like to give you Kai
again, to talk about the side of the Tort Law.
Mr. KAI WESTERWELLE:
Yes, thanks. What I'd like to show you is the enforcement of the German
law, especially the example I'd like to choose is the Unfair Competition
Act. And that's the Personal Class Action, that's what I want to show you.
It's not only the consumer to claim violation of his rights, it's also
different organisations. And as you may see here is, the possible claims
are any person who violates can be, may be enjoined from violation acts.
And what you have first of all is any competitor can claim for violation of
Section 1.03 of the Unfair Competition Act, which is for example false
advertising. So you see, Number 1: "By business persons distributing goods
or promotional services of the same or similar type that can claim for
And the same holds true for associations having legal capacity, whose
purpose is to "promote", and I choose the word "promote", commercial
interests. These private organisations to prevent unfair competition, we
call them "Wettbewerbszentralen" are very busy in here. If you have any
false advertising, you will face claims of them, I guess you will, if not
the competitor is being the first to claim you. So these are special
private organisations, these are not public organisations like FTC, as far
as I understood the principle of FTC.
And the next one is by association having legal capacity, whose chart of
purposes includes safeguarding and so on. This is about the same, this is
also private organisations which have been built up in Germany especially by
lawyers, I'm pretty sorry for that, just to sue and to get fees. It can't
sell wares, it's just a combination of lawyers to make money in some parts.
Which is more interesting is the private organisations to safeguard the
So what remedies are you facing? The same holds true for the enforcement
Class Action on standard terms, also the same organisations have the
possibility to claim against invalid clauses.
The remedies of this, I call them Class Actions, I don't know whether I
can choose one word to work with it because I'm not very familiar with
American law, are, first of all, the elimination of clauses, for example in
standard terms, which is very important. When you have important standard
terms of banks for example, it's almost the private organisations to claim
them against it because it's just a question of how much money are you able
to spend in the claim. And if they have the possibility to get your claim
up to the Federal Court, this clause will be invalid in any conflict of any
bank. So anyone, any consumer can claim based on this decision of the
The same holds true for elimination of misleading advertisement. There
are many lawsuits, as I've told before, and in the future it's planned that
of consumers should be in other legal areas so there's more class action in
Germany, but I can't tell you how that works in the future, especially when
it comes to civil law issues.
So I can just go through Territory Jurisdiction in Class Action. As you
see "Applicable Law" I'm not sure, I'm really not sure about that. I guess
if, this is law of tort, so if it comes to Germany and advertisement in
Germany, for example, I guess German Law will be the applicable law if the
German customers are the target of the advertising.
There's some indications, and I was very surprised yesterday hearing
about these aspects which are exactly the same German courts are now ruling
out, which is the language, for example, the German language, to order
possibly from Germany, or is it not possible to order from Germany, is there
a delivery into Germany, and so on. But I guess you've heard about that
yesterday, in the Asahi case, or I may refer to that.
Let me just say one word for this Class Action applicable law because it
is the link. We have a very interesting court ruling of the Regional Court
Munich saying that German advertisement, advertisement law, is applicable
because of a link on the home page of a German subsidiary of a Japanese
company to the home page of the sister company in America, which had
comparative advertising, which was not allowed two months ago or three
months ago. So they said just to have that link on your home page through
your sister company is that you have incorporated the advertisement of your
sister company in America to your German home page, so German courts can
rule this out by German law, which is strange in my opinion. But I don't
know, it's just a regional court, there's lot to do.
And the place of jurisdiction poses the same problem. I guess that will
be the place of tort, the locus delicti, that's wherever the offence against
the Unfair Competition Act takes place within Germany. We can't be sure,
right, that this is if you infringe something on the Internet, wherever you
are in Germany, wherever the terminal is, or wherever you have the
possibility to go to the Internet, that's everywhere.
I'm not pretty sure what it will be when it comes to international cases
because there's no court rulings on this subject right now.
So this again is mandatory law, and now is time to go back.
Mr. SVEN-ERIK HEUN:
As you can see, it's really fun doing business in Germany, especially
going to courts. What does that look like from a contractual point of view?
Now, to make it very short, we have statutory laws possible in contracts;
however, when it comes to consumer contracts, particularly when you also
look at choice of forum, which is the question of how you actually get your
remedies and enforce it, the rule usually says that, well, this is all fine,
but when already this creates a legal position for the customer which is not
that good then it won't work, and that is ,of course, when you look at
German customer protection laws is usually the case.
Which means that from the point of view of the venue again, you would
look at jurisdiction and being in Germany, and the court being able to have
jurisdiction over consumer protection issues whenever a consumer contract is
involved; from the European side, you have that principle laid down in the
anyway, so you end up with the domicile of the consumer. However, if
you're not in the area of application of the Brussels Convention, like in
the example of the U.S., it looks a little bit different but also very
interesting when it comes to the concept of mandatory law.
Now, what the customer can do on his side is pretty clear. He can sue at
the court of his domicile or abroad, of course if he wants to do that, or he
simply doesn't pay, which is the easiest way of remedy if he actually
ordered something over the Internet. It does not, however, solve the
problem if payment has already been made, for example, through a credit card
or even through electronic payment systems. Here there is some kind of a
blank also on the German legal system.
Whenever this is done in Germany, of course, you have enforcement through
the international instruments, which is also not necessarily very helpful
for the customer, given the fact that everything that crosses has to be
served abroad, for example in the U.S., it takes quite a while and is not
The customer, of course, on the other side may be sued
always at the court of his domicile, and the question of what's going to
happen if he's sued abroad is more a question of how do you enforce foreign
judgements in Germany, which is again quite difficult because what we need
to have is, we have to have a judgement in Germany which would be called
something like an Enforcement Judgement of the judgement that has been
And for that judgement, another test is being run by the German courts
which is that there has to be proof of jurisdiction of the foreign court
under German law, including German law of conflicts. That's one thing. So
we would be looking at German law of conflicts for a judgement that has been
obtained, applying the rules of long-arm statute for example in the U.S.
And secondly, we have what we call an Ordre Public reservation which is
again the mandatory law issue, and even though formulated slightly different
in our Classes Law, it basically means, and there's a very common opinion on
that, that all consumer protection laws will have to be observed to any
judgement obtained abroad against a consumer in Germany that violates
consumer protection laws, for whatever reason, is not going to be
enforceable under German law. Thank you.
Mr. RONALD PLESSER:
That was extremely well done and exactly on time. When I heard that
there was -- the German Minister of Industry several years ago said that the
electronic commerce is great and they wanted electronic commerce but they
had to figure out how to apply the Sunday closing laws to the Internet, and
I just wanted to make sure if you guys had any further intelligence on that.
Ms. CHING-YI LIU:
Good morning. I'm from Taiwan, but I'm not going to speak in Taiwanese
or Mandarin, don't worry.
It's a great honor to speak at the conference. I would like to thank
Chairman, Mr. Katoh's invitation to the conference, and help offered by Ruth
and the conference staff. In this presentation, I would like to offer a
comparative brief from the perspective of some Asian laws and then maybe a
quick policy overview on international harmonisation.
E-Commerce has become one of the most topical consumer
protection issue in the late 90's. As increasing number of people around
the world are using the Internet, many companies have utilized the Internet
as a venue for advertisement and sales. It seems clear that all online
entities hope to profit from E-Commerce. However, it's also true that
E-Commerce won't realize its full potential until consumers have confidence
in its efficacy.
In many aspects, I think the issues raised by E-Commerce are not
different from others, from those for any other forms of commerce. On the
other hand, some distinctive characteristics of the online environment
indeed complicate consumer protection issues. As the electronic marketplace
is a place where a wide range of industries can do their business at great
speed and operate with a much greater degree of anonymity. I believe
informed decision-making, security, reliability, and the protection of
online process to help consumer confidence would be indispensable.
It's also noticeable that although there is a great increase in the use
of the Internet in Asia, the uptake of E-Commerce in these regions seems
much more limited
while the development of E-Commerce in North America is very speedy. As a
matter of fact, the number of online users engaging in E-Commerce in Asia
is only a very small percentage. It might have something to do with the
customers' buying habits, and might have something to do with the consumer
protection concerns we have just identified a moment ago.
Generally speaking, in traditional consumer protection laws we have
minimum safety standards, minimum information standards and requirements,
and a minimum standard for data privacy. We have an extensive range of laws
and regulations and there's no single government agency responsible for
consumer protection. Most local consumer protection regulations have been
tailored to address national concerns. In the States, the consumer
protection laws is the Common Law of Contract, the U.C.C., they afford
traditional safeguards to consumers. In addition, many specific consumer
protection statutes supplement the general protection offered by the common
law and U.C.C.
For instance, both federal and state legislation prohibit unfair trade
practices. Furthermore, Congress has enacted a number of statutes
consumer protection concerns. Both in the States and in Taiwan, regulators
of banks and insurance companies have the responsibility to protect
consumers. In addition, regulators in the field of consumer protection
arrange from FTC, FDA and countless other agencies in the States.
Similarly, the scope of government agencies responsible for consumer
protection matters covers many different governmental entities from, in
Taiwan and China, as well as many other Asian countries, as I believe so.
The Application of laws rooted in the real space to online transactions
would be treated as a process of translation. In translating real-space
laws into the virtual space, several factors should be considered very
carefully to help us determine whether more regulations, or even more new
laws are indispensable. First, why is it necessary to regulate online
entities? Second, how different is the online industry to be regulated from
the traditionally regulated industries in the real space? And what would
the result of the regulation be and therefore to what extent would the
application of the real-space laws become appropriate?
As far as consumer protection is concerned, it seems
fair to say that online businesses should not be treated differently from
other entities in the real space. Furthermore, online consumers do not
deserve less protection than they have in real space. Also, it is
noticeable that how everyone will benefit from application of real-space
consumer protection laws is crucial. In other words, an optimal regulatory
model is the key to the future of E-Commerce in cyberspace.
To have a better idea about how difficult it is for an optimal regulatory
model of consumer protection to emerge, I will offer some Asian
prospectives, and here following are some general descriptions of consumer
protection regulations in Taiwan and in China, two nations.
Both Taiwan and China have consumer protection statutes for only a short
period of time compared to western countries. In Taiwan, Consumer
Protection Law is the major consumer protection statute; and in China the
law of the People's Republic of China on Protecting Consumers' Rights and
Interests, it's called PCRI, governs most of their consumer protection
First, fraud. In Taiwan, Consumer Protection Law does
not address consumer fraud issues specifically. If a specific fact pattern
was not covered within the articles of Consumer Protection Law, the general
default rule in the Civil Code of Taiwan would apply. According to the
default rule, the defrauded party will have the right to rescind the
In China, business operators would be fined in the amount of the doubling
prices that consumers paid for the goods and the services. It's in PCRI,
Section 49. If the specific conduct constitutes any of the items listed
under PCRI, Section 50, it's called the "Law of the People's Republic of
China on Qualities of Domestically Produced Products" and other relevant
laws and regulations will apply. Otherwise, the business operator would be
fined, confiscated or suspended.
Second: "Advertisement". In Taiwan, Fair Trade Law, Section 21
regulates the conduct of business. If a business falsely advertises its
products and the services, it will be fined successively until the conduct
is discontinued. According to Consumer Protection Law, Section 22, the
content of the advertisement will constitute part of the contract. If not
specified in the contract, the protection to
consumers shall not be lower than the content of the contract. The
advertisement agent will be jointly or severally liable with the business
if the agent knowingly places untrue advertisement, it's in the Consumer
Protection Law, Section 23. Matters regarding commodity labelling is
governed by Consumer Protection Law, Section 24, and other specific laws
In China, PCRI, Section 19, requires business operators to provide
truthful information regarding their products or services. Business
operators will be punished according to the "Laws of the People of China on
Qualities of Domestically Produced Products" and other relevant laws.
Similar to Taiwan's Consumer Protection Law, PCRI, Section 22, requires
business operators to guarantee the products and services they provide are
compatible with what described in advertisement. As for who shall be liable
for untrue advertisement, the advertising agent will not be liable for the
losses that consumers suffer unless they cannot provide the true name and
address of the business operator. The ad agent will be punished by the
administrative agency if such a complaint is brought by a consumer.
Third, Dispute Resolutions. In Taiwan, a special consumer dispute
resolution procedure is provided under Consumer Protection Law, Sections 43
to 46. The procedure includes three steps: complaint, reconciliation, and
administrative dispute resolution mechanism. The final ruling delivered by
the administrative agency shall be approved by the court, and Consumer
Protection Law, Section 47 introduced consumer class action.
In China, PCRI, Section 34, does not provide special consumer dispute or
mechanism. Consumers can utilize various procedures such as reconciliation,
consumer association mediation, litigation, arbitration, or administrative
Now, I would like to do a summary.
First, Structural Differences. There are some structural differences
between local regulations on consumer protection. Unlike the States, Taiwan
and China apply a more centralized approach and incorporate a general
consumer protection law into their legal systems. And the many other
consumer protection regulations supplement the general consumer protection
law. Viewed from this perspective, the consumer protection regulatory
approach adopted in the States seems more decentralized.
Second, Fraud. Even in the centralized legal system, different types of
default rules in fraud regulation still exist. In China, a fine with a sum
doubling the prices paid by consumers is used to prevent fraud, but in
Taiwan, the default rules in the Civil Code regarding fraud only involve
cancellation of contracts.
Third, Liability Allocation Between Business and Agents. The allocation
of liability between the agent and the business also presents some
differences. In Taiwan, the ad agents will share the liability with
business operators if it knowingly publishes untrue advertisement. In
China, the agent would be fined by the administrative agency and would only
share the compensation when it cannot provide the identity of the business
Four, Administrative Dispute Resolution Mechanism. Several alternative
dispute resolution mechanisms are available leverages at least in Taiwan and
consumers to resolve their disputes against businesses with which they
transact. This approach for consumer protection disputes might not be
available in some other countries.
The fifth one is Enforcement and its Future. It's noticeable that the
general consumer protection laws both in Taiwan and China were not
introduced until very recently. It's only five years old in Taiwan and six
years old in China, I think. Also, their enforcement, in my opinion, is
weak. The reasons why the enforcement seems not quite effective include the
immaturity of the laws, the lack of experiences of the regulatory agencies,
as well as other cultural and social factors. This aspect of consumer
protection regulatory schemes in Taiwan and China adds some uncertainties to
the future of E-Commerce in this region.
We have some difficulties about consumer protection here, and to save
some time I just skip.
And most legal systems protect consumers in many different ways as we
have seen before. Most countries have their own laws and regulations on
protection matters. However, this does not eliminate the lingering
consumer protection problems. Online entities can shop around for the most
permissive regulatory scheme while consumers who conduct online
transactions can establish virtual residents anywhere in the world. For
local governments, how to make cross-border enforcement for consumer
protection effective seems a mission impossible. And on the other hand,
there are a lot of discussions about whether current consumer protection
laws are out of date.
For example, in Asia, there are almost no special rules in their legal
systems to regulate online transactions although I think Singapore has an
Electronic Transaction Act passed in 1997, '97 or '98. As a matter of fact,
people are beginning to debate about whether it's necessary to create more
consumer protection laws for E-Commerce. And it seems impossible and an
undue burden for online entities to comply with all the potential consumer
protection regulations enforced by many different local governments.
In this sense, I think that the development of internationally uniform
rules seems to be one of the
potential propositions for consumer protection in cyberspace.
Consumer protection issues are complicated by the Internet, but in my
sense, the Internet should facilitate the globalization of consumer
protection. In addition, it should be a key issue for accountable Internet
governance and the empowerment of Internet users. Therefore should identify
general principles and should make international coordination possible seems
to be a critical step for consumer protection in the regulation of
And as for the choice of regulatory approach, and the discussion about
self-regulation and identification of key principles, I just skip and give
it through the speakers for the rest of the filing.
The Development of Uniform International Rules for Consumer Protection.
On the level of international norms, there should be a set of core
protections for consumers. In this sense, government cooperation in
enforcement and information sharing among consumer protection agencies
globally seems very necessary.
On the other hand, it's also undeniable that the development of globally
uniform rules for consumer protection would be an extremely difficult
process. First, we can predict some controversies brought by the conflicts
of different social, economic and cultural contexts. And because we, as an
international community, have very limited experiences in the
internationalisation or harmonisation of Internet regulatory schemes, it
might be more difficult than any other harmonisation of legal rules.
However, we do have some models to follow in this respect. We have
witnessed the achievements of WTO in the enforcement of intellectual
property rules through TRIPS and we have seen some transnational effort to
resolving difference of privacy protection rules between Europe and the
States. More importantly, we could also learn from some existing models of
organisation or organisations made by WIPO, OECD or APEC in similar
Okay, some concluding remarks.
For a better consumer protection scheme to emerge for a transnational
cyberspace, we need more in-depth comparative studies on local rules of
protection, which is only in its very beginning stage right now. Second,
we'll need a set of global standards for consumer protection. And third,
more efforts both in the private sector and the public sector are required
in the harmonisation process. The fourth point is we need an efficient and
accountable mechanism for dispute resolutions and, of course, finally,
international cooperation on enforcement is critical for a proper consumer
protection scheme in the E-Commerce age.
Thank you for your patience.
Mr. MICHAEL GEIST:
Good morning. Ron opened this morning's panel by noting the issue of
licensing within states, and he particularly noted the issue of licensing
with regard to the medical profession, and so I'm going to spend a couple of
minutes talking about where things stand in one jurisdiction, that is the
United States. I'm a law professor here in Canada, but I come to this issue
through the American Bar Association's Internet Jurisdiction Project, I am
Chair of the Sale of Services Working Group. And what our group quickly
realized as we embarked on this issue about one year ago, was that Sale of
Services as a sector is rather a huge sector and that the prospect of
analyzing each and every service simply wasn't going to be feasible. And so
what we sought out was to find a service that might provide a model for many
other services, so that if we could find something that was highly regulated
and already on track with regards to the issue of electronic commerce in the
Internet, it might well provide the model we were looking for, for assessing
issues in other services which might not be quite as regulated.
The group has quickly evolved into the telemedicine group as we found
that it was in fact telemedicine that was perhaps the most regulated of the
services, and provided a really good example of where things are going in
this area and where some of the issues arise.
Our analysis actually developed into three different types of services.
There was the no-regulation services which of course don't mean no
regulation, they just don't mean a lot of regulation, I suppose. We
considered business consulting one such service where
there certainly is regulation if you're consulting particularly in an
international framework, but there is little regulation in terms of who can
be a business consultant, and what exactly they can do.
The next sort of service that we identified was the Certifying Only, and
the Certifying Only services were services that regulated who could practice
but they didn't really regulate much about what you could do. And so in the
engineering context for example, many states include provisions which
stipulate who can become an engineer, or who can hold themselves out as an
engineer, but once you've met the standard, usually some educational and
testing requirements, what you do after that is largely your own business.
The ongoing areas were the areas that were of most interest, law and
medicine were the two areas that really covered, that were most interesting
there. There are of course some services which fall into all three.
Education was an area that we started to look at and found that depending on
what sort of education you're talking about, it might well cover any of
Onto telemedicine though, and let me just very quickly note that from a
adjudicative jurisdictional perspective, things pretty much follow on the
same lines that Professor Gedid covered yesterday so effectively. There are
not that many cases involving Telemedicine along the Zippo line of cases
yet, but the Mayo Clinic v. Jackson case was one case involving at least the
health care profession: the Mayo Clinic had a website or has a website, and
that factored into the overall analysis as to whether or not there would be
jurisdiction but didn't play a key role in the overall analysis.
There's actually a couple interesting cases in the legal field in this
area where there is actual practice taking place and the courts have said:
listen, we can still assert jurisdiction over you, even if you are not
within our jurisdiction physically.
The Birbrower case is a California case in which California courts quite
clearly stated that practice of law within the State of California does not
require physical presence. And so, if you're doing it electronically and
you meet the standards of the practice of law, they can assert jurisdiction
over you for those purposes.
The Parsons case is the case that attracted quite a lot of attention
earlier this year. It involves Parsons' Technology which is a software
maker and the distributor and manufacturer of the Quicken Family Lawyer
program. It's one of the software programs that allows you to replace all
of us supposedly by creating your own wills and other sorts of
documentation. The Unauthorized to Practice Committee in Texas brought an
action against Parsons suggesting that the software program itself was
violating the law as a means of practising. And the committee there
actually ruled that yes, it did violate the standards that were in place at
that point in time, and sought to ban the program from the state.
Within the last month or so there's been a reversal of that position,
both the case itself was appealed and the decision was vacated in a large
measure because Texas passed an amendment to the legislation in which they
stated that for this sort of electronic type of practice, if there's a
disclaimer that suggest that this is for information purposes only it won't
qualify under the Act. In some respect, that may be going too far.
There is an attorney out in British Columbia here in
Canada who has established a virtual law practice and he will incorporate a
company for you in BC, he will do an assortment of other legal services for
you, and he has no physical place. If he puts up a mere disclaimer, I
don't know that he should be able to contract out of other jurisdictions
from a practice perspective.
But in any event, from an adjudicative perspective, there is ample reason
to believe that, that the same sorts of analyses will apply.
The prescriptive jurisdiction perspective is where things get most
interesting. What I'm going to do is take you through how the analysis at
the moment plays out within several states because what we find is that
there are some states in the United States that have actually addressed the
issue and provided for the issue of telemedicine within their licensing
statutes. Others have not addressed it within the licensing statutes but
have addressed it within their practice of medicine definition and as such
are well positioned to, or at least somewhat positioned to deal with the
issue. Yet, other states haven't dealt with it at all. And so, what it
falls to is an examination of the actual activity that's taking place online
to gauge whether or not it might fall within the language of the statute
unless jurisdiction might be applicable.
There are some states, and it's rather difficult to see here, but there
are some states that require regular contact within a telemedicine venue for
jurisdiction. Indiana, Oklahoma, South Dakota are three examples, and this
is an excerpt from the Code which discusses the fact that as used in this
article, the practice of Medicine includes medicine or the practice that is
transmitted through electronic communications and, and this is important, or
on a regular routine or non-episodic basis or under an oral or written
And so here they're looking for some sort of regular contact. So for
those that might be practising telemedicine on a very sporadic basis, you
just happen to do it, to provide some sort of telemedicine service to a
person within that state on an occasional basis. At the moment, those
states seem to have opted out regulating that sort of activity.
It's also worth noting there is a provision also in here that deals with
the issue of consultations by a non-resident physician to another physician.
Ron, on the spectrum of where licensing falls, placed it at the sort of far
end of less compelling. I don't know that I'd agree with that, but I can
recognize the fact that there is a concern that we don't want legislation to
block the possibility of having an important doctor or a well known doctor
in one jurisdiction providing his or her advice or a second opinion on a
And some states have recognized that, and the way to do that is not to
say that we don't need any legislation at all, the way is to simply provide
an exception for that sort of activity as these states have done. So they
say, if you're providing that sort of a second opinion to another physician,
so not to an individual who isn't in a position necessarily to be the best
judge of what's taking place, but to another physician. They exempt that
from their jurisdictional reach.
Other states have taken a somewhat broader play. Nevada and Texas for
example don't require that regular contact and so they've provided that
services that are provided through an electronic medium will constitute the
practice of medicine within the state, and those people who do so need to
meet the licensing
And as I mentioned, some other states don't provide for it at all. For
those states that don't provide it within the licensing portion of their
statute, we often take a look at the practice of medicine definition because
if they provide it specifically for telemedicine with the context of
practice of medicine well then you're covered that way, so that if you're
practising medicine clearly you need to be licensed because the statutes
provide that practising medicine needs a licence. Colorado, for example,
includes telemedicine under its practice of medicine definition and as such
is covered that way.
For those states that don't provide this sort of language, and for even
states that do generally, it still raises the question, well what exactly is
practice of medicine online? And to speak to the futurists about this
issue, they talk about surgeries that are taking place jointly between
people in different jurisdiction and things of that nature. That's a bit
too far in the future for me, but what I wanted to do was focus on some
things that are taking place on the Internet right now through, you know,
simplistic websites, and just to get a sense of would these websites fall
under the current statutory framework.
Probably the most obvious one that might would be actual diagnosis
online, and interestingly there are sites that will now provide you with
This is Mediconsult.com and they have a service called Mediexperts in
which they have lined up a series of experts in a wide range of fields and
can scroll down. There is no, they know the field, but interestingly they
don't know which jurisdiction these various physicians are from. And what a
person can do is provide a history, provide their own history and indication
of what their symptoms are and what sort of resolution they're looking for,
and within two to five days, they say they receive a completely confidential
and private correspondence from the physician in their area which provides
some advice and the language they use here is some treatment
recommendations. At the same time, you fork over $195 dollars for the
Now, if this network managed to establish physicians in every state so
that the person providing the advice was located in the same state as the
individual, that doesn't really raise some significant jurisdictional
problems. But of course, there's no indication here that they're doing
that, and so, once you start getting physicians who are providing advice
from their home state, from their home jurisdiction into another state, they
would probably run into these various jurisdictional statutory provisions.
Ron alluded to pharmaceutical sales as well at the beginning of the
presentation, and that's become one of the hotter areas on the Internet.
Some statutes provide for, most statutes provide for some language in terms
of prescribing pharmaceuticals. This is the Oklahoma statute and it
provides prescribing or administering a drug or treatment without sufficient
examination and the establishment of a valid physician/patient relationship
would be seen as a violation of the Act.
Of course, the question on the Internet becomes what does sufficient
examination mean and what is the establishment of a valid physician/patient
The American Medical Association has said they'd like to see
face-to-face prescribing. So they haven't completely banned the practice,
they're in no position to do so, but it's their view that it should only be
face-to-face prescribing, and the online prescribing that's taking place
shouldn't be taking place. Some states, Connecticut and Nevada and several
others have actually tried to ban online prescriptions.
To give you a sense of what they're concerned about, these sites are very
easy to find. This is Netdoctor.com or Net-Dr.com and it allows you to buy
Viagra, Propecia and a couple of other drugs directly online, they suggest
with a consultation, but all it really -- there doesn't seem to be much here
about a consultation other than you need to pay $50 for the consultation,
and that they'll provide you with free overnight delivery.
You can see that this is all about price, and there are no shortage of
sites that are selling these sorts of pharmaceuticals online, and it's all a
matter of who's selling it for the cheapest.
This raises obviously issues beyond just in-state, it raises international
concerns. Here in Canada, Viagra was not approved at the same time that it
was approved in the United States, but there was a rush of Canadians
anxious to get it, and many were going about trying to buy it through the
Internet. This became a regulatory issue in California. This is
Dr.Propecia.com, and Dr.Propecia.com part of the Harman Group was selling
Propecia online, it's a baldness drug, and was ordered in June of 1999, you
now see that he's got a little note, this is going to be very difficult to
see, a little note that he has been told that don't do that. And so, he
stopped selling it through the online forum, but now requires face-to-face
Of course, there are no shortage of people that are not complying with
these sorts of issues and from a jurisdictional perspective, it certainly
raises issues and would in all likelihood under the current statutory
Even further along the spectrum is the issue of advertising. And here
you find a lot of statutes which haven't yet contemplated the issue of
advertising medical services online, and there's certainly a lot of
relevance for this in the legal field as well, where a lot of law firms
have gone and established websites and the lawyers may participate in chat
room and things of that nature, and the question arises, well, are they
violating the relevant statutes.
In Oklahoma for example, there is a requirement, unprofessional conduct
includes any advertising other than in a newspaper. Well, there is A, the
question as to whether an online newspaper would qualify, and B, the
question as to well, does a website then violate these provisions. Texas,
on the other hand, just deals with the issue of false or misleading
information, they don't actually cover the problem that there is going to be
some restrictions on the actual advertising itself.
And so this is one area where clearly some of the statutes are in need of
To just conclude then, so we'll have a couple of minutes for discussion.
The area of telemedicine is clearly and very rapidly evolving one and
what's interesting is that some states have recognized the issue and taken
steps to try to bring their statutory framework into the Internet age as it
were; many others
have not, and what, regardless of whether they have or haven't, we're
clearly heading for a situation whereby multiple jurisdictions are going to
be looking to regulate the same sort of activity. On a personal level, I
don't that that's, certainly in a medical context that that's so bad. But
nevertheless, that appears to be where we're headed.
Thank you very much.
Mr. RONALD PLESSER:
Well I just feel like I've been to Epcot Centre and if any of you have
been to Epcot, you know, you go around that big lake and you kind of go from
country to country to country and get a little cultural fix, and then you
kind of, you've done your hour and a half at Epcot and you've become global.
And so I feel we've had this wonderful survey and I think it really, Ruth
has done just a terrific job in getting this variety together, and when I
went and consulted with Ruth on the time she said: "Well, this is really
good because it just shows how difficult harmonisation really is going to
But the question I'd like to ask the panel is, you know, I was very
happy to be educated on the developments in German comparative advertising
law, and maybe that shows, maybe that is a good example of maybe there's
some convergence and these issues are focusing some reexamination of laws.
Without taking the mud flap metaphor too far, I mean, obviously there are
laws that states or countries need to do to protect their highways, they
can't allow trucks to go on the highways that are too heavy and that will
crumble those highways, and so we accept that there are restrictions. But
we also understand that there are states that may put mud flaps regulations
in and make people change them and customize them, and there's no real
interest being served.
And I guess the first question or the way to get around that, it seems to
me in this environment is a discussion of safe harbor, and this is where, I
don't think we're just talking about industry self-regulation because we're
talking about government, we're talking about consumer and we're talking
about industry coming together to develop a set of best practices or a set
of safe harbor practices, that if people follow them they
can have some legal certainty, some assurance that they're not going to be
in violation of a series of country laws.
And I'd like to kind of go down the panel and just get a comment on
whether or not you think a safe harbor approach working together would be a
fruit in your particular jurisdiction or is the rule so rigid and so set
that that kind of approach may not be effective. Roger, can you start?
Mr. ROGER TASSÉ:
I think that as insofar as fraud is concerned, I think that this is a
different category of fish, but with respect to reviewable transactions,
yes, the kind of false and misleading advertising I was talking about, I
think that it's to be remembered that the enforcement of these provisions is
in the hands of the Commissioner. I think the Commissioner - one can expect
- would use his wisdom and - you know - his good wits to enforce and really
in situations where it matters I think it might have an influence on him if
in effect there were general principles, broad principles agreed to by the
private sector and companies that are potentially of interest to him, and
that could show that in effect they are complying with broad principles to
which hopefully Canada would have subscribed.
So I think that a safe harbour approach might influence the way that
these provisions would be enforced as they leave great discretion in the
hands of the enforcer.
Mr. KAI WESTERWELLE:
Yes, very interesting is the safe harbor approach because it's very -- in
my country when it comes to terms of the print media, we have the print
media relation with Germany which is pretty strong, and it takes part of the
unfair competition, that means violating the self-regulations, it's also
violating the Unfair Competition Act. So there is the possibility to get
through that difficulty in Germany by self-regulation but let me say that we
have a new approach from the European Community. We're not in America, we
have smaller countries in a big continent.
So, the first step that we are taking, and I think you will hear more
later is to have a consensus within the European Union over the nation
states of Europe, so that's the first approach they're right now taking and
maybe the second step will be all over the world.
Mr. SVEN-ERIK HEUN:
Well, I think I agree. I believe it's all about harmonisation again,
particularly when you look at the issue within the European Union, that's
where the regulatory aspect will have to be resolved, instead of having a
common set of rules that are applicable.
Safe harbor altogether is also something that raises concerns on the
German side because we'll... Here we have all these nice laws, and now we
start the race to the bottom. What's the safe harbor going to be? Is it a
safe harbour for the German consumer? The German government has very often
taken the position, particularly within the European Community, that this is
not an approach it would like, that it is not harmonisation again on a
certain level which is certainly not the bottom level you could possibly
Self-regulation is something that is not commonly used yet in Germany,
and we have seen the first aspects of it, maybe it's something that's going
to become law. However, I don't think it will work in the framework of
consumer protection because the legal structure that we have here is too
much developed already, we can't turn
off the clock on that, unfortunately, in order to move away from that.
Mr. RONALD PLESSER:
Let me just add that the EU Directives, particularly in privacy and other
areas, do call for the acceptance and development of industry codes to
supplement. So it's a concept that I think at least has gotten some
application. Professor Liu.
Ms. CHING-YI LIU:
Yes. The idea might work in some areas, but maybe in privacy or content
regulation - I'm not quite optimistic about that.
Mr. RONALD PLESSER:
Mr. MICHAEL GEIST:
I would just echo some of the same comments that you're making.
Certainly looking -- fraud is probably the easy one, it's probably the
equivalent in consumer protection of the child pornography that was
referenced yesterday in terms of there's an area that we probably could come
to some agreement. But the mud flaps issue that you raised earlier, it's
one person's issue that seems to be just a trade blocking mechanism; it's
another person's important issue that they feel is an integral part of their
consumer protection framework. And looking at how difficult it's been to
come to agreement just between, on a bilateral basis, between the EU and the
United States on a privacy safe harbor proposal, to extend that worldwide on
issues where again there's going to be widely different perspectives on the
level of importance for these sort of things, strikes me as difficult as the
same approach to harmonisation on a treaty basis.
Mr. RONALD PLESSER:
Well, thank you. I think my view of privacy is somewhat different
because I don't think, at least I think industry is not, there's some
provisions of privacy that it's been resisting, I think, in consumer
protection, maybe that's not case so much, but I think it's a very
I'll take one question from the floor, I don't want to keep people from
the coffee break, but if there's a question, we'll certainly entertain it.
Oh, my wishes have been met.
Mr. ANDREW PINCUS:
I'm going to follow up on the harmonisation point because a lot of people
have raised it. What, the OECD, we all know, is working on consumer
protection principles, but beyond the OECD, if we want worldwide
harmonisation to the extent that we can achieve it, what is the appropriate
I mean, we established WIPO to deal with the intellectual property issues
as Jenny mentions, I think some people have talked about trying to raise
this issue within the WTO, maybe along the same track as the
multilateralisation of competition policy more generally. I've read in two
places it calls for a new world organisation, a world consumer protection
organisation, WPCO. I don't know, that's just totally a pie in the sky. But
what is the appropriate forum for these kinds of efforts involving
Mr. RONALD PLESSER:
Well, I'm not sure there's an answer to that, Andy. And Andy, do you
have the answer? I think we're going to have to really find our way, but I
think it's true efforts like ILPF and Ruth Day who's done a fabulous job in
pulling this together, that I think we'll come
to the answer. Maybe we ought to do an organisation, maybe there becomes a
virtual coming together that other organisations pick up the idea. I mean,
I don't think we always have to think about a new organisation, but we have
to think about new ideas in trying to solve these issues with ideas and
maybe the organisations will come.
Anybody else have a response, I don't want to necessarily take the last
Mr. SVEN-ERIK HEUN:
I think there's very good point to that. Apart from all these
international organisations that already exist, I think this is particularly
the businesses to take the lead, not necessarily to achieve self-regulation
or only self-regulation, but actually to make a proposition to ask all the
governments whenever they are facing the issues, ask them to try to give
some guidelines on their side, and one of them is for us to make the
transnational business dialog who's actually doing this at the moment.
I've been looking at electronic commerce issues and I've been trying to
see what kind of trade barriers are
there and what is justifying consumer protection because we should never
forget, and let me a little provocative here, when we talk about these
trade barriers, it's basically, or sometimes it very often boils down to
the issue that there are some countries that want to have completely free
trade without or with as little rules as possible, and there are other
countries that come from a more different legal and regulatory approach
where they say: well, there are some issues of protection on the customer's
side but not necessarily only on the customer's side.
And these approaches have to be discussed and have to be harmonised, and
I believe as using terms and business dialog, specifically the North
American approach and the European approach which is going to be quite
Mr. RONALD PLESSER:
Well, that is the last word, I want to thank this panel for, I think, an
excellent survey of laws, and we look forward to the rest of the conference.
CHOICE OF LAW FOR CONSUMER CONTRACTS AND
DEVELOPMENTS IN THE EU
Mr. MATTHEW YEO:
We have the agreeable task of holding on the panel challenges. So if you
could kindly return to your seats we'll get started and try to keep Ruth
There has been a slight change in the line up here. We've decided to
blend the next two panels together, that is, the panel concerning Choice of
Law and whether or not jurisdictions recognize choices of law in consumer
contracts, and the panel on Recent Developments in the EU. As we'll see
shortly, those two topics are very closely interrelated.
I'm Matthew Yeo. I'm a lawyer with the Washington law firm of Steptoe
& Johnson. I work in the E-Commerce area generally. Our panellists
today are Susan Crawford and Scott Blackmer who are partners at this law
firm in Washington, I've just heard of its name, Wilmer, Cutler &
Pickering; then we have Mike Pullen who is an associate with the Brussels'
office of Dibb Lupton Alsop. He's been very active in EU electronic
commerce matters; then we have Mark Bohannon who is the Chief Counsel for
Technology and Counsellor to the Under Secretary at the United States
Department of Commerce, he's been active in a wide array of matters at the
international level and within the U.S. relating to electronic commerce and
policy initiatives of the United States in that area.
One of the interesting things about being an American lawyer practising
in the area of electronic commerce is, and particularly in the area of
electronic commerce policy, is the extent to which so much of our focus
right now is on developments in the European Union. It seems like we spend
a lot of our time thinking about developments there and how those
developments will affect things at the broader international stage.
I think there are a number of reasons for this. The first, as several
people have alluded to, is simply that I think the Europeans have a penchant
for regulation that is perhaps not shared by some of their major trading
partners, and so it means that there's a lot of regulatory activity over
there that we have to keep our eyes on for better or for worse.
But I think the second and somewhat more charitable explanation is that,
because of the imperative of creating internal market because there are
fifteen member states with different languages and different legal
traditions, they've had to address a lot of these jurisdictional issues much
earlier on, even in the sort of pre-cyberspace world, and so have had some
greater experience in thinking about how to address conflicts of law issues;
how to address harmonisation of substantive principles in consumer
protection laws; how to think about different kinds of jurisdictional
principles. And in that respect, I think we can perhaps draw some lessons
both positive and negative from the European experience and think about how
those lessons might address efforts at the broader international level to
address some of these problems.
I think there are both positive and negative aspects of that. As I've
alluded to, I think the positive aspect is simply that Europe has a lot of
experience in this issue, has numerous conventions and directives, including
the Brussels and Rome Conventions which we'll hear about; the Distance
Selling Directive; the proposed Financial Services Distance Selling
Directive; a variety of other directives in this area. They've had a lot of
time to think about this, and we can look at some of those ideas.
I think the negative concern, though, is simply that, as Europe goes
forward to address some of these issues, I think there's a risk that they
will create an immovable baseline that will make it difficult in some
respects to address these problems in the broader international context, and
I think what's going on over there, we should watch with concern, lest it
create a list that preclude certain kinds of resolutions at the
international level, particularly of a self-regulatory nature to the extent
that some of these proposals and some of these directives and conventions
provide for certain non-waivable rights, or certain kinds of provisions from
which there are no derogations. I think there's a risk that that's going to
foreclose the range of possibilities at the broader international level.
So with this sort of preparatory remarks I will hand it over.
Mr. SCOTT BLACKMER:
Thank you, Matthew. Ron Plesser and the last panel gave, by the way, a
very good introduction for this one and so gave us an idea of the range of
consumer protection sorts of issues that are controlled by law, and now we
want to focus on what if anything we can do about selecting consumer
protections or remedies for consumer questions contractually. Ron gave a
good description of that panel as having taken you to Epcot Centre,
travelling from country to country, and I think we're going to take you now
over to the Magic Kingdom where we're going to visit Tomorrow Land. And I
just hope by the end of the panel you haven't decided it's Fantasy Land,
because something must be done.
If you look at what kinds of -- and the circumstances in which we make
contracts between consumers and businesses that are selling things in the
offline world, it's important to remember that an awful lot of consumer
transactions are not with written contracts at all and are not legally
required to be. There may be some consumer protections that apply as a
matter of law, but when I walk down to McDonald's and order a hamburger, I'm
usually not engaged in extended negotiation with the young person behind the
counter. There are posted terms, there's a picture of a hamburger up there,
there's a price posted and if I go -- that's treated traditionally in Common
Law countries as an invitation to trade -- and if I go in there and say:
"I'd like to order one cheeseburger", then I'm taken legally as offering to
buy a cheeseburger at the posted terms for the described product.
When we get into certain kinds of contracts or above a certain monetary
value, then it's wise for the parties that want to do it as a matter of
their own prudence but also often required (and typically required according
to the category of goods or services that are being purchased or the
monetary value of them) that there must be a written agreement or there must
be a signature. And that usually is going to include either stated or
statutorily provided default terms with respect to warranty, liability,
payment terms, et cetera.
And then we have to remember that so many consumer transactions offline
and the majority of consumer transactions online are handled with a form of
payment other than cash, so that often the rules that apply through a
credit, the use of a credit intermediary, credit cards or debit cards,
stored-value cards, smart cards, whatever is being used, often there will be
an intermediary involved, and there are agreements between the intermediary
and the merchant, and between the intermediary and the person who holds the
card. So that often there are additional procedures, and Ron alluded
earlier to the chargeback investigation procedures in the credit card
industry in the United States, and increasingly in other countries. So that
even if it's a low dollar value transaction, very often the method of
payment brings with it ways of resolving disputes and basic provisions that
make it difficult for someone to engage in transactions in a way would be
considered unfair or deceptive in the offline world.
The last panel, and I'll just go quickly through this, because the last
panel really talked about quite a number of public law constraints. The
general principle of course is the freedom to contract, but freedom to
contract in the consumer sales context is always going to be subject to
additional public law constraints -- first of all, with respect to the
legality of the transaction itself, and probably a good
example of that is Internet gaming sites.
In addition, there is fraud, which may be treated -- in fact, in most
jurisdictions seems to be treated -- both as a matter of living up to
contractual promises or advertised promises but also potentially as a tort
or a crime. And so those are public law constraints where it's not
possible, for example to have consumers waive their protections against
being deceived and entering into the transaction itself.
In the United States under the UCC, there's this notion that unfair or
unconscionable terms, especially in contracts of adhesion which are directed
by one party and not really negotiated between the parties, will be
unenforceable. And then, there are often rules of the sort which say: we
won't tell you what the term has to be, but we will tell you that it must be
disclosed. And in some cases -- think of interest rates, for example, on
credit arrangements or instalment sales, we'll tell you that it must be
disclosed in a particular way, and with rules of conspicuousness.
We haven't talked much about conspicuousness, but that's been quite an
issue in several legal areas where disclosures are required and there is a
conspicuousness requirement. It almost always has been stated in terms on
how conspicuous terms must appear on a written contract. It's very hard to
translate onto the presentation of webpages to people's own PCs, Internet
screenphones, or kiosk terminals where you don't know exactly how it's going
to appear in the final version.
And then, finally, there are public law constraints as to what kinds of
remedies are allowed or must be allowed, and that includes in what sort of
courts they must be enforceable, what sort of regulatory agencies may be
able to step in and offer -- as in the United States the consumer protection
agencies at state level often provide for -- additional procedural remedies.
And then there's the separate issue of the regulated industries and the
professions that require licensing because they often bear with them their
own minimum standards, ethical codes of conduct and regulatory bodies.
So those are all public law constraints on the freedom of contract. Just
so we're clear, there's only a certain range of activity that is going to be
possible to determine by contract between consumer and vendor in any event,
and that essentially has to do with the commercial nature of the dispute.
In choosing the law that will apply and the forum in which the law will be
enforced, there are a couple of general constraints. The concept which
we'll discuss a little bit later -- the choice of law, choice of forum even
in contracts of adhesion in the United States -- there's the possibility of
that application, but there are still some rules that courts tend to look
at. They still want to see a nexus of the forum to the transaction and to
the parties, and they want to see that the choice of law and the choice of
forum are not going to be contrary to notions of fundamental fairness. And
as Susan will explain in the adhesion contract context, that that brings
with it even more constraints.
And to the extent that the terms are being enforced through public law --
consumer protection acts are consistent with the principle of anti-fraud --
then the choice of law and choice of forum between the parties is probably
not going to be respected.
In the case of the regulated industries and professions, and we had the
good example of telemedicine a few moments ago, those laws themselves will
often import their own jurisdictional concepts so that they will define the
territory in defining the acts to which they apply. And to the extent that
the jurisdiction can claim that those acts are within its jurisdiction and
there are no limiting constitutional principles or international comity that
apply there, again, that's not something that can be altered by contract.
Another good example related to consumer protection is privacy, where one
of the issues with the Data Protection Directive in Europe is whether
Article 4 creates a separate jurisdictional basis for asserting that
European privacy rules apply to people outside of Europe who are using
facilities in Europe to collect data, even though they're not established
there in the regular sense for business.
And finally, there are mandatory consumer protection laws. You had the
example from China and Taiwan and Germany in the last panel, where there are
fairly comprehensive regimes, centralized regimes, for consumer protection
law, in which many of the provisions on their face are mandatory within the
territorial scope of the jurisdiction.
The kinds of consumer protection laws we're talking about, and that are
being discussed in the OECD context now - I will just give a few examples.
At the federal level in the United States, the Magnuson-Moss Warranty Act,
and there are several other federal acts especially with respect to
investments and depository institutions. And there are a lot of other acts
which are primarily at the state level and they're quite varied. Some of
them have to do with the use of credit cards, some of them have to do with
buying mobile homes or with telephone service; often they are very selective
in the activities that they apply to. They sometimes leave gaps, they don't
always use consistent terminology, and it is done state by state. All of
those are problems, of course, for those offering goods or services online.
In the European Union, there's been -- we'll talk about two or three of
the directives specifically today, but just to make clear that there are
actually several harmonising directives that have an impact on consumer
protection law in the member states - a directive on unfair terms,
advertising directives, the distance sales directive (and now the draft
directive for distance sales of financial services), a directive on package
travel which applies to tour packages, and, of Course, the proposed
E-Commerce directive that we'll be talking about in more detail later. And
all of those are interesting examples of trying to harmonise disparate
consumer protection rules amongst the Member States.
And then I'd like to point out that there are at least two different
kinds of consumer protection rules that you get in these statutes and
directives. One is providing default terms for terms and conditions that
have not been explicitly agreed between the parties, but where the parties
could have agreed to different terms. The other is in establishing minimum
standards; they sometimes are exclusive, sometimes they say what the rule
is, sometimes they say it must not be more than, or less than this. An
example would be usury laws that establish interest rates so that you know
what the top level of interest is that you can charge. In an installment
sale or a credit agreement there's typically no restriction on the bottom
level, there's no prescribed interest amount, but there is a cap that's set.
So very often there are floors or caps that are established in the consumer
protection laws, but sometimes they only provide the default terms. Now
obviously, anywhere the law is only providing default terms, we still ought
to be within the zone of things that consumers and vendors can contract
about, so that vendors ought to be able to include those sorts of terms in
their agreements - as long as they meet minimum standards wherever they are
There is an activity right now at the OECD in connection with trying to
establish online consumer protection guidelines. Last week the OECD
circulated a preliminary list of topics for consideration in the context of
mandatory consumer protection laws, and the activity going on right now is
asking the OECD member states to come back and provide a list of the laws
that apply in their jurisdictions that fall into these categories. They
list the possible mandatory laws such as minimum standards for warranty
terms, for liability and limitations on liability, for packaging and
labelling, marketing and advertising rules such as truth in advertising,
disclosures, special rules about gifts, contests, and lotteries, comparative
advertising rules and special rules with respect to dealing with children.
And then distance selling rules which have to do often with additional
disclosures, confirmation periods, cancellation periods, cooling off
warming up periods when you're selling at a distance, whether it's by
telephone or by television advertising or over the Internet.
So this is an inventory process that's going on right now, and one thing
we can take away easily from this conference is to say: let's gather the
information we have here and make sure it gets into the process so that
there's as complete an inventory as possible, because then you start to see
where the similarities are, and what are the things that most need to have
harmonisation or mutual recognition.
Once you go to cross-border consumer sales, then you have the issues that
I won't delve in depth now because I think they've been covered by earlier
panels: U.S. constitutional limits on how far state consumer protection
laws can apply; in the European Union, the Brussels Convention which is
present basically says that it's going to be the home court forum for the
customer who is targeted at his residence, and the Rome Convention as to the
applicable law for consumer products, which talks about not derogating from
the mandatory consumer protection laws, again of the jurisdiction in which
the consumer is resident when the customer has been targeted there. And the
question that everybody has been trying to resolve is how to apply those
rules and in the case of recent activities by the Commission, how to amend
those rules to specifically apply to online commerce.
And then, just keep in mind in the trade context, that in case you're
ready to run off with a WTO complaint, remember that both the GATT and the
GATS (trade in goods and trade in services) recognize that countries can
maintain non-discriminatory domestic regulation, and in the case of the GATS
Article XIV, it's much more specific about saying that this can include
regulation with respect to warranties, privacy, public order, public morals,
and certain other areas that we would think as of being related to consumer
protection. So the concept there is this: unless the regulation is applied
in a way that is disproportionate and discriminatory, in a way that acts as
an unjustified barrier of trade, the fact that there are restrictive
regulations in a country that says it allows cross-border sales and services
is not going to be enough by itself to create a WTO complaint.
Applying these principles to E-Commerce, we have the traditional problems
of figuring out when has a consumer been solicited in his or her own country
-- because that's often relevant under the existing laws -- and when has the
contract been completed online? And then there are the questions of who's
come to whom first, and whether it takes an email or simply a website to be
'targeting' customers, the uncertainty of applying the 'effects' test to
regulatory jurisdiction, and the desire to create a scheme in which there is
greater predictability and transparency, both for consumers and for vendors.
And then, what we're looking at here today especially, and that Susan
will be discussing, as you know, in greater in detail, is how you provide
Now, where are the fora where this is being discussed? Of course, first
at the national legislatures and provincial and state legislatures (and the
EU is a good example, because it's already having to deal with cross-border
sales) the OECD, the World Trade Organisation and The Hague Conference,
which we've spoken a little bit about, and some of the private industry or
private industry and public sector dialogue fora where this is being
discussed as well. The ICC project in which I'm involved is identifying
existing barriers, best practices and organisations on a self-regulatory
basis such as coming under the umbrella of the advertising associations in
the UK where there are already some trust seal and self-regulatory dispute
resolution procedures, and then with recommendations to governments as to
how to treat those. And there is the ABA jurisdiction project that, of
course, you've heard about.
Where all this is leading is that we don't expect, I think, any of us, to
see harmonisation across the board in all the contracts choice of law
issues, much less the public order issues, but there may be ways, even
before there is harmonisation in many of these sectors, to be able to create
a zone in which consumers and vendors can have greater confidence. And we
have some suggestions for what courts and legislatures might do to defer to
that, and what standards or conditions they might set for such remedies.
And having laid out the problems, this is where I'd like to turn to Susan
Crawford for some potential solutions.
Ms. SUSAN CRAWFORD:
Thank you, Scott. Well, there clearly is no magic bullet for choice of
law problems in consumer contracts with online vendors. Harmonisation is a
long way away, but because human beings, in which category many people
include lawyers, are naturally cheerful and resilient, I think we should try
to work on frameworks through which we can work, even short of
I'm going to touch extraordinarily briefly on conflicts theories in the
U.S.; I'm going to propose a new theory that could be applied
internationally to form contracts between online consumers and vendors; and
I'll point out all the many, many questions that are raised by the
application of this theory.
First, this is a time-honored practice. You look back at conflicts
jurisprudence, and say it's all chaotic, nothing can be done. Looking back
at the first restatement in U.S. conflicts, the idea was the law of the
place of the last act that gave rise to liability should be applied to a
Then we moved on in the 20th century to another multilateral approach
where we're considering interests
from outside the U.S.; this is the interest analysis theory under which
state interests have primacy; the problem of course is that courts can
manufacture interests at their will and find it very easy to do so.
Dean Perritt talked about this yesterday, that we have a mixture in the
States of territorial and interest analysis factors that courts use to
decide choice of law questions. What about the interests of private parties
and their expectations? And that's what we're here to talk about today.
What is our vision of how choice of law decisions ought to be made by
local courts? We're in search of what Professor Lea Brilmayer calls the
"Holy Grail of Conflicts Jurisprudence," finding a choice of law system
that's built on uncontroverted assumptions.
The recently appointed CEO of Hewlett-Packard, Carla Fiorina, told the
New York Times last week that the reason she dropped out of law school after
the first year was because of the singular focus on precedent that she saw
in her classmates and in her teachers; she couldn't stand it, she dropped
out, she became wildly successful and a great corporate leader. So perhaps
it's time for an Internet-based conflicts theory that takes into account the
special characteristics of the Internet of which we are all enamored, the
personalisation, the easy dissemination of the information to both consumers
and vendors, the almost unlimited information and availability of choice,
and the total absence of sales pressure.
What's the solution? As Andy Pincus said earlier today, and as Ron
repeated, there has to be a middle ground, it cannot be that we will choose
one way, country of origin or place of the consumer as the default rule,
there has to be a new solution. Harmonisation will take too long, we know
that we're going to have multiple legal regimes that will apply, and we want
to balance all the interests that are engaged in E-Commerce. We have
The proposal I'd like to discuss is called Deference Analysis and I've
been pumping this during the coffee break, so I hope you all recommend the
terminology. It fits in with Andy Pincus' two track system. I'm proposing
this in a single context: When courts consider choice of law elections made
by online vendors and consumers on the Internet, with all its availability
of choice and absence of pressure and opportunity for comparison shopping.
The first principle under U.S. law that provides a background for this
theory is that adhesion contracts (which you could call form contracts, a
less lurid term), are enforceable unless they are unfair or unconscionable,
and the forum selection and choice of law selections made in those contracts
The other assumption I'm making in this presentation is that we're
assuming the presence of personal jurisdiction. So here's the question:
should a court defer to a choice of law made by a consumer in a contract
with an online vendor, a form contract; under what circumstances should that
court defer? And the answer I'd like to propose is that yes, the local
court should defer in certain circumstances which I'll line up for you, if a
meaningful choice of law has in fact been made. Here's the first assumption
on which this theory is based.
We'd have to show the consumer extraordinarily clearly where they were.
It would have to be almost as clear as it would be if you were travelling to
Greece or France or England, that you had indeed entered a different place
by going to work with a particular online vendor. We have to talk about
what kind of disclosure would be necessary. This could be accompanied by
rich information for the consumer about the laws of the particular country
that has been chosen by the vendor.
The second assumption. There's got to be a convenient online forum, it
cannot be that the vendor is allowed to preclude availability of a
convenient forum in order to avoid litigation. In the context of the
Internet, an online forum may be the appropriately convenient place, and
this is the big next move that was suggested by Andy Pincus and many other
speakers at this conference, that we need to facilitate, accredit, and set
up reasonably administered online forums through which consumers can find
the kind of redress to which they're entitled, with adequate notice,
opportunity to be heard. You know, I spent an entire term on Goldberg v.
Kelly, I remember, you've got to be there, and this would be an online forum
that would embody those procedural rules.
The third assumption, and this is the tricky one, is that we need to
create a club of countries who respect one another's law. By this I'm not
talking about necessarily full scale harmonisation; I'm talking about a set
of minimum baseline characteristics that the members of this club would all
have; they would have to have a concept of unconscionability in their law.
Remember that the question the court is answering is not the ultimate
question of liability in the case, but simply is it reasonable to defer to
the law of country X that's been chosen by the consumer, whose contract is
in front of me? This may require some convergence, there's got to be
something more than mud flaps and Sunday closing laws, our new two favourite
examples of legislation, and less than absolute coherence, complete
agreement on consumer protection laws; something that's good enough so that
the court can be assured that the local consumer is in fact protected by the
law that's been chosen.
The fourth assumption is that the consumer has actually made a meaningful
agreement, a meaningful choice of the law of the online place that he's
visited, knowing that he's gone to a different place. On the Internet, I
posit, choices will be more meaningful because there will always be more
information that the consumer can quickly click to, comparative shopping,
the FTC, an ability to go very quickly with one click away to third party
intermediaries who can help you understand where you've gone and what you're
about to sign up to.
So the proposal is that if all four of these conditions exist, the local
court of the consumer's country should in fact defer to the law chosen
knowingly, meaningfully by the consumer and the online vendor.
Now. But you're saying, what about fraud? Oh, don't worry, we're not
trying to include fraud in this proposal. Consumer protection agencies
always have to have the ability to reach out and protect their constituents.
Of course, where do we draw the line, what is fraud? Also, we would
exclude from this proposal contractual terms that have effects on third
parties, such as importing illegal substances or otherwise affecting other
people. But what fits in this category and how does this fit with mandatory
law, that's a big question, and a big subject.
So what the proposal is aimed at is run-of-the-mill consumer/vendor
issues governed by contract and deferring to the choice of law made.
Deference analysis promotes the interests of all countries and protection of
E-Commerce, and protects party autonomy more importantly. I believe that
online consumers are by and large more sophisticated because they've had
exposure to more information than most other consumers. And we will have a
chance to permit them to choose a law and abide by it in a knowing and
meaningful way with real redress provided through an online forum.
Next steps. Well, there are a lot of next steps, what's fraud, how --
this is part of our convergence harmonisation, harmonic convergence process
that we're all going to go through over the next few years; how do we set
aside what is fraud, what are these third party effects other than the very
easy cases that should be excluded from the analysis? What are these
necessary minimum characteristics; what we can come up with as a set of
baseline protections that would enable the club to form and to defer each
other's law; and how do we set up a true convenient online forum that has
enforceable mandates and is trusted by consumers who are dealing with it?
Thanks very much.
Mr. MIKE PULLEN:
Good afternoon, good morning, ladies and gentlemen, should I say. It's
actually six o'clock in the evening in Brussels, so forgive me for being
confused. Just to prevent any confusion amongst you, I am not Margot
Froehlinger. Margot is fighting a good fight in Brussels and was unable to
come at the moment, so she asked me to come along and to give you an
overview of current developments in the EU. I will say that I am speaking
as an attorney in private practice, and you will gather from my speech that
I'm definitely not speaking on behalf of the European Union.
I was asked me to come as an expert in the area of EU E-Commerce. I
always have great difficulty with the term experts, but a Lithuanian
colleague of mine, after seeing ninety Western lawyers and economist come to
give presentations to the Lithuanian government, basically said that she had
a definition, and she said: the definition of an expert is a guy from out
of town with a power point presentation. So, under that definition I'm an
So I want to do two things. I first want to give you a quick run through
of the proposed E-Commerce directive, and the people who know something
about the directive, please bear with me, but I'm taking a zero level of
knowledge as my base point.
I have forty-one slides here, so for those who don't speed read, they're
posted on the Internet, and I will go through this very quickly because I've
got literally fifteen minutes. Then I want to talk in a little bit of
detail about amendments to the Brussels Convention, proposed amendments to
the Rome Convention, and a proposed Rome-II convention and non-contractual
liability which basically will have the effects of setting back E-Commerce
in the European Union by twenty years.
To give an analogy, when cars were first invented in the UK, we passed a
law which said if you are driving down the road, you ought to have a guy
with a red flag walking in front of the car. It was mandatory, you could do
three miles an hour, you needed this guy with the red flag. The proposed
amendments to Brussels and Rome are that red flag.
The overview. The E-Commerce directive was designed to create a European
internal market framework in E-Commerce by the year 2000. Now, as a
preliminary point, I should say, we don't need a directive for this. The
right to provide E-Commerce services is already there, it's been there since
1957 because Article 49 of the EU Treaty gives you the right to provide
services across borders. The only reason that we actually need directives
as secondary legislation is that most member states don't understand or
won't comply with their obligations, so we actually need them put in a
framework in order to get people to understand them.
One of its aims is to strengthen the competitiveness of European industry
and to reinforce the position of the EU in international discussions, that's
quite interesting. It's set to establish a clear framework that will allow
E-Commerce to benefit from the advantages of the internal market. And I'm
flying through this, in particular it's based on the country of origin
Now, country of origin in a EU context is very simple, it means that if
you are a company established in the UK, and you comply with UK law, any new
law as implemented in the UK, you can trade freely throughout
the other fourteen member states, notwithstanding the fact that their laws
may be different or more strict. It doesn't matter what the German law
says, as far as a company which is established in Germany is concerned,
that there may be stricter requirements, but the German government must
accept that the law in the UK offers an adequate level of protection.
The directive will remove legal uncertainty by providing a definition of
the place in which you're established. The reason for this definition is to
stop several member states trying to take jurisdiction over an E-Commerce
service provided so that a clear framework of what establishment means and
where you're established.
It prohibits prior authorization regimes by member states, specifically
aimed at targeting online service providers. It establishes certain
transparency requirements. Now, what that means is, if you're a service
provider or you're an E-Commerce trader, you're required to put your name,
your address and your contact details on your website so consumers and other
business parties know exactly who they're dealing with. It has a lot of
provisions on what in EU speak is called Commercial Communications. And
what we actually mean by that is advertising direct marketing and
sponsorship. It sets a benchmark for the free movement of those types of
communications. It also authorizes the use of commercial communications by
regulated professions subject to national self-regulatory codes. So, for
example, it allows lawyers to advertise, and that's not the case in many EU
jurisdictions at the moment.
It has fairly detailed provisions dealing with online contracts. First
of all, it establishes the fact that you should be allowed to contract
electronically, which is currently not the case; under the laws of many
member states you need a paper contract.
It also sets provisions for the point that when the online contract is
concluded, it -- this is contentious at the moment, but it limits the
liability of Internet service providers, it establishes a mere conduit
exemption. There's an argument over that, what the copyright will be. At
the moment there are some legitimate concerns about copyright, but it's my
personal view that a lot of concerns stem from the record companies trying
to protect their traditional
distribution systems, and they don't like people like E-Music, who they
think they'll just come and circumvent them.
Implementation. It encourages codes of conduct to be drawn up at the EU
level. It also encourages alternative dispute resolution, particularly in
the context of consumer protection.
It attempts to provide better legal redress which is appropriate to an
online environment, and to establish quick and efficient administrative
corporation between the member states to try and identify and solve problems
before they get to litigation.
What's in it for you? The E-Commerce directive sets out a clear light
regulatory framework for the internal market at the time when in Europe the
internal market is being threatened by all sorts of protectionist interests.
It also identifies areas where the internal market doesn't work, either
online or offline. It gives opportunity, if it goes through, to say:
"Well, I can trade in this method online, why can I not do this offline?"
The idea is that the E-Commerce should just be seen as another commercial
trading medium rather than something of a special issue. We'll forget about
Mr. Daley's quotes.
The E-Commerce initiative is being undermined by the adoption of the
Brussels regulation on jurisdiction, and the proposed adoption of the draft
Rome regulation on non-contractual liability. Now, I'll explain these, and
I should take a couple of moments to explain what happened.
The Brussels Convention was never part of the body of EU law, it was an
international treaty between the member states. Last year the member states
got together, or their ministries of Justice got together and they decided
to amend the convention. They didn't consult anybody to my knowledge, they
certainly didn't consult industry. They had a series of nine meetings in
which they came up with an amended text. They then froze their discussions,
and rather than going on to ratify the convention in the normal way you
would ratify a treaty, they asked the European Commission to propose it as
an EU regulation pursuant to new powers under the Amsterdam Treaty which
brought justice issues within the body of EU law.
The Commission has got a constitutional obligation to consult widely
before proposing new legislation. Because this measure had been agreed by
the member states, the Commission ignored that duty completely as a result
of a strong lobby. And at the back of the room there's an article from the
Wall Street Journal on letters we sent to the Commission on this issue which
set out the position. They've now agreed to hold hearings on the convention
in the autumn.
Now, the original text of the convention said that the consumer's courts
would have jurisdiction when you were dealing cross-border if you actually
targeted that consumer, you had to solicit him.
In an official report on the convention, the example that was given was
if you are a French company and you put an advertisement in a German
newspaper in German aimed at German consumers, you are caught by the rules.
If that advertisement appears in an American periodical, The Economist,
Wall Street Journal, whatever, which is circulated in Germany, but that
advertisement is not targeted at German consumers, you're not caught.
The new text says you're caught if you direct your activities towards
one or more member states. The recital to the new text, Recital 13 says
that you are deemed to be directing your activities towards other member
states if a consumer connects at your website.
So that means that you could have a website and have no intention
whatsoever of dealing with foreign consumers, but your website can be
accessed from another member state, that makes it easier for a foreign court
to gain jurisdiction.
So you say: "Well, what's the problem, it's only a jurisdiction issue."
If a consumer, say, we have freedom of movement in the EU, say for example
we've got a British consumer who lives in France; he accesses a website in
the UK, and he contracts on the basis of English law, standard form contract
with a UK company. There's a dispute. The French courts have jurisdiction
because he's accessed the website from France. Under the existing Rome
Convention on Applicable Law, you cannot by a choice of law clause take away
the mandatory protection that a consumer would have under his national
consumer protection laws. It's a mandatory rule of French law that all
consumer contract should be written in French, so I've got a Briton living
in France who understands English perfectly, the French judge, and this is
going to be a court of first instance, this is not a major arbitral centre
or whatever, can then throw that contract out, null and void. That means
that all your standard forum contracts with French consumers are also null
Now, you can say, a lot of the multinationals say: "No problem, we'll
put a disclaimer upon the site, and we'll have a different website for each
country, we'll have a disclaimer: this is only opened to residents of
country X." That would be fine, but most of the companies that are part of
this forum are dominant for the purpose of antitrust law. You start
fragmenting the market by using different websites, put up disclaimers,
you'll probably find yourself abusing your dominant position.
Okay. Now the Brussels regulation is going to be voted on by the Council
of Ministers on the 11th of December. I've been taking a leading role in
the lobby. We've had some success, the European parliament is now getting
involved, you've got one month; Brussels closes down in August, if you want
to stop this, you've got
one month to get involved and do something about it.
I'll talk a little bit about the Rome Regulation on Non-Contractual
Liability. The Rome Regulation has all sorts of nasty clauses about label
and product liability. But the worst one is Article 6 which relates to the
Continental European Concepts of Unfair Competition Law. And it says: "the
law applicable to obligations arising from unfair competition or unfair
competitive practices shall be the law of the country where the competitive
action or unfair practice affects competitive relations or the collective
And what does that mean? To give another example from the UK, if I got a
website based in the UK or Holland, I can offer three for the price of two
consumer discount quite legally, it's lawful under UK law. If that website
can be accessed by German consumers, the way this reads at the moment, I can
file with German Unfair Competition Law where this sort of thing is not
The Commission pointed out in its explanatory memorandum to the draft
E-Commerce directive that the whole concept of Continental European unfair
competition law will have a significant detrimental effect on the
development of E-Commerce within the EU. And I can give you an analogy of
how this works.
I used to work in the Commission, and I drafted a complaint against
Germany, and the complaint was on the basis of a complaint which the
Commissioner had received from Polygram. Polygram wanted to get into the
German CD market, and the only way they thought they could do it feasibly
was by using CD clubs, and they were based in Holland, so they were direct
marketing into Germany. The standard CD club format, you have to buy four
CDs a year, but if you bought six, Polygram would give you one free as a
The German Consumer Association took Polygram to court in Germany and got
an injunction and also got damages from Polygram under the German Unfair
This case is now going to the European Court of Justice. But I drafted
the original complaint five years ago. So Polygram has been kept out the
German market using those techniques, for six years.
So, don't think this is an hypothetical situation where what are these
guys are going to do, this looks like, you know, this is a law, but nobody
is going to enforce it. It's not your average consumer who's going to come
after you, it's the consumer associations pursuing class actions. That's
where you're going to get your problem.
Now, I'm just about finished because I'm running out of time, but I just
want to make two more points.
One, when you see consumer protection or protection of national culture
flagged up in Europe, if you scratch the surface, you will usually find
trade protection behind it. There's many times we're doing -- you know, in
England we have these dogs in the back of cars and they nod like this. In
industry, when consumer protection is mentioned we all seem to do a nodding
Now, we're not talking about protecting consumers because the Brussels
Convention doesn't work. In many European jurisdictions, there's no
contingency litigation, you can't recover your court costs effectively.
That means that by the time a consumer has gone to one attorney, they've
gone to court, they've got a judgement, it's been enforced by a second
attorney, the cost of going to court and going to the attorneys, it just far
outweighs the remedy which the consumer is looking for.
What the consumer wants is a quick effective cross-border remedy. That
is not the case with the Brussels Convention. The Rome Convention is simply
a piece of trade protectionist legislation designed to fragment the internal
I've now run out of time, so I will stop there, ladies and gentlemen, but
I'm prepared to take any questions later. Thank you.
Mr. MARK BOHANNON:
Ruth and Matthew, at the risk of subjecting the audience to my rendition
of the Man in the Federal Express commercial, how much time do I have?
Mr. MATTHEW YEO:
I think you're looking at about ten minutes.
Mr. MARK BOHANNON:
Okay, thanks. I wish I could say it was a pleasure to be here to talk
about what are developments in the European Union today; that is not a
reflection on either ILPF or the many good folks who are here, many of whom
I work with closely, I think it's the result of two things.
First of all, while I spend a great deal of my time following
developments in the EU, I do not hold myself out as an expert in European
law. Thus, I'm a little anxious to get engaged in the details which many
experts here are much more familiar with.
The second reason why I wish I were more thrilled to be here is that, in
fact, what I believe are some, maybe by perception, developments in the
European Union that I would like to reflect on. I would also like to make
it very clear that, in fact, on many issues related to electronic commerce,
I and my colleagues in the executive branch are engaged in very
constructive, very fruitful discussions to get a deeper understanding of the
need for proposals in the European Union and how we can ensure that those
proposals are consistent with what I think are all of our objectives in
global environment for electronic commerce that facilitates all of us
participating in an effective way.
So with that caveat, I would like to leave you with, I think, a few
observations. Reflecting on what has been said yesterday and this morning,
that I would like to categorize as thinking about developments in the EU as
raising the risk of revitalizing the law of unintended consequences. And I
say this with a very clear, another caveat, that some of these observations
may be entirely predicated on perception, and I stand ready to change my
perception if the facts prove otherwise. But I say this because I think
that there are going to be some unintended consequences that we all need to
think about - how we want to approach both our discussions and our approach
to the changes that are going on in the European Union.
I, of course, have to start by recognizing that, of course, this month is
the two-year anniversary of the release of the Framework For Global
Electronic Commerce issued by President Clinton. And it is, of course,
through that policy prism that I will review what I think is going on in the
To restate what has been said today, and on many other occasions, those
principles included the affirmation that the Internet and global electronic
commerce depend on private sector leadership; the government should refrain
from action; that when it is necessary for governments to act, they should
be acting based on the principles that their action should be transparent,
minimalist, predictable; that we should not discriminate between the online
and offline environment.
And I would have to say that while I think many of you here will find
examples where the United States government as well as other governments may
have violated those principles, I think on the whole, the United States
government has stuck to those principles, and we still believe they are the
right basis for action internationally.
I have to say also that I think it is difficult for someone in the United
States government to truly understand the immensity of the complexity of
what is involved in making an internal market work in the European Union.
And all one has to do is look at the list of proposals that might affect
electronic commerce, some of which have been mentioned today. This morning,
while waiting for the program to start, I, in my own mind, listed all the
ones that of course we are familiar with. As you just heard, there's a
directive on electronic commerce proposed by DG-15, or the commission
formerly known as DG-15; there is a proposed regulation that would implement
the Brussels and Rome conventions. I have to say I can't comment on it
substantively because I and, to the best of my knowledge, no one else in the
executive branches has been able to receive a copy of it yet.
There are proposals to the changes in the Rome and Brussels conventions;
there's a direct selling directive; there's a financial services directive;
there's an electronic signature directive; there's a proposed directive on
the details of encryption; there's a long standing council directive on
possible ISP regulation; there's a directive on the protection on data bases
which of course is to be distinguished from a proposed directive on the
protection of personal data; there are working papers on the harmonisation
of taxation, convergence, and as Scott suggested, there is also a proposed
directive on package travel.
The context, of course, of all of these directives are really quite
immense changes going on in the Common Market and in the European Union,
most important of which is probably telecom liberalisation which is changing
the fundamental economics for Internet access and making it more accessible
for individual Europeans to benefit from the global Internet. There's also
the challenge of doing all of this in the context of an expanded membership;
there's also the process over the next year of having a common currency;
and, of course, changes to the fundamental treaties such as Amsterdam where
questions such as the competency, with a small "c" of the European
Commission to address areas such as jurisdiction are also going to be
So, it is with all of this in mind that I think I would make the
following three observations which I think can be summarized in the
possibility of the risk of unintended consequences as all of these policy
objectives try to be achieved all at once.
The first is, I think there is a risk that, in fact, we will have a less
predictable environment, certainly in the short and medium term within the
European market. And I say this with the backdrop that one might argue that
in fact there has been a relatively predictable environment, particularly as
it relates to the transatlantic relationship that North America and the
European Union have.
Now, primarily that was because that relationship was inherently
commercial. And going back over a number of decades, that predictable,
albeit not always minimalist, not always streamlined, but certainly
predictable environment allowed, I think, one of the most, perhaps the most
intensive investment relationship to occur with any other region in the
world between North America and also throughout substantial sales of goods.
But as I said, that was predicated primarily on the fact that you had
inherently commercial activity going on to facilitate that relationship.
In this post World War II, up until the early 1990's, the role of the
individual, the consumer was not the dominant relationship, and therefore
you could establish, in a general sense, principles by which these
commercial relationships, which were heavily investment oriented could work.
We see the principles of the Rome Convention about allowing party autonomy
and choice of law. Similar provisions can be found in international
agreements such as the UN Convention on the contract sale of goods which
virtually all members of the European Union have signed onto.
But, of course, what we see in all of the proposals is, while we now are
beginning, like all governments, -- the United States government is not
excepted here - to begin focusing on the challenges of what it means to
provide confidence for the consumer in this environment, there are, in fact,
proposals, and I would say that the changes in the Rome Convention being the
most notable and the regulation, where the possibility of changes in the
commercial legal framework might also be affected as well. I say this
because I think it is important that, as we address the critical issue of
ensuring in this borderless world effective consumer protection, that we not
inadvertently affect what has been a very very deep commercial relationship
which is going to become more dependent on the Internet, more dependent on
electronic commerce, and more dependent on the borderless mediums in which
transactions can prevail.
But I also have to posit the possibility that in fact, even for
consumers, we may have a less predictable environment in the short and
medium term. And I say this based on my own reflections of what I've heard
yesterday and today and in other presentations prior to this conference,
that what we might be seeing through the mechanism of the European Union and
the various treaties under which the member states operate, is, and this
issue was brought up yesterday, we're not necessarily seeing the convergence
of substantive consumer protection law inside the European Union across the
board. Now I think there will be, in fact, some of the directives that do
provide that, but they were not necessarily seeing that across the board in
a way that in an idealistic world might in fact be assurances of broad
consumer protection. Instead what we might be seeing is, in fact, the
formalization of harmonisation that in fact may create more of a double
chess board than in fact a level playing field in which all of it is known.
Again, this may be my perception but it is an observation based on, I
think, the discussions yesterday and this morning that suggest that this is
a distinct possibility.
The second unintended consequence, and I do believe it is unintended, is
that I think through the plethora of directives which suggest that the
government needs to act first rather than wait is that we will probably be
experiencing an environment in which we see the reduced possibility for
I want to emphasize that I do not personally believe that the directives
add up to a rejection of self-regulation. In fact I think what we are
seeing through discussions, through the data, personal data protection
directive, and through other means is, in fact, a growing understanding on
both sides of the role of self-regulation. But I do believe that in all of
these directives, we are seeing the possibility that a framework for
consumers and industry or other private sector groups who have stakes in the
outcome of global electronic commerce will be inhibited from building
together non-governmental mechanisms that assure confidence and that there
might not be room to flourish those kinds of environments.
And I don't think this is an academic discussion because I also believe
that as I've grown to understand the complexity of the legal framework in
which all member states in the European Union operate, that, in fact, I
think there is a growing awareness of the role of what I would call
intermediaries who are not governmentally connected in assuring the
confidence that I think we are all seeking. I think we are seeing proposals
from countries like Ireland, many of the Scandinavian countries; I think we
will be seeing discussions of very interesting proposals in the Netherlands
with regard to this. The consultation paper issued by the United Kingdom in
March -- Jim Norton ,who serves as a key person in Prime Minister Blair's
cabinet on this issue, asked directly for comments about the role of
intermediaries to provide confidence in a world in which governments may not
be able to either have the resources or to act effectively.
So it's not just in the perspective of, I think, a North American
predisposition towards self-regulation that I think has, in many ways,
empowered our economy for many years, but I think it's also a question about
whether European versions of these non-governmental self-regulatory
mechanisms will, in fact, be allowed to flourish if, in fact, the assumption
of the European directives taken as a whole that the government must act
So with that, I leave you with some possibilities of the effect of
directions taken by the European Union over the last couple of years. We
look forward to continuing the discussions to reach a deeper understanding
of how the complex policy objectives that the Commission is seeking to come
together on in the European Union can work and our hope is that, in fact, my
perceptions (which I am perfectly prepared to say may not be accurate), we
hope they are disproved, and that in fact we do work together toward a role
in which governments are of, course, a key participant but are not, in fact,
directing at every level how global electronic commerce in the Internet is
With that I thank you and if we have time for questions, I look forward
to taking them, otherwise see you at lunch.
Mr. MATTHEW YEO:
We are right up against the limit of our time, but I think that meant
that we have five minutes for questions, is that okay?
In case there was any doubt that Mike is an advocate for a particular
point of view, he did ask me to announce that there's a meeting in Brussels
on September 9th for groups that have an interest in the revisions to the
Brussels and Rome conventions. Questions from the floor, yes.
Mr. CHRIS REED:
Can I make a brief observation on Mark's comments, I think, and then
leading to a short question.
I disagree that the European developments that Mark has talked about will
lead to greater uncertainty or may lead to greater uncertainty because the
certainty that he talks about was in business-to-business transactions. I
think the Internet offers the opportunity, for the first time, of large
scale business to consumer transactions across the Atlantic, and that's
really why these issues have come to the floor.
And the reason I felt I ought to make an observation is I have some
special knowledge on the electronic commerce directive because I ran the
research project, the last one that was done before the directive was
drafted. And I looked at the laws of all fifteen member states, and
essentially there is nothing new in the electronic commerce directive,
everything there was there in one member's state already. And what's quite
remarkable about it, is that in general, taking the disagreement across
fifteen member states, almost everywhere the electronic commerce directive
has opted for the least onerous possibility. It's not quite true, but
almost true, and if it goes through as it stands, it will be quite a
So in many ways there will be more certainty, certainly in my law firm
practice, advising multinational clients at the moment, we are reviewing
intensively the regulations of all fifteen member states. It's a very
expensive and longwinded activity, and they need to know this before they
can do business. As Mike said, what ought to happen is that now we will
have to review the electronic commerce directive which will be a much
shorter and less profitable job, but these things have to be done.
I think therefore the question is, the problem is actually at the
consumer protection level because the difficulty I see worldwide is that
most countries appear to assume or to start from the proposition that their
citizen should be protected by their own consumer protection laws. And I
wonder, is this also true of the U.S., would U.S. law and policy start from
the presumption that a U.S. citizen, sitting in the U.S., buying from a
foreign company should get the protection of U.S. law, because if so, that's
the fundamental problem everywhere in the world, and that's what we've got
to overcome, that kind of reluctance.
Mr. MARK BOHANNON:
Let me thank you Chris. Let me make sure that my point about a possibly
less predictable environment in a short and medium term is not directed at
any one directive, but in looking at, I think, a quite extensive list of
both actual directives and proposals, when taken together, suggest the
possibility that we may be in an environment in the short and medium term in
the Common Market where it is less predictable.
And I say that, leading to your question, because I think that by
comparison, U.S. legal experts have actually taken a much more cautious
approach to reexamining all laws that would affect. I mean, I think there's
been a very incremental approach to examining, starting with the principles
of minimalist approach, the Uniform Electronic Transactions Act being a good
one, where you start with the basics, then you start reviewing all the other
codes to see how they could be updated and adopted, but not rushing toward a
whole panoply of laws that suggest a very different framework in which we
are working. But again, as I said, this may be as much perception as it is
With regard to your question, I do not hold myself out as an expert on
all consumer law, but I do have to say that based on the information I get,
that the concept of a consumer in general being able to rely on one's
domestic legal framework for redress is, I think, a general principle.
I cannot say that it is in fact the case in every law in the United
States, and I use my credit card agreement as a very good example where I
may have certain rights if I have conflict with my issuing bank, in my
domestic law, but I'm fairly certain that many of my merchant agreement, I
mean, my card issuing agreements would subject me to the laws in another
state under certain circumstances.
So, I think it really depends on the kind of consumer protection we are
talking about, and in fact the nature of whether we are talking about say,
criminal, you know, where I am the victim of a fraudulent crime versus a
situation where I, as a consumer, may be a part of a transaction where I
might have, as was discussed earlier, basic protections that I was not
forced into a contract unreasonably but that I may still in fact be having
to deal with other jurisdictions depending on the kind of dispute it is.
So I don't think there's a categorical answer to your question, but I
think as a general principle, particularly when we're talking about criminal
enforcement or law enforcement kinds of things, probably right, but not
necessarily the case. I could actually be in a situation where, you know,
being a resident of Washington, D.C., I could easily contact, you know, a
law enforcement official in California if that company was subject to that
law. So it's not a yes or no question.
Mr. MIKE PULLEN:
Can I just make a point to something that Chris said. What interests us
in Europe at the moment -- we've got an agenda which says, you know, we're
going to have a Federal EU with an European army, but we don't trust each
other, with each other's consumers.
There's this real dichotomy in the, I won't call the consumer
protectionist lobby because the consumer lobby has been used as a vehicle to
hijack the internal market which was inadvertently a liberalising force by
law protectionist forces within the EU. And we say we need harmonisation
clauses, a very high level of protection, but there's no such thing as a
European consumer. We're not going to have harmonised laws across the EU to
protect consumers if there's no such thing as a European consumer. There
seems to be a duality of position.
There are a lot of issues we've engaged here, and as Chris has pointed
out, the electronic commerce directive take to a very low level, great light
flexible approach. If you look at what's happening in Brussels, when you
take several small pieces of things that I brought on and put them all
together, you'll find that certain more protectionist member states, notably
led by the current French administration, are actually trying to use Rome
and Brussels as a way to push back the electronic commerce venture. They
realize that they shouldn't have signed into this, and they now are trying
to pull it back into some sort of a more protectionist measure.
Mr. MATTHEW YEO:
I think we've run up against our time limit, and it's time for lunch, but
please join me in thanking this excellent panel.
LUNCHEON WITH SPEAKER
Mr. J.C. RENDEIRO:
Ladies and Gentlemen, if I may have your attention. My name is J.C.
Rendeiro, I'm the Vice-President and Associate General Counsel of IBM,
responsible for global services as part of IBM, that brings you e-business
services, the logo that we saw outside.
IBM is happy to sponsor this lunch, we obviously consider the subject
matter of this conference, and E-Commerce and E-Business generally, to be
extremely important in that regard. I'd like to compliment the speakers on
the overall quality of the presentations.
We are talking about the right thing if the rule of origin versus
destination, convergence, solutions by category of activity, the role that
bilateral or multilateral treaties can play, private law, the challenges and
opportunities of self-regulation, the importance of a pragmatic approach
that accommodates some and may be a lot of ambiguity in the short terms in
the thoughtful proposal advanced before lunch by Susan Crawford, which I
found very interesting -- as a disclaimer, I have to say that upon occasion
Wilmer, Cutler & Pickering does represent IBM, so I'm a little biased.
And while we're a long way from consensus, I personally am optimistic
about the future, if only because the technology which, as we all know is
driven by consumer demand, the technology has thus far proved more than able
to outrun the many forces that would slow it down.
It's now my pleasure to introduce Colm Dobbyn, Vice-President, Senior
Counsel of Mastercard International who will in turn introduce Nigel
Hickson, our luncheon speaker.
Mr. COLM DOBBYN:
I'm Colm Dobbyn of Mastercard International. It's my pleasure to be here
today to introduce Nigel Hickson. The ILPF is truly privileged to have
Nigel to talk to you today about the new UK Electronic Communications Bill
which was just released last Friday, and he'll give you details in URL later
on in this talk.
For those who don't know Nigel, Nigel is with the UK DTI, Department of
Trade and Industry, he's been there since 1982; he's an electrical engineer
by training from Hartfordshire, and he attended City University in London.
Since joining DTI in 1982, he's worked on encryption and financial service
regulation; among other things he's been in charge of the UK legislation
development for the last four or five years.
It was my pleasure to go to dinner last night with Nigel where he told me
some of the twists and turns that this piece of legislation has gone
through. But having heard some of the details, I think many of our
companies were very pleased with the substance of that legislation.
In addition to his work on the electronic authentication legislation, he
also deals with the EU directive on electronic signatures, and the
accreditation of certification schemes for BS-7799. He's also a member of
the Institute of Electrical Engineers.
Again I'd like to welcome Nigel and to thank him. I think he'll be a
very informative speaker.
Mr. NIGEL HICKSON:
Good afternoon, Ladies and Gentlemen! Thank you very much indeed for
that introduction, Colm, and indeed we did have a lovely meal last night.
Isn't Montreal a fantastic place, really, what a great place!
It's a real real pleasure to be here, it really beats London in the
summer, I can tell you that. And that's why it never fails to amaze me why
there are so many Americans in London during the summer, but there we are,
perhaps Washington is so hot.
I'm glad to be here, I'd like to thank the ILPF for inviting me to come
along; it's on very short notice that I decided that I'd like to come along.
We, as Colm said, published our legislation on Friday, which I'll tell you
a bit more about in a second, and until then, it was very difficult to know
whether I would be allowed out of London, but I'm very glad I was allowed
out of London because it's good to be here. And thank you very much indeed,
Ruth, for giving me a
slot to speak in today.
I suppose I have good news and bad news as in the case of all speeches, I
suppose. I mean, the bad news is that I'm a civil servant I suppose, you
know, I work for government, but you know, some of us have to work for
government because if we didn't work for government then you couldn't tell
jokes about us. And in the same vein, the good news is that I'm not a
lawyer, and I'm very grateful that there are lawyers, because if there
weren't, we couldn't tell jokes about them. So, no, it's a real privilege
to speak to you at lunch time.
I want to cover two subjects, very briefly indeed. The first is just
really to make a few observations on what we've talked about in the last
couple of days. It's certainly been absolutely fascinating for me because
firstly, as I said, I am not a lawyer, and secondly, this isn't really my
area. So when I go back and I have to report to the office what we've been
discussing, I can't tell them we haven't been discussing encryption,
electronic signatures and key-escrow, because if I go back and say we've
been discussing jurisdiction, consumer protection and issues like that,
they'll say: "Well, why did you go?" But I think these subjects are
absolutely vital and absolutely fascinating, and I want to just say a few
words about some of the things I've gained from the discussions in the last
couple of days and then go on to say a little about the Bill.
To start with I have a few observations. We are all heading for the
stars, it may seem a peculiar phrase, but it's something that came up right
at the beginning of this conference, and something that comes up in every
single conference I go to. Whenever you get a government speaker these
days, they have to start by saying: "We want to make our country the best
place to do electronic business, or we want to make our country the best
place to do electronic business." And it's very difficult actually being a
room with fifteen EU member states, because they all have to say this and it
becomes rather boring.
But I think the significance of this is, and I mean, and Canada to a
large extent, I think, has lead the way. I mean, it was Canada through
their own sort of light touch regulation that really enabled some of the
electronic commerce services from government to take off.
But we all have this common goal, and I think it's very important indeed,
because although we might all sometimes be rather negative about
legislation and I heard Mark, before lunch, say: "Oh God, the European
Union, there's directives here, there's directives there, they're coming
out all over the place." Well, I could say the same about the U.S.
Congress: "There's legislation here, there's legislation there." I mean,
how many Bills do you have to have on encryption before the House and the
Senate to get anything sensible?
There are a few years to go yet, I suppose, but I think the important
thing is, the important thing because our administrations are all trying to
encourage electronic commerce, I think that the sort of light regulation,
the 'light touch' and libertarian economics will prevail in the end because
the electronic commerce on the Internet is all so important to us.
And also, I think the other observation is that we're beyond first the
step, we take the Internet for granted now, we take electronic commerce for
granted. All the discussions we've had in the last couple of days haven't
been to say: "Oh, the Internet is a terrible thing, oh, this electronic
commerce is dreadful, we shouldn't get involved, you know, it's so terrible,
it's going to change our lives, consumers aren't going to know what to do."
I mean, that talk is gone. Only a few years ago, one could go to
conferences, not so much on this side of the pond, but certainly in Europe I
could go along to conferences, and people, even from governments, not from
France of course, people even from governments would stand up on the rostrum
and say: "Well, this Internet, you know, this Internet thing, you know,
perhaps it will be around for the next couple of years and then we'll forget
it, won't we, and get onto something more serious." But that's gone. We
all take it for granted that it's a fantastic tool, that electronic commerce
is going to be vital for all our lives, and I think that's incredibly
And so the conversation here, the discussions here are not on how to, not
if you like, how to suppress it, but how to use the Internet, how to use it
for our own advantage, and at the same time on how to find solutions to the
difficult problems that we've been discussing. Just a few observations on
some of them.
The jurisdiction discussion that we've had, the discussion on
jurisdiction has raised some really important issues. It's not simply a
host and home state issue, this demarcation, this problem that we've had in
the last couple of days in deciding whether it should be the rules of the
host country or it should be the rules of where the service is delivered has
become, has tended to overshadow some of the more I think important aspects
of the discussion.
And I think it was very salient indeed at the beginning of our
discussions yesterday morning, Mr. Perritt said - quite fundamentally for me
as a sort of newcomer to some of this scene - that we wouldn't really have
to worry too much about all these jurisdiction issues if we had some sort of
common framework for dealing with the problems, if we had a base regulation
to build upon and some of the extreme issues, there wouldn't be such a
problem. And I think that's where we are heading to a large extent.
The difference between the European Union and the U.S., and I won't say
much on that, but I mean, clearly we do have cultural differences, perhaps
we do have differences in the way we address problems, and we have
differences in the European Union, don't you believe it, I mean, just
because we come out with all of these hundreds of directives doesn't mean to
say that we all agree on them, not at all.
I mean, in the European Union we had to build a tunnel between France and
the UK and perhaps that's we'll need to do across the Atlantic or something
to bring ourselves a bit closer together because I think it is important
that we do try and share some of the common goals that we've been talking
And I think the direction is positive. If I can sort of reflect on some
of my experiences in the discussions on cryptography and the discussions on
electronic signatures which have taken place in the last few years,
certainly the process between the U.S. and Europe, and the OECD, and the UN
to an extent, have shown that we can work together as countries, we can find
common solutions, and I think that's all important.
Self-regulation, a lot of talk about self-regulation. And indeed, as I
will explain when I just touch on the Bill in a second, and I promise not to
go too much overtime, clearly I think self-regulation in most areas is the
way that we're going to move forward because governments, governments can't
hide behind the fact anymore. I mean, there was a time when we all thought
we could do things as governments without talking to the industry, I mean
it's much easier really, isn't it. I mean, dear me, now we just pass a few
laws for that industry. But unfortunately the industry can read. I think
it's all the fault of the lawyers actually, but no, self-regulation I think,
as Chairman Pitofsky said yesterday, really does have its place.
But we have to be very careful about self-regulation and we have to talk
about how we're going to develop it, and I think some of the speakers this
morning were thoughtful on this subject. But if you are going to have this
self-regulation regime, specially for consumer protection and other issues,
then you do need to build upon some sort of baseline of common agreements,
otherwise you tend to go all over the place.
Organisations. A lot of international organisations, I mean, you're
obviously the ILPF here, we've heard about the ICC, we've heard about other
international organisations in the last couple of days. For governments,
one of the most important thing is, is that business organisations come to
government with a consistent voice. It's all too easy, and it happens in
the UK and I'm sure it must happen over here in the States -- by the way,
over here, how many speakers have said over here when they're talking about
the US; we're in Canada by the way!
But I'm sure it's a common problem for a lot of governments or a common
issue that if business organisations and business organisations have made a
significant difference, the ILPF, the ICC, the Global Business Dialogue, if
these organisations are going to make a fundamental difference, then they've
got to talk to government, I think, with a consistent voice. It's all too
easy for us, civil servants, to sit in our offices and pick off the
differences between these organisations. And I mean, there's something
called the, is it the Transatlantic Alliance or something like that, I mean
I don't know, I won't be rude about them, but I think it is important that
organisations do, where possible, try and approach government with a common
And so, onto the legislation itself. Well, the UK legislation is called
'The Electronic Communications Bill', it's gone through many different
titles; it was called the Electronic Commerce Bill, and then -- no, first of
all it was called the Secure Electronic Commerce Bill, and then, because
they didn't have that much security, it was just called the Electronic
Commerce Bill, and then, the lawyers that drafted it didn't think it had
much to do with electronic commerce, so it became the Electronic
Communications Bill. And after it goes through Parliament, it'll probably
be called something else entirely.
But the UK government had been struggling in the area of cryptography and
encryption for some time. And it's interesting because I think the debate
on encryption and electronic signature has gone a long, quite a long way,
that, as I say, some of the experience is perhaps helpful in our discussions
of jurisdiction. We, in the UK, have gone through a hell of a battle on
encryption, especially in law enforcement, and I know the United States
haven't exactly had things their own way either in this issue.
I mean, only three years ago, we were going to have legislation
introducing mandatory licensing for the provision of cryptography services
where everyone would have had to be, had a licence for issuing a public
certificate. We've gone from mandatory licensing with mandatory key-escrow,
to voluntary licensing with voluntary key-escrow, to voluntary licensing
So, all the time we've gone down this slope of becoming more liberal. On
electronic signatures, we've gone from a state where we would were going to
give legal presumptions to only certain types of electronic signatures that
were backed by certificates from regulated bodies; we've now said that for
the future of electronic commerce, we've got to give admissibility to all
electronic signatures, whatever their color, and shape, and size, et cetera.
So I think, we in the UK and other countries as well, have seen the
direction of legislation become much more liberal in this area. It's become
much more of a light touch. Self-regulation has come into it although the
legislation that we're going to introduce allows the Secretary of State to
introduce a voluntary accreditation scheme for those bodies offering
cryptography services to the public, the so-called voluntary licensing
regime. The Secretary of State is minded at the moment and the UK
government is minded to allow self-regulation for that scheme, to allow an
industry scheme to take the place of that statutory regulation but with the
backup of legislation.
So, what's in the bill? Well, the first part of the bill covers, as I
said, this approval scheme for providers of cryptography services, it just
lays out that the government could introduce a scheme to give approval for
those providing certificates.
We think this is important because one of the problems we have in Europe,
and I think it's the same elsewhere, is there are a lot of people who don't
trust public certificate. They say, what, you know: "What backing does
this certificate have, what happens if I use this certificate and the person
at the other end sort of just says he didn't issue it or whatever." So we
think that bodies that are trusted in providing these services are
The second part of the bill gives, as I said, legal admissibility to
electronic signatures. It puts electronic signatures on a sound footing, if
you like, and it shows that no court is going to overturn a case simply
because there's electronic signatures being used rather than manual
The third part of the bill deals with electronic government. Electronic
government is very important for us, I'm sure it's very important for other
countries as well.
Our Prime Minister - our Prime Minister - makes a lot of promises, new
ones every day. But one of the promises he made was, first of all he said
that 25% of government services should be able to be delivered
electronically by 2002, and if that wasn't bad enough, he then said that 50%
of government services should be available, should be able to be delivered
electronically by 2005. And we said: "Well, you know, we can just about
cope with that." And then he said: "By the way, 100% of electronic
services should be delivered electronically by 2008." And this poses real
problems for government if we're going to deliver services electronically,
then we have to update a lot of existing legislation, and part of our bill
is aimed at that.
The fourth part of the bill deals with law enforcement and legal access
to encryption keys. As I said before, this notion of key-escrow, the
storage of encryption keys with providers - has been one of the great
sources of controversy in recent years. But what our legislation will do is
firmly put on a legal footing the ability of the law enforcement authorities
to go and access a key or to go and access a technology that will allow an
encrypted message to be decrypted by legal access methods. Now, whether the
key is being held by the suspects themselves, or whether the key is being
held by a third party or a second party is not material.
So that's what the bill does. As I said, the bill was published on
Friday, we were going to introduce it into Parliament by the end of this
session which ends in a couple of days time, but unfortunately we couldn't,
so we published it instead, it's in the form of a consultation document. No
doubt we'll get a lot of comments on it, and we'll reflect on those
comments, and the legislation will be introduced into Parliament in October.
I would give you a reference which I'm sure you want to take down as
you're eating your lunch.
By the way, it was a good move to, you know, have the speech over the
main course, wasn't it, so I like that, yes. But they do say they're going
to save my dessert for me, that's very good. But you know, us Brits don't
eat much, so it's all right.
Anyway, what I intend to do, I've just got one sheet of paper, I've got
lots of sheets of paper, but I've got one sheet of paper here, and perhaps
we might be able to copy this because it has got the reference on the
summary of the bill, but for those of you who have got pen in hand, the
whole document, and this is the document, and I'll be raffling up, raffling
off a copy of this in a minute -- paying for the plane fare home, you think
the government is generous with flights, you know, to get here, I flew
London/Detroit, you know, as we were flying over Montreal, you know, I said,
so five hours later back in Montreal, and tonight I have to fly back to
Amsterdam and I'll be flying over London again, but you know, this is, keeps
us in the air, I suppose, you know, taxpayers' money, anyway sorry, yes.
The legislation is at www.dti.gov.uk/cii/elec/ecbill. And of course,
when you access it, you'll find some massive file and you won't be able to
read it anyway. But no, seriously, hopefully I'll get some of these, I'll
get some of these copied, and I've got two copies left of this, so the first
people to approach me with a suitable offer can have them.
So to finish, Ladies and Gentlemen, I'd just like to say again that I'm
very pleased to have been invited to speak to you at lunch time, and I think
the issues that you've been tackling in the last couple of days are
extremely important indeed. Consumer protection is one of the issues that
gets people all wound up in lots of directions but clearly, if we're all
going to get the take off in electronic commerce, which we all want as
businesses, as governments, then we have got to be able to instill a sense
of confidence in the people that use these services. And I think that some
of the work that the ILPF are doing will lead in this direction. Thank you
very much indeed.
PROTECTING THE CONSUMER OVER A BORDERLESS
Mr. ROGER COCHETTI:
My name is Roger Cochetti, I'm with IBM. It is my pleasure to welcome
you to the panel discussion this afternoon. The panel, as you know, is
entitled Protecting Consumers Over a Borderless Medium.
I think it's not difficult to understand or conclude, after the last day
and a half worth of discussions, that sorting out the questions of consumer
protection are among the most difficult, complicated, and yet most important
in all of the discussions about jurisdiction on the Internet. And that's
for the obvious reason that in many cases there are laws, regulations and
practices that affect activities and transactions in which consumers engaged
are treated differently from those that occur in business to business
In IBM, we are keenly aware of this, quite aware of the fact that 90% of
the value of electronic commerce today occurs in a business to business
environment, and yet, 90% of the regulatory and policy issues, legal
questions that arise, occurs in a business to consumer environment. And
yet, what happens in a business to consumer environment affects everything
else that occurs in the entire medium, so that discussing what happens in
consumer protection on the Internet, I think, is important to everyone, and
even to those who are not themselves focused on business to consumer
In order to do that, what we've structured in this afternoon's discussion
is three parts to our conversation and review. The first will consist of
three government officials who are going to talk with us about the specific
areas of law enforcement with which they are familiar.
Hugh Stevenson is the Associate Director of the Division of Planning and
Information in the Bureau of Consumer Protection of the Federal Trade
Commission. In that position, he's one of the leading officials in the
United States government and in the U.S. Federal Trade Commission who is
thinking about consumer protection on the Internet, and what kind of
regulations and activities can be constructed to ensure that consumers are
protected on the Internet as they are off the Internet. And he spent, I
know, a lot of time dealing with the recent FTC workshop on the subject as
well as many of the international negotiations that are under way. He's
going to talk about the experience of the Federal Trade Commission in
enforcing, on a transnational basis, consumer protection regulations and
rules that arise in the United States.
He'll be followed by Natalie James; Natalie is the coordinator of the
Australian Competition Consumer Protection, Consumer Commission's Internet
Commerce and Competition Project. She's held this position since March of
this year and in that capacity their task is to enhance the welfare of
Australians by fostering consumer confidence and participation in
E-Commerce. She, like Hugh, is going to talk about their experience from an
Australian perspective in enforcing consumer protection laws on a
transnational basis and tell us about what she feels have been both some
successes and some non-successes.
The third government speaker is Barbara Wellbery; Barbara is a Counsellor
to the Under-Secretary for Electronic Commerce in the U.S. Department of
Commerce. Barbara is going to talk about the transnational enforcement of
U.S. laws in areas other than consumer protection to give us some depth to
what issues arise and what successes the United States government has
experienced and what non-successes it's experienced in its effort to enforce
U.S. laws where there's a transnational element to them.
I will come back in a few minutes after our first three speakers review
their presentations with you and introduce the second part of the panel, but
just to explain the structure of this: after we review the status quo of
government law enforcement, we will then go on to a presentation of existing
and new consumer protection activities that are either under way today or
planned for the future as illustrations of what kind of activities occur
supplemental to the government law enforcement activities described in the
first part of the panel.
So, without any further delay, let me ask Hugh Stevenson to talk with us
about his experience and the experience to the Federal Trade Commission
enforcing consumer protection regulations.
Mr. HUGH STEVENSON:
Thanks very much, Roger. We, at our workshop, considered the concerns of
business and consumers and of government law enforcement agencies, technical
concerns, involved in the Internet and international jurisdiction as far as
consumer protection issues are concerned. I'm focusing right now on the
concerns of law enforcement agencies and I'm speaking to you as someone who
is admittedly a civil servant and a lawyer, and I have no power point to
make me an expert. But I think, if you can just pity for a moment the poor
regulator or at least descend into the mind for a moment of the poor
regulator, to see what the world looks like from there in terms of what
we're seeing as we get into this brand new world of E-Commerce.
Just a little background for those of you who unfamiliar with the U.S.
Federal Trade Commission. We are a general jurisdiction consumer protection
agency; our organic statute prohibits unfair deceptive acts and practices;
we also enforce a variety of other statutes and rules, a lot of them
pertaining to disclosure issues and some others that mandate certain
There are two things in the world of Internet enforcement that are
relatively new to us. One is transactions involving the Internet and the
other is transactions that are international, business to consumer
cross-border international transactions. As far as the Internet is
concerned, as Chairman Pitofsky mentioned, we brought about ninety cases
involving the Internet in some way, and there are some new issues that are
raised from a law enforcement point of view with Internet cases, anonymity
issues, the possible speed at which harm can be done, the velocity of the
consumer protection problems that can arise, the ease of entry into the
market mandating swift and sure action.
We've also started looking at cases with international transaction
components. So far, our experience is predominantly in the area of fraud or
very serious deception, but I think that there are some lessons that can be
drawn here in a broader sense. We heard earlier this morning, I think, that
there's no one in favour of fraud here, and certainly not on the panel, and
certainly not very vocal, maybe sitting way in the back, but even there, we
have a consensus issue arguably.
Cross-border enforcement can be quite challenging and we are all
aficionados of jurisdiction here being lawyers. Other aficionados of
jurisdictional difficulties are people who take advantage of those
jurisdictional difficulties to evade or frustrate enforcement and I think
that if you bear in mind that even when there is more of a consensus
principle that enforcement can be difficult, this is something to bear in
mind in thinking about how the market might be ordered.
I think as a general proposition, we would all like to see a simpler
regulatory landscape but it's also important to have an effective one. And
we talked a lot about mud flaps, and nodding dogs, and double chess sets and
so forth, but you can be a little overcome by the matrix of complexities
here and it's important to bear in mind that there should, at the same time,
be some effective vehicle for consumer protection.
And at the risk of sounding a little retro, in response to some remarks
made this morning, I think that governments have a legitimate interest in
ensuring that their consumers are protected. Now, does that mean that
inevitably the choice of law goes in one direction or other, no, it does not
necessarily. But I think it's very important to bear in mind that the rules
of the game that are established are ones that are effective in terms of
providing consumers with a protection.
Now, what has been our experience in the international front. We've had,
although the Internet has really given rise to the possibility of broad
scale, cross-border business to consumer transactions, we've had a dress
rehearsal of sorts in the area of cross-border telemarketing. In the 90's
the United States enforcement against telemarketing and distance selling
consumer fraud became more aggressive. The FTC brought more actions, the
states became more active, the law enforcers coordinated their actions
better, there was more extensive federal criminal actions brought, there was
a telemarketing sales rule put into place.
And then, what happened was that we saw an increase in the incidents of
cross-border telemarketing between the United States and Canada. There was
a dramatic rise in the number of cross-border complaints, 20% of the
complaints in the consumer fraud database that we maintain together with
some of our Canadian counterparts, 20% of them involved cross-border
transactions. So this was not a small issue and in fact, this gave rise to
the creation by Prime Minister Chrétien and President Clinton of a
task force, a U.S./Canada task force to address some of the problems that
Well, what are some of those problems? There are problems for both the
enforcers and the country of origin, if you will, and the country of
destination. One of the problems is the authority to take action. We,
consumer protection agencies, often have the mission to protect consumers
from the world's businesses to the extent that they are not engaged in fair
business practices, and then, the other alternative is to protect the
world's consumers from one's own business.
This latter formulation is a little less intuitive, I think at least to
people in this area, which is not to say that it does not have a place, but
it is I think less the model, now partly because, I mean, if you're just
dealing domestic transactions you are in essence doing both of those things.
Now, legal authority is not always a foregone conclusion for law
enforcers. There has been some litigation for example in British Columbia
about whether there was authority to protect people from the jurisdiction's
businesses as opposed to protecting the jurisdiction's own consumers. There
are also just issues of who has the evidence, who has the incentives to act,
who gets the information and complaints to move ahead. The chairman
mentioned the Dominica example where people were basically tricked into
calling a phone number in Dominica, and the consumer reaction is not: "This
is outrageous, I am calling the government of Dominica right now." They
think of calling their local people. I don't know anything about Dominica
except someone mentioned yesterday they're the first government to establish
an online casino which, I guess, didn't inspire confidence entirely,
although I suppose you could have the complaint form on the website, but
that is an issue.
And even with Canada, where you have a country which has a lot of common
traditions, legal traditions and enforcement approaches, and obviously both
countries have respected judicial systems and so forth, even in those
situations you have problems of collecting the appropriate information, you
have problems of law enforcement priorities because obviously the first
priority tends to protect one's own consumers, and this is an area of
limited resources. And you have the issues of needing assistance to
coordinate the conduct.
The second problem you have, and this is more for probably the country of
destination if you will, is enforcement jurisdiction. And you go in,
supposedly, I think of one case we brought, we went in and we got an order,
we got a tough order, it froze assets, it enjoined further conduct, it
imposed monitoring provisions and so forth, and we got this issued by a U.S.
court against a defendant in Canada. It felt like a touchdown, except that
the other player, the other team was not actually on the field, and it was
unclear whether they were going to be interested in playing the game. And
so we had that order, and we had to go and see what can we do with that
order in another country.
Now, we've had some experience in enforcing orders in other countries
through the use of a Moreva injunction which is essentially an order that is
in aid of a proceeding elsewhere, and we've done this in, I believe, Canada,
Belize, Antigua and the Bahamas, although we didn't get to go to all those
places, we had to hire a counsel.
There are -- and actually as one of the several limits on that kind of
enforcement, it only applies really to certain kinds of cases, it really
applies essentially to the monetary relief, and it is expensive: you have to
hire a counsel, it's unpredictable, there are differences and vagaries with
various other countries' laws which affect how successful that can be and
one not does always know whether there's going to be something there that
makes it worth the candle to spend the money on pursuing.
Does this leave us otherwise paralysed, well, no, we do have ways of
acting on for example intermediaries that might be in the United States.
Federal court orders may affect those in an act of concert of participation;
there are maybe delivery services or suppliers; or there may be money in
transit that we can use our orders to have some effect on.
The other thing that we have tried is parallel suits. We worked for
example on one case where we filed a case and coinciding with the case by
the British Columbia
Attorney General's office against the same company seeking to effectually
relieve to deal with, from both sides of the border, but this again is not
without cost, is not a simple thing to do. And sharing information itself
can be a challenge given that countries' consumer protection laws were,
many of them are developed with domestic concerns in mind and may not
provide, at least easily, forced sharing of information across borders.
We have worked, as I say, with the Canadians quite extensively. There
was a report produced on U.S./Canada Cross-Border Fraud Issues and what
needed to be done. The Canadians have moved forward with certain
legislation, we moved forward with information sharing, there are things
that we had to do, but there are I think more things that need to be done in
order to make this an effective mechanism, even in these cases which, the
cases I'm talking about are relatively straightforward cases, and I think as
you get to subtler cases the problem becomes more difficult. And there is
an issue that Susan Crawford referred to: "What is fraud?" And the line is
not necessarily a bright one, and there may be cases of a serious deception
and finding sort of an agreement on how to
approach that is not always an easy thing.
What is necessary -- I think one of the lessons also in this process is
that it is very important to have greater agreement on enforcement and
recognition and so that the rules, how the rules of the game will work here
or clearer for the agencies.
It's important to have increased systematic cooperation. In the examples
I'm talking about with Canada, we had two countries working together; as you
get to a multiciplicity of countries, those problems multiply and these are
things that we need to coordinate better in order to have effective relief
for consumers. Thanks.
Ms. NATALIE JAMES:
Good afternoon. If we can have the Powerpoint running, thanks. My name
is Natalie James, and like you, my perspective in this area is enforcement.
I work for the Australian Competition and Consumer Commission which is
basically the equivalent of the FTC, and enforcement is what we're all
When you have a consumer on the other end of the file or, and these days
it's more often the hoards of E-mails that you get, you can't tell them:
"Wait a few years till we get this harmonisation of international law thing
together", you have to deal with it there and then. And that's the
situation we're dealing with at the moment.
Now, in Australia we haven't had hoards of consumer complaints from
aggrieved consumers; partly this could be because E-Commerce hasn't taken
off in a big way in Australia yet, although a lot of Australians are on
line, there seems to be a hesitancy about taking that extra step, and
sending your credit card via the Internet or purchasing goods or services
via the Internet. But it is happening, it's getting bigger all the time as
more Australian companies particularly go online. E-Bay is about to come to
town in Australia, so no doubt we'll be getting a lot more information from
consumers in respect of those sorts of things.
We do however get information from consumers who may not be aggrieved but
have received E-mails or identified websites that they think use, contain
information that should be of concern to us. Lots and lots of pyramid
games, all the time we get people forwarding us pyramid games, saying:
"Here's another one, please do something about it." They usually originate
from the United States and the Australian consumers forwarding the
information to us haven't been done either by them, but that doesn't mean
Australian consumers aren't being done either by them, and I'm sure that
they will come out of the woodwork as time goes by.
Now, in terms of our environment, we administer and enforce the Trade
Practices Act. Perhaps the simplest and most relevant provision of that act
is Section 52 which basically and quite simply prohibits misleading and
deceptive conduct, or conduct which is likely to mislead or deceive in the
course of trade and commerce. So it's a pretty simple provision, and
there's an awful lot of case law obviously on that. But that is the one
that we would use the most when it comes to consumer protection. We have
parallel, our states have parallel legislation, it's pretty much identical
so there's not a lot of conflict there, but obviously that does raise issues
of jurisdiction within the country as well.
We don't have a heap of case law yet on issues where the Internet site of
concern is like hidden out of that jurisdiction. That's the bottom line at
the moment. The Trade Practices Act does say that it applies to foreign
corporations and it also technically extends to conduct by Australian
companies or persons, ordinarily residents in Australia, and even if they're
outside Australia at the time. So there's the scope there, and in fact if
we came across a website and we thought it was in breach of the Trade
Practices Act and we believed that it impacted on Australian consumers, we
would take that up and we would argue to the court that we did have
jurisdiction to deal with that, even if the only presence in Australia was
the website. How far we'd get is another matter.
There have been cases in other areas, I was going to touch on that today,
but maybe I'm limited on my time so there's some of the stuff that I'm
actually skipping over, but please, if you want to talk to me about it
afterwards, feel free. But anyway, we'd like to broaden the scope of our
act, and we'd like to increase remedies that are available to consumers, and
so we would certainly in those circumstances attempt to do just that when it
comes to Internet sites.
Now, I'm just going to skip a few of these slides here, which should make
Roger very happy, and start talking about our actual experience when it
comes to cross-border stuff. I'm going to talk about a couple of cases, the
first was, in my view, quite successful, Internic. It was an Australian
company that maintained a website in Australia called Internic, it was the
name of the company, it created a site called Internic.com and it registered
domain name strangely enough, for quite a bit more than what you pay if
you're registering your domain name with Network Solution Internic.com,
Internic.net, sorry, which is the official domain name registering authority
in the U.S.
It was referred to us by the FTC. It came to their attention because the
company was Australian and the information was hosted by an Australian ISP.
We were, in this case we were the appropriate body, we believed, and I
believe the FTC believed, to deal with this matter. So a referral was a
We entered negotiations that didn't work; we filed proceedings against
them, that started to look like it was working. And eventually we settled
and part of the settlement was refunds, $250,000 Australian dollars, which
isn't quite so much in American dollars, but should be enough to cover the
difference for consumers who were misled, who thought they were going into
Internic.net and paid that money and weren't getting the service that they
thought they were getting in paying that extra money. So, in addition to
the refunds, we obviously also stopped the conduct. The company is no
longer going to trade under the name Internic, and any money that's left
over is going to go into consumer education for compliance with consumer
protection laws on the Internet.
And the way we have administered the refunds is everyone who registered a
domain name with Internic.com received an E-mail saying: "You may be
entitled to a refund, let us know, express an interest with us." They have
to fill in a set dec. saying they were misled, and off they go.
So far, we've had, the last I checked out, 700 E-mails from people who
believed they were misled. Most of them are from North America. We've got
some Australians in there, we've got some people in the UK and in Iceland,
believe or not. But in our view, this is a case of a very successful
example of cross-border enforcement. We got remedies for consumers all over
the world, and it was something that we were able to do for them.
However -- then again if you think about it, it's not that complicated.
The person responsible was in Australia and so was the content, and so, once
we started to take the matter up, there weren't really big jurisdictional
issues involved. We had comparable law to the United States, we could get
an appropriate remedy, so all of those consumers, and so there weren't too
many difficult problems there.
So I want to move on from Internic now and talk about a case that did
have some different problems. This isn't actually an Internet case, it
involved a pyramid scam, it was being run out of Australia, but the company
who was responsible for it was actually based in Vanuatu, they used
We went to court where the matter was defended. Although the judge
commented that Pamela Reynolds, one of the defendants, was a pretty
unsatisfactory witness, we won, and immediately after we got our orders,
Pyramid Pan (is now I believe in Vanuatu), fled back to Vanuatu and the
$550,000 we were hoping to have in trust for consumers, well a large amount
of that appeared to go with them. So that's, it was $550,000 that was in
the order. We had already secured about half that through injunctions
earlier on in the case, and what we tried to do initially was lodge those
injunctions in Vanuatu and that was refused at that point.
After we were successful in receiving our order, we decided to go back
and try and get the order executed in Vanuatu, and this is where the
problems really started. At first we weren't successful, and then we were,
and then while our officers were en route to Vanuatu to execute the order, a
decision made by a different judge in chambers, an ex parte decision,
reversed the decision. And so we were on our way to execute it, and when
the people got there, our officers got there, there was no order to enforce
after all. And so that made things a little difficult.
And part of the rationale for this, it appears, was that the Vanuatu
judge in this case interpreted, the fact that the respondents had 90 days in
which to pay the money into a trust fund, they interpret that as meaning
that the judgement didn't crystallise for 90 days, which isn't our view. So
we waited for the 90 days to pass and tried to enforce the order again. And
it was defended or is being defended, there are a number of reasons for
this, a number of claims, not including that the (?) has no standing in
Vanuatu, that we cannot invoke the jurisdiction of the court, and that the
conduct which gave rise to our judgement doesn't give rise to a cause of
action that's enforceable in Vanuatu. They've filed motions seeking to have
the proceedings struck out and --
Initially we had a hearing scheduled for March 1999, it was adjourned
until June, and that's been adjourned till September. Since then, Pyramid
Pan has come back to Australia to file for bankruptcy.
Now, I mean, this is a prime example really of the difficulties in
enforcing orders in other jurisdictions, particularly jurisdictions that
aren't the same as ours. When we're dealing with the U.S. or Canada, we
have similar legislation, we have organisations there who we can talk to
about how to go about doing this. In Vanuatu, finding counsel was difficult
enough. We had to get an expert in Australian law to file an affidavit, to
be available for cross-examination in Vanuatu because there's no video
conferencing, and this expert had to explain the trade practices that does
exist and is real genuine law and that the order was valid.
At this stage, we still haven't actually made it, and of course, there's
always the question as to whether the money is still there anyway. So that
is, I think, an example of difficulties faced when you're dealing with this
sort of jurisdiction.
So I mean, in our view, the main problems in this case is a lack of
familiarity with Australian law by the Vanuatu courts; the privacy laws over
there which prevented us from finding out much about the company's gall and
sphere in Vanuatu; finding legal advisors that could help us out; and of
course, all this conflict of cost, particularly when you have to get experts
and counsel ready to go at any notice to Vanuatu; and the delays, the case
is continually being delayed and so that's causing us added problems.
So now that I've talked about those two examples, I'll quickly go through
some of the basics that touches on what we've already really talked about
throughout the last two days.
Carrying out investigations from afar, we talked a lot about courts and
jurisdictions and orders, but actually carrying out the investigation from
Australia when you're dealing with U.S. companies and what have you, I mean,
poses a whole heap of problems, and that's where the cooperation becomes
very important. This is the kind of stuff that we've been talking about
over the last couple of days, I won't dwell on that.
Difficulties in referring matters. A lot of the time we talk about, or
we refer the matter to the FTC or the appropriate authority, but what if
there is none, what if it's not part of their priorities, what if it hasn't
impacted on their consumers, it's hard for them to justify resources in that
sort of situation. Referral is not always the answer, it is an answer to a
solution, but it's not always going to work.
In terms of strategies, enhanced international cooperation. Formal
agreements are obviously necessary, but again, we need to deal with a
situation now. Informal methods I think, are what we're relying on at the
moment, and they do seem to be working; things like we're investigating a
U.S. company, we can contact the FTC and get them to do the company search
and get them to send us the relevant documents, and get them to tell us
about what they know of the company rather than trying to do it ourselves.
Just that kind of knowledge helps out immensely when you're investigating a
matter or when you're deciding whether or not to pursue a matter.
Alignment of priorities. We, being a government organisation, have to
justify spending funds, and so we have a set of priorities, enforcement
priorities. One of the things that we could look at doing is actually
developing specific priorities for electronic commerce enforcement and
trying to align them, if that's possible, so that when we are referring
matters or investigating matters, that we're working in the same direction.
Learning about enforcement of orders in other jurisdictions is obviously
Test cases is something that we want to start doing to test and hopefully
stretch the law in our jurisdiction, and in some case legislative change is
called upon at the domestic level.
In terms of alternative strategies, education is obvious. Codes of
practice is something that we see a bit of in Australia. Under the Trade
Practices Act, there is provision for voluntary or mandatory codes of
conduct. They're almost all voluntary, but the mandatory code of conduct is
sort of like the big stick. If industry doesn't get its act together, if
business doesn't get together and develop some rules, then -- they're now in
the background and signals can and often are sent that something will be
written for them, and we all know what they prefer.
Harmonisation of consumer protection standards is a long-term goal.
We're all working towards that, but until then, some of these other methods
have to do. Thank you.
Ms. BARBARA WELLBERY:
Good afternoon, I'm Barbara Wellbery, and I'm with the U.S. Department of
Commerce. I'm going to talk about cross-border enforcement efforts outside
the consumer protection, or at least the conventional consumer protection
area. I've looked at areas of cross-border enforcement in the antitrust
area, the securities area, which is a subset of consumer protection, and
then the hi-tech and computer crime area to see what we could learn from the
cross-border enforcement activities that have been going on there and what
lessons we could take away.
First, I need to also thank my colleagues in those different agencies. I
am not an expert in any one of these areas, and I very much appreciate the
time and information that my colleagues in those agencies provided.
What can we learn from that activity, particularly with respect to the
questions that Hank Perritt posed yesterday morning in terms of what should
we be doing first, is should we be focussing on self-regulation, should we
be looking at substantive conversion, or should we be working on
international treaties or agreements? And I guess the succinct answer is
yes. Either fortunately or unfortunately, I think we need to be doing all
three at the same time. I don't think we have the luxury of proceeding one
at the time.
As I surveyed these areas a few things became clear. The first, and
this should come as no surprise, is that increased international commercial
activity leads to increased international criminal and regulatory
enforcement activity. It's no surprise that the more international
commercial activity there is, the more problems there are - the more crime
and the more regulatory infractions internationally there are.
I also should add that I did not limit my overview to just what's
happening on the Internet. I think we all know that we're in an
increasingly more global economy, and I think the same issues that come up
offline are pretty pertinent to what comes up online in terms of
international enforcement. But the fact is that there's much more now going
on internationally on the enforcement side. The Department of Justice
Antitrust Division estimates that about a third of its enforcement resources
for this year will be spent on international enforcement efforts with
respect to international cartel activity, and that a huge part of the fines
that were collected last year came from international cartel activity.
Similarly, the Securities and Exchange Commission has seen a big increase
in the amount of international enforcement that they're doing. In 1997 they
made 240 requests to other securities agencies abroad, and this year - in
1998 rather - they made 275 requests. The number of requests that they have
received from other agencies has increased even more. In 1997 they received
363 requests and in 1998 they received 412 requests.
I think another clear operative principle is that increased international
enforcement means that there needs to be increased international cooperation
which takes a whole bunch of different forms. Obviously, increased
cooperation happens both in terms of enforcement activities in terms of
going after crimes. It also happens in terms of pre-merger cooperation,
since there's now a lot more of that as we see more in the way of
international merger activity.
Also, now that there is Internet there's much more going on in the way of
computer crime. And so now for the last three years, the G-8 - the Group of
8, which consists of the major industrialized countries and Russia - have
actually set up a subgroup that's devoted just to dealing with crime that's
done on the Internet. When does international cooperation and enforcement
work best and what kind of factors need to be present for it to work? I
think there's at least two factors that need to be present. One, there
needs to be some sort of consensus on the substantive law, so in a sense
we've come almost full circle. There needs to be some sort of common
understanding that the activity in hand is considered bad by both
governments. That's not a legal requirement, for example, in the U.S. we
don't have a requirement of dual criminality, our Justice Department is
permitted to cooperate with other law enforcement agencies, even where the
activity is not necessarily illegal in the U.S.. But as a practical matter,
this is one of the constraints that both Natalie and Hugh identified.
Priorities are going to be determined by what each government considers to
be bad or problematic.
So there is probably most cooperation in the antitrust area of
international cartel where, as Chairman Pitofsky said yesterday, there is
among our major trading partners pretty much universal agreement that this
is a bad activity. But it also points up some difficulties. For example,
when our Justice Department started to investigate computer crime and tried
to get cooperation from other governments, if those governments had not
passed laws making it criminal to access other computer systems on an
unauthorized basis, the Justice Department had trouble getting any kind of
cooperation from them on that point.
Similarly, when the Securities and Exchange Commission tried to deal with
a Ponzi scheme that was originating out of Italy, it had the problem that
Italy doesn't consider Ponzi schemes to be illegal. And so it took a while,
and it took coordination with other governments whose consumers were also
being affected before they could move forward on that investigation.
Another factor that seems to be a prerequisite is that there needs to be
some sort of trust and confidence these governments have for each other,
and, of course, as Natalie pointed out, there needs to be another
responsible government on the other side, and that's not always the case.
For example, we certainly see more cooperation occurring, certainly in the
criminal area in computer crime among the G-8 where there are similar
approaches. In the antitrust area we've seen most cooperation occurring
with Canada and with the European Commission, and to some extent Australia
and Japan, where there are major industrialized countries which have faced
some of the same issues that we've had to face.
The other point that I find interesting (and this I've heard from a
number of the folks that I've talked to), is that cooperation begets more
and better cooperation. It seems that one way to achieve cooperation is
through cooperating. Probably the area that seems to have the longest-term
international cooperation is the securities area, where's there's an
international organisation of securities commissions called IOSCA which has
over 90 countries which belong to it. They've actually been able to reach
agreement on a code of principles that should govern securities regulation.
I think it's astounding that 90 countries were able to agree on something
like this, having sat through many many OECD meetings where we've only got
29 member states.
The tools that are used cover a wide range of different Areas. They're
very informal tools: just plain information sharing, both in the form of
technical assistance, which can be very helpful in bringing less developed
countries along and developing some sort of consensus and uniformity in
views. Then there can also be information sharing among major trading
partners and that can be very helpful in terms of helping to broaden and
develop consensus on issues like market definition. There are also
multilateral organisations where governments work together; I think we're
probably all familiar with those. There also are formal treaties as in the
multilateral assistance treaties which are mostly designed to foster
And there's also a new approach which Natalie has touched on and which I
find interesting. It suggests to me that the idea of deference - taking me
back to Susan Crawford's presentation earlier today - may be gaining some
ground. It's the idea of positive comity in the antitrust area, where one
government will bring to the attention of another government behaviour that
it views as violative of the antitrust laws. It often works best where
there's one market, where there's a company in one country that's been kept
out of another market. They refer the matter to that country for
investigation and then, depending on how the investigation proceeds, they
may defer to the other country's enforcement actions.
In closing, and I can see that Roger is getting nervous here, I think
that there's a couple of things we can take away. I think, just as in the
private sector, in the government sector there needs to be some basic trust
among governments, and there basically needs to be a responsible government
on the other side. There also needs to be convergence of some kind on the
substantive law; I don't think it needs to be harmonisation, but there needs
to be some broad overlap on what the standards or the benchmarks are.
And I think the other point that we need to recognize is that government
activity is just necessarily going to be very limited for a whole variety of
reasons that there's no time to go into right now. And so I think we really
do need to look to the private sector to develop self-regulatory codes and
to develop online dispute resolution mechanisms that will help us get beyond
this jurisdictional issue. Thank you.
Mr. ROGER COCHETTI:
Thanks to the three of you. We're now going to look at four different
perspectives on activities that can supplement the enforcement of national
laws. This is by no means the full range of tools that are available to
strengthen consumer protection on the Internet in addition to the
enforcement of national laws but it touches on four of what we think are the
most important areas.
First, Steven Cole who is the General Counsel and Corporate Secretary for
the Council of Better Business Bureaus and the Better Business Bureau OnLine
in the United States, a leading organisation that has offered already a wide
range of consumer protection, private sector consumer protection programs in
the United States and Canada. He's going to talk about the potential for
Lynne Nostrant who is a Vice-President of Visa International and
responsible for their Consumer Electronic Commerce Group, one of the
managers of their Consumer Electronics Group is going to talk with
us about voluntary intermediary dispute resolution programs which is a
longwinded way of saying that, in the Internet today, consumer dispute
resolution is a matter of working things out through your credit card or
charge card issuer. It's a very important part of the overall picture, and
she's going to tell us how it works and what's happening today.
Laurie Labuda, who works for the OECD Committee on Consumer Policy, is
going to discuss the emergence of international codes of conduct, or
international guidelines and the role that they can play in addressing
consumer protection on Internet questions.
And finally, Mary Wong, who is a visiting attorney with Morrison &
Foerster, as well as a professor at the National University of Singapore Law
Faculty, is going to talk with us about a key element that's come up
throughout the discussion, and that is a consumer dispute resolution
facilities, and new, and innovative online and similar dispute resolution
mechanisms that are emerging, and what we can learn about them to date.
So, we're going to go in order as they appear at the table, each of the
panellists has agreed they're going
to try to give us a snapshot of their presentation in about five minutes.
So with that introduction, let me ask Steve if he'll tell us about
industry self-regulation. Thank you.
Mr. STEVEN COLE:
Thank you very much, Roger. I'm going to use Powerpoint. I'm a lawyer,
I'm an ex-state regulator in consumer protection in securities, but I've
seen the light, as Roger's indicated, I'm here to advocate for
The Council of Better Business Bureaus is the umbrella organisation for
132 BBBs in the United States and 15 in Canada. The Better Business Bureaus
is a business membership organisation and we've promoted an ethical
marketplace through self-regulation, dispute resolution and consumer and
business education since 1912. We have about 300,000 local business members
in the U.S. and Canada and about 350 large corporate members at the national
There's been an important discussion in the past two days; my message
this afternoon is sort of a reality check. In my judgement, success in the
effort, success in the effort to develop a coherent international legal
framework won't be sufficient. Trusted self-regulation is going to be
needed, and there are two main reasons I say this.
First of all, judicial remedies will not be enough even they if are fair
and convenient. In my mind, our work here may in part be irrelevant to most
web users, I'll explain that briefly. And also, as everybody said, these
new procedures, new modes of operation are going to take too long to
develop. Complex treaties involving multiple issues or requiring possibly
different solutions. These are marketing issues we're talking about now as
much as legal and political issues, and the business community needs and
wants to build trust and confidence now and doesn't have the time to wait
for the development of all those remedies.
Now, I said that judicial remedies are not enough. The reason I say that
is they're not responsive for most consumer difficulties, even domestically,
let alone in an international environment. The amounts are often too small
to make the courts a relevant mechanism; the issues are not always strictly
legal or resolvable through judicial remedies. If you get a defective
product, do you want a Magnuson-Morse Warranty Act enforcement suit in
federal court, or do you want to go to someone and get it repaired or
replaced? I think we know the answer.
So it's very important that we have out-of-court remedies, these are
clearly needed. Someone mentioned Goldberg v. Kelly, I think it was Susan
earlier today, and it brought back memories. It was the first case I ever
worked on as a practising lawyer, so I'm very sensitive to the need for
effective and fair consumer remedies. I'd be very cautious about mandatory
models however, and if there's time in the question/answer period, I'll
discuss that. And even if choice of law solutions can be found, and
reasonably soon, they won't be accepted unless there are practical remedial
approaches that will go along with them.
In any event, the legal remedies may miss much of the point to the
Internet. Trust and confidence, as I see it, requires much more than
fighting fraud or perfecting contractual relationships. Information
environments such as the Internet need sorting out mechanisms, in particular
consumers need help finding reliable companies, help in sorting out the
fancy websites that may not deliver as promised from those that can deliver
and will deliver.
The absence of the kind of physical cues in the tangible market place
make choice very difficult, yet the Internet allows us to get needed
information to allow consumers to exercise the choice and the sorting out so
to speak, at the very right time and right place, precisely when they're
reading advertising and perhaps making a transaction. And private sector
self-regulation perhaps through, say, a seal mechanism and I'll mention that
briefly later, will be the proper way to accomplish this right time, right
Now, consumer trust and confidence must also be built on accepted minimum
fair business practices and I don't think we need to wait for officially
sponsored convergence or harmonisation or whatever the right word is. It
seems we can begin creating minimum and adequate online business practice
standards now that are widely accepted and not a race to the bottom.
Now, we think that the Better Business Bureau model is a good
self-regulation model for the Internet. The BBB or others, or coalitions
including the BBB would be a good way to use this model. And we think there
are two core attributes for effective self-regulation.
First, it should be built on brand recognition as a basis for consumer
trust. Let's remember, we're trying to build trust and confidence, we're
not writing law review articles, and so we need to find a way that consumers
can say: "Ha, ha, I get it, I could rely on this."
And second, for regulation truly to be self-regulation, it must be
developed and implemented by the relevant business communities, not in their
name. It's not done to them, it's done by them, and they're representative
and accountable organisations. And that's the way you get by and that's the
way you get compliance and participation.
Now, the Better Business Bureaus are well under way developing the
working models that Andy Pincus alluded to or encouraged this morning, I
should say. And ours is a multifaceted approach. Our dispute settlement
program is the largest consumer dispute settlement program in the United
States, it's flexible, it's free to consumers. On an annualized basis now
we're receiving online approximately 200,000 complaints a year, that's the
tip of the iceberg, it's growing dramatically.
We set and enforce voluntary standards. Chairman Pitofsky mentioned
yesterday the efficient self-regulation program for the advertising industry
-- we administer and enforce that for the advertising industry. And we
also are embarking on an online code of conduct, a standards program that
I'll mention very briefly.
The Better Business Bureau system also administers two of the most
respected seal programs on the Internet. Our reliability program is the
largest seal program on the Internet, and our new online privacy program is
one of those certification programs you heard other speakers talk about.
Now, the reliability program is a seal program, and that helps the
sorting out process; companies that need standards, including dispute
resolution participation, display a seal and then we use the verification
technology to minimize phoney seal display.
Now, notice the very simple but important eligibility requirement, this
needs to be a simple process for both the businesses and consumers, and we
think this could be a prototype for the sort of global self-regulation that
could be extended elsewhere. We use a multiple approach, we set standards,
we enforce the standards, we require participants to agree to cooperate in a
dispute resolution system, and we use a recognized seal to build consumer
choice and confidence.
Now I mentioned this online code of fair business practices. I don't see
this as the end of harmonisation or even the beginning of harmonisation, and
I don't see it as the end of a safe harbor or maybe not even the beginning,
but it begins to have us create an approach that's not the lowest common
denominator but it's a very reasonable common denominator of voluntary
standards of what we do in the United States and Canada. We'll start there
with an eye that it needs to be portable, it needs to become a global set of
standards eventually, that others could borrow and expand on and use.
We expect however that a minimum, tens of thousands of Better Business
Bureau members throughout the country will follow our code if we do this
right. And remember, I said that self-regulation is done by business with
public input. We will have a very open process, no single group would be
anointed as "the business advisors"; we will seek active input from those
who want to give it and wide comment on the work product from others.
Let me close in this whirlwind five minute tour, Roger, I'm actually
doing reasonably well.
We are not fixed on a global model for our organisation, we're taking
preliminary steps to maximize our options. Our own programs and
organisations can be replicated in other countries. We're starting a Better
Business Bureau with the cooperation of the local business community in
Malaysia for example. Or, we can develop alliances and partnerships with
other sorts of business organisations on particular products, whether
they're privacy products or dispute resolution products, or on a full range
of the private sector self-regulation activities.
What we know at the Better Business Bureau is that we need to do
something soon and we want to take advantage of the growing recognition and
trust that the BBB name is developing worldwide. Thank you.
Ms. LYNNE NOSTRANT:
Thank you very much. I'm going to talk about chargebacks and since I am
from out of town and I do have a Powerpoint presentation, I guess that makes
me an expert.
One of the things that -- in talking about voluntary intermediary
solutions, I wanted to explain how the Visa system works and at the same
time I'll be explaining how the Mastercard system works because they're very
similar, and I hope there's no one from the Department of Justice here to
hear me say that because we do compete furiously. There are some
additional, there are other card companies that don't go through the
association model such as Diners and American Express, and where there's a
difference, I'll point that out to you.
The reason to call it voluntary is because no one's forcing any of the
member banks to join these to be able to issue Visa cards, there's no one
out there who is telling merchants that they're required by law to accept
American Express cards, you know, it's basically a situation where there are
benefits to belonging and playing in this game, and so people come to us and
they want to play. But then, because they want to play using our marbles,
we say: "You've go to follow our rules." And those rules are this, for
Visa, a set of by-laws and operating regulations that are in essence the
contract between the member banks and Visa and spell out all the rules and
It does require once they do belong, as an association member they are
required to follow all the rules, and that includes having rules for
merchant websites and so forth, and I'll talk a little bit about that on the
The benefit to all of this is that it does provide a consistent global
trusted payment method that has been in existence and it works. Most of you
who have travelled here to Montreal to attend this conference have come from
perhaps another country, you have some kind of a payment card in your wallet
I'm sure everyone of you; you probably used it to check into the hotel where
you're staying. You didn't stop to think, well, I don't know, maybe you did
because you're lawyers, but those of you, for those normal people there,
when you use your card and you pull it out, you don't stop to think about
what jurisdiction applies here. If I give them my card, what -- you know,
and if they put extra charges on my account, do I have to worry about that?
I mean, basically you just know that if it's on your payment card that
there's some remedy available to you in case there's a problem. And we want
to extend that same trust into the digital world.
Now, let me explain just a bit more about how the contract works, and
again, this applies for both Visa and Mastercard, for Amex, Diners, JCB, et
cetera. You can just, you know, X out the banks, the issuer requirer
because they are both sides of that, they don't go through the financial
So there's a set of these operating regulations that spell out what the
requirements are for members, and by extension there are certain things that
have to be, for example, in a merchant agreement, that the acquirer actually
contracts with a merchant, so the acquiring bank makes the decision as to
whether or not they want to do business with that merchant and they want to
do some kind of a background check because in essence they're giving that
merchant a credit line because they could give them the money for the sales
drafts and then have a bunch of chargebacks come in. So it's, you know,
there's some safety mechanisms built in to try to make sure that there's
some quality in the system.
Some of the things that are required to be in the merchant agreement, you
know, that Visa operates require are things where we think it makes good
business sense to let consumers know that up front before they decide to
make a purchase from an online merchant. And that would be things like
where the merchant is domiciled; we want there to be an adequate disclosure
of any limited or no-refund policy; if the merchant will not ship to certain
countries because of, you know, legal restraints or because they've had bad
business experiences with having things never arrive there, whatever. They
should list that on their website so that the consumer doesn't think that if
they tried to purchase, that for some reason that merchant is not accepting
that consumer's card or won't sell to that consumer, that you know, that
it's a really, it's a different situation. And these are all things that
are actually required to be in there.
The Card Holder Agreement is a little bit different, there's not too much
that Visa requires to be in the Card Holder Agreement, but typically this is
where the issuer would spell out whatever finance terms were involved. It
would be things like under what circumstances the consumer could dispute a
transaction, and these are usually mandated by whatever consumer rights
Now, going on just a little bit further, I want to talk about
chargebacks, and I want to make the distinction between chargebacks and
consumer rights because consumers do not have chargeback rights. They have
consumer rights, whatever has been mandated by the jurisdiction wherein they
live, but only Visa members, Mastercard members and so forth have chargeback
rights. And that is a mechanism that's provided where -- and in this case,
the bank is the intermediary where they provide the mechanism to debit one
side and credit the other side.
Now, and the reason I make that distinction is, is that there may be more
chargeback rights available than there are consumer rights in a given
jurisdiction, or there may be fewer. If there were a case where there was
some consumer rights that we didn't happen to have a corresponding
chargeback right, that doesn't let the card issuer off the hook for
crediting the consumer, it merely means that the issuer of the card has
nowhere to, you know, they can't toss that monkey back over the fence,
they've got to absorb the loss themselves, but they still have to credit the
card holder. I really don't know of any circumstances that exist right now
where that would qualify, but hypothetically that would be the situation.
And in coming up with the chargeback rights, what we've tried to do is to
think, you know, what would be reasonable, and try to have a balancing act
between what's fair to consumers and what would be fair to merchants, where
they would, you know, want to be able to accept Visa cards. And that's
where the issue of competition comes in, to keep us honest, because if we
were to decide as Visa that we were going to subtract some chargeback rights
from the issuer so that the merchants liked us more, then what would happen
is that the consumers would start preferring Mastercard or American Express
because they have more rights attached to that and vice versa. So we have
to pretty much keep them in check.
Now, we actually have 41, Visa has 41 chargeback rights, I'm not going to
go through them, we don't have time, and it's boring anyway, but pretty much
everything that needs to be covered is there, so. And if you do have
questions, we can go over them.
Let me walk you quickly through the process, this is a lot simpler than
having to take someone to arbitration or file a lawsuit. If you have a
consumer who has purchased a widget from an online store and the widget
doesn't arrive, and you have there a charge for it, we would encourage them
first to try to contact the widget seller and find out what the situation
is, and it could be, you know, whatever that is. We don't want to step into
that relationship between the buyer and the seller, but we do want to be
there if that breaks down.
So let's assume that the consumer can't reach the widget seller or
whatever, and so, in that case they would contact their card issuer and
explain what the circumstances were. At that point, the card issuer would
credit the consumer right away and send the debit, if it's a Visa or
Mastercard it goes through our system, which is with the Visa logo they
represent, and it goes to the merchant's bank, and so, that's how the
issuer, you know, they've got the debit that offsets the credit, so they're
okay now, the customer is happy. The merchant's bank, or if this is Amex,
Diners, JCB, it would go directly to the merchant and debits the merchant's
account. So, it's all very efficient, there is an opportunity to, you know,
to go back around if one party wants to dispute it, but generally this works
So in conclusion, payment cards are a natural for the Internet, it's
pretty difficult to shove cash or cheques into your PC, you know that floppy
slot or that CD slot just doesn't, you know, take it in, so it is a very
good way to pay, the fact that it is tried and true and trusted, it does
work, it's convenient, and we think that, you know, that that hopefully
should be adequate. Thank you.
Ms. LAURIE LABUDA:
My name is Laurie Labuda, and I am a consultant to the OECD Consumer
Policy Committee, and probably you've -- well, everyone has heard the OECD
bantered about a bit in the past couple of days, but maybe it would help if
I gave you a quick overview of what the OECD does and how it works, and then
I'll give you a little more specific information about what the Consumer
Policy Committee is doing.
Basically, the OECD is an international, intergovernmental organisation
comprised of 29 member countries. It has no governmental powers but it's a
forum for governments to get together and also invite in business and
consumer representatives, labor groups, to join in discussions and formulate
policy decisions, exchange information.
One thing that the OECD does is develop policy recommendations that are
formal OECD instruments. These instruments are non-binding, they have no
legal power in any of our member governments, but because they're developed
on a consensus basis amongst member countries, there's sort of a moral
obligation for the countries to implement them and use them on a national
basis. Some examples of these kinds of instruments include the 1980 Privacy
Guidelines which I'm sure a lot of you are familiar with, and some recent
guidelines on security and cryptography.
We're also, within the Consumer Policy Committee, developing and working
on a set of guidelines for consumer protection for electronic commerce. A
lot of you are involved, I can recognize faces and E-mail addresses. A lot
of you are involved in that process and we're very happy to have business
and legal input, and it's a process that began in April of 1988 or 1998,
sorry, and with luck and keeping according to our plan, we'd like to finish
it within 1999. So by the end of this year hopefully we'll come up with
some sort of a consensus agreement.
The guidelines are basically a set of core recommendations of basic fair
business and marketing practices; it includes descriptions of what would be
fair business practices, fair marketing practices. This is the current
draft as a matter of fact, nothing has been, we don't have any consensus,
any kind of final decision on any aspect of the guidelines at present. We
also include information disclosures and information about the business,
information about the product or services being offered. And we are working
with both business representatives and consumer representatives to develop
The process generally works by the OECD releasing a draft to our member
delegations, the delegations then circulate and vet the draft on a national
basis, invite comment from national business groups, national consumer
groups and then return some sort of consensus opinion, some consensus
national opinion to the OECD and we redraft and send out draft number, we're
working on Draft Number 5 at the moment.
And just to be a little more specific about that, I had a comment period
close on the 20th of this month. As with most deadlines, they are meant to
be broken, at least my deadlines seem to be, and we are, we've been
extending that to most of our delegations, and I don't expect to close out
my comment period 'till the end of this month.
There will be a new draft released the first week of August, and I would
invite you to get a copy of the draft and comment to -- there are a number
of different ways to get a hold of it. For a lot of different reasons, you
can't get them from me but you can get them from some business groups that
we're working with or from national delegations that are members of the
Committee, and you can return comment to the national delegations and they
would also appreciate your input.
With respect to jurisdictions specifically, we have, I'm sure you can
imagine, spent a lot of time discussing the issue within the Committee.
It's -- the only consensus we've reached so far is that we won't be
attempting to determinate definitive recommendation for consumer-related
jurisdiction issues within the guidelines themselves. It's such a
horizontal issue and it touches on so many different aspects of electronic
commerce that all of the delegations understand that and agree that to try
and decide an instrument would be impossible for one thing, and probably not
particularly helpful in the long run.
So what we are trying to do, we can't ignore the issue completely, what
we are trying to do is find a way to address, to make sure that in
considering jurisdiction and other form, for example, in The Hague
conference, that the consumer, consumer concerns and the consumer aspects of
jurisdiction are not forgotten in those forums and the Committee would like
to make a recommendation to certain aspects of consumer policy that
shouldn't be forgotten as jurisdiction rules are considered, another forum.
Roger is giving me this signal. But I might also mention two other
things that are going on. One is with relation to chargebacks. We also
have a project, a recommendation to try and provide a more international
perspective on chargebacks and that's a process, an ongoing process that
should be going on through the end of this year and perhaps until next year.
It's going to be headed up by the U.S. delegation and the Federal Trade
Commission. I'm sure they'll be happy to hear from you on that.
The second project is the inventory that Scott Blackmer mentioned earlier
today which will be my summer vacation project and I'll be happily working
on that all through August. So any input that anyone would like to submit
on that regard is more than welcome as well. And that will be a publicly
released document to help everyone to try and determine what the various
international consumer policies and regulations are throughout the OECD
member countries. So that should be available some time -- a preliminary
draft should be available some time in the early fall. Thank you.
Ms. MARY W.S. WONG:
Good afternoon everyone. Roger, despite the fact that I'm a law
professor in my second life and therefore can go on for hours and hours, I
promise to stick to my time limit insofar as that's possible.
I think we'll probably all agree that one of the developments in the
legal area or quasilegal area that parallels the phenomenon of E-Commerce in
terms of explosive growth, is probably the exploration of alternative
methods of dispute resolution. And I've been asked to speak for a few
moments on something that the WIPO has been working on for a while, which is
an online dispute resolution mechanism.
Unfortunately as I said, they've been working on it for a while, and
Francis Gurry assures me that it will be ready for testing and launched
pretty soon. So what I intend to do is spend a couple of minutes just
explaining what that is, and maybe looking quickly at the possible benefits
for consumers that something like that could offer and then I'll move to
some examples of other types of dispute resolution mechanisms that we could
perhaps consider would aid in consumer protection.
The WIPO online dispute resolution mechanism aims to be essentially a
uniform facility, a repository. It will enable parties to dispute, who
employ, say, mediation or arbitration to conduct everything online, that is,
all communications, all transmissions, data storage, archiving, payments for
the services and so on can all be conducted online through the WIPO
facility. And this can be quite important. Obviously there are various
other initiatives, there are also proceedings being conducted right now
where people use video conferencing, teleconferencing and various other
forms of technology assistance.
But what WIPO hopes to provide, I would think, is that as a neutral third
party, it would provide the facilities for full online dispute resolution as
well as a trusted method of, say, document transmission, dating and
delivery, as well as archiving. So, in terms of representing a step
forward, and at least a mechanism of dispute resolution, it promises to be
In terms of benefits to consumers, I think one of the major things, as
was pointed out by Mr. Simpson in his presentation yesterday, is that when
you do things online, it's quicker and it can also be a lot cheaper. So, in
terms of cost, it can actually be beneficial to consumers, and this
obviously has a flip side that I'll come to, but that's one potential
benefit as well as the quickness and the ease of communication and
transmission. I think those are some fairly obvious benefits.
But there are also some things that we should bear in mind and some
potential problems and disadvantages. So, for example, one question would
be cost again. It can be quite expensive to conduct, say, arbitration or
mediation at various centres and facilities, including WIPO, and I have with
me here a schedule of fees for WIPO mediation and arbitration. And we
don't, at this point, have any idea what the charge for using the online
dispute resolution mechanism will be. But obviously the scale of charges
will be one important factor for a consumer.
Another important factor would probably be the nature of the dispute.
And the history of the development of the online dispute resolution
mechanism is really in the domain name dispute area, that was the impetus
for working on a project such as this. And I think we'd all agree that in
terms of a domain name dispute, online dispute resolution is probably
something that fits pretty well with a domain name dispute, but not all
disputes and certainly not all consumer-related disputes would necessarily
benefit from just going online. For example, a consumer who buys a widget
that's worth $50 or $500, which can be a significant amount, when something
goes wrong or when he discovers a defect, one of the first things he's going
to think of is not going to be going to WIPO or necessarily what sort of
dispute resolution mechanism he wants to use. It's really just going back
to the store where he bought it from and asking for replacement or a refund.
And as we've seen over the past two days, this can create a problem when
the transaction is conducted online.
Similarly, it does raise the question as to what would be the appropriate
forum or the appropriate body for the consumer to approach if he has a
problem with an online transaction. And again, an organisation such as WIPO
might not necessarily be the automatic response nor would any other
international body be an automatic idea, and it might not necessarily even
be the appropriate forum for an individual consumer who's purchasing an
The nature of the proceedings in dispute resolution can also be a factor.
I mean, essentially we're still talking about concepts of litigation,
arbitration and mediation as well as assisted negotiation in the appropriate
case. And we don't have time during this presentation to go through the
benefits as well as the limitations of each method and we've heard a lot
about the problems of litigation and enforcement. But I'd also like to
point out that when you use arbitration and mediation, one important factor
is that the parties have to agree to arbitrate or to mediate, for example,
by way of an arbitration clause in the contract or by way of a mediation
And in relation to a consumer, in you're dealing with a standard form,
for example, the consumer might not know what he or she has gotten himself
or herself into by agreeing to such a clause; for example, AAA rules for
arbitration might not mean anything to a consumer. So, although we talk of
agreement in terms of going to arbitration or agreeing to mediate, it may
not mean as much to a consumer as to a business.
One thing that has emerged, though, I think, that's quite interesting,
and several speakers have alluded to this and a few people who have spoken
during this conference have also mentioned it, is that one thing we might
look at in terms of ADR might be to encourage the development of cooperation
between various national bodies that are responsible for dispute resolution,
be it mediation or arbitration. And at this point, I'd just like to spend a
couple of minutes talking about a development in Singapore.
In Singapore we have several centres for dispute resolution, one is the
Singapore International Arbitration Centre which obviously deals with
arbitration; there's also the Singapore Mediation Centre that deals with
mediation as well as a couple of other bodies. The reason I mention these
two is because they have come together with the National Computer Board of
Singapore, which is the statutory body that's charged with implementing
Singapore's master E-Commerce IT Plan, to form a body called SITDRAC which
stands for Singapore Information Technology Dispute Resolution Advisory
Council. This is a body that's responsible for formulating policy in terms
of dispute resolution for information technology-related disputes and
various companies and industry have been supportive of its efforts. So far,
it has not come up with any guidelines or any policy regarding consumers in
relation to the IT industry, but that's one development I wanted to
highlight to you because it's possible that in the future they will look at
consumer disputes in relation to IT and the IT industry.
And just to finish up my example of Singapore, and I see that the time is
quickly running out too, the Singapore Mediation Centre has teamed up with
various other mediation centres in other countries, for example, in the UK,
the U.S., Australia and Hong Kong, to form something called the Millennium
Accord, and this is a cooperative effort amongst the various mediation
bodies in these countries that I've
mentioned, to deal with disputes arising out of the Y2K issue.
And the idea is that when there is a Y2K dispute, parties who refer their
disputes to any one of these centres - for example, an Australian company
and a Singapore company that's engaged in a Y2K dispute - if they go to the
Singapore Mediation Centre, or if they went the Australian equivalent that's
also part of the Millennium Accord, the procedures and the rules for
resolving that dispute would be the same, whichever centre you go to.
And although this has not anything to do directly with consumers, I feel
that that's a fairly interesting development in the sense that it does show
that the ADR bodies can and do take it upon themselves to enter into
cooperative efforts in relation to either the specific industries and
sectors or specific problems. So, it can be an encouraging sign for those
of us that are looking towards developments in consumer protection, and it
may well be that cooperative efforts amongst these bodies may be one way to
go in terms of aiding and protecting consumers.
Thank you very much.
Mr. ROGER COCHETTI:
Thank you, Steven, Lynne, Laurie and Mary. We'll now go to the last part
of the presentation, and in this part of the discussion, we're going to hear
comments on the comments that you've already heard from two different
First, Bill Poulos is the Director of Electronic Commerce Policy at EDS
Corporation in the Government Affairs Group in Washington DC. He provides
EDS officers and business unit leaders with advice on national and
international public policy areas that relate to the Internet and electronic
business. He's a very active member of the business community that is
dealing with electronic commerce policy issues.
Following Bill's comments, Philippa Lawson will be providing comments
from the point of view of a consumer advocate. Philippa is a counsel of the
Public Interest Advocacy Centre in Ottawa, Canada, and she's a very active
advocate for consumer interests in
telecommunications and other policy issues before the Canadian federal and
Each will spend about five minutes telling us what they think about both
the government enforcement solutions we've heard about, and some of the
ideas that we've heard about for -- that would build on the practice of
Following their comments, the entire panel will have opportunity to
comment on what others have said, or ask questions of each other. Bill.
Mr. BILL POULOS:
Thank you. I have to admit to be highly influenced by the comments of
the speakers before me on this panel and on other panels because what
brought me to this conference, and what has really attracted my interest is
that I'm chairing the effort to draft the GBDe jurisdiction paper to be
presented by the GBDe CEOs in Paris in September. And as I think back on
that work, it's interesting to note that we started off from a very rigid
position: country of origin, freedom of contracting, these were the
essential things that businesses needed to do business on the Internet. But
as I said, I've been highly influenced by this conference and by the
And I'm reminded of a short story. When President Clinton was merely a
candidate for office, he had a very effective campaign team that plastered
across their campaign office a big sign that said: "It's the economy,
Stupid!" I'm going home and put up a sign in my office when I get back, and
the sign is going to say: "It's the remedy, Stupid!" because the thing that
I'm, the idea that I'm most drawn to in the comments of the previous
speakers is that they're focusing on providing remedy to consumers who have
some consumer issue in the course of doing business.
At the GBDe, one of the major conclusions that we have drawn is that
consumer protection laws alone may not fully provide the consumer confidence
that's necessary when we recognize that electronic commerce is being done in
a global medium and therefore subject to all of the conflicts of law that
you are all aware of. I'm just learning what they are because I'm not an
So we believe that continuing government focus solely on trying to decide
which law is applicable, which court is competent to hear the case and apply
which law is really, it just doesn't go far enough to provide the kinds of
resolutions that consumers need.
Even when it's possible for a government to require that a buyer's
consumer protection law be in full force, even when it's possible, or even
when a court decides in favour of the buyer in the buyer's location, the
enforcement of such laws and court judgements outside of the jurisdiction of
the buyer is difficult. You all know that as attorneys. We're certainly
learning the realities of that as business people.
So in the end, we agree that customers must trust that when a problem
occurs, a remedy will be timely, easy, cheap and available from any location
in the world. The online technology that we're dealing with might make that
much easier in the future than it's ever been in the past.
So we believe that governments and businesses and consumer groups need to
cooperate, work together to provide consumers with more efficient remedy
mechanisms while we continue the debate and the discussion about whether
country of origin or country of destination and how much freedom should
consumers have to engage in contracts with businesses. These discussions
will continue as Andy Pincus pointed out in his comments today.
So in the end we believe that alternative dispute resolution mechanisms,
such as arbitration, mediation, conciliation, as well as creating new online
self-regulatory mechanisms such as codes of conduct, trust marks, seal
programs such as the one we heard about today are really the right approach.
While governments and businesses continue to discuss all of these other
jurisdictional issues, businesses have to take the leadership to put
self-regulatory programs in place that work, that are effective, that are
timely, that are cheap and which solve the customers problem.
The term self-regulation I don't think is moving away from
responsibility. I think, in fact it is a, it's a phrase or word that says:
"We are taking responsibility" and we certainly learned our lesson in the
great privacy debate over the European data protection directive because we
continue to say self-regulation is the way to go, but there were times
before we finally came up with something that was real and something that
was working when government officials said: "Where's the beef, where is
it, you said you wanted self-regulation, but where is it?"
We can't make that mistake again, we have to move fairly rapidly and put
systems in place that work and that will satisfy the needs of customers to
resolve minor issues in Internet transactions. Thank you.
Ms. PHILIPPA LAWSON:
Thanks. Well, I think there's a lot of agreement here at this conference
and on this panel, and maybe I'll start with that.
I think it's clear that we -- well, you can divide the problem really
into two parts from a consumer angle, the bad guys on one hand and the
not-so-bad guys on the other hand. And I think we can all agree that we
need to go after the bad guys - we've got to stop them - and that
governments play a critical role here in cooperating across borders to
enforce laws and to develop common standards, again across borders so that
we don't tolerate consumer fraud or deceptive marketing practices.
But as I mentioned, it's the other side of the problem that seems to be a
little bit more difficult: The well-intentioned businesses who sometimes
get in trouble. Here again I think we have a lot of agreement - and I
really like the make-up of this panel because I think what we've seen are a
number of critical components. Each is necessary; none is sufficient on its
own. And I think Steven mentioned in his presentation that self-regulation
is a critical component of the solution and that government regulation is
not sufficient on its own.
I would agree, I think that in the area of electronic commerce, all of
these players have a critical role. So government is still there setting
the minimum standards, enforcing and providing where possible for reciprocal
enforcement of judgements. I'll come back to that in a moment. And
government is going to play a critical role in establishing common
standards, internationally as well as domestically, although we recognize
that's going to take time, we can't wait for it.
Industry is going to play the key role in self regulating, and again in
establishing standards among themselves internationally and in providing
and promoting effective dispute resolution mechanisms. But I think we've
heard of the limitations of each of those. I mean, clearly self-regulation
is limited, it doesn't cover everyone. Clearly, dispute resolution
mechanisms are limited insofar as the two parties have to agree. So, if
you don't have a cooperative vendor, you're not going to be able to take
advantage of these online dispute resolution mechanisms.
Intermediaries play, or are going to play, a key role here as they are
doing right now through the chargeback mechanisms, and we want to see that
continue and indeed expand. And consumers obviously play a key role
themselves in informing themselves, acting prudently online and pursuing bad
actors where they can across borders.
Now, where we seem to be disagreeing are on a few points here. I think
I'll talk about three. I don't want to ignore this key jurisdictional issue
that discussions at this conference have revolved around: country of
origin, country of destination - I agree there's no point of being fixated
on that, it's not going to get us very far. However, I want to make sure
the consumer's position is presented to you on that point.
I guess one way of approaching it is, if what we want to do here is rely
more on market forces and less on direct government regulation, then you've
got to make it easy for those market forces to do the job. Consumers are
market forces, you've got to make it easy for consumers to enforce their
rights across borders.
Now, the first step of that is going to be, I think, this self-regulatory
online dispute resolution. But when that doesn't work then the consumer has
to have recourse to the default system, which is the judicial system. And
there, as it's been pointed out already, a country of origin rule is
essentially a barrier, a complete barrier. It's just, there's no way the
consumers have the ability, or in a normal consumer transaction that it's
worthwhile for a consumer, to pursue a business on their own across borders.
So, I think we're at a point here where we've got to address the issue as
a policy question really. Again you can try to argue through it as courts
have done, on, you know, "Is the merchant moving to the consumer's
jurisdiction by setting up a website?" or "Is the consumer going to the
merchant when they go online? ". I don't think that's going to get us
anywhere. I think ultimately we've got to address this as a policy issue.
What do we want the result to be? What is the fair reasonable result
here? What are our values? And this is where I have some difficulty because
I just can't believe that from the consumer perspective, being able to
choose among more commercial options online is more important fundamentally
to us than being able to pursue a legitimate complaint and get redress.
From the business perspective, I mean, how can we say, there are people here
who really think that's it's more important that a business is able to sell
in more jurisdictions than otherwise, than it is that a consumer who has a
problem and can't get redress otherwise, is able to do so through their own
court system. I think we really need to question that.
Now, acknowledging all the time that that's not the end of the story
because even once the consumer does get some kind of judgement against an
uncooperative merchant, they still have to enforce that. And that's where
again I think we can all agree governments in particular are going to play
an important role facilitating cross-border enforcement.
I think, just responding to the innovative suggestion made by Susan
Crawford earlier on today, which I think is a really interesting proposal
that should be pursued, I think there are, as she suggested really three
areas that need to be worked on before the deference analysis approach can
be adopted successfully. One is the agreement on the minimum standards that
we're talking about; two is the establishment of an effective online dispute
resolution system and industry self-regulation; and three is the effective
warning to consumers that they are in fact entering a certain country for
the purposes of that transaction.
So I'll just wrap up saying once again, no group here can do it on their
own, industry can't do it on its own through self-regulation; government
can't do it on its own through cross-border enforcement, there are practical
limits; intermediaries, financial intermediaries can't do it on their own
and consumers clearly can't do it on their own. We're all part of the
solution together. Thank you very much.
Mr. ROGER COCHETTI:
We are running short on time but what I'd like to do at this point is
give the members of the panel an opportunity to comment on what others have
said or on the comments that have been made. If anyone has a -- Steve?
Mr. STEVEN COLE:
Thank you, Roger. I want to jump off on a comment Bill made: "It's the
remedy, Stupid!" and his advocacy that business needs to get behind
self-regulation, and that was very closely related in my mind to a comment
that Phillipa made for another purpose, I'll admit, but what she said was
that we need to make this easy for consumers, and Mary before then, referred
to the possibility that the WIPO system may not always be à propos
because of the course in certain kinds of dispute resolution for this
environment for consumers, and I think all these comments have a very
important related thread.
And I'd like to caution my friends and the BBB supporters in the
business community who are cheerleading for self-regulation. For most of
the problems that consumers are going to find in international transactions,
and they're the same as in domestic transactions, there can't be a
significant cost attached to their remedy or it's not a real remedy.
The model that you lawyers, we lawyers are comfortable with in the
commercial setting, the AAA, WIPO, whatever, simply is not going to work in
my judgement in the consumer field. And I was worried about commercial
lawyers thinking we can transport this into the consumer model.
Let me just remind everyone, about 30 years ago, the Federal Trade
Commission in New York, investigated mandatory pre-dispute arbitration
clauses in consumer contracts, and at that time, without a rule, they wrote
much material indicating that these were terribly unfair to consumers, they
were dealing with companies writing in the AAA to arbitration clauses and
then finding out that the cost of filing with the AAA exceeded the cost of
the problem that the consumers were trying to deal with. Bottom line, that
didn't serve anybody, the business community, AAA, or anyone certainly
wasn't served by that.
And I guess the message is, if we all mean it, and we think
self-regulation can be one of the many effective tools, it's going to need
to be structured and paid for in a way that the consumers can get it and get
it quickly and fairly and inexpensively.
Mr. ROGER COCHETTI:
Anyone else on the panel want to offer a comment, if not, I'm going to
open it to the floor. I think we really have time for one question, if
there is one. Please identify yourself.
Ms. MARGO LANGFORD:
Thanks, Roger, my name is Margo Langford and I'm with IBM Canada, and I
also serve on a number of trade association committees working on these
I just think, I would be remiss since we're in Montreal not to mention
one of the remedies and it's not too stupid. Based here in the University
of Montreal is a cybertribunal and I wanted to mention it because it's up
and it's running, and it's operating both mediators and arbitrators in
French and English. And we welcome your comments either through various
members of the ILPF panel or anybody else who is working on GBDe or anything
The committee actually that's advising the cybertribunal is looking for
input, and so, please go to the website, it's www.cybertribunal.com, it's
actually at the moment free, so you can't get much cheaper than that. It's
a bit of a competition for you there, Bill or Steve, but it's free to both
merchants and to users at the moment.
So it's an experiment but it's also working with the Europe Canada
Consortium on Conflict Resolution, and so, the more that we can learn and
the more that we can get input to making this a viable alternative, not just
in Canada, but obviously across borders, the better. Thanks.
Mr. ROGER COCHETTI:
Thank you, Margo. I think at this point I'm going to ask the audience to
give our panel a thanks for their presentation and on point discussion. And
let me also remind you what most of the panellists have said is that they'd
also be available to discuss some of your ideas in the hallway afterwards in
Ruth, I think that the fact that we're running behind, do you still want
to go ahead with the coffee break or go right to -- you do want to have a
coffee break, so we're breaking for coffee now.
No wait, wait, we may not be breaking for coffee, so hold on a second.
Ms. RUTH DAY:
We've just had a short arbitration on the notion of a break, we are not
having to call in any dispute mediation at this point in time. If you take
ten minutes, ten minutes only, be back here, lots of people have planes and
trains and automobiles to catch and our last panel has a lot of important
things to say, so please join us in ten minutes.
Mr. JACK L. GOLDSMITH:
I'm Jack L. Goldsmith, I teach at the University of Chicago Law School,
and this is the final panel of the conference, somewhat implausibly entitled
the "Experts' Response".
Before we get started, each of us are going to speak for just five
minutes and maybe we'll have time for questions after that.
Before we get started however, I think we should all thank ILPF and Ruth
Day and Masanobu Katoh for putting on an extraordinarily well organized,
well executed conference from which we've all learned a lot. Thank you very
The three panellists need no introduction because they were on the first
panel: Hank Perritt, Agne Lindberg and Kazunori Ishiguro. I'm going to just
offer a few reflections, first on my reflections to the conference and then
turn it over to each of the panellists.
I basically have six general reactions to the different panels at the
conference. My specialty is conflicts of law in real space, and sometimes
The first reaction that I have to this conference is that the goal of
eliminating regulatory conflict in the Internet context is a false aim.
Regulatory conflict is going to be to some extent inevitable whenever there
are the following two things: a) decentralized law making by national or
subnational governments, and b) transnational transactions. If you have
those two conditions, it's simply impossible in my opinion to get rid of
conflicts of regulations.
Nations have, for often good reasons, sometimes bad reasons, different
regulatory commitments, and these different regulatory commitments are going
to be implicated in clashes when there are transnational transactions,
including those transactions on the Internet. So the aim of jurisdictional,
of jurisdictional harmonisation should be to reduce these conflicts not to
eliminate them. It's always a question of degree, not elimination.
The second point is that harmonisation of different regulatory regimes is
really really hard, it's easy to talk about and very hard to do. As a
matter of fact, with the exception of the special case of the European
Union, we see very little substantive regulatory harmonisation in the world
in any context. Most of the important international commercial treaties
such as the Commission on the International Sale of Goods, the Rome
Convention, the New York Convention related to arbitration, The Hague
Conventions, they all have so-called mandatory law or regulatory exceptions
precisely because it's so hard to get agreement on, and compromise on
matters of regulatory difference. So it's very hard, it's always proven
very hard to do, and I think it's going to continue to prove hard to do.
The third point is, in my opinion, that -- many of you have said this and
I agree, that conflicts of regulations will not make an E-Commerce
impossible, it's not going to destroy the Internet, it's not going to
destroy Internet transactions. That claim has been belied by the experience
in the last five or seven years with the Internet in which there's been
significant potential regulatory conflict and massive growth of the Internet
Another way of putting the point is that the elimination that that
which promotes the growth of the Internet and E-Commerce, if we're going
to be realistic, that that is not sancrosanct, the goal of promoting
E-Commerce and making it as an inexpensively as possible from a regulatory
standpoint to do business on the Internet, that can't be a sancrosanct
goal, that's one value, one very important value to be traded off against
the values that underlie regulatory difference.
The fourth point is that despite all that I've just said, it's quite
clear that many, perhaps most of the significant regulatory differences will
be overcome through, for lack of a better term, private ordering, and it is
not going to be done in the details by treaty or by unilateral regulation.
We've already seen Internet practices and customs far outrunning
governments in dealing with these jurisdictional problems, many of the
presentations in the last panel were devoted to this. This is going to be
inevitable for a lot of reasons. The value of transactions on the Internet
are low; it's not going to be cost effective for government to regulate
them, at least in the minutia; Internet transactions are so fast that it
won't be cost effective for governments to regulate them; and importantly,
because trust and reputation are so important on the Internet; companies
will, as they have done, have powerful incentive to provide dispute
resolution mechanisms and legal mechanisms that instill trust.
The fifth point is that some have posited a distinction and I've done so
thus far which I want to now back away from, between private ordering and
international harmonisation. These are not analytically distinct concepts
for the following reason. Private ordering, another way of thinking of
private ordering is government by contract, by private parties.
Government by contract only works, private ordering only works to the
extent that governments permit it to work, by which I mean, for example,
Susan Crawford's proposal of opting out, of letting private parties choose
the law to govern their consumer contracts, that only works, that private
ordering only works to the extent that governments don't permit lawsuits if
they're cost effective in derogation of that contractual regime. We
shouldn't think of private ordering and government regulation or
international harmonisation of government regulation as analytically
distinct concepts, they have to go hand in hand.
The last point is, and I think this is a lesson that many of the speakers
have taught us, is that resolution of the jurisdictional conflicts presented
by Internet should proceed on the micro level and not the macro level. I
did a lot of Internet conferences and this one has made especially clear to
me how much progress we've made I think in the last two or three or four
years because in this conference people haven't been talking about general
theories of jurisdiction, how we're going to solve the problem of Internet
jurisdiction. People have been focusing on concrete context, concrete
problems where progress might be slow, but might be sure as well.
The way to deal with jurisdictional conflicts presented by consumer
protection problems and Internet gambling and encryption, and privacy might
be completely different. Harmonisation might be achievable, but
technologically and in terms of agreement in one area but not in another,
and we shouldn't think that there's a global solution to the problems of
jurisdiction. The Internet is not an undifferentiated medium, and the
problems of jurisdiction presented by it aren't undifferentiated either.
With those thoughts, I'll turn it over to Hank.
Mr. HENRY PERRITT:
Thanks, Jack. At the conclusion of my remarks in the opening panel, I
asked whether we should focus first on working out a treaty on jurisdiction
and choice of law, or whether we should work on substantive harmonisation or
convergence, or whether we are to work on self-regulation. Chairman
Pitofsky said at lunch time yesterday that the answer was we should do all
of those things, and I agree with him.
Let me just say a word about each one of those, and how I think we might
proceed next to build on what we've learned over the last couple of days.
First, the question of some kind of treaty on choice of law and
jurisdiction. We actually have two vehicles for engaging that possibility:
one is a draft of a convention on the enforcement internationally of civil
judgements that has been generated by The Hague Conference on Private
International Law and was reviewed in June of this summer, and I expect
another draft will result from that meeting. It doesn't say anything
specifically about electronic commerce or the Internet, but there is a group
also associated with The Hague Conference that will be meeting in September
to consider the relationship between electronic commerce and the Internet
and this draft convention. So I think that there is already a drafting
process under way for a convention on jurisdiction, and that's so because
even though the title of the convention talks about enforcement of
judgements, it covers jurisdiction as well.
On choice of law, there is a somewhat more limited vehicle there that
you've heard a good bit about in the last couple of days, and that's the
European Union proposal to make some changes in the Rome Convention on
choice of law, covering contractual choice of law in Europe.
While Americans don't have standing to participate in those discussions,
I think we at least can interest ourselves in them and provide comments that
we think may be helpful. And the reason I suggest the European vehicle for
choice of law is that I think that there is no comparable vehicle in the
United States. There was a discussion at the last Association of American
Law Schools, - the law professors convention - last January about the
possibility of a third Restatement for conflict of laws, and it's fair to
say that there is no agreement whatsoever and that it's extremely unlikely
that such a thing will move forward within the near term or even in our
I like Susan Crawford's very interesting proposal for deference, what she
called deference analysis, what I think of as a kind of safe harbor for
choice of law, contractual choice of law. I think that's very interesting,
and I think it might be pursued further within the context of the
discussions over the Rome Convention.
Second, work of substantive harmonisation and convergence. I hope that
most of us are convinced that we must do that, as Jack Goldsmith just said,
on a micro level instead of a global level. And I would like to suggest to
you a prime candidate for that process of harmonisation and convergence. I
think it should be consumer protection, I think that is the best candidate
for a variety of reasons.
First of all, there is some natural convergence as Hugh Stevenson said,
no one is in favour of fraud, and I think Kai Westerwelle helped us
understand that even some of the differences that we thought were important
between German and American approaches have begun to evaporate because of
unilateral decisions by Germans and others to reduce some of these
Second, there is a robust institutional mechanism for consumer protection
already, and that means that unless we do something to work on
harmonisation, we're going to have North Carolina mud flap problems all over
the place, and that's what's going to begin to pinch unless we do something
about it by working on harmonisation.
The best prospects for success draws upon Jenny Clift's observation that
one can harmonize at different levels. And I think it's important that we
not try to undertake discussions over harmonisation and convergence with
detailed provisions or with especially difficult provisions. For example, I
would start with fraud which ought to be easy because there's so much
agreement already and it's at least a relatively simple concept until you
get to application, and I would leave hard questions like pharmaceutical
regulation and - Ron Plesser, I'm sorry - but probably professional
licensing until later because I think those are likely to be much more
But I think we can make a great deal of progress if we begin - and by we,
I mean groups like the ILPF, to some extent perhaps the ABA Jurisdiction
Project with the help of the Commerce Department, the Federal Trade
Commission, and other public and private groups in the U.S. and elsewhere -
to try to develop a statement of good practices, or a statement of best
practices, for consumer protection which I think is likely to bear fruit. I
think it would make solving some of these other problems easier.
Fourth and finally, self-regulation. I think it may have not always been
clear what self-regulation has to do with jurisdiction. So first of all,
let me say what I think it has to do with jurisdiction. You'll remember,
yesterday morning I talked about there being three kinds of jurisdiction:
prescriptive jurisdiction, adjudicative jurisdiction and enforcement
jurisdiction. It seems to me that self-regulation can help with all three of
With respect to prescriptive jurisdiction, if you have a private group
that agrees on a code of good practice, that is a kind of legislative act.
In other words, it is prescription and it is inherently transnational, at
least to the extent that the membership of the group is transnational.
With respect to adjudicative jurisdiction. We've had a lot of talk, and
appropriately so, about dispute resolution because self-regulatory programs
are not likely to be perceived as effective unless they contain some kind of
dispute resolution mechanism for consumers and sellers. Dispute resolution
can be inherently transnational; international commercial arbitration of the
New York Convention is a prominent example of that. But what's important,
and I think what we've learned over the last couple of days is that we ought
not to stop when we have understood the arbitration model or the mediation
There are some much more interesting new models. We heard about credit
card chargeback mechanisms. I think we should learn a lot more about that,
about their strengths and weaknesses, and about the important differences
among the U.S., Canada and Europe with respect to chargeback.
We haven't talked nearly enough about EBay, which has on its own, as an
intermediary in electronic commerce, offered an escrow system, an insurance
system, a dispute resolution system in the form of mediation, as well as a
mechanism for, if you will, a kind of consumer black listing of merchants
who don't behave themselves. All those forms of dispute resolution are
available and have been developed in terms of entrepreneurial private spirit
in the EBay context. I think we should understand more about how well that
model is working.
WIPO, which you've heard about, is an interesting model. Another that
might seem far fetched, but at least to an American lawyer is I think
potentially interesting: there's been a lot of debate in the United States
Congress about how to resolve patient care disputes with managed care
companies. There is a long history in health care delivery in the United
States of a hybrid system of dispute resolution that begins within a private
entity like an insurance company and eventually ends up in an appeal process
in a public entity. And I think there might be some interesting structures
that we could adapt from that area as well. It would provide the simplicity
of a private mechanism at the first level but also would have some type of
appellate review or control at the top level.
Finally, enforcement jurisdiction. Here I think is the rub. This is the
hard part for two reasons: first of all, Andy Pincus said that
self-regulation was coming to be perceived as a new method of real
protection. Now he said real protection, and that means that the private
schemes have to be enforceable. That's a political reality. The legal
reality that makes enforcement jurisdiction challenging is what Jack
Goldsmith just said: it only works, self-regulation does, to the extent that
government permits it to work.
Now, that's both a challenge and an opportunity with respect to
self-regulation. On the one hand, it means that if we go off and concoct
all kinds of fancy self-regulatory schemes and don't talk to the government
and don't explicitly link those schemes to the public authorities that exist
in abundance with respect to consumer protection, they aren't going to work
because the governments around the world won't let them work.
On the other hand, if we do link them to the public institutions, there
is the possibility for real protection because we can legislate and resolve
disputes privately and then, to the extent that it seems appropriate, rely
on the government apparatus for enforcement. And I think that's a
possibility of great promise.
Now, my final point is to urge you to recognize the importance of
something that's going on right now with respect to the future of the
Before I do that, let me mention the huge contribution that Roger
Cochetti consistently has made year in and year out in providing leadership
in getting people from the private sector to come together with people from
the public sector and otherwise, to have an open minded exploration of new
techniques for regulation. I think that's the kind of private sector
leadership that is really needed if we're going to realize the benefits that
some of these new concepts offer us.
If you really believe in self-regulation as a part of the answer, then
you ought to be cheering and rooting for success in the current efforts to
negotiate a safe harbor for self-regulation under the European privacy
guidelines. Those negotiations are difficult, there are a lot of people
that question whether they're worthwhile, but I would submit to you that
that is the best chance for private self-regulation to prove its viability.
If those negotiations are not successful, there's a very real possibility
that self-regulation as a part of the solution to these Internet
jurisdiction problems will be dead, and that we will have missed a great
So, give all the help and support you can to Barbara Wellbery and her
people who are working so hard to make this thing a reality and to move the
ball forward. Thanks a lot.
Mr. AGNE LINDBERG:
First of all, I know that I speak on behalf of all the participants in
the ABA Jurisdiction Project, including the ones we recruited over these two
days, when I say that this has been an extremely valuable conference both to
give some of our ideas out to you from the work done already in the project
and definitely also to get some input from all of you to continue the
project. And as you know, times flies when you have fun, so I'm going to
make some very short remarks to end with.
First remarks. Two Swedes at an international conference held in Canada,
what's that an indication of? My personal guess is that there is secret
work going on to create the Nobel prize in law, and that's going to be
handed out to the one who's going to give the solution to the problems we've
been discussing these two days, but we'll keep that to ourselves so far.
Other conclusions drawn, I think we all agree now, that the nature of
Internet by itself makes it impossible to use the traditional rules for a
jurisdiction which apply to international trade. Maybe to some extent we've
discovered that we don't even have common rules today to provide the
solution we need. So we definitely need solutions specific for the
Internet. These solutions will look different for different use of
E-Commerce and there's definitely not one single solution at all.
A worry has come up with me when we've been talking about all the
different solutions and the problems, and that's a worry I also had the last
time I went to Canada, which was as a part of the Swedish delegation to the
OECD Ministerial Conference last year, and that is that we are maybe
concentrating ourselves a little bit too much on consumer protection. Don't
throw any tomatoes on me yet.
I think that consumer protection is extremely important, but as we've
heard this afternoon, 90% of the volume of E-Commerce is business to
business. We must remember that business to business have other problems,
maybe other goals for the work we're doing and definitely we'll need other
solutions. We must keep that in mind when we work. And that's something
that struck me, as I said, already at the OECD Conference which was very
much, in my view, concentrated on the consumer issues.
Over to the solutions then, and I think back to the ABA Jurisdiction
Project, one of the most important results of this project I think we all
hope will be some sort of a map or maps over possible solutions, possible
venues for the jurisdictional problems for Internet, and we'll all meet in
July next year in London to hear what those maps will look like.
I have a few remarks to make already, personal remarks after these two
days regarding a few of the ways to go; maybe we can stake out at least
three main ways to go: harmonisation we've talked a lot about, regulation,
self-regulation. And as you've heard this afternoon, and the two days, it's
to quote a few of the speakers, none is enough, they have to go hand in
hand. I believe that as well.
Harmonisation of substantive law is probably a very very strong and
efficient way to get rid of the jurisdictional problem, at least for
consumer and public law areas. It does however, it will create a lot of
problems. I think I saw some surprised faces when my German colleagues drew
a picture of how substantive law in Germany looks, and it looks about the
same in the Scandinavian countries, it's totally different from the way you
have it in the U.S.
It will make it difficult to harmonise.
Regulation. An efficient way to create a legal predictable framework
definitely, but it's slow, it's difficult to reach it globally, and I have,
my colleagues from Europe to some extent have made some jokes about
Europeans always wanting to regulate. But I'd also like to end up with
saying that regulation does also create a very legally predictable framework
for E-Commerce. I think that actually Europe will have the world's most
predictable legal framework for E-Commerce in the world once all the
directives are in place. The problem is that we are limited to the fifteen
member states. But regulation is a powerful means.
And finally, self-regulation. There are openings in the EU regulation
about self-regulation, but as a general remark I would say that governments
in Europe are skeptic about it. At the same time, I am very positive, it's
a very flexible solution, it's quick and it can offer us solutions in many
of the areas we've been discussing these two days.
Just a final remark however about self-regulation, and that is my second
worry here today. That is, we might want to ask ourselves the question who
is self, who is the self? If we have the oneself, we're not going to build
trust; if we have too many selves, we're not going to build predictability.
And not having any further words to say, I would like, once again to say
thank you to all the organisers for a great conference.
Mr. KAZUNORI ISHIGURO:
It's my honor to be here to make my presentation again. Now I begin.
People in Common Law countries, especially American people tend to use the
word jurisdiction in a broad meaning which covers almost all conflict of
laws problems, treating applicable law in civil cases at the same level as
the legislative jurisdiction or extraterritorial application of public laws.
Indeed, conflict of laws covers problems of public law areas too.
However, as I mentioned yesterday, American way of intermingling of civil
and non-civil matters which also forms the background of so wide a
definition of the word jurisdiction is quite unique. That causes deep
theoretical confusion, especially since Hartford Fire Insurance case of the
U.S. Supreme Court. Such a trend is, from the Japanese perspective, quite
Hideo Tanaka, Emeritus Professor of the University of Tokyo, a leading
professor in Japan in the field of comparative studies on Anglo-American
Law, states in his very famous book that in the U.S. there is still not
enough academic basis of real comparative legal study, criticizing the works
of Professor John Haley of Washington University and other U.S. professors
who are specialized in Japanese Law.
Comparative law has its long history based mainly on efforts of
specialist in European continental countries. Savigny, who established the
traditional system of conflict of laws, can be seen as the father of such
comparative studies followed by Ernst Rabel, Andre Tunc, von Caemmerer and
In the U.S., according to my understanding, only Professor Arthur Taylor
von Mehven, one of the revolutionalists in conflicts of laws who proposed
functional analysis keeps such European-based tradition of comparative law.
Now if American people tell something about the present stage of the U.S.
law, then it is of course natural that they discuss on the basis of the U.S.
legal system and its tradition.
However, if they want to be, in a sense, the leader in harmonising legal
systems of countries in our world, European style of real comparative legal
study is essential or inevitable.
The most important aspect of the European-based comparative law which is
the real one is to analyze the legal system or individual legislation of
other countries, not at their surface level but in the depth of their
social, cultural, historical and other backgrounds.
I dare say that superficial comparison and superficial harmonisation
would be the cause of numerous misunderstandings and even harmful.
In reality, we may have already too many treaties or international
agreements which sometimes contradict each other. In such cases, those who
worried about the divergence of each legal system, now worries about the
so-called conflict of conventions which is a very complicated problem at the
level of public international law.
On top of that, to take the example of the United Nations Convention on
International Sales of Goods of 1980, we can find there not a few legal
terms the meaning of which are far from clear, such as substantial,
reasonable, adequate, et cetera, which are used quite frequently again and
again in that convention.
Whether the interpretation of such words or terms can really be the same,
for example, between the U.S. and the People's Republic of China, is highly
questionable to me.
Of course, we have discussed very important legal issues in cyberspace
throughout our forum. However, as I said yesterday, we must analyze the
reality, differences, the real features of each legal system as deeply as
possible. That's the reason why my paper discusses the very basic problems
which would not perhaps be able to be overcome in our life. As Professor
Perritt said yesterday, it might be still quite reasonable to do our best in
harmonising legal rules with regard to cyberspace as soon as possible, even
if it is only at the surface level.
However, please think of Asian countries. There are quite a lot of
varieties of religion, culture, ethics, language, history, social
background, political regime, et cetera, et cetera which form the background
of their individual legal culture or even the fundamental notion of justice.
Supply-side voices would say that such situations are too dangerous or
even trade barriers for everyday's business activities. But such varieties
as seen in Asian countries may function in the long-term, as some sort of
safety bulb if wisely managed. A phenomenon, in a sense, similar to the
freedom of expression under the constitutional laws of major industrialized
In other words, it would be dangerous for us to have only one way of
thinking on the basis of rejecting
other value standards for the sake of harmonisation.
Electronic Commerce will surely have huge impacts, not only on economy,
but also on society of each country and therefore we should go step by step
very carefully. We must see the reality of our world. We must learn much
from our history, especially when we are going to enter the new world,
In this sense, it is quite sure that we have done something very
important throughout this forum. I hope that such deep and at the same time
quite neutral discussions will be held in government-based international
forums too with regard to the Internet or electronic commerce.
That's my expression of my -- that's my response as an expert for the
purpose of this closing session. Thank you.
Mr. JACK L. GOLDSMITH:
A few minutes for questions if there are any. Everyone is cyberspaced
out. I think that'll wrap it up. Thank you very very much, thank you, Ruth.
Ms. RUTH DAY:
Just to say to all of you, you've been fabulous, just fabulous, and
there's no topping what has been said over these two days, so we are
I, the undersigned, JEAN RIOPEL, Official Court Reporter, do hereby
certify under my oath of office that the foregoing pages are and contain the
exact transcription of the proceedings of ILPF, taken by means of stenotype
and according to the law.
AND I HAVE SIGNED: