Commercial Conflict of Laws: Issues of Jurisdiction - Research Paper Example

Running Head: JURISDICTION OF THE INTERNET Commercial Conflict of Laws: Issues of Jurisdiction of the of the [Name of the Course] [Date] ABSTRACT This assignment deals with problems pertaining to e – commerce and online defamation. In this regard, the legislation of various countries and extant case law has been analysed. Inter alia, several legal principles, derived from court rulings, in respect of cross border disputes were examined. On the basis of legislation and case law, solutions were arrived for the two problem scenarios. Business over the Internet is always vulnerable to legal risks. Mere compliance with domestic laws is insufficient; because compliance with local laws is limited to a specific jurisdiction. To circumvent this legal predicament, the courts have developed a number of tests and principles. TABLE OF CONTENTS ABSTRACT 2 QUESTION ONE 4 QUESTION TWO 10 LIST OF REFERENCES 17 Commercial Conflict of Laws: Issues of Jurisdiction QUESTION ONE The Internet provides worldwide access to business websites; and customers can access services and products from anyplace in the world. Law – makers and courts find it difficult to determine the jurisdictional aspect of disputes. The legal principles of reasonableness and foresee-ability are rendered difficult to apply, due to the constantly changing nature of the technologies. In this online environment cross – border disputes have proliferated to a major extent1. Hanna Montana has been selling her music on the internet, via her home page. This home page is maintained by a company incorporated in England. The server hosting this home page is located in France. Anna – Maria, purchased online a Hanna Montana T – shirt and paid for the down load of a music track, performed by Hanna Montana. Due to a mistake of the webmaster, a song that was already in Anna’s possession was downloaded. Moreover, a dirty T – shirt, which was not the size specified by Anna, was delivered to her. The exercise of personal jurisdiction can be determined if it is in accordance with the due process requirements when the defendant has purposefully engaged in activities to conduct business. Availing the privilege of conducting business in the forum state is sufficient to prove the existence of personal jurisdiction2. In order, to advice Anna, the following cases, regarding E – commerce have been analyzed. In addition, personal jurisdiction is established if the actions of a defendant are deliberately intended to benefit from in the forum state, due to such activities; and consequently, derive the benefits and protections provided by that state’s laws3. Therefore, it cannot be construed that the internet is merely a medium for engendering communication between a plaintiff in the jurisdiction of the state and a defendant located in some other state. In People Solutions v People Solutions, the defendant’s website permitted visitors to examine various aspects of the defendant’s products, and place online orders for them. The defendant had neither sold any product nor contracted for any services with anyone in that geographical jurisdiction. The court held that mere potential to conduct interactive business was insufficient to aver jurisdiction4. In the case of International Shoe Co. v. Washington, the US Supreme Court delineated the basis for jurisdiction. Under this notion courts can determine the personal jurisdiction of the parties to a case. However, the defendant must have a minimum contact with the jurisdiction claimed. Moreover, such jurisdiction should not affect the doctrines of fair play and substantial justice5. It is more important to focus on where the marketing occurs instead of where it is directed. Therefore, it is important to determine the territory to which the marketing spreads, in comparison to where it originates. A very important consideration, in this context, is that even though such marketing might have commenced in one country, it cannot be presumed that such marketing cannot spread to other countries6. The court provided a substantial basis for the jurisdiction of internet in the case of Qwest Comm v Sonny Corp. In that case, the defendant was an operator of a marketing website, through which he had sold goods. The plaintiff filed a suit against the defendant in the state where the defendant lived. The latter claimed that action could not be initiated against him, for lack of personal jurisdiction. However, the court dismissed his contention and held that the defendant had established his business in the state of Washington for conducting business activities7. The website run by the plaintiff company Qwesty was simple to operate. A visitor to this site could order the products, by filling in a few fields, selecting the product and indicating the destination state to which it was to be shipped by clicking a drop-down menu box. This drop-down menu box contained all the states in the United States including Washington, where the defendant was located. The court employed several tests to determine the personal jurisdiction of the defendant8. For instance, it applied the Zippo sliding scale test9; and effects doctrine test, which was established in Calder v Jones10. The court held that defendant has sufficient jurisdiction; because the latter had a passive website through which he directed activity towards the forum state. Since, the Sonny website advertised, sold and shipped products, directly to the homes of customers in the state of Washington, the court held that it was interactive as determined by the Zippo test. As the drop down list contained the name of the state of Washington, the court held that the website offered sales that were expressly aimed at Washington, and that this conduct satisfied the effects doctrine test. Therefore, the defendant was deemed to have willfully shipped its products to that state11. In Digital Equipment Corp v Alta Vista Technology Inc, the plaintiff Digital, a Massachusetts corporation, sued the defendant company Alta Vista Technology on charges of trademark infringement in Massachusetts. The defendant contended that the Massachusetts courts had no jurisdiction over it. Alta Vista had taken care in maintaining contracts and non-web contacts with the Massachusetts plaintiff. However, the court employed the Zippo test and examined the implications of this internet business. This helped the court to assess the extent to which Alta Vista had infringed the trademark of Digital Equipment12. In Nissan Motor Co Ltd v Nissan Computer Corporation, the plaintiff Nissan Motor company sued the defendant company alleging that the websites of the latter were in direct infringement of the former’s Nissan trademark. The defendant had maintained two websites namely Nissan.com and Nissan.net. The defendant argued that they had not registered the domain names, in order to extort money from the plaintiff company. They also argued that they had not intended to blackmail the former. Moreover, the defendants did not sell any goods directly through their website. The court assessed the implications of the business of the defendant over the internet. It also examined, whether the defendant had earned money through advertising on its websites and deliberately creating confusion among consumers. Finally, the court surmised that the defendant had changed the content of the website, with the intention of taking advantage of the goodwill of the plaintiff. Thus, the court held that the defendant had “deliberately directed its business activity towards the forum of the state”13. Therefore, effects based analysis provides a better alternative for a court that is dealing with the jurisdiction of Internet cases. However, it is contended by many that such an approach could enhance legal uncertainty for web site operators. This is because of the fact that it is possible for a web operator to understand the effects of the doctrine the domestic courts use in respect of jurisdiction. However, the same may not hold true, in respect of courts in other countries. Moreover, there may be many cases against the web operators, worldwide, claiming jurisdiction. Hence, the way out of this difficulty could be provided by sophisticated technology that employs filter mechanisms. This makes it possible to direct the business of the website owners to a targeted jurisdiction. This is the reason for experts on e-commerce to advise their clients to determine their target markets and jurisdictions before starting business over the internet. They also advise them to block the receipt of orders from other jurisdictions. The main purpose of filtering mechanisms is to block orders from non – targeted nations14. The courts focus on the actual effect of the website in the jurisdiction. This doctrine was first established in Calder v Jones by the Supreme Court of the United States. Courts use this approach, in order to claim personal jurisdiction against the intentional wrongful behaviour of a defendant. In addition, such behaviour should be specifically aimed at the forum state, and injure claimants in that forum state15. In Calder, the claimant was a Californian. She initiated legal action for libel against the publisher of a Florida based newspaper. The case posed a challenge to the California district court as to whether it could exercise personal jurisdiction over the defendant publisher. The court had taken the approach of actual effects. It tested the effects of the actions of the defendant. It also examined whether the claimant in California had suffered harm to her professional reputation in California as a result of the intentional actions of the defendant Florida publisher. The court asserted personal jurisdiction; and established a direct relationship between the effects and the damage to the reputation of the claimant. Furthermore, it held that the publisher was liable to the extent of the injury caused to the claimant16. In the context of trade on the internet, the user makes the offer by clicking with his mouse on a specific icon. On this user’s choice being acknowledged by the service provider, acceptance is deemed to have taken place17. The Hanna Montana Company’s contention is that they can be sued, only in a Californian court, due to the terms accepted by Anna at the time of making the offer. These standard terms are always to be found on the company website. While making the offer, Anna had not specifically paid attention to these standard terms. Now, the Hanna Montana Company is incorporated in the UK; hence, in accordance with Article 2 of the EU Judgements Regulations, the relevant jurisdiction has to be the UK18. Specification of California as the relevant jurisdiction constitutes an invalid exclusion clause. Article 5(1) (b) of the Brussels 1 Regulation, states that in commercial contracts, the place of performance is the place where the goods are delivered under the contract. Hence, Hanna Montana Company can be sued by Anna in Italy; because the goods were delivered to her in Italy. In some famous cases, like Zippo and Calder, the courts held that the seller can be sued at a place where he was actively conducting business. For jurisdictional purposes, conducting the business in the forum state is sufficient. As such, the Hanna Montana Company, can be sued by Anna in Italy, since, this company is conducting business actively, by delivering the goods. QUESTION TWO The commission of tort can occur anywhere in the world. A defamation tort is deemed to have occurred in the place where the damage transpires. English common law specifies that the publication of defamatory material is considered to be the commission of a tort. The publication of defamatory material occurs, whenever such material is conveyed to a third party who understands its content. In addition, such publication should result in damage to the reputation of the claimant. Therefore, the place at which the consequences of the commission of defamation are felt and where the damage is suffered by the claimant is the place where the defamation has been committed. In the context of the internet, the place of commission of defamation is the place of downloading the defamatory material19. Therefore, the claimant’s reputation is said to be damaged in the place where the defamatory material had been downloaded or viewed. As such, that particular place is held to be the place of commission of tort. The action for that tort is to be limited to only the local torts. The commission of tort is the consequence of the defamatory material being downloaded and viewed; it is not due to the accessibility of the website or servers that host the defamatory material. The actual accessing, viewing or hearing of the defamatory material connotes damage to reputation, and confirms that the tort has been committed. In order to prove that defamation had occurred, a third party should have viewed such defamatory material. The mere storing of defamatory information on a computer does not provide a basis for defamation claims20. Extreme Pop, an online music magazine that is published in Spain; printed an article, which stated that Hanna Montana had collapsed on stage, due to the abuse of drugs. This article was published in Spanish and English. The webpage of this magazine is hosted in Portugal. Although, British nationals are not allowed to subscribe, some 150 Britishers managed to subscribe, by using foreign credit cards. 80 of these persons read the damaging article about Hanna. In the other countries, 500 people had read this article. Consequently, the sale of music products, of Hanna declined, significantly. Similarly, the sale of tickets to her concert was much less than what had been anticipated. The courts seek the implied knowledge factor in defamation cases. In other words, defaming parties should realize that their statement or article is going to harm the reputation of the targeted person and that the former would be held liable in the jurisdiction of the latter. As a result of this test, a defaming party cannot stipulate a specific jurisdiction for trying defamation suits. The jurisdiction of the injured party constitutes the applicable jurisdiction or forum for suits21. Legal principles vary with national jurisdictions, and this practice had resulted in increased legal uncertainty. In order to overcome this situation, the European Union approved of a Directive in the year 2000. This Directive harmonises legal principles that apply to information society services, throughout the EU, especially in the context of e – commerce. Hence this Directive is termed as the E-commerce Directive. The domestic legislation of the Member States was required to give effect to the provisions of this Directive22. The E-commerce Directive makes the law of the Member State where the commission of tort occurred to be the appropriate law for defamation suits. Thus, it mandates the doctrine of the country of origin. Under this doctrine, the country of the perpetrator of the defamatory statement will be the country of origin; and the applicable law will be that country’s law. This doctrine applies on to the Member States of the EU23. In Einstmann, the German court held that the operators of the search engine, Sharelook, were liable to pay damages to the claimant; because some of its search results displayed defamatory content about the claimant. Specifically, on entering the term ‘naked’ in the search engine, a link for an adult site appeared that featured the name of the celebrity Babette Einstmann. The German court held that the owners of Sharelook search engine were under an obligation to filter defamatory content, after realizing its defamatory nature24. The Yahoo case further substantiated that the internet does not have a clear jurisdiction. There is no court at the international level that has jurisdiction of the websites or content providers. This environment results in legal uncertainty regarding the internet. In the Yahoo case, the government of France intended to prevent access to anti – Semitic material and Nazi memorabilia on the Yahoo website. The content was posted by Yahoo in the United States, and this company contended that it could not be sued in a French court. The intentions of both the parties were noble and genuine. What was lacking in this case was clear jurisdiction25. The French court, in order to ensure national sovereignty, held that US companies were liable if their behaviour breached French laws. It held that the French law applied to any foreign entity, even if the latter’s behaviour was legitimate in its country. The French court also made it clear that the defendant could not claim protection under the First Amendment to the US Constitution. The court held that if French interests and policies were affected by the actions of the defendant; then the latter was precluded from invoking the protection provided by their Constitution, in respect of freedom of expression. The defendant should not breach French policy in any manner what so ever26. This case established the fact that the laws of the United States could not govern the internet. The French court also held that French citizens could sue a foreign company if they found prohibited material on the internet, which was directly detrimental to French policy. In such situations, French citizens can initiate legal action before the French courts. On the other hand, it is interesting to note that Yahoo used the First Amendment to defend itself for its publication of prohibited material under the freedom of expression doctrine. However, it refused to host websites that promoted paedophilia or material relating to paedophilia, although that would have enabled those websites to indulge in their freedom of expression27. This establishes that an American company can decline to host material that is offensive to the public. In such situations, the very same American companies either ignore freedom of expression or do not respect it. Therefore, the doctrine of freedom of expression is not an absolute right; and it does not apply to any and every type of information or content. It does not justify all things and materials. The French court imposed a penalty on Yahoo. The cases of Yahoo and eBay have put forth further difficult challenges to policy – makers and courts with regard to the forum and jurisdiction of the Internet. There is a need to enact legislation that effectively controls the entities on the Internet; and has international applicability28. Cases of defamation concentrate on the damage caused to the reputation of the claimants. Such damage takes place only when a third party reader, listener or observer actually comprehends the content of a defamatory statement or publication. The place where the reader accesses the defamatory statement is deemed to be the place where the damage to reputation is considered to have taken place29. In Berezovsky, the court held that the damage occurred in England. In this case, a US publisher had published defamatory statements against two Russian businessmen in a magazine and had also posted the same on a website. The Russian businessmen brought legal action before an English court for the harm done to their reputation in England. The court held that the place of commission of the tort was England30. The court held that the place where their English reputation had suffered damage was England; because English readers had viewed and received the defamatory information. The claimants restricted their action to the publications in England. The court held that the commission of tort and the damage to reputation had occurred in England. This case clearly established the fact that English courts had jurisdiction in such defamation cases31. In Shevill v Presse Alliance, the ECJ considered the invocation of Article 5(3) EC, regarding an action for libel. The plaintiff, an English woman, had brought a libel suit against the publisher of a French newspaper, for having published a defamatory article that had harmed her reputation. The newspaper article had alleged that the plaintiff had been involved in money laundering racket that had been in existence in Paris, for drug traffickers32. The ECJ held that the place of commission of the tortuous conduct of the publishers was where the newspaper was established. The defendant had published the defamatory article at the place of its establishment. The plaintiff was permitted to sue the defendants, under the provisions of Article 5(3), in the courts that related to the place of origin of the libel. Moreover, Article 5(3) confers jurisdiction on the courts of any Member State, in which the defendant had circulated the newspaper. This enables the plaintiff to sue in those Member States. However, the jurisdiction is to be restricted to the injury suffered in the forum state33. This principle had been established by the ECJ and thus it is applicable to the cases relating to television broadcasts, web publications and internet content. The Shevill principle allows a national court of any Member State, save that of the defendants to exercise jurisdiction, in cases of damage claims. The Member States’ national courts can decide upon damage claims, if the material downloaded locally from the internet was posted or published from anywhere within the EU. However, the jurisdiction in such cases will be limited to just the local injuries34. The ECJ interpreted Article 5.3 EC and the expression place where the harmful event occurred in a case that involved cross – border defamation. This expression connotes the place where the damage transpired, or in other words, the place of circulation of the publication; or the place where the tort of defamation had taken place, or the location of the newspaper’s editor. This interpretation renders the law of the place of commission of the tort, as the most appropriate law. The internet is a new platform of exchange of material and content. Therefore, it requires special type of rules to deal with cases of online defamation articles or material. In the event of damage to reputation due to the publication of online material, the place of origin is the principal place of establishment of the company that hosts the offending website35. In the present scenario, Extreme Pop, refused to accept UK credit cards, as it wanted to evade English Law. As per Article 5.3 of the Brussels 1 Regulation, the national courts of a Member State, in which this magazine had been made available, will have jurisdiction. Hence, Hanna can initiate proceedings against the magazine Extreme Pop, in any of the Member States of the EU, where the defamatory article had been accessed. Moreover, she can sue the magazine in England, because, English law states that jurisdiction exists, wherever the defamatory article is accessed. LIST OF REFERENCES Andreas Manolopoulos, 2003. Raising “cyber-borders”: the interaction between law and technology. International Journal of Law & Information Technology, Issue 11[1] Berezovsky v Forbes Inc. (2000) 2 All ER 986 HL Burger King Corp. v. Rudzewicz, 472 US 462, 475-76 (1985) Calder v. Jones, 465 U.S. 783 (1986) Case C-68/93 Shevill v. Press Alliance SA (1995) 2 AC 18 (ECJ) Carine Bernault, 2002. Case Comment: Applying old rules to new technology. European Intellectual Property Review; Issue 24(4) Digital Equipment Corp. v. Altavista Technology, Inc., 960 F. Supp. 456 (D. Mass. 1977) Einstmann v Sharelook Beteiligungen GmbH (LG Berlin, No. 27 O 45/05) International Shoe Co. v. Washington 326 U.S. 310 (1945) International Journal of Law and Information Technology. Vol. 8, No. 2, Oxford University Press 2000. Is There a There There? Toward Greater Certainty for Internet Jurisdiction. Berkeley Technology Law Journal, [Vol. 16: 1345] 2001 Jameel and others v. Wall Street Journal Europe Sprl Jonathan D Hart, 2007. Internet Law. BNA Books Michael A, Geist. 2001. Is There A There There? Toward Greater Certainty For Internet Jurisdiction. [on line] < http://euro.ecom.cmu.edu/program/law/08-732/Jurisdiction/GeistInternetJurisdiction.pdf> accessed 16 December 2008 Morten Fossl & Lee A. BVGrave, 2000. International Consumer Purchases Through The Internet. International Journal of Law and Infromation Technology, Vol. 8, No. 2. Oxford University Press. Nissan Motor Co., Ltd. v. Nissan Computer Corporation. 89 F. Supp. 2d 1154 (C.D. Cal. 2000) Oren Bigos, 2005. Jurisdiction over cross-border wrongs on the internet. International & Comparative Law Quarterly; Issue 54(3) People Solutions v People Solutions Peter Stone, 2006. EU Private International Law: Harmonization of Laws. Edward Elgar Publishing. ISBN: 1845420152, 9781845420154. P. 94-95 Qwest Comm. Int’l, Inc. v. Sonny Corp,. (Slip OP.) 2006 WL 1319451 (W.D. Wash., May 15, 2003) Telefonica’s Position Regarding The Preliminary Draft Proposal for a Council Regulation on the Law Applicable to Non – Contractual Obligations (ROME II). [online] accessed 18 December 2008 Tom Crone, Philip Alberstat, Tom Cassels and Estelle Overs, 2002. Law and the Media. Focal Press. Wood, Philip R. Conflict of Laws and International Finance. 2007. Sweet & Maxwell Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp 1119 (W.D. Pa. 1997) Read More