He wishes to thank his colleague Alex Marshall for his help in producing this article.
The European Commission has recently promulgated twodocuments intended to become EC legislation that will impact upon transnationale-commerce: the Proposed EC Regulation on jurisdiction and the recognition andenforcement of judgments (COM (1999) 348 final) (the ‘Regulation’), and theAmended Proposed EC Directive on electronic commerce (COM (1999) 427 final) (the‘Directive’). A number of newspaper and Web newsgroup articles have recentlyappeared decrying apparent tensions between the Regulation and Directive andalleging that the Regulation will prevent the Directive’s object beingrealised. Protest has been so vehement that the European Commission invitedsubmissions on the topics and held a two-day consultation in Brussels on thesepoints in November 1999. After the consultation, the „‘problems’ werereferred to expert committees within the Commission. This article analyses theinter-relationship between the Regulation and Directive and any potentialtensions between them and the effects of the changes introduced by theRegulation on e-commerce. The Regulation will be directly applicable in MemberStates while the Directive must be enacted into national law by each MemberState. Accordingly, any reference to the Directive will be to a provision ofnational law enacting it.
The Regulation is intended to update and replace thecurrent EU regime on intra-EU jurisdiction and enforcement of judgments (viz the1968 Brussels Convention, which is enacted in the UK by the Civil Jurisdictionand Judgments Act 1982, and is replicated in respect of EFTA countries by the1988 Lugano Convention enacted by amendments to the same Act). The Regulationwill not apply in the first instance to the United Kingdom, Ireland and Denmark.Therefore, for the time being the Brussels Convention will still be applicableas between these States and the rest of the EU States. However, the UK andIreland have indicated that they will opt-in to the Regulation. It remains to beseen whether the provisions of the Brussels and Lugano Conventions will beamended to bring them into line with the Regulation.
However, the Directive is intended, amongst otherthings, to ensure that an Information Society service provider is subject onlyto the regulatory laws of the Member State in which it is established (the‘country of origin’ principle). The Articles that attempt to achieve thisare Articles 3(1) and 3(2) which provide:
‘1. Each Member State shall ensure that the Information Society services provided by a service provider established on its territory comply with the national provisions applicable in the Member State in question which fall within the Directive’s co-ordinated field.
2. Member States may not, for reasons falling within this Directive’s co-ordinated field, restrict the freedom to provide Information Society services from another Member State.’
The Directive appears to have adopted convoluted anddifficult wording in Article 3 to achieve this purpose. Recital 8 states muchmore clearly what is sought to be achieved by the Directive.
It is not clear how the Directive restricts itself onlyto regulatory laws however it appears that the Directive’s ‘co-ordinatedfield’ in Article 3(1) is the means by which this will be achieved. Theco-ordinated field appears to be the requirements set out in the Directive: seeArticle 2(g). These requirements include:
- establishment and information requirements (Section 1)
- commercial communications (Section 2)
- the possibility of electronic contracts (Article 9)
- information to be provided with electronic contracts (Article 10)
- the moment at which any electronic contract is concluded (Article 11)
- the liability of intermediary service providers (Section 4)
- codes of conduct (Article 16)
- alternative dispute resolution (Article 17)
- court actions (Article 18)
- co-operation between Member States’ competent authorities (Article 19)
- proper functioning of electronic media between the Member States (Article 20)
- sanctions for infringement of the Directive (Article 21).
Accordingly, the Directive and its attempt to create a‘country of origin’ principle extend almost exclusively to these regulatorymatters; the Directive does not attempt manifestly to affect civil or commercialsubstantive laws. The only provisions of the Directive that should/could haveany effect on civil or commercial substantive laws are:
(a) treatment of electronic contracts vis-á-visarbitration agreements (Article 9(1) and the Arbitration Act 1996);
(b) the moment at which the electronic contract isconcluded (Article 11(1));
(c) liability of intermediary service providers(Articles 12(1), 13 and 14); and
(d) potentially, the sanctions imposed in national lawfor infringement of provisions of the Directive – eg avoiding or renderingunenforceable a contract made when the service provider fails to provide theinformation required by Articles 5 or 6 (Article 21).
These first two should not materially affect civil orcommercial substantive law. The last two may have material effects. However, asnoted below, the Regulation does not deal with subject-matter jurisdiction butonly personal jurisdiction.
Tensions between the Regulation and Directive
In the present author’s opinion, talk of manifesttension between the Regulation and Directive is unwarranted. There are tworeasons why the two EU documents are not in manifest conflict.
First the Regulation deals with when an EU court canaccept jurisdiction against a defendant in a particular matter. In contrast, theDirective deals almost exclusively with what regulatory laws will be applied toa service provider domiciled within the EU. Whilst related, these twoinstruments serve different purposes. The Regulation deals with personaljurisdiction whilst the Directive deals with subject-matter jurisdiction.Personal jurisdiction is that area of the conflict of laws whereby a court ortribunal determines whether it has the ability to hear an action against aparticular party, whilst subject-matter jurisdiction is the determination ofwhat substantive law will be applied by the court or tribunal against a partyover which it has personal jurisdiction. These two forms of jurisdiction runside by side and a court or tribunal cannot hear a case against a particulardefendant based on a particular cause of action unless both are present.1The Regulation cannot extend the compass of the Directive – the Directive eitherapplies or it does not. The Regulation merely provides the fora in which theDirective is to be applied. This dichotomy is made patent by paragraph 7 of therecitals of the Directive which states that it does not aim to establishspecific rules on private international law and it is not a substitute for therelevant international conventions.
Article 3(3) of the Directive states that ‘paragraph1 shall cover the provision set out in Articles 9, 10 and 11 only insofar as thelaw of the Member State applies by virtue of its rules of private internationallaw’. This provision is trite: the provisions of the Directive would not beapplicable in any case unless the rules of private international law of theforum court deemed them applicable.
Secondly, as noted above, the Directive deals almostexclusively with regulatory laws and their application to service providerswithin the EU. In many cases, these regulatory laws will be enforced by way of afine levied by state authorities and other penal relief. In contrast, theRegulation is applicable only to personal jurisdiction in respect of ‘civiland commercial matters’.2 Regulatory laws do notfall within this definition therefore the Regulation is largely inapplicable topersonal jurisdiction in respect of matters arising under the Directive.Personal jurisdiction in respect of these matters will be determined by therelevant state’s rules on personal jurisdictions for non-EEA domicileddefendants. Therefore, not only does the Regulation operate side by side withrather than extending or affecting the Directive’s subject-matterjurisdiction, but in most cases it will not even do that.
Impact of the Regulation on E-commerce
This following analysis is also relevant to the aboveanalysis of the putative tension between the Regulation and Directive. If theRegulation introduces only minimal or no changes to the jurisdiction regime forconsumers then any tension that does exist will apply equally to the extantBrussels and Lugano regimes, and therefore talk of tension created by theRegulation would be unwarranted or at least the potential problems would bemanifestly mitigated.
Articles 15(3) and 16 of the Regulation provide that ifa contract is concluded with a person who pursues commercial or professionalactivities in the Member State of the consumer’s domicile or, by any means,directs such activities to that Member State or to several countries includingthat Member State, and the contract falls within the scope of such activities,then a consumer may bring proceedings against the other party either in thecourts of the Member State in which that party is domiciled or in which theconsumer is domiciled. These Articles will ensure that suppliers will be liableto be sued in the country of delivery in most if not all cases.
However, this is not a manifest change from the currentlegal position in England or the USA. The Brussels and Lugano Conventions (thecurrent EEA jurisdiction regime) provide in Articles 13 and 14 special rules onjurisdiction for particular types of consumer contracts. These provisionsproduce the same result as Articles 15 and 16 of the Regulation but for asmaller category of contracts. Outside this category of contracts a consumermust rely on Article 5(1) to attempt to establish jurisdiction in the courts ofhis domicile. Article 5(1) provides that a person domiciled in a Member Statemay, in another Member State, be sued in matters relating to a contract in thecourts for the place of performance of the obligation in question.
The result of Article 5(1) is that, in a contract forthe sale of goods, the courts of the consumer’s domicile will havejurisdiction over a seller for breach of a contractual term with respect to thegoods if under the law applicable to the contract the place of performance ofthe obligation in question is the consumer’s domicile. In most cases asupplier will expressly specify that the law governing any contract for the saleof goods it makes will be its own country’s laws. The result would be the samein the absence of an express choice by virtue of Article 4 of the 1980 RomeConvention (enacted in England by the Contracts (Applicable Law) Act 1980). Ifthe law applicable to the contract is English, then the contractual obligationsowed to purchasers in sale of good cases are to be performed at the place ofdelivery.3 The law appears to be the same in France, Italy, Belgiumand Holland. The English Court of Appeal has recently decided that in a contractfor the sale of goods governed by German law the place of performance of acontractual term for fitness for purpose is to be performed at the place ofdelivery of the goods.4 However, I understand that, in fact, theplace of performance of the similar obligation in German law is the seller’sdomicile. In Swedish law the place of performance of the similar obligation isthe seller’s domicile.
In my experience, in most if not all cases in which aconsumer purchases goods over the Internet, the place of delivery will be theconsumer’s domicile. Therefore, in practice in many cases where Articles 13and 14 of the Brussels and Lugano Conventions are not applicable an EEA consumerwill nevertheless be entitled to commence proceedings in his domicile against anEEA supplier because the goods were delivered to his home country. Although I amnot an expert on American law, I understand that the American courts have becomeincreasingly sympathetic to consumers who have attempted to establishjurisdiction in their home courts against Internet suppliers who are residentelsewhere whatever the law governing the sale contract may be. Therefore, in thecase of goods delivered to consumers in a number of the larger EEA States andthe USA, there is a good case for saying that in many cases the present lawunder the Brussels and Lugano Conventions is equivalent to the position thatwill be established under the Regulation. Accordingly, while the new consumerprovisions in the Regulation appear to be stricter than their predecessors inthe Directive, their effect is often the same.
Much of the discussion of problems that will be createdby the interaction of the Regulation and sales over the Internet focuses on thefact that the Internet can be accessed throughout the EU and therefore companiesthat are not actively targeting a jurisdiction will be subject to the laws ofthat country under Articles 15(3) and 16 of the Regulation. However, theseconcerns ignore the fact that a supplier may be able to insist that all buyersprovide an address for delivery and may be able to refuse to deliver toparticular countries. This ring-fencing of particular jurisdictions could beexpressed on the Web site that offers the goods for sale.
In cases in which the consumer commences an action intort against the supplier of goods for personal or property damage caused by adefect in the goods, Article 5(3) of the Brussels and Lugano Conventions wouldprovide for the courts at the place where the damage occurred to assumejurisdiction against an EEA supplier. In my experience this will often be thejurisdiction where the plaintiff is domiciled. Article 5(3) of the Regulation isin the same terms and I expect it to be interpreted identically. Therefore inmost cases product liability claims will continue to be able to be broughtbefore the courts of the consumer’s domicile.
Conclusion
In my opinion, talk of manifest tension between theRegulation and Directive is unwarranted. The Regulation deals with personaljurisdiction whilst the Directive deals with subject matter jurisdiction, andthe Regulation is applicable only to civil and commercial matters whilst theDirective deals almost exclusively with regulatory matters.
Moreover, it appears that the law to be introduced inthe Regulation is not manifestly different from the law that is applied underthe current EEA jurisdiction regime in e-commerce cases where a person purchasesgoods over the Internet.
Endnotes
1. See further Dutson ‘The Conflictof Laws and Statutes’ (1997) 60 MLR 668 at 669-671.
2. Article 1.
3. See Collins Dicey and Morris on the Conflict of Laws(1993) at pp 358-359.
4. Viskase Ltd v Paul Keifer GmbH [1997] 1 WLR 1305.
