Electronic Commerce and the Internet (Press release including a synthesis of the Round Table’s recommendations)


The Hague Conference on Private International Law, an intergovernmental organisation whose objective is the unification of private international law norms (essentially conflict of laws, procedure and judicial co-operation), recently held, jointly with the University of Geneva (Switzerland), a Round Table discussion on issues of jurisdiction and applicable law arising out of electronic commerce and Internet transactions.

This meeting took place on 2, 3 and 4 September 1999 and was attended by one hundred experts representing the different sectors interested in electronic commerce: industry, operators, consumers, governmental experts and international organisations, both world-wide and regional. Twenty-six countries, as well as fourteen international governmental and non-governmental organisations were represented.

Seven commissions met simultaneously on the following subjects: contracts, torts, choice of court and choice of law clauses, service of process, applicable law to data protection, evidence and legalisation, standards of procedure for on-line dispute resolution.

During the first plenary session, Professor Henry H. Perritt Jr., Dean of Chicago-Kent College of Law, presented several highlights advocating the importance of the Internet for economic growth. He asserted that the Internet differed from other technologies in two majors respects: firstly, it is inherently global; secondly, it enormously reduces the economic barriers to entry into commerce. As a result, the number of electronic commerce providers, smaller enterprises and smaller-value-transactions appearing on the market increases dramatically. Those characteristics mean that traditional regulatory strategies to protect consumers and other important societal values, which depend to a large extent on the co-operation of large enterprises that serve as intermediaries in commerce, will be less effective because there will be so many more small enterprises doing business throughout the world. Professor Perritt concluded that the development of a new public law framework for private ordering and harmonisation was necessary in order to address the problems posed by e-commerce.

Professor Catherine Kessedjian, Deputy Secretary General of the Hague Conference on Private International Law, then introduced the work of the Round Table and focused her remarks on a number of issues. She stated that the Internet is the first medium to offer the possibility to execute and perform entirely on-line (i.e. without physical presence) a vast number of contracts for sale of immaterial goods and for the provision of services (notably financial and intellectual). Although the Internet was initially created so that each connected computer could be identified, the present trend towards anonymity may create an adverse environment for the development of electronic commerce and should be assessed in view of the interests at stake in that context. The Internet is also a medium which contributes to increase the scale of damages once a tort is committed over the net. The damage is instantly suffered on a number of markets in different parts of the globe and has wide-ranging effects. The prevention of these damages is almost impossible as the access providers do not want and probably are not in a position to play the role of regulator. Thus, the development of appropriate dispute resolution mechanisms become crucial as proper remedies would not be effective without them. It is also imperative that a clear framework is proposed to allow operators to know in advance what law will be applicable to their undertaking. Without such clear guidelines, development of electronic commerce will suffer. Although these are global problems which should be resolved by international co-operation via the competent organisations, States have already undertaken some isolated legislative initiatives. It is in view of these developments that the Permanent Bureau of the Hague Conference, under the mandate that it has to explore private international law questions of e-commerce, took the initiative to assess the pertinence of existing norms, notably for applicable law and jurisdiction, and convene the Round Table so that recommendations could be adopted towards any necessary adaptation. Professor Kessedjian also explained how these recommendations will be relevant for current and future work of the Hague Conference, particularly the current negotiations on a world-wide Convention on jurisdiction and the effects of judgments in civil and commercial matters.

Prior to the Round Table, Rapporteurs had been designated for each commission and were requested to prepare the substantive work of the commissions. A questionnaire, together with documentation, was made available to future participants and provided the framework for the discussions. These questionnaires and documents are available for consultation from the Geneva Round Table website at http://cuiwww.unige.ch/~billard/ipilec (user name ipilec; password unige).

Each commission adopted recommendations, which were presented at the second plenary meeting and discussed by all experts present. The full report of the Round Table will be available on the website of the Hague Conference by the end of November 1999.

At present the recommendations of the Round Table may be synthesized as follows:

As far as possible, instead of the creation of new norms for electronic commerce and internet operations, existing principles, rules, and procedures can and should be applied, in particular by way of interpretation, including the use of functional equivalents. This is not only true for the validity of choice of court and choice of law clauses in contracts entirely executed electronically by application of principles laid down by the uncitral Model Law on Electronic commerce, but also, as a general rule, for the Hague Conventions of 5 October 1961 Abolishing the Requirement of Legalisation for Foreign Public Documents, of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters and of 18 March 1970 on the Taking of Evidence Abroad in Civil or Commercial Matters.

When new norms are needed, they should be technologically neutral.

For on-line contracts in general, in the matter of jurisdiction and applicable law, if the performance of the relevant obligation takes place off-line, the existing rules of private international law referring to the place of performance remain relevant. If the performance takes place on-line, the place of performance is not appropriate as a connecting factor. In that case, the relevant connecting factors are the location of each of the parties involved.

In business-to-business electronic transactions, party autonomy should be the leading principle, both as regards applicable law and jurisdiction. As regard to jurisdiction, article 4 of the proposed preliminary draft Convention on jurisdiction and judgments was considered fully appropriate to provide operators with a flexible and adapted legal framework to uphold the validity of choice of court clauses.

For business-to-consumer transactions, further assessment is required in the light of all the interests involved. Particularly, during the second plenary, Professor Catherine Kessedjian proposed to avoid the traditional dichotomy between the "country of origin" (i.e. that of the seller or provider) and the "country of reception" (i.e. that of the consumer). She proposed to start with a process of site-certification along the lines of the work done within the icc and other private organisations. This certification process should include minimum substantive rules of protection for the consumer including warranties, and a fair and easy dispute resolution mechanism which could possibly be free of charge to the consumer. When a site has obtained the certification label, it could provide for the application of the law of the country of origin and for the courts of that country for the residual cases which could not be solved by the dispute resolution mechanism part of the certification. If a site has not been certified, then the law and the courts of the consumer's location would be competent.

In the interim, before such a certification system is available and fully in place, rules could be developed to allow countries to differ in the protection they afford to consumers residing on their territory. This principle could be enshrined in a provision amending the present drafting of article 7, paragraph 3, of the proposed convention on jurisdiction and judgments and read: "If the agreement (i.e. the choice of court clause) is entered into by a consumer who is habitually resident in a State which has declared that such agreements are enforceable against such consumers".

Identification of players over the net is essential to the well functioning of e-commerce. This principle is in line with the draft European directive on electronic commerce, the Best Business Practice principles and the icc guidelines on marketing over the Net.

In matters of tort and jurisdiction, it is difficult to depart from one of the two connecting factors: defendant's or victim's habitual residence forum. No definite conclusion could be reached. Some participants would require that the victim's habitual residence forum coincide with at least part of the injury. The preliminary draft Convention on jurisdiction and judgments (article 10) will have to be reviewed in light of the discussions.

In the matter of data protection, the Round Table recognised that data collection, personal data included, and processing thereof are inherent to electronic commerce. The dichotomy between systems which do not accept general standards and those which require a rigid a priori framework for the collection and transfer of data should be avoided. Furthermore, it is necessary to carry out a study on the most relevant system of applicable law which would also allow a greater role to self-regulation and model contracts such as those proposed by the icc and in line with the principles recommended by the Council of Europe.

In matters of security of systems (confidentiality, integrity, authentification, non-repudiation and availability), the Round Table came to the conclusion that the need for confidentiality should not be considered as a bar to the use of electronic forms of transmission. Techniques currently do exist to protect confidentiality. It was suggested that States should encourage the use of those techniques.

Finally, the Round Table encouraged the development of on-line dispute resolution mechanisms and of standards of procedure relevant for this new method of dispute resolution.