Litigation for International Online
Consumer Transactions is not Cost
Effective – A case for reform?
Daril Gawith1
Contents
 Introduction
 Description of litigation-based ICT redress
o The Basic Litigation Process
o Private International Law
o Jurisdiction
o “Wrap” and Standard Form Contracts
o Jurisdiction / Forum Selection Clauses
o Judicial Discretion
o Choice of Law / Applicable Law
o Mandatory Rules and Public Policy
o Renvoi
o Forum Shopping
o Recognition and Enforcement
 Assessment of litigation-based ICT redress
o Cost
o Difficulty of Enforcement
o Complexity
 Conclusion
Introduction
This article is an assessment of the cost-effectiveness (defined below) of
litigation as an international online consumer transaction (ICT)
protection/redress method, where the consumer and the vendor are in
different countries and neither party is in any particular country. As will be
seen, litigation in such circumstances will usually involve private international
law rules. This article is therefore concerned with private international law
issues in the form of contractual terms such as jurisdiction and choice of law
clauses and how such terms impact on the cost-effectiveness of litigation for
ICTs. Contractual terms are related to litigation because they are potentially
enforceable through the litigation process. The article demonstrates that
redress for disputed/failed low-value ICTs by means of litigation is generally
not cost-effective, wherever litigated, and notes that a significant reason for
this lack of cost-effectiveness, in the context of the relatively small loss
sustained by a consumer in an ICT, is the lack of harmony (i.e. full mutual
1
B.App. Sc.(EDP), Grad Dip Ed, LLB, PhD candidate, Lecturer, Solicitor, T C Beirne School of Law,
University of Queensland
196
compatibility) amongst various national private international law rules which
increases cost, difficulty of enforcement and complexity for litigants beyond
that associated with basic (i.e. non-international) litigation.2
In any event, whatever the reason for the lack of cost-effectiveness of
litigation for ICTs, the fact remains that the growth of global e-commerce is
being retarded as a result. From the mid 1990s there has been an exponential
world-wide growth in the volume of ICTs. According to Australian government
data, “on average, approximately one million Australians aged 14 years and
over made a purchase online in any given week of 2002-03. This represented
an increase of 85 per cent since 2000-01”.3 This is consistent with
international trends. According to OECD data,4 e-commerce sales in the
USA,5 as a share of total retail sales, increased to 1.2% in late 2001, being
valued in excess of US$10 billion in 2001. It is likely though, that because of
general trust concerns on the part of consumers, such growth has in fact been
significantly retarded – relative to what it could have been without trust
concerns.
According to an OECD survey of online consumers, one of the most
significant impediments to engagement in an ICT is consumer concern about
the lack of consumer protection, specifically “trust concerns/concerned about
receiving and returning goods”.6 This suggests that a solution to the problem
of untrustworthiness (for consumers) would lead to an even greater
acceleration of e-commerce sales world-wide, benefiting all involved. What
lies at the heart of this trust problem is that consumer redress for
disputed/failed ICTs involving uncooperative vendors is not practically
possible, generally speaking, due to the fact that the cost of obtaining a
remedy will be greater than any amount that could be recovered by any of the
current means of redress available. In other words, in considering any of the
currently available means of redress for a disputed/failed ICT, it is clear that
none of them are “cost-effective”, i.e. the cost of redress is greater than any
positive effect of any available form of redress (especially true, the lower the
value of the consumer transaction). This article though, only considers
litigation as a means of redress for ICTs,7 therefore it is only the proposition
that litigation is not cost-effective that this article seeks to demonstrate.
Assuming for a moment though, that the proposition is correct, and that an
elimination of impediments in the growth of e-commerce would be desirable,
2
It should be noted that in respect of all cost, difficulty of enforcement and complexity problems
considered below, no actual quantification or exact description of the extent of such problems is
possible due to the variable nature and proliferation of the source of such problems.
3
Treasury, A. G. (2005). The Internet and B2C E-commerce
4
OECD (2002). Update of official statistics on internet consumer transactions, OECD
5
There is no national perspective in this article. Data on the growth of e-commerce in the US is used
simply because it is available, from a reliable source. All data in this paragraph is seen as indicative of
international trends within an international phenomenon (international consumerism), as indicated by
circumstances in the US and elsewhere.
6
OECD (2002). Update of official statistics on internet consumer transactions, OECD
7
An article considering the cost-effectiveness of non litigation–based redress for ICTs was published
as ‘Non litigation-based redress for international consumer transactions is not cost effective – A case
for reform?’ (2006) 3 Macquarie Journal of Business Law 115-150.
197
the lack of cost-effectiveness of litigation for ICTs would clearly represent a
case for reform.
The article is divided into two main parts, description and assessment. In the
description part, the basic (non-international) litigation process is briefly
described, and then private international law factors in international litigation,
which can complicate basic litigation, are described. This is because any type
of private international law issue that could be seen as so connected with the
litigation process as to be part of the litigation redress method where it is used
in relation to ICTs, must be described (and assessed) where it could
potentially impact on that method. In other words, where private international
law issues arise in relation to international litigation – and they usually will
because litigation for disputed ICTs, under the current regime, will always
potentially involve problems with private international law rules – such issues
are an integral part of the litigation redress method and therefore they too
must be described and assessed. The method could not be assessed, as far
as it relates to ICTs, without consideration of private international law issues.
For example, the method could not be properly assessed if the impact of a
certain jurisdiction clause upon the litigation process was ignored. Also, of
further interest here, is the relationship at least between the phenomena
known as “wrap” and “standard form” contracts with the private international
law issue of jurisdiction, which can arise as an issue in relation to ICTs.
In the assessment part of this article, the litigation redress method, in both its
basic and international forms, is assessed in terms of cost, difficulty of
enforcement and complexity evaluation criteria.
To conclude this introduction, “cost effectiveness”, “cost”, “difficulty of
enforcement” and “complexity” is considered, as follows.
The definition of “cost-effective”, for the purpose of this article, is where, in the
pursuit of a remedy for a disputed/failed ICT, cost (relative to the value of the
ICT itself), difficulty of enforcement and complexity, are not high. In other
words, “cost-effective” litigation for disputed/failed ICTs could not be highly
expensive, could not involve high degrees of difficulty in respect of
enforcement of judgment, and could not be excessively complex. Further
elaboration of these meanings follows.
The definition of “cost”, for the purpose of this article, is an outlay or
expenditure, tangible or intangible, incurred or anticipated, in exchange for a
desired object or outcome.
The idea of “difficulty of enforcement”, for the purpose of this article, is as
follows. The beginnings of a definition of “difficulty of enforcement” may be
found by first considering the meaning of “enforceability”. The word
enforceability derives from the word “enforce” which has been defined as “to
compel observance of or obedience to”8 and “to compel obedience to a law,
8
Dictionary.com (2005). Enforceability
198
regulation, or command”.9 The basic common element to these definitions is
compulsion. Enforceability is therefore defined by this article to mean the
aspect of any ICT redress method, whether litigation-based or not, such that
the remedy offered by the method may be imposed compulsorily upon a party
to the ICT,10 assuming that physical enforcement in the real world is actually
possible and not merely hypothetical, either directly through litigation or
indirectly through legal or equitable/moral obligation. Alternatively,
enforceability may be thought of as having compulsion in varying degrees of
strength. Thus “difficulty of enforcement” is a variable depending on the
degree of compulsion involved. By way of illustration, “consumer education”
as a remedy for solving ICT problems would normally be understood to
involve no compulsion and thus having “high” difficulty of enforcement, since
the information offered by way of consumer education would normally be
unilaterally offered simply as good advice for avoiding such problems in the
first place, on a take it or leave it basis. On the other hand, ADR (alternative
dispute resolution) and arbitration would generally be understood as having
comparatively less difficulty of enforcement associated with them, at least in
some cases. ADR may involve enforceability by way of a process which might
result in a binding and thus enforceable agreement. Arbitration can be binding
where a quasi-judicial judgment may be binding and thus enforceable against
the relevant party.11 Litigation is highly enforceable (i.e. low difficulty of
enforcement) when the party being sued is within the relevant jurisdiction
because it involves state-backed enforcement powers, but may be less
enforceable when the other party is not within the jurisdiction.
The definition of “complexity”, for the purpose of this article, is as follows.
“Complexity” has been defined by the Oxford dictionary as being the noun
form of the word “complex” meaning “consisting of parts, composite;
complicated.”12 It has also been defined as “the quality or state of being
complex”.13 For present purposes however, the definition of complexity shall
mean the opposite of or the lack of “simplicity”. Simplicity has been defined as
“the state of being simple, uncomplicated, or uncompounded”,14 where
“simple” is defined as “free of secondary complications”15, “lack of complexity,
complication, embellishment, or difficulty”16 and “the property, condition, or
quality of being simple or uncombined”.17 In this article, simplicity is defined as
9
Encarta online dictionary (2005). Enforce
The concept of “enforcement” in the context of “difficulty of enforcement” should thus be initially
understood in a very wide sense, applicable to all ICT redress methods. By the end of this article
though, the “enforcement” of the terms of an ICT through court judgments can be narrowed down to
the senses of obtaining and enforcing such judgments (because the initial obtaining of a judgment is a
necessary precondition to enforcement), or to the even narrower sense of literally just the enforcement
of judgments, as the context requires.
11
Butterworths (2002). Business and Law Dictionary. Australia, Butterworths, under entry on
“Arbitration”
12
Oxford University (1980). Concise Oxford Dictionary English of current English. Oxford University
Press
13
Merriam-Webster Online Dictionary (2005). Complexity
14
Merriam-Webster Online Dictionary (2005). Simplicity
15
Merriam-Webster Online Dictionary (2005). Simple
16
Encarta World English Dictionary (2005). Simplicity
17
Dictionary.com (2005). Simplicity
10
199
freedom from complications, that is, a state where there is an absence of
confusion or complexity.
ICT redress methods of any kind (e.g. litigation, credit card terms, etc.) may
be evaluated in terms of simplicity according to the extent to which those
methods are accompanied by complexity, confusion or complications. Thus
complexity, confusion or complications may involve a range of factors of
various types, such as degree of difficulty in learning, using or applying the
remedy, potential waiting time, inconvenience and stress, and include
objective and subjective complications. Such factors can overlap with each
other, and they can even overlap with the cost and enforceability criteria.
Complexity is thus an underlying catch-all criterion, a clear advantage of
which is to allow for a limitation in the total number of criteria being used to
evaluate ICT redress methods.
Therefore complexity (lack of simplicity) may be used as a criterion to
evaluate ICT redress methods, litigation and non-litigation based, because,
firstly, it would be an advantage to a consumer to be able to avoid
unnecessary complications as between similar or equal redress methods and,
secondly, the criterion is general enough to cover a wide range of factors left
over after consideration of cost and enforceability factors in relation to
comparable redress methods. On that basis, an ideal redress method might
be one which was relatively cheap, enforceable, not too difficult to use,
speedy and relatively stress-free.
Description of Litigation-based ICT Redress
The Basic Litigation Process
First, the basic non-international litigation process in the Common Law
system, up to trial, will be briefly described in broad and generic terms.18
A party with some sort of grievance, a consumer who has not received what
they have paid for, perhaps, will initiate proceedings in a court of their
choosing; usually within the local area they have residence. This will be done
by them lodging with the court registry a properly completed form such as a
Plaint and Summons form, a Writ of Summons form, or similar, with the
prescribed number of copies. The court registry, if they accept the
submission, will provide the party so lodging, the plaintiff, with a service copy
that must be served upon the person being sued, the defendant. The plaintiff,
by some means within the rules of service provided by the court, will serve the
defendant – that is, give the defendant the service copy of the form used to
commence proceedings to the defendant – who will then be aware that the
litigation process has been commenced against them. The service copy so
served, is actually a court document, not a document from the plaintiff, and it
will state in broad terms what the complaint is and what the defendant must
do in order to respond. A defendant has two basic options: respond or not. If
18
The description that follows is a distillation of Cairns, B. (2005). Australian Civil Procedure.
Sydney, Lawbook Co., chapters 3 to 13.
200
the defendant does nothing they are at risk of obtaining a default judgment
against them as the court will assume the plaintiff’s claim is not denied.
Alternately, if the defendant decides to do something in response, they can
issue some sort of Appearance indicating they wish to contest the plaintiff’s
proceedings upon some basis. This completes the first cycle of action and
response in the “interlocutory” (unconcluded dialogue) phase, which may
continue until the actual trial phase commences in court, before a judge. The
interlocutory phase includes the “pleadings” phase which commences at this
point.
The pleadings consist of three parts: the Statement of Claim, which is issued
by the plaintiff who details the exact nature of the grievance and indicates the
causes of action concerned (for example, breach of contract), and the nature
of the remedy the plaintiff is seeking. The defendant responds with a Defence
or Defence and Counter-Claim and/or Set-Off, which indicates the defendant’s
response to the plaintiff’s Statement of Claim and what, if anything, the
defendant is claiming from the plaintiff in response. The plaintiff may respond
to the Defence with a Reply or a Reply and Answer, which may be used if the
Defence has raised some matters not raised by the plaintiff previously. This
concludes the pleadings phase of the interlocutories, which may continue with
any one or more of Discovery, Interrogatories and/or Inspection between the
parties, where the parties collect evidence from each other, for the purpose of
reducing surprise, putting the parties on an equal footing and defining the
issues, should proceedings continue into the trial phase.
If there is no settlement (mutually agreed resolution) prior to trial, the
interlocutory phase concludes and the litigation process continues into the trial
phase.
This is a very general description of the basic litigation process, which could
be complicated by difficulties and exceptions in the surrounding facts and
circumstances, should there be any.
Each step in the litigation process just described will represent a time and cost
problem to the plaintiff. Such problems would be very likely to increase
significantly, possibly dramatically, should the process involve private
international law issues which would probably arise if the parties reside in
different countries.
Private International Law
Private international law, also known as “conflict of laws”, is a set of rules and
principles which are adopted by each country and which can vary from
country to country, with the result that they are at present internationally
unharmonised. These rules and principles are concerned with resolving
conflicts and inconsistencies which can arise in international private law
matters (i.e. those between persons, natural or corporate, in different states)
because of interactions between different legal systems. For example, a
conflict of laws will arise if a contract is formed in one country and breached in
another. In that case a number of questions will arise, such as whose law
201
applies and where the matter should be litigated. Unfortunately, as noted by
Juenger;
[t]he outstanding characteristic of the conflict of laws is the astonishing
lack of consensus on the discipline’s goal and methods. Uncertainty
about the proper approach to multistate problems reigns supreme and
the conceptual apparatus of the approaches that have been proposed
is as complex as it is unconvincing … Alas, in spite of all the valiant
intellectual efforts lavished on it, and the voluminous literature that has
built up over the ages, the law of conflicts remains mired in mystery
and confusion.19
It will remain so while private international law rules are unharmonised
globally.20
A basic objective of private international law rules is to promote harmony, or
at least to assist with providing a resolution of disputes, between interacting
persons of different nations21 by resolving inconsistencies between their
different legal systems. Before this objective can be achieved, however, the
preliminary private international law issues to be dealt with by a court are:
 whether the court (the “local forum”) has the inherent power to hear
arguments and make decisions – the jurisdiction / choice of court
question;22
 whose substantive law has the closest connection with the subjectmatter of the dispute and is thus more applicable to it – the choice of
law question; and
 whether judgments of the court hearing the case will be recognized and
enforceable elsewhere.
According to Juenger:
Analytically, these three categories are distinct. For centuries jurists
have drawn a line to separate choice of law, on the one hand, from
jurisdiction and the recognition of foreign judgments on the other. The
choice of the applicable law is regarded as a “substantive” matter,
whereas jurisdiction and recognition are considered to be “procedural”.
Functionally, however, the three topics are intertwined. An attorney will
be hesitant to litigate in a forum whose choice-of-law rule invokes a law
19
Juenger, F. (1993). Choice of Law and Multistate Justice, Martinus Nijhoff Publishers, 1
For a glimpse of one extreme consequence of unharmonised private international law rules, see
discussion of “renvoi”, below.
21
Persons in different states can interact on the basis of differing types of legal obligations – for
example, contract, tort, matrimony and succession – but this article is concerned exclusively with
contractual obligations as far as its discussion of private international law is concerned.
22
They may have such power if, for example, there is a connection between the court and the cause of
action and, either the defendant submits to the court’s jurisdiction or if process can be served on the
foreign defendant.
20
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that defeats his client’s claim, and he ought to advise against suing in a
court whose judgment cannot be enforced in the forum and will not be
recognized elsewhere.23
In other words, it would be a tactical error on the part of a plaintiff to originate
proceedings in a court in a particular geographic jurisdiction when they have a
choice not to do so, knowing that the substantive law that may be applied to
the dispute by that court will not suit their needs, or that any favourable
judgment of that court won’t be effective against a foreign defendant. Thus the
issues of jurisdiction and choice of law, and jurisdiction and recognition, are
intertwined.
A reasonable place to commence a consideration of international litigation
involving private international law is with jurisdiction and its associated issues.
Jurisdiction
“Jurisdiction” is a generic term24 with a range of different meanings.25 In this
article it means a court’s power to hear and decide a matter. More-specifically,
jurisdiction has been defined as:
The scope of the court’s power to examine and determine the facts,
interpret and apply the law, make orders and declare judgment.
Jurisdiction may be limited by geographic area, the type of parties who
appear, the type of relief that can be sought, and the point to be
decided.26
A court may also have a monetary jurisdiction, so that the court may be
limited to hearing matters involving either upper or lower monetary amounts,
or both.27 The word “jurisdiction” can also have the popular sense of being the
geographic domain of a particular court.28
Thus, where the court's jurisdiction is called into question by either party or by
the court itself, the court will begin by considering whether it has authority to
consider the matter in question at all, as determined by such factors as
geographic area (involving a connection between the matter and the local
court geographically), the monetary value or the nature of the subject-matter
involved, and the effect of any contractual jurisdiction clause. A court may
also consider the question of “personal jurisdiction”, i.e. a court’s authority to
require a defendant to appear, based on valid service or submission.29
23
Juenger, F. (1993). Choice of Law and Multistate Justice. Martinus Nijhoff Publishers, 3
Fitzgerald, B., G. Middleton, et al. (2004). Jurisdiction and the Internet. Sydney, Lawbook Co., 4
25
Jew, B. (1998). Cyberjurisdiction - emerging issues and conflicts of law when overseas courts
challenge your web, Gilbert & Tobin Lawyers
26
Butterworths (2002). Business and Law Dictionary. Australia, Butterworths
27
Ibid, and see, for example, http://www.justice.qld.gov.au/courts/factsht/C01QldCrts.htm
28
Ibid
29
Fitzgerald, B., G. Middleton, et al. (2004). Jurisdiction and the Internet. Sydney, Lawbook Co., 6
24
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The parties to an ICT may agree that a court in a particular place is to be used
in the event of dispute between them. This agreement will manifest in the form
of a jurisdiction clause (described below) within their contract. Quite often
however, the content of a jurisdiction clause will be imposed upon consumers
through the use of wrap and standard form contracts, which may make
international litigation necessary in the first place.
“Wrap” and Standard Form Contracts
The issues at this point involve digressing briefly from pure private
international law issues to consider the nature of wrap and standard form
contracts, whether such contracts are enforceable, and the fact that such
contracts can be used by a vendor to dictate jurisdiction, choice of law or any
other terms, to a consumer. As we shall see, this can be a tactical move, even
a “pre-emptive strike” by a vendor to forestall the possibility of litigation from a
foreign consumer.
All of the terms “shrinkwrap”, “clickwrap” and “browsewrap” indicate some
issue in respect of the inclusion or otherwise of terms in contracts. 30 A
“shrinkwrap” contract may be described as one where a consumer purchases
goods which have been completely physically sealed inside “shrinkwrap” –
thin protective see-through plastic used to contain all components of the
package of goods just purchased (for example, computer software on disks
plus user manuals) – and which contains inside the package some sort of
notice that using the goods inside the package signifies the consumer’s
assent to the terms of use clauses also contained within the package (e.g.
licence terms). There is a direct similarity then, between shrinkwrap issues
and the “ticket” cases involving car parks and public transport, and therefore
with the legal topic of the enforceability of exclusion/exemption clauses in
contracts.
Clickwrap contracts are those where an online purchaser indicates their
willingness to make an offer to buy goods by clicking on an “I agree” button or
similar.31 The issue here is whether the vendor’s screen (containing invitations
to treat regarding consumer goods) was designed in such a way as to amount
to reasonable notice of the vendor’s terms and conditions applicable to the
ICT.
Browsewrap contracts are those where “the user can obtain [the goods]
without giving unambiguous consent to the terms of the offer”32 – apparently
similar to a “free trial offer” type of situation not unlike the situation in Hill v
Gateway.33
All wrap contracts can be standard form contracts containing jurisdiction,
choice of law and other terms. A standard form contract (also known as an
30
Quirk, P. and F. J (2003). Electronic Commerce and the Law. Milton, Australia, John Wiley & Sons,
76
31
Ibid, 73
32
Ibid, 76
33
This case is discussed further below.
204
adhesion contract) has been defined as “a contract (often a signed form) so
imbalanced in favour of one party over the other that there is a strong
implication it was not freely bargained”,34 and as a:
contract between two parties that does not allow for negotiation, i.e.
take it or leave it. It is often a contract that is entered into between
unequal bargaining partners, such as when an individual has a contract
thrust into her hand by the salesperson of a multinational corporation.
The consumer is in no position to negotiate the standard terms of such
contracts and the company's representative often does not have the
authority to do so.35
Standard form contracts are found, for example, in relation to air tickets, bank
documents, insurance documents, and car rentals.
In respect of shrinkwrap contracts, and on the face of traditional rules
regarding such matters, enforceability will turn on whether sufficient notice
has been given of the matter the seller is seeking to bind the purchaser to –
on whether, relative to the time of contracting, the notice came too late for
enforceability.
The law is evolving. “Recent cases have begun to recognise the practical
importance of allowing terms to be made known later in some situations”36
The Australian case of McRobertson Miller37 and the US case of Hill v
Gateway38 are examples. The court in the Australian case recognized that the
contract may not come into existence after the purchase of an air ticket but
before the flight “when the passenger had had a reasonable chance to object
to the conditions”.39 The court in the US case held that a contract came into
existence thirty days after purchase of goods where the package contained a
notice that the customer was taken to agree to contract terms if they did not
return the goods within thirty days of purchase.40 Furthermore, in the case of
an actual shrinkwrap contract, there may be two contracts – one between the
consumer and the retailer, and a separate one between the consumer and the
manufacturer of the goods contained within the shrinkwrap.41
34
thefreedictionary.com (2005). Adhesion contract
thefreedictionary.com (2005). Standard form contract (Emphasis added)
36
Quirk, P. and F. J (2003). Electronic Commerce and the Law. Milton, Australia, John Wiley & Sons,
72
37
(1975). McRobertson Miller Airline Services v Commissioner of State Taxation (WA). CLR, HCA
133: 125. A case where an airline ticket issued by the appellant to an intending passenger, was
allegedly dutiable as “a memorandum of a completed agreement”. The airline operator which issued
the ticket argued that the ticket was not itself an agreement or a memorandum of an agreement. Its
principal ground was that to proffer the ticket was to make an offer which was to be verbally accepted
by its recipient.
38
(1997). Hill v Gateway 2000 Inc. F.3d, 7th Cir. 105: 1147. In this case Hill purchased a computer
from Gateway. A clause in the contract gave Hill 30 days to accept the goods or else the contractual
terms would be triggered. The court upheld this view.
39
Quirk, P. and F. J (2003). Electronic Commerce and the Law. Milton, Australia, John Wiley & Sons,
72 and 81
40
Ibid, 72
41
Ibid
35
205
Thus, on the face of it, as far as shrinkwrap contracts are concerned, there
appears nothing that might impede redress for consumers engaged in ICTs so
long as the vendor operates along similar lines in respect of reasonable
opportunity for inspection of goods and conditions. Many vendors will not
allow an inspection period prior to payment however, and in fact the norm
would probably be that goods must be paid for prior to shipment; but moreimportantly, what constitutes a “reasonable opportunity for inspection of
contractual terms and conditions” for the average on-line shopper, is a serious
issue in terms of information asymmetry42 and inequality of bargaining
power.43
In respect of clickwrap contracts, the issue is whether the vendor’s screen,
containing invitations to treat regarding consumer goods, was designed in
such a way as to sufficiently bring to the attention of the shopper the vendor’s
terms and conditions applicable to the ICT. If yes, then the contract will be
valid on the face of it: Hotmail Corporation v Van$ Money Pie Inc.44 Once
again, there appears nothing that might impede redress for consumers
engaged in ICTs so long as “sufficient” effort is made to bring notice to the
consumer.
In respect of browsewrap contracts, to the extent that “the goods” mentioned
here refers to downloadable software or similar, browsewrap is not an issue
for this article which deals exclusively with non/wrong delivery of physical
goods. However, if the term “browsewrap” is wide enough to encompass
physical goods, the comments made above in relation to “shrinkwrap”
contracts are applicable here.45
In respect of standard form contracts, there are arguments on both sides as to
their appropriateness. As the above description suggests, they are presented
to consumers on a take it or leave it basis, yet they “do have the advantage of
reducing transaction costs”46 by standardising like-transaction terms.
Consumers, despite being the weaker of the “unequal bargaining partners”,
are arguably no better off otherwise with the doctrine of “freedom of contract”,
where the consumer would theoretically be free to negotiate all the terms of a
contract relating to a low-value ICT. Standard form contracts may thus
represent a trade-off of competing policy arguments, and may not necessarily
42
Basically, this is the ignorance consumers suffer relative to the knowledge vendors have about their
own goods, services and business practices, and lack of information concerning consumer rights and
remedies available in the event of legitimate grievance.
43
This is where a consumer suffer an imbalance in negotiating power as between themself and vendors,
either due to information asymmetry, or where consumer transactions are “forced” upon them through
the use of standard form contracts presented on a “take it or leave it” basis, where negotiation is
impossible.
44
(1998). Hotmail Corporation v Van$ Money Pie Inc. WL, USPQ 2d ND Cal. 47: 38839. In this case,
Hotmail Corporation provided a free email service. In order to access this service, the defendant had to
become a subscriber which required the defendant to assent to the terms of a Service Agreement. The
Terms of Service were presented in the form of a clickwrap agreement. The defendant was a spammer.
Hotmail was inundated with hundreds of thousands of misdirected responses. Hotmail sought an
injunction which was granted as the clickwrap terms had been presented with sufficient notice.
45
Quirk, P. and F. J (2003). Electronic Commerce and the Law. Milton, Australia, John Wiley & Sons,
75-76
46
Latimer, P. (2003). Australian Business Law. CCH, 401
206
impede redress for consumers engaged in ICTs – especially if interventionist
(statutory) adjudication and enforcement options are available. A serious
question remains however, as regards the effect of the undoubtedly significant
power advantage enjoyed by website vendors using standard form contracts
where freedom of contract private international law rules (such as Article 17(2)
Brussels Regulation – see below) can actually work against a consumer. This
is because such rules may represent a loss of opportunity for the restraining
effect of consumer redress/protection law where it might have otherwise been
present.
Finally, the ultimate point about wrap and standard form contracts, for present
purposes, is that they can be used by vendors to dictate jurisdiction, choice of
law and other terms to consumers. Such contracts can contain any manner of
terms, suitable to vendors, which would not merely favour the vendor in the
event of dispute, but would make the acquisition of a remedy by a consumerplaintiff practically unattainable, as the remainder of this article demonstrates.
On the balance of competing arguments, the consumer would probably better
protected, as a general rule, under the current regime, by insisting on their
right to negotiate contractual terms or, at the very least, by examining the
terms of the wrap or standard form contract concerned, to determine that the
jurisdiction and choice of law terms are acceptable to their needs, and avoid
commitment if necessary. Unfortunately this is probably beyond the
sophistication of the average consumer, a fact which arguably calls for some
kind of reform.
Jurisdiction / Forum Selection Clauses
Parties to an ICT may use a jurisdiction clause (or forum selection clause) in
their contract to specify their purported agreement regarding governing
jurisdiction.47 A jurisdiction clause is “a clause in a contract providing for the
settlement of any dispute between the parties arising out of the contract to
take place in a court of law of a particular jurisdiction.”48 A jurisdiction clause
purports to establish, by agreement between the contracting parties, where a
matter will be heard, either physically or virtually. What a jurisdiction clause
does not do, is to specify that the law of a particular place is to be the law
governing the contract. Therefore, it is conceivable that a court in one place
could be specified by a contract to be where the law of a different place shall
be applied to the dispute. This is the essential difference between a
jurisdiction clause and a choice of law clause. So, the jurisdiction clause only
purports to deal with the threshold issue as to where the matter shall be
initially dealt with (and thus could be known alternately as a choice of
court/forum clause), and not which substantive law will apply to the
contractual dispute.
47
An example standard clause for specifying the jurisdiction which the parties agree disputes will be
heard is: "The parties submit to the [non-exclusive/exclusive jurisdiction] of the courts of [ ] and any
courts that may hear appeals from those courts in respect of any proceedings in connection with this
Contract." In most circumstances, the parties will agree to submit to the non-exclusive jurisdiction of a
particular jurisdiction. This means that there is at least one jurisdiction where the parties have agreed
that disputes can be heard: Mallesons, S. J. (2005). Boilerplate clauses.
48
Butterworths (2002). Business and Law Dictionary. Australia, Butterworths
207
Judicial Discretion
An associated issue worth considering very briefly here is that of judicial
discretion. Many courts throughout the world are able to exercise discretion in
relation to a range of private international law issues. They can exercise
discretion in regards to jurisdictional matters – for example, through
application of the doctrine of forum non conveniens49 – and in relation to the
effect of the parties’ choice of law clauses in their contract. Also, subsequent
recognition and enforcement issues can be affected by judicial discretionary
issues too. These issues are considered further, in Part III.
Choice of Law / Applicable Law
The following descriptions concern private international law issues which can
operate to either create cost, difficulty of enforcement and complexity
problems in respect of obtaining redress for disputed/failed ICTs where none
previously existed in respect of jurisdictional or other issues, or create such
problems in addition to problems with jurisdictional or other issues.
Beyond issues of jurisdiction, a court may consider arguments as to whether
or not the local law (the lex fori) is the appropriate substantive law to apply to
the matter (e.g. local law of contract), or whether some other (foreign) law
applies. This is the “choice of law” or “applicable law” issue,50 and can be
simplified or complicated by such issues as whether or not the parties have
included a choice of law clause in their contract, and the effect on the contract
of relevant state or mandatory or international laws.
The distinction between “choice of law” and “applicable law” should be noted.
“Choice of law” is the contractual agreement regarding which jurisdiction’s
laws shall govern the contract in the event of dispute (as indicated by the
parties through a choice of law clause in their contract), while “applicable law”
is the law which will govern the contract in the event of dispute over the
content of a choice of law clause, or in the event of statutory over-ride of a
choice of law clause (e.g. section 67(a) Trade Practices Act 1974), or in the
absence of contractual agreement regarding such situations, as decided by a
court. Another way of thinking about the difference is to consider that a choice
of law may be made in order to determine the applicable law.
Mandatory Rules and Public Policy
The reference to section 67(a) Trade Practices Act 1974 above raises the
general issue of mandatory rules. One definition of “mandatory rules” is found
in Article 3(3) of the Rome Convention,51 which provides that mandatory rules
49
This term is considered further in Part III.
These are also sometimes known as “proper law” or “governing law” issues.
51
European Union (1980). Convention on the Law Applicable to Contractual Obligations. OJ C 027
(498Y0126(03)) of 26/01/98
50
208
are rules of law which cannot be derogated from by contract. Such rules
cannot then be ignored by parties to contracts which have some close
connection with a particular country. Section 67(a) Trade Practices Act, as an
example of such a rule, provides in summary that “Where the proper law of a
contract for the supply of goods would, but for a term that it should be the law
of some other country, be the law of Australia, this Division applies to that
contract notwithstanding that term”. In that case, the rules to be found in “this
Division”, whatever they may be, will be part or all of the mandatory governing
rules of the contract if the contract had some close connection with Australia.
That could be the case, arguably, if the consumer party to the contract was
resident in Australia and/or the contract was formed in Australia.
Article 5(2) of the Rome Convention, as further illustration of how mandatory
rules can work, preserves protection for consumers of the mandatory rules of
their home country upon certain conditions, such as the contract being formed
as the result of a specific invitation or advertising from/by a foreign vendor and
the consumer having taken all steps necessary on the consumer’s part for
conclusion of the contract in their own country.
Schu advises us that there are two types of mandatory rule.
Firstly, there are mandatory rules in a domestic sense. That means
they cannot, according to the definition, be avoided by contract within
their own legal system, however, they do not claim effect if the law of
which they are part of is not the applicable law to the contract. Thus,
mandatory rules in a domestic sense allow themselves to be
contracted out of by virtue of a choice of law. The second type of
mandatory rule are those in a conflict [i.e. private international law]
sense. Like the first type of mandatory rules they cannot be avoided by
a domestic contract, but they cannot be avoided by choice of law
either, because they themselves purport to be applicable even though
the parties have chosen another law.52
It is the mandatory rules of the second variety which are of interest here
because they relate to situations involving ICTs, which can involve conflict of
laws problems, and because such rules can affect the cost-effectiveness of
the litigation redress method for ICTs. How that may be the case is explained
in the Assessment part of this article.
As regards the issue of the impact of public policy in multi-jurisdictional cases,
Clarkson and Hill, to illustrate, remark that some English courts will not apply
certain foreign laws on the grounds that such laws would be contrary to
“public policy”, i.e. they would be contrary to English justice and morality or
the English public interest,53 noting, however, that “the doctrine of public
policy is used relatively sparingly in the English conflict of laws, especially in
52
Schu, R. (1996). Consumer Protection and Private International Law in Internet Contracts. See text
in relation to footnote 143.
53
Clarkson, C. and J. Hill (1997). Jaffey on the Conflict of Laws. London, Butterworths, 18 and 224
209
comparison with the laws of some foreign countries such as France and
Germany”.54 It is also pointed out that:
while the doctrine of public policy is seldom applied as such, many of
the conflicts rules [such as those regarding consumer protection for
example] … are in fact crystallisations of public policy considerations
… [and] … [t]he important difference between excluding foreign laws
on grounds of public policy and applying these crystallised public policy
rules is that with the former there is always a discretion, whereas rules,
where applicable, are mandatory.55
The conclusion that may be drawn from this is that the effect on the costeffectiveness of the litigation redress method for ICTs, because of public
policy factors as factors independent from mandatory rules, may be negligible.
This is the case as national consumer protection rules are well-established
and widespread – even as far as France and Germany.
Renvoi
At this point a very brief consideration of the private international law issue of
“renvoi” may be worthwhile. Renvoi is concerned with conflict between
national private international law rules, and thus is a topic that also illustrates
the consequences of unharmonised / mutually inconsistent national private
international law rules,56 even if there is some doubt as to whether it is
applicable to ICTs.57
The word “renvoi” has been defined as “the conflict of laws problem that
occurs when a forum court is directed by its choice of laws rules to the law of
another country whose rules in turn direct the matter back to the forum
court.”58 Renvoi then is concerned with a potential absurdity, an endless cycle
of referral from country to country, resulting in a kind of jurisdictional deadlock.
Forum Shopping
On the issue of “forum shopping” Juenger notes that:
the decision to sue in a particular place often implies a choice of the
applicable law … courts that purport to heed choice-of-law precepts in
practice nonetheless end up applying the lex fori [the local law] with
considerable frequency. This “homing trend” is universal. It is one,
54
Ibid, 528
Ibid, 19
56
In other words, private international law rules of different nations which are not in agreement with
each other.
57
In respect of contractual disputes, renvoi has been outlawed, at least, by Article 15 of the Rome
Convention: Clarkson, C. and J. Hill (1997). Jaffey on the Conflict of Laws. London, Butterworths,
516; but in respect of choice of laws issues, “the English court treats the reference to a foreign law in
the English choice of law rule as a reference to the conflicts of laws rules of the foreign law, and not
merely to its domestic law” – thus renvoi, with respect to choice of law issues, is a problem raised at
least under English law. Ibid at 512.
58
Butterworths (1998). Concise Australian Legal Dictionary. Sydney, Butterworths
55
210
though perhaps not the principal, reason for the phenomenon known
as “forum shopping.” As the parties’ juggling for position indicates, the
procedural aspects of multistate litigation are frequently of far greater
practical importance than the selection of the applicable law.59
Thus parties can sometimes go looking for a court that they think will best be
suited to delivering them a desired outcome. This is known as forum
shopping.
On this topic, Bell says that:
the venue in which … litigation is to take place will often be critical for
the ultimate outcome of the dispute … the guiding aspiration of the
conflict of laws, namely that the venue in which a piece of litigation is
tried should not affect the outcome or result of that litigation, is
unattainable as a matter of practical reality … [and one reason for this
is] absence of uniform choice of law rules … forum will dictate what
may be significantly different potential outcomes for any given dispute
depending on the forum in which the litigation proceeds.60
Of particular interest here is the issue of “negative” or “reverse” forum
shopping, an attempt by and a tactic of a defendant to try to get the litigation
changed to an alternative forum or, better still, to no forum at all.
On that topic, Bell says that “the concept of ‘forum shopping’ has largely been
considered … from a plaintiff’s perspective. But if the premise of this paper
has any foundation, namely that ‘venue matters’, then it must matter equally
for the defendant”.61
Reverse forum shopping to obtain the best substantive law for a defendant for
example, is just one of many reasons why a defendant might engage in
reverse forum shopping, as shall be seen below. As a preliminary however, it
is necessary to generally consider certain interlocutory proceedings62 –
challenging jurisdiction, stays of proceedings, applications for negative
declaratory relief and anti-suit injunctions63 – that a defendant may employ for
the purposes of reverse forum shopping.
Challenging jurisdiction is a tactic which may be made on the grounds (for
example) that the defendant has no presence in the forum, has not submitted
59
Juenger, F. (1993). Choice of Law and Multistate Justice. Martinus Nijhoff Publishers, 3-4 (emphasis
added)
60
Bell, A. (1994). Responses to forum shopping in transnational litigation: Recent developments and
new directions. Continuing Legal Education, The University of Sydney Faculty of Law, 2
61
Ibid, 3
62
It is neither possible to survey all the detailed meanings and rules of each of these proceedings as
they will differ from place to place, nor is it necessary to do so. Thus a representative description is
given only. The issue here is that such proceedings may be used by an evasive vendor, and not exactly
how.
63
None of which necessarily involve submission to the forum jurisdiction: Fitzgerald, B., G.
Middleton, et al. (2004). Jurisdiction and the Internet. Sydney, Lawbook Co, 19.
211
to the forum jurisdiction, has no assets or no creditors in the jurisdiction, or
has not breached a contract there.
Bell illustrates this tactic by giving examples from circumstances involving
English law. He says:
To draw an illustration from the Civil Procedure Rules, if a claimant or
plaintiff has served a defendant outside the jurisdiction on the basis
that the defendant was domiciled in England, relying solely on the
defendant’s residence in England for the last three months or more, the
defendant may make a clean and simple objection to jurisdiction by
demonstrating absence of the requisite residence for the period in
question.
Similarly … a plaintiff … must demonstrate … a good arguable case
that its claim falls within a case authorized by the Civil Procedure Rules
… for example, that a contract was breached in England by reason of
non-payment of the claimant, a defendant who is able to demonstrate
… that payment was not due in England and, hence, that no breach
occurred there would be well advised to challenge jurisdiction on this
elementary ground.64
As a procedural issue;
[a] defendant who intends to contest the court’s jurisdiction applies to
the court for an order setting aside service or setting aside the
originating process … The court decides whether it has jurisdiction and
if so whether it is the proper forum for the disposition of the litigation. In
addition to any power under the rules [of court] to set aside service or
to stay a proceeding, the court also has an inherent jurisdiction to do so
… the power to decline jurisdiction is discretionary.65
Seeking a stay (a suspension) of proceedings on the ground of forum non
conveniens (because, for example, another forum is more appropriate for
some reason) or because of an exclusive jurisdiction clause66 is a method
which “defendants are now using as a weapon rather than as a legitimate
defence”.67 A stay is the same in effect as a challenge to jurisdiction, as can
be seen from the previous quote, but which may happen later in proceedings,
i.e. after an appearance has been entered.
An application for a stay is made according to whatever the court’s rules
require. In Australia, for example:
64
Bell, A. (2003). Forum Shopping and Venue in Transnational Litigation. Oxford University Press,
138-139
65
Cairns, B. (2005). Australian Civil Procedure. Sydney, Lawbook Co., 150-151
66
Fitzgerald, B., G. Middleton, et al. (2004). Jurisdiction and the Internet. Sydney, Lawbook Co., 81
67
Bell, A. (2003). Forum Shopping and Venue in Transnational Litigation. Oxford University Press,
149
212
If the rules require an application to be made to a judge, the application
is made at chambers, usually by summons or application, depending
on the court’s practice. Where an application is to be made to the court
it is made by way of motion and the moving party serves a notice of
motion on the opposite party … In most jurisdictions the rules state that
evidence is given by affidavit.68
Challenging jurisdiction and stays of proceedings are:
the two most direct strategies which may be employed in the battle
over venue ….. but a foreign court [from the defendant’s perspective]
… may have extremely widely drawn jurisdictional rules or else lack a
doctrine of forum non conveniens so that these expedients will be of
limited value to the defendant.69
In such circumstances a defendant may approach avoidance of the plaintiff
through their own local court by means of negative declarations and anti-suit
injunctions. Applications for negative declaratory relief and anti-suit injunctions
go together. A negative declaration (an application that the applicant (a
vendor, for example), is not liable to the respondent-consumer, on certain
grounds) does not necessarily achieve anything positive for a
applicant/defendant on its own, thus the applicant/defendant may then seek
an anti-suit injunction, directed at the foreign consumer, based upon the
negative declaration as a prior fundamental legal claim. An anti-suit injunction
may be a tool used by a defendant where, for example, the forum court (the
defendant’s court) has claimed sufficient jurisdiction and has no issue with
forum conveniens. Thus a defendant over whom a court has personal
jurisdiction may apply, as an alternative tactic, for an injunction restraining
proceedings. An application for an injunction, of course, will proceed by the
usual means and will be judged by the usual criteria – a triable issue on the
negative declaration, and whether or not the foreign defendant would be
exposed to unreasonable levels of inconvenience and expense were the
injunction not granted.70
Recognition and Enforcement
To conclude this description of private international law issues which can
affect the cost-effectiveness of the litigation redress method for ICTs, let us
consider the topic of recognition and enforcement. Recognition and
enforcement issues in private international law are of relevance to ICTs when,
for example, a foreign court, i.e. a court foreign to the country in which a
consumer-plaintiff resides, is asked by a successful plaintiff to recognize and
enforce the judgment of their own local court. For example, the question
arises as to what will happen when an Australian consumer obtains a
68
Cairns, B. (2005). Australian Civil Procedure. Sydney, Lawbook Co., 418-419
Bell, A. (2003). Forum Shopping and Venue in Transnational Litigation. Oxford University Press,
170
70
“An interlocutory injunction is proper if there is a serious question to be tried and the balance of
convenience between the parties favours an injunction”: Cairns, B. (2005). Australian Civil Procedure.
Sydney, Lawbook Co., 435.
69
213
judgment against a German vendor in an Australian court, and asks a
German court to enforce the Australian judgment.
First, let us note that “enforcement of a judgment necessarily involves its
recognition … there can be no enforcement without recognition” 71 and
therefore we can talk here about enforcement as incorporating the prior
recognition phase, although recognition itself may not be without complication.
According to Clarkson and Hill, recognition and enforcement can be based on
the theory (using the example above) that if an Australian court produced a
judgement based upon a correct assumption of jurisdiction, then the
Australian court’s judgment should prima facie be regarded as creating an
obligation between the parties to the Australian proceedings which the
German court ought to recognize and, where appropriate, enforce.72
Furthermore, this approach still forms the basis of recognition and
enforcement in the statutory regimes based on the common law, but the
recognition and enforcement of foreign (e.g. Australian) judgments is limited
by a range of defences which may be invoked by a local defendant. For
example, German public policy considerations (unlikely in relation to an ICT)
or German notions of justice and fairness.73
An assessment of impact of all of the above factors upon the costeffectiveness of the litigation redress method now follows.
Assessment of litigation-based ICT redress
Cost
In order to assess the litigation redress method by the cost criterion, it is
necessary to first consider the cost of basic (non-international) litigation. That
is because international litigation, as a method of protecting ICTs, can
incorporate all the features of basic litigation. Therefore, before the impact of
private international law issues upon litigation can be assessed, the cost of
basic litigation must first be considered as one inescapable element of the
total cost of international litigation.
Assessment of the litigation method can only suffer by the impact of the
additional cost of the international aspects of litigation, as compounded by the
basic cost of ordinary litigation. For example, the cost of ordinary litigation is a
problem which can only be aggravated by the tactical use, by a defendant, of
reverse forum shopping, during interlocutory proceedings.
A benchmark cost of litigation figure of AUD$50,000.00 will be used here.74 It
is somewhat arbitrary but a reasonable approximation is needed, and it is
based on the following.
71
Clarkson, C. and J. Hill (1997). Jaffey on the Conflict of Laws. London, Butterworths, 143
Ibid, 146
73
Ibid
74
An attempted extensive survey, by the present writer, of law firms and legal costs consultants, to
obtain anonymous actual costs from real cases and “scale” costs for hypothetical cases, yielded nil
72
214
Giving a definition or even an approximation of litigation costs for a
hypothetical case (or a real one, for that matter) is virtually impossible.
Acquiring actual data would be an entire project in its own right, and using
hypothetical values is not meaningful. There are too many variables. It is
commonly known and widely accepted, however, that litigation is expensive.
There are many sources, at an informal level, which are of the view that
litigation is expensive, even without transnational dimensions to it. While the
informality of the sources is less than optimal, the sheer volume of such
evidence is supportive. A brief survey reveals the following sample.
An Australian article entitled “Tackle the high cost of litigation, not the DIY
brigade” describes how many litigants cannot afford lawyers to litigate for
them and are congesting the courts as a result.
One of the big challenges for the administration of justice in 2004 is the
rise and rise of the self-represented litigant … self-representation is
marching onwards and upwards at a faster clip than the growth in the
legal profession. This must be a disturbing development for the cartel
that is satisfactorily licensed to ply its trade in the publicly funded courts
and tribunals of the land … the trend towards self-representation
demonstrates that consumers are voting with their feet. The prices set
for services provided by the licensed cartel are out of alignment with
the market for those services. In classic terms, the sellers are in the
process of pricing themselves out of the market.75
Similarly, a Canadian article entitled “Lack of Courtroom Experience Due to
High Costs of Litigation” describes how lawyers are finding it difficult to
acquire courtroom experience because people are no longer hiring lawyers to
litigate for them due to the expense of litigation.
Some of Canada’s senior barristers say the high cost of litigation and
the economic pressures on law firms are marrying with unintended
result: An entire generation of litigation counsel is not getting out of the
office and into the courtroom frequently enough to develop basic
advocacy skills … litigation as a lose-lose situation – even if they win
[the parties who formerly hired lawyers more frequently] they’re going
to spend an enormous amount of money in legal fees.76
According to a US article by Michael Hanks entitled “The Five Limits of
Litigation”:
formal results. Only anecdotal evidence was obtained, on an “off the record” basis. Conversations with
a number of legal practitioners indicated that an international legal proceeding would be unlikely to
cost less than AUD$50,000 – with the highest figure mentioned being AUD$90,000.
75
Ackland, R. (2004). Tackle the high cost of litigation, not the DIY brigade, The Sydney Morning
Herald. 9 January 2004, 1
76
Rubin, S. (2005). Lack of Courtroom Experience Due to High Costs of Litigation: Article written by
a National Post columnist, published in ZSA Legal Recruitment (Canada) in-house newsletter or
magazine.
215
[l]litigation is extremely expensive … Even in justified litigation (i.e.
where [subject-matter of the dispute] value exceeds the probable
attorney’s fees, costs, and the value of your time), attorney’s fees will
be burdensome77
Hanks implies an interesting point, that litigation for ICTs would not be
“justified” (as defined), supporting the contention of this article that litigation is
not a source of redress for low-value ICTs because it is simply not costeffective.
Another US article, by Roy Martin, entitled “The Cost of Litigation” notes that:
[l]litigation is expensive. An attorney will typically spend an average of
two to three hours preparing for every hour in court … in addition to the
obvious financial cost of litigation, there are emotional costs as well …
anger, resentment, grief, rage, sadness, guilt and other complex
feelings.78
Apart from supporting the assertion that litigation is expensive, this quote also
suggests that the “cost” of litigation is broader in meaning than just monetary
cost. Vincent DiCarlo in “How to reduce the high cost of litigation” writes that
“litigation is bloodless war – expensive, exhausting, and generally out of
control. It should be avoided wherever possible.”79
Other US commentators have pointed out that litigation (as it currently is) is
not cost-effective, even for winners. Scott Berinato in “You sue, you lose: the
high cost of litigation” quotes Abraham Lincoln’s assertion that “the nominal
winner is often a real loser – in fees, expenses and waste of time”.80 An
article by John Sullivan entitled “Lawmakers Should Help Businesses Combat
Litigation Costs” includes the following:
‘I was ruined but twice in my life,’ a French philosopher wrote, ‘once
when I lost a lawsuit and once when I won one’ … That’s truer now
more than ever, especially for people trying to do business in
California. Litigation is one of your biggest competitors. It’s a cost
you’ve got to fight all the time.81
A webpage by Jossey-Bass, a subsidiary of Wiley publishers, advertises a
journal series entitled “Alternatives to the High Cost of Litigation”.82 This
shows that a well-respected publisher has no qualms about accepting the
view that litigation is expensive, and feels that it is enough of an issue to
devote an entire journal series to it.
77
Hanks, M. (2005). The Five Limits of Litigation
Martin, R. (2005). The Cost of Litigation
79
DiCarlo, V. (2005). How to reduce the high cost of litigation
80
Berinato, S. (2005). You sue, you lose: the high cost of litigation
81
Sullivan, J. (2005). Lawmakers Should Help Businesses Combat Litigation Costs
82
Jossey-Bass (2005). Alternatives to the High Cost of Litigation, Jossey-Bass
78
216
To conclude this section on the cost of basic litigation, it should be noted that
cost is inter-connected with its difficulty of enforcement and complexity. Cost
rises as complexity rises, and enforcement of a potential remedy becomes
more and more beyond the reach of a plaintiff the more expensive the remedy
becomes.
Consideration can now be given to the cost of transnational litigation – i.e. the
cost of litigation involving private international law issues because the parties
are in different countries. Let us commence with some general observations.
Some analogous evidence is available from Gamertsfelder who writes that:
the mere fact of disparity [between Australian and Japanese law] will
allow the [foreign] defendant to attack the judgment on public policy
grounds. Even if arguments based on these grounds are overcome,
this will increase litigation costs … [and] furnish the defendant with a
delaying tactic. 83
He goes on to comment that:
a successful judgement creditor can obtain reimbursement of court
costs incurred in bringing enforcement proceedings. However
attorney’s fees are not generally recoverable. Thus the costs of
attorney’s fees must also be factored in to the benefit-risk equation
when a judgment creditor determines a strategy in relation to crossborder litigation.84
He further notes that “if Australia and Japan were both party to a Convention
in the form of the Brussels or Lugano Convention the risk involved … would
be significantly reduced”.85
To this can be added Rule’s observation that:
The law surrounding these transboundary transactions is complex. Just
figuring out which law applies to a transaction can cost a lot of money.
Getting legal representation or even just advice from another country
can be frustrating and expensive. Legal systems don't really know how
to handle disputes that straddle borders very well. Paying lawyers to put
the time into figuring it all out really doesn't make that much sense,
especially if the transaction is less than a couple of thousand dollars.86
At this point we can consider the differences between how particular
jurisdiction issues (namely, how a court determines if it has jurisdiction or not,
contractual jurisdiction clauses and judicial discretion) are handled in
83
Gamertsfelder, L. (1998). "Cross border litigation: Exploring the difficulties associated with
enforcing Australian money judgements in Japan." 2 Australian Bar Review, 8
84
Ibid, 17
85
Ibid, 19
86
Rule, C. (2002). Online dispute resolution for business - B2B, e-commerce, consumer, employment,
insurance, and other commerical conflicts. San Francisco, Jossey-Bass, 94
217
Australia, the USA, and the European Union. It is precisely such differences,
especially if a vendor-defendant can exploit such differences, which are a
likely cause of the potential ineffectiveness of litigation, beyond its basic
expense, as a remedy for failed/disputed low-value ICTs. Put another way,
unharmonised private international law rules around the world regarding
jurisdiction can amount to increases in the cost of litigation for consumers, can
mean that the terms of the ICT are difficult to enforce because litigation can
become virtually impossible, and complex beyond the experience of even
general practice lawyers.
The following is mainly concerned with a survey of the differences between
how courts in different states decide whether or not they have jurisdiction. The
question as to whether a vendor who is a party to a disputed ICT could exploit
such differences and other factors is examined later.
As noted already, there may be a whole range of factors that a court will
consider in determining whether or not it has jurisdiction. Assuming, however,
that there are no problems with other jurisdictional issues (for example,
assuming there is no question as to whether or not a court has subject-matter
jurisdiction87 and has a right to hear matters concerning ICTs), the important
issue is how a court determines if, regardless of its rights, it should hear and
decide a dispute.
Australia
A court in Australia will have sufficient personal jurisdiction over a defendant if
that person has either:
 been served with originating process (a writ or otherwise) in
accordance with the rules of that court); or
 has voluntarily submitted to the court,88 for example by unequivocally
evincing an intent not to assert an objection89 including assenting to a
contractual jurisdiction clause.90
A defendant in an action brought by an aggrieved ICT consumer will not
necessarily be a natural foreign person; it is more likely to be a corporation. In
Australia such a defendant would be deemed to be present in the jurisdiction
if they carry on business in the jurisdiction,91 which means that they must be
registered with the Australian Securities and Investment Commission (ASIC)
and, by section 601CX(1)(b) of the Corporations Act 2001 (Cth), they may be
served through their notified local agent.92 Vendors who operate through
87
The subject-matter of actions which may be entertained by a particular court Fitzgerald, B., G.
Middleton, et al. (2004). Jurisdiction and the Internet. Sydney, Lawbook Co., 26
88
Nygh, P. and M. Davies (2002). Conflict of Laws in Australia. Sydney, Butterworths, 45
89
Fitzgerald, B., G. Middleton, et al. (2004). Jurisdiction and the Internet. Sydney, Lawbook Co., 18
90
Also known as forum selection or choice of court clauses.
91
Fitzgerald, B., G. Middleton, et al. (2004). Jurisdiction and the Internet. Sydney, Lawbook Co., 7
92
Ibid
218
foreign websites that may be accessed from Australia, however, will not
necessarily be so registered. In that case service must be affected either:
 according to the rules of court in respect of contract cases (as ICT
cases will be), and on the grounds that either the contract was made
within the jurisdiction, was governed by the law of the forum or was
broken within the jurisdiction;93 or
 in respect of proceedings founded on the breach of an Act within
Australia such as a misrepresentation in breach of section 52 of the
Trade Practices Act 1974 (Cth). 94
Under the private international law rules of Australia, where service of
process95 is made to a defendant outside Australia, service of process must
be authorised by the rules of court of whichever court in which process is
issued.96 The various Australian rules are not uniform. For example, in some
cases leave of the court is required prior to service, 97 and in others98 leave is
not required.99 There are further differences between the various Australian
courts’ jurisdiction rules flowing from this basic difference regarding whether
or not leave is required prior to service of process.
In relation to the courts where leave is not required prior to service 100
if the defendant does not appear, leave to proceed is required in all
States … If leave to proceed is not obtained in the jurisdiction where it
is required, any subsequent order or judgment will be a nullity … [and]
the defendant may apply to set aside the service of the originating
process on the ground that service was not authorised by the rules of
court,101
which, in the wider scheme of things, is a relatively minor point, but it serves
to illustrate that there are many ways in which a defendant vendor can exploit
differences between private international law-related rules for tactical
advantage.
93
Ibid, 11-12
Ibid, 14-15
95
Service of process has been called the basis of a court’s jurisdiction: Dicey, A. and J. Morris (1993).
"The Conflict of Laws." 263-264, and State, D. O. U. (2001). Australian Practice -- Note from the
Australian Delegation in Relation to Forum Non Conveniens.
96
For example, by the High Court, by one of the State Supreme Courts, etc.
97
In the High Court, the Federal Court, the Supreme Court of Western Australia, and in the Supreme
Court of the Australian Capital Territory.
98
In the Supreme Courts of New South Wales, Queensland, Victoria, South Australia, Tasmania, and
the Northern Territory.
99
Nygh, P. and M. Davies (2002). Conflict of Laws in Australia. Sydney, Butterworths, 51
100
In the Supreme Courts of New South Wales, Queensland, Victoria, South Australia, Tasmania, and
the Northern Territory.
101
Fitzgerald, B., G. Middleton, et al. (2004). Jurisdiction and the Internet. Sydney, Lawbook Co., 1011 (emphasis added)
94
219
Furthermore, even if a court decides it has personal and all other required
forms of jurisdiction;
“the court may still decline to exercise jurisdiction, or the defendant
may obtain a stay of the proceedings, on the basis … [of] the doctrine
of forum non coveniens”. 102
One possible definition of forum non conveniens is as follows:
Forum non conveniens is Latin for “inconvenient forum”103 or
“inappropriate forum.” It is a legal doctrine employed by courts to
dismiss a case where the court, although having jurisdiction over the
dispute, is of the opinion that the dispute more appropriately belongs in
a different legal forum. There may be a wide variety of reasons why the
court chosen by the plaintiff can be inappropriate. The factors to be
considered include the location of potential witnesses and relevant
evidence, the choice of law applicable to the dispute, possible undue
hardship for the defendant, the most expeditious use of judicial
resources, and other factors. In any event, the dismissal for forum non
conveniens is discretionary,104 and the court will not dismiss a lawsuit
unless it believes that there is an adequate alternative legal forum open
to the plaintiff. The doctrine of forum non conveniens exists in both
common law and civil law systems (with specific variations in different
jurisdictions), as well as in international law.105
Another definition is:
Forum non conveniens. Latin for a forum which is not convenient. This
doctrine is employed when the court chosen by the plaintiff (the party
suing) is inconvenient for witnesses or poses an undue hardship on the
defendants, who must petition the court for an order transferring the
case to a more convenient court.106
As noted in the first definition, 107 the doctrine may be applied by both
common law and civil law courts, and in potentially different ways. For
example, forum non conveniens is applied in some common law countries
using the “more appropriate forum” test, whereas Australia, controversially,
uses the “clearly inappropriate forum” test.
According to Nygh and Davies,108 the Australian position on forum non
conveniens is expressed by a combination of three cases: Spiliada,109
102
Ibid, 76
Doubtful: (1987). Spiliada Maritime Corp v Cansulex Ltd, AC, AC. 1: 460
104
See discussion on judicial discretion, below.
105
thefreedictionary.com (2005). Forum non comveniens.
106
Ibid
107
Ibid
108
Nygh, P. and M. Davies (2002). Conflict of Laws in Australia. Sydney, Butterworths, 128-129
109
(1987). Spiliada Maritime Corp v Cansulex Ltd. AC, AC. 1: 460
103
220
Oceanic Sun110 and Voth.111 A summary of their consolidation of these cases
is that the plaintiff has a marginal prima facie right to have a particular court
hear the matter if the defendant (wherever they may be) has been properly
served, unless the court is satisfied that it is a clearly inappropriate forum for
hearing the matter. This means that the right only exists if there is a “finely
balanced contest” between the parties,112 i.e. an absence of strong factors
which either support or displace that prima facie right. For example, where
there is a presence of substantial unfairness to (and shown by) the defendant
with respect to the particular forum, the right won’t exist and the court could
find the forum clearly inappropriate. The test can be seen as being more
“plaintiff-friendly” than the “more appropriate forum” test used elsewhere, as it
places a greater burden on the defendant to convince the court that an
Australian forum is not appropriate.
With respect to this position, Nygh argues that “it places Australia out of step
with other members of the Commonwealth of Nations … [it] is designed to
encourage forum shopping by plaintiffs113 … [and] the decision in Voth is
internally inconsistent … the situation may require legislative intervention”.114
It should be noted at this point however, that it is not the purpose of this article
to analyse the nature or merits of the Australian forum non conveniens test.
That test is considered here merely as further evidence of difference between
national private international law rules which could be exploited by a foreign
defendant for tactical advantage (e.g. to prevent a local consumer from
obtaining justice).
According to Deane J in the 1988 Oceanic case,115 decided by the High
Court:
A party who has regularly invoked the jurisdiction of a competent court
has a prima facie right to insist upon its exercise and to have its claim
heard116 … the onus lies upon the defendant to satisfy the local court
… that it is so inappropriate a forum for their determination that their
continuation would be oppressive and vexatious to him. 117
This is the origin of the Australian “clearly inappropriate forum” test under the
forum non conveniens doctrine, and was confirmed as Australian law in the
Voth decision.118
110
(1988). Oceanic Sun Line Special Shipping Co Inc v Fay. CLR, HCA. 165: 197
(1990). Voth v Manildra Flour Mills Pty Ltd. CLR, HCA. 171: 538
112
Nygh, P. and M. Davies (2002). Conflict of Laws in Australia. Sydney, Butterworths, 128
113
Presumably this is the case precisely because the Australian forum non conveniens test is more
“plaintiff-friendly”.
114
Nygh, P. and M. Davies (2002). Conflict of Laws in Australia. Sydney, Butterworths, 129-130
115
(1988). Oceanic Sun Line Special Shipping Co Inc v Fay. CLR, HCA. 165: 197
116
Ibid, per Deane J at point 7
117
Ibid
118
(1990). Voth v Manildra Flour Mills Pty Ltd. CLR, HCA. 171: 538
111
221
USA
As regards US federal and state jurisdiction rules generally, the situation is
even more idiosyncratic. While there are some similarities to Australian rules,
there are also significant differences across fifty US states, due to the fact that
US jurisdiction law is more-specifically developed for Internet e-commerce
(because commercial and consumer activity on the Internet started in the USA
and because of the size of the consumer market there).
US federal courts recognize two types of personal jurisdiction, general and
specific. General jurisdiction is exercised over non-resident defendants
regardless of whether the subject-matter of the case is related to the
defendant’s connection with the forum state, and arises when the defendant
engages in continuous and systematic contacts with the forum state.119
General jurisdiction is relatively exotic when it comes to “US Internet
jurisdiction” as the US Supreme Court has upheld general jurisdiction only
once, instead preferring to establish specific jurisdiction.120
Specific jurisdiction will arise according to the application of the minimum
contacts analysis espoused in International Shoe Co. v Washington,121 a
three part test looking (broadly) at the defendant “purposefully availing”
themselves in the plaintiff’s state (intentionally doing business there), a close
nexus existing between the defendant’s activities and the plaintiff’s cause of
action, and the court’s exercise of jurisdiction over the defendant being
reasonable. 122 Under this analysis, a court in the state in which the consumer
resides will have jurisdiction over a foreign defaulting Internet seller in relation
to an ICT, when “the minimum contacts of a non resident defendant with a
forum are such that the exercise of jurisdiction does not offend traditional
notions of fair play and substantial justice”.123
The defendant must have such a degree of “minimum contact” with the forum
that “he might expect the necessity of litigating there … [for example] by doing
business within it ... however a defendant need not have physically entered a
forum in order to be subject to its jurisdictional reach.”124
For the purpose of further refining the resolution of jurisdictional questions,
particularly in relation to the assessment of “purposeful availment”,125 US
courts have developed two approaches. Firstly, they have classified Internet
cases into three categories along a sliding scale from the Zippo case:126
119
University of North Carolina School of Law (2005), Personal jurisdiction
Fitzgerald, B., G. Middleton, et al. (2004). Jurisdiction and the Internet. Sydney, Lawbook Co., 105
121
(1945). International Shoe Co. v. Washington. U.S. 326: 310
122
University of North Carolina School of Law (2005). Personal jurisdiction
123
Etienne-Cummings, S. (1997). "Vanishing Boundaries: Extending The Long-Arm Statute Into
Cyberspace." Southern Illinois University Law Journal 22(1): 217-241 – quoting the court in
International Shoe Co. v State of Washington. See also University of North Carolina School of Law
(2005). Personal jurisdiction.
124
Cordera, M. (2001). "E-consumer protection: a comparative analysis of EU and US consumer
protection on the internet." Rutgers Computer & Technology Law Journal 27(2): 232
125
Fitzgerald, B., G. Middleton, et al. (2004). Jurisdiction and the Internet. Sydney, Lawbook Co., 106
126
(1997). Zippo Manufacturing Co v Zippo Dot Com Inc. F Supp, W D Pa. 952: 1119
120
222
First [jurisdiction over a foreign trader will be asserted] when a
defendant clearly does business over the Internet with clients from a
particular jurisdiction … Second, a middle category encompasses
interactive Web sites where a user can exchange information with a
host computer … [and] Third, a passive Web site that does little more
than make information available to those who are interested in it.127
So there is a sliding scale between deliberately “reaching” from the
defendant’s server to the plaintiff’s location to actively engage in business with
the plaintiff, on the one hand, to a defendant’s web pages merely being
available within their server for those seeking them out, on the other hand,
with varying degrees of difference in between those extreme positions.128
The second approach is the effects and targeting test from Calder v Jones129
which provides that where an act is done intentionally, has an effect within the
forum State and is directed or targeted at the forum State, the jurisdiction will
be satisfied.130 This is not dissimilar to the first of the three positions just
described in the Zippo sliding scale test.
As regards US state jurisdiction rules, the key difference compared with a
purely federal analysis is the extra requirement for satisfaction of state longarm statute rules131 and the US Constitution. A “long arm statute” has been
defined as “a law that allows one state to claim personal jurisdiction over
someone living in another state”.132 Each US state has its own long-arm
statute(s), and an example of how easily US states may claim such
jurisdiction can be seen in the case of Bochan v La Fontaine No. 1:98CV1749
(E.D. Va. May 26, 1999). In that case the Eastern District court of Virginia
ruled that the Texan defendants were not present in the state of Virginia since
1993 nor done any business there. The defendants, however, were subject to
personal jurisdiction under the long-arm statute of that state due to having
posted allegedly defamatory messages to the Internet via “America On Line”,
a service based in Virginia.
In considering a matter with potential foreign elements, a US state court
begins deliberations by examining whether jurisdiction over a foreign party is
allowed under the forum state's long arm statute, and whether that jurisdiction
would fall within the due process principle of the Fourteenth Amendment to
the US Constitution.133 It is “the due process clause of the Fourteenth
Amendment [which] enables a state to create a long-arm statute”. 134
127
Hoegle, R. and C. Boam (2000). "The Internet and Jurisdiction - International Principles Emerge but
Confrontation Looms." 3 The Journal of World Intellectual Property, 2
128
For a more-detailed discussion of the sliding scale, see University of North Carolina School of Law
(2005). Personal jurisdiction and the Internet.
129
(1984). Calder v Jones. US. 465: 783
130
Fitzgerald, B., G. Middleton, et al. (2004). Jurisdiction and the Internet. Sydney, Lawbook Co., 106
131
University of North Carolina School of Law (2005). Personal jurisdiction
132
County of Santa Cruz (2005). Long Arm Statute
133
Debussere, F. (2002). "International jurisdiction over e-consumer contracts in the European Union:
quid novi sub sole?" International Journal of Law and Information Technology 10(7): 345. The
Fourteenth Amendment provides, inter alia, that “no State shall make or enforce any law which shall
223
At this point it is appropriate to consider US views on forum non conveniens in
respect of international US cases. Fitzgerald’s view, as follows, will be
qualified by some discussion of the so-called “US foreign plaintiff rule”, below.
In the US, the plaintiff’s choice of forum will be rarely disturbed, unless
the balance of private and public interests is strongly in favour of the
defendant. This will only occur if the action may be more efficiently and
fairly tried elsewhere [and there are] at least two fora in which the
defendant is amenable to process ... private interest factors include all
practical issues that make trial of a case easy, expeditious and
inexpensive … public interest factors include the avoidance of
unnecessary problems regarding conflict of laws or in the application of
foreign laws.135
The comment there that “the plaintiff’s choice of forum will be rarely disturbed”
probably really means the American plaintiff’s choice of forum will be rarely
disturbed. The court in Piper Aircraft136 held that “ … when the plaintiff [who is
a US citizen] has chosen the home forum … it is reasonable to assume that
this choice is convenient. When the plaintiff is foreign, however, this
assumption is much less reasonable …”. The potential problem with that
doctrine here then, is that it could be abused by rogue American vendors
seeking to avoid prosecution within the US.
In the wake of Piper Aircraft American federal courts have dismissed a
substantial number of cases brought by foreign plaintiffs … there is
some evidence that the doctrine can be used to protect American
defendants from valid claims, even where the American court would be
the most suitable place to sue.137
Overall, the rules for courts in Australia and the US to decide whether they
have jurisdiction over foreign Internet retailers are substantially different,
potentially creating differences in private international law rules that may be
exploited by parties to litigation of ICTs through forum shopping or negative
forum shopping (see below).138 The Australian test for ICT-type matters is
likely to consist simply in the plaintiff “regularly invoking the jurisdiction of a
competent court”,139 and Australian courts have nothing like the tests
abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any
person of life, liberty, or property, without due process of law; nor deny to any person within its
jurisdiction the equal protection of the laws” (emphasis added), Findlaw (2005). US Constitution:
Fourteenth Amendment.
134
Etienne-Cummings, S. (1997). "Vanishing Boundaries: Extending The Long-Arm Statute Into
Cyberspace." Southern Illinois University Law Journal 22(1): 217-241, 217
135
Fitzgerald, B., G. Middleton, et al. (2004). Jurisdiction and the Internet. Sydney, Lawbook Co., 8485
136
(1981). Piper Aircraft Co v Reyno. US. 454: 235.
137
Mortensen, R. (2001) "Duty free forum shopping : Disputing venue in the Pacific." Victoria
University of Wellington 32: 673-703, 679-680
138
After all, if private international law rules were harmonised/globalised, the idea of any kind of
forum shopping would be pointless.
139
(1988). Oceanic Sun Line Special Shipping Co Inc v Fay. CLR, HCA. 165: 197
224
developed for US courts in the International Shoe, Zippo, Calder and Piper
Aircraft cases.
European Union
As regards European Union (EU) private international law rules, personal
jurisdiction in civil and commercial matters (where at least one of the
contracting parties lives in an EU member state) is regulated mainly140 by the
Brussels Regulation (the Regulation).141 The general jurisdiction rule under
the Regulation, Article 2, is that “subject to this Regulation, persons domiciled
in a Member State shall, whatever their nationality, be sued in the courts of
that Member State”.142 So, by that rule, an EU vendor would be sued where
the vendor is situated. In the case of consumer contracts however, the
general rule is not applicable, being over-ridden by Section 4 (Articles 15-17)
generally.143 Article 15(1) provides, inter alia, that
In matters relating to a contract concluded by a … consumer, …
jurisdiction shall be determined by this Section [section 4] … if:
(c) … the contract has been concluded with a person who pursues
commercial or professional activities in the Member State of the
consumer’s domicile or, by any means, directs such activities to that
Member State or to several States including that Member State, and
the contract falls within the scope of such activities. 144
A question could now be asked as to how that provision may compare with
the Zippo sliding scale, and at which point on that scale would “pursuing
commercial activities by any means directed at the Member State” equate to.
It would seem reasonable to conclude that the provision may equate to the
entire scale except for the most-passive website end of that scale.145
Furthermore, Article 16(1) – within the scope of “determined by this section” in
Article 15(1) – provides that “a consumer may bring proceedings against the
other party to a contract either in the courts of the Member State in which that
140
The Brussels Regulation applies to all EU member states except Denmark which continues to follow
the older Brussels Convention. Switzerland, Iceland and Norway apply the rules of the 1988 Lugano
Convention, which is similar to the Brussels Convention, DTI (2005), Cross border consumer
contractual disputes within the European Union: which country has jurisdiction?
141
European Union. (2001). Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction
and the recognition and enforcement of judgments in civil and commercial matters, (EC) No 44/2001 –
which came into force on 1st May 2002: The regulation replaced the Brussels Convention (of 27
September 1968) – European, U. (1968). Convention on jurisdiction and the enforcement of judgments
in civil and commercial matters Brussels of 26/01/98, OJ C 027 (498Y0126(01)).
142
(2001). Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the
recognition and enforcement of judgments in civil and commercial matters (the Brussels Regulation).
143
Section 4 is headed “Jurisdiction over consumer contracts”
144
(2001). Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the
recognition and enforcement of judgments in civil and commercial matters (the Brussels Regulation)
(emphasis added).
145
Fitzgerald, B., G. Middleton, et al. (2004). Jurisdiction and the Internet. Sydney, Lawbook Co., 25
225
party is domiciled or in the courts for the place where the consumer is
domiciled”.146
Thus, in the EU, subject to Article 17 – on contracting out of Article 16(1) – the
consumer decides where they wish to bring proceedings against the
defendant in an ICT matter, a rule which basically preserves the general
status quo regarding the prima facie inviolability of a plaintiff’s choice of forum.
Article 17(2) provides, inter alia, that:
The provisions of this Section may be departed from only by an
agreement … which allows the consumer to bring proceedings in
courts other than those indicated in this Section. 147
In other words, in relation to ICTs, an EU consumer can “agree” (to the extent
possible where a vendor uses a standard form contract) that in the event of
litigation, the forum shall be somewhere other than the domicile states of the
consumer and the defendant. This position may raise questions such as those
regarding consumer/vendor power differentials, and the use by vendors of
standard form contracts (see below).
The doctrine of lis pendens (or lis alibi pendens) is codified by Section 9 of the
Regulation. The term lis pendens refers to the case
when the same parties are litigating the same question at the same
time, but in more than one country … this duplicates efforts [and] risks
… incompatible judgments … [lis pendens has been] absorbed by …
the doctrine of forum non conveniens and is now regarded as an
important factor [within that doctrine] that the court must take into
account when deciding whether [it will accept jurisdiction and hear the
case].148
Section 9 of the Regulation, however, refers only to cases where courts of
different Member States are purporting to hear the same matter. In that case,
Article 27 of the Regulation provides that “any court other than the court first
seised shall of its own motion stay its proceedings”. This is known as the “first
come, first served” rule,149 but does not cover the kind of situation
contemplated by this article, which would most likely be where one of the
parties to an ICT is within the EU and the other is not. In that case, Section 9
would be inapplicable as the non-EU court would be governed by its own
version of the doctrine of forum non conveniens / lis pendens and not by
Section 9 of the Regulation.
146
(2001). Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the
recognition and enforcement of judgments in civil and commercial matters (the Brussels Regulation)
(emphasis added)
147
Ibid
148
Mortensen, R. (2001). "Duty free forum shopping :Disputing venue in the Pacific." Victoria
University of Wellington 32: 673-703, 678
149
Eisengraeber, J. (2004). "Lis alibi pendens under the Brussels I Regulation." Exeter Papers in
European Law 16: 1 of 63, 2
226
Once again, there is the problem of regional/national differences in private
international law rules that may be exploited by parties to litigation of ICTs
through forum shopping or negative forum shopping (considered below).
The previous passage considered differences between how courts in
Australia, the USA and the European Union determine if they have jurisdiction
or not. It is this lack of harmony in the way this issue is decided between
different countries which creates possibilities which may be exploited by
vendor-defendants (as will be demonstrated especially by the section below
on forum shopping). Such possibilities are one of the causes of the costineffectiveness of litigation beyond its basic expense, as a remedy for
failed/disputed low-value ICTs. Put another way, private international law
rules regarding jurisdiction that are unharmonised with each other can
increase the cost of litigation for consumers.
Also, the issue of unharmonised rules regarding jurisdiction can only be
compounded by the presence of “negotiated” jurisdiction clauses within ICTs.
As noted above, jurisdiction clauses deal with the threshold issue of where a
dispute, if any arises, shall be adjudicated. Unfortunately, however, it is not
necessarily as simple as that. A jurisdiction clause itself will not prevent a
defendant from using forum non conveniens and other factors to renege on
their own jurisdiction clause.150 A jurisdiction clause could be disputed, and
overturned by a court. As noted by Jew:
Even where the parties have agreed to the exclusive jurisdiction of a
particular country, eg England, it is still possible for one of the parties to
the contract to seek a stay of proceedings in that country, or to bring an
action in another country, eg Australia, if the party can establish that
Australia is clearly the more appropriate forum for determining the
dispute.151
Furthermore (apart from tactical manoeuvring by a defendant) that could
happen where, for example, all the evidence or witnesses turned out to be in
a country other than that specified by a jurisdiction clause. Furthermore,
contractual provisions in ICTs could also be effected by over-riding local or
international laws.
The US courts will generally uphold a forum selection clause unless it
is unfair or unconscionable to do so … [e.g.] if the weaker party to the
transaction cannot “shop around” for better terms or has no real choice
in the matter.
150
Fitzgerald, B., G. Middleton, et al. (2004). Jurisdiction and the Internet. Sydney, Lawbook Co., 80-
81
151
Jew, B. (1998). Cyberjurisdiction - emerging issues and conflicts of law when overseas courts
challenge your web. Gilbert & Tobin Lawyers.
227
Forum selection clauses have been successfully used by US online
suppliers in adhesion contracts152 to control the forum in which they
may be sued … However, the courts [by application of discretionary
powers] have refused to enforce forum selection clauses in online
contracts where it was unreasonable or unconscionable to do so,
having regard to the customers’ lack of sophistication … the distance
which customers must travel to attend proceedings in the chosen forum
… and where the operation of the forum selection clause is unduly
onerous, having regard to the small amount in dispute.153
As noted, the issue of unharmonised rules regarding jurisdiction can only be
compounded by the presence of “negotiated” jurisdiction clauses within ICTs.
That is, added to the problems outlined in the previous section, is the potential
effect of extra complications caused by the presence of a jurisdiction clause
which is disputed by the parties. In that case, the cost problems described
above would only be increased.
Furthermore, it is a combination of the relative sophistication of Internet
vendors and judicial discretionary power that provides scope for abuse of
jurisdiction clauses by vendors.
The mere fact of the exercisability of discretion, by different courts, in
connection with such matters, is just one consequence of the provincial nature
of the various differing private international law standards throughout the
world. It is that consequence which makes it possible for defendants to try to
bring tactical interlocutory (forum shopping and other evasive) proceedings in
relation to failed/disputed ICTs. In a world of harmonised choice of law rules
and reduced judicial discretion, however, there would be nowhere for a
defendant to hide, and a change of forum would be pointless.
A glimpse of the problem may be seen in the following excerpt:
The most likely manner in which a party may seek to subvert the
operation of an exclusive jurisdiction clause is through an appeal to the
discretion of the court, more precisely, through an appeal to the court
not to exercise its discretion and to decline to stay proceedings.154
Without the existence of such discretionary powers, there would be less
scope for a rogue Internet vendor to play tactical “games” for the purpose of
avoiding justice.
Cost problems are therefore not only created by mere unharmonised
jurisdiction rules as between different countries, and potentially exacerbated
by jurisdiction clauses, but are potentially exacerbated still further by judicial
152
An adhesion contract is a standard form contract drafted by one of the parties without any
opportunity for input from the other party: Fitzgerald, B., G. Middleton, et al. (2004). Jurisdiction and
the Internet. Sydney, Lawbook Co., 86 footnote 291.
153
Ibid, 86-87
154
Bell, A. (2003). Forum Shopping and Venue in Transnational Litigation. Oxford University Press,
315
228
discretionary powers which can arguably give the entire scenario a dimension
of subjectivity, as between different judges, and thus unpredictability.
The impact of choice of law issues (as described above) may now be
assessed. This assessment is concerned not so much with analysis of the
differences between how courts in different countries decide what the
applicable law is, using their own “choice of law rules”,155 but simply with
establishing that the differences exist to add confusion and expense to the
litigation of ICTs and scope for tactical manoeuvres by a defendant vendor.
In Australia “the law of the forum will be applied to determine if a choice of law
clause is effective.”156 If the contract contains no such clause, “the courts will
determine whether, on a proper construction of the contract, the parties have
evinced a common intention as to the system of law by which the contract will
be governed” 157 and, if that is not possible, the courts will “apply the law with
which the contract has the closest and most real connection at the time that
the contract is formed.” 158 These rules are simple enough, but it is the
difference with comparable laws in other places that creates the potential
problem.
In the USA, choice of law rules are contained in the Restatement (Second) of
Conflict of Laws (1971) (Second Restatement).159 Of this law, Fitzgerald says
that:
Commentators have criticised the choice of law rules in the Second
Restatement on grounds ranging from their flexibility producing
unpredictability in application, through to their being “an incoherent
mishmash” [and that] the key concept that permeates the choice of law
rules in the Second Restatement is the “most significant relationship”
[for which] there is no definition. 160
The choice of law rules in the EU are provided by the Rome Convention 161
(the Convention) which “applies to contractual obligations in any situation
involving a choice of law between the laws of different countries”. 162 The
Convention enshrines the doctrine of freedom of contract in its Article 3(1),
potentially allowing for abuse by vendors through standard form contracts
(see below) but does, under Article 5(2), preserve protection for consumers of
the mandatory rules of their home country upon certain conditions, such as
the contract being formed as the result of a specific invitation, or by
advertising, from/by the vendor and the consumer having taken all steps
necessary on the consumer’s part for conclusion of the contract in their own
155
Fitzgerald, B., G. Middleton, et al. (2004). Jurisdiction and the Internet. Sydney, Lawbook Co., 39
Ibid, 43
157
Ibid, 44
158
Ibid
159
Ibid, 47
160
Ibid, 47-48 (emphasis added)
161
European, U. (1980). Convention on the Law Applicable to Contractual Obligations. OJ C 027
(498Y0126(03)) of 26/01/98
162
Fitzgerald, B., G. Middleton, et al. (2004). Jurisdiction and the Internet. Sydney, Lawbook Co., 52
156
229
country.163 The exact detail of the rules in the EU, while being somewhat
analogous in intent, is unique to the EU and is not harmonised with
comparable US or Australian laws.
This previous passage on choice of law issues considered differences
between how courts in Australia, the USA and the European Union determine
the appropriate substantive law to apply to a matter. Once again, it is the lack
of harmony in the way this issue is decided between different countries which
creates possibilities which may be exploited by vendor-defendants. Private
international law rules regarding choice of law that are unharmonised with
each other can increase the cost of litigation for consumers.
The potential impact of renvoi can now be assessed. Renvoi can present a
dilemma which can, of itself, provide scope for cost, difficulty of enforcement
and complexity problems for a consumer suing a foreign vendor, purely
because of the intrinsic nature of unharmonised national private international
law rules – and, as noted below, even the solutions to the problem of renvoi
only serve to exacerbate the problem. Nygh and Davies say that:
[O]ne, though certainly not the sole, object of the law of conflicts is to
ensure a uniformity of result irrespective of the forum chosen … In an
ideal world where all legal systems employed conflict rules that were
identical in content and interpretation, the objective of uniformity of
result would be achieved. Unfortunately, however, conflict rules differ.
They differ because some legal systems use choice of law rules that
are quite different from our own … [and] Even where the choice of law
rules are the same, their interpretation may differ … How can the
problem of renvoi be solved? Three solutions have been put forward.164
The detailed nature of the three solutions (called “rejection”, “single renvoi”
and “total renvoi”) is not relevant here as it is the disharmony of acceptance of
a single solution to the problem of renvoi that is the question concerning this
article. In respect of the first solution mentioned however, Nygh says, “it is
followed by a number of foreign countries.”165 In respect of the second
solution, Nygh says, “it is followed by most civil law systems”.166 In respect of
the third solution, Nygh says, “this last method has found favour with the
courts in the United Kingdom and Australia and, to a limited degree, with
those in the United States.”167 It would seem then that, globally, there is a long
way to go to Nygh and Davies’ “ideal world where all legal systems employed
conflict rules that were identical in content and interpretation”.
The most recent High Court of Australia decision on renvoi in Neilson’s
case168 appears only to confirm this view, the judges deciding 5-2 (Kirby and
163
Ibid
Nygh, P. and M. Davies (2002). Conflict of Laws in Australia. Sydney, Butterworths, 289-290
(emphasis added)
165
Ibid, 290
166
Ibid, 291
167
Ibid, 292
168
(2005). Neilson v Overseas Projects Corporation of Victoria Ltd. HCA, HCA: 54
164
230
McHugh dissenting), with two judges accepting double/total renvoi, one judge
favouring rejection, and the remainder accepting single renvoi. It is submitted
that the range of difference for achieving the same decision amongst the five
judges in the majority and the similarity of reasoning yet with a different
decision by two judges (Gleeson and Kirby), perpetuates the complexity,
instability, subjectivity and unpredictability of this sub-set of private
international law. This result can only give comfort to those who would seek to
exploit globally unharmonised private international law.
Self-evidently, renvoi, if operable in respect of ICTs, could only increase cost
problems.
Recognition and enforcement issues may now be assessed. They are
assessed under the Cost heading although they could be assessed equally
under the next two headings, presenting both difficulty of enforcement and
complexity problems for litigators. There are a range of rules regarding
enforcement jurisdiction worldwide: case law and statutory law in common law
countries, and conventions in the EU. Once again, however, these rules are
unharmonised and create potential for inefficiencies and tactical manoeuvres
by a defendant.
As regards case law, because the USA is not a party to the scheme
underlying the Foreign Judgments Act 1991 (Cth),169 enforcement jurisdiction
rules in matters involving, for example, US consumers and Australian
plaintiffs, or vice-versa, would be determined by common law principles.
Furthermore, despite the commonality of the legal heritage between Australia
and the USA, the actual rules may well be different from court to court in each
of these two countries. For example, the common law rule applied in
Australia, that the court may enforce the judgment of the court of another
country if the court in the other country had personal jurisdiction over the
defendant, is derived from the case of Singh v Rajah of Faridkote [1894] AC
670, 170 a case which is not necessarily applicable throughout the whole of the
USA (or elsewhere).
Where the Foreign Judgments Act 1991 (Cth) is applicable, under section 5,
some types of judgments of foreign courts will be mutually enforceable
through registration as between signatory nations. A problem for consumers
that may arise under section 6(6)171 of this scheme is that judgments which
aren't legally enforceable in the country in which they were made cannot be
registered in the defendant's country, and even where they are registered, a
defendant can apply to the court (under section 7) for registration to be set
aside for a wide variety of reasons, an even more likely problem for
consumers. These reasons include that the courts of the country of the
original court had no jurisdiction in the circumstances of the case (section
7(2)(a)(iv)), or that the judgment debtor, being the defendant in the
169
(1991). Foreign Judgments Act 1991 (Australia)
Fitzgerald, B., G. Middleton, et al. (2004). Jurisdiction and the Internet. Sydney, Lawbook Co., 91
171
“A judgment is not to be registered if at the date of the application: (a) it has been wholly satisfied;
or (b) it could not be enforced in the country of the original court”: (1991), Foreign Judgments Act
1991 (Australia).
170
231
proceedings in the original court, did not (whether or not process had been
duly served on the judgment debtor in accordance with the law of the country
of the original court) receive notice of those proceedings in sufficient time to
enable the judgment debtor to defend the proceedings and did not appear
(section 7(2)(a)(v)).
In other words, an effect of sections 6(6) and 7(2) of the Foreign Judgments
Act is that as rules of law in a forum that are not harmonised with the private
international law rules of other countries, they may be shopped for by a
defendant seeking tactical advantage through and by forum shopping (see
below).
As noted, the USA is not a party to the scheme underlying the Foreign
Judgments Act 1991 (Cth), and the general principle of enforcement
jurisdiction there is that no judgment has effect beyond the limits of the
sovereignty from which its authority is derived.172 Thus (subject to the due
process requirement of the Fourteenth Amendment of the US Constitution,
noted above) common law principles of enforcement (explained above)
prevail in respect of international US cases and, to some extent, statutory
rules173 in respect of about half of the US states.174
So a consumer seeking to enforce a foreign judgment in the US must file
proceedings in accordance with the laws of the relevant state, and await the
discretion of the courts of that state.175
Furthermore, there may be (First Amendment freedom of speech)
constitutional dimensions to US enforcement rules. Fogel J in the District
Court for the Northern District of California in the Yahoo176 case held that the
order of the French court was inconsistent with the First Amendment of the
US Constitution and held that that precluded enforcement of the French
judgment in the US.177 Interestingly, while “freedom of speech” will probably
never be a direct issue in ICTs, the idea that a French person may still be able
to purchase Nazi memorabilia through a Yahoo-sponsored website because
of US law, is evidence of the link between ICTs and unharmonised private
international law rules.
Enforcement rules in the EU are regulated mainly178 by the Brussels
Regulation (the Regulation)179 which covers two situations – where foreign
Fitzgerald, B., G. Middleton, et al. (2004). Jurisdiction and the Internet. Sydney, Lawbook Co., 95 –
citing (2001), Yahoo! Inc v La Ligue Contre Le Racisme Et L'Antisemitisme, ND Cal, F Supp 2d. 145:
1168, as authority.
173
Purely in relation to certain intrastate matters within the USA – Fitzgerald, B., G. Middleton, et al.
(2004). Jurisdiction and the Internet. Sydney, Lawbook Co., 95-96.
174
Ibid, 95
175
Ibid, 96
176
(2001). Yahoo! Inc v La Ligue Contre Le Racisme Et L'Antisemitisme. ND Cal, F Supp 2d. 145:
1168
177
Fitzgerald, B., G. Middleton, et al. (2004). Jurisdiction and the Internet. Sydney, Lawbook Co., 97
178
The Brussels Regulation applies to all EU member states except Denmark which continues to follow
the older Brussels Convention. Switzerland, Iceland and Norway apply the rules of the 1988 Lugano
172
232
judgments are issued by courts of EU member states (but both disputants are
within the EU and in different countries), and where the judgments are issued
by non-member states. In the former case, a foreign judgment regarding an
ICT will be enforceable if it relates to a non-excluded civil or commercial
matter (Regulation Article 1), if it is a judgment of a court or tribunal of a
member state (Article 32) and if the judgment was not contrary to Section 4
regarding consumer contracts. In the latter case, where the judgments are
issued by non-member states, the Regulation (or Lugano Convention) will still
apply unless there is a specific international agreement which may over-ride
it.180
Enforcement jurisdiction rules worldwide are unharmonised and create
potential for inefficiencies and tactical manoeuvres by a defendant. Once
again, therefore, these can only add cost problems to the already high cost of
litigation.
Finally, the impact of forum shopping may now be assessed. A number of
aspects of the litigation redress method raised above amount to opportunities
for vendor exploitation of the fact of unharmonised private international law
rules. The topic of jurisdiction and other issues considered above shall now be
revisited briefly in order to assess the potential problem of reverse forum
shopping.
Determining whether or not a court has jurisdiction can be a complicated
process, requiring the balancing of a range of factors, with potentially different
factors in different courts in different countries.
A question arises, however, as to why jurisdiction would even become an
issue before a court. Jew’s view on this is that:
where parties from more than one jurisdiction enter into a contract [as
will be the case with ICTs usually], the laws of several different
jurisdictions could be relevant to issues arising under the contract. The
law of the place where the contract was made, the law of the place of
performance and the law of the domicile of each party are all relevant
in the conflict of laws as it relates to contracts.181
From that, one can immediately see the potential for problems; not that a
court may not be easily able to resolve such issues to its own satisfaction but
because a vendor may, either vexatiously or tactically, make an issue out of
such factors so that litigation, for the consumer, becomes too expensive as
compared with the highest possible recovery amount. Awards of costs are
Convention, which is similar to the Brussels Convention. DTI (2005), Cross border consumer
contractual disputes within the European Union: which country has jurisdiction?
179
European U, (2001), Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and
the recognition and enforcement of judgments in civil and commercial matters. (EC) No 44/2001 came into force on 1st May 2002.
180
Fitzgerald, B., G. Middleton, et al. (2004). Jurisdiction and the Internet. Sydney, Lawbook Co., 9798.
181
Jew, B. (1998). Cyberjurisdiction - emerging issues and conflicts of law when overseas courts
challenge your web. Gilbert & Tobin Lawyers.
233
also unpredictable and thus cannot be relied on to assist a plaintiff, especially
given the variety of multi-state rules.
Further points of potential tactical exploitation raised above were the variety of
different rules of service across the courts of different states in a federal
system (as in Australia for example), and the differing rules world-wide in
respect of the doctrine of forum non conveniens as between Australia and the
rest of the Commonwealth, the US and the EU.
It was also noted that despite the use of jurisdiction clauses in otherwise
binding ICTs, the potential for exploitation still exists through the ability of
vendors to renege on them and in the freedom of courts to exercise discretion
to tolerate such practices.
Furthermore, there was potential for vendor exploitation of world-wide private
international law disharmony and judicial discretion in respect of the variety of
choice of law and renvoi rules, and in respect of the variety of recognition and
enforcement rules.
The question now is whether a defendant-vendor in an ICT matter might want
to exploit the fact that private international law rules regarding jurisdiction and
other issues are globally unharmonised. The answer is necessarily “yes”
because, being unharmonised, the vendor may well want to seek to contest
proceedings where the rules of another jurisdiction may be more favourable.
Furthermore, as noted, a vendor defendant may so vexatiously make an issue
out of such factors that litigation becomes too expensive as compared with
the highest possible recovery amount.
So a vendor seeking to contest proceedings where the rules may be more
favourable in another jurisdiction can use “negative” or “reverse” forum
shopping, a tactic of a defendant to try to get litigation changed to an
alternative forum, or better still, to no forum at all. The tactic thus includes
both positive approaches (e.g. challenge the jurisdiction of the forum court)
and negative approaches (somehow evade proceedings altogether), including
the most basic and potentially most effective method, non-appearance.
As regards non-appearance, if a defendant is not within the consumer’s
jurisdiction, cannot be compelled to go there, does not conduct business there
and does not plan to (at all, or under the same name), has no assets there,
and has no creditors that may be garnisheed there, then the issue would be
why (under the current private international law regimes around the world) the
vendor would make any kind of response to proceedings there. The vendor’s
cheapest, simplest and most-effective tactic then, in such circumstances,
would simply be to ignore proceedings altogether and perhaps allow the
consumer to obtain a default judgment.182 That may not even be registrable in
the vendor’s jurisdiction and, if so, would be unenforceable (at either common
law or under some statutory regimes). In any event, default judgement or not,
182
Even that may be unlikely as a court may consider it has no jurisdiction where any judgment it may
make would be unenforceable in the vendor’s country. One reason for that may be that the defendant
has obtained a negative declaration within their local jurisdiction.
234
a hollow “victory” for the consumer-plaintiff would be an expensive and
meaningless victory.
As regards positive, more-sophisticated tactics a vendor might employ – true
reverse forum shopping – Bell argues that:
there is for defendants an enormous advantage in winning by way of
an interlocutory proceeding … venue will often be of crucial
significance in transnational litigation … a defendant will have as much
interest as a plaintiff in securing a forum in which it is most likely to
meet with success (or further its particular strategic motivation, which
may be fragmentation, delay, or an impact on the sequence of
proceedings).183
Thus, reverse forum shopping could just as well involve a mere war of attrition
as involve any other, more positive, motivation.
For Bell, a defendant winning by way of interlocutory proceedings can involve
challenging jurisdiction or seeking (dismissal or) stays of proceedings (on
principles of forum non conveniens on the grounds, for example, of
inapplicability of local contract law, non-breach of contract, and breach
outside the jurisdiction), and either seeking negative declaratory relief and
anti-suit injunctions,184 or both – none of which necessarily involve
submission, by a defendant, to the forum jurisdiction.185
At this point the clear potential should be noted for tactical use of each of the
interlocutory proceedings described above186 as a tool for a foreign
defendant-vendor in an ICT matter where private international law rules
around the world remain unharmonised – a tool to fend off a consumer’s
litigation by (ultimately) making it too expensive for a plaintiff-consumer.
In respect of the use of these interlocutory proceedings, Bell concludes that “a
great deal can turn on the venue in which a particular transnational dispute is
to be resolved … the various tools available to a defendant [discussed above]
… will be used to their limits by defendants”.187
Such tools may be ineffective as tactical manoeuvres by a defendant using
them to evade justice in the presence of harmonised private international law
rules; changing venues would then be pointless.
Reverse forum shopping is potentially a powerful tool in the hands of a
defendant-vendor who is seeking to evade litigation. It is made possible only
183
Bell, A. (2003). Forum Shopping and Venue in Transnational Litigation. Oxford University Press,
273
184
Ibid, 133
185
Fitzgerald, B., G. Middleton, et al. (2004). Jurisdiction and the Internet. Sydney, Lawbook Co., 19
186
These were challenging jurisdiction, stays of proceedings, anti-suit injunctions and applications for
negative declaratory relief.
187
Bell, A. (2003). Forum Shopping and Venue in Transnational Litigation. Oxford University Press,
133.
235
by unharmonised private international law rules and is a major explanation of
the fact that international litigation, to remedy failed low value ICTs, is not
cost-effective on grounds of cost.
Difficulty of enforcement
There are at least six factors which have the potential to increase the difficulty
of (obtaining and/or) enforcing a judgment in cases involving ICTs.188 These
include: the increased expense of transborder litigation; the potential need to
relocate proceedings, evidence and witnesses; the presence of jurisdiction
clauses; the potential exercise of judicial discretionary powers; the potential
involvement of mutually inconsistent private international law rules regarding
choice of law; and renvoi.
 Expense: Mutually inconsistent private international law rules
regarding jurisdiction can mean that the terms of an ICT are difficult to
enforce simply because potential enforcement proceedings subsequent
to expensive litigation can become too expensive. Strictly speaking,
however, if something becomes too expensive, it is beyond being
merely “difficult to enforce”, it has become impossible to enforce.
 Re-location: Obtaining and/or enforcing a judgement may also be
made more difficult because of the potential need to re-locate court
proceedings, evidence and witnesses to a court in a different country.
Beyond the merely financial aspects of this scenario, a consumer
plaintiff can potentially face a litany of factors to be coordinated in order
to pursue a remedy. Such factors could include the need to make
return air transportation arrangements for multiple persons (plaintiff
and, potentially, witnesses); the need to make arrangements for
temporary suitable accommodation for multiple persons; the need to
obtain permissions, in some cases, for absences; the need to make
arrangements for management of affairs at home during an absence;
the need to make arrangements for the timely and secure
transportation of evidentiary material to the country where a matter is to
be heard. Added to such difficulties is the potential for time
requirements to change unexpectedly: the plaintiff might be asked to
stay longer than was originally anticipated; and all such time change
scenarios will have “ripple” / “flow on” effects elsewhere.
 Jurisdiction clauses: The terms of an ICT may also be made more
difficult to enforce because of the potential effect of extra complications
caused by the presence of a jurisdiction clause which is disputed by
the parties. A jurisdiction clause, in itself, could cause difficulties. It can
be the cause of the previous scenario regarding the potential need to
As noted in the Introduction to this article, the concept of “enforcement” in the context of “difficulty
of enforcement” here, was to have been initially understood in a very wide sense, applicable to all ICT
redress methods, litigation-based or otherwise. At this point though, the “enforcement” of the terms of
an ICT through court judgments can be understood in the sense of obtaining and enforcing such
judgments (because the initial obtaining of a judgment is a necessary precondition to enforcement), or
in the even narrower sense of literally just the enforcement of judgments, as the context requires.
188
236
re-locate. A disputed jurisdiction clause, however, would necessarily
add a preliminary dimension of difficulty through the need to address
and resolve all significant aspects of the dispute in question. A
jurisdiction clause could be disputed (prior to obtaining judgment or at
the enforcement stage) for a variety of reasons, the most basic being
the presence of mutually incompatible rules regarding jurisdiction
clauses as between the different potential jurisdictions involved in
connection with the ICT in question. A jurisdiction clause could also be
disputed by a defendant for purely tactical reasons, raising the issue of
negative forum shopping – for no reason other than simply to frustrate
the plaintiff.
 Judicial discretionary powers Difficulty-of-enforcement problems are
not only created by merely inconsistent jurisdiction rules as between
different countries, and potentially exacerbated by jurisdiction clauses,
but are potentially exacerbated still further by judicial discretionary
powers which can arguably give any judicial process a dimension of
subjectivity, as between different judges, and thus unpredictability.
Judges, being human, are as potentially subject to as many subjective
influences (bias, for example) as others; and there may also be, in
different courts, wider latitude for the exercise of discretionary powers,
regarding varying defences found in different countries. For example, a
German judge may have different discretionary powers than those
exercisable by judges elsewhere, which are exercisable in relation to
peculiarly German public policy or other grounds for objections to a
possible decision to recognize and enforce the judgment of a court in
another country.
 Choice of law: Mutually inconsistent private international law rules
regarding choice of law can increase the probability of unsuccessful
litigation, for a consumer, through a potential change in substantive
law. In other words, because of the effect of inconsistency between
different relevant private international law rules, a substantive law,
unfavourable to the plaintiff, may unexpectedly apply.
 Choice of law could also potentially be a problem for a plaintiff at the
actual recognition and enforcement stage too. A court, asked to
recognize and enforce the judgment of a court elsewhere may exercise
its discretion not to recognize a judgment due to public policy or
unfairness grounds in connection with what the judgment court held to
be the correct applicable law.
 Renvoi: Renvoi, if operable, can also add difficulty of enforcement
problems if interlocutory manoeuvrings drive proceedings through a
succession of different courts.
As noted, enforcement jurisdiction rules worldwide can be mutually
inconsistent and create potential for inefficiencies and tactical manoeuvres by
a defendant. Once again, therefore, these can only increase difficulty to the
237
prospect of obtaining and enforcing any favourable judgement a consumer
may obtain.
Complexity
Mutually inconsistent private international law rules around the world
regarding jurisdiction, choice of law, renvoi and recognition and enforcement
can be complex beyond the experience of even general practice lawyers. A
litigant’s local private international law rules can be complex in their own right.
Added to this scenario is the certainty that even special private international
law practitioners will not have mastery over the laws of any other jurisdiction
they may have to deal with. The general picture that emerges then is one of
potentially huge complexity, especially true if more than one set of foreign
private international law rules are applicable.
Added to such problems is the potential effect of extra complications caused
by the presence of a jurisdiction clause which is disputed by the parties. In
that case, the complexity problems described above would only be increased
by the characteristics of the dispute involved.
Complexity problems may also be potentially exacerbated by judicial
discretionary powers which can arguably, as noted, give the entire scenario a
dimension of subjectivity, as between different judges, and thus
unpredictability.
As regards the impact of the effect of mandatory rules, one can see the scope
for disputation as to whether any particular mandatory rules may apply to any
given ICT. Recalling the applicability of section 67(a) Trade Practices Act, the
sufficiency of the degree of connection with a particular country is debateable.
Recalling the provisions of Article 5(2) of the Rome Convention, what is
enough to constitute a “specific invitation” is debateable, and what is enough
to constitute “having taken all steps necessary” is debateable. Mandatory
rules can therefore add an extra dimension of complexity and uncertainty and
thus cost
Once again, renvoi, if operable, and reverse forum shopping, could only add
complexity problems. Proceedings being sent between courts (or even the
possibility of that) would increase complexity.
Conclusion
Assessed by the cost criterion, the litigation redress method – involving the
usual high cost of ordinary litigation, plus any extra costs resulting from
tactical manoeuvring engaged in by a foreign vendor who might use negative
forum shopping, for example – would be expensive. In fact, under current
circumstances, litigation for ICTs is likely to cost more than the highest it could
238
recover. The cost criterion for evaluating the litigation method of protecting
ICTs is “high” because the cost of litigation, as a general rule, is high and
would only be made more expensive by adding transnational complications to
it. The result is not “very high” because there might be some occasional
exceptions to the general rule. Therefore, if any particular consumer wished to
sue a foreign vendor, the probability is very high that their costs would be high
or very high relative to the value of an ICT.
Assessed by the difficulty of enforcement criterion, effective litigation has
significant actual coercive force, being backed by state/court enforcement
powers (assuming the vendor has accessible assets that such powers might
be employed against), if such enforcement power can be accessed. It will be
accessible if use of the litigation redress method is not too costly or too
complex. The difficulty of enforcement criterion for evaluating the litigation
method of protecting ICTs, as a discrete criterion, produces a “low” result here
because successful litigation is backed by state/court enforcement powers.
The result is not “very low” because the mere presence or applicability of
enforcement powers does not guarantee that a remedy will be available to the
consumer; the vendor may have non-existent or inaccessible assets, for
example.
Assessed by the complexity criterion, the litigation method is comparatively
complex, and especially so where transnational complications are involved.
The complexity criterion for evaluating the litigation method of protecting ICTs
produces a result of “very high” because the relative complexity of litigation,
as a general rule, is high and would only be made more complex by adding a
transnational dimension to it.
Using this approach, the proposition that redress for disputed/failed low-value
ICTs by means of litigation is generally not cost-effective can now be
expressed by litigation, and thus its cost-effectiveness as a redress method,
being given a tabulated result as follows.189
Criteria for evaluation of ICT redress methods
Method
Cost
Difficulty of
enforcement
Complexity
Costeffective
Litigation-based redress under current legal regime
189
The table is expressed in the manner shown as if litigation were just one of a range of ICT redress
methods that might be evaluated using a cost-effectiveness evaluation. In such a case, it would simply
be a matter of adding more rows to construct a comparative cost-effectiveness evaluation of a range of
different methods.
239
Litigation
High
Low
Very High
No
As regards litigation generally not being cost-effective for redress of ICTs, the
likelihood, however, is that it is not litigation as such which is lacking,
intrinsically, but court-based remedies as they currently exist which appears to
be the problem – hence the question suggesting a need for reform in the title
of this article. As to whether modified court-based approaches may provide a
solution remains to be seen, the biggest problem being the relative cost of
litigation and enforcement as compared with the low values of ICT losses
under consideration here. If the cost of litigation and enforcement with respect
to ICTs could somehow be dramatically reduced, through cyberjurisdiction
techniques for example, litigation will be the only solution if non litigationbased methods of redress are not cost-effective.
At this point then, we can safely answer “yes” to the reform question posed by
the title of this article, and the retardation of growth in e-commerce sales will
continue, possibly even worsen – depending perhaps on whether non
litigation-based methods of redress for disputed/failed low-value ICTs are also
not cost-effective, and research by the present writer strongly suggests that
that is the case also.
240
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