On the question of which laws apply, the E-commerce Directive, which is meant to be adopted in all Member States before 17th January 2002, requires EU businesses to comply only with the laws of the country in which they are based when dealing with consumers, an approach known as the country of origin principle.
However, the question of where actions can take place is proving more difficult to answer.
A treaty known as the Brussels Convention, which has long existed, governs jurisdiction when a party wishes to sue across a border. In business to business (B2B) deals, the Convention says that the relevant courts in any dispute are those of the country in which the defending party is based. However, in business to consumer (B2C) deals, where a business has made what the Convention describes as a “specific invitation” to a consumer, then the consumer can sue that business in the courts of his own country. The justification for this is that a consumer may lack the necessary resources to sue overseas.
A “specific invitation” to a consumer has been taken to mean more than merely making the offer available to a consumer – it required the business to tailor its offer in some way to consumers in other countries, either by setting out the offer in another language or quoting the price in a different currency or by some other means. Under the Convention, a business could avoid giving foreign consumers these rights by expressly stating that the offer was only open to consumers in a particular country.
Controversy has arisen because the Brussels Convention will be replaced by an EU Regulation, entitled “Enforcement of Civil and Commercial Judgments,” which comes into force in all Member States in March 2002.
This Regulation extends the protection for consumers because a business need not make a “specific invitation” to be caught by the exception – it need only “direct its activities” to consumers. Although nobody yet knows the exact meaning of this phrase, it is thought that it is wide enough to catch all on-line B2C transactions and there is concern that this may discourage small businesses from trading on-line for fear of becoming involved in costly litigation in foreign countries.
The true effect of the Regulation remains to be seen. It will depend, to a large extent, on the interpretation given to the phrase “direct its activities.” According to a recent report in Computer Weekly, legal experts are soon meeting with MEPs in an effort to clarify this ambiguity.