UK: “Where Can We Be Sued?”- The Implications Of The New Jurisdiction Rules Under The Brussels Regulation For Online Consumer Contracts

The Brussels Regulation (the "Regulation") takes effect on 1^st March 2002, replacing the Brussels Convention of 1968 (the "Convention") which sets out the rules for determining which EU court will have jurisdiction over a dispute in relation to a commercial contract and facilitates the recognition and enforcement of judgements between member states. It is intended that the Regulation should increase uniformity between the member states in their application of the rules of jurisdiction contained in the Convention and take into account the development of e-commerce. The Regulation will apply in all member states of the EU, other than Denmark. The relations between Denmark and the other member states will continue to be governed by the Convention.

The Regulation makes important changes to the jurisdiction rules that apply to consumer contracts. When considering the question "Where can we be sued?", suppliers who sell to consumers in other EU member states may unwittingly find themselves subject to the jurisdiction of foreign courts in the event of a dispute brought by a consumer. Online consumer e-commerce businesses should, therefore, review their foreign sales efforts and identify those territories where their activities could lead to unfavourable jurisdiction rulings under the Regulation. A prudent review in advance of the introduction of the Regulation will at least give those businesses advance warning of the effect of the new Regulation on their foreign activities.

The Regulation follows the principle of the Convention that the parties should be free to include an express choice of jurisdiction clause (Article 23). Where it is unclear whether a particular choice of jurisdiction is exclusive or non-exclusive it will be presumed to be exclusive, although non-exclusive agreements are enforceable.

In the absence of express agreement on jurisdiction it remains the case that a defendant can be sued only in the courts of his home country (the ‘home courts rule’). The Regulation expressly states that nationality is not relevant to determine which courts have jurisdiction to hear a case. The determining factor is domicile.

Article 60 of the Regulation introduces a test for the domicile of companies and unincorporated businesses, an issue previously left to the laws of the member state in question. It defines the domicile of a company or other such legal entity as being where it has its statutory seat (i.e. registered office), its central administration or its principal place of business.

The home courts rule continues to be subject to modifications and exceptions under which a claimant may either have a choice of several jurisdictions or which may result in the courts of one member state enjoying exclusive jurisdiction although the defendant is not domiciled in that particular state.

Under the Convention one of the main exceptions applies to consumer contracts. If certain conditions are fulfilled they are permitted to sue suppliers in their own courts instead of the supplier’s courts. The exception takes precedence over any terms included in the contract to the contrary and it cannot be excluded. Article 13 of the Brussels Convention defines a ‘Consumer Contract’ as including the supply of goods or services where:

• In the consumer’s home state, the conclusion of the contract was preceded by a specific invitation addressed to him or by advertising; and
• The consumer took the steps necessary to conclude the contract in the consumer’s home state.

In terms of e-commerce this definition has been difficult to interpret. It has been unclear whether ‘advertising’ extends to the advertising of goods and/ or services on a website that can be accessed throughout the EU. Businesses with an e-commerce presence have argued that these provisions do not apply to e-commerce transactions and that, therefore, they can only be sued in their home courts.

Article 15 of the Regulation alters the definition of ‘Consumer Contract’ such that a consumer can now take action in his local courts against a supplier ‘who pursues commercial or professional activities’ in the consumer’s home state or who, ‘by any means, directs such activities’ to that state, or several states including that state, where ‘the contract falls within the scope of such activities’.

This amounts to a considerable dilution of the requirements of the Convention which require direct advertising/ invitation and could mean that where a consumer located in one member state visits a website and offers to buy goods/ services from a company’s website based in another member state, that company could be said to have directed its activities to the member state of the consumer domicile. Therefore, the company would face the prospect of proceedings in that state, regardless of any jurisdiction agreement contained in the contract- i.e. if a UK e-commerce site is used by a French consumer, the French courts will have jurisdiction in the event of a subsequent dispute.

There is no definition contained in the Regulation as to what ‘directing activities’ means in practice, consequently there is still no certainty for either consumers or businesses as to where they may sue or be sued respectively. Should the ECJ adopt the purposive approach taken towards the Brussels Convention, the aim of protecting the consumer as the weaker party may lead to a very broad interpretation- online traders then face the possibility of immediate jurisdiction in all 15 EU states.

A common sense approach would suggest that a company with a website written in Italian with prices in euros would be regarded as directing its activities at Italy. Similarly, if a website prominently stated that it only dealt with consumers in the UK it would not seem to be directing its activities at other member states. A website offering physical products could make it clear that it would only deliver products to UK addresses, although establishing the whereabouts of a consumer to whom software, MP3 files or other intangible goods/ services were provided electronically may be more difficult.

In addition, there is no official guidance on what constitutes ‘directing activities’ at a member state. Precedents will no doubt appear shortly after the Regulation comes into force as consumer spending via the internet increases. This should lead to a greater degree of certainty for both consumers and businesses with an e-commerce presence.