The
Cybersecurities' Notion of "Targeting" in General Private International
Law*
Prof.
Dr. jur. James A. Graham,
Director del
Centro
de Resolución de Controversias,
Facultad Libre
de Derecho de Monterrey, México
CBL
Web-Doc. 1/2003
In our opening discourse during the First World Congress for Informatics
and Law in Quito last year1,
we tried to demonstrate how the advent of U-business eliminates
one for all active territorialism, meaning the State's jurisdiction
because of something that relies on its territory. Traditional links
like the place of performance, the place of conclusion, domicile
and residence cannot anymore respond fully to the needs of e-commerce.
Especially if one agrees to see in the Internet a new international
space, status we do already have for the High Sea or, more closely
to Internet, the Ether. I briefly remind that the proposition is
based on the fact that in absence of any dominium, States only can
exercise an imperium in Cyberspace. In other words, a State cannot
exercise its jurisdiction because of a geographical, physical link
between virtual activities and its territories, but may exercise
jurisdiction because of an abstract, conceptual link like nationality
for instance. However, it is true that for the moment, Internet
does not have such a status and we ought to construct a general
theory taking into account the lex lata. In regard to the latter,
it is also obvious that traditional links cannot play their role.
That's
why we do think that the future lies in passive territorialism,
meaning that jurisdiction will be asserted from the moment that
there are "effects" on the national territory or the national population.
And that is the way securities regulation authorities went (I),
followed nowadays by other authorities (II). From their example,
it is possible to construct a general theory, plainly capable to
respond to the new needs of e-commerce and tomorrow u-business (III).
I - A special application of the notion of targeting: the example
of cybersecurities
Offers of financial products, especially securities and collective
investment undertakings, across national borders are normally submitted
to a registration procedure by the targeted country, like the one
provided by the US securities regulations. Under the SEC interpretation2,
"application of the registration provisions of the US securities
laws depends on whether Internet offers, solicitations or other
communications are targeted to the United States"3,
taking up the effect test of the second Circuit in its leading case
Schoenbaum v. Firstbrook4. In other words, in order to avoid the American registration procedure,
the cyberbanking site has to undertake the necessary technological
measures to guard against sales to US citizens. In the other way
around, the US have jurisdiction from the moment on that the cyberbanking
site is "targeting" US nationals.
A
same approach has been adopted by the French Securities Commission5,
which takes into account the intention of the offerer to determine
if the French market is targeted or not. Are taken as indication
for example the language used in the offer. It also invites on-line
traders to indicate the geographical area of their offer6.
The Hong Kong regulation applies if some "Internet technology induces
people residing in Hong Kong to deal securities, trade in commodity
futures contracts, engage in leveraged foreign exchange trading
or provides advisory services in respect of securities or futures
contracts to people residing in Hong Kong"7.
In February 1999, the Australian Securities and Investments Commission
(ASIC) issued a Policy Statement that sets out that the ASIC does
not regulate advertisements and offers if they are not targeted
at persons in Australia, or have little impact on Australian investors
or the offer contains a disclaimer which limits the jurisdiction
of the offer and that there is no misconduct8.
The Policy issued by the Belgian CBF9 goes the same way10. The British Financial Services Authority11 and the Italian Consob12 went a step further as they do consider that a Web site indexed
in a local search engine is constitutive of a targeting of a national
market.
The same Consob decided to prohibit a private Net-stock market,
registered in the British Virgin Islands, for not having respected
the Italian financial laws13.
To base its decision, it has been taken into account that an Italian
ISP hosted the site and, even if the site were multilingual, most
of the advertising was in Italian. Furthermore, Italian representatives
headed the Company14.
In an earlier case, the SEC ordered a foreign Website run by a Bahamian
Corporation to discontinue operations because of providing American
investors with the technological capability to trade directly on
a foreign market's facilities15.
However, these examples do not answer the question if the adoption
of a cctld can be regarded as a proof for targeting a national territory.
Other authorities than financial have already given some indications
in this respect.
II- The application of the notion of targeting and TLDs
In a Colombian case, the Constitutional court ruled that the adoption
of the Colombian cctld could be considered as a presumption of submission
to the national tax authorities16.
In the same manner, the Council of State of the same country underlined
that the cctld is an "official representation of the national State
before the International Community"17.
In regard to the negotiations of the future UNCITRAL Convention
on electronic contracting, many debates existed about the "value"
of the cctld. In a first movement, the drafting committee suggested
that " the sole fact that a person makes use of a domain name or
electronic mail address connected to a specific country does not
create a presumption that its place of business is located in such
country"18. In
other words, the UNCITRAL did not seem to want to take as a link
the cctld in itself, but to use it for determining the location
of the place of business, which should be the link. Seen from this
point of view, the assertion of the drafting committee is correct.
However, in our opinion, it is the cctld that should be the link.
And the following comments to the proposed assertion go in our direction.
In effect, in its latest comments, the report underlines that a
cctld may have some value as in many countries, it is only attributed
after verification of the location of the business place19. And this seems to us the key: if there is some kind of verification
of the only point of geographical link meaning the registree of
the domain name, why should it not to be considered that it is in
reality some kind of voluntary submission to the jurisdiction of
that country?
In other words, the notion of targeting seems to respond to the
needs of e-commerce. The question that remains is which are the
elements to be retained for identifying the targeting.
III - For a general application of the notion of targeting
The meta-norm of any jurisdiction system is foreseeability, without,
however, to forget the importance of venue, meaning that the tribunal
that has jurisdiction is also one of the most closest connected
to the litigation. In other words, the idea consists in constructing
a rule that permits the actor to seize the tribunal the most closest
to him, and that the jurisdiction of this tribunal does not constitute
a "surprise" for the respondent. Otherwise, as noted by the District
Court of Oregon, there will be a "litigious nightmare of being subject
to suit" in every jurisdiction in this" [world]20.
For the actor, it is surely the tribunal of his residence - or place
of business. Foreseeability is only guaranteed if the respondent
did have the opportunity to know that he contracted with a person
in this place. And in this sense, the cctld among others can play
an important role.
A - A proposal for a general rule
The primary idea consists in retaining general criteria for the
notion of targeting. The second idea pleads for constructing the
rule on the Proximity Doctrine developed by Paul Lagarde21. Such a rule could be formulated in the following manner:
"National courts have jurisdiction for electronic transactions if
there is a close connection between the litigation and the national
legal system.
The close connection is presumed if the party who is to effect the
performance which is characteristic of the contract targets the
national market."
The phraseology of the "specific performance" is taken from the
1980 Rome Convention on the law applicable to contractual obligations
and permits thus to include performance of sell as performance of
services. Targeting indices can be first of all the cctld. However,
other indices can intervene, which may be particular important in
case of use of an gtld, like the used language, currency, the fact
that there are "nationalized" pages in a site, and so on.
It seems prima facie that the European Union took up the same direction,
even if a closer analysis shows that in fact its regulations are
much broader than our suggestions.
B - The proposed rule in regard to the EU Regulation on jurisdiction
The European Regulation 44/2001 of 22 December 2000 on jurisdiction
and the recognition and enforcement of judgments in civil and commercial
matters22 previews
in its article 15 that:
"1. In matters relating to a contract concluded by a person,
the consumer, for a purpose which can be regarded as being outside
his trade or profession, jurisdiction shall be determined by this
Section, without prejudice to Article 4 and point 5 of Article 5,
if:
[…]
(c) in all other cases, 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."
The European criterion of "directing" has unfortunately not been
defined and the European commission itself admitted that its notion
is not of a "particular well-fined sharp"23.
If we do compare this notion to our proposal, a main semantic difference
appears. Whereas for the European text it is the "activities" that
must be directed to the European market, we do defend the idea that
it is the "site" that "targets" the market. The practical consequence
is that in our proposal a site that does not target the European
market is not submitted to the European courts nonetheless if there
is a conclusion of a single contract. If we do read article 15 of
the Brussels Regulation in the light of the published declaration
of the European Council, it is clear that for the Union, Member
States courts have jurisdiction for each contract concluded with
a consumer that has a domicile within the European territory, nonetheless
the employed language or currency for example24.
Italy consequently foresees in its law that local courts always
have jurisdiction in contracts involving consumers who have their
domicile or residence in the country, nonetheless any elective jurisdiction
clause25.
We do not have to underline the danger of such a broad jurisdiction,
especially in regard to sales contracts having for object immaterial
goods like music, movie, etc…that have to be downloaded and where
the whole contractual process is automated. If the seller targets
the United States, how could he be aware of one single contract
for instance concluded with an Italian consumer? Once more, the
meta-norm of transnational business is the principle of foreseeability,
insured through reasonable rules, as stated by Judge Aiken, quoting
in regard to e-commerce the obiter dictum in World-Wide
Volkswagen26:
"The
timeless and fundamental bedrock of […] jurisdiction assures us
all that a defendant will not be "haled" into a court of a foreign
jurisdiction based on nothing more than the foreseeability or potentiality
of commercial activity with the forum state"27.
Conclusion
In the frame of the present work, we did just evoke briefly the
notion of targeting for jurisdiction purposes. However, we do think
that the same reasoning could be adopted for the applicable law,
in particular in regard to the so-called lois de police.
The notion of targeting has already proved its efficiency in the
frame of the regulation of unfair competition, especially in European
law through the notion of "effect test" in the frame of article
85 EC dealing with the prevention, restriction or distortion of
competition within the Union28. Why could it not be the same for
e-commerce? The future will tell us.
*
Discourse presented at the Second World Congress for Informatics
and Law, Complutense University, Madrid, September 2002.
1
New Paradigms in Cyberlaw: U-Biz, RDI, # 3, 2002, www.alfa-redi.org.
2
The US Securities and Exchange Commission.
3
Interpretation: Use of Web Sites Offshore, Release n° 1125,
www.sec.gov/rules/concept/33-7516.htm.
4
405 F2d 215 (2d Cir. 1968).
5
Commission des opérations de bourse (COB).
6
Recommandation #99-02, www.cob.fr
.
7
6.1.1.1 and 6.1.2.1 of the Guidance Note of the HKSFC, March 31,
1999, www.hksfc.org.hk
, www.cyberbanking-law.de
, (statutes).
8
PS 141, www.asic.gov.au.
9
Commission bancaire et financière (CBF).
10
Lettre circulaire, 9/3/99, www.cyberbanking-law.de,
(statutes).
11
Treatment of Material on Overseas Internet WWW sites accessible
in the UK but not intented for investors in the UK, 1998.
12
Communication 7/7/99, www.consob.it
.
13
In particular the Draghi Law 1998.
14
Graham, The Italian Smallxchange Case, CBL-J, May 2000, www.cyberbanking-law.de
15
Offshore Capital Resources followed the order of the SEC
and by late 1997, the site was shut (ABA, Draft for the Internet
Jurisdiction Project, (securities)).
16
Judgment C-1147, 31/10/01, upublished.
17
Unpublished judgment cited in The Link, march 2002, p. 6.
18
Preliminary Draft, Report by the Secretariat, A/CN.9/WG.IV/WP.95.
19
Report of the Working Group on Electronic Commerce on its thirty-nine
session, 21/3/02, A/CN.9/509, #58.
20
Millenium Entreprises Inc. V. Millenium Music LP (D.Ore,
1999).
21
Op.cit., n° 124.
22
OJEC, 16/1/01, L12/1 ; Beraudo, Le règlement du Conseil du
22 décembre 2000, Clunet, 2001.1033 ; Droz & Gaudemet-Tallon,
La transformation de la Convention de Bruxelles en règlement du
Conseil, Revue critique de droit international privé, 2001.601.
Appendix : Basedow, European Conflict of Laws under the Treaty of
Amsterdam, International Conflicts of Laws for the Third Millenium,
New York, Transnational Publisher, 2001.175.
23
Proposition de règlement COM (1999) 349/4, 14/7/1999, p. 17.
24
Doc 13742/00 JUSTCIV 131, 24/11/00, p. 40.
25
Art. 14, decreto legislativo, 22/5/99, # 185, Gazzetta Ufficiale,
# 143, 21/6/99.
26
444 US 286 (1980)
27
Millenium case, op.cit.
28
For an extra-territorial application, see e.g. Woodpulp Producers
v. Commission (1988), ECR, 98.5193.
