Journal: December 2001 Issue 46

E-commerce and enforcement of foreign judgements – a solution or a nightmare

by Denise McBurnie & Samantha Jager, Freehills

Denise McBurnie & Samantha Jager of Freehills discuss the aims of the recently considered Hague Convention on Jurisdiction and Foreign Judgements in Civil and Commercial Matters. They argue that the concept behind the Convention is simple in theory but the question is whether the Convention can be successfully enforced and whether it creates more problems than the issue it was convened to resolve.

Denise McBurnie is a partner in the Corporate & Technology Group of Freehills, Melbourne office. Denise practises exclusively in the areas of information technology, communications and electronic commerce law. Samantha Jager is an articled clerk at Freehills, Melbourne office.

The recently considered Hague Convention on Jurisdiction and Foreign Judgements in Civil and Commercial Matters[1] ('Convention') has the ambitious aim of seeking to unify and streamline the rules for cross-border litigation between private parties on civil and commercial issues. The principle behind the Convention is to increase the effective enforcement of decisions of courts around the world where the parties are operating out of different jurisdictions. It is an undeniable feature of global e-commerce transactions that one of the principle blocks to enforcement of local laws against global e-commerce participants is the difficulty of enforcement of a local decision against a party outside the local jurisdiction.

The aims of the Convention are intended to be achieved by requiring the signatory countries to agree to enforce judgements handed down by the courts of the other signatory countries.[2] The concept is simple in theory but the issue for businesses worldwide will be whether the Convention can be successfully enforced and whether it creates more problems than the issue it may solve. To date, it is unsigned but reconvening of the participant countries is to occur again early next year.[3] The consequences of the signing of the Convention could have far-reaching effects especially for internet and e-commerce transactions.

The usual test for jurisdiction of a court is either presence of the litigant parties or their submission to a particular jurisdiction.[4] The Convention will work on the basis of submission.[5] To be effective the signatory countries must adhere to the Convention regardless of the decision of the court in question. Such unqualified submission to international jurisdiction is unlikely at best as it poses a fundamental challenge to the sovereignty of a country's legislative and jurisdictional powers. The Convention in fact provides for the principle of absolute submission to be avoided where the judgement is "manifestly incompatible with... public policy".[6]

There has been much discussion over the potential effects of ratification of the Convention.[7] This has centred around the concept of being liable for actions on the internet in other jurisdictions where the penalties or liabilities may be more stringent. There has been talk that companies may refuse certain countries access to their internet sites to prevent such liabilities from arising. This type of arrangement could hinder significantly the use of e-commerce and provide road blocks to the effective global reach of e-commerce business models. There is also concern over countries having to enforce judgements against individuals or companies whose actions are entirely legal in their own jurisdiction. Telecommunication firms and ISPs have also expressed concern that under some countries' laws, they would be liable for content travelling over their networks and so would have to start monitoring and filtering such content to avoid potential liability.

Despite these arguments there are strong suggestions that the treaty will never in fact be ratified or if it is, that its effects will be minimal.[8] The Convention's effective enforcement, like any international law, requires the submission of all participant countries.

With the increasing attention given to global e-commerce business, security and privacy standards, there is more potential today for an approach suggested by the Convention to have some success. Acceptance of submission to the decisions and laws of another jurisdiction is more likely for countries where their respective national laws serve similar purposes. It is also more likely that certain laws will be considered as deserving of such treatment (such as child protection and consumer protection laws). However, regardless of whether the Convention proceeds to acceptance and submission by participant countries, where differences in laws abound from country to country, the increased exposure to laws in other jurisdictions is likely to provide greater concern about the risk associated with the reach of international laws when participating in e-commerce transactions.

Footnotes

1       The amended version of the Convention (the result of the Discussion in Commission II of the First Part of the Diplomatic Conference 6-20 June 2001) is available at: The first draft version (draft of 30 October 1999) is available at:

2       See Article 25 of the Convention, 'Judgments to be recognised or enforced'.

3       The decision concerning continuation of the negotiations about the Convention has been deferred to January 2002. See .

4       OzNetLaw, 'Jurisdiction fact sheet', 23 May 2001, OzNetLaw .

5       Convention Article 2 and Chapter II - Jurisdiction.

6       Convention Article 28 (1) (f).

7       See the following articles:

Fiona Buffini, 'Policing e-commerce', The Australian Financial Review (Sydney), 5 July 2001, 53