If an Irish consumer buys defective goods over the Internet, can he sue the European supplier in Ireland? If so, can an Irish court apply Irish law to the contract? If, in turn, this is so does this mean that the European supplier must comply with Irish consumer protection laws (and similar laws in all 15 member-states of the EU)?
The European Commission has published a proposal to address the question of jurisdiction in the borderless world of e-commerce. The "Brussels Regulation" is intended to update and adopt into EU law the 1968 Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters. The Irish government plans to "opt in" to this regulation.
Under existing legal rules, consumers who enter into certain types of credit agreements are entitled to sue in their country of domicile. The Brussels Regulation extends this entitlement to all consumer contracts with a supplier whose activities are pursued in or directed towards the consumer's country. The proposals clearly apply to consumer contracts concluded via an interactive website accessible in the consumer's country.
The Brussels Regulation will let the consumer sue the supplier in either the country of domicile of the consumer or that of the supplier. The supplier, on the other hand, may sue a consumer only in the consumer's domicile. Furthermore, amendments to the proposed e-commerce directive mean that consumer contracts will be subject to legislation applicable in the consumer's country.
Consumers may be expected to welcome the proposals. Many e-commerce transactions require pre-payment so consumers bear a disproportionate risk that the goods will be faulty or fail to turn up. However, there are concerns that the Brussels Regulation may be a disincentive to e-commerce businesses, particularly among SMEs, deterring them from going online while failing to give adequate protection to consumers.
What of a website that is interactive but is not pitched at residents of a particular memberstate? An example might be an Irish company that sells luxury Irish goods primarily into the US. Its terms and conditions are in English and subject to Irish law. An Italian consumer, Anna, comes across the site and orders some crystal. She is dissatisfied with the goods and issues proceedings against the Irish company in the Italian courts under the Brussels Regulation. The Italian Civil Code provides that consumer contracts must be "clear and comprehensible" and that in the case of doubt, the interpretation more favourable to the consumer prevails. The Irish company is worried that because its terms are in English they may not meet this test.
Furthermore, the Italian courts may seek to apply Italian law to the contract. Consumer protection laws are not fully harmonised across the EU. Typically EUlaws set minimum standards of harmonisation, leaving member-states to apply higher levels of consumer protection if desired. The Irish company will need Italian legal advice on whether Italian consumer law applies. Concerned about the legal costs of just assessing its chances of success, the Irish company settles.
To avoid such problems a company trading on the Internet must decide whether to trade Europe-wide and accept the legal risk. Alternatively, it may refuse to deal with consumers from certain countries and to state this on its website. This approach could fragment the internal market (to the detriment of the consumer) and is difficult to implement where the an item, like software, is ordered and delivered over the Internet. The customer's email address (e.g. anna@hotmail.com) may not even indicate a country.
How then should consumers dealing with foreign suppliers be protected? One possibility is industry codes of practice such as the Which? Web Trader scheme of the Consumers' Association in Britain. Another suggestion would be a harmonised small claims procedure for the quick and cheap resolution of disputes across Europe.
The solution ultimately adopted should allow e-commerce to develop while addressing consumer concerns. Ideally, issues like jurisdiction would be resolved by international co-operation, possibly at OECD level, leading to global rather than regional solutions. An EU-wide solution would not bind US suppliers and might give them a competitive advantage over European competitors.
These issues are hot topics for the EU. The EU Commission held a hearing last week to clarify issues of jurisdiction and applicable law. Submissions to the hearing may be read at: http://europa.eu.int/comm/scic/conferences/991104/991104 info.htm. Decisions arising from this process may have major implications for consumers and businesses in Ireland.
Una Tighe, of McCann FitzGerald, solicitors, can be contacted at una.tighe@mccannfitzgerald.ie