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Journal

of rivate nternational

Law

EXCLUSIVE

CHOICE

OF

FORUM

CLAUSES AND

CONSUMER

CONTRACTS

IN

E COMMERCE

ZHENG

TANG*

A. INTRODUCTION

An

exclusive

choice of forum

clause

is

an

agreement

concluded

by contractual

parties,

for the purpose

of deciding

disputes

that have

arisen

or may

arise

in

connection

with

a

particular

legal

relationship,

which

allows

said

partied

to

pre-select

forum/fora

to

the

exclusion

of the

jurisdiction

of

any other

courts.

Such

a clause

functions

in terms

of

both prorogation

by

conferring

jurisdiction

on

a

forum

which

might

not

otherwise

have

jurisdiction,

and

derogation

by

precluding

the other

fora

which

might

be

competent

courts

from asserting

juris-

diction.

This

approach

has

long

been

applied

in

international

commercial

transactions

and has

been

recognized

by

the

courts

in different

jurisdictions

because

of the

contractual

freedom

principle

behind

it,

the

certainty

and secu-

rity

it

provides,

and the

resulting

order and fairness

therein.

The

acceptance

and

recognition

of choice of

court

agreements

should

be extended

in the internet

age.

Since electronic

commerce

( e-commerce )

strongly

challenges

the concept

of territory,

which

is

the

theoretical

basis for

traditional

conflict of

laws different

rules

that

are

able

to

avoid the

concept of

territorial nexus

are required,

which

can

be

satisfied

by

permitting

the contractual

parties

to

choose the courts

they

desire.

However, support

for

the application

of jurisdiction

clauses

in

e-commerce

has

been

questioned

in

consumer

contracts.

The inequality of

bargaining

power

means

that

the

consumer

contract

is

usually

a

standardised

contract

with the

choice of

forum

clause

unilaterally

inserted

by the business, and

the

consumer

is

in an

invidious

take-it-or-leave-it

position.

For

this

reason, many

states have

specific

rules

to

restrict

the

effect

of exclusive

jurisdiction

clauses

in

consumer

contracts,

and the

Hague Conference

on Private

International Law

has

excluded

consumer

contracts

from

the

scope

of

the Convention

on Exclusive Choice

of

Court AgreementsI

all

of which

makes

the situation

in consumer

contracts

more

uncertain.

It is

questionable

whether

the

specific advantages

a

jurisdiction

clause

PhD

student, University

of

Birmingham,

UK.

Hague onference on

Private

International

Law

Convention

on

Exclusive

Choice of Court

Agreements ,

concluded

on

30June

2005, Art 2 La.

October

2005



238

Exclusive

Choice of

Forim

Clauses

in E Commerce

JPrIL

Vol. 1

No. 2

can

provide

in e-commerce

will

change the

traditional

limitation

regulating

its

application

in

consumer

contracts.

If so

what

specific

rules have

to

be

estab-

lished to

improve

consumer-orientated

e-commerce,

to

ensure

litigation

certainty

and

predictability, and

to

protect

c-consumers from

being

abused?

This

article

attempts

to

answer

these questions

by

studying

both

the

rule-based

approaches

and

the discretion-based

approaches

in the current

world, and

tries

to provide

a

uniform

model

law

for the

possible

enlightened

unification

of

private

inter-

national

law

applied

in

the

exclusive

choice

of

forum

clauses

in electronic

consumer

contracts.

Section

B compares

the exclusive

jurisdiction

clauses

in

e-commerce

with

those in traditional

commerce

to see

whether

e-commerce

has

brought

tremendous

differences

in this

area.

If the

differences

are fundamental,

and

render

the present

legal

approaches

totally

impractical,

then

fundamental

innovation is

called for.

If

on

the

other

hand,

the differences are

only

as

to

the

form

and

procedure,

the

current legal

rules

still

can be

applied,

except for

some

necessary

reorganisation

or

reinterpretation

to tailor

them

to cyberspace.

Section

C

analyses

the prerequisites,

including

formal

validity and

substantive

validity,

for

the

valid

exclusive

jurisdiction

clauses.

Section

D

examines

the

effect

of

valid

exclusive

jurisdiction

clauses

in consumer

contracts.

For

rule-based approaches,

even

if a choice

of

forum

clause is

valid,

its effect

on consumer

contracts

will

be

greatly

restricted;

while

for the

discretion-based

approaches,

there is

no classifica-

tion

made

between

consumer

contracts and

normal

contracts,

and the effect

of

a valid

jurisdiction

clause

can

be

limited

by the

application

of

the

general

doctrine

of

forum non

conveniens.

Finally, Section

E makes suggestions

for

possible reform,

and proposes

a model

law for

the application

of exclusive

forum

selection

clauses

in electronic

consumer

( e-consumer )

contracts.

B.

COMPARATIVE

STUDY

OF CHOICE

OF

FORUM

CLAUSES

E COMMERCE

AND

TRADITIONAL

COMMERCE

1

Different

Contract

Forms

The most obvious

difference

between

choice

of

forum clauses

in

e-commerce

and traditional

commerce

is

that

the clauses

are

included

in

different

forms.

An

e-consumer

contract

is offered

via

electronic

communication,

usually

by

means

of

e-mail,

click-wrap

contract

and

browse-wrap

contract,

all of which

are

presented

electronically,

rather

than

in a paper-based

way

The contractual

terms

are

stored

as

intangible electronic

data messages,

which can

only

be

accessed

and

read

via

a combination

of computer

screen

and

software.

Consent

is

not

shown

by a

paper-based

signature, but

by

an electronic

signature,

or other

specific

actions,

such

as

clicking,

browsing,

entering

the website

or

continuing

purchas-

ing.

The

contract

can be

established

in

many new formats

with

the

application



Journal

of

Private

International

Law

of

various

website

design

techniques,

including

hyperlinks,

scroll

bars,

jump-out

windows,

etc.,

which

require

new

explanations

of formal validity

It

is question-

able

whether

the

formality

requirements

for

paper-based

contracts

can

be

applied equivalently

in

e-contracts.

2.

Substantial Differences

(a) Bargaining

Power

It is

claimed

that e-commerce

brings

some

factors

that strengthen

the

bargaining

power

of

consumers

relative

to

that

of businesses.

3

Compared with

paper-based

consumers,

e-consumers

are

generally younger,

better-educated

and

wealthier,

and

able to

defend

themselves

better

from being

exploited by invidious

contract

terms

inserted

by

the

businesses.

On

the contrary,

the low

cost

of e-commerce

makes

this

innovative

commerce

involve

many

less-qualified

businesses,

which

are

smaller,

financially

weaker

and

less

experienced

than traditional

businesses.

In

addition,

the

internet

provides

e-consumers

with

the possibility

of

making

comprehensive

shopping

comparisons.

By

making

use of

a

powerful

search

engine,

it is

possible

for consumers

to compare

the quality,

price,

service,

as

well

as

contract

terms

of all

the e-businesses,

and

easily

to

find

similar

products

without

the objectionable

contract

terms.

4

The powerful

information

transfer

capabilities

of

the

internet

can

easily

spread the comments

of

a

dissatisfied

con-

sumer

to

all other

potential

consumers,

making

e-businesses

more

concerned

over their reputation,

and

preventing

them

from

abusing

their

unequal

bargaining

power.

Although

these

factors

favour

the

consumers,

they

are

rather

superficial

and

not

fundamental.

The

basic

bargaining

position

held

by consumers

remains

unimproved

in

e-commerce.

The

jurisdiction

clause is

established

by e-businesses

unilaterally

and

leaves

consumers

in the same

take-it-or-leave-it

position.

E-consumers

usually will

not bother

to

read the

terms

and

conditions

pre-

sented on

a

business's

website

or via

e-mail,

for

it

is

also

long,

detailed,

full

of

legal jargon

and

too complex

for

a layperson

to

comprehend.

Even

if consumers

read

these

terms

and conditions ,

they

will barely

understand

the

accurate

meaning

therein

and

the actual

legal

effect of

most

of the

terms. Moreover,

even

a complete

understanding

will

make

little difference,

as consumers

have no

possi-

bility

of bargaining

over

the

terms

they

dislike. This

fact undermines

the possible

For f'urther

discussion

on this

issue

see infra

s

C.

See

R

HillmanJ

Rachlinski.

Standard-form

Contracting

in

the Electronic

Age ,

(2002)

77

.A ew

lirk Uniersitv

Law

Review

'129, 463-85;

D

Rice, A Cyberspace

Odyssey

through

US and

EU

Internet.Jurisdiction

over E-Commerce

July

2001)

ractisin

Law

Institute,

Patents. Copyrigits. rade-

narks.

and l leraj

Property

Course Handbook

Se nes, 421

at 429, 518-20;

American

Bar

Association,

Achieving

Legal and

Business Order

in

Cyberspace:

A Report

on

GlobalJurisdiction

Issues

Cre-

ated

by

the

internet

2000)

55

Business

Law ver

1801 para

2.4.

4

Hillman

and

Rachlinski,

supra

n

3 4164,

473.

October

2 5



Exclusive

Choice of

Fonim Clauses

in E Commerce

JPrIL Vol.

1No.

2

benefits the

consumers

might

accrue

via

e-commerce.

No

matter

how

qualified

the

e-consumers

are, they

are

still in

the

take-it-or-leave-it

position

and

are

rarely

able

to persuade

businesses

to

change

their

standard

contract

terms.

Furthermore,

some

other

factors

introduced

by

e-commerce make

the con-

sumers'

bargaining

position

worse. First

of

all

unlike

traditional

consumers,

who

are able

to deal

with the

businesses

or

the

businesses'

agent

face to

face,

and

at

least

are given

the opportunity

to

negotiate,

e-consumers

rarely have

the oppor-

tunity

to

negotiate

or inquire.

During

website

trading,

e-consumers

are faced

with

a

highly

standardized

screen,

with terms and

conditions

and other

rele

vant

contents.

The

e-consumers

directly

deal with an

electronic

agent,

a

computer

program

or

other automatic

electronic

process,

which

automatically

dispenses

all

the standardised

information

according to

a predetermined

pro-

gram

and

will

not

respond

to additional

enquiries by

consumers

as

to

the choice

of

forum

clause.

5

Of course,

e-consumers

have

the opportunity

to e-mail

busi-

nesses

to

negotiate

certain terms.

However, this

action

requires

consumers

to

stop

purchasing

straight

away and

restart

only after they

get

the answer

from

the

business.

In fact, e-consumers

are unlikely

to bother

to

do

this, because

they

do

not

know when the

businesses

will answer the

email,

and even

with a prompt

reply, the

businesses are very

unlikely

to change

their

terms.

Secondly,

website

design techniques

enable e-businesses

to

arrange

their

websites

to

minimise

con-

sumer

scrutiny,

using

techniques

such as

hyperlinks,

grey text,

tiny fonts,

time-limits,

etc. Moreover,

reading something

from

the

computer

screen has

been

proved to

be

more

tiring and harder

on the

eyes.

6

Taking

all the

relevant

ele-

ments into

consideration,

it can

be

assumed that

the

inequality of bargaining

power

between

businesses

and consumers

is worse

in e-commerce.

b)

itigation

Power

However,

it is

claimed

that the

litigation

power

of

businesses

becomes

weaker

in

e-commerce.

E-commerce

opens the door

for

the

participation

of

small

busi-

nesses,

including

family

businesses

or individual

businesses,

which

hold

similar

litigation power

to

individual consumers.

At

the same time,

e-commerce

brings

more

litigation

risks

to

businesses,

for

they

potentially

deal with

worldwide

con-

sumers and

thus

might be

subject

to worldwide

jurisdictions.

The

anonymous

nature

of e-commerce

makes

it very unlikely that

an e-business

will

identify

the

location

and real

identity

of its e-consumers,

including

the information

that

will

determine

the jurisdiction

issues

such

as the

habitual

residence

or domicile

of

the consumers.

On the

contrary,

because

many jurisdictions

require

the

seller

to

disclose such

information

to

the buyer,

7

although

e-commerce

also

increases

the

5

For the definition

of electronic

agent

see US

Unilbrm

Computer

Information Transaction

Act

UCITA) 2002,

s 102(a)

(27).

6

Hillman

and Rachlinski

slpra

n

3 479.



ournal

of rivate

nternational

Lau

consumers' possibility

of foreign litigation,

it

seems

more

predictable and

manageable.

3 Conclusion

Since e-businesses

will face more litigation

risks and costs

the effectiveness

of

choice

of

forum

clauses

becomes of

greater importance

in

order to reasonably

reduce the litigation

hazards.

Therefore a valid

choice

of forum

clause should

not be declared

ineffective

just

because

e-consumers cannot afford

the expense

of foreign litigation.

At the same time,

e-commerce weakens

consumers' bar-

gaining

power, which

requires

more restrictive prerequisites,

including

formality

and substantive

validity,

to

ensure

that consumers

read

the contractual

terms

and

protect the consumers'

real

consent.

Furthermore,

the

electronic

contract

differs

fundamentally

from the

paper contract

in

a

number

of ways:

the

contract form;

the

innovative

format; the procedure

to

enter

into

an

agreement;

the time

and

location

at which an agreement

is concluded; and

even the real consent

therein,

which

means the

detailed regulations

and

tests

for

prerequisites

need substantial

reform. The

following sections

will study

in

detail what

reforms should be

made

in all these areas.

C. PREREQUISITES FOR

EXCLUSIVE

CHOICE

OF FORUM CLAUSES

Generally,

the prerequisites for the

validity

of an exclusive

jurisdiction

clause

mainly concern

the existence of consent,

and safeguards

in relation

to

consent.

8

The present approaches

of most jurisdictions are

to

regulate

these issues

either

by

rules of

form,

or

of substance,

or

of

both.' Since formal

validity

is

more

tan-

gible and crucial to

the

decision, it is suggested

that all the expressed

or

external

manifestations

of consent be classified

as

formal

validity,

and

only those

issues

without

tangible

expression

that

need

evidence

other than

the contract be classi-

fied

as

substantive validity.

The

purpose of

formal

requirements

is

to

ensure

the

7 In

the

EU

tite

sellers

are

required

to

provide

his

name,

geographic

address,

and

other infbrmation

to tile

consumers.

see Directive on

Eh'ctronic

Commerce,

2000/31/EC.

art

5(l); Distance

Con

tracting Directive,

97/7/EC Art 5(l).

[he

prerequisites also

cover

a

wkide range

of issues including

the existence of

ans

international

element.

the partie's capacit. the

connection of tile chosen

lbrum with tile

disputes

and tile

parties, etc. These

issues

are

regarded as

less

important, and generate

fewer challenges

in

e-comnerce,

so will not

he discussed

here.

It is

usually not easy

to delineate

fbrm and substance

for both of

then concern the existence of

consent

ttn

act

to

provide

tie

safieguard

as

to consent.

The

tivil

l wv

tradition is

to

determine

the

issue of

substance

according

to the

urinal rules, While

the commonl lassw

radition pays

more

attention

to tie substance instead

of

explicit

fbrms.

0

This

delineation

provides a wide delinition

for formal validity 'br

the

sake of certainty

See eg.

NI

Giuliano

and P Lagarde, Report

on the Convention

on

tihe

Law

Applicable

to

Contractual

October

2005



Exclusive

Choice

of Forum Clauses in E-Commerce

JPrIL

Vol. No. 2

availability of proof that each

party

gave free

and

informed consent to

the

juris-

dictional choice,

and

to

try

to protect the

other

party to a contract

with anyone

using the jurisdiction

clause in

the contract from

the danger of being

bound

by

this

clause

without

realising

it II

All

the

other

issues

not

regarded

as

form

will

fall

into the

catch-all requirement of substantive validity, which

encompasses the

inherent authenticity

and lawfulness of

the expressed consent. The

requirements

on substance aim to achieve

real

fairness

and

justice,

and protect

the

genuine

intention

of the parties;

it

is especially important that where unequal

bargaining

power exists or the agreement is concluded

in

a non-negotiated nature,

close

examination is undertaken

to find out whether the consent really

exists

despite

the expressed

intention.

This section will

focus on studying the present

require-

ments

on formal

and

substantive validity,

and

whether

these requirements work

properly

in

e-commerce.

1 Formal

Validity

The

formality

requirements differ between

civil

law and

common

law

practices.

2

Rule-based approaches usually impose explicit formal conditions

of validity.

Generally, several

alternative permissible

forms

in which

the

choice

of court

agreement may be valid will be defined.

3

The discretion-based approaches gen-

erally do not

impose

explicit formal

conditions

for a jurisdiction clause to be

valid.

The

courts

usually

try to look

at

the

intent of

the parties

behind

the

forms,

and are

willing

to

recognise choice

of

forum

clauses not

finalised

in

writing,

not

signed,

contained

in small-print,

or included

in

a

purely oral contract.

4

How-

ever, although no specific rules for formality

are required

in

discretion-based

jurisdictions, the

courts

will

be reluctant to

enforce a

choice of

forum

without

any

tangible

evidence

of

the existence of and

consent

to

such

choice.

It has been

assumed that the approaches

in rule-based

and

discretion-based jurisdictions

are very different in method,

but

not

always

in

effect.'

5

By

summarising

the

Obligations

(1980)

OJ C282,

29; P

North

andJ Fawcett heshire nd

\orth's

rate

International

Law

(heareafter Cheshire and

Xorth ) (London,

Butterworths, 13th edn, 1999),

589;

J Yackee,

A

Matter

of Good Form: The (Downsized) Hague judgments Convention and Conditions of

Formal Validity

for

the

Enforcement of Forum Selection Agreements (2003) 53 Duke Law Journal

1179

1182, and

fn 14 therein. fJ FawcettJ

Harris and M

Bridge, International Sale

of

Goods in

The

onalictf Laws (Oxford

University Press, 2005),

para 21.38.

1 See eg, Estasis Salottiv

UIV

24/76 [1976] ECR 1831; Caleries

Segoura

Bonakdarian 25/76

[1976]

ECR 1851

2 he

civil law

practice

is

mainly

based

on rules

(and

is

known

as the rule-based

approach),

while

the common

law

practice is

generally discretionary

(known

as

the

discretion-based approach).

13 See

eg

Council Regulation

44/2001

on

Jurisdiction

and

the

Recognition

and Enforcement

of

Foreign

Judgments in Civil

and Commercial Matters

(Brussels

I Regulation),. Art 23.1; Hague

Conference

on

Private

International

Law,

Judgnent

Project,

Summary

of

the Outcome

of

the

Discussion in Commission 11

of

the

First

Part

of

the

Diplomatic Conference

6-20,june 2001.

Interim Text (Interim Text 2001), Art

4.2;

Hague Convention on

Choice

of Court

Agreement,

supr

n

I, rt

3.c.

See Yackee. supra n

hO 1192-93.

5

Abid, 12 5



Journal

ofPrivate InternationalLaw

discretion-based decisions

in common

law

countries and

the explicit listed formal

conditions

in rule-based

countries,

there are

in general three formal

require-

ments. These

are that an

exclusive

jurisdiction

clause

should

be

in a form: (1)

which

is

accessible

for subsequent

reference

as

evidence;

6

2)

which is

the

regular

usage

by the

parties;

7

or

3) which

is

the

common

usage in

the particular

trade

or

commerce.

8

The third

condition can

be applied only

to

the

area

where there

exists

internationally recognised

or authorised customs

and

general

commercial

usage,

which

does

not exist

in consumer-orientated

e-commerce.

For

this

reason,

this

section

will only try

to deal with the first

two

requirements

to see

how

these

requirements can

be applied to e-consumer

contracts.

(a)

Accessible

or

Subsequent

Reference

Traditionally,

the

best

way

for an agreement

to

be

accessible for

further reference

is to make

it

in writing ,

or

evidenced

in

writing ,

and

signed by

the parties.

9

E-contracts,

however,

by using electronic

data technology,

provide great

chal-

lenges to

this

traditional

formal

requirement.

(i)

In Writing/Evidenced

in Writing. The

traditional

concept of

writing

encom-

passes recording

everything

in

the

paper

document by a text

2

that

meets

standards

of reaccessibility,

legibility,

durability,

accuracy

and

unchangeability.

The

choice

of forum

clause

in

e-contracts,

however,

is

in

the form

of

an

elec-

tronic

data

message

or

digital information,

held

as

a series

of

on/off

switches

in

a chip

or other medium,

and

represents

words on

the

computer

screen

after

the

application

of code conventions

via software.

It is different

from paper-based

writing

both

in

form

and

in certain

functions.

The

content

herein

is

not simply

tangible

and legible,

but shown

in

two

forms,

the visual

form

of which is only

available

via a combination of

computer

screen and

software.

The

original

e-contract

term

is stored in the chip

or other

medium,

it is

intangible

in

nature

and can be easily

destroyed or

changed

either

deliberately

or

by

mistake,

without

any mark being left. Although

an

electronic

choice

of

forum

clause

can

be

16

See

eg,

Brussels

I Regulation Art 23.1 a);

ague Draft on

Exclusive Choice

of'

Forum

Agree-

ment,

Art

3 c).

17

See eg,

Brussels

I Regulation,

Ar-t

23.

1 b): US

case

.Mordyne,

Inc r

Intl

Controls

lleasurenients

G op,

262 F 3d

843,

847 (8th

Cir 2001); .Aew ,1loon

Sipping

Co

r

Man B IV Diesel A,

121 F 3d 24.

31-32

(2d Cir 1997).

8 See

eg Brussels

I

Regulation,

Art 23.1(c); English

case:

ircle Frecoht

International

Lid F/A Mogul

Air)

vAledeast Gulf Evports

d 7/A Gulf Erport)

[19881 2

Lloyd's

Rep

427.

'133.

19 Although

it

is not indispensable

in

all

the

states,

a

signature is

very

important

and usually required

for the validity

of

an

agreement.

See inia

text

C. I a) iii); CMV

Clarkson

and.J Hill, Jo_/kr

on the

oict

of

l auw

(London.

Butterworths,

2nd

ed, 2002) 76; artenreederei is Ti//l

Russc

.A'VIlzm

erroerbedrijf.Aora

71/83 11984] ECR

2417, 2432

para

16.

20

See

eg,

Switzerland's

Federal

Code on

Private

International

Lao:

Art

5.1: ...The

agreement

may

be

made

in writing, by telegram,

telex, telecopier, or

by any

other

means of commtuInication

which

evidences

the terms of

the

agreement by

a text.

October

2005



Exclusive

Choice of

Forum

Clauses in

E-Commerce

JPrIL Vol. 1 No. 2

printed

out

on

paper, which might

amount to evidenced

in writing ,

most

e-contracts

are only stored by

the

parties in

their

original forms

and

are not

printed out. The choice of forum

clause in an electronic form

raises

a

question:

is

the

application

of

the traditional requirement

of

writing and

its

reinterpre-

tation sufficient

and

efficient to cover the

e-contract

and regulate

it

to satisfy the

two main

requirements

concerning formality?

In

order to improve the development

of e-commerce, the current

tendency

is

to recognize

the

validity of e-contracts

with

the clauses and terms therein.

The

United Nations

Commission on

International

Trade

Law (UNCITRAL)

Model

Law on

Electronic

Commerce adopts

a

functional

equivalent approach, which

has been

mirrored by many countries' subsequent

legislation, to single out the

basic function of

the requirement of in

writing

to

form the criteria, which,

once met by

an

e-clause,

will enable

this

clause

to enjoy

the same

legal

recog-

nition

as

its

paper-based counterpart.

2

According

to UNCITRAL

Model

Law,

a

data message

satisfies

the

requirement

of

writing if the information contained

is

accessible

so s to be

usable

or subsequent reference.

This

approach has been

adopted

by many

later

legislations;

for

example,

the Hague

Convention

on

Choice of

Court

Agreement

adopts the

same interpretation,

23

and

the

Brussels

I Regulation

adopts its variation

providing that

any

communication

by

electronic

means

which

provides

a durable

record

of

the agreement

shall

be

equivalent

to 'writing'.

2 4

The

functional

equivalent

approach sounds

effective as

it avoids rigid

and

exhaustible

lists

of valid forms but

focuses on the substantial function of

different

forms.

However,

not

all the

functions

of

paper-based writing

can be satisfied

by

electronic clauses,

which makes further regulation

necessary

to

ensure

their

security.

25

The

problem

is which

functions are significant so that they have to

be

fulfilled

by electronic

means

of

jurisdiction

clauses in order to

meet

the

require-

ment of formality The definitions in

the UNCITRAL Model Law, the

Hague

Convention on Choice of Court

Agreements and the Brussels

I Regulation,

although

couched

in

different

terms,

all focus on

the same

point: to

provide

a

permanent and

unchangeable record of

a

choice

of

forum clause

for future

ref-

erence.

This requirement, however,

has

been criticised

for

its over-simplicity,

because

durability or

accessibility for future reference alone

cannot guaran-

tee

that the choice

of forum clause will

be

legible

and

tangible

to both parties at

2 UNCITRAL's

Guide to Enactment of the UNCITRAL

Model

Law

on

Electronic

Commerce

(1996): Introduction

to the

Model

Law

he

'tuctional-equivalent

approach.

22 UNCITRAL

Model Law. rt 6.

23

Art

3.c(i)(ii).

4 Brussels I Regulation,

Art 23.2. Before

this

legislation,

in

Porta Leasing

ibIl Prestige International

SA

Case

784/79,

[1980]

ECR

1517,

the

Court

did not insist

on

the

medium

but

on

the

fact

the

formal

requirements aiming to ensure

the

consent

of the parties has been expressed in a

clear

and precise way.

25 For

the functions

of

paper-based

writing

requirements,

see

UNCITRAL

Guide to

Enactment

1996,

supra

n 21 para 48 .



Journal

of

Private

InternationalLa w

the time of contracting. If an e-clause

is

just stored

in

the chip without being

shown on the screen, this

digital

information, although it is durable

and

can be

accessed

in the

future,

cannot be

the evidence

of an agreement. Furthermore,

either through software error or

mechanical mistake, the

visible

form

of

an

e-clause showing

on

one

computer screen as

legible

text may appear on

another

as

illegible

code. For

example, a

business

who sends an e-mail containing

a

choice of forum

clause

is able

to

view the complete

text

accurately

on its com-

puter screen,

while

the consumer, who received the e-mail, but does not have a

corresponding

decode program,

may find

the whole or part of

the e-mail

con-

tent

to be

unreadable text. In this case,

an

electronic choice of

forum clause,

although durable and

accessible for future reference, cannot prove the intention

of

the parties.

It seems that some

other

legislations pay

more

attention to the

legibility of a

form,

by interpreting in

writing as including an electronic message.. .which is

capable of expressing its content in a tangible form .26 The weakness here

is that a

message which is

tangible or accessible on

screen

can

be temporary: for example

if such a message

is stored

in

the computer's

volatile

memory

or

RATTM

it

will

disappear when the

machine is

switched

off; or the electronic

message may

be

revised in the future so that the tangible form

is

different

from

the original one

the consumer

accessed on the

screen. It

is suggested a valid form

should

be

both

legible

at

the

time

of contracting,

and permanent or durable

for

further

reference.

The other problem

is

whether only the original contract, which is able to

prove the

consent

of an agreement, can be regarded

as formally

valid, or

whether a copy

of

the

original contract

is enough to

meet

the

formal require-

ment, if

it

is legible and

durable. Although a

data message can

be copied

very

accurately as

another

data

message

or a hardcopy, a copy alone cannot

satisfy

the

requirement

of authenticity and

reliability, for

an

electronic

data

message is

vul-

nerable to revision,

damage or forgery.

However,

if

there

exists

reliable

assurance

as

to

the integrity

of

a

data

message

from the

time

it

is

first

generated

to

its

final

form,

this

information

message, no matter whether

it is

the original or

a copy,

can

be regarded as

the

original form.

27

Furthermore,

a

copy

does

meet

the evi-

denced

in

writing requirement

28

if

it

satisfies

the main purpose of

the formality

once,

and

neither

party

raises

any

objection.

2

9

16

See

eg

Chinese

Contract

law.

2001,

Art

: a

writing

means

a memorandum

of

contract,

letter

or electronic

message (inichding telegram, telex,

facsimile,

electronic data exchange

and

elec-

tronic mail,

etc.), which is capable of expressing its content in a tangible iorm.

27

UNCITRAL

Model

Law%.

rt

8(I),

Art

8(3)(a).

2

Brtssels

I

Regulation, Art

23.1(a).

29

For the formal

validity

of

the

agreement

evidenced

in writing,

the

parties'

confirmation

is

reqtuired. See

Gateries Segoura Sprl v

Firisa

Rahin Bonadarian Case 25/76

[19761 ECR 1851;

Berg/hoer ilbH and Co

k v

A SA S Case

221/84

[19851 ECR 2699. Cl Powell D~ffrvn

ph

r

lbygang Petereit,

Case

214/89 [

992

ECR

1 1745.

October

5



Exclusive

Choice

of Forum

Clauses in E-Commerce

JPrlL

Vol. 1

No.

2

ii)Format.

Besides

the

requirement

of in

writing ,

a court

may invalidate

a

choice

of

forum

clause

by additionally

examining

its format,

such

as a

clause

printed

on

the reverse side

of

a

contract

without

an

express

reference

directed to

it,

30

a clause

written

in a

language

illegible to

one

party,

3

a

clause

written

in

tiny

or

fine print,

3 2

etc.

Some

of

the traditional

format

requirements

can

be

copied

for e-clauses,

which can

also be

shown

in an unfamiliar

language, in

a

tiny or

fine

print,

or

in an

unobvious place

without

any

reference

to

it.

33

Although

electronic

communication

brings

some new

possibilities

as to format,

it

is assumed

that

the

principle

behind

the traditional

format

requirement

can be

applied

to e-con-

tracts,

namely

the

choice of

forum

clause should

be

indicated in a

manner

that is

obvious

and

convenient

for the

consumer

to

read.

Any

technique

that

makes

reading

less

attractive

should

be

adequately

explained,

and with

the

necessary

references

requiring

the

consumers

to

read

the

contract

completely

14

For example,

electronic

clauses

sometimes

appear

as

the form

of hypertext ,

which

means

the content

of

this clause

has

not been

directly

and

fully shown

in

the

contract

terms

on the

screen,

but has

been referred

to by a hyperlink

label.

The

consumer

has to click

the

label

to view

the

content

of

clause in

a pop-up

window,

or a

refreshed

window. More

complicatedly,

multiple

hyperlinks

may

be

involved.

The

consumer

has

to

follow

a hyperlink

to Terms and

Conditions ,

then

another

to

Dispute

Settlement ,

and

a third

to

'Jurisdiction

Clause ,

where

he/she finally

finds

the content

of

the

clause.

It

is

suggested

that busi-

nesses

be

obliged

to make a

clear

and conspicuous

disclosure to

the consumer

of

the general

conditions

of

the

e-contract,

make

the consumer

readily

aware

of the

real

content

of the

choice

of forum

clause and

make

the clause

easily accessible,

so that

the

content

of

jurisdiction

clauses

should usually

be

expressed

immedi-

ately rather than

via

hyperlinks.

3 5

However,

since the usage

of hypertexts

and

hyperlinks

is widely adopted

in e-commerce,

and

has

been approved

of

as

efficient

and

effective,

it is

not

a good

idea

to abandon

this

technique

in

e-contracts.

36

It is

assumed

that e-businesses

only adopt

hyperlinks

where

the clause is

lengthy

or

appears

in more

than one

place on

their

website.

In

this case

there

should

be

a

clear

language

on

the

hyperlink label

to indicate

the

importance and

general

3 Colzano

vRI

V

C24/76

[19761

ECR 1831.

3

Cass

corn,

27

eb

1996,

RCDIP

1996, 732, at

734,

H.G. L

32 Mellon First

United

easing r

Hansen

705 NE

2d 2 111pp

Ct

1998)

at 125-26; Tandy

Computer

Leas-

ing i; Terinam

izza,

Inc

784 P

2d

7 Nev

1989)

at

8.

33

For example,

a jurisdiction

clause can

only

be seen by scrolling

down the screen,

and

there is

no

obvious relitrence

directing the consumers

to this

clause.

3

See:

Ticketmaster Corp

e Ticket.s.com Inc

2000 WL

525390

CD

Cal

Mar 27 201)0) the

court held

the

user was

not bound

by the

terms,

because

the

website

was

n th rm

that the

user

could

escape

viewing the terms

by linking

to other

pages,

or needed

a great

ellrt

in order to

reach

the

terms to

read

them .

Cf

Caspi

v

licrosoji

a\ toork.

732

A 2d

528

NJ

Super

Ct

App

Div

1999)

the court held

the

terms binding

despite

the

user being

easily able

to

accept it without

reading).

33

Federal

Trade

Commission,

Dot

Corn Disclosures,

wwft.[tc.gov/bcp/cotline/pubs/buspubs/

dotcom/index.html, accessed

on

21

June

2005.

UNCITRAL

Model

Law.

A't

5 bis.



Journal

of Private

InternationalLaw

nature of this clause,

and to require

the consumer to read

the content of the

clause.

Access

to

the

content of

hyperlink

should

be convenient,

ideally without

the need to refresh

the previous window,

or should allow a party

easily to

return

to the previous window.

Multiple

hyperlinks

should

be avoided.

iii)

Signature.

Although a signature

is not required

by

all

states

to ensure

a

clause

is formally valid,

37

most

courts

do

regard

it

as

a

major factor

in

the authen-

tication

of consent.

38

Especially

for adhesion

contracts, some

jurisdictions

specifically

provide further formal

requirements, requiring

the adherent party

to

indicate expressed

acceptance of

the clause.

9

Although

the signature require-

ment has

not

been proposed in the

Hague

Conference on Judgments

Project, '

it is suggested

the requirement

of the

consumer's signature should

be

adopted

for e-consumer contracts,

for

the following two

reasons.

Firstly, in

an

electronic

business-to-consumer transaction,

the e-business is

usually

unaware of the

other

party's identity,

and so the requirement

to

identify

the

contractual

party is more

necessary and

important than the function

of a signature

in the paper-based

world.

Secondly, in a

contract

where the

parties hold unequal

bargaining

power,

it is

necessary to protect the

weaker party by requiring

express

acceptance

of the

contractual

terms to

indicate

his

real intent. It is suggested

that in an e-consumer

contract, a

jurisdiction

clause should

be held not to

satisfy

formal

requirements

without

the

necessary

means to identify

the consumer and

indicate the con-

sumer's

approval to

the

agreement.

The

requirement

for

a

signature in e-commerce

generates a problem:

what

can

be regarded as a signature in

e-commerce? The

traditional requirement

of a

signature encompasses

the

parties

setting

their

pens

on paper, which

is no longer

the situation in

e-contracts. The development

of e-commerce

calls for

reform

either by

adopting

the

electronic

equivalent

of a signature

and

providing

it with

the

same legal

effect,

or

by removing the

requirement

for

a signature

from the

recent

legislation and replacing

it

with any

means

that

can

establish authentic

assent, providing

the method is sufficiently

reliable and

secure.

2

Both these

For example,

no

sigature

require'mcrnt

for

a contract to

be

formally

valid

exists

in Japan.

Also

see:

Roberts Scaefer

o

v

Merit Conlracting

Inc 99 F 3d 248.

252-53

(7th Cir 1996).

8

See

ElU

case I arenreederei.

supra

n 19 para

16;

Italian Civil

Code, Art 2702; German

case

undesgerictlshqf1BGHI

ISupreme

Court] 22 Feb 2001, available at

http://vww curia.cu.int/

commori/recdoc/coitventjotii/ci/2001/29-2001.itm,

accessed

on

23 June

2005. Cf ow ll

Duffryn,

29. but

this should not

e applied

in

non-negotiable

consumner

contract.

9

See

eg French

case: Compagnie ,enerale

7iansotlantique PellierJferes,

Cass

req,

2

Mar 1909,

s

1909,

1-384;

halian

non-Regulationi

law.

Italian

Code of Civil

Procedure. Art

2

a See eg, Hague

Contfirence

on Private International

law.

NI

Dogauchi ard

T Hartley,

'Prelimin-

arv Drali

Convention

on ExCluSive

Choice of Court Agreements: Draft Report

(Prel

Doc

No

25),

para

78 .

See Hague Corifirence

on Private International

Law

P

Nygh

and F

Pocar

Preliminary Drali

C(Invention

nJurisdliction

and

Foreign

Judgments

in

Civil

and Commercial

Matters (Prel l)oc

II),

16.

12

As to

how to

lest

the

reliabiliiy

and

security

of rt electronic

signature

or any other

means,

the

October

5



Exclusive

Choice

of

Forum

Clauses in E-Commerce JPrIL Vol. 1No. 2

approaches are considered to differ only in

form but

have

the

same

function and

effects According to these approaches, if a data message uses a reliable method

to

identify the

party and to

indicate the parties' approval

to the

agreement, it

can

be regarded

as

satisfying the

requirement

of a signature ,

43

or

fulfilling the

requirement to establish authentic assent. It could be a

scanned

manuscript

sig-

nature

incorporated

into

an e-mail or

other online

document;

it

could be the

typing of a name of the signatory in an e-mail or other online document; or it

could be in any invisible form which confirms the identity

and

intention of the

parties, such as digital

signatures

using an encryption system, clicking on a

website button,

or

even

by continuing purchasing or

downloading.

The problem

here is whether the

consumer's intent can

be

indicated and

pro-

tected

by

these alternative forms of

signature .

Unlike traditional

commerce

where consumers

are accustomed to the importance of signing their names on

paper in e-commerce, consumers are less sensitive to

the

importance of the

electronic

signature .

To

most e-consumers,

the behaviour

of

clicking

or

downloading might mean nothing more

than the

normal process of trans-

action, and they will be

completely

unaware that

by

these actions they

are

bound

by the

jurisdiction

clauses

provided

by

the

businesses.

It is suggested

that

further

requirements be provided to ensure the consumer's intent.

The

words of accept-

ance

should be clear words

that indicate

the

consumer's intention to be bound by

such a clause, including Yes , 'Agree ,

'Accept , Consent ,

'Assent ,

etc.

Ambiguous

words,

such as Continue , Next , Submit , Confirm ,

Down-

load ,

etc,

cannot be regarded as

expressed

acceptance.

1 4

The method

of

accepting a choice of forum

clause

should

be

clear

and

obvious. The consumer

can indicate his intention either

by

typing Yes or by other unambiguous words

listed above in the

online purchasing

form

or in

an e-mail,

or

by clicking

a button

containing the clear words of acceptance.

1 3

Ambiguous behaviour such as down-

loading

the

software, continuing

purchasing, submitting

delivery information,

etc,

cannot

be

regarded

as

clear

indication

of

acceptance.

4 6

technique criteria

in

The

Electronic Signature Regulation

2002 can

be borrowed. An electronic

signature

or

any

other means

to

prove the user s

consent

is

regarded

as

reliable and safe, if

the

method

used

can

ensure that the

signature

or

other

indication is

uniquely

linked

to the signatory,

is

capable of identifying

the signatory, is

created using

means

that the

signatory can

maintain

under his

sole control,

and is linked to

the

data

to

which it relates in such a

mainner

that

any

sub-

sequent change of the data is detectable.

3

UNCITRAL Model Law,

Art 7.

4

See

pedht

Ascape Communications orp

15

F Supp

2d 585 (SDNY

2001)

(the

court held

the

action of

clicking

the download button cannot be regarded

as

assent to th agreement but only

an intention to obtain the products).

5

ee

ProsCf Zeidenberg 86 F 3d 1447

(7th

Cir 1996).

6

This requirement fundamentally

questions

the validity

of

browse-wrap

contracts

in electronic

consumer transaction. It

is assumed

that in this

way, the

consumers

more easily

ignore what

has

been

represented on

the screen,

and

they are not

professional

enough to predict that the behav-

iour

of

entering

a website

or downloading

a

product will

esult

in

a

submission

to a foreign

jurisdiction.



October

2005

Journal

of

Private International aw 249

b)

Regular Usage etween the

Parties

The recognition

of the regular

usage

between

parties

as

a valid

form usually

happens

in international

business-to-business

transactions,

where

there

is

a con-

tinuous, long-term

and

regular

business

relationship.

It

has been suggested

that

this approach

could be applied to electronic

business-to-consumer

transactions,

where the consumer

is

a frequent customer and

the company provides him

with

a shortcut channel after

the first

several

transactions,

through which the con-

sumer

only needs

to log-in

and

confirm his name,

address

and

account

details to

make

the

purchase, without being

required to read

the

terms

and

conditions

again. This

suggestion, however,

would be unreasonable

for consumers

who are

not

professional enough to foresee the

possible

effects

of

a terms

and

condi-

tions on

subsequent

transactions.

He might one day surprisingly

find himself

being

bound by a jurisdiction term in a

click-wrap contract he clicked

years

ago.

He may completely

forget the content of the agreement;

his

financial

situa-

tion may

have

already changed, such

as to prevent him from engaging

in

oreign

litigation; the

nature

of the

transaction, including

the

quantity and

total value of

the

subject

matter, may be

very

different from

the

first

time he dealt with

the

business.

It

is

suggested

even

if the regular

usage condition

can be

applied

to

online

consumer

contracts, there should

be

certain regulation on it,

depending

on the frequency

with

which

the consumer

transacts through the website,

and

whether the

nature of the transaction

is

substantially

different

from the first time

of transaction,

etc.

The

e-business also needs

to

make reference

notifying the

consumer

that

the previously

agreed contractual terms

will be applied.

2. ubstantive

Validity

There

is more

difficulty and confusion about

the requirement of

substantive

validity, which varies significantly

from one country

to

another, and

enters the

area

of national

substantive law, or

issues

of

public

policy.

At present,

there are

in

general three approaches to dealing

with the

issues

of

substantive

validity

in

choice

of

forum clauses: i) by leaving it to national

law; ii) by providing uniform

conflict

of

law

rules;

7

iii) by providing

uniform substantive

lav. While the

first

17

See

the preliminary

documents

for

Convention

on

Choice

of Court

Agreement

in

the Hague

Conference on Private

International

l.aw

which

are available at Nw-\vlcch.net;

United Nations

Convention on the Recognition

and Enforcement of Foreign

Arbitral Awards (New York Con

vention) Art

11 3); UNCITRAL Model Law

on International Commercial

Arbitration, Art (8).

This

approach has also

been

accepted by

Rome Convention to determine

the substantive

validity

of choice of

law clauses.

8 The

Brussels I

Regulation

has

not established any rules

on

substantive

validity of a

choice

of

forum

clause, however, in the

EU

case

law

the

ECJ has preferred to use

tnil-rnm

community law

to

ascertain the

actual

will of

the parties, see R ll

., supra

n

II,

l~ancesco

eniuasa

r

eralkit

Srl

Benincasa),69/95 [1997] ECR

1-3767;

Tramnporiastelletti Spedizioni nternazioali S l Ihoo

Trumpy

Sp

Castelletti), 159/97,

[19991 ECR 1-1597.

For

detailed

IiscussiorI, see

A Briggs and

Rees, CiritJurisdietion

andJutgients

London. l.LI 3rd

edn,

2002 ,

para 2 97



Exclusive Choice

of

Forum Clauses

in

E-Commerce

JPrIL Vol.

1

No.

2

option

is

considered

improper

due to

the

high degree of uncertainty

it

creates,

the

second

approach

is

more favoured by international

conventions,

for it

is con-

sidered

workable

and it

can achieve

partial predictability.

4 9

However,

it has

been

suggested

that

the

existing

wide

variety

of national

law

including private

inter-

national

law with

regard to the issues

of substantive validity

in consumer

contracts, the highly globalised character

of e-commerce, and the requirement

for

improved uniformity

and certainty

for

the

further development

of consumer-

orientated e-commerce

make the uniform substantive

law

approach more desir-

able.

Firstly, the uniform approach can provide the utmost certainty and

predictability to e-commerce,

the international character of which requires a

unified standard for its smooth

development.

Secondly, the innovative

character

of e-commerce

brings challenges to existing

national substantive laws.

Most

states

try

to

answer

these

challenges either

by

reinterpreting

the

traditional

law,

or by establishing new laws on the commercial

activities

carried

out

online.

Without the

application

of mature and

traditional

rules

to e-commerce, the

international

uniform

substantive

rules are

more practical

in e-commerce than in

traditional commerce. Thirdly, the choice

of forum

clause

is a

special

conflict of

law

rule, the primary

purpose of which

is

to provide

certainty

without relying on

any

other

nexus. This original intent of application of jurisdiction clause

will be

damaged

by

subsequent uncertainty caused by the less-than-certain

rules for its

validity. Even if there

are

uniform conflict

of

law

rules, they cannot provide the

predictability they are

supposed

to,

30

and

the

additional effort

taken to

determine

the

applicable

law will

increase the

parties'

litigation expenses.

Although

the

international

uniform substantive rules will doubtless

face obstacles and practical

problems,

it

is assumed

such

a uniform rule should be the

future or

final aim of

an

international

convention on jurisdiction

clauses. This section will adopt the

third approach

to

provide

uniform guidelines

and

tests to determine

the substan-

tive

validity

of

jurisdiction

clause

in e-consumer

contracts?

2

a) Authentic

Consent

A jurisdiction clause

complying with formal requirements may be impugned

upon

substantive

grounds where

inherent

authentic consent is

missing. Since

it

is

9

Nygh nd Pocar. supr n

41

43.

3 There

is

no

consensus

as to

how the choice of law rules can

he

designed

to

provide

both

certainty

and fairness. For

detailed

discussion

on

the pros and cons

of

different

choice of law rules

as

regards substantive

validity

of

jurisdiction clauses

see Hague Conference Judgment Project

reports especially Prel

oc Nos 7

19 20

21

51

Some experts on the Hague

Conlerence

have

expressed the view that uniform provision

on

sub-

stantive

validity

should

le

included

in

the

convention at least

in

the

future.

See

Prel Doc

No

7

para. 107; Prel Doc No 9 p

37.

5

However

the guidelines

and

tests

provided

this section

will

not

touch any

area

other

than

the

jurisdiction clauses

inelectronic

consumer contracts.

This section is

also

not

supposed to provide

uniform definition on any

traditional

concept such

as

fraud misrepresentation

mistake

etc.



Journal of Pivate nternationalLaw

not easy to determine whether there

is authentic consent at the time of conclud-

ing

the clause,

many

jurisdictions provide no further

rule

on

substantive validity

by

assuming

the

formal

requirements

are full

perfect and sufficiently

guarantee

the authentic

consent,

which, however,

is

obviously

not the

case.

3

In

order

to

guarantee

the

existence

of

authentic

consent

and

to protect the e-consumers as

the weaker

party,

it is suggested

to adopt the discretion-based

tradition in

e-consumer

contracts,

which

is

to consider

not only

the

formal

validity,

but also

the substantive grounds of the exclusive

choice

of forum

clauses.

First,

electronic

error may lead to unauthentic

consent in

electronic consumer

contracts.

5

Concluding an

e-contract primarily

depends

on

the proper function

of the

technology. A breakdown of

the

information processing system, a mistake

in the

information

transmission

system

or

software bugs

can

cause

a

jurisdiction

clause

short of

authentic

consent.

An

electronic

error

may also occur

if

the con-

sumer makes a mistake but has no chance to

make a change in

a reasonable

period of

time.

For

example, suppose a

consumer erroneously

clicks an 'Agree

button

below the jurisdiction clause but quickly notices

that he is in error. How-

ever, the

system

continues to

the

next

step

without

offering

the option of

reviewing

and

correcting

the

error,

and

the

consumer

cannot

get prompt contact

information

from

the

website to

inform

the business about the mistake.

5

A

juris-

diction

clause

concluded

in

this

case should

be

regarded as substantively

invalid

as it lacks authentic consent.

Secondly,

the character

of electronic communication

introduces a new possi-

bility where

the

e-contract may include a choice of forum clause

that is

inserted

after the

purchasing

procedure

has

been completed. One

common

practice

in

software purchasing

and

some

website

trading

is

that

the terms and conditions

only

appear

after

the

user

downloads

the software

or submits the

acceptance.

Another possibility is

that

the consumer

is

required to

read the

terms and

con-

ditions

before

acceptance,

but

after

clicking

'Assent ,

the screen will be

refreshed showing

the whole

contract

for the

consumer

to

Confirm , including

the condition of products, the

delivery

information,

the personal information

of

the consumer,

as well

as the new terms and conditions , which

may

include an

exclusive

jurisdiction

clause

not

shown

up in the previous terms and

condi-

tions .

The consumer might click

to

confirm,

assuming

they

have

read

the

same

terms already A similar situation

is

where the business sends the consumer an

e-mail confirming the

transaction,

including the

choice of

forum

clause, which

has not been disclosed

to the consumer

before purchasing.

In some

cases, the

contents in

a

website are dynamic

in nature. The whole

webpage

may change

after updating

without

any

trace left

of

the

previous

contents.

It

is

possible

that

during the actual procedure of purchasing, the webpage is

updated, and

the

5 See

generally

Briggs,

Rees,

supr n

48, para

2.97.

The

term electronic error has been

introduced

in

US UCITA,

213.

s ee UCITA, s 213(b).

October

5



252

Exclusive Choice ofForum Clauses

in E-Commerce JPrlL

Vol.

1

No.

2

terms

the consumer read

before

accepting are

different from the

terms when

he

clicks to accept.

In these cases

this jurisdiction

clause should

be held

invalid for

falling

short

of

authentic

consent.

5

6

Thirdly,

the

non-localization

and

non-identification

nature

of e-commerce

may

lead to

agreement

short

of consent, because some terms,

which

may be

accurate

in

traditional

contracts,

are

considered

ambiguous

in e-commerce.

The

jurisdiction

clause may state

that

any dispute

should

be

submitted to

the court

of the place

of

business/the place

of

performance/the

place the contract estab-

lished/etc. Not

only may

the

consumer

have

no

idea

which

country these

descriptions

actually refer to,

but

also

the

businesses,

the legal professionals, even

the courts may have

a

confused understanding

of

the

described locations

in

e-commerce. 5 Without further

explicit

disclosure

of

what the

designated

place

is,

the choice

of

forum

clause

can be claimed

by the

consumer

to

be invalid

for

falling short of authentic

consent.

Fourthly, an

e-consumer might encounter

a time-limit for

reading the contract

terms provided by

an e-businesses, which may

prevent

the

consumer from read-

ing and

considering with

his own pace and lead to

false consent. E-businesses

may

claim that this time-limit

is

provided

for

reasonable

marketing

and business

considerations, for

example,

there are

great amount

of

demands

over

the

limited

number

of

products,

or

the

price of some products

will

increase as time goes

by.

55

It is not

wise to permit

one consumer to hold

the bargain

for

an unreason-

ably

long time

while

other

potential

consumers cannot process

this

transaction.

However,

this time-limit

should

be

reasonable.

If there

is

no special

business con-

sideration

behind

it,

and the

limitation is

just

provided to

prevent

the

consumer

from

proper

reading

and

consideration

of

the

contractual

terms,

5

the authentic

consent can be questioned.

b) Lawfulness

Another requirement

for substantive

validity

is lawfulness.

Generally, a

choice

of

forum

clause that seems valid

might be claimed to

be invalid if it

is

regarded

as

unfair or unreasonable.

Presently,

there

are three possible

approaches as to the

lawfulness

of a choice of

forum clause.

The

first

one

is to look to

the

result of the

agreement to

see

if there is

unfairness, or unreasonableness

in

the

choice

of

forum

clause. n For

example,

if the effect

of the

choice

of forum

clause

is

obvi-

56

For example, in

Sperdt,

supra

n

44

the

court held that

since

the licence terms

only

appeared after

the user downloaded

the solware, the

downloaded software was not protected

by the licence.

57

However,

these

clauses are

valid

in

traditional

contracts.

ee

oreck

M1anitie

GsbH

r

Handelsrees,

Br

and

Others,

C387/98, 12

ECR

1-9337;

Powell supra

n

29.

58

Such

as

the tickets

for

transportation;

see

eg,

National

Express

fun

fare

ticket purchasing proced-

tire,

www.gobycoacl.com,

-accessed on

24

June

2005.

59

For

example, the time limit

is

set

up fbr

normal

transaction

without any

convincing

reason

and/or together with an

over-lengthy dral

of

contractual

terms.

See eg

Burke Goodtnan 4 SW

3d

276

at 280

Mo

App El 2003 ;

wain r . l/o Services. htc 128

S\\

31

103, (Mo App

ED

2003).

etc.



Journal of

Private nternationalLaw

ously one-sided,

with all

the disadvantages on one party,

it

can

be

declared unfair

and

might

be held

void or

avoidable.

However,

this

approach is not

favoured in

practice, because

if the

parties genuinely

consent

to

the

effects of

the agreement

at the time

it

is

established, especially where the

party carrying

the disadvantages

agrees

to

accept

the

invidious

result

in

exchange

for some

other

advantages,

6

there is no

sound reason

to

invalidate

the

clause based

on unlawfulness .

It is also

possible to

study the

process

involved in concluding

the

clause. If

the

clause

has

been concluded

in

an

abusive manner, including

an

abuse of

eco-

nomic

power,

or by other

unfair

means

eg,

taking advantage

of

the other

party's

weaker

position,

such

as poor bargaining

power,

low

education level

and

lack

of available

choice

the

clause

can

be

held

invalid

for its unlawfulness.

62

The problem

is that

no

criteria

have been established

to determine

what kind

of

manners can be called

abusive

or unfair

in e-commerce.

Click-wrap

and

browse-wrap

contracts

are widely

used

in e-commerce

and

have

been

accepted

for

their convenience

and

economy

When

we

look only

at

the process,

we

find

that the

contract terms are

provided unilaterally

by

the business

-

the

party with

stronger

economic

power. The

terms are

standard and

non-negotiable

in nature.

The

consumer,

being

the party

with

poorer

bargaining

power, is in

a take-it-or-

leave-it

position.

In

this process,

businesses

do make

use of

their

economic

power, and

consumers

have no

other choice

but

to accept

all the terms

or be

refused

the transaction,

due to their weaker

position. However,

if the process

of

concluding

a

click-wrap

or

browse-wrap contract

is regarded as

unfair, unjust or

unreasonable,

so that all click-wrap

or browse-wrap

contracts

would

be judged

invalid, the

whole of

e-commerce

would

be seriously impeded.

Thus, to

judge

the process

alone cannot

be a

reasonable

way to decide

the

lawfulness

of a

choice

of

forum

clause in e-commerce.

The possible

alternative

is to

connect

the

process

with the result

and other elements

to

determine

whether

the

choice

of

forum

clause

is lawful

or

not.

Many

states

adopt the

third

alternative

to study

both the

agreement

itself and

its

effects

as

well

as

the

process to

establish

whether

the

clause

should

be

regarded

as substantively

invalid. For example,

the

Unfair Terms

in

Consumer

Contracts Regulation

1999

provides

that

a

contractual

term

which

has not been

individually

negotiated

shall be

regarded

as unfair

if, contrary

to the

requirement

of

good faith,

it causes a significant

imbalance

in the parties'

rights

and obliga-

tions

arising under

the contract,

to the

detriment

of

the consumer .

63

Both

the

6 Such as

more

attractive

price, more

convenient

purchase,

or

favourable

service,

etc.

62 See Inter-American

Convention

on Jurisdiction

in

the

International

Sphere

for

the

Extra-

territorial

Validity

of Foreign

Judgments of 24 May 1984

(La Paz Convention),

Art

I D). The

Hague

Convention

of

25

November

1965

on the

Choice

of Court,

Art

q 3).

The

US Uniform

Commercial Code, Section

2-302 1). Also

see the US

Federal case: lonial

Leasing 0o

of

Wv

England Inc

v Pqh

Brothers

Garage.

735

F

2d

380 (9tl

Cir 1984).

63

Art 5 1).

See also Ociano

Grupo

Editorial

l

c

Rocid

MIurciano uintero

C 240 243/98

12000]

ECR

1-4,1.1,

para 24.

October 5



Exclusive Choice

of

Fonim

Clauses

in

E-Commerce

JPrIL Vol.

1

No.

2

Federal

Court

and

some State courts

of

the

United

States

adopt the

doctrine

of

reasonability

and conscionabiity

to

decide

the substantive

lawfulness

of the

choice of

forum clause.

64

Unconscionability

has

been

classified

by

some scholars

as

either procedural and substantive.

65

Under

procedural

unconscionability,

courts

should

look

for unfair

unawareness

or an

absence of

meaningful

choice by

considering

the

consumer's

educational

level,

the

lack

of opportunity

to study

the

contract

and enquire

about

contract

terms, whether

the

clause

was

stated

in

overly

technical

terms, and

whether there

was

a

lack of

voluntariness

of the con-

sumer.

66

Under substantive

unconscionability,

courts have

to

consider

whether

the

clause was unreasonably

one-sided,

oppressive or unfavourable

to one party;

whether the

creditor

or seller unduly

expanded his

own remedies;

or whether

the

consumer

waived

his

right

to

a

remedy.

6

7

This

last approach

may be

more

effective

when

applied

to

e-commerce

con-

sumer

contracts

than

the other

two. Take

click-wrap

contracts as an

example. To

a business,

a

click-wrap contract

will

be

regarded

as

prima

facie effective,

which

will increase

business

expectation

and

commercial efficiency

To

a

consumer,

this

requirement

to look

to the

process

and result

of

the

choice of

forum clause

will

help

to prevent

him from

being

bound by overly

hostile

clauses.

Under

the

third

approach, general

considerations

on

the lawfulness

requirements

of

consumer

contracts in

e-commerce

can

be suggested

as

the following.

i) Whether

the

choice

of

forum

clause has been individually

negotiated and agreed

without

any

economic

or

other

pressure

on the consumers.

If

the clause

has been

individually

negotiated

in an equal

and reasonable

way,

the clause

can

be

regarded as lawful.

For example,

the

consumer sends an

e-mail

to

the business to negotiate

the

choice

of forum

clause.

(ii) Whether

the procedure

to enter

into

an

agreement

is

reasonable

enough,

the

consumer

has the opportunity

to

review

the clause,

is

given

a

clear choice

between accepting

or

rejecting

the

clause.

69

has the chance

to

correct

errors and

change

his mind any

time

during

the

procedure, and

has

adequate

notice

of the consequences

of assent

and rejection.

70

If all of

these

procedural

requirements

are fulfilled,

the business

has

presented

utmost

good

faith

for the

consumers

to indicate

their

authentic

intention

on the

choice

of

61

See

eg,

M/SBreynen and Unten eser

Reederei,

ubHr

Zapata

Off-Shore

Co

,107 US

I

(1972) ( The

Bre-

men );

Wll11ians

v Anerican

Online,

Inc 2001

W

135825

Mass

Super

Ct, 8

Feb 2001 ;

amb

egaflight, Inc

26

SW

3d 627 (Ten

Ct

App,

2000).

65 See

A

Leit,

Unconscionability

and the

Code

-

the Emperor's

New Clause

(1967) 115

Unhiersi

o Pennvllania

law

Reniew.

185

66 J

Bruch, Forum

Selection

Clauses in

Consumer

Contracts: An

Unconscionable

Thing Hap-

pened

on

the

Way

to

the Forum

(1992)

23

Laola

Unirersit of

l(/ago

low

Journal

329, 333.

67

bid

68

UCITA

s

113(a)

delines

opportunity

to review

as a

term

available

in

a

manner

that

ought

to

call it

to

the

attention

of a reasonable

person and

permit

review .

69 See

eg,

Capsi r MWicrosoft

Aetwork LLC 732

A 2d 528

.NJ Super

Ct

App

Div,

1999);

Specit. sapra

n 46.

7 See

eg, Rudder

z ,Vlicrosqf1 ,16p.

[1999] 2

CPR (4th)

4741

(Out

Super Ctjustice,

8 Oct

1999).



Journal

of rivate

nternational

Law

forum agreement, which should be regarded

as

reasonable. iii)

If

the answer to

the

above

two

questions

is

negative,

then the effect

of the choice

of

forum clause

is

unreasonable

and unfair,

as

it

was unreasonably

one-sided, oppressive

or unfa-

vourable

to the weaker party.

If it

is

for

the

benefit

of

the

consumer,

even if the

clause

is designed by

one party

and put the

other

party

in a take-it-or-leave-it

position, the clause would

not be

regarded as

unlawful.

In

e-commerce,

in

most

cases,

the choice

of forum clause is unilaterally

inserted

by

the business,

and

no

individual negotiation

is involved.

Non-negotiation

in adhesion contracts

will

easily cause unfairness

and lack of authentic

consent. However,

since it is

widely

used

in e-commerce,

it

is

not reasonable to

invalidate

all

choice

of forum

clauses

without

individual

negotiation, especially

when the

effect of the clause

will not

be

a

disadvantage

to the

consumer.

The

same

reason will be applied

to the

sec-

ond point.

Even

if the

consumer

cannot understand

the choice

of

forum

clause,

if

the clause has

an

absolutely

fair result to the

consumer, simply

to disregard it

will

not be reasonable, and

will lead to

further uneconomic consequences

and

inconvenience

to commercial

practice.

D EFFECTIVENESS

OF

V LID EXCLUSIVE

CHOICE

OF FORUM

CLAUSES

Once

an

exclusive

choice

of forum

clause meets

all

the

prerequisites,

it

is

theoret-

ically effective

and binding on

both contractual

parties.

However,

in

practice

its

effectiveness

is

far from

certain.

7

Especially with

respect to

consumer

protection,

the

effectiveness of

a

valid exclusive choice of forum

agreement

might

be

more

complicated

and confusing.

Rule-based approaches

try

to set

up separate

rules

to

treat

jurisdiction

clauses

in consumer

contracts and limit

their

effe t

7

discre-

tion-based

approaches provide

judges

with discretion

to

decide the

effectiveness

they might

be given based on the

principles of fairness

and justice.

Since

there

are

many different

approaches to the

effectiveness of

jurisdiction

clauses

in the

present

world, this section

will

only

focus on studying

and comparing

the two

most

influential, and

possibly

the

most

appropriate, approaches

in rule-based

and discretion-based

jurisdictions,

namely the

approach adopted

in

the Brussels

I

Regulation, and the one

widely accepted

by most courts in England

and other

Commonwealth

countries.

For example,

some states

give full elfect to a

valid

jurisdiction

clause

y entertaining

tie

prorogated

jurisdiction

and

declining

jurisdiction if they

are riot

chosen,

see

Civil

Code of

Quebec,

Art

3148; other

states

only recognize the effect

of

jurisdiction

clause

in

its

prorogation

sense

but not

derogation.

7

Such

as the

approaches

adopted

in the

Brussels

Regime.

However.

many other

rule-based

cout-

tries still apply the

general rule to consumer

contracts owing

to the delayed response of

legislation

to consumer

protection. This

approach is outdated

and

obviously

unreasonable.

October 2005



Exclusive Choice of

Forum

Clauses

in E Commerce

JPrIL Vol. 1

No.

2

1.

Rule based Approaches

One of

the main

characteristics of rule-based

approaches

is that unlike their

discretion-based counterparts

they set

up

provisions

that

clearly distinguish

consumer contracts

from

other types of contracts

and design

different rules

regarding

the

effect

and application

of exclusive choice

of forum clauses within

them

in order to

protect consumers. The

most radical approach is simply

to

refuse to give

effect

to exclusive choice

of

forum

clauses

in all

contracts

that

involve

consumers.

73

However, this approach goes

too far and is very unlikely

to

be favoured

in e-commerce where

exclusive

jurisdiction

clauses should be given

more value.

74

Comparatively, the approach adopted

by the Brussels

Regime, to

recognize

the

effectiveness

of exclusive

choice

of forum clauses

in

consumer

con-

tract

with

certain

conditions,

is

more

reasonable,

and

it

seems this

approach

has

been widely

accepted

and is an

international

trend.

7

5

According to

this

approach,

exclusive

choice of forum

clauses in consumer contracts

are prima

facie ineffective,

except in certain

circumstances.

The

qualifications

can be read

as the

following: i) the exclusive jurisdiction

clause

is entered

into

after

the dis-

pute

has

arisen;

76

ii)

the

exclusive

jurisdiction clause

broadens

the consumer's

options;

77

or

iii)

the exclusive

jurisdiction specified

is

also the

domicile/habitual

residence

of

both the

business and the consumer

at the

time

of entering

into the

agreement.'

8

Despite it

having been favoured

by

more

countries,

this approach,

together

with

the qualifications described below,

faces

challenges

in

e-commerce.

a)

Qualifications

The first

qualification

concerns the difficulty

of deciding

two important

times in

e-commerce: when

the dispute has arisen, and

when the jurisdiction clause

has

been agreed

upon. It

has

been said the time

when the dispute has arisen is

the

time

as soon as

the parties disagree on a specific

point and

legal proceedings

are imminent or contemplated .

0

However,

this

explanation

has been

criticised

for its vague

and outdated nature,

8

' especially in e-commerce.

Unlike traditional

73 See

eg,

Switzerland's

Federal Code

on

Prixate

International

Law

of Dec

1987, Art

114.2

states:

The consumer

may not waive in

advance the

venue at his

domicile or place

of

habitual

resi-

dence.

Art 120.2

also rejects the effect

of

choice

of

law

in consumer contract.

74

See

generally

supra

s

B.

75

See

Brussels

IRegulation,

Art

17 Art

23.

76

Ibid,

Art

17.1.

Aid,

Art

17.2.

78

bid,

Art

17.3.

79

It

is

assumed

the

second

qualification

can

be

reasonably

applied

in e-contract,

so

that this

section

will

focus

on studying

only the

first

and

third qualifications.

8

See

eg: PJenard,

Report on the Convention

of

jursidiction

and the Enforcement

of

Judgments

in Civil

and

Commercial

Matters . (Jenard

Report),

[1979] OJ C59/1, 32;

Nygh,

Pocar supra

n 41, 5

1 Briggs and

Rees, supra

n 48, 81 and n 345 therein.



ournal

of

Private nternational

Lawi

commerce, where the parties

can discuss problems face to

face

and get immedi-

ate

feedback, e-commerce separates

the

complaint procedure

into

several

stages.

For

example,

an

e-consumer

will send a business an

e-mail or fill in an online

electronic

form to

complain, and the

business

will

reply with

a

possible solution

after a period

of time, which can be called

the first

negotiation.

If the

consumer

is

dissatisfied, he may

directly bring proceedings,

or

he

will try to

have

a

second

negotiation.

The same

procedure

might

continue

until finally the dispute

goes to

court. It

is

not clear which

stage

can

be

regarded

as that at which the parties

disagree

on

one

special

point . If

it

is the first time

the

consumer

sends the com-

plaint,

without

knowing

the business's response, it

is

too

soon to say the dispute

has arisen;

even if the

consumer

finally

received the answer

he is unhappy about,

he

might

try to continue negotiation

rather

than go to court, so

that

it is hard to

say

legal

proceedings

are

imminent or

contemplated .

If

it

is

the

first

time

the

business makes an unsatisfactory answer, when

can the

dispute

be regarded

as

having

arisen

if the business

just

ignores the

consumer's

complaint

and

never

replies? Even

if we

have chosen the first

time

the

consumer makes a

complaint,

it

is not certain what

the time is: is

it

the time

the

consumer sends the complaint,

or is it the time

the

business

receives it? The same

difficulty also

decides

when

the

agreement

is

concluded:

is it the time

the

consumer

sends the acceptance,

the time

the

acceptance has

been received

by

the other party, or

when

the

con-

sumer

has

received

from the business the

acknowledgement of the

receipt of

consent?

83

It

seems

the

second choice

is

more popular

nowadays,

but

it will face

problems

caused by the delay of e-mail

eg,

if

an

e-mail

containing

a jurisdic-

tion clause has

been held

up

by

the

server

or returned

owing

to a system

mistake,

while

the complaining e-mail, though

sent later,

has

arrived at the

business

earlier. It

also suffers from

the

difficulty

of determining when the acceptance has

been received

is

it

the time the acceptance

enters

the

receiver's

server,

the time

it is

downloaded

to the

receiver's

computer,

or

the

time

the

receiver opens

and

reads it? Taking these

two issues together, determining

the

effect of a

jurisdiction

clause

according

to the time of

dispute is

not

practical in e-commerce.

The

third

qualification

is

designed to protect the reasonable

expectation

of

the

business, for

a

subsequent

change of domicile

by

the

consumer

cannot

confer

jurisdiction

to

the

consumer's

new domicile. However,

uncertainty

will

result in

e-commerce,

given the difficulty of

identifying

the

other party When

dealing

with an

e-consumer,

the

business usually will

not

know

which

country is the con-

sumer's domicile/habitual

residence. It cannot

be judged from the consumer's

e-mail

address,

which

may be

misleading;

84

nor the

IP (internet

protocol) address

82

he

Electronic

Commerce

Regulation

2002

(transporting

into

UK

law

the

majority

provisions

of

the Electronic

Commerce Directive

2000/31

/EC

keeps silent in this

area.

83 See

eg, Malta

Electronic Commerce Act

2001, Art 10 a): ...an electronic

contract

is

concluded

when the

addressee has received from

the originator, electronically, the

acknowledgement

of

receipt

of the addressees'

consent...

81

Internet

service

providers

usually

w ll

provide

an internet user with

the

domain

name required

October

5



Exclusive

Choice of Forum Clauses in E-Commerce

JPrIL Vol. 1 No. 2

of the

information

message,

which

may be temporary;

5

nor the delivery

infor-

mation, which can

also be

temporary; '

nor the

consumer's

statement, which

may

be

untrue.

Without

knowing

the

consumer's

origin, the

business

will have

no

idea

about the

effectiveness

of

the

jurisdiction

clause. It seems

that

the

concepts

of time

and territory hold

little sway in

e-commerce,

and

should

be avoided

in e-contracts.

b)

rima

acie Ineffective

Policy

In

addition to concerns over

the

above

qualifications,

since

exclusive choice

of

forum clauses will play

a more

important

role in e-commerce,

it is questionable

whether

the obvious conservative

policy, namely to

hold

the

choice

of

forum

clause

prima

facie ineffective

in

consumer

contracts,

can

be

copied

in e-com-

merce.Y

7

E-business faces

great challenges in its litigation

power

and

has to

find a

way to avoid highly

oppressive global

jurisdiction

without

its

economic

efficiency

being

fatally

compromised.

E-commerce also

needs a

more positive model

to

improve

its development. E-consumers,

although

still holding

a weaker position

in general,

8 8

may be more reasonable

and economically sensitive and

may want

to enjoy the convenience

and

the

competitive

price

the

exclusive

jurisdiction

clauses

provide, despite

the disadvantage

of

foreign

litigation.

9

Providing the

strict

prerequisites to

ensure

the

e-consumer's real intention,

the effect of the

jurisdiction

clause shall

not

be

rejected

just

because

one party is

the

consumer.

The principle of regarding

exclusive

jurisdiction

clause

in consumer contracts

as

prima facie ineffective

is considered

too

restrictive and

unreasonably

limiting

of

the

application of

jurisdiction clauses.

without c reful

investigation of

the

user's real

location. It ispossible for someone

resident outside

the

UK to

register

a domain

name with

.uk.

In addition,

besides country code top-level

domains (TLDs)

there are generic

TLDs,

eg, .com and .net ,

which ill

ot give

the internet

user

any

hint about

the

probable location of the

other

party

85 ['he

IP

address

tells us

no

more than the location of

the computer,

which

can only indicate

the

location of

the

user during the

communication, but not

more.

86

For

example, the consumer

can

purchase

something during a short

holiday,

and proide

a

tempo-

rary

address for deliver.

87 Electronic

Commerce

and

International

Jurisdiction ,

Ottawa,

28

Feb-I

Mar 2000,

Prei

Doc

No 12, Hague Conference on

Private International

Law.

7.

8aTh

e-consumers'

weaker

position can

be

protected by strict and high standard prerequisites.

89

From

the economics point of' view, without

an

effective and

enforceable choice

of

forum clause,

tile

c-business

may

incorporate tie

cost

and

risk

of

global

jurisdiction

into

the

price

of

tie

prod-

uets

provided

online. See

eg, Carniral

Cruise Lines, Lid

i Shute

499 US

585

199 1

gave the economic

rationale

that passengers

who

purchase

tickets

containing a

forum clause.. benefit in the

form

of reduced

fairs

reflecting the savings that the

cruise

line enjoys by

limiting the for

a

in

which it

ma

be stied .



October 2005

Journalof

Private International

Law

259

2.

Discretion-Based

Approaches

a)

General

Principle

Discretion-based

approaches

have no predetermined

rules

to govern the con-

sumer protection

issues raised by

exclusive jurisdiction

clauses; however, more

flexible, but

also more

uncertain

approaches will

be

adopted,

so that

the effect

iveness

of

a valid

jurisdiction

clause primarily

depends on

the

courts' discretion.

Given

the widely accepted

policy for courts

to hold parties to

their

bargain, '

together with

the policy

that the parties

cannot oust

the courts'

jurisdiction

obtained

by their

private agreement,

91

common

law

courts usually will

give pri-

macy to

a valid

jurisdiction

clause, but may deny

its effectiveness in

certain

circumstances.

At

present,

most

of

the

common

law

jurisdictions

adopt

the

approach of holding

a valid

exclusive

jurisdiction

clause

prima

facie

effective

unless strong causes

have been shown

to

the contrary,

which

appears

more

appropriate

in traditional

commerce.

92

This

approach

is

assumed

at least

in

part

to achieve

order and fairness for it

ensures the courts

give

full

weight

to

the

parties' agreements and

also provides sufficient

leeway for

the

purposes

of

jus-

tice.

93

This general

rule

can be applied to

e-commerce, for

it satisfies

the

criteria

for

an appropriate

approach in e-consumer

contracts, by ensuring

certainty and

predictability, as

well

as proper protection

for the weaker party.

However,

although

the

general

principle is

quite

suitable

and

can

be

properly applied

to

e-commerce,

the test therein

for

the

courts

to exercise

their

discretion

whether

to

uphold

the clause needs

further

consideration.

(b)

Strong Causes

(i) The

Factors

or Discretion.

Theoretically,

the test

and

criteria

to buttress

the

9o According to

this

policy the court

has

discretion

to give effect

to the choice

of

forum

clause.

See

eg,

English

case: The

Chaparral

[1968]

2 Lloyd's Rep

158, Akai Py ld

v Peolples

Insurance

Compaly

Lid

[1999]

ILPr

24;

US Federal

case:

The

Brenmen,

supra

n 64;

Canadian

cases:

7I

Pompey

Industrie

z

ECU-Line

NV [2003] 1 SCR

450; Australian

case:

Oceanic

Sun

Line

Special

Shipping

Co

Inc v

Fav

1988)

165

CLR 197 at 230-31, 259.

51 According

to this policy,

the

court

has

discretion to maintain

its jurisdiction

despite

a

validjuris-

diction

clause.

Although

a

court

will be very

reluctant to disregard

a

valid

jurisdiction

clause,

it

does make this discretion

in limited circumstances

where

it

is considered

the

parties are amenable

to

the

jurisdiction

of

the

trial

forum

and

the

ends of justice

w -ille

hetter served by a trial

in

this

country See English cases:

Citi iarch lid

rs septune

Orient

Lines lid [1996] 2

All

ER

545; Air. surn

Aine

Airlines

lid [1993] 2 NZLR 632; Aratra

otato Co

Lid

r Le ptian

Narigation o

( The

El

Anria )

[19811

Lloyd's

Rep

119.

CA; US cases:

llKn

If

Muller Co r

Swedish Anerican

Line

Lid

224 F 2d

806 2d

Cir

1955 ;

Carbon Black

Erpori

Inc

r

The

SS Alonrosa 25,t

F

2d 297 (5th

Cir. 1958).

52 The approach

has

been

set up

in

a

cornerstone

case The

Eleflheria 11970] P 94,

110, repeated in

The

El

Amnria

supra

n 91,

and

has been

confirmed

as

accepted

by

a large

number

of

cases

in

the

Commonwealtl thereafter.

See

Akai

Ptv Lid,

supra

n

90;

Citi-Alarch

ltd

sopra

n

91: lbth v

Alanildra

flour Mills Ptv

Lid

171

CLR 538;

Oceanic Sun line,

supra

n

90, at 230-31, 259: lPompe supra

n 90.

For

more detailed

discussion see generally Cheshire

and s orih, supra

n

10 339.

350-355, 370-73.

93

ZI

Pomipv.

supra

n 90,

at

para

20.



Exclusive

Choice

ofForum

Clauses

in E-Commerce

JPrIL Vol.

1

No.

2

court's discretion in

enforcing an

exclusive

choice

of forum clause

are

not differ-

ent

in

the case of

the chosen

court

facing a

prorogation jurisdiction clause

and

the

non-contractual forum facing

a foreign jurisdiction clause.

9

Generally, all the

relevant factors

will

be

taken

into account,

both

those

concerning

the

nature

of

the

dispute,

including

the

availability

and

location

of witnesses

and

evidence,

95

the applicable

law,

96

the countries closely

connected with the

parties,

97

the place

of concluding

a contract,

98

the

place of

performance, etc; and the factors

con-

cerning the failure

of justice eg, if the

judiciary

is not independent,

99

the

chosen court is seriously

incompetent

in dealing with

the dispute,

°0

the resisting

party

will suffer prejudice

in

the

chosen forum for reasons

of insecurity , there

are

difficulties

in

enforcing

the judgment, or religious,

political,

racial

or

other

reasons which may

deprive him of a fair trial.

0

Applying

the

same

factors, espe-

cially the factors

concerning the natural forum, to e-commerce,

will create at

least

three

difficulties.

First, some

factors

in determining the natural

forum of

disputes will

be

regarded

as less important in

e-commerce. For example,

in a

transaction

of

digital products,

all

the processes are completed

online,

and usu-

ally

only between the parties without

the

involvement

of

any witnesses.

The

relevant

records or

evidence

can

be

stored in

a range

of

countries

in

different

forms

providing it

is

reaccessible,

accurate

and reliable. 03 Some are stored

on

the

internet server,

or the chips

of

any

other person

who

provides

service

for reten-

tion

of

electronic recodes,'

0 4

the location

of

which

may

be artificial,

multiple,

irrelevant to the dispute

or changeable. The businesses

might be obliged

to send

the

consumer

a copy;

in this case, the same evidence

will also be located in the

consumer's home

country.

Some

companies

just

make

records

on

the website,

and all persons are entitled

to access

these using their

username and

password.

No matter

where

the

evidence is

located,

it

is

portable and accessible

by courts

worldwide.

Secondly,

since

most of the

factors are

still

territorially

based, they

are no longer

effective

in e-commerce,

where

these territorial connections

are

broken.

It is

not

clear

where the place of business

is the place the company

is

physically located, the place

the

website

company is

located,

or where the

4 See

Akai P Ltd, supra

n 90, at

52.

95 See AlacShanno

r Rockware

Glass

Lid [1978]

AC

795,

at

812,

828;

The

Sidi

isr

[1987]

I Lloyd's

Rep

42, 4.3.

96 See

lbbbe v Capeplc [19991 IL

Pr

113 at

126,

C

97

See Spiliada

A.laritinie

Corpn v Cansulex

Lid

[1987]

AC 460,

at 4.78; rendex

Trading Co

v

Credit Suisse

[19801

3 All ER

721, at 734.

98

See

ank

of

Barodav

Vy59a

Bank

Lid [19941 2 Lloyd's Rep

87.

96.

9

See

M

iddle

East Ban/king

Co

SA

v AI-Haddad(1990)

70

OR

(2d) 97.

00

See

Islamic Arab InsuranceGo

vSaudi Egyptian.4 merican Reinsurance

Co

[

1987]

I Lloyd's

Rep 315, 319.

101

See Oppenheinmerr

Louis

Rosenthal

and

Co

G 11937]

I

All

ER

23.

102

See

Carralho

v lIl,

Blvth Amigola)

Lid

[1979]

3

All ER 280.

103 See UNCITRAL

Model

Law Art

10 l)

04 Ibid. Art 10 3) permits

the

p rty

using

the

services of

ny

other person to

ret in

data

message

records, providing

th t the ccur cy

re ccessibility nd

integrity

can be guaranteed.



Journal

of

rivate

International

Law

website can be

accessed.

It

is

also not clear where the

contract

is concluded.

In

click-wrap

contracts,

is it

the

place

where the consumer clicks

for consent, or

the

server

where the electronic

agent

for receiving

the electronic

data is located?

Where

does a

digital

product transaction

take

place?

Is

it where the

information

is

uploaded, or where

the information

is

downloaded from?

Thirdly,

in e-com-

merce,

in most cases there

is no natural

forum, or

the forum

which

is the

centre

of gravity is

in fact the jurisdiction

with fortuitous

connections

to the dispute.

The involvement

of an internet

service provider

(ISP)05 separates

the

formal

connection

and the

substantial

connection . The

traditional nexuses,

however,

mainly

focus on the

connection as

to the form

and the procedure

of a trans-

action.

Since in

most

of cases

the

evidence

is

stored

on the server,

the electronic

agent is

located

in

the

server, and the

products are

actually sent

out

from the

server, the agreement

can

be regarded

as

being

concluded on

the server. The

place of the server

thus

will

be

the

centre of

gravity

conferred

by

the

traditional

nexuses.

However,

an ISP is by

nature just a service

or

a channel

for

the perfor-

mance

of e-commerce.

It

is

not responsible

for any

actions

done

through it and

carries no

rights and obligation

over the

relationship

between

the

parties

in

e-commerce.

A business can

easily change

the location of

its server, or

apply sev-

eral servers

located

in

different

states. The

existence of

a natural

forum

conferred

by

traditional

factors

will

be purely

fortuitous.

(ii)

Test

Principle. Furthermore,

the current

approach

provides

no

more

than a

very basic

and ambiguous

principle

for the test,

without a

clear and guiding

criterion

of how the

test should

be taken,

or

how

much weight

should be

given

to

the

natural

forum fact

or justice

fact

against

enforcing

a valid agreement.

The

discretion

thus becomes too

flexible to be

certain.

With

different weights

given

to

the factors, and

different understandings

of

the

important factors , the

effect-

iveness

of

a

valid jurisdiction

clause, which is

supposed to be

respected

in

most

cases

turns

out

to

be

uncertain.

In some

cases,

the

courts permit

the

effective-

ness of a

valid

jurisdiction

clause to be

denied simply

on natural forum

grounds. '

In some

cases,

it is

held

that

the

simple

natural forum test is

not

enough,

and the

courts

only permit

the

party to

escape

the effect

of

a

valid juris-

diction

clause

by

relying

on

the

factors

they cannot foresee

at the

time

of

conclusion

of

the

contract.'

0

7 In other

cases, the courts

held that strong

causes

should be shown beyond mere

natural forum claims

and

look to the justice

of

the

matter.

08

105

An

ISP is a company that

provides access to

the

internet.

IrO

See The

.1mria ,

supra

n 9

:

Citi-Marrh.

supra n 9 : New

Zealand case: .Ipple

Computer

filc

Apple

Corps

Sa High

Cour or New

Zealand, 17

IPR

123 19

Feb

1990.

17

See British..lepospace

le r Dee Howard

Co

[19931

1

L.oyd's Rep

368,

at

376: The Sociey of ljords

Peter

Ererett

IVhitle (A6

2 120021 1LPr II.

1 8 See M lereur

IPh Communication

Yeicveoms

Lid

[1999] 2 ll ER Comni) :

Sinochem hiternationalOil

(london)

ld vAMobil

Sales and

Suppplr Cotp

12000]

I Lloyd s

Rep

670

at 679 80:.P

Alogquan

Securities

October 2 5



Exclusive

Choice of Forum

Clauses in

E Commerce

JPrIL Vol

1

No

2

Allowing

a valid

jurisdiction

clause

to

be

avoided

only by

reason that

the

non-contractual

forum

is clearly

more appropriate

does

not

seem

reasonable

because

it

will

lessen the effectiveness

a jurisdiction

clause would

otherwise

have

The

relevant

merits

comparison

between the

current

forum and the

chosen

forum

is

regarded as

having

already been

considered

at the

time of contracting,

so

taking

that into account

in

exercising

discretion

may

make

the choice

of

forum

clause overly

vulnerable.

Furthermore,

in

e-commerce,

the

natural

forum

might

be the

location of the

ISP,'

0

9

which

usually

is not

substantially

con-

nected

with

the dispute

at all; or there

might

be no

natural

forum

for the

current

dispute,

for

the

nexuses

will be

decentralised

and spread

around

many

states.

As

a

result, a new

test

combining

the

unforeseeable

factors and

end

of jus-

tice

sounds

more appropriate.

According

to

this test,

if the resisting

party

can

show

unforeseeable

factors

which

are

material for the convenience

and

expense

of the action

and

the

interests

of

the

parties,

the

relief

might

be

given.

Without

the unforeseeable

factors,

the

reason

that

justice

will be

denied in

the chosen

forum

also can

lead

to

a

relief. The

unforeseeable

test, which

has

been

regarded

as

extremely

rare

and impractical

in traditional

contracts,

can

work

better

in

e-consumer

contracts.

Based

on the

contract's

adherent

and

non-negotiable

nature,

as well

as the consumer's

inadequate

knowledge,

limited

time for

consid-

eration

and

non-access to

professional

consultation,

the

consumer

will often

have

something

reasonably

unforeseen

when

assenting

to

a

jurisdiction

clause, which

needs

to

be taken

into

account.

However,

this

unforeseeable

event

should

be

reasonable

and

arise in

good

faith. Simply

having

unexpectedly

high

travel

expenses cannot

be

sufficient

to

deny the effect

of a

jurisdiction

clause.

Only

subsequent

changes

which

are

unforeseen

at

the

time

of

contracting

meet

the

unforeseeable

requirement,

such

as the additional

requirement

for

travelling,

10

the

subsequent

change

in

consumer's

financial

or

physical situation, '

or

the

change

of

the

consumer's

residence.

2

The consumer

also

can

rely on

the jus-

tice

test

to escape

the effect

of a valid jurisdiction

clause. Besides

the

factors

buttressing

the justice

claim

in the traditional

commerce,

3

the

consumer

should

be

permitted

to challenge

the enforcement

of the

jurisdiction

clause,

by claiming

that

the

litigation is

unreasonable

and excessively

expensive

and

inconvenient

so

that

forcing him

to

litigate

in

the chosen

forum

will

deprive him

of his

day

in

Asia

Private

Limited

v Malaysian

Newsprint

ndustries

Sdn

Blid [2002]

ILPr

17

185-86. Although

these cases are

dealing

with non-exclusive

prorogation jurisdiction

clauses,

it is

assumed

that the

principle

can be applied

to exclusive jurisdiction

clauses.

10 See

supra

subsection

D2 b) i).

I0

For example

the

chosen forum

now

requires

the foreigner

to obtain a

visa for

entr. which it did

not at the

time

of

contracting.

Such

as

the consumer

suffers

bankruptcy afterwards

or

suffers

some

physically

disability

which

makes

foreign

litigation

oppressive.

112 For

example

the consumer

subsequently

changes

his

residence

to one more distant

friom

the cho

sen forum

which

makes

the litigation

unpredictably

expensive

and inconvenient.

113

See The

Eleftheria , supr

n 92 110.



October 2005

Journal of ivate nternational

Law

263

court, or make litigation

impossible. This relief can only

be granted by

compar-

ing the

possible litigation costs

and

the

value of

the subject

matter. If the former

is

far higher and

will

prevent an ordinary

person

from accessing justice, it can be

regarded

as

a

strong

cause against enforcing the

jurisdiction

clause.

Further,

it is

necessary to

point out

that in

an online

adhesion

contract,

only

the adhesion

party can

rely on this test to escape

a jurisdiction clause.

3.

Conclusion

Compared with

the

current

rule-based

approach in

the

Brussels

I Regime,

4

the

common

law

principle seems

more

appropriate for

e-commerce, where

the

choice

of

forum

clause should

be

given

more

value.

However,

the over-flexible

discretion procedure,

as

well

as

the

tradition

to respect

its

own

jurisdiction,

greatly

limits

the

effect that a choice

of forum clause is given according

to this

principle,

and

creates unnecessary

uncertainty. A proper

approach

should

pro-

vide both

primacy

to a valid exclusive jurisdiction

clause, and a pragmatic

test to

create

predictable,

unified and

logical

exceptions.

According

to the above

analy-

sis it is suggested

to use the rule-based frame

approach, but

also

to include

discretion-based

content, to

form a new

approach, to ensure

that a

valid choice

of forum

clause

is prima

facie effective with certain exceptions.

15 t is

suggested

that qualified

exceptions

should

go

beyond the

normal natural

forum con-

cerns, and

enter

into

the

area

of

unforeseeable

material

factors at the time

of

contracting

and

the absence of

justice.''

6

E. SUGGESTION OF

A NEW

MODEL

FOR

EXCLUSIVE

JURISDICTION

CLAUSES

IN ELECTRONIC

CONSUMER CONTRACTS

1.

The

Need

for

a Detailed

Flexible

and Certain Approach

As

we

have

discussed above, the

present

approaches

face a

many challenges

in

e-consumer contracts.

The rule-based

approach

generally ensures

the certainty

and

protection of

the

weaker

party, but unreasonably

limits

the

function of a

jurisdiction

clause in

c-consumer

contracts. The

formal requirement, although

it

has already been

partially

reformed

for

the

development of e-commerce,

needs

further

interpretation in e-contracts.

The

absence of

corresponding

rules

on sub-

stantive validity

undoubtedly

opens the

door

for unlawfulness and injustice.

The

three

qualifications

approach

actually

directs

courts

to

deny

the

effect

of

a

choice

of forum clause

in a

consumer

contract even if the parties actually

con-

4

Brussels I Regulation, Art 17.

1 5

A similar approach has

been

suggested

in Interim

Text

2001,

supr

n 13 Alternative B. variant 1

Art 7.5 7.6.

I16

For detailed

suggestion,

see

inji s

E(l)(d).

Journal of Private International 237

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Transcript of Journal of Private International 237