Examine the importance of the clauses of choice of law and choice of

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conducted electronically, using telecommunication networks. Such transactions occur between companies or between companies and their customers. Most companies have already established a Web site that can be accessed by users in just about every country in the World. However, this opportunity was also hiding the danger for the companies of becoming engaged in litigation in every single jurisdiction from which their Web site could be accessed. This means they are at risk of being hauled before courts in almost every country in the world and this risk of entanglement in a web of Zissis K. Tialios MSc in E-Commerce Technology E- Commerce Law Essay 22 / 04 / 2002 3 international litigation increases significantly since more and more companies are becoming engaged in e-commerce. An important issue of e-commerce is legal certainty with parties needing to know the legal context governing their trades and the applicable expectations and obligations if they are to trade with any degree of certainty. Why are these problems greater for e-commerce than offline commerce? Likely to be a far greater number of international transactions involving consumers because internet created a single world market and resolved many communications problems and time zone differences. Contracts cannot be negotiated since parties are acting remotely and the main characteristic of e-commerce is that emphasises on automated, mass-market solutions. Sellers don 9t necessarily know where their buyers are located and buyers on the other hand are facing greater risks since sometimes are dealing with invisible sellers. 2. The problem regarded from business and consumer view In this part I must first of all define the B2B and B2C transactions and then I explain their differences with regard to the problems emerging for each one of them at e-commerce transactions. Zissis K. Tialios MSc in E-Commerce Technology E- Commerce Law Essay 22 / 04 / 2002 4 B2B transactions are the transactions which take place directly between companies or through a third party (an intermediary) who helps match buyers and sellers. On the other hand business-to-consumer (B2C) is the use of Web-based technologies to sell goods or services to an end-consumer. Typically, the buyer (consumer) uses a Web browser and connects to the seller through an Internet Service Provider (ISP). In the case of business-to-business (B2B) transactions across borders, there exist established conventions and solutions, which help guide such transactions. For example, the use of contractual documents is generally standardized, as contracting parties are usually more sophisticated and often incorporate choice of law and choice of forum clauses in their agreements. There are also well established arbitration and mediation options to avoid litigation in the courts of one party's country. But such customs and practices are not familiar to transborder contracting between businesses and consumers, and many of the business practices and traditional ADR techniques are simply too costly - in terms of legal hire, correspondence, logistics, and the use of expert third parties - to be utilized by most consumers. But, for many online activities, it is very difficult or even impossible to comply with the laws of every potentially relevant jurisdiction. Once a website is posted, it is instantly available worldwide to anyone with a computer or other information appliance and a telecommunications (wired or wireless) or other form of network connection. Zissis K. Tialios MSc in E-Commerce Technology E- Commerce Law Essay 22 / 04 / 2002 5 According to discussions in the International ICC Chamber of Commerce and articles published in the general and trade press, it appears that many companies today simply are not willing to subject themselves to the costs of investigation and compliance with a myriad of rules in each country, or the risk of sanctions, unenforceable contracts, and adverse publicity in hundreds of countries, states, and provinces. Consequently, companies are limiting the use of their websites in terms of both products and geography, and they engage in e-commerce, if at all, largely through closed systems with established partners or sales to residents of the territories where the companies are already well established. The above is one of the negative result of jurisdictional ambiguity in e-commerce. Another negative consequence, which is due to the lack of confidence or of aggressive insistence on compliance with detailed local rules when dealing across borders with local residents, is twofold. First, many goods and services are held back entirely from the global electronic marketplace. Second, other goods and services are offered only in a limited number of jurisdictions, and consumers in other places are denied access to competitive products and prices through the online marketplace. The need, on the part of the suppliers, of legal certainty as to the risks to which they are likely to be exposed has been contrasted with the need for consumer confidence. Consumer confidence is critical to the success of B2C e-commerce and can be achieved only by allowing consumers to seek redress quickly and cheaply with a familiar legal system. Consumers, taking in account that most B2C disputes would be about smaller amounts of money, should not be expected to bear the costs or risks involved in a cross border enforcement of their rights. Zissis K. Tialios MSc in E-Commerce Technology E- Commerce Law Essay 22 / 04 / 2002 6 3 Legal issues The speed and ease of buying and selling globally on the web can mean a bundle of legal headaches for those unfamiliar with the growing body of law that is emerging around global e-commerce. From electronic contracts and signatures to data privacy and security, the openness of the internet has created the need to offer legal protection to both global buyers and sellers that no one ever imagined even five years ago. Knowing the laws of the markets where one exports goods, or the country of origin of goods one is importing, becomes very important. There's always been a risk factor when one is subject to the jurisdiction of another country. But that now gets heightened radically when it becomes so easy to deal with multiple other countries. One no longer has to have a distributor and/or office in every country where might expect orders. Countries worldwide have varying rules about whether one is subject to their jurisdiction. Moreover, global e-commerce isn't the same as international trade in the three-dimensional world. Besides the ease of reaching foreign markets, the Zissis K. Tialios MSc in E-Commerce Technology E- Commerce Law Essay 22 / 04 / 2002 7 internet creates legal issues that are unique to this medium. There are privacy concerns, contract problems, and content may be restricted in some countries. The question that courts adjudicating Internet disputes involving residents from different state are forced to address is this: Which state's substantive law applies? When the parties have entered into a contract, the answer is usually straight-forward. The court shall look to the contract to see whether the parties have agreed upon which state's law is to govern any disagreements involving the contract. As a general rule, as long as the contractual provision is reasonable, courts will honor it. Thus, as with personal jurisdiction and venue, parties entering into business transactions can avoid some of the uncertainty in the law by including such clauses in their negotiated documents. When a person commits a tort or does not enter into a contract with an enforceable forum selection clause (clause of ''choice of law'' or ''applicable law''), the "default" choice of law controls. It is important to keep in mind that the state court deciding the choice of law issue applies its own state's "choice of law" rule to render its decision. It is necessary here to make completely clear the definition of the notions ''applicable law'', ''choice of law'' and ''jurisdiction'' which are often confused together, before any attempt of dealing with such matters : applicable law is the law that governs the contract, and that on the other hand jurisdiction means the right to hear a contractual dispute. For example a choice of English law as the applicable of the contract does not mean that an English court would have jurisdiction to hear the dispute. "Jurisdiction" is a broad concept and can be used to refer to three separate concepts. First and most commonly, jurisdiction refers to whether a court has the power to adjudicate claims against a litigant - in legal parlance, whether the court has "personal jurisdiction" over the litigant. Second, jurisdiction may loosely refer to Zissis K. Tialios MSc in E-Commerce Technology E- Commerce Law Essay 22 / 04 / 2002 8 whether a court proceeding is being held in the proper location, or venue. A court that possesses personal jurisdiction over a defendant, but which is not the proper venue for the action, might be said not to have "jurisdiction" over the lawsuit. Third, jurisdiction has sometimes been used to refer to the decision of a court to apply one state's law over another's, when the law of two or more states are relevant to a dispute. This is often referred to as "choice of law." The states are currently split in using one of three "choice of law" rules. Some states apply the law of the state where the "last act" necessary to complete the tort occurred. Other states follow the law of the state with the «most significant relationship» to the action, and list several factors to be considered in making this assessment. A last group of states follows an "interest" test and will apply the substantive law of the state having the greatest policy interest in its law to the case. Choice of law issues are largely subject to debate in the "real world," and the complications attendant to the doctrine are multiplied when the doctrine is applied to cyberspace. Governments all over the world and especially in Europe soon recognised the vital role of e-commerce for any successful economy and are trying to implement measures to encourage growth. The way to do this is by increasing the legal certainty for the companies engaged in e-commerce and consumers by a clear legal framework, which gives solution to real world e-trade problems. Zissis K. Tialios MSc in E-Commerce Technology E- Commerce Law Essay 22 / 04 / 2002 9 In US each state and federal district may have different rules. So there has to be some legislation in deciding the jurisdiction. There are some initial decisions that a website alone justifies jurisdiction while other require more. 3.2. B2B and B2C distinction problem especially in B2C In this part I shall try at first to define the B2B and B2C transactions and then I shall explain their differences with regard to the problems emerging for each one of them at e-commerce transactions. B2B transactions are the transactions which take place directly between companies or through a third party (an intermediary) who helps match buyers and sellers. On the other hand business-to-consumer (B2C) is the use of Web-based technologies to sell goods or services to an end-consumer. Typically, the buyer (consumer) uses a Web browser and connects to the seller through an Internet Service Provider (ISP). In the case of business-to-business (B2B) transactions across borders, there exist established conventions and solutions, which help guide such transactions. For example, the use of contractual documents is generally standardized, as contracting parties are usually more sophisticated and often incorporate choice of law and choice of forum clauses in their agreements. There are also well established arbitration and mediation options to avoid litigation in the courts of one party's country. Zissis K. Tialios MSc in E-Commerce Technology E- Commerce Law Essay 22 / 04 / 2002 10 But such customs and practices are not familiar to transborder contracting between businesses and consumers, and many of the business practices and traditional ADR techniques are simply too costly - in terms of legal hire, correspondence, logistics, and the use of expert third parties - to be utilized by most consumers. But, for many online activities, it is very difficult or even impossible to comply with the laws of every potentially relevant jurisdiction. Once a website is posted, it is instantly available worldwide to anyone with a computer or other information appliance and a telecommunications (wired or wireless) or other form of network connection. For B2C e-commerce to reach its full potential, certainty and confidence is essential for both business and consumers when disputes arise between them on-line. Therefore, business seeks a predictable and stable framework for resolving these disputes. Such a framework should allow business to calculate cost, risk, competition, and prices. It should also guarantee that consumers have an easy and cost effective means of resolving disputes. When a consumer complaint arises, parties should first make reasonable attempts to utilise a company's internal mechanism, such as its customer satisfaction service; If the complaint remains unresolved, parties should utilise an online alternative dispute resolution -- a cost-effective solution that can bridge both geographic and cultural barriers; and if the complaint still remains unresolved, the parties can resort to legal action. The greatest majority of consumer complaints will be resolved either by a company's internal customer service or similar mechanism, or ADR. However, this does not preclude the need for a predictable legal framework in which to address the few disputes that persist. Zissis K. Tialios MSc in E-Commerce Technology E- Commerce Law Essay 22 / 04 / 2002 11 It is business's responsibility to provide rules of best practice that will enable contracting parties to make the right choices as to applicable law and competent forum in the domain of legal B2B and B2C transactions. In this context, "transactions" must be understood to encompass transactions conducted between or among legal persons. Regardless of size and other factors, legal persons - as opposed to natural persons - should be subject to the same rules in the same circumstances. This is particularly important in online transactions, where the parties may not know each other and cannot practicably make distinctions as to applicable law based on the size and character of the legal entity with which they are dealing. A primary goal of commercial law is to develop legal certainty for transacting parties. Freedom of contract is a general principle that should drive decisions regarding choice of law and forum. As the basis for all commercial law, contracts embody private agreements between parties, formalising their intent to be bound by the terms of the contract as if these were the law between them. For reasons of compelling public policy, however, in the context of B2C disputes, governments typically place limits or conditions on private agreements in heavily regulated sectors, such as banking and investments. Courts and regulators may also override the terms of private agreements that appear to result from fraud or deceptive practices. Governments should keep these limits on the applicability of party autonomy to a minimum, but, nevertheless, where a compelling and well-defined public policy objective dictates such a limitation, governments should indicate the circumstances in which they intend to apply local regulations to cross-border e- Zissis K. Tialios MSc in E-Commerce Technology E- Commerce Law Essay 22 / 04 / 2002 12 commerce, and to work toward a common approach to defining fraudulent practices in B2C transactions. Application of the "country-of-origin" principle is a preferable and most workable solution. However, ICC (International Chamber of Commerce) recognises that there is a subset of consumer transactions in heavily regulated industries where, due to compelling public policy reasons, regulations have been developed to provide that specific redress and information be made available to the consumer in his or her country of residence. As a commitment to consumer protection and empowerment is shared by business and governments, application of the "country-of-origin" principle should not be read to undermine such regulations. Consumer policies for the online medium have been and continue to be developed and implemented by both business and governments. Self-regulatory solutions provide the flexibility to respond to the dynamic nature of the online environment. Any policies must accommodate and promote this highly dynamic environment, which is a significant engine of economic growth and social development. 4. Current Legal framework The most important legal rules concerning the jurisdiction and applicable law in e-commerce dispute resolution are the 1980 Rome Convention on the law applicable to contractual obligations and the 1968 Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters, which has been recently amended by the Council Regulation (EC) No 44/2001 of 22 December 2000 on Zissis K. Tialios MSc in E-Commerce Technology E- Commerce Law Essay 22 / 04 / 2002 13 jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. According to the Rome Convention a contract shall be governed by the law chosen by the parties. The choice must be expressed or demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case. By their choice the parties can select the law applicable to the whole or a part only of the contract. The parties may at any time agree to subject the contract to a law other than that which previously governed it. To the extent that the law applicable to the contract has not been chosen the contract shall be governed by the law of the country with which it is most closely connected. n with another country may by way of exception be governed by the law of that other country. A choice of law made by the parties shall not have the result of depriving the consumer of the protection afforded to him by the mandatory rules of the law of the country in which he has his habitual residence. That is to say that in relation to the applicable law of a contract, the Rome Convention sets out exactly the same test, if satisfied, will prevent the parties agreeing that any law which was applied to the contract can have the effect of depriving the consumer of the relative protection laws of his home country. The protection is afforded to him under the mandatory rules of the law of the country which he has his habitual residence. As mandatory rules we can assume legislations like Unfair Contract Terms and consumer protection regulation. The recently amended EU Brussels Convention in effect subjects any dispute relating to an online contract with a consumer to the jurisdiction of the courts of the consumer's place of domicile and where conclusion of the contract was which was Zissis K. Tialios MSc in E-Commerce Technology E- Commerce Law Essay 22 / 04 / 2002 14 preceded by a specific invitation addressed to him and the consumer took the necessary steps for the conclusion of the contract. Indeed, from March 2002 a new regime dealing with questions of jurisdiction have come into force throughout Europe replacing the Brussels Convention. In short form it is known as the 8Brussels 1 Regulation 9, the long form of which is 8Council Regulation (EC) No 44/2001 (OJ 16 January 2001 L121) of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters 9 ( 8Brussels 1 9). Among other things, Brussels 1 will deal with the question of jurisdiction for electronic consumer contracts. It determines where legal disputes will be heard, weather in the country of the seller will have special rules to protect consumers , and might in the final text, provide that consumers have a right to be sued in their own country, not the sellers country. The most controversial thing in it is whether a website can specify local, for example English, law and be sure only English law will be applied, or whether a consumer in an other EU country would be entitled to invoke that country 9s law and jurisdiction. Most countries including all of the EU but not US, have agreed to the Rome Convention and the Brussels Convention. These were made part of the English law in UK. The essence of these is, that if a particular law and jurisdiction is chosen by the parties to an agreement, then that will prevail. In the case that no choice have been made by a contract then certain rules state what happens. In many cases, the laws with the closest connection to the contract will apply. Closest connection is established by reference to the country where the party who is to effect the Zissis K. Tialios MSc in E-Commerce Technology E- Commerce Law Essay 22 / 04 / 2002 15 performance that is 8characteristic 9 of the contract has, at the time of making the contract, its habitual residence or in case of a company, its central administration. Anyone domiciled in an EU country should be sued in that home state with some exceptions. Article 60 of the regulation stipulates what domicile means. For companies this means the place which is 8statutory seat, central administration or principle place of business 9. The regulation makes a major distinction between contracts with consumers, and other contracts. In European union where the consumer protection is considered as a vital principle demands better measures like those of Brussels 1 that would provide consumers at least the basic natural justice right to effective access to the courts and this means his state 9s courts. The consumer representatives in EU furthermore alleged that in establishing a Web site the e-Merchant is effectively invading the consumer 9s home and e-commerce is therefore something from which the consumer requires protection. One more issue is that since consumers can go to court in there one country for an e-dispute companies are forced to leave some certain markets were the uncertainty is high. But suppliers are arguing that because of the nature of e- commerce once the web site is fired up is made available globally. So there is a problem there for suppliers even if they use disclaimers to give the web site discretion over the consumers with whom he intends to deal. For example under a French law all terms in a consumer contract all terms must be in French. If a website established in the UK, in English, states in a disclaimer that it is available only to UK consumers is accessed by a consumer who is habitually resident in France, then it is likely that a Zissis K. Tialios MSc in E-Commerce Technology E- Commerce Law Essay 22 / 04 / 2002 16 French court would find it had jurisdiction and that the disclaimer was invalid. There are two different alternative views in the solution of this. One is that the parties should be free to decide whether to transact cross border with others and if they choose to do so, should accept the possibility of having to seek redress in a foreign court and since it is easier to ascertain the supplier 9s location than the consumer 9s then the supplier 9s local courts should have jurisdiction. A different approach in this matter would be that it is open to the suppliers to ask consumers where they are habitually resident and then to refuse to contract with any consumers resident in countries where the supplier does not wish the courts to have jurisdiction. E- Commerce technology can makes feasible the implementation of such steps before they make an invitation to treat to a consumer. Consumers who give false information would not be able to benefit of local jurisdiction. 5. Conclusion As a conclusion we must say that all the parties involved must act as to generate consumer confidence, which is necessary for open, competitive, and cross- border electronic commerce. Ensuring consumer protection and generating consumer confidence requires a combination of private sector initiatives and a clear, consistent and predictable legal framework. Easy access to fair and effective ADR, especially if provided online, has the potential to increase consumer confidence in cross-border electronic commerce and may reduce the need for legal action. Zissis K. Tialios MSc in E-Commerce Technology E- Commerce Law Essay 22 / 04 / 2002 17 Consumer groups and governments have to work together to educate consumers and businesses about good business practices, including ADR, as a means to ensure fair and effective implementation and enforcement, and promote consumer confidence to the fullest extent possible. The Internet, which can support the growth of cross-border consumer transactions at unprecedented levels, poses challenges to the existing legal framework. The issues of applicable law and jurisdiction will be difficult to resolve in the near term, but solutions at the international level would help to achieve the goals of global electronic commerce growth, consumer confidence and the predictability of transactions. At present, there are a wide variety of ADR schemes being developed and implemented in the marketplace, employing various different approaches and technologies. Governments should maintain adaptable policies that encourage the continued growth and development of new and innovative ADR mechanisms, technologies or approaches that are fair and effective Zissis K. Tialios MSc in E-Commerce Technology E- Commerce Law Essay 22 / 04 / 2002 18 6. BIBLIOGRAPHY 1. Electronic Commerce Law and Practice Second Edition Michael Chissick and Alistair Kelman 2. A Guide to the Law of Electronic Bussiness Daniel Tunkel and Stephen York 3. eCommerce: A practical Guide to the Law Susan Singleton 4. E-Commerce, Jurisdiction and Choice of Law Adrienne Seaman 5. EC Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, Brussels 1968 (Full Faith and Credit Convention) http://www.jus.uio.no/lm/ec.jurisdiction.enforcement.judgements.civil.commercial.matt ers.convention.brussels.1968/toc.html 6 . THE HAGUE CONFERENCE ON PRIVATE INTERNATIONAL LAW Preliminary draft convention on jurisdiction and the effects of judgments in civil and commercial matters. http://www.unice.org/unice/docum.nsf/AllDocumentsSearchEng/82AF4602596288FBC 1256B1A0057EBD9/$File/011128HAGUE.pdf 7. U.S.-EU Statement on E-Commerce, Alternative Dispute Resolution Office of International Information Programs, U.S.Department of State. Web site: http://usinfo.state.gov Zissis K. Tialios MSc in E-Commerce Technology E- Commerce Law Essay 22 / 04 / 2002 19 8. EC Convention on the Law Applicable to Contractual Obligations (Rome 1980) http://www.jus.uio.no/lm/ec.applicable.law.contracts.1980/toc.html 9. Report of Meeting, Centre Borschette, Brussels, 1 March 2001 http://www.ec-pop.org/20010111/report.htm 10. JUDICIAL COOPERATION IN CIVIL MATTERS (directive) Jurisdiction, recognition and enforcement of judgments in civil and commercial matters. http://europa.eu.int/scadplus/leg/en/lvb/l33054.htm#top

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