Rules Of Private International Law

The purpose of this project is to discuss the application of traditional rules of international private law rules on jurisdiction in case a transaction is concluded or performed through the Internet and the development of EU legislation in this respect.

Scope and Limitation

In this project, the researcher has concentrated on studying application of law in e-commerce in United States and United Kingdom legislation.

Research Methodology:

The researcher has made extensive use of the sources available at the National Law Institute University library, as well as the World Wide Web. This project has been divided into four parts: First part deals aim and scope of private international law along with the general rules of jurisdiction, Second part provides grounds of special jurisdiction and jurisdiction over consumer contracts, Third part deals with the prorogation of jurisdiction and arbitration, Last part deals with the conclusion.

Table of content:

Aim and scope of private international law……………………………………….4

General principles of jurisdiction …………………………………………………6

Special jurisdiction grounds……………………………………………………….9

The place of performance of the obligation in question

The place of operation of the branch, agency, other establishments

Jurisdiction over consumer contracts ……………………………………………11

Prorogation of jurisdiction ………………………………………………………13






The application of private international law to electronic consumer contracts raises new, complex, and controversial questions. It is new because consumer protection was not a private international law concern until very recently and e-commerce only became an important commercial activity within the last ten years. E-consumer contracts generate original questions which have not been considered under traditional private international law theories.

Traditional rules of private international law on jurisdiction are based on geographical connecting factors, such as domicile of the parties, which are sometimes not applicable in the Internet. Some other connecting factors, such as the place of contracting, the place of performance, the place where an establishment is situated, etc, are not so easy to be determined in the electronic world. At the same time, traditional rules of international law on jurisdiction cannot be set aside only because they seem not to be appropriate or relevant in this case.

It is complex because it has to deal both with difficulties raised by consumer contracts and the challenges of e-commerce. Reasonable resolutions to consumer contracts may prove inappropriate in e-commerce, while effective approaches to resolving private international law problems in e-commerce may be improper for consumer contracts. It is controversial because it concerns the conflicting interests of consumers and businesses in a fast-moving commercial environment - a fair balance is therefore hard to achieve.

Aim and scope of private international law

International private law provides rules of jurisdiction, choice of law and regulation and enforcement of foreign judgments for cases where the existence of a foreign element is present in the facts of the dispute. The aim of choice of law must be to select the appropriate governing law on criteria of justice and convenience for the parties.

Once the jurisdiction of cross-border dispute has been determined, the lex fori’s choice of law rules will be applied.

The operation of international private law rules are premised on connecting factors which are used to determine whether parties are physically present or their activities are associated with certain jurisdictions and laws in a material way. Domicile is important connecting factor most often used to determine whether parties are physically located in a jurisdiction. Connecting factor are means of ensuring that the closest and hereby the most appropriate, jurisdiction of a dispute can be foreseen. or determined with a degree of certainty and predictability. Since international law rules seek to ensure justice to the parties in a cross border dispute, an important consideration is the meaning of justice in this context and in the context of disputes between consumers and foreign sellers who have contracted by electronic means.

Sookman has defined electronic commerce as ‘ any kind of transaction that is made using digital technology, including transactions over open networks such as the internet, closed networks such as electronic data interchange(EDI) and debit and credit cards.

The united states has introduced the uniform electronic transactions act (UETA) and the uniform computer information transactions Act (UCITA) to regulate electronic commerce activity. the courts in US have also sought to adapt the rules of personal jurisdiction to apply to the defendant’s commercial activities conducted via e-commerce in a particular state.

Various international organizations such as the Hague Conference on private international law UNICTRAL have undertaken project and written reports and guidelines that have directed a national, and an inherently particularistic, approach to the legal regulation of contracts by e-commerce.

Where the American doctrine distinguishes between prescriptive, adjudicative and enforcement jurisdiction, the European rules make a fundamental distinction between jurisdiction and applicable law. The concept of “jurisdiction" is taken as to designate which Court is competent in order to rule a case. Once the “jurisdiction" ascertained, the judge has to designate the applicable law. Where jurisdiction is mainly based on territorial principle, the designation of the applicable law is mostly based on the closest connection to a legal system. In other terms, whereas an American Court looks for which law is applicable in order to ascertain its jurisdiction, European Courts are reasoning in two steps. In a first stage, the European judge will verify the jurisdiction rules in order to ascertain its jurisdiction; then, he will look at his rules of conflict of law in order to designate the applicable law. The result is that in international situations there is not often a forum legis.

The American approach is based on casuistry - in each case the judge analysis the facts in order to determine the applicable law. In Europe, there are abstract formulated rules which gives the judge the solution. Maybe it is true that at the end the result with both approaches is the same. However, for legal engineering, there is a fundamental difference as it is reasonably possible in Europe to foresee the applicable law at the moment of the conclusion of the contract for example. Even the modern principle of the closest connection, replacing the ancient lex loci executionis is an abstract formulated rule in the Rome Convention because it is in 9/10 of the cases the law o<SPAN STYLE="font-weight: medium">f the country of the residence of the party who is to effect the performance which is characteristic of the contract. It is only in some exceptional cases that the judge must refute the presumption in order to undertake a contact analysis in order to determine the applicable law.</SPAN>

Two different set of rules, abstract pre-formulated rules of conflict, that are the postulates of the European PIL and which must be taken in consideration in regard to the new paradigm of e-commerce

As e-commerce is not restricted to consumers and businesses situated in one jurisdiction, the ways in which other countries have sought to adapt their international private law rules for such contracts must be considered. Both countries economies have continued to maintain high levels of participation in e- commerce and have also adapted existing jurisdiction rules for consumer contracts and are in the process of modernizing choice of law rules. The court of the US have adapted their existing rules of personal jurisdiction in an attempt to ensure the online activities of a foreign defendant and the US is currently participating in negotiations for convention on choice of law rules for consumer contracts.

The UK has implemented an EU regulation which modified the jurisdiction rule for consumer contracts. The EU has recently adopted a regulation to replace the Rome convention 1980.

1.General principles of jurisdiction

The European national legal systems have a dual regime in regard to jurisdiction. If the defendant is domiciled or if the obligation is performed in the EC, one has to refer to the Brussels Convention. In the other cases, the judge applies its national jurisdiction rules.

The basic principle of the Brussels Convention is that only the forum domicilii has jurisdiction to adjudicate. However, the Convention provides some limited options and exceptions.

In respect to contracts, one has first of all to point out that the concept of “contract" is construed under the Brussels Convention independently of any particular national law and defined has an transaction between parties who have voluntarily undertaken an obligation towards the plaintiff. By art. 5.1 the plaintiff has an option between the jurisdiction of the domicile of the defendant and the jurisdiction of the place of performance of the relevant contractual obligation. If the action is based on a single obligation, one has to locate its place of performance by reference of the substantive law which governs the obligation under the choice of law rules of the country whose court is seized. If the plaintiff makes in the same action several claims based on different obligations from the same contract, jurisdiction belongs to the court of the place of performance of the most important obligation.

The difficulty here is obvious : how to locate the place of some specific obligations under a national law as they do not contain any provisions in this sense ? That's why the European Working Group proposes to modify art. 5.1 in adopting the place of delivery and the place of prestation as most modern codification do. The adoption of the place of performance of the contract instead of the relevant obligation would also help for cases involving e-commerce. How can under the actual regime a virtual transaction be localized like an online banking transaction ? Technically the obligation, resulting of a contract between a French client and a Swiss bank, of crediting a smart card is executed on a server which can be in the United States for example. The place of payment can neither be localized in case of use of e-money. However, either the place of prestation can be localized in the country where the bank is established or the place of delivery in the country where the client has his habitual residence.

The Brussels Convention foresees a certain number of protective jurisdiction rules as well. One of these is article 13 that allows the court of the domicile of the consumer to judge the litigation if in the State of consumer's domicile the conclusion of the contract was preceded by a specific invitation addressed to him or by advertising; and the consumer took in that State the steps necessary for the conclusion of the contract.

Unfortunately, during the Commission's public hearing in Brussels, it were surprising how the new draft was misinterpreted by the representatives of industry who consider that the simple fact of having a Website fulfills the new requirement. For torts and non-contractual restitutionary obligations, the plaintiff may sue the defendant's domicile jurisdiction or in the court of the place where the harmful event had taken place (art.5.3). The concept of harmful event has been interpreted as either the place where the wrongful conduct has occurred and the place where the resulting injury happened without however including the place where the victims claims to have suffered financial damage when the initial damage was suffered in another Member State. The Court of the place where the wrongful conduct has been occurred has jurisdiction to grant indemnities covering the whole prejudice beard in all the countries while the Court of the place where a the resulting injury happened only awards damages for the “national" prejudice.

In regard to enforcement of judgments, those rendered under the Brussels Convention are recognized and enforceable unless :

such recognition/enforcement is contrary to public policy;

the defendant was not duly served and did not have the opportunity to prepare its defense;

the judgment is irreconcilable with a judgment given in a dispute between the same parties in the State in which the recognition/enforcement is sought;

if the Court of the State of origin, in order to arrive at its judgment, has decided a preliminary question concerning the status or legal capacity of natural persons, rights in property arising out of a matrimonial relationship, wills or succession in a way that conflicts with a rule of the private international law of the State in which the recognition is sought, unless the same result would have been reached by the application of the rules of private international law of that State;

if the judgment is irreconcilable with an earlier judgment given in a non-contracting State involving the same cause of action and between the same parties, provided that this latter judgment fulfills the conditions necessary for its recognition/enforcement in the state addressed.

2.Special jurisdiction grounds

In some cases, the court other than that of the country where the defendant is domiciled can solve the dispute. This other court has so-called special jurisdiction on the issue. But in these cases the Plaintiff has still a right to choose whether he wants to sue the defendant in the court of his domicile or the other court.

2.1. The place of performance of the obligation in question

In accordance with Article 5.1 in case of breach of contractual obligations, the defendant may be sued before the court of the state where the obligation in question was performed. Article 5 of the Regulation governs the place of the performance of the obligation in question. In case the sale of goods, this will be the place where the goods were delivered or should have been delivered, in the case of the provision of services, the place where the services were provided or should have been provided under the contract. This solution absorbed earlier court practice on this matter. In case of several contractual obligations, which must be performed in different countries, the obligation in question will be a contractual obligation forming the basis of the legal proceeding, in case of several claims involving different obligations – the principal obligation.

Determining the place of performance will create no Internet-related problems when the product advertised on the Internet was delivered to the customer by post. But if, for example, you could download the product from the Internet (for example, music, games or books), by way of entering the code, which you received after the payment? Where would be the place of performance of the obligation, taking into consideration that you could download the product from anywhere in the world? Or is it going to be the place where the products were placed to the disposal of the customer by the seller?

Commission recommendations (Hague conference on Private international law, April 2000) provide that it was best to separate contracts concluded electronically online, but performed offline either wholly or in part, from those which, although concluded online, are also performed entirely online. For the first, jurisdictional based on the place of the performance remain the same.

For the second neither place of conclusion, the place of performance nor the place of activity are relevant. There exist an opinion think that downloading could constitute sending of a product.

2.2. The place of operation of the branch, agency, other establishments

Article 5(5) of all documents permits a dispute arising from the operations of a branch, agency or other establishments to be adjudicated by the courts for the place in which the branch, agency or other establishment is situated. To establish jurisdiction based on the location of the "branch, agency or other establishment" required, the branch must have been operated and subject to the control of the defendant and the dispute must have arisen out of the operations of that branch, agency or other establishment.

Can an Internet site constitute an establishment that can serve as a basis for jurisdiction pursuant to Article 5(5)? There exist a point of view that an Internet site itself could constitute an establishment, it was a code of a particular country in the address of the web-site, which could create a legitimate expectation on the side of the customer that he is dealing with an establishment situated in a particular country.

But Electronic Commerce Directive states that the place of establishment of a company providing services via an Internet website is not the place at which the technology supporting its website is located.

Therefore it could be concluded that the location of a web server would not establish jurisdiction. The web server is a conduit of information, similar to a telephone or a fax machine and need information input from the owner or operator of the web site itself if it is to make that site available and useful. That information may well come from another web server or servers. Accordingly to try to find out the precise server(s) from which the web site derived from could be time consuming and costly.

Whether an electronic agent constitutes a "branch, agency or other establishment" also remains to be considered. In any event, such an agent would have to be situated in a Member State to the Regulation and any dispute would probably have to arise from that agent's acts or omissions.

3. Jurisdiction over consumer contracts

Consumers have a special protection under the rules of the Conventions and the Regulation. When a contract is concluded between a professional and a consumer, consumer is regarded as a weaker party. Consumer is defined as a person who concludes a contract for a purpose exclusive his professional activities (Article 13.1 of the Conventions, Article 15.1 of the Regulation).

These specific rules apply to contracts for the sale of goods on installment credit terms; for a loan with installment credits, or for any other form of credit, made to finance the sale of goods, the list of contracts is open, so it could be any other contract (Article 15.1 of the Regulation, Article 13.1 of the Conventions). The consumer has a right to choose a competent court. It could be either:

i) court of the defendant’s domicile, or

ii) court of his own domicile (if the contract was preceded by advertising there and consumer took in that country the steps necessary for the conclusion of the contract)(Article 13 of the Conventions, Article 16 of the Regulation).

But the consumer can use this special protection only in case when the conclusion of the contract was preceded by a specific invitation addressed to him or by advertising in the state of his domicile; or the consumer took in that State the steps necessary for the conclusion of the contract (Article 13.3 (b) of the Convention). In case of electronic transaction, it’s very difficult to apply those rules.

In the new Regulation there is new concept of activities pursued in or directed towards a Member State (Article 15.1 (c). In a proposal for this regulation (Brussels, 14.07.1999 COM (1999) 348 final, 99/0154 (CNS), it said that this would apply in case of consumer contracts concluded via the Internet site accessible in his country of domicile. In case the site only advertising products (passive web-site) with no possibility to conclude a contract through the Internet, will give no grounds for special jurisdiction. You have to have the ability to conclude a contract through the site accessible in your country, and then you could use a special protection.

It actually raised anxieties in business world, because it gives the customer an opportunity to sue the company in every Member State, where you can conclude a contract. This problem could be solved by means of placing a list of countries which consumers could conclude a contract through the Internet. But this might not a very ‘clean’ method from the competition law point of view. There also proposed in a business world to take into consideration such facts as the use of the certain language, currency, etc. The use of the certain language may be a sign of orientation towards the relevant market. But this is not a fact that the court would consider such proposals.

ICC fears that proposed EU legislation would discourage companies, and particularly small and medium-sized enterprises, from embarking on B2C ventures and also place severe limitations on e-business in developing countries. The ICC statement said: 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.

There could be also situation where a Web site is neither passive nor active, for example, when it allows only a limited exchange of information, such as request for an order or for a consumer to add his name in a mailing list. Only European Court of Justice may decide in this case how to interpret a term directing such activities.

About the requirement that the consumer must have taken steps for the conclusion of the contract in his home country. How could we, if a contract was concluded through the Internet, find where the consumer took the relevant steps as he could access the site all over the world?

The new Regulation’s rules removed this requirement. So consumer can take advantage of special protection in case when contract was concluded in a state other than the consumer’s domicile.

4. Prorogation of jurisdiction

The court, which has a jurisdiction to solve the dispute, can be selected by common agreement between the Parties (Article 17 of the Conventions, Article 23 of the Regulation). Court should be located in a Contracting State. The jurisdiction could be different from that under Convention, except for the rules on exclusive jurisdiction (Article 15) and those, which are applicable to consumer contracts (Article 15). This rule is a solution to avoid all difficulties described above arising at the interpretation of jurisdictional rules of the Convention from one side, but there is its own problem here on the other side.

The choice of the court must be made in writing or it should be a verbal agreement with verbal confirmation. There was no decision of the EC Court of Justice whether an exchange of electronic messages fulfils this requirement. In Article 9 (of the Directive on electronic commerce it’s also provided that Member states shall ensure that their legal system allows contracts to be concluded by electronic means. And that Member states shall ensure that the legal requirements applicable to the contractual process can’t create any obstacles for the use of electronic contracts or affect their validity.

So the legislation of the EU members should develop in direction of accepting that electronic contracts and its condition (we are interested in agreement about jurisdiction) are equivalent to writing contracts, which would solve this problem for countries where the Regulation doesn’t apply, because Article 23 of the Regulation provides that any communication by electronic means which provides a durable record of the agreement shall be equivalent to writing. Means that clauses in contracts concluded by electronic means are valid and enforceable.


The validity of arbitration terms is usually determined under Article 2.1 of the New-York Convention, which is applicable in more than one hundred countries. According to this provision, only written agreements are valid prima facie. However, the requirement of writing is interpreted “normally by the reference to the mode of imposition of the medium rather than the reference top the medium itself".

This seems that it would be possible to have virtual arbitration clauses at the condition that the clause is accessible and that the other party can in a clear and comprehensive manner be informed about the clause.

The New-York Convention requires as well that the arbitration clause must be signed which excludes click-wrap contracts. Nevertheless, it is possible to consider that the signature is not required if the arbitration clause is considered as a reference clause, i.e. the main contract contains a reference to another document which stands outside of it. French case law validates this kind of clauses, and a French author sustains the idea that even a pure verbal arbitration agreement should be valid.

It has traditionally been considered that disputes related to consumer contracts were not arbitrable in order to protect the consumer against abusive or fraudulent practices by retailers and manufacturers with superior bargaining power. In this sense, the directive 93/13 considers as unfair a term which excludes or hinders “the consumer's right to take legal action or exercise any other legal remedy, particularly by requiring the consumer to take disputes exclusively to arbitration not covered by legal provisions", if the consumer has its domicile in a EU Member State. However, a new trend arises in favorem of the acceptance of arbitration clauses in consumer contracts.

In Hill v. Gateway 2000, an American Circuit Court ruled in a case, where consumers purchased a computer system by mail from Gateway 2000 and were the shipping carton contained a standard form contract with an arbitration clause, mentioning that the buyer would be deemed to have consented to the terms of the agreement unless the computer was returned within 30 days, that “ a contract need not to be read to be effective; people who accept take the risk that the unread terms may in retrospect prove unwelcome. Terms inside gateway's box stand or fall together.

If they constitute the parties' contract because the Hills had an opportunity to return the computer after reading them, then all must be enforced".

The French Supreme Court also enforced an arbitration agreement in a consumer contract, but the facts in case were established before the directive 93/13 has been transposed in French law. This leads me to think that for the moment consumer contracts cannot include arbitration agreements, unless that a teleological interpretation prevails that wants that the directive accepts arbitration clauses in consumer contracts if they are not unfair. In other words, the arbitrator would have to examine in detail the contract and decide if the arbitration term is unfair or not in the context of the negotiation and the general content of the contract.


It is very difficult to apply traditional rules of international private law on jurisdiction in case a transaction is concluded or performed through the Internet. The EU legislation is now developing to satisfy the needs of this field, some specific rules have been adopted. But there are still a number of issues to be approached. In particular, interpretation of international private law terms when they are to be applied in connection with electronic transactions. Business world has very serious anxieties about very wide interpretation of such terms. The EU Court of Justice has not had a chance yet to clarify these issues. Some more time is needed to adjust contemporary legislation to requirements of nowadays businesses in the light of new communicational techniques development.