Global Reach Brings Global Legal Liability

By Harowitz, Sherry L. | Security Management, October 2000 | Go to article overview

Global Reach Brings Global Legal Liability

Harowitz, Sherry L., Security Management

A Web page can instantaneously give a local or regional business an international presence. But that added reach has legal ramifications that have yet to be fully defined. Can simply posting a Web site subject a business to the laws and courts of hundreds of jurisdictions? The American Bar Association, through a cyberspace jurisdiction project, is searching for answers.

The question is whether a business selling to a person in a far-away state or country should be subject to the laws of the purchaser's country (country of destination) or whether the company only needs to concern itself with the laws where its own offices are located (country of origin). A third option is to allow the seller to prescribe the rules and disclose them to the consumer, the theory being that the buyer accepts the rules by accepting the transaction.

Looking at the cases that have already been litigated, jurisdiction will be determined by the level of interactivity and commerce, says Thomas P. Vartanian, head of the ABA project. For example, "if you are actually involved in interactive sales and commerce...there is probably jurisdiction" at the buyer's end. At the other end of the spectrum, if the site is purely passive, courts are less likely to assert jurisdiction. Everything in between is open to interpretation.

The ABA cites one case, for example, where the court determined that advertising via the Internet, which might be considered passive content, was enough to give the court jurisdiction where the ads were viewed, rather than where the company was based. "One of the problems," notes Vartanian, "is that some courts view cyberspace as putting you in that jurisdiction almost physically."

The bottom line is that "if you sell to everybody around the world, you've got to accept jurisdiction wherever you are selling. That's an easy legal answer," says Vartanian. "The more difficult legal question is what happens when you don't want to sell to 45 countries, and you do want to sell to 12. How do you make sure you are just subject to the jurisdiction of those 12 countries?"

The ABA Global Cyberspace Jurisdiction Project, which has prepared a paper on the topic, suggests that perhaps governments in the future should develop agreements so that jurisdiction will be determined based on such factors as disclaimers, targeting, and filtering. For example, explains Vartanian, "if you want to do business in France, there ought to be uniform rules and standards for you to target France with your Web site."

The standards might include having the Web site in French, with all of the disclosures, disclaimers, and documentation dealing with French law and with mechanisms in place for discouraging business from residents of other countries, such as a French-speaking person who might log on from Singapore.

In addition, Vartanian does not believe that there should be a "one size fits all" approach to this issue. Right now, the courts have tended to go with the country of destination. "What we are saying is that for different kinds of commerce, you need different kinds of answers. For consumers, [country of destination] may be the right answer, and for business-to-business it may not. And for hybrid forms of business, there may be a different answer."

Speaking at an ABA session on the issue, Federal Trade Commission Chairman Robert Pitofsky took issue with some of the ABA's suggested options, specifically with regard to consumer protections. "The prescribed-by-seller and rule-of-origin systems raise significant consumer protection concerns that risk undermining consumer confidence in e-commerce," he said.

Instead, Pitofsky recommended that efforts be focused on making companies more aware of practices that might expose them to liability under the existing country-of-origin legal framework.

Pitofsky also suggested that private sector programs like codes of conduct, escrow programs, and the use of alternative dispute resolution programs could alleviate the legal burdens arising from global business over the Internet. …

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