Summary:

The following are CPT's comments for a March 1, 2000 meeting in Ottawa on the Hague Convention on Jurisdiction and Foreign Judgements in Civil and Commercial Matters. CPT is concerned about proposals that would eliminate the right of consumers to bring legal actions in their own countries, weaken consumer rights in intellectual property, and authorize private trade associations to write their own privacy and consumer protection rules that would preempt national laws.

Background:

These extraordinary discussions concern a proposed Hague Convention on Jurisdiction, that would include provisions regarding business-to-consumer transactions in cyberspace. The Hague Convention was first proposed in 1992, long before anyone was considering the impact of the Internet.

Formal negotiations began in 1996. The Convention was supposed to be finished this year, but has been slowed by controversy, particularly over the ecommerce provisions. There are meetings this week in Ottawa on electronic commerce and a proposed meeting in July in Geneva with the World Intellectual Property Organization (WIPO).

CPT, Consumers Union, and the National Consumers League were briefed on the treaty last week. We were told it was the first briefing for consumer groups. There have been extensive business sector involvement in the treaty negotiation process. For example, in meetings this week in Ottawa the US delegation includes Cindy Rose, an employee of Disney.

In the negotiations, the US government is opposing language (Article 7) that would guarantee a consumer the right to bring a private legal action in her country of residence.

Key persons working on the Hague Convention are also proposing a system whereby an ecommerce firm could seek a private sector "certification" that it provided good consumer protection or privacy practices. Such a certification would mean that a business would not be required to abide by country of destination laws. The certification proposal provides a context for the current Federal Trade Commission/Department of Commerce efforts to push for "alternative dispute resolutions (ADR) systems.

Jamie Love, Director, Consumer Project on Technology
love@cptech.org, http://www.cptech.org

cc: Jeffrey Kovar, US Department of State
Mark Bohannon, Department of Commerce
Commissioner Mozelle Thompson, Federal Trade Commission
Michael Donohue, Federal Trade Commission

Views of the Consumer Project on Technology

James Love

March 1, 2000

Meeting in Ottawa on the Hague Convention on Jurisdiction and Foreign Judgements in Civil and Commercial Matters

The Consumer Project on Technology (CPT) is a non profit organization created by US consumer advocate Ralph Nader. The work of CPT is on the web at http://www.cptech.org.

CPT is concerned about several issues in the Hague Convention on Jurisdiction and Foreign Judgement in Civil and Commercial Matters. In particular, we are interested in the provisions in the Convention that address business-to-consumer transactions, including transactions in electronic commerce.

In the October 1999 draft of the Convention, there are strong protections for consumers with respect to the issue of jurisdiction. In Article 7, consumers cannot alienate, at the time of the transaction, their right to sue in their home courts. Only after a dispute takes place could consumers be asked to make a "choice of court" that would exclude the right to sue in the home country jurisdiction. We believe this is the correct approach. Choice would be permitted if the consumer had a real opportunity to decide which court to use, and the choice would make the consumer better off.

It is our view that consumers will be harmed if they are faced with contracts of adhesion that undermine consumer rights on issues of jurisdiction of law. This is an issue in the United States now, where contracts that address jurisdiction are common. For example, Microsoft routinely presents consumers with "take it or leave it" contracts that establish King County, Washington as the venue of jurisdiction. Corel, a Canadian software firm, requires consumers to "agree to irrevocably submit to the jurisdiction of the Courts of the Province of Ontario." The October 1999 draft, particularly Article 7(3), would protect the consumer interest, by declaring these contract provisions to be invalid in international business to consumer transactions.

Unfortunately, the US government has voted against the October 1999 draft of Article 7, on the grounds that US businesses oppose rules that guarantee consumers legal rights in the country where they live. We are also concerned with reports that large ecommerce firms are lobbying the European Union for changes in the EU position on the same issue. Moreover, other proposals would create new systems of private law making, and eliminate existing legal rights.

In the press release from the September 1999 Geneva Roundtable on electronic commerce and private international law, Professor Catherine Kessedjian, the Deputy Secretary General of the Hague Conference on Private International Law, made a proposal that sellers could go through a certification process concerning:

"minimum substantive rules of protection for the consumer including warranties, and a fair and easy dispute resolution mechanism which could possibly be free of charge to the consumer."

Professsor Kessedjian further proposed that:

"When a site has obtained the certification label, it could provide for the application of the law of the country of origin and for the courts of that country for the residual cases which could not be solved by the dispute resolution mechanism part of the certification."

Professor Kessedjian says this will "avoid the traditional dichotomy between the "country of origin" and the "country of destination," and she suggests the certification process be "along the lines of the work done within the icc and other private organizations."

We are concerned and indeed alarmed that the Hague Convention is considering an agreement that would permit private organizations to exempt sellers from laws where the consumer resides. We recognize that this is not part of the current draft of the Convention, and we strongly oppose its inclusion.

We are further troubled by item 9 of the press release from the September 9, 1999 Geneva Roundtable, which included this proposal regarding privacy laws:

9.In the matter of data protection, the Round Table recognized that data collection, personal data included, and processing thereof are inherent to electronic commerce. The dichotomy between systems which do not accept general standards and those which require a rigid a priori framework for the collection and transfer of data should be avoided. Furthermore, it is necessary to carry out a study on the most relevant system of applicable law which would also allow a greater role to self-regulation and model contracts such as those proposed by the icc and in line with the principles recommended by the Council of Europe.

Taken together, the opposition by the US and others to the October 1999 draft Article 7 language, and the proposals to create "self regulation" mechanisms that would exempt sellers from national laws in the country where the consumers reside, raise the possibility that the Hague Convention will be used to privatize parts of our legal system and shift control of public policy from democratically elected governments to powerful industry trade groups.

It is also relevant that these proposals are being taken at a time when large ecommerce firms are asking US State governments to enact a controversial "Uniform Computer and Information Transactions Act," known as UCITA, that will greatly expand the domain of contracts of adhesion in the United States.

Under a system of Hague Convention exceptions from national jurisdiction and UCITA-style contracts of adhesion, one can imagine a future where consumer rights will be extremely limited and sellers of ecommerce services will write their own private laws.

It is of course difficult to address global jurisdictional issues in cyberspace, and there are good reasons to seek more uniform rules for electronic ecommerce. However, we are also mindful of the benefits of democratic governance, and national laws to protect consumers from abusive practices by businesses. Greater efficiencies in global ecommerce business are not a rationale for stripping consumers of their rights, including the right to elect the governments that determine the rules of commerce.

Discussions with TACD

After several years of meeting with various business lobbyists, the negotiators for the Hague Convention would benefit from a broader engagement with consumer interests.

The Hague Convention should schedule a meeting with the Trans Atlantic Consumer Dialogue and other consumer interests to address issues concerning the appropriate forums for setting norms for consumer and privacy protection. The TACD has adopted statements on electronic commerce for unfair contracts, intellectual property rights, the appropriate framework for alternative dispute resolution systems, jurisdiction of law and other topics. These are found on the TACD web page at: http://www.tacd.org. TACD is also working on a statement regarding self regulation and consumer protection, and the development of international institutions that address global consumer protection issues.

While this Hague convention is focusing on issues relating to private judgements, it would be useful to consider a joint workshop on jurisdiction issues, where there would be discussion of the special issues of cross national jurisdiction for laws dealing with unsolicited commercial mail, consumer privacy, the marketing of securities on the Internet, and the difficulties of regulating Internet marketing practices for a wide range of goods regulated in non-internet media. It would also be useful to compare the approaches in the consumer protection and privacy area to the approaches in the area of Intellectual property, and to explain why self regulation should be accepted in areas of consumer protection and privacy, but rejected in matters concerning intellectual property rights. We suggest the Hague Convention approach the TACD about joint sponsorship of a meeting on this topic.

Background Information:

http://www.hcch.net/e/events/press01e.html
http://cuiwww.unige.ch/~billard/ipilec/
http://www.hcch.net/e/members/members.html
http://www.state.gov/www/global/legal_affairs/whats_new.html
http://www.state.gov/www/global/legal_affairs/991030_forjudg.html