Version 1.0a
June 2, 2001
This note addresses concerns over the negotiations for a new treaty that seeks to strengthen the global enforcement of private judgments and injunctive relief in commercial litigation. While the convention would clearly have some benefits, in terms of stricter enforcement of civil judgments, it would also greatly undermine national sovereignty and inflict far-reaching and profound harm on the public in a wide range of issues.
The treaty is called the Hague Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters, and is being negotiated under the little known Hague Conference on Private International Law. The treaty is complex and far reaching, but is effectively unknown to the general public.
In this paper, I examine the following issues.
II. HOW DOES THE TREATY WORK?
The general framework for the convention is as follows.
1. Countries which sign the convention agree to follow a set of rules regarding jurisdiction for cross-border litigation. Nearly all civil and commercial litigation is included.
2. So long as these jurisdiction rules are followed, every country agrees to enforce nearly all of the member country judgments and injunctive orders, subject only to a narrow exception for judgments that are "manifestly incompatible with public policy," or to specific treaty exceptions, such as the one for certain antitrust claims.
3. A judgment in one country is enforced in all Hague convention member countries, even if the country has no connection to a particular dispute.
4. There are no requirements to harmonize national laws on any topic, except for jurisdiction rules, and save the narrow Article 28(f) public policy exception, there are no restrictions on the types of national laws that to be enforced.
5. All "business to business" choice of forum contracts are enforced under the convention. This is true even for non- negotiated mass-market contracts. Under the most recent drafts of the convention, many consumer transactions, such as the purchase of a work related airline ticket from a web site, the sale of software to a school or the sale of a book to a library, is defined as a business to business transaction, which means that vendors of goods or services or publishers can eliminate the right to sue or be sued in the country where a person lives, and often engage in extensive forum shopping for the rules most favorable to the seller or publisher.
6. There are currently 49 members of the Hague Conference, and it is growing. They include:
Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Chile, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, Former Yugoslav Republic of Macedonia, France, Germany, Greece, Hungary, Ireland, Israel, Italy, Japan, Republic of Korea, Latvia, Luxembourg, Malta, Mexico, Monaco, Morocco, Netherlands, Norway, Peru, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Suriname, Sweden, Switzerland, Turkey, United Kingdom of Great Britain and Northern Ireland, United States of America, Uruguay and Venezuela.
III.THE CONSEQUENCES OF GLOBAL ENFORCEMENT OF NON-HARMONIZED LAWS.
The early discussions on the current convention began in 1992, largely in the context of judgments where businesses would be the defendants, for disputes involving physical goods or traditional services. Only recently has there been recognition of the far-reaching consequences of using the treaty framework for address disputes involving the Internet, or litigation involving intellectual property claims or information in general.
The Internet issues deserve special attention. The treaty gives nearly every member country jurisdiction over anything that is published on or distributed over the Internet. If the treaty (as written) is widely adopted, it will cripple the Internet. The reason is fairly straightforward. The Hague framework begins with the notion that there will not be harmonization of substantive law, only harmonization of rules regarding jurisdiction and enforcement of laws. So it is a fundamental part of the Hague treaty that laws that are very different from each other will be enforced, across borders.
For example, under the treaty, different national laws concerning libel or slander will give rise to judgments and injunctions, as will different national laws regarding copyright, patents, trademarks, trade secrets, unsolicited email, unfair competition, comparative advertising, parallel imports of goods, and countless other items. As a consequence, people will find that activities that are legal where they live are considered illegal in a different country and that under the treaty, the foreign country will likely have jurisdiction, and their laws will be enforceable in all Hague member countries.
To be more concrete, note that under different national copyright laws, authors can liberally use quotations from other authors in some countries, but not in others. Software engineers can decompile or use other reverse engineering techniques to find out how to make software programs work together (be interoperable) in some countries, but not in others. In some countries school teachers can distribute newspaper stories and other copyrighted materials in class rooms as a fair use, but such distribution would be illegal in other countries. Some countries allow the use of parody as an exception to copyright or trademark laws, while other countries do not. In some countries it is permissible to disparage products or publish comparative price advertisements, while in other countries it is not. In some countries it is permitted to publish leaked memorandums and documents that embarrass governments or corporations, but in other countries this would be considered a violation of copyright laws (as in the UK David Shayler case), or a wrongful disclosure of proprietary business information. Rap music that legally uses "sampling" of music under US law will violate certain European copyright regimes where this is illegal. In some countries a failure to obtain permission to hyper-link to a web page or use a meta-tag with the name of a business is considered an infringement of intellectual property, while in other countries it is not. This list of examples could go on and on.
There are fundamental problems with enforcing every country's national trademark laws on the Internet, because different firms sometimes claim the same mark in different countries, and what may be a generic term in one country is a proprietary mark in another country. These are important and difficult conflicts and it is useful for policy makers to seek solutions to these jurisdictional disputes, but a "solution" that simply enforces everyone's laws on everyone is really no solution at all.
In the patent area, the Hague convention would force European governments to begin enforcing judgments and injunctive relief from US software and business methods patents, even though software and business methods cannot be patented in many European countries. As the rest of the world is forced to pay for US software and business methods patents, they will enact their own anti-competitive and poorly managed software and business method patent systems, and US citizens will have to pay for those too.
The Internet related cases are the most obvious areas where the Hague Convention will cause problems, but hardly the only cases.
IV. WHAT IS THE SIGNIFICANCE OF THE ARTICLE 4 CHOICE OF FORUM CLAUSE IN THE HAGUE CONVENTION?
As noted above, under all current drafts of the convention, "business to business" choice of court clauses must be enforced, even those involving mass marketed non-negotiated contracts. In the Edinburgh drafts, business to business contracts are defined as everything that does not involve personal household use, and so every library, every university and school, and every work related purchase, will be considered business to business transactions, and even click on or shrink wrapped licenses with choice of court clauses must be honored. This is spelled out in Article 4 of the proposed Convention.
In an earlier attempt to negotiate a treaty on jurisdiction, this choice of court provision was not mandatory in all contracts, and in particular, there was good language to exempt contracts that were abusive or unfair. The 1965 text, which has *NOT* been used in the current treaty negotiations, read:
"The agreement on the choice of court shall be void or voidable if it has been obtained by an abuse of economic power or other unfair means."
With the elimination of the safeguards against unfair and abusive contracts, you now have a mandatory choice of court clause in Article 4. This will have a huge effect on national sovereignty, because any publisher or seller of any product can simply shift jurisdiction, by contract, to a different country.
One effect will be in the area of books or videos, where publishers can use contracts to shift jurisdiction to countries (there are many in Europe) that do not recognize the "first sale" doctrine which permits zero royalty lending by libraries or video stories. The South Africa victory over the pharmaceutical companies for parallel imports of medicines could be undermined by choice of forum contracts that select courts that did not recognize the first sale doctrine. Airlines, banks and any number of institutions can use these choice of court agreements to change the country where disputes are heard. Any seller can use Article 4 to shop for favorable national laws, and also to deny the public the opportunity to seek redress or defend actions in the countries where they live, which is a huge burden for most people and small businesses and non-profit organizations.
The contracts can also shift jurisdiction on software to countries that do not permit reverse engineering. Web pages that have terms of service agreements on such issues as hypertext linking or use of company or brand names in meta- tags, or that require prior approval for reviews of products, or any number of other clauses, all of which exist today, would be much stronger because companies could simply point the choice of court to the jurisdiction most likely to actually enforce these provisions. The free software movement would be particularly vulnerable to these provisions, as well as the expanded reach of overly broad national laws on software patents and trade secrets.
V. THE SIGNIFICANCE OF MANDATORY ENFORCEMENT OF ALL SUI GENERIS INTELLECTUAL PROPERTY LAWS ON MARKETS FOR DATA, MUSIC, MOVIES, PHARMACEUTICALS AND BIOTECHNOLOGY.
Sui generis systems for protecting intellectual property are those that are special systems -- one of a kind -- that fall outside of traditional IPR regimes like copyright, patents or trademarks. For example, the US has a sui-generis regime to protect data from clinical trials on pharmaceutical drugs, Europe is implementing national sui generis legislation on databases, and several African, Asian and Latin American countries have sui generis regimes on traditional learning and culture, and a there are quite a few efforts to create sui generis regimes on genetic and biological resources, to mention only a few areas where sui generis regimes are being discussed.
There is no doubt about the status of sui-generis IPR regimes in the Hague convention -- they are all enforceable, regardless of what they are. At present these laws are often controversial, because they push protections into new areas, that would otherwise be in the public domain. But under the convention, countries could get enforcement of judgments globally, even if no other country had a similar regime.
For example, if Cuba enacted a sui generis regime and declared that the Cuban "beat" was intellectual property, it could get a judgment in Cuba against US record companies that were engaged in cultural "piracy," and demand for example, 5 percent of the revenues from global sales of music that use the Cuban beat. Other countries could do the same thing. These judgments would be enforceable globally, under the Convention. So too would bio-piracy judgments against US and European biotechnology and pharmaceutical companies, for "stealing" traditional knowledge, or exploiting without benefit sharing a variety of biological and genetic resources. The motion picture industry could be hit with new sui generis IPR liabilities by countries that give rights in history. Countries like China, which is a member of the Hague Conference, could use this to limit who could actually make films about China. The Hague convention would instantly create a legal framework to legitimatize all of these new IPR claims, and it would not even matter if the "infringing" party did business in the country at all, since the judgments would be enforceable globally, in any Hague member country, and the claims could be based upon shares to global (rather than local) revenues of products.
Some would consider this a positive feature of the Convention, because it would give the developing countries opportunities to "tax" the rich countries, under new and controversial IPR regimes. But of course, the rich countries could and will also enforce their own regimes, including, for example, the European Union sui generis regime on database protection. The US and EU would probably modify their sui generis regimes on pharmaceutical registration data to make it illegal for developing countries to rely upon those data for registration of generic products in poor countries, an approach already included in the new US-Jordan "Free Trade" agreement. And in general, would one would observe is a new dynamic of everyone trying to create their own "rights" in everything, until the public domain shrinks if not disappears altogether.
The Hague negotiators have never been willing to explore and discuss the merits of including national sui-generis laws regarding intellectual property in the Convention.
VI. THE ARTICLE 28F PUBLIC POLICY EXCEPTION FAILS TO PROTECT THE PUBLIC, AND THE CONVENTION UNDERMINES COMMON CARRIER PROTECTIONS FOR ISPS.
In discussions regarding the treaty, we have brought to the attention of the delegates all of the issues and many others as well. We have indicated the treaty will shrink the public's rights to only those that exist in every country, which of course is smaller than what exists in *any* country -- a frightening outcome, and we have pushed to have intellectual property or e-commerce removed from the convention, and we have pushed for a variety of more minor fixes, such as to improve Article 4 or Article 7 or to exempt the first sale doctrine. In these discussions, the Hague Negotiators frequently refer to the so-called public policy exception, which provides that judgments need not be enforced if:
28(f) recognition or enforcement would be manifestly incompatible with the public policy of the State addressed.
This provision is of course quite important, but it should not be used to justify a convention that is fundamentally the wrong approach. Moreover, its usefulness is much undermined by the fact that judgments will be enforced in *any* Hague member country -- the so called "you can run but you can't hide" provision. Moreover, for Internet related disputes, the ISP will typically be sued, both because it has deep pockets and because it has assets in many countries. In those cases, the IPS will only escape the judgment if *every* country finds the judgment "manifestly incompatible public policy." And the plaintiff need only find one country that is willing to enforce the judgment. Also, there are all sorts of creative ways that suits can bring in parties that are vulnerable to enforcement. In addition to suing ISPs like AT&T or Verizon that clearly have assets all over the place, one could sue an IPS that had a peering relationship with another ISP, and refused to block bits from an offending site. ICANN could be hit with cross border injunctive requests to remove IP numbers or domains. Lots of things are possible.
Moreover, it is not at all clear that it will be easy to get countries to refuse to enforce judgments under Article 28f, because they will want their own judgments enforced, particularly countries like the USA or in Europe, that are anxious to have intellectual property infringement cases enforced globally.
All of this the practical effect of undermining the common carrier status of IPSs, because they will likely not be considered a common carrier in all countries where they have assets. This will lead to content regulation by IPSs, who will fear liability in countries with restrictive laws. A Chinese lawsuit against a US citizen who criticizes a Chinese official, might be undertaken in China, but enforced against AT&T in Korea, Romania or anywhere else, creating a limitation on speech in the USA that would never involve a US judge. Indeed, this could happen even is the USA does not sign the convention, if other countries do.
VII. WHAT CAN PEOPLE DO?
The most important thing people can do is to contact their own national governments to find out who their negotiators are, and to raise directly your concerns. If you don't know where to start, look a this page for links to the agencies that are representing countries in the Hague:
http://www.hcch.net/e/members/members.html
Also be sure to ask your member of Congress or Parliament to address your concerns.
The CPT web page on the Convention is here:
http://www.cptech.org/ecom/jurisdiction/hague.html
From this web page you can check out the texts of the
Convention. Questions and comments about the Hague Convention may be directed to CPT's Hague Convention email discussion list. You can also send documents and comments
about the Hague convention to Vergil Bushnell, and he can add them to the page.