Dispute Resolution in Cyberspace

by Devashish Bharuka and William Fisher

last modified:  June 25, 2001


Table of Contents


Introduction

What court or other tribunal may and should resolve a particular controversy?  That composite question arises often with respect to conflicts in "real space."  Efforts to answer it have generated several venerable and formidable bodies of legal doctrine:  personal jurisdiction, subject-matter jurisdiction; venue; and the collection of rules and policies collected under the umbrella of "alternative dispute resolution."

For three reasons, the same composite question arises unusually frequently -- and in unusual postures -- in cyberspace.  First, the plaintiff and the defendant in a cyberspace dispute often reside in different countries.  Indeed, the defendant's only contact with the jurisdiction in which the plaintiff is inclined to bring suit is likely to consist of having made his or her website available to computer users there.  Under such circumstances, the question of whether the defendant is amenable to suit in the jurisdiction congenial to the plaintiff arises especially sharply.  Second, speed is often especially important in resolving Internet-related controversies.  The glacial pace of most court proceedings is ill suited to such controversies -- creating unusually strong incentives for the identification or creation of alternative fora.  Third, as the previous modules have shown, many cyberspace disputes raise novel issues of substantive law and of technology -- issues that frequently perplex courts of general jurisdiction.  Thus, the pressure for finding some alternative (more specialized or more flexible) forum for resolving such disputes increases.  This module examines the rapidly growing body of case-law and scholarship growing out of the foregoing concerns.

Table of Contents | Introduction | Readings | Questions for Discussion | Additional Resources

Readings

1.  Personal Jurisdiction

Of this collection of issues, the one that, to date, has been litigated most often is personal jurisdiction.  Under what circumstances may a court legitimately exercise jurisdiction over the defendant in an Internet dispute?  Set forth below are summaries of how that question has been addressed in three legal systems:  the United States, the European Union, and Australia.

a. United States

In the United States, the establishment of personal jurisdiction by a court over a defendant requires two things.  First, some statutory provision must empower the court in question to exercise jurisdiction over the defendant.  State statutes typically indicate that any of the following will be sufficient:

Second, the exercise of jurisdiction under the circumstances must comport with the Due Process Clause of the Fourteenth Amendment to the Federal Constitution.  That, in turn, requires that the defendant have had "such minimum contacts with the [state in question] so that the exercise of jurisdiction does not offend traditional notions of fair play and substantial justice."

Is a defendant who lives and conducts business in state (or country) X, but whose website is available over the Internet to computer users in state Y, subject to the jurisdiction of the courts of state Y?  Judges who have been confronted with this question have usually focused on the degree to which the defendant's website can be described as "active" or "passive."  For example, in the leading case of Zippo Manufacturing Co. v. Zippo Dot Com, Inc. 952 F. Supp. 1119 (W.D. Pa. 1997), the court held that the likelihood that personal jurisdiction can be constitutionally exercised is closely related to the nature and quality of the commercial activity that an entity conducts over the Internet.  At one end of the spectrum are situations where a defendant clearly does business over the Internet.   For example, if the defendant uses the Internet to enter into contracts with residents of the forum state, personal jurisdiction is plainly proper.  At the other end of the spectrum are situations in which a defendant has simply posted information on a website that, because of the global character of the Internet, is accessible to users in the forum state.  The operation of "passive" Websites of this sort does not justify the exercise of personal jurisdiction.  The hard cases lie in between these two extremes.  For example, in situations in which computer users in the forum state can exchange information with the defendant's website located elsewhere, the legitimacy of the exercise of jurisdiction should be determined by considering the level of interactivity and the commercial nature of the exchange of information.

A sampler of cases developing and applying this approach would include:

In trying to reconcile these decisions, you might find helpful the attached Zippo Sliding Rule, constructed by Devashish Bharuka.  Other recent scholarship trying to make sense of these decisions include:

A few states have attempted to reach a wider set of Internet-related activities than the foregoing analysis would suggest.  For example, the Attorney General of Minnesota issued a Statement asserting both civil and criminal jurisdiction over "[i]ndividuals and organizations outside of Minnesota who disseminate information in Minnesota via the Internet and thereby cause a result to occur in Minnesota."  The State of Virginia, in its Internet Policy Act enacted on March 29, 1999, “establishes personal jurisdiction for transmitting unsolicited electronic mail in a bulk transmission to or through an internet service provider's network or facility located within the Commonwealth.”  By contrast, the Florida Attorney General was of the opinion that any effort to regulate use of the Internet is better suited to federal regulation than to patchwork attention by individual states.
 

b.  European Union

There does not yet exist an analogous body of case law in the European Union.  However, several Conventions govern the circumstances in which the exercise of jurisdiction would be proper, and various scholars recently have suggested how those conventions would and should apply to Internet-related disputes.

The central principle of the Lugano Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters is that the power of a state to assert jurisdiction over a person domiciled therein will be decided upon according to the internal law of the state itself.  Several exceptions to this principle have been enumerated.  For example, in contractual relationships, a person may be sued in the courts of the country where the obligation should be performed. In the case of involvement of a branch, agency or other establishment, the courts of the place where such branch, etc. is situated have jurisdiction to adjudicate the matter.  In consumer disputes, the complainant is entitled to bring proceedings against a supplier of goods or services or a creditor in the state where the consumer is domiciled.  Finally, an entrepreneur can only bring proceedings against a consumer in the country where the consumer is domiciled.

The Romano Convention on the Law Applicable to Contractual Obligations deals with the choice-of-law issues. Parties are free to choose the law applicable to a whole contract or to parts of a contract. In the absence of any valid agreement regarding choice of law, the applicable law shall be that of the country most closely connected to the agreement.  Here too, consumers are given special protection.  A consumer's right under the law of his domicile cannot be overridden by a contractual choice-of-law provision if (1) the execution of the contract was preceded by specific invitations addressed to the consumer or by advertising directed towards the consumer; or (2) the seller or its agents received the order in the country of the consumer.

Agne Lindberg argues that, when these conventions are applied to Internet-related disputes, the physical domicile of entrepreneurs acting on the Internet will still be the determining factor when deciding which are the competent courts and which is the applicable law within the EC countries.  He suggests that these Conventions are already well suited for the Internet transactions and that the European Court of Justice can and will apply them properly to the new medium.

Also important in the E.U. context is the "country of destination rule," which entitles a consumer to bring suit in his own domicile whenever the defendant has been pursuing business activities in the consumer's domicile or directing commercial activities towards that state. In relation to e-commerce, this rule, in view of Frederica Greggio and Andrea Platania, would mean that the proprietor of an interactive website based in an E.U. Member State would be subject to the jurisdiction of any E.U. Member State where his website is accessible.

The European Commission has proposed the targeting approach in its draft regulation to implement the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters as part of E.U. Law. Greggio and Platania analyze the impact of the proposed Council Regulation on Jurisdiction and the Recognition and the Enforcement of Judgments in Civil and Commercial Matters, aimed to replace and update the Brussels Convention.
 

c. Australia

Traditionally, Australian courts have been somewhat more willing than American courts to require out-of-state defendants to appear and defend themselves. In Australia, a personal action typically is initiated by serving the defendant with a writ or other originating process. Such service generally establishes the court’s adjudicative jurisdiction over the person served. Regarding interstate service, the Service and Execution of Process Act of 1992 provides for jurisdiction by initiating process in an Australian State or Territory to be served in another State without the need to show a nexus between the initiating State and the parties or the cause of action.

No judicial opinions or legislation have yet attempted to apply these principles to online disputes. In the attached article, Mallesons Stephen Jacques discusses the current status of Australian law on this subject and how it is likely to develop in the near future.
 


2.  Conflict of Laws

Once a tribunal has been selected, the next question is:  what body of substantive law should be use to resolve the controversy.  As previous modules have shown, the laws in force in different countries pertaining to the Internet vary considerably.  Thus, the choice of law often matters.  In the United States, the meta-doctrine that determines which substantive law should be applied in known as conflict of laws.  In other countries it is more likely to be called "private international law."   This is a notoriously unstable, shifting field of doctrine, characterized by warring principles or tests.  Some of the major contending principles include the ‘the most significant relationship’ test, the ‘center of gravity’ approach, and the ‘interest’ approach.

It is far from clear how this body of law will or should be brought to bear on Internet-related disputes.  The attached articles offer two views.  Hao-Nhien Q.Vu outlines the major tests that might be employed.  Paul Edward Geller focuses on lawsuits claiming infringement of intellectual property over the Net.  Geller argues that, in such cases, cross-border infringing acts could be best localized by considering consequences for judicial remedies.
 


3.  Alternative Dispute Resolution

The term, "Alternative Dispute Resolution" (ADR), refers to a miscellaneous collection of techniques -- most notably, arbitration, mediation, and negotiation -- that in some contexts have proven to be more efficient and arguably more fair in resolving controversies than traditional forms of litigation and adjudication.  A rapidly growing group of organizations are now employing the Internet to offer ADR services -- both for "real-space" disputes and for Internet-related disputes.  Examples include:

In Online ADR: An Issues Primer, Anita Ramasastry examines these systems and discusses their merits and demerits.  You may find especially helpful her summaries of the services offered by the Better Business Bureau (Arbitration and Peer Pressure), Clicknsettle.com (Negotiation), and Squaretrade.com (Mediation).  A summary of her argument by Devashish Bharuka is available here.
 
 

4.  The Net: A Separate Sphere?

Some observers believe that the Internet could and should regulate itself.  They argue that legislation and adjudication -- inevitably the product of nation-specific institutions -- are less effective and appropriate vehicles for shaping the Internet than “Internet Arbitration” and “Electronic Federalism.”  For descriptions and evaluations of these arguments, see:

A related perspective sees the Internet as, at least potentially, a jurisdiction of its own.  Territory-less, non-physical, and virtually sovereign-free, it could be understood and could function as an autonomous jurisdiction -- analogous to the special jurisdictions that have already been established for Antarctica and Outer Space.  How would such a jurisdiction be governed?  Two possibilities:  (1) the Internet could regulate itself and create laws of its own, as Dilloway puts it, by “experience”; (2) the existing nations could adopt a Convention of Cyberspace similar to the international convention governing the Law of the Sea and Admiralty Law.  This vision is presented and assessed in the following articles:

Table of Contents | Introduction | Readings | Questions for Discussion | Additional Resources

Questions for Discussion

1) What do you think of George Perry's suggestions concerning how an online enterprise could limit its vulnerability to being sued in a foreign jurisdiction?

4) Greggio and Platania in their article, “The Competent Jurisdiction in B2C Contracts,” argue that, ‘In relation to e-commerce the “country of destination rule” would mean that the proprietor of an interactive website based in an E.U. Member State would be subject to the jurisdiction of any E.U. Member State where his website was accessible (i.e. potentially every Member State…”  Do you agree with this position? Can we harmonize the E.U. ‘country of destination rule’ with the U.S. personal jurisdiction rule of ‘minimum contacts’ to create a more favorable solution?  Is the Sliding Rule developed in the Zippo case helpful?

5) Larry Lessig introduces his article, "The Law of the Horse," 113 Harv. L. Rev. 501 (1999), with the following anecdote:

A few years ago, at a conference on the "Law of Cyberspace" held at the University of Chicago, Judge Frank Easterbrook told the assembled listeners, a room packed with "cyberlaw" devotees (and worse), that there was no more a "law of cyberspace" than there was a "Law of the Horse"; that the effort to speak as if there were such a law would just muddle rather than clarify; and that legal academics ("dilettantes") should just stand aside as judges and lawyers and technologists worked through the quotidian problems that this souped-up telephone would present. "Go home," in effect, was Judge Easterbrook's welcome.

Lessig goes on to disagree with Easterbrook.  What do you think?  What, if anything, can we learn from the study of the distinctive forms that legal issues take when they arise on the Internet?  More fundamentally, is there -- or should there be -- a separate "law of cyberspace"?
 


Table of Contents | Introduction | Readings | Questions for Discussion | Additional Resources

Additional Resources

Table of Contents | Introduction | Readings | Questions for Discussion | Additional Resources