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One of the advantages of the Internet over other methods of communication and commerce is that it enables access to a much wider, even a worldwide, audience. Spatial distance and national borders are irrelevant to the creation of an Internet business, many of which are conceived for the express purpose of expanding sales horizons across borders. In a sense, a person can be everywhere in the world, all at once. This ease of communication raises a vital legal question, however: when a person puts up a website on his home server and allows access to it from all points on the globe, does he subject himself to the governance of every law- and rule-maker in the world? Under the current system, in order to decide what state's or nation's laws govern disputes that arise over Internet issues, a court first must decide "where" Internet conduct takes place, and what it means for Internet activity to have an "effect" within a state or nation.
Even apart from the Internet, this border-centric view of the law creates certain difficulties in an economy moving toward globalization. Entire bodies of law have been developed by every nation to deal with the resolution of international conflicts of law, conflicts that arise when geography and citizenship would allow a dispute to be decided by the laws of more than one country, and the laws of those countries are not consistent with each other. Conflicts of law are particularly likely to arise in cyberspace, where the location of an occurrence is never certain, where ideological differences are likely to create conflicting laws, and where rules are made not only by nations and their representatives, but also by sub-national and transnational institutions.
II. The test currently in force
A. In the United States
A court does not have power over every person in the world. Before a court may decide a case, the court must determine whether it has "personal jurisdiction" over the parties. A plaintiff may not sue a defendant in a jurisdiction foreign to the defendant, unless that defendant has established some relationship with that forum that would lead him to reasonably anticipate being sued there.
In the U.S., the Due Process clause of the Constitution's Fourteenth
Amendment sets the outermost limits of personal jurisdiction. If
a party has substantial systematic and continuous contacts with the forum,
a court may exercise jurisdiction over a party for any dispute, even one
arising out of conduct unrelated to the forum. This is known
as general jurisdiction. For example, a corporation or person can
always be sued in its state of residence or citizenship or its principal
place of business, regardless of whether or not the claim arose there.
If a party is not present in the state or does not have systematic and continuous contacts with the state, courts may exercise jurisdiction over a party for causes of action arising out of his contacts with the state, or arising out of activities taking place outside the state expressly intended to cause an effect within the state. This "effects" test is described from the American Law Institute's Restatement (Second) of Conflict of Laws 37 (1971), which provides:
"A state has power to exercise judicial jurisdiction over
an individual who causes effects in the state by an act done elsewhere
with respect to any cause of action arising from these effects unless the
nature of the effects and of the individual's relationship to the state
make the exercise of such jurisdiction unreasonable."
To do this, the court must look to the state's "long-arm" statute, which sets the parameters for the state's exercise of its constitutional power to govern conduct by non-citizens (including both Americans and foreigners). Long-arm statutes vary widely from state to state. For example, Arizona grants the broadest possible freedom to its courts: "Arizona will exert personal jurisdiction over a nonresident litigant to the maximum extent allowed by the federal constitution." New York, on the other hand, gives a more restricted and specific charge to its courts with its statute, which allows personal jurisdiction over those who transact business or commit a tortious act within the state of New York, and over those who commit an act outside the state that could reasonably be expected to have a tortious effect within New York. The Federal courts have the equivalent of a long-arm statute of their own, in Federal Rule of Civil Procedure 4(k) (Rule 4(k)), which provides three basic grants of jurisdiction. First, it authorizes federal courts to "borrow" the long-arm statute of the state in which the federal court is located. Second, Rule 4(k) authorizes federal courts to exercise grants of personal jurisdiction contained in federal statutes, such as the federal securities and antitrust law, which have their own jurisdiction provisions. And third, Rule 4(k)(2) grants long-arm jurisdiction in an international context, within the boundaries of the Constitution, over parties to cases arising under federal law who are not subject to the jurisdiction of any particular state. The concept of being able to have minimum contacts with the United States as a whole has profound implications for the Internet and international jurisdiction. Users all over the world, without establishing contacts in a particular state, could establish contacts with the entire country with nearly every foray into cyberspace.
In order to be subject to personal jurisdiction in a state that is not his domicile, not only must a person fit under the ambit of the state's "long-arm" statute, but also the state's jurisdiction must be valid under the Due Process Clause of the Fourteenth Amendment. The Supreme Court set the standard for constitutional exercise of jurisdiction in International Shoe Co. v. Washington. Pursuant to the Due Process Clause, a nonresident defendant may not be sued in a forum unless it has first established sufficient "minimum contacts with [the forum] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." In addition, the nonresident's "conduct and connection with the forum [must be] such that he should reasonably anticipate being haled into court there." This test relies on courts to decide, according to "traditional notions of fair play and substantial justice," what contacts are sufficient.
Courts will generally hold that contacts are sufficient to satisfy due process only if the nonresident "purposefully availed" itself of the benefits of being present in, or doing business in, the forum. According to a the plurality of the Supreme Court in Asahi Metal Industry v. Superior Court, a connection sufficient for minimum contacts may arise through an action of the defendant purposefully directed toward the forum State. The placement of a product into the stream of commerce, without more, is not an act of the defendant purposefully directed toward the forum State, but advertising or marketing in the forum state may fulfill the deliberate availment requirement. There must be clear evidence that the defendant sought to serve the particular market.
If the minimum contacts test is met, a court may only exercise jurisdiction if it is "reasonable" to do so. In determining reasonableness, a court must weigh and consider the burden on the defendant to litigate in the forum, the forum state's interests in the matter, the interest of the plaintiff in obtaining relief, efficiency in resolving the conflict in the forum, and the interests of several states in furthering certain fundamental social policies.
In sum, under U.S. law. if it is reasonable to do so, a court in one state will exercise jurisdiction over a party in another state or country whose conduct has substantial effects in the state and whose conduct constitutes sufficient contacts with the state to satisfy due process. Because this jurisdictional test is ambiguous, courts in every state of the U.S. may be able to exercise jurisdiction over parties anywhere in the world, based solely on Internet contacts with the state.
There is little dispute that nation-states can prosecute Internet users (or anyone else, for that matter), whatever their location, for revealing national secrets, falsifying official documents, or inciting war. These activities threaten national security, wherever they are committed, and therefore fall under international standards for jurisdiction. Similarly, it is a universal crime to publicly incite torture or genocide. These universal offenses may be prosecuted extraterritorially by any nation, regardless of the citizenship or location of the user.
These are easy cases, however. Nations may also be interested in enforcing non-universal laws extraterritorially; for example, In Germany, it is illegal to import distribute material espousing a Nazi or Neo-Nazi viewpoint. Such material is not difficult to find in USENet or on the World Wide Web. German authorities may be interested not only in interpreting German laws to classify Internet viewing as "importation" of material, but also (in part because of the difficulty of locating those who break an importation statute without leaving their own homes) in prosecuting those who make such material available to Germans via the Internet. If German authorities attempted to prosecute a U.S. citizen r resident for such an offense, however, they would be met with geat opposition by the U.S., which certainly would not enforce any judgment against the U.S. citizen in such a case, because the German statute violates U.S. Constitutional principles. Umder U.S. law, because it would be prohibitively difficult to prevent German users from viewing such a site and therefore the result of such a prosecution would be to chill otherwise legal (if unpleasant) speech in the U.S. Under the current system, it is possible to envision that German courts may have jurisdiction over Americans who publish such material, even though the material may not be "purposefully directed" (one interpretation of the American standard ) toward Germany in the way a mailing of flyers would be.
As discussed above, U.S. courts apply the same "effects" test to foreign parties as to American parties. If minimum contacts exist, parties from other countries may be haled into court in the United States just as parties from one state may be haled into another. Similarly, Americans may be tried by courts in other countries depending on the rules of that country. Although each country's laws are different, most rely on some sort of "effects" test resembling the U.S. test, whereby a party is subject to jurisdiction in a place where his conduct has an effect. This jurisdiction traditionally is subject to a "reasonableness" test. According to section 421 of the Restatement (Third) of the Foreign Relations Law of the U.S., exercise of jurisdiction is generally reasonable if the party is a citizen, resident, or domiciliary of the state, or if:
. . . (g) the person, whether natural or personal, has consented to
the exercise of jurisdiction;
(h) the person, whether natural or juridical, regularly carries on business in the state;
(i) the person, whether natural or juridical, had carried on activity in the state, but only in respect of such activity;
(j) the person, whether natural or juridical, had carried on outside the state an activity having a substantial, direct, and foreseeable effect within the state, but only in respect of such activity; or
(k)the thing that is the subject of adjudication is owned, possessed, or used in the state, but only in respect of a claim reasonably connected with that thing.
This standard differs somewhat from the U.S. standard for interstate exercise of jurisdiction; for example, transitory presence (known as "tag" jurisdiction), accepted in the U.S., is not generally accepted as a method of international jurisdiction.
Every nation has an obligation to exercise moderation and restraint in invoking jurisdiction over cases that have a foreign element, and they should avoid undue encroachment on the jurisdiction of other States. Although countries are given great discretion in deciding whether to exercise jurisdiction over conduct in other countries, international law dictates that a country exercising its jurisdiction in an overly self-centered way not only contravenes international law, but can also "disturb the international order and produce political, legal, and economic reprisals."
Based on this traditional moderation, and the relatively high threshold of the "reasonableness" standard discussed above, it is unlikely that foreign nations will have the sort of long-arm power over citizens of other nations as states have over citizens of other states within the U.S. today. Scholars have suggested that individual persons and small commercial entities whose only contacts with a nation are on-line are, in all likelihood, more insulated from international jurisdiction than they are from interstate jurisdiction. This is largely speculative, however, because international Internet jurisdiction cases have thus far been rare, and nations have not hesitated to pass laws conferring global jurisdiction for Internet activities.
III. Application of the "effects" test to the Internet
A. in the United States
The Supreme Court has not discussed the impact that technology might have on the analysis of personal jurisdiction. Lower courts, on the other hand, have explored the question of cyberspace jurisdiction. While most have held that merely creating and hosting a website available to all does not subject a person to general jurisdiction everywhere in the U.S., they diverge widely as to whether the presence of such a site will lead to specific jurisdiction over the party for the purposes of disputes arising from the website.
Some decisions suggest that a court may obtain personal jurisdiction over a non-resident defendant whose sole contact with the forum state arose through the Internet. Examples of these include: CompuServe, Inc. v. Patterson, Zippo Manufacturing v. Zippo Dot Com, Inc., Panavision International, L.P. v. Toeppen, and Maritz, Inc. v. Cybergold. In each of these cases, Internet contacts with the forum state exceeded those of a passive website: In CompuServe, the defendant knowingly reached out to and did business with CompuServe, knowing that CompuServe was an Ohio corporation. In addition, the dispute arose out of contacts with the forum state. In Zippo, the defendant's site required participants to submit address information in order to receive a news service; therefore, the site operators knowingly transacted business with residents of the forum state, where the plaintiff was headquartered. In Panavision, the defendant had set up his web site as part of a "scam" to make the plaintiff purchase the domain name from him, and as such had intentionally directed his actions toward the plaintiff's home state. In Maritz, the defendant's site invited users to send and receive information about services it offered, and the defendant company had send information to over 100 users in the forum state. The court found that "[a]lthough [defendant] characterizes its activity as merely maintaining a 'passive website,' its intent is to reach all Internet users, regardless of geographic location."
Two other recent decisions, in declining to exercise jurisdiction, support the notion that passive Internet sites are not sufficient to support jurisdiction. In McDonough v. Fallon McElligott, Inc., a Minnesota defendant had displayed plaintiff's photographs on the Web without plaintiff's consent, in possible violation of California copyright and unfair competition laws. The Southern District of California held that: "Because the Web enables easy world-wide access, allowing computer interaction via the Web to supply sufficient contacts to establish jurisdiction would eviscerate the personal jurisdiction requirement as it currently exists . . . . Thus, [having] a Web site used by Californians cannot establish jurisdiction by itself." Similarly, in Benusan Restaurant Corp. v. King, the Southern District of New York held that the operator of a small Missouri jazz club called "The Blue Note" did not subject it to New York's trademark laws by erecting an advertising site on the Web.
The New York district court's holding in Benusan is at direct loggerheads with the District of Connecticut's holding in Inset Systems, Inc. v. Instruction Set, Inc. In Inset, a party utilizing the trademark of another company for its domain name and "800" number was subject to jurisdiction in the home of the party whose mark was infringed. Also in seeming conflict with Benusan and most other U.S. interstate Internet jurisdiction cases, the Federal Circuit found in Graphic Controls Corp. v. Utah Medical Prods., Inc., that a Utah corporation's activities, which included having an open-access website for ordering goods, having an "800" number, having meetings in New York unrelated to the cause of action, and sending "cease and desist" letters to party in New York, did not constitute minimum contacts with New York. In similar conflict with the above cases, the Southern District of New York held that creating a commercial and interactive (though not yet operational at the time of litigation) website that was available to, and used by, New York residents was not in itself enough contact to subject a publisher to New York jurisdiction in Hearst Corp. v. Goldberger. The District court found that exercising jurisdiction would violate traditional notions of fair play, and noted that the site operator did not purposefully direct his activities toward New York.
The disagreements between the cases above illustrate some of the variety among courts as to the proper approach to take when dealing with Internet jurisdiction. Approaches differed greatly, even among some of the above cases having similar final outcomes. States have not regularized an approach to the Internet, preferring to analogize it to real space. Erecting a website has been compared to publishing in a widely distributed general-interest magazine or putting an item (with the capacity to travel) in the stream of commerce by selling it locally. As the above illustrate, courts seem to be taking an approach resembling that recently laid down by the Ninth Circuit Court of Appeals in Cybersell, Inc. v. Cybersell, Inc., which held that the mere presence of a passive website on the Internet does not constitute the minimum contacts needed to subject a person to the jurisdiction of every court and that "something more," either interactivity or purposeful direction, is needed to justify jurisdiction. What degree of interactivity is required to constitute minimum contacts, however, remains largely unclear from case law. Under the rule set forth in Cybersell, a court would decide whether a website creates minimum contacts by examining the degree to which the site is commercial and interactive, and the degree to which the site is directed at citizens of the forum state. The more interactive a site is (i.e. the more exchange of information is possible between the site and the user), and the more commercial the site's nature, the more likely a court is to find that contact exists between the site owner and the distant user. Similarly, the more the site is directed at an audience in the forum site or designed to harm citizens of the forum state, the more likely a court will be to find that purposeful availment has occurred. Still, the Supreme Court has not addressed the issue of persona jurisdiction in cyberspace and many details still remain unresolved.
U.S. courts have, basically, shoehorned Internet cases into the same jurisdictional rules that they use for non-Internet cases, with the result that U.S. courts lean toward limiting jurisdiction, regulating only sites that intentionally direct themselves into the U.S. in some way. Other countries have not limited their courts so. Several examples illustrate that jurisdictional issues are at least as severe and jumbled in the international context as they are within the domestic U.S.
In the United Kingdom, the Financial Services Act of 1996 makes
criminal offense to place investment ads in the U.K. unless they are issued or approved by the Financial Services Authority (FSA). In early 1998, the FSA notified the national U.S. mutual fund association that mutual fund Web sites which can be brought up on a screen in the U.K. are considered to have been issued in the U.K. This could have had a profound impact on the way in which U.S. mutual fund sites operated, however, the FSA stated that it would not take enforcement action against U.S. companies that complied with certain FSA regulations, including placing disclaimers or warnings on their Web sites.
Germany has passed a sweeping law that subjects any Web site accessible in Germany to German law, holding Internet service providers (ISPs) liable for violations of German content laws if the providers were aware of the content and were reasonably able to remove the content. This followed the settlement of a well-publicized incident between Germany and CompuServe, in which German authorities threatened to prosecute CompuServe for allegedly pornographic news groups. In response to the German threat, CompuServe blocked access to those newsgroups to all users, approximately 4 million worldwide. Later, CompuServe restored access and distributed free software for blocking pornography. This caused CompuServe's indictment for aiding in the distribution of pornography and computer games. Prosecutors charged that CompuServe did not do enough to block Germans from accessing the material.
Malaysia's new cyberspace law also extends well beyond the borders of Malaysia. The bill applies to offenses committed by a person in any place, inside or outside of Malaysia, if at the relevant time the computer, program, or data was either (i) in Malaysia or (ii) capable of being connected to or sent to or used by or with a computer in Malaysia. The offender is liable regardless of his nationality or citizenship.
IV. Conflicts of Law
As mentioned above, the Constitution and states' long-arm statutes may permit court jurisdiction over out-of-state conduct, depending on the specific long-arm statute and the conduct involved. This means that many states may have concurrent jurisdiction over the same conduct. A similar situation exists in the international context. Because it is generally accepted as a matter of international law that nations may govern conduct of citizens of the nation taking place outside the nation, conduct by non-nationals that take place elsewhere but has significant and intended effects in the state or nation, conduct that threatens the sovereignty or security of the nation, and conduct that constitutes a universal crime such as torture and genocide, many situations may arise in which several nations' laws could govern the same conduct. To use a real-space example, imagine that A (an American shipping company) ships a batch of B's widgets from New York to B in Belgium, by way of France. The widgets are damaged during the French stopover and that this damage gave rise to a cause of action in tort between A and B. Assuming that A had significant enough contacts with both France and Belgium to warrant jurisdiction in both courts, B could sue A in the U.S., in France, or in Belgium, depending on which legal system would treat B more favorably. Additionally, B could sue in U.S. court but request that the court apply Belgian law to the dispute, or sue in Belgian court but request that the court apply French law, or any other combination of courts and laws.
The many applicable laws will not necessarily be substantively compatible. Different states and nations will have different interests and each will want its laws to govern each dispute. This situation becomes extremely poignant when laws are not only inconsistent, but also incompatible; for example, in some states of the U.S., it is illegal to provide or engage in Internet gambling, but in Liechtenstein, such gambling is government-sponsored. Although the situation of inconsistent laws occurs with moderate frequency now (especially in the antitrust and securities fields) it is likely to become even more common as cyber-commerce becomes more prevalent. This is because, in cyberspace, cross-border transactions are no more difficult than transactions with local parties.
When conflicts of law arise, courts must decide which law will govern. A court need not decide a dispute according to its own law; for example, a court deciding a dispute arising out of an automobile accident in another state would be likely to apply the driving standards of the state where the dispute arose, rather than of the forum state. Several methods exist to aid courts in the decision between laws. Historically, U.S. courts decided a dispute according to the law in the lex loci delicti, the "place of the wrong." In transnational cyberspace, however, the place of the wrong might be any of the nations that are on-line. There is no lex loci delicti.
The Restatement (Second) of Conflicts of Law rejected this historical formulation, preferring the so-called "most significant relationship" test, which values (1) the needs of the international system; (2) relevant policies of the nation in which the suit was brought; (3) the relevant policies of all interested states; (4) justified expectations of the parties; (5) certainty, predictability, and uniformity; (6) and ease of administration.
Several other approaches to choice of law have also been posited and accepted by some courts. The "center of gravity" approach, first adopted by the Court of Appeals of New York, might be characterized as a simplified version of the "most significant relationship" test of the Second Restatement. This approach authorizes courts to look at all the existing contacts between the various parties to a suit and various jurisdictions. Ultimately, the court should choose the law of whatever jurisdiction is most closely tied to the case.
Legal scholar Brainerd Currie espoused the "interest" approach, which encouraged courts to look to the history of the applicable laws and, if the laws of one state could be applied without impairing the other state's interests, those laws were to apply. In the case of a true conflict, in which one state's interests would always be impaired, Currie suggested using the law of the forum. California has accepted this approach, but instead of automatically applying the law of the forum in true conflicts cases, applies a "comparative impairment" analysis and applies the law of the state that creates the least impairment.
Finally, professor Robert Leflar has devised a test in which courts consider 1) predictability of result, (2) maintenance of interstate and international order, (3) simplification of the judicial task, (4) advancement of the forumís governmental interests, and (5) application of the better rule of law.
Currently, U.S. states and the U.S. itself take a variety of approaches; none of the above approaches have been universally accepted.
Interestingly, most approaches other than the "place of wrong" approach eliminate the need to decide "where" the conduct in question occurred before deciding what law governs (although determining the location of an action may help create the list of nations' laws from which to choose). As the few reported cases show, however, courts may ignore traditional choice-of-law principles entirely and simply apply forum law to Internet-related disputes. Indeed, at least one state, responding to the problem of Internet-based gambling, has announced an intention to apply its own law to lawsuits resulting from in-state Internet contacts. The Minnesota Attorney Generalís office, has interpreted existing Minnesota law to prohibit all forms of on-line gambling, and noting that "[g]ambling is just one example of illegal activity on the Internet" and "the same jurisdictional principles apply with equal force to any illegal activity." Courts have tended to apply the law of the forum state in Internet cases, without discussion.
It should be noted that many Internet activities are commercial and that many of these involve contractual transactions. These contracts may contain choice-of-law clauses defining what state's law will govern any dispute arising out of the transaction. Most ISPs, for example, include choice of law clauses in their service agreements; such clauses may greatly simplify choice of law questions on the Internet, as choice of law clauses are, for the most part, honored as a matter of international law. Many Internet activities are not commercial or even transaction-oriented, however, and choice of law clauses may not cure problems arising from non-transaction-oriented activities. Case law does not indicate what route courts might take in resolving true choice of law disputes arising from such activities. One commentator has suggested the creation of a choice-of-law treaty for the Internet.
V. Practical Implications of these laws: Looking to the future
Many questions remain about how courts will fit the Internet into the current system of jurisdiction. For this reason, people do not know what laws to live by. Although most people know the laws of their domicile state, many do not know the laws of states with which they will be interacting; therefore, under the current system, it remains entirely possible that a person could be haled into court in a foreign land for something that is perfectly legal in his domicile.
Simply put, the "effects" test doesn't work. It is true
that states and nations are perfectly within their power in prosecuting
foreign parties who provide illegal services (for example, a Nevada site
that provides gambling to a Minnesota resident), and foreigners who commit
crimes (for example, an American who posts names of businesspeople on a
site available to Chinese dissidents). However, the architecture
of the Internet makes it easy for people to obfuscate their identity and
location and it is therefore impractical, under the current architectural
regime, to make sites provide and deny service based on a person's identity;
yet, that is exactly what the current legal system requires.
Most importantly, under the current regime, people can unwittingly open themselves to liability, by posting information on the Web that they consider proper. For example, a local company with the same name as a different company across the country and thereby expose itself to trademark liability; or an American could put up a site containing photos of women in short skirts, thereby exposing himself to criminal liability in countries under Islamic law.
If the current legal system is to maintain effective and fair
control over the Internet, courts all over the world will have to make
a clear move toward a new test for jurisdiction, and a consistent test
for resolving choice of law disputes. If courts could agree to exercise
jurisdiction based on an effects test with a much stronger element of purposeful
availment than exists in the current system, the current style of legal
governance might be able to serve the Internet in an effective and consistent
way, without the excessive and unpredictable elements that it currently
suffers from. For the purposes of fairness, mere awareness
that a site could be accessed at a location would not be enough to trigger
jurisdiction; rather, in order to be subjected to jurisdiction in a place
other than his domicile or its primary place of business, a party would
have to display intent to reach the audience in that location through advertising
or special targeting subject matter, or a positive awareness of an audience's
locations by way of interactions involving the exchange of information
about realspace location. Under such a system, a party would still
be subject to jurisdiction in its home state or nation, but not in a foreign
jurisdiction unless the party sought out an audience in that foreign jurisdiction.
Such a system would put the burden on state and local authorities to prevent
the viewing of illegal material and to focus on laws regarding the use
of illegal material, rather than laws the provision of such material.
As hey are today, transactions would be susceptible to the jurisdiction
of the domiciles of all parties involved and any jurisdiction in which
the transaction was definitively intended to have an effect.