Addressing the Jurisdictional Issues Over Cyberspace Transactions By Reuben C. Okafor

Introduction

Technology is massively transforming the world. Disruptive innovations are churned out almost a daily basis and these have affected the way we do things. The traditional marketing landscape has been disrupted by technology, and the issue of courts’ jurisdiction in resolving disputes arising from e-commerce (also “e-business”) transactions tends to pose a major challenge to the parties involved. It is not in doubt that technology has transformed our states of living, but we cannot wish away the challenges appurtenant to it; and the most prominent and current issue, is the jurisdiction of courts to resolve interparty disputes which arose in the course of entering or performing a cyberspace contractual transaction.

Jurisdiction

Jurisdiction is the power of a court to entertain a matter brought before it. It is a very fundamental condition which empowers a court to entertain, hear and deliver its decision on a matter brought before it. Where a court lacks the capacity to assume jurisdiction over such matter and goes ahead to hear and deliver its judgment on the matter, on appeal, such decision would be upturned by the appellate court, as the trial court could not have entertained the matter ab initio. Jurisdiction can either be substantive, procedural, or personal. Where it is substantive, the subject matter of the case must, as a principal condition, fall within the jurisdiction of the court, and where such is lacking, the court shall not entertain the case, as whatever it does where it has no jurisdiction to do so is deemed void ab initio. Where the jurisdiction is procedural, it means that the claimant must have observed the requirements for approaching the court, and where he fails to do so, the court shall not entertain such matter. He must come properly before the court. This is summarised in the locus classicus case of Madukolu v. Nkemdilim (1962) 1 NLR, 587 where the Federal Supreme Court espoused that for a court to have jurisdiction over a case brought before it, such court must be properly constituted as to the judges presiding over the case, the subject matter of the case must fall with the jurisdiction of the court, and that it must be properly brought before the court; due process must be observed. Personal jurisdiction, on the other hand, is not a popular term within our legal system. However, its purport is that the courts ought to have personal jurisdiction over one or all of the parties based on the fact that the individuals, or either of them, is resident where the court is situate. This can as well attach to venue (as jurisdiction can sometimes be used interchangeably to mean the venue of the court) and this is the object of this article- what should be the proper venue to commence an action against a defaulting party in a cyberspace transaction?

Some Basic Contractual Principle

The general position of the law is that where disputes arise from a contractual transaction because of a breach of any, or all of the terms of the contract, by either of the parties to the contract, such disputes should be resolved in the court having jurisdiction where the defendant resides or carries on business, or where the contract ought to have been performed. Another principle of law providing guidance on how to determine the jurisdiction where a party can commence an action for a breach of contract, is the choice of law as agreed by the parties, which could be the law of the jurisdiction where the contract was entered into, expressed in the Latin term- “Lex loci contractus,” or the law of the jurisdiction where the contract ought to have been performed expressed, “Lex loci solutionis.”

However, the current developments in the area of cyberspace transactions seem to render non-effect, or make it very cumbersome for the applicability of the traditional principle guiding the choice of jurisdiction for the enforcement of contractual terms. It is important to note that parties are permitted, by law, to enter into contractual relationships and choose the governing law and/or jurisdiction which should regulate the contract so entered. That way, the principle of “Lex loci contractus” or “Lex loci solutionis” may be relevant in this technology age (but this is highly doubtful as the parties rarely have a one-on-one negotiation, but operate on the basis of the terms and conditions of use contained on the e-business owner’s website). Transactions have transfigured from the original one-on-one transaction to e-commerce. E-commerce enables people from different localities, regions, countries and even continents to enter into a contract for purchase of goods or services. As such, neither of the parties may meet each other physically till the contract is performed. This is the innovation which technology has brought to us.

Now, the question is, in the event that the cyberspace contractual relationship becomes flustered, which country should have jurisdiction in such case? Where should the aggrieved party seek redress? Should it be the location where the contract ought to have been performed or the location where defendant resides or carries on business, or the location where the contract was entered into? Courts have been divided in their decisions with respect to this issue. It is important to have in mind the age-long international law principle that countries have equal status in the international plane. Therefore, a sovereign country should not impose itself or make another sovereign country subservient to its laws. Let us consider some jurisdictions where this issue had been addressed by the courts.

United States of America

The courts in the United States (U.S) have been confronted with issues bordering on its jurisdiction over matters involving a U. S subject and a foreigner. And the courts have propounded two principles in resolving such issues, namely:

• Minimum/Minimal Contacts; and
• Personal/Purposeful Availment Tests.

Minimum/Minimal Contacts Test

The U.S Supreme Court, in International Shoe v. The State  of Washington, 326 U.S 310 (1945), held that in the minimum contacts test, there must be sufficient contacts or ties to make it reasonable and just for the court to establish personal jurisdiction over a party and that due process must have been met. This happens where, for instance, a party from another jurisdiction pushes spam messages to citizens of the United States to advertise his product(s), or does an act that ties him to that forum. Such act, in the opinion of the court, suffices to establish minimum contacts with the forum and therefore, such person is amenable to the jurisdiction of the U.S court.

Personal/Purposeful Availment Test

The U.S court, also, in Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 119 (W.D. Pa. 1997), followed this standard. The position of the court was that, in determining whether it has personal jurisdiction over a foreigner who is a party to the suit before it, and the act resulting to the suit was done through a website, the court would review the website to determine whether it is passive or active. According to the court, an active website will allow a user to order products or services and therefore establish personal jurisdiction. On the other hand, a passive website would only present information or advertising. In opinion of the court, exchanging information with a host computer is insufficient activity to satisfy the purposeful availment standard and cannot establish personal jurisdiction over the foreigner. Therefore, for the court to assume jurisdiction over the defendant, the website must be an active one which can tie the defendant to the forum of the court.

Other Jurisdictions Generally

Different decisions of courts in other foreign jurisdictions tilt towards favouring the claimant. Just recently, in a case involving Facebook and some Belgian users, a Belgian court held that it was competent to hear and decide a matter before it on breaches of Belgian privacy law when the company tracked web users in Belgium. This was in response to Facebook’s contention that the court lacked jurisdiction over a matter involving a business headquartered in the U.S.A. Even though the ruling of the Belgian court was overruled on appeal to a U.S Court of Appeal which held that the Belgian court lacked jurisdiction over Facebook, it however shows that courts’ interests have been aroused internationally to place a check on cyberspace transactions. In a proceeding instituted against Booking.com, an Israeli court held that it had jurisdiction to deliberate the lawsuit, even though the company who owns the website is domiciled in the Netherlands. A few months earlier, in an action against LinkedIn, whose owners’ places of domicile are Ireland and California, U.S.A, the court held that in this age of “global village,” which is characterised mainly by use of the internet, the major corporations providing their services throughout the world through the internet must take into account the possibility that consumer lawsuits for damages resulting from their services will be adjudicated in the place or domicile of those consumers when their identities are clearly known to the website. Similarly, in a suit against PayPal, an Israeli court also held that the fact that major corporations conduct their service principally or exclusively via the internet does not grant them immunity from litigations in courts in Israel and according to the Israeli law.

A common feature of e-commerce companies is that they do not get to negotiate the contract one-on-one with their prospective customers. They assume that the terms and conditions of use as provided on the companies’ websites would regulate the transaction. And it is doubtful whether these prospective customers would bother to read and donate their consent to the terms and conditions of use as contained on the companies’ websites which is ‘supposed’ to guide the transactions.

The European Union Jurisdictional treaties provide a sort of protection for consumers who are citizens of its member states. Articles 13–15 of the Brussels Convention of 1968 on Jurisdiction and the Enforcement of Judgements in Civil and Commercial Matters; Articles 13–15 of the Lugano Convention of 1988 on Jurisdiction and the Enforcement of Judgements in Civil and Commercial Matters; and Articles 15–17 of the Council Regulation (EC) No 44/2001 of 22 December 2000 on Jurisdiction and the Recognition and Enforcement of Judgements in Civil and Commercial Matters, provide to the effect that, where a dispute arises over a transaction between the parties, the claimant should commence the action in the jurisdiction where the consumer resides. Here, whether or not the claimant is the consumer, the treaties’ requirement is that such action must be commenced in the jurisdiction where the consumer resides. The rationale for this provision is that the seller has a more advantageous position over the consumer, and that the consumer is weaker. However, these provisions are riddled with exceptions, and one of it is that they apply to transactions primarily for purchase of personal, family or household goods and do not extend to the purchases of goods or services for commercial purposes. Also, the intendment of these provisions is not to regulate cyberspace transactions. It might, therefore, be difficult to place reliance on them in cyberspace transactions.

A school of thought suggests that such action can be commenced in the jurisdiction where the server of the website is situate. But this is the most difficult option to explore, because most of the times the server of a website might be situate in a country different from where the company has its registered address, therefore, involving three different countries. This makes it a herculean task for the aggrieved party to get the justice he so desired. A notable difficulty in enforcing a party’s right in a foreign country is the task of having to travel to and fro the country. Apart from the attendant difficulty in commencing the action in a foreign country, the risk involved in it is also unimaginable.

Our Position

Cases of this character have not come to the public domain in Nigeria, and we cannot rely on any of the decisions of the Nigerian courts on matters bordering on the subject matter of this article. E-business owners always provide their terms and conditions of use on their websites which, according to them, prohibit commencing an action against them in a foreign country. However, such terms and conditions of use, in the opinion of an Israeli court constitute a “discriminatory condition” in a standard contract. In his opinion, the Israeli Attorney-General stated that such stipulation of terms of use, especially by Facebook, may discourage Israeli users from suing Facebook due to the considerable costs involved which include retaining a foreign attorney, frequent trips abroad etc. and therefore, constitutes a discriminatory condition. According to him, such stipulation of jurisdiction is not binding on Israeli users. We totally agree with this position expressed by the learned chief law officer of the Republic of Israel. A strict adherence to such jurisdictional limitations on a company’s website would work to obfuscate the course of justice.

Considering the direction the world is going because of the impact of the internet on businesses, we posit that the interest of consumers who, presently, may be unable to enforce their rights in an “over-the-internet” contractual transaction, should be in the forefront of governments’ legislations. And this can only be achieved when courts assume jurisdiction to hear and determine suits brought before it by claimants who cannot travel to a foreign country to commence a suit against a defaulting party residing in a foreign jurisdiction. The “Terms and Conditions of Service,” Governing Law” and “Choice of Jurisdiction” on the e-business companies’ websites should not be upheld when doing same would be discriminatory and cause hardship to the claimant. Courts should adopt a liberal approach and ensure that substantial justice is done.

We know that one fundamental condition which is capable of vitiating a decision of a court (no matter how well decided) is failure by the claimant, to put a party against whom a case is instituted, on notice, and it threatens the jurisdiction of the court. However, service of such court process has now become easier as a defendant can be served through electronic mail. And a party cannot claim ignorance of the existence of such suit against him. Law should be enacted to strengthen this position.

Conclusion

Technology has brought the world much closer, and cross-country transactions can now be initiated and completed between parties seamlessly. At present, there is paucity of legal frameworks in addressing this issue. Discriminatory conditions which are capable of obstructing an aggrieved party from obtaining justice should not be given a place in this modern age. We encourage nations to brace up and provide legal frameworks to address this lingering, and as well as emerging issues on over-the-internet transactions. The Republic of Germany has enacted a law, subjecting every website which is accessible to German users to its law. Also, Malaysia’s new cyber law well extends beyond its jurisdiction and covers acts perpetrated on the internet. Although the Malaysian law is primarily to prevent committing crimes through the internet, but we do hope that laws regulating cyberspace contractual relationships will be enacted soon. Nations who have not addressed this issue should do the needful and set a law in motion to address this issue.

Reuben C. Okafor, Attorney, Technology Law