DETERMINING THE JUDICIAL JURISDICTION IN THE TRANSNATIONAL CYBERSPACE

BIMAL RAUT

BL (TU) (Nep), LLM (BU) (Ind), LLM (SCU) (Aus)

A Thesis submitted in total fulfilment of

the requirements of the degree of

DOCTOR OF JURIDICAL SCIENCE (SJD)

2004

SCHOOL OF LAW Queensland University of Technology

Abstract This thesis analyses the traditional notion of jurisdiction in the light of Internet based

activities which are inherently decentralised and ubiquitous. It is clear that the unique

nature of the Internet has undermined the very foundation of the traditional notion of

jurisdiction and the territorially based concepts of law and their application.

Which court should hear disputes arising out of Internet activities? On what grounds

may a court assert or decline the jurisdiction? These are perplexing questions

currently facing courts worldwide because of the trans-national nature of the Internet

by which people can transcend borders readily and rapidly. One simple and

straightforward factor confronting lawmakers is that while most laws have a territorial

nexus, the Internet defies the notion of territoriality. Traditionally, judicial jurisdiction

has been exercised on a number of bases, such as where the defendant resides,

whether the defendant is present within the forum and whether the defendant has

property in the forum or not. These elements have been made largely irrelevant by

the Internet. The Internet does not respect traditional boundaries and territories and it

can even enable people to cross borders without any physical mobility. For instance,

people are able to interact and even do business without revealing their identity.

In the absence of any definite international law on Internet jurisdiction, how have the

courts responded to this challenge? This thesis has examined the recent case law in

Australia, United States of America and France. In examining the case authorities, the

only conclusion that can be reached is that current court approaches are unworkable.

This thesis has also examined some international proposals on the matter and found

them to be deficient.

Now, the dilemma before us is this: on the one hand, the present court approaches on

Internet jurisdiction are unworkable. On the other hand, there is no clear international

guidance to govern the jurisdictional issue. I believe this book makes a small

contribution towards this perplexing question by proposing a new transnational

principle which could be achieved through a “trans-national judicial dialogue”.

Trans-national judicial dialogue can play a significant role in the creation,

recognition, and enforcement of global norms. There are a number of benefits to be

gained if this approach is adopted in Internet jurisdiction cases. Ideally, trans-national

judicial dialogue would reduce the conflicts among courts and foster a consensual

approach, thus providing a stable and predictable paradigm for the crucial issue of

jurisdiction. Moreover, the parties involved in a case would be prevented from forum

shopping in search of a forum with a greater likelihood of a favourable decision. Also,

courts would not be able to decline jurisdiction merely because of foreign elements

involved. This may be the most appropriate global approach which is urgently

required to address an increasingly global problem.

CONFERENCE PAPERS 1. Raut B, “Jurisdiction in Cyberspace: Rethinking of Traditional Notion and

Search for Global Jurisdiction?” at the Risks and Responsibilities, the Second National Postgraduate Law Students Conference, Organized by the Sydney University, Sydney, 10th November 2000.

2. Raut B “Jurisdiction in Cyberspace: Court Jurisprudence” at the IT and

the Law: Recent Developments, organised jointly by the Bar Council of Malaysia, Commonwealth Lawyers Association and the LAWASIA, Kuala Lumpur, 7-8 August 2002.

3. Raut B “Trans-Judicial Dialogue: A Mantra for Internet Jurisdiction!” at

the Right and Wrong: Judging the Law, the Fourth National Postgraduate Law Students Conference, Organized by the Sydney University, Sydney, 6-7 December 2002.

4. Raut B “Jurisdiction and the Internet: Need for a Trans-judicial Dialogue”

at the 5th LAWAISA Business Law Conference, organised by the LAWASIA and the Bar Association of India, New Delhi, 17-20 January 2003.

5. Raut B “Copyright in Digital Age: Vanishing Point of National Judicial

Jurisdiction” at the Nepal Bar Association Conference, Kathmandu, 7-8 March 2003.

6. Raut B “The Internet and the Jurisdiction: Is the Trans-judicial Dialogue a

Way Forward? At the 18th Biennial Conference of LAWASIA2003 in Conjunction with the 10th Conference of the Chief Justices of Asia and the Pacific, Tokyo, 1-5 September 2003.

DECLARATION OF ORIGINILILTY

I, hereby, declare that this thesis entitled “Determining the Judicial Jurisdiction in the Transnational Cyberspace” to the best of my knowledge and belief, is original, except as acknowledged in the text, and that the material has not been submitted, either in whole of in part, for a degree at this or any other university. Bimal Raut 10/03/2004

Acknowledgements My special thanks go to my supervisor Professor Brian Fitzgerald for his outstanding support and guidance throughout the research. Without that, the thesis would have been impossible to complete on time. There are some others who have also played an instrumental role in the course of the completion of the research. I wish to thank Dr Geraldine Mackenzie and Dr Ben Mathew for offering practical tips on thesis writing from time to time. I would also like to thank Lynda Lawson and Rachel van Witsen for their help in reading the drafts and giving important feedback. I would like to acknowledge the administrative support provided by Cheryl Kutschkin and Suzanne Lewis. Last but not least, I would like to thank my family for their continuous support during the research work.

LIST OF CASES

Australian Competition and Consumer Commission v Hughes [2002] FCA 270 (18 March 2002). Australian Competition and Consumer Commission v Chen [2002] FCA 1248. Airways Corporations of new Zealand Ltd v Pricewaterhouse Coopers Legal [2002] NSWSC 138. ACCC v. Purple Harmony Plates Pty Ltd (2001) FCA 1062. American Information Corporation V. American Infometrics, Inc. 139 F. Supp. 2d 696, ; 2001 U.S. Dist. Lexis 4534. Als Scan, Inc., Plaintiff Vs. Robert Wilkins, Alternative Products, Inc. And Digital Service 142 F. Supp. 2d 703; 2001 U.S. Dist. LEXIS 6605. Bensusan Restaurant Corp., v. King, 937 F. Supp. 295 (S.D.N.Y. 1996). Cybersell Inc. v. Cybersell, Inc No. 96-17087 (C.A. 9th 1997). Cem Corporation,, Vs. Personal Chemistry Ab, Defendant. 192 F. Supp. 2d 438, 2002 U.S. Dist. LEXIS 60. David Mink, Plaintiff/Appellant, V Aaaa Development Llc, 190 F.3d 333; 1999 U.S. App. LEXIS 22783. Dow Jones & Company Inc v Gutnick [2002] HCA 56 (10 December 2002). DPP v Sutcliffe [2001] VSC (1 March 2001). English Sports Betting, Inc. And Dennis J. Atiyeh V. Christopher "Sting" Tostigan, 2002 U.S. Dist. Lexis 5012. Hasbro, Inc. v. Clue Computing, Inc 958 F. Supp. 1 (D.D.C. 1996). James M. Lofton, Plaintiff Vs. Turbine Design, Inc, 100 F. Supp. 2d 404,; 2000 U.S. Dist. LEXIS 4593. Katherine Griffis, Respondent, vs. Marianne Luban 2002 Minn. LEXIS 461. Lipohar v Queen [1999] HCA 65. Macquarie Bank Limited & Anor v Berg [1999] NSWSC 526 (2 June 1999).

MGM Studios Inc. v. Grokster, Ltd., 2003 U.S. Dist. LEXIS 865 (C.D. Cal. Jan. 9, 2003). Oliver "Buck" Revell, Plaintiff, V. Hart G. Lidov, 317 F.3d 467 (5th Cir. 2002) 3133. Publications International, Ltd., An Illinois Corporation, V. Burke/Triolo, Inc., a Supp. 2d 1178; 2000 U.S. Dist. LEXIS 17373. Pavlovich v DVD Copy Control Association 127 Cal. Rptr 2d 329 (Cal. 2002). Panavision International, LP v. Toeppen, 938 F. Supp. 616 (C.D. Cal 1996). Rudder v Microsoft Corp 1999 O.T.C. LEXIS 3218 (Ontario Superior Court of Justice, 8 October 1999). Young, V. New Haven Advocate 315 F 3d 256 (4th Cir. 2003). Specht v Netscape Communications Corp. 150 F. Supp. 2d 585 (S.D.N.Y. 2001); affirmed on appeal, 306 F.3d 17 (2nd Cir. 2002). SCC Communications Corporation, a Delaware corporation, v. J. Clarke Anderson, 195 F. Supp. 2d 1257. The Board Of Trustees Of Columbia University, 2001 U.S. Dist. LEXIS 3133. Ty, Inc., Plaintiff, V. Baby Me, Inc. 2001 U.S. Dist. Lexis 5761 The League Against Racism and Antisemetism- Licra v Yahoo Inc and Yahoo France County Conf of Paris, 20th November 2000. Weber v Jolly Hotels 977 F Supp 327 (DNJ 1997). William Gordon Bailey, V. Turbine Design, Inc 86 F. Supp. 2d 790, ; 2000 U.S. Dist. Lexis 2538. Yahoo! Inc v La Ligue Contre Le Racism et L’ Antisemitisme 169 F. Supp 2d. 1181, (N.D. Cal 2001). Zippo Mfg. Co. Zippo Dot Com, Inc, 952 F. Supp. 1119 ( W.D. Pa. 1997).

CONTENTS

PAGE ABSTRACT CONFERENCE PAPERS DECLARATION OF ORIGINALITY ACKNOWLEDGEMENTS LIST OF CASES ORGANISATION OF THE RESEARCH

CHAPTER I: INTRODUCTION

1.1 Introduction to the research …………………………………………………….. 3

1.1.1 Challenges to the law …………………………………...………………………………….. 4

1.1.2 Traditional jurisprudence on jurisdiction: lost ground ……...……………………………… 7

A. Power ………………...………………………………………………………………. 8

B. Effects………………………………………………………………………………… 9

C. Notice……………………………………………………………………………..…. 10

D. Legitimacy…………………………………………………………………………... 11

1.2 Emergence of Internet jurisprudence……………………………………………..12 1.2.1 Declaration of Independence of Cyberspace ………………………………………………..13

1.2.2 Law of Cyberspace ………………………………………………………………………….14

1.2.3 Hybrid theory of the law and the technology ……………………………………………….15

1.3 Aims of the research ……………………………………………………………….16

1.4 Objectives of the research …………………………………………………………16

1.5 Scope of the research ………………………………………………………………17

1.6 Methodology………………………………………………………………………...17

CHAPTER II: Traditional Notions of Jurisdiction and the Impact of the Internet

2.1. Background ……………………………………………………………………….20 2.1.1 Why jurisdiction is an important issue …………………………………………….21

2.1.2 Definition of “jurisdiction” ………………………………………………………..22

2.2 Common legal theories underpinning the notion of jurisdiction ……………….24 2.2.1 Sovereignty ………………………………………………………………………..24

2.2.2 Territoriality ……………………………………………………………………….26

2.2.3 Physical Presence…………………………………………………………………..27

2.3 Key legal theory governing the notion of extraordinary jurisdiction …………..29 2.3.1 Forum connection theory ………………………………………………………….30

2.4 Principal elements of jurisdiction …………………………………………………32 2.4.1 Personal / subject matter jurisdiction ……………………………...........................32

A. service within the jurisdiction ………………………………………………33

B. service outside the jurisdiction………………………………………………33

2.4.2 Choice of law ……………………………………………………...........................34

2.4.3 Choice of forum…………………………………………………………………….35

2.4.4 Enforcement of judgment………………………………………..............................35

2.5 US laws and practice in relation to judicial jurisdiction ………………………...37

2.6 Impact of the Internet upon the traditional notions of jurisdiction …………….39

2.7 What is the Internet? ……………………………………………………………...42 2.7.1 Ubiquitous and non-territorial ……………………………………………………44 2.7.2 Possibility of anonymous interaction …………………………………………….45

2.8 Theoretical conflicts between the traditional legal notions of jurisdiction and the Internet …………………………………………………………………………………45

A. Inter-sovereign conflicts …………………………………….......................45 B. Over-inclusiveness…………………………………….................................46 C. Under-inclusiveness ………………………………………………………..46

2.9 Conclusion ………………………………………………………………………….47

CHAPTER III: THE INTERNET AND THE JUDICIAL JURISDICTION: CASE LAWS

3 Overview ………………………………………………………………………..52 3.1 Australian Courts’ approach ……………………………………………………………..53

3.2 Jurisdiction declined ……………………………………………………………………..54

A. Nature of the Internet and the futility of extraterritorial jurisdiction …………..54

B. Information placed on the Internet could not be easily controlled …………….55

3.3 Jurisdiction exercised …………………………………………………………………….56

3.3.1 How the dispute arose? ………………………………………………………...56

3.3.2 Question of jurisdiction ………………………………………………………...57

3.3.3 Publication occurred and the damage felt in the territory ……………………...57

A. Substantial and greater connections ………………………………….58

B. Subscription - is targeted …………………………………………….59

C. Social affairs………………………………………………………….60

3.3.4 High Court of Australia’s approach in the Gutnick case ………………………60

3.3.5 Publication at point of downloading …………………………………………...61

3.3.6 Limits to the decision …………………………………………………………..61

3.3.7 US hegemony – unacceptable ………………………………………………….63

3.3.8 Is there a need for a trans-national paradigm on Internet jurisdiction? ………..63

3.3.9 Courts should not impede but facilitate technological development …………..64

3.3. 10 Formulating a new set of rules on Internet jurisdiction ……………………….65

3.3.11 Critical assessment of the Australian Courts’ Approach ……………………...66 3.4 US Courts’ approach ………………………………………………………………66

3.4.1 Sliding scale doctrine: A benchmark …………………………………………66

3.4.2 What is the Sliding scale doctrine? ……………………………………………68

3.4.3 What makes a website active? ………………………………………………....69

A. Deliberate and conscious effort …………………………………………...69

B. Subscription of customers …………………………………………………70

3.4.4 What makes a website passive? ………………………………………………..71

A. Merely posting the information on the website …………………………...73

B. “Merely fortuitous” contact – insufficient to assert jurisdiction ………….75

C. Website advertisement – passive act ……………………………………...75

3.4.5 Critical assessment of the elements of a passive website ………………………78

3.4.6 Interactive website ……………………………………………………………..79

3.4.7 Move away from the Sliding scale doctrine ……………………………………..80

3.5 Move toward the Target-based effects doctrine ……………………………………..80

3.5.1 Applying the Calder effects test ……………………………………………….81

3.5.2 Further considerations of the target-based effects test …………………………83

3.5.3 Cause of action …………………………………………………………………84

3.5.4 Target-based effects doctrine: not established …………………………………85

3.5.5 No target – no special forum connection ………………………………………87

3.5.6 Critical assessment of the US Courts’ approach…………………………………...88 3.6 Conclusion ………………………………………………………………………….89

CHAPTER IV: FUTURE SOLUTIONS: MODEL FOR INTERNET

JURISDICTION

4.1 Need for national/trans-national cooperation ……………………………95

4.2 International Cooperation theory: The OECD Guidelines ……………..96

4.2.1 Inadequacies in the OECD Guidelines …………………………………97

4.3 Critical importance of the American Bar Association’ Report on

Harmonisation theory …………………………………………………………98

4.3.1 The theory of harmonisation ……………………………………………99 A. A new paradigm needed ………………………………………………….................100

B. The global benefits of reciprocal enforcement of judgements should be explored

………………………………………………………………………………................................101

C. The Passive web is free from jurisdiction …………………………………………...101

D. Hybrid method ………………………………………………………………………102

E. Summary of the ABA report ………………………………………………………...103

F. Perplexing questions out of the ABA report ……………………………...................103

4.4 Proposed International Hague Convention ……………………………104 4.4.1 Background of the Hague Convention ……………………………… ………………..104

4.4.2 Defendant’s forum ……………………………………………………………………...106

4.4.3. Choice of court ………………………………………………………………………...107

4.4.4 Contracts ………………………………………………………………………………..108

4.4. 5 Multiple defendants ……………………………………………………………………109

4.4.6 forum non conveniens …………………………………………………………………..108

4.4.7 Shortcomings in the Hague proposal ……………………………………………………110

A. Proposed Hague Convention- too slow …………………………………………110

B. Not inclusive …………………………………………………………………….110

C. Too controversial ………………………………………………………………..111

D. Divisive: limited only B2B contracts …………………………………………..113

4.5 Formal method of getting law on Internet jurisdiction: Remote ………114

4.6 Nationalistic approach from courts will have adverse affect in Internet

cases…………………………………………………………………………………….115 4.6.1 Jurisdiction exercised by the French court ………………………………………………115

4.6.2 American Court decision negates French Court decision ……………………………….117

4.6.3 Factual dilemmas ……………………………………………………..............................118

A. Involvement of the foreign website ………………………………………………118

B. Issue relating to the technical difficulty …………………………………………..118

4.6.4 Conclusions from two court decisions ……………………………………………………..120

A. One country’s court can easily negate another country’s decision ………………...120

B. The very essence of the judiciary undermined ………………………….................120

C. The Internet goes unregulated by the law ………………………………………….121

4.7 Courts should facilitate the development not impede it ………………..122

4.8 The Need for a new Role from the National Courts: Agents of Trans-

national Law …………………………………………………………………..123

4.9 Trans-national business create trans-national norms ………………….124

4.10 What is the trans-national legal process ………………………………125

4.11 How does the trans-national legal process contribute to create substantive

international law? ………………………………………………126

4.12 A trans-national role is required of national courts …………………..127

4.13 Need for Trans-national judicial Dialogue (TJD) ……………………..128

4.14 Liberalism: Source from trans-national judicial dialogue ……………130

4.15 How can TJD facilitate the development? ……………………………..130

4.16 Trans-judicial contact …………………………………………………...131

4.17 Common judicial enterprise …………………………………………….132

4.18 Conclusion ………………………………………………………………133

BIBLIOGRAPHY

I

Organisation of the Study

The thesis is divided into four chapters.

The first chapter of the thesis introduces the background of the research by

demonstrating precise reasons as to why this research was undertaken. This chapter

then explains the aims and objectives of the research and concludes with the

methodology used in the thesis.

The second chapter examines the traditional notion of jurisdiction and the impacts of

the Internet upon it. Traditionally, the judicial jurisdiction has been exercised on the

basis of where the defendant resided, whether the defendant is present within the

forum and whether the defendant has property in the forum or not. These elements

have been made largely irrelevant by the Internet. The Internet disregards boundaries

and territories and enables people to cross borders without any physical movement, to

interact and do business without even revealing their identity. The Internet is

inherently decentralised which undermines the very foundation of the traditional

notion of jurisdiction and the territorially based concept of law and its application.

The third chapter discusses the case law on Internet jurisdiction in Australia, the

United States of America, and France. In examining these cases, the focus of

discussion will be to critically analyse the doctrinal approaches of the courts and

examine whether underlying court doctrines are workable.

The fourth chapter discusses future solutions and proposes models on Internet

jurisdiction. The thesis concludes that the current courts approaches on Internet

jurisdiction are unworkable and that there is no effective international guidance to

govern jurisdictional issues. At this critical juncture, my thesis proposes an alternative

approach, that of “trans-national judicial dialogue”. The idea of such dialogue, should

reduce the conflicts among courts, increase the consensual approach and provide a

stable and predictable paradigm to the problem of jurisdiction. If trans-national

judicial dialogue is applied in Internet jurisdiction cases, the parties would not be

II

prevented from forum shopping, seeking a greater likelihood of a favourable decision.

Trans-national dialogue can thus play a role in the creation, recognition, and

enforcement of global norms.

CHAPTER I

INTRODUCTION

2

This chapter outlines:

1.1 Introduction to the research 1.1.1 Challenges to the law

1.1.2 Traditional jurisprudence on jurisdiction: lost ground

A. Power

B. Effects

C. Notice

D. Legitimacy

1.2 Emergence of Internet jurisprudence 1.2.1 Declaration of Independence of Cyberspace

1.2.2 Law of Cyberspace

1.2.3 Hybrid theory of the law and the technology 1.3 Aims of the research

1.4 Objectives of the research

1.5 Scope of the research

1.6 Methodology

3

1.1 Introduction to the Research

“The Internet is the epitome of the information society”1. Information is now available at

the fingertips of many and this has brought about some remarkable changes in our

society2. We are living in a unique time in the history of human civilisation. The Internet

has created a realm in which individuals, corporations, communities, governments and

other entities can exist within and beyond the borders of nation states in a ubiquitous

manner3. Increasingly, people in the information society are becoming involved in online

services, online contracts4, electronic commerce5, online transactions, and online

publications6.

1 Fitzgerald B 'Dow Jones & Co Inc v Gutnick: Negotiating "American Legal Hegemony" in the Transnational World of Cyberspace' (2003) 27 Melbourne University Law Review 590. See also Fitzgerald B and Fitzgerald A, Cyber Law: Cases and Materials on the Internet, Digital Intellectual Property and E Commerce (2002) Lexis Nexis Butterworths Sydney; Fitzgerald B, Cifuents C and Cook P (eds) Going Digital 2000: Legal Issues relating to E Commerce, Software and the Internet (2000) Prospect Media Sydney; Fitzgerald B, Fitzgerald A, G Middleton, Jurisdiction and Ecommerce (2003) Law Book Company, Sydney; Fitzgerald B, ‘Software as Discourse: The Power of Intellectual Property in Digital Architecture’ (2000) 18 Cardozo Journal of Arts and Entertainment Law 337. See also Clark E and Puig GV, ‘When Global Highways Intersect Local Laws: Defamation via the Internet- Dow Jones & Company Inc v Gutnick’ (2001) 12 Journal of Law and Information Science 271. 2 See Henry H. Perritt, ‘What is the Internet’? http://www.kentlaw.edu/cyberlaw/resources/whatis.html (10/05/03). For a precise judicial definition of the Internet see: American Civil Liberties Union v Reno 929 F. Supp. 824, 830-845 (E.D. Pa 1996). See also Kirby J in Dow Jones & Company Inc v Gutnick [2002] HCA 56 at [ 78] –[87]. 3 See Barlow JP, ‘Selling Wine Without Bottles: The Economy of Mind on the Global Internet’ http://www.eff.org//Publications/John_Perry_Barlow/HTML/idea_economy_article.html (10/06/03). 4 See Hughes G, ‘Electronic Contracting And Consumer Protection: An Australian Perspective’ in Proceedings of the 18th Biennial Conference of LAWASIA , Tokyo, (2003). 5 According to the International Telecommunication Union (ITU), the number of Internet users worldwide stood at 500 million people at the end of 2001. This represents 115 million more than at the end of 2000 (or about a 30 per cent increase). The ITU forecast that at the end of 2002 the global number of Internet users will have grown to 655 million, which would represent a yearly rate of growth of around 31 per cent. In other words, more than 150 million people, roughly the equivalent of a country like the Russian Federation, or 2.5 per cent of the world’s population, would be joining the numbers of Internet users every year. A figure of 500 million current Internet users around the world would therefore seem to be a safe estimate. See the United Nations Conference on Trade and Development E-Commerce And Development Report (2002). 6 See Ginsburg JC, ‘Putting Cars on the "Information Superhighway": Authors, Exploiters, and Copyright in Cyberspace’ (1995) 95 Columbia Law Review 1466.

4

Some of the reasons behind this online trend provide quite an insight into the Internet’s

popularity. The Internet has made the concept of a global society7 more of a reality. It

can be quicker, cheaper, and easier than traditional methods to access and publish

information8. For instance, most of the information placed on the Internet is generally

available to anyone who has an Internet connection, the correct website address and

possibly, pays a small subscription fee. This allows for indiscriminate access of certain

online material. Today, unlike in the past, a person can sell goods from a desktop

computer located anywhere to many different consumers all over the world by means of

the Internet. Moreover, a person can easily publish information in a chat room or on a

website about a person or corporation elsewhere9.

1.1.1 Challenges to the law

Along with the unique opportunities the Internet offers, it also poses new and significant

challenges to traditional legal philosophy10. The growth of trans-border activities and e-

7 See Keane J, Global Civil Society? (2003) Cambridge University Press, Cambridge. See also Elliot A, ‘Individualism Lost in World Village’ The Australian, August 6 2003. 8 See Shapiro C, and Varian HL, Information Rules, Harvard Business School Press, Boston, 1999. 9 See Clark E and Puig GV, ‘When Global Highways Intersect Local Laws: Defamation via the Internet- Dow Jones & Company Inc v Gutnick’ (2001) 12 Journal of Law and Information Science 271. 10 See Oberding JM and Norderhaug T, ‘A Separate Jurisdiction for Cyberspace?’ <http://www.ascusc.org/jcmc/vol2/issue1/juris.html>(2/10/2000); Puurunen T, ‘The Legislative Jurisdiction Of States Over Transactions In International Electronic Commerce’ (2000) 18 The John Marhall Journal of Computer & Information Law 689; Petty WS, ‘Which Court Has Jurisdiction Over Cyberspace?’ (1997) 1(8) Cyberspace Lawyer <http://www.lexis-nexis@prod.lexis-nexis.com> (30/9/00); Post DG, ‘Anarchy, State, and the Internet: An Essay on Law-Making in Cyberspace’ <http://www.cli.org/DPost/X0023_ANARCHY.html>(2/10/2000); Post DG, ‘Governing Cyberspace’ (1997) 43 (155) Wayne Law Review http://www.temple.edu/lawschool/dpost/Governing.html (2/10/2000); Post DG, ‘How shall the Internet be Governed? http://www.cli.org/DPost/governance.html (2/10/2000); Post DG, ‘Personal Jurisdiction on the Internet: An Outline for the Perpelexed’ <http://www.temple.edu/lawschool/dpost/outline.htm>(2/10/2000); Post DG and Nunziato D C, ‘Personal Jurisdiction on the Internet’ http://www.cli.org/DPost/jcases.html (2/10/2000); Post DG, ‘The "Unsettled Paradox": The Internet, the State, and the Consent of the Governed <http://www.cli.org/sov.html>(2/10/2000); Perritt HH, ‘Jurisdiction In Cyberspace’ (1996) 41 Villanova Law Review 1 <lexis-nexis@prod.lexis-lexis.com>(1/11/00); Perritt HH, ‘The Internet And Public International Law: The Internet Is Changing The Public International Legal System’ (1999) 88 Kentucky Law Journal 885; Perritt HH, ‘The Internet And Legal Theory: The Internet Is Changing International Law’(1998) 73 Chicago-Kent Law Review 997; Post DG & Johnson DR, ‘The Internet And Legal Theory: "Chaos Prevailing On Every Continent": Towards A New Theory Of Decentralized Decision-Making In Complex Systems’ (1998) 73 Chicago-Kent Law Review 1055; Patchel K, ‘Software As A Commodity: International Licensing Of Intellectual Property: Article: Choice Of Law And Software Licenses: A

5

commerce in particular pose new challenges to the ability of consumer protection policy

and enforcement agencies to protect consumers. Most existing laws and enforcement

systems designed to address fraudulent and deceptive commercial practices against

consumers were developed at a time when such practices were predominantly domestic.

The current laws and systems are therefore not always adequate to address the increasing

prevalence of cross-border fraudulent and deceptive commercial practices that harm

consumers11. Another challenge is the diverse legal systems worldwide, with different

laws, enforcement procedures, and roles for judicial authorities, and varying reliance on

civil, criminal, and administrative law.

Internet activities can easily give rise to trans-national disputes, which may be difficult to

resolve12. For example, many limitations on the enforcement of national laws result from

having wrongdoers, victims, other witnesses, documents, and third parties involved in a

fraudulent transaction widely dispersed in many different places and territories. This

makes it difficult for adjudicating and enforcement authorities and other relevant

government entities to gather the information necessary to detect injurious practices, and

to deter conduct occurring beyond a country’s borders13. Even the location of wrongdoers

can be difficult to determine, since they may operate in concert using corporate shells in

various territories14. Fraudsters may move their operations to different territories over

Framework For Discussion’ (2000) 26 Brooklyn Journal of International Law 117; Pelzer FC, ‘Unchartered Territory: Personal Jurisdiction in the Internet Age’ (2000) 51 South Carolina Law Review 745. 11 See Clark E, Cho, G and Hoyle (eds) E-Business: Law and Management for 21stCentury, Canberra, Info-Sys Law International, 2001. 12 See Rothman MS, ‘It's A Small World After All: Personal Jurisdiction, the Internet and the Global Marketplace’ (1999) 23 The Maryland Journal of International Law & Trade 127; Salbu SR, ‘Who Should Govern The Internet?: Monitoring And Supporting A New Frontier ’(1998) 11 Harvard Journal of Law & Technology 429; Sheehan KC, ‘Predicting the Future: Personal Jurisdiction for the Twenty-First Century’ (1998) 66 University of Cincinnati Law Review 385.

13 See Caden ML & Lucas SE, ‘Accidents on the Information Superhighway: On-line Liability and Regulation’ (1996) 2 Richmond Journal of Law & Technology 3. 14 See OECD Guidelines for Protecting Consumers from Fraudulent and Deceptive Commercial Practices Across Borders. They were adopted on 11 June 2003 http://www.oecd.org/EN/document/0,,EN-document-29-nodirectorate-no-24-41808-29,00.html (23/6/03).

6

time, using facilities such as product suppliers, Internet service providers, express mail

delivery services, telephone providers, domain name registries, post office boxes, web

site hosting services, banks, credit card processors, call centres, data processing centres,

advertising agencies, and answering services in a variety of territories15. Moreover,

investigations of cross-border fraudulent and deceptive commercial practices can depend

on evidence that is often transient, including information from computer systems and

networks that can be lost before consumer protection enforcement agencies can examine

it.

As trans-national Internet disputes become more common and the stakes increase, the

demand for quick and just resolutions through the various legal systems will grow. Thus,

serious jurisdictional questions arise when considering how to resolve disputes resulting

from trans-national Internet activities, namely: Which court should hear the dispute?

What law should be applied? Which court should enforce the decision16?

With so much at stake online, lawmakers may be anxious to reign in the Internet to

secure their own economic benefits and those of their national companies and protect

their citizens from harm. But they have a serious dilemma as to how can they protect

their citizens17? How can the governments take action, make decisions and execute their

decisions when the parties involved are trans-national? In my view, traditional legal

philosophy has lost ground and is not able to adequately address these issues.

15 See Caden ML & Lucas SE, ‘Accidents on the Information Superhighway: On-line Liability and Regulation’ (1996) 2 Richmond Journal of Law & Technology 3. 16 See Aoki K, ‘Considering Multiple and Overlapping Sovereignties: Liberalism, Libertarianism, National Sovereignty, "Global” Intellectual Property, and the Internet’ (1998) 5 Indiana Journal of Global Legal 443; Boyle J, ‘Intellectual Property Law For The Twenty-First Century: Article: Foucault In Cyberspace: Surveillance, Sovereignty, And Hardwired Censors’ (1997) 66 University of Cincinnati Law Review 177. 17 Gibbons LJ, ‘No Regulation, Government Regulation, Or Self-Regulation:’ Social Enforcement Or Social Contracting For Governance In Cyberspace’ (1997) 6 Cornell Journal of Law and Public Policy 475.

7

1.1.2 Traditional Jurisprudence on Jurisdiction: Lost Ground

State laws are traditionally based on borders and jurisdiction18. Traditional jurisprudence

on jurisdiction assumes that the law is made for a definite group of people residing in a

certain territory where the government of that territory will prescribe the law and execute

the law. Legal rights and responsibilities are therefore largely dependent on where one is

located. With the growth of Internet based activities, however, these elements have

become increasingly irrelevant19. Online activities bring people together from all over the

world and trans-national activities become very much a part of daily life. When the

regulation of such activities comes into a question, traditional jurisprudence loses its

foundation20.

In fact, some of the traditional elements of legal authority have been demolished by the

global nature of the Internet21. In order to analyse the defining character of the traditional

18 See Aron Mefford, ‘Lex Informatica: Foundations of Law on the Internet’ (1997) 5 Indiana Journal of Global Legal Studies 211. 19 See Trachtman JP, ‘Cyberspace, Sovereignty, Jurisdiction, and Modernism’ (1998) 5 Indiana Journal of Global Legal Studies 561. 20 See ‘Traditional Notions of Fair Play and Substantial Justice Lost in Cyberspace: Personal Jurisdiction and On-Line Defamatory Statements’ (2001) 51 Catholic University Law Review 301; Joanna Zakalik Rachael T. Krueger, ‘Law Without Borders In Cyberspace’ (1996) 43 Wayne Law Review 101; Aron Mefford, ‘Lex Informatica: Foundations of Law on the Internet’ (1997) 5 Indiana Journal of Global Legal Studies 211. 21 See Ballon IC, ‘The Law of the Internet: Developing a Framework for Making New Law’ (1997) 2 Cyberspace Lawyer 12; Beall CP, ‘The Scientological Defenestration Of Choice-Of- Law Doctrines For Publication Torts On The Internet’ (1997) 15 The John Marshall Journal of Computer & Information Law 361; Burmeister K, ‘Jurisdiction, Choice of Law, Copyright, and the Internet: Protection against Framing in an International Setting’ (1999) 9 Fordham Intellectual Property, Media & Entertainment Law Journal 625; Borchers PJ, ‘Conflict Of Laws’ (1999) 49 Syracuse Law 333; Booysen H, ‘Is International Law Relinquishing Its Exclusively Public Law Nature?’ (1997) 4 Tulsa Journal of Comparative & International Law 219; Burk DL, ‘Jurisdiction in a World Without Borders’ (1997) 1Virginia Journal Of Law And Technology 3 http://vjolt.student.virginia.edu/graphics/vol1/home_art3.html>(2/10/2000); ‘Conflicts on the Internet: Choice of Law in Transnational Cyberspace’ (1996) 29 Vanderbilt Journal of Transnational Law 75; Caden ML & Lucas SE, ‘Accidents on the Information Superhighway : On-line Liability and Regulation’ (1996) 2 Richmond Journal of Law & Technology 3; Cohen JE, ‘Copyright and The Jurisprudence of Self-Help’ (1998) 13 Berkeley Technology Law 1089; Ciolino DS, ‘Why Copyrights Are Not Community Property’ (1999) 60 Louisiana Law Review 127; Burmeister K, ‘Jurisdiction, Choice of Law, Copyright, and the Internet: Protection against Framing in an International Setting’ (1999) 9 Fordham Intellectual Property, Media & Entertainment Law Journal 625.

8

laws on jurisdiction22, we will consider the following categories of power, effects,

legitimacy, and notice.

A. Power

Power underpins the law - if a law is violated, an authority must have the power to

impose sanctions. Effective lawmaking thus requires some mechanism for law

enforcement. Enforcement, in turn, depends on the ability of an authority to exercise

physical control over or to otherwise impose coercive sanctions on violators. An

authority may derive that power from physical control over a territory or the people and

things located in that territory. An authority wishing to impose a set of laws should

ensure the integrity of their boundaries to keep illegal activities and illegal actors out.

This is also a defining attribute of an authority’s sovereignty and statehood.

The Internet has created a different scenario Internet because of its design23. Boundaries

in cyberspace do not necessarily correspond to the geographical boundaries of the

physical world and the power of the authorities, which had been based on physical

control, becomes outdated. Governments wishing to impose laws on or in cyberspace

find that they simply do not have the necessary physical control over the Internet for

effective lawmaking.

Another enforcement problem stems from the difficulties that legal authorities have in

exercising power over people who may, for instance, have a damages order made against

them or who are to be subjected to some other sanction24. The difficulties arise because

22 See Malley R, Manas J and Nix C, ‘Constructing the State Extra-territorially: Jurisdictional Discourse, the National Interest, and Transnational Norms’ (1990) 103 Harvard Law Review 1273. 23 See Menthe D C, ‘Jurisdiction in Cyberspace: A Theory of International Spaces’ (1998) 4 Michigan Telecommunication and Technology Law Review 69. 24 See, Dawson S, Kloczko A and Waldron BD, ‘Beyond Gutnick: Enforcement of Foreign Defamation Judgements in Australia’ (2003) 52 Journal for the Australian and New Zealand Societies for Computers and the law 2, Degnan R E and Kane MK, ‘The Exercise of Jurisdiction over and Enforcement of Judgments Against Alien Defendants’ (1988) 39 Hastings Law Journal 799.

9

of a key Internet feature when authorities try to track down and find offenders. The

Internet25 is set up to operate logically rather than geographically26. In other words, the

Internet is primarily programmed to only deal with finding the logical location of a

computer, called a URL (or Internet address), not the physical location of the computer

with that address or the person behind that address. As a result, the person or corporation

behind the cyber-identity can use that identity to remain anonymous while evading

detection by authorities. For example, a person determined to commit a certain type of

activity which is illegal in her own jurisdiction, such as Internet gambling, might register

her Internet address in a less restrictive jurisdiction, out of reach of her own state's laws.

The individual may then engage in the illegal Internet activity, with little fear of detection

from her own state. A state may technically have jurisdiction over the offending user, but

be unable to act because the structure of the Internet allows that person to remain

undetected and so beyond the reach of the state.

B. Effects

Another reason why the law has been limited by geography in the past is that the extents

of the harms caused have been generally limited within the physical boundaries of the

jurisdiction. The law of jurisdiction therefore governs actions that are most likely to have

effects solely in that jurisdiction. This concept is reflected in the judicial doctrine of lex

loci delecti, or the law of the place of the wrong. This concept highlights the connection

between jurisdiction and the effects of certain activities. The effects of illegal actions on

the Internet may not necessarily take place and have their effects within a

confined geography.

25 See Henry H. Perritt, ‘What is the Internet’? http://www.kentlaw.edu/cyberlaw/resources/whatis.html (10/05/03). For a precise judicial definition of the Internet see: American Civil Liberties Union v Reno 929 F. Supp. 824, 830-845 (E.D. Pa 1996). See also Kirby J in Dow Jones & Company Inc v Gutnick [2002] HCA 56 at [78] –[87]. 26 See Trachtman JP, ‘Cyberspace, Sovereignty, Jurisdiction, and Modernism’ (1998) 5 Indiana Journal of Global Legal Studies 561.

10

The speed of electrons and the interconnected nature of the Internet mean that

communication of information via the Internet defies the notion of geography and

distance27. Consequently, the effects of actions may be felt immediately throughout the

world, regardless of location. The effects of an action are not merely confined to a certain

localized area. Rather, these effects can have an impact on every location on the Internet

instantaneously28. To highlight this issue, a defamatory statement made on a website in

Australia can have an impact on an Internet user in China at the same time it affects

another user in Nepal. The fact that Australia and Nepal are geographically closer than

China is irrelevant by Internet standards29. The action taken in Australia may just as well

have taken place in China from the perspective of a computer user in Nepal. On the other

hand, in the physical world the effect of a defamatory statement is generally limited to

quite a defined audience, such as the readership of a local newspaper or the viewers of a

local TV broadcast. As a result, defamation has mostly local effects. On the Internet,

however, a defamatory statement can be instantaneously available throughout the world.

The consequent damage of the action may now also be felt throughout the world. Thus,

the effects of Internet activity are not limited by geography because distance is largely

irrelevant in Cyberspace30.

C. Notice

Traditional concepts of jurisdiction rely on the assumption that an individual who deals

with persons in a jurisdiction is on notice that laws may govern the activity and therefore

has the opportunity to take appropriate precautions to avoid violating any laws. But

Internet users cannot take this precautionary action for a number of reasons. First,

“Netizens” (a term coined to refer to citizens of the Internet, highlighting its rise above

geographical boundaries) may have no notice that they are acting within another

27 Lewis H S, ‘The Three Deaths Of "State Sovereignty" And The Curse Of Abstraction In The Jurisprudence Of Personal Jurisdiction’ (1983) 58 Notre Dame Law Review 699. 28 See Daughdrill BE, ‘Information Super Highway: Territorial-Based Jurisprudence in a Technological World’ (2001) 52 Mercer Law Review 1217. 29 See Adria Allen ‘Internet Jurisdiction Today’ (2001) 22 Journal of International Law & Business 69. 30 See Adria Allen ‘Internet Jurisdiction Today’ (2001) 22 Journal of International Law & Business 69.

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jurisdiction because Internet addresses do not correspond to physical locations. These

users are only aware of the Internet location they are at and not necessarily the country.

It is not always reasonable or practical to expect a user to take precautions. Second,

information placed on the Internet that causes harm must be actively retrieved by Internet

users so that only an attenuated definition of directed activity will cover harmful activity

that flows outside the physical jurisdiction.

Internet publishers are also unlikely to consider their audiences. Furthermore, even if a

publisher knows certain material might be seen outside its home country, it may not

know exactly where it will be accessed. In any event, even if a publisher expects the site

will be accessed, there is the question about whether such access was directed knowingly,

intentionally or specifically.

D. Legitimacy

Any legal system should have the consent of the people governed to be seen as

legitimate. Otherwise, there is a serious possibility that citizens will rebel against or

simply ignore the law. For traditional territorial legitimacy, individuals living in a given

territory should have some say in how the laws affecting them have been written31.

States wishing to control activity on the Internet suffer from two legitimacy problems32.

First, there is the general problem present in all international transactions that an actor in

country A may be subjected to the laws of country B although s/he had no voice in the

enactment of those laws33. In the past, this problem only impacted upon a few

31 See Berman N, ‘Modernism, Nationalism and the Rhetoric of Reconstruction’ (1992) 4 Yale Journal of Law and the Humanities 351. 32 See Dawson S, Kloczko A and Waldron BD, ‘Beyond Gutnick: Enforcement of Foreign Defamation Judgements in Australia’ (2003) 52 Journal for the Australian and New Zealand Societies for Computers and the Law 2. 33 See Degnan R E and Kane MK, ‘The Exercise of Jurisdiction over and Enforcement of Judgments Against Alien Defendants’ (1988) 39Hastings Law Journal 799.

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transactions (eg. if there was no choice of law clause in a contract) and then only those

who had notice first. However, the Internet presents unique problems for state legitimacy

because of its unprecedented ability to bring people together from all over the world on a

such a regular basis. This increased interaction means that there are more transactions

between people from different states. A greater number of transactions mean a greater

number of conflicts and disputes and so legitimacy problems arise for states trying to

exercise jurisdiction. Netizens are likely to be unhappy about being required in a

jurisdiction in a country where they did not even know they had acted.

Such failings by the law to address some of these new challenges pave the way for a new

school of thought on Internet jurisdiction.

1.2 Emergence of Internet Jurisprudence

As society changes and new technologies emerge, it is imperative that the law fills the

gap between the old norms and what new norms require34. In relation to Internet law and

jurisdiction, three mainstream schools of thoughts have emerged. One is a radical school

which considers that cyberspace should be completely free from the government and any

physical control or the law of any state of government. Another school of thought argues

that a distinctive set of cyber laws are required for cyberspace. Finally, the third school of

thought suggests a blend of law and technology to regulate cyberspace successfully.

34 See Clark EE, Cho, G and Hoyle (eds) E-Business: Law and Management for 21stCentury, Canberra, Info-Sys Law International, 2001; Ballon IC, ‘The Law of the Internet: Developing a Framework for Making New Law’ (1997) 2 Cyberspace Lawyer 12; Edwards L and Waelde C (eds), Law and the Internet: A Framework for Electronic Commerce, 2nd Ed, Hart Publishing, Oxford, 2000.

13

1.2.1 Declaration of Independence of Cyberspace- Radical School

This school makes the declaration that cyberspace is independent from all kinds of

government regulation. Accordingly, any disputes and concerns that arise in cyberspace

should not be governed by any one law or government authority. Cyberspace will have

its own set of norms and patterns. It says:

Governments of the Industrial World, you weary giants of flesh and steel, I come from

Cyberspace, the new home of Mind. On behalf of the future, I ask you of the past to leave us

alone. You are not welcome among us. You have no sovereignty where we gather. We have no

elected government, nor are we likely to have one, so I address you with no greater authority

than that with which liberty itself always speaks. I declare the global social space we are building

to be naturally independent of the tyrannies you seek to impose on us. You have no moral right to

rule us nor do you possess any methods of enforcement we have true reason to fear. Governments

derive their just powers from the consent of the governed. You have neither solicited nor received

ours. We did not invite you. You do not know us, nor do you know our world. Cyberspace does

not lie within your borders. Do not think that you can build it, as though it were a public

construction project. You cannot. You have not engaged in our great and gathering conversation,

nor did you create the wealth of our marketplaces. You do not know our culture, our ethics, or the

unwritten codes that already provide our society more order than could be obtained by any of

your impositions. Our world is different. Ours is a world that is both everywhere and nowhere,

but it is not where bodies live. We are creating a world where anyone, anywhere may express his

or her beliefs, no matter how singular, without fear of being coerced into silence or conformity.

Your legal concepts of property, expression, identity, movement, and context do not apply to us.

They are all based on matter, and there is no matter here. But we cannot accept the solutions you

are attempting to impose. We must declare our virtual selves immune to your sovereignty, even as

we continue to consent to your rule over our bodies. We will create a civilization of the Mind in

Cyberspace35

35 A Declaration of the Independence of Cyberspace http://www.eff.org/~barlow/Declaration-Final.html (13/06/03). See also Barlow JP, ‘Selling Wine Without Bottles: The Economy of Mind on the Global Internet’ http://www.eff.org//Publications/John_Perry_Barlow/HTML/idea_economy_article.html (10/06/03).

14

Obviously, this is an extremist, non-legalistic view and as such is unlikely to be accepted

by legislators as the recommended approach. Another more balanced and more practical

school of thought argues the need for a distinct and separate law for cyberspace.

1.2.2 Law of Cyberspace

This school of thought emphasises the need to recognise that cyberspace is distinctive

and so a distinctive set of laws are needed to order this space. Accordingly, laws based on

the physical world cannot be applied to cyberspace. It argues:

Many of the jurisdictional and substantive quandaries raised by border-crossing electronic

communications could be resolved by one simple principle: conceiving of Cyberspace as a

distinct "place" for purposes of legal analysis by recognizing a legally significant border between

Cyberspace and the "real world. Treating Cyberspace as a separate "space" to which distinct

laws apply should come naturally. Crossing into Cyberspace is a meaningful act that would make

application of a distinct "law of Cyberspace" fair to those who pass over the electronic boundary.

To be sure, Cyberspace is not a homogenous place; groups and activities found at various online

locations possess their own unique characteristics and distinctions, and each area will likely

develop its own set of distinct rules36.

This approach suffers from serious unanswered questions. If the laws made by any

particular national government cannot be applied, which body should have law making

authority? Given the ubiquitous nature of the Internet, who will then enforce the rules

which an authority states are to be applied in Internet disputes?

1.2.3 Hybrid theory combining law and technology

36 David G. Post & David R. Johnson ‘Law and Borders --The Rise of Law in Cyberspace’ (1996) 48 Stanford Law Review 1367. http://www.temple.edu/lawschool/dpost/Borders.html (13/06/03).

15

The final school of thought argues that cyberspace is not free from any form of laws and

regulations, however, not only the law can regulate cyberspace. According to this theory,

it is the combination of law and technology which can form a successful model of

regulation.

The architecture of cyberspace, or its code, already regulates some behaviour in

cyberspace. The code, or the software and hardware that make cyberspace the way it is,

constitutes a set of constraints on how one can behave. This school of thought differs

with the previous two theories substantially. The cyberspace is not free from government

regulations and solely the government laws will not be able to regulate but there should

be hybrid of law and technology. Technology in the form of code37 will play a crucial

role. For example, the law can prohibit the viewing of pornographic material by minors.

To help prevent minors accessing such material, technology can be used to introduce a

password based access system whereby no passwords are issued to any users that are

underage.

For some websites, one must enter a password before one gains access; in other places,

one can enter freely whether providing an identity code or not. In some circumstances,

the transactions that one engages in produce traces or “mouse droppings,” that link the

transactions back to the individual; while in other circumstances, this link is achieved

only if the individual consents. In some places, one can elect to speak a language that

only the recipient can understand (through encryption); in other places, encryption is not

an option. Code sets these features, they are features selected by code writers, they

constrain some behaviour (for example, electronic eavesdropping) by making other

behaviour possible (encryption). They embed certain values, or they make the realization

37 See Lessig L, Code and Other Laws of Cyberspace, Basic Books, New York, 1999. See also Lessig L, ‘The Law of the Horse: What Cyberlaw Might Teach’ 113 Harward Law Review 501; Lessig L, ‘Zoning Speech on the Internet: A Legal and Technical Model’ (1999) 98 Michigan Law Review, 395; Henry H. Perritt, Law and the Information Superhighway, John Wiley & Sons, New York 1996.

16

of certain values impossible. In this sense, these features of cyberspace also regulate the

Internet, just as the architecture in real space regulates physical constructions.

Nevertheless, these new schools of thought for Internet jurisdiction have not adequately

addressed the dilemma of how to determine which is an appropriate forum to hear a

matter which has arisen out of Internet activities. My research was undertaken with the

aim of finding out the best model for Internet jurisdiction.

1.3 Aims of the Study

The research intends to examine the traditional notion of jurisdiction in the light

of Internet based activities and will investigate the impacts of the Internet on the

notion of jurisdiction. Based on the investigation, I will then propose a new

paradigm of Internet jurisdiction that will provide a framework for understanding

theoretical and doctrinal issues facing jurisdiction in cyberspace.

1.4 The Objectives of the study are to:

• examine the traditional philosophy of jurisdiction and analyse

the impacts of the Internet upon this;

• analyse current court approaches through the study of recent

case law on Internet jurisdiction;

• examine an international proposal concerning Internet

jurisdiction ( the Hague proposal); and

• propose a new paradigm for Internet Jurisdiction.

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1.5 Scope of Study

The research is confined to the issues relating to civil jurisdiction and excludes criminal

jurisdiction.

1.6 Methodology

Literature review and research through accessing hard copy and electronic libraries has

been the main source of collection of information and knowledge38. Primary sources of

materials for Australian, American, and French cases and statutes and international

treaties have been obtained from AUSTLII and the Lexis-Nexis databases. Secondary

materials were also gathered electronically while number of the commentaries and

articles were gathered from the library.

The second important step I took was to analyse this information in the light of the aims

and objectives of the thesis. The approach taken in this thesis was to interpret the

gathered material from the perspective of proposing a new paradigm on Internet

jurisdiction. The underlying conceptual framework of the thesis has thus become trans-

national judicial dialogue. This conceptual framework is justified in two ways. One is

that there is no effective international law on Internet jurisdiction and the other is that the

pure application of traditional national laws will create chaos because the Internet is

inherently trans-national.

38 For more detail on legal research see Watt R, Concise Legal Research, 3rd ed , Federation Press, Sydney, 1997; Dayal S. LDL Online: Computer Assisted Legal Research, Butterworth, Victoria, 1998, Clinch P, Using A Law Library : A Student’s Guide To Research Skills, Blackstone Press; London, 1992; Holborn G, Legal Research Guide, Butterworth, London 1993; Cook C, Creyke R, Geddes and Hollay I, Laying Down the Law: The Foundation of Legal Reasoning , Research, and Writing in Australia , 4th ed, Butterworth, Adelaide , 1996; Campbell E, York LP and Tooher J, Legal Research : Materials and Methods , 4th ed, LBC Information Services , Sydney 1996.

CHAPTER II

Traditional Notions of Jurisdiction

and

the Impact of the Internet

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This chapter examines:

2.1. Background

2.1.1 Why jurisdiction is an important issue

2.1.2 Definition of “jurisdiction”

2.2 Common legal theories underpinning the notion of jurisdiction

2.2.1 Sovereignty

2.2.2 Territoriality

2.2.3 Physical Presence

2.3 Key legal theory governing the notion of extraordinary jurisdiction

2.3.1 Forum connection theory

2.4 Principal elements of jurisdiction

2.4.1 Personal / subject matter jurisdiction

A. service within the jurisdiction

B. service outside the jurisdiction

2.4.2 Choice of law

2.4.3 Choice of forum

2.4.4 Enforcement of judgment

2.5 US laws and practice in relation to judicial jurisdiction

2.6 Impact of the Internet upon the traditional notions of jurisdiction

2.7 What is the Internet?

2.7.1 Ubiquitous and non-territorial 2.7.2 Possibility of anonymous interaction

2.8 Theoretical conflicts between the traditional legal notions of jurisdiction and the Internet A. Inter-sovereign conflicts B. Over-inclusiveness C. Under-inclusiveness 2.9 Conclusion

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2.1 Background

The legal notion of jurisdiction helps to define and determine1 the power of States to regulate

people, property and circumstances. This jurisdictional power confers the legal power to a State

to make (legislative), implement (executive) and adjudicate (judicial power: personal and

subject matter) laws. The ‘power theory’, in particular, justifies a State’s authority to exercise its

legal power.2 Under international law, this power is generally most effective when it is

exercised within a State’s territorial borders.3

History testifies to the fact that many obstacles (such as financial, temporal and linguistic) have

confined human activities to relatively small geographical areas. When the property and persons

involved in a dispute are all within one area, there is a greater likelihood of an obvious and

1 See Fitzgerald B and Fitzgerald A, Cyber Law: Cases and Materials on the Internet, Digital Intellectual Property and E Commerce (2002) Lexis Nexis Butterworths, Sydney, Chapter 4; Cameron B, ‘Jurisdiction and the Internet’(2000) 42 Computers and the Law 13; Logan Everett Sawyer ‘Jurisdiction, Jurisprudence, And Legal Change: Sociological Jurisprudence And The Road To International Shoe’ (2001) 10 George Mason Law Review 59; Mammen C E, ‘Here Today, Gone Tomorrow: The Timing Of Contacts For Jurisdiction And Venue Under 28’ (1993) 78 Cornell Law Review 707; Julia Christine Bunting ‘Ashley V. Abbott Laboratories: Reconfiguring The Personal Jurisdiction Analysis In Mass Tort Litigation’ (1994) 47 Vanderbilt Law Review 189.

2 “In the context of dispute resolution, the ‘power theory’ justifies the exercise of a State’s jurisdiction over an entity if the State has, directly or indirectly, an effective hold over a defendant. The State already has power over the plaintiff because s/he has submitted to the State’s power. The decisive jurisdictional question, therefore, is whether there a State can exercise its power over the defendant. When the State’s power is clear and complete, the claim to adjudicatory jurisdiction is strongest; when the power is contingent or incomplete, the jurisdictional claim is correspondingly problematical. A State that adheres to the ‘power theory’ will not exercise jurisdiction when it lacks the requisite power over a defendant”. Arthur Taylor von Mehren. “Adjudicatory Jurisdiction: General Theories Compared And Evaluated” Boston University Law Review (1983) 63 B.U.L. Rev. 279. 3 Under current international law, there are five established principles concerning when a State is entitled to exert its jurisdictional power: • territoriality principle: what occurs within the territory of a State is the primary concern of that State; • nationality principle: a State has significant interest in exercising jurisdiction over entities that possess its

nationality; • passive nationality principle: a State may assert jurisdiction over activities which, although committed outside

its territory by foreign nationals, have affected (or will affect) nationals of that State; • protective principle: a State may assert jurisdiction over offences committed outside its territory which have

affected (or will affect) a State’s security, integrity or vital economic interests; and • universality principle: any State has an interest in exercising jurisdiction to combat certain activities which are

universally condemned. See Henkin L, Pugh RC, Schachter, Smit H, International Law: Cases and Materials, 3rd ed, West Publishing, ST. Paul, MINN, 1993, at 1046.

21

uncontroversial jurisdictional choice. Since a State authority rendering judgment also has the

power of enforcement against property or persons within its territory, no other State needs to be

involved to recognise the legitimacy of the judgment. So in the past, the notion of territoriality

has been one of the most effective principles to define both the personal4 and the prescriptive5

jurisdiction of a State.

Before the advent of the global village via the Internet, questions of jurisdiction were not

commonly encountered by domestic courts. However, the explosion of the Internet has created

significant challenges for the traditional notion of ‘territoriality’ and other established

jurisdictional principles. To understand and respond to these challenges, we will examine the

theoretical underpinnings and the fundamental elements of the traditional notions of jurisdiction,

then analyse the impact of Internet-based activities. First of all, how does the notion of

jurisdiction function in the context of dispute resolution?

2.1.1 Why jurisdiction is an important issue

The notion of ‘jurisdiction’ is vital in the context of dispute resolution because of the deeply

rooted relationship between physical proximity and the effects of any legal activity. Jurisdiction

enables States to monitor and control the activities of property and persons within and across its

territorial boundaries. This is based on the underlying principle of “consent of the governed”,

which implies that those subject to a set of laws must consent to their formulation or application.

The subjects of a sovereign State's laws are primarily located within its physical borders and so

are greatly affected by the application of its laws. It is also generally easier to determine the will

of those subjects who are in physical proximity to one another. In this way, persons within a

geographically defined border are often considered the ultimate source of law-making authority

for a State. Consent to a set of laws is not sought from or given by any persons beyond a State’s

borders because such persons are not usually affected by these laws. This often prompts a State

4 Personal jurisdiction is the authority of a State to insist that a defendant appear and defend a claim brought against it or have an enforceable default judgment entered against it. It is part of a broader universal requirement that a Court should possess adjudicatory jurisdiction, which encompasses subject matter jurisdiction as well.

22

to have its own set of laws and principles for its subjects within its jurisdiction. Thus for many

legal disputes, the notion of ‘jurisdiction’ is an important way of considering who may be most

affected by the application and enforcement of a State’s laws. But what is ‘jurisdiction’ exactly?

2.1.2 Definition of jurisdiction

As a general term, jurisdiction can refer to the following interconnected concepts:

• a State’s power to exercise authority over property and persons within its geographical

borders; or

• a geographical area within which political authority may be exercised;

• a court’s power to issue a decree or decide a case.

We have already considered the concepts of ‘jurisdiction’ in the broader sense of a State’s

power within a geographical area. The third interrelated concept is ‘judicial jurisdiction’,

which concerns a State’s power, as exercised through its Courts, to adjudicate disputes. In the

context of dispute resolution, a clear concept of jurisdiction is needed to answer questions, such

as ‘Which is the most appropriate court to hear the dispute? What law will be applied to

resolve the dispute? Which authority will enforce the judgment.?’ This ‘jurisdiction’ involves:

The scope of the court’s power to examine and determine the acts, interpret and apply laws,

make orders and declare judgments. Geographic area, the type of parties who appear, the type

of relief that can be sought, and the point to be decided may limit jurisdiction.6

5 Prescriptive or regulatory jurisdiction is the authority of a State to regulate an entity’s conduct and to penalize its failure to comply with that regulation, either in an enforcement action brought by the State or through the use of its courts to determine the merits of a private claim.

6 Nygh PE, Butt P (eds) Australian Legal Dictionary, Sydney, 1997 at 650.

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In particular, there are two main sub-types of a Court’s jurisdiction:

• ‘personal (in personam) jurisdiction’ - refers to the persons over whom the Court may

exercise jurisdiction; and

• ‘subject matter jurisdiction’ - refers to the nature of the disputes which may be adjudicated

upon by a particular Court.

For example, a Court may assert personal jurisdiction over a defendant to a legal action if s/he

has been effectively served with initiating process documents within the territorial boundaries of

the Court’s authority or s/he voluntarily submits to the Court’s jurisdiction by filing an

unconditional defence.7 In Australia, whether the High Court8, the Federal Court9 or the various

State10 and Territory Supreme Courts11 will exercise personal jurisdiction over a defendant may

also depend upon the nature of the subject matter. In short, once ‘jurisdiction’ has been asserted

by a Court, it is able to adjudicate a dispute.

Next, we will consider some of the legal theories on jurisdiction which support the fundamental

elements of a Court’s jurisdiction.

7 Solomon D (ed), The Legal Reporter, 22 (2001) at 2. 8 Original jurisdiction of High Court is exercised in all matters:

1. arising under any treaty; 2. affecting consuls or other representatives of others countries; 3. in which the Commonwealth, or a person suing or being sued on behalf of the Commonwealth, is a party; 4. between States, or between residents of different States, or between a State and a resident of another State; 5. in which a writ of mandamus or prohibition or an injunction is sought against an officer of the

Commonwealth. 9 Under the Federal Court of Australia Act 1976, the original jurisdiction of the Federal Court includes:

1. the jurisdiction invested in it by laws made by the Parliament; 2. any jurisdiction invested in it to hear and determine appeals from decision of persons, authorities of

tribunals other than courts. 10 For example: Supreme Court of Queensland Act 1991 prescribes the jurisdiction of the Supreme Court of Queensland generally as:

1. all jurisdiction that is necessary for the administration of justice in Queensland; and 2. subject to the Commonwealth Constitution, unlimited jurisdiction at law, in equity and otherwise.

11 The following legislation defines the jurisdiction of the various Supreme Courts, Supreme Court Act 1933 (ACT) s 20, Supreme Court Act 1970 (NSW) s 23, and Constitution Act 1975 (Vic) s 85.

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2.2 Common legal theories underpinning the notion of jurisdiction

Legal theories about sovereignty, territoriality and an entity’s physical presence support the

traditional notion of a Court’s jurisdiction in its role as adjudicator. These schools of thought all

recognise the sovereign power of a State (namely that a State is entitled to exercise exclusive

authority within its own territory) and the territorial origin and application of a set of laws. A

key assumption in all of these theories is that a State, which is supported by the people of a

particular area, makes laws12 which will only be valid, applicable and enforceable within its

territory. The concept of the exclusivity of State authority derives from the Positive School of

Law.

2.2.1 Sovereignty Theory

The traditional sovereignty paradigm defines the spheres of State authority13. This theory views

the habitable portion of the planet, with few exceptions, as divided into sovereign States. Under

the classic formulation, each State is the ultimate and supreme political entity within its

jurisdictional sphere. All non-State actors coming within a State's jurisdictional sphere and the

State's own internal organs of administration are subject to the absolute exercise of that State's

domestic authority through its law. Law is considered a human invention to help order social

behaviour. To accomplish this task, when legal doctrines are not being employed to create new

(or to reform) a State’s institutions, such doctrines must reinforce existing institutions.

12 ‘Vested right theory’ postulates that all law is territorial in scope. This means that the law of a country, including the authority of its courts, does not extend beyond its territory but applies to all persons and property, situated within that territory. 13 SS, ‘Nationality Law, Sovereignty, And The Doctrine Of Exclusive Domestic Jurisdiction’ (1994) 9 Florida Journal of International Law 219; Lanza E, ‘Personal Jurisdiction Based On Internet Contacts’ (2000) 24 Suffolk Transnational Law Review 125; Lewis H S, ‘The Three Deaths Of "State Sovereignty" And The Curse Of Abstraction In The Jurisprudence Of Personal Jurisdiction’ (1983) 58 Notre Dame Law Review 699; Clarkson G, ‘Indigenous Nations Law Issue: Introduction: Reclaiming Jurisprudential Sovereignty: A Tribal Judiciary Analysis’(2002) 50 Kansas Law Review 473; Haskew HS, ‘Shaffer, Burnham, And New York's Continuing Use Of Qir-2 Jurisdiction: A Resurrection Of The Power Theory’ (1996) 45 Emory Law Journal 239; Joshua D. Groff, ‘A Proposal For Diplomatic Accountability Using The Jurisdiction Of The International Criminal Court: The Decline Of An Absolute Sovereign Right’ (2000) 14 Temple International and Comparative Law Journal 209; Barbara Ann Atwood, ‘Child Custody Jurisdiction and Territoriality’ (1991) 52 Ohio State Law Journal 369; Sarah R. Cebik ‘A Riddle Wrapped In A Mystery Inside An Enigma": General Personal Jurisdiction And Notions Of Sovereignty, (1998) 1998 Annual Survey of American Law 1.

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Jurisdictional principles, both personal and prescriptive, originally derived from an assumption

about the absoluteness of boundaries and sovereign power within them. The assumption was

grounded in political practicality. Every nation (or, in a federation, every state) was thought to

have complete authority to control persons and property only within its borders. Outside a

State’s borders was another nation (or state) with complete authority over its own territory,

foreclosing the exercise of jurisdiction by any other State.14 This is the defining characteristic of

the theory of sovereignty – a State has no power or ability to control beyond its borders. Such a

system gives critical importance to the physical location of a defendant at the moment the State

attempts to assert its authority, which is the moment a defendant is served with initiating

process. If a defendant is served within the borders of the State, its jurisdiction is quite clear,15

generally a Court would apply its own law or dismiss the case; it did not apply the law of

another State.16

This theory of sovereignty confers supreme and absolute political power in the State, a

territorially defined entity, which may legitimately assert jurisdiction over a defendant that

enters its territory. So under the sovereignty theory, the State has the exclusive power to

exercise its jurisdiction over any defendant within its territory. Territorial theory is another

traditional approach to the jurisdictional issue.

14 One early exception to this absolute rule, though perhaps not clearly perceived as such, was the recognition of a nation’s jurisdiction over its citizens even in their absence. See Pennoyer v. Neff, 95 U.S. 714, 723-24 (1877). As the story of King Henry II and Thomas Becket demonstrates, such an exception was not always accepted; the Archbishop fled to France because the English crown had no jurisdiction to penalize his prior conduct in England while he was in French territory. 15 In the U.S., a State may still constitutionally exercise jurisdiction on this basis, Burnham v. Superior Court, 495 U.S. 604 (1990). Australia also recognizes such jurisdiction on a nation-wide basis. See Comments-Australia, submitted by Mallesons Stephen Jaques, available at <http://www.kentlaw.edu/cyberlaw/docs/foreign/>. On the other hand, the Brussels Convention, § 1, art. 3, disallows jurisdiction based solely on service in the forum. And the Draft Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters proposed by the Hague Conference on Private International Law (May 5, 1992) also bars this basis of jurisdiction. Article 18 (2) (f) (2) (a) of the same draft precludes the exercise of jurisdiction based on the seizure of property within the State unrelated to the claim, a position with which the U.S. is now in agreement. Shaffer v. Heitner, 433 U.S. 186 (1977).

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2.2.2 Territorial Theory

The underlying rationale for the theory of territoriality is the protection of the territorial integrity

of States against encroachments by other States. It was considered a direct threat to a State's

sovereign control over its territory for another State to exercise its judicial process within the

home State’s territory.17 From this paradigm, for jurisdiction to be rightfully exercised by a

State, it must be founded either upon a defendant or property being within its territory. In

Pennoyer v. Neff the US Supreme Court took the view that:

Every State possesses exclusive jurisdiction and sovereignty over

persons and property within its territory.. and no State can exercise

direct jurisdiction and authority over persons or property without its

territory.

The Supreme Court adopted the territorial notion of jurisdiction and categorically established the

following two principles:

• each State has jurisdiction over the persons and property located within that State; and

• a State cannot exert jurisdiction over persons or property outside of the State’s territorial

boundaries.

States have been conceptualised as blocks of land fenced in by boundaries. So a State has the

exclusive jurisdiction/power to make and enforce laws for events happening within its territory,

as it is the primary ruler over its territory. The territorial paradigm enables a Court to readily

assert personal jurisdiction over a defendant. Before the advent of the Internet, it was common

to think of personal jurisdiction in terms of territoriality. Jurisdiction was allowed if the

defendant could be served with the originating Court documents within a Court’s territory,

otherwise it was not. This concept of personal jurisdiction flowed directly from the traditional

16 See A.E. Anton and PR. Beaumont, Private International Law (2d ed) (1990) at 18. 17 The service of the writ, or something equivalent thereto, is absolutely essential as the foundation of the court’s jurisdiction. Where a writ can not be served upon a defendant the court can exercise no jurisdiction over him. In an action in personam the converse of this Statement hold good, and wherever a defendant can be legally served with a writ, there the court, on service being effected has jurisdiction to entertain an action against him. Hence, in an action in personam, the rules as to the legal service of a writ define the limits of the court’s jurisdiction. See Dicey, Av and Morris , Conflict of Laws (13th edition) London : Sweet & Maxwell, 2000 at 172.

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understanding of the State as a territorially defined entity with exclusive and absolute authority

over activity its territory. Physical presence is another theory underpinning the traditional

notion of jurisdiction.

2.2.3 Physical Presence Theory

This is one of the core theories on which a Court may claim to exercise jurisdiction over a

defendant.18 Unless a foreign defendant is validly served with initiating process or voluntarily

submits to its jurisdiction, a Court cannot exercise its jurisdiction.19

The Australian High Court in Laurie v Carroll20 held that:

The defendant must be amenable or answerable to the command of the writ.

His amenability depended and primarily depends upon nothing but presence within the

jurisdiction.

Some of the following points are additional grounds for the exercise of jurisdiction by Australian

courts:

• Physical presence (service within the jurisdiction);

• Contract made within the jurisdiction;

• Contract governed by the law of the forum;

• Contract breached within the jurisdiction; and

• Voluntary submission to the jurisdiction.

18 Heichel EP, ‘The Physical Presence Basis Of Personal Jurisdiction Ten Years After Shaffer V. Heitner: A Rule In Search Of A Rationale’ (1987) 62 Notre Dame Law Review University 713. 19 Australian courts do in some cases have jurisdiction over defendants who are not physically present in the jurisdiction when the writ is served. The rules of each Australian court make provision for what is known as substituted service and also for service outside the jurisdiction. Typical methods of substituted service include serving the writ on someone physically present within the jurisdiction that would be likely to be aware of the defendant’s whereabouts, by posting the process to the defendant or by advertising in a news paper. Service of a writ on the defendant outside Australia is permitted by the rules of court if there is sufficient connection between the dispute and the geographical jurisdiction. See Nygh PE, Conflict of Laws in Australia (6th Edition), Butterworths, Sydney, 1995, Martin D, Ricketson S, Lindell G, Conflict of Laws: Commentary and Materials, Butterworths, Sydney, 1997. 20 (1958) 98 CLR 310 at 323.

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The presence of a person or property in a State is the basic ground upon which a Court exercises

its jurisdiction over a defendant. Among the different practices in various countries, the US

approach, which is stipulated in Burnham v. Superior Court, is that US courts have jurisdiction

over non residents who are physically present in the State.21 Justice Scalia applied this

traditional philosophy to issues of personal jurisdiction in the case of Burnham v. Superior Court

stating that jurisdiction based on physical presence alone constitutes due process and represents

one of the continuing traditions of the US legal system that defines the standard of fair play and

substantial justice.

Exercising control over a physical territory, and in turn, a State's authority to prescribe a set of

laws, necessarily extends only to events and transactions that have a nexus to that physical

territory.22 This follows on from Lockean notions of consent, which are central to the laissez

21 Kamp AR, ‘The Counter-Revolutionary Nature of Justice Scalia's Traditionalism’(1995) 27Pacific Law Journal 99 <lexis-nexis@prod.lexis-lexis.com>at 4 (1/11/00). 22 Thomas D G, ‘Personal Jurisdiction in the Nebulous Regions of Cyberspace: A Call for the Continued Relaxation of Due Process and Another Debilitating Blow to Territorial Jurisdiction’(1997) 31 Suffolk University Law Review 507; Bradley CA, ‘Universal Jurisdiction and U.S. Law’ (2001) 2001 University of Chicago Legal Forum 323; Juss, Brown BS, ‘Universal Jurisdiction: Myths, Realities, And Prospects: The Evolving Concept of Universal Jurisdiction’ (2001) 35 New England Law Review 383; Madeline H. Morris, ‘Universal Jurisdiction, Myths Realities, And Prospects: Universal Jurisdiction in a Divided World: Conference Remarks’ (2001) 35 New England Law Review 337; Walter W. Heiser, ‘A "Minimum Interest" Approach To Personal Jurisdiction’ (2000) 35 Wake Forest Law Review 915; Simkins CP, ‘Class Actions and Supplemental Jurisdiction: Will Zahn v. International Paper Co. Remain Viable?’ (1996) 1996 Brigham Young University Law Review 707; Maltz EM, ‘Unraveling the Conundrum Of The Law Of Personal Jurisdiction: A Comment On Asahi Metal Industry Co. V. Superior Court Of California.’ (1987) 1987 Duke Law Journal 669; Nicol JLA, ‘Given an Opportunity to Redefine the Gray Area of "Minimum Contacts," the Court in Prince v. Urban Chose to Remain in the Dark’ (1998) 25 Western State University Law Review 313; Whincop M, ‘Three Positive Theories of International Jurisdiction, (2000) 24 Melbourne University Law Review 379; Casad RC, ‘Jurisdiction in Civil Actions at the End of the Twentieth Century: Forum Conveniens and Forum Non Conveniens’ (1999) 7 Tulane Journal of International and Comparative Law 91; Rutherglen G, ‘International Shoe and the Legacy of Legal Realism’(2001) 2001 Supreme Court Review 347; Juenger FK, ‘The American Law of General Jurisdiction’ (2001) 2001University of Chicago Legal Forum 141; Robert Banks, ‘The Future of General Jurisdiction in Tennessee’ (1997) 27 University of Memphis Law Review 559; Borchers PJ, ‘The Problem with General Jurisdiction’ (2001) 2001 University of Chicago Legal Forum 119; Knudsen, Jr. William J, ‘Keeton, Calder, Helicopteros and Burger King --International Shoe's Most Recent Progeny, (1985)39 University of Miami Law Review 809; Katharina Pistor, ‘The Standardization of Law and Its Effect on Developing Economies’ (2002) 50 American Journal of Comparative Law 97; Francesco Berlingieri, ‘American Law of Collision: Jurisdiction and Choice of Law in Collision Cases and an Overview of the Concept of Fault and its Apportionment’ (1977) 51 Tulane Law Review 866; David E. Seidelson, ‘A Supreme Court Conclusion And Two Rationales That Defy Comprehension: Asahi Metal Indus. Co., Ltd. V. Superior Court Of California’ (1987) 53 Brooklyn Law Review 563; John R. Leathers, ‘Supreme Court Voting Patterns Related To Jurisdictional Issues’ (1987) 62 Washington Law Review 631; Steven L. Schwarcz, ‘Introduction The Universal Language Of Cross-Border Finance’ (1998) 8

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faire ideology of the late nineteenth century classical legal thought. The constitutional

requirement of strict in-State service of process meant that all other States were forbidden to

exercise jurisdiction over that person.23

The doctrines of sovereignty, territoriality and physical presence, however, do not adequately

deal with the multitude of ongoing trans-national developments through the Internet. The trans-

national nature of business activities has prompted law makers to ponder a shift. Critical to this

doctrinal shift was the increasing prevalence of the corporate form of economic organization,

and the corresponding increase in the number of corporations that became defendants in civil

cases. Corporations do not have a physical existence in the same way that individuals do, so the

presence test was becoming redundant in an increasing number of cases. It was difficult, for

example, to precisely say that a corporation was physically present “in” a territory (perhaps

where it was incorporated or where its subsidiaries were incorporated). In some circumstances,

States have desired to exercise their sovereignty, in the form of extraordinary jurisdiction,

where a defendant may not be physically present in a territory.

2.3 Extraordinary Jurisdiction

The formation of a contract by way of email or Internet communications has complicated the

situation since it may be more difficult to determine where and when the acceptance takes place.

For example, a person may receive an email or other Internet communication at work or an

Internet café, while travelling. The procedural rules of the various Australian courts set out the

Duke Journal of Comparative & International Law 235; Lee M. Caplan, ‘The Constitution and Jurisdiction over Foreign States: The 1996 Amendment to the Foreign Sovereign Immunities Act in Perspective’ (2001) 41 Virginia Journal of International Law 369; Andrew L. Strauss ‘Beyond National Law: The Neglected Role Of The International Law Of Personal Jurisdiction In Domestic Courts’ (1995) 36 Harvard International Law Journal 373; Gordon A. Christenson ‘Appraisals Of The Icj's Decision: Nicaragua V. United States (Merits), (1987) 81 American Journal International Law 93; Robert McLaughlin, ‘Improving Compliance: Making Non-State International Actors Responsible For Environmental Crimes’ (2000) 11 Colorado Journal of International Law and Policy 377; Richard K. Greenstein ‘The Nature of Legal Argument: The Personal Jurisdiction Paradigm’ (1987) 38 Hastings Law Journal 855. 23 Kamp AR, ‘The Counter-Revolutionary Nature of Justice Scalia's Traditionalism’(1995) 27 Pacific Law Journal 99 lexis-nexis@prod.lexis-lexis.com> (1/11/00).

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grounds on which service may be affected on a defendant outside of Australia.24 The grounds

vary between the States and territories, although some grounds are available in all jurisdictions.

In each Australian State and territory other than Tasmania, service of process may be effected

outside Australia in respect of proceeding for the enforcement, rescission, dissolution,

rectification or annulment of a contract, or which otherwise involves a claim for damages or

other relief in respect of a breach of contract where such contract:

• is made within the jurisdiction;

• is governed by the law of the forum; or

• is breached within the jurisdiction.

A State only has the authority to require a foreign defendant to appear before its courts to defend

a claim if that State has personal jurisdiction over the defendant. If the defendant is not present

physically, a State’s court will only have personal jurisdiction if that defendant has voluntarily

submitted to the jurisdiction of that court or the defendant has been served with originating

process in accordance with the rules of that State. Forum connection is one of the common

factors Courts take into consideration before exercising extraordinary jurisdiction.

2.3.1 Forum connection theory

Under the various rules for service of process outside Australia, there must be a nexus between

the Australian jurisdiction in which the originating process has been issued and the defendant or

the relevant cause of action. This involves proving that the defendant was connected with the

forum by some means of purposeful contact. Once the minimum contact is established, a Court

would be permitted to exercise its jurisdiction.

Internet based activities have made the minimum contact test more relevant than ever because

entities can conduct business within a State without any physical presence in the forum.

24 See High Court Rules O10; Federal Court Rules O8; Supreme Court Rules (ACT) O12; Supreme Court Rules (NSW) Pt 10; Supreme Court Rules (NT) O7; Uniform Civil Procedure Rules (Qld) r124; Supreme Court Rules

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The test was laid out in the case of International Shoe Co. v. Washington. In 1945, the US

Supreme Court explicitly endorsed what came to be identified as the ‘minimum contacts test’ in

that case:

[D]ue process requires only that in order to subject a defendant to a judgment in personam, if

they be not present within the territory of the forum, have certain minimum contacts with it such

that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial

justice25.

If it is reasonable to expand the territorial definition to include the ability to assert jurisdiction

over any defendant whose actions have only minimum effects within that territory, then a Court

can expand its jurisdiction over many foreign defendants. The essence of minimum contacts test

that has developed in the United States is that there be some act by which the defendant

purposefully avails itself of the privilege of conducting activities within the State, thus invoking

the benefits and protection of its laws.

Under the minimum contacts test, if the constitutional threshold of minimum contacts is met,

other doctrines can be employed to help direct civil cases to the appropriate forum. More

importantly, state and federal Courts in the US have discretion to establish rules and procedures

that allow them to decline to exercise their jurisdiction26. Due process limitations require that a

non-resident defendant have 'minimum contacts' with the State such that the defendant would

reasonably anticipate being haled into court there, such as when products are delivered into the

stream of commerce with the expectation that consumers will purchase the products in the

(SA) R 18; Supreme Court Rules 2000 (Tas) Pt 7 Div Rules; Rules of the Supreme Court (Vic) Ch 1 O7; Rules of the Supreme Court (WA) O10. 25 International Shoe Co. v Washington, 326 U.S. 310, 316 (1945). 26 See C. Douglas Floyd ‘The ALI, Supplemental Jurisdiction, and the Federal Constitutional Casa' (1995) 195 Brigham Young University Law Review 819; Spencer Weber Waller and Alan M. Simon ‘Perspective: Analyzing Claims of Sovereignty in International Economic Disputes’ (1985) 7 Journal of International Law & Business 1; B. Glenn George, ‘In Search Of General Jurisdiction’ (1990) 64 Tulane Law Review 1097; Lea Brilmayer, ‘Contacts And Personal Jurisdiction.’(1988) 101Harvard Law Review 1444; Bruce A.Wagman, ‘Second Bites at the Stephen Goldstein , ‘Federalism and Substantive Due Process: A Comparative and Historical Perspective on International Shoe and Its Progeny’ (1995) 28 University of California Davis Law Review 965; Robert Haskell Abrams, ‘Power, Convenience, and the Elimination of Personal Jurisdiction in the Federal Courts’ (1982) 58 Indiana Law Journal 1.

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State27. However, a defendant's awareness that the stream of commerce may or will ‘sweep a

product into the forum’ does not necessarily convert the act of placing the product into the

stream of commerce into an act purposefully directed to the State28. Nonetheless, the

maintenance of a legal action in a State does not offend traditional notions of fair play and

substantial justice29. Finally, the defendant's contacts with the State must be either “continuous

and systematic" (giving rise to general jurisdiction), or the cause of action must ".

After discussing the theoretical underpinnings of the traditional notion of jurisdiction, the next

section will focus on the principal elements of the jurisdiction.

2.4 Principal elements of jurisdiction

There are four fundamental elements of jurisdiction which will be considered as follows:

• personal and subject matter jurisdiction

• choice of law;

• choice of forum; and

• enforcement of judgment.

2.4.1 Personal / subject matter jurisdiction

‘Personal jurisdiction’ refers to the power a Court can assert over a defendant if a defendant has

been served appropriately with originating Court documents, which is usually limited to a

specific geographical area defined by the territorial boundaries of the Court’s authority, while

‘subject matter jurisdiction’ refers to the category of disputes which may be considered by a

particular Court.

27See World- Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). 28 See Asahi Metal Indus. Co. v. Superior Ct. of Ca, 480 U.S. 102 (1982)

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A. Service within the jurisdiction

Under the common law, a court can have a valid personal jurisdiction over a defendant only if

s/he can be served with an originating process issued by the court while the defendant is

physically within that court’s geographical jurisdiction.30 The length or purpose of the

defendant’s presence in that geographical jurisdiction is immaterial to the validity of service. To

effect personal service on a defendant in Australia, that person must have a physical presence

within the jurisdiction. For instance, if a defendant has a website which is accessible in Australia

through which that person carries on business with Australians but is physically outside the

borders of Australia, personal service within Australia cannot be effected on that defendant,

since such presence is virtual, not physical. The virtual world of cyberspace, through the

Internet, has undermined both the legitimacy of that type of service.

B. Service outside the jurisdiction

Pursuant to the procedural court rules for service of process on a defendant located outside

Australia, there must be a ‘sufficient nexus’ between the Australian jurisdiction in which the

originating process has been issued and the defendant or the relevant cause of action. This nexus

with the jurisdiction is required in order for the defendant to be validly served. Although there

are differences between the Commonwealth, States and Territories, some common threads in the

various Australian jurisdictions which satisfy a ‘sufficient nexus’ are as follows:31

• submission by the defendant to the jurisdiction; • the existence of a contract connected with the jurisdiction; • the contract was governed by the jurisdiction; • commission of a tort within the jurisdiction; and • damages occurring within the jurisdiction.

29 See International Shoe Co. v Washington, 326 U.S. 310, 316 (1945) . 30 Laurie v Carroll (1958) 98 CLR 310. See Fitzgerald B, G Middleton, Fitzgerald A, Jurisdiction and E-commerce, (2003) Law Book Company, Sydney. 31 See Fitzgerald B and Fitzgerald A, Cyber Law: Cases and Materials on the Internet, Digital Intellectual Property and E Commerce (2002) Lexis Nexis Butterworths, Sydney Chapter 4; Cameron B, ‘Jurisdiction and the Internet’(2000) 42 Computers and the Law 13.

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Sometimes, even if a Court has personal and subject matter jurisdiction, it may decline to hear

the legal dispute because it is an “inappropriate” forum or “a more appropriate” forum is

available to hear the dispute. Choice of forum rules closely relate to geographical borders and

areas. Once the choices of forum and law are made, the dispute is heard and determined, the

next stage is the enforcement of the judgment.

2.4.2 Choice of Law

The rules used by courts to determine which law to apply in proceedings where an action has a

connection with more than one State are known as the choice of law rules. A Court may still

need to apply choice of law rules to select a proper body of substantive law even if it has

asserted personal jurisdiction. Usually, the choice of law issue will involve a choice between

the law of the forum and the law of another State, although it can sometimes involve a choice

between the laws of two States outside of the forum.

The objectives of the choice of law rules are32:

• To meet the expectations of the parties regarding the applicable law;

• To ensure that the same result will be obtained in proceedings on the same facts, regardless

of the forum chosen; and

• To ensure that within a federal system, a conflict of laws does not arise.

There are at least two possible ways in which a choice of law33 rule might operate:

• it could identify the jurisdiction with which the most important aspects of the dispute are

connected, and apply the law of that jurisdiction, no matter what its content; or

• instead of choosing between jurisdictions, it could choose between laws, by comparing

the substance of the laws of the jurisdictions and determining which law should most

appropriately be applied to determine the dispute.

32 See Fitzgerald B, G Middleton, Fitzgerald A, Jurisdiction and E-commerce, (2003) Law Book Company, Sydney. 33 Linda J. Silberman ‘Judicial Jurisdiction in the Conflict of Laws Course: Adding a Comparative Dimension’ (1995) 28 Vanderbilt Journal of Transnational 389.

35

The next element to consider is the choice of forum.

2.4.3 Choice of Forum

Even if a Court has personal and subject matter jurisdiction and the law of the forum applies to

the proceedings, a Court may still decline to exercise jurisdiction. This could be on the basis

that it is not the most appropriate Court to exercise jurisdiction, known as the forum non

conveniens principle34. That in certain circumstances choice of law and choice of forum can be

stipulated in contractual clauses.35

2.4.4 Enforcement of Judgment

The power to enforce a judgment concerns a Court's authority to compel compliance or to

punish non-compliance, whether through its own procedures or with the assistance of the

State’s executive, or other non-judicial action. Technically and practically, a Court may have

34 Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538. 35 See Raymond L. Niblock, William C. Plouffe, ‘Federal Courts, Tribal Courts, And Comity: Developing Tribal Judiciaries And Forum Selection’ (1997) 19 University of Arkansas Little Rock Law Journal 219; Martin H. Redish, ‘Reassessing The Allocation Of Judicial Business Between State And Federal Courts: Federal Jurisdiction And "The Martian Chronicles’(1992) 78 Virginia Law Review 1769; ‘Development: Vi. Cyberspace Regulation and the Discourse of State Sovereignty’ (1999) 112 Harvard Law Review1680; Michael C. Blumm Michael Cadigan ‘The Indian Court of Appeals: A Modest Proposal to Eliminate Supreme Court Jurisdiction over Indian Cases’ (1993) 46 Arkansas Law Review 203; Patricia A. McKeon, ‘An International Criminal Court: Balancing The Principle Of Sovereignty Against The Demands For International Justice’ (1997) 12 St. John's Journal of Legal Commentary 535; David H. Herrold, ‘A New, Emerging World Order: Reflections Of Tradition And Progression Through The Eyes Of Two Courts’ (1994) 2 Tulsa Journal of Comparative & International Law 143; John Henry Stone, ‘The International Criminal Court: The Political Problems Of Having It All, The Practical Problems Of Having Too Little’ (2000) 9 Michigan State University-DCL Journal of International Law 197; Laura L. Roos, ‘Stateless Vessels And The High Seas Narcotics Trade: United States Courts Deviate From International Principles Of Jurisdiction’ (1984) 9 The Maritime Lawyer 273; Robert L. Theriot, ‘Specific And General Jurisdiction -- The Reshuffling Of Minimum Contacts Analysis’ (1985) 59 Tulane Law Review 826; William B.T. Mock, , ‘Game Theory, Signalling, And International Legal Relations’ (1992) 26 George Washington Journal of International Law & Economics 34; Harold L. Korn,’ Rethinking Personal Jurisdiction And Choice Of Law In Multi State Mass Torts’ (1997) 97 Columbia Law Review 2183.

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great difficulty in enforcing its judgment on a person residing outside its territorial

boundaries.36

There are common principles governing recognition and enforcement of foreign judgments,

which are similar in many countries,37 such as ‘No State recognises or enforces the judgment

of another State rendered without jurisdiction of the judgment debtor’. Some States require a

treaty or proof or reciprocity (such as between Australia and Germany, while others have very

few requirements). Some States reserve the right to review the merits of a foreign judgment,

though they do not always do so (Belgium), other States do not enforce foreign judgments at

all in the absence of a treaty (Netherlands).

Under the common law of Australia, a Court may enforce the judgment of another country’s

court if:

• the court which made the judgment had personal jurisdiction over the defendant (in

other words, the court was competent to hear the matter);38

• the judgment was based on the merits of the case rather than on the basis of a

procedural requirement;39

• the judgment is final and conclusive;40 and

36 Adrian J. Sawyer ‘Electronic Commerce: International Policy Implications for Revenue Authorities And Governments’ (1999) 19 Virginia Tax Review 73; Brian Peck, ‘Extraterritorial Application of Antitrust Laws and the U.S.-EU Dispute Over the Boeing and McDonnell Douglas Merger: From Comity to Conflict? An Argument for a Binding International Agreement on Antitrust Enforcement and Dispute Resolution (1998) 35 San Diego Law Review 1163; Stephen E. Jones, ‘The Maryland Survey: 1995-1996: Recent Decisions: The United States Court of Appeals for the Fourth Circuit’(1997) 56 Maryland Law Review 1147; Joseph Schmitt and Peter Nikolai, ‘Application Of Personal Jurisdiction Principles To Electronic Commerce: A User's Guide’(2001) 27 William Mitchell Law Review 1571; Paul W. Shagen , ‘Indian Country: The Dependent Indian Community Concept And Tribal/Tribal Member Immunity From State Taxation’(1997) 27 New Mexico Law Review 421; Matthew T. Boyer , ‘Is The Titanic Resting In The Right Hands? A Discussion of R.M.S. Titanic, Inc. In Federal District Court And The Fourth Circuit’ (2000) 9 Widener Journal of Public Law 379; Tomas A. Lipinski, ‘The Developing Legal Infrastructure and the Globalization of Information: Constructing a Framework for Critical Choices in the New Millennium Internet -- Character, Content and Confusion’ (1999/2000) 6 Richmond Journal of Law & Technology 19. 37 To entitle a foreign judgment to recognition at common law four conditions must be satisfied: (a) the foreign court must have exercised a jurisdiction which Australian courts will recognise; ( b) the foreign judgment must be final and conclusive; (c) there must be an identity of parties; and ( d) if based on a judgment in personam, the judgment must be for a fixed debt. 38 Singh v Rajah of Faridkote [ 1894] AC 670, PC. 39 Charm Maritime Inc v Kyriakou [ 1987] 1 Lloyd’s Rep 433 (CA). 40 Nouvion v Freeman [ 1889] 15 App Cas 1.

37

• the judgment is for a liquidated (fixed or readily calculable) sum of money.41

Under section 9 of the Foreign Proceedings (Excess of Jurisdiction) Act 1984 (Cth), the

Commonwealth Attorney–General may prohibit the enforcement in Australia of a judgment

made in foreign anti-trust proceedings if s/he believes that it is desirable to prohibit its

enforcement in the national interest, or where the foreign court has exercised jurisdiction in

circumstances which are contrary to international law or inconsistent with international

practices.

2.5 US laws and practice in relation to judicial jurisdiction

In the context of judicial jurisdiction, the Due Process Clauses of the US Constitution restrict the

extent to which courts may exercise jurisdiction over a defendant. During treaty negotiations

with other nations, these clauses place limitations on the ability of the United States government

to agree to rules of jurisdiction that might result in a conflict with its Constitution and so a

perceived denial of due process to a defendant. Due process is the cornerstone for judicial

jurisdiction as can be seen from an analysis of personal jurisdiction.42 In US courts generally the

41 Sadler v Robins [1808] 170 ER 948. 42 See Anderson, ‘Personal Jurisdiction Over Outsiders’ (1963) 336 Mo Law Review 28; Auerbach, ‘The "Long Arm" Comes to Maryland’ (1966) 13 Maryland Law Review 6; Barker, “Jurisdiction Under New Ohio "Long-Arm Statute -- Problems of Interpretation and Application” (1966) 35 U of Cincinnati Law Review 157; Cantrell, ‘Expanded In Personam Jurisdiction--Due Process and the Tennessee long-arm statute’ (1966) 371 Tennessee Law Review 33; Carrington and Martin, ‘Substantive Interests and the Jurisdiction of State Courts’ (1967) 227 Michigan Law Review 66; Cindrich, ‘Substituted service under Pennsylvania's Business Corporation Law: What is "any action arising within this commonwealth’? (1967) 28 U of Pittsb Law Review 471; Cleveland, ‘Personal Jurisdiction Over Nonresidents--The Louisiana "Long-Arm" Statute’ (1966) 40 Tulane Law Review 366; Clifford, ‘Colorado's "Short-Arm" Jurisdiction’ (1966) 37 U of Colo Law Review 309; ‘Comment, Jurisdiction in personam over contracts with nonresidents’ (1966) 26 La Law Rev 372; Comment, ‘Long-Arm Jurisdiction Over Publishers: To Chill a Mocking Word’ (1967) 67 Columbia Law Review 342; Comment, ‘The isolated contract as a basis of jurisdiction over nonresidents’ (1955) 22 University of Chicago Law Rev 674; ‘Comment, “Tortious Act as a Basis for Jurisdiction in Products Liability Cases’ (1965)33 Fordham Law Rev 671; ‘Constitutional Limitations to Long-Arm Jurisdiction and Newspaper Libel Cases’ (1967) 34 University of Chicago Law Review 436; Cummins, ‘In Personam Jurisdiction Over Nonresident Manufacturers in Product Liability Actions’ (1965) 63 Michigan Law Review 1028; Davis and Ostmann, ‘Jurisdiction over nonresident corporations based on a single act: A New Sole for International Shoe’ (1958) 47 Georgetown Law Journal 342; ‘Developments in the Law, State-Court Jurisdiction’ (1960) 73 Harvard Law Review 909; Ehrenzweig, ‘The Transient Rule of Personal Jurisdiction: The "power" myth and forum conveniens’ (1956), 65 Yale Law Journal 289; Foster, ‘Long-Arm Jurisdiction in Federal Courts’ (1969) Wisconsin Law Review 9; Homburger, ‘The Reach of New York's Long-Arm Statute: Today and Tomorrow’ (1965) 15 Buffalo Law Review 61; Horowitz, ‘Bases of Jurisdiction of California Courts to Render

38

question of personal jurisdiction involves a two-step process.43 First, a forum State's long-arm

statute must reach a defendant, and most importantly, the reach must not violate Constitutional

due process. For a court to exercise personal jurisdiction over a defendant who is not resident in

the US state in which the court is located, the plaintiff must establish that there are ‘sufficient

contacts’ between the defendant and the forum. While State long-arm reaches differ, State long-

arms generally reach defendants who:

• transact business within the State;

• commit a tortious act within the State; or

• commit a tortious act outside the State where harmful effects are felt within the State along

with some type of additional activity, such as a regular solicitation of business within the

State, a persistent contact within the State, a reasonable expectation that actions will result in

an injury within the State, or deriving substantial revenue from interstate commerce.

Judgments Against Foreign Corporations and Nonresident Individuals’ (1958) 31 Southern California Law Review 339; Jacobson, ‘The Enlargement of Jurisdiction Over Unlicensed Foreign Corporations in Missouri--The "Single-Act Statute’ (1963) 31 University of Kansas City Law Review 292; Kellogg, ‘Transacting Business as Jurisdictional Basis--a Survey of New York Case Law’ (1965) 14 Buffalo Law Review 525; Kurland, ‘The Supreme Court, the Due Process Clause and the In Personam Jurisdiction of State Courts’ (1958) 25 University of Chicago Law Review 569; McBaine, ‘Jurisdiction Over Foreign Corporations: actions arising out of acts done within the forum’ (1946) 34 California Law Review 331; Nichol, ‘Expanded Bases of Jurisdiction--An Examination of Tennessee's New "Long-Arm" statute” (1965) 18 Vanderbildt Law Review 1484; Note, ‘Retroactive Expansion of State Court Jurisdiction Over Persons’ (1963) 63 Columbia Law Review 1105; Note, ‘The Virginia "Long-Arm" Statute’ (1965) 51 Virginia Law Review 719; Note, ‘some problems under Iowa judicial jurisdiction statutes’ (1963) 48 Iowa Law Review 968, Reese & Galston, ‘Doing an Act or Causing Consequences as Basis of Judicial Jurisdiction’ (1959) 44 Iowa Law Review 249; Shafer, ‘Jurisdiction Under "Long-Arm" Statute Over Breach of Warranty Actions’ (1965) 22 Washington & Lee Law Review 152; Sobeloff, ‘jurisdiction of State courts over nonresidents in our federal system’ (1957) 43 Cornell Law Quarterly 196; Sondberg, ‘Service of Process on Foreign Corporations Outside the Forum’ (1962) 34 Rocky Mt. Law Review 359; Thode, ‘In Personam Jurisdiction; Article 2031B, The Texas "Long-Arm" Jurisdiction Statute; and the Appearance to Challenge Jurisdiction in Texas and Elsewhere’ (1964) 42 Texas Law Review 279; Thornton, “First judicial interpretations of the New York single-act statute” (1964) 30 Brooklyn Law Review 285; Towe, ‘Personal Jurisdiction Over Nonresidents and Montana's New Rule 4B’ (1962) 24 Montreal Law Review 3; Von Mehren & Trautman, ‘Jurisdiction to Adjudicate: A suggested analysis’ (1966) 79 Harvard Law Review 1121; Walls, ‘Jurisdiction Over Nonresidents--The Washington "Long-Arm" Statute’ (1963) 38 Washington Law Review 560; Weinberg, ‘The Helicopter Case and the Jurisprudence of Jurisdiction’ (1985) 58 Southern California Law Review 913; Wilson, ‘in personam jurisdiction over nonresidents, "an invitation and a proposal’ (1957) 9 Baylor Law Review 363; See also Currie, ‘The Growth of the Long-Arm: Eight Years of Extended Jurisdiction in Illinois’ (1963)University of Illinois Law Forum 533; Stimson, ‘Omnibus Statutes Designed to Secure Jurisdiction Over Out-of-State Defendants’ (1962) 48 American Bar Association Journal 725. 43 Ronald A. Brand, ‘ Due Process as a Limitation on Jurisdiction in U.S. Courts and a Limitation on the United States at the Hague Conference on Private International Law’ http://www.state.gov/www/global/legal_affairs/brand.html (11/06/03).

39

It is important to note that the Due Process Clauses of the Fifth and Fourteenth Amendments

of the US Constitution provide clear limitations on the federal and various state governments.

They exist to protect individuals from excessive exercise and unreasonable use of

governmental authority, in turn, curbing the exercise of judicial jurisdiction in the United

States. This has become a significant issue since the advent of the global village via the

Internet.

2.6 Impact of the Internet upon the traditional notions of jurisdiction

The introduction of new technology and in particular the Internet44 has brought about

important changes to the way people interact and conduct business.45 In the famous Burger

King case, a US Court observed that:

44 The Internet began, as ARPANET, in 1969 at the Advanced Research Project Agency. The goal was to create a network of computers for which there would be no central operating computer in order to reduce the risk that vital information and communications would be lost if a computer on the network was damaged. 45 See Susan Nauss Exon, ‘A New Shoe N1 Is Needed To Walk Through Cyberspace Jurisdiction’ (2000) 11 Albany Law Journal of Science & Technology Science 1; The Internet represents perhaps the latest and greatest manifestation of these historical, globe-shrinking trends. It enables anyone with the right equipment and knowledge--that is, people like Patterson--to operate an international business cheaply, and from a desktop. Burcher E A, and Hughes AM, ‘Center v. Netcom On-Line Communications Services, Inc.: Internet Service Providers: The Knowledge Standard for Contributory Copyright Infringement and The Fair Use Defense’ (1997) 3 Richmond Journal of Law & Technology 5; Bevill K, ‘Copyright Infringement and Access: Has the Access Requirement Lost Its Probative Value?’ (1999) 52 Rutgers Law Review 311; Davis K, ‘Fair Use on the Internet: A Fine Line Between Fair and Foul’ (1999) 34 University of San Francisco of Law Review 129; Weiskopf DN, ‘The Risks of Copyright Infringement on the Internet: A Practitioner's Guide, (1998) 33 University of San Francisco Law Review 1; Calvert SR, A Digital World Out Of Balance’ (1997) 13 Santa Clara Computer and High Technology Law Journal 545; Halpern SE, ‘New Protections For Internet Service Providers: An Analysis Of "The Online Copyright Infringement Liability Limitation Act’ (1999) 23 Seton Hall Legislative Journal 359; Carlson BA, ‘Balancing the Digital Scales of Copyright Law’ (1997) 50 Southern Methodist University Law Review 825; Hayes DL, ‘Advanced Copyright Issues on the Internet’(1998) 7 Texas Intellectual Property Journal 1; Henriquez RS, ‘Facing the Music on the Internet: Identifying Divergent Strategies for Different Segments of the Music Industry in Approaching Digital Distribution’ (1999) 7 University of California Regents Entertainment Law Review 57; Appel S, ‘Copyright, Digitization of Images, and Art Museums: Cyberspace and Other New Frontiers’ (1999) 6 University of California Regents Entertainment Law Review 149; Boyle J, ‘Taking Stock: The Law And Economics Of Intellectual Property Rights: Cruel, Mean, or Lavish? Economic Analysis, Price Discrimination and Digital Intellectual Property’ ( 2000) 53 Vanderbilt Law Review 2007; Brauner SL, ‘High-Tech Boxing Match: A Discussion of Copyright Theory Underlying the Heated Battle Between the RIAA and MP3ers’ (1999) 4 Virginia Journal of Law and Technology 5; Wollman NR, ‘Maneuvering Through The Landmines Of Multi-territorial Copyright Litigation: How To Avoid The Presumption Against Extraterritoriality When Attempting To Recover For The Foreign Exploitation Of U.S. Copyrighted Works’ (2002) 104 West Virginia Law Review 343; Dotseth KA, and Hillard JJ, ‘Intellectual Property In An Information Economy: Sailing Uncharted Waters: Insurance Coverage For Intellectual Property Disputes Arising From The Internet’ (2002) 28 William Mitchell Law Review 1125; Boyle J, ‘Foucault in Cyberspace’ (2000) 2 Yale Journal of Law & Technology 2; Katz R, ‘Netscape and the Law in the

40

It is an inescapable fact of modern commercial life that a substantial amount of commercial

business is transacted solely by mail and wire communications across state lines, thus

obviating the need for physical presence within a state in which business is conducted.46

The emergence of the Internet based activities has challenged the above mentioned foundation

of traditional jurisdiction. Internet communications cut across State boundaries, creating a new

realm of human activity and weakening the legitimacy of applying laws based on territorial

borders. Some territorially-based law-makers and law-enforcement authorities find this new

environment threatening. A State is territorial in nature while the Internet has no strict relation to

territorial boundaries. For example, a website can generally be viewed by anyone (with access

to a computer and modem), at anytime, in any part of the globe. This tends to make the location

of the site less relevant but broadens the geographic reach of business.

Cyberspace radically undermines the relationship between legally significant (but online)

phenomena and physical location. The rise of the global computer network is eroding the link

between geographical location and the following :

(1) the power of local governments to assert control over online behaviour;

(2) the effects of online behaviour on persons or property;

(3) the legitimacy of the efforts of a State to enforce rules applicable to global phenomena; and

(4) the ability of physical location to give notice of which sets of rules apply.47

Information Age’ (2000) 2 Yale Journal of Law & Technology 4, Netanel N W, ‘Copyright and a Democratic Civil Society’ (1996) 106 Yale Law Journal 283. 46 See Burger King, 471 U.S. at 476. 47 Davis E S, ‘A World Wide Problem on the World Wide Web: International Responses to Transnational Identity Theft via the Internet’ (2003) 12 Washington University Journal of Law & Policy, 201; Aoki K, ‘Considering Multiple and Overlapping Sovereignties: Liberalism, Libertarianism, National Sovereignty, "Global” Intellectual Property, and the Internet’ (1998) 5 Indiana Journal of Global Legal Studies 443; Dogan SL, ‘Infringement Once Removed: The Perils of Hyperlinking to Infringing Content’ ( 2002) 87 Iowa Law Review 829; Brown S, ‘Legislative Updates: The No Electronic Theft Act: Stop Internet Piracy’ (1998) 9 Journal of Art and Entertainment Law 147; Loren LP, ‘Redefining The Market Failure Approach To Fair Use In An Era Of Copyright Permission Systems’ (1997) 5 Journal of Intellectual Property Law 1; Kokka SS, ‘Property Rights on an Intranet’ (1998) 3 Journal of Technology Law and Policy 3; Williams S, ‘The Digital Millenium Copyright Act and the European Copyright Directive: Legislative Attempts to Control Digital Music Distribution’ (2001) 3 Loyola Intellectual Property and High Technology Journal 35; Yamamoto L, ‘Copyright Protection And Internet Fan Sites: Entertainment Industry Finds Solace In Traditional Copyright Law’ (2000) 20 Loyola of Los Angeles

41

A State is territorial in nature while the Internet has little or no relation to territorial

boundaries. None of the traditional theories underpinning the notion of jurisdiction mentioned

in this chapter, such as sovereignty, territoriality and the theory of physical presence

adequately postulate about judicial jurisdiction over persons or activities acting in cyberspace.

Traditional theories of jurisdiction are inapplicable to the Internet because:

• material posted on the Internet have a worldwide audience;

• it is easy to move a website from one territory to another;

• a website can be hosted in one area, but directed at users in another geographic location;

• parts of a website may be hosted in one area, while other parts of the web site are hosted in

another location;

• it is not always possible to determine where a website or user is located.

The issue is whether the global nature of the Internet naturally forms a separate legal space,

perhaps ‘cyberspace’.48 If a natural jurisdiction exists, then should special laws be enacted to

Entertainment Law Review 95; Sylva JB, ‘Legal And Business Issues In The Digital Distribution Of Music: Digital Delivery And Distribution Of Music And Other Media: Recent Trends In Copyright Law; Relevant Technologies; And Emerging Business Models’ (2000) 20 Loyola of Los Angeles Entertainment Law Review 217; Wagner R, ‘Frontiers Of Law: The Internet Ad Cyberspace: Comment: Don't Shoot The Messenger: Limiting The Liability Of Anonymous Remailer Operators’ (2002) 32 New Mexico Law Review 99; Srikantiah J, ‘The Response Of Copyright To The Enforcement Strain Of Inexpensive Copying Technology, (1996) 71 New York University Law Review 1634; Gurnick D, ‘Intellectual Property in Franchising: A Survey of Today's Domestic Issues’ (1995) 20 Oklahoma City University Law Review 347; Ryan M, ‘Cyberspace as Public Space: A Public Trust Paradigm for Copyright in a Digital World’ ( 2000) 79 Oregon Law Review 647; Lipinski TA, ‘The Developing Legal Infrastructure and the Globalization of Information: Constructing a Framework for Critical Choices in the New Millennium Internet -- Character, Content and Confusion’ (1999/2000) 6 Richmond Richmond Journal of Law & Technology 19. 48See Petty WS, ‘Which Court Has Jurisdiction over Cyberspace?’ (1997) 1 Cyberspace Lawyer 8. Post DG, ‘Anarchy, State, and the Internet: An Essay on Law-Making in Cyberspace’<http://www.cli.org/DPost/X0023_ANARCHY.html>(2/10/2000); Post DG, ‘Governing Cyberspace’ (1997) 43 Wayne Law Review 155 <http://www.temple.edu/lawschool/dpost/Governing.html>(2/10/2000); Post DG, ‘How shall the Net be governed? <http://www.cli.org/DPost/governance.html>(2/10/2000); Post DG, ‘Personal Jurisdiction on the Net: An Outline for the Perplexed’ <http://www.temple.edu/lawschool/dpost/outline.htm>(2/10/2000); Post DG and Nunziato D C, ‘Personal Jurisdiction on the Internet’ <http://www.cli.org/DPost/jcases.html>(2/10/2000); Post DG, ‘The "Unsettled Paradox": The Internet, the State, and the Consent of the Governed <http://www.cli.org/sov.html>(2/10/2000). Perritt HH, ‘Jurisdiction in Cyberspace’ (1996) 41Villanova Law Review 1.

42

govern the Internet? Before answering this question, we must consider what the Internet really

is and how people can navigate in such a way that traditional approach of legal regulation

cannot control their behaviour.

2. 7 What is the Internet?

The Internet resembles a supermarket, consisting of many aisles leading to shelves where a

shopper can find goods, information and services. In more technical terms, the Internet has

been described as:

a network of networks, local computer systems hooked to regional systems hooked to national

or international high-capacity backbone systems. Global computer-based communications cut

across territorial borders, creating a new realm of human activity and undermining the

feasibility - and legitimacy - of applying laws based on geographic boundaries49.

The Internet50 is a global communications network linked principally by modems which

transmit electronic data over telephone lines. It is a network of millions of computers and

computers that enables computer users to communicate with one another through the digital

transmission of information from one computer to another. A US District Court in ACLU v.

Reno described the Internet as not being a physical or tangible entity, but rather a giant

network which interconnects innumerable smaller groups of linked computer networks. In

49 American Civil Liberties Union v Reno 929 F. Supp. 824, 830-845 (E.D. Pa 1996). See also Kirby J in Dow Jones & Company Inc v Gutnick [2002] HCA 56 at [78] –[87]. 50 For a precise judicial definition of the Internet see: American Civil Liberties Union v Reno 929 F. Supp. 824, 830-845 (E.D. Pa 1996). See also Kirby J in Dow Jones & Company Inc v Gutnick [2002] HCA 56 at [78]-[87]; "The Federal Networking Council (FNC) agrees that the following language reflects our definition of the term "Internet". "Internet" refers to the global information system that - (i) is logically linked together by a globally unique address space based on the Internet Protocol (IP) or its subsequent extensions/follow-ons; (ii) is able to support communications using the Transmission Control Protocol/Internet Protocol (TCP/IP) suite or its subsequent extensions/follow-ons, and/or other IP-compatible protocols; and (iii) provides, uses or makes accessible, either publicly or privately, high level services layered on the communications and related infrastructure described herein."

43

simpler terms, the Internet is a decentralised means of global communication that links people,

and other entities.

It is a unique because of some of the following characteristics:

• an open architecture - one computer system can connect to others simply by adhering to

the TCP/IP standards. It is not necessary for users of one computer system to use the

same hardware or software as another computing system with which they wish to

communicate, or even to know the nature of the hardware and software in the other

system;

• a distributed architecture - different parts of the information content and related services

requested by users may be supplied by different Internet nodes, operated by different

entities;

• there is no charge for access to other nodes on the Internet nor, with rare exceptions, to

information resources made available through those nodes (although entities connecting

to the Internet must pay for their own hardware, software and communications lines);51

• historically, the majority of Internet users were members of institutions (like universities)

that had Internet connections and were not charged directly for Internet usage (although

now the Internet is evolving to accommodate pay-as- you-go use).

The nature of the Internet presents one of the biggest challenges to traditional law and

undermines the territorial and geographical based notion of jurisdiction.

51 See Henry H. Perritt, ‘What is the Internet’? http://www.kentlaw.edu/cyberlaw/resources/whatis.html (10/05/03).

44

2.7.1 Ubiquitous and non-territorial

Laws made by sovereign States are geographically limited, divisive and diverse. Before the

arrival of the Internet, the identity of parties involved in legal disputes was solely based on

physical presence and application of relevant law was usually to be of the territory where the

act took place or the parties resided. The Internet brought about a revolutionary change since it

does not readily recognise physical and territorial boundaries52. It operates in the realm of

‘cyberspace’, an area which significantly weakens the significance of physical location. Events

in cyberspace largely ignore the existence of State boundaries. The cost and speed of message

transmission from one point on the Internet to any other is independent of physical location.

Messages can be transmitted between physical locations with very little distance- or location-

based degradation or delay. There are few physical cues or barriers that might otherwise keep

geographically remote places and people separate from one another, no territorially based

boundaries. The Internet also enables simultaneous transactions between large numbers of

people who do not and cannot know the physical location of the other party. Moreover, once

material is posted on the Internet it can be available wherever there is a computer network

anywhere in the world. Most material is not filtered53 so that it is only available to a specific

group of people or some part of the world.

52 The term ‘cyberspace’ was first used by W Gibson in Neuromancer (1984) at p51. See also Digital Equipment Corp v Altavista Technology Inc 960 F. Supp. 456 (D. Mass. 1997); Blumenthal v Drudge 992 F Supp. 44 (D.D.C 1998); M Lemley, ‘Place and Cyberspace’ (2003) 91 California Law Review 521. 53 LICRA sued Yahoo in French court last year, charging that sales of Nazi-related material on Yahoo's U.S.-based auction site violated French law because the material was available to French citizens. The court ruled in favor of the anti-racism group and ordered Yahoo to block French citizens from accessing auction listings or Web pages on its site that contained anti-Semitic or Nazi-related material. Although Yahoo objected that instituting such a block would be technologically impossible. Yahoo! Inc v La Ligue Contre Le Racism et L’ Antisemitisme 169 F. Supp 2d. 1181, (N.D. Cal 2001). .

45

2.7.2 Possibility of anonymous interaction

The Internet also enables transactions between people who do not know, and in many cases

cannot determine, the physical location of the other party. The idea of location itself remains

vitally important, but only location within a virtual space consisting of the "addresses" of the

machines between which messages and information are routed.

It is clear that the traditional legal theories on jurisdiction are seriously challenged by the

Internet. In light of what has been considered about the nature of the Internet, there are some

additional theoretical conflicts discussed below.

2.8 Theoretical conflicts between the traditional legal notions of jurisdiction and the

Internet

There are three particular conflicts which will continue to arise if the traditional notions of

jurisdiction are inappropriately imposed in Internet related legal disputes.

A. Inter-sovereign conflicts

Unless there is trans-national understanding between States, any attempts by law-makers to

expand their laws beyond their borders may prove confronting. By imposing a State’s own set

of laws over Internet activities which take place across borders, inter-sovereign conflicts can

easily arise. For example, an Australian court may have personal and subject matter jurisdiction

over a specialist physician in Canada that diagnoses patients over her website based in Canada,

on the grounds that she is practicing medicine without proper registration in Australia and thus

jeopardizing the welfare of potential patients located in Australia. In this case, the traditional

notion of sovereignty could enable both Canada and Australia to exercise the sovereignty right

equally. An Australian court may order the Canadian specialist to shut down her website that is

located in the Canada. Such an order could cause an inter-sovereign conflict, which will not be

easily resolved without a sound theoretical basis.

46

B. Over-inclusiveness

Most of the traditional theories of jurisdiction are over-inclusive in relation to the Internet

because they allow for the almost unlimited exercise of judicial jurisdiction.54 They suggest that

each sovereign is entitled to apply its own substantive law to persons, property or activities

within its geographical realm of authority. The unique nature of the Internet allows a web page

to be visible around the world and not just in the State where the server is physically located.

While a State may have legitimate interests in regulating the website because it is visible and

accessible by its own subjects, the same interests exist with respect to nearly 300 other States

around the world. A traditional jurisdictional approach may suggest that, since a creator of a

web page knew (or ought to have known) that it would be available throughout the world, any

court around the world has judicial jurisdiction over the creator. Thus, traditional jurisdiction

analysis is over-inclusive with resulting spillover effects wherever Internet activity occurs.55

C. Under-inclusiveness

At the same time, traditional jurisdictional analysis is under-inclusive because a State cannot

legitimately and effectively control and monitor conduct occurring outside its borders without

the willingness of other States to cooperate or the ability to exercise its own coercive power to

extraterritorially enforce its law. To do so could create the inter-sovereign conflict addressed

above. However, with the rapid increase in new technology, States may be able to extend their

enforcement jurisdiction beyond persons, property or activities that are present in the enforcing

jurisdiction through the use of trans-national technology to localize conduct. Still, there needs to

be a sound theoretical basis in order to conform the Internet to a globally acceptable doctrine of

judicial jurisdiction. Thus, at present, applying traditional notions of jurisdiction to the Internet

is under-inclusive because States that want to regulate Internet activities cannot effectively

54 See Adria Allen ‘Internet Jurisdiction Today’ (2001) 22 Journal of International Law & Business 69. 55 See Adria Allen ‘Internet Jurisdiction Today’ (2001) 22 Journal of International Law & Business 69.

47

enforce their laws against “purveyors of harmful material through the Internet” who are located

outside their territorial borders.56

2.9 Conclusion

The new Internet technology poses such a serious challenge to the traditional legal notions of

judicial jurisdiction. The existing theories cannot adequately explain how to regulate the

Internet, an inherently global environment. Legal theorists and law-makers must be willing to

accept that the technological advancements require an innovative approach to the jurisdiction

issue. Traditional approaches are roadblocks to progress because of their inability to adapt to

the ubiquitous, non-territorial and potentially anonymous nature of Internet activities.57

The question is whether the Internet naturally forms a separate legal arena, ‘cyberspace’. In

the most general sense, a well functioning international jurisdictional system should facilitate a

concept of trans-national judicial jurisdiction. Specifically, it should promote an effective

system of dispute resolution whereby opportunities for forum shopping will be minimized,

foreign judgments will be satisfied and jurisdictional conflicts will be avoided. In addition,

because the State asserting jurisdiction over a case presently determines which State's

substantive law applies, the trans-national jurisdictional system should also promote a coherent

scheme for applying what are presently diverse and sometimes conflicting national legislative

policies. Finally, the trans-national system should ensure that all defendants, regardless of

nationality, are protected from the inconvenience that would result from overly broad

assertions of jurisdiction by individual States. We will now examine the current system, in

which all States unilaterally circumscribe their own jurisdictional laws, to highlight that it is

woefully inadequate to accomplish any of these above-mentioned objectives. Then we will

consider how an effective trans-national jurisdictional approach can be negotiated and agreed

upon.

56 See Adria Allen ‘Internet Jurisdiction Today’ (2001) 22 Journal of International Law & Business 69. 57 See Adria Allen ‘Internet Jurisdiction Today’ (2001) 22 Journal of International Law & Business 69.

CHAPTER III

THE INTERNET AND JUDICIAL

JURISDICTION:

Case Laws

50

3 Overview 3.1 Australian Courts’ approach

3.2 Jurisdiction declined

A. Nature of the Internet and the futility of extraterritorial jurisdiction

B. Information placed on the Internet could not be easily controlled

3.3 Jurisdiction exercised

3.3.1 How the dispute arose?

3.3.2 Question of jurisdiction

3.3.3 Publication occurred and the damage felt in the territory

A. Substantial and greater connections

B. Subscription - is targeted

C. Social affairs

3.3.4 High Court of Australia’s approach in the Gutnick case

3.3.5 Publication at point of downloading

3.3.6 Limits to the decision

3.3.7 US hegemony - unacceptable

3.3.8 Is there a need for a trans-national paradigm on Internet jurisdiction?

3.3.9 Courts should not impede but facilitate technological development

3.3. 10 Formulating a new set of rules on Internet jurisdiction

3.3.11 Critical assessment of the Australian Courts’ Approach 3.4 US Courts’ approach

3.4.1 Sliding scale doctrine: A benchmark

3.4.2 What is the Sliding scale doctrine?

3.4.3 What makes a website active?

A. Deliberate and conscious effort

B. Subscription of customers

3.4.4 What makes a website passive?

A. Merely posting the information on the website

B. “Merely fortuitous” contact – insufficient to assert jurisdiction

C. Website advertisement – passive act

3.4.5 Critical assessment of the elements of a passive website

3.4.6 Interactive website

3.4.7 Move away from the Sliding scale doctrine

3.5 Move toward the Target-based effects doctrine

3.5.1 Applying the Calder effects test

3.5.2 Further considerations of the target-based effects test

3.5.3 Cause of action

3.5.4 Target-based effects doctrine: under threat

51

3.5.5 No target – no special forum connection

3.5.6 Critical assessment of the US Courts’ approach

3.6 Conclusion

52

3 Overview

We have examined how the Internet has undermined the traditional legal notions of

judicial jurisdiction. Now we will analyse recent Australian and US case law

authorities to see how the Courts have handled the Internet jurisdiction issue. In

examining the following cases, the focus is to critically assess the doctrinal approach

of the Courts and see whether the underlying principles are workable. An overview

of the recent cases indicates that a new, consistent approach is needed.

53

3.1 Australian Courts’ approach

The approach of the Courts in Australia1 to Internet jurisdiction will be examined in

light of two significant cases: Macquarie Bank Limited & Anor v. Berg2 and

Gutnick v. Dow Jones,3 both of which concerned foreign-based websites allegedly

involved in defamatory publications. These two decisions highlight how the

Australian Courts are shifting away from declining jurisdiction (Supreme Court of

New South Wales in the Macquarie Bank case) toward exercising jurisdiction (the

High Court of Australia, affirming the decision of the Supreme Court of Victoria in

the Gutnick case) over foreign-based websites.

1 See generally, Fitzgerald B, ‘Dow Jones & Company Inc v Gutnick: Negotiating “US Hegemony” in the Trans-national World of Cyberspace’ (2003) 27 Melbourne University Law Review 590; Fitzgerald B, Middleton G, Fitzgerald A, Jurisdiction and Ecommerce Law Book Company, Sydney 2003, Clark E and Puig GV, When Global Highways Intersect Local Laws: Defamation via the Internet- Dow Jones & Company Inc v Gutnick’ (2001) 12 Journal of Law and Information Science 271. 2 Macquarie Bank Limited & Anor v Berg [1999] NSWSC 526 (2 June 1999). 3 Dow Jones & Company Inc v Gutnick [2002] HCA 56 (10 December 2002). See also Australian Competition and Consumer Commission (ACCC) v. Purple Harmony Plates Pty Ltd (2001) FCA 1062, a case which concerned the veracity of statements made in marketing consumer products (including on the Internet). The ACCC produced evidence that the website was registered in the name of the company and Mr. Lyster was the administrative contact of the site. The defendant, Mr. Lyster, submitted that the Court had no jurisdiction over the website as his contact with the company which administered ‘com’ domain names was governed by the laws of Virginia in the US. A single judge of the Federal Court of Australia explained that: “although the website does not have ‘au’ designation [suffix used for website addresses in Australia], the Court’s view was that it had jurisdiction in relation to the website. See also ACCC v Hughes [2002] FCA 270, in which the offending website was hosted in the US, and was used to sell prescription-only pharmaceuticals to consumers both in Australia and the US. Allsop J of the Federal Court of Australia exercised judicial jurisdiction and granted injunctive and other relief against the website sponsor in respect of misleading advertising of certain pharmaceutical products on the website. See also ACCC v Chen [2002] FCA 1248 where all three websites were hosted and operated by Chen in the US and contained false representations. Sackvile J held that, because Chen had engaged in conduct over the Internet, using telephone services or alternatively which had taken place in trade or commerce between Australia and the US, jurisdiction was established. See also Airways Corporations of New Zealand Ltd v PricewaterhouseCoopers Legal [2002] NSWSC 138, DPP v Sutcliffe [2001] VSC, Lipohar v Queen [1999] HCA 65.

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3.2 Jurisdiction: Declined

Macquarie Bank Limited & Anor v. Berg4 was the first case in Australia concerning

Internet jurisdiction. The case was brought in the Supreme Court of NSW, where the

Court declined to exercise jurisdiction on a number of grounds.

A. Nature of the Internet and the futility of extraterritorial jurisdiction

The plaintiff sought an injunction to prevent5 allegedly defamatory material being

published on a foreign based website. Simpson J held that the Supreme Court could

not exercise jurisdiction over a foreign website.

The first concern of the Supreme Court regarded the enforceability of any order it

might make. The Court formed the view that the nature of the Internet was not

amenable to the traditional territorial rules on jurisdiction. The Court considered that

the confrontation between laws which are based on State borders and a borderless

Internet even affected the function of the law. The Court reasoned that there was no

utility in exercising jurisdiction against a foreign-based website as the information

uploaded reached everywhere and could not be limited to a selective geographic area.

Moreover, the Court held that exercising its jurisdiction over the non-resident

defendant would be futile because it was unlikely that he would be able to meet any

award of damages ordered. Therefore, it was considered inappropriate to exert its

jurisdiction.

The Court6 took the view that if it could restrain a foreign defendant from publishing

on the Internet then that “would have the effect of restraining publication of all the

material presently contained on the website to any place in the world”.

4 [1999] NSWSC 526 ( 2 June 1999). 5 Sometime before December 1997, Macquarie Bank engaged the defendant to work in its business. From at least January 1999 material relating to the relationship and litigation appeared on a website. The defendant's name appeared prominently in the material which included a document headed "Letter From Charles Berg". There was a reasonable inference that the material had been placed on the site by Mr Berg. However, since May 1999, material had been appearing on another website, which was transmitted to and could be retrieved in NSW. It was the publication of this material that the plaintiffs sought to restrain: at [4} and [5]. 6 Realizing the difference between the territorial nature of law and non-territorial function of the Internet the Court stated that: “Such an injunction is not designed to superimpose the law of NSW relating to defamation on every other state, territory and country of the world. Yet that would be the

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B. Information placed on the Internet could not be easily controlled

The Court further stated that the first and most significant of these concerns was the

nature of the Internet itself:

“It is reasonably plain, that once published on the Internet, material is

transmitted anywhere in the world that has an Internet connection. It may be

received by anybody, anywhere, having the appropriate facilities7”.

The Court refused to issue an order to stop the publication saying that once the

information is published on the Internet, it could not be excluded from transmission to

any geographical area. Once published on the Internet material could be received

anywhere, and it did not lie within the competence of the publisher to restrict the

reach of the publication.

The Court plainly declined the jurisdiction because of the ubiquitous and non-

territorial nature of the Internet. If this path is followed to its logical conclusion, the

Internet would be largely free from any jurisdiction.

3.3 Jurisdiction: Exercised

Similar facts to the Macquarie Bank case arose in Gutnick v. Dow Jones Co Inc.8 This

is the first case decided by the highest Court in Australia on Internet jurisdiction

cases. However, the Supreme Court of Victoria and then the High Court of Australia

took a different approach and exercised jurisdiction even though the website was

based in a foreign territory. The High Court did not consider that extraterritorial

effect of an order restraining publication on the Internet”. The Courts view was that an injunction to restrain defamation in NSW was designed to ensure compliance with the laws of NSW, and to protect the rights of plaintiffs, as those rights are defined by the law of NSW: at [14]. 7 Macquarie Bank Limited & Anor v Berg [1999] NSWSC 526 (2 June 1999).

8 See Gutnick v Dow Jones & Company Inc [2001] VSCA 305. The decision attracted harsh criticism from the media industry, which claimed that the decision gave a green light to forum shopping, so that plaintiffs could choose to litigate in any country where the Internet was available and cast a shadow over the capacity of the Internet to embrace freedom of expression. See, The Sydney Morning Herald, 30 Aug 2001. Due to the significance of the case, the Internet Industry of Australia and eighteen media organizations had sought to intervene in the case.

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jurisdiction was futile. Instead, the Court took the view that based on the effects

caused in this Australia, regardless of where the website is located, it could

legitimately exercise jurisdiction.

This is the first case decided by the highest Court in Australia on the issue of Internet

jurisdiction. Consequently, the decision has attracted a wide range of comments and

criticisms, particularly from the media industry.9 The decision has also sparked

different schools of thought in the jurisdiction arena as well10.

3.3.1 How the dispute arose?

The plaintiff a Victorian businessman, Joseph Gutnick, initiated proceedings in the

Victorian Supreme Court against the international business publisher, Dow Jones

based in the United States. Dow Jones published an article entitled “Unholy Gains”

on the website of its business magazine, Barron’s. The web publication was limited

because it is a subscription-only site. The article alleged that Mr Gutnick was the

biggest customer of a money-launderer, tax evader and unfair financial trader. The

plaintiff, being a resident of Victoria, Australia, claimed that the article adversely

affected his reputation most significantly in Victoria. Mr Gutnick claimed that the

defamatory article, which was published on the Internet was read by Victorian people

in Victoria

9 See ‘High Court threatens net’s liberty’ The Australian, December 11 2002, & the daily editorial ‘A dark day for the Internet’. See also Reynolds GH, ‘High Court throws a spanner in the global network’ The Australian, December 11 2002. The articles claim that the Gutnick decision could halt the communication revolution. 10 See Clark E and Puig GV, ‘When Global Highways Intersect Local Laws: Defamation via the Internet- Dow Jones & Company Inc v Gutnick’ (2001) 12 Journal of Law and Information Science 271; Nicholson A, ‘Is jurisdiction now out of this world’ July 2002 Proctor at 27. The author of the Unholy Gains’ article has now taken the issue to the UN: ‘Australian Cyber law in the UN’ Lawyers Weekly, 25 April 2003. See also Thompson B and Toorn D ‘Defamation- silencing the internet or a manageable risk’? (2003) 6 Telemedia 8; Barlet P, ‘Jurisdiction on the Internet’ in Proceedings of the 5th LAWASIA Business Law Conference (2003); Dawson S, Kloczko A and Wladron BD, ‘Beyond Gutnick: Enforcement of Foreign Defamation Judgements in Australia’ (2003) 52 Journal for the Australian and New Zealand Societies for Computers and the law 2.

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3.3.2 Question of Jurisdiction

The immediate question before the Victorian Supreme Court was an attempt to gain a

tactical legal advantage, namely whether the Court had the jurisdiction to hear the

dispute.11 The argument advanced on behalf of the defendant was that the online

article was not published in Victoria12 but in the US (New Jersey), the location of its

web server. So it was argued that the case should be heard in New Jersey.

Nevertheless, the Supreme Court exercised its jurisdiction on the following grounds.

3.3.3 Publication occurred and the damage felt in the territory

In exercising its jurisdiction, the Victorian Supreme Court relied on the evidence

presented by the plaintiff that a number of Victorian people had accessed the website

and read the article. It was sufficient for the Court to consider that the article was

published in Victoria since the act of downloading the information was carried out in

Victoria. It held that the defamatory statement was published:

… in Victoria, where it was downloaded and where the print publication was

also sold. Second, the plaintiff is a resident of Victoria, has his business

headquarters here, his family here, his social and business life here, and seeks

to have his Victorian reputation vindicated by the Courts of the State in which

he lives. The Victorian connections of Mr Gutnick … the article was published

in Victoria; he sues only in respect of publication in Victoria”.13

11 Other issues concerned whether the jurisdiction existed and if so, what law would be applied. Was Victoria a clearly inappropriate forum? 12 The core submission of the defendant was that the Internet publication of "Unholy Gains" occurred when and where the material was uploaded in New Jersey, that is, when it was pulled from the server in New Jersey. The defendant’s counsel, Geoffrey Robertson QC claimed under the ‘push and pull technologies’ that the information was obtained by the searchers’ own deliberate actions, by clicking on to the defendant’s website to provide access to the relevant document. When the person who requests the document uses a browser specifying the website address, the server of the website document uploads the requested information into the storage area managed by the server, which then delivers the document to be finally downloaded. Thus, it was argued that the delivery of electronic documents will only occur if the person searching for the document sends an electronic message to locate it on the relevant website. The argument was that downloading is a result of an independent action for which the defendant cannot be held "properly responsible”. See Gutnick v Dow Jones & Company Inc [2001] VSCA 305 at [14] –[21]. 13 See Gutnick v Dow Jones & Company Inc [2001] VSCA 305 at [127].

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A. Substantial and Greater Connections

Recognising the need for an appropriate jurisdictional theory for the Internet, the

defendant developed a “substantial connection theory”. On the other hand, the

plaintiff tried to counter the defendant’s approach by developing a “greater substantial

connection theory”. The defendant argued that it would not be unfair for Mr Gutnick

to sue in the US as he has a “substantial connection”14 to the US. Whereas it would

be unfair to the publisher to be sued in Australia, since the publication did not target

any specific forum, in particular not Victoria. Since the matter was published in the

US, a US Court was the most appropriate forum. The defendant’s argument15 was

that:

“… it would be unfair for the publisher to have to litigate in the multitude of

jurisdictions in which its statements are downloaded and read, must be

balanced against the world-wide inconvenience caused to litigants, from Outer

Mongolia to the Outer Barcoo, frequently not of notable means, who would at

enormous expense and inconvenience have to embark upon the formidable task

of suing in the USA”.

The plaintiff counter-argued that he has greater connection to Victoria. In supporting

the Plaintiff’s stand, the Court said that:16

“His [Gutnick’s] connections with Victoria are greater, since he grew up in

Victoria. He lives here with his wife and children; his business is headquartered

in Victoria and that is where his reputation is well known”.

14 Mr Robertson QC, on behalf of the defendant, claimed that Mr Gutnick, was a prominent business identity with a reputation in philanthropic, sporting and religious circles and that he was an international entrepreneur with substantial connections in the United States. See at [ 1]. 15 See Gutnick v Dow Jones & Company Inc [2001] VSCA 305 at [73]. 16 See Gutnick v Dow Jones & Company Inc [2001] VSCA 305 at [114].

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B. Subscription – is targeted

The defendant argued that since the US was the place of uploading, the article being

stored there and written in the US for US citizens, then the allegedly defamatory

statements had an indelibly US complexion. The Court rejected that argument and

said that Dow Jones could have controlled access to its publication by Victorian

persons if they had desired to do so. The Court documents showed that only about

1,700 of the 550,000 subscribers were located in Australia. As the Court said:17

“… the article "Unholy Gains" was published in the State of Victoria when

downloaded by Dow Jones subscribers who had met Dow Jones's payment

and performance conditions and with the use of their passwords. It is also

absolutely clear that Dow Jones intended that only those subscribers in

various states of Australia who met their requirements would be able to access

them, and Dow Jones controls access18 to its material by reason of the

imposition of charges, passwords and the like, and the conditions of supply of

material on the Internet. It can, if it chooses to do so, restrict the

dissemination of its publication of Barrons on the Internet in a number of

respects. For that matter, the freedom to learn from the Internet of the

statements of Mr. Alpert in "Unholy Gains" is restricted to those who pay for

it”.

Because Dow Jones failed to filter the publication and restrict access, it should have

anticipated that it would be subject to an Australian Court, in particular one in

Victoria.

17See Gutnick v Dow Jones & Company Inc [2001] VSCA 305 at [60]. 18 Dow Jones has programmed its subscription website to decline requests e.g. for Barron’s in the absence of a password and, even with a password, if the requestor is delinquent in the payment the subscriber’s outstanding account. See Gutnick v Dow Jones & Company Inc [2001] VSCA 305 at [14].

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C. Social Affairs

The plaintiff’s link to social affairs in the territory was also taken into consideration in

the case. The Court, by ignoring the defendant’s plea to transfer the matter to a US

Court, accepted the fact that Mr. Gutnick had an effective link to social affairs19 in

Victoria and his family and relatives resided in Victoria. As such, Mr. Gutnick’s

complaint against Dow Jones could reasonably be heard in Victoria. However, this

consideration is certainly not convincing in itself. In this world of highly mobile

entrepreneurs, social affairs could easily be considered multi-national. If we accept

this approach to Internet jurisdiction, it could allow well-heeled and well-travelled

plaintiffs to sue in many countries on the same matter.20

3.3.4 High Court of Australia’s approach in the Gutnick Case

The US-based Dow Jones (defendant/appellant), promptly appealed against the

decision of the Victorian Supreme Court to the High Court of Australia.21 All of the

High Court justices were unanimous in finding that publication on the Internet occurs

when the material is made comprehensible through downloading. The High Court

held that:

Mr Gutnick has sought to confine his claim in the Supreme Court of Victoria to the

damage he alleges was caused to his reputation in Victoria as a consequence of the

publication that occurred in that State. The place of commission of the tort for which

Mr Gutnick sues is then readily located as Victoria. That is where the damage to his

reputation of which he complains in this action is alleged to have occurred, for it is

there that the publications of which he complains were comprehensible by readers22.

19 See at [130]. 20 For example, consider what would have happened if Mr Gutnick’s relatives, who were living in other States had also sued Dow Jones for defamation under the social affairs theory.

21 Dow Jones & Company Inc v Gutnick [2002] HCA 56 (10 December 2002). Dow Jones also sought special leave to appeal to the High Court to strike out parts of its defence [2003] HCA Trans 254 (28 July 2003). 22 Dow Jones & Company Inc v Gutnick [2002] HCA 56 (10 December 2002).

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The place of download or where the information is received will be an appropriate

place, according the Gutnick decision, to hear the matter. Thus, the High Court

affirmed the earlier decision of the Supreme Court of Victoria to exercise its

jurisdiction over the defendant. This brings the effects based doctrine into the play.

3.3.5 Publication at Point of Downloading

In summarizing their approach, the High Court justices explained:

“ In defamation, the same considerations that require rejection of locating the tort by

reference only to the publisher’s conduct, lead to the conclusion that ordinarily,

defamation is to be located at the place where the damage to reputation occurs.

Ordinarily that will be where the material which is alleged to be defamatory is

available in comprehensible form assuming, of course, that the person defamed has in

that place a reputation which is thereby damaged. It is only when the material is in

comprehensible form that the damage to reputation is done and it is damage or

reputation which is the principal focus of defamation, not any quality of the

defendant’s conduct. In the case of material on the World Wide Web, it is not

available in comprehensible form until downloaded on to the website server. It is

where that person downloads the material that the damage to reputation may be done.

Ordinarily then, that will be the place where the tort of defamation is committed”.23

The High Court’s reasoning shows that it is willing to exercise its judicial jurisdiction

over a foreign-based website if the publication occurs in the Court’s territory. This

approach confirms that the place where the information has been downloaded is one

of the most appropriate forums to hear the dispute.

3.3.6 Limits to the Decision

Gleeson CJ, McHugh, Gummow and Hayne JJ explained that the effect of the

judgment was limited by the following:

23 At [ 26]-[27].

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• “A claim for damage to reputation will only warrant an award of

substantial damages if the plaintiff has a reputation in the place

where the publication is made;

• Plaintiffs are unlikely to sue for defamation published outside the

forum unless a judgment obtained in the action would be of real

value.

• The value that a judgment would have may be much affected by

whether it can be enforced in a place where the defendant has

assets24.”

Their Honours further explained that Dow Jones’ claim that if publication occurs at

the point of downloading, they had to understand of defamation law (A-Z from

Afghanistan to Zimbabwe) was not persuasive as “in all except the most unusual of

cases, identifying the person about whom material is to be published will readily

identify the defamation law to which that person may resort25.” As has been

suggested “Internet publishers bear some responsibility for understanding the laws of

countries where possible plaintiffs reside and possess reputations”26.

24 Fitzgerald B, Fitzgerald A, Middleton G, Jurisdiction and Ecommerce (2003) Law Book Company, Sydney (forthcoming) at 125-6. 25 At [ 33 ]. 26 Fitzgerald B, Middleton G, Fitzgerald A, Jurisdiction and Ecommerce (2003) Law Book Company, Sydney (forthcoming) at 126.

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3.3.7 US hegemony -unacceptable

Dow Jones argued that the state of New Jersey (US) was the appropriate forum to

hear the matter. His Honour Justice Callinan held that this was an attempt to impose

the defamation law of the US on Internet publications. In Australia, defendants in

defamation actions must prove the truth (and in some cases, also the public benefit) of

their claims. In the US, however, the onus is generally on the plaintiff to prove that

the claims were false. The US also grants further protection for a defendant by virtue

of the US constitutional right of free speech. Callinan J stated that:

I agree with the respondent’s submission that what the appellant [Dow Jones] seeks

to do, is to impose upon Australian residents for the purpose of this and many other

cases, an US legal hegemony in relation to Internet publications. The consequence, if

the appellant’s submission were to be accepted would be to confer upon one country,

and one notably more benevolent to the commercial and other media than this one, an

effective domain over the law of defamation, to the financial advantage of publishers

in the United States, and the serious disadvantage of those unfortunate enough to be

reputationally damaged outside the United States. A further consequence might be to

place commercial publishers in the United States.27

The High Court’s approach may thus lead to an increase in global defamation actions

and so require Internet publishers to consider the defamation laws of many States.

Clearly, a global approach is needed to address this global problem of uncertainty.

This was recognised in the pragmatic judgment of one of the most progressive High

Court justices, His Honour Justice Kirby.

3.3.8 Is there a need for a new paradigm on Internet jurisdiction?

Justice Kirby acknowledged that the Internet is ubiquitous and it knows no geographic

boundaries. It was the view of Kirby J that there is an urgent need for a new set of

legal rules to deal with Internet disputes to address the absence of congruence

27 At [200].

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between cyberspace and the boundaries of any given jurisdiction.28 He also indicated

that the new approach could be trans-national. He indicated that:

“To wait for legislatures or multilateral international agreement to provide solutions

to the legal problems presented by the Internet would abandon those problems to

"agonizingly slow" processes of lawmaking. Accordingly, Courts throughout the

world are urged to address the immediate need to piece together gradually a coherent

trans-national law appropriate to the "digital millennium". The alternative, in

practice, could be an institutional failure to provide effective laws in harmony, as the

Internet itself is, with contemporary civil society - national and international. The new

laws would need to respect the entitlement of each legal regime not to enforce foreign

legal rules contrary to binding local law or important elements of local public policy.

But within such constraints, the common law would adapt itself to the central features

of the Internet, namely its global, ubiquitous and reactive characteristics. In the face

of such characteristics, simply to apply old rules, created on the assumptions of

geographical boundaries, would encourage an inappropriate and usually ineffective

grab for extra-territorial jurisdiction”.29

3.3.9 Courts should not impede but facilitate technological development

Justice Kirby made the point that the law should generally facilitate and encourage

technological advances, not attempt to impede them by inconsistent and ineffective

interventions. If the Courts keep applying the traditional principles of law in Internet

disputes, this could interrupt the benefits that the Internet has brought and potential

future benefits. The common law should adapt to the radically different environments.

It was the view of Kirby J. that the High Court should seek a ‘bold’ solution because

of the revolutionary character of the technology that had produced the need to do so.

28 At [118] and [119]. 29 At [118] and [119].

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3.3.10 Formulating a new set of rules on Internet jurisdiction

It is commendable that Kirby J pointed out the need for a new set of rules but

questions remain as to how this is possible for Internet jurisdiction? What does a

‘bold’ solution mean? On the one hand, there is acknowledgement of the

‘agonizingly slow’ legislative process. The legislatures in each State are not faced

with the immediacy of the dilemma of Internet jurisdiction and so cannot be relied

upon to bring about a global solution. Anecdotal evidence suggests that the volume

of Internet disputes before the Courts is rising on a daily basis. Worldwide, the

judiciary is being confronted with the need for a just and global solution. Considering

the importance and urgency of the issue, a new kind of approach is proposed to

formulate a consistent set of rules for Internet jurisdiction, namely trans-national

judicial dialogue. In any event, the approach of Kirby J in the Gutnick decision is

one step in this direction.

3.3.11 Critical assessment of the Australian Court Approach

The High Court will not deny jurisdiction just because a website is located in a

foreign State, otherwise the Internet could be free from any jurisdiction. Currently,

publication of information on the Internet, even on a foreign-based website, may be

curbed by an Australian Court asserting its jurisdiction. Jurisdiction can be exercised

over the publisher of such a website if the publication has occurred through

downloading in an Australian state or territory. Also, according to the Victorian

Court of Appeal, if a website targets a forum by subscription or if the publication has

been made accessible to local people, the website should be subject to the local

jurisdiction. Clearly, the Gutnick decision has significant ramifications for Internet

publishers, who may be subject to the defamation laws of many different States.

On its widest interpretation, it could be argued the High Court’s decision suggests a

view that jurisdiction can be exercised on mere access to a website30. Notwithstanding

the limits explained by the Court, the decision is open to the criticism that it gives

30 See Fitzgerald B, ‘Dow Jones & Company Inc v Gutnick: Negotiating “US Hegemony” in the Trans-national World of Cyberspace’ (2003) 27 Melbourne University Law Review 590.

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Australian Courts jurisdiction anywhere the Internet can be accessed. This is too weak

an approach for a workable theory of jurisdiction.

3.4 US Courts’ approach

Unlike the Australian Courts, the US Courts have initially applied the ‘sliding scale

test’ to determine whether or not to exercise the jurisdiction over a website.

3.4.1 Sliding Scale doctrine: a benchmark

In US jurisprudence, the sliding scale theory has been a benchmark for considering

Internet jurisdiction31. This occurred for the first time in the case of Zippo

Manufacturing v. Zippo Dot Com,32 when a new theory on Internet jurisdiction was

formulated. The websites on the Internet were categorised as active, passive or

interactive. In post -Zippo cases on Internet jurisdiction, the active/passive

classification prevailed in answering whether or not a Court should exercise

jurisdiction.33 However, there is still no definite view as to how one can determine

31 See Rice DT, ‘Consumer Protection in E-Commerce’ Conference Proceeding, CLA Lisbon Conference, October 11-12, 2001; McWhinney C, Wooden S, McKown J, Ryan J, and Green J, ‘The "Sliding Scale" of Personal Jurisdiction via the Internet’ (2000) 2000 Stanford Technology Law Review1.

32 Zippo Manufacturing. Co. v. Zippo Dot Com, Inc, 952 F. Supp. 1119 ( W.D. Pa. 1997) Zippo Manufacturing, a corporation with its principal place of business in Pennsylvania, makes the Zippo tobacco lighters. Dot Com, a corporation with its principal place of business in California, operated a website and had obtained the exclusive right to use the domain names zippo.com, zippo.net and zipponews.com on the Internet. The plaintiff, Zippo Manufacturing, filed a complaint against the defendant, Dot Com alleging trademark dilution, infringement, and false designation. Dot Com filed a motion to dismiss the claim for lack of jurisdiction and improper venue. 33 Among the cases where US Courts have asserted jurisdiction in relation to Internet activities are: Starmedia Network, Inc. v. Star Media Inc., 2001 WL 417118 (S.D.N.Y.) (site deemed interactive because while customers could not purchase products, they could register, send comments, and obtain special price information, and defendant could reasonably expect its actions to have consequences in New York); Divicino v. Polaris Industries, 129 F. Supp. 2d 425 (D.Conn. 2001) (specific jurisdiction in product liability case where, in addition to a toll free number, advertisements on the website indicated the defendant’s reasonable expectation that goods would be used in Connecticut); Multi-Tech Systems, Inc. v. Vocal-Tec Communications, Inc., 122 F. Supp. 2d 1046 (D.Minn. 2000) (specific jurisdiction based on a moderately interactive website that allowed Minnesota residents to register, download and use Internet phone software, emphasising use of a click box on the website for US states only; Nida Corp v Nida,, 118 F. Supp. 2d 1223 ( M.D. Fla. 2000) (accessibility of website in Florida plus one industry-specific advertisement and a small percentage of sales in Florida was sufficient for jurisdiction); Publications Intern., Ltd. v. Burke/Triolo, Inc., 121 F. Supp. 2d 1178 (ND Ill. 2000) (Court exercised its jurisdiction over a website which posted information and allowed users

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to fill out and submit catalog requests, even though no actual sales were made online, plus the defendant maintained on of its representative in Illinois); Peridyne Tech. Solutions Llc v. Matheson Fast Freight, Inc.,117 F. Supp. 2d 1366 (ND Ga. 2000) (defendants illegally hacked into plaintiff’s servers and directories in Georgia to download proprietary information and access plaintiff’s source codes. Court asserted its jurisdiction); Hasting Ten Enterprises USA, Inc. v. Clark Enterprises, F. Supp. 2d (SDNY 2000) (applying the Zippo test to assert jurisdiction where Internet users could purchase infringing exercise machine online, download forms and query online representatives); Archdiocese of St. Louis v. Internet Entertainment Group, Inc., 1999 WL 66022 ( E.D. Mo) F. Supp. 2d ( 1999) (operator of adult site intended to reach Missouri residents in connection with papal visit to St. Louis); GTE New Media Services, Incorporated v. Ameritech Corporation, 21 F. Supp. 2d 27 (DC, 1998) (telephone companies increased advertising revenue by channelling District of Columbia viewers to their websites); US Network Inc. v. Access America/ Connect Atlanta, Inc., 975 F. Supp. 494 (SDNY 1997) (Georgia Internet service provider sued in New York for trademark infringement had 7500 customers worldwide, including 6 in New York who paid $150 per month in the aggregate, and defendant sent software and agreements to sign up new customers. The Court found purposeful availment in the New York forum); Telco Communications v. An-Apple-A-Day, 977 F. Supp. 404 (E.D. Va. 1997) (defendant’s website along with the other contacts with Virginia was sufficient for jurisdiction to be exercised over defendants, who posted allegedly defamatory press releases regarding plaintiffs on a passive Internet site); Cody v. Ward, 1997 U.S. Dist. LEXIS 1496 (D.Conn. Feb. 4 1997) (Californian defendant’s telephone and email transmissions to a plaintiff in Connecticut to induce the plaintiff to purchase securities was enough to exercise jurisdiction under Connecticut statute); Telephone Audio Productions, Inc. v. Smith, 1998 U.S. Dist. LEXIS 4101 ( ND Tex. March 26, 1998) (although defendants’ acts failed to rise to the level necessary for the Court to have general jurisdiction over the defendants, they were sufficient for specific jurisdiction where defendants maintained a website to promote their business with registered trademark owned by plaintiff. The webpage with the infringing mark was accessible to Texas residents plus the defendants used the infringing mark at a trade show in Texas and received orders from distributors in Texas. The combination of the website and other contacts with Texas were sufficient for jurisdiction); Mieczkowski v. Masco Corp., 997 F. Supp. 782 ( E.D. Tex. 1998) (nature of the manufacturer’s website which had a “ Shop Online” webpage, offering customers an opportunity to check the status of their purchases and providing for direct on-line communications with sales representatives, combined with other factors such as the volume of business conducted in the state, provided a basis for asserting jurisdiction over a bunk bed manufacturer); Clipp Designs, Inc. v. Tag bags, Inc., 996 F. Supp. 766 (ND Ill. 1998) (jurisdiction found in trademark infringement action where defendant was alleged to have solicited orders for its locket tag protector in Illinois and advertised the device on its website and through a national magazine); Bunn-O-Matic Corp. v. Bunn Coffee Service, Inc., 1998 U.S. Dist. LEXIS 7819 (C.D. Ill. March 31, 1998) (allegedly infringing marks used on defendant’s passive web site, which provided only general information, did not allow customers to place orders by accessing the site, had no Illinois resident who accessed site and other than its website, defendant did not advertise, sell or ship any of its goods or services in Illinois. Nonetheless, defendant’s actions in setting up a website accessible to residents of plaintiff’s state of Illinois held to meet the low threshold for jurisdiction where the defendant was on notice that its use of an infringing mark would cause injury to an Illinois resident); Blumenthal v. Drudge, 992 F. Supp. 44 (D.D.C. 1998) (jurisdiction in District of Columbia over defendant, a California resident, based on: 1. interactivity of the website between defendant and D.C. residents; 2. the regular distribution of the defendant’s “Drudge Report” via AOL, email and the web to D.C. residents; 3. defendant’s solicitation of and receipt of contributions from D.C. residents; 4. the availability of defendant’s website to D.C. residents 24 hours a day; 5. defendant’s interview with media organisation in D.C; and 6. defendant’s contacts with D.C. residents who provided gossip for his “Drudge Report”, which was distributed to subscribers by email via the defendant’s own website, and Hotwired magazine and AOL, all adding up to a “persistent” course of contact with D.C.); Heroes, Inc. v. Heroes Foundation, 958 F. Supp. 1 (D.D.C. 1996) (Defendant’s web-page, soliciting contributions and providing toll-free telephone number, and use of allegedly infringing trademark and logo, along with other contacts, also found to be “persistent” contact with the District of Columbia); Hall v. La Ronde, 1997 Cal. App. LEXIS 633 ( August 7, 1997) (Court of Appeal held that the use of e-mail and telephone to contract California resident and continuing relationship contemplated by such contract were sufficient to establish minimum contacts with California to support jurisdiction over New York defendant); Hasbro Inc. v. Clue Computing Inc., 1997 U.S. Dist. LEXIS 18857 (D. Mass. Sept. 30,1997) (Rhode Island website operator listed Massachusetts client on its site, which was accessible to Massachusetts residents); CompuServe, Inc. v.

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whether a particular website is active or passive. Courts have conflicting views,

which will be examined below.

3.4.2 What is the Sliding Scale Doctrine?

In this context, the sliding scale is used in the classification of the nature of activity on

the Internet. In particular, the sliding scale describes the variable spectrum of

commercial activity on the Internet on the basis of what a website involves. The

Court in the Zippo case found that:

“Personal jurisdiction can be exercised … directly proportionate to the nature and

quality of commercial activity that an entity conducts over the Internet. According to

the Court, at one end of the spectrum are situations where a defendant clearly does

business over the Internet. If the defendant enters into contracts with residents of a

foreign jurisdiction that involve the knowing and repeated transmission of computer

files over the Internet, personal jurisdiction is proper”.34

The view of the Court was that if the website enables any commercial activity over

the Internet then it can be subject to the jurisdiction of the Court in the place where

the business is conducted.

Patterson, 89 F. 3d 1257 ( 6th Cir. 1996) (repeated transmission of software and messages to the forum was sufficient for jurisdiction); Inset Systems, Inc. v. Instruction Set, Inc., 937 F. Supp. 161 (D.Conn.1996); Martiz, Inc. v. CyberGold, Inc., 947 F. Supp. 1328 (E.D. Mo. 1996) (191 hits by Missouri viewers on California website constituted “ Purposeful availment”); Weber v Jolly Hotels 977 F Supp 327 (DNJ 1997). Zippo Mfg. Co. Zippo Dot Com, Inc, 952 F. Supp. 1119 ( W.D. Pa. 1997) (3000 Pennsylvania subscribers to Internet news service constituted “purposeful availment”); Panavision Intern, L.P. v. Toeppen, 938 F. Supp. 616 ( C.D. Cal 1996) 144 F. 3d 1316 ( 9th Cir. 1998); EDIAS Software Intern, L.lc v. Basis Intern, Ltd., 947 F. Supp. 413 (D.Ariz. 1996) (defendant could foresee impact in the forum state of defamatory material on its website and email sent into the state); Minnesota v. Granite Gate Resorts, Inc., 1996 WL 767432 (E. Minn. 1996) (contract provision that website operator could sue user of operator’s services in user’s home state); Resuscitation technologies, Inc. v. Continental health Care Corp., 1997 WL 148567 (SD Ind. 1997) (although plaintiff initiated contacts with its website posting, subsequent extensive email and phone contacts by Michigan defendants warranted Indiana jurisdiction); California Software Inc. v. Reliability Research, 631 F. Supp. 1356 (CD Cal. 1996) (messages placed by Vermont residents on website bulletin board defaming California business foreseeably caused damage in California). 33 Zippo Mfg. Co. Zippo Dot Com, Inc, 952 F. Supp. 1119 ( W.D. Pa. 1997). 34 See Zippo Mfg. Co. Zippo Dot Com, Inc, 952 F. Supp. 1119 ( W.D. Pa. 1997).

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According to the sliding scale doctrine, a website may be classified as:

• Active - website enables business contact with other States;

• Passive - website merely exists with no contact options;

• Interactive - website provides contact options but does not directly

enable business.

We will now examine in detail how the US Courts have used this doctrine to evaluate

judicial jurisdiction over Internet activities.

3.4.3 What makes a website ‘active’?

An active website is one which:

• deliberately and consciously enables contact beyond the territory of its location;

• engages in commercial activities in another forum; and

• provides access to commercial information through a website subscription.

For example, in the Zippo case, the Court of Pennsylvania declared a website ‘active’

since the above elements were satisfied. Thus, it exercised its jurisdiction over the

website based in California.

A. Deliberate and Conscious Effort

‘Deliberate and conscious effort’ made by the website to reach out to another forum

made it subject to the jurisdiction to that forum. The Court explained this element in

the following terms:

“If the website makes a purposeful contact with another trans-national forum with the

purpose of any commercial act performed; if the website is involved in any kind of

commercial act into another territory, when a defendant makes a conscious choice to

conduct business with the residents of a forum state, it freely chose to do so,

presumably in order to profit from those transactions; those acts would constitute a

deliberate and conscious effort and under such scenario, the jurisdiction exists”.35

35 See Zippo Mfg. Co. Zippo Dot Com, Inc, 952 F. Supp. 1119 ( W.D. Pa. 1997).

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The Court found that the activity of the defendant, Dot Com, constituted a deliberate

and conscious effort since it involved luring customers from the state of Pennsylvania,

the home state of the plaintiff. Accordingly, Dot Com was found to have repeatedly

and consciously processed Pennsylvanian residents' applications and assign them

passwords. Dot Com knew that the result of these contracts would be the transmission

of electronic messages into Pennsylvania. The transmission of these files was entirely

within its control. Dot Com had not just posted information on its website which was

accessible to Pennsylvanian residents36 but the Court found that Dot Com's conducted

electronic commerce with residents. This constituted a ‘purposeful availment’ of

conducting business in Pennsylvania. The nature of such commercial acts was one

element which categorised the website as active.

B. Subscription of Customers

The subscription basis was another element considered by the Court in determining

whether the Dot Com was an active web. If the website enables contact with

customers on a subscription basis, it can be construed as an active effort to conduct

business.37 The evidence showed that Dot Com's offices, employees and Internet

servers were all located in California. Dot Com's advertising on its website, however,

was accessible to Pennsylvania residents via the Internet.38 Out of the defendant’s

140,000 or so subscribers worldwide, approximately 3,000 were Pennsylvania

residents.39 These subscribers had contracted to receive Dot Com's service by visiting

its website and completing the application form.40 Additionally, Dot Com had entered

into agreements with seven Internet access providers in Pennsylvania to permit their

subscribers to access Dot Com's news service. Two of these providers were located in

Pennsylvania.41 All these subscription-based activities were considered sufficient to

constitute an active website. Therefore, jurisdiction was asserted in Pennsylvania

over the Californian-based Dot Com website.42

36 Ibid. 37 Ibid. 38 Ibid. 39 See Zippo Mfg. Co. Zippo Dot Com, Inc, 952 F. Supp. 1119 ( W.D. Pa. 1997) 40 See Zippo Mfg. Co. Zippo Dot Com, Inc, 952 F. Supp. 1119 ( W.D. Pa. 1997). 41 Ibid. 42 See Geist MA, ‘Is There a There There? Toward Greater Certainty for Internet Jurisdiction’ (2001) 16 Berkeley Technology Law Journal 1345.

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3.4.4 What makes a website passive?

Another aspect of the US sliding scale theory is the classification of a passive web.

Courts have declined to exercise jurisdiction over a website which is found to be

‘passive’ by satisfying the following elements:

• merely posting information on the website is passive, even if it is

accessible to users in foreign jurisdictions;43

• advertising on the website is generally passive; and

• even if a service is provided, if it is not commercial in nature, the website

cannot be considered an active website.

The notion of the passive website was initially brought out in the Zippo case where it

was held that a passive website is one that does little more than make information

available to those who are interested and which does not lay any ground for the

exercise of jurisdiction.44 In post-Zippo cases, if US Courts have satisfied the passive

web test they have declined to exercise their judicial jurisdiction.

43 Ibid. 44 E.g. Bensusan Restaurant Corp., v. King, 937 F. Supp. 295 (SDNY 1996).

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The Courts have interpreted the passive web approach in the following ways. 45

45 Among the US cases where jurisdiction has not been asserted are: Fugazy International Travel Group, Inc v. Fugazy Executive Travel, Inc., 2001 WL 50936 (SDNY) (In a trademark infringement action, jurisdiction was denied. Although the defendant’s website could be accessed from New York, this alone did not support jurisdiction, absent targeting of business in New York, and a substantial part of the acts did not occur in New York); Purchased Parts Group, Inc. v. Royal Appliance Manufacturing Co., 2000 WL 33125340 (Tenn. Ct. App. October, 2000) (no specific jurisdiction in Tennessee although website posted and accepted information and processed orders, its 800 number accepted orders, it marketed and sold product in Tennessee through local retailers); Liberty Aircraft v. Atlanta Jet, Inc., 2000 WL 1682500, 28 Conn. L. Rep. 398 (the Court stated that the defendant did not intend to subject itself to every jurisdiction in which its general advertisement reached); Holiday v. 3Com Corp., 2000 WL 1796535 (D. Wyo) (where no specific jurisdiction over employment dispute because no substantial in-state activity related to plaintiff’s claim, general jurisdiction could not be based on operating a website capable of being accessed in Wyoming; no indication that any transactions occurred); First Financial Resources v. First Financial Resources Corp., ( N.D. Ill. 2000) (website which was only ‘slightly more’ than passive because it allowed clients of financial planner to exchange information via emails but this was still insufficient for jurisdiction); US Information Corp. v. US Information Metrics Inc., 2001 WL 370109 (D. Md) ( “an entirely passive website cannot create jurisdiction in Maryland simply because it is theoretically available to website users in Maryland and everywhere else”, even if site “uses someone else’s trademark as an address”, ability to to submit inquiry on availability of services in viewer’s area was insignificant); US Online , Inc v. Chih Hsien Huang, 2000 U.S. Dist. LEXIS 10232 (ED Va) (defendant’s only contact with Virginia was through domain name registration made with Virginia registrar. This was insufficient); Heathmart E.A. Corp. v. Technodrome.com, 2000 U.S. Dist. LEXIS 10591 (ED Va) (same result); Chiaphua Components Limited v. West bend Company, 95 F. Supp. 2d 505 (ED Va., Norfolk D iv. 2000); Mid City Bowling Lanes & Sports Palace, Inc. v. Ivercrest, Inc., 1999 WL 76446 (ED La), F. Supp. 2d (1999) (an advertisement on website held essentially “passive”); Pheasant Run, Inc. v. Moyse, 1999 WL 58562 (N.D. Ill.), F. Supp. 2d (1999); Mink v. AAAA Devel. Llc 190 F.3d 333 (5th Cir. 1999) (website with printable mail-in form, toll- free number and email address insufficient for specific jurisdiction); People Solutions, Inc. v. People Solutions, Inc., 2000 U.S. Dist. LEXIS 10444 (ND Tex) (no jurisdiction where defendant’s website merely had potential to interact with and sell to Texas residents); Minge v. Cohen, 2000 WL 45873 (E.D. La) (maintaining website alone is insufficient to confer jurisdiction); Search Force Inc. v. Dataforce International Inc., 2000 U.S. Dist. LEXIS 12790 (SD Ind) (utilizing interactive Internet service to post information under allegedly infringing mark does not confer jurisdiction); Millenium Enterprises, Inc. v. Millenium Music, L.P., 1999 WL 27060 (D. Ore.), F. Supp. 2d (1999) (interactive website was not targeted at Oregon viewers and had no significant sales in Oregon); Origin Instruments Corp. v. Adaptive Computer Systems, Inc., 1999 WL 76794 (ND Tex) F. Supp. 2d (1999) (no jurisdiction where “moderate level” of interactivity); ESAB Group, Inc. v. Cetricut, Llc, 1999 WL 27514 (D.S.C.) F. Supp. 2d (1999); Blackburn v. Walker Oriental Rug Galleries, 1998 U.S. Dist. LEXIS 4517 (E.D. Pa 1998) (website illustrating various types of rugs sold by plaintiff was passive advertisement and, without message by email, was not enough to demonstrate the nature and quality of the commercial activity in the jurisdiction nor did it form continuous and substantial contacts with the forum sufficient for jurisdiction); Transcript Corp. v. Doonan Trailer Corp., 1997 U.S. Dist. LEXIS 18687 (ND Ill., Nov. 17, 1997) (in trademark infringement action, website was just a general advertisement accessible worldwide, with no particular focus on Illinois); No Mayo-San Francisco v. Memminger, 1998 U.S. Dist. LEXIS 13154 (ND Cal. 1998) ( merely registering someone else’s trademark as a domain name and posting on a website not sufficient to subject a party in Hawaii to jurisdiction in California); CFOS 2 GO, Inc. v. CFO 2 Go, Inc., 1998 WL 320821 (ND Cal. June 5 1998) (defendant’s website and email addresses for communication over the Internet insufficient in trademark suit to establish that the defendant had purposefully availed itself of the privilege of conducting activities within plaintiff’s home state); K.C.P.L., Inc. Nash, 49 U.S.P.Q. 2d 1584, 1998 WL 823657 (SDNY Nov. 24 1998) (Court lacked jurisdiction over alleged ‘cyber pirate’ who registered domain name for the purpose of extorting money from plaintiff in exchange for the assignment of all rights in the name, where the defendant resided in California and had no contacts with New York. There were no allegations that the defendant sought to encourage New Yorkers to access his site or that he conducted business in New York);

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A. Merely posting the information on the website

In Oliver "Buck" Revell, Plaintiff, v. Hart G. Lidov, The Board Of Trustees Of

Columbia University,46 the US District Court in Texas held that the facts of this case

Conseco, Inc. v. Hickersson, 698 N.E. 2d 816 (Ct. App. Ind. 1998) (Hickerson’s use of Conseco’s trademarke name in the text of its website was not sufficient to support jurisdiction in Indiana over resident of Texas where the use of ‘Conseco’ was made without any other contact with Indiana); Patriot System, Inc. v. C-Cubed Corporation, 21 F. Supp. 2d 1318 (D.Utah 1998) (although Court determined that C-Cubed was transacting business with Utah by virtue of its license relationship with company, headquartered in Utah, and payment of royalties to Utah, there was insufficient nexus between the claims in the lawsuit and C-Cubed’s other contacts with Utah for specific jurisdiction over the Virginia company; website was passive advertisement, merely providing information to those interested in it); Edberg v. Neogen Corporation, 17 F. Supp. 2d 104 (D.Conn. 1998) (defendant’s website had hyperlinks that permitted users to learn about its products, order product information through an online catalog, email specific comments or questions to or from its representatives, and order products through a toll-free number, but there was no act purposefully directed towards the forum state, any evidence that anyone in Connecticut purchased the defendant’s product through its website or that any advertisement was directed to Connecticut); Osteotech, Inc. v. Gensci Regeneration Sciences, Inc., 6 F. Supp. 2d 249 (DNJ 1998) (websites easily accessible from computers in New Jersey were insufficient proof by themselves of purposeful availment in New Jersey, even with a phone number and email address on the website); Bancroft & Masters, Inc. v. Augusta National, Inc., 1998 U.S. Dist. LEXIS 22025 (ND Cal. 1998) (domain name dispute, website not enough for jurisdiction in California); Black & Decker (U.S.) Inc. v. Pro-Tech Power Incorporated, 26 F. Supp. 2d 834 (ED Va. 1998) (patent lawsuit where the defendants advertised their products on website accessible to Virginia residents and provided interested customers in Virginia with their email address, was not enough to show purposeful availment for personal jurisdiction); Advanced Software, Inc. v. Datapharm, Inc. 1998 U.S. Dist. LEXIS 22091 ( CD Cal. Nov. 3, 1998) (no jurisdiction over Datapharm in California where it had website and links to other pharmaceutical sites such as the FDA, offered visitors to the site the ability to receive emails by clicking on a hyperlink, listed Datapharm’s address and provided a toll- free number); 3D Systems, Inc. v. Aarotech Laboratories, Inc., 160 F. 3d 1373, 48 U.S.P.Q. 2d 1773 (Fed. Cir. 1998) (no jurisdiction over parent of alleged patent infringer where it only maintained a website accessible by California residents that was passive and it did not purposefully direct any of its activities at California residents); Cybersell Inc. v. Cybersell Inc. (9th Cir. 1997) (mere accessibility by Arizona resident to passive- Florida based website not sufficient for personal jurisdiction in Arizona); Bensusan Restaurant Corp. v. King, 937 F. Supp.295 (SDNY 1996) (Missouri defendant with a website advertising its nightclub, no evidence that sales were made solicited in New York or that New Yorkers were actively encouraged to access the site); Smith v. Hobby Lobby Stores, Inc., 968 F. Supp. 1356, 1365 (WD Ark. 1997) (no jurisdiction where Hong Kong manufacturer of artificial Christmas tree advertised on the web, but tree was purchased from a retailer in Arkansas); McDonough v. Fallow McElligott, Inc., (mere accessibility of Missouri website by Californians insufficient for general personal jurisdiction); Hearst v. Goldberger, 1997 WL 97097 (SDNY 1997) (no specific jurisdiction where New Jersey site was accessible to and visited by New Yorkers, where no sales of goods or services had occurred). 46 Oliver "Buck" Revell, v. Hart G. Lidov, The Board Of Trustees Of Columbia University In The City Of New York, And Columbia University School Of Journalism, 2001 U.S. Dist. Lexis 3133, 3:00-Cv-1268-R, United States District Court For The Northern District Of Texas, Dallas Division. The case was concerned of the publication of an article on the Columbia University Journalism Review Internet bulletin board. The article was about an alleged conspiracy involving the bombing of Pan Am Flight 103 and was authored and posted by the Defendant, Mr Lidov. The Defendant lived and worked in Boston, Massachusetts. The defendant Lidov had never been toTexas, nor was he aware that the Plaintiff resided in Texas at the time he wrote the article in question. Mr Lidov was not an employee or

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fitted perfectly into the passive end of the Zippo sliding scale. The Columbia

University website at issue was a bulletin board on which members of the public

could post articles and comments. Although this might seem interactive, in that

information can be sent to the website, the website itself did not respond. There was

no direct contact between the website, the persons who sent the information and those

who read it. According to the Court, once information was posted, the site was

completely ‘passive’. Also, the website did not involve the commercial exchange of

information, or otherwise. In this way, it did not stretch out its activities to reach out

to another territory.

A passive website makes no effort to make contact and if no contact has been made

with the initiative of the web, no jurisdiction will be asserted. This view was

supported in the James M. Lofton, Plaintiff v. Turbine Design, Inc47 decision. The

Court found that there was no evidence of any contact at all between the defendant,

TDI, and the forum state via the Internet. Additionally, the Court did not find any

evidence that defendant’s site was accessed by Mississippi residents, except for the

plaintiffs. The defendants did not have an office within the State of Mississippi, they

did not have Mississippi employees or sales representatives, did not solicit business in

Mississippi, and did not derive any income from Mississippi residents. So, the Court

declined to exercise its jurisdiction.

In SCC Communications Corporation, A Delaware Corporation, Plaintiff, v. J.

Clarke Anderson,48 the plaintiff initiated proceedings in the US state of Colorado

against a group of Michigan defendants, which sponsored a website server based in

Michigan. The Court found that the defendants website incorporated several images

and hyperlinks to other sites. The links were only to different web pages within the

a student of Columbia University. The article did not appear to be related to the profession and there was no apparent commercial purpose for writing and posting the article to the bulletin board. 47 100 F. Supp. 2d 404,; 2000 U.S. Dist. LEXIS 4593. 48 SCC Communications Corporation, a Delaware corporation, v. J. Clarke Anderson, 195 F. Supp. 2d 1257, ; 2002 U.S. Dist. LEXIS 5740. The plaintiff, SCC Communications Corporation (SCC), was incorporated in Delaware with its headquarters in Boulder, Colorado. There was a collective group of: A.J. Boggs & Company (A.J. Boggs), a Michigan Corporation with its principal place of business in Okemos, Michigan; J. Clarke Anderson (Anderson), Managing Director and Secretary of A.J. Boggs; Emergency Services Network, an entity owned by A.J. Boggs. SCC brought the legal action against the defendants under federal and state law, for unfair competition, federal trademark dilution, and ‘cyber piracy’.

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site or e-mail addresses to write to company employees. For the most part, the site

was limited to the retrieval of company information. A visitor to the website did not

have the option to purchase products or services and no evidence was led that

suggested the site caused a Colorado resident to do business with defendants. As

such, the Court found that the defendant’s website was essentially passive and

concluded that defendants did not, through their website alone, purposefully direct

their activities toward Colorado.

B. "Merely fortuitous” contact - insufficient to assert jurisdiction

Once information is posted on the Internet, it is available almost indiscriminately. In

the situation where persons can access a website merely by chance in a particular

territory, the jurisdiction has been denied by US Courts. For instance, in Oliver

"Buck" Revell, Plaintiff, v. Hart G. Lidov, The Board Of Trustees Of Columbia

University,49 the US District Court found that the article about the Plaintiff was posted

on Columbia University's website where it could be viewed by anyone in the world

who had Internet access. The defendant, who did not know where the plaintiff

resided, could not have anticipated “being haled into Court” in Texas just because one

of the people mentioned in the article happened to reside here. It would be “merely

fortuitous” if anyone in Texas happened to read the article, and this was not sufficient

grounds to assert jurisdiction over the defendant, absent any other contact between the

defendant and the forum.

C. Website advertisement - passive act

Another matter which may constitute a passive website is also noted in James M.

Lofton, Plaintiff v. Turbine Design, Inc,50 where the Court found that in the instant

49 2001 U.S. Dist. LEXIS 3133, 3:00-CV-1268-R United States District Court For The Northern District Of Texas, Dallas Division. 50 James M. Loftonf v. Turbine Design, Inc., A Florida Corporation, Douglas Karlsen, Individually, Defendants, Robert E. Lamb, v. Turbine Design, Inc., et al. Phoenix Corporation, v. Turbine Design, Inc., v. Turbine Design, Inc., et al. 100 F. Supp. 2d 404,; 2000 U.S. Dist. LEXIS 4593, ; 28 Media L. Rep. 1726 . The plaintiffs, Lofton, Lamb and Lee, were three of the four original shareholders of a Mississippi-based corporation, Phoenix, which was in the business of converting aircraft. The defendant, Turbine

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case, the primary purpose of the defendants’ website was for advertising. The website

would most likely be accessed by individuals interested in aircraft conversion. The

site displayed information about the defendants' business and its services as well.

While it is true that it did contain information regarding the plaintiffs, according to the

sliding scale promulgated by the Zippo Court, it was held that the defendants' website

was purely passive.

In Cybersell Inc. v. Cybersell, Inc.,51 the US District Court of Arizona declined to

exercise its jurisdiction.52 The Court took the view that an Internet advertisement

alone is not sufficient to subject an advertiser to the jurisdiction of a plaintiff's home

State.53 According to the Court:

“There is no evidence that any Arizona resident signed up for Cybersell FL's website

construction services. It entered into no contracts in Arizona, made no sales in

Arizona, received no telephone calls from Arizona, earned no income from Arizona,

and sent no messages over the Internet to Arizona”.

The decision of the US Court of Appeals in David Mink, plaintiff/appellant, v. AAAA

Development Llc,54 shows the fine line that is drawn when a website does not easily

Design, Inc. (TDI) was a competitor of the plaintiffs. TDI's principal place of business was an airport in Florida. Douglas Karlsen, was the president of TDI and also a resident of Florida. 51 Cybersell Inc. v. Cybersell, Inc., No. 96-17087 (C.A. 9th 1997). The plaintiff was an Arizona corporation that advertised its commercial services over the Internet. It filed a complaint in Arizona, alleging trademark infringement, unfair competition, fraud, and other violations. It claimed that Cybersell, Inc., a corporation based in Florida, offered its webpage construction services over the Internet and so infringed its federally registered trademark. In response, Cybersell FL moved to dismiss the complaint for lack of jurisdiction. Cybersell FL also filed suit in the United States District Court for declaratory relief with regard to use of the name "Cybersell". 52 The Court relied on the principles of ‘specific jurisdiction’ in the following three-part test to determine whether a US District Court can assert specific jurisdiction over a non-resident defendant: (1) non-resident defendant must do or perform some act within the forum or by which he purposefully

avails her/himself of the privilege and protections of conducting activities in the forum; (2) the claim must arise out of or result from the defendant's forum-related activities; and (3) the Court’s exercise of its jurisdiction must be reasonable. 53 See, e.g., Smith v. Hobby Lobby Stores, 968 F. Supp. 1356 (W.D. Ark. 1997) (no jurisdiction over a Hong Kong defendant who advertised in a journal posted on the Internet without sale of goods or services in Arkansas). Rather, in each case, there has been ‘something more’ to indicate that the defendant purposefully (albeit electronically) directed her/his activity in a substantial way to the forum. 54 David Mink v. AAAA Development Llc, (t/as Adamant Development, Four A Development, Upfront, et al), & David Middlebrook. No. 98-20770 US Court of Appeals for the 5th Circuit 190 F.3d 333; 1999 U.S. App. LEXIS 22783; 52 U.S.P.Q.2D (BNA) 1218; Copy. L. Rep. (CCH) P27,954 September 17, 1999. The plaintiff’s computer program developer created and patented computer program

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fall into the category of active websites (where a defendant clearly conducts business

over the Internet) nor into the category of interactivity (where a defendant and users

exchange information through the Internet). Essentially, the defendant, AAAA,

maintained a website that posted information about its products and services. The

website provided users with a printable mail-in order form, AAAA's toll-free

telephone number, a mailing address and an email address, but no orders were taken

through the defendant's website. There was no evidence that the website allowed

AAAA to do anything more than reply to e-mail initiated by website visitors or that it

conducted business over the Internet. AAAA's website lacked any other forms of

interactivity. For example, the website did not allow users to order or purchase

products and services on-line. The presence of email access, a printable order form,

and a toll-free phone number, without more, was found to be insufficient to establish

jurisdiction. Thus, it was held that the website was really a passive advertisement,

which could not be grounds for the exercise of its jurisdiction. The Court concluded

that the nature of AAAA's website was insufficient to subject it to the Court’s

jurisdiction.

In another case, ALS Scan, Inc., Plaintiff v. Robert Wilkins, Alternative Products,

Inc,55 the Court concluded that the defendant's websites were passive rather than

designed to track information on sales made and opportunities missed on sales not made. Plaintiff filed a lawsuit in the US District Court in Texas, claiming that the defendants, a Vermont corporation and individual, conspired to copy the plaintiff's computer program in violation of federal copyright and patent pending rights. The Court dismissed the case for lack of jurisdiction. In response, the plaintiff filed a motion for reconsideration and included additional allegations that the defendant corporation's website, which was accessible from Texas, fulfilled the minimum contact requirement for the exercise of judicial jurisdiction. Even the Court of Appeals denied the plaintiff’s motion for reconsideration. It found that the defendant’s website provided users with a printable mail-in order form, a toll-free telephone number, a mailing address and an e-mail address, but orders were not taken through website. It was just a passive advertisement which was insufficient to subject it to the Court’s jurisdiction. 55 ALS Scan, Inc., v. Robert Wilkins, Alternative Products, Inc. And Digital Service Consultants, Inc., defendants 142 F. Supp. 2d 703; 2001 U.S. Dist. LEXIS 6605; Copy. L. Rep. (CCH) P28,273. The plaintiff, ALS Scan, was a Maryland-based corporation. The defendant, Digital, was incorporated and had its only place of business in Georgia. ALS Scan was engaged in photographic products for the Internet, which were marketed throughout the United States. All of its photographs are copyrighted and contained its name "ALS Scan" as well as a copyright symbol.

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active in nature. Although Digital used its websites for advertising, providing

customer services and soliciting employees, there was no indication in the record that

the existence of the websites had directly affected Maryland or its residents. Digital

did not sell products nor conduct any other commercial activity for profit over the

Internet. Moreover, it provided services to customers mainly in the south-eastern

United States and had never consciously directed any of its activities at Maryland

residents nor purposefully availed itself of the benefits and protections of Maryland

law.

3.4.6 Critical assessment of the elements of a passive web

It appears in some cases, that the facts have been uncomfortably made to fit neatly

into the ‘passive’ category. Yet, how can a Court simply categorise a website

advertisement, which actively initiates product orders and commercial agreements, as

a passive act? In accordance with the US Court’s current approach, if a defamatory

article is merely posted on a foreign-based but ‘passive’ bulletin board, a US Court

may also be reluctant to assert its jurisdiction. If the website does just a little more

than advertise or post information, will it still fall within the definition of an passive

website? The US Courts are not clear on where to draw the line in the active/passive

dichotomy, so another ‘interactive’ category has been devised. Even if this approach

seems to have been accepted by Courts in the US, it will not be readily adopted

worldwide if it lacks a sound theoretical basis. A globally-acceptable approach is

required.

The Plaintiff contended that even though Digital was not present in Maryland, its website efforts in Maryland constituted a “persistent course of conduct in the State”. To support this argument, the plaintiff made the following three points: (1) it was claimed that Digital had purposefully availed itself of the benefits and protections of

Maryland law through both of its website(s); (2) Digital's contacts with Maryland by way of these websites were substantial enough for Digital

to reasonably expect ‘to be haled before a Maryland Court”; (3) Digital intentionally directed its Internet activities at Maryland residents through these

websites and it had fair warning that it might be subject to jurisdiction in Maryland.

The defendant’s counter-argument was that it had not entered into contracts with persons or entities in Maryland and derived no income from clients or business in the state. Moreover, Digital’s websites contained no means for any person to enter into a contract or otherwise transact business with it. In fact, it conducted no business in, had no offices or other property in Maryland and did not advertise in the state apart from its websites.

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3.4.7 Interactive Web

A middle ground is now categorised as ‘interactive’ websites, where an Internet user

can exchange information with the host computer.56 In these cases, the exercise of

jurisdiction is determined by examining the level of interactivity and the commercial

nature of the exchange of information that occurs on the website. It is quite a

convoluted task to determine when an ‘interactive’ website falls within the

parameters, when a US Court will exert its jurisdiction.

In Publications International, Ltd., an Illinois Corporation, Plaintiff, v. Burke/Triolo,

Inc,57 Burke contended that its website was merely informational, but Illinois users

who accessed the website could fill out a formal request for the defendant’s catalogue

and submit it directly. Burke also advertised a national listing of clients on the

website, including two large and well-known Illinois corporations. The Court found

the website belonged in this middle ‘interactive’ category, and so declined to exercise

its jurisdiction.

In another case, Uncle Sam's Safari Outfitters, Inc. v. Uncle Sam's Army Navy

Outfitters-Manhattan, Inc, the defendants did ‘nothing more’ than set up an

interactive website. There was no evidence that anyone from the state of Missouri

accessed the defendant’s website, let alone attempted to purchase anything over the

telephone using the toll-free number provided. The Missouri Court held that merely

creating an Internet website is not an act purposefully directed toward the forum state

and, without something more, was insufficient as a basis for exercising jurisdiction

“throughout the [US] nation and even the world”.

On the other hand, in Ty, Inc., plaintiff, v. Baby Me, Inc,58 the US District Court found

that the Baby Me website based in Hawaii offered plush toy bears for sale to Internet

56 See Zippo Mfg. Co. Zippo Dot Com, Inc, 952 F. Supp. 1119 ( W.D. Pa. 1997). 57 Publications International, Ltd., An Illinois Corporation v. Burke/Triolo, Inc., a California corporation, Supp. 2d 1178; 2000 U.S. Dist. LEXIS 17373 October 16, 2000, Decided 58 Ty, Inc. v. Baby Me, Inc. 2001 U.S. Dist. Lexis 5761, 00 C 6016 April 20, 2001. United States District Court For The Northern District Of Illinois, Eastern Division. The plaintiff, Ty Inc., was a Delaware corporation with its principal place of business in Illinois. Ty was a leading manufacturer of plush animal toys, including bears. The defendant, Baby Me, was a Hawaiian corporation, which manufactured and sold plush toy bears under the name "Baby Me Bears"

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users via its interactive website. In this case, however, the Illinois Court exercised its

jurisdiction based on the interactive nature of the website. Conflicting views on the

sliding scale doctrine (active/passive/interactive categorisation) continue to issue from

the US Courts.

3.4.8 Move away from the Sliding Scale Doctrine

A move away from the approach in the Zippo case, is to be found in the judgment of

Digital Control Inc. v. Boretronics. The Court held that it is not enough to exercise

its jurisdiction over a defendant just because a website is classified as ‘active’. The

Court held that until a defendant is actually faced with and makes the choice to be

active in a particular forum, the mere existence of its website, regardless of whether

the site is active/passive/interactive, is not a sufficient basis on which to exercise

jurisdiction. The defendant has to purposely direct its Internet activities at the forum

state. This judgment only adds further complexities to an already ambiguous area.

Therefore, recent US Court decisions are shifting their focus towards a target- based

effects approach.

3.5 Move toward the Target- based Effects Doctrine

Even though the sliding scale doctrine has been extended beyond the classification of

active and passive websites, its utility is clearly limited. A new approach is being

taken by some of the US Courts by applying the jurisdictional doctrine of target-based

effects to Internet activities59. Pursuant to this new approach, the existence of an

active website will not be enough in itself to justify the exercise of judicial

through its retail establishment in Hawaii. The plaintiff claimed that an Illinois resident purchased three "Baby Me Bears" from the Baby Me website, which were then delivered to Illinois. Ty alleged that the Baby Me Bears were confusingly and substantially similar to its Beanie Babies plush toys, and thus infringed its copyright and trademark. In addition, Ty contended that Baby Me infringed its trademarks by including the word “beanies” as a meta-tag for the Baby Me Bears website. The defendant moved to dismiss the legal action for lack of jurisdiction. 59 See Geist MA, ‘Is There a There There? Toward Greater Certainty for Internet Jurisdiction’ (2001) 16 Berkeley Technology Law Journal 1345.

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jurisdiction. A plaintiff needs to establish the fact that the website targeted and

caused the effect(s) in the forum.60

The Courts assess the evidence to determine whether the website has targeted the

forum:

• specifically,

• intentionally, and

• knowingly.

These requirements have been uplifted from the US Supreme Court formulation for

jurisdiction in Calder v. Jones, commonly called the Calder effects test.61 Under the

test, it is appropriate for a Court to assert its jurisdiction where a non-resident

defendant engages in:

(1) intentional actions;

(2) expressly aimed at the forum state;

(3) causing harm, the brunt of which is suffered, and which the defendant

knows is likely to be suffered, in the forum state.

3.5.1 Applying the Calder effects test

The Californian Supreme Court in Pavlovich v DVD Copy Control Association,62

recently applied the test. The defendant, Pavlovich, was a Texas resident who had

posted material to a website that facilitated the decoding of copy protection placed on

DVD movies. In trying to establish jurisdiction the plaintiff, DVD Copy Control

Association, argued that Pavlovich’s actions would harm the whole motion picture

60 Target-based effects doctrine for internet jurisdiction: recent US cases have modified the active/ passive dichotomy to make the exercise of jurisdiction more likely where a website has had an actual effect in a particular location, regardless of whether it is a passive or active website. See MGM Studios Inc. v. Grokster, Ltd., 243 F. Supp 2d 1073 (CD Cal 2003). Katherine Griffis, Respondent, vs. Marianne Luban,.C3-01-296 Supreme Ct of Minnesota 646 N.W.2d 527; 2002 Minn. LEXIS 461. Cem Corporation, v. Personal Chemistry Ab. 192 F. Supp. 2d 438, 2002 U.S. Dist. LEXIS 60; English Sports Betting, Inc. And Dennis J. Atiyeh v. Christopher "Sting" Tostigan, 2002 U.S. Dist. Lexis 501. 61 Calder v. Jones, 465 U.S. 783 in which the United States Supreme Court held that the assertion of jurisdiction was proper if a defendant's conduct caused certain "effects" in the forum state. In Calder, the Court concluded that Californian Courts had jurisdiction over a defendant in Florida because the defendant's conduct was "calculated to cause injury to [the] respondent in California."

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computer and consumer electronics industry based in California. However, there was

no evidence that the defendant’s actions were expressly aimed at California, in fact,

there was no evidence of downloads from Pavlovich’s site by California residents. It

was relevant to consider the defendant’s knowledge of harm to industries in California

but this was not the sole basis for exercising jurisdiction. So the Calder effects test

was not satisfied.

In distinguishing this case, the Court in MGM v. Grokster pointed to evidence of

continuous and substantial contact with Californian residents and knowledge of

alleged infringements in California, so that the Calder test was satisfied.

One of the defendants, Sharman, was incorporated in Vanuatu, and carried out its

business principally in Australia. In January 2002 Sharman acquired the assets of a

Dutch company, Kazaa BV, which included the rights to file sharing software which

was used by millions of people worldwide to share digital data. The defendants

distributed the software that allowed the exchange via a peer-to-peer network. The

plaintiffs allege that the defendants infringed the plaintiffs’ copyright through

"willful, intentional and purposeful" conduct. In particular, the plaintiffs alleged that

the defendants, including Sharman:

(1) actively participated in the unauthorized distribution and reproduction of

copyrighted works; and

(2) provided the means and facilities for, and encouraged users to engage in,

unauthorized reproduction and distribution of copyrighted works.

One of the defendants brought a motion to dismiss the action for lack of jurisdiction.

In considering this issue, the Court used the Calder test and held that the website

operators intentionally and materially contributed to the copyright infringement with

full knowledge that much of the harm from this infringement would be suffered in the

forum.

The Court found that the defendant Sharman had “knowingly and purposefully”

engaged in business in California. There was little question that Sharman had

62 127 Cal. Rptr 2d 329 (Cal. 2002).

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knowingly and purposefully availed itself of the privilege of doing business there.

Sharman did not dispute that jurisdiction is typically appropriate if:

(a) a significant number of the website users are residents of the forum (perhaps

up to 2 million were residents of California);

(b) a foreign defendant engages in significant infringement of a resident's

intellectual property; and

(c) a foreign defendant knows where the harm from that infringement is likely to

be suffered.

The Court accepted that Sharman was well aware that its users were infringing

copyright and should have reasonably been aware that many, if not most, music and

video copyrights were owned by Californian-based companies. This was enough for

the Court to be satisfied that not only was Sharman engaged in an intentional act that

was targeted towards California residents but also had an effect in California. So even

where a defendant does not directly contact the forum state, knowingly and

intentionally targeting a forum is the crux of the target-based effects approach.

3.5.2 Further considerations of the target-based effects test

In SCC Communications Corporation, a Delaware Corporation, Plaintiff, v. J. Clarke

Anderson, the Ninth Circuit succinctly set forth the elements upon which a Court can

base its jurisdiction in Internet cases:

(1) intentional actions;

(2) expressly aimed at the forum state; and

(3) causing harm.

The Court’s view was that if the website aimed at any forum state and caused any

consequences in that state, the jurisdiction is valid. In this case the brunt of the harm

which was suffered, and which the defendant knew was likely to be suffered, occurred

in the forum state.

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In Panavision International, LP v. Toeppen,63 the defendant, Mr Toeppen, allegedly

registered Panavision's trademarks as domain names with the knowledge that the

names belonged to Panavision and with the intent to interfere with Panavision's

business. In this way, it could be construed that Toeppen expressly aimed his conduct

at California. Finally, Toeppen had harmed Panavision, the brunt of which Panavision

had borne in California, which Toeppen knew (or ought to have known) would likely

happen because Panavision's principal place of business and the heart of the theatrical

motion picture and camera equipment business is in California. Thus, the Court held

that under the Calder effects doctrine, the defendant was subject to the judicial

jurisdiction of California.

In Ty, Inc. v. Baby Me, Inc,64 discussed earlier in this chapter, the Court said that even

limited Internet sales of allegedly infringing products to forum state residents was

sufficient to provide a basis for the Court’s jurisdiction, and inconvenience of forum

did not amount to deprivation of due process.

3.5.3 Cause of Action

One of the factors the Court has considered to determine the Calder effects test is the

cause of action itself. The case of Hasbro, Inc. v. Clue Computing, Inc, concerned

advertisements placed on the website of the defendant, Clue Computing. The

plaintiff, Hasbro, alleged in Massachusetts that the defendant had infringed its

trademark on the website. The Court found that the plaintiff's cause of action arose

from the website, which was continuously available to residents of Massachusetts and

caused tortious injury in Massachusetts. In this case jurisdiction was asserted over

only a (passive) website advertisement.

63 Panavision International, LP v. Toeppen, 938 F. Supp. 616 (C.D. Cal 1996). The plaintiff, Panavision, was a Delaware limited partnership with its principal place of business in California. Panavision owned trademarks, including ‘Panavision’ and ‘Panaflex’, which it used in connection with its theatrical motion picture and camera equipment business. The defendant, Dennis Toeppen, who was an resident of Illinois, owned several websites, panavision.com and panaflex.com. When summons was issued against Toeppen, he filed a motion to dismiss for lack of jurisdiction. 64 Ty, Inc. v. Baby Me, Inc., 00 C 6016, United States District Court For The Northern District Of Illinois, Eastern Division, 2001 U.S. Dist. LEXIS 5761.

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Interestingly, in Young, Plaintiff, v. New Haven Advocate65, the Court also concluded

that defamatory information placed on an Internet website should be subjected to

judicial jurisdiction. In that case, the defendants published and circulated articles on

their websites concerning the policy of sending Connecticut prisoners to correctional

facilities in Virginia and the plaintiff's relationship to the Virginia correctional

system. The defendants argued that it would be unfair to subject them to worldwide

jurisdiction simply because they placed information on the Internet.66 The Court

disagreed, it found that the defendants were all involved in some form of the news

media so ‘information’ was the product they offered to the public. When such

information is posted on the Internet, the product is offered to a worldwide audience,

as the use of the Internet defies all geographic boundaries. Thus, a newspaper article

published and circulated on the Internet can essentially be physically "present" in

different locations at one time and subjected to multi-state jurisdiction.67 Moreover,

the defendants were found to be well aware that any defamatory content published

and circulated on their websites could be physically uploaded by a Virginian resident.

The Court said that the defendants activities on the Internet, which were ultimately

accessed in Virginia, were not “random, isolated, or fortuitous”. Rather, the

defendants' acts were intentional and sufficient for the Court to exercise jurisdiction

over them in this case.

3.5.4 Target-based effects doctrine: Not Established

In Katherine Griffis, v. Marianne Luban, the respondent, Katherine Griffis based in

Alabama, brought an action against the appellant, Marianne Luban, in Alabama. The

respondent alleged defamation and invasion of privacy arising out of statements made

by Luban on the Internet, challenging Griffis’ credentials as an Egyptologist. Griffis

65 Young, v. New Haven Advocate, et al., 184 F. Supp. 2d 498, 2001 U.S. Dist. LEXIS 23492, 29 Media L. Rep. 2609. 66 See Roche, 90 F. Supp. 2d 714. 67 “US Judge Rules Kazaa Amenable To Suit In US”: A Californian federal judge ruled that Sharman Networks, the producer of KaZaA software for P2P activity, can be sued in the US. Sharman had headquarters in Australia and was incorporated in Vanuatu. The judge largely based his decision on the fact that millions of downloads of the software had taken place in the US and that many of the infringed copyrights were held by California companies.

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stated that she responded by citing her credentials in an electronic message sent

directly to Luban. When Luban did not appear in the defamation action in the

Alabama District Court, a default judgment for $25,000 in damages was entered and

an injunction prohibiting Luban from making certain statements in the future was

issued. Luban brought a motion to vacate the judgment in Minnesota, challenging the

jurisdiction of the Alabama Court.

The Minnesota Supreme Court applied the Calder effects test to determine whether

the Minnesota District Court could enforce the Alabama judgment. Griffis argued that

Luban directed the defamation at the Alabama forum because she targeted her

messages at Griffis, whom she knew to be an Alabama resident, and knew that the

messages posted on the website could be read anywhere in the world. Griffis further

contended that Luban's defamatory statements had "deleterious effects" on Griffis’

consulting business and her professional reputation in Alabama. The Minnesota

Supreme Court found that the mere fact that Luban knew that Griffis resided in

Alabama was insufficient to conclude that Luban expressly targeted her conduct at the

Alabama forum, as required to satisfy the Calder test.68 The third element of the test,

namely the harm suffered by Griffis, was not considered in detail. So the evidence

was found to be insufficient to extend jurisdiction over the Minnesota resident in

Alabama. Thus, the judgment of the Alabama District Court was not entitled to be

enforced in Minnesota, based on the Calder test.69

In US Information Corporation v. US Infometrics, Inc,70 the Court found that even if

the evidence showed that the plaintiff's harm occurred mainly in the forum, asserting

jurisdiction would still be problematic.

68 Katherine Griffis vs. Marianne Luban, .C3-01-296 Supreme Ct of Minnesota 646 N.W.2d 527; 2002 Minn. LEXIS 461 69Katherine Griffis, vs. Marianne Luban, C3-01-296 Supreme Ct of Minnesota 646 N.W.2d 527; 2002 Minn. LEXIS 461 70 US Information Corporation v. US Infometrics, Inc. 139 F. Supp. 2d 696, ; 2001 U.S. Dist. Lexis 4534, United States District Court For The District Of Maryland. The US Information Corporation, based in Maryland, sold Internet access services, hosting and designing websites, and security services for websites. US Infometrics was based in California and also sold Internet access and services to entities. US Infometrics maintained a website advertising to the public, including links to search engines and price lists for prospective residential and commercial customers, and some information and services for paying customers, including usage records and technical support. A user may submit her/his resume for jobs but may not enter into a contract, purchase goods or services, or transact business on the website. The company never had a place of

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In CEM Corporation, Plaintiff, v. Personal Chemistry Ab,71 CEM alleged that PC

had:

• advertised its products in several nationally distributed publications and on a

website accessible in North Carolina;

• participated in various national trade shows;

• presented at least one seminar on its products in North Carolina; and

• offered and sold a product to a corporation located in North Carolina.

PC contended that these activities were attributable to Personal Chemistry, Inc., a

United States subsidiary of PC, with its principal place of business in Boston and

were not specifically targeted to North Carolina. In particular, the website was not

specifically targeted to North Carolina residents.

The Fourth Circuit Court found that PC's passive advertisement on a website

accessible in North Carolina did not support exercising jurisdiction over PC in North

Carolina. The Court held that advertisements and solicitations not targeted to the

forum, but that subsequently find their way into the forum, are insufficient to support

the Court's exercise of general jurisdiction, even when coupled with ‘de minimus’

sales and meeting activities in the forum.

3.5.5 No target - no special forum connection

In English Sports Betting, Inc. And Dennis J. Atiyeh v. Christopher "Sting" Tostigan,

Www.Playersodds.Com72 the Court held that the allegedly defamatory articles on the

defendant’s websites were targeted at the international off-shore gambling

business, customers, licenses, or certification in Maryland. Moreover, the company had never had an inquiry about its services from anyone in Maryland, and had never solicited customers in Maryland. 71 Cem Corporation v. Personal Chemistry Ab, 192 F. Supp. 2d 438, 2002 U.S. Dist. LEXIS 60. 72 English Sports Betting, Inc. And Dennis J. Atiyeh v. Christopher "Sting" Tostigan, 2002 U.S. Dist. Lexis 5012, One of the plaintiffs, Atiyeh (a resident of Pennsylvania), was the owner of English Sports Betting, Inc. That corporation was organized under the laws of Jamaica and had its principal place of business in Montego Bay. The plaintiffs owned and operated a website for users to place off-shore sports bets on-line. Christopher Tostigan, under the pseudonym "Sting," wrote a column captioned "Sting's Offshore Insider" which appeared on the ‘playersodds’ website, which also provided sports and gambling information. He also occasionally wrote columns for the website. The plaintiffs alleged that Tostigan (a resident of New York), authored three defamatory articles and posted them on his websites. The defendant’s www.playersodds.com corporation was "believed" to be located in Toronto.

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community.73 The recipient audience was not linked by geography but by a common

interest in off-shore sports gambling. The brunt of any harm suffered by the plaintiff

corporation would be in Jamaica, its place of incorporation. Even if it could be shown

that harm would be suffered by the individual plaintiff in the forum of Pennsylvania,

there was no evidence that the defendant, Tostigan expressly aimed the tortious

conduct at the forum. The Court declined to exercise its jurisdiction and held that:

"There is an important distinction between intentional activity which foreseeably

causes injury in the forum and intentional acts specifically targeted at the forum”.

A similar finding was made in William Gordon Bailey, Plaintiff, v. Turbine Design,

Inc. The fact that the website contained defamatory information and that such

information was accessible worldwide did not mean that the defendant had the intent

of targeting the particular forum with such information.

3.5.6 Critical Assessment of the US Courts’ approach

In considering the issue of Internet jurisdiction, US Courts have been willing to assert

jurisdiction against a foreign-based website using the Sliding Scale doctrine in the

past. It is not an easy task to distinguish what constitutes and ‘active’ or ‘passive’

website, since there has been little consistency in the judgments. Websites of a

similar nature have been classified as ‘active’ by some Courts and ‘passive’ by others.

So if a website was classified as ‘active’ and clearly involved in commercial

transactions, the jurisdiction would be exercised. Judges were more reluctant to do

so, however, if the website was classified as ‘passive’ or ‘merely interactive’.

In more recent cases, the focus has shifted from the active/passive classification to the

target-based effects doctrine. Under this approach, jurisdiction will only exist if a

73 See Remick, 238 F.3d at 259 (defamatory material was not just published in Pennsylvania but throughout the national boxing community. There was no evidence of a unique relationship between that community and Pennsylvania. Thus, the Court concluded that Pennsylvania was not the focal point of the tortuous conduct and so jurisdiction could not asserted.)

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website has caused effects (or harm) in the forum by targeting the forum specifically,

intentionally, and knowingly.

It is commendable that the Courts have tried various approaches to tackle the difficult

issue of Internet jurisdiction, including the target-based effects doctrine (based on the

Calder test). Nevertheless, this doctrine faces some serious challenges, as revealed by

the inconsistent US case authorities, which appear to make some arbitrary

distinctions. For instance, Courts are not clear what constitutes an express target. In

relation to this targeting element of the test, the design of the website itself becomes

paramount. In order to introduce some consistency for this key requirement, it is

proposed that the following additional factors be considered when determining

whether a particular forum is the express target of a foreign-based website. These

factors may constitute evidence that a particular forum is being made a target by a

website, if it:

(a) mentions or appears in a local language and discusses commercial

transactions in that local language;

(b) mentions that any transactions will be in a particular currency and the

transactions occur in the local currency; and

(c) focuses on particular local needs and supplies those needs.

If a website has such an obvious focus then it can quite easily be considered as

targeting a particular forum. As the cases highlight, that is not always the case.

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3.6 Conclusion

An examination of some of the cases on Internet jurisdiction in Australia and the

United States reveals that the Courts in both countries have failed to achieve a

uniform and clear approach to the matter. Instead, the judgments which result in

Courts asserting and declining jurisdiction are conflicting and unworkable. Courts are

in dispute as to what type of additional activity, other than the website, is necessary in

order for a foreign-based defendant to be subject to a forum's laws. The following

table clearly illustrates the situation.

1 Extraterritorial Jurisdiction is futile – Macquarie Bank Limited & Anor v. Berg

Extraterritorial Jurisdiction is not futile – Gutnick v. Dow Jones

2. Defendant does have to comply with a French Court decision – French Court in Yahoo case

Defendant does not have to comply with a French Court decision – US Court on Yahoo case

3. Jurisdiction can be exercised if the website is active - Zippo case

Jurisdiction may be not be exercised even if a website is active – Digital Control Inc case

4. Website information - 24 hours access sufficient for jurisdiction – Stanley Young Case

Website information is passive – insufficient for jurisdiction - Oliver "Buck" Revell case

5. Minimal sales over the website – insufficient for jurisdiction – CEM Corporation Case

Single sale over the website – sufficient for the jurisdiction - Baby Me case

6. Harm suffered – sufficient for jurisdiction - Hasbro, Inc Case

Harm suffered – insufficient for jurisdiction - US Information Corporation Case

A suitable adjudicatory method in Internet jurisdiction cases is needed to address this

global problem. At present, there is no effective and appropriate global legal regime

so the Courts need to initiate a new judicial approach. Courts could adapt existing

legal doctrines to the changing global order; from a traditional territorial approach to a

trans-national approach. The Courts need to abandon traditional notions of

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jurisdiction and adapt to Internet based activities. It is proposed that a concept and

practice of trans-national judicial dialogue could provide this new set of rules, which

are needed to address the new challenges we are facing. What is trans-national

judicial dialogue? How can it be applied to address the legal issues concerning

Internet jurisdiction? These questions will be dealt with in the next chapter.

CHAPTER IV

Future Solutions: Models for Internet Jurisdiction

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This chapter discusses the following points:

4.1 Need for national/trans-national cooperation

4.2 International Cooperation theory: The OECD Guidelines

4.2.1 Inadequacies in the OECD Guidelines

4.3 Critical importance of the American Bar Association’s Report on

Harmonisation theory

4.3.1 The theory of harmonisation

A. A new paradigm needed

B. The global benefits of reciprocal enforcement of judgements should be

explored

C. the Passive web is free from jurisdiction

D. Hybrid method

E. Summary of the ABA report

F. Perplexing questions out of the ABA report

4.4 Proposed International Hague Convention

4.4.1 Background of the Hague Convention

4.4.2 Defendant’s forum

4.4.3. Choice of court

4.4.4 Contracts

4.4. 5 Multiple defendants

4.4.6 Forum non conveniens

4.4.7 Shortcomings in the Hague proposal

A. Proposed Hague Convention- too slow

B. Not inclusive

C. Too controversial

D. Divisive: limited only B2B contracts

4.5 Formal method of getting law on Internet jurisdiction: Remote

4.6 Nationalistic approach from courts will have adverse affect in Internet cases

4.6.1 Jurisdiction exercised by the French court

4.6.2 American Court decision negates French Court decision

4.6.3 Factual dilemmas

A. Involvement of the foreign website

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B. Issue relating to the technical difficulty

4.6.4 Conclusions from two court decisions

A. One country’s court can easily negate another country’s decision

B. The very essence of the judiciary undermined

C. the Internet goes unregulated by the law

4.7 Courts should facilitate the development not impede it

4.8 Need for a new Role from the National Courts: Agents of Trans-national Law

4.9 Trans-national business create trans-national norms

4.10 What is the trans-national legal process?

4.11 How does the trans-national legal process contribute to create substantive

international law?

4.12 A trans-national role is required of national courts

4.13 Need for Trans-national judicial Dialogue (TJD)

4.14 Liberalism: Source from trans-national judicial dialogue

4.15 How can TJD facilitate the development?

4.16 Trans-judicial contact

4.17 Common judicial enterprise

4.18 Conclusion

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Which is the most appropriate court to hear Internet disputes? The current approaches

adopted by the various courts to Internet jurisdiction are unworkable on a global scale

and there is no international law to govern such issues. We need a global solution to a

global problem so as to avoid the undesirable consequence of “Internet anarchy”. Thus,

an alternative judicial approach is proposed in this chapter, namely “trans-national

judicial dialogue”. Trans-national judicial dialogue (“TJD”) should reduce the conflicts

amongst courts and provide guidelines for the worldwide Internet community by giving

life to trans-national court decisions. TJD should also enhance the consensual approach

towards the global problem and provide a more stable and predictable paradigm to the

problem of jurisdiction. If TJD were applied in Internet jurisdiction cases, parties to

disputes should be curbed from forum shopping, hoping to increase the likelihood of a

favourable decision, courts will exercise jurisdiction even more readily applying foreign

laws and rules and more importantly, one court will not negate the decision of another

courts just because it is foreign. TJD can thus play a role in the creation, recognition, and

enforcement of global norms.

This chapter will:

• Examine the OECD Guidelines on international cooperation theory;

• Analyze the harmonization theory by American Bar Association (ABA) report

on Internet jurisdiction;

• Examine the recent Hague proposal on jurisdiction; and;

• Argue for a new paradigm on Internet jurisdiction, that is trans- national judicial

dialogue.

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4.1 Need for national/trans-national cooperation

There is clearly a need for a new approach for courts of different countries to face the

difficult jurisdictional dilemma presented by the Internet. In order to bridge the void that

exists currently, there has to be national/trans-national cooperation amongst law courts

and enforcement authorities. One good place to start could be with the judges who face

the dilemma directly when adjudicating disputes. There will be great rewards for any

who are willing to invest time and effort in devising a notion of the Internet as a trans-

national society and exploring its constitutional structure and governing principles.

Judges and other adjudicators can begin the process of defining and devising of trans-

national law through TJD since they are at the forefront of the jurisdiction dilemma1. In

my view, a paradigm devised through trans- national judicial dialogue could lead to a

new school of thought suitable to regulate this era of information technology. This new

school of thought might make it easier for the law of one country in relation to Internet

activities to be applied in another country and the court decisions of one country might be

more easily recognized and enforced in another country2.

1 See Fitzgerald B, ‘Dow Jones & Company Inc v Gutnick: Negotiating “American Hegemony” in the Trans-national World of Cyberspace’ (2003) 27 Melbourne University Law Review 590; Fitzgerald B, Fitzgerald A, G Middleton, Jurisdiction and Ecommerce,(Forthcoming) (2003) Law Book Company, Sydney. 2 Applying foreign laws could be a resisted at first. Such resistance may be overcome, however, if the issue of how Australian courts could apply the laws of say, Canada and USA, is adequately settled by TJD. To assist such application of foreign laws, the following attributes of foreign states should be assessed as to whether there is: legal equality for all legal citizens and constitutional guarantees of civil and political rights, such as freedom of religion and freedom of the press;

• a representative legislature based on the consent of the people and a separation of powers; • legal protection of private property; • a free market economy; and • an independent and just judiciary.

If a foreign state has most or all of these basic attributes, it is suggested that their laws should be considered to be applied in other countries. See Burley A, ‘Law Among Liberal States: Liberal Internationalism and the Act of State Doctrine’ (1992) 92 Columbia Law Review 1915. See also Fitzgerald B, ‘An Emerging Liberal Theory on International Law and the Non-Enforcement of Foreign Public Laws’ Australian Year Book of International Law 311, Anne-Marie Slaughter, ‘International Law in a World of Liberal States’ (1995) 6 Journal of International Law 1.

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4.2 International Cooperation theory: The OECD Guidelines

The imperative for international cooperation3 to investigate and adjudicate online related

illegal activities has been documented in the recent OECD guidelines. The OECD

Guidelines for Protecting Consumers from Fraudulent and Deceptive Commercial

Practices Across Borders4 clearly highlight that international cooperation is crucial in

order to be able to exert legal authority over cyberspace. In the absence of international

cooperation, the arm(s) of the law cannot effectively regulate cyberspace. As principles

of international cooperation, the OECD guidelines have this to say:

Member countries should improve their ability to co-operate in combating cross-border

fraudulent and deceptive commercial practices recognising that co-operation on

particular investigations or cases under these Guidelines remains within the discretion of

the consumer protection enforcement agency being asked to co-operate. This agency may

decline to co-operate on particular investigations or proceedings, or limit or condition

such co-operation, on the ground that it considers compliance with a request for co-

operation to be inconsistent with its laws, interests or priorities, or resource constraints,

3 See Clark E and Puig GV, ‘When Global Highways Intersect Local Laws: Defamation via the Internet- Dow Jones & Company Inc v Gutnick’ (2001) 12 Journal of Law and Information Science at 281. See also Australian Competition and Consumer Commission v Chen [2002] FCA 1248. 4 See OECD Guidelines for Protecting Consumers from Fraudulent and Deceptive Commercial Practices Across Borders. They were adopted on 11 June 2003 http://www.oecd.org/EN/document/0,,EN-document-29-nodirectorate-no-24-41808-29,00.html (23/6/03). “International cooperation between regulators is necessary for the effective regulation of cross border activities. The inability to provide regulatory assistance can seriously compromise efforts towards effective securities regulation. Domestic laws need to remove impediments to international cooperation”. The International Organisation of Security Commission http://www.iosco.org/pubdocs/pdf/IOSCOPD154.pdf (29/10/03).

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or based on the absence of a mutual interest in the investigation or proceeding in

question5.

There are broad principles for international cooperation and specific provisions brought

out covering notification6, information sharing7, and assistance with investigations8. They

also cover issues regarding the authority of consumer protection enforcement agencies,

invite private-sector co-operation and set the stage for future work on the issue of

consumer redress. According to the Guidelines, for instance, consumer protection

enforcement agencies should co-ordinate their investigations and enforcement activity to

avoid interference with the investigations and enforcement activity taking place in other

OECD countries. Consumer protection enforcement agencies should make every effort to

resolve disagreements9 that may arise.

4.2.1 Inadequacies in the OECD Guidelines

It is to be greatly appreciated that the OECD has brought a new theoretical approach to

dealing with online disputes. The need to have a reciprocal exchange in investigations,

5 See OECD Guidelines for Protecting Consumers from Fraudulent and Deceptive Commercial Practices Across Borders. They were adopted on 11 June 2003 http://www.oecd.org/EN/document/0,,EN-document-29-nodirectorate-no-24-41808-29,00.html (23/6/03). 6 See OECD Guidelines for Protecting Consumers from Fraudulent and Deceptive Commercial Practices Across Borders. They were adopted on 11 June 2003 http://www.oecd.org/EN/document/0,,EN-document-29-nodirectorate-no-24-41808-29,00.html (23/6/03). 7 See OECD Guidelines for Protecting Consumers from Fraudulent and Deceptive Commercial Practices Across Borders. They were adopted on 11 June 2003 http://www.oecd.org/EN/document/0,,EN-document-29-nodirectorate-no-24-41808-29,00.html (23/6/03). 8 See OECD Guidelines for Protecting Consumers from Fraudulent and Deceptive Commercial Practices Across Borders. They were adopted on 11 June 2003 http://www.oecd.org/EN/document/0,,EN-document-29-nodirectorate-no-24-41808-29,00.html (23/6/03). 9 See OECD Guidelines for Protecting Consumers from Fraudulent and Deceptive Commercial Practices Across Borders. They were adopted on 11 June 2003 http://www.oecd.org/EN/document/0,,EN-document-29-nodirectorate-no-24-41808-29,00.html (23/6/03).

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decisions and enforcement is explicitly emphasised. This means a court from one OECD

country will have to recognise and enforce another member country’s laws and

principles. The most glaring deficiency of the guidelines, however, is that they urge only

the OECD member countries to cooperate. If we limit the principle of international

cooperation only to OCED member countries, the principle will be made a mockery of

because persons or corporations involved in illegal Internet activities will have many

other non-OECD countries to take refuge in from which they can continue harmful and

deceptive activities online.

Another theory on Internet jurisdiction has been propounded by the American Bar

Association. In essence, it recommends that the harmonisation of laws of different

countries is the best way to address the conflict of laws and rules on forum selection.

4.3 Critical Importance of the American Bar Association’s Report on

Harmonisation theory

The ABA10 report has become significant in considering the jurisdiction question in the

electronic age because it was one of the first reports prepared on the issue. One of the

basic questions the ABA report responded to was whether Internet based activities should

be subjected to any jurisdiction at all. The report concluded that every Internet user

should be subjected to personal and prescriptive jurisdiction at least somewhere11. More

than one jurisdiction was also raised as a possibility. It said that in reasonable

circumstances, more than one state12 may be able to assert both personal and prescriptive

jurisdiction in electronic commerce transactions as they have historically arisen in

physical transactions. This section will discuss:

• The Theory of harmonisation;

10 See the Report of the American Bar Association (“ABA”) Jurisdiction in Cyberspace Project Empanelled in 1998 under the title, “Transnational Issues in Cyberspace: A Project on the Law Relating to jurisdiction.” 11 See page 18 of the Report.

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• The need for a new paradigm on jurisdiction;

• The critical importance of the ABA report.

4.3.1 The Theory of Harmonisation

The main cause of conflict in relation to the forum selection is the discrepancy between

interconnected world of the Internet and territorially divided blocks of many nation

states. Those nation states have a plethora of different laws in different areas. The

harmonisation of laws on jurisdiction among nation states was one of the primary

suggestions the ABA, which was put forth in the context of defining and determining the

power of courts to adjudicate matters involving cyberspace. In relation to the

harmonisation of laws, the ABA proposal states that

Wherever possible, the convergence and harmonization of the laws of the countries of the

world, or at least those that desire to participate and reap the benefits of a truly global,

ecommerce fuelled economy, should be expedited. Finally, the creation and adoption of

reliable, efficient and transparent alternative dispute resolution bodies to adjudicate

ecommerce based claims and a proactive ecommerce based commercial standards

organization will greatly reduce the reliance on traditional regulatory and adjudicatory

bodies.

It would be certainly a desired outcome if all countries could harmonise their differences

and have laws and rules so that there is no longer any conflict of laws. Realistically, this

is an impossibility while humans want to preserve sovereignty and power. This gives rise

to great uncertainty in the ABA’s proposed theory as to how to harmonise laws given the

vast array of differences among countries. Also, who would initiate or coordinate such a

process? The United Nations (or any of its bodies) does not offer much hope since it

12 For purposes of the Report, a “state” is a nation-state (“country”), a confederation of nation-states or a separate governmental entity within a nation-state that constitutes a forum which may apply or enforce laws and/or adjudicate disputes.

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cannot even fulfil its current mandate. Although, the harmonisation theory is utopian, the

ABA makes a number of valid suggestions concerning Internet jurisdiction. Nevertheless,

of the many points made by the report, there are some fundamental concerns regarding

how the recommendations could be applied. Some of the main points embodied in the

report, which could become the principal guidelines for Internet jurisdiction, will now be

discussed below.

A. A new paradigm on jurisdiction needed

The ABA argues that the traditional way of adjudication cannot be applied in Internet

disputes:

Cyberspace may need new forms of dispute resolution—to reduce transaction costs for

small value disputes, and to erect structures that work well across nation boundaries.

Voluntary industry councils and cyber-tribunals should be encouraged by governmental

regimes to continue developing private sector mechanisms to resolve electronic

commerce disputes. Government-sponsored online cross-border dispute resolution

systems may also be useful to complement these private sector approaches. The disputes

resolution machinery established under ICANN rules to resolve trademark/domain name

disputes is a promising example13.

B. The global benefits of reciprocal enforcement of judgments should be explored

Another recommendation is to consider a multilateral approach through a body called the

Global Online Standards Commission14 (“GOSC”). This body could be empanelled to

study jurisdiction issues and develop uniform principles and global protocol standards by

a specific date, working in conjunction with other international bodies considering

13 See the page 24 the report. 14 See the page 22 of the report.

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similar issues.15 In considering the conclusions listed above as well as others, the GOSC

should take into account the following:

In the interests of encouraging the growth of electronic commerce on a fair, universal

and efficient basis, governmental entities should be cautious about imposing

jurisdictional oversight or protections that can have negative extra-territorial

implications in Cyberspace.

Ideally, the multilateral approach would result in a multilateral treaty on Internet

jurisdiction. In my view, this recommendation will suffer the same fate that the Hague

Convention is suffering.

C. The Passive web is free from jurisdiction

Passive websites have been spared by the ABA report. It said that personal or

prescriptive jurisdiction should not be asserted based solely on the accessibility in the

state of a passive website16 that does not target a state. Both personal and prescriptive

jurisdiction should be assertable over a website content provider (“sponsor”) in a state,

assuming there is no enforceable contractual choice of law and forum, if:

15 For example, the Global Business Dialogue, the Hague Conference on Private International Law, the Internet Law and Policy Forum, the International Chamber of Commerce, the United Nations Commission on International Trade Laws, the World Intellectual Property Organization, the World Trade Organization and others are studying jurisdiction issues in Cyberspace. For example, the Committee of Experts on Crime in Cyberspace of the Council of Europe released a draft treaty that would require all participating nations to adopt new laws requiring government access to encrypted information, expanding copyright and criminalizing possession of common security tools http://conventions.coe.int/treaty/en/projects/cybercrime.htm. The Global Internet Project has issued recommendations for businesses and organizations to follow and measures for governments to consider regarding cyber crimes http://www.gip.org/pr20000J16a.htm. 16 See page 19 of the Report.

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the sponsor is a habitual resident of that state or has its principal place of business in

that state; the sponsor targets that state17 and the claim arises out of the content of the

site; or a dispute arises out of a transaction generated through a web site or service that

does not target any specific state, but is interactive and can be fairly considered

knowingly to engage in business transactions there.

This is a very ambiguous and impractical recommendation because all websites are

involved in some kind of activity, which makes it hard to classify which are ”passive”

and which are not.

D. Hybrid method

One way of eliminating the uncertainty of the probable forum is by revealing the location

of the web and customer and to agree to select a consensus forum in the case of a dispute

arising. The ABA report mentions that good faith efforts to prevent access by users to a

site or service through the use of disclosures, disclaimers, software and other

technological blocking or screening mechanisms should insulate the sponsor from

assertions of jurisdiction18.

Users (purchasers) and sponsors (sellers) should be encouraged to identify, with adequate

prominence and specificity, the state in which they habitually reside. Sponsors should be

encouraged to indicate the jurisdictional target(s) of their sites and services, either by:

(a) defining the express content of the site or service, or listing destinations targeted or

not targeted; and

(b) By deciding whether or not to engage in transactions with those who access the site

or service.

17The report made the point that what constitutes targeting needs to be agreed upon globally. Generically, targeting should cover technological practices that sponsors use to purposefully avail themselves of the commercial benefits of the targeted states.

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E. Summary of the ABA report

• Internet users should be subject to jurisdiction somewhere and harmonisation of

laws is the key to resolving jurisdictional dilemmas;

• An Internet user will only be subject to a particular jurisdiction if the website had

targeted that forum;

• The website should mention clearly and categorically on the web page the choice

and selection of jurisdiction so that the contractual party understands; and

A new method of dispute resolution and the global benefits of reciprocal enforcement of

judgments should be explored.

F. Perplexing Questions out of the ABA Report:

• One of the primary recommendations the report has made is the need for

harmonisation of the jurisdictional rules across countries. How can this approach

be feasible when most, if not all, countries in the world need to be involved in

changing their laws to be consistent with each other? The recommendation

sounds rather utopian.

• The report recommends not exercising jurisdiction over passive websites, but it

does not define what constitutes a “passive” website. As noted in the previous

chapter, the definition of “passive” website is currently inconsistent between

various courts. By not taking any firm view on the idea of passivity, the report has

left room for ambiguity;

• The report advocates a “target theory”, stating that a website should be subject to

jurisdiction only if it has made a specific target of any forums. Yet, the report

provides very few details about what the target theory involves.

18 See page 19 of the Report.

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In addition to the OECD Guidelines and the ABA recommendations, there is another

international attempt to negotiate a treaty on Internet jurisdiction - The Hague

Convention which aims to end the uncertainty of forum choice and selection of a forum

where the parties are multinationals or trans-nationals. The defendant’s forum is the

central thesis of the Convention.

4.4 Proposed International Hague Convention

This section will examine the following points:

• What the Hague proposal is about;

• What it has done so far;

• Shortcomings in the Hague Proposal.

4.4.1 Background of the Hague Convention

There was general agreement reached on 19 October 1996 of the need for an international

treaty on jurisdiction, recognition and enforcement of foreign judgements. The States

represented at the Eighteenth Session of the Hague Conference on Private International

Law decided:

"… To include in the Agenda of the Nineteenth Session the question of

jurisdiction, and recognition and enforcement of foreign judgments in civil

and commercial matters".19

A working group of the Hague Conference unanimously agreed "on the desirability of

attempting to negotiate through the Hague Conference a new general convention on

19 See the Final Act of the Eighteenth Session, Part B, No 1. In accordance with the Decision of the Eighteenth Session of the Conference, the Permanent Bureau established a Special Commission which has held many meetings so far: 17-27 June 1997, 3-13 March 1998, 10-20 November 1998, 7-18 June 1999 and 25-30 October 1999. Part one of the Nineteenth Diplomatic Session, which was held from 6-22 June 2001. Meetings were held in October 22-25, 2002, 25-28 March 2003 too.

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jurisdiction and recognition and enforcement of judgments".20 One of the key factors

which has recently attracted so many new Member States to the Organisation is the need

for a global framework for jurisdiction and the recognition and enforcement of

judgments. This has arisen because of the ongoing globalisation of trade and commerce

and the exponential growth of the Internet and e-commerce.21

The process of negotiation is still ongoing amid many contentions and it seems the

probability of reaching a successful conclusion even among member countries is very

remote22. During the discussion, however, it became clearer why some participants felt

the need for at least some rule of this kind: there was general agreement on the first part

of paragraph 3 relating to subject matter jurisdiction. But it appeared that there are great

differences in understanding certain concepts, including that of subject matter

jurisdiction. An example given was the allocation of jurisdiction to different courts

20 See Conclusions of the Working Group meeting on enforcement of judgments, drawn up by the Permanent Bureau, Preliminary Document No 19 of November 1992 for the attention of the Seventeenth Session, in Proceedings of the Seventeenth Session, Tome I - Miscellaneous matters, pp. 257-263. It should be remembered that the decision to include the topic in the agenda with a view to negotiate a Convention was only taken – unanimously – by the Eighteenth Session, in October 1996, see Final Act D1, Proceedings of the Eighteenth Session, Tome I – Miscellaneous matters. See also Preliminary Document No 13 - Report of the experts meeting on the intellectual property aspects of the future Convention on jurisdiction and foreign judgments in civil and commercial matters, Geneva, 1 February 2001, drawn up by the Permanent Bureau, Preliminary Document No 12 - "Electronic Commerce and International Jurisdiction", Ottawa, 28 February-1 March 2000; Summary of discussions prepared by Catherine Kessedjian with the co-operation of the private international law team of the Ministry of Justice of Canada, Preliminary Document No 11 - Report of the Special Commission, drawn up by Peter Nygh and Fausto Pocar; Preliminary Document No 10 - Note on provisional and protective measures in private international law and comparative law, prepared by Catherine Kessedjian; Preliminary Document No 9 - Synthesis of the work of the Special Commission of March 1998 on international jurisdiction and the effects of foreign judgments in civil and commercial matters, drawn up by Catherine Kessedjian; Preliminary Document No 8 - Synthesis of the work of the Special Commission of June 1997 on international jurisdiction and the effects of foreign judgments in civil and commercial matters, drawn up by Catherine Kessedjian,; Preliminary Document No 7 - International jurisdiction and foreign judgments in civil and commercial matters, Report drawn up by Catherine Kessedjian http://www.hcch.net/e/workprog/jdgm.html (19/8/03).

21 It is worth mentioning that much of the ongoing discussion has revolved around the difficulties relating to activity based jurisdiction, intellectual property, consumer rights and employee rights, amongst others. 22 See Brand RA, ‘Due Process, Jurisdiction And A Hague Judgments Convention’ (1999) 60 University of Pittsburgh Law Review 661; Herbert Bernstein, ‘International Contracts In European Courts: Jurisdiction Under Article 5 (1) Of The Brussels Convention’ (1996) 11 The Tulane European and Civil Law Forum 31; Joachim Zekoll ‘Could A Treaty Trump Supreme Court Jurisdictional Doctrine?": The Role And Status Of American Law In The Hague Judgments Convention Project’ (1998) 61 Albany Law Review 1283.

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within a State according to the value of the case. While this would be considered as

subject matter jurisdiction in some States, it is not in others. Venue was another example

where doubts arose.

Some of the key provisions on the jurisdiction so far they have brought out are as

follows:

4.4.2 Defendant's forum

A defendant can be sued in the forum where the defendant is habitually resident. Article

3 of the convention says that23:

1. Subject to the provisions of the Convention, a defendant may be sued in the courts of

the State where that defendant is habitually resident.

2. for the purposes of the Convention, an entity or person other than a natural person

shall be considered to be habitually resident in the State -

a) Where it has its statutory seat,

b) Under whose law it was incorporated or formed,

c) Where it has its central administration, or

d) Where it has its principal place of business.

23 See Preliminary Document No 9 - Synthesis of the work of the Special Commission of March 1998.

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4.4.3 Choice of court

With regard to the choice of the court, the agreement (if any) between the Internet users

about which forum they have chosen will prevail. Article 4 of the convention says that:

1. If the parties have agreed that a court or courts of a Contracting State shall have

jurisdiction to settle any dispute which has arisen or may arise in connection with a

particular legal relationship, that court or those courts shall have jurisdiction, and that

jurisdiction shall be exclusive unless the parties have agreed otherwise. Where an

agreement having exclusive effect designates a court or courts of a non-Contracting

State, courts in Contracting States shall decline jurisdiction or suspend proceedings

unless the court or courts chosen have themselves declined jurisdiction.

2. an agreement within the meaning of paragraph 1 shall be valid as to form, if it was

entered into or confirmed -

a) In writing;

b) By any other means of communication which renders information accessible so as to

be usable for subsequent reference;

c) In accordance with a usage which is regularly observed by the parties;

d) in accordance with a usage of which the parties were or ought to have been aware and

which is regularly observed by parties to contracts of the same nature in the particular

trade or commerce concerned.

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4.4.4 Contracts

According to Article 6 of the Convention concerning the contracting parties, a plaintiff

may bring an action in contract in the courts of a State in -

a) Matters relating to the supply of goods, the goods were supplied in whole or in part;

b) Matters relating to the provision of services, the services were provided in whole or in

part;

c) Matters relating both to the supply of goods and the provision of services,

performance of the principal obligation took place in whole or in part.

4.4.5 Multiple defendants

If there are multiple defendants and the issue of habitual residency cannot be

straightforwardly resolved according to Article 3, Article 14 has the provisions for

multiple defendants. A plaintiff bringing an action against a defendant in a court of the

State in which that defendant is habitually resident may also proceed in that court against

other defendants not habitually resident in that State if -

a) the claims against the defendant habitually resident in that State and the other

defendants are so closely connected that they should be adjudicated together to avoid a

serious risk of inconsistent judgments, and

b) For each defendant not habitually resident in that State, there is a substantial

connection between that State and the dispute involving that defendant.

2. Paragraph 1 shall not apply to a co-defendant invoking an exclusive choice of court

clause agreed with the plaintiff and conforming to Article 4.

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4.4.6 Forum non conveniens

The doctrine of forum non conveniens might also apply within a State in this respect.

While there seemed to be agreement so far that, in the presence of an exclusive choice of

court clause, the chosen court should be no longer allowed to apply this doctrine in order

to decline jurisdiction in favour of a foreign court, the question of whether it should be

permitted to decline jurisdiction in favour of another court in the same Contracting State

has never been canvassed. To admit such discretion may at first sight seem to be a

contradiction to the freedom of the parties, as stated in Article 2(1) (a) to choose “a

specific court”. On the other hand, in the past negotiations had always been based on the

common understanding that the Convention would only deal with the international, and

not with the internal allocation of jurisdiction.24

It was mentioned in the proposed provision that in some States there are rules for a more

efficient administration of justice within a State which permit or require the transfer of

cases from one court to another, even where the court chosen and seized may have

subject matter jurisdiction, and all other requirements (venue etc) are fulfilled.25

During the discussions on Article 4(3), one participant asked what would happen if the

parties had chosen “the courts of State X”, and State X did not have a rule on venue for

such cases. The answer given by the group was that the plaintiff would exercise a choice

by filing suit with a specific court and whether that particular court could hear the case

would then be decided by the internal law of the State. If suit was filed in any other State,

it would be sufficient for the court seized to note that the parties had agreed on the courts

of a different State, even if the individual court was not yet identified at that time. The

court seized but not chosen would have to decline jurisdiction.

24 As an example, it may be mentioned that there had been attempts to refer, in Article 10 of the 1999 Text, to the place where the injury arose, in order to establish tort jurisdiction, and not only to the State where the injury arose. These attempts failed, however.

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Though the Hague Convention has some good provisions on Internet jurisdiction, its

shortcomings are causing problems and it does not appear that the Convention will be

succeeding in the near future. Some of the apparent shortcomings in the Hague Proposal

are discussed below.

4.4.7 Shortcomings in the Hague Proposal

A. Proposed Hague Convention- Too slow

The Hague Convention proposal raises serious concerns about the procedural aspects of

the progress made. This shortcoming is not concerned with the adequacy of the proposed

provisions but rather with the agonisingly slow progress and compromises that have been

made so far. There is very little indication that a workable treaty will materialize in the

near future. Such slow progress and compromise cannot offer a quick and effective

solution to the dilemma of Internet jurisdiction. There are also substantive reasons why

The Hague proposal is at present not a solution to the jurisdictional problem.

B. Not Inclusive

If there is to be a workable International treaty to govern Internet jurisdiction, there needs

to be as many countries as possible as signatories of the treaty because of the

pervasiveness of the Internet. A treaty would be dysfunctional if it is negotiated and

signed by just a few member countries. The Hague Convention currently has 62 member

States and as such it cannot be called an inclusive treaty for Internet jurisdiction. It is a

start but will not work since some countries who do not become signatories of a treaty

can easily make the treaty ineffective and thus destroy its very essence.

25 This is true in particular for federal States having a common law system. Transfers between state and federal courts, among federal courts, or among courts of different states, provinces or territories are possible. The Permanent Bureau is preparing a research paper on this topic.

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C. Too controversial

Criticism of the Hague proposal has been raised in many different quarters,26 this make

the chances of negotiating in the near future much more difficult27. Negotiators now say

that the aims of the Hague proposal may have been too ambitious28. Even after many

rounds of meetings nothing seems to be even close to the negotiation phases. It is obvious

that the proposal is going through a difficult and a critical phase. It would seem that,

among member countries, there were at least six major areas, where a there was a lack of

consensus creating obstacles to progress29:

26 Prospects for Web Treaty Growing Dim: After many drafting session, critics have voiced their opposition to the Hague Convention on Jurisdiction and Foreign Judgements, claiming that it threatens free speech and could force ISPs to police global content. It is also said that the proposal is too ambitious. See generally the official website for the Convention. 27 One of the serious differences in the Convention is the European and the US approaches have been critically different. EU – CONSUMERS CAN SUE SELLERS IN THEIR OWN COUNTRY: The Council Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (the Brussels Regulation) entered into force on March 1. The Regulation replaced the Brussels Convention and sets out the legal framework for jurisdiction in disputes between litigants. In particular it gives the consumer the right to take legal action in his home country in case of cross-border transactions, including e-commerce. But the US does not agree with this approach which puts the two strong parties in the conventions in contrasting theoretical approach and causes persistence differences. 28 James Love argues that in a nutshell, “it will strangle the Internet with a suffocating blanket of overlapping jurisdictional claims, expose every web page publisher to liabilities for libel, defamation and other speech offenses from virtually any country, effectively strip Internet Service Providers of protections from litigation over the content they carry, give business who sell or distribute goods and services the right to dictate via contracts the countries where disputes will be resolved and rights defended, and narrow the grounds under which countries can protect individual consumer rights. This proposed Hague treaty stands the tradition globalization approach on its head. It does not impose global rules on substantive laws -- countries are free to enact very different national laws on commercial matters. The only treaty obligation is that member countries follows rules on jurisdiction and agree to enforce foreign judgments. Rather than a WTO or WIPO type approach of harmonization of substantive policies, every country can march to its own drummer. The treaty is about enforcing everyone's laws, regardless of their content, and enforcing private contracts on which national courts will resolve disputes. It is a treaty framework that made some sense in a world of trade in pre-internet goods and services that lend themselves to easy interpretation of jurisdiction based upon physical activity. It is a treaty that makes little sense when applied to information published on the Internet, and more generally for intellectual property claims, where one should not leap into cross border enforcement without thinking”. James Love, ‘As the Hague Conference Diplomatic Conference ends, the Internet and Public Domain are at Risk’ on http://www.cptech.org/ecom/jurisdiction/badly.html (15/11/2002). 29 Internet and e-commerce It has become apparent from both the Geneva roundtable and the Ottawa meetings that the additional difficulties which e-commerce poses, as far as determining globally acceptable grounds of jurisdiction is concerned, relate mostly to jurisdiction in disputes for which the parties have not taken the precaution of

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A the Internet and e-commerce;

B activity based jurisdiction;

C consumer contracts (in particular Article 7) and employment contracts (in

particular Article 8);

D patents, trademarks, copyrights and other intellectual property rights (Articles 12

and 10, among others);

E the relationship with other instruments on jurisdiction and recognition and

enforcement of judgments, in particular regional instruments, more particularly

the Brussels and Lugano Conventions and the Brussels Regulation (see Annex I

to the Interim Text);

F bilateralisation (Article 42).

making a choice of court that is valid for the purposes of the Convention (sometimes referred to as "jurisdiction by default"). There was also wide agreement that the Internet and e-commerce should or could not be excluded from the Convention. Finally, Article 4 in particular seemed to be satisfactory for the purpose of electronic commerce i.e. for any clause appearing in a business to business contract concluded or performed electronically. It would seem to follow that the problematic impact of e-commerce and the Internet on the Convention concerns mostly Articles 6, 7, 8, 10 and 13 of the Convention, and to some extent, Article 9, but much less so other provisions of the Interim Text. (2)Relationship with regional instruments Annex I to the Interim Text contains no less than four proposals on the relationship of the future Convention with other instruments, in particular, the Brussels and Lugano instruments. No decision was taken on any of these proposals. In its Note on the relationship between the future Hague Judgments Convention and regional instruments, in particular the Brussels and Lugano instruments (Annex D to the Agenda of the experts' meeting (electronic commerce) held in Ottawa 26 February-2 March 2001), the Permanent Bureau suggested an approach which would seek to combine, to whatever extent possible, the advantages of the future Hague Convention and regional instruments such as the Brussels and Lugano instruments. In a globalising economy, the Note argues, litigants would be best off if they were to have the benefit of both the global and the regional instruments. The Note suggests that to the extent that there is an overlap between the Hague Convention and the Brussels and Lugano instruments, the solutions of Article 3 and 4 (and possibly 9) of the 1999 draft are much the same as those of the corresponding provisions of the Brussels/Lugano instruments, although there may be minor discrepancies. It may be worth trying to solve these issues before turning to the slightly more complicated questions which come up in the context of Articles 6-13. With regard to Articles 21 and 22 of the Interim Text (lis pendens and exceptional circumstances for declining jurisdiction), there should be no conflict except in cases where both courts are located in a State bound by the Brussels/Lugano instruments. A similar conclusion would apply to the provisions on recognition and enforcement of the Interim Text. (3)Bilateralisation Article 42 of the Interim Text includes alternative proposals for a provision dealing with bilateralisation . No decision was taken on this issue. Closer examination may, however, reveal that those States which favour the option of bilateralisation may be prepared to make certain exemptions, in particular, where parties have made a choice of forum agreement in a business to business context.

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Apart from the differences in negotiating in the above mentioned areas, the convention

itself has been divisive.

D. Divisive: Limited only B2B contracts

The convention is shrinking back further which is not at all a favourable outcome. There

is a need for a broader and more inclusive treaty but the Hague Proposal is not

accommodating that need. A recent decision of the Convention shows that it is going to

be a treaty for business to business (“B2B”) matter rather than considering consumers.

Even if a treaty is eventually negotiated, it will not include consumers, which makes it

even more incomplete. In accordance with the Decision of Commission I of the

Nineteenth Session of the Conference of 24 April 2002, the Permanent Bureau set up an

informal working group to prepare a text on jurisdiction, recognition and enforcement of

foreign judgments in civil and commercial matters to be submitted to a Special

Commission. Among the core areas identified by Commission I,30 the informal group

chose to start working on choice of court agreements for commercial transactions.

If Member States decide that it is worthwhile to continue the work on a global

Convention on jurisdiction and recognition and enforcement of judgments in civil and

commercial matters, it follows that they will also have to have some direction as to the

manner of proceeding.

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4.5 Formal method of getting law on Internet jurisdiction: Remote

To sum up, the OECD guidelines on international cooperation theory, harmonization

theory by the ABA report and The Hague Convention all emphasize formal methods of

getting international laws on Internet jurisdiction. This international negotiation process

has shown itself to be hopelessly slow and too politically contentious. Such formal

methods are not going to bring any immediate and effective solution to the pressing

jurisdictional problem. This view was affirmed by Kirby J in the Gutnick decision. He

noted that:

To wait for legislatures or multilateral international agreement to provide solutions to the legal problems presented by the Internet would abandon those problems to "agonizingly slow" processes of lawmaking. Accordingly, courts throughout the world are urged to address the immediate need to piece together gradually a coherent trans-national law appropriate to the "digital millennium". The alternative, in practice, could be an institutional failure to provide effective laws in harmony, as the Internet itself is, with contemporary civil society - national and international. The new laws would need to respect the entitlement of each legal regime not to enforce foreign legal rules contrary to binding local law or important elements of local public policy. But within such constraints, the common law would adapt itself to the central features of the Internet, namely its global, ubiquitous and reactive characteristics. In the face of such characteristics, simply to apply old rules, created on the assumptions of geographical boundaries, would encourage an inappropriate and usually ineffective grab for extra-territorial jurisdiction31

If the legislative process does not offer any hope, attention may be turned to another law

making body, the judiciary. The judiciary does make laws through their decisions

everyday and these may not be as slow or as compromised as the formal law making

process is. Are judges currently responding to this need for trans-national law in Internet

related disputes? The answer is negative because at present, most courts are still bound to

apply their national laws in deciding cases relating to Internet jurisdiction. But applying

the national laws independently in Internet jurisdiction will inevitably lead to conflict of

30 Commission I identified as core areas choice of court agreements in B2B cases, submission, defendant’s forum, counterclaims, trusts, and physical torts (see Prel. Doc. No 19 at < ftp://ftp.hcch.net/doc/jdgm_pd19e.doc >, p. 6). 31 See para 118 and 119 of the decision.

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laws that will aggravate the problem. Courts have been forced to acknowledge that the

traditional notion of the function of law is outdated in this context and clearly, a purely

nationalistic approach will prove to be unworkable.

4.6 Nationalistic approach will have adverse affect in Internet cases

The suitability and effectiveness of the judiciary in Internet dispute resolution rests upon

the practical relevance the judicial decisions have. For instance, when the court hands

down the verdict, it can be in force immediately if the judiciary’s authority is respected

and the decision is abided by. This is the very basis for the existence of the judiciary and

its value. However, the value of the judiciary seems to have been threatened when

deciding issues of Internet jurisdiction, one court in one country seems to be striking

down the validity of another country’s court decision quite blatantly.

The approach of the French courts demonstrates that applying a traditional approach to

adjudication on Internet jurisdiction is unworkable and threatens the very essence of the

judiciary by making some court decisions futile. The Yahoo case32 is a perfect example

that shows that if each court applies their own national laws and court rules to adjudicate

Internet cases, it will jeopardise the utility of judicial dispute resolution. In the Yahoo

case there was a true conflict of laws, but also a complete disregard for the court ruling of

another country. If this trend continues, none of the court rulings will be paid any regard.

4.6.1 Jurisdiction Exercised By the French Court

The view of the court was that the American based Website Yahoo! Inc. could be sued

under French law as long as the alleged act was committed on French territory.

According to the French Court, the act was committed in France because the French

32 The League Against Racism and Antisemetism- Licra v Yahoo Inc and Yahoo France County Conf of Paris, 20th November 2000.

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people could access the Nazi memorabilia in France, which was illegal according to

French law. The court delivered its decision where the French people were able to

commit the illegal act through that website. The Judge ordered Yahoo! Inc. to prevent all

French Web surfers33 from being able to access its controversial auction services.

In this case, the visibility and accessibility of the information placed on the web was the

reason why the case was brought in France and the jurisdiction was asserted. The case

was brought in France against the US based web Yahoo Inc! By the International League

Against Racism & Anti-Semitism (LICRA) and the Union of French Jewish Students

(UEJF). These two Paris-based anti-racism groups accused Yahoo! Inc. of making

available thousands of items of Nazi memorabilia34 for auction each day online so

French people could access them easily, something which is illegal in France. UEFJ

demanded that Yahoo! France remove all hypertext links to Yahoo! Inc. which provided

33 During the hearing of the case, there was a court order to find out whether there could be any technological solutions by blocking the material from being viewed by the French people. Requiring the advice of technical experts “The Judge had announced that he would rule a final decision on this case only after hearing from a panel of three technical experts, one French, one American, and one European, assigned to determine the existence of viable technologies that Yahoo! Inc. could employ. Should such technologies be available, Yahoo! Inc. would therefore be forced to comply with the May 22nd court ruling”. A technical impossibility to comply ? “On July 24th, after two months of research and investigation, Yahoo! Inc. pleaded to the court that they were not capable of abiding by the May 22nd order by virtue of the technical impossibility of blocking French Internet users from its U.S. based Web site. In response to Yahoo! Inc.’s claim, the prosecution accused Yahoo! Inc. of not taking the proper initiative to find or develop the required solutions. The prosecution then recommended to the judge that the court should appoint a panel of technical experts to independently determine if and how such an apparent technological impossibility could be solved”. Experts report their results “On November 6th, the panel of three experts presented their findings to the French court. They concluded that although some technologies where capable of preventing Internet users, based on their geographical origin, from accessing targeted Web sites, such filtering was not considered full proof but could only successfully restrict access approximately 80 percent of the time. Will today’s technologies which can only guarantee an 80 percent success rate be considered inadequate to satisfy French Law? Or will foreign Web sites influencing populations abroad continue to operate out of the reach of local legislation?” The League Against Racism and Antisemetism- Licra v Yahoo Inc and Yahoo France County Conf of Paris, 20th November 2000. 34 They included films, swastikas, uniforms, daggers, photos and medals. The League Against Racism and Antisemetism- Licra v Yahoo Inc and Yahoo France County Conf of Paris, 20th November 2000.

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web surfers with the possibility of accessing allegedly racist material. Furthermore,

UEFJ demanded Yahoo! France explicitly warn its French Internet surfers of the racist

content that could be found at Yahoo! Inc. and that navigating into the U.S. based search

engine would put them at risk of breaking French law. The US courts were quick to

respond.

4.6.2 American Court Decision negates French Court Decision

An American court undermined the French judicial authority by deciding that Yahoo did

not have to comply with the French court decision. Against the French Court ruling,

Yahoo had filed a counter-suit in the US seeking a declaratory judgment that the French

court’s orders were neither cognizable nor enforceable under the laws of the USA. The

defendants had moved to dismiss the complaint on the basis that the US court could not

assert personal jurisdiction over them.

In favour of Yahoo, the Northern District court of California ruled that Yahoo did not

have to comply with a French court decision that requires the company to block Nazi-

related material from French consumers. The court took the view that:

Although France has the sovereign right to regulate what speech is permissible in

France, this court may not enforce a foreign order that violates the protections of the

United States Constitution by chilling protected speech that occurs simultaneously within

our borders.35

Here the court has not given any consideration to the effects of the publication in France.

The US court may be right in saying that the first amendment protects Yahoo and its

work is not illegal or objectionable in the USA. Nevertheless, the court should have

acknowledged that if any parts of the publication were seriously objectionable to the

35 Yahoo! Inc v La Ligue Contre Le Racism et L’ Antisemitisme 169 F. Supp 2d. 1181, 1192-3 (N.D. Cal 2001).

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French people, Yahoo should have taken notice of that and perhaps at least made an

effort to warn the French people on access, as per the French court decision. Moreover,

once Yahoo knew of the possible contravention of French law it could have applied some

technological measures to block access to whatever extent it was possible. The decisions

of these two courts have raised some unique dilemmas which may never have arisen

without the advent of the Internet. These issues will now be considered.

4.6.3 Factual Dilemmas

A. Involvement of Foreign the Website

A national court hearing an issue concerning a foreign website poses a critical question to

a domestic court. The Yahoo website was located in the US and in its defence, Yahoo!

Inc. argued that the French court did not have jurisdiction to rule over such allegations as

the alleged act was committed on foreign territory (in the USA). As a result, this dispute

should be the subject of U.S. law where such material, albeit controversial, is protected

by the US constitution’s First Amendment. Yahoo! France pleaded in its defence that the

UEJF’s claims should be dismissed as there was never an intent to contravene French law

by glorifying Nazism or promoting hatred by accessing Yahoo! Inc website. Yahoo!

France attested that it did not personally promote any access to illegal sites and services.

B. Issue relating to the Technological difficulty

Another dilemma courts often have to face is the complex technological issues. The

courts have to consider whether the information placed on the Internet can be available

only to some of the selected geographical area. In the Yahoo case, the court had taken

notice of the technical aspects and had even ordered an expert report to find out whether

Yahoo could have or would be able to block such illegal material from being accessed by

the French people. An interesting part of the decision is that the technical committee

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submitted the report saying that it was not possible to block the information to a

particular country or territory.

The court, however, did not accept the expert report and required Yahoo, upon the

exercising of its jurisdiction to:

(1) eliminate French citizens’ access to any material on the Yahoo. com auction site that

offered for sale any Nazi objects;

(2) eliminate French citizens’ access to web pages on Yahoo.com displaying text,

extracts;

(3) post a warning to French citizens on Yahoo.fr that any search through Yahoo.com

may lead to sites containing material prohibited by Section R645-1 of the French

Criminal Code and that such viewing of prohibited material may result in legal

action against the internet users; and

(4) remove from all browsers directories accessible in the French Republic index

headings entitled “negotiations” and from all hypertexts links the equation of

“negotiations” under the heading “Holocaust”.

The order subjected Yahoo! to a penalty of 100,000 Francs (about US$13,600) for each

day that if it failed to comply with the order36.

These kinds of factual dilemmas will probably become more commonplace in any

disputes relating to cyberspace with the increasing complexity of technology. That is why

it is urgent for the legal community and in particular the judiciary to devise an innovative

approach. Instead, what these two decisions indicate are that:

36 The League Against Racism and Antisemetism- Licra v Yahoo Inc and Yahoo France County Conf of Paris, 20th November 2000.

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4.6.4 Conclusions from two court decisions

A. One country’s court can easily negate another country’s decision

Both decisions show the persistence of the question of jurisdiction. The San Francisco

attorney Ronald Katz, who represented the French organizations, said he would be likely

to appeal the decision on the grounds that US Judge Fogel had no authority to make his

decision. The French organizations had no presence in the United States and had made no

effort to enforce the French court's decision. According to Mr Katz:

"No other court has decided what this court decided on jurisdiction… If you don't have

jurisdiction, then the court shouldn't be saying anything."

Both the US and the French court decisions have caused more confrontation between the

parties to the litigation and also the decisions have added more ambiguities to the notion

of Internet jurisdiction. None of the decisions have shown any inclination to discern the

nature of the Internet and indicate the need for a different approach to decide Internet

jurisdiction cases which go far beyond the traditional notion of sovereignty.

B. The very essence of the judiciary undermined

If two courts are at loggerheads with each other on a decision, there may be an adverse

impact since the conflicting decisions cause a great deal of uncertainty. For example,

after the French court decision, Yahoo had already acted to block the allegedly

objectionable material in French territory. Although Yahoo objected that instituting such

a block would be technologically impossible, the court later affirmed its ruling and

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threatened to fine Yahoo 100,000 francs a day if it did not comply. Yahoo responded to

the decision by filing to block its enforcement in the United States and by barring the sale

of Nazi materials and Ku Klux Klan memorabilia on its site.

However, after the US court decision, Yahoo maintained it had the legal right to

disregard the French court ruling based on the US court order. This is a lamentable result

for a consistent global approach to Internet jurisdiction.

C. The Internet goes unregulated by the law

Apparently, some judges are still unsure of themselves when deciding issues related to

the Internet. Both of these court rulings fail to address the very nature of the Internet.

When deciding on Internet cases, courts need to take a new approach rather than sticking

to their traditional territorial way of functioning. In this case, both the French and the US

courts are wrong in terms of not recognizing the law of different countries. The French

court did not acknowledge that under the First amendment, Yahoo was protected and

permitted to publish Nazi memorabilia. Similarly, the US court did not see the need to

recognise the fact that the Nazi memorabilia are illegal in France.

Instead, courts should have applied a mutually respectful, trans-national approach which

would have helped to resolve the dilemma. There would have been less or perhaps even

no confrontation at all and also it would have created a trans-national judicial dialogue if:

• The US court had acknowledged that the First amendment right is not applicable

in France and so required Yahoo to place a warning notice on the website saying

that no French nationals should attempt to access the web and that Yahoo should

endeavour to make it inaccessible to French people. (Even though the expert

group had suggested that it would be only 80% likely to succeed).

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• The French court had recognised the privilege of Yahoo in the US under the First

amendment but required Yahoo to respect French law when its actions are

exercised extraterritorially and where a website causes social unrest. As in the

present case, the publication did raise serious concerns in certain sections of the

French community.

If both courts had demonstrated mutual respect, it would have contributed to the

constructive exchange of judicial dialogue. Rather, both courts opted for a method that

negates each others’ arguments and hinders the creation of a process that could facilitate

new technological developments.

4.7 Courts should facilitate the development not impede it

Ideally, appropriate and just laws can facilitate social and technological development. If

the traditional outdated principles of jurisdiction are applied in Internet cases, however,

technological developments may be impeded. Law should not be a hurdle to such

development. Justice Kirby in the Gutnick case agreed with the need to build a

conciliatory approach to technological advancement and made the point that the law

should generally facilitate and encourage such advances, not attempt to restrict or impede

them by inconsistent and ineffective, or only partly effective, interventions, for fear of

interrupting the benefit that the Internet has already brought and the greater benefits that

its continued expansion promises.

It was the view of Kirby J. that the Court should seek a bold solution because of the

revolutionary character of the technology that had produced the need to do so. Kirby J.

urged judges to be bold enough on the simple grounds that the common law adapts even

to radically different environments and the courts have been asked to be no less bold than

those technologists which invented and developed the Internet.

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The point made by Kirby J is timely and appropriate. Courts should not hinder the

process and use of technology. A trans-national role from national courts could be the

right approach for our time.

4.8 The Need for a new Role for the National Courts: Agents of Trans-national Law

The Internet is the epitome of the trans-national society. The hallmark of the trans-

national space is that it is governed through an integrated network of international and

national laws, entities and regimes. The question each judge has to ask themselves is

when national courts engage in the trans-national arena, are they acting as agents of the

national or trans-national37? So what approach should be taken to deciding trans-national

disputes?

37 On the concept of transnational, see Philip Jessup, Transnational Law (1957) Yale University Press New Haven; Henry Steiner, Detlv Vagts and Harold Koh, Transnational Legal Problems: Materials and Text 4th ed (1994) Foundation Press Mineola NY; Andreas Lowenfeld, International Litigation and Arbitration 2nd ed (2002) West Group; St Paul Minn, Kalir DM, ‘Taking Globalization Seriously: Towards General Jurisprudence’ (2001) 39 Columbia Journal of Transnational Law 785; Bermann GA, ‘Provisional Relief in Transnational Litigation’ (1997) 35 Columbia Journal of Transnational Law 553; Jaccard MA, ‘Securing Copyright in Transnational Cyberspace: The Case for Contracting With Potential Infringers’ (1997) 35 Columbia Journal of Transnational Law 619; Lee Y, ‘Forum Selection Clauses: Problems of Enforcement in Diversity Cases and State Courts’ (1997) 35 Columbia Journal of Transnational Law 663; Wai R ‘Transnational Liftoff and Juridical Touchdown: The Regulatory Function of Private International Law in an Era of Globalization’ (2002) 40 Columbia Journal of Transnational Law 209; Waller SW, ‘A Unified Theory of Transnational Procedure’ (1993) 26 Cornell International Law Journal 101; Burk DL ‘Transborder Intellectual Property Issues on the Electronic Frontier’ (1994) 6 Standford Law & Policy Review 9 (discussing the alternative means by which to address the transborder nature of information flow); Raustiala K, ‘The Architecture of International Cooperation: Transgovernmental Networks and the Future of International Law’ (2002) 43 Virginia Journal of International Law 1; Hongju K H, ‘Transnational Public Law Litigation’ (1991) 100 Yale Law Journal 2347; Tan D, ‘Towards a New Regime for the Protection of Outer Space as the "Province of All Mankind’ (2000) (25) Yale Journal of International Law 145; Kenneth D. Crews, ‘Harmonization and the Goals of Copyright: Property Rights or Cultural Progress?’ (1998) 6 Indiana Journal of Global Studies 117; Berman H J, ‘Toward an Integrative Jurisprudence: Politics, Morality, History’ (1988) 76 California Law Review 779; Hanno E ‘Competence, Conflicts and Solutions: National Tax Exemptions and Transnational Controls’ (2002) 9 Columbia Journal of European Law 79; Shafter J, ‘Original Intentions and International Reality: States, Sovereignty, and the Misinterpretation of Alienage Jurisdiction in Matimak v. Khalily’ (2001) 39 Columbia Journal of Transnational Law 729; ‘The Decline of the Nation-State and its Implications for International Law’ (1997) 36 Columbia Journal of Transnational Law 7; Austin G W, ‘ Domestic Laws and Foreign Rights: Choice of Law in Transnational Copyright Infringement Litigation’ (1999) 23 VLA Journal of Law & the Arts 1; Charney J I, ‘Transnational Corporations and Developing Public International Law’ (1983) Duke Law Journal 748; Gibney M, Tomasevski K, and Jens Vedsted-Hansen ‘Transnational State Responsibility for Violations of Human Rights’ (1999) 12 Harvard Human Rights Journal 267; Blakely TW, ‘Beyond The International Harmonization Of Trademark Law: The Community Trade Mark As A Model Of Unitary Transnational Trademark Protection’ (2000) 149

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Perhaps, we need to acknowledge more clearly in our jurisprudence a notion of the trans-

national and consider its origin and how it is to be enforced. At the highest level, the

Internet and trans-national jurisdiction require national courts to act as agents of a trans-

national law - which may in itself, be a derivative of international law38.

4.9 Trans-national business create trans-national norms

The obvious need for the non-state based dispute resolution specifically in the context of

trans-national business networks is paramount39. Teubner argues that contemporary

global society must be viewed as being comprised of “multiple norm systems”, each of

which has its own participants and norms. The result is "global law without a state," in

which operate systems of trans-national commerce and multinational corporations. These

systems challenge the supremacy of state-based legal systems for pre-eminence in the

production of social norms40.

University of Pennsylvania Law Review 309; Mehren AT, ‘The Rise of Transnational Legal Practice and the Task of Comparative Law’ (2001) 75 Tulane Law Review 1215; Silberman L J, ‘Judicial Jurisdiction in the Conflict of Laws Course: Adding a Comparative Dimension’ (1995) 28 Vanderbilt Journal of Transnational Law 389; Schneiderman D, ‘Investment Rules and the New Constitutionalism’(2000) 25 Law and Social Inquiry, 757; Lash W H., ‘The Decline Of The Nation State And Its Effect On Constitutional And International Economic Law: Contribution: The Decline Of The Nation State In International Trade And Investment’ (1996) 18 Cardozo Law Review 1011. 38 See, Fitzgerald B, ‘Dow Jones & Company Inc v Gutnick: Negotiating “American Hegemony” in the Trans-national World of Cyberspace’ (2003) 27 Melbourne University Law Review 590; Fitzgerald B, G Middleton, Fitzgerald A, Jurisdiction and Ecommerce (2003) Law Book Company, Sydney (Forthcoming). 39 See Sandeep Gopalan, ‘Transnational Commercial Law: The Way Forward’ ( 2003) 18American University International Law Review, 803, Gunther Teubner, 'Global Bukowina': Legal Pluralism in the World Society, in Global Law without A State 3 (Gunther Teubner ed., 1997). 40 See Sandeep Gopalan, ‘Transnational Commercial Law: The Way Forward’ ( 2003) 18American University International Law Review 803, Gunther Teubner, 'Global Bukowina': Legal Pluralism in the World Society, in Global Law Without A State 3 (Gunther Teubner ed., 1997). “The relationship between transnational private dispute-resolution and national laws is better understood at the present time as a dialectical one, where the rules of private international law are an important part of the dialectical relationship in which neither has a clearly dominant status. The international business communities and networks may therefore be best viewed as "semi-autonomous social fields" as has been argued in accounts of legal pluralism. Clearly, Teubner and others are correct in observing that state laws no longer have, and probably never had, a normative monopoly on transnational conduct and that non-state based norm systems

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4.10 What is the Trans-national Legal Process?

The Trans-national legal process41 has four distinctive features. First, it is non-traditional:

it breaks down two traditional dichotomies that have historically dominated the study of

international law: between domestic and international, public and private. Second, it is

non-statist: the actors in this process are not just, or even primarily, nation-states, but

include non-state actors as well. Third, the trans-national legal process is dynamic, not

static. Trans-national law transforms and mutates from the public to the private, from the

domestic to the international level and back down again. Fourth and finally, it is

may have become the more significant force in the global economy. However, it seems equally clear that there is some ability for national authorities not just to abandon state laws in the face of these other normative systems, but rather to use the remaining leverage of private law as a site for international regulation”. 41 See generally, Fitzgerald B, ‘Dow Jones & Company Inc v Gutnick: Negotiating “US Hegemony” in the Trans-national World of Cyberspace’ (2003) 27 Melbourne University Law Review 590; Fitzgerald B, Middleton G, Fitzgerald A, Jurisdiction and Ecommerce (2003) Law Book Company, Sydney (forthcoming); Brian F. Fitzgerald, ‘Trade-Based Constitutionalism: A Framework for Universalising Substantive International Law’ (1996-97) 5 University of Miami Year Book of International Law 111; Anne-Marie Slaughter, ‘International Law in a World of Liberal States’ (1995) 6 European Journal of International Law 1; Graeme B. Dinwoodie, ‘A New Copyright Order: Why National Courts Should Create Global Norms’ (2000) 149 The University of Pennsylvania Law Review 469; Andrew L. Strauss ‘Beyond National Law: The Neglected Role Of The International Law Of Personal Jurisdiction in Domestic Courts’ (1995) 36 Harvard International Law Journal 373; Harold Hongju Koh ‘Transnational Legal Process’ (1996) 75 Nebraska Law Review 181; Richard Thigpen, ‘Resolution of Conflicts Between National and Transnational Legal Prescriptions -- A Case Review and Assessment (1982) 25 Howard Law Journal 635; Lawrence M. Friedman, ‘On the Emerging Sociology of Transnational Law’ (1996) 32 Stanford Journal of International Law 65; Matthew Taylor, Book Review: ‘The Third Force: The Rise of Transnational Civil Society’ Edited by Ann M. Florini”, (2001) 6 Georgetown Public Policy Review 170; Mathias Reimann, ‘Beyond National Systems: A Comparative Law for the International Age’ (2001) 75 Tulane Law Review 1103; Don Suh, ‘Situating Liberalism In Transnational Legal Space’ (2002) 12 Duke Journal of Comparative & International Law 605; Anne-MarieSlaughter and J. Sinclair Armstrong ‘Judicial Globalization’(2000) 40 Virginia Journal of International Law 1103; Laurence R. Helfer, Anne-Marie Slaughter ‘Toward a Theory of Effective Supranational Adjudication’ (1997)107 Yale Law Journal 273; Laurence R. Helfer, Anne-Marie Slaughter ‘Toward a Theory of Effective Supranational Adjudication’ (1997) 107 Yale Law Journal (273); Regina v. Bow St. Stipendiary Magistrate, ex parte Pinochet Ugarte, 4 All. E.R. 897 (H.L. 1998), Regina v. Bow St. Metro. Stipendiary Magistrate, ex parte Pinochete Ugarte (No. 2), 1 All. E.R. 577 (H.L. 1999); Jerry Everard, Virtual States: The Internet and the Boundaries of the Nation State (2000); Gunther Teubner (ed.), Global Law Without a State, Aldershot, (1997); David Held et al, Global Transformations, Stanford, California : Stanford University Press, (1999); Michael P. Ryan, Knowledge Diplomacy (1998).

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normative42. From this process of interaction, new rules of law emerge, which are

interpreted, internalized, and enforced, thus beginning the process all over again. Thus,

the concept embraces not just the descriptive workings of a process, but the normativity

of that process. Its focus is beyond mere international interaction among trans-national

actors.

4.11 How does the Trans-national Legal Process contribute to create substantive

international law?

If one accepts a theory of trans-national legal process, what conclusions follow? The

following points can be made43. First, like post-war international relations theories, a

theory of trans-national legal process has both predictive capacity and explanatory power

regarding questions of causation. It predicts that nations will come into compliance with

international norms if trans-national legal processes are aggressively triggered by other

trans-national actors in a way that forces interaction in forums capable of generating

norms, followed by norm-internalization. This process of interaction and internalization

in turn leads a national government to engage in new modes of interest-recognition and

identity-formation in a way that eventually leads the nation-state back into compliance.

Second, the theory suggests the value and the imperative of clinical work in international

law. The trans-national legal process forces states to become more law-abiding by

incorporating trans-national law into their domestic legal and political structures. Non-

governmental organizations are not just observers of, but important players in, trans-

national legal process. Their actions can greatly influence the process and their inaction

ratifies its outcomes.44

42 See Harold Hongju Koh ‘Transnational Legal Process’ (1996) 75 Nebraska Law Review 181. 43 See Harold Hongju Koh ‘Transnational Legal Process’ (1996) 75 Nebraska Law Review 181.

44 See Harold Hongju Koh ‘Transnational Legal Process’ (1996) 75 Nebraska Law Review 181.

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4.12 A Trans-national Role is required of National Courts

Considering the basic notion and importance of trans-national law and legal process, how

can it be applied in the context of Internet disputes? It is argued that the idea of trans-

national law should help to stabilise the cyberspace disputes which are inherently trans-

national in nature. With regard to the new approach required by courts, Graeme B.

Dinwoodie45 argues with reference to copyright disputes in cyberspace, as follows:

Instead, I propose that courts should decide international copyright cases not by

choosing an applicable law, but by devising an applicable solution. International

copyright disputes implicate interests beyond those at stake in purely domestic copyright

cases. National courts should thus be free to decide an issue in an international case

using different substantive copyright rules that reflect not only a single national law,

but rather the values of all interested systems (national and international) that may

have a prescriptive claim on the outcome. This approach to choice of law may unleash

the generative power of common law adjudication as a means of developing

international copyright norms. And it would accommodate the concerns of dynamic

flexibility without compromising the values of national diversity or pluralistic

perspective in a way that public law-based copyright lawmaking does not46”.

He emphasises the need to devise an applicable solution rather than concentrating only

on applying the local court rules while determining the court jurisdiction. “Cyber

disputes” demand that “national courts involve in the task of trans-nationalization by

sketching a new choice of law methodology for trans-national disputes”. All current

approaches to choice of law force courts to fictionalize multinational disputes as

implicating purely national norms (the process of "localization"), and thus foreclose the

consideration by courts of international norms separate and apart from domestic policy

45 See Graeme B. Dinwoodie, ‘A New Copyright Order: Why National Courts Should Create Global Norms’ (2000) 149 The University of Pennsylvania Law Review 469. 46 See Graeme B. Dinwoodie, ‘A New Copyright Order: Why National Courts Should Create Global Norms’ (2000) 149 The University of Pennsylvania Law Review 469.

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objectives. Each of these approaches requires courts to decide issues raised by such

disputes according to a single national law which will not be a constructive role47. There

is a need to go beyond the notion of simply applying a single national law on cyberspace.

4.13 Need for Trans-national judicial Dialogue (TJD)

The question facing judges around the world, in the words of Justice Stephen Breyer, is

how to "help the world's legal systems work together, in harmony, rather than at cross

purposes”48. Dialogue between the court of one country and the court of another county

is needed in order to fill the trans-national role by a national court. But can there ever be

such a thing as trans-national law?49 What is the primary duty of a national court - to the

national, trans-national or international? While this approach may sound radical it could

47 See Graeme B. Dinwoodie, ‘A New Copyright Order: Why National Courts Should Create Global Norms’ (2000) 149 The University of Pennsylvania Law Review 469. 48 “What is new is the rise of a distinct and meaningful concept of "judicial comity," deference not to foreign law or foreign national interests, but specifically to foreign courts. This emerging doctrine has four strands. First is a respect for foreign courts qua courts, rather than simply as the face of a foreign government, and hence for their ability to resolve disputes and interpret and apply the law honestly and competently. Second is the corollary recognition that courts in different nations are entitled to their fair share of disputes - both as co-equals in the global task of judging and as the instruments of a strong "local interest in having localized controversies decided at home." Third is a distinctive emphasis on individual rights and the judicial role in protecting them. A fourth and final strand of judicial comity involves recognition of a kind of legal globalization that is both cause and consequence of economic globalization”. Anne-MarieSlaughter and J. Sinclair Armstrong ‘Judicial Globalization’(2000) 40 Virginia Journal of International Law at 1103. 49 "Trans"national symbolizes a notion of movement and cross-border activity. Transnational society inhabits a global space and to this extent extends beyond territory, sovereignty, and the state. "Inter"national symbolizes a static notion rooted in territory and sovereignty. If I draw a picture of the international, I might draw the blocks of stone (the buildings) in Harvard Yard, stationary in their territory, controlling whoever walks in the door. While if I draw a picture of the transnational, I might draw Harvard Yard as a space filled with a swirling mass of things, humans, corporations, blocks of stone (buildings), or states. The transnational is a space "beyond or without borders"; it does not seem to be merely a society of states, rather it is a society that inhabits spaces beyond borders, beyond territory and sovereignty; it is a space that is ever moving and not static, and one that fills every corner of the earth”. Fitzgerald B, ‘Software as Discourse: The Power of Intellectual Property in Digital Architecture’ (2000) 18 Cardozo Journal of Arts and Entertainment Law 337 at 352. See also Fitzgerald B, ‘Dow Jones & Company Inc v Gutnick: Negotiating “US Hegemony” in the Trans-national World of Cyberspace’ (2003) 27 Melbourne University Law Review 590.

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be implemented in a basic way, through the process of judicial law

making/interpretation50.

There are some schools of thoughts which promote the notion of TJD where we can have

a new method of judicial adjudication and enforcement in the case where trans-national

issues are involved. Anne-Marie Slaughter argues that states (including courts) are

important and will continue to be so in the face of globalization - as they are key actors

especially in the enforcement area. Her overriding theme is that democratic states should

uphold a similar rule of law and that state courts are the agents of this. But how do we

piece together the trans-national law? Is this really asking courts to try and harmonize

laws- to create a trans-national body of principle?

50 On the legitimacy of judicial law making see Roscoe Pound, An Introduction to the Philosophy of Law Holmes Beach, Fla : Wm. W. Gaunt, 1922; Roscoe Pound, Contemporary Juristic Theory Littleton, Colo : F.B. Rothman, 1981; K.N. Llewellyn, The Bramble Bush : On our Law and its Study Dobbs Ferry, N.Y : Ocean Publications, 1960; K.N. Llewellyn, The Common Law Tradition :Deciding Appeals Boston Little, Brown and Company, 1960, Benjamin N. Cardozo, The Nature of the Judicial Process New Haven : Yale University Press, 1921. See also Kirby M, ‘Lionel Murphy and the Powers of Ideas’ (1993) 18 Alternative Law Journal 253; Sir Anthony Mason, ‘The Role of a Constitutional Court in a Federation: A Comparison of the Australian and United States Experience’ (1986) 16 FLR 1; O. Dixon, “Address upon taking the oath of office as Chief Justice”, Sydney, 21 April 1952, (1952) 85 CLR xiv; Sir Anthony Mason, ‘Future Directions in Australian Law’ (1989) 13 Monash Law Review 1; Sir Anthony Mason, ‘The Role of the Courts at the Turn of the Century’ (1993) 3 JJA 156; Daryl Dawson, ‘Do Judges Make Law? Too Much?’ an address delivered to the Law Chapter of the Alumni Association of the University of Adelaide 22 August 1994, McHugh M, ‘The Law-making Function of the Judicial process’ (1988) 62 Australian Law Journal 116; Fitzgerald B, ‘International Human Rights and the High Court of Australia’ (1994) 1 James Cook University Law Review 78; Horrigan B, ‘Towards a Jurisprudence of High Court Overruling’ (1992) 66 Australian Law Journal199; Fitzgerald A, ‘The Jurisprudence of Judicial Law Making by the High Court’ (1991) Masters thesis Columbia University New York; Lord Ried, ‘ The Judges as Law Maker’ (1972) 12 JSPTL 22, Holmes, ‘The Path of the Law’ (1897) 10 Harvard Law Review 469, See also Peter L, ‘Democratic Legitimacy and the Administrative Character of Supranationalism: The Example of the European Community’ (1999) 99 Columbia Law Review. 628; Paul B. Stephan, ‘The New International Law - Legitimacy, Accountability, Authority, and Freedom in the New Global Order’ (1999) 70 University of Colombia Law Review 1578; Richard Falk & Andrew Strauss, ‘On the Creation of a Global Peoples Assembly: Legitimacy and the Power of Popular Sovereignty’ (2000) 36 Stanford Journal of International Law, 191; Reimann M, ‘Beyond National Systems: A Comparative Law for the International Age’ (2001) 75 Tulane Law Review, 1103.

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4.14 Liberalism: Source for Trans-national Judicial Dialogue

Liberalism can be a benchmark to determine whether the laws from other countries can

be considered valid or not (called "Trans-national Relations among Liberal and Non-

liberal States" "The "Zone of Politics' Beyond Law). Slaughter seems to suggest that

domestic courts have an expanded role to play in sustaining the international order - but

only among certain states - and that legal order can be established trans-nationally, but

based only on the common values and institutions shared by liberal states51.

Slaughter's most recent work recognizes this by deemphasizing the liberal/illiberal label

and emphasizing two trans-national legal process elements:

(a) the density of trans-national transactions; and

(b) trans-governmental communication among trans-national actors.

As Slaughter argues in the text, these aspects of the trans-national legal process, and not

the "liberal" label, explain the phenomenon of compliance with trans-national law52.

Why is liberalism such an important factor in this regard? Simply because the current

form of liberalism demands that a domestic court get involved and

promote/educate/admonish friends of liberalism, thus, domestic courts are agents for

liberal internationalism and they should promote this for it is the best way ahead. Liberal

theory is a useful tool in dealing with trans-national legal problems53.

4.15 How TJD can facilitate the development?

Constructive dialogue between the adjudicative bodies of the world community could

promote a trans-national legal structure. It could help build a trans-national adjudicatory.

Not U.S. courts, and French courts and associated international tribunals, but simply

adjudicative entities engaging in resolving disputes, interpreting and applying the law as

51 See F. Dely, International Business Law and Lex Mercatoria (1992). 52 See F. Dely, International Business Law and Lex Mercatoria (1992).

131

best they can. It is a vision of a global community of law, established not by the United

Nations or the International Court of Justice in The Hague, but by national courts

working together around the world. It is also a vision of a shift from deference to

dialogue, from passive acceptance to active interaction, from negative comity to positive

comity54.

This dialogue can be very direct. In bankruptcy law, for instance, judges increasingly

communicate directly with one another with or without an international treaty or

guidelines to ensure a cooperative and efficient distribution of assets. When Maxwell

Communication Corporation, an English holding company with more than four hundred

subsidiaries worldwide, began to falter, it filed for Chapter XI bankruptcy in the Southern

District of New York and entered insolvency proceedings in the United Kingdom

simultaneously. To determine what laws and procedures to apply in the reorganization,

judges in both countries appointed administrators or liquidators, who engaged in

extensive discussions and ultimately reached an agreement setting forth procedures and

assigning responsibility for the liquidation. This "mini-treaty" was then memorialized by

an "Order and Protocol" approved and adopted by the two courts within two weeks of

each other. Other areas of law, like antitrust, securities, and even criminal law are likely

to follow and there is no obvious reason why it cannot be used in cyberspace disputes.

4.16 Trans-national Judicial Contact

Trans- national judicial dialogue can be promoted by giving due recognition to courts of

other countries and mutual respect. That can be begun by cross-citation which is a most

informal level of trans-national judicial contact. While opinions rendered by the courts of

53 See Brian Fitzgerald, ‘An Emerging Liberal Theory on International Law and the Non-Enforcement of Foreign Public Laws’ Australian Year Book of International Law 311. 54 See Anne-MarieSlaughter and J. Sinclair Armstrong ‘Judicial Globalization’ (2000) 40 Virginia Journal

of International Law 1103.

132

other national legal systems are never binding, national constitutional courts turn to

foreign decisions for different perspectives on similar issues55.

The combination of active collaboration and vigorous conflict is likely to mark the next

phase of judicial globalization: a move from comity among, what Justice Breyer called

the "world's legal systems," in which judges view one another as operating in equal but

distinct legal spheres, to the presumption of an integrated global legal system. This

presumption, in turn, rests on the conception of a single global economy in which borders

are increasingly irrelevant and an accompanying legal system in which litigants can

choose among multiple fora to resolve a dispute, but each of those fora has an equal

interest in seeing the dispute resolved. Paradoxically, whereas a presumption of a world

of separate sovereign’s mandates courtesy and periodic deference between them, the

presumption of an integrated system takes mutual respect for granted and focuses instead

on how well that system works. It is a shift that is likely to result in more dialogue but

less deference56.

4.17 Common Judicial Enterprise

The idea of common judicial enterprises will promote the trans-national judicial

understanding. All this activity, from the most passive form of cross-fertilization to the

most active cooperation in dispute resolution, requires recognition of participation in a

common judicial enterprise57, independent of the content and constraints of specific

national and international legal systems. It requires that judges see one another not only

55 See Anne-Marie Slaughter and J. Sinclair Armstrong ‘Judicial Globalization’ (2000) 40 Virginia

Journal of International Law 1103. 56 See Anne-Marie Slaughter and J. Sinclair Armstrong ‘Judicial Globalization’ (2000) 40 Virginia Journal

of International Law 1103. 57 See Robert Wai ‘ Transnational Liftoff and Juridical Touchdown: The Regulatory Function of Private

International Law in an Era of Globalization’ (2002) 40Columbia Journal of Transnational Law 209.

133

as servants or even representatives of a particular government or polity, but as fellow

professionals (sometimes called “brother judges”) in a profession that transcends national

borders.58

4.18 Conclusion

To wait for the nation states to negotiate an international treaty on jurisdiction as the

OECD, Hague member countries are working on is not the best way forward for Internet

jurisdiction. The complexity and compromise involved in negotiation among so many

different countries and different models from different countries seem to be getting worse

rather than moving towards consensus. Hence, my thesis argues that the most practical

and feasible way forward, at this juncture, is the idea of “trans-judicial dialogue”. When

the TJD is applied, courts will not look at the local court rules and laws only to exercise

jurisdiction. Under the TJD, a national court would go beyond the traditional bases of

jurisdiction which makes them agents of trans-national law whereby they, through the

judicial exchange, might apply foreign court rules considering the importance of the case.

Also the TJD will respect and recognise that foreign judges are fellow workers; and

respect and recognise the status of foreign courts as it would in the case of a domestic

situation.

It will provide a viable and stable legal framework for Internet jurisdiction. Parties can

bring cases from where they habitually live and if there are possible multiple forums,

courts can exchange their ideas to build transnational legal principle. Unlike in the

Yahoo case the TJD would prevent court decisions becoming futile. In Yahoo, it was

ridiculous to see that the French and the US courts negating each others decisions. If

such a trend continues, all decisions will be futile. But pursuing TJD is more likely to

achieve the constructive outcomes where one court can give due respect and

consideration to foreign courts decisions and recognise and enforce as well. That means

58 See Anne-Marie Slaughter and J. Sinclair Armstrong ‘Judicial Globalization’ (2000) 40 Virginia Journal of International Law 1103.

134

TJD would be giving life to judicial decisions and dispute resolution process. If courts

around the world keep coming to loggerheads, the Internet will go unregulated. Through

TJD, the Internet will come under regulation because courts will recognise the foreign

court decisions too. Most importantly, the TJD will promote trans-national judicial

cooperation and assist in resolving the issue of uncertainty over Internet jurisdiction.

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