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ECJ Explains Jurisdiction On The Internet

by Ulrika Lomas, LawAndTax-News.com, Brussels

10 December 2010


In a preliminary ruling, the Court of Justice of the European Union (ECJ) has explained the rules of jurisdiction in European Union (EU) law that are applicable to consumer contracts in relation to services offered on the internet.

Firstly, the ECJ stated that EU regulation on jurisdiction in civil and commercial matters provides that actions against a person domiciled in a member state must, as a general rule, be brought in the courts of that state. However, within the rules protecting the consumer, if the trader ‘directs its activities’ to the member state in which the consumer is domiciled, the consumer can bring proceedings before the courts of the member state of his domicile, and can be sued only in that member state.

The Austrian Supreme Court brought two cases before the ECJ, in both of which the contention was whether a trader had directed its activities, within the meaning of the regulation, when it used a website to communicate with consumers.

The ECJ was therefore asked whether the fact that a company established in a member state offers its services on the internet means that they ‘are directed’ to other member states too. If that were so, consumers domiciled in those other states who have recourse to the services could also benefit, in the event of a dispute with the trader, from the more favourable rules of jurisdiction laid down by the regulation.

However, in its judgment, the ECJ stated that mere use of a website by a trader does not in itself trigger application of the rules of jurisdiction for the protection of consumers in other member states. It held that, for those rules to be applicable in relation to consumers from other member states, the trader must have ‘manifested its intention to establish commercial relations with such consumers’.

In this context, the Court considered what evidence can demonstrate that the trader was envisaging doing business with consumers domiciled in other member states. Such evidence would include clear expressions of the trader’s intention to solicit the custom of those consumers, for example when it offers its services or its goods in several member states designated by name, or when it pays a search engine operator for an internet referencing service in order to facilitate access to its site by consumers domiciled in those various member states.

In addition, the ECJ’s opinion was that there could also be other less patent items of evidence, possibly in combination with one another, which would also be capable of demonstrating the existence of an activity ‘directed to’ the member state of the consumer’s domicile.

These could include the international nature of the activity at issue, such as certain tourist activities; mention of telephone numbers with the international code; use of a top-level domain name other than that of the member state in which the trader is established; and mention of an international clientele composed of customers domiciled in various member states, in particular by presentation of accounts written by such customers.

A comprehensive report in our Intelligence Report series examining the new possibilities that offshore e-commerce open up for business, and analysing the offshore jurisdictions that have led the way in offering professional e-commerce regimes for international business, with a particular focus on e-gaming, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report6.asp
TAGS: court | compliance | business | commerce | law | offshore e-commerce | offshore | internet | e-commerce | regulation | trade | European Union (EU) | Europe

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