European Union: Brussels Regulation (EC Regulation 44/2001)

The European Council’s Brussels Regulation came into force on 1 March 2002. It impacts on jurisdiction and the recognition and enforcement of judgements in civil and commercial matters. It does not seek to regulate the choice of law. It replaces the Brussels Convention 1968 for all EU Member States except Denmark (for which the provisions of the old Brussels Convention will continue to apply). The European Free Trade Association countries will continue to apply the rules of the 1988 Lugano Treaty which is similar to the Brussels Convention. (The EU Member States are France, Germany, Italy, Belgium, Netherlands, Luxembourg, UK, Ireland, Denmark, Greece, Spain, Portugal, Austria, Finland and Sweden; and the European Free Trade Association countries are Liechtenstein, Iceland, Norway and Switzerland).

In relation to E-Commerce the most important change introduced by the new Regulation is the new definition of "consumer contract".

Background

The existing Brussels Convention applies to civil and commercial disputes between parties domiciled in two different contracting states. The general rule is that a defendant can only be sued in their domicile State. There are a number of exceptions to the rule. One of these exceptions relates to consumer contracts.

Under the Convention a consumer has the choice to bring an action either in the consumer’s domicile state or that of the defendant. "Consumer contracts" include those for the "supply of goods or services, where in the state of the consumer’s domicile, the conclusion of the contract was preceded by a specific invitation addressed to the consumer, or by advertising, and the consumer took the steps necessary for the conclusion of the contract in that State." These rules apply regardless of any choice of jurisdiction clause in the contract.

What has changed?

The new Regulation makes a number of changes to the old Brussels Convention. The rules in relation to jurisdiction for "consumer contracts" essentially continue under the new Regulation but there is a new definition of "consumer contract" which has two limbs.

Under the Regulation a contract will be a "consumer contract" if the purchase is for a purpose outside the consumer’s trade or profession and the seller either:

• pursues commercial or professional activities in the Member State of the consumer’s domicile; or
• by any means, directs such activities to that Member State or to several States including the Member State,

and the contract falls within the scope of such activities (Art 15 (1) (c)).

The Regulation does not provide guidance on the threshold level of activity that would need to be reached before a vendor could be regarded as either pursuing activities in or directing activities at a Member State. For example, will it be sufficient to come under the first limb if the website is hosted on a server in a Member State? Will it be sufficient to come under the second limb if the website is in English and accepts payment in Euros? These issues have yet to be determined.

The meaning of "Consumer Contracts"

In 2001, the DTI released a draft Guidance Note outlining its view on the type of activities that will come within the new definition of consumer contracts. The DTI’s views can be summarised as follows:

• mere accessibility of a website in a particular Member State should not be enough to bring a transaction stemming from a website within the definition of consumer contract;
• if your website is designed to sell to EU States and you do actually sell to those states you will be caught by the definition; and
• you might be seen to be directing at particular EU States if your website offers a choice of language and/or currency relevant to that State.

The final version of the Guidance Note was due to be published in January 2002. The DTI has indicated that the legal interpretation in the draft will be the same in the final document. Even when the final Guidance Note is available it will not have any binding legal effect. It remains for the courts to interpret the very broad provisions of the Regulation.

Conclusion

Under the new Regulation, consumer contracts are an exception to the general rule that a defendant can only be sued in their domicile State. By increasing the breadth of the definition of "consumer contract" the Regulation increases the potential for online suppliers of goods or services that are domiciled in one member state to be subject to the jurisdiction of all other Member States.

The decision of the French courts in the Yahoo! case illustrated that some European courts are willing to claim jurisdiction over websites outside their geographical borders. The lack of clarity in the Regulation may accelerate the trend for courts to claim jurisdiction over online suppliers in other Member States.

© Herbert Smith 2002

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