Most companies have already established a Web site that can be accessed by users in just about every country in the World. Indeed, its global reach is one of the Web's most powerful attractions since it creates opportunities for us to penetrate markets that were previously inaccessible. However, in pursing such opportunities, we expose ourselves to the horror of becoming engaged in litigation in every single jurisdiction from which our Web site can be accessed. This means we are at risk of being hauled before courts in almost every country in the world, including the USA. And this risk of entanglement in a web of international litigation increases significantly once we begin to engage in e-commerce.
However, legal structures can be created for the conduct of e-commerce that very significantly reduce our exposure to international litigation. In this area, it is clear that an ounce of prevention is worth the proverbial pound of cure. Businesses who are in the process of exploring their options for conducting e-commerce - and few can afford to ignore the impact of the Internet and e-commerce on our business - need to be addressing these issues in a proactive way. The cost of waiting to react to a crisis, involving the potential of litigation in distant lands, is far too high to ignore.
As we begin to market and sell our products and services in cyberspace, we therefore need to increase our understanding of how we can manage legal risks across national boundaries. In particular, we need to know what we can do to reduce the risk of being dragged into distant Courts where it may be expensive and difficult to protect our rights.
We have already seen that contracts are our most flexible and powerful tools for creating certainty in commercial transactions. In relation to the management of our legal risks across national boundaries, contracts provide us with tools to manage the risk of becoming entangled in a web of litigation across the globe. In particular, there are three types of contractual provisions that can be used to minimize our exposure to international litigation:
- Clauses that express a choice of jurisdiction, e.g. the Courts of Trinidad & Tobago or the Courts of New York;
- Clauses that express a choice of law, e.g. the laws of Trinidad & Tobago or the laws of New York; and
- Clauses that express a choice of dispute resolution mechanisms, e.g. mediation or arbitration.
Obviously all of these contractual provisions are closely related. And informed commercial decisions need to be made about how aspects of all three can be combined for use on your Web site or in other electronic communications.
Companies that have engaged in significant international commerce have long used all three types of clauses. However, as digital technology and the Internet allow us to break down barriers of time and space and become involved in international commerce, a much wider range of companies need to make consistent use of these types of contractual provisions. Fortunately, many models are available and these can be adapted to meet our own business objectives as we begin to conduct e-commerce in worldwide markets.
In relation to clauses addressing the choice of dispute resolution mechanism, in particular, a wide variety of approaches are available. Mediation may be especially relevant to many models of conducting e-commerce. Interesting new models for dispute resolution are being developed and made available on the Web itself. Companies that intend to market heavily on the Internet may want to keep a close eye on these developments. For some kinds of electronic transactions these hold considerable promise as they can find acceptance among your potential customer base that will, by definition, be made up of Internet users.
Apart from drafting suitable language covering some blend of these three areas, we also have to decide how to make the user aware of these clauses. And we need to find a way to create a reliable record - such as will be acceptable in a Court - of the fact that the user has agreed to these terms spelling out the choice of jurisdiction, law and dispute resolution mechanisms. When we addressed the incorporation of contract terms into electronic contracts earlier in this series, we identified some of our options when designing the structure and user-interface of our Web sites to achieve these objectives.
When properly thought through, therefore, contractual terms can be assembled into legal structures that we can use to conduct e-commerce via the Web while managing the risk of becoming embroiled in international litigation. However, this risk cannot be entirely eliminated, nor can it be properly managed by using contractual approaches alone. One reason for this is that each country has its own laws that govern when, and in what circumstances, contractual provisions expressing a choice of jurisdiction, law or dispute resolution mechanism may be invalid or unenforceable.
In our next article, we shall therefore examine some of the additional steps that we can take to provide further protection against the risk of becoming embroiled in international litigation when we establish a commercial presence on the Internet and begin to conduct e-commerce via the Web.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
