AS OF NEXT MONTH, using a dot-com strategy for e-commerce in Europe will become a lot more difficult. The reason? A new regulation has been passed that effectively means any company trading online within the European Union (EU) will have to abide by the laws of all 15 member states – simultaneously.
Not surprisingly, the legislation has been condemned by the direct marketing industry. Alastair Tempest, director general of the Federation of European Direct Marketing Associations (FEDMA), says: “It’s ridiculous – this goes too far.” However, because ministers of justice in the European Parliament have introduced the law, it’s almost certain to be adopted by the EU’s member states and put into effect immediately. (Normally, new laws would have to be passed into each country’s statute books individually.)
The justice ministers, each of whom represents a member country in Parliament, have finalized the regulation’s wording. It’s the resolution of a long-running debate that’s caused concern among DMers and commercial organizations. The controversy began in November 1999 when the European Commission (EC) held a hearing on the issue of jurisdiction over private international law (DIRECT, December 1999).
The situation arose because the core conventions that established the EU in the early 1970s did not give it authority over contracts between private companies and individuals. This left open the question of where a consumer with a complaint against a company based in a different country could bring a lawsuit against it.
According to Tempest, the November 1999 hearing “was not a particular success – it was a face-off between industry and consumer interests. I’m sure that’s how the European Commission wanted it to be.” The industry’s view was that if there’s a single market across the EU with no trade barriers or frontiers, a law that puts up obstacles to e-commerce should not be passed.
Yet this is precisely what the new regulation does. It gives consumers the right to raise a case in their own country (known as the “country of destination” approach), rather than making the contract subject to the law in the country where the trader is based (known as “country of origin”). For example, if Amazon.com were to trade across Europe as a single dot-com Web site (instead of using the approach it favors: the Amazon.co.uk or French-language Amazon.fr sites), it would have to accept liability in 15 separate legal codes.
“[This is] grossly unfair to companies. It might be all right for the big players, but not for everyone else, particularly small- and medium-sized enterprises,” asserts Tempest. FEDMA did score one victory over the EC’s original proposals, however. These said that a Web site would be subject to the jurisdiction of any country that could access it within the EU, even if the company was not trading with consumers there. This has now been struck from the legislation.
For DMers and e-commerce organizations, the problem with the regulation is its wording. Instead of directly addressing the rights of buyers, it allows courts of law to hear cases in the country of destination if they choose to.
“It’s more difficult to argue that courts shouldn’t have the right to hear cases brought by individuals in their country. That’s like arguing against motherhood and apple pie,” says Tempest. The regulation also has political backing, as it represents a formal agreement reached between member states on this issue. While it will have to be adopted by a unanimous vote in the European Parliament, it seems unlikely that any members will object.
Although judges in the country of destination will now have jurisdiction to settle consumer disputes with traders, they could still choose to work under the legal code of the country of origin. (An example of this procedure was the recent trial of the Lockerbie airline suspects; a court in the Netherlands heard the case under Scottish legal practices.)
Such a choice seems unlikely, however. Instead, companies pursuing e-commerce across the EU may be forced to leave a footprint in each country where they trade and to limit their offer to buyers in that territory. That way they can contain their legal exposure. As Tempest says, “watch this space [for further developments].”
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