[Ecommerce] E-Commerce Roundtable on Hague Convention negotiations

[James Love]

-------- Original Message --------
Subject: [Hague-jur-commercial-law] Reminder for Roundtable and selected
quotes from the Hague report
Date: Mon, 09 Dec 2002 12:37:09 -0500
From: Manon Anne Ress <manon.ress@cptech.org>
To: haguelist <Hague-jur-commercial-law@lists.essential.org>,	Jeff Kovar
<KOVARJ@ms.state.gov>

This is a reminder that we are having an E-commerce Roundtable hosted by
the American Library Association, Wednesday December 18, 2002, 10am - Noon.

American Library Association
1301 Pennsylvania Ave. NW - #403
Washington, D.C. 20004-1701

Re: Update on the future of the proposed Hague Convention on
Jurisdiction and Foreign Judgments with Jeff Kovar, Department of State,
Elaine T.L. Wu, USPTO, Marla Poor, US Copyright Office, and Peter Trooboff.

Contact:
Miriam M. Nisbet
Legislative Counsel
American Library Association
1301 Pennsylvania Ave. NW - #403
Washington, D.C. 20004-1701
Voice:  202-628-8410, x. 202,
or 800-941-8478, x. 202
Fax:  202-628-8419
e-mail:  mnisbet@alawash.org
http://www.ala.org/washoff

Here are a few interesting quotes from the Hague Conference report:

On license agreement:

    "litigation about infringement would only be covered by the scope of
this Article in the context of a dispute about the terms of a license.
Such litigation about copyright licensing contracts had not given rise
to similar concerns like those of ISPs and consumers, as mentioned
above, in 2001. Where a license agreement contains a choice of court
clause, the group therefore felt that it might be desirable to
strengthen such a clause by including it into the scope of the Convention"

and below more selected quotes from REPORT ON THE FIRST MEETING OF THE
INFORMAL WORKING GROUP ON THE JUDGMENTS PROJECT – OCTOBER 22-25, 2002
on process, formal validity, substantive validity, connection to forum,
possible escape clause, B2B definition, intellectual property...
http://www.hcch.net/e/workprog/index.html

On process:
"the informal group shall explore whether a text could be presented to a
Special Commission, to be held in mid-2003, with a sufficient prospect
of reaching agreement."
[SNIP]
"The group agreed that two or three more meetings would probably be
necessary, the next one to take place from 6 to 9 January 2003 in The
Hague, stretching over three full working days"
[SNIP]
On formal validity:
"An extensive debate developed about the question whether the
Conventional form standard should also be a minimum standard to the
extent that any existing national requirements which were less strict
could no longer be applied.
Some participants were of the opinion that a clause that was invalid as
to form under the Convention but valid as to form under less strict
national form requirements should fall outside the Convention, as
suggested in footnote 6 of Preliminary Document No 19.
Other participants, however, favoured full harmonisation of the formal
validity aspect so that national law would not apply at all in this
area. In their view, it was clear that this had been the approach
followed so far in that Article 17 which defines the grey area is
“subject to Article 4”. This suggests that within the scope of Article
4, i.e. for choice of court clauses, there is no grey area."
[snip]
On substantive validity:
"Capacity...[snip] the group tentatively proposed the following rule for
further consideration:
	“The Convention does not determine the law applicable to the capacity
of the parties.”
"Consent...[snip] In the absence of a choice of law by the parties, the
internal law of the court chosen [by the parties] shall determine
whether a party has consented to the agreement.”

On connection with forum:
"In the context of the discussion about the international element, a
related but distinct question was raised: Should a specific connection
with the forum State be required?
While the concern of those in favour of an international element in the
previous section had been that parties would take domestic cases abroad,
the focus here is on the situation of the chosen courts.  Some
participants wanted to make sure that courts do not become overburdened
with cases that are unconnected with the forum state 9except for the
choice of court clause).  Court congestion, taxpayers' money and a
preference for arbitration in those "unconnected cases were given as
reasons."

While many participants thought that these cases would not be numerous
and therefore did not require special treatment in the Convention,
others had strong feelings and required, more specifically, a connection
between the case and the State of the chosen forum in addition to the
clause. They suggested to either leave it to national law whether the
courts of a Contracting State would take these cases, to allow for the
use of national forum non conveniens, to cover this by a general “escape
clause” to be discussed later, or to provide for a
declaration/reservation that the State requires a connection to the
forum (which could be supplemented by an exhaustive or non-exhaustive
list of required connections in the provision on that
declaration/reservation). Possible connecting factors to be included
were: habitual residence of one of the parties; place of performance of
the contract; the law chosen by the parties; and the location of assets
to satisfy any resulting judgments.

There was strong disagreement on the whole issue."

On possible escape clause:
    Some participants strongly called for a general “escape clause” which
would enable courts to hold a choice of court clause invalid in
exceptional cases. Others felt that this would undermine legal certainty
and foreseeability.
When asked in which cases such an escape clause should apply, those
asking for it mentioned unfairness, injustice, denial of justice and
unreasonableness, in particular. Reference was made to existing clauses
of a similar nature in other Conventions:
·	Article 4 (3) of the Hague Convention of 25 November 1965 on the
Choice of Court: “The agreement on the choice of court shall be void or
voidable if it has been obtained by an abuse of economic power or other
unfair means.”
·	Article 1 (D) of the Inter-American Convention on Jurisdiction in the
International Sphere for the Extraterritorial Validity of Foreign
Judgments of 24 May 1984 (the La Paz Convention) states that the clause
is valid, “provided that such jurisdiction was not established in an
abusive manner …”.
[SNIP]
Others stated, however, that they needed an escape clause looking to the
result. Where the agreement or its effects were unfair, unjust,
unreasonable or similar, it should be possible to disregard it. To those
opposed, this seemed to reintroduce some element of forum non conveniens
they would not wish to accept. In this context, reference was made to
footnote 12 in Preliminary Document No 18 where the criteria given by a
U.S. court to hold a clause unreasonable were the same as those
considered when applying the doctrine of forum non conveniens in many
cases (location of the evidence and of the activities relating to the
dispute). It was pointed out in response that this case was an anomaly,
and that choice of court clauses are virtually never invalidated under
the U.S. Supreme Court test in the Bremen case, according to which
clauses are enforced unless unreasonable or unjust. Nevertheless, the
concepts of unfairness, injustice and unreasonableness were considered
by the opponents to be far too broad. Moreover, a comparison with
arbitration was made in that Article II (3) of the New York Convention
does not contain any such clause. According to it an arbitration clause
cannot be considered invalid just because it was "unfair". Therefore it
should not be easier to get out of a choice of court clause than out of
an arbitration agreement. A contrary argument was advanced that the New
York Convention leaves all questions of validity apart from form to
national law, including questions of justice or fairness.
There was a general discussion of whether there should be an explicit
provision permitting courts to deny enforcement of a choice of court
clause based on public policy.
[SNIP]
Nevertheless, most participants seemed to assume that in truly
exceptional cases their courts would apply a public policy control in
any case. Therefore the group suggested that it would not add any
element of uncertainty or discretion if such a public policy exception
were included explicitly in the Convention. This was based on the
commonly shared notion that such a public policy exception should not be
limited to consent or even to choice of court clauses but should apply
to the whole chapter on jurisdiction (provided that further bases were
to be added during the discussions of the group). In general, it was
pointed out that it would always be the public policy of the court
actually seized.

However, although there seemed to be consensus that any escape clause
(provided that it was agreed to include one) should be applied narrowly,
a pure public policy clause was considered to be too narrow by some.
Therefore the need for an additional specific clause was discussed.
Although no consensus has been reached yet on that question, the group
nevertheless discussed possible wording of such a clause in order to
facilitate consultation.

[SNIP]

A suggestion referring to “abusive actions” was not pursued. The
discussion then centred around manifest unfairness and a denial of
justice. In addition, the proposal to explicitly limit the application
of a possible clause to exceptional cases was supported. Some members of
the group then suggested the following:
	“In exceptional cases, a court may decline to give effect to a choice
of court agreement if giving the agreement effect would result in a
manifest injustice.”
As an initial reaction, others stressed that there should not be any
discretion for the court when applying this provision.


On B2B definition:
“This Article shall not apply to consumer choice of forum agreements or
individual contracts of employment. A consumer choice of forum agreement
is an agreement between a natural person acting primarily for personal,
family or household purposes (the consumer) and another party acting for
the purposes of its trade or profession, or between two consumers.

It was stressed that transactions performed by a business in the area of
social or charitable activities within the scope of its corporate
charter were considered to be “for the purpose of its trade or
profession”, as well as purchases of non-charitable goods made by a
charitable organisation pursuant to its activities.

By this definition, also transactions performed by governments would be
covered where the government acts like a private business. Governmental
privileges and immunities as referred to in Article 1 (5) of the Interim
Text were considered to be sufficient to exclude purely “governmental”
action.

There was some uncertainty whether employment contracts would equally
have to be defined. It was felt that high-profile management staff
contracting with an employer should be covered by the scope of the
Convention. While some participants reported that, in their country,
“individual contracts of employment” would not cover these cases anyway
but presupposed a subordinate, dependant working relationship, other
legal systems seemed to take a different approach.
While some participants were of the opinion that small and medium
enterprises (SMEs) required special protection, others stressed the
difficulty of defining them in case of such a different treatment.
Depending on the decision to be taken on a general “escape clause”, the
issue may have to be revisited at another meeting.
The group rejected the suggestion to include a presumption that a
transaction was a B2B transaction.

[SNIP]

On intellectual property:
The group recognised that under most national laws, the freedom of the
parties to enter into choice of court agreements was limited as far as
the question of validity of patents, trademarks (both registered and
unregistered) and other registered industrial property rights was
concerned. It was normally for the State of registration (or, in the
case of unregistered trademarks, for the State for whose territory
protection was requested) to decide on validity

[SNIP]

Therefore the group tended to excluding those rights in general from the
scope of a rule on choice of court agreements. Tentatively, the group
felt that this should be different for copyright for several reasons.
While for patents and registered trademarks it was understood that
decisions on the validity of a right which had been created by an act of
state should be taken by the authorities of that State only, validity is
normally not an issue in copyright litigation, and moreover,
registration, although sometimes possible, is generally not decisive for
the coming into being of the right as such. Therefore there is generally
no exclusive jurisdiction in national laws with regard to copyright.

Most important, however, is the argument that under a choice of court
clause we are talking about litigation between two parties who have a
contract with each other. Thus the fears voiced in particular by
Internet Service Providers (ISPs) with regard to the tort jurisdiction
under Article 10 of the 2001 text may not be relevant in this context.
The ISPs feared that they could be sued world-wide in cases of alleged
on-line IP infringement and, due to the differences in conflict of laws
rules and substantive law, maybe held liable abroad while they were not
liable in their home jurisdiction. Consumers had similar concerns
because what would be covered by fair use, freedom of information, or
statutory limitations to copyright in their home country, thus allowing
them to make a certain use of a foreign IP right, may be unlawful in
other countries. If jurisdiction exists in those countries and the
judgment is enforceable under the Convention, they would be in danger to
be held liable for infringement.
In these cases, however, there is normally no contractual relationship
between the right-holder and the alleged infringer. Where there is no
contractual agreement between the parties, there is no choice of court
clause, either. Therefore, litigation about infringement would only be
covered by the scope of this Article in the context of a dispute about
the terms of a license. Such litigation about copyright licensing
contracts had not given rise to similar concerns like those of ISPs and
consumers, as mentioned above, in 2001. Where a license agreement
contains a choice of court clause, the group therefore felt that it
might be desirable to strengthen such a clause by including it into the
scope of the Convention.

[SNIP]


-- 
Manon Anne Ress
Consumer Project on Technology
www.cptech.org
PO Box 19367, Washington, DC 20036
manon.ress@cptech.org, voice: 1.202.387.8030, fax: 1.202.234.5176

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