SLA: issues of jurisdiction (I)

Question: in case of B2C SLA, what if there is no clause about jurisdiction and the competent judge? How is it possible to assess which court will be competent?

Basically when the parties do not include a choice of court clause in their contract, it is necessary to determine the competent court with reference to the applicable ordinary rules on jurisdiction. In EU Member States the first question to be asked is whether Council Regulation 44/20019, which is the most important legal source in the field, is applicable and consequently if the defendant (i.e. the person/company sued) is domiciled within the European territory. It is first of all necessary to separate B2C from B2B scenarios, provided that in the former cases the contractual freedom of the parties to choose the competent court is limited by legal rules. Regulation 44/2001, in fact, provides for specific rules applicable to consumer contracts, i.e. agreements concluded with a person “for a purpose which can be regarded as being outside his trade or profession”, as specified by art. 15(1). The first problem to analyse regards the notion of ‘consumer’, and the solutions provided before apply also to this topic. The definition provided by the above legal provision is (also in this case) apparently very clear, so that a person is a consumer every time he buys a good or a service for purposes not linked to his activity, profession, or business. Therefore, in the above example, a lawyer who requires Grid storage resources to host his professional file is not a consumer and, as a consequence, the special rules set forth by the Regulation (see infra) do not apply. If, on the other side, the same lawyer buys storage capacity for his personal files, e.g. music, videos or pictures, he is deemed to be a consumer.

The special rule for the determination of the competent court can be found in art. 16 of the Regulation. This provision is applicable if the criterion set forth by art. 15(1)(c) is met, i.e. if and when “the contract has been concluded with a person who 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 Member States including that Member State, and the contract falls within the scope of such activities.” It may problematic, in an e-commerce scenario, to assess whether or not this criterion is met. The indent ‘by any means’ refers, as pointed out in the literature [Rowe] [Berliri] and by the European Commission [Proposal 1998], to business activities carried on through the Internet, and an example will clarify the point. Let us assume that a Grid provider, established in the Netherlands, has a website through which customers located all around the world, including in the Member States of the EU, can buy services. The question that arises is whether or not such a website can constitute a way to direct activities to those Member States: to provide an answer to this question, some criteria must be taken into account. First of all, we could assume that the language of the website is a key factor. [Graham] Can we say that a website that is, for instance, only in English is directed only to English-speaking countries, so that if a German consumer buys services there the special protection set forth by Regulation 44/2001 does not apply? We would say that this solution is not satisfying and may lead to unfair treatments: provided that the majority of the websites of ICT vendors is in English, only customers domiciled in the United Kingdom or in Ireland will be protected, although these websites are accessible also by other countries and sell services to customers located all around Europe. On the other way, we can assume that a website translated in many languages is a clear indicator of the will of the company to address some specific national markets. 

From a different perspective, it is necessary to assess the nature and the characteristics of the website in order to establish whether or not it is directed to sell products or services in one or more Member States. The literature [Wild] and the European Commission itself [Proposal 1998] rely on the distinction between passive and active website: the former is a website that contains only advertising material and that provides mere information, while the latter allows the client to enter into an agreement with the supplier and therefore buy Grid services or Grid-based services. It is necessary to perform a case-by-case analysis in order to assess whether a website is passive or active: in principle, if the technology or service provider has a website with information in several European languages and it is possible for the customers to buy the offered services, i.e. ‘signing’ a contract, providing his credit card number, etc there are few doubts that the provider wanted to target those national market and therefore customers domiciled there will enjoy from the protection offered by Regulation 44/2001.

This happens unless the provider expressly states in the website that the offered products and services are not intended for a certain market, [Rosner] or if payment is expressed only in one currency and no other currencies are accepted (this criterion is not very effective after the adoption of the Euro) or it is possible to pay for the services only with credit cards issued in one or more specific countries (if, for instance, only credit cards issued by German banks are accepted it is pretty clear that the services are not intended to be sold in Belgium).

Having said that, art. 16 specifies which courts will be competent if the above requisites are met. Pursuant to paragraph 1, “a consumer may bring proceedings against the other party to a contract either in the courts of the Member States in which that party is domiciled or in the courts for the place where the consumer is domiciled.” This means that a customer, when acting as plaintiff i.e. when bringing an action against a technology or service provider, can choose the court of the place where he is domiciled or the court of the place where the provider is domiciled. Art. 16(2) provides a solution for the opposite case, when the provider brings an action against the consumer (who is thus the defendant): “proceedings may be brought against a consumer by the other party to the contract only in the courts of the Member State in which the consumer is domiciled.” The protection for the consumer is here evident.

The above provisions, especially paragraph 1, make also clear that these special rules are applicable only if the defendant is domiciled in a Member State. If, pursuant to art. 4, this is not the case in point, the national jurisdictional rules will apply. In other words, if a consumer, domiciled in France, wants to sue a Grid provider domiciled in the United States the jurisdiction will be assessed in light of the national rules of civil procedure of France. If, on the other side, the Grid provider is domiciled in a Member State, nulla quaestio and the rule of the Regulation will be applicable. It is, then, necessary to establish when a person is domiciled in a Member State. First of all, pursuant to art. 59(1), the court seised of a dispute will decide whether or not the party is domiciled in that State applying its national law.

For what concerns “a company or other legal person or association of natural or legal persons” (i.e. Grid providers and providers of Grid-based services), art. 60 specifies that the domicile will be determined by the place where the company etc has its (i) statutory seat, or (ii) central administration, or (iii) principal place of business. It is often cumbersome to establish these coordinates and “sometimes the principal place of business of such a company, especially if it sells electronic materials, is rather difficult, if not impossible, to be established” [Rosner].

In case of Grid providers, we would exclude that the place where the Grid components (i.e. servers, routers, nodes, etc) are located corresponds to the principal place of business of the company, which is a business fact rather than a technical one.
 
A further issue related to the domicile of the consumer is the consideration that must be paid to the place from where the consumer buys the services. In other words, does it matter if a consumer, who lives (i.e. is domiciled) in Germany, buys online services while on business or leisure trip to Spain? Does this prevent the competence of the German courts, as indicated by art. 16? The literature did not reach a univocal position on this point, but the majority of the authors say, in the above example, that German courts will be competent as far as the website targets also Germany. If, for instance, the German consumer buys Grid-based services while he is in Spain from a website that allows sales only to users located in Spain (e.g. thanks to the adoption of GeoIP-based filtering systems), the consumer could not sue the company in Germany.[Riefa] [Rosner].