[ARCHIVED CONTENT] E-commerce

EUROPEAN COMMISSION PROPOSALS FOR CHANGES TO ARTICLE 13 OF THE 1968 BRUSSELS CONVENTION

Electronic commerce is bringing the benefits of the single market to more and more European citizens. The Portuguese Presidency’s conclusions following the Lisbon European Council on 23-24 March emphasised that the knowledge based economy is a powerful engine for growth. The Presidency’s conclusions drew attention to the importance of skills, access and take up of new technologies, and on regulation said that:

"the rules for electronic commerce must be predictable and inspire business and consumer confidence … speed of technological change may require new and more flexible regulatory approaches."

The Council conclusions called for work on how to "promote consumer confidence in electronic commerce, particularly through alternative dispute resolution systems". The Government is actively supporting initiatives to develop European self-regulatory schemes including codes of practice and cross border alternative dispute resolution (ADR). It believes that ADR is the practical answer to on-line disputes for many consumers and businesses.

The Brussels Convention* must be considered against this background. It sets the basic legal framework for jurisdiction in disputes between litigants - that is, in which court the case will be heard - and in certain cases allows the consumer to take legal action at home when he or she is in dispute with a trader in another EU Member State. Court action is usually a last resort, particularly in the consumer field, and is rare in cross border cases. However, the Government recognises the need for a legal framework which works for e-commerce, which business understands and which does not deter new entrants.

The changes proposed by the European Commission (extract at Annex A) concern the way e-commerce sales involving websites should be treated.

If you want your comments to be treated in confidence please make it clear. A summary of responses will be published. The Government has already received a number of written representations about the proposed changes to the Brussels Convention. If you have already made a submission there is no need to send it again.

The deadline for comments is Friday 19 May. If you would like to send an initial response by that date, could you please send any further material by 31 May.

1. The Brussels Convention, to which the EU Member States are the signatories, deals with jurisdiction in disputes between litigants and provides for the recognition and enforcement, in the courts of one state, of judgments given in the courts of another state. The Convention deals only with jurisdiction and the enforcement of judgments in civil and commercial matters*.

*The proposed EC Directive on Certain Legal Aspects of Electronic Commerce does not deal with the jurisdiction of courts. Article 3 of the draft Directive, the general aim of which is to allow e-businesses to trade freely in the single market and requires them to comply only with the rules of the Member States in which they are established (the principle of "home state control"), does not apply to the designation of competent courts. The proposal on which the Member States have reached a common position is now before the European Parliament and the Directive is expected to be adopted this year.

2. It does not automatically follow that if a country has jurisdiction over a case, its law applies to the substance of a dispute. The 1980 Rome Convention*, to which the EU Member States are signatories, deals with which country’s law applies in contractual disputes. The Convention contains in Article 5 provisions on consumer contracts which are similar to those in Article 13 of the Brussels Convention (some types of contract within Article 13 of the Brussels Convention are excluded from Article 5 of the Rome Convention). A review of the Rome Convention is expected to take place in 2001.

3. Article 13 confers jurisdiction over a contractual dispute between a consumer and a business in the courts of the consumer’s country of domicile when certain tests are met. These include when:

(a) in the state of the consumer’s domicile the contract was preceded by a specific invitation addressed to him or by advertising, and

(b) the consumer took in that State the steps necessary for the conclusion of the contract.

4. The rationale for Article 13 is that where a business purposely takes advantage of the opportunity to sell to consumers in a particular national market, the consumers should be able to take action in their home courts in the event of a dispute, rather than pursuing the business abroad. (This has similarities to the approach to deciding jurisdiction between the states within the United States.)

5. In the absence of any relevant case law it is not clear how Article 13 applies to electronic transactions and websites in particular. Arguably, it would be necessary to look at the nature of any given website. Some websites might be covered by Article 13. Others, however (eg a site in English with prices in £ Sterling and confining orders to UK customers) might be hard to describe as advertising outside the UK.

6. In May 1999 Member States agreed, as part of their general review of the Convention, that the courts of the consumer’s domicile would have jurisdiction if the trader:

...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 countries...

This amendment suggests that e-commerce contracts are not automatically outside the scope of Article 13. However, it would still be necessary to look at the nature of any given website before deciding whether it amounted to an activity directed to a Member State or several countries.

Commission proposal to convert the Brussels Convention to a Community Regulation

7. In September 1999 the Commission proposed, under powers in the EC Treaty as amended by the Amsterdam Treaty, to convert the Convention, with the amendments agreed in May, into a Community Regulation. The new Title IV of the EC Treaty gives the United Kingdom the choice of whether to opt in to the negotiations on the Regulation. The Government has decided to participate, but is not bound by the Treaty to accept the final Regulation. The Regulation falls to be adopted by the procedure of Article 67 of the Treaty, which includes consultation with the European Parliament.

...electronic commerce in goods or services by a means accessible in another Member State constitutes an activity directed to that State.

Websites are generally accessible from anywhere. Therefore a trader with a website might be said to be directing its activities to all EU countries. If this interpretation were to be held to be correct, it would automatically extend the scope of Article 13 (which as a result of other changes in the draft Regulation is now numbered Article 15) to all transactions stemming from websites. It would depart from the rationale of allowing the consumer to sue at home only if he or she had been deliberately targeted there. According to Recital 13, in the event of a dispute the jurisdiction would always be the consumer’s country. On-line businesses would not be able to limit their exposure by stating which Member States they were targeting. It might be that a business which targeted only its own national market would be deemed to be directing its activities to all other Member States as well.

9. The Government is not seeking to alter the revisions to Article 15 (Article 13 in the present Convention) agreed last May. They are a minor change, clarifying that electronic transactions, including those involving websites, are not necessarily outside the scope of Article 15. However, the Government opposes Recital 13 of the Commission’s September proposal because it might result in an extension of the scope of Article 15 automatically to cover all transactions stemming from websites. The Government invites views on other options including whether the Regulation should contain an alternative definition of what is meant by "directs such activities to that Member State or to several countries..." (see questions below).

10. It might be possible to provide a definition of "directs" which is more consistent with the concept of (to use the words in paragraph 4 above) purposely taking advantage of the opportunity to sell to a particular national market. It might be possible to make it clear that a business could limit its exposure to being sued in different countries by listing the Member States to which its activities were (or were not) directed. To protect businesses from being misled, the Regulation might say that consumers who fail to give correct information about their domicile could lose the protection of Article 15. Leaving the definition of "directs" open, on the other hand, would allow the courts more flexibility to take into account all the circumstances in individual cases, but might not provide the predicable rules necessary to promote the development of e-commerce.

Q1 should provisions be included to explain that a website is not necessarily directed at particular countries, or would it be better for the Regulation to be silent on the matter?

Q2 should an activity be regarded as being "directed to" a state if the invitation to acquire goods or services was extended to, or could be construed as extending to, consumers in that state?

Q3 should a provision clarify that a business could limit its exposure to being sued in different countries by listing the Member States to which its activities are or are not directed?

Q4 should a provision state that consumers who fail to give correct information about their domicile could lose the protection of Article 15?

11. Discussions in the European Parliament and elsewhere have produced some possible further options including:

(i) defer adoption of the Brussels Regulation - either for a fixed period (eg a year), or until a package of related measures, including European out of court dispute resolution and small claims procedures, is in place;

(ii) give consumers a general right to choose whether or not to sue at home (as in Article 16 of the draft Regulation), but allow individual consumers to waive this right through an explicit contractual agreement with the trader.

(iii) apply the consumer provisions of the Regulation to contracts concluded at a distance rather than using the test of activities directed to a Member State or several countries.

12. The approach at 11(ii) is the subject of an amendment tabled by Angelika Niebler MEP (Annex B) which was recently accepted by a majority of members of the Legal Affairs and Internal Market Committee, which is one of the committees of the European Parliament considering the Commission’s proposals. The amendment would not however be confined to e-commerce transactions, and concerns have been expressed that it could lead to confusion in relation to existing Community legislation. It seems likely to be opposed by some Member States and the Commission. Unanimity amongst the participating Member States is required for the Regulation to be adopted.

13. A draft regulatory impact assessment is attached. The Government invites comments on the draft and in particular welcomes responses to the following questions on the likely costs and benefits of the Commission’s proposals and other options.

improve consumer confidence in e-commerce and improve consumers’ access to justice (please quantify where possible)?
increase UK firms’ costs (please specify and quantify where possible) and deter firms from engaging in e-commerce?

Q7 If Recital 13 were removed and Article 15 kept, what would be the effect on:

consumers’ confidence in e-commerce and access to justice?
(ii) UK firms’ costs (please specify and quantify where possible) and their willingness to engage in e-commerce?

Q8 If "directs" were to be defined differently (see paragraph 8, what would be the effect on:

consumers’ access to justice and confidence in e-commerce?
UK firms’ costs (please specify and quantify where possible) and their willingness to engage in e-commerce?

Q9 In the sector with which you are concerned what are the typical costs to firms of insuring against the risk of being sued for breach of contract by consumers in other EU Member States?

EUROPEAN COMMISSION PROPOSALS FOR CHANGES TO ARTICLE 13 OF THE 1968 BRUSSELS CONVENTION

1. The Brussels Convention, to which the EU Member States are the signatories, deals with which court has jurisdiction in civil and commercial disputes between litigants. It also provides for the recognition and enforcement, in the courts of one state, of judgments given in the courts of another state. The Convention is implemented in UK law through the Civil Jurisdiction and Judgments Act 1982.

2. Member States concluded a general review of the Convention in May 1999. As part of this they agreed changes to Article 13, which confers jurisdiction over a contractual dispute between a consumer and a business on the courts of the State of the consumer’s domicile when certain tests are met. These include when:

(a) in the state of the consumer’s domicile the contract was preceded by a specific invitation addressed to him or by advertising, and

(b) the consumer took in that State the steps necessary steps for the conclusion of the contract.

3. The Convention pre-dates the internet and in the absence of any case law it is not clear how Article 13 applies to electronic commerce and websites in particular. The revised version agreed by Member States in May 1999 aimed to address this by saying that the consumer’s country would have jurisdiction if the trader:

...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 countries...

4. The Commission’s proposals, which are part of its wider proposal to convert the Convention into a Community Regulation, incorporate this change to Article 13 (which is re-numbered 15 in the draft Regulation). In addition the Commission proposes to add a recital, Recital 13, which says that

...electronic commerce in goods or services by a means accessible in another Member State constitutes an activity directed to that State.

Since all websites are accessible from any country, a trader maintaining a website might, according to this, be said to be directing its activities to all EU countries. This could extend the scope of Article 15 to all websites so that in the event of a dispute the jurisdiction would always be the consumer’s country.

The concept of activities pursued in or directed towards a Member State is designed to make clear that Article 15 applies to consumer contracts concluded via an interactive website accessible in the State of the consumer’s domicile.

6. The proposed amendments have not been introduced to deal with risks and a risk assessment is not appropriate.

7. The Department’s consultation document sets out a number of options, which broadly fall into four categories:

(iv) defer adoption of the Regulation as proposed or in amended form (for perhaps a year, during which time the existing Convention provisions would remain in force);

It has also been suggested that consumers could be given a general right to choose whether or not to sue at home (as in Article 16 of the draft Regulation), but allowed to waive this right through contractual agreement with the trader. This would not, however, be confined to e-commerce transactions, and concerns have been expressed that it could lead to confusion in relation to existing Community legislation. It seems likely to be opposed by some Member States and the Commission. Unanimity amongst the participating Member States is required for the Regulation to be adopted.

8. The rationale for Article 13 is that where a business targets consumers in a particular national market, those consumers should be able to take action in their home courts in the event of a dispute, rather than pursuing the business abroad. The consumer is often the weaker party in these cases, particularly where he or she has paid before receiving the product or service.

9. The changes to Article 13 which Member States agreed last year and which the Commission has copied into its proposal help clarify that e-commerce contracts are not automatically outside the scope of Article 13, but otherwise the policy of the draft revision is close to the existing Article 13.

10. A rule letting consumers sue at home whenever the transaction stemmed from a website would give more legal certainty. In some cases legal action would be cheaper and less risky for consumers. It might enhance consumer confidence in e-commerce, for example if it led to an increase in traders’ willingness to settle claims voluntarily or submit them to out of court dispute resolution.

11. Value of benefit to consumers: a 1998 paper of the European Consumer Law Group suggests that consumers’ costs might be 3% lower if they could sue at home. In a case which would cost a UK consumer £2000* to pursue abroad, the saving might be around £60. In any given case the figure might depend on factors such as:

(i) the relative costs of legal advice and court services in the Member States concerned;

(ii) whether the consumer would need to give evidence in person and, if so, the distance he or she might have had to travel if the action was brought in the trader’s state;

(iv) the outcome of the case and cost allocation rules of the court in question.

*A 1995 study for the Commission said that the cost of pursuing a cross border claim for 2000 ECU would be 2,500 ECU (about £1500), excluding the cost of having the judgment enforced.

12. It is not possible to put a value on the effect of the Commission’s proposal on consumer confidence. The total direct monetary value of the benefit is likely to be low. UK consumers bring few cases using the Brussels Convention. In 1998, 69 individuals made requests for documents to be served to other Member States*. Furthermore Article 5(1) of the Convention and draft Regulation will already give jurisdiction to the courts of the place where the goods/services were to be delivered (usually the consumer’s home address) in many simple contracts for the sale of goods or supply of services. In a few cases Option (i) might enable consumers to pursue claims which it would not be economical to pursue at present. In such cases the value of the claim itself would be added to the benefits if the consumer were to win the case.

*Source: The Court Service. Not all of the 69 cases will necessarily have involved UK consumers suing foreign businesses in the UK courts.

13. Depending on how this was done, it might help clarify that e-commerce contracts are not automatically outside the scope of Article 15. This might provide more legal certainty (which would benefit business and consumers) and business would be less exposed to the risk of being sued in other jurisdictions than under Option (i).

14. Much would depend on how the courts interpreted "directs such activities". The likely benefits to business and consumers are hard to quantify, but might fall somewhere between those of options (i) and (ii).

15. Deferral would allow more time for cross border out of court dispute resolution to develop within the EU. This might help reduce the risk that the Regulation could deter businesses from engaging in e-commerce.

16. The following comments relate mainly to Option (i), the Commission’s proposal. Option (ii) might, depending on the detail of the definition, be close to the status quo. Options (iii) and (iv) would impose lower costs than Option (i).

17. All UK businesses selling to consumers in other EU countries could potentially be affected, but the numbers directly affected are likely to be small - those sued for breach of contract in circumstances falling within the scope of the draft Article 15/Recital 13 (but not within the existing Article 13). Firms selling higher value services such as financial services and holidays are more likely to be affected. Costs could arise in three ways:

18. In paragraph 11 above we note that the UK consumer might save £60 if he or she could pursue a £2000 claim at home, but that the actual amount would depend on a range of variables. If in the case of a consumer in another Member State suing a UK firm there was a similar saving to the consumer, the cost would fall on the UK firm firm, which might also incur additional legal expenses depending on how it decided to defend the claim.

19. A typical business would be unlikely to be sued by a consumer in another Member State, but might insure against the risk. Figures from the Association of British Insurers reported that in 1998 5-10% of firms took out commercial legal expenses insurance. This insurance usually provides cover against a range of risks and not just those associated with consumer contracts. Premiums cost £24,651,000 in 1998, or an average of about £66-130 per firm on the assumption that there are around 3.7m businesses in the UK. The Commission’s proposal might lead to a slight increase in premium levels and in the number of firms taking out insurance.

20. The total costs might consist of any increased premium payments (paragraph 19), plus an extra amount per case as in paragraph 18. We do not have information on the number of cases which would be likely to arise, but the Court Service has supplied the following figures on requests from other Member States for service of process against companies in this country in 1999:

Note: these figures are only provided as a guide. Most of the above requests are likely to concern businesses to business disputes. However, not all cases are served through the Court Service, so the actual figures could be higher.

A small business litmus test - individual consultations with a small number of SMEs - is to be carried out.

23. DTI held a seminar in October 1999 to consult business and consumer organisations, regulatory bodies and academics about the Commission’s proposals. A summary of points made and a list of attendees is at Annex B. A written consultation exercise is underway, with an initial deadline for comments of 28 April.

25. Article 15 provides rules to be applied by the courts in determining jurisdiction in certain consumer cases and would not be enforced by any public authority. Article 65 of the Commission’s proposal would require the Commission to present a report on the application of the Regulation five years after its adoption.

Council Regulation on jurisdiction and the recognition and enforcement of judgements in civil and commercial matters.

This Chapter contains a single Article, which is unchanged. The scope is the same as that of the Brussels Convention; it should be remembered that the Commission has presented a proposal for a Regulation on jurisdiction and the recognition and enforcement of judgements in matrimonial matters*, and Germany and Finland have presented the Council with a proposal for a Regulation on insolvency procedures**.

This Article establishes the principle of the defendant’s domicile as the general ground for jurisdiction. It contains two new paragraphs. The purpose of paragraph 3 is to make the text more transparent; it refers to Article 57 for the definition of domicile in relation to legal persons. Paragraph 4 defines the concept of "Member State" as being a Member State bound by the Regulation. Denmark, the United Kingdom and Ireland are not concerned by the Regulation. But they cannot be treated as non-member countries, either as regards the rules of jurisdiction to be applied there or as regards the recognition of judgements given there.

The list of national grounds of jurisdiction that may be used in the Member States against defendants not domiciled in a Member State are given in Annex I to the Regulation. The Annex may be amended if need be and will be published in the Official Journal. The list has been amended very slightly to reflect a subsequent change in Italian national legislation.

The rule determining the scope rationae personae distinguishes between two situations: cases where the defendant is domiciled in a non-member country and cases where the defendant is domiciled in a Member State not bound by the Regulation.

Where the defendant is domiciled in a non-member country, national rules will apply. But this rule does not operate where a court in a Member State has exclusive jurisdiction (Article 22). Nor will it operate where the defendant, although domiciled in a non-member country, has signed a contract containing a clause-conferring jurisdiction on a court in a Member State. By Article 23, it is enough that one of the parties to the case (not necessarily the claimant) be domiciled in a Member State

Where the defendant is domiciled in a Member State not bound by the Regulation, the Brussels Convention rules on jurisdiction will, of course, be applicable.

The Brussels Convention rule regarding contractual obligations is maintained. But to remedy the shortcomings of applying the rules of private international law of the State whose courts are seized*, the second paragraph of Article 5(1) gives an autonomous definition of the place for enforcement of "the obligation in question" in two specific situations. For the sale of goods, it will be place where, under the contract, the goods were or should have been delivered. In the case of the provision of services, it will be the place where, still under the contract, the services were or should have been provided. This pragmatic determination of the place of enforcement applies regardless of the obligation in question, even where this obligation is the payment of the financial consideration for the contract. It also applies where the claim relates to several obligations. The rule may, however, be "displaced" by an explicit agreement on the place of performance.

Where the effect of the autonomous definition is to designate a court in a non-member country, rule (a) will apply rather than rule (b). Jurisdiction will lie with the court designated by the rules of private international law of the State seized as the court for the place of performance of the obligation in question (c).

Article 5(3) covers not only cases where the harmful event has occurred but also those where it may occur. The proposed text removes an ambiguity in the interpretation of Article 5(3) of the Convention. It offers litigants a clear ground of jurisdiction for preventive measures. And since the Protocol annexed to the Brussels Convention is deleted, Article II of the Protocol (proceedings for involuntary offences before criminal courts) is incorporated here.

Paragraph 1 explicitly makes the subjecting of cases involving several defendants to a single forum conditional on the claims being so closely linked that there is a risk of irreconcilable judgements. It expressly takes over the rule posited by the Court of Justice for the interpretation of this Article*.

*Case 189/87 Kalfelis v Banque Schroder [1988] ECR 5565 (judgment given on 27 September 1988).

Paragraph 2 contains a new sub-paragraph incorporating the provision earlier contained in Article V of the Protocol to the Brussels Convention in favour of Austria and Germany, where the procedural law makes no provision for claims for guarantees or intervention but only "litis denuntiatio" (third-party notices).

The jurisdiction conferred by this Section is substituted for that conferred by Sections 1 and 2.

This Article is unchanged. But in matters of reinsurance it must be interpreted as not applying in relations between insurers or in relations between insurers and re-insurers. There is no particular need for weaker-party protection. On the other hand the Article does apply actions brought by policy-holders against re-insurers.

The right of the applicant to sue in his own courts, originally conferred by this Article solely on insurance policy-holders (first paragraph, point (2)) is now extended to the insured person and the beneficiary where they are the applicant. The objective of protecting the weaker party in the case, which warrants an exception from the principle that jurisdiction lies in the defendant'’ domicile in favour of the applicant’s domicile, also applies to applicants who are insured persons or beneficiary, who are likewise in a weak position in relation to the insurer.

As in Article 6, Article V of the Protocol applicable to Austria and Germany, where the procedural law makes no provision for claims for guarantees or intervention but only "litis denuntiatio" (third-party notices).

The derogation provided for by paragraph 5 of Article 13 from the strict rules governing clauses conferring jurisdiction in relation to insurance is extended to all "large risks" that are or will be defined in Article 5(d) of Council Directive 73/239/EEC of 24 July 1973 on the co-ordination of laws regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance, as amended by Council Directives 88/357/EEC and 90/618/EEC, and to ancillary risks. Subsequent amendments to Directive 73/239/EEC will affect the scope of the concept of large risks to which Article 14 applies.

The jurisdiction conferred y this Section is substituted for that conferred by Sections 1 and 2.

Article 15 confirms the orientation reached in the Council concerning the need to protect consumers, as the weaker parties to a contract. The contracts traditionally covered by this Article – sale of goods on instalment credit terms and contracts for loans repayable by instalments other and similar credit arrangements to finance the sale of goods – automatically entitle the consumer to sue in the courts for his domicile, and in this respect there is no change to the content of Article 13 of the Brussels Convention. It is also proposed that Article 15, first paragraph, point (3), be amended to extend this entitlement to all other consumer contracts, provided certain conditions are met.

The use of general terms makes clear that all the contracts mentioned in points (1), (2) and (3), whether they relate to goods or to services, are within Article 15 as long as they are consumer contracts. "Time-share" contracts* are within Article 15 and not Article 22(1)(a), unlike contracts for the sale of real property.

*Directive 94/47/EC of the European Parliament and the Council of 26 October 1994 on the protection of purchasers in respect of certain aspects of contracts relating to the purchase of the right to use immovable properties on a timeshare basis (OJ L 280, 29 October 1994).

The criteria given in Article 13(3) of the Brussels Convention have been reframed to take account of developments in marketing techniques. For one thing, the fact that the condition in old Article 13 that the consumer must have taken the necessary steps in his state has been removed means that Article 15, first paragraph, point (3), applies to contracts concluded in a State other than the consumer’s domicile. This removes a proved deficiency in the text of old Article 13, namely that the consumer could not rely on this protective jurisdiction when he had been induced, at the co-contractor’s instigation, to leave his home State to conclude the contract. For another, the consumer can avail himself of the jurisdiction provided for by Article 16 where the contract is concluded with a person pursuing commercial or professional activities in the State of the consumer’s domicile directing such activities towards that State, provided the contract in question falls within the scope of such activities.

The concept of activities pursued in or directed towards a Member State is designed to make clear that point (3) applies to consumer contracts concluded via an interactive website accessible in the State of the consumer’s domicile. The fact that a consumer simply had knowledge of a service or possibility of buying goods via a passive website accessible in his country of domicile will not trigger the protective jurisdiction. The contract is thereby treated in the same way as a contract concluded by telephone, fax and the like, and activates the grounds of jurisdiction provided for by Article 16.

The removal of the condition in old Article 13(3)(b) that the consumers must have taken necessary steps for the conclusion of the contract in his Home State shall also be seen in the context of contracts concluded via an interactive website. For such contracts the place where the consumer takes these steps may be difficult or impossible to determine, and the may in any event be irrelevant to creating a line between the contract and the consumer’s State. The philosophy of new Article 15 is that the co-contractor creates the necessary link when directing his activities towards the consumer's State.

Article 15, third paragraph, and also contains an amendment. The exclusion of transport contracts does not apply where the contract covers both travel and accommodation for an all-in price (package holidays)*.

*Council Directive 90/314/EC of 13 June 1990 on package travel, package holidays and package tours: OJ L 158, 23.6.1990.

The Commission has noted that the wording of Article 15 has given rise to certain anxieties among part of the industry looking to develop electronic commerce. These concerns relate primarily to the fact that companies engaging in electronic commerce will have to contend with potential litigation in every Member State, or will have to specify that their products or services are not intended for consumers domiciled in certain Member States. One such concern relates to the perceived problems with the notion of "directing his activities" in Article 15, first paragraph, point (3), which is considered difficult to comprehend in the Internet world.

In order to further clarify the legal implications and requirements of electronic commerce, in particular in respect of jurisdiction and applicable law, as a result of the economic, transborder development of electronic commerce, the Commission will organise a hearing on this subject in the Autumn of 1999 with the participation of regulators, legislators, consumers, industry and other interested parties.

The Commission intends to report in accordance with Article 65 on the application of Article 15 not later than two years after the entry into force of the Regulation.

To increase consumer protection, the option available to the consumer in case of disputes is either the Member State where the other part is domiciled or the courts of the place where he is domiciled (and not the Member State where he is domiciled). This departure from the rule that the Regulation applies only to international jurisdiction and not to jurisdiction within a Member State is warranted by the concern to enable the consumer to sue the other part as close as possible to his home.

The jurisdiction conferred by this Section is substituted for that conferred by Sections 1 and 2.

The provisions concerning jurisdiction in relation to employment contracts undergo little change of substance but are re-grouped in a specific section as is the case for insurance and consumer contracts. The rules of jurisdiction in Articles 19 and 20 apply without prejudice to the rule laid down by Parliament and Council Directive 96/71/EC of 16 December 1996 concerning the posting of workers in the framework of the provision of services*.

Article 18(2) applies where the employer, although not domiciled in a Member State, operates a branch, agency or other establishment there. The employer is then presumed to be domiciled in a Member State. This increases the protection given the worker, considered to be the weaker party to the contract. The same protection is already available to the insurance policy-holder and is now extended to the insured and the beneficiary (Article 9(2) and to the consumer (Article 15(2)), who again are the weaker parties enjoying enhanced protection.

SECTION 4 – JURISDICTION OVER CONSUMER CONTRACTS

Article 15

In matters relating to a contract concluded by a person, the consumer, for a purpose which can be regarded as being outside his trade or profession, jurisdiction shall be determined by this Section, without prejudice to Article 4 and Article 5(5), if:

it is a contract for the sale of goods on instalment credit terms; or
it is a contract for a loan repayable by instalments, or for any other form of credit, made to finance the sale of goods; or
in all other cases, 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 countries including that Member State, and the contract falls within the scope of such activities.

Where a consumer enters into a contract with a party who is not domiciled in a Member State but has a branch, agency or other establishment in one of the Member States, that party shall, in disputes arising out of the operations of the branch, agency or establishment, be deemed to be domiciled in that Member State.

This section shall not apply to a contract of transport other than a contract which, for an inclusive price, provides for a combination of travel and accommodation.

Article 16

A consumer may bring proceedings against the other part to a contract either in the courts of the Member State in which that party is domiciled or in the courts for the place where the consumer is domiciled. 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 first and second paragraphs shall not affect the right to bring a counter-claim in the court in which, in accordance with this Section, the original claim is pending.

Article 17 The provisions of this Section may be departed from only by an agreement:

which is entered into after the dispute has arisen; or
which allows the consumer to bring proceedings in courts other than those indicated in this Section; or
which is entered into by the consumer and the other party to the contract, both of whom are at the time of conclusion of the contract domiciled or habitually resident in the same Member State and which confers jurisdiction on the courts of that Member State, provided that such an agreement is not contrary to the law of that Member State.