Addressing the Jurisdictional Issues Over Cyberspace Transactions By Reuben C. Okafor

Introduction

Technology is massively transforming the world. Disruptive
innovations are churned out almost a daily basis and these have
affected the way we do things. The traditional marketing landscape
has been disrupted by technology, and the issue of courts’
jurisdiction in resolving disputes arising from e-commerce (also
“e-business”) transactions tends to pose a major challenge to the
parties involved. It is not in doubt that technology has
transformed our states of living, but we cannot wish away the
challenges appurtenant to it; and the most prominent and current
issue, is the jurisdiction of courts to resolve interparty disputes
which arose in the course of entering or performing a cyberspace
contractual transaction.

Jurisdiction

Jurisdiction is the power of a court to entertain a matter
brought before it. It is a very fundamental condition which
empowers a court to entertain, hear and deliver its decision on a
matter brought before it. Where a court lacks the capacity to
assume jurisdiction over such matter and goes ahead to hear and
deliver its judgment on the matter, on appeal, such decision would
be upturned by the appellate court, as the trial court could not
have entertained the matter ab initio. Jurisdiction can
either be substantive, procedural, or personal. Where it is
substantive, the subject matter of the case must, as a principal
condition, fall within the jurisdiction of the court, and where
such is lacking, the court shall not entertain the case, as
whatever it does where it has no jurisdiction to do so is deemed
void ab initio. Where the jurisdiction is procedural, it
means that the claimant must have observed the requirements for
approaching the court, and where he fails to do so, the court shall
not entertain such matter. He must come properly before the court.
This is summarised in the locus classicus case of
Madukolu v. Nkemdilim (1962) 1 NLR, 587
where the Federal Supreme Court espoused that for a court to have
jurisdiction over a case brought before it, such court must be
properly constituted as to the judges presiding over the case, the
subject matter of the case must fall with the jurisdiction of the
court, and that it must be properly brought before the court; due
process must be observed. Personal jurisdiction, on the other hand,
is not a popular term within our legal system. However, its purport
is that the courts ought to have personal jurisdiction over one or
all of the parties based on the fact that the individuals, or
either of them, is resident where the court is situate. This can as
well attach to venue (as jurisdiction can sometimes be used
interchangeably to mean the venue of the court) and this is the
object of this article- what should be the proper venue to commence
an action against a defaulting party in a cyberspace
transaction?

Some Basic Contractual Principle

The general position of the law is that where disputes arise
from a contractual transaction because of a breach of any, or all
of the terms of the contract, by either of the parties to the
contract, such disputes should be resolved in the court having
jurisdiction where the defendant resides or carries on business, or
where the contract ought to have been performed. Another principle
of law providing guidance on how to determine the jurisdiction
where a party can commence an action for a breach of contract, is
the choice of law as agreed by the parties, which could be the law
of the jurisdiction where the contract was entered into, expressed
in the Latin term- “Lex loci contractus,”
or the law of the jurisdiction where the contract ought to have
been performed expressed, “Lex loci
solutionis.”

However, the current developments in the area of cyberspace
transactions seem to render non-effect, or make it very cumbersome
for the applicability of the traditional principle guiding the
choice of jurisdiction for the enforcement of contractual terms. It
is important to note that parties are permitted, by law, to enter
into contractual relationships and choose the governing law and/or
jurisdiction which should regulate the contract so entered. That
way, the principle of “Lex loci
contractus” or “Lex loci
solutionis” may be relevant in this technology age
(but this is highly doubtful as the parties rarely have a
one-on-one negotiation, but operate on the basis of the terms and
conditions of use contained on the e-business owner’s website).
Transactions have transfigured from the original one-on-one
transaction to e-commerce. E-commerce enables people from different
localities, regions, countries and even continents to enter into a
contract for purchase of goods or services. As such, neither of the
parties may meet each other physically till the contract is
performed. This is the innovation which technology has brought to
us.

Now, the question is, in the event that the cyberspace
contractual relationship becomes flustered, which country should
have jurisdiction in such case? Where should the aggrieved party
seek redress? Should it be the location where the contract ought to
have been performed or the location where defendant resides or
carries on business, or the location where the contract was entered
into? Courts have been divided in their decisions with respect to
this issue. It is important to have in mind the age-long
international law principle that countries have equal status in the
international plane. Therefore, a sovereign country should not
impose itself or make another sovereign country subservient to its
laws. Let us consider some jurisdictions where this issue had been
addressed by the courts.

United States of America

The courts in the United States (U.S) have been confronted with
issues bordering on its jurisdiction over matters involving a U. S
subject and a foreigner. And the courts have propounded two
principles in resolving such issues, namely:

• Minimum/Minimal Contacts; and
• Personal/Purposeful Availment Tests.

Minimum/Minimal Contacts Test

The U.S Supreme Court, in International Shoe v. The
State  of Washington,
326 U.S 310 (1945), held that in the minimum
contacts test, there must be sufficient contacts or ties to make it
reasonable and just for the court to establish personal
jurisdiction over a party and that due process must have been met.
This happens where, for instance, a party from another jurisdiction
pushes spam messages to citizens of the United States to advertise
his product(s), or does an act that ties him to that forum. Such
act, in the opinion of the court, suffices to establish minimum
contacts with the forum and therefore, such person is amenable to
the jurisdiction of the U.S court.

Personal/Purposeful Availment Test

The U.S court, also, in Zippo Mfg. Co. v. Zippo Dot
Com, Inc., 952 F. Supp. 119 (W.D. Pa. 1997), followed
this standard. The position of the court was that, in determining
whether it has personal jurisdiction over a foreigner who is a
party to the suit before it, and the act resulting to the suit was
done through a website, the court would review the website to
determine whether it is passive or active. According to the court,
an active website will allow a user to order products or services
and therefore establish personal jurisdiction. On the other hand, a
passive website would only present information or advertising. In
opinion of the court, exchanging information with a host computer
is insufficient activity to satisfy the purposeful availment
standard and cannot establish personal jurisdiction over the
foreigner. Therefore, for the court to assume jurisdiction over the
defendant, the website must be an active one which can tie the
defendant to the forum of the court.

Other Jurisdictions Generally

Different decisions of courts in other foreign jurisdictions
tilt towards favouring the claimant. Just recently, in a case
involving Facebook and some Belgian
users, a Belgian court held that it was competent to hear and
decide a matter before it on breaches of Belgian privacy law when
the company tracked web users in Belgium. This was in response to
Facebook’s contention that the court
lacked jurisdiction over a matter involving a business
headquartered in the U.S.A. Even though the ruling of the Belgian
court was overruled on appeal to a U.S Court of Appeal which held
that the Belgian court lacked jurisdiction over
Facebook, it however shows that courts’
interests have been aroused internationally to place a check on
cyberspace transactions. In a proceeding instituted against
Booking.com, an Israeli court held that
it had jurisdiction to deliberate the lawsuit, even though the
company who owns the website is domiciled in the Netherlands. A few
months earlier, in an action against
LinkedIn, whose owners’ places of
domicile are Ireland and California, U.S.A, the court held that in
this age of “global village,” which is characterised mainly by use
of the internet, the major corporations providing their services
throughout the world through the internet must take into account
the possibility that consumer lawsuits for damages resulting from
their services will be adjudicated in the place or domicile of
those consumers when their identities are clearly known to the
website. Similarly, in a suit against
PayPal, an Israeli court also held that
the fact that major corporations conduct their service principally
or exclusively via the internet does not grant them immunity from
litigations in courts in Israel and according to the Israeli
law.

A common feature of e-commerce companies is that they do not get
to negotiate the contract one-on-one with their prospective
customers. They assume that the terms and conditions of use as
provided on the companies’ websites would regulate the transaction.
And it is doubtful whether these prospective customers would bother
to read and donate their consent to the terms and conditions of use
as contained on the companies’ websites which is ‘supposed’ to
guide the transactions.

The European Union Jurisdictional treaties provide a sort of
protection for consumers who are citizens of its member
states. Articles 13–15 of the Brussels
Convention of 1968 on Jurisdiction and the Enforcement of
Judgements in Civil and Commercial Matters; Articles 13–15 of
the Lugano Convention of 1988 on Jurisdiction and the
Enforcement of Judgements in Civil and Commercial Matters; and
Articles 15–17 of the Council Regulation (EC) No 44/2001 of 22
December 2000 on Jurisdiction and the Recognition and Enforcement
of Judgements in Civil and Commercial Matters,
provide to the effect that, where a dispute arises over a
transaction between the parties, the claimant should commence the
action in the jurisdiction where the consumer resides. Here,
whether or not the claimant is the consumer, the treaties’
requirement is that such action must be commenced in the
jurisdiction where the consumer resides. The rationale for this
provision is that the seller has a more advantageous position over
the consumer, and that the consumer is weaker. However, these
provisions are riddled with exceptions, and one of it is that they
apply to transactions primarily for purchase of personal, family or
household goods and do not extend to the purchases of goods or
services for commercial purposes. Also, the intendment of these
provisions is not to regulate cyberspace transactions. It might,
therefore, be difficult to place reliance on them in cyberspace
transactions.

A school of thought suggests that such action can be commenced
in the jurisdiction where the server of the website is situate. But
this is the most difficult option to explore, because most of the
times the server of a website might be situate in a country
different from where the company has its registered address,
therefore, involving three different countries. This makes it a
herculean task for the aggrieved party to get the justice he so
desired. A notable difficulty in enforcing a party’s right in a
foreign country is the task of having to travel to and fro the
country. Apart from the attendant difficulty in commencing the
action in a foreign country, the risk involved in it is also
unimaginable.

Our Position

Cases of this character have not come to the public domain in
Nigeria, and we cannot rely on any of the decisions of the Nigerian
courts on matters bordering on the subject matter of this article.
E-business owners always provide their terms and conditions of use
on their websites which, according to them, prohibit commencing an
action against them in a foreign country. However, such terms and
conditions of use, in the opinion of an Israeli court constitute a
“discriminatory condition” in a standard contract. In his opinion,
the Israeli Attorney-General stated that such stipulation of terms
of use, especially by Facebook, may
discourage Israeli users from suing
Facebook due to the considerable costs
involved which include retaining a foreign attorney, frequent trips
abroad etc. and therefore, constitutes a discriminatory condition.
According to him, such stipulation of jurisdiction is not binding
on Israeli users. We totally agree with this position expressed by
the learned chief law officer of the Republic of Israel. A strict
adherence to such jurisdictional limitations on a company’s website
would work to obfuscate the course of justice.

Considering the direction the world is going because of the
impact of the internet on businesses, we posit that the interest of
consumers who, presently, may be unable to enforce their rights in
an “over-the-internet” contractual transaction, should be in the
forefront of governments’ legislations. And this can only be
achieved when courts assume jurisdiction to hear and determine
suits brought before it by claimants who cannot travel to a foreign
country to commence a suit against a defaulting party residing in a
foreign jurisdiction. The “Terms and Conditions of Service,”
Governing Law” and “Choice of Jurisdiction” on the e-business
companies’ websites should not be upheld when doing same would be
discriminatory and cause hardship to the claimant. Courts should
adopt a liberal approach and ensure that substantial justice is
done.

We know that one fundamental condition which is capable of
vitiating a decision of a court (no matter how well decided) is
failure by the claimant, to put a party against whom a case is
instituted, on notice, and it threatens the jurisdiction of the
court. However, service of such court process has now become easier
as a defendant can be served through electronic mail. And a party
cannot claim ignorance of the existence of such suit against him.
Law should be enacted to strengthen this position.

Conclusion

Technology has brought the world much closer, and cross-country
transactions can now be initiated and completed between parties
seamlessly. At present, there is paucity of legal frameworks in
addressing this issue. Discriminatory conditions which are capable
of obstructing an aggrieved party from obtaining justice should not
be given a place in this modern age. We encourage nations to brace
up and provide legal frameworks to address this lingering, and as
well as emerging issues on over-the-internet transactions. The
Republic of Germany has enacted a law, subjecting every website
which is accessible to German users to its law. Also, Malaysia’s
new cyber law well extends beyond its jurisdiction and covers acts
perpetrated on the internet. Although the Malaysian law is
primarily to prevent committing crimes through the internet, but we
do hope that laws regulating cyberspace contractual relationships
will be enacted soon. Nations who have not addressed this issue
should do the needful and set a law in motion to address this
issue.

Reuben C. Okafor, Attorney, Technology Law

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