Electronic Consumer Contracts in the Conflict of Laws

Zheng Sophia Tang

• Publisher: Hart Publishing
• Year: 2015
• ISBN:
  9781782259305
• Edition: 2
• Topic: Jura
• Subtopic: Kollisionsrecht

The second edition of this highly recommended work addresses the interaction between conflict of laws, dispute resolution, electronic commerce and consumer contracts. In addition it identifies specific difficulties that conflicts lawyers and consumer lawyers encounter in electronic commerce and proposes original approaches to balance the conflict of interest between consumers' access to justice and business efficiency. The European Union has played a leading role in this area of law and its initiatives are fully explored. It pays particular attention to the most recent development in collective redress and alternative/online dispute resolution. By adopting multiple research methods, including a comparative study of the EU and US approach; historical analysis of protective conflict of laws; doctrinal analysis of legal provisions and economic analysis of law, it provides the most comprehensive examination of frameworks in cross-border consumer contracts.

Part I

Introduction

1

Electronic Consumer Contracts in Private International Law

I.Introduction

Traditional private international law does not have regard for the protection of consumers in cross-border contracts. It is partially because of the neutral nature of traditional private international law, and partially because of the infrequency with which consumers enter into international contracts. Neither of these, however, can be justified in modern international commerce. On one hand, traditional private international law gives little consideration to the substantial power balance or material justice between the parties, and provides no protection to the party characterised by the weaker bargaining and litigation power.¹ The parties have freedom to determine private international law issues under the economic liberalism, and it has been argued that it is not the business of private international law to consider whether the parties have made a fair bargain.² This traditional role of private international law proves inappropriate in the contemporary world, where private international law is no longer a pure technical exercise regardless of the outcome and the substantive interest of each case, but has social functions providing degrees of material justice to the parties.³ On the other hand, consumers traditionally were very infrequently involved in international transactions, when consumer protection was regarded as a domestic problem.⁴ With the improvement in transportation, innovation in technology and communication, and the development of international and regional markets, it is more and more usual for consumers and businesses in different countries to contract with each other. The development of information communication technology in particular creates a borderless ‘cybermarket’, which enables consumers to have easy, convenient, and low-cost contact with businesses internationally. Frequent online business-to-consumer transactions challenge the traditional private international law, rendering it an obstacle which discourages the confidence of both parties and prevents the further development of consumer-oriented e-commerce. Consumer protection is no longer merely a domestic concern, but becoming an issue in private international law, especially in the age of electronic commerce.⁵ It is important to establish appropriate private international law rules for e-consumer contracts, which should provide sufficient protection for consumers and encourage development of electronic business-to-consumer commerce.

II.Consumer Contracts and Private International Law

A.A Brief History of Consumer Contracts in Private International Law

The history of weak party protection in private international law is short and straightforward compared to the complex, sophisticated and lengthy history of private international law. Ever since its origin private international law, especially choice of law, has presented indifference to substantive justice.⁶ The classic methodology of the conflict of laws generally depends on the value-free connecting factors and the technical mechanism to localise the legal relationship between the parties in the territory of a particular country, regardless of the interests of the parties, of the power balance between the parties, or of the substantive value of the applicable law. Since the 1930s the mechanical conflict of law rules have been criticised by some distinguished scholars in the US,⁷ and the trend continued and dominated in the US from the 1950s, when promoting the substantive policies and justice in choice of law became the ultimate goal.⁸ The conflict of laws revolution has fundamentally changed the traditional conflicts theories, but there was no specific consideration to take on consumer protection as a distinct issue.

Although a similar theoretical revolution did not happen in Europe, the continental European countries have taken the lead in bringing consumer protection into private international law. There was no clear event in Europe which marked the abandoning of traditional mechanical conflicts rules. Some commentators argue the European development would show the indirect influence of the American conflicts revolution.⁹ However, the European development in the protective conflicts rules originated from an area of jurisdiction which was largely overlooked in the American Revolution. European conflicts lawyers in the twentieth century paid more attention to the requirement of social policy and the social value of the proper functioning of private international law, instead of the theoretical foundation to reform the conflict of laws. As a result, European conflicts rules developed gradually and modestly, coinciding with the development of the social policy. The European contribution in this area of law was due to the growth of the consumer society and the post-war development of the protection of human rights.¹⁰ With the development of the consumer market and frequent transactions of consumer products, consumers became a real and active party in commerce and in law; with the thought of human rights protection, the law started to pay special attention to protect the rights of the weaker party. The direct result of the post-war development was the rise of consumer policy around 1960 in Western Europe,¹¹ which led to the boom of consumer law. A series of important domestic legislation was established to protect consumers. This tendency gradually separated consumer law from other areas of commercial law and made consumer law a different division, which created the preliminary interest in having distinct private international law rules for this subject.¹²

Before the EEC adopted the first European jurisdiction and judgment convention in 1968, some Contracting States had already established piecemeal protective jurisdiction provisions in instalment sales and loans.¹³ Protective jurisdiction in credit sales thus entered into the negotiation between the six original Contracting States to promote judicial cooperation and remove obstacles in recognition and enforcement of judgments between each other, and had been eventually adopted by the EC Convention of 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters (Brussels Convention).¹⁴ However, the Brussels Convention of 1968 did not go very far, as it only provided the distinct jurisdiction rules applying to protect buyers and borrowers in contracts for the sale of goods by instalment and loans. It did not specifically refer to the concept of ‘consumer’. As a result, the relevant protective rules could be interpreted as providing general protection to any buyers or borrowers in credit sales, including those in commercial contracts. This ambiguous scope of protection is not satisfactory. In 1978, the concept of consumer was introduced by the Court of Justice decision in Bertrand v Ott, where the scope of the protective rules in the 1968 Brussels Convention was clarified to cover cases where buyers were final consumers who should be protected because:

[T]heir economic position being one of weakness in comparison with sellers by reason of the fact that they are private final consumers and are not engaged, when buying the product acquired on instalment credit terms, in trade or professional activities.¹⁵

The Bertrand decision established the basis to protect those who are generally weaker in a contractual relationship because they are contracting outside their trade or profession. However, the scope of protection in the 1968 Brussels Convention was still narrow, which only protected consumers in the sale of goods by credit. With the development of consumer law and protective consideration, a much broader jurisdiction rule with a clear-defined view to protect consumers as a specific group of persons was required.¹⁶ Changes were brought in the subsequent amended convention of 1978 on the accession of Denmark, Ireland and the UK. The 1978 Accession Convention is the first European legislation that clearly contains the concept of consumer in its text by incorporating part of the Bertrand definition and extends the scope of protection to consumers in not only instalment sales and loans but also other contracts of sale and services.¹⁷ The same policy was followed when the Contracting States negotiated the harmonised Convention on choice of law. The EEC subsequently adopted the Convention on the law applicable to contractual obligations (Rome Convention) of 1980, which contains the protective choice of law rules for consumer contracts corresponding to those in the revised Brussels Convention.¹⁸ The Brussels Convention and the Rome Convention form the European conflict of laws system and are remarked on as the cornerstone of the advanced, comprehensive and systematic protective conflict of laws in consumer contracts.

By the end of the twentieth century, e-commerce developed as a new commercial model, the low-cost, international and convenient nature of which caused a further bloom of cross-border consumer transactions. Special attention was paid to protect consumers in e-commerce. The European Community converted both Conventions into EU instruments and reformed the conflicts rules relating to consumer contracts in order to provide certainty and efficiency for the development of e-commerce. The protective jurisdiction rules in the Brussels Convention were replaced by the more updated and sophisticated conflict rules in the Brussels I Regulation from 1 March 2002,¹⁹ and the protective choice of law rules in the Rome Convention were replaced by the Rome I Regulation²⁰ in all Member States except Denmark from 17 December 2009. Both Regulations have further expanded the scope under which a consumer can be protected and modernised the conflicts rules to suit the development of e-commerce.²¹ From 10 January 2015, the Brussels I Regulation was replaced by the Brussels I Recast, which extends the protection to transactions with businesses domiciled in third countries, taking into account of the fact that the e-commerce not only boosts the internal consumer market but also improves globalisation of consumer transactions.²²

The European legislation has a great influence on the rest of the world. The work not only affects the Member States of the European Union, but also spreads its influence outside Europe. With the European influence and the response from the rest of the world, private international law in consumer contracts can be generally categorised into two groups: the protective model and the neutral model. Although comparatively fewer countries have adopted the protective model, the current tendency shows the protective model has been gradually accepted by more and more countries in the world. More and more non-Member States have successfully reformed, or are prepared to reform, their traditional conflicts rules to incorporate special rules for the protection of weaker parties, by following the European model. For example, the similar protective conflicts rules were later introduced in the Civil Code of Quebec,²³ the Uniform Commercial Code of the United States,²⁴ the Korean Private International Law,²⁵ the Turkish Code on Private International Law and International Civil Procedure,²⁶ and the Application of Law to Foreign-Related Relationships of China.²⁷ Many other international and regional organisations have also learnt from the European practice in drafting private international law conventions. The Special Commission of the Hague Convention on Private International law adopted the agenda to draft a convention on the Law applicable to certain consumer sales in 1979, the text of which was adopted by the 14th session in 1980. Although this convention has never been enforced, many later conventions have accepted the necessity to treat business-to-consumer contracts differently in the conflict of laws by providing separate rules for different types of contracts.²⁸ During the negotiation for the international judgments convention, the protective rule-based approach again was proposed and included in the preliminary draft Convention of 1999. Although the final convention limits its scope on choice of court agreements in business-to-business transactions, this attempt shows that the topic is never dying in the international agenda. In the 7th Inter-American Specialized Conference on Private International Law, Brazil proposed a draft Inter-American convention on ch...