JURISDICTION ISSUES RELATING TO E CONTACTS POSTION IN USA

EU AND INDIA

Information Technology and Commercial Law

Submitted by:
MANVESH VATS
2019LLM011
SEMESTER II

Submitted to:
Prof (Dr.) P Sree Sudha,

Associate Professor, DSNLU

DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

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 ACKNOWLEDGEMENT

I have taken efforts in this project. However it would not have been possible without the kind
support and help of many individuals. I would like to extend my sincere thanks to all of them.
I am highly indebted to Prof (Dr.) P Sree Sudha, for her guidance and constant supervision as
well as for providing necessary information regarding the project.
I would like to express our special gratitude and thanks to our faculty member for their patience,
time and helping me in developing the project and people who have willingly helped us out with
their abilities.

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 TABLE OF CONTENT

INTRODUCTION.....................................................................................................2

Jurisdiction Issues over the Internet.......................................................................4

LEGAL PRINCIPLES ON JURISDICTION IN ENGLAND..................................9

Sources of Law.......................................................................................................9

English Common Law/ Civil Procedural Rules...................................................10

The Requirements of Justice................................................................................11

Non-EU Jurisdiction Agreements........................................................................13

LEGAL PRINCIPLES ON JURISDICTION IN INDIA........................................14

Effect of Foreign Judgments................................................................................14

Jurisdiction under the IT Act, 2000......................................................................19

LEGAL PRINCIPLES ON JURISDICTION IN THE UNITED STATES OF

Minimum Contacts...............................................................................................23

The Law relating to Multi-Jurisdictional Transactions86 (Section 2B-106).........24

Active and Passive Websites................................................................................26

CONCLUSION.......................................................................................................30

Possible Suggestions............................................................................................32

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 INTRODUCTION

Netizens and websites are nowhere and everywhere, such is said to be the nature of the

internet. Many websites do not even carry the geographical addresses.1 One doesn’t even

know with whom one is transacting online and where the location of that person is. When a

person buys a product from any website, he is not interested where the site is located

geographically.2 The internet has led to the elimination of physical boundaries, hence,

raising the question as to the jurisdiction. A world-famous view gaining ground is that the

prevailing jurisdiction law is useless for the cyber world and a completely different set of

rules are essential to manage jurisdictional issues over the internet which should be free

from the restraints of geographical borders.3

In the offline world, disputes are fundamentally settled through the traditional process of

court litigation system which is primarily structured on a territorial basis, i.e., each country

has its own laws and courts of the country use to decide disputes, if fall under their

jurisdiction, mostly on the basis of the application of local laws.4 Under traditional legal

systems, if parties are situated in different territorial jurisdictions, the transactions between

them are governed either by the choice of law clause (the laws of the country which the

parties agree to govern the transaction) or by the laws of the country in which the

transaction takes place. As the internet is indifferent to locational constraints, the traditional

laws of jurisdiction have not much significance to the activities carried over the internet. If

the dispute arises on the internet and the parties to the dispute belong to the same

1
Vivek Sood, ‘Cyber Law Simplified’ (2001), p. 186, Tata Mcgraw Hill Publishing Co. Ltd., New Delhi.
2
Id
3
Id
4
S.K. Verma and Raman Mittal, ‘Legal Dimensions of Cyber Space’, (2004), Indian Law Institute, New Delhi at p.
266.

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jurisdiction, there is no problem as the dispute in such a case would be settled in the same

way as any other offline dispute. 5 For example, a company ‘A’ based in Mumbai is selling

its products to its customers in Delhi through its website. In case of any dispute between

the company and its customers, it can be easily concluded that the dispute will be settled

according to the laws applicable in India but the problem would arise when their customers

are in countries different from the company of its own.

The dispute resolution mechanism based on territoriality faces a great number of challenges

when used to settle the disputes arising on the internet. The internet is international in

character and a person can have access to it from almost any place on the earth, hence,

multi-jurisdictional. On the internet, digital data may travel through various countries and,

hence, different jurisdictions in order to reach its destination. For example, a dispute arises

between two parties belonging to two different countries who entered into a contract online.

Now the question arises as to courts of which country should have jurisdiction to decide the

dispute. As the internet has become a convenient tool of business and communication, a

virtual world has come into existence which cannot be controlled with in a territorial limit,

thereby making the issue of jurisdiction in cyberspace intricate.

Basically, cyberspace is regulated by the power exercised by its operators or users of World

Wide Web leading freedom as to choice of rules and enforcing them in cyberspace which is

independent of any territorial government. Hence, the preliminary issue is how the

traditional territory based jurisdiction principle can be applied in the cyberspace.

By the term ‘Jurisdiction’ is meant the legal compliance which a state enjoys over the

territory which belongs to it. The expression ‘Compliance’ is a wide term and includes

judicial, legislative and administrative competence. Jurisdiction of a state may be divided

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into two categories: territorial and extra territorial jurisdiction.

According to Briggs, the fundamental importance to determine jurisdiction is to enable the

parties to predict the magnitude of their liability and consider the legal and practical

expense of defending a dispute in a specific jurisdiction. 6 In order to determine the

jurisdiction of a dispute between parties located in different jurisdictions, geography or

location of the parties or the place where their commercial activities take place are used

as fixed factors connecting the parties, their contract or their dispute to a particular

jurisdiction according to international private law rules.

Jurisdiction Issues over the Internet

The internet is network of networks, some of the networks are closed networks, not linked

to other computers or networks while many of them are widely connected capable of rapidly

transmitting information without direct human participation or control and also having the

automatic ability to re- route the information if links are damaged .7 Messages on the

internet, if required, travel through many routes. Internet is totally indifferent to the physical

location of the machines between which the information is transmitted and there is no

physical link between an internet address and a physical jurisdiction. It, therefore, presents

various practical questions such as which court to hear a dispute arising out of internet

activity, grounds on which a court may assume or deny jurisdiction, laws used to decide a

particular dispute etc. another challenging question is whether the person posting any

information on the website is subject to the laws of every state from where this information

can be assessed, and, consequently, do the courts of every such state have personal

6
Adrian Briggs, ‘The Conflict of Laws’, Claredon, Oxford, 2002
7
A.C.L.U. v. Reno, 5 (1929) F.Supp.824(E.D.P.A. 1996)

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jurisdiction over the person posting the information or operator of the website. What

appears as the chief issues of concern are - jurisdiction to resolve a dispute at a particular

location (a forum/site), the law applicable to the dispute or choice of law and the

recognition and enforcement of judgment in courts in foreign jurisdictions, In absence of

treaties to harmonize these issues, principles of international laws may be applied to the

question of jurisdiction and enforcement.

One major and direct issue challenging legislators is that while most laws are based on

territorial nexus, the internet denies the concept of territoriality. 8 The distinctive nature of

the internet has diluted the very basis of the traditional concept of jurisdiction and the

territorial laws and their application.9 Traditionally, territorial jurisdiction has been

exercised by the courts on a number of bases, such as where the defendant resides, whether

the defendant is present within the forum and whether the defendant has property in the

forum or not. The Internet has made these fundamentals largely immaterial.10

With the advent of the internet, cross-border transactions have increased and also the

disputes arising out of these transactions, raising more complex and numerous questions of

jurisdiction and applicable law. Though cross border disputes and the resulting debate are as

old as international trade itself, a number of special characteristics of internet-based

communications have added novel dimensions to the whole issue which are as follows:

1. Instant Global Presence- Prior to evolution of internet, the sale or distribution of

products/services in foreign market was through the physical presence of the seller

in one form or the other. With the gigantic development of internet, a seller is not

required to rely on the local sellers of a particular country to sell its products nor is
8
Vivek Sood, ‘Cyber Law Simplified’ (2001), p. 186, Tata Mcgraw Hill Publishing Co. Ltd., New Delhi..
9
Id
10
Id

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 he supposed to engage any of his agents over there. Through internet, any e-

commerce website is immediately accessible from anywhere in the world. With such

access, potential of contact with the judicial system of the country/ countries of the

consumers has increased leading to the possibility of being litigated in the foreign

court.

2. Trade Relations- Rising effect of internet on the commerce has not left the trade

relations a matter of choice. Prior to internet, a seller used to decide in the location

where he intends to sell his products. Decision used to be made at his suitability,

discretion and on his initiative. However, electronic commerce has limited the

seller’s discretion to enter into or leave the market. Once accessed market online,

seller loses his control over it. The transactions are initiated by the buyers and the

buyer may be in a country with which the seller never had any dealings and had no

information about its legal system. It is also impracticable to gain that information at

the stage of receiving the order.11 There may not be time to do so (specially in case

of transactions done through electronic agent), in addition, the value of the

transaction may not match the cost of acquiring advice. It has, therefore, become

more challenging for the seller of goods or services to forecast the situation that may

arise in future and to take appropriate measures to deal with the risk of being bound

either to sue or to defend a suit in a foreign court.12

3. Multiple Jurisdictions- While transacting over the internet, one or more of the

parties involved in the transaction including buyers, sellers, businesses, service and

content providers may be and often are located in different countries having their

11
Id. at p. 268.
12
Id

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 own legal systems.13Similarly, the assets of businesses and other processes used in

transacting over the Internet like technology systems and computer servers may also

be located in different jurisdictions. This leads to uncertainties and ambiguities as to

the place of the disputed activities and the place where the consequences are being

felt. These impugned activities can have intended and unintended consequences

around the world, resulting in uncertainties as to the location of the dispute, the

applicable law and the manner of getting enforcement.14

4. The role of Private International Law- Private international law or conflict of

laws is the body of law that strive for resolving issues that arise out of the

presence of a foreign component in legal relationships. Globally, private

international law is referred to resolve questions as to jurisdiction, applicable law

and enforcement of foreign judgements. Generally, private international law is a

part of the municipal law and essentially aims to regulate conduct between private

parties. It assumes international character because of the existence of a foreign

element in legal relationships. Cross-border movement of persons and goods, for

business and other purposes existing for hundreds of years is the primary catalyst

of private disputes comprising foreign elements. The following issues arise in the

context of private international law:

1. Jurisdiction to adjudicate a dispute at a particular location (i.e., the

forum or situs);

2. Applicable law to the dispute; and .

3. Enforcement of judgments in courts in foreign jurisdictions Many of the

13
Id. at p. 267.
14
Id

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transactions on the Internet are international in nature and possibly involve

many jurisdictions having connection with a particular dispute in case a dispute

arises. In such cases, if every court in possibly every country will assume

jurisdiction over that dispute, it would certainly result in hampering trade.

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 LEGAL PRINCIPLES ON JURISDICTION IN ENGLAND

Sources of Law

The main sources of English law on this subject are:

 The Brussels Convention and Lugano Convention on jurisdiction and the

recognition and enforcement of judgments in civil and commercial matters

which is now replaced by Brussels 1 Regulation and has been referred in the

Civil Jurisdiction and Judgements Act 1982 at many places.

 Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction

and the recognition and enforcement of judgments in civil and commercial

matters (the Brussels 1 Regulation15)

 The Civil Jurisdiction and Judgement Order 2001

 English common law. Jurisdictional rules have largely been codified in the

Civil Procedural Rules (‘CPR’)

English Common Law/ Civil Procedural Rules

In cases where the 1982 Act doesn‟t apply, the English jurisdictional rules are

derived from the common law or specific set of principles contained in statutes,

statutory instruments of the UK (where common law is codified). Common law in

England is an unwritten body of law derived from precedents and case laws as

15
Council Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in
Civil and Commercial Matter (‘Brussels Regulation’), see Council Regulation (EC) No.
44/2001,

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 established by the English courts. One of the central features of the common law rules

regarding jurisdiction in England is that a Defendant, who is served with a claim form

in England, is subject in personam to the jurisdiction of that Court, regardless of how

momentary his presence might be (H.R.H Maharanee Seethadevi Gaekwar of Baroda

v Wildenstein16; Colt Industries Inc. v Sarlie.17 In England, no specific protective rules

are being created for non-EU Defendants. The common law rule provides that the

Defendant can be served with a claim form if he is present within the jurisdiction, even

though the presence is for a very short duration. The main rule regarding cross-border

jurisdiction is based on common law rules which are now largely been reiterated and

incorporated in the Civil Procedural Rules(CPR). Part 7 of the CPR provides that a

Defendant should be sued in the jurisdiction where the claim form is served on him.

Rule 6.20 of the CPR provides for the service of a claim form out of jurisdiction. Rule

6.20(5) provides: ‘...a claim form may be served out of the jurisdiction with the

permission of the court if a claim is made in respect of a contract where the contract –

(5) (a) was made within the jurisdiction; (b) was made by or through an agent trading

or residing within the jurisdiction; (c) is governed by English law; or (d) contains a

term to the effect that the court shall have jurisdiction to determine any claim in

respect of the contract. (6) a claim is made in respect of a breach of contract

committed within the jurisdiction.’ This means that it is no longer a requirement for

the Defendant to be present within the jurisdiction for proceedings to be commenced

against him. The defendant can be sued in England provided the contract was made

within the jurisdiction or the agent of the defendant trade or reside within the

16
[1972] 2 W.L.R 1077.
17
[1966] 1 W.L.R 440.

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 jurisdiction or contract is governed by English lawor the parties by clause confer

the jurisdiction or the breach of contract takes place within the jurisdiction.

However, the Court may decide not to assume jurisdiction on the basis of forum non

conveniens if it finds itself not the most appropriate forum to hear the case. Section 49

of Act 1982 allows courts to stay, sist, strike out or dismiss proceedings on the

groundsof forum non conveniens or inconsistency

with the conventions. Section 49 provides:

‘Nothing in this Act shall prevent any court in the United Kingdom

from staying, sisting, striking out or dismissing any proceedings before

it, on the ground of forum non conveniens or otherwise, where to do

so is not inconsistent with the 1968 Convention or, as the case may be,

the Lugano Convention.’

The Requirements of Justice

‘If there is some other available forum which prima facie is clearly more

appropriate for the trial of the action, the court will generally grant a stay unless there

are circumstances by reason of which justice requires that a stay should nevertheless

not be granted.

Once it has been proven that there is evidently a more appropriate forum for trial

abroad, the burden of proof gets shifted to the Claimant to justify proceeding of suitin

England. As a general rule, the Court will not refuse to grant a stay merely because the

claimant shows that he won‟t get any financial assistance (e.g. legal aid) in the

appropriate forum, whereas the same will be available to him in England. However, in

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 Connelly v RTZ Corpn. Ltd18, the House of Lords refused to stay proceedings despite

the fact, which was accepted by the Claimant, that Namibia was the jurisdiction with

which the action had the closest connection on the ground of non-availability of

financial assistance to the Claimant. However, this was an exceptional case as it was

clear that the nature and complexity of the case was such that it could not be tried at all

without the benefit of financial assistance.

In determining whether justice requires that a stay should not be granted, all of the

circumstances of the case will be taken into account, for example; (i) where the

judiciary is not independent; (ii) where a Claimant, who had an arguable claim, finds

his claim summarily rejected; (iii) an inordinate delay before the action comes to trial

(i.e. 10 years); (iv) the imposition of a derisory low limit on damages; (v) where the

Claimant would be liable to imprisonment if he were to return to the alternative forum.

Non-EU Jurisdiction Agreements

In determining the ‘appropriateness’ of forum, an agreement by the parties to

trial in a foreign country is a strong indication that the appropriate forum is abroad and

operates as a weighty factor in favour of a stay of the English proceedings being

granted under the doctrine of forum non conveniens.

Where the English Court has undoubted jurisdiction over actions properly instituted

here, there is an inherent discretion for the court to disregard an express foreign

jurisdiction clause. Nonetheless, in accordance with the principle that a contractual

undertaking should be honoured, there is a prima facie rule that an action brought in

18
[1999] C.L.C. 533.

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England in defiance of an agreement to submit to a foreign jurisdiction will be stayed.

However, the Court has discretion in the matter and may allow the English action to

continue if it considers that the ends of justice will be better served by a trial in this

country.

The principle that the parties should abide by their agreement is of great

importance in cases involving an exclusive jurisdiction clause. The starting point is

that the English proceedings should be stayed if there is such a clause providing for the

exclusive jurisdiction of a foreign Court. Under the forum non conveniens discretion

the starting point is that an action properly commenced in England should be allowed

to continue.

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 LEGAL PRINCIPLES ON JURISDICTION IN INDIA

The Indian jurisprudence with regard to jurisdiction over the Internet is almost non –

existent. Hence, there has been precious little by way of development of private

international law rules in India. Furthermore, there have been few cases in the Indian courts

where the need for the Indian courts to assume jurisdiction over a foreign subject has arisen.

Such jurisprudential development would, however, become essential in the future as the

Internet sets out to shrink borders and merge geographical and territorial restrictions on

jurisdiction.

It is worthwhile to consider the issue of jurisdiction at two levels. In the first place,

given the manner in which foreign courts assume jurisdiction over the Internet related issues

(as evidenced by the cases discussed above), the consequences of a decree passed by a

foreign court against an Indian citizen must be examined. In other words, under what

circumstance the decision of a foreign court can be enforced against an Indian citizen or a

person resident in India. It is also necessary to examine the circumstance under which the

Indian courts would assume jurisdiction over foreign citizens in order to better understand

the rights of an Indian citizen who is affected by the act of a foreign citizen.

Effect of Foreign Judgments

Under the Code of Civil Procedure, the effect of foreign judgments has been spelled

out under the provisions of s. 13

Except for the six grounds specifically mentioned in the section, the Indian courts are

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 bound to accept the decree of a foreign court as being conclusive order to enforce a

foreign judgment, care must be taken to ensure that the judgment is not flawed in any

of these ways. The courts have built up considerable case law with regard to the

interpretation of the various provisions of this section.

As is obvious from the language of the section, if the foreign court did not have

jurisdiction over the matter, any decree passed by such a court would not be

conclusive, as far as an Indian court is concerned. In various cases, the court has stated

that where there has been voluntary consent to submit to the jurisdiction of the court,

the court would be recognized internationally to have competent jurisdiction over the

matter and such jurisdiction would be binding.19 This principle is grounded on the

foundation that a party having taken a chance of a judgment in his favor by submitting

to the jurisdiction of the court, should not be allowed to turn round when the judgment

goes against him, to say that the court had no jurisdiction. 20 As a corollary, in the event

an ex parte decree is passed by a court, in a matter where the person against whom the

decree is passed, does not contest or even appear in court, the party cannot be said to

have submitted to the jurisdiction of the court.

However, using the requirements of sub-section (b) of the section, the mere fact that

the decision was passed ex parte, does not constitute sufficient grounds for declaring

that the relevant court did not have jurisdiction, as it will have to be seen whether the

decision was merely passed as a formality or after a consideration of the plaintiff‟s

case.21

19
Narhariv. Pannalal AIR I977 SC 164; Lalji Raja and Sons v. Firm Hansraj Nathuram AIR l97l SC 974.
20
O P Vermav. Gehr iLal AIR 1962 Raj 231.
21
Govindanv. Sankaran AIR l958 Ker 203;Rajaratnamv. Muthuswami AIR 1958 Mad 203.

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 This position of law assumes significance in relation to the judgment of

foreign courts over internet related disputes as in most such litigation, the main

argument on behalf of the defendant is that the foreign court has no jurisdiction to try

the matter. In the first place, it appears that a decree of a foreign court in a personal

action, that was passed in absentium and in respect of which the defendant did not even

appear before the foreign court, would not be deemed to have been passed by a court

of competent jurisdiction. This apparently opens the doors for Indian defendants to

avoid the consequences of foreign decisions by staying away from the forum where the

proceedings are taking place. Not being present at the trial, the decisions of the court

cannot be enforced against them in India. However, courts in India have not struck to

this narrow view and have at times enforced the ex-parte decrees of foreign courts,

where the decision has been arrived after a consideration of the evidence and where the

proceedings have in general not taken place in a summary manner.

An important aspect that the court must take into consideration is the fact that

the decision of the foreign court must have been taken strictly in accordance with the

principles of natural justice. It is well-settled that a mere error in procedure in a foreign

court will not affect its conclusive nature under

S.13 of CPC provided that error in procedure does not amount to a violation of natural

justice under S.13 (d) of CPC. There is no doubt that the nature of the violation must

be substantial and not a minor violation of natural justice.

So also, where the judgment of the court has been obtained by fraud, the decree

is liable to be set aside. However, in these matters, it is more relevant to consider

whether the court has obtained jurisdiction by fraud, rather than to examine whether

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the decision on the merits of the case was so obtained.

Finally, the last sub-section of s.13 states that the foreign judgment is not conclusive, if

the judgment sustaining the claim is founded on a breach of Indian law. Without

putting too fine a point on it, the import of this section is merely this: where a dispute

is governed by Indian law, the final judgment of the foreign court should not be in

violation of Indian law.

Thus, where the claim is not based on Indian law and where the court has

accepted the plea that the law governing the dispute is not Indian law, no objection can

be taken to the judgment under S 13(l)(c) on the grounds that it sustains a claim based

on Indian law.

In summary, the courts in India are not averse to upholding the decree of a

foreign court and can, in fact, only hold the decree of a foreign court to be non-

conclusive, if such a decree does not fulfill the criteria set out in s. 13 of the Code of

Civil Procedure. Thus, in the event a decree is passed against an Indian citizen in

respect of any perceived breach of the laws of another state, the decree will be upheld

in India, against the Indian citizen, provided it does not suffer from any of the

infirmities listed under s.13.

Moving back to our primary issue of jurisdiction over the Internet, in the event

a foreign court passes extra-territorial judgment over a citizen of India, the case law

examined above would clearly indicate that the courts in India would have no

hesitation in upholding a reasoned and sound decision of a foreign court. Indian

citizens, who establish a presence on the Internet would therefore need to be careful to

follow the principles of law, set out in international jurisdictions to avoid prosecution

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 under those laws. It is therefore not enough to be mindful of local laws alone. Any

venture on the Internet appears to be open to challenge from virtually any jurisdiction

and from any country that has Internet access.

This is a situation that is perhaps uncomfortable from the point of view of carrying out

a business on the Internet. Commercial entities that are looking to use the Internet as a

medium through which to conduct their business would be constantly looking over

their shoulders, as it were, for the first signs of litigation. As a lawyer, it is difficult to

advise clients as to the strategy to be adopted in situation such as these. While on the

one hand, the promise of the internet is extremely attractive to commerce, on the other

hand, the potential risks are virtually impossible to calculate. It is difficult to

categorically state that a particular brand name that a businessman chooses to use on

the Internet is an original mark and that such use would not be tantamount to the

violation of the intellectual property rights of someone, somewhere on the net. In such

circumstances, businessmen should proceed to take a commercial risk to get out on the

Internet and to tackle any potential litigation as and when it arises. There is no

mechanism at present to conclusively state that a given act of an entity on the Internet

violates the rights of another person on the Internet.

Jurisdiction under the IT Act, 2000

The IT Act 2000, passed in India, is illustrative of the prevailing confusion in the area

of jurisdiction in the context of the Internet. The Act begins by saying, in clause (2) to

section, that it shall extend to the whole of India and, save as otherwise provided in the

Act, it applies also to any offence or contravention there under committed outside

20
India by any person. Clause(2) of Section 75 of the Act also simply states that ‘.

this Act shall apply to an offence or contravention committed outside India by any

person if the act or conduct constituting the offence or contravention involves a

computer, computer system or computer network located in India’. Provisions of this

nature are unlikely to be effective for a number of reasons.

Firstly, it is unfair to suggest that the moment an Indian computer system is

used, an action defined by Indian laws as an ‘offence’ would be subject to the

jurisdiction of Indian Courts. To illustrate, let us consider a web site located in a

foreign country. The site may host content that would be perfectly legal in its home

country, but may be considered offensive or illegal in India. If an Indian chooses to

view this site on a computer situated in India, does that mean that the site can be

prosecuted in an Indian Court? This would appear to violate principles of justice. As

explained earlier, the judicial trend of examining the amount of activity that a site

undertakes in a particular jurisdiction is a far more equitable method to determine

jurisdiction.

Further, even if Indian Courts are to claim jurisdiction and pass judgments on

the basis of the principle expostulated by the IT Act, it is unlikely that Foreign Courts

will enforce these judgments since they would not accept the principles utilized by the

Act as adequate to grant Indian Courts jurisdiction.

This would also render the Act ineffective in this context, it is necessary that

Indian courts take a leaf out of the books of their counterparts and develop justifiable

grounds on which extra- territorial jurisdiction may be validly exercised. The times

ahead promise to be very interesting.

21
 It is desirable to provide a mechanism for online dispute resolution in the case

of e-contracts, e- receipts and e-payments. There is a need to introduce accountability

online in relation to the transactions on the internet. Even though e-records and digital

signatures together with a secure system of payments provide a sufficiently safe

mechanism for authenticity of the transaction, still the transaction may be marred by

non-delivery of goods/services or defective/deficient goods or services. There might be

a delay or the goods simply may not match with the expectations. In this situation, it is

suggested to set up e-consumer courts.

22
 LEGAL PRINCIPLES ON JURISDICTION IN THE UNITED STATES
OF AMERICA

Due to the fact that U.S. companies are at the forefront of Internet technology,

litigation regarding e-commerce in the United States is more advanced than anywhere

else in the world. Similar to the EU Brussels regime (general and special jurisdiction),

U.S. Law has two types of jurisdictions: general and specific. General jurisdiction is

jurisdiction over the defendant for any cause of action, whether or not related to the

defendant’s contacts with the forum state; whereas specific jurisdiction exits when the

underlying claims arise out of, or are directly related to, a defendant’s contacts with the

forum state.22 It is worth examining the decision in Cybersell, Inc. v. Cybersell, Inc.23 as

a typical example of a fact situation involving a conflict over jurisdiction. The case

involved a service mark dispute between two corporations, one at Orlando and another

in Arizona. The Court had to address the issue of whether the mere use of a website by

the Florida Corporation was sufficient to grant the Court, in Orlando, jurisdiction. The

Court answered the question in the negative, focusing on traditional analysis

established by the US Supreme Court concerning the due process aspects of personal

jurisdiction: ‘It is essential in each case that there should be some act by which the

defendant purposefully avails itself of the privilege of conducting activities within the

forum State, thus invoking the benefits and protections of its laws’. 24 The Court

rejected the plaintiff’s argument that by employing a web page, without more, a web

22
Warren B. Chik, U.S. Jurisdictional Rules of Adjudication Over Business Conducted Via the Internet
Guidelines and a Checklist for the E-Commerce Merchant.
23
1997 U.S. App. LEXIS 33871 (9thCir., December 2, 1997).
24
1997 U.S. App. LEXIS 33871, p. 8, citing Hanson v. Denckla, 357 U.S. 235, 253, 2 L. Ed. 2d 1283, 78
S.Ct. 1228(1958).

23
 publisher was subject to jurisdiction in the plaintiff‟s forum. The Court also rejected

the plaintiff’s reliance on the ‘effect test’, holding that the test does not apply with the

same force to a corporation as it does to an individual ‘because a corporation does not

suffer harm in particular geographic location in the same sense that an individual does.

Facts situations such as this, raise multifarious questions that are difficult, if not

impossible, to answer with the application of contemporary legal principles. Then, to

what extent should we force old models and analogies on this new way of

communicating and doing business.25

In these circumstances, the courts could, and do, assume jurisdiction over the

offence and try the offender within their own jurisdictions, resulting in situations

where persons located in a completely different jurisdiction may be tried in a court of a

given territory. There have been various examples of foreign courts assuming

jurisdiction over a matter that prima facie arose in a different jurisdiction, on the

strength of the long arm statues of that state.

Minimum Contacts

In 1945, the United States Supreme Court in International Shoe v. Washington,26

created a ‘minimum contacts’ test for States to use as a basis for exercising jurisdiction

over an out-of-state defendant. The Court stated that to the extent that a corporation

enjoys the privilege of conducting activities within a state, it also enjoys the

protections and benefits of that state. Since these privileges may also give rise to

obligations which arise out of or are connected to the activities within the state,

25
Bradley A. Slutsky, ‘Jurisdiction Over Commerce On The Internet’, available at
http://www.kslaw.com/menu/jurisdic.htm( last visited on22nd May 2020).
26
326 U.S. 310 (1945).

24
 requiring a corporation to answer to a suit in that state is not an undue burden. 27 This

test has been modified, to include even individuals, and not just corporations.28

The Burger King v. Rudzewicz,29 the Court reasoned that the ‘Purposeful availment’

requirement is satisfied when the defendant‟s contacts with the forum ‘proximately

result from actions by the defendant himself that create a „substantial connection‟ with

the forum State,’ and are such that he ‘should reasonably anticipate being hauled into

court there.’ Hence, contacts that are simply ‘random, fortuitous, or attenuated’ do not

provide an adequate basis for the exercise of personal jurisdiction. Recently, the US

Supreme Court narrowed its analysis of purposeful availment of the forum in Asahi v.

Superior Court of California.30 The Court observed that, ‘the placement of a product

into the stream of commerce, without more, is not an act of the defendant purposefully

directed toward the forum State.’ Additional conduct on the part of the defendant is

necessary to establish an act purposefully directed toward the forum State.

The Law relating to Multi-Jurisdictional Transactions86 (Section 2B-106)

(a) A choice-of law term in an agreement contract is enforceable.

(b) If an agreement contract does not have an enforceable choice of law term, the

following rules apply:

(1) In an access or other online contract or a contract providing for delivery of

a copy by electronic communication, the contract is governed by the law of the

jurisdiction in which the licensor is located when the [transfer] [activation] of rights
27
NandanKamath, ‘Law Relating to Computers, internet and E-commerce’, (4 th Ed. 2009), p. 23 Universal
Law Publishing Pvt. Ltd., New Delhi.
28
Kulko v. Superior Court, 436 U.S. 84 (1978).
29
471 U.S. 462 (1985).
30
480 U.S. 102 (1987).

25
occurred or was to have occurred.

(2) In a consumer contract not governed by sub-section (b) (l) in which the

contract requires delivery of a copy on a physical medium to the consumer, the

contract is governed by the law of the jurisdiction in which the copy is located when

the licensee receives physical possession of the copy or, in the event of non-delivery,

the jurisdiction in which receipt was to have occurred.

(3) In all other cases, the contract is governed by the law of the State with the

most significant relationship to the contract where the licensor is located.

(c) If the jurisdiction whose law applies as determined under sub- section (b)

is outside the United States, sub-section (b)(2) applies only if the laws of that

jurisdiction provide substantially similar protections and rights to the party not located

in that jurisdiction as are provided under this article. Otherwise, the rights and duties of

the parties are governed by:

(1) The law of the jurisdiction in the United States or in the most

substantial connection with the transaction; or

(2) If no such jurisdiction exists, the law of the jurisdiction in the United States

in which the licensee is located.

(d) A party is located at its place of business if it has one place of business, at its chief

executive office if it has more than one place of business, or at its place of

incorporation or primary registration if it does not have a physical place of business.

Otherwise, a party is located at its primary residence.

To paraphrase, under the proposed code in respect of online transactions, the

country in which the licensor was situated at the time when the transfer of license

26
 rights took place would have jurisdiction over the dispute. In respect of all other

computer transactions where physical delivery of the physical media is of the essence,

the place where the transfer took place or was to have taken place would be the country

with jurisdiction over the dispute. In other situations, the country with the most

significant connection would assume jurisdiction.

This brings us to the test of substantial connection with the subject matter of the

contract. Given that most contracts concluded over the Internet relate to activities or

services to be performed on the Internet itself rather than at a given physical location, it

is almost impossible to determine who has jurisdiction over such contracts. The courts

have attempted to assume jurisdiction by drawing a substantial nexus between the

physical location of one or more party to the transaction and the contract.

Active and Passive Websites

For jurisdiction purposes, web sites are split into two groups: passive and

interactive. Passive sites provide information in a read-only format. Interactive sites

encourage the browser to enter information identifying the browser and/or providing

background on the browser’s interests or buying habits. It is not surprise that courts are

more willing to find that a web publisher who solicits information about the forum;s

residents is purposefully availing itself of the forum’s benefits than a publisher who

simply provides information about the publisher, its products and services.

Thus in Zippo mfg. Co. v. Zippo Dot Com, Inc. 31, purposeful availment was

found based on the defendant’s interactive web site and contracts with 3000 individuals

and seven internet access providers in Pennsylvania in a trademark infringement suit.

31
952 F.Supp 1119, 1124 (W.D. Pa. 1997).

27
 The websites here allowed browsers to sign up for the defendant’s internet news

service. Defendant was a California company, its employees were located in California,

and it maintained no offices in Pennsylvania, where the suit was brought.

No matter where parties may fall on the spectrum, they should recognize that

engaging in commercial activity over the internet may spawn liability in foreign

jurisdictions if that activity consists of something more than simple posting of

information. In a trademark infringement case similar to Zippo32American Network,

Inc v. Access America/Connect Atlanta, In33, a Georgia defendant was hauled into a

New York court. A New York plaintiff sued the Georgia defendant for trademark

infringement and unfair competition in the U.S. District Court for the Southern District

of new York. The plaintiff, a provider of similar consulting services to those provided

by the defendant, claimed the mark used by the defendant, <America.net>, ‘infringed

the plaintiff‟s mark <American.net>. New York‟s long-arm statute includes a

provision for jurisdiction over an out of state tortfeasor when harm is felt within the

state if defendant derived substantial revenue from interstate or international

commerce. Since the plaintiff‟s business was located in New York, and the

defendant was aware of such, it was reasonable for the defendant to expect that the

publication of the offending mark on the Internet would result in harm suffered in New

York. The court, looking further to due process, stated that the web page alone would

32
Zippo‟s analysis has also been adopted in the context of emails – aspect discussed in detail later. In Resuscitation
Technologies, Incv. Continental Health Care Corporation. No IP 96-1457, 1997 WL 148567 (S.D. III March 24,
1997) the plaintiffs, a corporation in Indiana, had an interactive web site seeking capital for its company. The
defendants responded to the solicitation through email. Through numerous and continuous email messages over a
period of months, the court found a quality of interactive electronic contacts whose intended object was to transact
business in Indiana. The court concluded that jurisdiction was proper and noted the commercial nature of the
contacts and that the contacts were focused on Indiana.
33
975 F. Supp. 494 (S.D.N.Y. 1997).

28
not necessarily have been enough, but that additional contacts with six New York

subscribers to the advertised services established purposeful availment. Additionally,

the court held that those subscribers evidenced the defendant‟s efforts to market his

services in New York, making New York court appearance a reasonable expectation.

Since marketing was the basis for the cause of action, the defendant‟s online actions

were found to be directly related to the complaint.

Passive activity is considered a ‘posting’ of information, lacking interaction and is

typically and advertisement on the Web. As mentioned earlier, one of the first federal

cases deciding whether an advertisement posted on the website is sufficient to confer

jurisdiction over an out-of-state defendant was Inset Systems, Inc. v. Instruction Set,

Inc34 This case was based on the claim of trademark infringement, but it yields a

different finding of personal jurisdiction. The court held that the defendant was subject

to jurisdiction in Connecticut because its advertising activities were purposefully

directed to Connecticut. Taken one step further, this would suggest that advertising

over the Internet confers jurisdiction in any state or country where it could be accessed.

The court concluded that since the defendant ‘purposefully’ directed its advertising

activities toward this state on ‘continuing basis’, it could reasonably anticipate the

possibility of being hauled into court here. To avoid such an untenable result, one

should keep in mind the particular facts of the Inset case, namely that jurisdiction was

established in Connecticut over Massachusetts Corporation, implying that the

reasonableness prong played an important role. Perhaps the court should have insisted

on the presence of some other factor, in addition to those it relied upon, for the

34
937 F. Supp. 161 (D. Conn. 1996).

29
establishment of jurisdiction. Maritz, (refer above) was decided relying on Inset. Once

again a court found that advertising on the web is enough in itself to suggest that the

defendant is purposefully availing the forum and could reasonably anticipate being

hauled into court there.

Another internet advertising case with a bit of twist is Minnesota v. Granite Gate

Resorts, Inc.35 which involved a suit brought by the Minnesota Attorney General

alleging, deceptive trade practices, false advertisings and consumer fraud against the

defendant, a Nevada corporation advertising an online gambling service. The

advertisement was not active and visitors to the site were directed as to where and how

to sign up for the service. The site also contained a bold notice to the users to check

with their state and local authorities regarding this type of wagering before registering

with the defendant. Despite the language the defendant employed and the passive

nature of its website, the court found that the defendant had established a sufficient

number of contacts with the state and could reasonably anticipate being hauled into

court in Minnesota. Regarding the quantity of advertising acts and contacts with the

forum and supporting inset, the court stated that, ‘once the defendant place an

advertisement on the internet, that advertisement is available 24 hours a day, seven

days a week, 365 days a year to any internet user until the defendant take it off the

internet’. As in Maritz, regarding the number of times a resident of the forum contacted

the defendant’s page, the Court noted that at least 248 computers located in Minnesota

accessed the defendant’s website.

35
No C6-95-7227, 1997 WL 767431 (Minn. Dist. Ct. December 11, 1996).

30
 CONCLUSION

In comparison to the UK special jurisdiction approach, the US specific jurisdiction

approach is different. Whilst the US employs ‘Zippo’, ‘effects’ and ‘targeting’ tests,

the UK adopted classical general and special jurisdiction approaches concerning

special jurisdiction in the Brussels Regulation, in an effort to bolster confidence in E-

commerce. The Indian Code of Civil Procedure, 1908, bases territorial jurisdiction 36 on

two principles - first, the place of residence of the defendant, and second, the place

where the cause of action arises. However, there are no clear guidelines as to how these

are to be determined. In the context of the Internet, residence of the defendant may

well include either his place of physical residence or the place where the web-site

server is located. Similarly, the cause of action may be said to arise at a variety of

places where the site is accessed or where its server is located. But in the absence of

any statutory clarification, courts will be forced to rely upon precedents, such as those

described above.

The review of the decisions seems to indicate that any active attempt to utilize the

World Wide Web to reach its vast audience will likely subject the publisher to a

lawsuit in a distant forum. The growing popularity of interactive sites enabling the

browsers to do business with the publisher from their desktops alone will almost

certainly provide a basis for jurisdiction in the plaintiffs chosen court. Furthermore, a

website coupled with a toll-free number will almost certainly indicate an intention to

reach the widest possible market, also permitting a court to exercise jurisdiction over

the defendant.37 The effect of this could be to force website owners to attempt to
36
See sections 15-20 of the Code of Civil Procedure, 1908.
37
Drescher and Associates, P.A. ‘Business: Internet Jurisdiction’, at
http://faculty.cua.edu/fischer/cyberlawsyl3.htm (last visited on 22nd May,2020).

31
restrict access to their sites to local persons, thus affecting the global reach of the

Internet-one of its primary aims.

Parties to a contract may select a preferred forum, or a preferred choice of law,

as a part of their agreements with each other. Similarly, parties to a lawsuit, or a

potential lawsuit, may select a forum or applicable law after the fact, in order to

smoothen matters at trial. In the absence of clear choice-of law rules, courts could

benefit by abiding by the wishes of the parties and enforcing valid forum selection

clauses. Thus, if one is concerned about jurisdiction in connection with commercial

transactions, it may be advisable to create on-line agreements that govern those

transactions and to specify the jurisdiction in which any disputes will be litigated and

the law that will be applied. It is also probably advisable to require users to manifest

their assent to such agreement before they enter into any transactions.

Generally, a forum is safe in applying its own law to a controversy being tried

in its courts. After all, if the suit is proceeding in a forum, it must have a sufficient

relationship to the transaction to have jurisdiction over the parties. Thus, often, a forum

that is torn between two conflicting laws often chooses to apply its own law. Although

this reaction is certainly understandable- a forum will always be most familiar with the

nuances of its own laws - such a rule, on the whole, would be unwise. This could give

rise to forum shopping by plaintiffs. lf forum shopping is allowed on a global scale, it

could lead to situations which are not entirely equitable- for example, plaintiffs would

sue in nations where the defendants are unable to respond, either due to absence of

resources, or due to unfavorable legal conditions in that particular forum. The author

submits that parties should have freedom to decide upon the forum which will have

32
 jurisdiction in case dispute arises, however, forum must have some reasonable nexus

with the transaction to get legal sanctity.

Until the law in this area becomes clearer, there are at least some lessons we

can learn from the cases that have been decided so far. For instance, there may be some

jurisdictions in which you will not want to do business at all. If the nature of your

business requires that users be a certain age or if your business is banned or regulated

in certain areas (for example, gambling), then it may be necessary to identify all users

before they can be permitted to engage in transactions, and to prohibit transactions

with certain users and in certain jurisdictions.

Suggestions

One of the suggestions that have been made towards the resolution of this rather

troublesome problem is the evolution of new and entirely independent rules to govern

33
jurisdiction on the Internet. These regulatory structures should treat cyberspace as a distinct

place for purposes of legal analysis. This suggestion originates from the conception that

cyberspace has its own sovereign jurisdiction. By developing uniform law governing

cyberspace transactions, it will be much easier to determine which rules regulate one’s

online activities, rather than deciding which territory’s laws apply. The next question that

arises from this suggested approach is who is to develop and enforce these rules. The

proponents of such a system suggest that since the Internet was implemented through a

system of self-governance, those persons can establish a system to govern them. Yet, they

concede that determination of those who would have the ‘ultimate’ right to control the

policies remains uncertain.

Bibliography

Books Referred-
 Rahul Matthan, The law relating to computers and the internet (Edn. 2016), Butterworths,

34
 India.
 Vivek Sood, Cyber Law Simplified, 2014, Tata Mcgraw Hill Publishing Co. Ltd., New
Delhi.

Websites Referred

 http://www.tkhr.com/articles/personal.html

 http://www.uakron.edu/dotAsset/8229f776-0d7c-49a6-bb4c-4ee95afe2f8a.pdf

 http://www.uncitral.org/english/test/electron/ml.ec.htm.

 http://www.uncitral.org/pdf/english/texts/electcom/05-89450_Ebook.pdf
 https://shodhganga.inflibnet.ac.in/

Articles Referred-
 A Guide to the UNCITRAL Model law on Electronic Commerce, notes on Article 7.
 Electronic Discovery in Litigation, INFOLOGY

35