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There’s one thing about the Hague Convention that everyone can agree on: It’s darn confusing. The treaty, being negotiated by the United States and 46 other countries, would essentially do two things: assure that judgments issued by a court in one country are enforced by other countries and establish jurisdictional rules governing transnational legal disputes. “It’s very important but it’s very, very complicated,” said Jonathan Band, a partner at Morrison & Foerster’s Washington, D.C. office. “It’s so complicated people say, ‘OK, I can’t deal with it.’ “ In the past year, however, more consumer groups and members of the business and legal communities have started grappling with the treaty. They are concerned that it could dramatically limit the ability of U.S. courts to exercise jurisdiction over companies and individuals outside the United States. In addition, companies selling goods over the Internet fear that under the treaty they could be hauled into courts around the world for a breach of contract or product liability claim. IP holders worry that foreign courts will be able to decide whether or not someone is infringing a U.S. patent or trademark. And consumer advocates are afraid that individuals will face increased liability for infringement in countries that don’t allow for fair use of copyrighted works. The treaty — officially titled the Hague Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters — is even more controversial given the evolution of the Internet and e-commerce. Since U.S. law has not yet established which state or country has appropriate jurisdiction over e-commerce sales, drawing up an international treaty on the subject is “like putting the analog cart before the digital horse,” said Marc Pearl, a partner at Washington, D.C.-based Shaw Pittman and leader of an ad hoc e-commerce working group on the treaty. “The concern of the business community is: can you and should you impose European law on American interests?” As for consumers, Jamie Love, who heads the Ralph Nader organization Consumer Project on Technology, said the convention “is the most important legal event in the history of cyberspace” as it will determine “what laws apply and where you can be sued.” EUROPE FLEXES ITS MUSCLES The U.S. government was actually the original promoter of the treaty, which initially focused solely on foreign judgments. In 1992 the United States asked the Hague Conference on Private International Law, an intergovernmental organization of 47 member states, to negotiate a treaty to assure that judgments in one country are recognized and enforced in another. While U.S. courts typically abide by the rulings of foreign courts, other countries often do not reciprocate. In response to the U.S. proposal, European countries pressed to include uniform rules of jurisdiction in the treaty as well. If they were going to give something up, those following the treaty negotiations say, they wanted to get something in return. Several European countries had adopted the so-called Brussels Convention in 1968 governing jurisdiction and enforcement of each other’s rules. A companion document, the Lugano Convention, was extended to non-European Union countries in 1988. With these documents in mind, members of the Hague Conference began negotiating a treaty in 1996 and issued a draft document in October 1999. But the U.S. balked at several provisions, such as the requirement that a consumer can sue for breach of contract in his or her country of residence and that jurisdiction for a product liability suit belongs within the country where the product caused an injury. In testimony before Congress last year, Jeffrey Kovar, the U.S. State Department official leading the U.S. delegation to the Hague Conference, voiced concern about the appropriateness of applying Europe’s jurisdictional rules to the United States. “Because the [Constitution's] due process clause puts limits on the extension of jurisdiction over defendants without a substantial link to the forum, the United States is unable to accept certain grounds of jurisdiction as they are applied in Europe under the Brussels and Lugano Conventions,” Kovar testified. “For example, we cannot, consistent with the Constitution, accept tort jurisdiction based solely on the place of the injury, or contract jurisdiction based solely on place of performance stated in the contract.” Given its concerns, the United States pushed back the schedule for final negotiations on the treaty, originally planned for the fall of 2000. A diplomatic conference to finalize the treaty is now slated for two sessions, in June 2001 and in the beginning of 2002. STICKING POINTS Two of the most controversial aspects of the treaty relate to e-commerce and IP disputes. For companies that sell goods over the Internet, U.S. law has not yet determined whether the appropriate jurisdiction is where a company is based or the place where a product or service is purchased. E-commerce companies therefore don’t want the treaty to specify jurisdiction for disputes involving Internet sales. Businesses also are concerned about a provision addressing agreements between businesses and consumers. In the United States, such agreements generally can specify which state laws govern the contract. The draft treaty specifies that the appropriate jurisdiction is where the consumer resides. “That could be of concern generally but it intensifies in e-commerce,” MoFo’s Band said. “If you sell globally, can you be hauled into court globally?” The business community apparently is divided on the subject. “I’ve spoken to companies where one division likes the treaty and another division doesn’t,” said Edward Lau, a member of the nine-person U.S. delegation to the Hague Conference who has his own law practice in San Francisco specializing in international litigation. “There is concern by some businesses that if they sell a product abroad they don’t want to be responsible for breaches of contract in every country,” said Lau, who is also a member of the Association of Trial Lawyers of America. He added that other segments of the community would like to be able to file suit in the United States against a foreign entity for violation of their IP rights. John Vail, senior counsel at ATLA, said there is a big split between companies that import goods and those who export goods. Importing companies “want to be able to sue here and get a judgment enforced elsewhere” while exporters do not want to be sued outside the United States, he said. The ATLA wants the treaty to keep intact the current provision that says consumers have a right to sue where they live and not require mandatory arbitration, Vail said. The association also would like consumers to be able to obtain all the damages — actual, economic and punitive — that a U.S. court orders. That issue is controversial because of the differences in European and United States policies. For example, in European countries, Vail said, the state pays for an individual’s medical expenses. Members of the IP community also are anxious that the treaty could curtail their rights. The current draft “would allow a court in Italy to interpret the patent laws of the United States to determine if a patent issued by the United States was valid from their perspective,” said Michael Kirk, executive director of the American Intellectual Property Law Association. “We don’t believe a court outside the jurisdiction of the body that issued a patent should be in the business of interpreting its validity.” The U.S. Patent and Trademark Office, which is advising the U.S. delegation to the Hague Conference, is also wary about the impact the treaty may have on IP rights. “Our position is that we cannot support the treaty at this time,” said PTO official Jennifer Lucas. Last week, Lucas attended a meeting of IP experts in Geneva to discuss the treaty. The agency put out a call for public comment on the treaty four months ago and received 27 responses, most of which did not support the treaty. The Consumer Project on Technology, one of the most outspoken critics of the document, is calling for the Hague Conference to exclude intellectual property from the treaty, as it has for maritime law, wills and estates, insolvency and bankruptcy and other areas of law. With four months left to go before Hague delegates sit down for final negotiations, the fate of the treaty remains uncertain. “We have a lot of problems out there [with the treaty],” Lau said. But, he added, “if we decide this treaty is not worthwhile, what do we say” to members of the World Trade Organization whose members are marketing products globally without a way to resolve disputes? However, if the treaty dramatically limits U.S. jurisdiction, it may be too hard for the United States to swallow. If the United States ratified the treaty, “Congress would have to amend jurisdictional statutes and that’s highly unlikely,” Band said. “The U.S. government historically is reluctant to change U.S. law to conform to international rules.”

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