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With the growth of international business has come the growth of international litigation — and all the attendant conflicts between nations’ rules of litigation. The world community is trying to resolve some of those conflicts by negotiating a Hague Convention on Jurisdiction and the Recognition and Enforcement of Foreign Judgments. Marc Pearl, a partner in the Washington, D.C., office of Shaw Pittman and head of the firm’s e-commerce policy practice, coordinates an ad hoc working group of companies and trade associations with e-commerce interests. The group has presented its positions at informal meetings of the Hague Convention and attended the treaty conference in June. Pearl spoke with Tech Counsel, a publication of Legal Times, in early July. Tech Counsel: Why does this treaty matter to the high-tech community? Pearl: That’s the question of the hour. U.S. contracts involving foreign defendants that are litigated in the United States have not always been recognized and enforced in foreign courts. This was the motivation in the early 1990s to call for an international treaty. However, Western European countries saw this as an opportunity to impose their approach to jurisdiction issues on U.S. business. The October 1999 draft convention would require member states to recognize and enforce judgments if, and only if, the jurisdiction in the court rendering the judgment was founded on one of the jurisdiction bases under the convention. Unfortunately, many of the draft provisions parallel the European Union’s jurisdictional rules and would require (in some instances) a 180-degree turn of U.S. law. While these issues were being debated, along came this thing called the Internet. The 1999 draft essentially ignored e-commerce and its challenge to traditional concepts of jurisdiction. Now the “wrong” treaty could have enormous impact on e-commerce. Tech Counsel: Can you give us the history of the negotiations? Pearl: Since the release of the October 1999 draft, the delegates have met informally to see if consensus could be reached on such issues as the convention’s scope, its relationship to existing conventions, and whether consumer contracts should be covered. Special sessions focused on e-commerce and intellectual property rights, and a two-part Diplomatic Conference to finalize the convention was scheduled. The United States, meanwhile, gathered industry, academic, and consumer input. Discussions were led by the State Department, the Federal Trade Commission, and the Library of Congress. The House of Representatives held two hearings. The delegates originally thought that Part I of the Diplomatic Conference, which was held June 6 to 20, would naturally lead to Part II sometime early next year. In truth, the document coming out of this session will be far from ready for a final vote. Tech Counsel: Are there particular issues on the table that should concern the e-commerce community? Pearl: First, we have to see that, unlike earlier modes of doing business, an e-tailer has to take extraordinary steps to limit the reach of its solicitation and receipt of customer orders. If a court, such as the French court in the Nazi memorabilia case against Yahoo, decides that the mere accessibility of a Web site lets it assert jurisdiction, every site operator could be subject to the laws of numerous countries. In addition to issues already raised, some e-commerce questions include: � The effect the draft convention has on substantive IP law (for example, business method patents); � The effect the draft has on traditional contract freedom principles permitting parties to designate a choice of forum; � The basis for jurisdiction as to “where the injury occurs” and whether this subjects a seller to jurisdiction in any country where the site can be downloaded; � The ability of an e-commerce seller to take “reasonable steps” to not do business in a particular country; � Whether a digital sale results from the customer coming to the store or the store coming to the customer; � The extent of liability borne by an Internet service provider; and � Whether economic loss only rises to the level of a tortious action, thereby allowing creative plaintiff attorneys to ‘forum shop’ jurisdictions that may be open to ruling a dispute outside the bounds of contract law. Tech Counsel: Are there issues that are not on the table that should concern the e-commerce community? Pearl: The e-commerce community has been very good thus far about identifying the key issues. And the U.S. delegation has been incredibly responsive to issues raised by both the private sector and consumer interests. The question is whether the Hague delegates can come to grips with the fact that this current draft is overly ambitious, could force a number of countries to amend substantive laws, and would freeze into place legal theories when domestic and global case law on e-commerce is still evolving. Tech Counsel: Are differences between U.S. and EU legal philosophy creating stumbling blocks? Pearl: Major differences — grounded first in Europeans’ opposition to the U.S. approach to “doing business” jurisdiction, and their rejection of the notion that jurisdiction can only be based on a substantial connection between the defendant and the claim. The EU also severely limits the U.S. concept of “specific jurisdiction.” The EU is weary of enforcing punitive damages. A major rift has appeared over European approaches to protecting consumers. The concept of a Web site’s mere accessibility equaling jurisdiction is a major stumbling block. And the EU’s insistence that its own jurisdiction convention — the Brussels Regulations — will trump the Hague Convention is also unsettling. Tech Counsel: How is the U.S. government handling these negotiations? Pearl: Superbly! The head of our delegation, Jeffrey Kovar of the State Department, is the consummate diplomat. He has gathered an excellent team of negotiators from Justice, Commerce, the Patent and Trademark Office, academia, and the private sector. Kovar always keeps his cool when barraged. He is a cordial, persistent negotiator well-respected by his foreign counterparts — even those who disagree with us. Tech Counsel: What’s the next step in the negotiations? Pearl: The heads of the delegations met immediately following the Diplomatic Conference and decided not to decide. At least, they finally realize that they cannot reach an easy conclusion with one more meeting. We’re awaiting the “final” new draft [as of early July]. There will be no more formal or informal meetings among all delegates, though we anticipate bilateral meetings between the U.S. and individual country delegates. Individual countries and even the EU may hold private sector consultations in the fall. The EU ministers will meet in December to coordinate a strategic approach. And the heads of delegations will meet (possibly in late January) to decide on a final approach. Essentially there are three options for the January meeting: 1. Continue with this approach of a “mixed” convention dealing with jurisdiction and foreign judgments. 2. Scale back this draft to avoid the controversies and differing legal philosophies. By narrowing the convention to possibly focus only on B2B transactions and the resultant ability of foreign courts to enforce judgments, the chances of finding a common ground are substantially raised. 3. Suspend the entire process until the time is ripe again. An unwillingness by key foreign governments to scale back the convention may force a number of other countries to grudgingly accept this approach. Tech Counsel: Any predictions on how the treaty will turn out? Pearl: Yeah, right. No question but the U.S. will never join if the “doing business” jurisdiction issues and the relationship of this convention to the Brussels Regulations is not resolved appropriately. These need to be settled even before the e-commerce problems. The wide array of industries that make up the digital economy will not allow this proposal to freeze into place concepts of e-commerce law prematurely. A treaty is meant to survive for generations and must be flexible enough to allow for change. In many ways this treaty is either too late (should have been concluded long before the Internet) or too early (let’s be cautious about imposing protections that can have extraterritorial implications in cyberspace). But that’s not to say we should be discouraged. The 1999 draft simply ignored the Internet and major controversies. The new draft reflects our input of the past year and a half. While we didn’t make real progress on the key issues, and delegates were not prepared to find consensus and not permitted to reach compromises, they are now focused and understand the controversial issues which must be tackled. We still have a long row to hoe, but I am encouraged by the seriousness of the deliberations in June.

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