WHY THE HAGUE CONVENTION ON JURISDICTION THREATENS TO STRANGLE E-COMMERCE AND INTERNET FREE SPEECH

Beginning next January, negotiators from at least 50 countries will convene in the Netherlands under the auspices of a little-known intergovernmental organization, the Hague Conference on Private International Law. There, they will consider a proposed treaty that would establish new global rules governing jurisdiction in cross-border lawsuits.

Thus far the public has paid little attention, but the stakes are potentially enormous. If the current proposal is accepted and ratified by the negotiating countries, the Hague Convention may achieve what a worldwide economic slump, a terrorist attack, and the Communications Decency Act thus far have failed to do: strangle both e-commerce and free speech on the Internet. Accordingly, it is imperative that the United States should not agree to the Convention — at least in its present draft form.

The draft Hague Convention on Jurisdiction and the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters covers commercial law. It is intended to harmonize jurisdictional rules governing cross-border litigation between private parties, including disputes over contracts, patents, copyrights, and defamation.

The draft treaty does not impose global standards governing the substantive issues in cross-border lawsuits. Instead, it establishes global rules for jurisdiction, and obliges signatories to enforce the judgments rendered by the courts of other member countries, as long as those countries have complied with the jurisdictional rules.

All of this sounds reasonable. Indeed, a similar arrangement, the Brussels Convention, is already in force in the EU. That agreement requires that a legal judgment in one EU member country be enforced in all others.

But the Hague Convention would cover a much larger number of countries — the current 50 member states include industrialized nations such as the United States, France, Germany, Sweden and Australia, as well as developing countries such as China, Romania, Turkey, and Venezuela.

Moreover, unlike in the EU, where national laws are broadly similar and are undergoing further convergence, the national laws of the Hague Convention member countries often diverge and are sometimes mutually incompatible. As a result, if the Convention is ratified, U.S. courts could be obliged to enforce foreign judgments even against people and companies whose actions were entirely legal in the U.S.

A Strikingly Broad Effect on E-Commerce

The reach of the treaty's mutual enforcement regime is especially sweeping in the context of e-commerce. Under the current draft, lawsuits based on intellectual property claims such as patent or copyright infringement, or information-based torts such as defamation and hate speech, can be brought in any jurisdiction in which injury arises. Because Internet websites operate worldwide, if an offense is alleged to have been committed online, suit can be brought anywhere, and all signatories are obliged to enforce judgments rendered by the courts of any other signatory.

For example, in defamation suits, the injury is generally thought to arise wherever the defendant resides, since that is where his reputation primarily exists. Under the Convention, then, if a U.S. website publishes an article discussing a foreign person who lives in a signatory country, and the foreign person sues in his country's court for defamation and wins, the U.S. must enforce the judgment against the website — even if U.S. First Amendment law would clearly protect the article.

The Convention's imposition of virtually universal jurisdiction over cross-border intellectual property disputes also threatens to stunt the development of global e-commerce. To stay out of trouble, online operators would have to comply with the laws of the most restrictive signatory country.

So much for the "fair use" defense. While U.S. websites would be entitled to the defense under U.S. law, in practice they could not rely on it. U.S. law would effectively be trumped by contradictory — and more restrictive — foreign law.

Chilling Political Speech: Yahoo! and Nazi Memorabilia

Worse yet, the Convention threatens to chill online political speech. Consider this nightmare scenario:

Last year, the U.S.-based Internet portal Yahoo! was sued in France for having links to U.S. sites that auctioned Nazi memorabilia. French hate speech law prohibits the trading of Nazi items within France. Because Yahoo!'s auction sites are accessible within France, the French court found that Yahoo! was violating the French law.

Yahoo! first tried to escape liability by removing Nazi items from its French sites alone. But that did not satisfy the French court, which threatened Yahoo! with a fine of US$14,000 for every day Nazi items remained on Yahoo!'s U.S. auction sites.

Rather than attempt to prevent French nationals from accessing its U.S. auction sites, Yahoo! chose to remove Nazi items altogether. (Yahoo! has filed suit in U.S. district court requesting a declaratory judgment that the French court lacks jurisdiction over Yahoo!'s U.S. sites). For the moment, the French court's ruling has effectively been imposed on U.S. citizens, despite the fact that Yahoo!'s actions are protected by the First Amendment.

Granted, this has all happened even without the Convention, but the Convention threatens to make a bad situation much worse. Yahoo has stated that it has no assets in France that the French court could order seized in satisfaction of its judgment. So Yahoo! has a fighting chance now of nullifying the French court's judgment by preventing the French plaintiffs from reaching Yahoo's U.S. assets. But if the U.S. becomes a signatory to the Convention in its present draft, companies in Yahoo!'s position will not even have the choice to fight. The French court's judgment could be enforced in any signatory country where Yahoo! had assets, including this one.

Effectively Applying Chinese or Pakistani Law To U.S. Websites

The Yahoo! example is drawn from an actual case, but there are other scenarios that are even more threatening. If a French court can prohibit Nazi expression and have courts outside France enforce its judgment, perhaps a Chinese court can similarly stamp out online criticism of the Chinese government, or a Pakistani court online criticism of Islam — assuming China and Pakistan become signatories to the Convention, of course.

Exactly what is "manifestly incompatible" with U.S. public policy would most likely be determined ad hoc by individual judges. And even if U.S. courts decline to enforce foreign censorship judgments, the threat to Internet free speech remains.

The ISPs that carry Internet traffic either have assets in countries that lack free speech protections, or "peer" with larger ISPs that do. A censorship judgment against a website could be enforced against that website's ISP (or the ISP's ISP) in any other country where it has assets and in which there is no First Amendment — not just in the country that issued the initial judgment, as is currently the case.

So even if a French judgment against Yahoo! were not enforced by the U.S. as contrary to public policy, it still could be enforced elsewhere — financially crippling the company. And every judgment will automatically give birth to as many enforcement lawsuits as there are signatory countries in which a multinational company has assets.

Reducing the Net to the Lowest Common Denominator

In sum, it is clear that the Convention should not be ratified in anything resembling its current form. If it were to become law, the Convention could reduce the Internet, which currently offers a greater variety of viewpoints than any other medium, to the lowest common denominator, where websites avoid controversy for fear of offending someone and being sued in a jurisdiction that offers little protection.

Ironically, the Convention's imposition of uniform jurisdictional rules also threatens to balkanize the world's first global medium. Online businesses might choose to block users from particular countries from accessing their sites, rather than be subject to those countries' laws.

The U.S. Delegation's Initial Approach

The United States will be represented in the Hague negotiations by officials from the Department of State and the Patent and Trademark Office. In a letter to the secretariat of the Hague Conference, the Department of State has stated that it cannot accept the Convention in its current form. The Department suggested that the next round of negotiations focus on identifying a narrow set of jurisdictional rules that could form the basis for an initial agreement.

The exact approach that the U.S. delegation will take in the January round is, however, still to be determined. On August 20, the PTO published a notice in the Federal Register soliciting comments on the current draft. The PTO also scheduled a public hearing on the Convention for September 11 — though, for obvious reasons, that hearing was canceled.