Internet Self Regulation

I have recently come from private practice in San Francisco, and am well aware of the importance of private international law for international commerce. By private international law I mean the growing body of treaty law and domestic legislation that deals with everything from the sale of goods to abduction of children, from carriage of goods by sea to electronic commerce, and from adoption of children from abroad to the legalization of documents.

In the United States, the private sector has a close partnership with the State Department in the development of private international law. Indeed, the principal aspect of the Legal Advisers portfolio with which I was familiar before taking the job was its work in this area. I need not tell you the effects on international business of an instrument such as the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.¹ With its 104 state parties, the New York Convention has created the legal framework to resolve international commercial disputes in a reliable and cost-effective manner through the use of arbitration and the enforcement of arbitral awards. Because of this Convention, most significant international contracts now have arbitration clauses.

Nor do I need to explain to you the importance of the three well known Conventions concluded under the auspices of the Hague Conference on Private International Law -- on the Service of Process Abroad,² the Taking of Evidence Abroad,³ and the Legalization of Foreign Public Documents.⁴ These instruments (particularly the conventions on service of process and taking evidence) have greatly facilitated the pursuit of civil lawsuits involving foreign parties. In the United States we handle seven or eight thousand requests for foreign service of process every year. The legalization convention has saved time and expense that previously resulted from the laborious process for official certification and authentication of documents intended for use abroad.

The development of private international law is a continuing process, and is far from completed -- particularly in the area of enforcing foreign judgments. At the State Department we receive dozens of calls each month from attorneys and business people asking how to pursue litigation, or enforce judgments, against foreign corporations and persons. These callers are invariably disappointed to learn that while U.S. courts will generally enforce foreign judgments, there is no certainty about the enforcement of U.S. judgments abroad.

Efforts have been made to develop agreements to provide for the international enforcement of civil judgments. In the 1970s, the United States and the United Kingdom almost concluded a bilateral agreement, but opposition from insurance interests in the United Kingdom halted the effort.

The European Union has been most successful: the European Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters (known as the 'Brussels Convention'), signed in 1968, with subsequent protocols to bring in new member states, effectively provides for the enforcement of civil judgments among the EU countries.⁵ In 1988, the EU members negotiated an almost identical convention with countries of the European Free Trade Area, known as the Lugano Convention.⁶ And, a multilateral Inter-American Convention on the Extraterritorial Validity of Foreign Judgments and Arbitral Awards was adopted in 1979.⁷ A few countries have successfully completed bilateral agreements, but none with the United States.

An effort is now underway in the Hague Conference on Private International Law to prepare an international judgments convention. While the second negotiating session is just ending today, there remain at least 3 more years of hard work for which we need the guidance and support of the practicing bar.

I would like to tell you a little about why an international enforcement of judgments convention is important, and mention briefly some of the difficult legal issues being grappled with. I would also like to describe how the convention will be negotiated at the Hague Conference, and urge you to follow the negotiation carefully. I hope you will agree with me about the importance of this effort.

With the continuing expansion of international trade and commerce, and the phenomenal growth in international telecommunications, we are riding the crest of a social and economic revolution as profound as the industrial revolution of the 19th Century. Our domestic economies are rapidly evolving into global economies.

In only 20 years, the value of U.S. exports has grown sixfold, from $142 billion in 1977 to nearly $900 billion in 1997. During the same period, foreign investment in the United States jumped from $35 billion to over $500 billion. Today, the percentage of U.S. gross domestic product derived from international trade stands nearly 50% higher than it was only 20 years ago.⁸

We only need look at the attention paid to the financial crisis in Asia by the U.S. government's most senior finance officials, the IMF, and other governments, to realize the extent to which our national economies are increasingly part of a single global economy. Look also at the phenomenal growth of the Internet in only the last 3 or 4 years -- an unbounded form of communication that is changing the means for doing business and engaging in social interaction forever. The United States has no hesitation here. As the White House has said, we must strive for a marketplace that knows no international boundaries.

With this growth in international commerce and human contacts inevitably comes a growth in civil disputes, but the world's means of dispute resolution are not evolving at the pace of international trade law and institutions or the Internet. While arbitration has proved very effective at resolving an increasing number of international commercial disputes, it is not appropriate for all legal disputes or for all parties. If we are to avoid limiting or distorting the globalization of the economy, we must make sure that the world's judicial systems cooperate in providing remedies to international businesses. European Common Market countries recognized very early how essential an integrated system for the recognition and enforcement of judgments was to their economic integration. They made accession to the Brussels Convention a requirement for entry into the EC and later the EU. Today European businesses enjoy the security of knowing that a judgment rendered by a court in one country of the European Union will be enforced with minimal procedural requirements in the courts of the 15 other EU states and the remaining EFTA states.

For reasons related to the federalist structure of the United States, the United States Supreme Court has also recognized the importance of enforcing foreign judgments in the 1895 case of Hilton v. Guyot.⁹ In Hilton, the Supreme Court found that foreign judgments are entitled to recognition and enforcement in the courts of the United States on the basis of the principle of comity, provided they meet general requirements of due process.

Unfortunately, piecemeal solutions are not effective on a global basis, and raise their own inequities. The Brussels Convention, for example, generally only addresses jurisdiction and enforcement of judgments between EU domiciliaries, but it also discriminates against persons and companies not domiciled in the EU.

For example, a Greek company could bring an action in Greek courts against a U.S. company on grounds that would not be permitted against an EU company, and the Brussels Convention would require the recognition and enforcement of the judgment in the United Kingdom and elsewhere in the EU where assets could be located. But if the U.S. company were instead a German or Danish company, no such judgment could be obtained or enforced.

As for U.S. practice, although U.S. courts provide a hospitable forum for foreign judgment holders -- at least those from countries with well-established and independent judicial systems that assure basic due process -- there is little reciprocity in other countries for persons holding a valid judgment from a U.S. court. In fact, the courts of many countries cannot enforce the judgments of a foreign court unless there is a treaty obligation to do so. And, as I said earlier, the United States is not a party to any such treaties.

The lack of reciprocity and perception of unfairness cannot continue indefinitely. I believe that if a survey of the number of foreign judgments enforced in the federal and state courts of the United States, and a calculation of their dollar value, were carried out, the results would prove very interesting.

I suspect that our European friends would come to understand in concrete terms the importance to them of enforcing their judgments in the United States. I would think, too, that absent efforts to provide reciprocal benefits to U.S. litigants, there is at least some risk that interests in the United States might attempt a change in the favorable status quo.

The legal and policy issues confronting the negotiation of a global judgments convention are daunting. As a threshold matter, the Hague Conference member states have decided to attempt to prepare a convention that will address not only the recognition and enforcement of judgments, but will also set out required and prohibited grounds of jurisdiction over foreign defendants.

Clearly, a convention that simply set up rules for recognizing and enforcing judgments would most closely parallel the existing U.S. system of comity. (In the language of the negotiations, such a convention would be called a "simple" or a "single" convention.) However, we and other countries will seek to exclude grounds of jurisdiction that appear unreasonable, and forms and measures of damage viewed as excessive or otherwise unacceptable will be examined.

An international judgments convention that addressed only the recognition and enforcement of judgments, without addressing jurisdiction, would be perceived as opening the door to unfairness. While the New York Convention is not so limited, agreements to arbitrate represent the choice of both parties. Because the jurisdiction of national courts depends upon the choice of the plaintiff and local law, a convention simply providing for the recognition and enforcement of all foreign judgments can afford only limited protection to defendants.

In fact, if defendants could be brought before the courts of any country they reach by Internet, with the resulting judgment fully enforceable outside that country, an enforcement of judgments convention could have an inhibiting effect on the growth of electronic commerce. Because civil litigation varies tremendously among jurisdictions in rules of procedure, available causes of action, discovery, damages, and effectiveness, these differences must be considered.

The Brussels Convention creates a very rigid framework of required grounds of jurisdiction, and effectively prohibits courts from assuming jurisdiction against EU domiciliaries that are not among the required grounds. (It is called a 'double' convention.)

The Brussels Convention has a list of required grounds of jurisdiction that is both broad and narrow. In certain applications it would violate constitutional due process limitations in the United States that protect the defendant (for example, the Brussels Convention permits jurisdiction over a tortfeasor in whatever country the effect of the tort is felt). The Convention also omits (and therefore prohibits) jurisdictional grounds that are well known in this country (for example, 'doing business' jurisdiction).

It is natural for European countries to prefer their approach, which works well for them. However, it would not be reasonable to expect that such a system could be applied on a world-wide basis. While the approach may work within the confines of the EU -- where countries are increasingly integrating and share an historic legal culture¹⁰ -- a global agreement must be able to take into account the significant differences in the legal systems that exist outside the EU.

What this means, therefore, is that the negotiation of a successful convention will require compromises on all sides. Thus, countries may have to both limit and expand to some degree the grounds of jurisdiction now available in their legal systems for some civil actions involving foreign defendants from countries party to the convention.

It is no secret that U.S. 'long-arm' and 'tag' jurisdiction are not favored abroad. Nor do foreign governments appreciate our courts' awards for punitive and treble damages. It may even prove difficult to obtain acceptance of the common law principle of judicial restraint known as forum non conveniens by civil code countries unfamiliar with this type of judicial discretion.

To take the example of 'tag' jurisdiction -- to accept a convention, the United States may have to agree to provisions that could limit the right of plaintiffs to acquire jurisdiction over a French debtor in Massachusetts based solely on serving him when he passes through Boston's Logan Airport on his way to Vancouver.

In the same way, EU countries may have to agree to accept grounds of jurisdiction or measures of damage with which they are not familiar -- for example, compensatory damages reflecting anticipated future medical costs. This give and take will be among the most difficult aspects of the negotiations, and the outcome will largely determine whether the project succeeds or fails.

So, how can we structure a successful convention?

One proposal is to take the approach of the Brussels Convention, and negotiate a convention with an exhaustive list of required grounds of jurisdiction, all other grounds of jurisdiction being prohibited. This does not appear realistic to us. The Brussels Convention was originally operative only among civil law countries with quite similar civil codes. This would not be the case for a global convention.

In our view, a more workable alternative would be for the convention to present a list of required and a list of prohibited grounds of jurisdiction, that do not purport to be exhaustive. The convention would therefore permit, but not benefit, any grounds of jurisdiction not listed. (Such a convention is currently referred to as a 'mixed' convention.) U.S. courts would have to hear cases against persons and entities domiciled in a party state based on the required grounds, and judgments from U.S. courts based on the required grounds would be enforceable in other states party as a matter of treaty obligation. U.S. courts would refuse to hear cases invoking jurisdiction based on prohibited grounds of jurisdiction.

Litigation based on grounds of jurisdiction not listed in a mixed convention would not be barred, but recognition and enforcement under the convention would not be possible. Recognition and enforcement would only be available under the general law and comity of the requested country.

Whether or not the Hague convention will be a double or mixed convention has not yet been decided. We hope to see consensus on a mixed convention by the end of the special commission negotiating session next fall.

There are also questions of fundamental fairness that inevitably arise when considering the recognition of foreign judgments from a widely disparate group of countries. Some effort will have to be made, for example, to ensure that the convention takes into account the diversity of judicial systems represented by the various parties, and provides a mechanism that allows the recognition and enforcement of only those judgments that were the result of fair proceedings. For example, a state or state-owned entity should not be able to enforce a judgment against a debtor where the legal proceeding was subject to undue influence by the state.

In the United States, we will also have to grapple with constitutional due process requirements, as well as federalism concerns. Because due process limitations cannot be overcome by treaty or statute, they will constrain our negotiating latitude.

None of these difficult considerations should deter us from pursuing the negotiation of a multilateral convention. The United States was well aware of these types of concerns when we proposed to the Hague Conference on Private International Law in 1992 that it take up the negotiation of a jurisdiction and judgments convention. The Conference agreed in 1996 to do so. Negotiations are scheduled for completion by October of 2000.

Some might ask why, given the number of issues that will have to be resolved, and the widely varying judicial systems involved, a series of bilateral treaties might not better accomplish the same end. Given that U.S. courts already recognize and enforce judgments from countries with established reliable and independent judicial systems, why not simply seek bilateral arrangements with them?

There are a number of reasons why a multilateral approach makes sense. First, and foremost, negotiating separate bilateral agreements would require a much larger commitment of human and financial resources than a multilateral effort.

Second, litigants would be disadvantaged if they had to cope with the differences that would surely result from the negotiation of a number of treaties with different negotiating partners.

Third, each treaty would require advice and consent of the Senate, and enactment of necessary implementing legislation. For reasons that become increasingly evident with each new treaty sent to the Hill (there are now 68 treaties pending before the Senate Foreign Relations Committee), we would prefer to minimize the number of times we have to seek formal congressional action.

The Hague Conference -- a standing intergovernmental forum for the negotiation of private international law instruments -- provides a natural venue for this project. The Hague Conference has been the locus for negotiating important private international law agreements for over 100 years.

Its 46 Member States include Canada, Mexico and other Latin American states, the E.U. member states, China, Japan, Australia, Israel, some North African states, several countries of Eastern Europe, and the United States.

The Hague Conference offers all the necessary conference infrastructure and services for what will be at least 11 weeks of negotiation over 4 years, including an excellent legal and professional staff. Its operating costs are already covered by annual assessments upon the member states.

The Hague Conference has a regular four-year rhythm of work that begins with the adoption of the proposal for a convention, a thorough preparatory study by the Permanent Bureau, the creation of a special commission to conduct the negotiations in several sessions, and the final adoption at a formal diplomatic session. The process is open, and detailed records of the negotiating sessions and interim texts are prepared and published. Moreover, the Hague Conference is a non-confrontational and non-politicized forum characterized by a professional and goal-oriented approach.

The Hague Conference in June 1997 held its first two-week formal negotiating round, or 'special commission' meeting on this project. As I speak, the second two-week session is winding up in the Hague. The next is scheduled for November 1998. The Permanent Bureau of the Hague Conference has prepared a comprehensive report and analysis on the many issues under discussion, and prepares progress reports following each negotiating round. These documents are available on my office's web page, which you can find by going to the State Department's web site or by going directly to the documents.

A convention on judgments cannot be achieved without sustained attention and participation by you in the private bar who are most concerned with the role of private international law in international commerce. You are well placed to evaluate the benefits of such a convention, and to consider and provide advice on the major issues facing the negotiators. Let me list a few:

-- Which types of civil jurisdiction should be required or prohibited, and which types should be permissible but not benefitted by the enforcement provisions of the convention? (We believe, for example, that specific required grounds of jurisdiction should include torts and product liability.)

-- Should the judgment court's decision be reviewable by the enforcing court? (We believe the court hearing a request for enforcement should be able to review the fairness of the proceedings below, and the independence of the judgment court.)

-- How should jurisdiction be exercised over corporate subsidiaries and branches? (We think U.S. rules in this area are effective, and should be favorably considered.)

-- Should a court properly seized with a case under the convention be able to refer it to another court under the doctrine of forum non conveniens? (We believe that common law courts should be permitted to continue to exercise this traditional method for referring cases to a more suitable forum.)

-- How should the convention address complex and multiple-plaintiff litigation? (We would like class actions to be possible and the resulting judgments enforceable under the convention.)

-- Should judgments for punitive and multiple damages and so-called 'excessive' damages be enforced under the convention? (We hope that other countries will examine U.S. awards with fresh eyes.)

-- How should the preservation of assets pending judgment be addressed? (We believe it is essential that provisional measures be enforceable to ensure that assets are available to satisfy judgments enforceable under the convention.)

In the United States, full consultation with, and support from, the private sector is essential if we are to be able politically to achieve ratification of the final convention. Through the Secretary of State's Advisory Committee on Private International Law, and its Study Group on Judgments, we have a regular group of practicing attorneys, representatives of legal and business organizations, and law professors, who are participating in the development of the United States negotiating positions on the convention.

Moreover, the U.S. delegation to the special commission negotiations includes leading practitioners from the Litigation and International Law sections of the American Bar Association and from the Association of Trial Lawyers of America, and distinguished legal scholars in this field.

To conclude, I would like to urge that we all agree to make the conclusion of a global convention on jurisdiction and the enforcement of foreign civil judgments a priority objective for the development of international law in the 21st Century. I hope you will follow these developments and assist your governments in their efforts to ensure that the Hague Conference develops a convention that can be widely accepted.

NOTES


1. Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958; entered into force for the United States, December 29, 1970; 21 UST 2517; TIAS 6997; 330 UNTS 3.

2. 1965 Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, Hague Conference on Private International Law, Actes et documents de ladixième session, 1965, tome III, 'Notification,' at pp. 345 et seq.; 20 UST 361; TIAS 6638; 658 UNTS 163; 4 Int'l Legal Mat. 341-347 (1965).

3. 1970 Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters, Hague Conference on Private International Law, Actes et documents de la onzième session, 1970, tome IV, "Obtention des preuves à l’étranger," at pp. 191 et seq.; 23 UST 2555; TIAS 7444; 847 UNTS 231; 8 Int’l Legal Mat. 37-41 (1969).

4. 1961 Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents, Hague Conference on Private International Law, Actes et documents de la neuvième session, 1961, tome II, 'Légalisation,' at pp. 167-171; 33 UST 883; TIAS 10072; 527 UNTS 189; 20 Int'l Legal Mat. 1405-1419 (1981).

5. European Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters, done at Brussels on September 27, 1968, 33 O.J. Eur. Comm. (No. C189/1) 1 (July 28, 1990) (consolidated and updated version of the 1968 Convention and the Protocol of 1971, following the 1989 accession of Spain and Portugal) reprinted in 29 Int'l Legal Mat. 1413 (1990)).

6. Convention on the accession of the Republic of Austria, the Republic of Finland and the Kingdom of Sweden; done at Brussels, Nov. 29, 1996, 40 O.J. Eur. Comm. (No. C 15/1)(Jan. 15, 1997).

7. Inter-American Convention on the Extraterritorial Validity of Foreign Judgments and Arbitral Awards, adopted 1979, entered into force, June 14, 1980.

8. Statistics derived from the U.S. Department of Commerce, International Trade Administration, Office of Trade and Economic Analysis, US International Trade in Goods and Services Balance of Payments Basis 1960-1996; U.S. Department of Commerce, Bureau of Economic Analysis, International Accounts Data: Foreign Investment in the U.S.; Superintendent of Government Documents 1996, Chicago Federal Letter, Foreign Direct Investment in the U.S. and Midwest, May 1996.

9. Hilton v. Guyot, 159 U.S. 113 (1895).

10. The Brussels Convention was negotiated without significant participation by the United Kingdom or Republic of Ireland.

"Cyberspace, the electronic super-highway or the Internet, as it is most commonly known, is a globally-networked, computer-sustained, computer-accessed and computer-generated multidimensional virtual reality, the use of which is increasing at a tremendous rate. Although much has been written on the legal issues relating to this new virtual reality, to date there has been little coverage of the private international aspects.

This new work aims to address two basic questions, namely, which court has jurisdiction and which law is to be applied when litigation arises from activity on the Internet? The book comprises seven key papers, presented by distinguished lawyers at the international colloquium organised by Utrecht University's Molengraaff Institute of Private Law and the Hague Conference on Private International Law, which was held in Utrech in June 1997.

The main topics covered include the following: *The role of law in cyberspace *Experiences in the field of intellectual property *Can private international law provide order to the chaos? *Problems concerning jurisdiction and applicable law *Conclusions and recommendations.

[Four of the seven papers in the book are in French]

Please address comments for the Web Page Author to cliff@dilloway.co.uk