Discussion Questions for
Afternoon Session of February 6 Roundtable(1)

Issue 1: Contract Actions By Consumers Against Businesses

Attached are 5 options that have arisen during the Hague Convention negotiations for dealing with contract actions by consumers against e-businesses. What is the appropriate result for an international convention?

Issue 2: Contract Actions By Businesses Against Consumers

Carol Consumer, a U.S. consumer, buys $1000 worth of jewelry from ABC Company, located in Foreignland. ABC Company sends the jewelry, but Carol never pays. The contract between ABC Company and Carol states that Foreignland is the applicable forum. ABC Company wants to sue Carol.

Under Article 7(2) of the current draft of the Convention, ABC Company cannot get a judgment against Carol enforced unless ABC Company sues Carol in the United States, regardless of whether the contract contains a forum selection clause. Is this appropriate?

Issue 3: Intersection of ADR and Hague Convention

How does the current draft of the Convention treat the following? How should it treat the following?

(1) The contract between Carol Consumer, a U.S. consumer, and ABC Company, a Belgian company, requires any disputes to be submitted to the WorldWide Arbitration Association for binding arbitration in Foreignland. If Carol wishes to file a lawsuit directly in U.S. court without submitting to binding arbitration, does the current draft of the Convention require a U.S. court to set aside the binding arbitration clause? Should it?
(2) The contract between Carol Consumer and ABC Company requires any disputes to be submitted to the WorldWide Dispute Resolution Association for online mediation, but allows both parties to appeal the result of the arbitration or mediation to court. If Carol wishes to file a lawsuit directly in U.S. court without submitting to mandatory mediation, does the current draft of the Convention require a U.S. court to hear the case? Should it?

Issue 4: Targeting

How should the Convention address the following?

(1) ABC Company, a Belgian company, advertises in U.S. newspapers and magazines and states on its Web site that it has "special offers for U.S. customers." Carol Consumer, a U.S. consumer, sees a newspaper ad for ABC Company, surfs the Internet from her living room in California, makes a purchase from ABC Company, puts in her credit card billing address and requests that the goods be shipped to her address in California.
(2) ABC Company, a Belgian company, does not advertise in U.S. media. Carol Consumer buys digital music from ABC Company, using her mother's credit card, which has a Canadian billing address.
Under the current draft of Article 7, Carol can sue ABC Company in the U.S. for problems arising from either transaction. Is this appropriate? Should the result for scenario (1) be different from the result for scenario (2)?

Issue 5: Definition of Consumer

Should protections under the Convention available to Carol Consumer be afforded to Carol's mother's company Stephanie Small-Business if Stephanie is buying supplies online for the office kitchen?

 

Special Rules for Consumer Contracts under the Hague Convention

General Rules

  If consumer contract does not contain a forum selection clause: If consumer contract contains a forum selection clause:
Option 1:
Current Text of Article 7		 Consumers must be permitted to sue businesses at consumers' home; resulting judgments enforced under Convention. (White list) Consumers must be permitted to sue businesses at consumers' home. Forum selection clauses not binding on consumers; resulting judgments enforced under Convention (White list) Consumers can sue businesses under other provisions of Convention and enforce resulting judgment. For example,

if contract does not contain a forum selection clause,

  • consumer can sue business in business's home forum (Article 3)
  • consumer can sue business where business has branch (Article 9)
  • consumer can sue business where goods are supplied (Article 6)

if contract does contain forum selection clause

consumer can sue business in forum designated by forum selection clause (modified Article 4)
Option 2:
Revise Convention:		 Consumer must be permitted to sue business at consumer's home; resulting judgments enforced under Convention. (White list) Whether consumers can sue at home is left to national law; resulting judgments not enforced under Convention (Grey area)
Option 3:
Revise Convention:		 Consumers must be permitted to sue businesses at consumers' home; resulting judgments enforced under Convention. (White list) Contracting States choose Option A or B with respect to Article 7(3)
Option A: Consumers must be permitted to sue businesses at consumers' home; forum selection clauses not binding on consumers; resulting judgments enforced in other opt-in countries but not enforced under Convention in opt-out countries Option B: whether consumers can sue at home is left to national law; if forum selection clause invalidated, consumer sues at home, with resulting judgment enforced only in opt-in countries under Convention.
Option 4:
Revise Convention:		 Whether consumers can sue at home is left to national law; resulting judgments not enforced under Convention (Grey area) Whether consumers can sue at home is left to national law; resulting judgments not enforced under Convention (Grey area)
Option 5:
Exclude consumer contracts from Convention/No Convention		 Whether consumers can sue at home is left to national law; resulting judgments not enforced under Convention Whether consumers can sue at home is left to national law; resulting judgments not enforced under Convention Consumer can never get the benefits of recognition and enforcement under the Convention. However, consumer could assert bases for jurisdiction that would have been prohibited by Convention (black list) such as
  • "tag" jurisdiction
  • jurisdiction based on general business activity

1. The draft convention would create three categories of jurisdiction: (1) a white list, consisting of required bases for jurisdiction and recognition of judgments (generally Articles 3-16); (2) a black list, consisting of prohibited bases for jurisdiction and recognition of judgments (Article 18); and (3) a grey area, which covers everything else not covered by (1) or (2) (Article 17).

The White List: Articles 3-16 set out jurisdictional rules for specific types of actions that the courts in Contracting States must provide, and from which any resulting judgment may gain the benefits of the recognition and enforcement provisions of the Convention.
 
The Black List: Article 18 defines grounds of jurisdiction that are prohibited in Contracting States. Article 18(1) would place a general limitation on the exercise of jurisdiction based on the absence of a "substantial connection between that State and the dispute." Article 18(2)(e) is of  particular interest to U.S. litigants because it states that jurisdiction cannot be based solely on the fact that the defendant carries on commercial or other activities in that State, except where the dispute is directly related to those activities. This provision would prohibit the exercise of general "doing business'" jurisdiction as currently recognized under U.S. law. Article 18(2) also would prohibit the exercise of "tag" jurisdiction in a court based on service upon the defendant in the State.
 
The Grey Area: Everything that does not fall under either of these categories is included in the "grey area" as defined in Article 17. Generally, countries can continue to act as they normally do under their national law; however, judgments resulting from actions covered by this provision will not get the benefits of recognition and enforcement under the Convention.