October 30, 2000, Letter from United States Council for International Business to Secretary Albright

United States Council for International Business

Thomas M. T. Niles, President

1212 Avenue of the Americas, New York, NY 10036-1689
tel: 212-354-4480- fax: 212-575-0327
e-mail: info@uscib.org-lnlemel:www.uscib.org

American Business as U.S. Affiliate of:

International Chamber or Commerce (ICC)
International Organisation of Employers (IOE)
Business and Industry Advisory Committee (BIAC) 10 the OECD ATA Camet System

October 30, 2000

The Honorable Madeleine K. Albright
Department of State
2201 C Street,N.W.
Washington, D.C. 20520

VIA FACSIMILE Total Pages: 3

Dear Secretary Albright:

I am writing to you to convey the views of the members of the United States Council for International Business (USCIB) on the draft Hague Convention on Jurisdiction and the Enforcement of Foreign Judgments in Civil and Commercial Matters. With a membership of over 300 global corporations, professional firms, and business associations, USCIB advances the global interests of American business both at home and abroad. It is the American affiliate of the International Chamber of Commerce (ICC), the Business and Industry Advisory Committee (BIAC) to the OECD and the International Organisation of Employers (IOE). As such, it officially represents U.S. business positions in the main intergovernmental bodies, and vis-a-vis .foreign business communities and their governments.

In theory, our members would support a convention that would ensure that judgments of U.S. Courts in favor of U.S. companies are enforced in foreign courts. This interest is even more important given that U.S. courts traditionally enforce judgments against U.S. defendants rendered by foreign courts considered to satisfy the basic principles of due process.

Despite the worthwhile goal of the proposed Convention, USCIB members, as well as many of our foreign counterparts, have identified significant problems with the current draft in such areas as electronic commerce, intellectual property and employment, among others. A brief, and non- exhaustive, explanation of the concerns of our members follows.


1. Jurisdiction over Sellers for Actions in Contract: Jurisdiction attaches wherever the goods or services were received in whole or in part, or where the contract was performed, thereby potentially subjecting companies to jurisdiction in unexpected countries. It may be impossible to determine where the buyer or user of a digitized product is located at the time of the sale or use or where electronic perfonnance of the contract took place;

2. Jurisdiction over Consumers for Actions in Contract: The draft Convention adopts the country-of-destination approach to jurisdiction, with very limited exceptions, over sellers who conclude contracts with consumers, thereby subjecting companies to the jurisdiction of the courts of all countries from which its website may be accessed;

3. Jurisdiction over Defendants for Actions in Tort: The draft Convention tracks existing private international law by providing for jurisdiction based on where the injury occurs or where the wrongful act was committed. In the context of electronic commerce, it is not always apparent where the tort occurred. In addition, this article could raise certain jurisdictional issues for e-commerce stakeholders including content and service providers;

4. Jurisdiction over a Branch: A company can be hailed into court if it has a branch or presence in a given country, including "regular commercial activity." The problem here is: does the accessibility of a website constitute such "regular commercial activity"?

5. Carve-out for Regional Arrangements: The draft Convention gives Europe a carve-out, excluding regional arrangements when they conflict with the Convention.

EXCLUSIVE JURISDICTION ISSUE: The proposed Convention provides for exclusive jurisdiction over actions involving trademarks in the country of registration. This makes no sense, for example, in cases where trademarks are unregistered, or in the case of the Community trademark or under the existing U.S. anti-cybersquatting laws pursuant to which a court may assert jurisdiction in rem.

EMPLOYMENT ISSUES: The draft Convention's treatment of contracts of employment, which links jurisdiction to the employee's country of origin or place of primary residence, is extremely controversial. Businesses and their employees need contractual autonomy and certainty with respect to employment contracts. This provision would result in states interpreting and attempting to enforce widely differing employment laws of other states. Moreover, in contracting for work over the Internet, companies may not even know exactly where the contracting party primarily resides or is physically located, which could subject the employer to unacceptable risks and liabilities.

It is important to note that many of the issues set forth above are particularly onerous on small and medium-sized enterprises and could serve as a barrier to their entry into the online marketplace.

In order to assess the sentiment of the business community and to identify whether the draft Hague Convention would be beneficial to business, we developed a summary of the draft Convention along with a survey to be completed by members. We received many responses to the survey from businesses from many sectors, including the electronic commerce, intellectual property and general business communities.

Without exception, the responses indicated that the concerns highlighted above significantly outweigh any potential benefit that the draft Convention would confer. Therefore, USCIB members strongly urge the U.S. Government and its negotiating partners to reassess the utility of pursuing the negotiations on the current text of the draft Convention. It is the view of our members that such negotiations will not result in a product that they will be able to support.

USCIB looks forward to continuing our dialogue with the U.S. Government on the draft Convention. In addition, we will continue to discuss this issue within our membership and the International Chamber of Commerce and will convey additional views to the U .S. Government, its negotiating partners and the Hague Secretariat.

We hope that these comments are helpful and look forward to continuing to work with you. I am also sending a similar letter to Secretary Mineta.

Please do not hesitate to contact us if you have any questions. Sincerely,

Thomas M.T. Niles

Cc: Mr. Jeffrey Kovar, Assistant Legal Adviser for Private International Law, Department of State