October 5, 2000 (corrected Oct 9) Meeting of E-Commerce Roundtable on Hague Treaty Held at American Library Association Offices These are my notes from our October 5 meeting on the Hague Convention Jurisdiction and Foreign Judgements. Participants: USG: Jeff Kovar, State Department Hugh Stevenson, FTC Maneesha Mithal, FTC NGO/unions: Sarah Andrews, Electronic Privacy Information Center Thiru Balasubramanian, Consumer Project on Technology (CPT) Alan Bushnell, CPT Jamie Love, CPT Rick Weingarten, ALA (chair of meeting) Miriam Nisbet, American Library Association (ALA) Carrie Russell, ALA Manon Ress, Debs, Jones, Douglass Institute Rob Weisman, Essential Action Joel Yudken, AFL-CIO Press: Dugie Standeford, Washington Internet Daily Will Rodger, USA Today Documents: Jeff Kovar provide copies of a 10 page letter from him to UK official Alasdair Wallace, dated September 10, 2000, that discussed specific issues in the negotiations, and his June 29, 2000 testimony on the treaty to the House Subcommittee on Courts and Intellectual Property. We asked that these documents be put on the USDOS web page. US-DOS was also asked to provide details of the various Hague meeting dates and agendas on its web pages. Basic rationale for treaty and dates of meetings The treaty was described at a litigation convention. The basic rationale for the USG pushing the treaty goes something like this: 1. The USA is the most receptive country to recognizing foreign judgments. 2. Foreign judgments are already regularly enforced in US courts. 3. Few countries recognize US judgments. 4. Better foreign recognition of judgments would allow US citizens to collect US judgements abroad. Why then would foreign countries want to have the treaty? Apparently there is some foreign resistance to the treaty, in part, for example, over the big US judgments, and resentment over the fact that the US system which allows jury verdicts in many civil trials. There is also foreign opposition to the US practice of permitting extensive off shore discovery, and other aspects of the US assertion of "long arm" jurisdiction. Some governments would like to force the USA into a more consistent framework regarding jurisdiction, cutting back of the current "long arm" approach to jurisdiction. This is a simplified version of things, of course, and it was mentioned, for example, that currently in France any French citizen can sue anyone, anywhere in the world, for anything, in a French court. The push for the treaty by the US was described as coming from "middle class" litigants -- apparently relatively small parties (not giant corporations), who had claims against foreign parties that would not pay. "It's a plaintiffs treaty," USG says. Apparently some plaintiff lawyers emphasized cases such as foreign sales of unsafe children cribs or other goods, where they are seeking to make US judgements collectable abroad. Europe is now also dealing with changes in the Brussels convention, which addresses the same issues regarding judgements and jurisdiction. The talks on the treaty began in 1992, but the first drafts did not appear until 1998, and the first complete drafts were made available in June and then October 1999. The treaty was supposed to be finished this month (Oct 2000). Of course, when people started talking about the treaty, no one was thinking about the Internet, and how the treaty would affect the Internet, where the amount of cross border transactions has skyrocketed. In October 1999, the US government opposed many aspects of the Draft the treaty, registering opposition, for example, to articles 7 and 8 of the October 1999 text, and raising a number of other issues, as outlined in Mr. Kovar's September 10, 2000 letter to Alasdair Wallace. The U.S., along with a several other countries, pressed for the negotiating schedule to be revised and for additional negotiating sessions to be held. The current schedule for discussions on the treaty are: October 30- November 1, international negotiations on the text, held at the US Department of State in Washington, DC December 11-12, ICC/OECD/Hague meeting in the Hague on ADR, with discussion of relationship between ADR and Hague. December 13-15, Basel, Switzerland, government negotiations on the treaty text January 30-31, Geneva WIPO meeting on jurisdiction and choice of Law for intellectual property disputes Last week in February (3 to 5 day meeting), in Ottawa, on E- Commerce June 2001, the first session of a two-part diplomatic conference to complete the treaty Date unknown, the second part of the diplomatic conference, which may be the end of 2001, or the beginning of 2002. The rules are different for each meeting. NGOs can seek to have a Representative become a member of the US delegation at several of these meetings. Indeed, business groups already have requested. The October Washington, DC meeting will be closed, except to members of the country delegations. The December 11-12 Hague meeting will be restricted to 250 participants, worldwide. The Basel meeting will be closed, unless you can get on a country delegation. The WIPO meeting is open, according to WIPO. It is possible to be invited as an expert to the Ottawa meeting. International NGOs can also ask to participate (business NGOs do), and there will be private citizens on the US delegation. The ordinary Hague Conference rules will be for the diplomatic convention in June: government delegations (which may include private advisers) and international NGO's accredited to the Hague Conference. Mr. Kovar said to contact him for specific guidance on attendance at any of these meetings. He also asked whether consumer NGO's wished to put forward one person to be considered as a member of the U.S. delegation. He noted that this would entail some loss of independence to the individual while serving as a member of the delegation but offered the opportunity for direct input. Substantive Issues The USG will be provide written answers to the two letters I sent on September 29, 2000, regarding questions about the Hague treaty. Here are some notes from discussions about some of these issues. Libel and Slander Foreign libel or slander judgments that raise US first amendment issues are currently difficult to collect in the US. Under the proposed treaty, there are specific "Grounds for refusal of recognition or enforcement of judgments." These are set out in Article 28. Apparently the relevant 1st amendment provision is Article 28 (f), which is: 28(f) recognition or enforcement would be manifestly incompatible with the public policy of the state addressed. There was some question about broad the 28(f) provision would be. The USG seemed to think the 1st amendment would fit here, but it also seemed to be the case that many intellectual property concerns would likely not qualify. The American Library Association asked that Article 28 be expanded to include specific reference for US concepts on fair use. (Not discussed in the meeting was the controversy over Article 10.4, which concerns limits on damages for torts where injuries are alleged in more than one county, a section said to be relevant to defamation suits.) Default judgments There was discussion about cases where someone could not afford to be represented in foreign litigation. According to Article 27(2), the draft treaty says: Article 27 Verification of jurisdiction 2. In verifying the jurisdiction of the court of origin, the court addressed shall be bound by the findings of fact on which the court of origin based its jurisdiction, unless the judgment was given by default. Thus, if you are subject to the judgement by default, the US court is not bound by the foreign findings of fact. However, you can still be liable for the foreign judgment, even if it involves laws which are different from the US laws. Intellectual Property On the issue of intellectual property, both CPT and the American Library Association expressed interest in an exclusion for all intellectual property issues from the treaty. I suggested the exclusions could be based upon the rights defined under the WTO TRIPS accord. (This may not be broad enough). One argument for the exclusion is that there exists separate mechanisms for global harmonization of minimum rights (WIPO and WTO). But more generally, there was a concern that the public's rights would be extremely narrow if everyone was subject to claims from all Hague member countries. The examples of this were the fact that the EU has restrictive laws on fair use under copyright and trademark, while the US has very aggressive expansions of patents to business methods, and some countries have very poor examination processes, and issue very broad patents. With foreign judgement recognition, one could imagine a very small sub-set of public rights. The issue of which laws will apply for intellectual property is not addressed directly in the treaty -- it addresses choice of court rather than choice of law, but often the choice of court will have consequences in terms of the choice of law. Article 12 of the treaty deals with special cases of exclusive jurisdiction. Paragraphs 12.4 and 12.5 of the draft deal with intellectual property issues. In 12.4, there is bracketed language that would provide for exclusive jurisdiction based upon country of registration for matters involving infringement of patents, trademarks and "similar" rights. This would not apply to copyrights. In 12.5, there is bracketed language that would seem to permit broader jurisdiction in patent cases. There was talk that IPR issues could sink the whole treaty, because lots of people did not want to be subject to all of these IPR laws, and lose rights under national laws. And, it was also discussed that IPR laws are in a state of flux, and that we didn't even know what the laws would be in the future, and that it was important to retain the right to obtain national protection from foreign judgements that do not reflect national policy values, for example on the scope of rights, fair use or other matters. The treaty does in fact have carve-outs. In Article 1.1 the treaty begins with a statement on scope: "The Convention applies to civil and commercial matters. It shall not extend in particular to revenue, customs or administrative matters." Then, in Article 1.2, there are several exceptions, including such things as wills, social security, insolvency proceedings, matrimonial property disputes, and admiralty or maritime matters. (Interestingly, in Article 1.3 a dispute is not excluded solely because a government or agent is involved.) It would seem that there could be a campaign for an exclusion for intellectual property, and indeed, apparently the maritime exclusion came about after it was clear that the US maritime industry could not reach consensus on its position under the treaty. (See too excerpts from Kovar to Loon letter, below) Contracts of Adhesion For contracts concluded by consumers, Article 7.3 of the current draft of the treaty excludes contractual provisions that determine the choice of court. And, Article 7.2 would require a business to sue a consumer in the courts where the consumer lives. However, both of these provisions have been opposed by the US negotiators as (they said) being too broad and therefore inconsistent with U.S. law. The Global Business Dialogue, the International Chamber of Commerce and a dozen other business groups say that Article 7 must be eliminated, and they are asking that the treaty take an approach whereby rights and jurisdiction would be determined by choice of forum clauses in contracts. They say that ecommerce would otherwise be hampered by a system based upon a patchwork of national laws. This debate is very similar to the US debate over UCITA, and will likely cover a lot more than consumer protection and privacy issues. Today there are countless contractual provisions that address issues such as restrictions on criticisms of products, reverse engineering, rights to link web pages, rights to collect prices (ebay), the redistribution of data, software, music and other content, and a plethora of other issues (see http://www.cptech.org/ecom/ucita/licenses/ for examples). The US government has asked for the elimination of Article 7, in part upon the grounds that it changes US law, a position challenged by others in our meeting. There was discussion of a US Supreme Court case, where the Court indicated that contracts on jurisdiction could be considered unreasonable for remote jurisdictions. There is some difference of opinion, within the US government, on this issue, and the FTC has expressed some concern about contracts that would force US consumers to seek redress in foreign jurisdictions. But there is also considerable concern by NGOs that high level policy makers in the USG are pushing a "safe harbor" private sector ADR approach as a way of privatizing policy making and law enforcement for consumer protection and privacy rules. (See the TACD statements on jurisdiction, safe harbor and ADR). There was also a discussion of Article 8, concerning individual contracts of employment. In the current draft, Article 8 is very favorable to the employee, and gives the employee the right to bring an action against his employer in a court where he lives, and requires the employer to sue the employee where the employee lives. Again, the US has opposed Article 8 for similar reasons to Article 7 on consumers. This Article is significant for many reasons. An employer can include in contracts a wide variety of issues concerning limits on speech, prohibitions on future employment, disclosures of company information, the rights to intellectual property, compensation, and countless other items. Treatment of electronic commerce I asked if it would be possible to exclude electronic commerce from the treaty. The answer was no -- because the sense was that this was the future of commerce and it was unclear to the US government how You could separate ecommerce from other modes of commerce. Other topics We did not really get much of an opportunity to further into substantive issues at this meeting. It should be noted that there are many areas of controversy, including such topics as the treatment of antitrust and human rights litigation. ---------------------------- Excerpts from: Jeff Kovar letter of February 22, 2000 to J.H.A. van Loon: . . . the United States is opposed to scheduling a diplomatic conference this year or next. We believe it would be helpful to convene a stock-taking session where delegations can discuss in a frank, informal, and serious way whether there is the desire and political will to depart from the current text and seek new avenues for agreement. If there is such a will, then a much more open-ended schedule of work may be possible along with agreement on more consensus-based negotiating methods. Indeed, the informal experts sessions on electronic commerce and intellectual property issues are examples of the kind of process that should be given time to explore critical issues before any decision can be made on a future diplomatic conference. . . . . . . this would leave open the possibility that the underlying views and dynamics could mature over time, with the hope that achieving a viable Hague convention would ultimately be possible. This would also be the safer course in relation to the revolutionary changes underway in our lives through the electronic medium, which we have not even begun to assess as part of this negotiation. During a suspension, technical discussions could continue on specific issues, major shifts in domestic and regional law and legal institutions could be completed and consolidated, and revolutionary changes in commercial practice in the area of electronic commerce could have time to mature and be evaluated. * * * * It is impossible to give an adequate point-by-point assessment of the preliminary draft convention because of the enormous scope and complexity of its provisions. Nevertheless, a summary of some of our more pronounced concerns is offered here as an illustration of the obstacles facing the current text from a U.S. perspective. It is important to stress, however, that this list is not intended to be comprehensive or final. The list does not, for example, attempt to address crucial concerns related to electronic commerce and intellectual property issues. . . . - Article 7 (Consumer Contracts): This article repeats formulations from the Brussels Convention. These formulations have raised a storm of controversy in the electronic commerce world. It is an important illustration of the broader problems with electronic commerce mentioned above to note the severe policy problems this article raises. - Article 8 (Employment Contracts): This article, which is derived from the Brussels Convention, seems to us to be out of touch with modern employment practice, good economic policy, and evolving practices. It does not permit even sophisticated employees (e.g., senior and middle management of major multinationals from all Conference member states) to agree to a choice of forum. . . . In short, we believe serious discussions about the future of the project are necessary. If those discussions, and the experience of alternative work methods in experts meetings on electronic commerce and intellectual property issues, do not reveal an adequate basis to be confident that a text representing a wide global consensus can be negotiated, then we believe the project should be suspended so that it can be resumed at a more propitious time.