Tereza Kyselovská

Faculty of Law, Masaryk University, Brno, Czech Republic

Abstract

The connecting factor for internet-related consumer contracts in harmonized European
conflict-of-laws rules can be described as from “specific invitation or advertising” to
“international targeting”. The choice of law rules for consumer contracts must be clear,
predictable and provide efficient protection for consumer who contracts electronically. According
to Rome I Regulation the law of consumer’s habitual residence applies to all consumer contracts.
Careful consideration should be given to term “directing such activities”. This connecting factor
is of little use in electronic consumer contracts unless it is clearly defined. The analyzed
hypothesis of this contribution is following: The conditions upon which the choice of law rules for
consumer contracts operates are not sufficient to consumer contracts concluded by means of
electronic commerce. This hypothesis will be analyzed on doctrinal approaches and current case-law
concerning online consumer contracts.


Introduction

Aim of this contribution is to analyze the recent case-law of the European Court of Justice
(hereinafter ECJ) regarding internet-related cross border consumer contracts. Nowadays almost
everyone has at least once concluded contract via internet. Thanks to globalization and growing use
of Internet as mean of communication and electronic contracting, the consumers can generally access
the website of professional anywhere in the world. The interpretation of “directing activity”
should not be too narrow. This interpretation would mean that the creation of a website could mean
that the professional directs its activities to the states of the consumer. The interpretation must
find a balance between the protection of consumer entitled to special rules of jurisdiction and law
applicable, and the consequences for the professional.

Consumer is considered to be a weaker party in the contractual process and should be protected by
rules more favorable to his interests than the general rules provide for[1]. The consumer
protection should not be absolute, it is necessary to find the borderline between protection of
weaker party and legal certainty in the contracting process[2]. In cross-border relations (or
relations with international element) many important legal questions are raised, e.g. where is the
forum (which court can hear the case) and what is the law applicable. In the online context rules
for determining the law applicable and jurisdiction of courts are very problematic. These rules
have to be adapted to “cyberspace” without physical borders between states[3].

The most important European legal norms for determining law applicable and jurisdiction in consumer
contracts are Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the
recognition and enforcement of judgments in civil and commercial matters (hereinafter cited as
Regulation Brussels I) and Regulation (EC) No 593/2008 of the European Parliament and of the
Council of 17 June 2008 on the law applicable to contractual obligations (hereinafter cited as
Regulation Rome I). Regulation Brussels I is the successor to the Convention on 27 September 1968
on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (hereinafter cited
as Rome Convention).

Regulation Rome I contains choice-of-law rules regarding consumer contracts is Article 6 paragraph
1 as follows: “… a contract concluded by a natural person for a purpose which can be regarded as
being outside his trade or profession (the consumer) with another person acting in the exercise of
his trade or profession (the professional) shall be governed by the law of the country where the
consumer has his habitual residence, provided that the professional a) pursues his commercial or
professional activities in the country where the consumer has his habitual residence, or b) by any
means, directs such activities to that country or to several countries including that country.” The
wording of the Regulation Rome I is different from Rome Convention. The latter was based on
“special invitation rule” from the professional to the consumer.[4] The consumer had to take in
that State steps necessary for the conclusion of the contract. According to the changed rule in
Regulation Rome I the professional must pursue its commercial activities in the Member State if the
consumer’s domicile, or, by any means, direct such activities to that Member State or to several
States including that State. This change is deemed to strengthen consumer protection.[5] It was
made because of the development in online communication and electronic contracting[6]. The rule in
Rome Convention was more difficult to determine the place where the steps necessary for the
conclusion of the contract were made.

Regulation Brussels I contains rules on jurisdiction in consumer contracts in Article 15 paragraph
1 section c) “… in matters relating to a contract concluded by a person, the consumer, for a
purpose which can be regarded as being outside his trade or profession, jurisdiction shall be
determined by this Section … if …the contract has been concluded with a person who pursues
commercial or professional activities in the Member State of the consumer's domicile or, by any
means, directs such activities to that Member State or to several States including that Member
State, and the contract falls within the scope of such activities.“[7]

According to the Recital 7 in the Preamble to Regulation Rome I “the substantive scope and the
provisions of the Regulation should be consistent with the … [Regulation Brussels I]. Recital 24 of
the Preamble to the Regulation Rome I states: “With more specific reference to consumer contracts,
the conflict-of-law rule should make it possible to cut the cost of settling disputes concerning
what are commonly relatively small claims and to take account of the development of
distance-selling techniques. Consistency with [Regulation Brussels I] requires both that there be a
reference to the concept of directed activity as a condition for applying the consumer protection
rule and that the concept be interpreted harmoniously in Regulation Brussels I and this Regulation,
bearing in mind that a joint declaration by the Council and the Commission on Article 15 of
Regulation Brussels I states that "for Article 15(1)(c) to be applicable it is not sufficient for
an undertaking to target its activities at the Member State of the consumer's residence, or at a
number of Member States including that Member State; a contract must also be concluded within the
framework of its activities". The declaration also states that "the mere fact that an Internet site
is accessible is not sufficient for Article 15 to be applicable, although a factor will be that
this Internet site solicits the conclusion of distance contracts and that a contract has actually
been concluded at a distance, by whatever means. In this respect, the language or currency which a
website uses does not constitute a relevant factor."

There is no case-law concerning conflict-of-law rules in consumer contracts in Regulation Rome I.
However, to define the terms used in this Regulation, it is possible to use the ECJ’s case-law to
Regulation Brussels I. Interpretation of the term “directing” of such activities is important when
such direction occurs through the Internet. This activity has very specific characteristics that
must be taken into account.

On 7 December 2010 the ECJ rendered judgment in joined cases Pammer and Alpenhof[8]. The judgment
concerned the interpretation of Article 15 paragraph 1 section c) of Regulation Brussels I. In case
Pammer dispute arose between Mr. Pammer, consumer resident in Austria, and Reederei Karl Schlüter,
a company established in Germany. Mr. Pammer concluded an electronic contract via internet. Later
refused to pay the contract price due to alleged breach of this contract and filed an action to
Austrian court. The Supreme Court of Austria then decided to stay proceedings and referred the
following question for preliminary ruling: “… is the fact that an intermediary’s website can be
consulted on the internet sufficient to justify a finding that activities are being “directed” [to
the Member State of the consumer’s domicile] within the meaning of Article 15 paragraph 1 section
c) of the Regulation Brussels I?” In the second case Alpenhof the dispute arose between Hotel
Aplenhof, a company which operates in Austria, and Mr. Heller, consumer resident in Germany. Mr.
Heller reserved and confirmed his stay in the hotel by email. Mr. Heller stated to have found fault
in hotel’s service and have left without paying the bill. Hotel Alpenhof then brought an action
before an Austrian court. Mr. Heller raised the plea that as consumer he may be sued only in the
Member States of his domicile, before German courts. The Austrian Supreme court stayed proceedings
and referred the question for preliminary ruling: “…is the fact that a website of the party with
whom a consumer has concluded a contract can be consulted on the internet sufficient to justify a
finding that an activity is being “directed” within the meaning of Article 15(1)(c) of Regulation
Brussels I?“ Because of the similarities between these two cases the ECJ joined them.

The most important question arising out of these two cases is what is (are) the criteria to
consider activity presented on the website to be “directed” to this Member State. Consequently,
whether the fact that those sites can be consulted on the internet is sufficient for that activity
to be regarded as such. For example, if someone finds a website of some company that is accessible
from his/her Member State, orders some goods. Is he/she under the consumer protection? In my
opinion, the ECJ’s answer was very careful. It was for the first time that the ECJ was asked to
interpret these questions.

ECJ did not state a clear rule. ECJ stated that Regulation Brussels I do not define the term
“directing” of activities. This term must be interpreted independently and autonomously, “by
reference principally to the system and objectives of the regulation, in order to ensure that it is
fully effective”.[9] As the Advocate General has stated in her Opinion[10], European Union
legislature did not intent to consider the mere existence of the website as condition of the
“directing” such activities. Also the fact that the website is interactive or passive cannot be an
important point. According to the joint declaration of the Council and the Commission to the
adoption of Regulation Brussels I, the mere fact that a website is accessible from one Member State
is not sufficient for Article 15 paragraph 1 section c) of the Regulation. According to the ECJ the
professional must have manifested its intention to establish commercial relations with the
consumer.[11] Therefore there must be sufficient evidence that the professional was envisaging
doing business with consumer domiciled in other Member State. Such evidence does not include
mention on the professional’s website its email address, telephone number without an international
code. That type of information is condition sine qua non according to the Directive 2000/31/EC of
the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information
society services, in particular electronic commerce, in the Internal Market ('Directive on
electronic commerce').[12]

For the evidence required the ECJ created a non exhaustive list of such evidentiary matters. These
are[13]:
  * International nature of the activity at issue, such as certain tourist activities
  * Telephone number with the international code
  * Use of a top-level domain name other than that of the Member State in which the professional is
established, or use of neutral top-level domain (.com, .eu)
  * Description of itineraries from one or more other Member States to the place where the service
is provided
  * Mention of an international clientele composed of customers domiciled in various Member States,
in particular by presentation of accounts written by such customers.

The judgment in these two cases was very much awaited. It was presumed that the ECJ will give
answers to many questions related to online consumer contracts. The presented judgment raises far
more questions. The evidentiary materials are quite problematic and vague. As was stated in the
Recital 24 of the Preamble to the Regulation Rome I, the language or currency used do not
constitute relevant factors for the purpose of determining whether an activity is directed to one
or more other Member States. It is worth mentioning that the majority of cross border transactions
are made in U.S. dollars or Euros. It is difficult then to find the connection with a particular
country. Also the language used nowadays is English or German. The Advocate General in her Opinion
concluded that this is the case when if a website is presented in a given language, but this
language can be changed. This is relevant because it is an indication that the professional directs
its activity also to other Member States. Through the possibility to change languages, the merchant
shows knowingly his wish that consumers from other Member States also conclude contracts with him.
The international nature of the activity at issue or use of top-level domain name is also very
problematic. It is possible to imagine for example Czech internet company with top-level domain
name .cz. This website is accessible all over the world. If consumer for example forms Hungary
enters this website and orders some goods. Is he under the consumer protection? Did the Czech
company aimed and directed its activities to Hungary? Also the use of telephone number with the
international code seems to be redundant. Nowadays every telephone number has its international
code. This cannot be considered as any decisive factor.

             The opinion of Advocate General was in my opinion more suitable. It was based on four
pillars[14]: The usual sense and interpretation of the term “directing an activity”[15];
historical[16] and teleological[17] interpretation and the systematic interpretation of the
concept. The Advocate General also proposed several criteria to determine whether a person who
pursues commercial or professional activities directs them towards the Member State of domicile of
the consumer. Some of these criteria were used in the judgment of the ECJ. Among others we can
find: if the professional concludes traditionally distance contracts with consumers of a given
Member State, there is no doubt that he directs its activities towards that Member State. On the
contrary, the conclusion of one contract with one consumer of a particular Member State will not
suffice for the direction of the activity to that Member State. If the professional explicitly
includes/excludes the direction of his activity to some Member States (and actually behaves in
accordance with this inclusion/exclusion)


Conclusion

Growing number of internet-related consumer contracts requires clear and simple rule for
determining the law applicable. The connecting factor used in Regulation Rome I quite confusing and
causes many problems. Although the aim of this Regulation was to extend the consumer protection, in
the online context it needs further changes. The ECJ has chance to define and made these rules more
specific, but in the judgment Pammer and Alpenhof did not state clear rule. The proposed list of
evidentiary factors in non-exhaustive. It is on the national courts to determine in every single
case if these conditions are fulfilled. We can presume that in the near future more preliminary
questions concerning internet-related consumer contracts will be raised to the ECJ.

The analyzed hypothesis of this contribution The conditions upon which the choice of law rules for
consumer contracts operates are not sufficient to consumer contracts concluded by means of
electronic commerce was confirmed.


Literature

COTENAU, C. Cyber Consumer Law and Unfair Trading Practices. Aldershot : Ashgate, 2005. 240 p. ISBN
0-7546-2417-X.

GILLIES, L. Electronic Commerce and International Private Law. A Study of Electronic Consumer
Contracts. Aldershot : Ashgate, 2008. 261 p. ISBN 978-0-7546-4855-0.

GILLIES, L.  Choice-of-law Rules for Electronic Consumer Contracts: Replacement of the Rome
Convention by the Rome Regulation. Journal of Private International Law. 2007, Vol. 3, No. 1, p. 89
– 112.

MAGNUS, U., MANKOWSKI, P. (ed). Brussels I Regulation on Jurisdiction and Recognition in Civil and
Commercial Matters. Sellier : European Law Publishers, 2007. 852 p. ISBN 978-3-935808-32-3.

TANG, Z., S. Review Article Private International Law in Consumer Contracts: A European
Perspactive. Journal of Private International  Law. 2010, Vol. 6, No. 1, p. 225 - 248.

WANG, F., F. Law of Electronic Commercial Transactions. Contemporary Issues in the EU, US and
China. Oxon : Routledge, 2010. 270 p. ISBN 978-0-415-55745-0.
________________________________

[1] Recital 13 Regulation Brussels I.

[2] Opinion of the Advocate General Trstenjak delivered on 18 May 2010 in Case Pammer and Alpenhof,
para 2. See also TANG, Z., S. Review Article Private International Law in Consumer Contracts: A
European Perspactive. Journal of Private International  Law. Vol. 6, No. 1, p.235 et sec.

[3] COTENAU, C. Cyber Consumer Law and Unfair Trading Practices. Aldershot : Ashgate, 2005. 240 p.
ISBN 0-7546-2417-X.

[4] GILLIES, L. Electronic Commerce and International Private Law. A Study of Electronic Consumer
Contracts. Aldershot : Ashgate, 2008. P. 131 et sec. ISBN 978-0-7546-4855-0.

[5] GILLIES, L.  Choice-of-law Rules for Electronic Consumer Contracts: Replacement of the Rome
Convention by the Rome Regulation. Journal of Private International Law. 2007, Vol. 3, No. 1, p. 89
– 112.

[6] Judgment Pammer and Aplenhof, para 62.

[7] For commentary on Article 15 of the Regulation Brussels I see MAGNUS, U., MANKOWSKI, P. (ed).
Brussels I Regulation on Jurisdiction and Recognition in Civil and Commercial Matters. Sellier :
European Law Publishers, 2007. 852 p. ISBN 978-3-935808-32-3.

[8] Judgment of the Court (Grand Chamber) of 7 December 2010 in joined cases C-585/08 and C-144/09
Peter Pammer v Reederei Karl Schlüter GmbH & Co. KG (C-585/08) and Hotel Alpenhof GesmbH v Oliver
Heller (C-144/09) [2010]. ECR 2010.

[9] Judgment Pammer and Alpenhof, para 55.

[10] Opinion of the Advocate General Trstenjak delivered on 18 May 2010 in Case Pammer and
Alpenhof, para 64.

[11] Judgment Pammer and Alpenhof, para 75.

[12] See article 5 paragraph 1 section c) of Directive 2000/31/EC of the European Parliament and of
the Council of 8 June 2000 on certain legal aspects of information society services, in particular
electronic commerce, in the Internal Market ('Directive on electronic commerce').

[13] Judgment Pammer and Alpenhof, para 83.

[14] Opinion of the Advocate General Trstenjak delivered on 18 May 2010 in Case Pammer and
Alpenhof, para 61.

[15] Opinion of the Advocate General Trstenjak delivered on 18 May 2010 in Case Pammer and
Alpenhof, para 63.

[16] Opinion of the Advocate General Trstenjak delivered on 18 May 2010 in Case Pammer and
Alpenhof, para 66.

[17] Opinion of the Advocate General Trstenjak delivered on 18 May 2010 in Case Pammer and
Alpenhof, para 64.