E-businesses at new risk of being sued abroad from tomorrow

The new law means that, in the event of a dispute based on a contract, a consumer in another EU Member State (except Denmark) will in most cases have the right to sue a UK business in his home court. Any judgment given by that court would be enforceable in the UK. Certain non-EU countries are also covered by the Regulation, namely Iceland, Lichtenstein, Norway, Poland and Switzerland. Denmark opted-out of the Regulation.

It also means that businesses wanting to sue a foreign consumer will need to do so in the consumer’s own Member State. In a DTI consultation on the Regulation, which ended in December last year, businesses expressed grave concerns about the potential costs of suing and being sued abroad.

A web site is only caught by the Regulation if it is “directing” its activities at the relevant states. There is little guidance on the meaning of this term. However, a site is likely to be covered if it fulfils orders to consumers in particular states or offers a choice of languages or relevant currencies. If a business only intends to sell within the UK and its web site reflects this, it is less likely to be sued abroad.

For safety, web sites should display notices about their target markets and use technical means to catch those who ignore the notice – e.g. invite the user to select his country from a list and block orders from non-targeted countries.

In contracts with other businesses, a UK trader cannot be sued in another of the countries covered if its standard contract says that in the event of any dispute the English, Scots or Northern Ireland courts will have jurisdiction. However, the UK trader cannot use its contract to escape consumer lawsuits.

The Regulation does not apply in cases where the law, including criminal law, is enforced by public authorities such as, in the UK, the Director General of Fair Trading and local authority trading standards departments. Nor does it apply to certain types of civil case, including insolvency. Further, it does not concern which country’s law should be applied in judging the substance of a dispute.