01 December 2000

Edward Alder

Any person operating an e-commerce web site is potentially promoting goods and services to, or transacting with, businesses and consumers in many political territories around the globe.

The substantive, jurisdictional and procedural laws of the world's many states vary greatly. Business activity that is lawful in one place may expose one to civil or criminal liability elsewhere. For example, some territories, such as France and Indonesia, have language laws requiring advertisements in their territories to appear in the local language. Many territories regulate the advertising of harmful products and questionable trading practices such as pyramid selling and the sale re of alcohol and guns in unique ways. On the civil side, different territories have differing laws governing liability for misrepresentation and defamatory statements and what business arrangements between citizens are enforceable by law.

Whether the content or transactional capabilities of an e e-commerce web site breach the substantive laws of a particular territory and whether the operator of the site is subject to the 'jurisdiction' of the courts of that territory, are of course separate questions. Jurisdiction in this sense means the courts' authority to hear a particular case. The issue of jurisdiction itself is commonly divided into the two overlapping issues of a court's personal jurisdiction over a party and its subject matter jurisdiction over the case in question. Each territory has its own procedural laws governing the reach of its courts' personal jurisdiction and conflicts laws governing when transactions will be regarded as having been made in, or in respect of, its geographical territory or residents. In common law territories such as Hong Kong, criminal jurisdiction is generally (but not always) dependent upon the criminal act having been carried out (at least in part) within the geographical boundaries of the territory, and enforcement requires the presence of the individual in the territory (or the individual being susceptible to extradition): see Air India v Wiggers [1980] 1 WLR 815. A person generally becomes subject to the civil jurisdiction of the territory's courts if the person is present in the territory (even fleetingly) and can be served with or notified of an' originating process' (such as a writ) regardless of whether the transaction in question has anything to do with the territory .

In most common law territories the general rule on civil jurisdiction has been extended by the so-called 'long arm statutes' under which an originating process issued by the local courts may in certain cases be served on a defendant outside the territory if the transaction in question had certain points of connection with the territory. Once a defendant to an action resident abroad has been served with originating process from the court outside the territory, the defendant must decide whether to participate in the proceedings, or ignore them and face the risk of a default judgment being entered against it that will be enforceable against its assets in the territory and may be enforceable elsewhere.

In territories such as Hong Kong and the UK long arm provisions are incorporated into the procedural subsidiary legislation. In Hong Kong's case, O 11 of the Rules of the High Court (Cap 4 sub leg) (RHC) enables persons resident or incorporated outside Hong Kong to be sued in Hong Kong and served with Hong Kong originating process at their place of residence or business where, amongst other things, they have made contracts in Hong Kong, have committed breaches of contract in Hong Kong or have committed torts in Hong Kong or torts the resulting damage from which is suffered within Hong Kong.

There is at present in Hong Kong and the Commonwealth a dearth of case law relating to e-commerce and jurisdictional issues. However, due to a different approach to long arm jurisdiction, the law of e-commerce jurisdiction is now well developed in the US.

The US Approach

Most if not all states of the US and the federal jurisdiction have long arm provisions providing for persons and companies resident abroad to be sued in their courts in certain circumstances. Unlike in Hong Kong, these long arm provisions generally (but not always see New York State CPLR Section 302) do not identify particular fact circumstances in which non-resident persons may be sued in the local courts, but rather provide that non- resident persons may be sued whenever that is constitutionally permissible.

By reason of the 14th Amendment of the US Constitution, non-residents, which term includes both foreign and US persons resident outside the state in question (or the federal jurisdiction), may only be sued in a state (or federal) court where that would constitute due process.

To ensure that due process is observed the courts have developed a 'contacts' test under which it is constitutional for a state (or the US) legislature to enact a long arm statute (by reference to particular fact situations or otherwise) conferring jurisdiction over non-residents on its courts where the non-resident has generally engaged in 'continuous and systematic contacts' with the state (or the US as a whole) or a particular transaction or relationship amounted to 'minimum contacts' with the state (or the US as a whole). Other more familiar bases of jurisdiction, such as presence of real property within the territory, service of process during presence in the territory and submission (for example, by way of a jurisdiction clause in a contract) are also considered constitutional.

US residents have of course been trading with residents of other US states and foreign residents by means interstate and international post, advertisements, telephone conversations and local representatives since long before the Internet came into existence, and US case law on what constitutes the necessary contacts to found jurisdiction is well developed.

The existing contacts tests have carried across well into the cyberspace context. Case law has emerged to the effect that advertising or offering goods and services on a web site that happens to be accessible in a particular state because all web sites are accessible anywhere will usually not amount to minimum contacts with that state such that the operator of the web site will be liable to be served with the process of that state. However, where an operator intentionally directs, offers or advertises goods or services to persons within the state by means of the Internet that may well amount to minimum contacts.

At one end of the spectrum is the Blue Note Café case. The proprietors of the Blue Noté cafe in New York issued New York proceedings against the proprietors of the Blue Note Cafe in Florida in respect of the latter's promotion of their cafe on their web site. The New York court declined to exercise jurisdiction over the Florida proprietors because they had not intentionally directed any of their activities towards residents of New York. In another case the New York Courts held that offering to sell a domain name in New York (by way of counter offer to a rejected offer) did not constitute transacting business in New York. At the other end of the spectrum is the CompuServe case. A software provider in Texas made software products available to CompuServe users by making the products downloadable from the CompuServe computers in Ohio. A CompuServe user subsequently sued the Texas company in respect of the software in Ohio. The Ohio court found that the activity of providing software within Ohio by the Internet amounted to minimum contacts with that state.

The same constitutional case law applies federally under the Federal Rules of Civil Procedure where a foreign resident has engaged in the necessary contacts with the US as a whole.

Service Outside Hong Kong of Originating Process

The US constitutional case law on this point is not relevant outside the US. In Hong Kong it has not yet been suggested by a non-resident sued here in any reported case that O 11 of the RHC is unconstitutional under the Basic Law or contrary to the Hong Kong Bill of Rights.

In most cases involving O 11 the key question for the non-resident defendant will be whether the case in question falls factually within any of the limbs of O 11 r 1(1), and there is an important subsidiary question in each case of service out as to whether it is a 'proper' case for service out. This depends on the convenience of the parties and other forum non conveniens considerations.

The Hong Kong Electronic Transactions Ordinance (Cap 553) (ETO) provides answers to some of the questions that will inevitably arise in service out cases involving e-commerce. Section 17 confirms, in case anyone doubted it, that electronic records (which term includes e-mails or messages sent between web servers and PCs) may be used to conclude contracts. Section 18 provides guidance as to the attribution of electronic records, and s 19 deals with the timing and place of dispatch and receipt of electronic records.


The basic rule is that a tort (which includes infringement of intellectual property rights) is considered to have been effected in the place where the relevant acts took place.

In the case of misrepresentation, deceit or negligent misstatement that will probably be the place where the statement comes to the attention of the addressee. So where a Hong Kong party is in negotiations with, or is being advised by, a non-Hong Kong resident, and a misstatement is made to the Hong Kong party, the location of the tort constituted by the misstatement will probably be Hong Kong. In the case of defamation, the tort occurs if the place of publication.


The basic rule at common law is that a contract is made when and where the acceptance of an offer is receive by the offeror. This rule can be applied easily enough to contract concluded by instantaneous means of communication. For non-instantaneous means of communication the rule has historically been subject to the exception known as the 'postal acceptance rule' which provides that when an offer is accepted by post, the contract thereby concluded is deemed to have been made when, and therefore where, the acceptance is put in the post.

There are as yet no reported Hong Kong or UK cases on whether or how the postal acceptance exception applies to e-mail or interaction through a web site. Some recent books treat e-mail as an instantaneous form of communication (see, for example, Dicey & Morris, The Conflict of Laws (13th Ed, 2000) p 319 and Chitty on Contracts (28th Ed, 1999) para 2-048) although the difficulties with e-mail are acknowledged.

Section 19 of the ETO provides that an electronic message is regarded as having been sent at the place of business of the originator and to have been received at that place of business of the addressee with which the underlying transaction is related, or if the addressee has no place of business then where the addressee ordinarily resides. Apart from that, the ETO is silent on when and where contracts concluded over the Internet or otherwise using electronic messages will be regarded as having been made. The general contract rules on these questions stated above will therefore apply.

It seems that by focussing on individual messages themselves rather than exchanges of messages the drafters of the ETO deliberately avoided providing new contract law rules or clarifying how existing ones apply, and intentionally left open the question of whether the postal acceptance exception will apply to exchanges of Internet communications and e-mail messages.

The only provision that touches on contract law is s 17(3), which states expressly that s 17 does not affect any rule of law to the effect that an offeror may prescribe the method of accepting an offer.

This approach contrasts with other legislative measures dealing with contracts formed electronically. For example, the US Uniform Computer Information Transactions Act of 1999 provides in s 203(4) that a contract formed by exchange of e-mail is formed when the acceptance is received. This excludes the postal acceptance exception.

According to Brinkibon v Stalag Stahl [1983] 2 AC 34, a case dealing with telexes, recently followed in Eastern Power Limited v Azienda Communate Energia and Ambiente [1999] OJ 3275 (Ontario CA) as regards faxes, there can be no general rule applicable to all instantaneous or 'virtually' instantaneous communications, and the questions of whether and when a contract is concluded by such means will depend on all the circumstances, including the interacting parties' intentions.

It may be that as between two parties dealing on a 'B2B' basis and using 'always on' e-mail systems the postal acceptance exception will not apply, but the exception will apply in the 'B2C' situation where it is likely that the consumer is using dial-up or other non-instantaneous e-mail access. It seems unlikely that the postal acceptance exception would apply to a contract concluded via interaction on a web site when an order is acknowledged immediately as the communication is sufficiently instantaneous. On the other hand, if a transaction on a web site requires a delayed confirmation e-mail sent by the operator to the customer before the contract is concluded, the exception may apply.

Any well-organised e-commerce web site will operate on the basis of terms of business providing that the operator accepts or declines 'orders' (that is to say, it invites offers to purchase) from customers, rather than makes offers to customers capable of immediate binding acceptance.

The operator of a web site can take further steps to avoid the uncertainty and business risk by providing in its terms of business precisely when and where a contract arising out of an order comes into existence and using appropriate governing law and jurisdiction I dispute resolution clauses.

If matters are left uncertain by the relevant terms of business, then where an e-mai1 or web site contract is entered into by a Hong Kong resident with a non-resident web site operator, the contract is probably made in Hong Kong when the Hong Kong resident receives the web site operator's acceptance of the order. The Hong Kong resident may therefore be able to sue the other party in Hong Kong by relying on the combined effects of ss 19(4) and 19(5)(b) of the ETO and O 11 r 1(1)(d)(i) of the RHC. In the perhaps unlikely event of the postal acceptance exception applying, the contract would be made abroad when the operator dispatched its acceptance. Conversely, a Hong Kong web site operator may enter into contracts abroad, and therefore be liable to be sued abroad, when sending acceptances to customers abroad.

Recent Developments

Two recent UK cases, one concerning the criminal law and one concerning civil law, have raised, if only obliquely, the question of jurisdiction in respect of Internet transactions.

In Victor Chandler International v Customs & Excise Commissioners and Anor [2000] 2 All ER 315 a Gibraltar based company (VCI) providing election information to UK residents proactively sought a declaration that advertisements promoting gambling services created by it in Gibraltar and transmitted electronically to the UK would not constitute a breach of s 9 of the Betting and Gaming Duties Act 1981. That section provides that '(a)ny person who...knowingly issues, circulates or distributes in the United Kingdom...any advertisement or other document inviting or otherwise relating to the making of (such) bets...shall be guilty of an offence' (emphasis added).

VCl's advertisements were not transmitted over the Internet but rather by means of the 'Teletext' system which operates on UK television. With an appropriately equipped TV set viewers in the UK can call up 'screen frames' or 'pages' of information on their televisions containing news, information and advertisements. The page content is transmitted alongside the normal video and audio signals utilising certain unused bandwidth and can be accessed by the viewer using a remote control to enter the relevant page number. In 1995 Teletext Limited began broadcasting pages alongside the ITV and Channel Four television channels.

VCI's pages were prepared on VCl's computers in Gibraltar using bespoke software. VCI updated teletext pages in real time from Gibraltar. The information was 'relayed' in real time as 'batches of information' to Teletext's central editing system in the UK. Teletext then distributed the data electronically to remote databases sited at major TV transmitter sites around the UK from which the Teletext services were broadcast alongside the television channels.

It was not VCI's intention that a viewer should use a printer to print out the information, although it would not be possible to stop them doing so if the viewer so wished. Further, any viewer who had access to a computer could purchase a TV card (like a sound card) and display teletext services on the monitor or print out the material with an ordinary printer. In these respects the Teletext system is like the Internet.

The issue was whether the process by which the data was prepared by VCI in Gibraltar and sent to computers in the UK and made available for viewing on UK monitors amounted to the 'issue, circulation or distribution in the UK of an advertisement or other document' (emphasis added).

It was common ground between VCI and Customs that the VCI Teletext 'broadcasts' were 'advertisements' and that a 'document' includes anything in which or on which information could be recorded or stored. Counsel for VCI relied on the words 'or other document' in submitting that the section required the relevant advertisements to be in documentary form. He fortified this argument by reference to the words 'issue', 'circulate' and 'distribute' which, he said, have physical connotations.

The first instance judge had accepted the proposition in Derby & Company Limited v Weldon (No 9) [1991] 2 All ER 901 that the database of a computer, insofar as it contained information capable of being retrieved and converted into readable form, whether stored in the computer memory itself or recorded in backup files, was a 'document'. Similarly, he approved a passage from Rollo v HM Advocate [1997] SLT 958 to the effect that the essence of a 'document' is that it is something physical containing recorded information of some sort and that it does not matter if the information is required to be processed in some way, such as electronic retrieval, before it can be viewed.

So far the decision was uncontroversial. It was the next step in the reasoning that was relevant to the Internet. VCI had argued that under conventional definitions of, 'document' it was the hardware with the information on it that constituted the documents and the hardware was not issued 'circulated' or 'distributed' by reason of the information being available on monitors in the UK.

The judge agreed. He found that a transmission from VCI to Teletext's system and from there to the remote databases was the transmission of electronic impulses containing information which the recipient then inscribed on his own 'document' .The judge said that the analogy in this case, as in the case of faxes and e-mail, was not with the sending of a computer disk but with the recipient taking down in shorthand or transcribing an ephemeral message. The judge therefore held that the statutory language was not apt to embrace what modem technology can achieve, namely the dissemination of 'mere information' in non-documentary form (as opposed to data which is recorded information) which only on receipt is reduced to documentary form.

The Court of Appeal, however, approached the matter on the footing that an 'ongoing' statutory provision such as s 9 should be treated as 'always speaking' so as to apply to activities made possible by technological advances since the section was enacted. The Court of Appeal said that 'always speaking' constructions could be applied to the definitions of criminal offences, citing R v Burstow [1997] 1 All ER 112 in which it had been held that a silent telephone call could constitute an 'assault' even though the early cases on the meaning 'of assault' pre-dated the telephone.

The Court of Appeal concluded that a mere bundle of information sent from one electronic memory to another could constitute a 'document'. Chadwick LJ pointed out that it is now a matter of common language to speak of 'sending a document' from one computer to another when in fact what actually happens is that a set of electronic impulses is sent to the recipient's computer which then 'writes' it to its own hard drive. Thus the word' document' has two senses. For the purposes of, say, discovery the word might refer to physical documents (paper, other media or hardware), but in other situations the word might refer to ephemeral bundles of information. What VCI was proposing to do was therefore contrary to the Act.

It is now clear that the preparation of electronic messages outside the UK and causing those electronic messages to be sent by telecommunication to the UK can constitute the doing of an act 'in' the UK. Although the case did not concern the Internet, the Court of Appeal relied on features of the system which were almost identical to those involved in the sending of web pages or e-mail messages. It seems clear, therefore, that offences that are constituted by the sending of information, for example incitement, sedition and criminal libel as well as the distribution of unlawful advertising, could be committed 'in' the UK by persons acting entirely outside the UK.

When a person surfing the web clicks on a link, the person sends a message through the Internet to the web server hosting the relevant web-page that triggers the sending to the surfer's PC of the electronic data constituting the desired web page. Although the surfer electronically solicits the sending of the page, the server responds to the request and does the act of sending. In Hong Kong, under s 18(1)(c) of the ETO, the response of the web server is deemed to be that of the operator of the web site, and the electronic record (or 'document' if the UK reasoning applies) is deemed to have been sent from the operator's place of business and received at the address the surfer's place of business or residence. There are no equivalent deeming provisions regarding the attribution, timing and location of electronic communications in the UK Electronic Communications Act 2000.

The territorial issues were not discussed at all in the case. Both sides must have accepted that uploading data in Gibraltar and sending it to the UK constituted doing something 'in' the UK.

Had the Victor Chandler case been heard in Hong Kong there might have been a different result, because the sender's act is clearly to be regarded as having been done at the sender's place of business.

The second case, Berezovsky v Michaels & Ors [2000] 2 All ER 986 is a decision of the House of Lords from May of this year that concerned the appropriate forum for the determination of a claim arising out of libellous statements published in a number of jurisdictions. Forbes, the US business magazine, published an edition containing an article accusing two prominent Russian citizens of being involved in organised crime in Russia. The article was published in North America with a circulation of close to one million copies, in Russia where only 13 copies were distributed and in England with a circulation of under 2,000 and a total readership of around 6,000. The article was also published on the Internet.

The Russian plaintiffs brought proceedings in England rather than in the US or Russia and their claims were confined to claims for damages for the publication within England. The plaintiffs sought leave to serve the writs on the defendant publishers out of the jurisdiction. The defendants applied to have the service set aside and/ or the action stayed or dismissed on the basis of forum non conveniens. At the first instance the judge held that, despite the evidence of the plaintiffs' connections with England, Russia was the most appropriate forum, and stayed the action. That decision was reversed by the Court of Appeal, which concluded that both plaintiffs had a substantial complaint in respect of torts committed in England. The defendants appealed to the House of Lords.

By a majority of three to two (Lords Hoffmann and Hope dissenting) the House dismissed the appeal and allowed the case to proceed in England. It may be said that the case is no more than another example of the application of the well-established principles set out in Spiliada [1987] AC 460 to a routine service out or forum non conveniens situation. The most interesting thing about the case was the bold, but ultimately unsuccessful, attempt by the defendants to overturn the long-standing approach of the UK courts to multi-jurisdictional torts, or at least multinational defamation, and replace it with a 'global theory of tort'.

The majority speeches in the House dealt only very briefly with the Internet aspects of the case. While the Statements of Claim had pleaded the fact that the article was available on the Internet within the jurisdiction, the Court of Appeal referred to it only in passing. Lord Steyn noted that it became clear during the course of argument that the necessary evidence to consider this 'important issue' satisfactorily was not before the House and, having come to a clear conclusion on the basis of the multi-jurisdictional publication of the article in hard copy, there was no need to deal with the Internet aspects. That part of the decision is disappointing for those looking for guidance on jurisdiction and Internet torts, but is perhaps understandable on the facts and evidence.

The starting point was fairly straightforward. A tort had clearly been committed in England. The English courts therefore had jurisdiction to deal with the matter, and service out was, prima facie, permitted under the UK's own long arm provisions, O 11 of the Supreme Court Rules. The judge correctly held that notwithstanding that the territorial basis for service out had been established, the plaintiffs (not, the defendants) had to show it was a proper case to be tried in England or that the action should not be stayed on the principles laid down in Spiliada. Counsel for Forbes submitted in Court of Appeal that the correct approach in such a multi-jurisdictional case is to treat the facts as giving rise to a single global cause of action and then to ascertain where the single cause of action 'arose'. Counsel relied on the Uniform Single Publication Act of the US which provides that in respect of a single publication only one action for damages is maintainable. The Act does not assist in selecting the most suitable court for trial, it merely prevents a multiplicity of suits.

Hirst LJ observed that the 'single cause of action theory would, if adopted in England, disable a plaintiff from seeking an injunction in more than one jurisdiction, and while the us legislation no doubt did much good in the US the theory underpinning it could not readily be transplanted to English courts dealing with trans-national publication'.

In the House of Lords, counsel for Forbes put the matter somewhat differently. There he put forward a 'global theory' under which the correct approach is to treat the entire publication, whether by international newspaper, satellite broadcast or Internet posting as if it gives rise to one cause of action (presumably justifiable anywhere) and then to ask whether it had clearly been proved by the plaintiff that the action is best tried in England.

Lord Steyn held there was no support for the principles of the US Act in English law and that there is long standing support in English law for the treatment of the publication in each jurisdiction as a separate tort. The single tort theory was also inconsistent with the acceptance by the Court of Justice of the European Communities that separate actions in each relevant jurisdiction are permissible in principle.

Lord Steyn said that if counsel was simply submitting that in respect of transnational libels the court had to consider the global picture then his proposition was uncontroversial but if counsel was advancing the more ambitious proposition that the court should proceed on the assumption that there is in truth one cause of action then that was different. The result of such a principle would usually be to favour a trial in the home courts of a non-resident publisher, because the bulk of the publication will usually have taken place there and the necessary evidence will usually be there. Although true, it is difficult to see this as a reason to reject the global approach, because the general rule, as reflected in the common law and the European conventions, is that defendants get sued at home.

The usual approach to jurisdiction in tort cases is to look over the series of events constituting the alleged cause of action and ask where in substance the cause of action arose, and the location of the tort is a weighty factor pointing to where the action would best be tried. Counsel for Forbes had argued that that was inappropriate in defamation cases where publication occurs in several jurisdictions, and submitted that the Court of Appeal had fallen into error by relying on the line of authority holding that the jurisdiction in which a tort was committed is prima facie the natural forum for the determination of the resulting claims. Counsel said that the Spiliada test admits of no presumptions.

The majority rejected this bold attempt to re-cast the Spiliada principles in multi-jurisdictional defamation cases and reaffirmed the principle that multinational publications constitute separate torts in each jurisdiction and that the rule regarding defamation is the same as the rule for any other tort and therefore the Spiliada test applies. The plaintiffs had produced evidence that the courts in Russia would not redress the damage to the reputations done in England, and Russia could therefore not realistically be treated as an appropriate forum. The case was therefore allowed to proceed.

This means that in future the English courts will look at a defamatory Internet publication as constituting an English tort that may well be prima fade pursued in England unless, on the Spiliada principles, the balance of convenience suggests that the claim in respect of the English tort could better be litigated elsewhere.

Persons guilty of publishing defamatory statements on the Internet therefore continue to face the prospect of suits in many jurisdictions.

It is perhaps not surprising that the House was not willing to embrace the 'global tort' principle for international or Internet publications. The existence of a principle under which an international publication is to be treated as a single global event to be litigated in the jurisdiction most convenient for the trial would require all countries to adopt the principle at the same time. Some four years earlier, in EDIAS Software International v BASIS International Ltd an Arizona court exercised jurisdiction over a non- resident defendant in a defamation and tortious interference case because the defendant knew that his out-of- jurisdiction activities would have an effect in Arizona. The court said that the defendant could not escape traditional notions of justice through the use of modern technology.


The upshot is that the Hong Kong courts and those in Commonwealth jurisdictions with similar procedural laws may have considerable jurisdiction over Internet activities in which non-residents are involved. Where a Hong Kong resident deals with a non-resident provider of goods or services or publisher, and unlawful acts take place or a dispute arises in relation to the contract formation process or performance, the Hong Kong courts may be willing to exercise jurisdiction if the non-resident comes here or is liable to be served under O 11. Whether any particular case will be a 'proper' one to be determined here will of course depend on all the facts of the case.

First published on the Hong Kong Lawyer in December 2000.