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Consumer transactions are increasingly globalising. Recent decisions of courts across the world indicate the factors used in deciding whether to exercise domain over disputes involving foreigners.

The US

Shopify received relief in the US, where the court held that its web based payment processing service (offered through a Canadian company) to consumers globally did not represent enough of a connection to consumers who interact with Californian vendors, that use Shopify’s platform to sell to consumers within that state. A class action in California was brought by end users who made claims relating to personal information being collected and shared by Spotify.

In finding that data collection practices relating to processing payments, was insufficient to create a ‘special’ jurisdiction, the court also made comments that might leave web companies reviewing their business practices. It suggests that the salient features of a relationship which might bring a foreign company within the jurisdiction of the US courts could be the use of targeting, either by focusing on a US market, or customising advertising to a market.

Fenwick explains the decision here.

Australia

In Australia, the courts have demonstrated the extra-territorial scope of its consumer protection regime. A covid outbreak aboard the Carnival Cruises’ Ruby Princess resulted in a class action being brought in the Australian courts, on behalf of all of the passengers aboard that cruise. The holiday was sold to several hundred passengers on T&Cs which were governed by US law, and which included a choice of law clause applying the general maritime law of the US, an exclusive jurisdiction clause in favour of the United States District Courts; and a class action waiver clause. If these terms had been upheld, then the Australian consumer protection law would not apply.

In finding that the the class action waiver was void, under Australian law, as an unfair term, and refusing to stay the proceedings in recognition of the exclusive US jurisdiction election, the Australian court has allowed foreign consumers to seek remedy in its courts. The court held that if a corporation carries on business in Australia, then a price of doing so is that the corporation is subject to and complies with statutes intended to provide protection for consumers. Inconsistent contractual terms will be subject to these local law requirements.

Shine explains the decision here.

The UK

Earlier this year, the UK court refused to recognise a foreign arbitral award which came as the result of a mandatory B2C arbitration in California, on the basis that it was contrary to consumer protection provided by UK law. Payward, a crypto-trading web service, through which a UK consumer engaged in trading activities that resulted in hefty losses, demonstrates a policy mandate consistent with that recognised in the Australian Ruby Princess decision.

The UK proceedings raise issues for international platform services, on the basis that a nexus with a UK consumer, will bring UK policy interests into consideration. In Payward, the UK court recognised that the mandatory US arbitration process would be unduly expensive for UK consumers, and would not be an appropriate forum to consider the application of UK consumer law in deciding the merits of that case. The court also recognised the importance of local dispute resolution proceedings as a means to bring misconduct to the attention of regulators (which may have been less likely had they been conducted in foreign arbitral proceedings).

Herbert Smith Freehills explains the case here and here.

This judgment was delivered at the same time as a UK policy push to expand pre-action ADR in civil cases, including mandatory mediation escalates, as HSF explains here.

In October, the High Court declined jurisdiction in claims made against Dyson, on the basis that the centre of gravity surrounding those claims was Malaysia. The claims in Limbu were brought by 24 migrant workers, employed by a Malaysian third-party supplier of products and components to the Dyson Group. In a post-Brexit world, claims brought in the UK ‘as of right’ are no longer part of the regulatory framework. Instead, a nexus to the jurisdiction must be demonstrated.

In finding that Malaysia was a proper forum to hear the dispute, the court relied on undertakings made by Dyson to neutralise the asserted hardships associated with proceedings conducted in Malaysia (including an undertaking to cover the claimants legal costs and the UK parent agreeing to be sued in the Malaysian courts).

Debevoise & Plimpton explains the legal principles underlying the test for forum non conveniens, and the judgment here.

Factors influencing a decision on what constitutes a nexus to the UK will include the location of users interacting with a web based product or service, as well as the location of its developers. The UK decision to allow proceedings against Stability AI, for models trained on copyrighted material, owned by Getty (a UK company) or created by users in the UK, indicates the scope of the work that companies need to do in order to assess local law compliance and the range of activities that may give rise to exposure to recourse in the UK.

Sheppard Mullin explains the decision here.

Implications

In a world of clubs and fences, the boundaries are shifting to the point where it might be reasonable to question whether legal forum bears relevance to contemporary practice. Companies that are engaged in cross-border activities will need to consider whether their activities rise to the level which may trigger a relationship with the foreign jurisdiction, and the extent to which their operating procedures, particularly relating to dealings with protected groups, such as consumers and employees, satisfy local law requirements.