The Impact of EC Legislation for a Service Provider Established in the United States

• Author: Stéphanie Francq
• Position: Aspirant F.N.R.S, Research Fellow, Université Catholique de Louvain, Belgium
• Pages: 1071-1085

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Aspirant F.N.R.S, Research Fellow, Universit Catholique de Louvain, Belgium.

European Community legislation, i.e. the different kinds of legislative acts enacted by the Community institutions (mainly Directives and Regulations), are certainly not without impact on companies established outside the territory of Member States of the European Community. As for any statute, their application depends on specific provisions of private international law. These can be found either in the statutes themselves or in other acts, specifically dedicated to private international law and covering a range of related issues. The multiplicity of sources of choice of law rules is probably one of the main difficulties of private international law, but also accounts for much of the fun of it. The European Community offers a good example of this practice.

An outsider doing business in the European Union would be tempted to think that the Rome Convention on the law applicable to contractual obligations¹ would be sufficient to indicate which law would be deemed applicable by a European judge and thereby which obligations he must comply with. As this short study aims to show, one would be mistaken in this belief, almost as much as a European thinking that American conflicts are embodied in the Second Restatement.²Nowadays attention should be paid to secondary Community law which, because of the conflict provisions that it contains, explicitly or implicitly, modifies the impact of the Rome Convention and renders the determination of the applicable law more complex, in a way, despite the harmonization process.

Along with the ever farther reaching extent of their competencies, the European institutions have been, in the last two decades, intervening more and more in the field of private law. This is no surprise because the achievement of an internal market,³ introduced by the Single European Act (1986), was bound to affect some notions of private law, especially contract law. Indeed, the obligations arising from the goal which the Member States assigned themselves⁴ are twofold. First, obligations are imposed on Members States to refrain from hampering the free movement of goods, services, persons and capital. Second, the European institutions must play an active part through the harmonization of legal fields Page 1072 necessary to ensure the achievement of the four basic freedoms.⁵ As divergence of national legislation and the consequential legal uncertainty can be considered obstacles to free movement, European institutions have not hesitated in enacting legislation in various fields of private law.⁶ Consumer protection in particular has received a great deal of attention.⁷

Trying to give an overview of the EC intervention in private law, or even in the field of consumer protection, would be useless. Rather, our goal will be to illustrate it and to show how it can affect trade with those established outside the EU. Since a short story is better than a long theoretical explanation, we will simply follow the hypothetical adventures of Anatole and Buena Vista, contracting together on the Internet. This will lead us to analyze the interaction of the Rome Convention with some applicability provisions contained in relevant Directives. Many could be cited, but apart from certain allusions to peripheral ones, we will limit ourselves to the two main ones, the Directive on distance marketing with consumers⁸ and the Directive on certain legal aspects of electronic commerce.⁹

I When Anatole And Buena Vista Meet On The Internet

Anatole is a law student living in Brussels who is strongly involved in the actual world music trend. Having recently developed a passion for Cuban music, partially thanks to Wim Wenders, he decides to subscribe to an online database created by Buena Vista, an American corporation based in Philadelphia. The database offers the lyrics and scores of traditional Cuban jazz. Anatole broadly reads the standard terms of the contract governing access to the database and then cleverly uses his dad's credit card with which he is allowed to purchase fuel for his car. He pays little attention to the contractual clause designating the law of Pennsylvania as applicable to the contract. In fact, the clause does not actually designate the law of Pennsylvania as the law of the contract but states that the general terms of the contract are to be construed according to the law of Pennsylvania. Within the same week, however, two major events occur. First, Anatole has a lively discussion with his father concerning the gas bill. Second, he meets Nathalie who convinces him to take tango lessons. Being a law student, Anatole thinks he can maneuver his way out of his Buena Vista subscription Agreement. He believes that Belgian law provides him with the proper protection.

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II When Is A Consumer Protected By European Community Law?

Obviously, the intent of the relevant contract is to invoke the law of Pennsylvania. However, if the question were submitted to a European judge,¹⁰ he would: 1) examine the Rome Convention on the law applicable to contractual obligations, and 2) examine some national dispositions implementing EC Directives relevant to the subject matter with which he is confronted.

A The Rome Convention On The Law Applicable To Contractual Obligations

The Rome Convention¹¹ is not a Community Act as such. It is nevertheless part of the "acquis communautaire" that new Member States must adopt and was negotiated within the framework of the Community.¹² It provides conflict rules common to all Member States in the field of contractual obligations. Its application is not restricted to situations involving Member States. Indeed, the Convention may designate the law of a third country (Article 2).

Regarding the contract Anatole entered into, Article 3 of the Convention allows parties to choose the law applicable to their contract under the sole condition that the choice should be expressed or reasonably deducible from the terms or circumstances of the contract. The fact that a specific reference is made to a legal system may amount to designation of that system as the applicable law.¹³ It should also be noted that no written statement is demanded.¹⁴ In this respect, a choice of law made on-line could be held valid with regard to the Convention. This would not mean, however, that Anatole is entirely deprived of the protection of his home state's law.

Article 5 provides a special protection for consumers which enables them to demand application of the mandatory laws of their country of habitual residence, notwithstanding the law designated in the contract. These circumstances are Page 1074 specifically enumerated in Article 5.2. Only the first one is relevant to our case.¹⁵It is required that the consumer received a special advertisement or offer in his home country and in that country took all steps necessary for the conclusion of the contract. These cumulative conditions describe what is commonly called the passive consumer. The application of this Article to contracts concluded on the Internet is obviously debatable.¹⁶ It can be argued that all the steps necessary for the conclusion of the contract are indeed taken in the consumer's place of habitual residence. But, unless he received a special advertisement via e-mail, the first condition is hardly met.¹⁷ Some suggest that the Article should be applied anyway by analogy because it is the only protection offered to the consumer and should therefore be considered as covering new situations that were not thought of at the time of redaction. Moreover it could be maintained that the one organizing the sale of his products through a web site specifically intends to offer world-wide advertisement and should, therefore, expect to have to submit to the laws of different countries. To this, others reply that compliance with the laws of the entire world cannot be reasonably demanded from any corporation. All of these arguments are already well-known. They seem to arise from and control any debate on the law applicable to Internet transactions, whatever the context. In the end Anatole, who probably surfed the web in search of a specific product, appears like a rather active consumer.

Two additional points must be made about Article 5 of the Rome Convention. First, contracts for the supply of services are covered by Article 5 only when a service is not provided entirely in a country other than the country of the consumer's residence (Article 5.4.b). Regarding this provision, the status of on-line services is difficult to state. What should be considered of a service like the one provided to Anatole, one comprised solely of an online database and the posting of information on-line? Might we assume that this service is entirely accomplished at the service provider's place of establishment? A positive answer to these questions would certainly exclude the situation of Anatole from the scope of Article 5 of the Convention. Case law has yet to answer any of these questions. Second, the Article mandates a departure from the chosen law only as far as it is less favorable to the consumer. If the protection of the contract's chosen law is considered equivalent (which does not mean identical) to the one offered by the law Page 1075 of his habitual residence, there is no reason to derogate from the contractor's choice of law clause.¹⁸

Considering all the uncertainties detailed so far, it is not clear whether the situation of Anatole would fall under Article 5 of the Rome Convention. If it did, Article 5 would allow him to...