Updated as at 25/10/2001.
1. What is Jurisdiction?
In broad terms, jurisdiction refers to the power and authority of a government to legislate, adjudicate and enforce its laws. Jurisdiction is dependent on the sovereignty of the government and therefore is usually territorial. It is bound by the territorial limits and usually does not extend beyond the territory. This fact sheet looks at, in particular, the power of a government to adjudicate a dispute.
In any case, the first question a court must ask is whether or not it can hear the matter (ie. does it have necessary jurisdiction?) and then whether or not it will hear the case (ie. is it the most appropriate court to hear the matter?). If the court does not have jurisdiction in a matter, then the court is not competent to adjudicate on the matter. If it did hear and decide the matter, then the judgment given by the court would not be enforceable and could be quashed.
In order for a court to adjudicate in a case, the court must have authority over the subject matter in dispute (subject matter jurisdiction) and authority over parties before the court (personal jurisdiction).
The basis of jurisdiction can be either:
(a) the party (for example, the party’s nationality, domicile, presence or residence in the forum, possession of property in the forum, etc); or
(b) the cause of action (usually whether the act or event giving rise to the proceedings occurred wholly or partly in the forum).
In this fact sheet the term 'forum' is used to refer to the geographical place where jurisdiction is asserted.
The requirements for jurisdictional competency of a court depend on the type of action that is involved. As outlined above, the court must have both subject matter jurisdiction and personal jurisdiction. The subject matter jurisdiction is often determined by the constitutional document of the court, eg. legislation which creates the court. Inferior courts and specialist courts are usually limited with respect to subject matter jurisdiction. For example, a magistrate’s court is limited with respect to the type of action it can hear and also the amount in dispute. The Family Court of Australia has jurisdiction only over matters related to family law. This fact sheet is confined to the elements required for a court to have personal jurisdiction over a party. (1)
The jurisdiction issue relates to whether or not the defendant is subject to the jurisdiction of the court. The plaintiff is, by the act of issuing the action in the particular court, taken to have submitted to the jurisdiction of the court. Therefore, any discussion of personal jurisdiction relates to whether or not the court has jurisdiction over the defendant.
In Australia, personal jurisdiction of a court over a defendant is based on either presence or submission.
2. Jurisdiction Based on Presence
(a) Presence of Individuals
Service based on the presence of the individual occurs when the defendant is present in the forum at the time of service of the process (ie. a writ) and is validly served with the process (which usually means personal service). However, personal service may be replaced by substituted service under certain circumstances, such as where personal service is not possible or practicable. This is discussed further below.
There is some debate as to the precise time at which the defendant must be present in the forum for the service or writ to be valid and jurisdiction found to exist. There is a view that the defendant must be present in the forum at the time of the issue of the process. According to this view, a defendant who was present at the time of the issue but left the forum before a personal service could be effected could be validly served with a substituted service. However, the majority of the decisions tend to support the view that the defendant must be present in the forum when the process is served. (2)
This means that even if the defendant is a foreigner who visits the forum for a very brief time and then goes out of the forum, if the service of process was effected while the defendant was present in the forum, then the forum court will have jurisdiction over the defendant. (3)
(b) Presence of a Corporation
At common law, a foreign corporation (ie. a company incorporated outside the forum, regardless of whether or not the corporation has "physical" presence in the forum) could be sued in the forum if the company was present in the forum.
The presence of a foreign corporation is determined by whether the company has transacted business for a definite period of time at some fixed place within the forum. (4)
One of the factors to consider when determining the presence of a company is the nature of business carried on by the company. It is not necessary that the company has an office or other "physical" presence in the forum. It may carry out a material part of its business through the intermediaries or agents it engages. (5)
This gives rise to a significant implication for all the corporations that engage in e-commerce. By nature, e-commerce is intended to facilitate the carrying on of business without having a physical presence where the customers may be. The transactions are carried out in cyberspace – a place that is everywhere and nowhere. Since it is not a necessary requirement that a company has physical presence in the forum, a court in Australia may well have jurisdiction over a company that has no other connection whatsoever with Australia apart from a website which may be accessed from anywhere in the world.
There is no law in Australia regarding this issue at the moment but some developments particularly in the US indicate that the courts are likely to require something more than just a presence on the internet to find jurisdiction with respect to companies or individuals who have no other connection to the jurisdiction except for a website. This is discussed further below.
3. Jurisdiction based on Submission
A defendant who is not present in the jurisdiction may submit to the jurisdiction. This is usually done by way of the defendant’s solicitor in the forum agreeing in writing to accept service of the process and enter an appearance before the forum court.
4. Service Outside Jurisdiction
Service outside the jurisdiction is sometimes allowed under specific circumstances where there are certain connections between the case or the defendant and the forum. The rules for service outside jurisdiction differ to some extent from court to court. However there are some common factors which give rise to the capacity to make a service outside the jurisdiction. As an example, the circumstances that allow service outside jurisdiction for contractual and tortious actions are outlined below.
5. Contract
In relation to suits arising out of a contract or related to a contract, the following circumstances will give rise to the forum court having jurisdiction over the case.
(a) Contract made within the jurisdiction: If a contract is made within the forum, then the forum court has jurisdiction with respect to any action brought in relation to the contract. A contract is made within the jurisdiction when the last act necessary to create a binding contractual obligation took place within the jurisdiction. The question of what is the last necessary act is answered by applying the law of the forum in relation to the formation of the contract. For example, under Australian law, where a contract is made as a result of instantaneous means of communication, it is made where the acceptance is received. This has certain implications for online contracts. What is the last act necessary to create a binding online contract? In relation to a clickthrough contract, for example, is it the act of the customer clicking through or is it the notice that gets sent to the seller to say the customer has clicked through? (See Online Contracts fact sheet).
(b) Contract is made by or through an agent residing within the jurisdiction on behalf of a principal trading or residing outside jurisdiction: In this situation, in order to establish jurisdiction it is not necessary that the agent has actual authority to bind the principal.
(c) Governing law of the contract is the law of the forum: This begs the question what is the proper law of the contract? This is answered by applying the ordinary contract choice of law rules.
(d) Contract is breached within the jurisdiction: Again, one needs to look carefully at where the act of breach occurred. If it is deemed to have occurred within the forum, this gives sufficient connection with the forum for the forum court to have jurisdiction.
6. Tort
The following circumstances will give the forum court jurisdiction over the defendant in a tort action:
(a) commission of tort within jurisdiction;
(b) where the defendant is a necessary or proper party; or
(c) if the defendant is domiciled or ordinarily resident within jurisdiction.
Once again, this gives rise to questions with respect to acts that occur in cyberspace. For example, if incorrect information is published in cyberspace and someone suffers damages as a result of that publication, where is the tort committed? Where is the place of publication? Is it where the information is uploaded or where the information is downloaded?
7. Internet and Jurisdiction
As discussed above, jurisdiction is usually subject to territorial limits. How does this apply to the internet where there are no territorial borders and where the defendant does not have any physical presence in the forum?
Activities which occur on the internet by their nature are worldwide. A website, no matter who builds it and where it is hosted, is accessible from anywhere in the world. Does this mean that the person who built the website is now subject to personal jurisdiction anywhere in the world?
It is likely that something more than just a website would be required for a court to have jurisdiction. As can be expected, the US has the most number of cases dealing with disputes arising in relation to the internet and therefore the most litigation in relation to this issue. Consequently, some principles have emerged from the US case law which Australian courts may well adopt. Therefore, the US decisions will be discussed briefly.
The US, like Australia, is a federation of states. Therefore, each state has its own jurisdiction. In most of these states there is what is known as the "long-arm statute". A "long-arm" statute subjects foreign defendants to the jurisdiction of that state as long as the foreign defendant has some connection with the state. The test to be applied is whether that foreign defendant has "certain minimum contacts" with that state such that the litigation being held and heard in that jurisdiction does not offend the "traditional notions of fair play and substantial justice" (6).
The court also looks at the quality and nature of the party’s contacts with the relevant state. This is important because if the court concludes that the party’s contacts with that state are "continuous and systematic", then the court may find that it has general jurisdiction over the defendant even where the defendant’s contacts are unrelated to the injury suffered by the plaintiff.
In contrast, specific jurisdiction may be asserted over a foreign defendant if the contact by the defendant is of the same kind of activity that caused injury to the plaintiff. A single instance of contact with the state may be sufficient to establish specific jurisdiction over a foreign defendant if the resulting injury is of a serious nature and quality. For specific jurisdiction to exist, the following criteria must be established:
(a) the defendant purposefully availed itself of the privilege of doing business within the forum state;
(b) the relevant cause of action arises from the defendant’s activities within the forum state; and
(c) the exercise of jurisdiction would be fair and reasonable.
Very generally speaking, the cases to date in relation to internet jurisdiction fall into three categories:
* cases where it was held that placing a website on the internet is a sufficient act to establish personal jurisdiction over foreign defendants in the jurisdiction where the website can be viewed by users (7);
* cases where it was held that mere placing of a website was not sufficient to find personal jurisdiction over the foreign defendant (8); and
* cases where it was held that placing of the website together with other acts were sufficient to found personal jurisdiction over the foreign defendant.(9)
In addition, there are also cases where sending emails and placing notices on internet bulletin boards were held to be sufficient to establish jurisdiction over the foreign defendant. (10)
There is no uniform approach by the courts to what would constitute sufficient contact with the forum state for the forum court to found jurisdiction over a foreign defendant where the contact relates to activities on the internet. In Australia, however, given the requirement of "presence" of the defendant in the forum, it is likely that more than mere placing of a website would be required for a company that otherwise has no contact with Australia. In addition to a website, it is likely that an Australian court would require something more, such as the foreign defendant interacting with its customers in Australia via the internet, or selling products to customers in Australia, and so on.
7. Australian Position
Thus far, there have been two Australian cases which have considered the issue of jurisdiction related to the internet activity of a defendant: Macquarie Bank v Berg [1999] (11) and Gutnick v Dow Jones [2001] (12). Both cases offer contrasting views and as a consequence, there is still some confusion on this issue. (13)
In the former case, Macquarie Bank and another person brought an application in the Supreme Court of NSW for an injunction restraining the defendant, Mr Berg, from publishing defamatory material on the internet. The defendant had been a consultant previously employed by Macquarie Bank but the employment was terminated in less than amicable circumstances leading to proceedings in the Industrial Relations Court of NSW and the Federal Court. Mr Berg left Australia and is thought to have returned to America. Since about May 1999, material containing defamatory imputation about the plaintiffs appeared on a website and there was reasonable inference that the defendant was involved in the publication of that material. The defendant was not in NSW at the time and the acts he is alleged to have engaged in were probably done in the USA. He did not return to NSW when the defamation proceedings were brought against him.
The judge, Simpson J, considered the issue of whether to exercise jurisdiction over the defendant. Her Honour held that a court is empowered to grant an injunction to restrain conduct occurring or expected to occur outside the jurisdiction. It is in the court’s discretion whether or not the court will exercise such power. Factors relevant in determining whether to exercise this discretion include whether there is a more appropriate forum and the enforceability of any order made.
The judge refused to grant the order sought because "it would exceed the proper limits of the use of the injunctive power of the [NSW] court". She noted that any order she made would only be enforceable if the defendant were to return to NSW, which was unlikely. The unenforceability of any order was a factor against granting the order sought by Macquarie Bank. However, the major factor against granting the order was that the injunction would effectively restrain publication of the material anywhere in the world. This would mean that the law of NSW would be imposed worldwide. It was admitted by the plaintiff that there was no known technology or mechanism by which the transmission of material on the internet could be restricted to certain geographic areas. The judge explained that an injunction to restrain defamation in NSW is designed to ensure compliance with NSW law and is designed to protect the rights of people as defined by the law of NSW but is not intended to operate in other jurisdictions, which would be offensive to the sovereignty of other jurisdictions.
In the second case of Gutnick v Dow Jones, Gutnick brought an action in the Supreme Court of Victoria claiming that Dow Jones had defamed him by publishing an article, "Unholy Gains" on its subscriber-based website. Dow Jones contended that publication occurred when the material was uploaded from the company’s webserver in New Jersey and therefore, the jurisdiction should be there. However Justice Hedigan disagreed, concurring with Gutnick’s argument that "the article was published in the State of Victoria when downloaded by Dow Jones subscribers". His Honour distinguished the former case of Macquarie Bank v Berg by stating: (i) "[the Gutnick] case is not concerned with the World Wide Web because Dow Jones only puts it on for subscribers or trial subscribers. It limits access and thereby limits it from the world."; (ii) "[the Berg] case was an application of an injunction, a discretionary remedy her Honour declined to grant in the circumstances prevailing"; and (iii) although the judge in Berg did address the undesirability of imposing NSW law on "every State, Territory and country of the World", his Honour felt that those opinions were mere obiter.
8. Further Developments
The problem of jurisdiction arises because laws are different from country to country, and where there is a federation of states, from state to state. Also, it would be unfair and unjust to defendants to be subjected to litigation in places that are inconvenient for them to defend the action. Plaintiffs would be able to shop for the most favourable forum in which to bring litigation. In addition, the authority of the court is diminished if its decisions are not enforced in a proper manner.
If, however, the laws in different territories were the same or substantially similar, then the problems or issues arising out of the matter of jurisdiction would be reduced. It is thought that the work which is being undertaken in relation to harmonisation of the law (for example, international commercial law and, to some extent, the intellectual property law regime) will reduce the extent of problems resulting from different laws.
9. Enforcement of Foreign Judgements
Finally, what happens in the reverse case – that is, if a foreign country asserts jurisdiction over an Australian person or company on the basis that the person or the company operates a website which is accessible from the foreign country or is directed at the foreign country? A well-known recent example is the Yahoo Nazi memorabilia case. In November last year, a French appeals court ruled that Yahoo must block French residents from viewing auctions of Nazi memorabilia at its US-based auction sites or face stiff fines (14). This ruling upheld the initial judgment despite the fact that the website concerned was US-based rather than French-based. The question is how will it enforce its judgment against Yahoo?
A French court will be unable to enforce its judgment in the United States without the co-operation from the US government. Usually, countries have either a bilateral treaty agreeing to recognise each other’s judgment or some other law based on reciprocity principle.
In Australia, there is the Foreign Judgment Act 1991 ("the Act"). Under this Act, a plaintiff who obtained a judgment against an Australian entity in a foreign court can seek to have that judgment registered in Australia and then receive assistance from the relevant authorities to enforce that judgment. The Act applies only to monetary judgments.(15) Whether or not the registration of foreign judgment will be allowed depends on the principle of reciprocity (ie. how likely it is that the country where the judgment was passed will enforce Australian judgments) and also that the judgment must come from a superior court of that foreign country.
Other relevant Fact Sheets:
Sources of Law
Supreme Court Act 1933 (WA)
Supreme Court Act 1986 (Vic)
Supreme Court Act 1935 (SA)
Supreme Court of Queensland Act 1991 (Qld)
Supreme Court Act 1970 (NSW)
Foreign Judgement Act 1991
Family Law Act 1975 (Cth)
Federal Court of Australia Act 1976 (Cth)
Supreme Court Act 1933 (WA)
Macquarie Bank v Berg [1999] NSWSC 526
Gutnick v Dow Jones [2001] VSC 305
End Notes
1. This distinction is based on the traditional distinction between an action in personam (which is an action resulting in a decision on rights of the parties themselves) and an action in rem (which is an action resulting in a decision about a thing and which is binding against the whole world). A classic example of an action in rem is a suit against a ship or its cargo. In such an action, the defendant, at least in theory, is the ship or the cargo and the process is served on the "defendant" by nailing the writ on the mast of the ship!
2. See E Sykes & M Pryles, "Australian Private International Law", 3rd ed (1991) at 22.
3. For an extreme example of how this rule can apply, see Grace v MacArthur (1959) 170 F.Supp 442 where service was effected on an aeroplane in which the defendant was travelling. The plane was making an interstate flight and when the plane entered the airspace of the forum state, the lawyer stepped across the aisle and served the writ on the defendant. The service was held to be effective and the forum court had jurisdiction over the defendant based on this service.
4. See Dunlop Pneumatic Tyre Co Ltd v A.G. Cudell & Co [1902] 1 KB 342.
5. See BHP Petroleum Pty Ltd v Oil Basins Ltd [1985] VR 725.
6. International Shore v Washington 326 US 310 (1945).
7. For example, see Inset Systems Inc v Instruction Set Inc 937 F Supp 161 (D Conn 1996); Maritz Inc v Cybergold Inc 947 F Supp 1328 (ED Mo 1996); and Minnesota v Granite Gate Resorts Inc 568 NW2d 715 (Minn Ct App 1997).
8. See Bensusan Restaurant Corp v King 937 F Supp 295; and Zippo Manufacturing Co v Zippo Dot Com Inc 42 USPQ2d 1062 (WD Pa 1997).
9. See CompuServe Inc v Patterson 89 F3d 1257 (6th Cir 1996); and Digital Equipment Corp v Altavista Technology Inc 960 F Supp 456.
10. See Hall v LaRonde 66 Cal Rptr2d 399 (1997) with respect to emails and California Software Inc v Reliability Research Inc 631 F Supp 1356 (CD Cal 1986) with respect to bulletin boards.
11. [1999] NSWSC 526
12. [2001] VSC 305
13. The decision in Gutnick v Dow Jones is currently on appeal to the High Court. Therefore the direction in which this issue is heading is still uncertain.
14.> See L Enos, "Yahoo Ordered to Bar French from Nazi Auctions", E-Commerce Times, 20 November 2000 at http://www.ecommercetimes.com/perl/story/5406.html.
15.> See section 7 of the Foreign Judgement Act 1991 . Penal statutes are strictly subject to the sovereignty of the forum government. Moreover, the presence of the defendant is a necessity in penal trials and therefore, usually what is relevant is law concerning extradition.