1. General issues with overseas transactions

Subject to technical security procedures, every website on the internet is available from any computer with an internet connection. Given the internet is borderless the laws of several countries or jurisdictions may affect a website, its contents and any online transactions entered into.

The offline legal concept of jurisdiction is generally defined by reference to territorial limits. On the internet there are no territorial borders and a party will often not have a physical presence in the jurisdiction.

Increasingly countries have begun to assert their legal jurisdiction over transactions initiated on the internet which have a sufficient level of contact with that State or country.

2. Legal jurisdiction issues arising from the Internet

It may be uncertain when a website developer, host or owner in one jurisdiction will be subject to the legal jurisdiction of a State or country in which the website is accessible. It is likely something more than a website is required for a court to assert jurisdiction. Legal cases in the United States provide the following guidelines:

(a) Connection with State: foreign defendants will be subject to the jurisdiction of a State provided the foreign defendant has some connection with the State. The required level of connection will be satisfied if the foreign defendant has "certain minimum contacts" with that state and litigation being held and heard in that jurisdiction does not offend the "traditional notions of fair play and substantial justice" .(1) The quality and nature of the party’s contacts with the relevant state are considered by a court. If the party’s contacts with that state are "continuous and systematic" the court may have general jurisdiction over the defendant even where the defendant’s contacts are unrelated to the injury suffered by the plaintiff.

(b) 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 found 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:

* the defendant purposefully availed itself of the privilege of doing business within the forum state;
* the relevant cause of action arises from the defendant’s activities within the forum state; and
* the exercise of jurisdiction would be fair and reasonable.

(c) Personal jurisdiction: placing a website on the internet may in some cases found personal jurisdiction over foreign defendants in the jurisdiction where the website can be viewed by users (2) but not always so.(3) In some cases placing a website together with other acts may be sufficient to impose personal jurisdiction over a foreign defendant.(4)

(d) Emails and posting to bulletin boards: Sending emails and placing notices on internet bulletin boards may be sufficient to found jurisdiction over a foreign defendant(5).

(e) States which do not recognise internet transactions: entering into a transaction with an end user in a country that does not recognise internet transactions (or electronic records are not recognised in evidence) means you may be unable to enforce payment even when delivery is fulfilled.

In Australia generally the "presence" of the defendant in the forum is required before an Australian court will impose its jurisdiction. It is likely the placing of a website will not of itself be sufficient to assert jurisdiction over a company that otherwise has no contact with Australia. For example, jurisdiction may be asserted where the foreign defendant interacts with customers in Australia via the internet or sells products to customers in Australia.(6)

An Australian court has a discretionary power to grant an injunction to restrain conduct occurring or expected to occur outside the jurisdiction. Where a more appropriate forum can be found or the enforceability of the order is doubtful the court is unlikely to exercise the power.(7)

(see Jurisdiction Fact Sheet)

3. Managing legal risk

The legal risk of your website or online transaction (with an overseas party) falling within another countries legal system may be managed as follows:

(a) In your terms and conditions of website use or online contract:

* restrict offers of goods or services to jurisdictions you primarily wish to operate in; and

* specify what State or Country law will constitute the law of the contract and specify which court or tribunal will have jurisdiction to resolve any disputes arising under the transaction.

(b) Implement other procedures to restrict sales of goods or services to residents of countries or states in which you intend to do business, including:

* technical measures to prevent end users from other jurisdictions from accessing or entering into transactions on your website; and

* a risk management policy excluding offers to certain areas or jurisdictions that do not recognise internet transactions or do not accept electronic records in evidence in legal proceedings.


Other relevant Articles on this site:
Website development agreement
Terms and conditions of website

Other relevant Fact Sheets:
Jurisdiction
Online Contracts

End Notes
(1) International Shore v Washington 326 US 310 (1945).
(2) 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).
(3) 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).
(4) See CompuServe Inc v Patterson 89 F3d 1257 (6th Cir 1996); and Digital Equipment Corp v Altavista Technology Inc 960 F Supp 456.
(5) 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 bulletinboards.
(6) In Gutnick v Down Jones [2001] VSC 305 (28 August 2001), it was held that if an overseas person publishes an article on its website which defames someone in Australia, it is possible for an Australian court to have jurisdiction to hear the matter. However this case is currently on appeal and may be limited solely to defamation matters.
(7) Macquarie Bank v Berg [1999] NSWSC 526