In all aspects of Business, one which gives nightmares
to a Businessman is the factor of "Unknown Risks". In the context of
E-Business, Digital Contracts and Transactions over the Internet, what the
E-Business entrepreneur dreads most is the Cyber Law related risks which
may lurk around the corner and hit him just when he thinks "I have
arrived".
For a law compliant individual, who has a workable
business model, it is critical that his otherwise viable business is
protected from liabilities on account of laws that he is not aware. There
have been many instances when legal action has killed many promising
business initiatives.
In normal legal circumstances it is an accepted rule
that "Ignorance of Law is Not a Defense". As long as this concept was
being implemented within a limited jurisdiction of one country, which is
either as small as England or as large as China, there was a reasonable
assumption that the Businessman either on his own or with the assistance
of professionals could gather enough knowledge of law to steer clear of
violations.
E-Business on the other hand is a different
proposition. While, from the Marketing point of view, the Businessman is
happy that with one website he can reach out the entire globe, he cannot
forget that by the same yardstick, he is exposing himself to the legal
risks of the entire globe.
The matter of "Jurisdiction" has therefore been of
interest to E-Business enterprises.
When ITA-2000 was passed with section 75 of the Act
providing extra territorial jurisdiction to bring Cyber Criminals to book,
many considered this as an unblemished boon.
The Section states,
75.Act to apply for offence or contraventions
committed outside India
(1) Subject to the provisions of sub-section
(2), the provisions of this Act shall apply also to any offence or
contravention committed outside India by any person irrespective of his
nationality
(2) For the purposes of sub-section (1), this Act
shall apply to an offence or contravention committed outside India by
any person if the act or conduct constituting the offence or
contravention involves a computer, computer system or computer network
located in India
This was however a trap in the UNCITRAL model law and
exists in the Cyber Law statutes of many other countries. As a result,
similar provisions exist in the laws of Malaysia or South Africa and
expose Indians to the Global set of laws in all respect. It is not as if
this section is relevant only for "Criminals". It extends every aspect of
the Cyber Law including formation of digital contracts, conduct of
E-Business etc to the global domain.
Countries such as South Africa have been more explicit
in their E-Commerce enactments and protect their citizens against
E-Businessmen (Including those from outside the Country ).
We are all aware of the disputes between Yahoo and the
French Government where the French Government is claiming jurisdiction
over Yahoo Website while Yahoo is prepared to admit only a restricted
jurisdiction.
There have been many other conflicting judgements where
the issue of Jurisdiction is looked at differently by different Courts for
different types of offences.
For example, in
Forrest v. Verizon Communications, Inc., which
was a Consumer Protection case, the forum selection
clause was upheld for jurisdictional purpose. If this is adopted as a
universal principle, then perhaps the E-Businessman and the Customer know
what they are contracting.
In
Gorman dba Cashbackrealty.com v. Ameritrade Holding Corp. the court
held that in the case of an interactive website, the jurisdiction extends
to the area of residence of the customer. This could negate the principle
of specific forum selection as the basis of determining Jurisdiction.
In
Griffis v. Luban, which was a case of Libel, the Court refused to
allow extention of jurisdiction.
Under these confusing circumstances, the recent
Judgement in the case of Metro-Goldwyn-Mayer
Studios, et al. v. Grokster, Ltd., et al in the United States District
Court For the Central District of California Western Division has opened a
new chapter. This Judgement clearly sets out the rules under which the
Californian Courts assume Jurisdictional control over any service which is
being used by the Citizens of the State.
According to the judgement,
California authorizes its courts to exercise
personal jurisdiction over non-resident defendants to the full extent
permitted by the United States Constitution. As such, its courts can
exercise jurisdiction over a defendant if he has "certain minimum
contacts with the forum [state] such that the maintenance of the suit
does not offend 'traditional notions of fair play and substantial
justice."
In Other Words, if you have a successful business run
from India and have clients in California, then you must adhere to the
regulations of California. The plight of the Russian Software developer
Dmitry Sklyarov is too well known to be repeated here.
If this becomes a universally accepted principle, then
every Indian E-Business will be subject to the Cyber Laws of every other
Country including the many states under USA having different sets of law.
It is therefore an onerous task for any E-Business to
hedge against all legal risks that afflict the entity.
While Naavi.com continues to consider that Cyber Law
Compliancy is the essential part of Business and every Portal or
E-Business should address this issue without neglect, it is also necessary
to debate if a time has come to question this basic concept that
"Ignorance of Law is No Defense" since it is unfair to expect any Company
to be fully aware of all the laws of all the countries in the world.
Probably, in case of Cross Border disputes of
E-Transactions, "Notice of Infringement" must be made mandatory before any
action.
While one may argue that the law is same for all and
the same law gives the power to an Indian Consumer to file a case against
a Pornographic Site in USA, it is obvious that the practical situation is
different.
No Indian consumer will have enough resources to fight
a case in USA and even if it does, as was evident in the Yahoo case there
could be different interpretations. For example we know that USA has one
interpretation of Terrorism for Iraq and another for Pakistan.
Let us therefore admit that the concept of "Universal
Jurisdiction" based on the location of the Consumer of an E-Business is
not a practical idea. Under this principle, no Business will ever feel
confident that it is not violating the regulations of another country. It
has to therefore opt for short term business policies aimed more at
avoiding legal action rather than a long term brand building activity.
In order to protect Indian E-Business community
therefore, it is necessary to create a "Protective Umbrella" by which
application of any International Law over an Indian should be approved
by a suitable authority. This principle is like what is already available
in Indian law where for certain actions against the Chief Ministers, the
approval of Governors is mandatory.
Obviously, there will a few questions on the WTO
compliance and the effect of International Treaties. If the system is
properly designed, it can protect all these commitments which actually
fall under "Known Legal Risks" while the future manifestations of new laws
that are coming up world over can be properly filtered.
Comments are
invited from public in this regard.
Naavi
February 7, 2003
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