A company’s website provides a global presence. The website can usually be accessed from all over the world by anyone who has an internet connection. A company therefore cannot assume that it need only be concerned with the laws and regulations of its domestic jurisdiction when publishing material on its website or conducting transactions through the site. The Yahoo! case, where a French court asserted jurisdiction over a website operated by a US company that was not targeted at French citizens, is one of a number of cases worldwide that demonstrate an increasing tendency on the part of national courts to impose domestic laws on websites operated in foreign jurisdictions. A knowledge of the main types of liabilities that may arise across a variety of jurisdictions, and an understanding of how to avoid or restrict such liabilities, is therefore increasingly important for any company with a presence on the web.
This note reviews the main liabilities that may arise in ten jurisdictions: Australia, Brazil, Canada, France, Germany, Italy, Spain, Sweden, the UK and the US. Which of these liabilities are relevant to any particular website will, of course, depend on the exact nature of the business concerned. The main focus of this note is on the liabilities of website owners, but some key considerations for internet service providers (ISPs) are highlighted in the text and under the heading Specific issues for internet service providers. For the purpose of this note, the liabilities are divided into the following categories:
Tort (including defamation).
Criminal liabilities (including obscene or racially inflammatory material and, in certain jurisdictions, gambling).
Advertising and marketing (including legal and voluntary regulations, infringement of certain intellectual property (IP) rights, consumer protection laws, and sales promotions, lotteries and prize competitions).
Methods of restricting liability are discussed under the heading Restricting liability.
The main liabilities that may arise in each of the countries surveyed are discussed in outline below.
The following areas of liability in relation to contracts are discussed below:
General principles of contract law and remedies for breach.
Liability for breach of statutory implied terms in contracts.
The extent to which it is possible to exclude or limit liability for breach of contractual terms.
Enforcement of contracts.
The regulation of contracts that are concluded at a distance (which includes contracts made over the internet, in addition to other forms of distance selling, such as mail order, telephone or fax) is considered in the Practice note, Making contracts online: Terms implied by law and mandatory statutory provisions (www.practicallaw.com/A25570).
In Australia, Canada (except Quebec) and the UK, contracts are mostly governed and interpreted by common law principles. In the US, most contracts are governed and interpreted by common standards supplemented by provisions of the Uniform Commercial Code, adopted in whole or in part in each state. Other countries, in particular the European jurisdictions and Brazil, have civil codes which deal with contractual issues. In most jurisdictions, however, specific statutory provisions will also apply to various types of contracts. The relevant laws or statutes, tests for extraterritorial application and methods of enforcement relating to contractual matters in the jurisdictions surveyed are listed or summarised in Country Question 1.
Generally, a website owner will not be able to avoid liability for breach of contract merely because a contract has been made in electronic form. Electronic contracts are valid in all the jurisdictions surveyed, subject to specific exceptions in relation to, for example, property-related matters. Electronic contracts are considered in detail in the Practice note, Making contracts online (www.practicallaw.com/A25570).
The remedy for breach of contract is usually damages and/or (depending on the circumstances) termination of the contract. In some circumstances an order for specific performance of a contract can be sought. In Germany, for example, since 1 January 2002 there has been the option of specific performance (Nacherfüllung), as well as damages, as a remedy for breach of contract.
In Australia, Canada, the UK and the US, certain terms are implied by statute into contracts for the supply of goods or services. A supplier proposing to sell goods or services through a website must be aware of these terms as they impose significant obligations, breach of which will entitle the buyer to remedies including the right to claim damages and/or to terminate the contract (in certain circumstances).
On a sale of goods, the implied terms include assurances that:
The seller has the right to sell the goods and that the goods are free from third party rights.
Where the goods are sold by description or by sample, the goods will correspond with the description or sample.
The goods will be of satisfactory or merchantable quality and fit for the purpose for which they are supplied.
In Canada, however, suppliers are subject to several additional implied obligations, including that the price of the goods must be reasonable and that the goods must be delivered within a reasonable period of time (such terms may be varied by agreement, but generally cannot be varied in consumer contracts). There is no implied term with respect to fitness for purpose or quality of goods in most of the Canadian provincial sale of goods legislation.
In Brazil, warranties are implied in contracts for the sale of goods by the Consumer Protection Code of 1990. Breach of such warranties will render suppliers liable for defects and imperfections in goods supplied, including damage caused to third parties, regardless of fault, negligence or intention.
Terms which may be implied in a contract for the provision of services include the following:
That the services will be performed with reasonable skill and care.
That the services will be performed within a reasonable time.
Where no price is stated in the contract (and there is no other way of assessing the parties’ intention regarding it), that the person requesting the services will pay a reasonable price.
Many countries impose their own mandatory rules (especially in the context of consumer transactions) which apply regardless of what the terms of a contract may say or the governing law chosen by the parties. The application of such rules can result in companies incurring unforeseen liabilities to customers in foreign jurisdictions. In the UK, the Unfair Terms in Consumer Contract Regulations 1999 (which implemented EC Directive 93/13/EEC on unfair terms in consumer contracts (see below)) are an example of such mandatory rules.
A supplier cannot deny the existence of terms implied by statute merely because they were not expressly included in a contract. The supplier may provide in the contract that its liability for breach of such terms is excluded or limited, but this may well be subject to legal controls on the effectiveness of such provisions (see below).
In most jurisdictions, the extent to which a party may validly exclude or restrict liability for breach of express or implied terms in a contract is subject to legal controls, which are generally much stricter in business-to-consumer (b2c) transactions than in business-to-business (b2b) transactions.
In EU countries, for example, suppliers to consumers must take account of the provisions of EC Directive 93/13/EEC on unfair terms in consumer contracts (OJ 1993 L95/29) (Unfair Terms Directive), as implemented in national legislation. Broadly, the effect of the Directive is that a consumer will not be bound by any “unfair” term which has not been individually negotiated in a contract with a seller or supplier. A term is “unfair” if, in a way which is contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer (Article 3(1)). A number of factors must be taken into account in assessing unfairness (Article 4), and the Annex to the Directive contains an indicative and non-exhaustive list of terms which may be regarded as unfair. The Directive also requires any written term of a contract to which it applies to be expressed in plain and intelligible language, failing which the interpretation most favourable to the consumer will prevail (Article 5). The Directive is discussed further in Practice note, Making contracts online: Terms implied by law and mandatory statutory provisions (www.practicallaw.com/A25570).
The provisions of Directive 1999/44 on certain aspects of the sale of consumer goods and associated guarantees also impact on b2c contracts. The Directive provides for a hierarchy of remedies for defective consumer products. If a product is not in conformity with the contract at the time of delivery, consumers are entitled to certain remedies for a minimum period of two years from delivery:
In addition, the Directive reverses the burden of proof for the first six months after delivery by introducing a presumption of non-conformity if a defect becomes apparent within that six-month period. The other element of the Directive is that it makes manufacturers' guarantees (which includes guarantee statements made in advertising materials) automatically binding. Businesses therefore need to consider the statements made on their websites in that context. In the UK, implementation has not resulted in significant changes to consumers' rights because the existing regulatory regime was already quite generous in terms of the remedies available for defective products, and the existing six-year limitation period in which those remedies are available has been retained. In Germany, however, implementation of the Directive coincided with a much wider review of contract law and consumers do now have a two-year warranty against defective products.
In Australia, certain statutory implied terms in consumer contracts cannot be excluded at all. In consumer contracts generally, rules in certain states prohibit harsh, oppressive, unconscionable or unjust provisions.
Liability for damages for breach of the terms implied by the Brazilian Consumer Protection Code of 1990 (see Statutory implied terms above) cannot be waived by the parties. However, in b2b transactions and in “justifiable” cases, the supplier may be able to limit the amount to be paid in respect of any breach. As there is no statutory definition of what is “justifiable”, the application of this exception is a matter to be decided by the courts in each particular case.
In Canada, a contract for the sale of goods may generally exempt the supplier from performance of certain terms, or limit his liability for breach of such terms. However, in relation to consumer contracts such exemptions or limitations are generally prohibited.
In the UK, in the case of b2b contracts that are on standard written terms (which would generally include terms on a website), liability for breach of contract can be limited or excluded only so far as is “reasonable”. In determining what is reasonable the courts will consider such factors as the parties’ relative bargaining strengths, the availability of insurance and whether the affected party knew of the exclusion or limitation. There are specific controls in the UK on the extent to which liability for breach of statutory implied terms can be excluded. In a b2b contract for the sale of goods, for example, a term excluding or limiting liability for breach of the implied terms as to correspondence of the goods with description or sample, or the quality of the goods or their fitness for purpose, is valid only so far as the term is reasonable, and in a b2c contract such a term is void. In b2c contracts, there are additional constraints: as well as being reasonable, terms must also be “fair”, as required by the Unfair Terms in Consumer Contracts Regulations 1999 (implementing the Unfair Terms Directive). An unfair term is one which causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer.
In Sweden, liability for breach of contract cannot be excluded or limited if the party in breach acted with intent or gross negligence.
Limitation of liability clauses are widely upheld in the US in b2b transactions, subject to “failure of remedies” principles. According to these principles, where the contracting parties’ proposed remedies fail in their essential purpose (that is, they leave the parties without any actual remedy), the courts are empowered to look beyond the enumerated remedies and allow for remedies imposed by the common law or the Uniform Commercial Code to “make the parties whole”. In consumer contracts, however, limitation of liability clauses are regulated and restricted through various state unfair competition laws and basic contractual principles of unconscionability.
In all jurisdictions, contractual obligations are enforced through the courts, usually by way of an action for damages and/or termination of the contract (although specific performance may sometimes be available).
A website owner or ISP may be subject to many different kinds of liabilities in tort. In France and Italy, for example, an infringement of copyright is actionable as a tort, and in Australia, Canada and the UK, an action for the tort of passing off may be brought where one trader takes advantage of the goodwill of a third party by passing off its goods or services as those of the third party (see Practice note, Protecting website content: intellectual property rights (www.practicallaw.com/A21114)). In the US, the tort of trespass may be relevant to the practice of "spidering", where a web business uses a computer program known as a "spider", "bot" or "crawler" to seek out and collect information from other websites (see Practice note, Protecting website content: linking and other special issues, Spidering (www.practicallaw.com/A21251)).
This note, however, focuses on the following liabilities in tort which may arise as a result of statements or information published on a website:
Defamation (liability for defamation may also arise under criminal law).
Fraudulent misrepresentation (also known as the tort of deceit).
In most jurisdictions, liability for defamatory statements made on a website may be imposed on a provider of website content. In some circumstances an ISP or other provider of web-hosting services may also be liable. Claims for defamation may potentially be brought against authors, editors or publishers of website materials. The remedy for defamation is generally damages, but in some jurisdictions (such as Germany and Sweden) criminal liability may arise. Liability for defamation should therefore be considered seriously by website owners, and it will be of particular concern to ISPs who may face claims for defamation in respect of statements posted to message or bulletin boards or made in online live chat rooms which they cannot monitor (see Specific issues for internet service providers). The relevant laws or statutes, tests for extraterritorial application and methods of enforcement in relation to liability for defamation in the jurisdictions surveyed are listed or summarised in Country Question 2.
The elements of a claim for defamation vary from one jurisdiction to another. In France, public defamation is defined as any public statement, made either orally or in writing, which harms a person’s honour or reputation, and which includes false facts relating to the injured party. French law provides for a hierarchy of liabilities in relation to defamation. The person liable is:
First, the director (directeur) or co-director (co-directeur) of the publication, if the infringing material has been reproduced prior to its communication to the public (on the basis that the directeur or co-directeur will have had the opportunity to review the material before its communication - this would not be the case, for example, in relation to material published in an online live chat room).
Second, in the absence of a directeur or co-directeur, the author of the publication.
Third, if the author is anonymous, the producer of the publication (this could include, for example, the creator of an online live chat room, where infringing content has been posted anonymously).
(Act of 29 July 1982.)
In Sweden, a person who accuses another person of being a criminal, of having a reprehensible way of living or who otherwise furnishes information intended to cause disrespect by others will be fined or, in very serious cases, imprisoned for up to two years. A claim for defamation may only be made by individuals and not by companies or other legal entities.
In the UK, to be actionable a statement must be defamatory, refer to a living individual or entity and be published to a third party. A statement is likely to be regarded as defamatory if it involves the lowering of a person in the opinion of right-thinking members of society generally, or exposes a person to public ridicule or contempt, or causes the person to be shunned or avoided. The other jurisdictions surveyed have substantially similar definitions of defamation.
In all jurisdictions, a person will not be liable for defamation if the statement is shown by him to be true, although in France this defence is not available in relation to certain types of statement, for example those which relate to a person’s private life or concern crimes committed against a minor. Other defences may be available, for example in the UK that of fair comment on matters of public interest.
In the UK, an action for the tort of negligence will arise where there is a breach of a duty of care which leads to recoverable damage. The remedy for negligence is damages. Whether or not a duty of care arises will depend on the nature of the relationship between, and proximity of, the parties. Generally, under English law, there is no duty of care on the maker of statements, although a person does owe a duty of care not to make false statements which result in foreseeable physical harm to another or his property (assuming there is sufficient proximity between the parties). However, in certain other circumstances a duty of care will be imposed, and in such circumstances economic loss caused by a negligent statement will be recoverable. It will be a question of fact whether or not the relationship between a website owner and its customers is sufficient to establish a duty of care. The following factors are relevant in assessing whether such a relationship exists:
The knowledge and expertise of the maker of the statement;
The purpose for which the statement was made (if the website owner makes the statement with the intention that the customer will rely on it, it is more likely that a duty of care will be implied); and
Whether it is reasonable for the customer to rely on the website owner’s statement (the specific circumstances may suggest that the customer should have clarified the information before placing reasonable reliance on it, but the fact that the statement is one of opinion, or even of future policy, does not preclude reasonable reliance provided that the website owner presented itself as having requisite knowledge or authority).
In Australia, very similar rules exist at common law to determine whether liability will arise as a result of negligent misstatement. Australia’s Trade Practices Act 1974 (Cth), and its various individual state and territory fair trading legislation, also impose statutory liability, to varying degrees, for misleading and deceptive conduct. This may be the case notwithstanding that such misleading and deceptive conduct occurs as a result of negligence as opposed to a positive intent to mislead or deceive.
The Canadian common law on negligent misrepresentation substantially mirrors that in the UK. Canadian courts have emphasised that the duty of care requires a “special relationship” going beyond passing contact and most often being found where the relationship is quasi-contractual. A successful plaintiff may be entitled to damages for economic loss, including reasonably foreseeable profits. If a misrepresentation is found not to be negligent, it will not give rise to tortious damages but may still permit rescission if there is a contract.
In the US, negligent misrepresentation, a statutorily defined term in nearly every state, differs from the normal common law rules of "deceit" or "fraud" in one important respect. It does not require the maker of the misrepresentation to know that the misrepresentation is false. For example, under California law negligent misrepresentation is "[t]he assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true" (section 1710(2), California Civil Code).
Liability for negligent misrepresentation may be of particular practical concern for web businesses which, as part of their regular activities, provide information or advice with the intention that recipients may use and rely on it. Such businesses may include financial, medical, legal and other professional advisory businesses.
The relevant laws or statutes, tests for extraterritorial application and methods of enforcement in relation to liability for negligent misstatement and misrepresentation in the jurisdictions surveyed are listed or summarised in Country Question 3.
An action for fraudulent misrepresentation, also known as the tort of deceit, arises in the UK where a person makes a statement which he knows to be false, or which he does not actually and honestly believe to be true. Proof of the absence of actual and honest belief in the truth is all that is necessary to establish the tort, whatever the circumstances in which the statement is made.
Where a person visiting a website is induced by a fraudulent misrepresentation on the web site to alter his position, he can bring an action for damages against the content provider. The tort attracts a special measure of damages, which makes the content-provider liable for all losses flowing directly from the fraudulent statement, whether they were foreseeable or not. Furthermore, a dishonest tort such as this may attract an additional award of exemplary damages.
Where the person visiting a website is induced by the fraudulent misrepresentation to enter into a contract with the content-provider, he may either maintain an action for damages, or repudiate the contract or transaction, but not both. He may also use the fraudulent misrepresentation as a defence to any claim made against him for breach of contract.
In all jurisdictions which recognise the concept of torts, actions in tort are brought in the courts, usually by way of an action for damages. In jurisdictions where defamation gives rise to criminal liability, criminal prosecutions will be brought by the relevant prosecuting authorities.
All jurisdictions surveyed impose criminal liability for obscenity, racially inflammatory material, incitement to violence, blasphemy and related activities. Sweden does not impose criminal liability for obscenity or blasphemy. The penalties that can be imposed vary from one jurisdiction to another. The relevant statutes, tests for extraterritorial application and sanctions in the jurisdictions surveyed are listed or summarised in Country Question 4.
As mentioned above, with the exception of Sweden all jurisdictions surveyed impose liability for obscenity.
In Brazil, for example, publications directed at persons under 18 must not contain (among other specified items) content which violates the ethical and social principles of the individual or family, including pornography. The Brazilian authorities have created a task force of law enforcement officers with discretionary powers to monitor and shut down websites containing illicit content.
In France, two specific offences relating to obscenity are as follows:
Broadcasting pornographic images of a person under 18 through any means of communication (including the internet); and
Posting pornographic or violent material on a website without providing for access-controlling devices to limit access to such material, thereby making it available to persons under 18 (Articles 227-23 and 227-24, French Criminal Code).
These rules apply to the authors or providers of the obscene content. There is a defence of being unaware of the obscene content (Articles 282, 286 et seq., French Criminal Code). While this will not be available to editors or providers of content, as they are in principle aware of the content that they publish, a provider of website hosting services may have a defence if, upon notification by a judicial authority, it acts promptly to prevent access to the unlawful content (see Specific issues for internet service providers).
In the UK, it is an offence to publish obscene material (section 2, Obscene Publications Act 1959). Material is considered obscene if its effect is likely to “deprave or corrupt” persons who are likely to see, read or hear it (section 1). It is clear that obscenity extends beyond pornography: the UK courts have, for example, found publications giving detailed instructions on drug use, or glamourising drugs, to be obscene. The offence will apply to providers of online content, and it is also likely to extend to ISPs on the basis that publishing includes the transmission of electronically stored data. Material on a foreign website intended for audiences outside the UK will still be caught by this provision if it is accessed by audiences in the UK. In a recent case, the Court of Appeal held that material published on a website hosted in the US, but accessible from the UK, was "published" for the purposes of the Obscene Publications Act when the material was downloaded by individuals in the UK (R v Waddon ). There is a defence of innocent publication, but it is unlikely to be available to ISPs who have monitored or examined the content they transmit.
As has been mentioned, all jurisdictions surveyed impose criminal liability for racially inflammatory material.
In Australia, a procedure under which members of the public can lodge complaints regarding offensive material on the internet has been established by the Broadcasting Services Amendment (Online Services) Act 2000. The Australian Broadcasting Authority may:
In the case of content hosted in Australia, issue notices to internet content hosts requiring the offending material be removed.
In the case of content hosted outside Australia, issue notices to ISPs requiring that access to the offending material be prevented.
Daily default fines can be imposed for failure to comply with such notices.
An infringement of the provision in the Brazilian Constitution that all individuals are equal before the law is a serious crime, for which bail is not available and there is no limitation period. Racism, or the promotion of racism, are crimes under certain federal and state statutes, and there are specific prohibitions dealing with Nazi-related materials.
In France, it is an offence to incite racial hatred (Articles 24 and 48-1 of the Act of 29 July 1881, prohibiting the act of inciting racial hatred). The difficulties that arise when the laws of a jurisdiction in which a website can be accessed are imposed on a website operator based in a different jurisdiction were clearly illustrated by the Yahoo! case, which concerned the French Criminal Code. The US company Yahoo! had operated auctions for the sale of Nazi memorabilia on its websites, including a French-language site. A French court held that this contravened a prohibition in Article R. 645-1 of the French Criminal Code on the sale or public exhibition of any Nazi uniform, sign or emblem and, as a result of the court’s decision, Yahoo! removed the offending material from its French-language site (Paris High Court, 22 May 2000). However, in the French Court of Appeal it was held that Yahoo! must go further by taking steps to ensure that French citizens could not access those parts of the US website that continued to offer the Nazi memorabilia (20 November 2000). The effect of the judgment was therefore to apply French criminal law to a US website operated by a US company which was accessible in France, even though the site was not specifically targeted at France. Although it appeared from the outset unlikely that the judgment would be enforced in the US, on the ground that it might infringe the right to free of speech contained in the First Amendment to the US Constitution, Yahoo! removed the material from all its sites. Indeed, in a hearing in November 2001, a US Federal District Court in California ruled that the French judgment could not be enforced in the US as the website was subject to US law and therefore protected by the First Amendment to the US Constitution relating to free speech. This ruling was overturned by the Ninth US Circuit Court of Appeals in August 2004 which held that the Federal District Court did not have jurisdiction over the French claimants. In February 2002, the French court held that the matter did come within its jurisdiction. Yahoo!'s former president, Timothy Koogle, was charged with violating France's anti-hate laws but was acquitted at trial.
In Germany, it is an offence to stir up hatred against parts of the population or to attack human dignity by insulting or slandering part of the population (section 130, German Criminal Code), and in Sweden a person commits an offence if he publishes a statement or communication which threatens or expresses contempt for a national, ethnic or other group of persons with reference to race, colour, national or ethnic origin, or religious belief.
In the UK, the relevant prohibition deals with behaviour intended or likely to stir up racial hatred (Public Order Act 1986). Racial hatred is defined as hatred against a group of persons in the UK defined by reference to colour, race, nationality (including citizenship) or ethnic or national origins (section 17). This covers acts or words directed outside the UK that could incite hatred against a group of people within the UK. In addition to any offence that may be committed by a provider of website content, there are several specific offences which may apply to ISPs, including the display of written material (or any other visible representation), the publication of material and the broadcasting of a programme service, provided in each case that it was intended or (having regard to all the circumstances) likely that racial hatred would be stirred up.
In Australia, it is an offence under the Interactive Gambling Act 2001 to provide an interactive gambling service to a customer physically present in Australia. The offence applies to all interactive gambling service providers, whether based in Australia or offshore, and whether Australian-owned or foreign-owned. Although the legislation purports to apply to other jurisdictions, the enforceability of this is unclear. Under the Act, conduct is regulated if it occurs in a designated country or if there is a sufficient nexus with Australia. Such a nexus will exist if, for example, the effective controlling mind responsible for the conduct is in Australia, even if the company through which the gambling service is provided is incorporated offshore. However, the offence will not apply if an interactive gambling service provider did not know, and could not with reasonable diligence have ascertained, that its service had Australian customers.
In all jurisdictions, criminal prosecutions will generally be brought by the government, regulatory authorities or the police.
All the jurisdictions surveyed have legislation or voluntary codes (or both) dealing specifically with advertising and marketing. Examples of other legislation relevant to companies engaging in advertising or marketing activities (for example, consumer protection laws and regulations dealing with lotteries and competitions) are also considered under this heading. The relevant statutes or codes, tests for extraterritorial application and sanctions in the jurisdictions surveyed are listed or summarised in Country Question 5.
In Australia, Brazil, Canada and the UK there are voluntary codes of practice which regulate advertising and marketing generally, with guidelines as to advertising and marketing on the internet. In Sweden, the rules in the Marketing Practices Act (1995: 450) apply to marketing on and offline. Generally, companies are required to ensure that marketing communications conform to a specified standard (in the UK, for example, the Committee of Advertising Practice (CAP) Code of Advertising, Sales Promotion and Direct Marketing requires that marketing communications are “legal, honest, decent and truthful”), and self-regulatory authorities can require advertisers to withdraw or amend materials which are in breach of the codes.
In France, however, the Consumer Code contains mandatory rules relating to advertising. The advertiser on whose behalf an advertisement is broadcast will be primarily liable for a breach of the rules, but an advertising agency may also be liable (see also Local language requirements below).
Most jurisdictions have legislation that applies to misleading advertising (see Misleading advertising below), and many countries also have specific laws concerning comparative advertising (see Comparative advertising below).
For detailed consideration of advertising law and regulation in France, Germany, Italy, the UK and the US, see Practice notes, Advertising (www.practicallaw.com/A21043)and Online advertising and marketing (www.practicallaw.com/A26338) in the PLC International Sales and Marketing Practice Manual (www.practicallaw.com/9-103-1807).
In France, information and marketing materials directed to consumers and end-users resident in France are required to be exclusively in French (Article 2, Toubon Law) or, if accompanied by a version in another language, the French-language version will prevail over the other version in the event of inconsistency. Failure to comply is punishable by a fine of EUR760 for individuals and EUR3,800 for companies in respect of each untranslated document.
Similar requirements apply in the Canadian province of Quebec, where information and marketing materials directed to consumers and end users resident in Quebec must either be exclusively in French or, if accompanied by a version in another language, the French-language version must be no less prominent than the other version. In practice this requirement is only enforced against companies with a place of business or address in Quebec.
It should be noted that the use of a local language may be regarded by national courts as an important factor in determining the governing law which is to be applied to a particular transaction, as for example in Brazil and Italy.
Most jurisdictions have legislation which applies to misleading advertising.
In Australia, misleading advertising is covered by the general prohibition against misleading or deceptive conduct in the Trade Practices Act 1974. Misleading or deceptive conduct may be the subject of injunctions, undertakings or corrective advertisements, and fines may be imposed if false representations are made in breach of section 53 of the Act.
In the EU, Directive 84/450/EEC concerning misleading and comparative advertising (OJ 1984 L250/17, as amended by Directive 97/55/EC of 6 October 1997) requires EU member states to ensure that adequate and effective means exist to combat misleading advertising and to ensure compliance with the provisions in the Directive relating to comparative advertising (see Comparative advertising below). “Misleading advertising” is defined in the Directive as any advertising which in any way, including its presentation, deceives or is likely to deceive the persons to whom it is addressed or whom it reaches and which, by reason of its deceptive nature, is likely to affect their economic behaviour or which, for those reasons, injures or is likely to injure a competitor (Article 2(2)). The Directive requires member states to ensure that designated persons or organisations are given power to take legal action against such advertising and/or to bring such advertising before an authority with power to decide on complaints or initiate appropriate legal proceedings.
In the UK, for example, the implementing regulations enable the Director General of the Office of Fair Trading to consider any complaint that an advertisement is misleading (or is a prohibited comparative advertisement) and, if he is satisfied that the complaint is justified, to apply to court for an injunction requiring the advertisement to be withdrawn (Control of Misleading Advertisements Regulations 1988, SI 1988/915). Italy and Sweden have also implemented the Directive. The Directive did not require implementation in Germany, as the existing Act Against Unfair Trade Practices contained provisions stricter than those in the Directive, or in Spain, where the Spanish Advertising Act 34/1988 already regulated misleading and comparative advertising.
In most jurisdictions comparative advertising is regulated either by legislation or voluntary codes of practice, or a combination of both.
In Australia, comparative advertising is covered by the general prohibition against misleading or deceptive conduct in the Trade Practices Act 1974 (see Misleading advertising above). A voluntary Code of Ethics prepared by the Australian Association of National Advertisers also contains guidelines relating to comparative advertising. The Code contains the following provisions relevant to comparative advertising:
Advertisements shall comply with Commonwealth law and the law of the relevant state or territory.
Advertisements shall not be misleading or deceptive or be likely to mislead or deceive.
Advertisements shall not contain a misrepresentation which is likely to cause damage to the business or goodwill of a competitor.
Under the Brazilian Consumer Protection Code, the Advertising Self-Regulatory Code and unfair competition provisions in the Brazilian Industrial Property Law, comparative advertising is permitted provided that it is objective and can be proved to be so. On the other hand, advertising which misleads or confuses customers by denigrating competitors would be illegal or improper under the Law or Codes mentioned above. Although the Advertising Self-Regulatory Code is not legally binding, it is strictly applied by advertising companies and the communications media. In general, if an advertisement is considered misleading or prejudicial to third parties’ rights, it will be reviewed by the Self-Regulatory Council, which may require that the advertisement is withdrawn.
The non-binding Canadian Code of Advertising Standards contains the following specific requirements relating to comparative advertising:
A comparison should be a fair and factual comparison of similar properties, features, ingredients, attributes or benefits.
Competitors must not be unfairly discredited or unjustly disparaged by the specific or overall impression created by the advertisement.
The comparison should be based on adequate and proper tests of the elements being compared, following accepted industry methods.
Selected comparisons of specific features or attributes should not be used to claim overall superiority.
Advertisers must provide support for advertising claims.
Comparisons delivered through testimonials or by a spokesperson should be identified as an individual opinion, unless justification exists for the comparison to represent a widely held viewpoint.
Advertisements must not include deceptive price claims or discounts, unrealistic price comparisons or exaggerated claims as to worth or value.
As has been mentioned (see Misleading advertising above), in the EU the Directive concerning misleading and comparative advertising requires EU member states to ensure that adequate and effective means exist to ensure compliance with the provisions in the Directive relating to comparative advertising (Directive 84/450/EEC concerning misleading and comparative advertising, as amended by Directive 97/55/EC of 6 October 1997). The main conditions which must be met if a comparative advertisement is to be permitted are that the advertisement:
Is not misleading.
Compares goods or services meeting the same needs or intended for the same purpose, and does so objectively.
Does not create confusion between the advertiser and a competitor.
Does not discredit or take unfair advantage of trade marks or other marks of a competitor.
Does not present goods or services as imitations or replicas of goods or services bearing a protected trade mark or trade name (Article 3a).
The provisions of the Directive dealing with comparative advertising have been implemented in Germany, Italy, Sweden and the UK (where the voluntary CAP Code also contains detailed requirements regarding comparative advertising).
In France, these provisions of the Directive have been implemented (to the extent that they were not already covered by existing legislation) by means of an amendment to the French Consumer Code. Comparative advertising will only be permitted if the following conditions are satisfied:
The goods or services compared meet the same needs or serve the same purpose.
The comparison is truthful and not misleading.
The comparison is objective.
The comparison applies to “essential, relevant, checkable and representative features of goods or services, of which price is a part.” (Art L 121-8, Consumer Code).
In Spain, as mentioned under Misleading advertising above, the Unfair Competition Act 3/1991 and the Advertising Act 34/1988 already regulate misleading and comparative advertising.
Infringement of other rights in comparative advertising
Advertisers will need to ensure that a comparative advertisement does not infringe the rights of third parties named in the advertisement, which may be protected by registered trade marks, or laws relating to passing off, unfair competition or trade libel:
Trade marks. In Australia, the use of trade marks in comparative advertising is permitted, whereas in the EU the laws of the member states broadly reflect the provisions of the Trade Marks Directive (89/104/EEC, OJ 1989 L40/1), which allow the use of a third party’s mark only if it is in accordance with “honest practices in industrial or commercial matters”.
Passing off. In Australia, Canada and the UK, protection for the goodwill of a business may be available under laws of passing off, which enable one trader to prevent another trader from misrepresenting its goods or services as being or having a connection with the goods or services of the first trader. The principles of passing off apply equally to infringements on the internet or elsewhere.
Unfair competition. In Brazil and France, laws relating to unfair competition prevent certain activities, such as the unauthorised use of trade marks (whether registered or otherwise) or the imitation of a third party’s activities, products or services, which cause confusion, mistake or deception as to the origin or association of the defendant’s goods or services.
Trade libel. In the UK and Canada, certain false statements about a third party’s business may be actionable under laws relating to trade libel (or malicious falsehood). In the UK, for example, a false statement about the goods or property of another, which is made with malice and causes damage, constitutes a trade libel for which an injured party may claim damages. A statement is made with malice if the party making it knew that it was not true (or was reckless as to its truth), or acted on an improper motive.
For detailed consideration of trade mark, passing off and unfair competition laws, and remedies for infringement, see Practice note, Protecting website content: intellectual property rights (www.practicallaw.com/A21114).
Always compare like with like so as not to fall foul of comparative advertising regulations.
Make it clear when an opinion is being expressed, rather than fact.
Do not mislead or confuse. Be clear, fair and honest (honesty should be tested objectively, by reference to the target audience).
Do not discredit, disparage, denigrate, take unfair advantage of or be detrimental to a competitor’s trade marks, goods, services, circumstances or reputation.
If using the results of a published survey, obtain appropriate consent to such use in advance.
Do not present goods or services as an imitation or replica of goods or services bearing a protected trade mark.
Note that compliance or non-compliance with statutory or industry codes, while providing guidance, will not in itself be conclusive as to the permissibility or otherwise of a comparative advertisement.
The jurisdictions surveyed have a wide range of specific consumer protection laws dealing with such matters as false, deceptive or misleading descriptions or statements, and misleading price indications or comparisons, many of which impose criminal penalties. Owners of websites through which transactions directed to consumers are carried out should be aware of the possible application of such laws, and take local legal advice if the degree of exposure in any particular jurisdiction is considered sufficient to warrant it.
Care must be taken if a sales promotion (which typically involves the offer of "money off", free extra volume or value) is to be conducted through a website, as there are wide variations in the treatment of such promotions under the laws of different jurisdictions.
In the UK, for example, promotions such as a "two for the price of one" offer are permitted, but they are prohibited in a number of countries including France and Germany, where making the supply of a free product conditional on the purchase of a "lead" product is not permitted. In the EU, however, a draft Regulation on sales promotions was published by the European Commission on 2 October 2001 and is still being reviewed and revised by the Council. Although the Regulation is not expected to come into force for some time, in its current form the Regulation would prohibit national restrictions on sales promotions except where justified on specific grounds such as public health or consumer protection.
Generally, lotteries and prize competitions which do not require the use of skill, and that require some form of contribution from entrants, are prohibited in all jurisdictions unless (in most jurisdictions) specific approval is obtained (the precise definitions of skill and contribution vary between jurisdictions).
For detailed consideration of the regulation of sales promotions, lotteries and prize competitions in France, Germany, Italy, the UK and the US, see Practice note, Sales promotions (www.practicallaw.com/A25063) in the PLC International Sales and Marketing Practice Manual (www.practicallaw.com/9-103-1807).
A number of jurisdictions have or are in the process of implementing legislation dealing with direct marketing by means of the despatch of large quantities of unsolicited e-mail, known as “spamming”, and there may be alternative or additional legal consequences in some jurisdictions. Spamming is discussed in Practice note, Protecting website content: attacks, Spamming (unsolicited e-mail) (www.practicallaw.com/A21228).
Most websites collect some personal information about individuals who access the sites by requiring user registration. In countries with data protection laws this information must be treated in accordance with the relevant rules, failing which specified persons (who are likely to include the website owner) may face criminal liability, as well as claims for compensation from individuals affected and a requirement to amend or delete certain data.
In the EU, data protection law is based on the EC Data Protection Directive (Council Regulation (EC) No 95/46 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (OJ 1995 L281/31)).
Outside the EU, some countries (such as Australia, Canada and the US) have introduced or are in the process of introducing privacy legislation to cover companies in the private sector, as well as public sector bodies already subject to legislation.
For detailed consideration of data protection laws, see Practice note, Data protection (www.practicallaw.com/A25225).
In a number of sectors, such as financial services, pharmaceuticals, food, alcohol and firearms, advertisers and suppliers must comply with specific regulatory regimes. In addition, special rules may apply to the advertising of tobacco products. In France, for example, tobacco advertising is prohibited unless specific conditions are met. A list of the sectors which are subject to specific regulations in each of the jurisdictions surveyed is set out in Country Question 6.
Certain professions, such as medicine, the law and accountancy, are subject to specific rules of conduct and codes of professional ethics.
In most jurisdictions, regulations or voluntary codes contain specific requirements relating to advertising or marketing targeted towards minors. In Brazil, France, Germany, Italy, Sweden and the UK, a minor is a person under 18, and some countries (such as the Canadian province of Quebec and the US) impose even more stringent requirements on materials targeted at minors under 13. In Sweden, although a minor is a person under 18, there is a general prohibition on direct marketing to under-16s which it is thought probably applies to marketing by e-mail. In Spain, a person under 18 is a minor, but he may cease to be a minor at 16 if he leaves home before reaching 18.
In all jurisdictions the regulations relating to advertising and marketing activities outlined above may be enforced through the courts or by the relevant regulatory bodies.
Often, enforcement action may be instigated by a competitor, either by means of a private action in the courts or by complaining to the relevant regulatory body dealing with, for example, unfair trade practices or advertising and promotional initiatives.
In the case of voluntary codes, decisions of bodies such as the Advertising Standards Authority in the UK, which deals with complaints about advertising or marketing initiatives, are well publicised, for example by means of publication on the relevant body’s website. Although not legally binding, most advertisers comply with such decisions in practice, as non-compliance usually leads to adverse publicity.
Specific statutory bodies or officials may be responsible for enforcing consumer protection legislation. Examples are the General Directorate for Fair Trading, Consumer Affairs and Fraud in France, the Consumer Ombudsman in Sweden and the Office of Fair Trading in the UK.
Lotteries and prize competitions
Generally, lotteries and prize competitions which do not require the use of skill, and that require some form of contribution from entrants, are prohibited unless specific approval is obtained from the relevant body in the jurisdiction concerned. In Australia, for example, permits to run a competition will need to be obtained from every state and territory in which the competition is run, and permits for lotteries will generally be available from the relevant gaming authority in each jurisdiction. In the UK, lotteries must be approved by the Gaming Board of Great Britain (in future, following adoption of the Gambling Bill, licensing will be by the new Gaming Commission), although prosecutions for illegal lotteries will be brought by the Home Office.
The question of whether a particular country’s laws will be applied to content on a website accessible in that country will depend on that country’s local laws for determining:
The law which applies in a particular situation.
The circumstances in which that country’s courts have jurisdiction to hear legal proceedings.
In countries with separate bodies of federal and state laws, such as Australia, Canada and the US, it is necessary to consider the additional question as to whether federal or state laws apply.
The relevant rules for determining questions of governing law and jurisdiction vary from one jurisdiction to another (although as between European countries a degree of uniformity has been introduced by the Rome Convention in the case of governing law, and the Brussels Regulation and the Brussels and Lugano Conventions in the case of jurisdictional issues). However, in the countries surveyed it is clear that application of the laws of one country is not necessarily dependent upon the physical location in that country of a website’s servers, nor will the laws of a country necessarily be prevented from applying because a website is targeted to an audience located in another country or countries. For example, the fact that a website’s servers are hosted in Australia does not mean that liability for content on the website cannot be incurred under German law, and the fact that the content of a website is intended for an audience in Australia does not necessarily mean that the laws of other countries will not apply if the site can be accessed by audiences in those other countries. A website sales promotion intended for Australian consumers could, for example, be prohibited under German laws if it was accessible to consumers in Germany.
These issues must be considered individually in relation to the specific type of liability under consideration.
Where the Brussels Regulation or the Brussels or Lugano Convention applies, a dispute in relation to a contract will generally be determined in the courts of the country where the defendant is domiciled (although there are special rules for consumer contracts). It should be noted that the Brussels Regulation took effect on 1 March 2002 as regards all EU member states except Denmark, so that the Brussels Convention continues to apply as between Denmark and the other EU member states. Where the Regulation and the Conventions do not apply, the local laws relating to jurisdiction over contracts must be applied. The rules dealing with jurisdiction in relation to contractual disputes are discussed in Practice note, Making contracts online: Choice of governing law and jurisdiction over disputes (www.practicallaw.com/A25570).
As to the laws that will be applied by the court which has jurisdiction, it should be noted that, even though the parties may have chosen the law of a particular country to govern their contract, some countries (for example, France and Italy) impose their own mandatory laws to protect their citizens regardless of (and in addition to) such choice. For example, a Dutch company conducting business over the internet with a customer in France may find that its contractual relationship with the customer is also subject to mandatory provisions of French consumer protection laws of which it was unaware, even if the contract expressly states that Dutch law applies. In many countries a choice of foreign governing law will not be applied if it is contrary to the public policy of the country concerned. The rules dealing with governing law in relation to contractual disputes are discussed in Practice note, Making contracts online: Choice of governing law and jurisdiction over disputes (www.practicallaw.com/A25570).
In the case of torts, such as defamation (other than where defamation constitutes a criminal offence) or negligent misstatement, the test for jurisdiction over a foreign website owner varies and generally depends on the local laws of the country where the injured party resides. Often these local laws provide that an injured party may sue a defendant in the jurisdiction where the damage was suffered. In cases where the Brussels Regulation or the Brussels or Lugano Convention applies, a website owner may be sued in a court other than in the place of its domicile only in certain circumstances, for example in the courts of the place where the harmful event occurred. Additionally, under the Brussels Regulation, European consumers can bring claims against website owners with a branch or company resident in the EU in the home courts of the consumer, irrespective of whether the website provider is physically located in that consumer’s country provided the website was “directed at” consumers in the consumer’s country.
The difficult jurisdictional questions that can arise in an online environment are illustrated by the Australian case of Gutnick v Dow Jones (1 August 2001). An online magazine published by the US Wall Street Journal, owned by Dow Jones & Co, contained comments about an Australian businessman, Joseph Gutnick, which he claimed were defamatory. When Mr Gutnick sued for defamation in Australia’s Supreme Court of Victoria, Dow Jones argued that the court had no jurisdiction on the ground that publication of online materials occurs when the relevant material is uploaded and that, as the website servers for the magazine were located in New Jersey in the US, the courts of that state should have jurisdiction. Mr Gutnick argued that publication occurs when online materials are downloaded from a website. As he had downloaded the article in Victoria, those courts should have jurisdiction. The court held that the article was published when it was downloaded in Victoria, Australia and that the Supreme Court of Victoria therefore had jurisdiction, although the decision is under appeal. If the principle underlying this decision were given widespread application, the publisher of a defamatory online article could face claims for damages in every jurisdiction in which the article is downloaded.
The rules dealing with governing law and jurisdiction in relation to torts are discussed in Practice note, Enforcement of rights (www.practicallaw.com/A24250).
In the case of criminal offences, the general rule in all jurisdictions is that a person accused of committing an offence must either have done so in the relevant country or there must have been a “real and substantive link” with that country.
In Australia, for example, the application of criminal law to offences committed outside the jurisdiction is limited (as it is in most other jurisdictions). However, in a recent case in the state of Victoria, a decision that an Australian man who had been “cyber-stalking” an actress in Canada was not guilty under state criminal law because the effects of his crime had been felt outside the jurisdiction was reversed by the Supreme Court of Victoria on appeal (R v Vose (1999) VSCA 200). The court held that the legislation operated extraterritorially and extended to methods of communication, such as e-mail, where the effects might be outside the jurisdiction. Canadian authorities had not prosecuted the case because the defendant was resident in Australia and therefore outside Canadian jurisdiction.
In France, the Yahoo! case (discussed in detail above under Racially inflammatory material) illustrates the readiness of the French courts to apply French criminal law to a US-based website operated by a US company which was accessible in France, even though the site was not specifically targeted at France.
The tests for the application of non-criminal regulatory laws vary from one jurisdiction to another. The starting point in determining the application of such laws is any express provisions within the legislation or regulation regarding its application outside the country.
In Brazil, for example, the application of local law will generally depend on whether the content is accessible to users who are connected from a server located in Brazilian territory, or causes effects in Brazil. If the website is in Portuguese under a Brazilian country-code top level domain name (.br), or is directed at Brazilian users, Brazilian law is likely to apply.
In Canada, under the Consumer Protection Acts of Quebec, Alberta and Saskatchewan, any distance contract with a consumer resident in one of those provinces is deemed to be entered into at the consumer’s address. In the other provinces and territories, Canadian courts are likely to claim jurisdiction over any disputes involving Canadian consumers.
As mentioned above, in France and Italy there are mandatory laws (covering matters such as consumer contracts and employment agreements) which apply even where a contract is governed by the law of another country. In the UK, regulations that prevent the inclusion of unfair terms in consumer contracts are expressed to apply to any contract which has a “close connection” to an EU member state, notwithstanding that the governing law of the contract may be that of a non-member state.
The fact that a website is in the English language does not mean that the application of laws of non-English speaking countries can be avoided. In Germany, for example, internet users are assumed to understand English, on the basis that it is a global language, and an English-language website will therefore need to comply with any applicable German laws.
There are various methods by which a website owner may restrict its liability for content on the website or transactions carried out through the site:
The use of disclaimers, that is, contractual terms or notices which exclude or restrict the liability of the website owner in specified circumstances.
Technical measures to restrict access to the website from residents of jurisdictions where there is perceived to be a high risk of infringing local laws.
Obtaining specific insurance against the risks associated with operating a website or providing e-commerce services.
Taking account of any legal defences or exceptions that may be available in the case of specific liabilities.
Each of these is considered below.
The primary method by which a website owner may seek to exclude or restrict liability for content on the website, or in respect of transactions carried out through the website, is the inclusion of a suitable disclaimer, either in the form of a separate notice on the site or as part of a set of website terms and conditions. A disclaimer can also be used to notify visitors to the site that certain promotions or goods or services are not available to them, for example because they are resident in a different jurisdiction from that of the website owner and the promotion or the supply of goods or services might infringe the rules of other jurisdictions.
In most of the jurisdictions surveyed, disclaimers of liability for website content are enforceable provided they comply with certain rules (see below). Disclaimers of liability that apply to consumers are subject to more stringent requirements than those which apply to businesses.
The following general guidelines should be borne in mind when drafting disclaimers:
The wording of the disclaimer must be clear. Any ambiguity will be interpreted against the interests of the party seeking to rely on the disclaimer.
The disclaimer must be incorporated in the contract between the website owner and the user. This means that it must be clearly brought to the attention of the user. More prominence is required to be given to disclaimers than ordinary contract terms, so the disclaimer should be displayed prominently in the form of a notice on the website or set out in a prominent position in the website terms and conditions - this is often achieved by using capital letters, bold print or other distinctive writing. From a legal perspective, the most effective mechanism for ensuring that a disclaimer is binding is to set up the website so that each visitor must scroll through the disclaimer (or the terms and conditions in which it is contained), and then click on an “Accept” button before the visitor is permitted to proceed further (this is often referred to as a “click-wrap” agreement). In practice, because this mechanism can impair the user-friendliness of the website, many website owners prefer to incorporate a clearly visible hypertext link to the disclaimer (or the terms and conditions in which it is contained), accompanied by a button which the visitor can click to signify that he has read the disclaimer or terms and conditions, even if in fact he has not (this has been referred to by the US courts as a “browse-wrap” agreement). Although more commercially attractive, this device carries a greater risk that the disclaimer will not be binding on the visitor. (See Practice note, Making contracts online: Incorporating express terms (www.practicallaw.com/A25570).)
An example of a form of disclaimer governed by English law is set out in the box, Specimen form of disclaimer. This disclaimer would also be effective in the other jurisdictions surveyed, subject to the comments below in relation to specific jurisdictions (and to amending the statutory references as necessary). In Sweden, Brazil and France, however, it should be noted that such disclaimers are generally not enforceable against consumers.
This site is for use only by persons who access it from within the UK. Goods available from this site are available only to residents of (or companies incorporated in) the UK. This disclaimer covers use of the site and any promotional or other materials or information contained on it. Disclaimers and limitations and exclusions of liability, which relate to goods or services purchased or made available through this site are contained in the relevant terms and conditions [link] governing such purchases.
Any goods displayed or provided on this website by [COMPANY] are done so on an “AS IS” and an “IF AVAILABLE” basis and [COMPANY] expressly disclaims and excludes all warranties, conditions, representations and terms, whether express or implied by statute, common law or otherwise, with respect to this website or the information, content, materials, goods or services included in this site including, without limitation, as to the accuracy or completeness of the website, as to whether it is up to date and as to the condition of any goods or services displayed or provided.
[COMPANY] reserves the right, at its sole discretion, to amend or withdraw any goods or services offered on this website.
[COMPANY] hereby [excludes] all liability for any claim, loss, demands or damages of any kind whatsoever (whether such claims, loss, demands or damages were foreseeable, known or otherwise) arising out of or in connection with the use of this website or the information, content or materials included on this site, including without limitation, indirect or consequential loss or damage; loss of actual or anticipated profits (including loss of profits on contracts); loss of revenue; loss of business; loss of opportunity; loss of anticipated savings; loss of goodwill; loss of reputation; loss of damage to or corruption of data; loss of use of money or otherwise, and whether or not advised of the possibility of such claim, loss demand or damages and whether arising in tort (including negligence), contract or otherwise. [This statement does not affect your statutory rights.]
Nothing in this website disclaimer excludes or limits [COMPANY’s] liability for: (a) death or personal injury caused by [COMPANY’s] negligence (or that of its employees, agents or directors); or (b) the tort of deceit; [or (c) any breach of the obligations implied by Sale of Goods Act 1979 or Supply of Goods and Services Act 1982 (including those relating to the title, fitness for purpose and satisfactory quality of goods);] or (d) any liability which may not be limited or excluded by law.
The use of this website is governed by English law and you and [COMPANY] irrevocably submit to the non-exclusive jurisdiction of the English courts.
It is possible to restrict liability to a limited extent by using technical measures in order to restrict access to a website (or the ability to purchase goods or services on a website) by users in particular jurisdictions, so minimising the risk of incurring liabilities in those jurisdictions.
The technical means by which website access may be restricted in this way were considered in the Yahoo! case referred to above (see Racially inflammatory material), which involved the sale of Nazi memorabilia on Yahoo!’s US website. An action was brought against Yahoo! in France for breach of French anti-racism legislation, despite the fact that, following an earlier court ruling, the offending pages had already been removed from Yahoo!’s French-language website. The judge ordered Yahoo! to explore technical means of blocking access to its US sites by users in France. In November 2000, the experts reported that such technical means did exist and the judge therefore ordered Yahoo! to put in place a filtering system that would block access by 24 February 2001. Yahoo! did not do so, but decided in any event to remove the material from all its sites. Yahoo! filed a counter-suit in a California court on the grounds that the French judgment could not be enforced in the US as the website was subject to US law and therefore protected by the First Amendment to the US Constitution relating to free speech. The court ruled in favour of Yahoo!, although an appeal held that the court did not have jurisdiction and overturned the ruling.
Although none is completely effective, possible methods of restricting access or availability include the following:
Requiring users to indicate the country in which they are located before they are allowed access to a website, or parts of the site.
Requiring users to register their residential addresses. This approach is more effective when users order goods or services that must be delivered to or performed at a particular address, or where the website owner simply requires the information as a pre-condition to completing the transaction. Website operators should have policies in place which allow them to refuse to process orders from users in certain countries. For example, where consumer protection legislation in the country in which a consumer is resident requires more warranties or guarantees than the supplier is prepared to give, the supplier may wish to prevent that country’s consumers from purchasing its goods, and may expressly do so on its website. This avoids the unnecessary administration of having to review all orders to check that the consumer is resident in a country to which the supplier is willing to supply its goods.
Using software which enables websites to identify the geographical location of users and hits received by the website (for example, Infosplit’s NetLocator product). This method is not foolproof, however, as not all website or e-mail addresses will be associated with a particular country.
Although specific insurance for risks associated with operating a website or providing e-commerce services is widely available in the US, such insurance is still being developed and extended in the EU and other countries. E-commerce-related disputes may well fall outside the scope of traditional business insurance cover. Although certain classes of existing policies (for example, property, business interruption and fidelity policies) may give partial or full coverage, the position is not straightforward. In view of the potentially large scale of the losses or exposure that could occur as a result of liabilities incurred through a website, existing coverage should be reviewed and, if necessary, specific cover sought. Those insurance companies which do offer specific "cyber-liability" policies may cover risks such as infringement of third party IP rights, breach of privacy or data protection legislation, defamation and inadvertent or negligent transmission of computer viruses.
When building or operating a website, it is important to bear in mind any legal defences or exceptions that may be available in the case of specific liabilities, and clearly these will also be relevant when dealing with any claims that do in fact arise. Certain specific defences and exceptions have been considered above when discussing the specific liabilities to which they relate, but examples are as follows:
Contract. Is there a valid contract? In the UK and other common law jurisdictions, there must be offer, acceptance and consideration for a contract to be legally effective. In addition, there must have been no mistake, duress, undue influence or public policy reason which would invalidate the contract.
Defamation. Generally, a statement will not be defamatory if it can be proved to be true. Are other defences available, such as fair comment on a matter of public interest or innocent publication? (The latter will probably only be available to ISPs or other web-hosting companies who have no knowledge of the material that is published.)
Criminal. Are the elements of any possible criminal offence present? Are any statutory defences available, for example, those relating to innocent publication?
Advertising and marketing. Have specific regulatory requirements been infringed? Are any specific defences available, for example those relating to “honest practices” in the context of comparative advertising?
Carry out due diligence, both when setting up the website and on an ongoing basis. What are the areas of law or regulation that will or may in the future affect your site? Consider what steps you need to take as a result, for example modifying content, including disclaimers or restricting access. Ensure that regulatory requirements (for example, regarding the provision of company or business information) are satisfied.
Monitor legal developments closely to ensure that website material is up-to-date, effective and compliant. Watch competitors’ sites to see how they are dealing with new developments. Consider seriously any complaints or investigations.
Consider any special audiences to whom the website is addressed and tailor it accordingly, for example special requirements may apply in the case of websites directed to children.
Consider whether access from certain countries is to be restricted. If so, ensure that appropriate statements to this effect appear on the website and consider whether any technical steps are appropriate in order to restrict access from those countries.
Ensure that the website does not give rise to offers by the company that automatically become contractually binding upon acceptance by users. Instead, design the website as an "invitation to treat" (like an ordinary shop window), where users make offers to purchase. Include a clear and prominent statement that orders are subject to availability and that the company will not be bound unless it formally accepts an order and informs the user that it has done so.
Incorporate suitable disclaimers (taking account of applicable legal controls on the exclusion or limitation of liability) and display them prominently in order to ensure that they are effectively incorporated into any contract.
Try to ensure that any relevant legal defences or exceptions will be applicable.
In countries with data protection or privacy laws (or in order to conform with standards of best practice), include an appropriate statement on the website as to the company’s policy on the use of personal data gathered through the website, and ensure that compliance procedures are in place.
Conduct frequent virus checks.
Establish a customer hotline and complaints procedure so that issues can be dealt with quickly and efficiently, to avoid formal, legal disputes.
In practice, a party seeking redress in relation to material which, for example, is alleged to be defamatory or to constitute an infringement of IP rights, will often approach or initiate proceedings against the ISP through which the material has been made available, rather than the person from whom the material originates. It may be argued that the ISP is liable as the publisher of an allegedly defamatory statement or because it has infringed IP rights by reproducing the relevant material on its servers. The ISP, however, is unlikely to be aware of the offending nature of the material unless it has a policy of monitoring content.
ISPs therefore need to consider:
The extent of their legal liabilities in such circumstances, including the availability of possible defences based on "innocent publication".
Restricting or excluding liability in their contracts with subscribers.
In most jurisdictions where the question of the liability of ISPs has arisen, it is clear that a failure to remove material after being advised of its offending or infringing nature may well prevent an ISP from relying on a defence that might otherwise be available.
Many of the cases relating to the liability of ISPs involve defamation law, but similar principles may be applied in other areas where liability is based on actual knowledge or there are specific defences based on lack of knowledge, including some criminal offences and certain types of infringement of IP rights.
In Canada, for example, it appears that an ISP will need to take reasonable steps to remove harmful content of which it has been made aware in order to be able to rely on a defence of innocent dissemination (insofar as the defence is recognised at common law). The liability of an ISP is likely to depend on the extent of the ISP’s knowledge of the content of statements transmitted on its system and any action it has taken to prevent such communications.
In France, a company which provides website hosting facilities (as opposed to an ISP which merely provides access to websites) can be liable in tort or commit a criminal offence if unlawful content (including but not limited to defamatory material) appears on a website hosted by it and, following notification by a judicial authority, it fails to act promptly in order to prevent public access to such content (Act of 1 August 2000). This provision must be read together with Chapter II of Title II of the draft Act on the information society, which provides that, while ISPs and providers of website hosting services have no general obligation to supervise the information they transmit or store, nor actively to seek facts or circumstances revealing unlawful activities, they must promptly inform the competent public authorities of the unlawful activities or information they become aware of in the course of their businesses.
Under the French Criminal Code, it is a defence to certain offences involving the circulation of obscene material to show that a person is unaware of the obscene content (Articles 282, 286 et seq., French Criminal Code). An ISP or other provider of web hosting facilities may be able to rely on this if, upon notification by a judicial authority, it acts promptly to prevent access to the unlawful content. This was illustrated in a case in which Bertrand Delanoë sued the search engine operator, Alta Vista, for referring to an erotic website at the URL address reproducing M. Delanoë’s name, and Alta Vista was able to show to the satisfaction of the court that it had acted promptly to stop referring to that website (Bertrand Delanoë v Alta Vista and others, Paris High Court, 31 July 2000).
In the UK, at a preliminary hearing of a case that was subsequently settled out of court, the judge held that the ISP, Demon Internet, was a publisher and could therefore be liable for defamatory material that had been posted on a message board to which it provided access (Godfrey v Demon Internet Ltd  4 All ER 342). The material had been posted by an unknown person in the US and, although it purported to have been written by the claimant, Professor Godfrey, it was in fact a forgery and was defamatory of him. Despite Professor Godfrey’s requests for the removal of the material, it was carried on Demon’s servers for several weeks. Demon argued that it had innocently disseminated the material, relying on the defence under section 1 of the Defamation Act 1996 which is available if a person who is not the “author, editor or publisher” of material can show that he took reasonable care in relation to its publication and did not know or have reason to believe that what he did caused or contributed to the publication of defamatory matter. However, the judge rejected this as Professor Godfrey had notified Demon of the defamatory nature of the material and Demon did not remove it for several weeks.
In the US, an ISP may not disclose the content of any “communication” to any party other than pursuant to a government subpoena (Electronic Communications Privacy Act (ECPA), 18 U.S.C. § 2510 et seq., at § 2703). However, less protection is afforded to the identity of the subscriber sending a specific message. Under the ECPA, an ISP “may disclose a record or other information pertaining to a subscriber to or customer of such service (not including the contents of communications) to any person other than a governmental entity”. A government entity may only obtain such information as name, telephone number and so on by issuing a subpoena. There have been numerous so-called “John Doe” cases involving the disclosure by ISPs of the names of subscribers accused, generally, of posting defamatory statements on internet bulletin boards (see, for example, Lunney v Prodigy Service Co. 683 N.Y.S.2d 557 (N.Y.App.Div. 1998)). These cases establish that the ECPA, and general common law standards, will generally only impose liability for such disclosures on an ISP where it acted with “knowing and intentional” malice (or a similar state of mind). Many ISPs avoid such issues regarding the state of their knowledge by complying with discovery requests to reveal subscriber information as a matter of course and without prior notice to the subscriber.
In the EU, the E-Commerce Directive, which was due to be implemented in member states by 16 January 2002, contains important provisions relating to the liability of ISPs (Directive 2000/31/EC on certain legal aspects of information society services, in particular electronic commerce, in the internal market (OJ 2000 L178/1)). These include a requirement on member states to ensure that ISPs will not be liable for information stored at a user’s request where the ISP has no actual knowledge of illegal activity or information, or where the ISP acts quickly to remove or disable access to the information once it becomes aware of it (Article 14). Although the precise ways in which this will be implemented by member states remains to be seen, this exception will clearly be crucial to ISPs in avoiding liability for defamatory or other illegal material held on their servers without their knowledge. In relation to ISP services which consist merely of transmitting the information of others in a communications network (as opposed to content-hosting services), the E-Commerce Directive requires member states to ensure that the provider of such services is not liable for the information transmitted provided that it does not initiate the transmission, select the recipient of the transmission or select or modify the information contained in the transmission. This is known as the "mere conduit" exception (Article 12). Further, the Directive requires that member states must not impose obligations on providers of transmission, caching or hosting services to monitor information stored or transmitted, or actively to seek out illegal activities (Article 15).
ISPs may achieve some degree of protection against liabilities in respect of infringing or illegal content by incorporating appropriate provisions in contracts with customers, including:
Indemnities against losses incurred as a result of third party actions in respect of content provided by customers (although these will only be as good as the ability of the indemnifying party, who may be a private individual, to meet any claim under the indemnity).
The right to take appropriate measures (such as the modification or deletion of offending material, and the closure of websites or e-mail accounts) once they become aware that defamatory, infringing or illegal materials have been posted.
Ilana Saltzman is a partner and Sara Dethridge and Rebecca Lang are associates in the London office of Baker & McKenzie.