Another step towards Europe

The Brussels Regulation will affect all companies that trade across international boundaries. Charlotte Walker-Osborne spells out...

The Brussels Regulation will affect all companies that trade across international boundaries. Charlotte Walker-Osborne spells out what you need to know

From 1 March EU consumers who buy goods or services over the Internet will have the right to insist that disputes with retailers are heard in their home country, rather than that of the retailer. Organisations wishing to bring proceedings against an EU consumer will have to do so in the consumer's own country.

The changes result from the Brussels Regulation, which updates the 1968 Brussels Convention and will apply in all EU member states except Denmark.

The regulation widens the potential for consumers to sue businesses in their own country, regardless of any jurisdiction provisions in your agreements with them. Consumers can bring proceedings in their own country when companies are considered to have pursued commercial or professional activities in that country or by any means "directed" activities at that country.

There is clear potential to catch certain Internet, digital television or mobile telephone activities.Under previous law there must have been a contract concluded in the consumer's own country.

A European Commission memorandum explains that activities are considered to be "directed" at a foreign country when a Web site upon which contracts can be made is "accessible". Alarmingly for businesses, this could apply to most sites.

But the European Council and the European Commission have issued a joint statement to the effect that if an Internet site is accessible this does not automatically mean that consumers can sue in their own country - the site must "encourage the concluding of a contract at a distance". However, the situation remains unclear because it fails to clarify the difference between "directing" and "encouraging".

A key concern is that the regulation may cover Web sites that a foreign consumer has accessed, regardless of whether the business specifically targeted that country.

While you can try to restrict access to your Internet retail activity by setting out which countries your business agrees to sell to, or by technical means (such as requiring the input of valid UK postcodes), it is unclear whether this would avoid legal liability. Such practices may also breach EC competition rules by re-introducing national barriers to trading.

It has been argued that the regulation is heavily weighted in favour of the consumer, and some claim it will stifle e-commerce, push up legal costs for businesses and discourage smaller companies from trading online. On the other hand, improved consumer confidence may increase demand for purchase of services and goods online.

Figures show that few consumers exercise their existing rights to sue companies outside the UK under UK law, so it is possible that take-up of the new rights will be limited.
While it is difficult to estimate how much impact the regulation will have on UK firms that are active in Europe, this is clearly a good time to review terms and conditions of trade, perhaps setting up mediation schemes to resolve disputes without recourse to the courts.

What you should do before 1 March
  • Evaluate foreign sales; identify which countries risk unfavourable jurisdiction rulings under the regulation and whether the costs would be significant

  • Review your terms, conditions and business practices, check whether they need to be amended

  • If most or all of your business will be conducted within the UK, consider stating on your Web site that orders will only be accepted from within the UK

  • Spell out internal dispute resolution procedures and arbitration services to be used before a court action

  • If a significant part of your business is with consumers in particular European countries consider setting up deals with appropriate professionals in those countries.

Charlotte Walker-Osborne is a lawyer at Eversheds

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