The author of this post is Zhen Chen, PhD researcher of Private International Law at the University of Groningen.
Consumer contracts are subject to protective choice of law rules both in China and in the EU.
Under Article 6(1) of the Rome I Regulation, such consumer protective rules apply under the condition that the business pursues commercial or professional activities in, or directs such activities to the consumer’s home country. The same targeting test is adopted in Article 17(1)(c) of the on jurisdiction rules over consumer contracts.
By contrast, in Chinese private international law, there is no specific jurisdiction rule over consumer contracts, consumers are subject to general jurisdiction rules. However, consumers are protected with favorable choice of law rules in China. Under Article 42 of the Chinese Conflicts Act, the law of the consumer’s habitual residence applies unless the business operator does not engage in relevant commercial or soliciting activities in the consumer’s home country.
The European approach focuses on the positive criterion by examining what constitutes a targeting activity (targeting test), whereas the Chinese approach puts more weight on the negative criterion of not applying consumer choice of law rules by examining what does not constitute a targeting activity (dis-targeting test).
Criteria of Targeting and Dis-targeting Tests
The targeting test is crucial to determining whether a business is an active business, whilst the dis-targeting test allows to determine whether a business is a passive business. From the consumer’s perspective, the targeting test ensures that only passive consumers targeted by the active business is protected. By contrast, the dis-targeting test makes sure that active consumers not targeted by passive businesses are not protected by favorable consumer choice of law rule. The targeting and dis-targeting tests are two sides of a coin. Essentially, the targeting and dis-targeting tests are examined to decide whether a business’ commercial activities have a close connection with the consumer’s country of habitual residence. In the context of globalization and digitalization, it is insufficient to rely on merely targeting test or dis-targeting test in order to protect electronic consumers. Rather, the targeting test in Article 6(1) of the Rome I Regulation should be supplemented by dis-targeting test, while the dis-targeting test in Article 42 of the Chinese Conflicts Act should be complemented by the targeting test.
A non-exhaustive list of indicative factors that may be relevant to the targeting test and dis-targeting test is provided by the CJEU in judgment (paras 83, 93). It does not mean that all criteria have to be fulfilled nor each factor is decisive or conditional. The absence of one factor can be substituted by another factor. A business should have expected to sue and being sued in a State it directs to unless it expressly declares that it will not conclude contracts with consumers domiciled in that State (Pammer and Hotel Alpenhof, EU:C:2010:273, opinion of advocate general, para. 25).
For instance, in (paras 10-12), a German consumer who was looking for a second-hand motor vehicle learned from his acquaintances, instead of the Internet site, of a French business and went to the business premises France. The German consumer concluded a written sale contract with the French business at the premises in France. Although the business claimed that the consumer was an active consumer and thus should be deprived of the protection of consumer jurisdiction rules, the CJEU held that the geological factor acts as a strong evidence to indicate that the French business has not taken measures to dis-target German consumers living near the borders. The risk of being sued in the courts of the neighbouring State does not seem to be an excessive burden which might act as a disincentive to the defendant’s commercial activity (para. 37). Rather, the trader or service provider must be fully aware that a significant proportion, or even the majority, of his clientele will have their domicile in the neighbouring State. Since the French trader did not take any measures to exclude consumers from Germany, the exercise of jurisdiction by German courts should be entirely foreseeable for the French trader. This means that even of the consumer is an active consumer, the business should be subject to consumer jurisdiction and choice of law rules if the business is an active business.
Given that an indicative factor may act as a facilitating or inhibiting factor in different circumstances, it is not accurate to state that ‘the language or currency which a website uses does not constitute a relevant factor’ in Recital 24 of the Rome I Regulation. For instance, the Washington-based American e-commerce company Amazon has a country-neutral domain name ‘amazon.com’ and many country-specific domain names, such as ‘amazon.nl’, ‘amazon.it’, ‘amazon.de’ and ‘amazon.fr’. These domain names, together with the languages used on the website (Dutch, Italian, German, French), indicate that Amazon has directed its commercial activities to European countries such as the Netherlands, Italy, Germany and France. If an Italian consumer buys products via any of these websites, the targeting test is fulfilled. In this context, the commercial activities of Amazon have directed to several counties including the consumer’s home country, and it is not necessary that the website targets only or specifically to the consumer’s home country (GP Calliess and M Renner, Rome Regulations, Wolters Kluwer, 2020, 124, para.51). Therefore, the inaccurate statement in Recital 24 of the Rome I Regulation needs to be rephrased, since the language or currency may act as a relevant factor in certain circumstances.
Geo-location and Geo-blocking Technologies
Moreover, with the development of the geo-location and geo-blocking technologies, the weight has shifted partly from the targeting test to the dis-targeting test. Geolocation technologies allow the identification of the geographical location of a user accessing the Internet, whereas geo-blocking technologies disallow a user’s access to certain internet applications. Such technologies re-territorialize the internet by creating border lines in global internet applications such as websites, social media platforms, search engines and other applications(J Hörnle, Internet Jurisdiction Law and Practice, OUP, 2021, 448). Although these technologies represent a threat to the Internet’s borderlessness, it also means that it is possible for a business advertising via websites to restrict its products and services to consumers from particular countries. Nevertheless, if the consumer misrepresent himself or herself about the domicile deliberately, and the business is in good faith, jurisdiction and choice of law rules over consumer contracts in Articles 17-19 of the Brussels I bis Regulation and in Article 6 of the Rome I Regulation cannot be invoked to protect the consumer. It is noticeable that traveling in cyberspace, or cyber-travel, allows Internet users to view the Internet as if they were in a location other than where they are physically present. Many cyber-travel tools for the evasion of geo-location have become sufficiently user-friendly to allow even average Internet users to utilize them(M Trimble, ‘The Future of Cyber-travel: Legal Implications of the Evasion of Geolocation’, 22 Fordham Intellectual Property, Media and Entertainment Law Journal 2012, 569.). If a consumer domiciled in one country claims living in another country, and deliberately covers its whereabouts by using anti-geolocation tools, in particular VPNs, or by giving a false address, such proactive consumers should not be protected by the favorable jurisdiction and choice of law rules, as the protection of the businesses’ reasonable expectation should also be taken into consideration.
To sum up, the dis-targeting test focuses on whether a business has taken active measures to dis-target consumers from a particular country and avoid concluding contracts with unsolicited or unintended consumers from that country. This means that instead of asking the difficult question of whether a business has targeted a particular jurisdiction, it may rather examine whether the business has taken steps to dis-target consumers (D Svantesson, ‘Time for the Law to Take Internet Geolocation Technologies Seriously’, 8 JPIL 2012, 485). The adoption of a combination of the targeting test and dis-targeting test may enhance legal certainty, while allowing space for legal flexibility to adapt to fast-changing technology and marketing strategies.
For a more elaborate discussion of the criteria employed in the framework of the targeting and dis-targeting tests, see ‘Internet, Consumer Contracts and Private International Law: What Constitutes Targeting Activity Test?’, by the author of this post, published on Information and Communications Technology Law, freely accessible here.