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Survey of Global Internet Jurisdiction

The American Bar Association/International Chamber of Commerce (ABA/ICC) recently released a survey [PDF] on global Internet jurisdiction. The survey, co-chaired by Professor Michael Geist, involved nearly 300 companies in 45 different countries.  It found that U.S. companies were far more concerned and pessimistic about Internet jurisdiction risk than European and Asian companies. The study has also found that an “Internet jurisdiction risk toolkit” is emerging where companies target low risk jurisdictions and take steps to avoid doing business in perceived high risk jurisdictions.

In 2003, the American Bar Association’s Business Law Section, Cyberspace law Committee joined forces with the International Chamber of Commerce, a global leader on Internet jurisdiction policy, and the Internet Law and Policy Forum, a global consortium of technology companies, in crafting a detailed survey to examine the practical effects of Internet jurisdiction risks on companies worldwide.

The survey was translated into French, Spanish, Arabic, Polish, German, Korean, and Chinese, and distributed in mid-August 2003 by ICC national committees and by country correspondents identified by the ABA. Following an extensive effort, the survey was ultimately distributed in 45 countries to hundreds of companies. The survey distribution was designed to encompass small, medium, and multinational companies and cut across all business sectors. The Committee closed the survey in November 2003 with responses from 277 organizations.

The survey’s key findings are as follows:

A. Companies from North American responding to the survey were far more concerned with Internet jurisdiction issues than their counterparts in Europe and Asia. By a ratio of six to one, U.S. companies said that the Internet jurisdiction issue has become worse over the past two years and four of every five companies say they feel that matters will worsen by 2005. In contrast, responding Asian and European companies think that the risk associated with the issue has improved since 2001 and will improve further by 2005.

B. The majority of responding companies who think that jurisdictional issues are an increasing problem attribute the increase to the emergence of the Internet and e-commerce. C. When companies were asked which jurisdictional issues posed the greatest concern, first on the list was litigation risk, which was commonly cited by companies worldwide and by all industrial sectors as their primary concern. This suggests the risk of getting hauled into court is the biggest fear of companies operating online, exceeding concerns associated with conflicting legal frameworks. Other notable concerns included industrial and consumer regulations, ecommerce regulation, taxation, and privacy.

D. Of those sectors polled by the survey, the media sector was clearly the most affected by Internet jurisdiction. For example, more than half of media company respondents indicated that they have adjusted their business operations in response to Internet jurisdiction risk. E. Some companies, particularly those situated in North America, seek to influence jurisdictional outcomes by using both technological and legal approaches to mitigate risk. The most common methods to achieve this include the insertion of legal terms on websites, the use of a local server, the use of a national (country-code) top domain name, or the posting of local content.

F. North American companies appear far more likely to attempt to identify the geographic location of their users. Sixty-nine percent of North American respondents indicated that they employed techniques to identify user location, compared with 41 percent of Asian companies and 29 percent of European companies.

G. It appears that companies are increasingly refraining from interacting with certain “higher risk” jurisdictions citing fears of liability in the target jurisdiction, liability in the home jurisdiction, and user fraud as the primary reasons for doing so. They attempt to achieve this by employing technical measures to block access to their site or by establishing registration requirements. The use of geo-locational technologies, which purport to identify the location of Internet users, is still relatively rare.

While the final results cover a broad cross-section of small, medium and large sized business engaged in various business sectors in every geographic region, it is important to caution that the results of the survey have not been tested for statistical significance. Though the sample size of 277 companies might be viewed as respectable, the survey was distributed to an indeterminate number of companies, yielding an unknown response rate.

By Michael Geist, Chair of Internet and E-commerce Law

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