[Home] [Databases] [WorldLII] [Search] [Feedback] New Zealand Law Commission

[Database Search] [Name Search] [Previous] [Next] [Download] [Help]

14 Conflict of laws

271 CONFLICT OF LAWS (or private international law) is the body of law concerned with the special issues that arise where dealings between parties, or disputes, have connections with more than one country. New Zealand conflict of laws rules address the four broad issues that arise where a dispute involves a foreign element:⁴⁰⁵

• whether the New Zealand court can exercise jurisdiction to hear the dispute;
• whether the New Zealand court will exercise jurisdiction, or will decline to do so and leave the dispute to be resolved in the courts of another country;
• by reference to which country’s laws the various issues in the dispute will be resolved – this is referred to as the question of “choice of law”; and
• whether a foreign judgment will be enforced in New Zealand, or recognised by the New Zealand courts as determinative of a dispute or of some issues in a dispute.

272 As explained in ECom 1, each country has its own conflict of laws rules. There are significant differences between New Zealand’s conflict of laws rules and those of many other countries. Difficult practical problems arise where differences in conflict of laws rules result in inconsistent answers being given to the issues identified above. Indeed, even where countries have identical conflict of laws rules, the way in which those rules are framed can result in unsatisfactory outcomes such as a judgment given in the country with the closest connection with the dispute not being recognised and enforced in the other.⁴⁰⁶

273 The increasing importance of electronic commerce requires a renewed focus on conflict of laws rules:

• where a person or company makes material available on a website, that material can be accessed and read by millions of people in many different countries. This immediately raises questions of the application of foreign laws to the content of the site, and to dealings resulting from it;
• the increased ease of dealing across borders has resulted in a huge increase in the number of interactions and disputes which, because they are not purely domestic, raise conflict of laws issues;
• the parties to many of these cross-border dealings are not experts in cross-border trade, and many of the transactions involve relatively small amounts of money. So it is less likely that they will have addressed conflict of laws issues in their dealings in advance, for example by expressly agreeing where disputes will be resolved, or which law or laws will govern their dealings;
• many current rules in relation to jurisdiction, and to a lesser extent choice of law, turn on where a certain person was at the time of the relevant event, or where some act took place (eg a publication of defamatory material, or entry into a contract, or performance of that contract). Applying these tests is much more difficult – perhaps impossible – where the parties deal online. Even where these tests can be applied, the answer is often quite fortuitous, with no substantive connection to the relevant dealings or dispute.

274 There is also the difficulty of internet communication having numerous participants, as illustrated by Longworth’s commentary:

Given the transnational nature of the communications, it will prove exceedingly difficult to determine which jurisdiction should apply. For example, in any interaction in cyberspace there is an uploader (of information), a downloader, the potential to access or view information, a server containing the web page files, the routing of data in packets through nodes around the world, the practice of constituent parts of a web page (such as images) being called up from other servers, links from the web page to other pages from elsewhere in cyberspace, and the intervention of sysops. Each of these actors and activities may be ‘located’ in different jurisdictions. It will be the norm rather than the exception that these participants are unknown to each other (rather than being seen as senders and recipients in a pre-determined relationship).⁴⁰⁷

275 The challenges which electronic commerce poses for the conflict of laws fall into two quite distinct categories. First, there are issues which are peculiar to the electronic environment, such as the difficulty of applying some traditional tests in that environment, and the unpredictability of the outcome of applying such tests. The second, more general category of issue is not in fact peculiar to electronic commerce – rather, all that electronic commerce is doing is increasing the frequency with which more general problems arise in cross-border disputes, highlighting existing deficiencies in private international law regimes.

276 With a view to addressing the special issues that arise where parties deal electronically, at least in the short term, and in particular to enhance the predictability of the application of existing New Zealand conflict of laws rules to e-commerce, ECom 1 proposed introduction of the following presumptive rules:⁴⁰⁸

• in an international contract for the sale of goods,
– the courts of the State to which the goods are to be delivered prima facie be considered forum conveniens.
– the contract will be governed, . . . by the law of the state to which the goods are delivered.
• in an international contract for the provision of services,
– the place at which the services are to be performed will be the forum in which any dispute arising is to be resolved.
– the place at which the services are to be performed will determine the law under which the dispute shall be resolved.

The longer term initiative we proposed was to “. . . encourage international discussion with a view to formulating a convention likely to be acceded to by most of New Zealand’s major trading partners”.⁴⁰⁹

277 The few submissions received in response to these proposals are set out below:

The presumptive rule as to choice of laws, is very attractive. It would provide certainty, as suggested, especially in relation to consumer contracts. In this respect it would also be consistent with the direction of the OECD Guidelines. However, as a short term, and essentially unilateral measure, there seems little point in passing legislation.⁴¹⁰
The Commission suggests . . . presumptive rules for choice of forum, and . . . for choice of law. . . . The Committee supports these proposals as interim measures until a more comprehensive solution is available by international convention.⁴¹¹
With regard to international reforms, the advent of electronic commerce will ultimately increase the level of integration between the New Zealand and global economies. Telecom would therefore encourage the Law Commission to take an active role in appropriate international fora in order to present a New Zealand perspective.⁴¹²
The proposal to introduce presumptive choice-of-law rules for contract disputes may be supported in principle, but the specific rules proposed are crude; . . . The proposal to amend the New Zealand law on jurisdiction and recognition of foreign judgments is ill-timed, as work will soon commence at the Hague on an international convention on these matters and it would be inappropriate to engage in idiosyncratic legislative reform at this juncture.⁴¹³

278 Having considered these submissions, and discussed them with the Advisory Committee, the Commission has decided not to recommend short-term legislative solutions along the lines canvassed in ECom 1.

279 Instead, the Commission has focused on the longer-term objective of multilateral coordination, and has been able to coordinate representation of New Zealand at the Hague Conference discussions in relation to a proposed convention on jurisdiction and enforcement of judgments in civil and commercial matters.⁴¹⁴ In particular, the Commission has encouraged the Hague Conference to pay close attention to electronic commerce issues in formulating the proposed convention. While the convention is primarily directed at resolving deficiencies of a general kind in private international law regimes, it is essential that it does so in a way which also addresses problems of the second kind identified above, and establishes rules which can be readily and predictably applied where parties deal electronically.

280 The biggest drawback of international treaties is of course their painstakingly slow creation.⁴¹⁵ But despite this, there are compelling practical reasons for participating in the work of the Hague Conference in this field:

• the nature of these problems – in particular, the lack of consistency and coordination in how different countries respond to the four issues identified in paragraph 271 above – means that they can only be resolved multilaterally, through an initiative involving a large number of countries;
• the Hague Conference is a body with substantial expertise and experience in private international law treaty-making. The Conference’s 46 member countries include all New Zealand’s major trading partners. ⁴¹⁶  New Zealand, though not a member of the Hague Conference, is a party to two of the treaties formulated by the conference in this field;
• work on the proposed convention is well advanced. At the June 1999 meeting of the Hague Conference the text for roughly two-thirds of a draft convention was discussed and provisionally approved. The balance of the draft will be discussed at a one week meeting in October 1999, and the entire text will be reviewed and approved for submission to a Diplomatic Conference scheduled for October 2000. The Diplomatic Conference, which is the decision-making body of the Conference, is expected to approve a final text of the convention at the session in October 2000, and the convention would then be opened for ratification by Member States and other States such as New Zealand.

281 As a result of his involvement in the work of the Hague Conference session in June 1999, Mr David Goddard, New Zealand’s representative at that session, was asked to attend a three day “Round Table” in Geneva in early September 1999 to discuss the challenges electronic commerce poses for private international law. The meeting was jointly organised by the Hague Conference and the University of Geneva, and focused on the extent to which the current draft of the proposed Hague Convention adequately accommodates electronic commerce issues, as well as considering whether further multilateral initiatives are required in the field of private international law, for example to address questions of choice of law. The conclusions of that Round Table will assist the Hague Conference to develop a convention which is suitable for an environment where a significant (and increasing) proportion of cross-border dealings will take place electronically. Mr Goddard also attended the meeting of the Hague Conference on private international law in October 1999.

282 In the circumstances, it would be premature to embark on a detailed consideration of conflict of laws issues in this report. Once the draft convention has been finalised later this year, however, it will be timely to consider both the content of that draft, and whether New Zealand should seek to become a member of the Hague Conference prior to the October 2000 Diplomatic Conference which will discuss (and is expected to adopt) a convention on these important issues. We will address these topics in our third report.⁴¹⁷

283 We make one final point: it is clearly preferable to harmonise laws to avoid or to reduce the possibility of conflict of laws issues arising. The recommendations made in this report are largely supportive of the Australian Bill. We urge Parliamentary Counsel to consider drafting our proposed Electronic Transactions Act in a manner consistent with the Australian Bill so as to minimise the potential for conflict of laws issues to arise.