Friday, 17 July 2015

Choice of Court Convention to go into Effect October 1, 2015

              The European Union having recently approved the Hague Convention on Choice of Court Agreements, that Convention will go into effect in the European Union (except Denmark) and in Mexico on October 1, 2015. 
The convention facilitates international business by giving weight to choice of court clauses, also known as forum selection clauses, in the dispute resolution provisions in international contracts.    Among other things, the Convention compels courts to respect such clauses, e.g. to accept jurisdiction over a dispute where mandated by such clause, and to not exercise jurisdiction if parties to a contract have agreed not to litigate in that court.    For details of the Convention, see my April 27, 2015 post, “Some Progress for the Hague Choice of Court Convention”, or the Hague Conference on Private International Law website,
 The Convention applies presently in only the European Union and Mexico, the only two states to have ratified it.  There are just two other signatories: the United States and Singapore; there is no indication as to when they might ratify it.     It is unfortunate that Canada has not even signed, let alone ratified, the Convention.   There is much to be done before the full potential of this convention can be realized.  Choice of Court Convention to go into Effect October 1, 2015

Thursday, 9 July 2015

BCCA Affirms Order for Google to Censor its Search Results Worldwide

             Last month, the British Columbia Court of Appeal unanimously affirmed an injunction that prohibits Google, the internet search engine giant, from including specific websites in results delivered by its search engines – anywhere in the world.    Was this such a “disastrous” decision or the “most expansive decision in the common law world to date”, as some commentators claim?  First, for those who have not heard about the case, what was it about?

            The case – Equustek Solutions v. DatalinkTechnologies Gateways et al 2015 BCCA 265 --  arose out of a trademark dispute.  The plaintiff is a manufacturer of industrial network interface hardware, and the defendant Datalink, a B.C .company, was its distributor.   Datalink advertised the plaintiff’s products but began filling the orders with its own products, which were knockoffs of the plaintiff’s products.  The plaintiff sued Datalink for infringement of its trademarks and misappropriation of trade secrets.  Datalink initially contested the claim but later stopped defending the action and the court struck out their statement of defence.   Datalink moved out of British Columbia and apparently out of Canada, but continued to advertise online and fill orders from an unknown location.  Most of its sales are to customers outside Canada.  Efforts to locate Datalink proved fruitless.  Injunctions against Datalink were ignored.   The plaintiff then sought an injunction against Google, on the grounds that if Google search results did not include Datalink’s sites, Datalink’s sales – and thus the amount of business diverted from the plaintiff – would be significantly reduced.   70-75% of all searches are done through Google.    Google had voluntarily agreed to remove certain results from searches but only those done at, not other Google sites, e.g.  The plaintiff then obtained an order that “Google Inc. is to cease indexing or referencing in search results on its internet search engines [certain listed websites].”  This order extends to all Google searches worldwide. 

            The court found that it had territorial jurisdiction over Google based on the provisions of the Court  Jurisdiction and Proceedings Transfer Act, S.B.C. 2003,ch. 28  regarding territorial competence.  The court found in personam jurisdiction based on the business Google carries on in B.C.  – the sale of advertising – and its website.  The mere fact a company’s website is accessible in B.C. would not suffice for jurisdiction, but Google’s search engine is not passive:  its search results are based in part on the particular user’s previous searches.   

            What makes the decision controversial is the world-wide scope of the injunction, made against an innocent party that neither intentionally facilitates Datalink’s infringement of trademark, nor profits from it.    Moreover, the order imposes a limit on freedom of expression. Commentators have raised the concern that if this order is legitimate, what stops courts in other countries from applying their laws to conduct in Canada?   

In fact, the decision is not as alarming or expansive as it may first appear, for several reasons.  One,   injunctions with extra-territorial effect are nothing new.  World-wide Mareva injunctions freezing assets in foreign jurisdictions have been issued by Canadian courts since 1989*.   There is precedent also for orders requiring innocent non-parties to do things.  Mareva injunctions often include a provision requiring banks to freeze funds.  Consider also Norwich Pharmacal orders, whereby a plaintiff can obtain financial information about a defendant or potential defendant by way of an order requiring a third party  -- usually the defendant’s bank – to provide that information if it is not otherwise available. 

The injunction in Equustek imposes a limit on freedom of expression, in the sense that Datalink’s website is made effectively invisible around the world, and Google is forced to censor its search results.  However, the expression affected in this case is not political at all, it is only the advertising of a certain product, and that advertising is clearly an infringement of a trademark.    In Canada such a limit on expression is not controversial.  Insofar as the defendants have essentially admitted the infringement (in that they are no longer defending the action), presumably there are many jurisdictions in which this limit is not considered controversial.  However, courts in other countries may impose limits which are regarded there as uncontroversial but which would be regarded as highly intrusive and inappropriate in other countries, especially if imposed by a foreign court.     Thus there is an issue about the legitimacy of a Canadian court ordering that search results in other countries be limited.   To ensure that courts’ exercise of jurisdiction is legitimate, there is a constitutional real and substantial connection test, as distinct from the more familiar conflicts of law real and substantial connection test where practical considerations are key.  It is disappointing that the Court did not address the constitutional real and substantial connection test except in passing.

Although the order is worded as prohibitive, it is effectively mandatory in the sense that Google must take action to ensure its search results exclude the listed websites.  However, Google already has about 45 full time staff working on ensuring search results do not include child pornography or hate speech.  Google admitted it would be able to comply with the injunction in Equustek and did not allege that compliance would cause significant expense or inconvenience (para. 153 of the motion court’s reasons: 2014 BCSC 1063).

Generally courts are reluctant to issue orders that will be likely unenforceable.   Non-monetary foreign judgments are not enforceable in many – probably most -- foreign jurisdictions.  (Even Canada, which is relatively liberal about enforcing foreign judgments, did not enforce any foreign non-monetary judgments until quite recently, and even then only on a case-by-cases basis:  ProSwing v. Elta Golf 2006 SCC 52).    This order will likely not be enforced, or even be enforceable, in many jurisdictions abroad.    

Apparently for that reason, the motion court indicated that if Google did not abide by the order, Google might be barred from access to the Courts of B.C.   The Court of Appeal said barring access would be “draconian” but hinted that such a bar could be imposed if circumstances warrant:  “Given that Google does business in the Province, British Columbia courts are entitled to expect it will abide by its orders” (para. 98).   This is certainly a controversial aspect of the decision. While it is not uncommon to bar a party in default of a court order from taking steps in the same lawsuit, to bar a party from all access to the courts -- even for unrelated cases -- is unprecedented.   It is not clear whether the courts have that power under statute, or among their inherent powers.   Such a bar is contemplated in this case presumably only because there would be no other way to enforce the order. 

So all in all, Equustek is a controversial decision, but not an alarming or radical one.



* See Mooney v Orr (1994), 98 B.C.L.R. (2d) 318 and 100 B.C.L.R. (2d) 335.  The B.C.C.A. decision cites decisions giving orders in the context of the internet, from courts in Paris, Hamburg, Ireland, and Spain at paragraph 95.