The strange case of ecommerce regulation in Europe

From this day forward, European ecommerce will be governed by the so-called country of destination principle. That means consumers can take a company to court in the consumer's home country, rather than the country where the company is registered.

For example, if an Italian consumer buys a car from a Dutch site, they will have the right to sue under Italian law if something goes wrong.

Of course that also means any company engaging in ecommerce is now beholden to the national laws of 15 EU member states.

Country of origin versus country of destination has been at the heart of the ecommerce debate in the EU for years. Consumers advocates argue - and obviously most of the officials in Brussels agree - that ecommerce in Europe won't take off until consumers are confident they can seek redress in their own courts. Opponents say it places an undue burden on small businesses.

At a recent debate in London hosted by law firm DLA, both sides battled over the nature of the Brussels Convention.

Sheila McKechnie, the director of the UK Consumers Association, explained: "The B2C market is bedevilled by a lack of confidence, and the deregulation lobby is going to destroy consumer confidence. We need to provide a protective framework that makes consumers feel safe."

Industry doesn't see it that way. British MEP Theresa Villiers has argued for the country of origin principle coupled with an alternative dispute resolution system to protect consumer interests.

"Consumer protection must be proportionate to the problem it addresses," she said at the DLA debate. "Consumers shouldn't be smothered by over-regulation. That will simply put small businesses out of business and all we'll be left with are the big brands."

Nigel Hickson, chairman of the E-Council at the Confederation of British Industry, backs Villiers. "Under the Brussels Regulation, a lot of dot-coms will not trade with anyone from other member states because they don't want to deal with the different laws. Consumers will have less choice in the marketplace."

The Consumers Association's McKechnie says that view tilts the balance too far in favour of business: "If dealing with the laws of 15 countries is a problem for small businesses, it's even more of a problem for consumers. If the Council votes in country of origin, every consumers association in Europe will tell its members to shop only in their own country, and the single market will go up the spout."

Mike Pullen, a lawyer with DLA, feels strongly that consumers don't need to be able to sue in their home country in order to feel confident about buying online. "Something like three million European consumers buy books from Amazon.com under Washington state's jurisdiction. They must feel protected," he said.

Confusingly, the Ecommerce Directive passed earlier this year sides with country of origin principle. That makes it difficult for legal advisers to guide their clients, and also makes it necessary for small businesses to seek legal advice.

But Pullen sees a more sinister problem with the Brussels Convention, particularly in the light of the recent decision by the French courts to order a US company, Yahoo!, to pull a site selling Nazi memorabilia. That activity is illegal in France, but perfectly legal in the US.

Pullen notes that if Yahoo! had been based in the UK, then under the Brussels Regulation the company would have been forced to bow to French laws, even if the activity was legal in the UK. He says that effectively means "every time a judge in a national court comes up with a decision like that it will change the law of the internet".

One thing's for sure. Just how workable or unworkable the Brussels Regulation makes ecommerce in Europe will be plain to see. And perhaps only then will we know the right answer.