European justice ministers yesterday passed a law that will force traders to abide by the laws of all 15 member states of the European Union when they go online.
The law, dubbed the Brussels I regulation, will come into effect next March. It states that where there is a dispute between a consumer in one EU country and an online retailer in another, the consumer will be able to sue in a court in his own country.
The justice ministers and the European Commission, which drafted the regulation, argue that this focus on the consumer is essential to help get electronic commerce off the ground in Europe.
"A lack of consumer confidence is the main thing holding up the development of e-commerce here," said Leonello Gabrici, spokesman on judicial matters for the Commission.
He said that by handing jurisdiction of such cross-border disputes to the courts in the consumers' country, the regulation will be encouraging consumers to purchase online.
But industry representatives in this debate argue that this approach will create legal uncertainty for small companies using the internet.
"For large companies it isn't a problem, because they have offices and lawyers in all EU countries. The SMEs (small and medium-sized enterprises) would be burdened with substantial legal and insurance costs if they took protection against litigation from outside their home market," said Wim Mijs, vice president of EU affairs at Dutch bank ABN Amro.
"As a result, venture capitalists might be a little more cautious about investing in a European Web venture."