The Impact of the New Judicial Interpretation of the Civil Procedure Law on “Online Shopping”

Recently, Suzhou Intermediate People’s Court has ruled on the jurisdiction dispute on a Tmall Online Shopping case, which raises a widespread concern. In this case, the court applies the article of the newly promulgated “Interpretation of the Supreme People’s Court concerning the Implementation of the Civil Procedure law” (“New Interpretation”), in which prescribes if both parties have signed the purchase contract via an information network, and the object is delivered via an information network as well, the place of performance shall be the place of the buyer. Finally, the court rules that the case shall be heard by the court located in the buyer’s (plaintiff’s) domicile.

While the New Interpretation is warmly welcomed by the media and consumers, the alarm comes to those enterprises who are selling products via their own website or the third party’s online platform. What does the new article on jurisdiction mean to those enterprises? How to reduce the risks and disadvantages brought by this New Interpretation to those enterprises?

According to Article 20 of New Interpretation, where a subject is delivered via an information network under a sales contract concluded by means of an information network, the domicile of the buyer shall be the place where the contract is performed; where the subject is delivered otherwise, the place of receipt shall be the place where the contract is performed. Where the contract stipulates the place of performance, such agreement shall prevail. This article is a symbol which indicates the abandonment of the “plaintiff accommodated to defendant doctrine” in the disputes related to the online shopping. For the consumers, it would be more convenient for them to file a lawsuit and save the costs for such lawsuit. However, for those enterprises, it would bring more risks and disadvantages, such as there would be more and more lawsuits, the jurisdiction of those lawsuits may be uncertain, and the relevant cost would increase as well.

The fundamental method to reduce such risks and disadvantages is to agree on the performance of the contract or the jurisdiction of the court in advance. However, while making such agreement, there are some aspects shall be paid attention to.

Firstly, where the seller provides the standard terms, the seller shall prompt the caution to the consumer in a reasonable way. According to Article 31 of New Interpretation, where an operator uses standard terms to conclude a jurisdiction agreement with a consumer but does not prompt the caution to the consumer in a reasonable way, and the consumer claims the jurisdiction agreement to be invalid, the people’s court shall support such claim. In the previous Tmall Online Shopping case, the court points out that the jurisdiction agreement (“the disputes shall be heard by the court located in the seller’s place”) is invalid, because such agreement has not been marked in the eye-catching position of the website, and the seller fails to prompt the caution to the consumer in a reasonable way. In view of this, the caution shall meet at least 1 of the following requirements: (1) remarkable, which says that normal person shall notice it under the ordinary circumstance; and, (2) prompt clearly, for example, send the short message to the consumer and require the confirmation while accepting the order via the information network.
Secondly, when making the jurisdiction agreement, it would be better to state the specific domicile. The New Interpretation has amended the standard to decide the domicile of a legal person or other entities, such as Article 3 has prescribed that ……the domicile of a legal person or other organization (Note: the branch of such legal person or other organization shall be included according to Article 52) refers to the place where the place of main office of the legal person or other organization is located. Nowadays, the registered address and the business address of some companies may be different, or some companies may establish many branches and etc., in order to avoid the misunderstanding of the domicile as agreed for jurisdiction, it would be better to state the specific domicile.

In fact, to make an agreement on the jurisdiction for the performance of the contract is only 1 aspect in reducing the risks and cost of the lawsuits, the most important method is to improve the quality of the products and service, which could eliminate the possibility of lawsuits from the roots.