Note: The rules and law may have changed since this article was first published. It is provided for archival purposes but you should consult with your lawyer for the current state of the law
One of an exporter’s best friends has always been international borders, at least as far as lawsuits are concerned. It is extremely difficult for a foreigner to enforce their home country’s judgments in Canada. In most cases, it means that the plaintiff has to come to Canada to fight things in court, which is a huge advantage for the Canadian business.
The most important exception to this rule is when the defendant has assets in that foreign jurisdiction. If a judgment is obtained in the other country, the plaintiff does not have to worry about where the defendant is located. It will simply seize the assets, and sell them to satisfy the judgment.
Therefore, the first question a lawyer asks a client that is being sued in another country is “Do you have any assets there?” If the answer is no, it is common to ignore the action altogether. Sure, the foreign plaintiff might get a default judgment in that country, but as long as no assets are there, and no plans to have assets, it is a worthless piece of paper.
The Internet Age means that borders are less important, however, and this is another case where businesses will have to be more careful about ignoring lawsuits.
Take the case of a British company known as Spamhaus. That internet-based business maintained a blacklist of junk e-mailers, and offered its customers a way of reducing the spam that would otherwise overwhelm email boxes. In what appears to be a dispute with one of the organizations that Spamhaus was blocking, a lawsuit was brought against the British company. It wasn’t brought in the UK, though. Instead, the court chosen was in Illinois.
Spamhaus did initially defend itself, but then intentionally dropped out, on the theory that a British company did not have to worry about a U.S. lawsuit. When a lawsuit is undefended, the plaintiff usually gets what is known as a “default judgment”. This is exactly what happened here, with the default judgment totalling $11.7 million (US).
Spamhaus had no tangible assets in the United States, so that would normally be the end of the story. But there was one asset that might be within the control of a U.S. court – the domain name “spamhaus.org” itself. That shouldn’t matter; the internet is international, right? Well, not quite. Certain parts of the internet still owe much to their mother country, the United States of America. One of these vestiges is the Internet Corporation for Assigned Names and Numbers, or ICANN.
ICANN is the supreme authority for issuing domain names on the internet, although much of its work is done through licensed registrars around the world. There has been a lot of controversy recently over the “control” that the U.S. exerts over the internet. Many countries feel that ICANN, being a creation of the United States, does not fairly reflect the international status of the Net. Whether this is accurate or not is beyond the scope of this article, but it is fair to say that ICANN is not truly independent of U.S. law and influence.
The plaintiff in the Spamhaus case asked the judge to order ICANN to delete the spamhaus.org domain name. The judge issued a proposed order for comment, and ICANN quickly stated that it could not comply. It claimed that the actual domain was issued by its registrar, in this case, Tucows. Interestingly, Tucows is a Canadian organization, and is therefore also beyond the direct jurisdiction of the U.S. court.
In the end, the Illinois judge declined to issue the order, probably recognizing that there was little he could do jurisdictionally. Although Spamhaus was therefore successful, the case raises a troubling spectre that has always haunted the Internet: whenever traffic or infrastructure is routed through a country, does that country seize jurisdiction?
No lawyer can say that a domain registered in the U.S. is at certain risk, in light of the Spamhaus decision. On the other hand, no lawyer can guarantee that it might not be an issue in a future case. Anyone that is extremely risk averse, or that has a very valuable domain name might want to look at its registration details and consider moving it to a safe haven. Of course, a safe haven today might be a risky country tomorrow, so it could be a coin flip as to whether this worthwhile. But having the registration based in the home country, where the rest of the assets live anyway, might not be a bad idea.