Consumer Behaviour and Consumer Protection in India

The process of development coupled with increasing liberalization and globalisation across the country
has enabled consumers to realize their increasingly important role in society and governance. The
consumer movement in India is as old as trade and commerce. In Kautilya’s Arthashastra, there are
references to the concept of consumer protection against exploitation by the trade and industry, short
weighment and measures, adulteration, and punishment for these offences. In a developing country
like high and the level of literacy is very low, the people face a volume of problems, particularly in the
context of consumer related issues. This book brings into focus the role and status of Indian
consumers and their problems arising from the given socio-economic set up of our society. A critical
appraisal of government policies and programs has also been attempted. Ensuring consumer welfare is
the responsibility of the state. Accepting this, policies have been framed and the Consumer Protection
Act, 1986 was introduced. A separate Department of Consumer Affairs was also created in the Central
and State Governments to exclusively focus on ensuring the rights of consumers as enshrined in the
Act. This Act has been regarded as the most progressive, comprehensive and unique piece of
legislation. The present book provides a detailed and comprehensive study of the recent developments
in the Indian consumer protection law, besides examining the provisions of various other statues
dealing with consumer protection. It also provides further insight into consumer behaviour to help
marketers develop an appropriate marketing strategy. The book constitutes a rich contribution to an
issue of considerable importance. It is expected to be highly useful to policy planners, economists,
researchers, NGOs and students.
Contents : Consumer Behavior and Consumer Protection: Theoretical and Conceptual Issues /
Consumer Protection in Indian Economy / Consumer Organisations and Consumer Protection /
Consumer Behaviour-An Empirical Approach / Consumer Protection Act, 1986-Ligislative and Judicial
Dimensions / Consumer Organisations-Role and Importance / Consumer Awareness and Protective
Aspects: Global Experiences / Governmental Role in Consumerism / Buying Behaviour and Grievance
Redressal / Consumer Protection Through Mass Awareness: Challenges and opportunities in the Global
Era / Consumer Rights and Consumer Protection Act, 1986 / Consumer Awareness and Government
Role / Governmental Role for Consumer Awareness and Welfare / Protective Aspects of Consumer
Protection / Economic Analysis of Consumer Behavior / A New Era in Consumerism / Consumer
Behaviour, Communication and Rural Market / Consumer Protection Act, 1986-A Case Study Approach
/ Consumerism and Role of Legislation / Banking Services in India and Consumer Protection / Impact
of Advertising on Consumer Education and Behaviour / Consumer Problems / Consumer Behaviour in
Selection and Purchasing of Clothes / Food Adulteration-A Case Study / WTO and Indian
Pharmaceutical Industry: Implications for Consumer Welfare / Managing Consumer Expectations
through Encouraging Customer Complaints / Healthcare in India and Consumer Protection Act /
Advertising and Consumer / Globalization and Consumer Behaviour: Some Gender Issues /
Appendix.

Globalization of Law and Practices

Written By : Parikshit Dasgupta, ALMT Legal,Indo-European Consultants

Introduction
The term 'globalization of law' refers to the degree to which the whole world lives under a single set of legal rules.
Such a single set of rules might be imposed by an international body, adopted by global consensus, or arrived at by
parallel development in all parts of the globe. In today's world of increasing international trade and inter-
dependence the need for transnational law has increased many folds. Since more and more countries, open their
economy, either partially or completely, there is a growing need to recognize and work towards a uniform system
of law. This process of globalization is evident in all facets of law. It is the intent of this paper, to bring forth the
concept of globalization of law in regard to different facets and discuss the merits or demerits of such globalization
and harmonization.

I. Globalization of Commercial and Contract Law

There are various connotations to the term 'Globalization of law'. It may be viewed as a concomitant of the
globalization of markets and the business practices of the multis- national corporations that operate in those
markets. There has been some movement toward a relatively uniform global contract and commercial law. It is well
established that contracts are a kind of private lawmaking system. By that we mean that a contract may be
defined as a law between the parties to the contract. The two or more contracting parties create a set of rules to
govern their relationships, as laid down under the terms of their agreement. In international trade too, the parties
enter in contracts and the contracting parties invariably agree to submit to a nongovernmental arbitration
mechanism or the courts of some particular nation state, or both, to resolve contract disputes. They may also
chose the governing law of the contract under which any contract dispute between them shall be resolved.

In today's world of inter-dependence and international commerce, there is increasing importance of growth of
harmonization of international commercial law. Most of the countries have now recognized the need for a uniform,
predictable and transparent system of law for encouraging foreign investment and international trade with other
countries. As a result of this, the courts and law of most of the countries recognize and enforce the judgments of
the others. Hence there is a tentative movement towards the formulation of transnational commercial law through
contracts.

In the global context, because of the economic position of the United States and some of the countries of Europe,
these countries substantially influence the process of globalization of law. The obvious reason being that they
contribute substantially to foreign investments in other parts of the world and have a strong role to play in
international trade. Other than American economic power, another reason for this is the receptivity of common law
to contract and other commercial law. It is widely believed in Europe that European Community legal business
flows to London because English lawyers are more adept than civil law lawyers at legal innovation to facilitate new
and evolving transnational business relationships. For whatever reasons, it is now possible to argue that American
business law has become a kind of global jus commune incorporated explicitly or implicitly into transnational
contracts and beginning to be incorporated into the case law and even the statutes of many other nations.

II. Globalization of Public Law

Certain global commonalities in law develop from a universal, and apparently growing, popular distrust of
government . The Government has undertaken many welfare activities and also expanded its role to the
commercial front. The need to put appropriate checks on the Government has also increased. This has paved way
for administrative law and now many nations have accepted the Rule of law and used it to check the Government.
The world has unanimously recognized that appropriate checks are needed on the Government and there now
exist certain fundamental principles that have been recognized as basic to all populations for checking the
Government from abuse of power.

Today global community has recognized the need of transparency of, and increased public participation in,
bureaucratic decision-making. it seems obvious that law is an available instrument for achieving greater
transparency and participation. Globalization here refers primarily to the industrialized states. In the period from
roughly 1960 to 1990, the United States went through a virtual revolution in administrative law. Much growth and
innovation also occurred in Canada and Australia. It is alleged, that English administrative law revived in parallel
fashion. Even in India drastic improvements were made in this field. Very recently, the European Community has
begun to experience a vivid urge to make appropriate laws for keeping a check on the authorities.

In the Global context, the world over there seems to be efforts to have checks on Governments so that the basic
rights of the population cannot be abused. In the 1960s, 1970s, and 1980s, American federal courts, seconded by
Congress, created a new apparatus of administrative law designed to maximize both the participation of interest
groups in the bureaucratic policy-making process and the obligation of bureaucracies to make public every bit of
their fact gathering, analysis, and policy choice processes. Not only were enormous amounts of new administrative
law generated, but there was also a steep increase in the judicial supervision of bureaucracies. The judges now
demanded that the bureaucrats fully, completely, and publicly explain what they were doing and do so in such a
way that the judge, a person totally devoid of technological training and knowledge, could understand. It is also
clear that across that world attention is being paid to the use of law to achieve those goals. This concept has
rapidly spread all over the globe and is now increasingly recognized in U.K. and India too. In India, we have land
mark cases where administrative discretions and quasi-judicial functions have been checked and supervised by the
Courts. The principles of natural justice are now acknowledged the world over and courts around the world are now
giving effect to the two maxims of natural justice namely, Audi Alterem Partem and Nemo Debit Juris in Propria
Causa. The countries around the world now openly acknowledge these two as pillars of public law. The import of
these two maxim implies that no person shall be the judge in his own cause and that every person shall have a
right to be heard before a order is passed against him.

III. Globalization of Protective Law

The constitutional rights movement is one aspect of a global movement that is based on the distrust of
concentrations of power. The individual is seen as needing protection from all the larger forces that threaten to
crush him, not simply from the governmental ones . Law is seen as one instrument for such protection. Thus, in
speaking of globalization, we move from the realm of constitutional law to the realm of torts, product standards,
consumer protection, and occupational health and safety. Of course, most legal systems around the world have
always dealt with personal injury, fraud, and shoddy goods. However, with passage of time the 'caveat emptor' rule
was replaced and the laws of consumer protection and investor protection were taken became more stringent. E.g.
In the sphere business organization and finance there has been active improvisation in securities and corporate
governance law. Globalization here refers to a worldwide increase of legal protection against the ill effects of
technical, economic, and social devices too complex, distant, or powerful to make individual self-protection
possible. The most recent manifestation of this movement is the great outburst of environmental protection law
that is partially fueled by a concern with nature itself but tends to achieve its greatest impetus when that concern
is coupled with putative injury to individuals from pollutants.

Global patterns are, however, far from uniform here. India has experienced a tort explosion in the form of landmark
cases concerning CNG buses and the reallocation of Taj Mahal. Many other nations too have now under the wake of
environment consciousness has started active legislations in this regard. In the securities market there has been a
rapid law innovations for better investor protection, such as the ban on insider trading and committee reports on
corporate governance. There has been an enormous, global flood of product standards and other consumer
protection law, but not only are developments much faster in some nations than in others, but the substantive
standards and rules adopted also vary widely.

Perhaps globalization is clearest and most dramatic in environmental law. As it became increasingly clear that the
externalities of environmental degradation crossed national boundaries and that some of them, like ozone
depletion, were truly global, parallel developments in national environmental law accelerated, as did efforts at
multi-national and/or international environmental protection law. Given the global uniformity of the industrial
technologies threatening the environment, a considerable substantive uniformity emerges even in national
environmental rules.

Conclusion
We have been looking at the globalization of law along a number of vectors. The global distrust of hierarchical
authority and concentrated public and private power generates growth in administrative law, constitutional, and
other rights law, and in legal regulation of economic enterprise. The global desire to protect the individual
generates growth in personal injury, consumer protection, environmental law, and even family law. The
globalization of markets and business enterprise generates the growth of a worldwide law of business transactions.
The global multiplication of exterior business relationships and the growth of arms-length regulatory styles fuel a
growing demand for lawyers and their involvement in more and more social, economic, and political relationships.
Thus in light of all the above, it may be inferred that there is an increasing need for a global mechanism of legal
education, law enforcement and also harmonization of most of the transnational laws. Having stressed on the need
for globalization, we need to adopt our domestic structure to be able to keep pace with the movement of
globalization both in terms of legislation and in terms of legal education and practice

Abstract

Consumers are now participants in a global market, and possibly in a cybermarket. Law can
only protect them (or us-we are all consumers) through rules which are essentially national, and
which can only be enforced within national frameworks. Most of those rules have been enacted
through a democratic political process. If the rules are useless in practice, people may question
the usefulness of democracy and nation states. Consumer protection laws enable the correction of
market failures and the redress of inequalities of information and power. Recent cases indicate
that consumer protection laws, for a number of reasons, will be of little practical use to protect
consumers in the global economy and in cyberspace. That raises the question of whether
democratic politics can ever be used to bring countervailing force against those who abuse their
position in the global market or the cybermarket. If so, what other national laws will be rendered
useless: labor laws, environmental laws, other laws that result from an often vigorous political
process? What functions remain for democratic politics?

Challenges to the Nation-State

A combination of new technologies and the globalization of the economy presents challenges to
national legal systems and therefore to the democratic process. National legal systems are the
outcome of the political process within the nation.

The legal implications of two recent cases suggest that many social benefits-which people
assumed were enshrined in law-are now under threat. Laws embodying political gains of a
particular section of society may remain on the books, but technological and economic changes
may render them ineffective.

Virgin Atlantic Airways Ltd

In 1995 Virgin Atlantic Airways was fined $14,000 by the U.S. Department of Transportation
for putting misleading advertising on the Internet. [ 2 ] It had placed on its World-Wide Web
page a statement that a certain fare for a designated sector was available when, in fact, the lowest
available fare for that sector was significantly higher. The case was reported in a Canadian
newspaper which gave very few details, but even without the details, some implications are
obvious:

• There may be a problem identifying where any misleading advertising

occurred.
• While in this case Virgin Atlantic was an obvious defendant, it may not have
been the only party involved in the wrongdoing or technically guilty of an
offense; if the operator of the website, or of the network, had been charged,
would he or she have been guilty of an offense?

Williams v. The Society of Lloyd's [ 3 ]

An action against Lloyd's and an agent alleged, among other causes of action, breaches of the
Australian Trade Practices Act 1974, s. 52, and its counterpart in the Fair Trading Act 1985
(Victoria), s. 11, which provide that a person shall not, in trade or commerce, engage in conduct
that is misleading or deceptive or likely to mislead or deceive. Most of the defendants were
located in England. The plaintiff and one of the defendants resided in Victoria. The action arose
out of representations alleged to have been made on behalf of Lloyd's and others by their agent in
Victoria. In interlocutory proceedings, the judge stayed proceedings against the English
defendants permanently on the ground that the Rules of the Victorian Supreme Court did not
apply to these proceedings, because claims under the Trade Practices Act and the Fair Trading
Act were not "actions in tort". The relevant rules of the court allowed service of process out of
the jurisdiction where the proceeding is either founded on a tort committed in Victoria [ 4 ] or is
"in respect of damage suffered wholly or partly in Victoria and is caused by a tortuous act or
omission wherever occurring." [ 5 ]

The implication of this decision is perhaps even more worrying than the Virgin Atlantic case.
Consumer protection laws that prohibit misleading or deceptive marketing behavior are essential.
If they are to be characterized other than as laws creating tort liability, it is unlikely that
legislation giving effect to consumer protection and other social benefits can ever be enforced
beyond the boundaries of the state that enacted them. Criminal laws rarely, if ever, can be
enforced beyond the boundaries of the state where enacted. If consumer protection legislation
providing civil remedies is to be limited in the same way, it may be virtually useless in a global
economy, where marketing may be accomplished through computer-mediated communication. If
a nation-state cannot protect the interests of the groups that comprise its political community,
then its purpose is in doubt.
Consumer Protection Laws in the Global World

What are consumer protection laws?

Consumers have sought protection through legislation because the general laws and market
forces have failed to provide it. Many consumer protection laws either relate to the terms and
conditions of contracts that consumers make with suppliers for the supply of goods and services,
or to conduct intended to encourage the making of such contracts (marketing, packaging,
advertising and provision of information). Previous laws, especially the law of contracts,
assumed that the parties to contracts are legally equal in terms of power and information. In
substance, in real markets, almost invariably consumers have markedly less power and
information than suppliers. The law deems the action of a consumer in buying a commodity to be
the making of a contract - in theory a free, consensual act. In practice, the legal consequences are
attributed to the action by the law without any consideration of what the consumer actually
knows or wants. The common law of contracts simply cannot afford consumers the protection
they probably would seek if they were rational, fully informed, and equal in economic power to
the supplier. Because contract law offers an inadequate basis for an equitable legal transaction, it
must be modified by legislation [ 6 ] in order to afford greater protection to consumers than they
can negotiate individually for themselves.

Law and the globalized world

Since 1960 most developed countries with common law legal systems, the nations of Europe and
most recently of Asia have enacted significant consumer protection legislation. [ 7 ] Such laws
are national, and operate only within the geographical limits of the enacting jurisdiction, except
where conflict of laws rules permit them to be applied as part of the law of some other country.
[ 8 ] Attempts to apply such existing laws to activities outside the geographical boundaries of the
enacting state might prove ineffective. Examples include marketing and sale of goods or services
(including financial services) online through the Internet or satellite TV by suppliers who are in
remote areas, often beyond the reach of legal process.

If consumers (and groups who are similarly disempowered through social fragmentation, such as
employees) are to be able to participate in markets on even a rough approximation of equal terms
with suppliers, there must be both a geographically-defined arena in which there can be a
political contest of interests and a countervailing political force. If it is impossible to locate
production, marketing, distribution and trade in goods and services in a defined physical and
juristic locality, no legal control is possible.
International Law and Consumer Protection

Two distinct bodies of rules and principles constitute "International Law"- public international
law (formerly called "the law of nations") and private international law (in the United States and
other federal systems more accurately called "conflict of laws," because the rules determine
which of two different legal systems apply within or outside a particular political institution. The
terms "public" and "private" indicate an important practical distinction. Both potentially affect
legal and political measures in respect of transnational activities and both are predicated on the
existence and operation of nation states. Laws that give remedies or impose sanctions are
essentially national laws: international law is of a different order.

International law and municipal law

What a nation state can achieve legally outside its geographical boundaries is determined by both
public and private international law.

"Public" international law governs the relations between entities recognized as having legal
status. or personality under its own rules of recognition [ 9 ] -usually nation states. There is no
supreme, authoritative ruler who has legal authority to discipline states that do not toe the line.
The content of the rules comes from the practice of states towards each other (usually referred to
as "custom") and from international agreements. For this reason, much public international law is
"soft", [ 10 ] and legal positivists deny it the status of "law". Public international law rules do
have significant moral and political force, and states that continually break them attract odium
with significant economic and political consequences.

Public international law only affects people's behavior indirectly, through the operation of
municipal law systems. Its rules have little direct impact on individuals and business
corporations. Infringement of any rights afforded by international law ordinarily will assist only
those individuals or corporations whose national government takes up their cause. [ 11 ]

"Private" international law by contrast forms part of the system of rules administered and
enforced by the national, state or "municipal" law. This body of rules determines whether any
jurisdiction is competent to entertain disputes ("judicial jurisdiction"), to enforce any judicial
determination of those disputes ("recognition and enforcement"), and which body of rules will be
applied to the issues ("choice of law").

In the past the rules of private international law may have seemed remote from the lives of
ordinary people. Today's easier communication means that they affect many individuals every
day. Anyone who travels from one country to another (or, in a federation, from one state or
province to another) is immediately exposed to the operation of private international law, as are
businesses that deal anywhere outside their own country or state. Anyone who logs onto the
Internet immediately becomes exposed to the rules of private international law in the country
where he or she is physically located.
Every system of legally binding commercial arrangements presupposes a national legal system to
which, in the last resort, the parties may resort to enforce compliance. Most rules governing
international commerce have a common origin in the body of rules developed among traders [ 12
] that was incorporated into most of the legal systems of Europe. All regulation and public
international law itself presuppose national legal systems. This does lead commercial interests to
devise means of avoiding litigation in national courts. In the last resort, however, national laws
are essential.[ 13 ]

Globalization of commerce and communication may exacerbate the problems that arise when
activities of a commercial nature cross national boundaries, especially when any single nation
wishes to exercise some control over part or all of these activities.

The problem of legislative jurisdiction

Both public and private international law restrict the power of nation states to provide legal
sanctions and remedies. Any controls on transnational activities must come from nation states,
because international intercourse at all levels is essentially anarchic, and the players cannot
afford to trust the other players or voluntarily to accept limitations on what they may do.

United States anti-trust law provides a good example of how law, politics and practicalities
intersect in ways that destroy international goodwill. [ 14 ] The United States attempts to
proscribe activities occurring outside its geographical boundaries by persons who were neither
residents nor citizens of the U.S. Virtually every other nation has resisted this attempt. Other
attempts by any single nation to proscribe activities beyond its physical boundaries by people
who are neither residents nor citizens are likely to create similar problems. When this happens, a
state may enforce its extraterritorial laws within its own boundaries, but other states will
steadfastly block any attempt to enforce those laws within their own territories.

In 1909, a fruit company, thwarted in its attempts to break into the market for banana production
in central America, attempted to invoke the U.S. Sherman Antitrust Act on its behalf. It had been
frustrated by activities, including violent and other conduct by, among others, Costa Rican
citizens, corporations and its government, all of which would have been contrary to the Sherman
Act if done in the U.S. or by U.S. citizens. The U.S. Supreme Court, in a judgment delivered by
Justice Holmes, refused to give the legislation any extraterritorial operation whatever. [ 15 ] He
relied on the presumption that legislation does not have extraterritorial effect. The Clayton Act,
enacted subsequently, expressly provides for its own operation outside the United States. [ 16 ]
United Fruit has never been expressly overruled. [ 17 ] However, in United States v. Aluminum
Corporation of America, [ 18 ] Judge Learned Hand, influenced by the effects of an
extraterritorial breach of the anti-trust laws on business within the United States, indicated that
those laws might apply to a U.S. company outside the U.S. There was support for this view in the
Supreme Court, [ 19 ] leading some U.S. lawyers to assume that U.S. antitrust laws affect foreign
businesses operating outside the U.S.

In 1978, the then U.S. Attorney-General told the Law Council of Australia that if the U.S. did not
assert its own values, others would assert their values on the U.S. Sine competition was valued
highly in America, the U.S. would continue to assert its sovereignty over activities that impacted
business in the U.S. [ 20 ] As a senior U.S. Justice Department official stated:

There are two primary objectives of U.S. policy in the application of our antitrust
laws to foreign jurisdictions. First is to prevent national boundaries from providing a
haven from which Americans may flout laws designed to protect our domestic
competition; and second, to prevent arrangements made abroad from depriving
U.S. consumers of the benefits of competition among importers and between
domestic and foreign sources of supply. [ 21 ]

This view has been treated with the deepest skepticism by a leading international lawyer. [ 22 ]

Most of the world's uranium is produced outside the United States. Westinghouse, an American
manufacturer of uranium-powered electrical generators, claimed to have been affected adversely
by a producers' cartel. It commenced actions in the United States against the members of the
alleged cartel, and then sought discovery of documents in a number of foreign countries,
including the United Kingdom, Australia and Canada. These countries objected to the discovery
proceedings in their own courts on the grounds that U.S. laws had no application to acts outside
the U.S. by persons who could not in any sense be described as U.S. residents or citizens. [ 23 ]
These three countries, among others, enacted 'blocking' legislation to prevent their domestic
courts from granting interlocutory orders. Although there were some moves toward a
reconciliation, [ 24 ] the situation remains a stand-off. The U.S. alone asserts a right to apply its
criminal laws to activities beyond its territorial boundaries. [ 25 ]

The problem is obvious. Because of the cultural and political significance of the anti-trust laws
(which are essentially penal laws), U.S. policy makers do not wish to concede that their laws can
be thwarted simply because the forbidden acts occur outside the U.S. and the actors are not U.S.
citizens. The effects are identical to those that would follow from similar acts or omissions
within the territory of the U.S.

On the other hand, the view of virtually every other country is that the operation of laws such as
the U.S. antitrust law, like all other penal laws, should be confined to the territory of the
legislating state and to individuals and other legal persons over whom that state exerts effective
control. Any attempt to apply such laws to non-citizens of that state outside its territorial
boundaries is regarded as an arrogant encroachment on national sovereignty and contrary to
public international law. The government of any state that wishes to enforce laws that are
possibly "penal" outside its boundaries is caught in the dilemma of satisfying the demands of
voters and pressure groups internally, and the demands of diplomacy and good relations with
other states externally. While it may be easy for governments to explain the impact of political
pressures to other governments, it is more difficult for governments-such as the U.S. government
with a national culture that has strong historical tendencies to isolationism-to justify actions
dictated by international pressure and public opinion of its citizens.

The arguments about antitrust law might apply equally to other transnational activities, including
activities conducted online. [ 26 ] Many countries would consider the consequences of
transnational cyberspace activities (fraud, pornography, etc.) injurious to their citizens. They
might seek to penalize activities carried out beyond territorial limits but with effects within those
limits.[ 27 ] By doing so, they run the risk, at worst, of accusations that their activities are
contrary to public international law, and at best, disapproving attitudes from the governments of
other countries.

Conflict of Laws, Rules and Consumer Protection Laws

Public international law

Public international law does not operate directly within any state but it does influence what
states do. Principles of "comity," as applied by municipal courts in conflict of laws cases,
embrace some of the broad principles of public international law, especially the principle of
territoriality.

Jurisdiction-The territoriality principle

Public international law limits the right of States to legislate extraterritorially or to enforce their
laws outside their own boundaries, [ 28 ] whether the consequences of the legislation are to
penalize misbehavior (criminal law), or to create enforceable rights between legal persons (civil
law). The distinction between civil and criminal law is not always clear. Some regulatory laws,
including some laws of a kind that might possibly be contemplated to control transnational or
cyberspace activity, are a mixture of "civil" and "criminal" laws. Regulatory laws may create
both civil and criminal consequences. [ 29 ] However, the rules that permit extraterritorial
operation of laws applying to criminal jurisdiction are different from, and simpler than, those
relating to civil claims.

Criminal law

Because criminal law traditionally is not classified as "private law" it is not considered in works
dealing with private international law or conflict of laws. The basic principle is: "The criminal
courts of a state apply only the law of that state. That is not the case with civil law." [ 30 ] A
century ago, Hall wrote:

No country can insist as against another that acts performed in a manner

demanded by itself shall be recognized in the country where they are accomplished,
still less can it there exercise the jurisdiction over the persons of its subjects without
the express or implied consent of the territorial sovereign. [ 31 ]

It is generally accepted that a nation-state may legislate to prohibit specified behavior outside its
geographical boundaries, and impose penal sanctions, provided that it only enforces those laws
when the accused persons are physically within its territory or under its control. [ 32 ] In
Commonwealth countries, it is generally accepted that unless legislation specifically and
expressly applies to acts or omissions taking place beyond the territorial limits of the state, it will
be construed as applying only to conduct within the jurisdiction. [ 33 ] This view prevails outside
the United States. [ 34 ] It does not mean that every element of every offense and its prosecution
must take place within the territory of a single jurisdiction. [ 35 ]

A question also arises where an offense has several constituent elements, each of which may
occur in a different jurisdiction, and with "inchoate" offenses, attempts and abetting, counseling
or procuring the commission of offenses outside the prosecuting jurisdiction. In Canada, it is
enough that a significant proportion of the events constituting the offense took place within the
territory. [ 36 ] In New Zealand, the Crimes Act 1961, s 7, provides that if "any act or omission
forming part of any offense, or any event necessary to the completion of the offense" occurs in
New Zealand then the offense is deemed to have been committed in New Zealand, even if the
person concerned was not in New Zealand at the time. The law reform agencies of Canada,
England and Wales have found that such a provision has merit, but should be confined to
situations where the offense was also prohibited under the law where the other acts or omissions
occurred. [ 37 ] The Criminal Codes of Queensland and Western Australia, ss 12-14, provide
that, if a person commits offenses or makes omissions outside the jurisdiction which, if
committed within the jurisdiction would be an offense under the Code, that person, upon entering
the jurisdiction, is deemed to have committed that offense. [ 38 ] These provisions do not appear
to have been drawn to the attention of the British and Canadian law reform agencies, but
represent a solution which is both pragmatic and defensible under international law.

Courts of any nation have jurisdiction to try an offense if it occurred in, or its perpetrators have a
significant connection with that nation or one of its subdivisions (the "forum"). The generally
accepted exceptions are for "universal" crimes, or "crimes against humanity", such as piracy, (the
earliest) and genocide. [ 39 ] To achieve more general applicability miscreant behavior in
cyberspace would have to reach a level of universal unacceptability deserving of such general
condemnation. Some nation-states take the view that their laws may properly apply if an act is
committed against their citizens wherever situated [ 40 ] but common law jurisdictions have
generally taken the opposite view. [ 41 ] In any event, validity of the extraterritorial operation of
laws of this type seems confined only to specific offenses created by statute.

A justification for extraterritorial jurisdiction has been expressed by a former U.S. prosecutor:

Extraterritorial jurisdiction provides the authority by which the United States may
enforce its criminal laws against those who conduct their criminal acts from the
sanctuaries of foreign jurisdictions. In a world made smaller by supersonic jet travel,
cellular telephones, telefax machines, international bank transactions by wire
transfer and the use of computers, the need to protect the nation's citizen and the
lawful order of our society requires the enactment of legislation with the authority
to prosecute those who commit crimes beyond the border. [ 42 ]

These are understandable sentiments, but states often disagree on the kinds of behavior that
should be criminalized. Such differences are an essential attribute of national sovereignty,
provided that the manner of exercise of sovereignty is not itself contrary to international law or
commonly accepted morality. Anti-competitive behavior by business may in fact be the overt
and consciously chosen policy of national governments, especially in the face of predatory
competition by foreign businesses. It is, nevertheless, an exercise of sovereign power that must,
as a matter of public international law, be respected. The criminalization of certain activities, for
example, abortion, advertising and production of alcohol and drugs (including tobacco) for
recreational use, pornography, advertising and certain economic activities may be regarded as
abhorrent and criminal in some nations, but accepted and even constitutionally protected in
others.

There are, however, some commonly accepted extraterritorial applications of criminal laws.
Most states claim the right to exercise power over contiguous. waters and often within their
maritime zones, even though these may technically lie beyond recognized territorial boundaries.
[ 43 ] Ships (probably including drilling rigs) and aircraft are traditionally regarded as an
extension of the territory of the state in which they are registered. States have a right to protect
their diplomatic and consular staff serving in other countries, and the physical premises occupied
by embassies and consulates is regarded, for many purposes as the territory of the State they
represent. Similar principles may apply, with the consent, in peacetime, of the state where the
missions are located, to naval and military forces stationed outside their home territory for
example, U.S. forces stationed in Okinawa.

Nation-states also have a right to protect themselves against activities carried on outside their
territory with a view to overthrowing or destabilizing their institutional structures. Treason and
similar offenses may, under the rules of most legal systems, be punishable, even though the
offenses were committed in the territory of another State. [ 44 ] Some nation-states might
consider disruption of networked communication would have such deleterious impacts on
activities within their jurisdiction that perpetrators causing such disruption would be considered
domestic felons.

The claim to criminal jurisdiction that has excited the most comment, however, is the claim to
jurisdiction where behavior, wherever and by whom it may be committed, has effects on or in the
territory of the prosecuting state. This is the basis of the controversy surrounding attempts by the
U.S.A. to enforce its anti-trust laws extraterritorially. The rationale for such law may be easier to
comprehend when the activity complained of is not commercial behavior regarded as normal in
most countries, but rather the production of heroin for non-medicinal use. Suppose A, B and C,
who are all residents and citizens of Illyria, produce heroin in Illyria (where such production is
legal) and offer it for sale over the Internet, where potential purchasers in Arcadia arrange for
sale and delivery in a third country. Arcadian law penalizes the production, as well as sale and
possession of heroin for non-medicinal use. If A ceased to produce heroin in 1992 and closed its
Web site offering it for sale then visited Arcadia as a tourist in 1995, would Arcadia have
jurisdiction to try him for a crime based on events which happened in Illyria in 1992 but caused
effects in Arcadia? [ 45 ] Transnational transactions-far more common now than a century, or
even 25 years ago-raise problems which the law finds extremely difficult to resolve. [ 46 ] When
transactions are accomplished over computer mediated communication networks, the challenge
to the efficacy of local law is even more threatening. If the behavior is considered criminal by the
law of one place, why should the perpetrators, assuming they can be found and brought to trial,
not be treated as if they were within that place when the prohibited activity occurred?

It seems reasonable for a country to assert jurisdiction if at least one vital element occurs within
its territory and that element is also an essential element of a crime in the state where the other
elements of the offense took place. To go beyond this risks trampling on the national interests
and sovereignty of the other members of the international community.

Extradition and enforcement

Few, if any countries, enforce penal sentences or orders of foreign governments. [ 47 ] Even
within federal systems, special legislation or constitutional provisions are Used to enforce minor
penal sanctions such as "on the spot" fines for traffic and parking offenses. The reason for this
lies in the assumption, in international law and practice, that no nation-state will attempt to
exercise its power or public authority within the territory of another, without its express
agreement. Even when the United States offends international law and the feelings of other
nations by arresting and abducting persons within their territories, [ 48 ] it does not attempt to
carry out sentences of U.S. courts in other countries.

The power to tax is regarded, like the power to punish, as an exercise of sovereign power. In the
absence of the agreement or treaty arrangements, neither the civil nor criminal courts of any
country will recognize or enforce the penal or revenue judgments or orders made by courts (or
other aspects of the implementation of public policy) of those countries. [ 49 ]

Where a person commits a crime under the laws of country A but is physically in country B the
solution seems to lie in extradition. [ 50 ] A requests B to apprehend and hand over the accused.
Extradition involves both the executive and judicial branches of government and usually takes
place under a bilateral treaty that sets out grounds for extradition, although ad hoc extradition is
possible. Each country also usually has general extradition legislation, setting out general
procedures for, and conditions of, extradition orders. After initial contact between governments,
leading to police action, such as the issue and execution of an arrest warrant, the accused must be
brought before a court where he or she is. That court must be satisfied of matters set out in the
legislation, and the accused has the opportunity to contend that extradition is improper-for
example that the crime of which he or she is accused is not an "extradition" crime" within the
meaning of any relevant treaties or legislation. The most salient characteristic of an extradition
crime is that the behavior complained of must constitute activity prohibited by the criminal law
of both countries, and must not be a political or ideological. If the prosecution succeeds, the
court orders that the accused be surrendered to the authorities of the prosecuting government.
That government then disposes of the matter under its own laws, generally by a criminal trial in
its own courts.

The procedure may be complex and time-consuming, and the authorities of the prosecuting
nation may decide that the time and expense are not justified, relative to the returns. It is
questionable whether the peccadilloes that occur in computer mediated communication networks
have yet reached the level of concern that would warrant extradition procedures. However,
behavior online that is considered sufficiently abhorrent in a number of countries with major
online services to warrant extradition procedures would go a long way toward curbing such
activities.

Civil law - rules of Private International Law

[ 51 ]

Recognition and enforcement law

In almost all countries, courts will recognize and enforce judgments and orders of foreign courts,
especially those that provide for the payment of money. [ 52 ] Recognition and enforcement is
not automatic, in the absence of local legislation which provides for registration of foreign
judgments and generally requires considerable formalities. [ 53 ] The normal procedure for
enforcing a civil judgment awarded by a foreign court is that the person seeking to enforce that
judgment must commence the appropriate claim in a forum court seeking payment of the debt
created by the judgment. The judgment debtor may deny that the foreign court had jurisdiction to
make the judgment, or that there was a procedural irregularity (such as a failure to afford the
judgment debtor a fair hearing); but normally the forum court will not question the substantive
finding of the foreign court and re-litigate the issue. Penal and revenue judgments and their
judgments or orders that are "repugnant to the public policy" of the forum (as determined by the
courts of that forum) may not be recognized and enforced. [ 54 ]

The court may refuse to recognize and enforce a foreign judgment if it finds that the court giving
the original judgment lacked jurisdiction. That question, like the question of jurisdiction in
criminal cases, is usually decided on some basis of territoriality. The basic ground for
recognizing jurisdiction of a foreign court is that the court determining the issue would itself
exercise jurisdiction in similar circumstances.

The most obvious basis of jurisdiction is physical presence of the defendant personally in the
jurisdiction, even if that presence is fleeting. [ 55 ] The question is more difficult if the defendant
is an artificial legal person, typically a corporation, which has no personal physical presence
anywhere. Generally courts recognize jurisdiction of foreign courts over corporations based on
the corporation being registered, doing business or having significant assets in the jurisdiction.
Defendants may submit to the jurisdiction of the foreign court by defending the action.
Defendants who are not physically present in a country may nevertheless be subject to the
jurisdiction of its courts if they are domiciled in that country, and in some cases if they are
residents or nationals of that country. In the U.S., the Supreme Court has placed a constitutional
gloss over the area, by holding that the "due process" clause of the constitution requires at least
minimal contacts with the jurisdiction. [ 56 ]

Most states allow the joinder of a defendant who is neither domiciled nor physically present in
the jurisdiction if the circumstances giving rise to the claim have a connection with that
jurisdiction. In the U.S., these are called "long-arm" statutes. Most other common law
jurisdictions have more limited provisions based on Order 11 of the Rules of the High Court In
England. For example, Commonwealth Courts usually have jurisdiction in an action for breach
of contract if that contract was made in the forum state, no matter where the breach occurs. [ 57 ]
Similarly if the claim is founded on a tort and the damage was sustained, or resulted from an act
committed within the jurisdiction, the courts will entertain the action. [ 58 ] A statute of this type
was invoked in Williams v.. The Society of Lloyd's [ 59 ] difficulties arose because the judge
refused to classify the cause of action as a "tort".

Choice of law

Once the courts of a state take jurisdiction over a civil claim, the next task is to determine which
of the legal systems will determine the substantive outcome of the case. By definition more than
one legal system is potentially involved, and in common law systems, the courts resort to a series
of complex rules, known as "choice-of-law" rules, to determine this issue. Generally, in contract
law cases, the parties are free to choose a governing law, and if they fail to do so the court will
apply the system of law that has the closest or most significant connection with the transaction.
[ 60 ] In tort claims, courts in the U.S. generally make an assessment of which legal system has
the greatest interest in the proceeding and apply the law of that state. [ 61 ] Common law courts
within the Commonwealth tend to apply the law of the place where the unlawful act was
committed. They offer a remedy only if the acts giving rise to a tort claim also unlawful in the
forum. [ 62 ] There are weaknesses in both the U.S. and Commonwealth positions. [ 63 ] The
complexity of law is a deterrent to litigation.

Is unification or harmonization of law a solution?

A preferable solution seems to be bilateral or multilateral international agreements under which

governments concur that each will make criminal, under its domestic laws, the conduct which all
desire to prohibit. This process is sometimes called "unification" or "harmonization" of law. If
any activities in the Networld are to be made criminal, even though this process seems
cumbersome, it may be the only acceptable means available. There are problems of securing
agreement of uniform laws. [ 64 ]

Implications for Democracy

The social nature of legislation

Market forces, in practice, do not give adequate protection to consumers of 'household or

domestic' goods and services, because of marked inequalities of access to information and
economic power. Because everyone is a consumer, in democratic societies legislation has been
enacted to correct some of the patent failures of the market. [ 65 ] Rectification of market
failures, in practice, depends on political action within a territorially defined nation-state, within
which a political contest may take place between the interests of manufacturers and distributors,
on the one hand, and that of consumers on the other. The result of this political contest is often
legislation-in this case, legislation protecting the interests of consumers as such, and redressing a
perceived imbalance. [ 66 ] Democracy, above all, is about who exercises power in society;
having information or knowledge is essential, but doing something with that information is the
real test. Within society, groups contend about the way in which power is exercised. In other
words, within a nation, democratic government allows consumer interests to Use the
countervailing power of the state to rectify, in part, the inherent imbalance of power in the
market. This facet of democracy-its appropriation by interest groups-is one reason why the
"public choice" school criticizes representative democracy.[ 67 ]

The use of countervailing political power by organized consumers (and its analogs, such as the
use of governmental power by organized labor to provide minimum standards of safety and
remuneration in the workplace, and efforts by citizens to improve administrative law to obtain
better control over and accountability of government officials) requires the existence and
apparatus of an established government. Interests which are adversely affected by the use of
countervailing power of this sort, therefore, favor reduction in the role of the nation-state, and the
removal of politics from the operations of the economy. Interest groups which favor state
intervention, and which are numerically large but lack resources, like consumer interests and
environmentalists, have greater success at local than at wider levels than do interest groups with
fewer numbers and more resources, such as organized business groups. [ 68 ] Interest groups
such as environmentalists find that they enjoy more political support at local levels, where
politicians are more sensitive to local issues, than at national or supranational levels where
political concern is more at the macro-level.

Returning to the consumer example, when goods and services are provided by suppliers who do
not necessarily have a constant and permanent physical location, or through media that are not
necessarily confined to a physical location, (or both) any thought of use of traditional
'countervailing forces' is illusory.

Where structural inequalities exist, (as between employers and employees, or between
manufacturers and consumers) many communities, acting democratically, decided that some
minimum protections are required for proper social functioning, regardless of what the parties
agree. They have therefore limited the theoretical autonomy of the parties to make contracts-a
situation which always favors those with the greater wealth and power-in ways that prevent the
Use by one party of its economic power to the detriment of the other. For example, in most
developed countries it is unlawful to contract to require a worker to work in unsafe conditions, or
for less than an agreed minimum rate of pay. It is also unlawful to agree to sell goods for a
purpose when the seller knows or ought to know that the goods are not fit for that purpose.

Consumer protection laws are an admission that a legal regime based on freely negotiated
contracts serves primarily the interests of suppliers and manufacturers. [ 69 ] The politics (and
much ideologically inspired language) about rolling back the apparatus of the nation-state is
often really about the removal of legal requirements that limit the use of untrammeled power by
the economically strong in ways that adversely affect the economically weak. Those limits are
established through democratic processes because people and their representatives place a higher
value on safety and public welfare than on the profit margins of business.

Economists have often asserted that political decisions have been made, and legislation enacted,
without full knowledge of the economic consequences. This is probably true, and better
decisions may have been made if the economic consequences had been considered if they could
have been predicted accurately. However, unwillingness in the past to consider economic
consequences does not mean that legislatures in the present and future should make decisions
based entirely on prescriptions by economists. The values represented by the bottom line in some
business's accounts are not the only values that humans hold dear. Business, undoubtedly, would
welcome a roll-back of all protection established in favor of consumers, [ 70 ] and an unfettered
right to seek profits. In practice, business probably has more influence than most citizens realize.
Yet all citizens have a right to assert their voices in determining the nature of public policy
decisions within democracies.

The effect of "transnationality"

The presence of an international or transnational element is likely to make the application of

political will, translated into law, extremely difficult. International law does not operate directly
on human behavior, or the behavior of corporations; the effective actors in international law are
nation-states. Rights and remedies acquired under the law of one nation may be recognized and
enforced in another nation, but this is not guaranteed. To obtain redress of grievances may be
difficult and technically complex quite apart from the practical difficulties of language, location
of parties, and finding a party with sufficient assets to justify initiating enforcement procedures.

Even where nation-states have the political will to unify or harmonize their legal rules, there may
be difficulties in securing an expression of the policy which produces the same effects. However,
the crucial factor in achieving any political solution to the control of anti-social behavior lies in
the effective application of legal rules by entities sufficiently capable of asserting sanctions to
effect their efficacy. If netizens can remove themselves from the scope of national laws, nation
states may defeat the political process and it is not sufficiently clear what sanctions they may
impose to assure compliance with rules they may themselves promulgate.

The Future of Nation-States

For the foreseeable future nation-states will continue to play a significant role both in the
physical and the real world. The economically strong forces in society who assert a need to
dismantle impediments to international trade often also assert a need for "strong" domestic
policies such as more public and private police services and heavier penalties for crime. [ 71 ]
Most citizens still expect basic state services, such as those which ensure physical safety and
integrity and, though they may be reluctant to admit it, basic welfare services. Businesses expect
the nation state to underpin commerce, by providing 'last resort' mechanisms for enforcing
contracts. Only nation-states can provide these. The forces that dominate the transnational
economic game, themselves beyond the control of any single nation-state, require nation-states
and will continue to tolerate them so long as they do not attempt to use the power they retain to
pre-empt decisions on major economic and social policy which they prefer to leave to "market
forces" -- that is, effectively beyond the power of any government. It is important for consumers
and other economically disadvantaged groups to ensure that nation-states have more than a
community policing role. Consumers need the machinery of nation-states in order to influence
the behavior of suppliers. They lack the power to do so on their own.

Nation-states are also required to satisfy the demands of ethnic and cultural groups who feel that
they form a political community. Some of these communities are based on language and
customs, some on religion, some on geographic ties and links with land. The former U.S.S.R.
and Yugoslavia have broken into a series of relatively powerless states mostly based on ethnicity
and language. Other ethnic groups - Francophone Quebecois, Kurds, Basques, Catalans and
several groups in Africa - wish to establish their own nation-states. Within the United States and
Australia, Amerinds and Aborigines deny the legitimacy of the European conquest with its
seizure of their lands. They assert their own rights to sovereignty over native tribal lands. [ 72 ]
Economically, these nationalist demands may not make sense, but they are a fact of modern
political life. Fortunately, in the Networld, cyberspaces are not limited in number, and any
nationality that chooses to exercise sovereign rights in cyberspace may do so establishing
cybercommunities. Cybercitizens may adhere to whatever ethos and cultural norms they choose
which do not contravene the local laws of the jurisdiction within which they reside.

While law may drag behind social and technological change, it may exercise an influence on the
direction of change. Those who are not economic determinists of either the Chicago or Marxian
school may draw hope from the idea that the forces that benefit most from globalization-large,
transnational businesses-are predicated upon and constantly require support from the legal
systems of nation- states.

Nations, and nations alone, provide a forum for the political expression of the popular will. As
we are all consumers, the popular will, given the chance and the vehicle for proper expression,
will establish legal rights for consumers within national legal systems in their capacity as such.
The political will of nations may be required to ensure that those legal rights are recognized and
enforced in other jurisdictions. Even though that recognition and enforcement may involve a

surrender of elements of sovereignty, it is relatively minor and does not amount to an abdication
of political power. Forces that, contrary to their own needs, devalue or destroy the national state
which is the vehicle for the expression of popular will are destroying also the legal infrastructure
that underpins the commerce which is their life-blood.

How Consumer Fraud Might Be Addressed in the Networld

The globalization of markets makes it very difficult for the laws of nation states to control the
excesses of businesses operating outside of their physically defined territories. Computer
mediated communication networks afford new opportunities for transnational marketing that
may ignore the restrictions afforded by national consumer protection laws. How then could
consumers be protected in this new virtual marketplace? A few possibilities are suggested, but
none really offers promise of the level of protection which consumers receive under national
laws.

First, the most obvious step would be for nations to seek bi-lateral treaties that establish
reciprocal arrangements for enforcing consumer protection laws between nation-states that have
similar laws. This would deal with issues arising where two nation-states have a great deal of
mutual trade, but suffers from similar territorial challenges if third or fourth nations are involved
in any way.

Secondly, the most effective means, but most difficult to accomplish would be an international
agreement concerning the rights of consumers online, similar to the international agreements
governing transnational postal services and telecommunications. These, of course, depend
ultimately on the agreement of nation-states and implementation in national legislation. Although
such agreements as the Law of Outer Space take years to conclude and promulgate, if

consumer transactions online become a major component of international trade,

the need to curb outrageous and damaging behavior may become sufficiently compelling to
attract the interests of major trading nations to participate in a broadly based effort to establish
international consumer protection norms.

Thirdly, the World Trade Organization might determine that consumer fraud online constituted a
threat to the viability of international trade. As sanctions may be imposed upon non-conforming
nation-states, those countries that tolerated reprehensible behavior on the part of commercial
entities operating within their territories might be censured by imposing restrictions on their
import/export privileges with participating nation-states.

Fourthly, individual nation-states may enforce their own consumer protection

laws unilaterally by inhibiting the travel of offending parties foreclosing entry into their
territories and/or by serving process upon such parties should they choose to enter. This may be a
reasonably effective sanction to deter entrepreneurs who are global operators by limiting their
mobility-if sufficient important states take this type of action. Also sanctions may be imposed
upon nationals who fund or serve as agents for offending offshore parties. Moreover, consumer
goods may be stopped at the border if they come from offending merchants. There are practical
and political difficulties in such unilateral action, and in any event it may contravene obligations
arising under international trade agreements such as the General Agreement on Tariffs and
Trade.

Fifthly, Information Service Providers and Internet Access Providers may themselves unite to
establish industry norms for appropriate behavior in offering consumer transactions over their
systems. Commercial entities that fail to comply may be refused service. Such arrangements are
strictly private, and, despite their beneficial consequences for consumers, they may run the risk
of offending against national anti-trust or other pro-competition laws.
Sixthly, major commercial interests that choose to offer products online may establish industry
organizations that purport to guarantee an optimum level of consumer protection for purchasers
of their products. Like the Good Housekeeping seal of approval, participating companies may
advertise their compliance as a major attraction to consumers who wish to be assured that they
are engaged in a fair and equitable transaction free of fraudulent and unverifiable representations.
This has the disadvantage that abuse of consumers is more usually committed by marginal
operators rather than established firms with sound reputations, and these marginal operators are
unlikely to join industry organizations.

In summary, if trade online proliferates and consumer fraud becomes a major problem, nation-
states and commercial interests that provide online access are fairly restricted in the action they
may take to curb unacceptable and deleterious practices. Certainly if consumers perceive online
commerce as a hazardous place to make purchases, they will not choose this alternative, and a
major opportunity for electronic commerce may be forfeited. Consequently, there is strong
motivation for reputable business to observe high commercial standards of behavior.
Unfortunately, most harm results from the activities of marginal operators who do not care for
their reputation and operate entirely in the short-term, or by established firms driven by
competitive pressures to drop their standards below an acceptable level. The theoretical tendency
of market forces to provide safe and wholesome commodities at an affordable cost does not
match practical reality. By the time market forces have time to operate, far too many consumers
are dead, maimed, or impoverished. Within a nation-state, national laws may prevent some of
this harm, but once national boundaries are crossed, their effectiveness is limited, and consumers
can hope for very limited protection.

Footnotes

1. BA, LLB (Hons) (Sydney); LLM (Columbia); Barrister and Solicitor (PNG and
ACT); Barrister, (NSW); Professor of Law, University of Wollongong,
Northfields Avenue, Wollongong, NSW, Australia, 2522. E-mail:
j.goldring@uow.edu.au Much of the work represented here was made
possible through a research grant from the Law Foundation of NSW, and
visiting appointments at the Law Centre, University of Alberta, Canada and
the Benjamin N Cardozo Law School of Yeshiva University, New York City. An
article expanding on many ideas raised here will appear in the Cardozo
Journal of International and Comparative Law.
2. Jim Carroll, "Lawsuit sends a wake up call to senior management," Computing
Canada, Vol. 21, No. 26, p. 028, 20 December 1995; Paul Taylor, "Virgin Air
fined for false ad on the Internet," The Financial Post, 24 November 1996, p.
7.
3. [1993] 1 VR 274, esp 310-312. (Supreme Court of Victoria, McDonald J.)
4. Rule 7.01(1)(i).
5. Rule 7.01(1)(j).
6. For fuller explanation, see J Goldring, "Consumer Law and Legal Theory:
Reflections of A Common Lawyer" 13 J Consumer Policy 1, (1990) .
7. For example, Japan, Korea and Taiwan have all recently introduced product
liability legislation which is based on the 1985 Product Liability Directive of
 the European Communities: See Jocelyn Kellam, ed., (1995)Product Liability
in the Asia-Pacific, Sydney, Legal Books.
8. Text at notes 52-65.
9. James Crawford, (1979) The Creation of States in International Law, Oxford,
Clarendon Press.
10.C M Chinkin, "The Challenge of Soft Law: Development and Change in
International Law" 38 ICLQ 850 (1989) .
11.As the Turkish and French governments did in the seminal case of the Lotus
(1927) PCIJ Series A No 10.
12.Leon E Trakman, (1983) The Law Merchant: The Evolution of Commercial
Law, Littleton, Colo, Fred B Rothman & Co.
13.Clive Schmitthoff "International Business Law, A New Law Merchant" 129
Current Law and Social Problems (1961) : see also his Commercial Law in a
Changing Economic Climate London, Sweet & Maxwell, (1977), 2-3, and
(more skeptically) Rene David, "Le droit du commerce international: une
nouvelle tache pour les legislateurs nationaux ou une nouvelle 'Lex
mercatoria'" in UNIDROIT (1977), New Directions in International Trade Law,
Oceana, Dobbs Ferry, 5.
14.Still the best, and most thoughtful account of the subject (at least in terms of
appreciating the position of people outside the United States, is Kingman
Brewster Jr, (1958) Antitrust and American Business Abroad, New York,
Toronto & London, McGraw Hill, but see also Lea Brilmeyer, (1986) An
Introduction to Jurisdiction in the American Federal System, Charlottesville,
VA, Chap 10; for a non-U.S. view, J-G Castel, (1988) Extraterritoriality in
International Trade, Butterworths, Toronto and Vancouver, Chap 2 is useful.
Most self-respecting law reviews have carried at least one article each year
on this subject. I will not attempt to refer to all of them. There is an excellent
select bibliography by Thomas Amos Behney Jr, 50 Law and Contemporary
Problems 3, 303 (1987).
15.American Banana Co v United Fruit Co 213 U.S. 347 (1909).
16.15 U.S.C §22.
17.see Joseph P Griffin, "Antitrust and Act of State" in John R Lacey, ed, (1983)
Act of State and Extraterritorial Reach: Problems of Law and Policy, Chicago,
ABA Section of International Law and Practice. The Restatement of the Law
(Third): The Foreign Relations Law of the United States (1986) §421 (j) does
accord jurisdiction to United States courts over persons where "the persons . .
. had carried on outside the state an activity having a substantial, direct and
foreseeable effect within the state, but only in respect of such activity". Even
this circumscribed statement is, in terms of public international law,
controversial, at least everywhere outside the U.S..
18.148 F 2d 416 (2d Cir, 1945).
19.Continental Ore Co v Union Carbide and Carbon Corp 370 U.S. 690 (1962).
20.Griffen Bell Jr, in A V Lowe, (1983) Extraterritorial Jurisdiction: An Annotated
Collection of Legal Materials, Cambridge, Grotius Publications, 4-5.
21.John H Shenefeld, "The perspective of the U.S. Department of Justice", in
Griffin, supra, note 123. 13.
22.R Higgins, "The Legal Basis of Jurisdiction" in Cecil J Olmstead, ed, (1984)
Extraterritorial Application of Laws and Responses Thereto, Oxford,
International Law Association and ESP Publishing Ltd, 7-13.
23.for British reactions: see S Silkin, in Joseph P Griffin, ed, (1979) Perspectives
on the Extraterritorial Application of U.S. Antitrust and Other Laws, Chicago,
American Bar Association, at 30-32; for Canadian reactions, D Gordon Blair,
ibid, 65-7; for Australian reactions, see Laurence W Maher, "Anti-Trust Fall-
out: Tensions in the Australian-American Relationship" 13 FL Rev 103 (1982);
Warren Pengilley "Extraterritorial Effects of United Sates Commercial and
Antitrust Legislation: A View from 'Down Under'" 16 Vanderbilt J Trans Law
833 (1983).
24.The 1982 agreement between Australia and the U.S. is an Appendix to Lacey,
supra, note 17.
25.for example, R Y Jennings, "Extraterritorial Jurisdiction and the United States
Anti-trust Laws" [1957] BYIL 146; Brewster, supra, note 14; cf H P de Vries
and A Loewenfeld, "Jurisdiction in Personal Actions - A Comparison of Civil
Law Views" 44 Iowa L Rev 306 (1959); Kurt H Nadelmann, "Jurisdictionally
Improper Forum" in XXth Century Comparative and Conflicts Law - Legal
Essays in Honor of Hessel E Yntema, (1961); L I de Winter, "Excessive
Jurisdiction in Private International Law" 17 ICLQ 706 (1968); Hans Smit,
"Common and Civil Law Rules of In personam Adjudicatory Authority: An
Analysis of Underlying Policy" 21 ICLQ 335 (1972).
26.If, in fact activities in cyberspace can be seen as being in any way different to
those conducted in "real" space, so long as that space is beyond the
territorial boundaries if the state concerned: see I Trotter Hardy, "The Proper
Legal Regime for Cyberspace", 55 U Pitt L Rev 993-1000 (1994).
27.In its December 1995 Second Report, the Australian Senate Committee on
Computer On-line Services has recommended a series of measures, including
criminal sanctions, to proscribe the communication of pornographic material.
28.Brilmeyer, supra, note 14; R Higgins, supra, n. 22, 7-13; (as to criminal law)
Restatement of the Law (Third): The Foreign Relations Law of the United
States (1986) §422; A V Lowe, "The Problems of Extraterritorial Jurisdiction:
Economic Sovereignty and the Search for a Solution" 34 ICLQ 724 (1985); J-G
Castel, (1988) Extraterritoriality in International Trade: Canada and the
United States of America Practices Compared, Toronto and Vancouver,
Butterworths .
29.In both the U.S.A and Australia, since the Sherman Act of 1890, the tendency
has been to include both civil and criminal sanctions for contravention of
provisions of legislation designed to promote competition, as this avoids
some consequences of bureaucratic "capture" and expenses for the state.
30.Glanville Williams, "Venue and the Ambit of Criminal Law - Part I" 81 L Q Rev
275, 277 (1965); The U.S. position with respect to criminal law is similar:
Restatement (Third): Foreign Relations §422.
31.W E Hall, (1894) A Treatise on the Foreign Powers and Jurisdiction of the
British Crown, Oxford, Clarendon Press, 3.
32.Enforcement by way of confiscation of assets may be permissible if the
assets are within the jurisdiction: Banco Nacional de Cuba v Sabbatino 376
U.S. 398 (1964).
33.Cox v Army Council [1963] AC 48 (HL); Air-India v Wiggins [1980] 1 WLR 815;
2 All ER 593.
34.Law Reform Commission of Canada, (1984) Criminal Law Working Paper No
37, Extraterritorial Jurisdiction, Ottawa; esp 1-3; Sharon A Williams and J-G
Castel, (1981) Canadian Criminal Law, International and Transnational
 Aspects, Toronto, Butterworths, Chapter 2; Edward M Morgan, (1990)
International Law and the Canadian Courts, Carswell, Toronto, Calgary and
Vancouver, Chap 2; Jennings, supra, note 125; Michael Akehurst, "Jurisdiction
in International Law" 46 BYIL 146 (1972-3); R S O'Regan, (1988)
"Extraterritoriality", in New Essays on the Australian Criminal Codes, Sydney;
Christopher L Blakesley, "United States Jurisdiction over Extraterritorial
Crime" 73 J of Crim L and Criminology 1109 (1982).
35.Blakesley, supra, note 34, probably gives the fullest account of the then
current position in the U.S.A; see also Behney, supra, note 14; In the UK see
Akehurst, supra, note 34; Great Britain, The Law Commission, (1970)
Territorial and Extraterritorial Extent of the Criminal Law, WP 29, London; in
Canada, G V LaForest, (1970) The Ambit of Criminal Law, Ottawa, Law Reform
Commission of Canada, Working paper: Law Reform Commission of Canada,
supra, note 34
36.Libman v R [1985] 2 SCR 178; 21 DLR (4th) 174.
37.Great Britain, The Law Commission, (1970) Territorial and Extraterritorial
Extent of the Criminal Law, WP 29, London, 47.
38.O'Regan, supra, note 34
39.for example, Polyukhovich v The Commonwealth (1991) 172 CLR 501 (High
Court of Australia). The trial of Adolf Eichmann in Jerusalem is also often cited
to support this principle, and there is little doubt that Israel, or any other
State, could have tried Eichmann for these crimes. What was questioned (and
is questioned in other cases) is the use of illegal means to bring defendant s
to such cases before the courts.
40.Such circumstances gave rise to the leading case of The Lotus (above).
41.R v Keyn (1876) 2 Ex D 63 (Court for Crown cases reserved); Croft v Dunphy
[1933] AC 156; 59 CCC 141 (Privy Council).
42.Richard D Gregorie, "Extraterritorial Jurisdiction: Its use, Its Roots and Its
Validity" 15 Nova L Rev 625 (1991), (referring to General Noriega, the former
president of Panama.)
43.see Michael Hirst, "Jurisdiction Over Cross-frontier Offenses" 97 L Q Rev 80
(1981). See also Law Reform Commission of Canada, (1984), Criminal Law
Working Paper No 37, Extraterritorial Jurisdiction, Ottawa; esp 1-3; Sharon A
Williams and J-G Castel, (1981)Canadian Criminal Law, International and
Transnational Aspects, Toronto, Butterworths, Chapter 2; Edward M Morgan,
(1990) International Law and the Canadian Courts, Carswell, Toronto, Calgary
and Vancouver, Chap 2; Jennings, supra, note 125; Michael Akehurst,
"Jurisdiction in International Law" 46 BYIL 146, (1972-3); O'Regan, supra, note
34; Blakesley, supra, note 34
44.for example, Joyce v DPP [1946] AC 347; the House of Lords found that
English courts had jurisdiction to try Joyce (also known as "Lord Haw-haw")
who was a citizen of the Republic of Ireland, and whose acts, (broadcasting
Nazi propaganda in English) amounting to treason, had been committed in
Germany.
45.cf DPP v Doot [1973] AC 807.
46.Consider these cases:

DPP v Stonehouse [1978] AC 55, where a former British Cabinet minister faked his
death in Florida, intending to defraud an English insurance company;
Treacey v DPP[1971] AC 527 where the accused wrote and posted in England a
 blackmailing letter demanding money; the letter was delivered to the addressee in
Germany; cf Re Chapman [1970] 5 CCC 46 (Ontario CA.) ;
R v Blythe (1895) 1 CCC 263 (BC SC) where a man in British Columbia wrote letters to a
girl in Washington State which constitute an attempt to seduce her while she was under
age;
Ward v R (1980) 142 CLR 308 (High Court of Australia) where D and V were both
residents of Victoria. D was standing at the top of a steep bank of a river which forms the
border between Victoria and NSW. D shot V, who was standing on a sandbank in the
river, intending to kill him, and succeeded. When the matter came to trial it was
established that the boundary of Victoria is the bank of the river on the Victorian shore,
so that the sandbank on which V was standing is in the territory of NSW. The NSW
Courts assumed jurisdiction and dealt with the matter. See O'Regan, supra, note 34, 14.

47.Glanville Williams, supra, note 130; L Collins ed., (1993) Dicey and Morris on
the Conflict of Laws, 12th ed, London, Sweet & Maxwell, 97 say that "There is
a well-established and almost universal principle that the courts of one
country will not enforce the penal and revenue laws of another country.";
Restatement of the Law (2nd) Conflict of Laws §§ 89, 120; Restatement of the
Law (3rd) Foreign Relations § 422.
48.As the United States did in the Escamilla case, referred to in LaForest, supra,
note 135. In that case and subsequently (eg General Noriega) U.S. law
enforcement officers have arrested foreign nationals in foreign countries with
the purpose of removing them physically, and regardless of the wishes of the
State where the persons are found, for trial in the United States : see Ethan
A. Nadelmann, (1993) Cops Across Borders: The Internationalization of U.S.A
Criminal Law Enforcement, University Park, PA, Pennsylvania State University
Press. The legality of acts of this type was upheld by the U.S. Supreme Court:
Ker v. Illinois 119 U.S. 436 (1886). In the cases of Eichmann and some other
cases, Israel has also abducted persons accused of crime under its laws in
the territory of other states.
49.In the UK, Australia, Canada and most Commonwealth Countries the
decisions by the Privy Council in Sirdar Gurdyal Singh v. Rajah of Faridkote
[1894] AC 679 and Attorney-General (New Zealand) v. Ortiz [1984] AC 1 and
the House of Lords in Government of India v. Taylor [1955] AC 491 still
represent the law. See Attorney-General (UK) v. Heinemann Publishers
Australia Pty Ltd (the Spycatcher case) (1988) 165 CLR 30, esp 43; Morgeaud
Investments Ltd v De Savoie [1990] 3 SCR 1074, 76 DLR (4th) 256; Hunt v T
& N plc [1993] 4 SCR 289; L Collins ed., (1993) Dicey and Morris on the
Conflict of Laws, 12th ed, London, Sweet & Maxwell, 97; P E Nygh, (1991)
Conflict of Laws in Australia, 6th ed, Sydney, Butterworths, 242-245; J-G
Castel, (1994) Canadian Conflict of Laws, 3rd ed, Toronto and Vancouver.
161-163. For the U.S. position see Restatement of the Law (Second) Conflict
of Laws §§ 89, 98-102; Hilton v. Guyot 159 U.S. 113 (1895); H.M. The Queen
in Right of British Columbia v. Gilbertson 597 F. 2d 1161 (9th Cir. 1979). It is
interesting that U.S. Courts (1) appear to be able, even in the absence of
reciprocal legislation, to enforce foreign revenue or tax law s: Restatement of
the Law (Second) Conflict of Laws § 89, note (b); (2) have refused to give
extraterritorial operation to U.S. legislation dealing with employment
conditions (see Benz v Compania Naviera Hidalgo, 353 U.S. 138 (1957);
 McCulloch v Sociedad Nacional 372 U.S. 10 (1963); Windward Shipping
(London) Ltd. v. American Radio Association 415 U.S. 104 (1974); (cf
International Longshoremen's Association v Ariadne Shipping Co. 397 U.S.
195 (1920) and Marine Cooks v Panama SS Co., 362 U.S. 365 (1960)),
discussed in NOTE (B A Rosenfeld) "Extraterritorial Applications of United
States Laws - A Conflict of Laws Approach" 28 Stanford L. Rev 1005 (1976).
They appear to have not enforced anti-discrimination laws outside the U.S..
50.See I Shearer, (1971)Extradition in International Law, Manchester,
Manchester UP; Restatement (3rd) Foreign Relations § 475-478.
51.The following account is based on the situation in common law countries: I
have drawn on available literature of Australia, Canada, the UK and the U.S..
The basic principles governing recognition and enforcement of foreign
judgments in each of these countries is the same, though the federations
may differ in their treatment of internal conflict of laws, and the "due
process" clause of the U.S. Constitution has affected judicial attitudes in that
country. The "long-arm" statutes of some states are considered below.
Reference may be made to P E Nygh, (1991) op cit; J-G Castel, op cit; (994);
L. Collins op cit; (1993); Restatement of the Law (Second) Conflict of Laws,
Chap. 3, (1971), and Gary B Born with David Westin, (1992) International
Civil Litigation in United States Courts, 2nd ed., Kluwer Law and Taxation
Publishers, Deventer and Boston, Chapter 2.
52.Orders affecting status of persons, such as orders for the custody of children
of marriages that have ended, create different problems. Because that type
of proceeding has few analogies with events relating to the use of
cyberspace, it will not be pursued further.
53.Restatement of the Law (3rd) Foreign Relations § 481-482. Like most of the
principles set forth in the Restatement, these principles are always subject to
a requirement of "reasonableness".
54.Restatement of the Law (2nd) Conflict of Laws, (1971) § 98, which states that
a "valid judgment rendered in a foreign nation after a contested proceeding
will be recognized in the United States so far as the immediate parties and
the underlying cause of action are concerned"; Restatement of the Law (3rd)
Foreign Relations § 482(2)(d); Attorney-General (UK) v Heinemann Publishers
Australia Pty Ltd (the Spycatcher case) (1988) 165 CLR 30 involved an
attempt by the UK government to prevent publication in Australia of
information which it alleged to contravene provisions of its official secrets
legislation. The High Court of Australia drew an analogy between that type of
legislation and penal and revenue laws: see esp at 43.
55.Restatement (3rd) Foreign Relations § 482(b); Restatement (2nd) Conflict of
Laws §28; Laurie v Carroll (1958) 98 CLR 310; Amusement Equipment Inc v
Mordelt 779 F 2d 264 (5th Cir, 1985).
56.International Shoe Co v Washington 326 U.S. 310 (1945); Helicopteros
Nacionales de Colombia v Hall 466 U.S. 408 (1984); Brilmeyer, supra, note
14.
57.English Rules of Court O 11, r 1(1)(d); for example, where a contract is made
by fax or telex, the English courts have ruled that the contract is made in the
place where the acceptance is communicated to the offeror, i. e. the place
where it is received. So if the acceptance of an offer is received in England by
telex, fax or e-mail, the contract is made there, and English Courts will
 entertain an action wherever the breach may have occurred: See Dicey &
Morris s 329; Nygh, 39-41.
58.English Rules of Court, O 11, r 1(1)(f); Dicey & Morris 340; Nygh 42-52. See
Distillers Co (Biochemicals) Ltd v Thompson [1971] AC 458; Moran v Pyle
National (Canada) Ltd (1973) 43 DLR (3d) 239: Hunt v T & N plc [1973] 4 SCR
289; J Goldring. "Product Liability and the Conflict of Laws in Australia" 6
Adelaide L Rev 151 (1978); Peter Kaye, (1991) Private International Law of
Tort and Product Liability, Dartmouth, Aldershot .
59.[1993] 1 VR 274, esp 310-312. (Supreme Court of Victoria, McDonald J.)
60.Bonython v The Commonwealth [1951] AC 201; Amin Rasheed Shipping Corp
v Kuwait Insurance Co [1984] AC 50; Restatement of the Law (2nd) Conflict of
Laws §188.
61.Babcock v Jackson 191 NE 2d 279 (1963); Restatement of the Law(2nd)
Conflict of Laws §145.
62.Phillips v Eyre (1870) 6 LR QB 1; but cf Breavington v Godleman (1988) 80
ALR 362.
63.Great Britain, Law Commission, (1990) Private International Law: Choice of
Law in Tort and Delict, LRC 193, London, HMSO: Australia, The Law Reform
Commission, (992) Choice of Law, ALRC 58, Canberra.
64.J Goldring, "Uniformity, Harmonisation or Restatement of Laws: Desirability
and Implementation" 68 Reform, 68, 7 (1996); for a fuller account: J.
Goldring, 'Unification of Law in Australia' (1977) 1 Uniform Law Review 82;
and 'The Unification and Harmonisation of the Rules of Law' 9 Federal Law
Review 284 (1978).
65.for example, John Kenneth Galbraith, American Capitalism: The Concept of
Countervailing Power, Boston, Houghton Mifflin, (1952) Chaps 9-10; Cass R
Sunstein, "Disrupting Voluntary Transactions" In J Roland Pennock and John W
Chapman, Eds, (1989) Markets and Justice (NOMOS XXXI), New York and
London, New York University Press,279; Michael Pertschuk, (1982) Revolt
Against Regulation: The Rise and Pause of the Consumer Movement,
Berkeley, Los Angeles and London, University of California Press, Chap 1, 62-
66ff.
66.Mark V Nadel, (1971) The Politics of Consumer Protection, Indianapolis and
New York, Bobbs-Merrill. See also various contributions in David A Aaker and
George S Day, eds, (1978) Consumerism, Search for the Consumer Interest,
3rd ed., New York, The Free Press; Stephen Breyer, (1982) Regulation and its
Reform, Cambridge, Mass, Harvard University Press, especially chaps 1 and
9: more recently Anthony Ogus, (1994) Regulation: Legal Form and Economic
Theory, Oxford, Clarendon Press, Part 1.
67.for example, Daniel A Farber and Phillip P Frickey, (1991)Law and Public
Choice: A Critical Introduction, Chicago and London, University of Chicago
Press, Chapter 5, for a discussion of these arguments.
68.Ogus, supra, note 67, 99-101 cites the success of industry groups which had
been unsuccessful at local or national level succeeding with the central
organs of the European Union.
69.Patrick S Atiyah, (1979) The Rise and Fall of Freedom of Contract, Oxford.
70.Robert B Reich, (1991) The Work of Nations: Preparing Ourselves for the 21st
Century, New York, Knopf, esp 140, 301-305.
71.P Hirst and G Thompson, "Globalization and the Future of the Nation-state" 24
Economy and Society 408 (1995).
 72.Eric Hobsbawm, (1995) Age of Extremes: The Short 20th Century 1914-1991,
London, Abacus, 428.

The Globalization of Consumer Credit

A consumer’s ability to buy and sell is strongly influenced by a new set of rules. Risk-based
credit scoring models, with incredible reach and thoroughness, present new challenges for
consumers. Some are threatened with elimination from the credit markets. Others, particularly
the new immigrants, won't be able to participate.

In fact, millions of consumers will pay more for – or be denied – credit, insurance, rent or
utilities because of the growing use of the consumer “Credit Score”. In virtually every household
budget a secret sacrifice is being waged on consumers as creditors use the credit score to justify
increased fees on the highest level of consumer debt in history. This system of consumer
judgement is quick and terribly efficient. The Information Policy Institute called this system "the
envy of the world" before the U.S. House Committee on Financial Services, May 8, 2003.

The credit system is a complex process of reporting, scoring and distributing information on
consumer credit. The credit system works along side an alarmingly small number of private
entities carefully supported by governmental laws. These laws are fiercely protective of these
collection and scoring systems because without them consumer spending might be threatened.
Governments must protect and promote the extension of credit and ensure its spending
economies have accuracy and widespread availability. The process is designed to remove risk
from the credit system. The risk, however, are consumers that make up the system itself.

In 1946, outstanding U.S. consumer credit was $55 billion. By 1970 it had reached $556 billion,
a ten-fold increase. Today outstanding consumer credit stands at $7 trillion. Alan Greenspan, in a
speech to the U.S. Congress in 2003 stated that "unless we have some major sophisticated system
of credit evaluation continuously updated, we will have very great difficulty in maintaining the
level of consumer credit currently available because clearly, without the information that comes
from various credit bureaus and other sources, lenders would have to impose an additional risk
premium..."

Even without this uncertainty, risk premiums are not retracting but dramatically expanding. The
risk premium infrastructure is created, in part, by the Fair Credit Reporting Act or its equivalent
internationally. The credit score has created a system that lenders can use to exploit its
algorithmic power to model debt data. This gives them the ability to squeeze more profits from
their debt portfolios. For evidence of this, one has to look no further than the dramatic rise in
sub-prime mortgage notes, or stratospheric interest rates in the credit card industry as premiums
for auto and home policy rates soar. Even the utility industry has discovered risk-based pricing.
In some states, including Texas, the credit score allows utilities to justify increased rates on low-
score energy users.
However, governments have a responsibility to protect the consumer. Through a series of
consumer protection statutes, in countries around the world, new laws are tightening up the
loopholes in the credit system. Many of these changes focus on who has a permissible purpose to
view the reputation of a consumer and how is the data being used in the name of privacy. Despite
the public good of protecting the consumer, it is the consumer reporting and scoring system
government aims to most protect.

Contrary to popular belief, the credit reporting system is not a consumer-purposed instrument. Its
customers are the firms to whom it sells its data. The raw material used to manufacture its
database is voluntarily provided to it by a creditor community, that in turn, continually re-
purchases its data on consumer reputations. Therefore, the consumer is not a direct party to this
complex transaction. He is merely the judged.

As the world’s major credit bureaus quickly proliferate into a worldwide network of consumer
spending habits, the consumer is mostly unaware of what how these data bureaus work. Credit
data is voluntarily reported. Typically, creditors in the U.S. report both positive data (white data)
and negative data (black data), such as delinquencies and collection accounts. In reality, the
exact balance of this reporting is unknown. This contrasts with practices in some other countries
where only black data is reported. However, in the interest of protecting privacy, some countries
continue to ban the reporting of white data such as account balance and credit limit on accounts
that are not delinquent. For example, Australia’s Commonwealth Privacy Act allows reporting of
only "black" information about borrowers, plus inquiries from potential creditors. This is
common in other countries, including the U.S., where the collection industry buys and sells the
same debt account many times -- each time reporting only black data -- under a variety of
different creditor names.

It has been estimated that over 75% of all credit decisions are based on the credit score produced
by an American company, Fair Isaac Company. Their credit score, known as the FICO score, has
a monopoly on the formula that controls the majority of lending decisions. The FICO Score, and
variations of it developed for the major credit bureaus, is sold through the major worldwide
credit bureaus. It has few meaningful competitors and vehemently protects its franchise. Since it
is a privately-held company, it is largely immune to suggestions that it should reveal how its
score grades customers because intellecutual property laws properly protect its trade secrets.
Moreover, a developing nation government is unlikely to force the hand of these private
enterprises, as they must protect the credit system's continued proliferation and technology
thereby protecting its own consumer spending economy. The maintenance of consumer
spending, a government's private economic engine, is consequently becoming a function of a
small group of private companies themselves protected by the need for privacy and the lack of
transparency. Interestingly, it has created an industry of practitioners that use the secretcy of the
scores' formulary to promote their own personal belief that they seem to understand what makes
a FICO score go up, or down. This industry, called the credit repair industry, has overwhelmed
the consumer with fraud and mis-information.

Unfortunately for consumers, the credit scoring method is a well-guarded secret. Not even the
lender that denies you credit can tell you exactly why you have been given your particular score.
There are companies who have developed credit scores and readily reveal how they work. One
such company is Community Empower who works with consumers to provide credit education.
Without a definitive knowledge of how a scoring models works, credit education is impossible.
Tragically, credit-challenged consumers, who are often the less sophisticated consumers,
increasingly find themselves without hope of ever understanding how to outrun the efficiencies
of the modern credit system.

Consumer groups frequently claim that ”globalization” in general and

trade Liberalization in particular exert downward pressure on consumer protection standards and
will ultimately lead to a “race-to-the-bottom” of standards at lower levels of stringency. Free
trade supporters argue that free trade not only fails to undermine but in fact promotes higher
consumer protection standards. A second area of controversy concerns the effects of consumer
regulation on the international trading system. Substantial uncertainty over many environmental
and health risks contributes to the diversity of national regulatory responses to these risks while
precluding easy judgments on the legitimacy of regulatory differences between countries when
international trade disputes over such differences arise. Some analysts claim that regulatory
diversity in consumer protection poses a serious threat to international trade regimes. Others
argue that regulatory diversity is easier to accommodate than frequently thought.
Rise or Decline of Consumer Protection Standards in Open Economies?
The regulatory capacities of states are central to contemporary debates on
the consequences of globalization. Several authors claim that increasing economic integration
forces states to deregulate. The mobility of capital and other factors of production, the argument
goes, generates more options for firms and owners of capital to exploit the relative location
advantages of jurisdictions. For firms, lavational advantage means less state intervention, since
greater government intervention can result in higher costs of production. States may thus engage
in inter-jurisdictional regulatory competition over the attraction or retention of mobile factors of
production and mobile tax bases. Assuming that states respond to regulatory competition in
similar ways, supporters of this argument expect an overall trend towards deregulation in open
economies. Consumer protection standards have indeed declined in some Cases analysts of
consumer protection policy have also observed and explained the opposite phenomenon, namely
increases in the stringency of consumer protection.iv David Vogel, for example, has shown that
under conditions of increasing economic integration states may still able to install stricter
regulations. He argues that powerful and wealthy jurisdictions can promote greater regulatory
stringency across the board by driving the environmental and consumer regulations of their
trading partners up. The trading partners of large and rich jurisdictions are, under specific
circumstances, simply forced to meet the higher standards of these jurisdictions or risk losing
access to important export markets. Open world markets can thus act as a transmission belt for
the prevailing policy preferences in large and economically powerful jurisdictions. Other authors
claim that regulatory competition might lead to more stringent regulations if a system of
certification exists.vi A labeling scheme, for example, may allow producers to pass on higher
production costs to consumers if the latter are willing to pay a premium for higher standards of
protection.

Globalisation
Globalisation is the process by which interaction between humans, and the effects of that
interaction, occurs across global distances with increasing regularity, intensity and speed. This
adds a new dimension to, or even replaces entirely, interaction which previously occurred across
continental, national or local distances.

Although much of the current debate about globalisation gives the impression that
the process is relatively new, most analysts agree that globalisation has in fact been underway for
many centuries. However, none believe that globalisation has been a straightforward process.
Trends towards greater global interaction have, in fact, ebbed and flowed quite radically as they
have developed alongside the rise of local, national and continental interaction and power.

Political Globalisation

Political globalisation refers to the increasing number and power of human associations which
influence or govern the world as a whole. Thus, it has been noted that in 1909 there were 37
inter-governmental organisations (IGOs) and 176 international non-governmental organisations
(INGOs), by 1996 there were 260 IGOs and 5,472 INGOs (Held at al. 1999; p.53).

It is also of significance that a series of key IGOs established in the post-war period have
become increasingly influential over the affairs of individual nations and the world. Prime
amongst these bodies are the United Nations (UN), the World Bank, the International Monetary
Fund, the World Trade Organisation (WTO), the Organisation for Economic Co-operation and
Development and the Group of Eight (G8).

Economic Globalisation

Economic globalisation refers to the increasing occurrence, speed and intensity of

production, trading and financial exchange between individuals and bodies across global
distances. This is a process which has developed over centuries, even millennia, but is taken by
many analysts (although not all – see, for example, Hirst & Thompson, 1996) to have accelerated
and intensified significantly in the post-war period and in particular over the last twenty to thirty
years.

There are numerous indicators of this expansion of the global economy, all of which are
subject to dispute. Examples include a rise in world exports as a percentage of world gross
domestic products from 7% in 1950 to 17% in 1995 (Krugman, 1995). Others might point to the
massive growth in the issues and loans on international capital markets of 14.4% between 1973
and 1982 or 8.2% between 1983 and 1995 (Held et al, 1999). Alternatively there is the fact that
international bank loans accounted for only 0.7% of world output in 1964 but stood at 16.3% in
1991 (UNCTAD, 1994).

Cultural Globalisation

Cultural globalisation refers to the growth in the exchange of cultural practices

between nations and peoples. Although, this is a process that has undoubtedly occurred for
thousands of years, economic and political globalisation has enhanced the process enormously in
recent decades. In addition, many analysts point to the way new technologies and their
exploitation such as commercial air travel, satellite television, mass telecommunications and the
internet have created a world where billions now consume identical cultural products – such as
pop music, soap opera and sporting events – and employ cultural practices they would never
otherwise have encountered – such as foreign food preparations and foreign words and phrases.

References

Ben-David D. & Winters L. (2000), WTO Special Study No.5: Trade, Income Disparity and
Poverty, World Trade Organisation

Dollar D. & Kray A. (2000), Growth is Good for the Poor, The World Bank

Held D. et al. (1999), Global Transformations, Polity

Hirst P. & Thompson G. (1996), Globalization in Question, Polity

Krugman P. (1995), 'Growing World Trade: Causes and Consequences', Brookings Papers
on Economic Activity, pp.327-62

Legraine P. (2001), 'Dump Those Prejudices', The Guardian (UK newspaper), 12 July

UNCTAD (1994), World Investment Report 1994, United Nations