Reverse Solicitation

My piece for Ogier Leman on 'reverse solicitation' is here.

Any business dealing with residents of another country faces the potential risk that the authorities in the other country might decide that it is somehow actively operating in that other country, rather than only dealing with foreign customers in or from its home territory after being approached by them ('reverse solicitation'). This could mean action being taken by a foreign consumer, ombudsman or regulator, including action in the civil or criminal courts of another country. A recent Irish case has added some colour to the factors that the European Court of Justice ('CJEU' or 'ECJ') has previously said may show that a business is actively doing business in another country; and I've added a list gleaned from guidance applicable to financial services in particular. This post is for information purposes only. If you need advice, please get in touch.

The ECJ has held that a firm based in one EU Member State won't be doing business in another Member State just because its website is accessible in the other country. Nor will it be enough for the firm's website to display its own email/ geographical address, or phone number (without an international dialing code), because that information is needed by consumers in the firm's own home country. 

Instead, a firm must have somehow 'manifested' or demonstrated its intention to establish a commercial relationship (contract) with consumers in the other country. There must be clear expression of the intention to solicit custom from those foreign consumers. 

The sort of objective factors that the ECJ held to be relevant to that question include: the international nature of the business activity (e.g. tourism); telephone numbers with the relevant country code; a web address with the other country's top-level domain name (e.g. “.de” or ".fr"); itineraries to get to the foreign place where the relevant service is provided; mentions/testimonials of clients based in other countries; and using a foreign language and/or currency not also commonly used in the firm's home country.

The Irish courts have also pointed to these factors in various cases with unsurprising results. But a recent Irish case adds a bit more colour... 

A UK-based firm organised group cycling tours in foreign countries, but not the travel to those countries. So the consumers were never going to be using the firm's service in the UK. Customers had to make their own way to where the tours operated locally. The firm stipulated that it was only responsible for the tour from the appointed start time at the meeting point, but it did also arrange the transport of customers from the foreign/local airport to the meeting point. 

While there was evidence that the booking process did not target a customer's specific country of residence (e.g. Ireland), the firm was aware of the country they had come from and this did not have to be from the UK. The website/email addresses ended in ".co.uk" but the contact phone number carried the international "+44" country code. Customer testimonials also stated the customer's nationality, including one from Ireland. Prices were stated in currencies other than GBP, including the Euro, and there was a currency conversion feature on the website, to enable customers to figure out how much they would have to pay in their own currency when paying the price in GBP. Prior to booking, a customer also had to create an online account, giving details of their city, country of residence and post code (not just provide those details in the form to verify the payment card details being used, for example, which may only go to the card acquirer rather than the merchant). 

So, the Irish court held that, before the conclusion of any contract with the consumer, it was apparent from the firm's website and overall activity that the defendant intended to do business with - and enter into contracts with - consumers in Ireland (among other places).

These are not the only factors to consider, of course. For example, the EU's financial services 'passporting' requirements and Brexit have provided opportunities for UK and EU authorities to consider what factors - alone or together in a specific context - could mean that an EU financial services provider may be wrongfully targeting the UK market or vice versa:

• firms must have a 'head office' and hold board meetings in their country/territory of residence/authorisation, so any of those features that are instead based in the other jurisdiction would be problematic from that standpoint alone (i.e. those who decide the firm’s direction, make material management decisions on a day-to-day basis; the finance, settlement and compliance functions - ‘central administrative functions’ - and their systems and records),
• the website should be hosted on local servers in the 'home' territory (and certainly not in any other country where foreign customers are resident);
• no marketing, advertising or services should be directed specifically at other countries/territories or their residents;
• there should not be a foreign language version of the website or customer communications or support specifically for the relevant foreign customers;
• management and staff should not visit any foreign customers or service providers for operational or marketing purposes or to resolve disputes;
• foreign customers should only be able to approach the firm's website or staff in its 'home' territory;
• the firm should not set cookies on the devices of of foreign customers or otherwise monitor their behaviour outside the firm's home territory;
• the firm should not provide services beyond the scope requested by the foreign customer approaching the firm and they should have to request the service each time they wish to use it;
• the firms should keep records (not just a tickbox or contractual provision) showing that it was approached by the customers, not the other way around; 
• the firm should have no agents, intermediaries or outsourced/delegated services outside its home territory or be a member of a foreign payment system, trading exchange/venue or trade body - or vice versa - but could use services in other countries (e.g. hold foreign bank accounts or rely on advice from foreign professional firms);
• being part of a wider corporate group based outside the territory or being funded from outside the territory may also be problematic; 
• customer contracts must not be subject to any law of a country other than the firm's home state or specifically refer disputes to any other jurisdiction;
• a firm should not deposit its clients' money/assets in any institution outside its home territory, or safeguard customer funds outside its home territory (other than as incidental to dealing appropriately with foreign customers in or from the home home territory, supported by correspondent services outside the country where necessary for that purpose).

This post is for information purposes only. If you need advice, please get in touch.