Viagogo case update: ‘Choice of jurisdiction’ clauses in online consumer contracts may be “unfair contract terms”

17 May 2024

Since 1988, New Zealand consumers have been able to use the Disputes Tribunal (Tribunal) to resolve disputes of less than $30,000, if those disputes are based (in summary) on contract, quasi-contract or tort (with some exceptions). Most disputes relating to misrepresentation about the quality of goods or services are within the Tribunal’s jurisdiction.

E-commerce has made access to the Tribunal less certain. Various internet sellers are located outside New Zealand. Some have terms which provide for dispute resolution in particular forums outside New Zealand.

On 28 March 2024, the High Court delivered its judgment in Commerce Commission v Viagogo SA (Judgment).[i] The Judgment is useful for both consumers and those drafting consumer-facing contracts with a cross-border element.

Viagogo is an online ticket reselling agent based in Switzerland. The Judgment addresses various statements on Viagogo’s website, which were found to be misleading. It also addresses whether governing law and jurisdiction clauses may be “unfair contract terms” under the Fair Trading Act 1986 (FTA). If so, the Court can declare them unenforceable.

The clause in question was:

This Agreement shall be governed by and interpreted in accordance with the Swiss laws, with the exclusion of its conflict of laws rules and the provisions of the United Nations Convention on Contracts for the International Sale of Goods (CISG). All disputes arising out of or in connection with this Agreement, including disputes on conclusion, binding effect, amendment and termination, shall be resolved exclusively by the competent Courts of Geneva, Switzerland. We also have the option of taking legal action against You at Your domicile.

This is a combined governing law clause (first sentence) and jurisdiction clause (second and third sentences).

As to governing law, Her Honour found (at [219]-[244]) that the clause was not unfair, for two main reasons: (i) there is nothing materially different about Swiss Law so as to give rise to an imbalance between the parties; and (ii) in any event, if Viagogo relied on a particular point of Swiss law, it would need to prove it (otherwise the parties would simply apply New Zealand law).

As to jurisdiction:

• The Court found that the jurisdiction clause was unfair. There were two main reasons: (i) the asymmetry within the clause; and (ii) the unfairness of the clause, compared to Viagogo’s alleged ‘legitimate interest’ in having claims heard in Switzerland.
• The Court held that there was an asymmetry within the clause, without which the customer could commence proceedings in the Tribunal. In a ticket re-selling transaction, the purchaser of the ticket from Viagogo will be the only party likely to have a claim (and therefore want to sue in their home jurisdiction). Yet under Viagogo’s terms, the purchaser has to sue in Switzerland. (In other contexts, asymmetric jurisdiction clauses are less problematic. For example, in lending contracts, they give flexibility to lenders seeking repayment.[ii] An asymmetry in that context might be said to restore balance, rather than create an “imbalance”.)
• The more important issue, therefore, in terms of relevant “imbalance”, is not the asymmetry per se, but the exclusive jurisdiction given to the Swiss Courts in respect of customer claims. The Court found that this “tilts the parties rights and obligations markedly in Viagogo’s favour”.
• The Court distinguished a number of Australian cases which have held that exclusive jurisdiction clauses are not unfair because they protect a legitimate interest (defending claims in a home jurisdiction). This was on the basis that the damages to which the clause might apply were likely to be “modest” – the cost of tickets refused at the gate.[iii]

The Judgment does not support a blanket proposition that all exclusive jurisdiction clauses are unfair contract terms. Only those in respect of consumer contracts under which claims are likely to be “modest”.

The decision is useful (noting that it is under appeal):

• For consumers: It should give confidence to online shoppers. Even if there is an exclusive jurisdiction clause in the ‘fine print’, it may be susceptible to being set aside. Against that, however, it should be noted that only the Commerce Commission can seek a declaration as to “unfair contract terms” (which can take several years).   The FTA does not render the terms automatically void or ineffective.
• For lawyers: It suggests that exclusive jurisdiction clauses in consumer contracts cannot (effectively) contract out of the Tribunal’s jurisdiction. Similarly, arbitration clauses in consumer contracts are ineffective unless the consumer ‘opts in’ to arbitration after a dispute has arisen.[iv] Given the Court’s logic, it may still be possible to include ‘choice of jurisdiction’ clauses in standard terms, so long as they are said to be subject to the Disputes Tribunal’s (or other small claims courts’) jurisdiction.