The High Court recently decided that a foreign jurisdiction clause in a contract entered into with New Zealand consumers was an unfair term: Commerce Commission v Viagogo AG [2024] NZHC 713. The Commerce Commission had sought relief against viagogo AG, a company incorporated in Switzerland, under the Fair Trading Act 1986 (FTA). viagogo operates a global website for the re-sale of tickets to live events. The terms and conditions entered into with New Zealand consumers included a Swiss jurisdiction and choice of law clause. The Commerce Commission argued that the clause was an unfair contract term under s 46L of the FTA. Peters J agreed, but only insofar as the clause related to jurisdiction (rather than choice of law). On that basis, Peters J was wiling to declare that the jurisdiction clause was an unfair contract term, to the extent that it applied to consumers within the reach of the FTA (at [227]).
A term is unfair under s 46L if the court is satisfied that it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and it would cause detriment (whether financial or otherwise) to a party if it were applied, enforced, or relied upon.
Unfairness of the jurisdiction clause
The jurisdiction clause provided that “[a]ll disputes arising out of or in connection with this Agreement … shall be resolved exclusively by the competent Courts of Geneva, Switzerland”, while also reserving an option for viagogo “of taking legal action against You at Your domicile”. In other words, the clause provided for the exclusive jurisdiction of the Swiss courts, except that viagogo could choose to bring proceedings in New Zealand. This is known as an asymmetric jurisdiction clause (see generally Brooke Marshall Asymmetric Jurisdiction Clauses (OUP, 2023)).
Peters J was satisfied that this clause would give rise to significant imbalance in the parties’ rights and obligations under the contract, and that it would cause detriment to the consumer if relied upon (at [209]). This was mainly because of the asymmetrical nature of the agreement (at [210]) and because requiring a consumer to sue in Geneva “rules out any prospect of litigation against it by a consumer” (at [211]), presumably because it is not realistic, as a matter of practicality, that a consumer would go to the trouble of pursuing viagogo in Switzerland. In the absence of the jurisdiction clause, on the other hand, a consumer could commence proceedings in New Zealand, “probably in the Disputes Tribunal”, with relatively little effort and expense (at [210]).
The Judge was also satisfied that the clause was not reasonably necessary to protect a legitimate interest of viagogo. viagogo argued that it had a legitimate interest to confine litigation against it to its home jurisdiction, referring to some Australian authorities in support (at [212]). Peters J dismissed this argument, referring to the particular context of the case (at [217]). The “likely scenario” was that claims against viagogo would relate to events held in New Zealand and would involve local witnesses. There was “no obvious reason” why viagogo could not participate in New Zealand proceedings, “whether by audio visual link or by appointing a representative to attend any hearing on its behalf”. The dispute could be “determined quickly by the Disputes Tribunal” (at [217]).
The Court’s emphasis on the potential role of the Disputes Tribunal is interesting. Considering the practical difficulties faced by consumers to obtain access to justice, and the complexities of cross-border litigation, it made sense to place reliance on the fact that there seemed to be a quick and cost-effective option available to consumers in New Zealand (that would not impose an undue burden on viagogo). However, it is not clear that the Disputes Tribunal would have jurisdiction over claims against foreign defendants such as viagogo. Personal jurisdiction over defendants that do not have a presence in New Zealand depends on there being a statutory basis for service outside of the jurisdiction. The Disputes Tribunal Rules 1989 do not seem to contemplate this possibility.
More generally, the decision provides useful ammunition to any consumer seeking to bring proceedings in New Zealand despite the existence of a foreign jurisdiction clause, especially where the clause is asymmetric. The more obvious route for consumers might be to rely on the court’s common law discretion not to give effect to a jurisdiction clause, on the basis that there are strong reasons for not doing so: The Eleftheria [1970] P 94 (Prob) at 99–100; see Karpik v Carnival plc [2023] HCA 39). This does not mean, however, that consumers may not also attempt to attack the validity of the jurisdiction clause directly under s 46L (assuming that s 46L would be applicable to determine the validity of the clause as an overriding mandatory rule), although a claim under s 46L would probably be less fact-specific (and, depending on the facts, may be more difficult to make out).
No unfairness of the choice of law clause
The same clause in viagogo’s terms and conditions also provided that the contract would “be governed by and interpreted in accordance with the Swiss laws, with the exclusion of its conflict of laws rules…”. The Commerce Commission argued that this part of the clause was unfair “because it imposes a prohibitive layer of cost on a consumer, being the cost of taking legal advice on Swiss law” (at [219]).
Peters J did not accept this argument. A consumer, when bringing proceedings against viagogo in New Zealand, would not be under an obligation to plead Swiss law. It would be up to viagogo to adduce evidence of the content of Swiss law if it wanted to rely on it (at [221]).
There was also no evidence to show that the application of Swiss law would give rise to a significant imbalance in the parties’ rights and obligations when compared to New Zealand law (at [221]). In fact, it was not clear what the proper law of the contract would be in the absence of the clause. It “would not inevitably be New Zealand law” (at [223]).
Three points in particular may be of interest here.
The first is that it is not inconceivable that a decision by viagogo to plead Swiss law could come with additional expense for New Zealand consumers. If viagogo decided to plead Swiss law, and Swiss law was found to be applicable, New Zealand law would no longer apply by default, and the presumption of similarity, too, may be unavailable to a consumer: see Brownlie v FS Cairo (Nile Plaza) LLC [2021] UKSC 45, [2022] AC 995 at [113]-[153].
The second point is that Peters J’s reasoning demonstrates a potential willingness to apply s 46L to the substantive effects of choice of law agreements. For example, if there was evidence that, under Swiss law, the consumer would have significantly fewer rights than under New Zealand law, then the clause could be considered unfair under s 46L, assuming that the objective proper law of the contract would actually be New Zealand law. However, it is not clear whether s 46L ought to be applied in this manner. The function of choice of law agreements is not to create rights and obligations under the chosen law (see Maria Hook The Choice of Law Contract (Hart Publishing, 2016 at ch 8, pt IIIA and ch 5, pt IIIB(2)), so it may not be right to say that the agreement would “cause a significant imbalance in the parties’ rights and obligations arising under the contract”.
Third, if a consumer sought to rely on s 46L to argue that a foreign choice of law clause is unenforceable, it might be faced with an argument that the foreign law, as the putative chosen law, should govern the validity of the clause, as opposed to New Zealand law. However, the consumer would still be able to argue that s 46L applies to the choice of law clause as an overriding mandatory rule (see The Conflict of Laws in New Zealand at 4.156).
Fourth, the Commerce Commission apparently did not argue that the choice of law clause was misleading, on the basis that consumers may consider themselves unable to seek relief under the FTA or the Consumer Guarantees Act 1993 (CGA) (cf Australian Competition and Consumer Commission v Valve Corporation (No. 3) [2016] FCA 196). It is unlikely that the choice of law clause would make relief under the FTA and the CGA unavailable. In a way, the continued availability of relief under these statutes might have been another reason why the choice of law clause was not unfair in substance, and may offer an additional explanation why the Court was not too concerned about the clause.
Concluding remarks
The judgment is a useful addition to the New Zealand jurisprudence on cross-border consumer contracts. New Zealand does not have general rules restricting the enforceability of dispute resolution clauses in consumer contracts per se. This approach is different from the approach taken in the European Union. The European Rome I Regulation, for example, submits consumer contracts to the law of the consumer’s place of habitual residence (provided the other party pursues their commercial or professional activities in that place, or directs their activities to that place); and it allows a choice of law to the extent that it will benefit the consumer (see art 6). Similar protections are available in relation to jurisdiction, under the Brussels I Regulation. In the absence of such general provisions, it is especially important that courts make use of the varied tools that are available to them to regulate the enforceability of jurisdiction and choice of law agreements in consumer contracts.
