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Dark and Stormy: potential problems for cloud users…

Oct 24, 2012

The law is, by its nature, territorial.  It applies to individuals and entities within a particular territory.   The internet represents a significant challenge to this notion, since it has no geographical boundaries.  Perhaps a slight gloss on this is country code top level domain names (ccTLD’s).   This aspect of the internet means that cloud computing solutions enable individuals and businesses to store their data and software far away from them, whilst simultaneously providing instant access. Pirate Bay have just announced that they are moving to a cloud based solution to host their site.  They hope that this will make it harder for law enforcement to find evidence of illegal file-sharing through the site or to bring the site (or the people behind it) within reach of the courts. In a blog post, they describe the “pirate cloud” as, “[a] reality to us. A ghost to those who wish to harm us.”   In this blog we consider what happens when things go wrong and you need to bring court proceedings against individuals or businesses that are not based in the UK.   [caption id="attachment_2501" align="alignleft" width="260"] Rest assured, this variety of 'dark and stormy' should pose less problems for cloud users[/caption] Case Study: Newzbin II - slipping out of jurisdictional reach   Newzbin was a website which marketed itself as a “Usenet search” (Newzbin I).  What this meant was that it promoted and categorised links to unauthorised copies of films and TV shows, including, Atonement and Spiderman 3.  In 2010, 20th Century Fox together with other copyright owners successfully brought a copyright infringement claim against the company behind Newzbin I.  In the wake of that result, Newzbin I was shut down and, with the threat of paying millions of pounds in costs and damages, the company behind Newzbin I filed for voluntary liquidation.   In May 2010, a second website, Newzbin II, phoenixed out of the ashes of Newzbin I.  When it did the operators ensured that it slipped out of the jurisdiction of the English courts.   Newzbin II offered users exactly the same service as the previous site (with the same web address).  The difference? Newzbin I was based in the UK; Newzbin II was based offshore.  Its servers were hosted in Sweden and the domain name was registered to a company based in the Seychelles.   Without a connection to the jurisdiction (i.e. England), a party cannot normally be brought before the courts here.  This means that to bring a claim directly against Newzbin II, 20th Century Fox may have had to sue the operators in Sweden or the Seychelles.   Even if you are able to bring the matter into an English court, the defendant’s assets may well be located elsewhere. If you win, you want to know that the defendant will pay up and if they don’t, you will need to know where to enforce the English court’s judgement (this in turn may give rise to additional problems about whether the English court’s judgement is even recognised by the courts of the relevant territory).   In this case, instead of suing the operators of Newsbin II, 20th Century Fox decided to pursue the internet service provider for an injunction requiring the ISP to block its subscribers from accessing Newzbin II.  It was successful and the ISP had to bear the costs of implementing the injunction.  However, not all disputes with overseas companies will have such an effective alternative remedy.   5 Tips for knowing your contractor (and keeping them within reach of the English Courts)  

  1. Who: do you always deal with the same individuals? Do they live in the UK? Do they have offices here?
  2. What: are you working with a registered company? Where is it registered? If it is not in the UK, does it have a local subsidiary or branch in the UK?
  3. Where: if it is appropriate, specify in the contract that the contractor’s obligations must be performed in the UK.
  4. How: if you are negotiating the contract you could insist on the law of the contract being English law and the English courts having exclusive or non-exclusive jurisdiction to resolve any disputes.
  5. Assets: where are their assets? In the UK and difficult to get rid of, like land and property?  Great! Overseas or easy to send overseas (e.g. via banks)?  Consider whether you need to take action early in the dispute to ensure that money stays in England and Wales (e.g. freezing injunctions).

  If you are contracting with an overseas company or may be in dispute with one, give us a call and we will work with you to find the most effective way to protect your interests.   If you're interested in reading more about the cloud, you're in luck! Carole Hailey's blog discusses how technology companies and cloud providers don’t always see eye to eye and Anthony Purvis has tips for employers considering a move to cloud-based services.