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V. Which law applies?
Suppose that a Chinese student wishes to purchase a membership from Westlaw. Westlaw offers Chinese customer payment by e-money issued by Mondex Aisa of Singapore. The student does not have an account with Mondex Aisa, but has exchanged coins issued by HSBC Internet Bank of Hong Kong. These coins were paid for by ordinary EFT transfer from a Chinese local bank, Bank of China. The Chinese student is not satisfied with the service and wishes to take action. Which law governs the various transactions?
The question of which law applies is governed by the so-called rules of conflict of laws. However, the problem with having to rely on the conflict of laws rules is that the factual situations which are likely to arise in on-line commerce are even more complex than those which arise in paper trading. For example, conflict of law rules usually end up applying the law of the jurisdiction with the closest connection to the transaction. In a situation where the customer is in one jurisdiction, the vendor in another, payment is made by e-money issued from a bank in a third jurisdiction which is endorsed by a second bank in yet another jurisdiction, and the goods sold actually manufactured in a different jurisdiction again. The search of a “closest” legal system seems hopelessly futile in the above example. “The crux of the current complexity lies clearly in the reality that there are global markets, but only domestic laws and regulations”. How can the paradox of no boundary network and territorial law be solved?
It is incorrect and unfair to say that there is no rule at all. We have the agreements of the IMF and of the World Bank long before, which are legally binding to their member states in the sense of international public law. We also have regional conventions and treaties on the financial affairs, which are functioning at least in some parts of the world, and some of them have proved quite successful in influential such as the EU Directives. More importantly, a couple of informal International Financial Institutions (IFIs) with full capacity and expertise have set down basic standards and principles to regulate financial services, and guide individual nations in the development of stronger financial systems, which have received more and more attention and eulogy.
Unfortunately, these standards and principles are still insufficient, because of their inherent defects. First, there are still some big loopholes existing in the global legal framework made up with such standards. For example, despite the persistent efforts by IASC, there is still a gap between the GAAP of U.S. and that used in the rest of world. With admirable fortitude, IASC, along with IOSCO, is still in the process of developing internationally acceptable accounting standards, with the hope to unifying the international financial system with a single language. But quite foreseeable, difficulties need to overcome are enormous.
Secondly, such international standards could be considered as more inflexible and less adaptable rules than multiple rules of sovereign states that compete with each other. Apparently, on the international spectrum, no one choice is always appropriate, rather to be tailored individually in each case, provided the fact that the nations around the world are at different stages of capital liberalization. From this perspective, coherence may be more appealing than convergence, and regional rules like the EU Directives may have good reasons to act as the supplement or alternative to such international standards. However, it is obvious that regionalism will present a conflict with globalism.
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