How many times have you signed up for services, especially online services and software, and discovered that any issues under the contract/licence/app terms are governed by the laws of some State of the USA, or some other jurisdiction thousands of miles from where you live?  This doesn’t just happen to consumers.  Unless you are a major customer, many business contracts with overseas suppliers will require that the laws of some other country 'govern' the contract.  What does this mean?

Let's say you sign up for Facebook.  Facebook's terms state that all disputes under the terms of use (a contract) are governed by the laws of California, and, the parties have to bring any court action in California, and nowhere else.  In practice this means if Facebook breaches the contract you have to sue them in California under a set of unfamiliar laws.  These law and 'venue' requirements may make your complaint uneconomic to pursue in terms of both time and expense.  

But that isn’t the end of the story.  Facebook is trading in New Zealand and, whether they like it or not, some New Zealand laws will apply to their activities, such as the Fair Trading Act or the Consumer Guarantees Act and its implied guarantees about the quality of consumer services.  Also, if Facebook misuses one of your pictures, it might be infringing the New Zealand Copyright Act, giving you potential rights to sue for damages under that Act.  In spite of this Facebook is quite cunning; their terms of use require that any court action between them and you can only be heard in California.  This suggests that a claim under the New Zealand legislation might only be able to be heard in California, where it is certain they are unfamiliar with such claims.

Facebook is an overseas company; we can safely assume that most of their assets are in the USA (or maybe Ireland) and nothing significant lies within New Zealand.  So, even if you can sue Facebook in New Zealand there may be no assets for your New Zealand High Court judgement to attach to.  However, you may be able to take your New Zealand judgment and court orders to California and attempt to convince the California courts to enforce your New Zealand judgment there against Facebook's US assets.  This will probably cost even more than the New Zealand proceedings but gives you some chance of recovering your losses.

Contracting with an overseas supplier, whether as a New Zealand business or consumer, in most cases leaves you in a pretty poor position if things go wrong if the governing law and venue are anything other than New Zealand.  Even submitting to NSW or Victorian law in Australia may mean that in practice the cost of enforcing the contract with your Australian supplier is out of all proportion to the loss you have suffered.  Does your MD have time in her calendar to go to Perth for a four day court hearing?

So what can you do?  Try to get the governing law to be New Zealand law.  Try to contract with someone with assets on the ground here in New Zealand.  Finally, consider contracting with a big guy – if Microsoft messes up Excel or Word you won’t be the only end user with a complaint, you will be one amongst a legion of aggrieved users.