Dropbox launched its revolutionary cloud-based file hosting service in 2009 and unsurprisingly over 200 million users have flocked to it. In legal-speak that means they’ve also agreed to Dropbox’s Terms of Service.  Most online businesses’ T&Cs say they can vary their terms whenever they like. In the past this has been controversial (remember Instagram’s grab for control over images uploaded on the service?)

For those paying attention over the weekend, Dropbox sent you an email  announcing it is changing its terms of service from 24 March 2014.  One of these changes is that any disputes between you and Dropbox will now be subject to arbitration in the U.S under the laws of California.

Fine, if you’re American.  But if you’re a consumer or business in Australia, then not so good.  It’s a long long way to California.

If you’re a business operating anywhere in the world, but offering services to consumers in Australia, then all your terms and conditions need to comply with the Australian Consumer Law (ACL).  In particular, you can’t put ‘unfair’ terms in your standard form agreements with consumers.  Those are the sorts of terms that create a ‘significant imbalance’ in the relationship between the parties, and are particularly onerous, without protecting a ‘legitimate interest’ of the supplier.

So is it fair for Dropbox to unilaterally impose US arbitration on you?  

Probably not.  Why? Because removing a dispute from the supervision of the Australian courts can deprive a consumer of the protection of the ACL.  We think that Australian courts won’t allow that.

Businesses like limiting their exposure to being sued in foreign jurisdictions. That is hard if you’re an online business offering your services to consumers around the world.  Consumers in each jurisdiction might be able to take you to court in their home jurisdiction – no matter what your terms and conditions say about it.  So, if you’re selling to consumers in Australia, assume that Australian law will apply.