An Australian businessman, in a court ruling that could change how publishers view their ability to distribute information around the world, won the right to sue a U.S. news organization in his home country over a story published on the Internet.
In the first decision of its kind in any country, Australia's highest court ruled yesterday that Dow Jones & Co., which publishes the Wall Street Journal and Barron's, must stand trial in Australia, not in the United States, for allegedly defaming a mining executive from Melbourne. Like most countries, Australia offers fewer free-speech protections than are afforded by the First Amendment to the U.S. Constitution.
A group of U.S., European and Australian media organizations and Internet companies supported Dow Jones in the case, arguing that publishers could be subject to an array of different legal standards.
"The rule that the court adopted, if more broadly applied by other countries, could render the Internet unusable as a vehicle for mass communication," said David A. Schulz, a New York lawyer who helped the coalition prepare legal briefs supporting Dow Jones. The group includes The Washington Post Co., the New York Times Co., Yahoo Inc. and Amazon.com Inc.
The case demonstrates the difficulty in applying laws to the Internet, which has no borders. Some legal experts said the ruling could crimp the increasingly free flow of information across borders that the Internet has unleashed.
"It's a significant case," said Ian C. Ballon, a lawyer and the executive director of Stanford Law School's Center for E-Commerce. "What it says is that free accessibility of expression on the Internet carries risks."
Stuart D. Karle, a Dow Jones lawyer, said the ruling means that "you don't know what law will apply to what you're saying until someone sues you. At that point, it's a little late." He said the risk applies to news organizations, which have foreign correspondents based in many countries, and individuals whose personal Web sites contain political expression.
Others worry that the case could be a harbinger of a legal free-for-all that might undermine Internet commerce more broadly. If, for example, consumers or businesses in various countries could sue over a failed Internet transaction under myriad local laws and jurisdictions, doing business online would be jeopardized because it would be unclear which laws govern commercial liability.
"It's going to have a snowball effect on other countries asserting jurisdictions over things going on in cyberspace," said Megan E. Gray, an Internet lawyer in Washington.
International treaty negotiations to deal with jurisdictional questions have been stymied thus far, and, Gray said, many countries may lose patience and begin to "put up fences in the ether."
More than 150 countries allow defamation or libel suits in some form, and none is bound by the decision of the High Court of Australia. But Australia's laws are grounded in the law of the British Commonwealth, and the decision could be viewed as a precedent by courts in other Commonwealth nations, such as Canada and New Zealand.
Dow Jones argued that the case should be heard in the United States, where Barron's, which carried the article at the heart of the case, is published. The company said in a prepared statement that it will vigorously defend the suit in Australian court, and is heartened by language in the ruling that allows the trial court to take into account the relevant libel laws where the story was produced.
The story, published in October 2000, questioned the propriety of business dealings by Joseph Gutnick, a mining entrepreneur and philanthropist in Melbourne.
In its ruling, the court said that publishers' concerns about legal uncertainty were overwrought. A news organization will know, the court said, which jurisdiction would be involved in a particular story, and it can adapt its story to those laws.
Gutnick told an Australian television station that the ruling puts the Internet on a par with a local newspaper.
Schulz said free expression could be jeopardized by the ruling. Foreign correspondents for U.S. news organizations report on other countries assuming U.S. libel standards. If they can be prosecuted under local laws, such stories might be less likely to be produced.
A British journalist recently was arrested in Zimbabwe under similar circumstances but was released on a technicality.
Karle said that in response to the ruling, news organizations probably will keep their financial assets out of countries that assert Internet jurisdiction, making it harder for anyone to collect damages if the new organization loses a case in local courts.
"Decisions like Gutnick are going to require some very careful thought," said Clifford M. Sloan, general counsel of The Washington Post Co.'s digital division, Washington Post Newsweek Interactive. "But an institution like ours has a commitment to doing the best job it can and spreading it widely."