Kentucky Cannot Go After Registrars In Foreign Countries

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In regard to the heavily covered Kentucky Internet gambling domain seizure case whereby the commonwealth's governor, Steve Beshear, wants to block 141 gambling websites, a reader with obvious expertise submitted the following analysis of this matter:

A point that seems to have been lost in the coverage to date is that many of these registrars are foreign companies operating in foreign, sovereign countries. The assumption that Kentucky can simply forward this Order to entities that are not subject to its jurisdiction and assume international compliance is, at best, an American-centric perspective. (The ICANN UDRP claim is clearly a red herring- even if the court were to ignore the fact that this entire dispute resolution policy is designed to govern administrative proceedings related to cyber-squatting, Kentucky is not a party to the agreement, is not a named third party beneficiary, and cannot enforce it against the registrars directly.) Even a cursory review of the registrars with which many of these domains are registered disclose several in both the United Kingdom and in Canada, for example. This foreign order of a Kentucky court would need to be "reciprocally enforced" in the courts of those jurisdictions (in a sense, locally ratified) before they could be enforceable against these registrars.

The problem for Kentucky is this: generally speaking, penal or quasi-penal orders like this simply won't be reciprocally enforced by the courts of most jurisdictions.

The order of a Kentucky court - particularly orders of a penal nature such as this - are not some international weapon that can be wielded at will against foreign registrars doing business in other countries. One cannot simply email a local order to the registrars, as was done in this case, and assume the authority to compel compliance, as much as Kentucky may wish it so.

In the UK, for instance, it is well established that an English court will not entertain an action to enforce, directly or indirectly, penal or revenue law. Lord Watson in Huntington v. Attrill [1893] AC 150 provided as follows on this point:

"The rule has its foundation in the well-recognised principle that crimes, including in that term all breaches of public law punishable by pecuniary mulct, or otherwise, at the instance of the State Government, or of some one representing the public, are local in this sense, that they are only cognizable and punishable in the country where they were committed."

In a case called USA v Inkley [1988] 3 All ER 144, the US Government sought to enforce in England a default judgment obtained in Florida. The Court of Appeal held that notwithstanding the civil form of the enforcement proceedings, in substance the purpose of the civil action was the execution of the United States own penal laws. English courts therefore had no jurisdiction to hear the claim. The English appeal court stated that:

"Notwithstanding its civil clothing, the purpose of the action initiated by the writ issued in this case was the due execution by the United State of America of a public law process aimed to ensure the attendance of persons accused of crime before the criminal courts."

The situation is the same in Canada, confirmed as recently as 2006 by the Supreme Court of that country in Pro Swing Inc. v. Elta Golf Inc., [2006] 2 S.C.R. In that case, Supreme Court Justice Deschamps clarified the state of law regarding the enforceability of foreign quasi-penal or penal judgements and specifically considered orders such as that secured by the Commonwealth of Kentucky in this case. Justice Deschamps ruled that "It is well established that Canadian courts will not enforce a penal order, either directly or indirectly". He notes as follows on this issue:

"Equally important concerns can be raised by other types of orders, like anti-suit injunctions, and search or freezing orders. The question of their territorial scope is highly relevant ... The frontiers of the foreign state are the very reason why its judgments need to be recognized and enforced abroad. Should the orders not be assessed to ensure that their form is compatible with domestic law?"

The Chief Justice of that country's Supreme Court went on to note the following in explanation of this principle:

"It is for each state to impose its own punishments, penalties and taxes, and other states are not obliged to help them. When we move to penal orders, we move out of the realm of private international law and into public law. As a result, Canadian courts will not entertain an action for the enforcement of a foreign penal, revenue, or other public law, nor will they enforce a foreign judgment ordering the payment of taxes or penalties that gives effect to the sovereign will of a foreign power."

Clearly, the attorneys in this case have made the arguments that the in rem jurisdiction of the Kentucky court was improperly seized, as well as rationally arguing that domain names are not "gambling devices" under the ambit of a definition designed to encompass roulette wheels and slot machines. However, it is worth considering that, even if these cogent arguments fail and the ruling next week affirms the current Order in Kentucky, foreign registrars should consider carefully whether they will simply capitulate to this order as GoDaddy has done.

Domain registrars are among the stewards of the integrity of the Internet as a means of international communication and commerce, and we can only hope that they choose to take this role seriously. To simply capitulate to these unilateral actions in Kentucky would have a frightening chilling effect, potentially turning ".com" into the functional equivalent of ".us" as foreign registrants evaluate the risk of having ".com" domains simply seized in this manner.

There can be little doubt that these registrar's choices in the coming weeks will be rewarded or punished by the markets they purport to serve.

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