Officials at the European Commission have made a spectacular U-turn on a proposed law governing crossborder internet commerce in Europe.

EC bureaucrats have decided to seek input and are considering abandoning a long-held position on a key legal question. Justice and home affairs experts drafting a law dubbed 'Rome II' will consult industry and consumer groups, despite having claimed in April that doing so would be a waste of taxpayers’ money.

Rome II’s authors are contemplating changing long-established laws about which jurisdiction should apply in a crossborder dispute.

Until now, officials have advocated applying the laws in the country where a consumer is situated. But this has provoked criticism from a range of industries including fast-moving consumer goods, e-commerce merchants and publishers, that such an approach will smother e-commerce with legal obligations.

"We are not sure whether to set up a special regime for e-commerce or to remove the country of destination principle altogether. This has yet to be clarified," said David Seite, one of the draft regulation’s authors.

"We have been given clear instructions from [Commissioner for Justice and Home Affairs, Antonio] Vittorino that Rome II should not prejudice e-commerce," Seite said.

Vittorino is believed to have come under pressure from other commissioners and from leading European parliamentarians, including Spanish MEP Anna Palacio, to change Rome II.

By applying a country-of-origin approach to crossborder online disputes the regulation will be reinforcing, rather than contradicting, existing European legislation such as the E-commerce Directive, said an official inside another EC department. However, he was wary of giving his full support to his justice and home affairs colleagues. "I'll reserve judgment until I see what they come up with," he said.

"If the Rome II regulation does abandon the country-of-destination approach, then that is definitely a step in the right direction," said David Fares, director in charge of electronic commerce issues at the US Council for International Business.

As Europe grapples with this awkward legal technicality, a court in California is assessing a real-life example of how the country-of-destination principle does not work.

Internet portal Yahoo has appealed to the court to examine the legality of a French court's decision to force to remove Nazi memorabilia from its online auction site on the grounds it breaches France's anti-racism laws., the French portal, was spared because it conforms with local law.

The California court will decide whether France has the right to impose its laws on a US internet portal. If, as is expected, it applies the country-of-origin principle it will overturn the French court ruling.