Do courts have jurisdiction over online service providers from overseas?

Question

Consider this pretty common scenario: company (or person) A, incorporated/residing in country X, provides online services all over the world. Technically, the services do not require any physical presence of A (or its property) outside X — international customers receive and pay for them online only, so there are no signs of A anywhere outside X apart from the Internet. For example: blogging platform, photo hosting, classifieds/advertisements directory etc.

Now, say B, someone in country Y (whether customer of A or not), files a lawsuit against A in a court of Y — grounded by the statement that A is providing services "in Y to the citizens of Y", and hence must obey all relevant laws of Y. Let's also say that A is indeed violating some laws of Y, or at least, would be doing so if A was from Y, although A is legally crystal clean it its home country X.

For simplicity, let's say the "world" in this question is the Western English-speaking world only, or, more specifically, these countries: UK, US, Canada, Australia and New Zealand.

So, taking into account nowadays' international law, common practices, precedents etc.:

1. How likely is it that the court in Y will rule out that A is violating the laws of Y — as opposed to deciding that it has no jurisdiction over A?
2. In case the court of Y rules out against A, what sort of enforcement is likely to happen on A? If Y was, say, China or Russia, A could be simply blocked by their national firewalls. For the Western countries, would the measures be likely to involve prosecution of the owners/directors of A personally?

Answer 1

The courts in Y would decide if they have jurisdiction to hear the case: they almost certainly do. A would presumably petition the court that the courts of X are a better venue, B would argue "liar, liar, pants on fire". The court would then decide if they or a court in X should hear the case.

They would then decide if the contract is subject to the laws of X or Y. Given that A is presumably savvy enough to put in a choice of jurisdiction clause specifying X, the law of X probably applies.

The court would then look at what laws of Y apply that cannot be excluded by contract - those laws apply too. Many consumer protection laws fall into this category.

If B is successful in obtaining judgement, they would then take that to the court in X. A would argue it should be thrown out, B would argue it should be enforced. The court in X would decide which way to go. In general, courts will usually give effect to foreign jurisdictions unless doing so would offend local law specifically; not just if local law would give a different result.