The extraterritoriality of American law

The extraterritoriality of American law is the capacity that the United States of America gives itself to enact standards applicable to persons, natural or legal, not American. It is illustrated in several fields, in particular that of international corruption where American standards are imposed thanks to a recurrent application of the Foreign Corrupt Practice Act (FCPA), adopted in 1977.

Extraterritorial jurisdiction (ETJ) is the legal ability of a government to exercise authority beyond its normal boundaries. Any authority can claim ETJ over any external territory they wish. However, for the claim to be effective in the external territory (except by the exercise of force), it must be agreed either with the legal authority in the external territory, or with a legal authority that covers both territories. When unqualified, ETJ usually refers to such an agreed jurisdiction, or it will be called something like “claimed ETJ”. The phrase may also refer to a country’s laws extending beyond its boundaries in the sense that they may authorise the courts of that country to enforce their jurisdiction against parties appearing before them in with respect to acts they allegedly engaged in outside that country. This does not depend on the co-operation of other countries, since the affected people are within the relevant country (or at least, in a case involving a person being tried in absentia, the case is being heard by a court of that country).

This allows, when talking about the extraterritoriality of American law, the American authorities, in particular the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC), to sanction companies having committed acts of international corruption which can be linked to the jurisdictional power of the United States. The link can be a listing of the company’s stock in the United States of America, or even a simple dollar payment. This text allowed the United States of America to sanction several European companies: Siemens in 2008, Technip in 2010, and Alstom in 2014… In 2018, Sanofi was forced to pay a fine of around twenty-five million American dollars, under the Foreign Corrupt Practice Act (FCPA). Holder of shares listed in the United States of America, the French company has been accused of corruption in the context of several public tenders in the Middle East and Kazakhstan. Latest case to date, Airbus is said to be under prosecution for corruption in the United States of America, Le Monde revealed on December 20, 2018.

Applied to international economic sanctions, extraterritoriality is a legal tool but especially diplomatic and economic without common measure, of which only the Americans are holders. Such sanctions, comparable to measures of economic warfare, must in theory be taken within a multilateral organisation like the United Nations (UN). In particular, the U.N. Security Council can take economic sanctions against a country to maintain or restore international peace and security. When one of the States adopts economic sanctions more important than the organisation, these can then be qualified as individual retaliatory decisions, or even as countermeasures. This is precisely what the United States of America is doing by unilaterally deciding to prohibit other states from trading with a third state, as is the case with Iran today and as was the case for Cuba in 1996.

Under the guise of fighting, one can no longer legitimately, against corruption, money laundering or the financing of terrorism, the United States of America has gradually made its rules of law a weapon of destruction in economic warfare (that they) lead against the rest of the world, including their traditional allies in Europe, as deplored by the authors of a parliamentary report submitted to French Prime Minister Edouard Philippe last June. We are thus witnessing, still according to this document, a proliferation of laws with extraterritorial scope allowing the authorities of the first world power to investigate, prosecute and condemn the commercial practices of businesses and individuals around the world. These procedures violate the sovereignty of the countries of which these actors are nationals, leading to “disproportionate” sanctions with the sole aim of weakening them in international competition.

In fact, on the extraterritoriality of American law, Uncle Sam’s hunting table is edifying and has enough to make you dizzy. Countless banks, like BNP Paribas, Commerzbank, HSBC, Crédit Agricole, ING, or Bank of Tokyo, but also major European industrial flagships, like Siemens, Alstom, Total, or Volkswagen, thus dealt with American justice. In twenty years, continue the authors of the aforementioned report, several tens of billions of dollars in fines have been claimed from foreign entities even though none of their incriminated practices had any direct link with the territory the United States of America. In 2018, Royal Bank of Scotland was fined almost five billion American dollars for its bad practices during the last financial crisis, a shame, the latter having mainly arisen due to the carelessness of American banks. Even the famous Swiss banking secrecy does not resist this widespread racketeering, Crédit Suisse having been fined, four years earlier, a fine of two and a half billion American dollars for having helped several thousand of its customers to defraud the American tax authorities.

To this end and in reaction to the imposition of the secondary sanctions of the United States of America on Iran, the European Union announced to envisage a mechanism of payment by compensation within a vehicle of financing known as SPV. This financial arrangement would isolate any link with the American monetary system, so as not to expose any transaction to American sanctions. If this funding channel is created, it could, in the long term, allow European companies to freely pursue trade with Iran. However, today it seems far-reaching: to preserve their role in international trade, European companies have so far preferred to comply with American sanctions. In addition, the European Union modified its blocking regulation launched in 1996. It therefore leaves European companies with the choice of complying with American law by placing themselves in violation of the regulation, or of being in violation of American law and to be protected by European Union law. But again, all European multinationals have chosen the first option. In addition to a potential fine by a repressive court or an administrative authority, they fear a lack of interest from American or foreign investors (who can constitute a part of their significant shareholding) and the isolation of the American economic and monetary system. That is what can be said concerning the extraterritoriality of American law.