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Extraterritorial impact of U.S. law – where do we stand now?

It has been three years since the United States Supreme Court issued its decision in Morrison v National Australia Bank Ltd, 130 S.Ct. 2869 (2010), blowing up 40 years of case law on the extraterritorial application of the U.S. federal securities law and reinvigorating the presumption against extraterritorial application of U.S. statutes. Judging from Westlaw’s 2,300+ decisions citing Morrison, it seems that a good proportion of the defendants who have been prosecuted or sued under a federal statute in the last three years must have taken a run at a Morrison-inspired extraterritoriality defense.

Much ink has been spilled by litigants and courts in search of clarity on how exactly Morrison applies to the federal securities laws, and on how the newly reinvigorated presumption against extraterritoriality applies to a host of other statutes. Earlier this summer, in United States v Vilar, 2013 WL 4608948 (2d Cir. August 30, 2013), the Second Circuit in New York had little trouble rejecting the government’s argument that Morrison did not apply to criminal proceedings under the federal securities laws.

In a somewhat surprising decision, issued in April 2013, the Supreme Court considered how the Morrison presumption applied to claims under the Alien Tort Claims Act (ATCA), which authorizes foreigners to bring suit in U.S. courts based on violations of customary international law. Enacted by the first Congress in 1789, the ATCA has been used in recent years to bring claims against global corporations based on allegations that they procured or aided and abetted violations of the human rights of the local population in developing countries where they operate.

In Kiobel v Royal Dutch Petroleum Co, 133 S.Ct. 1659 (2013), the defendants were accused of complicity in abuses committed by the Nigerian government against the local population in the context of the development of oil exploration facilities in Nigeria. The Supreme Court initially agreed to hear the argument on the question of whether customary international law recognizes the concept of corporate liability, but later turned to the question of whether the ATCA applies extraterritorially at all. Based on the language and history of the statute, and notwithstanding the fact that it has always been understood to cover acts of piracy, the court held that it does not apply to violations of customary international law occurring outside the U.S. Following Kiobel, in Balintulo v Daimler AG, 2013 WL 4437057 (2d Cir. August 21, 2013), the Second Circuit effectively put an end to a long-running lawsuit, originally filed in 2002, charging a large group of multinational corporations and banks with complicity with the South African apartheid-era government, through such activities as supplying goods and services to that regime.

As these cases make clear, the U.S. courts continue to grapple with Morrison, sometimes with counterintuitive results, and litigants continue to formulate more or less ingenious extraterritoriality arguments. It will be interesting to see how many Morrison decisions Westlaw reports on the five- and ten-year anniversaries. Recent experience promises a big number.

Contributed by Andrew Rhys Davies

the U.S. courts continue to grapple with Morrison, sometimes with counterintuitive results, and litigants continue to formulate more or less ingenious extraterritoriality arguments. 

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