The limits of substantive international economic law: In support of reasonable extraterritorial jurisdiction

Abstract

Ordinarily, the legislation or jurisdiction of a State stops at the State's borders. Exceptionally, the jurisdiction of a State's laws may extend beyond its borders, and apply to situations that are already regulated ? or deliberately not regulated ? by the ?territorial? State, understood here as the State on whose territory the situation arises. This is notably the case in economic law, specifically in antitrust and securities law. Jurisdiction exercised by a State over a foreign economic activity deemed harmful to that State will, in this chapter, for the sake of convenience, be referred to as ?extraterritorial? economic jurisdiction. When exercising extraterritorial jurisdiction, a State may fail to adequately account for the interests of the territorial State, a State that presumably has a legitimate ? and possibly overriding ? regulatory interest in the case. Extraterritorial jurisdiction or the extraterritorial application of national laws has therefore been denounced for violating the principle of non?intervention in other States' affairs. Yet because global business'restrictive practices and securities fraud are realities which the territorial State does not face up to, States that are harmed by them are unlikely to scale down their assertions of jurisdiction. In order to accommodate foreign concerns, they may impose certain restraints on themselves, and subject their jurisdictional assertions to a reasonableness test. At bottom however, reasonableness is in the eye of the beholder, and quite frequently, the defence of national sovereignty tends to masquerade as ?reasonable jurisdiction? (section 2). Since rational people may differ over how reasonably to exercise jurisdiction, the emphasis has recently shifted from the exercise of unilateral jurisdiction to a harmonisation of economic laws, transnational cooperation in the enforcement of these laws, and even to the establishment of international regulators and institutions (section 3). It is claimed that this 'shift to substantivism? moves beyond the fruitless debate over sovereignty ? a debate in which any State somehow affected by an economic situation, either positively or negatively, brandishes 'sovereignty? to fend off the other's assertions. It is also claimed that, if internationally standardised substantive rules and procedures are increasingly used, normative competency conflicts will soon belong to the past, and the peaceful co?existence of States will be ensured. In this chapter, it will be argued that substantivism may fail to deliver all benefits ascribed to it because of the dubious process in which substantive international law may come into being (sections 4 and 5). To put it differently, this chapter traces the limits of an approach that intends to supplant procedural international law, a law based on delimiting States' spheres of competence (the law of jurisdiction), with substantive international law, an international jus commune of substantive rules and procedures. It will be submitted that the international community, and its weaker members in particular, may, on balance, sometimes be better off with a rule?based framework of international jurisdiction than with common substantive rules and procedures saturated with the interests of the powerful. A rule? based framework may come into being if transnational judicial networks are set up, enabling frequent low?threshold contact between courts, regulators and private actors (section 6). In terms of the perspective taken in this book, this chapter emphasises the limits of the rights'guaranteeing function of substantive international law. It is argued that, somewhat counter?intuitively perhaps, ill?conceived harmonisation?driven solutions to international (economic) problems may fail to adequately protect the rights of States and transnational economic actors. Consensual solutions are not necessarily in the best interests of those who participated in their making. Instead, this chapter will praise the unilateral exercise of extraterritorial jurisdiction by States. It does not, however, shut its eyes to problems of legitimacy and democracy that this limited concept of the role of international law embodies. It will be submitted that the law's rights'guaranteeing function could only be properly served if all the stakeholders concerned are granted sufficient procedural and participatory rights that allow them to have their voice heard, and, accordingly, to influence a State's final jurisdictional assertion touching upon their interests (section 7). © 2009 Springer-Verlag Berlin Heidelberg.