Extraterritorial Regulation Research Articles

Green public procurement of pharmaceuticals as a regulatory response to antimicrobial resistance and its compatibility with the WTO Agreement on Government Procurement

AbstractThis article examines the compatibility of production‐related environmental criteria in green public procurement with international trade law, specifically the World Trade Organization's Agreement on Government Procurement (GPA). In response to the global health and environmental challenge of antimicrobial resistance (AMR), such measures offer extraterritorial regulation by pharmaceutical purchasing countries where domestic regulation is not forthcoming in pharmaceutical producing countries. The article finds that such green public procurement measures may be compatible with the GPA. The general exceptions of the GPA can be invoked to overcome the potential non‐adherence of these measures to the principle of non‐discrimination between like products (in this case pharmaceuticals) from different importing countries. The provisions of the GPA relating to technical specifications and tender documentation accommodate such green public procurement measures. The provisions relating to conditions for participation in tenders for a public procurement contract and the award criteria for choosing the bidder to whom the contract should be awarded are silent in respect of environmental considerations. However, this may change with the development of domestic regulation on antibiotic effluent and an expansive reading of the term ‘public interest’ in the GPA. For now, international trade law continues to adopt a limited, accommodationist approach towards non‐trade objectives. This approach must be abandoned given the grave implications of failure to address the adverse impacts of global challenges such as AMR. At the same time, compatibility between green public procurement measures and the GPA cannot be taken for granted. The growing interest in domestic or regional drug security, especially in the wake of the COVID‐19 pandemic, may expand the geographical range of pharmaceutical manufacturers, with the possibility that such measures, originally intended to achieve non‐trade objectives, restrict trade.

Recasting Sanctions and Anti-Money Laundering: From National Security to Unilateral Financial Regulation

Practitioners and academics traditionally think of U.S. sanctions and anti-money laundering rules as bargaining tools: measures that governments use to pressure adversaries and achieve national security goals. Open-ended non-state national security threats like terrorism, climate change, and corruption cast doubt on the accuracy of this “bargaining” model. This Note offers a “regulatory” view that treats these measures not as bargaining chips but as extra-territorial regulatory tools. This approach reflects the current state of these measures, which have leveraged U.S. dollar centrality and financial institutions’ rigorous rule-following to impose economic restrictions on global threats, often permanently. In addition to describing more accurately current U.S. sanctions and anti-money laundering practice, the “regulatory” view better articulates these measures’ functioning. Specifically, applying Professor Anu Bradford’s “Brussels Effect” framework for analyzing extra-territorial regulations yields three insights. First, it offers a granular explanation of these measures’ reach by offering five elements that are predictive of their functioning: “market size,” “regulatory capacity,” “stringent standards,” “inelastic targets,” and “non-divisibility.” Second, it highlights the particularities of U.S. sanctions and anti-money laundering rules. Counter to Bradford’s prediction, U.S. measures suggest that the extra-territorial regulation of finance is possible. Third, and finally, the application of Bradford’s predictive elements to U.S. sanctions and anti-money laundering rules suggests both the continued durability of these measures and future threats to their use.

Features of Extraterritorial Protection of Trademarks

The paper examines the phenomenon of extraterritoriality in the legal protection of trademarks. The author highlights the signs of extraterritorial regulation of relations related to the protection of trademark rights, namely, signs of national extraterritorial regulation and signs inherent in international legal models of legal protection of trademarks, such as legal protection of well-known trademarks, legal protection of trademarks that have received an international registration, regional integration models of legal protection of a trademark (trademarks of the EU, EAEU, etc.). As a common feature for all extraterritorial mechanisms, the author proposes to single out the principle of priority of trademarks. For the mechanism of protection of a trademark that has received an international registration and for regional models of trademark protection, the author singles out the need for all the patent offices of all states where protection is sought to approve an application form for the trademark registration and the existence of uniform norms common to all parties to an international agreement. The author of the paper does not exclude the possibility of overcoming the territorial principle and reducing possible infringements in the field of trademark protection.

Business and Human Rights: Alternative Approaches to Transnational Regulation

In recent years, various approaches to transnational regulation of business conduct have evolved as an alternative to the command-and-control model focusing on conduct of domestic businesses and the soft law approach of international human rights law to regulate corporations. On reviewing the potential of five such approaches (i.e., polycentric governance, extraterritorial regulation, proposed international treaty, reform of corporate laws, and rebalancing of trade-investment agreements), this article makes two arguments. First, although polycentric governance is critical to fill regulatory deficits of state-based regulation, this approach should not ignore or weaken further the role and relevance of states in regulating businesses, given the dynamic relation between state-based and other regulatory approaches. Second, greater attention should be paid to nonhuman rights regulatory regimes to change the corporate culture, which tends to externalize human rights issues. The increasing focus on the role of corporate laws and trade-investment agreements should be seen in this context.

Sailing in All Winds: Extraterritorial Regulation as a Trigger for Self-Regulatory Practices in Shipping Industry

The regulation of private activities that take place overseas has received significant attention in the legal scholarship. The traditional discussion of the topic observes such regulation from the perspectives of public international law principles of jurisdiction or private international law conflict of laws rules. The present article contributes to the discussion from the perspective of private parties engaged in shipping activities, who face an increasing need of compliance with different regulatory acts of extraterritorial application. It argues that the proliferation of such acts incentivizes private parties to include regulatory interests in their business activities. The article further suggests that extraterritorial regulation can serve as a trigger for transfer and intrinsic adoption of state’s regulatory interest by private parties. It observes the examples of such ‘privatization of extraterritoriality’ in corporate compliance policies and contractual CSR clauses used by shipping companies, noting their spillover effects over other parties. It further notes that the proliferation of extraterritorial regulation sometimes results in the universalization of responses from private parties, as acquisition of regulatory interest untied from its nation-state origins. The concluding section puts the observed phenomenon into a broader picture, discussing the contribution of extraterritorial regulation to the mechanisms of private governance.

COVID‐19 and the Future of CSR Research

COVID‐19 and the Future of CSR Research

The Eras of Extraterritoriality in the United States

This article uses the research from Kal Raustiala’s book, Does the Constitution Follow the Flag? : The Evolution of Territoriality in American Law, and the research from several of my articles on extraterritorial applications to explain how the United States has used the regulatory tool, extraterritoriality, since the time of the American Founding and how such use has differed as the United States gained power. The manner by which the United States has relied on extraterritoriality has differed depending on a particular era of history. For instance, this article articulates five eras that have characterized the U.S. decision-making process for extraterritoriality: cautionary, progressive, indiscriminate, withdrawal, and arbitrary. The United States within each era has embraced certain customary principles more than others such as sovereignty, territorialism, international comity, and global constitutionalism. Its reliance on these principles is volatile and changes in each era. What is remarkable is the extent to which the United States has and has not considered international issues as a part of its practice of utilizing extraterritoriality. As a young nation, the United States greatly clung to notions of sovereignty and territorialism and eschewed extraterritoriality because it was not strong enough to exert such power nor could it handle an invasion from another foreign power. Sovereignty and territorialism gave the United States the peace of mind and security against an uprising. International considerations were prominent and commonplace in the early eras. But as the nation grew in strength throughout each successive era, it no longer needed the bedrock of sovereignty and territorialism to safeguard it from other foreign powers. The United States instead sought to inject its laws extraterritorially and engage in global policing. Its rise in economic and political power gave it the strength to do so. Extraterritorial regulation was on the rise. However, the more its use of extraterritoriality rose, the more domestic struggles the United States encountered, which led to arbitrary judicial decisions and policy-making. Further, during the later eras, the United States relied less and less on international considerations and engaged in withdrawal tactics, causing some to view its behavior as hegemonic. There is a great imperative of examining history with the law. How U.S. history and politics can inform the future of the law is critical. The findings laid out within this article will serve a starting point for future research regarding potential future eras.

Research Handbook on Labour, Business and Human Rights Law, edited by Janice R.Bellace and Beryl terHaar. Edward Elgar Publishing, Cheltenham, UK, 2019, 528 pp., ISBN: 978‐1‐78642‐310‐7, £195.00 (US$290.00)

Research Handbook on Labour, Business and Human Rights Law, edited by Janice R.Bellace and Beryl terHaar. Edward Elgar Publishing, Cheltenham, UK, 2019, 528 pp., ISBN: 978‐1‐78642‐310‐7, £195.00 (US$290.00)

Homogenous and Extra-territorial Border Regime? Migrations and Control Efforts Across the Eastern EU External Border

ABSTRACTIn light of the high amount of refugees wishing to cross the EU’s external borders into the Union, the border regime is becoming more and more standardized and, to a great extent, involves the EU neighbor states. These are confronted with a double strategy with regard to their involvement in the EU’s migration policy. On the one hand, the EU tries to guarantee its own security by setting up a tough border regime. On the other hand, the EU strives for a closer connection with its neighbors by including them more and more into its migration regulations. By having a look at Ukraine and Moldova, the paper asks what this involvement in EU policies means for the mentioned countries and focuses on their perspectives. How does their participation in EU extra-territorial migration regulation look like? What does the extra-territorialized border regime mean for those actors wishing to cross the border? For this purpose, a concept of the EU’s eastern external border regime will be developed first, including its targeted homogeneity and its partly extra-territorial functioning. By discussing the results of an ethnographic border regime analysis, the paper will present the perspectives of specific actors in third states who implement EU migration regulations on a local level by carrying out concrete EU-driven projects. Furthermore, voices from refugees and inhabitants of the border regions in third states are taken into account.

Fading Extraterritoriality and Isolationism? Developments in the United States: The 2016 Earl A. Snyder Lecture in International Law

This working paper (in draft form) is a slightly expanded version of the 2016 Earl A. Snyder Lecture delivered at the Lauterpacht Centre for International Law at the University of Cambridge in May 2016. These remarks provide an overview of how the procedural rules of international civil litigation are developing and changing in the United States, and how those developments in turn affect more traditional forms of international lawmaking. I take a different tack from those who are more pessimistic about recent U.S. Supreme Court decisions that have curtailed private enforcement of extraterritorial regulation, and challenge the notion that the effect of the Court's decisions is anti-internationalist or isolationist. To the extent the use of domestic law applied extraterritorially and unilaterally is a less viable option to provide redress, it may prompt, at least on the margins, a reinvigoration of other more cooperative approaches to solving global challenges. For those skeptical of the legitimacy and longer-term efficacy of unilateral approaches (whether through the courts or elsewhere), modest pressure to spur further responsible multilateral coordination and engagement may be a positive development.

The Extraterritorial Regulation of Clearinghouses

This article argues that post-Crisis reform of over-the-counter derivatives is in trouble. While regulators agree on the broad strokes of regulation, they diverge on the detail, often on core issues like how clearinghouses should manage risk. In examining divergences between the USA and Europe, this article makes three points. First, divergences in clearinghouse regulation matter in derivatives markets because these markets are uniquely international in scope. Contracts involve counterparties in different countries. Many transactions comprise cross-border aspects lacking a geographical anchor. Where derivatives traders face legal uncertainty, they can be dis-incentivized from observing laws or motivated to seek out the lowest cost compliance options. Secondly, although the USA and European Union (EU) have adopted common ground rules, their approaches to implementation differ in matters of detail. Such divergences prevent regulators from recognizing each other’s clearinghouses as sufficiently robust. Thirdly, while acknowledging that mutual recognition is the most appropriate way forward, substantial shortcomings exist with this approach. This article highlights continuing areas of structural divergence—like access to emergency funding and bailouts—that impact the costs of the EU and US regimes. Where costs diverge, traders will seek out avenues for regulatory arbitrage to lower costs of compliance. In concluding, this article explores implications for reform.

The Extra-Territorial Regulation of Clearinghouses

This Article argues that post-Crisis reform of over-the-counter derivatives is in trouble. While regulators agree on the broad strokes of regulation, they diverge on detail, often on core issues like how clearinghouses should manage risk. In examining divergences between United States and Europe, this Article makes three points. First, divergences in clearinghouse regulation matter in derivatives markets because these markets are uniquely international in scope. Contracts involve counterparties in different countries. Many transactions comprise cross-border aspects lacking a geographical anchor. Where derivatives traders face uncertainty, they can be dis-incentivized from observing laws or motivated to seek out lowest-cost compliance options. Secondly, although both the United States and European Union have adopted common ground-rules, their approaches to implementation differ in matters of detail. Such divergences prevent regulators from recognizing each other’s clearinghouses as sufficiently robust. Thirdly, while acknowledging that mutual recognition is the most appropriate way forward, substantial shortcomings exist with this approach. This Article highlights continuing areas of structural divergence – like access to emergency funding and bailouts – that impact the costs of E.U. and U.S. regimes. Where costs diverge, traders seek out avenues for regulatory arbitrage to lower their costs of compliance. In concluding, this Article explores implications for reform.

Sovereignty-Plus in the Era of Interdependence: Towards an International Convention on Combating Human Rights Violations by Transnational Corporations

This paper argues that the classical rules that restrain the exercise by States of their extraterritorial jurisdiction may have to be reinterpreted in the light of the growing interdependency between States, which results from increased trade and investment flows. The traditional understanding is that, when a State adopts regulations that seek to influence situations located outside its national territory, it competes with the sovereignty of the territorially competent State, and that such regulations therefore should only be allowed in the most exceptional circumstances, since they may run counter to the principle of sovereign equality of States. However, if the adoption by the State of origin of the investor of extra-territorial regulations in fact facilitates the role of the host State in regulating that investor, thus ensuring that the investment will contribute to human development and will benefit local communities, this enhances, rather than restricts, the exercise by the host State of its sovereignty. To the extent that it serves universal values, unilateral action may thus contribute to the achievement of the goals set by the international community: the regulation of transnational corporations becomes a global public good, to which each State should contribute in accordance with its ability.Against this background, this paper examines the question of the jurisdiction of States over the activities of transnational corporations. It argues that the duty of the host State to regulate corporations operating on its territory could be more easily discharged if home States of transnational corporations made a more principled use of extraterritorial regulation. These two sovereignties are not as much competing with each other than they are mutually supportive: the adoption of a new international instrument allocating responsibilities to control transnational corporations could codify in treaty form what is already, arguably, emerging customary international law. The paper also argues that, until a consensus emerges about the desirable division of tasks between the host State and the home State in controlling investors, the adoption by the home State of extraterritorial legislation addressed directly to the parent company, but imposing on that company to exercise control on its subsidiaries, may be the best route forward.

Capacity and Constraint: Governance Through International and Transnational Law

Transboundary problems have provided serious challenges for states’ governance capacity for long. As a result, the modern state has not only begun to adapt its own administrative and regulatory structures; it has also come to rely increasingly on effective institutional structures for cooperation and governance on a regional and global scale. The classical instrument for international cooperation, international law, can only provide such structures under certain conditions and within strict limits. Governments have therefore turned to alternative forms of transnational ordering, which in some cases have indeed led to more effective decision-making – key among them formal international institutions, informal government networks, extraterritorial regulation, and links with private forms of regulation. However, all of these tools come with drawbacks – some are more effective than others, and the more they are effective, the more they tend to entail a loss of control for national governments, regulators and administrators. Domestic authorities have sought to readjust and develop new forms of influence in transnational regulatory contexts, some of them resulting in asymmetrical structures that increase the capacity of some countries’ institutions while constraining those of others. In this paper, I analyze the different forms of transnational law- and rule-making with respect to their varying impacts on, and links with, domestic governance institutions, and I place a particular focus on the most prominent example – the rise of informal institutions and transgovernmental networks in global regulation.

The Political Economy of Extraterritoriality

Near the end of the 2009 Term the Supreme Court decided Morrison v. Australia National Bank, Ltd., the strongest anti-extraterritoriality opinion it has produced in modern times. Not only is Congress presumed generally to prefer only territorial regulation, but lower courts that had carved out exceptions from this principle over a long period of time must now revisit their positions. Again this year in Kiobel v. Royal Dutch Shell Co. the Court relied on an aggressive use of the presumption against extraterritoriality to cut back on an important field of private litigation. The Court appears to have embraced two related stances: The imposition of barriers to extraterritorial regulation generally advances welfare, and the lower courts cannot be trusted to determine those instances where an exception to this rule might be justified. Implicit in the Court's position are intuitions about the political economy of both legislation and litigation. I want to use the occasion of the Morrison and Kiobel decisions to consider the political economy of extraterritorial regulation by the United States. International lawyers for the most part have analyzed state decisions to exercise prescriptive jurisdiction over extraterritorial transactions in terms of a welfare calculus that determines the likely costs and benefits to the state as a whole. Fewer studies have considered the political economy of the decision whether to regulate foreign transactions. No work of which I am aware has considered the political economy of deciding the extraterritorial question through litigation. This paper seeks to fill these gaps by sketching out what political economy suggests both about extraterritoriality and the role of courts as arbiters of extraterritoriality.

The Long Arm of the DOT: The Regulation of Foreign Air Carriers Beyond US Borders

The European Union's plan to include foreign air carriers in its Emissions Trading Scheme (ETS) attracted considerable opposition based upon the ground of extraterritoriality, but it certainly was not the first effort to regulate air transportation beyond national borders. Notably, the United States - one of the most vigorous opponents of the application of ETS to its own air carriers - has a long history of imposing extraterritorial requirements on carriers from other nations. Although many of these proposals previously have been analyzed on an ad hoc basis, there has not been a comprehensive overview of them and their implications. This article contends that, post-deregulation, such proposals have become more common, even while the consequences of extraterritorial regulation may not have been fully considered. In recent years, Congress and Department of Transportation (DOT) often have proposed extraterritorial aviation obligations; the Federal Aviation Administration (FAA), by contrast, has been more restrained in its approach, although it also has proposed requirements that would reach beyond US borders. In some cases, statutes and regulations have been limited or withdrawn based on extraterritorial concerns, but in others, they have been adopted despite objections from foreign carriers and governments. As a consequence, the United States is now potentially vulnerable to accusations of inconsistency in its opposition to foreign proposals that would have the effect of regulating US-flag carriers.

Extraterritoriality for cross-border reproductive care: should states act against citizens travelling abroad for illegal infertility treatment?

Since the development of assisted reproduction technologies, there has been discussion on which people should have access to these technologies and which treatments and techniques are morally acceptable. However, national legislation can no longer determine what citizens do. Some countries react to their citizens going abroad to evade restrictions by implementing even more restrictive laws. Turkey has recently become the first state to ban reproductive travel in pursuit of donor gametes. Several states in Australia have enacted or are considering laws that prohibit international commercial surrogacy. This article investigates the consistency and morality of several state reactions to cross-border reproductive care (CBRC), including extraterritorial regulation. The only widespread existing extraterritorial regulation of private life concerns female genital cutting (FGC), sex with children and (largely in the past) abortion. This discussion develops an analogy with these cross-border crimes to evaluate the morality of similar legislation in cases of CBRC. The dissimilarity in these analogies shows that extraterritoriality is a radical position that is generally inappropriate in the case of CBRC. Subsequently, several potential state reactions to CBRC for law evasion are considered. It is concluded that legislation of CBRC should be modest, tolerant and nuanced. Since the dawn of assisted reproduction, there has been discussion as to which people should have access to these technologies and which treatments and techniques are morally acceptable. However, national legislation can no longer determine what citizens do. Some countries react to their citizens going abroad to evade restrictions by implementing even more restrictive laws. Turkey has recently become the first state to ban reproductive travel in pursuit of donor gametes. Several states in Australia have enacted or are considering laws that prohibit international commercial surrogacy. In this article, we investigate the consistency and morality of several state reactions to cross-border reproductive care (CBRC), including extraterritorial regulation. The only widespread existing extraterritorial regulation of private life concerns female genital cutting (FGC), sex with children and (largely in the past) abortion. We develop an analogy with these cross-border crimes to evaluate the morality of similar legislation in cases of CBRC. The dissimilarity in these analogies shows that extraterritoriality is a radical position that is generally inappropriate in the case of CBRC. Subsequently, we consider several potential state reactions to CBRC for law evasion. It is concluded that legislation of CBRC should be modest, tolerant and nuanced.

Evading Legislative Jurisdiction

In the last few years, and mostly unnoticed, courts have adopted a radically different approach to issues of legislative jurisdiction. Instead of grappling with the difficult question of whether Congress intended a law to reach beyond U.S. borders, courts have side-stepped it entirely. Courts have done so by redefining the definition of extraterritoriality. Significant and contentious decisions in the Ninth and D.C. Circuits paved the way by holding that not all regulation of overseas foreign conduct is extraterritorial. And then suddenly, last term, the U.S. Supreme Court breathed life into the practice. In its landmark Morrison v. National Australia Bank decision, the Court suggested that legislation focused on domestic conditions may not be extraterritorial, even if the legislation regulates overseas foreign activity. This Essay laments the birth of this troubling new approach, where established law is jettisoned and legislative jurisdiction analysis is evaded. The Essay’s aim is largely descriptive: it summarizes an important development and reveals how courts have lapsed into error. But it goes beyond the descriptive to also critique the new practice. Redefining extraterritoriality not only subverts established doctrine; it removes an important safeguard to the difficulties that extraterritorial regulation creates. More problematically, the practice undercuts principles that have been foundational in both domestic and international law.

Morrison v. National Australia Bank: Defining the Domestic Interest in International Securities Litigation

become a meaningful way to exert greater influence beyond what they could expect as a result of multilateral negotiation. Americans should be concerned that, following the U.S. lead, other countries will embrace extraterritoriality as a way to impose liability on Americans for conduct occurring in the U.S. and lawful under U.S. law, that is alleged to have an effect abroad. While these criticisms of the effects approach are significant, Professor Dodge and I share some common ground. Extraterritorial regulation is not always a bad idea. In under-regulated areas, extraterritoriality can sometimes fill a gap. And it may be that extraterritorial regulation can serve as a placeholder before more comprehensive, international agreement can be reached. Certainly, there is no problem with a nation regulating its own citizens and subjects abroad. But Congress should not take the decision to regulate extraterritorially lightly, and, in the face of congressional silence, courts should not simply assume that Congress intended to regulate whenever an effect in the United States exists. The Morrison case reaffirmed these basic principles. Contrary to Professor Dodge’s reading, Morrison correctly interred the effects test and reaffirmed that Congress is presumed to have exercised only its territorial jurisdiction. For those who see the value in primarily resolving global challenges through multilateral agreement, rather than through unilateral domestic action, that is good news indeed.

The Allocation of Governmental Regulatory Authority: Federalism and the Case of Insurance Regulation

AbstractWe investigate the incentives states have to provide insurance regulatory services in an efficient manner. Regulation of the insurance industry in the United States is unique, as it is conducted primarily at the state level whereas the majority of insurance sales are interstate. Consistent with predictions from the federalism literature, we find evidence of trans‐state externalities, as states with small domestic insurance markets are less efficient producers of insurance regulation and appear to allow states that choose to expend the greatest resources to regulate for them. In addition, states with more profitable domestic insurers are shown to export greater levels of regulation, suggesting extraterritorial regulation may erect modest barriers to entry. We find evidence of increasing economies of scale in the production of insurance regulation after controlling for these regulatory externalities.