Are There Limits To The Creeping Extraterritorial Application Of U.S. Law?

In May 2015, the U.S. Department of Justice (DOJ), in connection with investigations by the Federal Bureau of Investigation and the Internal Revenue Service Criminal Investigation Division, indicted fourteen people in connection with wire fraud, racketeering and money laundering as part of an investigation over the past several years.  Seven current FIFA officials were arrested in Zurich as they prepared for the 65th FIFA Congress and are expected to be extradited to the U.S. on suspicion of receiving US$150 million in bribes, even though the alleged misconduct was based outside of the United States.  The only connections with the U.S. are that two of the fourteen individuals indicted were U.S. citizens, one was a permanent resident of the U.S. and three others owned residences in the U.S.  The U.S. government also claims the U.S. banking system was used extensively to facilitate the alleged activities.

Several commentators have recently voiced concern over the extraterritorial reach of U.S. law implied by the FIFA indictments, as well as other recent actions by U.S. authorities.  However, the concept that Congress has the authority to enforce its laws outside of the U.S. has been well established for many decades.  While there is a presumption against extraterritoriality absent a clearly expressed intention of Congress to extend jurisdiction beyond the United States, U.S. courts have ruled that such intention may be inferred from the subject matter of the statue and the nature of a defendant’s alleged offenses.  For example, the U.S. Supreme Court in its decision, United States v. Bowman, 260 U.S. 94, 98, decided in 1922 (over 90 years ago), stated that the presumption of territoriality “should not be applied to criminal statutes which are, as a class, not logically dependent on their locality for the government’s jurisdiction, but are enacted because of the right of the Government to defend itself against obstruction, or fraud wherever perpetrated, especially if committed by its own citizens, officers, or agents”.  According to the Court, to apply such a statute only territoriality, “would be to greatly curtail the scope and usefulness of the statue and leave open a large immunity from frauds as easily committed on the high seas, and in foreign countries as at home.”

More recently, in a unanimous opinion issued on December 18, 2012, the U.S. Court of Appeals for the Fourth Circuit in United States v. Ayesh strengthened the government’s ability to prosecute public corruption by U.S. Government personnel in cases where (a) all elements of the offense conduct occurred outside of the United States and (b) there was no express intention to extend jurisdiction beyond the United States.   In Ayesh, the alleged fraudulent conduct occurred entirely in Iraq and Jordan.  The criminal claims were based statues that did not include any express intention to extend jurisdiction of cases brought under those statues beyond the United States.  Nonetheless,  the Fourth Circuit in Ayesh decided that congressional intent to exercise overseas jurisdiction can be inferred from the nature of the offenses criminalized in 18 U.S.C. §§ 208(a) and 641.  The Court said that if ruled otherwise, government employees, contractors or agents “would be at liberty to pilfer public money or engage in acts of self-dealing with impunity so long as they did so abroad.”  A detailed analysis of the Bowman and Ayers decisions can be found here

In a similar vein, the U.S. District Court for Connecticut in United States vs. Ivanov found extraterritorial intention for computer crimes performed by internet users outside of the United States against American businesses and infrastructure. After his indictment, Ivanov filed for a motion to dismiss all charges because “he was physically located in Russia when the offenses were committed” and thus “he cannot be charged with violations of United States law.” The appeal was denied not only because the Court decided that the intended and actual detrimental effects of Ivanov’s actions in Russia occurred within the United States, but also because the U.S. Congress to intended that that the applicable statutes apply.

Although many commentators consider the U.S. unique in its approach with respect to the extraterritorial application of its laws, most of the major common law jurisdictions apply their criminal laws extraterritorially in the same manner as the U.S.  What sets the U.S. apart from these other jurisdictions may be that the DOJ has relatively greater resources together with more experience in prosecuting white collar crimes.  Recently the DOJ increased its efforts in applying its criminal laws on an extraterritorial basis, claiming that it has the right to go after anyone who uses its banking system (including indirectly, using “correspondent” banks to clear payments) or plans an illegal scheme on its soil.

There is plenty of other legislation to test the DOJ’s resolve on extraterritoriality.  The Military Extraterritorial Jurisdiction Act was passed by Congress for use by US government agencies overseas to deal with the private military contractors and private security contractors.  Economic sanctions with extraterritorial impact exist under the Trading with the Enemy Act (for sanctions against Cuba), the Arms Export Control Act, International Traffic in Arms Regulations, and International Emergency Economic Powers Act (with respect to sanctions against Iran).  However, the U.S. Courts may begin to push back against the DOJ’s efforts.  In April 2015, an American court dismissed charges against two Ukrainians, in a case in which the only American link was the tangential involvement of a federal agency.  In his decision, the judge stated that the charges represented a deeply misguided attempt to turn America into the world’s policeman.  For the time being however, the extraterritorial application of U.S. laws remains contested terrain, and it’s perhaps best to start with the assumption that U.S. law does apply to foreign parties and then see if there are persuasive grounds to conclude that there is no U.S. jurisdiction.