When and How Does U.S. Law Apply Extraterritorially?
The presumption against extraterritoriality is an interpretive principle whereby “federal courts avoid reading U.S. statutes as applicable on foreign soil without Congress’s clear indication to the contrary.”[1] Traditional justifications for the presumption include comity,[2] i.e., “courtesy among nations, as in respect shown by one country for the laws, judicial decisions, and institutions of another.”[3] Another justification is Congress’s general focus on domestic concerns.[4] While this interpretive principle originated in the nineteenth century,[5] international law has since evolved; accordingly, the presumption against extraterritoriality has evolved alongside it.[6]
In 2016, the Supreme Court in RJR Nabisco v. European Community outlined a two-step framework for analyzing extraterritoriality issues.[7] The Court held that the Racketeer Influenced and Corrupt Organizations (RICO) Act applies to events occurring and injuries suffered outside the United States.[8] Congress passed RICO, a criminal statute, to combat the involvement of organized crime in interstate commerce.[9] The Act also provides a civil remedy for private parties “injured…by a [defendant’s] RICO violation.”[10]
In applying the framework, the Court first asks whether “the presumption against extraterritoriality has been rebutted.”[11] In Nabisco, this meant an inquiry into whether the statute gave a “clear, affirmative indication that it applies extraterritorially.”[12] If at step one the Court finds the statute is not extraterritorial, it moves to step two: an examination of “the statute’s ‘focus’ to determine whether the case involves a domestic application of the statute.”[13] Thus, the Court held that a civil RICO plaintiff must allege domestic injury—not foreign injury.[14] Nabisco concluded that application of this rule will not always be clear, as “disputes may arise as to whether a particular alleged injury is ‘foreign’ or ‘domestic.’”[15] The Court left this question open, leading to circuit splits between the Second, Third, Seventh, and Ninth Circuits on the issue of what constitutes a domestic injury.[16]
The Supreme Court will once again consider the issue of whether and how RICO may apply outside of the Unites States; in doing so, it should resolve the aforementioned circuit split. In January 2023, the Court consolidated two cases for review: Yegiazaryan v. Smagin and CMB Monaco v. Smagin.[17] Smagin, a civil RICO plaintiff, obtained a judgment in California district court.[18] Smagin first sued Yegiazaryan in London, and after winning a multimillion dollar judgment, domesticated the judgment in the United States.[19] Smagin then filed suit against Yegiazaryan and other defendants, claiming they sought to prevent him from collecting this judgment award because they concealed money Yegiazaryan had recently obtained—money which could have been used to pay Smagin.[20]
Herein lies the dilemma: is the injured property—i.e. a court judgment or arbitration award—a domestic or a foreign injury?[21] The Ninth Circuit held that the California judgment was intangible property and thus a domestic injury, while noting that this approach departed from the Seventh Circuit’s.[22] The significance of the Supreme Court’s upcoming ruling on this decision cannot be understated, as the world becomes more interconnected by the day. The ability to engage in business transactions, conduct legal proceedings, and even simply communicate with countries around the globe makes it more important than ever before to clarify, on a national scale, the ways American statutes apply extraterritorially.
Talia Abed is a staff member of Fordham International Law Journal Volume XLVI.
[1] See James Janison, Justifying the Presumption Against Extraterritoriality: Congress as a Foreign Affairs Actor, 53 NYU J. of Int’l Law and Pol. Online 1, 1 (2020) (citing Restatement (Fourth) of the Foreign Relations Law of the United States § 203 (Am. L. Inst. 2018)).
[2] Id.
[3] Comity, Dictionary.com, https://www.dictionary.com/browse/comity (last visited Feb. 1, 2023).
[4] See Janison, supra note 1, at 1.
[5] See generally Am. Banana Co. v. United Fruit Co., 477 U.S. 347, 356 (1909) (discussing that applying the law of somewhere other than the jurisdiction where the act occurred “would be an interference with the authority of another sovereign, contrary to the comity of nations”).
[6] See William S. Dodge, The New Presumption Against Extraterritoriality, 133 Harv. L. Rev. 1582, 1584 (2020).
[7] See RJR Nabisco, Inc. v. European Cmty., 579 U.S. 325, 326 (2016).
[8] See id. at 325.
[9] See Jennifer & Block, A guide to Civil Litigation in Federal Courts 4 (2021), https://www.jenner.com/a/web/taV21sfHsERD37g5Wk8dA6/4HRMZQ/2021_RICO_Guide.pdf?1625754342.
[10] See id.; 18 U.S.C. §1964(c) (1970).
[11] See Nabisco, 579 U.S. at 326.
[12] See id.
[13] See id.
[14] See Dan Schweitzer, Supreme Court Report: Yegiazaryan v. Smagin, 22-381; CMB Monaco v. Smagin, 22-383, National Association of Attorneys General (Jan. 30, 2023), https://www.naag.org/attorney-general-journal/supreme-court-report-yegiazaryan-v-smagin-22-381-cmb-monaco-v-smagin-22-383/ (discussing the holding in Nabisco).
[15] See Nabisco, 579 U.S. at 354.
[16] See Schweitzer, supra note 16.
[17] See generally Kian Hudson & Lara Langeneckert, SCOTUS Cert Recap: SCOTUS Adds Eight Issues To Its Docket, Including Appellate Procedure, Religious Accommodations In Employment, Civil Forfeiture, Free Speech, And The False Claims Act, The National Law Review (Jan. 30, 2023), https://www.natlawreview.com/article/scotus-cert-recap-scotus-adds-eight-issues-to-its-docket-including-appellate.
[18] See Schweitzer, supra note 16.
[19] See Hudson & Langeneckert, supra note 19.
[20] See id.
[21] See id.
[22] See Schweitzer, supra note 16 (citing Smagin v. Yegiazaryan, 37 F.4th 562, 568 (4th Cir. 2022)).
This is a student blog post and in no way represents the views of the Fordham International Law Journal.