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The problem with extra-territorial law

August 15, 2012

Debates over the rights and wrongs of US ‘extra-territorial’ legislation continue, with the recent ‘exposure’ of Goldman Sachs for money-laundering making worldwide headlines.

In general, I presume that US lawmakers have enacted their various acts with noble motives, to encourage ethical principles. The problems arise when those laws also appear to serve self-interest, or are disproportionate to the crime or characters involved.

This entire topic has unfortunate tones of imperialism, when power is used to impose values onto others (always, of course, with the claim that it is for their own good). It is also problematic when only one country seeks to assert such global rights (though we must assume that it will not be long before others start to follow suit, with perhaps a quite different moral or ethical agenda).

The Goldman Sachs ‘exposure’ by New York regulators came at a time when supposedly the Federal authorities were still in process of investigation. Given the perception by the rest of the world that the US has been remarkably lax with the wrong-doings of its own financial services sector, it is perhaps not surprising that this action (coming close on the heels of action against HSBC) is seen by some as being more about challenging competition to New York as the world’s financial hub than it is to do with equity and justice.

Similar concerns apply to the process of extradition that the US employs in the case of hackers, leakers or whatever other form of action they deem ‘anti-US’. The fact that some US states do not like competition to their monopolistic state lotteries should not result in non-US citizens being imprisoned. It is hard to see the proportionality of pursuing an individual with Asperger’s Syndrome and a fixation of flying saucers who successfully hacked into Department of Defense computers. Maybe in this case it would be smarter to penalize the computer experts who failed to prevent such an amateurish attack.

Overall, the problem with extra-territorial legislation is that it can quickly start to look abusive and undermine the very principles for which it was introduced. The boundaries between extradition and rendition sometimes appear very blurred. The sense that there is not ‘due process’ quickly damages confidence in all aspects of the US legal system. And that is perhaps the real point. If US business wishes to be seen as true and trusted partner, it needs the rules, ethics and laws under which it operates to be seen as balanced and fair. It is not helpful when organizations from other countries fear doing business in the US, or agreeing contracts that are subject to US law.

In my view – and based on the discussions I have – I believe the use of extra-territoritorial law is damaging US interests.

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