Extraterritoriality and Conflict of Laws Theory: An Argument for Judicial Unilateralism

Posted by Social Science Research Network

Extraterritoriality and Conflict of Laws Theory: An Argument for Judicial Unilateralism

William S. Dodge (University of California)

Abstract:     Each of the three basic approaches to the extraterritorial reach of statutes is based on a different conflicts theory. The territorial approach of American Banana is based on the “vested rights” theory of Joseph Beale and the first Restatement of Conflicts; Alcoa’s effects approach is based on Learned Hand’s “local law” theory and the conflicts decisions of Justice Harlan Fiske Stone; and Timberlane’s balancing approach is based on the “most significant relationship” test of the Restatement (Second) of Conflicts.

This Article argues that courts should adopt a unilateral rather than a multilateral conflict-of-laws approach to regulatory statutes like the Sherman Act. “Unilateral” and “multilateral” are terms of art in conflicts theory. Unilateral conflicts theories focus simply on whether the forum’s law applies to the activity in question, without worrying that another forum might also apply its law. Multilateral conflicts theories, on the other hand, try to resolve conflicts of jurisdiction so that each activity is assigned exclusively to the legislative jurisdiction of one state. Thus, I argue that a court should apply a statute extraterritorially whenever doing so appears to advance the purposes of the statute and should not worry about resolving conflicts of jurisdiction with other nations.

In support, I advance two process-based arguments that the international system would work best if every nation’s courts were to adopt a unilateral approach to extraterritoriality. First, in the short run, judicial unilateralism corrects for failures in the legislative process that lead to underregulation in areas like antitrust. Second, judicial unilateralism helps promote international negotiations in the long run. The antitrust experience shows that concurrent jurisdiction leading to a moderate amount of “conflict” actually promotes long-run international cooperation by providing stronger incentives to negotiate. In short, judicial unilateralism is the best way to political multilateralism.