International Litigation Update: Second Circuit Clarifies Rules Governing Extraterritorial Application of RICO and Definition of “Foreign State” Under Foreign Sovereign Immunities Act


In a series of recent decisions, the U.S. Supreme Court has sought to restrict plaintiffs’ ability to apply U.S. law to, and to bring claims in the U.S. courts based on, extraterritorial conduct. In Morrison v. National Australian Bank, the Court established a presumption that U.S. statutes do not apply extraterritorially unless Congress has, in the text of the statute, clearly indicated that they do. More recently, the Court held in Kiobel v. Royal Dutch Petroleum that the Alien Tort Statute, which had in recent years been used by non-U.S. plaintiffs to bring large class action claims in U.S. courts against companies operating abroad based on alleged violations of customary international law, did not confer U.S. court jurisdiction over tort claims involving conduct abroad. In addition, recent rulings have sought to restrict U.S. courts ability to exercise personal jurisdiction over foreign defendants, including under the “stream of commerce” theory of jurisdiction. Viewed collectively, the Court’s rulings appeared to reflect a view that plaintiffs, likely encouraged by plaintiff-friendly U.S. rules including liberal discovery, the availability of jury trials, and the “American Rule” requiring parties to presumptively bear their own litigation costs regardless of the outcome of a case, were bringing cases to U.S. courts that should properly have been brought under foreign law and/or before foreign tribunals.

Lower federal courts have struggled to apply these rulings; those struggles have focused specifically on (a) whether particular statutes evidence a clear congressional intent to apply extraterritorially, and (b) in what is perhaps an even more vexing factual inquiry, whether particular allegations (or established facts) create a sufficient nexus with the United States to render a case domestic, as opposed to extraterritorial.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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