Many years ago, an American friend of mine was living in Paris and went to the local post office near his apartment to mail a letter. There he found some American tourists who were clearly upset with the French postal clerk. My friend went over to see what the problem was, and to see if he could help. It turned out that the American tourists were trying to mail postcards to the United States, but wanted to put American stamps on the cards. They couldn’t understand when the postal clerk tried to explain that one cannot send mail to the United States from France using United States stamps. My friend explained this to the American tourists; however, they remained incredulous that mail sent to the United States had to have French stamps.
I tell this story because it illustrates a bigger point: how many Americans view the rest of the world as an extension of the United States. How dare the French post office not honor United States stamps on postage sent to America? The gall of those French!
This story comes to mind now because of the increasing influence of the United States on the world’s regulatory environment, imposing United States views of how things should be run on the rest of the world. This week, the Department of Justice announced that it had reached an agreement with Credit Suisse whereby Credit Suisse agreed to plead guilty to conspiracy to commit tax evasion in the United States and pay a penalty of $2.6 billion. Presumably, most of the conduct at issue took place outside of the United States. But because it had consequences in the United States, the United States government believed that it had the right to punish that conduct.
Recently, the Foreign Corrupt Practices Act (“the FCPA”) has become a favorite of prosecutors and regulators. Most of the conduct being investigated for potential FCPA violations took place completely outside of the United States. However, if public companies that trade on United States exchanges pay bribes overseas (usually through foreign subsidiaries), those foreign bribes are treated as United States crimes.
(Photo credit: Wikipedia)
In 2011, Judge Lewis Kaplan in the Southern District of New York enjoined plaintiffs who had successfully sued Chevron CVX -0.18% in Ecuador from enforcing that judgment anywhere in the world! In a rare rebuke to the trend in favor of extraterritorial jurisdiction by U.S. court, in 2012, Judge Kaplan was reversed, with the appellate court finding that the law did not give Judge Kaplan the authority “to dictate to the entire world which judgments are entitled to respect and which countries’ courts are to be treated as international pariahs.” However, on March 4, 2014, Judge Kaplan entered a lengthy order in favor of Chevron. A lawyer for the Ecuadorian plaintiffs said that Judge Kaplan’s ruling amounted to “what is in effect a global anti-collection injunction that would preclude enforcement of a judgment from another country in every jurisdiction.” The matter is on appeal.
How can the United States impose its will upon foreign plaintiffs and corporations to toe the line on conduct that is largely outside of the United States? Because the United States has the power to do so.
Someday, China or India may replace the United States as the proverbial 800 pound gorilla in the world of international commerce. By virtue of their economic might, they may (indeed, it seems likely that they will) impose their own set of morals on conduct largely in the United States, with small impact outside of the United States. One can easily imagine the outrage that would be expressed in the United States if and when that happens.
Which brings me back to the post office in Paris. As long as the United States views the rest of the world as an extension of the United States (just as the famous Saul Steinberg poster in The New Yorker viewed the rest of the world as an extension of New York), it will create resentment by those whose conduct is being now regulated or prosecuted from afar (i.e., in the United States). That resentment may have consequences that the United States may regret. In the meantime, don’t mail letters from Paris to the United States using U.S. postage. It gives the U.S. a bad name.