The Second Circuit Speaks: The Presumption Against Extraterritoriality Applies to Criminal Prosecutions

Last Friday, the Second Circuit held that the presumption against extraterritoriality applies to criminal cases, resolving a key question left open by the United States Supreme Court in Morrison v. National Australia Bank, and sharply restricting the ability of United States criminal authorities to prosecute individuals and companies for conduct outside the United States. The opinion, issued in United States v. Vilar, closes one possible avenue for prosecution of foreign individuals and companies, but leaves open many questions in its wake.

MORRISON AND ITS LEGACY -

In 2010, the Supreme Court in Morrison held that the plaintiffs in a private securities suit could not bring claims under Section 10(b) of the Securities Exchange Act because the purchase of the relevant security did not take place on a United States exchange or otherwise qualify as a domestic transaction. Underlying the decision was the Supreme Court’s reasoning that statutes enjoy a presumption against extraterritoriality, which can be rebutted only by a clear demonstration of Congressional intent. Because Section 10(b) did not clearly apply extraterritorially, it could not be invoked by the plaintiffs to pursue claims arising from foreign transactions.

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