The extraterritorial application of Title VII: an argument for an informal foreign compulsion defense.

• Author: Bell, Matthew K.

1. INTRODUCTION

   The discrimination laws of the United States are presumed to only apply within its territorial borders. (1) An increasing number of corporations are moving and expanding overseas. Additionally, a large number of United States citizens are now living abroad and working for these modern multinational companies. However, a problem arises when these multinational companies ignore or violate United States law abroad. The question as to whether the laws, specifically Title VII, (2) will apply extraterritorially is one that took a Supreme Court decision and decisive congressional action to answer. Title VII prohibits discrimination in employment on the basis of race, religion, sex, or national origin. (3) This paper will analyze the general rules of international law and extraterritorial application of laws. It will then analyze the Supreme Court decision and congressional actions that brought us to the present state of the law. Third, it will detail the current scope of Title VII's application and the recognized defense to its violation. Finally, it will outline new defenses and standards for their application in domestic litigation.

2. BACKGROUND

   Generally, the laws of the United States do not apply extraterritorially unless Congress clearly exercises its prescriptive jurisdiction. (4) Jurisdiction to prescribe is defined as the "authority of a state to make its law applicable to persons or activities." (5) There are two bases that allow Congress to exercise prescriptive jurisdiction extraterritorially. First, the "effects principle" allows laws to apply abroad if the prohibited conduct has a substantial domestic effect. (6) Second, the "nationality principle" recognizes a state's jurisdiction to control the activities, interests, and actions of its nationals abroad. (7) Discrimination against United States citizens abroad has a substantial domestic effect. This discrimination may have originated in the United States, or it may effect hiring of United States citizens. Therefore, extraterritorial application of Title VII is within the prescriptive jurisdiction of Congress. To determine whether Congress intended to exercise prescriptive jurisdiction, it is necessary to look at two canons of statutory interpretation.

   First, all laws face a presumption against extraterritorial application unless Congress clearly intends otherwise. (8) Once a court determines that the presumption has been rebutted by congressional intent, the second rule of statutory interpretation becomes necessary. The "Charming Betsy" principle, named for the formulating case, stands for the idea that laws with extraterritorial application should be interpreted in a way that does not conflict with the law of nations, if such an interpretation is possible. (9) The presumption against extraterritorial application of Title VII prompted a decision by the Supreme Court in EEOC v. Arabian American Oil Co. (10) and ultimately led to the passage of the Civil Rights Act of 1991. (11) A quick journey through that jungle is laid out below.

   Prior to the 1991 decision in EEOC v. Arabian American Oil Co. (hereinafter referred to as ARAMCO), the Equal Employment Opportunity Commission (hereinafter referred to as EEOC), Department of Justice, and lower federal courts considered Title VII to have extraterritorial effect. (12) The intent of Congress was inferred from the "alien exemption" clause, (13) which provides that Title VII "shall not apply to an employer with respect to the employment of aliens outside any State." (14) The inference is that Congress intended Title VII to apply extraterritorially because providing an exemption would be unnecessary otherwise. The Act also defined "commerce" as "trade, traffic, commerce, transportation, transmission, or communication among the several States; or between a State and any place outside thereof." (15) Once again, if Title VII was only supposed to apply domestically there would be no reason to define "commerce" in this broad manner. Finally, application of the judicial branch's policy of deference toward administrative agencies was also viewed as a reason for extraterritorial application of Title VII. Both the Equal Employment Opportunity Commission (EEOC) and Department of Justice supported extraterritorial application of Title VII. (16) Unfortunately, all three of these reasons were based solely on inference and deference.

   In 1991, the Supreme Court decided to create a new rule, departing from the traditional approach which inferred the congressional intent. (17) In ARAMCO, the Court refused to apply Title VII extraterritorially and created the "clear statement rule." (18) The Court held that inferences of intent are insufficient and, absent a clear statement of intent, all statutes should only apply domestically. (19) The Court made short order of the traditional reasons for inferring extraterritorial intent. The Court also invited Congress to amend the statute if it intended Title VII to apply extraterritorially. (20) The ARAMCO ruling settled the debate over extraterritorial application of Title VII, but only for a short time.

   Congress accepted the Court's invitation and clearly stated its intent for extraterritorial application in the Civil Rights Act of 1991. (21) This Act specifically expanded the scope of the term "employee" by stating, "with respect to employment in a foreign country, such term includes an individual who is a citizen of the United States." (22) This broad definition qualified as a clear statement for extraterritorial application of Title VII. Now that we have traced the foundations of Title VII's extraterritorial application, we will consider the defenses that are built into the statutory scheme and some new defenses that should be examined.

   III SCOPE OF EXTRATERRITORIAL APPLICATION OF TITLE VII

   Once Congress made a clear statement of its intent to apply Title VII extraterritorially, (23) defining the scope of its application became increasingly important. By its own terms, Title VII respects the purpose of the "Charming Betsy" principle by avoiding conflict with foreign laws. (24) It does this by providing for an affirmative defense of foreign compulsion. (25) Unfortunately, this statutory defense does not go far enough. It still leaves open the possibility that compliance with Title VII will mean conflict with both social and religious customs that do not rise to the level of positive law. Therefore, the scope of the 1991 Act must be limited even further due to principles of international comity and respect for religious practice.

   The 1991 Act already gives United States employers a defense to liability when foreign law compels discriminatory conduct. (26) However, the foreign compulsion defense has been interpreted very narrowly, requiring actual compulsion of law, and not a generalized political compulsion. (27) For example, in Abrams v. Baylor College of Medicine, a medical school refused to admit two doctors to a program in Saudi Arabia because they were Jewish. (28) The school argued that this result was compelled by Saudi law, but could not point to an actual statute or ruling requiring such discrimination. (29) This case demonstrates that defendants must take affirmative steps to ascertain official national laws of the compelling government and cannot rely on generalized understandings of customary practices. (30) The dichotomy between actual and informal...