Extraterritoriality by other means: how labor law sneaks across borders, conquers minds, and controls workplaces abroad.

AuthorArthurs, Harry


Labor lawyers generally believe that each country's labor law, for better or worse, expresses its fundamental values and reflects its historic experience; that states can neither import nor export labor law because of the unique characteristics of each country s legal and industrial relations systems; (1) and that the doctrine of extraterritoriality (2) shields each state's labor law from the intrusion of others, thus ensuring that each can pursue its social and economic development in the manner it thinks best. While labor lawyers who hold these views are genuinely respectful of national sovereignty, some also chafe under its restrictions. They believe that the extraterritoriality doctrine unduly limits the capacity of a state to protect the labor rights of its own citizens while they are employed abroad. They are also concerned that a state cannot punish the businesses it has incorporated for engaging in exploitative labor practices when operating in foreign countries, thereby harming workers in those countries as well as undercutting labor standards at home. (3)

This Article challenges this state-centered description of labor law and impoverished view of extraterritoriality. It suggests that transnational flows of technology and capital, goods and services, and ideas and information have brought in their wake changes in political economy and social relations that have transformed regimes of public and workplace governance in all countries. It proposes that the extraterritoriality doctrine operates, if at all, only in the formal sense of not allowing one state to overtly project its law into the territory of another. But extraterritoriality does little to prevent the rules governing employment relations in one country from taking root elsewhere, from shaping foreign labor market norms, institutions, and practices, and from being reproduced, in their original or mutant forms, in foreign systems of labor law. The result is the extraterritorial projection "by other means" of labor law and policy--a form of extraterritoriality that has the potential to enhance as well as undermine labor standards in global enterprises.

This challenge, in turn, rests on two premises.

The first is that all workplaces tend to generate their own law. (4) The "law of the workplace" thus comprises not only state labor law but also (and more importantly) formal contractual understandings; workplace customs explicitly acted on and implicitly accepted as binding by workers and managers; and low-visibility behavioral norms embedded in operating manuals, daily routines, and workplace cultures. The law of the workplace has long been understood by industrial relations practitioners and socio-legal scholars to exist apart from-and sometimes in contravention of--state law. Indeed, given the unwillingness or incapacity of states to regulate the labor practices of transnational corporations, such corporations are relatively free to develop their own normative regimes. The law of the workplace is therefore not unduly influenced by national legal systems, though for their own reasons corporations may choose whether and to what extent they will comply with the local law of the countries in which they operate. Consequently, to describe labor law as operating extraterritorially is only to identify one more way (amongst many) in which it departs from the formal state-centered paradigm of law to which most jurists subscribe.

The second premise is that "labor" is not a discrete domain of law and policy. (5) While a central preoccupation of labor law is indeed to regulate the balance of power between workers and employers, many of the factors that actually determine that balance are not conventionally perceived to be "labor" related. Trade and taxation, homeland security and health insurance, and insolvency and immigration laws and policies (to name but a few) have profound effects on labor markets in general, and therefore on particular economic sectors, enterprises, and workplaces. The result is that in many advanced economies--especially those where global corporations originate and dominate--labor law and policy become an incidental by-product, an externality, of other political preoccupations. The bargaining power of unions, the enforcement of labor standards legislation, and the provision of employment opportunities for excluded minorities are often determined in a practical sense by public policies whose primary purpose is to encourage or discourage consumption, pacify or punish particular political constituencies, or realign relations with foreign trading partners. Nor, given the declining political influence and bargaining strength of unions in most advanced economies, can workers count on recouping at the workplace level losses sustained in debates at the political level. And, of course, the situation of workers in most developing economies is even worse: they are not citizens of the metropolitan countries where important decisions are made that affect their jobs, are often denied a voice even in the political system of their own country, and seldom wield much power at the workplace level.

Thus, the "extraterritoriality" debate is not merely over the extent to which states have the right to project their labor laws beyond their territorial borders or, for that matter, to exempt foreign corporations from their labor laws. It is more fundamentally a debate over the multiple sources and meanings of "law," the permeable boundaries of "labor" as a policy domain, and the effects of globalization on these two difficult issues.

In the next Part, I introduce this debate by briefly examining the legal doctrine of extraterritoriality, by providing historical examples of states that have actively sought to project their labor laws into foreign territories, and by showing that labor laws do operate extraterritorially (with varying degrees of success), legal-doctrinal objections to the contrary notwithstanding. Then, in successive Parts, I address what I have referred to as the "fundamentals" of the debate, by describing how labor laws in fact "sneak across borders" relatively unconstrained by the extraterritoriality doctrine; how they "conquer the minds" of foreign legislators and policy makers, workers and managers, and their advocates and allies; and how they come to "control workplaces abroad." These are the "other means" by which extraterritoriality is accomplished. In a concluding Part, I revisit the issue of globalization, and suggest that since extraterritoriality "by other means" is probably inevitable, we had better understand its modalities and consequences.


    1. Extraterritoriality as Legal Doctrine

      The legal doctrine of extraterritoriality has three distinct aspects. First, it prima facie prevents states from applying their laws to anyone not physically present within their own territorial boundaries. (6) Not surprisingly, then, states may not enact laws that purport to govern employment relations in another country. To do so would clearly infringe the sovereignty of that country. Second, by way of exception, states may regulate the conduct and protect the rights of their individual and corporate citizens while abroad so long as they do not require them to violate the law of the country where they live, work, or carry on business. (7) Consequently, if a state does wish to subject its expatriate workers and employers to the extraterritorial reach of its labor laws it may do so by making this explicit in domestic legislation or by demonstrating that their conduct abroad has significant effects at home. (8) And third, the extraterritoriality doctrine may be qualified by treaty or international law so as to confer on the expatriate citizens of one state full or partial immunity from the law of another state in which they work or live. This type of extraterritoriality is relatively rare in the labor context, but certainly not unknown. (9) Obviously, full or partial immunities for foreign corporations may be established unilaterally by the domestic legislation of the host country, as they are in export processing zones (EPZs). (10)

    2. Extraterritoriality in Historical Context

      The great trading companies that undertook the first wave of globalization, from the seventeenth century onwards, did not hesitate to impose their own "law" on their employees, whether dispatched from the mother country or employed locally. (11) Nor did colonial courts and administrations shrink from holus bolus importation of labor laws from their home countries, however ill-suited to local conditions. Nor did colonial legislators hesitate to replicate in local form legislation clearly borrowed from the motherland--the U.K. Master and Servant Acts being a particularly well-documented case in point. (12) Nor did newly independent nations always shrug off colonial labor laws when the flag of the metropolitan power was lowered. (13) Even post-apartheid South Africa redesigned its collective labor laws through extensive "borrowings and bendings" from other national systems, in the hope of both enabling its labor market institutions to operate in the context of a global economy, and ensuring its workers freedoms and protections comparable to those enjoyed by workers in other democracies. (14) In fact, attempts to import labor market policies, institutions, and laws from one state to another have been so frequent that debate over the feasibility of "transplantation" has become a dominant theme of comparative labor law scholarship. (15)

      Moreover, the transplantation of labor law and policy has featured prominently in international politics. Thus, in 1944, American labor law significantly influenced the ILO's Declaration of Philadelphia (16) and subsequently other labor-related international regimes (17) (though apparently not the U.S. Congress itself, which declined either to ratify this text or reform U.S...

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