Jurisdictional Standards (and Rules)

• Author: Adam I. Muchmore
• Position: Assistant Professor of Law, Penn State University Dickinson School of Law. J.D., Yale Law School, 2003

171

Jurisdictional Standards (and

Rules)

Adam I. Muchmore*

ABSTRACT

This Article uses the jurisprudential dichotomy between

two opposing types of legal requirements—“rules” and

“standards”—to examine extraterritorial regulation by the

United States. It argues that there is natural push toward

standards in extraterritorial regulation because numerous

institutional actors either see standards as the best option in

extraterritorial regulation or accept standards as a second-best

option when their first choice (a rule favorable to their interests

or their worldview) is not feasible.

The Article explores several reasons for this push toward

standards, including: statutory text, statutory interpretation

theories, the nonbinary nature of the domestic/foreign

characterization, the tendency of extraterritorial regulation to

favor plaintiffs, interest-group pressures, and interbranch

struggles within the federal government.

Since it appears standards are here to stay, this Article

concludes by suggesting that they may have some

underappreciated benefits, at least from the perspective of a

regulating state. First, the uncertainty inherent in standards

may be a necessary consequence of regulatory schemes

permitting private civil litigants to enforce extraterritorial

statutes. Second, this inherent uncertainty may permit a state’s

regulatory program to influence primary behavior abroad that

would be difficult to reach through a rule-based model.

* Assistant Professor of Law, Penn State University Dickinson School of Law. J.D.,

Yale Law School, 2003. Earlier versions of this paper were presented at the 2011

Midyear Research Forum of the American Society of International Law, the 2012

Arizona State University Legal Scholars Conference, the 2012 Big Ten Untenured Law

Professor’s Conference, and the 2012 International Conference on Law and Society. For

insightful comments on earlier drafts, I am grateful to Daniel Abebe, Larry Backer, Bill

Fox, Mary Anne Franks, David Kaye, Kit Kinports, Julia Lee, Catherine Rogers, Victor

Romero, Steve Ross, and Sam Thompson. Kirill Lavinski and Brandon Merritt

provided excellent research assistance.

172 vanderbilt journal of transnational law [vol. 46:171

TABLE OF CONTENTS

I. INTRODUCTION .............................................................. 173

II. “RULES” AND “STANDARDS” ........................................... 176

A. Overview .............................................................. 176

1. Rules ....................................................... 177

2. Standards ............................................... 178

B. Existing Literature ............................................. 181

C. Rules, Standards, and the Conflict of Laws ..... 183

III. THREE CATEGORIES OF TERRITORIAL SCOPE ................ 187

A. Extraterritorial Rules ......................................... 188

B. Territorially Limited Rules ................................ 189

C. Potentially Extraterritorial Standards .............. 191

IV. THREE TYPES OF INTERPRETIVE METHODS ................... 193

A. Proextraterritoriality .......................................... 195

1. Analysis of Interests .............................. 195

2. Last-in-Time Rule .................................. 196

3. Traditional Categories of International

Jurisdiction ............................................ 196

B. Antiextraterritoriality ......................................... 197

1. Territorial Theories of State Power ...... 198

2. Presumption Against Extraterritoriality 198

3. Presumption that Congress Does Not

Intend to Violate International Law .... 198

4. Comity .................................................... 199

C. Territorially Neutral ........................................... 200

1. Archaeological Theories ........................ 201

2. Dynamic Theories .................................. 201

3. Preference-Eliciting Default Rules ....... 204

4. Other Canons of Construction .............. 204

V. PRECEDENT, THROUGH RULES AND STANDARDS .......... 207

A. Rules, Standards, and Extraterritoriality

Precedents ........................................................... 212

B. The Extraterritoriality Spectrum ....................... 216

C. Plaintiffs, Defendants, and Extraterritorial

Regulation ........................................................... 217

VI. STRUCTURING LEGAL REQUIREMENTS: RULES,

STANDARDS, AND LEGISLATIVE DELEGATION ................ 219

A. Instrumental Perspectives and Nonrepeat

Players ................................................................. 219

B. Repeat Players, Regulators, and Principal–

Agent Problems ................................................... 219

C. Optional Delegation of Legislative Authority .... 220

D. Mandatory Delegation of Enforcement

Authority ............................................................. 222

2013] jurisdictional standards (and rules) 173

E. Interest Groups and the Rule/Standard

Decision ............................................................... 223

1. Business Groups .................................... 223

2. Lawyers .................................................. 224

F. Rules, Standards, and International

Economic Policy .................................................. 226

VII. STABILITY AND UNCERTAINTY ....................................... 227

A. Stability: Interpretive Methods .......................... 227

B. Uncertainty as a Regulatory Tool ...................... 229

1. Self-Adjusting Enforcement Levels ...... 229

2. Discouraging Egregious Violations ...... 230

VIII. CONCLUSION .................................................................. 232

I. INTRODUCTION

Extraterritorial regulation, once an esoteric topic, is now a basic

fact of the international business environment. A company may be

incorporated in one country, listed on a stock exchange in a second

country, have offices in numerous other countries, and sell products

throughout much of the world. Each country with which the company

has a connection will likely seek to regulate some of the company’s

activities within that country. However, many countries find that

they cannot reach in-country activities (such as sale of dangerous

products or monopoly pricing) without regulating out-of-country

activities (such as manufacturing processes or agreements to collude)

as well.1

Moreover, countries are almost never adequately conceptualized

as single institutional actors. 2 Within a single country, different

institutional actors are likely to have different preferences with

respect to the scope of extraterritorial regulation.3 To the extent

different structures of legal requirements give discretionary authority

to different institutional actors, they can affect the allocation of

foreign-policy decision making w ithin a country.

1. The United States is widely acknowledged to be an aggressive

extraterritorial regulator. While much opposition to U.S. extraterritorial regulation has

come from European countries, the European Union is now itself an important

extraterritorial regulator. China is even beginning to exercise extraterritorial

authority, though it may be hampered by a domestic regulator system that is currently

far less developed than those of the United States and Europe.

2. Even countries widely considered autocratic often have formal institutional

separations, and dictators—like everyone else—must contend with principal–agent

problems.

3. They may have different preferences both as to the scope of extraterritorial

regulation generally and the degree of extraterritorial regulation appropriate in

different substantive fields.