Jurisdictional standards (and rules).

• Author: Muchmore, Adam I.
• Position: I. Introduction to IV. Three Types of Interpretive Methods C. Territorially Neutral, p. 171-201

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.

TABLE OF CONTENTS I. INTRODUCTION II. "RULES" AND "STANDARDS" A. Overview 1. Rules 2. Standards B. Existing Literature C. Rules, Standards, and the Conflict of Laws III. THREE CATEGORIES OF TERRITORIAL SCOPE A. Extraterritorial Rules B. Territorially Limited Rules C. Potentially Extraterritorial Standards IV. THREE TYPES OF INTERPRETIVE METHODS A. Proextraterritoriality 1. Analysis of Interests 2. Last-in-Time Rule 3. Traditional Categories of International Jurisdiction B. Antiextraterritoriality 1. Territorial Theories of State Power 2. Presumption Against Extraterritoriality 3. Presumption that Congress Does Not Intend to Violate International Law 4. Comity C. Territorially Neutral 1. Archaeological Theories 2. Dynamic Theories 3. Preference-Eliciting Default Rules 4. Other Canons of Construction V. PRECEDENT, THROUGH RULES AND STANDARDS A. Rules, Standards, and Extraterritoriality Precedents B. The Extraterritoriality Spectrum C. Plaintiffs, Defendants, and Extraterritorial Regulation VI. STRUCTURING LEGAL REQUIREMENTS: RULES, STANDARDS, AND LEGISLATIVE DELEGATION A. Instrumental Perspectives and Nonrepeat Players B. Repeat Players, Regulators, and Principal--Agent Problems C. Optional Delegation of Legislative Authority D. Mandatory Delegation of Enforcement Authority E. Interest Groups and the Rule-Standard Decision 1. Business Groups 2. Lawyers F. Rules, Standards, and International Economic Policy VII. STABILITY AND UNCERTAINTY A. Stability: Interpretive Methods B. Uncertainty as a Regulatory Tool 1. Self-Adjusting Enforcement Levels 2. Discouraging Egregious Violations VIII. CONCLUSION 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 within a country.

The United States has long been an aggressive extraterritorial regulator. Some federal laws provide explicit extraterritorial authority; others have been interpreted by courts to apply outside the United States. Many statutes permit the U.S. government to bring extraterritorial enforcement action; a smaller but still significant number also give private parties the ability to enforce extraterritorial statutes through civil suits. (4)

Despite the importance of extraterritorial regulation to the modern states, doctrinal accounts have proved highly unsatisfactory in either explaining existing jurisprudence or predicting future decisions. This Article puts traditional doctrinal tools to the side and looks instead at the underlying structure of the legal framework that has developed around extraterritorial regulation. The Article focuses on one aspect of this underlying structure that has not been explored in existing literature--the degree to which the territorial scope of a legal requirement is structured as a "rule" or a "standard." (5) The rule/standard distinction serves as a wider lens for viewing existing case law. From this perspective, existing doctrine looks less like a confused jumble of inconsistent decisions. (6) Instead, it begins to look more like the doctrinal consequences of a larger battle over the form of legal requirements and the allocation of decision-making authority within a multibranch government. (7)

This Article has four primary goals. First, it suggests that the rule/standard distinction provides a way of understanding the manner in which the territorial scope of statutes is structured. Second, it suggests that the statutory-interpretation battles that dominate existing doctrine are relevant only for one type of statute--those whose territorial scope is structured as a standard rather than a rule. Third, it suggests that different institutional actors will have different preferences with respect to whether the territorial scope of a statute is set out as a rule or a standard. Fourth, it suggests that the uncertainty inherent in standards may have some underappreciated benefits.

The argument proceeds as follows. Part II provides an overview of the jurisprudential concepts of rules and standards. Part III introduces three broad statutory categories: (1) extraterritorial rules, such as the Foreign Corrupt Practices Act (FCPA), in which there is a clear statement of extraterritorial reach; (2) territorially limited rules, in which there is a clear statement against extraterritoriality; and (3) potentially extraterritorial standards, in which extraterritorial reach is uncertain. The third category, potentially extraterritorial standards, accounts for much of the current doctrinal confusion. Part IV explains that one way of making sense of this confusion is to understand potentially extraterritorial standards as being subject to three types of interpretive approaches: (1) proextraterritoriality interpretive methods, (2) antiextraterritoriality interpretive methods, and (3) territorially neutral interpretive methods. (8) Part V suggests that leading extraterritoriality precedents make more sense when viewed as a struggle between rules and standards, on the one hand, and proextraterritoriality and antiextraterritoriality interpretive methods, on the other hand. Part VI addresses the stability of interpretive methods over time and the uncertainty created by standards. It suggests that differences in interest-group pressure may make antiextraterritoriality interpretive methods more stable than proextraterritoriality interpretive methods. It further suggests that the uncertainty inherent in standards-based regulation may have advantages in the extraterritoriality context, at least from the perspective of an individual state. Part VII concludes.

2. "RULES" AND "STANDARDS"

   This Part analyzes the jurisprudential concepts of rules and standards. Part II.A provides an overview of the distinction between rules and standards, using examples to illustrate the explanatory value of this distinction. Part II.B surveys existing literature on rules and standards. It highlights the role that the distinction between rules and standards has played in multiple schools of academic thought (from Critical Legal Studies to Law and Economics) and of multiple fields of public and private law (ranging from property and contract law to constitutional and administrative law). Part II.C focuses on the surprising absence of academic discussion of the distinction between rules and standards in the field of conflict of laws.

   1. Overview

      One helpful perspective on the rules/standard distinction is set out in Lewis Kaplow's Rules Versus Standards: An Economic Analysis. (9) Kaplow suggests that the primary distinction between rules and standards is that rules are legal commands that seek to determine an...