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1 Extraterritorial Criminal Jurisdiction2 SJICL

Singapore Journal of International & Comparative Law(1998) 2 pp 1 36

EXTRATERRITORIAL CRIMINAL JURISDICTION:BRITISH, AMERICAN AND COMMONWEALTH

PERSPECTIVES.

This article surveys developments in the area of criminal jurisdiction. It seeks to formulatea theory accommodating these developments which could accommodate conflicts resultingfrom excessive claims to jurisdiction.

I. I NTRODUCTION

AS facilities for global transport and communications increase and theinterlinking of commerce on a global scale accelerates, the opportunitiesfor transnational crime also grow. There is an evident growth of transnationalcrimes, particularly, commercial crimes involving fraud, bribery, violationof security laws, drug-trafficking, money laundering, environmental pol-lution and terrorism. Recent events show that the machinery devised forthe investigation and prevention of such crimes has not kept pace with theincreasing sophistication of those involved in the commission of these crimes.

Globalisation and technology have brought about the positive effects of integrating markets and bringing about the so-called borderless world.But, the negative consequences of globalisation is the fact that it has also

made crime go global. The same techniques that facilitate business alsofacilitate crime. Electronic and other means of communication which areused in modern commerce and banking have diminished the significanceof territorial boundaries. Funds can be transferred between banks in differentcountries and shares can be traded globally with amazing speed. Thisglobalization of banking and commerce has led to greater opportunities forfraud in such transactions. 1 Money, that is the fruit of crime in one statecan be transferred several times over to differrent states and kept in a safehaven. Rapid means of transport not only allow the transport of prohibitedgoods like drugs and contraband but permit the escape of offenders easily.

1 The insider trading scandals involving Boesky and Levine are shown up in other countries.They were connected with the Guiness affair in the United Kingdom investigations intowhich commenced with information supplied by Boesky to the SEC and passed on to theBoard of Trade.

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(1998)2 Singapore Journal of International & Comparative Law

The intermeshing of the politics of the separate regions of the world leadsto an increase of political terrorism and hijacking of aircraft. Criminal gangs,previously organized within one country have found it profitable to link with gangs in other states so that they could help each others criminalactivitites. This linkage has prompted one international relations scholarto suggest that these gangs are significant transnational actors very muchin the way of states or multinational corporations and that their activitiesshould be studied as they have an impact on international relations. 2 Theseare new phenomena which requires rapid responses from the law.

But, the law has not kept apace with these global changes. Perspectiveson criminal jurisdiction differ from state to state, adding to the confusionand providing comfort to transnational criminals. 3 This article is largelyconcerned with the legal attitudes to criminal jurisdiction in England andthe states which have been influenced by English attitudes to the issue.The latter states include the United States and states of the Commonwealth.

The methods of dealing with transnational crime in England, the UnitedStates and the Commonwealth countries are still buried in notions of territorialitywhich were evolved in more sedate times. 4 A rigid notion of territorialityas the basis for criminal jurisdiction requires that the trial of the offendershould take place where the offence was committed. Extradition now providesthe only means of obtaining jurisdiction over an offender who is overseas,either because he is a fugitive or because he manipulated the events leadingto the crime from outside the territory of the state seeking jurisdiction. 5

From a Singapore perspective, the fortuitous existence of an extraditiontreaty made between Britain and Germany enabled the extradition of Leeson,the principal actor in the Barings fraud, who had fled to Germany to beextradited to Singapore for trial. Recent cases illustrate the clumsiness and

2 S Strange. Rival Firms and Rival States (1994).3 For a study of attitudes to criminal jurisdiction in different states, see report by M Bos on

The Extraterritorial Jurisdiction of States (1993) 65 Ann IDI 14.4 In England, the authoritative statement of territoriality was in R v Keyn (1876) 2 Ex D 63.

Further see on the case, G Marston, The Marginal Sea Bed (1980) 114-137. There wereprogressive extensions of criminal jurisdictions after the case which are detailed in Marstonsbook.

5 It would appear from the unfortunate decision in Alvarez-Machain v US (1992) 112 S Ct2188 that, in the United States, kidnapping is an alternative means of obtaining jurisdiction.The view that jurisdiction could be obtained through the kidnapping of offenders has beenseverely criticised in literature following the case. Cases in England and South Africa haveheld that they will refuse to exercise criminal jurisdiction over kidnapped offenders. R v

Horsferry Magistrates. [1994] 1 AC 42.

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the delay involved in the use of extradition as the mechanism for theprosecution of those accused of transnational frauds. 6 Given this situation,the alternative is to move away from territoriality as the basis of criminal

jurisdiction. But, there appears to be an entrenched view against the adoptionof such a course. A recent Privy Council decision, Liangsiriprasert v United States Government ,7 however, shows a judicial awareness of the need todepart from these old attitudes. The decision of the Privy Council has beenfollowed by the Court of Appeal in England in one case. 8 But a more recentcase indicates that the territoriality principles continues to have sufficient

vigour to prevent a fuller reconsideration of the issues involved in juris-dictions over crimes initiated from abroad. 9 Earlier, the law reform agenciesin England and Canada had advocated changes to the law. 10 But, whenlegislation has come about, it has dealt piecemeal with specific situations. 11

6 The most recent incident is the prolonged litigation concerning the extradition of LorrainOsman to stand trial in Hong Kong in respect of alleged frauds committed in Hong Kongagainst Bank Bumiputera Malaysia. The principal effects of the fraud, which led to the near

collapse of the bank in Malaysia were felt in Malaysia. But no prosecution was broughtin Malaysia in the belief that the Malaysian courts had no jurisdiction over the offences.For the extradition proceedings, see R v Governor of Pentonville Prison, ex parte Osman[1989] 3 All ER 701.The cost and delay involved have been great. The question of jurisdictionbecomes relevant to extradition as well for the courts of the extraditing state will have toconsider whether the state requesting extradition could properly claim jurisdiction. R vGovernor of Pentonville Prison, ex parte Naghdi [1990] 1 All ER 257. Extradition mayfail as some states refuse to extradite nationals. In the Liangsiriprasert case, the Thai nationalwho was alleged to be a drug-trafficker, was lured into Hong Kong and arrested by agentsthere. Thailand, following the practice of some European states, does not extradite nationals.

7 [1990] 2 All ER 867.8 R v Sansom , Times, 31 July 1990.9 R v Atakpu [1993] 4 All ER 215 . The Court of Appeal held that there was no jurisdiction

to try a conspiracy to steal cars from a rental company in Belgium and drive them to Englandfor sale there. The crime was held to have been committed outside England. The territorialityprinciple was affirmed by the Australian High Court with equal vigour in R v Thompson(1989) (1989) 86 ALR 1. Earlier, the House Lords has asserted the territorial basis of criminal

jurisdiction in strong terms. In Cox v Army Council [1963] AC 48 at 67, Viscount Simonhad stated that the whole body of the criminal law of England deals only with acts committedin England. The rule may be overridden by statute but even in the case of statute, thereis a strong presumption that it was intended to apply only territorially. Air India v Wiggins[1980] 1 WLR 815.

10 There is now a bill before the House of Lords which seeks to deal with extraterritorial jurisdiction over some property crimes including fraud. The Council of Europe also advocatedchange in the area. See Council of Europe, Committee on Crime Problems, ExtraterritorialCrime Problems (1990). Also see D Lanham, Cross-border Criminal Law (1997).

11 Part 1 of the English Criminal Justice Act,1993 deals with the limited situation of crimesinvolving fraud and fills a gap which had been created by some decisions in England whichhad held that jurisdiction may be exercised if the fraud had been initiated abroad but took effect in England but not with the converse situation where the fraud was thought of in

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There have been no legislative formulation of general principles in recenttimes which could guide courts on the issue of criminal jurisdiction.

One reason for preserving a restrictive rule on criminal jurisdiction isthat states may, when their interests require, seek to obtain illegal meansof acquiring jurisdiction. Thus, in the United States, the Supreme Courthas held that American courts could exercise jurisdiction over offenderskidnapped from abroad. 12 Wide claims to jurisdiction on the basis of protectingnationals living or travelling abroad have also met with critical responses. 13

Such techniques of obtaining jurisdiction will promote conflicts between

states.The better course may be to explore avenues of extending criminal

jurisdiction in areas in which the mutual interests in the suppression of crime may outweigh sovereign sensibilities that the enforcement may amountto interference in the competence of the state where the offence was initiatedor committed. 14 In many instances such a state may not concern itself withthe crime either because the pursuit of the offender overseas was not possiblefor economic or other reasons or because the primary effects of the crimewas not felt in the state itself. Policy should favour that the criminal bepunished by some interested state than that he should escape punishmentaltogether.

A re-thinking in this area will require the changing of the acceptedprinciple that a state may not exercise its power in any form in the territoryof another state 15 and the corollary of this principle that the jurisdiction

England but took effect entirely abroad. The legislation is largely confined to commercialcrimes and does not give rise to any general rules on criminal jurisdiction.

12 US v Alvarez-Machain (1992) 112 S Ct 2188. The case has met with much criticism. InJune,1993, the governments of Mexico and the United States formally agreed to amendthe US-Mexico Extradition Treaty to prohibit transborder kidnapping. In South Africa andEngland, courts have held that jurisdiction cannot be obtained through kidnapping of offenders. See State v Ebrahim 1991 (2) SALR 2206.

13 US v Younis (1988) 681 F Supp 909; see for adverse comments, A Lowenfeld, US LawEnforcement Abroad: The Constitution and International Law (1989) 83 AJIL 880;Abramovsky, Extraterritorial Jurisdiction: The United States Unwarranted Attempt toAlter International Law in United States v Younis (1990) 15 Yale Journal of International

Law 121.14 Several years ago, Devlin J in Martin [1956] 2 QB 272 attempted a deviation from the

English position and suggested that offences such as murder and theft are offences againstthe moral law and are not thought of as having territorial limits. They are universal offences.This idea was scotched by the House of Lords in Board of Trade v Owen [1957] AC 602;also see for Australia, Brennan J in Thompson (1989) 86 ALR 1 at 20.

15 SS Lotus [1927] PCIJ Series A, No 10 at 18.

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of a state does not extend beyond the geographical boundaries of a state.International society is organized on the basis of nation states and the interestsof these states in avoiding conflict have been served by maintaining theprinciple of territoriality which confines the competence of states to theirterritory. 16 There has been little reason to depart from this principle. In ahorizontal world system based on a fiction of equality of states, the rulehas served well to ensure harmony by confining competence over conducton strictly territorial basis. 17 But, expediency has required the making of departures from a strict territoriality principle in the past. Whenever states

were threatened by a common problem, they resorted to the principle of universality which gave all states jurisdiction over the offence regardlessof where it was committed. Piracy was the obvious example of this departurebut efforts to extend the list of offences in respect of which universal

jurisdiction can be exercised have generally been resisted. 18 Beyond piracy,the list of crimes subject to universal jurisdiction extends to slavery, genocideand certain types of war crimes. 19 Though there has been considerable

16This principle was formulated in the heyday of positivism. There is no reason why it shouldnot now be leavened by having regard to the circumstances of modern international life.Inroads have been made into this principle through developments in the field of humanrights, environmental laws and other areas.

17 The theory is that if a domestic court asserts jurisdiction over conduct in other states, itupsets the horizontal system and converts it into a vertical system as it claims competenceover conduct occurring in the territories of other states. The notion of equality of statescan no longer prevail in these circumstances. The act of state doctrine and the sovereignimmunity plea are off-shoots of this idea. See for analysis along these lines, R Falk, The

Role of Domestic Courts in the International Legal Order (1964). There has been an erosionof this notion of a perfect order through developments in fields like human rights. Thereis an interesting view that states cannot complain with interference of their sovereign rightsif they permit their territories to be used for the violation of human rights. This view stillremains in the realm of idealism, F Teson.

18 The classic statement of the principles of international law on jurisdiction still remains theHague Lectures of Dr Mann. FA Mann, The Doctrine of Jurisdiction in International Law(1964) Hague Recueil des Cours 1; Ibid , The Doctrine of Jurisdiction Re-visited afterTwenty Years (1984) 186 Hague Recueil des Cours 9. A useful collection of materialson extraterritoriality is AV Lowe, Extraterritorial Jurisdiction: An Annotated Collectionof Materials (1983). A recent consideration of the issue of jurisdiction in relation totransnational fraud is L Collins, Fraudulent Conduct in International Law [1989] 42Current Legal Problems 255. Extension of jurisdiction to hijacking and terrorism are basedon treaty arrangements. For recent literature on the subject, see G Gilbert, Crimes sansFrontieres: Jurisdictional Problems in English Law (1992) 63 BYIL 415; Report of M Bosto the International Law Institute, The Extraterritorial Jurisdiction of States (1993) 65Yearbook of the International Law Institute 14.

19 Slavery is included but despite wide condemnation, the authority for the exercise of universal jurisdiction is sketchy. The candidacy of genocide and war crimes may also be doubted.But, there is an increasing number of scholars who include them in the list of offences whichattract universal jurisdiction.

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enthusiasm shown to graduate various crimes such as political terrorism,drug trafficking and hijacking into the category of crimes justifying theexercise of universal jurisdiction, more cautious observers have taken theview that authority for such a view is meagre or non-existent. 20 The proposalto create state responsibility for international crimes presupposes the liabilityof individuals who committed them. 21 But, here again, the developmentsare too hazy to be the focus of any definite law which could be developedby domestic courts. Despite these developments, there will be a categoryof offences which will not qualify for proscription as international crimes

simply because they do not receive the same degree of condemnation orthe same agreement among states as to their characterization as internationalcrimes.

It is unlikely that a category of offences ranging from drug traffickingto transnational fraud would be subjected to universal jurisdiction, thoughthere may be an urgency to deal with such problems through collectiveaction of states. To take the example of fraud, there is little possibility of states achieving any unanimity as to what offences should be classifiedas amounting to the type of frauds which would justify the assumption of

jurisdiction on the basis of a principle of universal jurisdiction. 22 Giventhis situation the possibility of extending the jurisdiction of individual statesremains a viable alternative that needs to be explored. This article examinesthe possibility of using extraterritorial jurisdiction to deal with the problemof extraterritorial crime. The article begins by showing that the traditionalhostility to extraterritoriality in many areas of the law has given place toa position which seeks an accommodation brought about by the belief thatin certain areas of the law such extraterritoriality is either inevitable or isdesirable. This may lead to a re-thinking of the issue of extraterritoriality.In the context of such re-thinking it may become possible to accept theexercise of extraterritorial jurisdiction over transnational crimes at least toa limited extent. Unlike in situations of civil jurisdiction, there is a sharedinterest in the suppression of crime which is also supported by shared notionsof international morality which regards certain types of conduct as generallyreprehensible and worthy of punishment. The strong articulation of thisshared interest in morality and the suppression of crime will also facilitatethe extension of jurisdiction over transnational crimes, particularly if thetension brought about by broad claims of extraterritoriality have begun to

20 R Higgins, Problems and Process: International Law and How We Use It (1994) p 58.21 See, eg , LS Sunga, Individual Responsibility in International Law for Serious Human Rights

Violations (1992).22 An instance is the situation of insider trading which was considered criminal by the United

States but European states were reluctant to treat it as criminal until recently.

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abate. Secondly, it examines the trends within the Commonwealth to showthat Commonwealth courts are beginning to adopt tests relating to criminal

jurisdiction which are moving away from a stance of strict territoriality.It then makes a short comparison with the position reached by the Americancourts and the Commonwealth jurisdictions and suggests that a movementtowards the American position recognizing wider jurisdiction over transnationalcrime may be desirable in the Commonwealth. There is also a considerationof the constitutional ability of a Commonwealth state to legislate extra-territorially and the need for the Commonwealth court to give as wide an

interpretation on legislation creating crimes so as to permit extraterritorialityso as to facilitate the prosecution of transnational crimes. A final conclusionis that a theoretical model other than one of total hostility to extraterritorialityshould be developed. The model should be capable of identifying areasin which global interests could be furthered by the relaxation of the traditionalbasis of jurisdiction based on territory. 23 The application of the model isnot confined to the Commonwealth. It should have universal validity.

II. E XTRATERRITORIALITY: THE RELAXATION OF HOSTILITY

Recognition of extraterritorial jurisdiction over transnational crime willgreatly facilitate the aim of controlling such crimes. Law reform agenciesrecognize the inadequacy of jurisdiction based on territoriality to controlthe growing incidence of such crimes. The English Law Commission, dealingonly with transnational fraud, pointed out that the modern rules governing

jurisdiction over dishonesty offences with a high foreign element shouldbe so framed as to take into account the high incidence of large scale fraudcommitted across national boundaries and involving modern electronic andother means of transferring money. 24 Reform of the law on criminal jurisdictionwas also suggested by the Canadian Law Reform Commission. 25 The CanadianCommission favoured the extension of criminal jurisdiction to offencescommitted abroad which produce effects within Canada. The EuropeanCommittee of Crime Problems also advocated a change in existing attitudesto criminal jurisdiction on the basis of an international solidarity betweenstates in the fight against crime. The Committee stated that public in-

23 Existing theoretical discussions are based on the traditional hostility to extraterritoriality.24 The Law Commission, Criminal Law: Jurisdiction over Offences of Fraud and Dishonesty

with a Foreign Element. (Law Commission No 180, 27 April 1989); Law Commission,Criminal Law: Report on the Territorial and Exterritorial Extent of the Criminal Laws(1979).

25 Law Reform Commission of Canada, Extraterritorial Jurisdiction (Working Paper 37,1989).

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ternational law does not impose any limtations on the freedom of statesto establish forms of extraterritorial criminal jurisdction where they are basedon international solidarity between states in the fight against crime. 26 Thereis a general consensus among agencies concerned with the reform of thelaw that there should be a departure from the strict territoriality basedprinciple of jurisdiction.

It is not likely that the executive and legislative branches of the governmentwill accept these recommendations in full. They have had to bear the bruntof conflicts created by the use of extraterritorial jurisdiction by the United

States in many areas of the law.27

Courts, on the other hand, may be morewilling to move towards the acceptance of some form of extraterritorial

jurisdiction to cope with the increasing phenomenon of transnational crimes,even though they may have to take nationalistic stances on other issuesrelating to extraterritoriality. 28 A short survey of the state of the hostilityand conflict provoked by extraterritoriality is necessary to show that theintensity of the conflict has not abated. As a result, the executive and thelegislative arms of the state may be averse to making changes to the existinglaw through legislation because of the possibility of the resurgence of theproblems associated with the area in the past. It has been left to the judiciaryto devise an acceptable basis for the extension of jurisdiction. This cannotbe done in isolation but only with an understanding of all the areas in whichextraterritorial extensions of jurisdiction has been made and the nature of the conflict that such extension has provoked.

Conflicts resulting from expansive claims to jurisdiction, particularly bythe United States, have led to the reassertion of the territoriality principle.Much of the debate has focused on the American claim to enforce antitrustlaws extraterritorially on the basis of the effects doctrine formulated in the

Alcoa case. 29 The effects doctrine permitted a state to claim jurisdiction

26 European Problems on Crime Problems, Extraterritorial Criminal Jurisdiction (1990).27 For materials on past conflicts, see AV Lowe, Extraterritorial Jurisdiction (1984).28 Thus, the courts in England have consistently taken a view similar to the view taken by

the executive on issues relating to antitrust.29 (1945) 148 F 2d 416 (2d Cir). There is extensive literature on the problem of antitrust

extraterritoriality. For works on the subject, see AD Neale and ML Stephens, International Business and National Jurisdiction (1988); JG Castel, Extraterritoriality in InternationalTrade (1987). The Foreign Trade Antitrust Improvements Act ( 15 USC s6a 45 (a)3, 1988),which now codifies antitrust extraterritorial jurisdiction, makes the Sherman Act inapplicableto foreign commerce, unless there is a direct, substantial and reasonably foreseeable effecton domestic or import commerce. For interpretations of this legislation, see Eurim-PharmGmbH v Pfizer Inc (1984) 593 F Supp 1102 (SDNY). Also see RP Alford, The ExtraterritorialApplication of Antitrust Laws: The United States and European Community Approaches(1992) 33 Va JIL 1.

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over conduct which occurred outside the states territory but whose effectswere intended to be felt within its territory. There was vehement objectionby other states to this deviation from the principle of territoriality. 30 TheUnited States courts themselves sought a compromise by adopting a balancingof interests test which required the American courts to balance the interestsof the United States in assuming jurisdiction over the conduct with thoseof other states which may have interests affected by the exercise of such

jurisdiction. 31 This reaction may, of course, be taken as showing that thereis good cause to adhere to a position of strict territoriality in the hope that

the American judicial retreat may continue. In turn, there are dicta in Englishcases which could be construed as acknowledging that the protection of American interests may in some instances justify the exercise of certaintypes of extraterritorial jurisdiction by American courts. 32 But, recent liti-gation in the United States concerning practices within the British insuranceindustry may stir up the old debate relating to the extent of antitrust jurisdiction. 33

The European hostility to antitrust extraterritoriality may become muted

30 The Westinghouse litigation drew protests from Britain, France and Australia.These statesalso passed clawback legislation enabling recovery of treble damages paid in the UnitedStates on the basis of orders made in cases where jurisdiction was exercised on the basisof extraterritoriality. Protection of Trading Interests Act (UK,1980). AV Lowe, BlockingExtraterritorial Legislation: The British Protection of Trading Interests Act (1981) 75 AJIL257. The American response was that the clawback legislation was itself a piece of extraterritorial legislation seeking to impose consequences on events that took place abroad.

31 Timberlane Lumber Co v Bank of America (1977) 549 F 2d 597 (9th Cir); Mannington Mills Inc v Congoleum Corp (1979) 595 F 2d 1287 (3rd Cir); Industrial Investment Development Corp

v Mitsui

(1982) 671 F 2d 876 (5th Cir). Recent indications are that therewill be a two stage analysis. First, jurisdiction will have to be established on the basis of the direct, substantial and reasonably foreseeable effects test and next, there will be ananalysis on the basis of a balance of interests of factors indicated in cases like Timberlane .

32 The decision of the House of Lords in British Airways Board v Laker Airways Ltd [1985]AC 58 may be seen as a judicial softening of attitudes but the Court of Appeal in Midland

Bank v Laker Airways [1986] 1 All ER 526 returned to a vigorous resistance to extraterritoriality.See G Born, Recent British Responses to the Extraterritorial Application of United StatesLaw (1985) 26 Va JIL 91. A conflict between the United Kingdom insurance industryis currently before the American courts.

33 Hartford Fire Insurance Co v California (1993) 113 S Ct 2891. Further see PM Roth,Reasonable Extraterritoriality: Correcting the Balance of Interests (1992) 41 ICLQ 245.

34 Re Woodpulp Cartel [1988] 4 CMLR 901. Though some writers have argued that Woodpulpdid not adopt the effects doctrine, the assertion of jurisdiction over a cartel which had notoperated in the EC indicates that the effects test was adopted in that case. The EuropeanCommission has advocated the adoption of the effects doctrine consistently; Dyestuffs Case[1969] CMLR D23. R Whish Competition Law (1985) pp 267-268. JJ Friedberg, TheConvergence of Law in an Era of Political Integration: The Woodpulp Case and the AlcoaEffects Doctrine (1991) 53 U Pittsburgh LR 289. It may be even argued that the European

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as a result of the Woodpulp decision. 34 The European Court, though it didits best to appear not to be accepting the effects doctrine, was formulatingrules of jurisdiction which commentators regard as coming very close tothat doctrine. The adoption of a US-EC Competition Laws CooperationAgreement which provides for consultation and cooperation in antitrustmatters of interest to both parties will ease the possibility of future conflictsbetween the parties. 35

In the area of export controls, the previous attitude of hostility generatedby American efforts to prevent subsidiaries of American companies operating

abroad from selling products to enemy states36

has been replaced by a growingtendency to use the existing multilateral administrative machinery estab-lished by the allied states which oversees such sales. 37 The failure of communismin Eastern Europe and the growing trade with the remaining communiststates will diminish the significance of this area of conflict. 38

Hostility to extraterritoriality is maintained in several other areas. Thus,in the case of efforts to freeze assets held in overseas branches of Americanbanks, there has been consistent opposition to American orders directedat foreign branches of American banks. 39 The American view that its discoveryprocedures could be used to collect evidence abroad have also led to allegations

Court now adopts a harsher effects test as there is no reference to a balancing of interestsas in the United States indicated in Woodpulp .

35 For text, see (1991) 30 ILM 1487.36 The more celebrated instances involved the Fruehauf case involving France and the Soviet

Pipelines embargoes. The Dutch courts held that such embargoes did not have extraterritorialeffect and did not affect contracts made by subsidiaries of American companies incorporatedin Europe. Compagnie Europeene des Petroles v Sensor Nederland (1983) ILM 66. Forthese instances, see JW Bridge, The law and Politics of United States Foreign Policy ExportControls (1984) 4 Legal Studies 2; AV Lowe, Problems of Extraterritorial Jurisdiction:Economic Sovereignty and the Search for a Solution (1985) 34 ICLQ 724 ; the recentToshiba incident was settled by the use of administrative procedures; see JW Morehead,Controlling Diversion (1988) Nw J Intl L & Bus 277.

37 Ibid . On the need to reduce tensions in the area, see OECD, Minimizing Conflicting Requirements(1987).

38 Trade with China is flourishing. The US embargo on trade with Vietnam has been all butlifted.

39 For litigation in France concerning the freeze of Iranian assets, see Banque Centrale delEtat Iranien v City Bank, Paris (1980) JDI 330. For the consideration of the freeze ordersof Libyan assets by English courts, see Libyan Arab Foreign Bank v Bankers Trust Co[1988] 1 Lloyds Rep 259. For a Hong Kong case concerning international banking, see

Nanus Asia Co Inc v Standard Chartered Bank [1990] 1 HKLR 396. Generally see R Cranston(Ed), Legal Issues of Cross-Border Banking (1989).

40 WR Slomanson, The United States Supreme Court Position and the Hague EvidenceConvention (1988) 37 ICLQ 391; L Collins, The Hague Evidence Convention andDiscovery: A Serious Misunderstanding (1986) 35 ICLQ 765.

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of encroachment on sovereignty. 40But, while maintanining this general stance of hostility to extraterritorial

jurisdiction, both courts and legislatures within the Commonwealth havebegun to exercise jurisdiction which have extraterritorial features. 41 Theblocking statutes aimed at the use of antitrust extraterritoriality by the UnitedStates have elements of extraterritoriality as they affect litigation that hadtaken place overseas. 42 Antisuit injunctions issued by English courts againstantitrust litigation in the United States had the purpose of controlling conductoutside the jurisdiction of the courts. 43 English courts have issued Mareva

injunctions that are to operate outside their jurisdiction.44

The developmentof a forum non conveniens doctrine by Commonwealth courts has exploredthe circumstances in which jurisdiction may be exercised in disputes havingcontacts with other jurisdictions. This judicial experience with extraterri-toriality may lead to liberal views on legislation which has extraterritorialeffect and a greater readiness to extend the jurisdiction of the courts overtransnational conduct. In Australia, where much objection to extraterrito-riality was generated as a result of the Westinghouse antitrust litigation,some provisions of the Trade Practices Act have been given extraterritorialeffect. 45 Developing states of the Commonwealth, like India, have not shownanxiety over extraterritoriality. Instead, they have used such extraterritorialityon occasion to their advantage. 46 The Indian Supreme Court has ruled inan early case, that a fraudulent crime initiated abroad but intended to have

41 In AG v Yeung Sun-shun [1987] HKLR 998, Roberts CJ said: We are not unsympathetic

to the view that the territorial basis of jurisdiction is becoming outmoded....42 Thus in Aerospatiale v United States District Court for the Southern District of Iowa (1987)482 US 107 at 554, the American Supreme Court said: Extraterritorial assertions of

jurisdiction are not one-sided. While the District Courts discovery orders arguably havesome impact on France, the French blocking statute asserts similar authority over acts totake place in this country.

43 Thus, referring to the British antisuit injunction in the Laker Airways litigation, Judge Wilkeysaid in Laker Airways Ltd v Sabena, Belgian World Airlines (1984) 731 F 2d 909 at 938:...the English injunction seeks only to quash the practical power of the United States courtsto adjudicate claims under United States law against defendants admittedly subject to thecourts adjudicatory jurisdiction. For a survey, see TC Hartley, Comity and the Use of Antisuit Injunctions in International Litigation (1987) 35 AJCL 487.

44 Eg , Babanaft International Co v Bassante [1989] 2 WLR 232. Also see L Collins, TheTerritorial Reach of Mareva Injunctions (1989) 105 LQR 262.

45 Eg , Section 5(1); Green v Australian Investment Ltd (1989) 90 ALR 500.46 In Pfizer Corp v India (1978) 434 US 308, the Government of India successfully argued

that price-fixing in India by the drug company was a violation of the Sherman Act. Thelitigation concerning the Bhopal disaster was brought in the United States.

47 Mobarak Ali Ahmed v State of Bombay AIR 1957 SC 857.

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effects in India, is subject to the jurisdiction of the Indian courts. 47Despite the conflict that remains, the picture on extraterritoriality has

changed rapidly. It is coming to be recognized that the exigencies of multinationalbusiness now demand a relaxation of the traditional principle of territoriality.The ambivalence towards the conflict in the area will mean that courts maybe able to extend extraterritorial jurisdiction without too much restraint.There is indication that the courts in the Commonwealth are cautiouslymoving toward the acceptance of a theory that will favour the use of extraterritorial jurisdiction over transnational fraud. Whereas courts may

be willing to go towards accepting extraterritoriality in limited instances,there will be greater cautiousness displayed by the executive or the legislaturetowards such extensions. 48

III. E XTRATERRITORIAL CRIMINAL JURISDICTION ANDTHE COMMONWEALTH COURTS

The traditional view of the courts in the Commonwealth has been that criminal jurisdiction is based on territoriality. The common law position that criminal jurisdiction was confined within the territorial jurisdiction of the courts, 49

is stated in the Commonwealth penal codes. 50 Common law courts construelegislation of other states as also limited to their territories. 51 The dominanceof territoriality as the basis of jurisdiction has continued to hold sway inthe Commonwealth despite the need for extending jurisdiction in the faceof the increasing phenomenon of transnational crimes.

However, courts gradually extended jurisdiction over crimes which were

48 This may explain the cautiousness displayed in the Bill presently before the House of Lords.It does not take the law as far as it has been taken by the Privy Council in Liangsiriprasert v United States Government [1990] 2 All ER 867.

49 R v Kohn (1864) 4 F & F 68; Air India v Wiggins [1980] 1 WLR 815; Holmes v Bangladesh Biman Corp [1989] AC 1112; Liangsiriprasert v United States Government [1990] 2 AllER 867. For Australia, see Jumbunna Coal Mine v Victorian Coal Miners Association (1908)6 CLR 309 at 363; Anderson v R (1987) 117 ALR 1.

50 See s 2 of the Malaysian and Singapore Penal Codes. For a recent assertion of the territorialbasis of jurisdiction by the Malaysian courts, see Public Prosecutor v Rajappan [1986] 1

Malaysian Current Law Journal 175. But Indian courts have read the same provision asgiving extraterritorial jurisdiction to the courts in some instances. Mobarak Ali Ahmed vState of Bombay AIR 1957 SC 857. In Canada, the current trend appears to take a muchwider view of territoriality. SJ Whitley, Jurisdiction in Criminal Law (1985) at 51. Alsosee Libman v R (1985) 21 DLR (4th) 174.

51 Wiiliams and Humbert Ltd v W & H Trademarks Ltd [1986] 1 WLR 129.52 There was some debate whether the courts used initiation or termination of the crime as

the relevant criterion. G Williams, Venue and Ambit of the Criminal Law (1965) 85 LQR276,395,518. But, termination is seen as the more relevant criterion. See the South Australiandecision, Collins (1987) 42 SASR 47.

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initiated abroad but terminated within the jurisdiction of the courts. 52 The justification possibly lay in the fact that the state in which the crime terminatedhad a greater interest in its prosecution. Another technique that was developedto deal with crimes which commenced elsewhere but terminated within the

jurisdiction of the courts was to use the continuing nature of the act involvedin some crimes and regard the actus reus of the offence as continuing within

jurisdiction though commenced elsewhere. 53 The definition of conspiracyas such a continuing offence enabled courts to assume jurisdiction overconspiracies to defraud which were formed overseas but were intended to

be effected within the jurisdiction.54

A policy justification that has beenadvanced is that crimes such as conspiracies are inchoate crimes, the purposebehind which is the protection of peace. That being their object, it makeslittle difference where the conspiracy was formed provided it was intendedto take effect within jurisdiction. 55 But jurisdiction has been denied in theconverse case where the conspiracy was formed within jurisdiction to commitan offence overseas. 56 There was a great reluctance to depart too radicallyfrom the territoriality principle. A theoretical justification was provided forthe latter deviation by making a distinction between result crimes and conductcrimes. 57 A conduct crime consists of specified prohibited act on the offenderspart, irrespective of its consequences. In the case of such crimes, a courthas jurisdiction only if the conduct takes place within jurisdiction. A resultcrime consists not only of the specified conduct but also of its consequences.In the case of result crimes, it was suggested, at least by Lord Diplock,that it would be sufficient if either the conduct or the consequences occurwithin England for English courts to have jurisdiction. But, in cases involvingobtaining by deception, which is a classic instance of a result crime, Englishcourts have not been prepared to accept this view. In these cases, therehas been some insistence in showing that there was obtaining of property

53 Lawson v Fox [1974] AC 803.54 Doot [1973] AC 807.55 Lord Griffiths in Liangsiriprasert v United States Government [1990] 2 All ER 867.56 Board of Trade v Owen [1957] AC 602 followed in R v Tomsett [1985] Crim LR 369; R

v Nanayakkara [1987] 1 WLR 265. But, the decision did not prevent a Jamaican court frompunishing such a conspiracy. On appeal, the Privy Council did not decide the issue, findinga Jamaican statute which could be used to convict the accused. James Smith v The Queen(Privy Council Appeal 7 of 1992, decided on 26 October 1992).

57 The basis of the distinction is to be found in the text on Scottish criminal law, Gordon,Criminal Law of Scotland (2nd Ed,1972). AJ Arlidge and J Parry, Fraud (1985) pp 279-285.

58 Harden [1963] 1 QB 8; Tirado (1974) 59 Cr App R 80; Khubchandani (1980) 71 Cr AppR 241.

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within England, though the deception may have taken place elsewhere. 58The subtlety of the distinctions made in these cases show that the courts

do feel the need to depart from territoriality as the basis of jurisdictionbut are constrained by doctrine. In Harden ,59 the hoary postal acceptancerule was used to justify the view that an acceptance of a fraudulent offermade in England by the posting of a cheque in Jersey made the crime of deception complete in Jersey at the moment of the posting of the cheque.The result was that the English courts did not have jurisdiction over theoffence. 60 Later courts have not been too impressed by the rigid analysis

made in Harden and have preferred to confine the effects of that case.61

It may have been preferable to have accepted boldly the change that LordDiplock sought to make. Instead, English courts which were convinced of the need to assume jurisdiction over transnational frauds continued to justifysuch assumptions of jurisdiction in a manner consistent with the territorialityprinciple. In doing so, they stretched logic to the extremes and GAVE riseto nice debates as to whether the particular crime involving fraud was onewhich depended on the effect it had on the victim or third parties for theircompletion. Several techniques have been used to rationalise extensionsof jurisdiction with the territoriality principle.

One technique was to use some act that takes place within England asthat of an agent and assume jurisdiction on the basis that there was somepart of receiving by means of deception or part of an act involving theconspiracy to defraud committed in England through agency. Thus, in

Markus, 62 the deception was on West German investors who had handedover their money in Germany. The House of Lords focussed on the processingof the applications of the investors which was done in London. It held thatthe company was an agent of the investors and that acts in connection withthe fraud had been performed in England. The case shows that it wouldbe sufficient to assume jurisdiction if a part of the actus reus , a not toonecessary part, was committed in England even by an agent. It is consistentwith existing theory to exercise jurisdiction if some part of the act took place within jurisdiction. At times, the English courts have used rathercircuitous reasoning in order to find jurisdiction over the offender. In Bevan ,63

the accuse had obtained guarantees for his overdrawn cheques by usinghis gurantee card. The cheques were presented in Belgium and France. Thecourt held that there was jurisdiction on the ground that the crime was

59 Supra, note 30.60 See also Baxter [1972] 1 QB 1.61 Tirado (1974) 59 Cr App R 80.62 [1976] AC 35.63 (1986) 84 Cr App Rep 143.

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completed in England when the cheques were presented to the English bank for payment by the foreign banks which had cleared them. The result of the crime took place in England. The New Zealand Crimes Act has a provisionwhich confers jurisdiction provided a part of the actus reus was committedwithin jurisdiction. Some artificial notion, like the final act committed byan agent within jurisdiction, is resorted to in order to found jurisdiction.

It may not be necessary to resort to notions of agency to rationalise sucha position with the territoriality principle. Yet, the use of the agency principleis coming to be generally accepted in many common law jurisdictions. In

a Hong Kong case, AG v Yeung Sun-shun ,64

where a conspiracy to exportelephant tusks from Macau into Hong Kong, contrary to the Export Ordinanceof the colony was involved, the assistant purser of the ship which transportedthe tusks was a party to the conspiracy. The Court of Appeal of Hong Kongheld that though the conspiracy was formed in Macau, the Hong Kong courtshad jurisdiction as the master of the ship was an innocent agent and theassistant purser was a guilty party and they participated in the performanceof the conspiracy within jurisdiction. Roberts CJ also stated that the courtwas not unsympathetic to the view that the territorial basis for jurisdictionis being outmoded. 65

Lord Diplock, however, adopted a more realistic and novel approachto the problem of criminal jurisdiction. He pointed out that the territorialityprinciple had its historical origin in the jury trial where the accused wastried by knowers of facts and were drawn from the locality in whichthe crime was committed. The historical reason for the rule had lapsed andthere was no need to be constrained by the rule in modern times. The onlyrestraint in modern law was that imposed by international law. The onlylimiting factor in international law was the notion of international comitywhich required that the assumption of jurisdiction should be reasonablein situations where there was a possibility of another state assuming ju-risdiction over the same incident. He coupled this idea of international comitywith the notion of result crimes to arrive at the view that in result crimes,

64 [1987] HKLR 987. Compare Stonehouse [1975] AC 55 where the wife would have actedas an innocent agent in claiming insurance. Also see R v Beard [1974] 1 WLR 1549. ForAustralia, see White v Ridley (1978) 140 CLR 342; R v Skewes (1981) 7 A Crim R 276.An old case, Brisac (1803) 4 East 154 is used to support the theory of agency, the judgethere holding that the agents were mere instruments in the hands of those who formedthe conspiracy outside jurisdiction.

65 The Chief Justice referred to Treacy v DPP [1971] AC 537, the Canadian case, Libmanv R (1985) 21 DLR (4th) 174 and the Zimbabwean case, Mharapara v The State [1986]LRC (Const) 235.

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where the offender commits acts in one country and the consequences of the act are to occur in another country, the latter country would be actingin conformity with international comity if it exercised jurisdiction over theoffender. 66

Yet another approach was the acceptance of a doctrine similar to theeffects doctrine at least in criminal cases. This approach is evident in thedicta of Lord Keith in the Stonehouse case. 67 Lord Keith sought to justifythe assumption of jurisdiction in that case on the ground that the acts of the accused had effects which were intentionally felt in England. The

use of the word effects may be unfortunate for it would appear to bean acceptance of the effects doctrine formulated in the Alcoa case. Thereis reference to effects in the Criminal Justice Bill currently before theHouse of Lords. 68 In the past, the United Kingdom has resisted the useof the effects doctrine as a basis of jurisdiction, at least in antitrust matters.It may be that there is, at least, a subconscious acceptance of the relevanceof effects at least to criminal jurisdiction.

There does not appear to be much of a difference in the approaches of Lord Keith and Lord Diplock. 69 They both concentrate on the effects within

jurisdiction of the acts done abroad. Lord Diplock seeks to identify resultcrimes as the ones capable of producing such effects and adds the cautionaryprinciple that international comity should provide limits for the exerciseof the jurisdiction even where such effects are felt within jurisdiction. Tothe extent, that it is more precise and avoids comparison with the Americaneffects doctrine, the formulation of Lord Diplock may seem the better one.

IV. A MERICAN V IEWS ON EXTRATERRITORIAL CRIMINAL JURISDICTION

(1) General Criminal Jurisdiction

English courts have sometimes referred to American decisions to justifypositions they have taken on the issue of criminal jurisdiction. 70 But, it isevident that American courts assume jurisdiction on the basis of moreexpansive notions of jurisdiction than those used by the English or Com-

66 Eg , in DPP v Stonehouse [1978] AC 55 at 67.67 [1978] AC 55 at 93.68 S 3(3) b of the Criminal Justice Bill (1992).69 For the suggestion that there is, see Lord Griffiths in Liangsiriprasert v United State

Government [1990] 2 All ER 867 at 876.70 See, eg , R v Baxter [1972] 1 QB 1 at 13 where Sachs LJ said that it is not without interest

to note that the decision of this court today accords in essence with one reached in the UnitedStates as long ago as 1893...

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monwealth courts. To some extent, their more liberal views on jurisdictionare facilitated by the fact that they deal with statute based criminal law.The principles of statutory interpretation the American courts use enablethem to guess the intention of the legislature and give an interpretationwhich accords with such an intention. Often, it is possible to pass off thecourts views as to the object of the legislation as the intention of thelegislature. Penal Codes in American jurisdictions entrench this attitude bystating the grounds of jurisdiction in a liberal fashion. 71

Some lip service is paid to the principle of territoriality in that is recognised

that a criminal statute will be construed ordinarily as applying only to crimescommitted within the territory. 72 But, courts have generally shown a willingnessto infer extraterritoriality on the basis of the presumed intention of thelegislature. 73 The general approach in the United States parallels the approachof Lord Diplock that extraterritorial jurisdiction is permissible if internationallaw permits it and that the only restrictions on such jurisdiction are to befound in the rules of international comity. The understanding of the Americancourts of the permissible basis of jurisdiction are stated in the followingoft quoted passage:

Under international law, a state does not have jurisdiction to enforcea rule of law enacted by it unless it has jurisdiction to prescribe.International law recognises five general principles whereby a sovereignmay exercise this prescriptive jurisdiction: (1) territorial, wherein

jurisdiction is based on the place where the offence is committed; (2)national, wherein jurisdiction is based on the nationality or the nationalcharacter of the offender; (3) protective, wherein jurisdiction is basedon whether the national interest is injured; (4) universal, which amountsto physical custody of the offender, and (5) passive personality, wherein

jurisdiction is based on the nationality or national character of thevictim. 74

71 See, eg , s 1.03 of the Model Penal Code.72 US v Bowman (1922) 260 US 94.73 Skiriotes v Florida (1941) 313 US 69; US v Cotten (1973) 471 F 2d 744 (9th Cir); Stegemann

v US (1970) 425 F 2d 984 (9th Cir); US v Layton (1988) 855 F 2d 1388 (9th Cir).74 US v Smith (1982) 680 F 2d 255 (1st Cir); the five bases of jurisdiction are based on the

Harvard Research in International Law, Jurisdiction with Respect to Crime (1935) 29AJIL Spec Supp 435 at 445. In substantially similar form, these heads of jurisdiction arerepeated in s 402 of the Third Restatement; American Law Institute, Restatement of the

Law: Foreign Relations Law of the United States (1987) p 237. US v Pizzarusso ( 1968)388 F 2d 8 at 10.

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Since American courts perceive extraterritorial jurisdiction as being permittedprovided such jurisdiction could be justified on the basis of the five groundsof jurisdiction, they have been able to claim wide jurisdiction. The principalinstance in which such wide extraterritorial jurisdiction has been claimedin the field of criminal law is the prosecution of drug offenders. 75 But thepropositions are stated as general propositions in these cases and are notconfined to the prosecution of drug offenders. They will have a tendencyto be established as general propositions. There is wide jurisdiction claimed

also on the basis of the nationality of the victim in the case of violent crimesdirected at Americans abroad. This type of jurisdiction is claimed on thebasis of the passive nationality principle and though it is extraterritorialin a sense, it is best to assign it to a distinct category and confine discussionhere to the situation where a crime is committed abroad but produces andis intended by its perpetrators to produce effects within the jurisdiction of the United States.

A justification advanced for such extraterritorial criminal jurisdictiontakes the form of an objective territoriality principle. 76 A dictum of HolmesJ in Strassheim v Daley ,77 is used to define the acts covered by the doctrine.It reads:

Acts done outside the jurisdiction, but intended to produce and producingdetrimental effects within it, justify a State in punishing the cause of the harm as if he had been present at the effect, if the State shouldsucceed in getting him within its power.

The protective principle and the objective territoriality principle have beenused to obtain wide jurisdiction, particularly over conspiracies involvingdrug trafficking. The distinction between the two theories is that the protectivetheory provides jurisdiction if the offence affects governmental interestseven without the need to prove effects within the United States, whereas

75 US v Smith (1982) 680 F 2d 255 (1st Cir) Chua Han Mow v US (1984) 730 F 2d 1308(9th Cir). Also see US v Gonzalez (1985) 776 F 2d 931 where the court justified the useof jurisdiction over drug trafficking on the high seas on the protective principle and statethat such jurisdiction extended to such an extent and to so great a distance as is reasonableand necessary to protect itself and its citizens from injury. RR Churchill and V Lowe,

Law of the Sea (1988) p 175 state that for the moment the legality of the claims mustremain highly controversial.

76 Chua Han Mow v US 730 F 2d 1308 at 1312.77 (1911) 221 US 280.78 Pizzarusso 388 F 2d at 11.

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for the objective territoriality principle such effects have to be shown. 78The finding of a conspirator within jurisdiction has also enabled the courtsto use agency principles and attribute acts of the agent to the other membersof the conspiracy and justify jurisdiction on the basis of territoriality. 79 Thistechnique is similar to the one used in the English and Hong Kong casesdiscussed above. 80 But, there is a tendency in recent cases to dispense withthe need for such agency. 81 These cases suggest that producing effects within

jurisdiction or having an intention to do so will be sufficient. They do notrequire the commission of any act within jurisdiction.

Another technique that is used, reminiscent of the use of the notion of result crimes in English law, is the idea that the actus reus of certain offenceshave a continuing character. In English law, this idea has principally beenused in connection with charges of conspiracy, the offence held to becontinuing, though formed entirely abroad, and the territoriality principlebeing held to be satisfied where some act, however trivial, is performedwithin jurisdiction, or where no act takes place, but there is an intentionto cause effects within the territory. 82 This technique is easier to adopt inAmerican law as the statute defining the offence itself will usually indicatethe continuing character of the offence. 83 This development parallels theview of Lord Diplock that in result crimes, jurisdiction could be exercisedif one or more of the acts involved in the crime take place within jurisdiction.

(2) Extraterritoriality and Fraud

The broad bases of criminal jurisdiction stated in the drug cases havebeen used in cases involving criminal fraud as well. 84 The obtaining of anAmerican passport by supplying false information at an American consulateabroad was held to be a fraud triable in the United States on the basis of the protective principle as it affected governmental interests. Here, effectswithin the United States need not be shown. As governmental interests need

79 Ford v US (1927) 273 US 593; Winter v US 509 F 2d 975 (5th Cir); Chua Han Mow vUS (1984) 730 F 2d 1308 (9th Cir); US v Alvarez-Mena (1985) 765 F 2d 1259 (5th Cir).

80 AG v Yeung Sun-shun [1987] HKLR 987 and Stonehouse [1975] AC 55.81 US v Postal (1979) 588 F 2d 862; US v Angola (1981) 514 F Supp, 933 (SDS Fla); SE

Chilberg, The Contours of Extraterritorial Jurisdiction in Drug Smuggling Cases (1983)5 Mich YB Intl Leg Studies 43.

82 Thus, in Liangsiriprasert [1990] 2 All ER at 878, Lord Griffiths said: Their Lordshipscan find nothing in precedent, comity or good sense that should inhibit the common lawfrom regarding as justiciable in England inchoate crimes committed abroad which areintended to result in the commission of criminal offences in England.

83 US v Mancini (1989) 882 F 2d 401 (act of mailing does not complete crime where theagreement was to send pornography from Italy).

84 Eg , US v Columba-Collela (1979) 604 F 2d 357 (5th Cir).

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to be affected for the use of the protective principle, such effects are presumedonce it is shown that the conduct harmed such interests. 85 So too, fraudinvolving the disbursement of social security cheques drawn on the UnitedStates Treasury taking place in Mexico was held to be subject to American

jurisdiction. 86 The justification for such jurisdiction was that detrimentaleffects were produced within American jurisdiction, preventing the normaldisbursement of social security funds to those lawfully entitled to receivesuch funds. 87

Fraud involving transnational banking transactions have been dealt with

in various ways. Since such frauds would usually involve telecommuni-cations facilities in the United States, statutory provisions which prohibitsuch use in interstate or foreign commerce become an obvious ground of

jurisdiction. 88 The notion of conspiracy has also been given a wide meaningand it has been held that as long as acts relating to the conspiracy takeplace within the United States, even those conspirators who do not enterthe United States are subject to the jurisdiction of the American courts. 89

In frauds involving cheques, it has been held that where a cheque usedabroad had to be cleared within the United States by a bank, jurisdictioncould be assumed. In Braverman ,90 counterfeit money orders drawn on anAmerican bank were cashed in Brazil. The court assumed jurisdiction onthe ground that they had to be paid ultimately in Brooklyn, New Yorkand referred to the dictum in Strassheim v Daley 91 concerning effects producedwithin jurisdiction in support. English courts would probably assume jurisdictionin similar cases by relying purely on the territoriality doctrine, focussingon the last act of clearance by the bank on which the fraudulent chequeswere drawn. 92

In some cases, an effort has been made to retain an element of theoreticalpurity. Thus, occasionally, the need for some nexus between the United

85 US v Fernandez (1974) 496 F 2d 1295 (5th Cir).86 US v Pizzaruzzo (1968) 388 F 2d 8 (2d Cir); Rocha v US (1961) 288 F 2d 545 (9th Cir);

US v Khalje (1981) 652 F 2d 90. Compare Nanayakara , where English courts refused jurisdiction over a conspiracy to use such cheques formed in England on the ground thatthe offence was to be committed overseas.

87 Fernandez 496 F 2d at 1296.88 18 USC s 1343; US v Gilboe (1982) 684 F 2d 235 (2d Cir); US v Goldberg (1987) 830

F 2d 459 (3rd Cir); US v Amrep Corp (1976) 545 F 2d 797 (CANY).89 US v Inco Bank & Trust Corporation (1988) 845 F 2d 919 (11th Cir).90 Supra.91 See text at note 49.92 As in Stonehouse , it could be argued that it was necessary part of the conspiracy that acts

should take place in Britain. Compare Bevan (1986) 84 Cr App Rep 143.

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States and the crime has been asserted. In Columba-Colela , there was afraudulent scheme to sell cars stolen in the United States in a Mexicanborder town. The court refused jurisdiction over the fraud on the groundthat there was no effect of the crime within the United States. The courtcautioned against the drawing of an artificial nexus or effect like the Americanowners being unable to recover the cars. In Evans ,93 where there was afraudulent evasion of the Export Control Act involving the sale of Americanequipment situated abroad to an Iranian buyer, the court upheld jurisdictioneven though the whole transaction took place abroad but such a decision

is explicable on the basis that the whole purpose of the legislation wasto operate extraterritorially to prevent American products reaching enemyhands.

(3) An Assessment

American courts have generally adopted a functional approach to theproblem of criminal jurisdiction often sacrificing theoretical purity in orderto justify the assumption of jurisdiction over offences committed overseas. 94

In most cases, such an assumption of jurisdiction has been over nationalsso that the nationality principle could be used to buttress the extensive claimsmade on the basis of the objective territoriality principle. 95 Most of theoffences in which extensive jurisdiction has been claimed also involve drugoffences in the suppression of which states share a common interest andhence protests are unlikely. In fact there has been extensive cooperationin the field, states showing a great readiness to extradite offenders to standtrial even in situations where extraterritorial jurisdiction is involved. 96 Infields such as drug trafficking and other drug related offences, conflict willnot be generated by wide extraterritorial claims as there is a shared interest

93 (1987) 667 F Supp 974 (SDNY).94 See generally CL Blakesley, United States Jurisdiction over Extraterritorial Crime (1982)

J Crim Law & Criminology 1108.95 Eg , in US v King (1976) 552 F 2d 833 (CA Cal), jurisdiction was established over sale

of heroin in Japan by nationals. In US v Brown (1977) 549 F 2d 954 (CA Md) jurisdictionwas established over a conspiracy to import drugs into the States from Germany by Americannationals.

96 Thus, eg , the accused in Chua Han Mow 730 F 2d 1308, was extradited from Malaysiafor a conspiracy formed in Malaysia to export drugs into the United States. He was perhapslucky that the Malaysian courts adopt a strict territoriality principle as there is capitalpunishment for drug offences in Malaysia. Compare Liangsiriprasert [1990] 2 All ER 866where the Thai authorities cooperated with the US authorities in the arrest of their nationalin Hong Kong.

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in the suppression of such activity which finds expression in internationalconventions. Thus, referring to the trafficking in drugs and the exerciseof jurisdiction, Lord Salmon observed in Doot :97

I do not believe that any civilized country, even assuming that itsown laws did not recognize conspiracy as a criminal offence, couldtoday have any reasonable objection to its nationals being arrested,tried and convicted by English courts in the circumstances to whichI have referred. Today, crime is an international problem perhaps

not least, crimes connected with illicit drug traffic and there is agreat deal of cooperation between nations to bring criminals to justice.

The dictum is certainly true as far as drug-related offences are concerned.But, though fraud may be widely considered as morally reprehensible, 98

there may not be the same shared interest in its suppression as other interestsmay come into conflict. Thus, a ready acceptance of another states exerciseof extraterritorial jurisdiction may require the granting of access to businessdocuments or the waiver of bank secrecy laws. Yet, the American courts,though conscious of the difficulties, are inching towards finding a solutionwhich takes transnational frauds to a situation akin to that which existsin the case of drug related offences. Such a situation, to a large extentcoincides with American national interests as is evident in the case of securities fraud where the exercise of wide jurisdiction followed by a discreetcaution indicates American perceptions of the problem of jurisdiction overfraud more clearly.

V. J URISDICTION OVER SECURITIES FRAUD

Statutes on securities frauds which were enacted in the United States duringthe Great Depression were clearly intended to deal with domestic problemsinvolving fraudulent share transactions leading to bankruptcies of smallinvestors. 99 Willful violations of all federal securities legislation is criminal,

97 DPP v Doot [1973] 1 All ER 940. Compare US v Gonzalez (1985) 776 F 2d 931 wherethe court in exercising jurisdiction over drug smuggling on the high seas, justified theextension of the jurisdiction on the ground that such conduct is generally recognised asa crime under the laws of states that have reasonably developed legal systems.

98 That opinions could differ is shown by the fact that it took a long time for Europeans tocome to terms with the idea that insider trading could be criminally fraudulent.

99 Leasco Data Processing Equipment Corporation v Maxwell (1972) 468 F 2d 1326.100 L Loss, Securities Regulation (Vol 3, 1961) pp 1984, 2013.

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though civil damages could be had in respect of such violations. 100 As faras jurisdiction under them is concerned there is no difference made betweencivil and criminal jurisdiction. 101 Though the cases discussed have involvedcivil jurisdiction, since civil and crimininal jurisdiction are coterminous inthis area, the cases on civil jurisdiction serve to illustrate the extent of criminal

jurisdiction as well. It is relevant to note that the more modern statuteswithin the Commonwealth on securities regulation specifically provide forextraterritorial operation. 102 Early cases acknowledged that the fraud pro-scribed by the statutes had a clear territorial base. 103 But, by 1968, American

courts had switched this position and held that where the fraud related tostocks of foreign corporations listed on American stock exchanges, theAmerican courts could exercise jurisdiction even if the foreign corporationsdid no business within the United Sates. This result was reached in theseminal decision, Schoenbaum v Firstbrook .104 A limitation was that thetransactions should have been detrimental to American investors.

But as the courts found that share transactions abroad were affectingstock exchanges in the United States and American citizens, they reachedan intermediate stage in which artificial reasoning was often used to findthat some act in connection with the fraud took place in the United States.Two techniques were used in the cases which constitute this intermediatestage. First is the use of the nationality doctrine as the basis of jurisdictionand the assertion that where fraudulent transactions affected Americancitizens, American courts would assert jurisdiction wherever the transactiontook place. 105 The protection of citizens or the passive personality principleon which this step is based does have support in international law. A secondtechnique was to find jurisdiction on the basis that the participants in thefraud had used American postal and telecommunications facilities for effectingthe fraud.

These cases contained expansive bases of jurisdiction and in a seriesof decisions made by Judge Friendly, an effort was made to chart out amore precise formulation of jurisdictional principles to be applied in such

101 Further see Section 416 and commentary on the section in the American Law Institute, Restatement of the Law Third: The Foreign Relations Law of the United States (Vol 1, 1987)pp 295-303.

102 Eg , see ss 123 & 124 of the Australian Securities Industries Code and s 1 of the AustralianCompanies (Acquisition of Shares) Code CAC v National Nominees (1982/83) 8 ACLC1038.

103 Eg , Kook v Crang (1960) 182 F Suppl 388 (SDNY).104 (1968) 405 F 2d 200 (2d Cir).105 SEC v Gulf International Finance Corporation (1964) 223 F Supp 987 (SD Fla); SEC v

United Financial Group Inc (1973) 474 F 2d 354 (9th Cir).

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cases. Firstly, there was a rejection of the view that an extensive effectsdoctrine should be applied in the area. Leasco Data Processing Equipment Corporation v Maxwell 106 signalled a return to territoriality at least as thestarting premise of analysis. In this case, Judge Friendly stated that if allthe fraudulent acts in respect of the sale of the stocks of an English companyhad taken place in England, serious doubts would be entertained as towhether the securities legislation would be applicable simply because of the adverse effect of the fraudulently induced purchases in England of securities of an English corporation, not traded in an organized American

securities market, upon an American corporation whose stock is listed onthe New York Stock Exchange and its shareholders. But the judge wenton to say that if there had been significant conduct within the territory,then jurisdiction may be assumed. In Bersch v Drexel Firestone Inc ,107

jurisdiction was declined as the transactions involved were predominantlyforeign.

But, in IIT v Vencap ,108 Judge Friendly ruled that the American courtswould assume jurisdiction to prevent the United States being used as a basefor fraudulent securities schemes even when the victims are foreigners, aholding which goes beyond any case yet decided. 109 But the judge alsoheld that jurisdiction should not be extended to cases where the UnitedStates activities are preparatory or take the form of culpable neonfeasanceand are relatively small in comparison to those abroad. The court heldthat a lower threshold of preparatory acts done in the United States maybe sufficient if Americans abroad had been harmed. 110 There is an effortin these judgments to limit the wide claims of jurisdiction that had beenpreviously made. The limitation is based on the primacy of the territorialitydoctrine, with exceptions being made where there were substantial effectsof the fraud on the American investors or the American economy.

Even the limited attempt at cautiousness shown by the Second Circuitwas discarded in later cases. This may have been due to the concern thatsecurities frauds were arousing globally and the vision that the American

106 (1972) 468 F 2d 1326 (2d Cir).107 (1975) 519 F 2d 974 (2d Cir).108 (1975) 519 F 2d 1001 (2d Cir).109 In a later decision, SEC v Kasser (1977) 548 F 2d 109 (3rd Cir), Judge Adams asserted

a similar proposition in more spectacular language: We are reluctant to conclude theCongress intended to allow the United States to become a Barbary Coast as it were,harbouring international securities pirates.

110 There is of course, no basis for this exception. The protective principle justifies protectionof national or governmental interests and the nationality principle justifies exercise of

jurisdiction over nationals who commit crimes whilst abroad.

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courts had the function of policing such frauds. As the securities marketswere becoming globally integrated and the United Sates markets werebecoming the leaders of the world markets, the American courts respondedby departing from the territoriality principle and accepted more expansivebases of jurisdiction. A newer line of cases began to emerge in which theprotection of the reputation of the American markets from both local andforeign manipulators became the concern of the courts. 111 The fact that thesemarkets could be manipulated by electronic and other speedy means withoutthe offender setting foot within the United States also justified the use of

expansive doctrines.112

Thus, in Continental Grain , the securities transaction was in respect of an Australian company and the victims of the fraud were Australian nationals.Some conduct took place in a lawyers office in New York and this providedthe only contact with the United States.The stocks of the Australian companywere not registered in the American exchanges. The Eighth Circuit Courtof Appeals held that the mere use of mail and telecommunications facilitiesin the United States to make misrepresentations as to the continuation of existing licensing arrangements was sufficient to provide jurisdiction. Therewas also justification provided on the basis of forum non conveniens asthe victim was prepared to litigate the matter in the United States and thedefendant resided in the United States. The court recognised that the decisionwas largely based on policy considerations. It articulated three distinctpolicy grounds:

(1) the denial of jurisdiction would embolden those who wish todefraud foreign securities purchasers or sellers to use the UnitedStates as a base of operations;

(2) concern with the prospect of unfavourable reciprocal responsesby other nations and the hope that the exercise of jurisdictionwould lead to effective anti-fraud enforcement internationally;

(3) the belief that the finding of jurisdiction was consistent withCongressional intent to elevate the standard of conduct in se-curities transactions.

Decisions, principally of the Ninth Circuit, have sought to advance the

111 Eg , SEC v United Financial Group Inc (1973) 474 F 2d 354.112 See Note, American Adjudication of Transnational Securities Fraud (1976) 89 Harv LR

553 at 565.

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policies underlying the Federal securities laws and expand jurisdiction inthis manner. 113 During this expansive period, the official quarters were toyingwith a theory that would justify the assumption of extensive jurisdiction.This theory had it that if there was any direct or indirect trade done throughany American exchange, there must be implied from this conduct a waiverof any objection to the exercise of jurisdiction over the transaction by anAmerican court. 114 The idea has since been given up which itself may indicatethat there has been a change of approach to extraterritorial jurisdiction oversecurities frauds in favour of more cooperative endeavours in the area than

confrontational standpoints.More recently, there has been an indication of a shift back to cautiousness

favoured by the decisions of the Second Circuit. A court has acknowledgedthat jurisdiction should be refused over a transaction designed in such away as to have minimal contacts with the United States. 115 Likewise, therehas been preference shown to the views of the Second Circuit in Zoelschv Arthur Andersen .116 Here, fraud committed in Germany was involved and

jurisdiction of American courts was sought to be established on the basisof preparatory acts within the United States. The court refused jurisdiction.Bork J, noting that there were views more permissive, allowing subjectmatter jurisdiction where some activity designed to further a fraudulentscheme occur here, preferred to follow the more restrictive view of theSecond Circuit. He observed:

... jurisdiction is appropriate when the fraudulent statements ormisrepresentations originate in the US, are made with scienter andin connection with the purchase or sale of securities, and directly causeharm to those who claim to be defrauded, even if reliance and damagesoccur elsewhere. 117

113 Grunenthal GmbH v Hotz (1981) 511 F Supp 582 (CD Cal); Consolidated Oil Fields v Monoco (1989) 871 F 2d 252 (2d Cir).

114 J Fedder, Waiver by Conduct: A Possible Response to the Internationalization of SecuritiesMarkets (1986) 6 J Comp Bus & Cap Mkt L 1; Symposium on Policing Transborder Fraudin the United States Securities Markets (1985) 11 Brooklyn JIL 475-559.

115 The Plessey Co v The General Electric Company [1986] NACL 93.116 (1987) 824 F 2d 27 (DC Cir).117 In MCG Inc v Great Western Energy Corporation (1990) 896 F 2d 170 (5th Cir) jurisdiction

over a purely foreign fraud was refused though the court found that the defendant had madeextensive machinations to avoid contact with American law. The judge explained thedifferent views in the American courts in the following terms:

...our colleagues in the Second Circuit have exercised jurisdiction in cases in whichforeign investors alleged fraudulent acts in the United States but declined jurisdictionwhen the acts occurring in the United States were merely preparatory to the alleged fraud.This approach has been viewed as requiring that domestic conduct needed to triggersubject matter jurisdiction must satisfy the elements of a violation of Rule 10b-5. The

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1. Commodities Frauds

Trading in commodity futures being a later phenomenon, legislationconcerning it came later. But, the provisions on fraud in the CommodityExchange Act 118 have been interpreted in light of the experience relatingto the securities field. The assumption that the legislative purpose behindthe legislation in the two areas are the same has been made in several cases. 119

Most of the cases on the Act were decided after the period in which the

cautiousness in the interpretation of the securities legislation had ended andmore expansive claims to jurisdiction were coming to be formulated. Thefirst case to deal with jurisdiction under the Act was Tamari v Bache and Co (Lebanon). 120 Here, though both parties were non-residents and all conductby them had taken place outside the United States, the court upheld ju-risdiction on the basis that the transaction was effected through an Americanexchange. The trend set in this case was followed in other cases involvingfrauds on the commodities markets. 121 Thus, in Psimenos v Hutton, 122 thealleged fraud consisted of misrepresentations made by the defendants agentin Athens and the court was convinced that the core of the alleged fraudwas committed in foreign lands. But, it nevertheless assumed jurisdictionover the case. In justifying its decision the court observed:

Although most of the fraudulent misrepresentations alleged in thecomplaint occurred outside the United States, the trading contractswhich consummated the transactions were often executed in New York.The issue on appeal is whether that trading in the United States commoditiesmarkets is sufficient to confer subject matter jurisdiction on a federaldistrict court to hear a claim for damages brought by an alien underthe Commodity Exchange Act. We find that the district court has

Third, Eighth and Ninth Circuits have adopted a more relaxed standard, requiring thatconduct, not necessarily fraudulent itself, be alleged to have occurred in the United Statesin furtherance of the fraudulent scheme.

118 Ss 6 (b) and (c) of the Commodity Exchange Act (1982) deal with fraud.119 Tamari v Bache (1982) 547 F Supp 309 at 311. For a survey of the law, see RB Earls,

Extraterritorial Application of the Frauds Provisions of the Commodity Exchange Act41 Wash & Lee LR 1215; M Sager, The Extraterritorial Application of the AntifraudProvisions of the Commodity Exchange Act (1985) 11 Brooklyn JIL 615.

120 Supra, at note 75.121 Mormels v Girofinances (1982) 544 F Supp 815 (SDNY); Cresswell v Prudential-Bache

Securities Inc (1984) 580 F Supp (SDNY); but see Alpa SA Agroindustrial Aleman v Acli Internatinal Inc (1983) 573 F Supp 1070.

122 (1983) 722 F 2d 1041 (2d Cir).

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jurisdiction to hear the plaintiffs claim. The trades Hutton executedon the American markets constituted the final act in Huttons allegedfraud on Psimenos, without which Huttons employees could not havegenerated commissions for themselves.

Put in this manner it may be possible to justify the view that jurisdictionwas properly had on the basis that there was necessarily some act to bedone in the United States for the fraud to be complete and the analogywith an English decision like Stonehouse 123 could become strong. Though

both in the field of securities and commodities frauds, American courtshave asserted wide grounds of jurisdiction, there is evidence of a conscious-ness of the limits to jurisdiction and the need to identify a territorial nexus.But, often policy reasons seem to predominate and the nexus is found onthe existence of minimal conduct.

VI. T OWARDS A NEW THEORY OFEXTRATERRITORIAL CRIMINAL JURISDICTION

The need for extraterritorial extension of jurisdiction over crimes is comingto be accepted by the courts. Such a measure of acceptance of extrater-ritoriality can be seen in newer areas of criminal law where regulation of conduct harmful to common interests is visible. Thus a report at a conferenceof European Ministers of Justice, referring to the need to control environ-mental pollution, concluded that steps should be taken to ensure thatenvironmental pollution perpetrated in another member State or acrossborders can be punished not only in the place where the act was done,but also where the result is felt. 124 As the effects of acts begin to be feltincreasingly outside the borders of states, the need to reach out of theterritorial jurisdiction to control these acts will also grow. Policy reasonswill be articulated in justifying extensions of jurisdiction. A recent exampleis to be found in the opinion of the Privy Council in Liangsiriprasert vUnited States Government, 125 where Lord Griffiths, speaking for the PrivyCouncil, observed:

Unfortunately in this century crime has ceased to be largely local

123 [1975] AC 55.124 Protection of the Environment through the Criminal Law (Rapporteur: Hans A Engelhard,

Minister of Justice of the Federal Republic of Germany, 17th Conference of EuropeanMinisters of Justice, Istanbul, 5-7 June, 1990). Council of Europe, Summary of Reportsissued by Information Department, 16 May 1990.

125 [1990] 2 All ER at 878.

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in origin and effect. Crime is now established on an international scaleand the common law must face this new reality. Their Lordships canfind nothing in precedent, comity, or good sense that should inhibitthe common law from regarding as justiciable in England inchoatecrimes committed abroad which are intended to result in the commissionof criminal offences in England.

The dicta indicates that there exists within the Commonwealth, a judicialawareness of the policy grounds justifying the extension of jurisdiction. 126

But, there is a need to control and limit the exercise of such jurisdiction.Where states do not share a mutual interest in the control of conduct, frictionis bound to result. Existing authority in international law provides onlyambivalent guidance. The Lotus Case, 127 which contains wide and permissivecriteria of jurisdiction, also contains seeds of rules limiting such jurisdictionon the basis of which it is yet possible to build a useful theory of extra-territoriality. While laying down a permissive doctrine, the Court did saythat jurisdiction must be exercised by a State without objections or complaintson the part of other States. This provides broad support for the existenceof an international rule that exercise of a States jurisdiction should notaffect the interests of other States.

Given this limitation, which can be supported by other doctrines suchas the equality of States, non-interference in domestic affairs and the generalfact that States are organised in a horizontal international order, it mustbe taken as accepted that States must confine their jurisdiction to their territoryexcept in situations where it is clear that other States will not object totheir exercise of extraterritorial jurisdiction.

Such objections will generally not be forthcoming in many areas of thecriminal law in modern times. The one obvious area is the control of drugrelated crimes. Here, the nature of the cooperation that is evident in theinternational sphere indicates a shared interest in the control of the problemthat the exercise of extraterritorial jurisdiction by one State will hardly causeany protest by other States. 128 The rigidity of the categorization of theprinciples of jurisdiction has resulted in the reluctance to recognise thata category of jurisdiction which stands as an intermediate category betweenuniversal jurisdiction and territoriality jurisdiction is developing and thatthis category permits the exercise of extraterritorial jurisdiction, particularly

126 Compare also the dictum of Roberts CJ of the Hong Kong Supreme Court at note 21.127 PCIJ Series A, N 10.128 This shared interest is evidenced by international conventions such as the UN Convention

against Illicit Traffic in Narcotic Drugs and Psychotropic Substances.

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over criminal conduct. The identification of such a category will preventthe haphazard attempts to promote certain crimes as attracting universal

jurisdiction on the basis of meagre auth

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