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The Reach of U.S. Law over Foreign Corporations

By Jay Mayesh and M. Tomas Murphy
June 10, 2013

As global commerce has expanded beyond traditional territorial bounds, the jurisdiction of the U.S. courts has undergone a similar expansion. Long behind us are the days when a foreign corporation could consider itself comfortably beyond the reach of a U.S. court so long as it maintained no “physical presence” in that court's geographical jurisdiction. By the middle of the last century, a clear trend toward “expanding the permissible scope of state jurisdiction over foreign corporations” was already evident, in response to what the U.S Supreme Court in McGee v. Int'l Life Ins. Co. characterized as the “increasing nationalization of commerce.” In more recent years, driven by the increasing internationalization of commerce, the movement toward expanded extraterritorial jurisdiction has continued to gather momentum.

Current Precedents

Under current Supreme Court precedents, including Hanson v. Denckla and its successors, a foreign manufacturer or other company may be subject to the jurisdiction of a U.S. court only if that company “purposefully avails itself of the privilege of conducting activities within the forum State.” As the Supreme Court acknowledged in J. McIntyre Mach., Ltd. v. Nicastro, this “purposeful availment” test “does not by itself resolve many difficult questions of jurisdiction that will arise in particular cases,” and the standard has proven highly elastic in the hands of the lower courts. Indeed, the Supreme Court's own fractured decisions on personal jurisdiction have allowed lower courts wide latitude in interpreting the “purposeful availment” standard, enabling the contours of extraterritorial jurisdiction to be drawn expansively.

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