Challenges to the DOJ's Jurisdiction over Extraterritorial Conduct

The DOJ had previously argued successfully, relying on United States v. Bowman, 260 U.S. 94 (1922), that the presumption against extraterritoriality did not apply to criminal statutes. In recent opinions, the U.S. Court of Appeals for the Seventh Circuit and a Pennsylvania federal district court, among others, agreed with the DOJ's position. See U.S. v. Leija-Sanchez, 602 F.3d 797, (7th Cir. 2010) (“What Bowman has said is that 'the same rule of interpretation [i.e., the presumption that civil statutes do not apply to activity outside the U.S.] should not be applied to criminal statutes which are, as a class, not logically dependent on their locality for the Government's jurisdiction.'”) (quoting Bowman, 260 U.S. at 98); United States v. Harde , __ F. Supp. 3d __, 2016 WL 807942, at *8 (E.D. Pa. Mar. 2, 2016) (same); see also United States v. Siddiqui, 699 F.3d 690, 700 (2d Cir. 2012) (“The ordinary presumption that laws do not apply extraterritorially has no application to criminal statutes.”).

By contrast, RJR Nabisco specifically held that with regards to the criminal aspects of RICO:

It is a basic premise of our legal system that, in general, United States law governs domestically but does not rule the world. This principle finds expression in a canon of statutory construction known as the presumption against extraterritoriality: Absent clearly expressed congressional intent to the contrary, federal laws will be construed to have only domestic application.

136 S. Ct. at 2100 (internal citations omitted).

In that regard, the Court drew no distinction between civil and criminal statutes.

Other Limits in the FCPA Context

Even where the presumption against extraterritoriality is rebutted, courts have not always been willing to sanction limitless extraterritorial application. For example, the Foreign Corrupt Practices Act, 15 U.S.C. ” 78dd-1, et seq. (FCPA), on its face applies to extraterritorial conduct ' the payment of bribes to foreign officials. As a matter of course, the DOJ has used the FCPA to prosecute extraterritorial conduct. However, the DOJ's attempt to prosecute conduct that has little to no connection to the United States has prompted at least some push-back from courts separate from the presumption against extraterritoriality.

For instance, a Connecticut federal district court recently held that the DOJ could not use conspiracy or accomplice liability to prosecute foreign defendants under the FCPA for extraterritorial conduct. See United States v. Hoskins, 123 F. Supp. 3d 316 (D. Conn. 2015). The DOJ had indicted Lawrence Hoskins, a UK citizen and employee of a foreign subsidiary of French transportation company Alstom, S.A. (Alstom), for alleged bribes to Indonesian government officials. It was important to the court that the DOJ charged Hoskins with conspiracy to violate the FCPA by acting “together with” Alstom's U.S. subsidiary, but did not allege that Hoskins acted as an agent of that U.S. subsidiary in paying the alleged bribes, or that Hoskins committed any of the conduct at issue while in the U.S. Id. at 318-19.

The court sided with Hoskins with regard to this charge, and found that conspiracy or accomplice liability did not bring within the court's jurisdiction a foreign defendant who is not an agent of a domestic concern and who did not commit any offending act while in the United States. The DOJ has filed an interlocutory appeal on the conspiracy charge, which is pending before the U.S. Court of Appeals for the Second Circuit. As to the DOJ's charge of primary liability under the FCPA, the district court did not dismiss this count, which remains open against Hoskins.

A Washington, DC, federal district court also held that the DOJ could not prosecute foreign defendants for substantive violations of the FCPA under ' 78dd-3, which proscribes “foreign trade practices by persons other than issuers or domestic concerns,” when the conduct at issue took place overseas. United States v. Patel, 1:09-cr-00335, Trial Tr. at 5:11-14, 7:17-8:2 (D.D.C. June 6, 2011). The only alleged link to the United States in that action was a package the defendant had mailed from the UK to the U.S., which contained a written agreement allegedly memorializing the corrupt deal. Patel, 1:09-cr-00335, Trial Tr. at 5:11-14, 7:17-8:2. The court held that DOJ could not charge substantive violations of ' 78dd-3 unless the defendant engaged in a corrupt act while in the United States.

Nor is judicial pushback on extraterritorial prosecutions limited to the FCPA. For example, last year, the DOJ sought to prosecute foreign nationals for alleged bribes involving federal programs. A California federal district court dismissed the bribery charges on jurisdictional grounds, because neither the bribery scheme nor the defendants had any ties to the U.S. United States v. Sidorenko, 102 F. Supp. 3d 1124, 1125 (N.D. Cal. 2015). The court had harsh words for the DOJ's broad interpretation of its jurisdiction over extraterritorial conduct:

[U]nder the government's theory, there is no limit to the United States' ability to police foreign individuals, in foreign governments or in foreign organizations, on matters completely unrelated to the United States[] ' . This is not sound foreign policy, it is not a wise use of scarce federal resources, and it is not, in the Court's view, the law.

Id. at 1132.

Due Process Concerns

Finally, defendants still have recourse under the Fifth Amendment when seeking to challenge the DOJ's claim of jurisdiction over extraterritorial conduct. When seeking to prosecute foreign defendants and extraterritorial conduct, the DOJ still must demonstrate a connection between the defendant and the United States that satisfies due process under the Fifth Amendment; that is, there must be enough of a nexus that prosecution of the defendant would “not be arbitrary or fundamentally unfair.” See, e.g., United States v. Davis, 905 F.2d 245, 248-49 (9th Cir. 1990).

The DOJ historically has shown little concern for establishing much of a connection to the United States in order to prosecute foreign misconduct. And because most enforcement actions are settled rather than litigated, the DOJ is rarely held to its burden. Nevertheless, the Supreme Court's discussion of RICO in RJR Nabisco confirms that although the DOJ can prosecute foreign misconduct under RICO, it must stay within certain recognized limits: “[A] RICO enterprise must engage in, or affect in some significant way, commerce directly involving the United States ' e.g., commerce between the United States and a foreign country. Enterprises whose activities lack that anchor to U.S. commerce cannot sustain a RICO violation.” RJR Nabisco , 2016 WL 3369423, at *14. And while the Supreme Court referred to the statutory text and not to due process concerns specifically, it still indicates a similar limit on the DOJ's powers: Not all extraterritorial conduct will be fair game.

Recent civil cases similarly show that courts are not afraid to hold the government to due process limits. See, e.g., SEC v. Sharef' 924 F. Supp. 2d 539 (S.D.N.Y. 2013). In Sharef, a federal district court in Manhattan ruled that the SEC could not pursue civil FCPA charges against a foreign executive of a foreign corporation for alleged bribes paid overseas, even when the corporation's shares were traded in the United States. It was important to the court that the defendant did not himself make or authorize the alleged bribe payments, and he was not involved in preparing the fraudulent U.S. securities filings that failed to disclose the payments. This court too had harsh words for the government's interpretation of its jurisdictional reach:

[U]nder the SEC's theory, every participant in illegal action taken by a foreign company subject to U.S. securities laws would be subject to the jurisdiction of U.S. courts no matter how attenuated their connection with the falsified financial statements. This would be akin to a tort-like foreseeability requirement, which has long been held to be insufficient ' . Absent any alleged role in the cover ups themselves, let alone any role in preparing false financial statements, the exercise of jurisdiction here exceeds the limits of due process.

Id. at 547-48.

Conclusion

Although recent Supreme Court cases have limited the ability of civil plaintiffs to pursue claims under U.S. law for wrongs committed overseas and have seemingly left DOJ's extraterritorial reach intact, there are still ways to challenge DOJ's overbroad interpretation of its jurisdiction ' if a defendant is willing forgo a plea and engage in such a challenge.

David S. Krakoff, James T. Parkinson and Lauren R. Randell are Partners and Veena Viswanatha and Bree Murphy are Associates at BuckleySandler LLP.