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A Hard Look at the Effects Doctrine of Jurisdiction in Public International Law

Published online by Cambridge University Press:  21 July 2009

Jason Coppel
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Extract

The extraterritorial application of competition law on the basis of the effects doctrine of jurisdiction has long been controversial. An analysis of the assumptions which underlie the discourse of jurisdictional assertion leads, however, to the conclusion that the effects doctrine is the only principle on which competition law jurisdiction can reasonably be based.

Moreover, a form of qualified effects principle, founded upon the consent of the undertakings involved, would be supported by most, if not all, of the leading players in the competition law arena.

Type
Student Contributions
Information
Leiden Journal of International Law , Volume 6 , Issue 1 , April 1993 , pp. 73 - 90
Copyright
Copyright © Foundation of the Leiden Journal of International Law 1993

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References

1 See, Wood Pulp, Aahlstrohm et al.v. Commission, ECR 1988, at 5193 discussed further infra.

2 Rholl, E., Inconsistent Application of the Extraterritorial Provisions of the Sherman Act: A Judicial Response Based Upon the Much Maligned ‘Effects’ Test, 73 Marquette LR 435, at 469 (1990) notes that: “The focus of the ‘effects’ test is upon […] the alleged impact [of the activity] as opposed to the actors involved”. The effects doctrine takes cognizance of the physical location of the victim in that it generally relates to a territorial market.Google Scholar

3 “The substantive rules of Articles 85 and 86 are widely seen as implying an approach to jurisdiction which centres on the […] effect of restrictive practices”: W. Van Gerven, EC Jurisdiction in Antitrust Matters. The Wood Pulp Judgement, (1989) Fordham Corp. L. Inst. 451.

4 L. Brittan, Jurisdictional Issues in EC Competition Law, Hersch Lauterpacht Memorial Lecture, Cambridge 1991, at 10.

5 For an account of the controversy surrounding the effects doctrine, see, e.g., Mann, F., The Doctrine of Jurisdiction Revisited After Twenty Years, 186 Receuil des Cours (Hague) 1 (1984)Google Scholar; Akehurst, M., Jurisdiction in International Law, 46 B YIL 145 (1973)Google Scholar; Jennings, R., Extraterritorial Jurisdiction and the US Antitrust Laws, 33 BYIL 146 (1957).Google Scholar

6 See. e.g.. Advocate General Mayras in Dyestuffs, ECR 1972,665, at 696.

7 European Commission, I lth Report on Competition Policy 39.

8 Aahlstrom el al. v. Commission, ECR 1988, supra note 1, at 5193.

9 Id..

10 The Commission has consistently claimed jurisdiction, at least in the alternative, on the basis of the effects doctrine. See, e.g., Dyestuffs, ECR 1972, at 619.

11 See, e.g., D. Hume, III Treatise on Human Nature, Chapter 3 (1987).

12 See K. Meessen, Antitrust Law – International, in R. Bemhardt (ed.), 8 Encyclopedia of Public International Law 29 (1987).

13 The actual reason given by the Court was that KEA had no identity separate from that of its members, the American wood pulp producers. It seems unusual, however, that having utilized a controversial doctrine of corporate legal personality to sustain extraterritorial liability in the past, the economic entity doctrine of Dyestuffs, a doctrine which was founded on the allegation that the body accused had no legal personality separate from the body which actually perpetrated the acts on Community territory, the Court should now use exactly the same justification for denying liability.

14 Meessen, K., Competition of Competition Laws, 10 NW J. of Int'l L. & Bus. 17 (1989).Google Scholar

15 This conclusion is shared by, amongst others, W. Van Gerven supra note 3, at 471, and J. Perez Santos, The Territorial Scope of Article 85, (1989) Fordham Corp. L. Inst. 571, at 577.

16 In the United States, the Webb-Pomerene Act provides a limited antitrust exemption to the export of “goods, wares, or merchandise”.

17 L. Brittan, supra note 4 at 6.

18 The House of Lords in British Airways v. Laker Airways, AC 58 (1985), recognized this problem to some extent, in holding that Laker ought to be allowed to proceed with its antitrust suit in the United States partly because its cause of action was not recognized under British law.

19 J. Moore, IIA Digest of International Law 244 (1906).

20 Bowett, D., Changing Patterns of Authority over Activities and Resources, 53 BYIL 1 (1982), at 7.Google Scholar

21 Many jurisdictions, including the home of the European Community and the United States, recognize a category of antitrust infringement which does not require proof of actual effect on the market. In the US such offences are known as per se offences; in the EC, they arise from the disjunctive reading of the ‘object or effect’ criteria of Article 85. The rationale for the existence of this category of offence is not, however, that an anticompelitive effect on the market is not necessary, but that such an effect is presumed, in clear cases of anticompetitive behaviour, in order to spare plaintiffs the often complicated and controversial task of definitively proving that an actual anticompetitive effect has occurred. The existence of per se and ‘object only’ offences does not, then, defeat this argument.

22 1927 P.C.U. Rep., Ser. A, No. 10 at 23, 30.

23 R. Jennings, supra note 5, supports this view. He notes that the objective territorial principle extends to those effects which are directed, if not immediate, and which form a part of the actus reus of the offence. This line of argument is also followed by M. Akehurst, supra note 5, and by Advocate General Darmon in the Wood Pulp case.

24 US v. Aluminium Co. of America 148 F.2d 416,443–4 (2nd Cir. 1945).

25 Fugate, Foreign Commerce and the Antitrust Laws 48 (1973).

26 See, e.g., Sabre Shipping Corp v. American President Lines Ltd., 285 F. Supp 949, (SDNY 1968) at 953. The district court held that it had subject matter jurisdiction over the foreign defendants simply because the US antitrust laws extended to any conduct “which affects the trade and the commerce of the US”.

27 This wording appears notably in the Restatement (Second) of the Foreign Relations Law of the United States. Para. 18 (1965) and in the Foreign Trade Antitrust Improvement Act 1982. applying to export commerce. It is also the criterion applied by the Department of Justice in deciding whether to proceed against foreign conduct See Department of Justice, Antitrust Division, Antitrust Enforcement Guidelines for International Operations (1988), 55 Antitrust & Trade Reg. Rep. (BNA) No. 1391, Spec. Supp., S–21. It should be noted, however, that the more recent Restatement (Third) of the Foreign Relations Law of the United States, Para. 402(l)(c) (1988) adopts the object or effect formulation of Article 85. It asserts American jurisdiction over “conduct outside its territory that has or is intended to have substantial effect within its territory”. A good discussion of recent American practice in this respect is to be found in Roth, P., Reasonable Extraterritoriality: Correcting the ‘Balance of Interests’, 41 ICLQ 245 (1992).CrossRefGoogle Scholar

28 See Gerber, D., The Extraterritorial Application of the German Antitrust Laws, 11 AJIL 756 (1983), at 769.CrossRefGoogle Scholar

29 Rahl, J., Panel Discussion on the Extraterritorial Application of US Antitrust Laws, 54 Antitrust LJ (1985).Google Scholar

30 See, e.g., the comments of A. Neale, in R. Jennings, supra note 5; he concludes that American courts cannot be expected to refuse jurisdiction over agreements which primarily intend to produce and do produce illegal activities within US territory. But, he argues, Alcoa goes too far in extending objective territoriality to cover mere repercussions and sometimes repercussions ancillary to the purpose of the scheme, as in Alcoa itself.

31 See, e.g., World-Wide Volkswagen v. Woodson, 444 US 286, at 291 (1980). Further, one reading of US v. General Electric Co., 82 F.Supp. 753 (DNJ 1949), the Incandescent Lamps case decided shortly after Alcoa, suggests that the intention to affect American commerce was imputed to the defendants based not upon their subjective state of mind but upon the very act of entering into the agreements with the American company. In general, the broader the interpretation of foreseeability applied by the court, the closer it comes to adopting a doctrine of jurisdiction by voluntary contacts.

32 See Austin, J., Regulatory Principles and the Internationalisation of Securities Markets, 50 Law and Contemp. Problems 221 (1987).CrossRefGoogle Scholar

33 See. e.g., Jaffey, A., Volenti Non Fit Injuria, 44 CLJ 87 (1985).CrossRefGoogle Scholar

34 3 All E.R. 375 (C.A.) (1983); 3 All E.R. 39 (H.L.) (1984).

35 Wood pulp case, ECR 1988, supra note I, Para 12.

36 Id., Para 17.

37 Supra note 3, at 468–471.

38 FCO, February 24, 1982, WuW/E BKartA 1943.

39 Id., at 1954.

40 Note, Predictability and Comity: Toward Conunon Principles of Extraterritorial Jiirisdiction, 98 Harv. LR 1310(1985).

41 Id., at 1319.

42 The ECJ in Wood Pulp itself went further than this.

43 On the municipal law defences, see A. Neale and M. Stephens, International Business and National Jurisdiction (1988). On non-interference, see Gerber, D., Beyond Balancing: International Law Restraints on the Reach of National Laws, 10 Yale JIL 151 (1984).Google Scholar