By Allawi Ssemanda
For decades, the U.S has on numerous occasions unilaterally announced sanctions targeting foreign companies involved in trade Washington deem against their interests through the so-called long-arm jurisdiction. Long-arm jurisdiction refers to jurisdiction over persons or entities domiciled or resident outside the territory of the sanctioning state.
It was unilaterally established after a case of International Shoe Co. v. State of Washington (1945) in the U.S Supreme Court. This means that, it is largely in interest of the U.S.
This law is unacceptable in present global order. For example, on a simple basis that the defendant has what American authorities consider to be some “minimum contacts” with the state, under the long-arm jurisdiction, U.S state courts are allowed to exercise in personam jurisdiction in civil and commercial cases including where jurisdiction cannot be exercised. It is not a surprise that it has been largely used by the U.S to “punish” countries and companies’ world over the U.S considers to be impeding America’s interests.
Secondly, going by international laws, the exercise of a country’s jurisdiction over an extraterritorial person or entity generally requires that the person or entity or its conduct has a real and sufficient connection to that country. Yet the U.S. exercises long-arm jurisdiction on the basis of the “minimum contacts” rule, constantly lowering the threshold for application. The law is very unfair and gives American judicial system unchecked powers to go after foreign individuals and companies which we have no guarantee that it cannot be abused because of politics. For example, a mere use of the U.S dollar for financial services or using U.S mail services is considered to constitute the so-called “minimum contacts.“
Indeed, during Trump Administration, the U.S used long-arm jurisdiction to unfairly target China with endless unfair tariffs against Chinese products, an act some analysists argue was meant to promote unfair competition in favour of American companies.
A study by the Cato Institute, an American libertarian think tank found that the U.S used long-arm jurisdiction in violations of World Trade Organisation (WTO) and the U.S laws as Executive ignored Congress role. The study further revealed that while Chinese firms were most affected, even American’s citizens were affected as China responded to Trump administrations trade tariffs. The study entitled “Unfair Trade or Unfair Protection? The Evolution and Abuse of Section 301” argues that section 301 of long-arm jurisdiction “grants the executive branch far too much discretion in defining an actionable foreign trade practice” which may be exploited for political reasons – it allows American President to safeguard America’s trade interests by remedying any “act, policy, or practice of a foreign country [that] is unreasonable or discriminatory and burdens or restricts United States commerce.” Important to note is that the same law defines “unreasonable” in very ambiguous manner simply calling it “otherwise unfair and inequitable.”
All the above puts the U.S at advantage over other countries, potentially making the rest inevitable victims should American politician(s) feel that a foreign company is putting a stiff competition against American(s), such foreign companies or individuals can easily be sanctioned by America and tactfully kicked out of business.
As Alan Sykes, a Law professor at Stanford University argued, the choice of words used in long-arm jurisdiction “Section 301 can encompass virtually any foreign government practice unilaterally deemed objectionable by the U.S.” This has huge potential to facilitate political opportunism and harmful outcomes where the U.S can freely target other competing countries.
More worrying, the U.S keeps making the use of its unfair long-arm jurisdiction purposefully wide. It has developed the so-called “effects doctrine,” meaning that jurisdiction may be exercised whenever an act occurring abroad produces “effects” in the U.S regardless of whether the actor has U.S citizenship or residency, and regardless of whether the act complies with the law of the place where it occurred!
Because politics makes players selfish, it is perhaps the right time countries globally call on the U.S to abandon laws that antagonise global trade, order and peaceful co-existence as well as free and fair competition. This is because, whether you’re U.S’ adversary or ally, individual or a foreign company, provided you’re not American or fully serving their interests, we are all candidates of this unchecked long-arm jurisdiction.
Today, the U.S has come up with different legislations which are meant to advance the long-arm jurisdiction which has potential to harm interest of foreign countries. Other legislations that have been made to further strengthen long-arm jurisdiction among others include Trading with the Enemy Act, International Emergency Economic Powers Act, and Countering America’s Adversaries Through Sanctions Act.
Despite favouring the U.S, such legislations also in the long run hurt America(ns) and have potential to disrupt global chain supply and international trade. For example, despite Trump Administration targeting China, actions of Section 301 strained relations between Washington and the European Union as Trump administration twice targeted the EU using the same section.
European Union has been opposing Section 301 arguing it is inconsistent with the rules of the WTO which prompted EU to challenge it at the WTO which ruled in EU’s favour.
While tensions as a result of U.S’ tariffs which EU called illegal ended after the Biden administration negotiated a mutual cease-fire, this did not result into total termination of the offending subsidy programs in the Airbus‐Boeing case. Whilst the Biden argues that it is Trump administration that misused section 301 of long-arm jurisdiction, Biden administration which came promising to embrace globalism seems reluctant to move away from Trump-era section 301 and appears to be in agreement with the Trump era’s America first with reports that his administration is now considering a new Section 301 case against China. Indeed, recent reports consistently shows U.S courting Japan and the Netherlands to restrict China from accessing semiconductor manufacturing equipment.
In conclusion, as the famous Martin Niemöller would warn in his “first they came for Communists and I did not speak out because I was not a Communist.,” those who believe in fairness should stand up against America’s long-arm jurisdiction now before it is too late to have anyone to speak for us. The jurisdiction is a thing of past and is akin to colonialism. The practice is not only a major way of violating fundamental rights but has in many instances resulted into suffering and death of people. For example, as a result of the so-called long-arm jurisdiction, the U.S imposed sanctions on countries like Afghanistan, Iran, Syria and Yemen among others. U.S based Brooking Institute estimated that as a result of American sanctions, affected countries lost abilities to effectively contain COVID-19 pandemic. In Iran alone, over13,000 people died from the COVID-19 pandemic which was worsened by U.S sanctions.
Allawi Ssemanda, PhD is a Senior Research Fellow at the Development Watch Centre.
