US extraterritoriality on trial

How far past the water’s edge do America’s laws apply? Can the US become a focal point from crimes allegedly committed in places like Indonesia, Africa, and Europe? Those questions are not hypothetical. Rather, they are being asked in courtrooms across the US, from New Haven, Connecticut, to Brooklyn, New York, to Salt Lake City, Utah, and up to Congress and the Supreme Court.

In New Haven, the Foreign Corrupt Practices Act (FCPA) trial of Lawrence Hoskins, a British national, enters its second week for actions alleged to have been committed in Indonesia. Already, an appellate court has pared back the charges being leveled at Hoskins on the grounds of governmental overreach. As the US Court of Appeals for the Second Circuit saw things, the FCPA applied to non-resident foreigners only in those instances where the government could demonstrate that the individual acted as an agent of a “domestic concern” or while actually in the US.

Hoskins’ case dates back to Barack Obama’s presidency, 2013 to be exact, and the underlying actions are alleged to have happened in the early aughts, between 2002 and 2004. A former executive of Alstom, a French company, Hoskins is accused by US prosecutors of participating in a scheme to bribe Indonesian government officials in an effort to win a US$118 million power contract for his company.

Before his election, President Donald Trump took a dim view of the FCPA and what he saw as America hyper-extension. In 2012, Trump lashed into the FCPA, saying: “It’s a horrible law and it should be changed. We are like the policeman for the world. It’s ridiculous.”

For its part, a small but bipartisan group of Congress members have introduced the Foreign Extortion Prevention Act, which would subject foreign officials who demand bribes to prosecution within the US. Even if this were enacted, enforcement would appear to be a matter of wishful thinking. It does not, however, appear to be the direction that was envisaged by candidate Trump.

Elsewhere, the fraud and money-laundering trial of Jean Boustani, a Lebanese boat salesman, is now in its fourth week in the federal courthouse in Brooklyn. Prosecutors allege that Boustani, who is employed by Privinvest, a global shipbuilding company, had engaged in illegal conduct in connection with loans totaling nearly $2 billion to entities in Mozambique made by two European-based investment banks.

The defense contends that the alleged actions all occurred overseas and repeated Trump’s own words from seven years ago for good measure. To be clear, none of Boustani’s communications in question were directed to or from the US, and the pertinent securities’ offering circular was emblazoned with the directive that they were not to “be offered or sold” within the US. In the end, the securities were only traded outside the US through foreign clearance systems.

Elsewhere, the US Securities and Exchange Commission is arguing that Dodd-Frank, the law enacted by Congress in the aftermath of the financial crash, expanded the commission’s powers, and so it may more readily reach overseas. In SEC vs Scoville, the  Court of Appeals for the Tenth Circuit affirmed the decision of the federal district court sitting in Salt Lake City, and ruled that Dodd-Frank had widened the door to global enforcement. According to the court, the statute had added a “conduct-and-effects test” to the federal securities laws. On Monday, the Supreme Court declined to review that decision.

A group of law professors has sounded the alarm, observing that if the “approach is adopted by other courts and applied to other provisions of the securities laws, the resulting uncertainty could have significant negative effects on domestic and foreign securities markets.” It is to be hoped that they will be proved wrong.