The Rising Jurisdictional Problem of International Companies

Posted by: Michael Avila

April 20, 2015

InternetAs access to the Internet has grown to include almost half of the world’s population in its user base, the chances of websites and the companies owning them running awry of laws not inside that of its home country have grown much larger and more concerning. Google has had many conflicts with China in the recent years due to China’s censorship laws, and as recently as 2014 Google’s gmail service had its access blocked in mainland China. As companies like Google grow and begin having a more substantial presence in countries outside of the U.S. they will likely have to learn how to bow to pressure and possibly fragment their services in order to comply with the laws of local jurisdictions.

In 2006 Yahoo! faced a legal battle that pitted them against two civil rights organizations in France for allowing access to websites with Nazi content, which is illegal in France. Though there were no lasting financial repercussions to Yahoo! or the two organizations that the California Court held they had jurisdiction over because of the organizations’ attempts to stymie a California business’ operations and First Amendment rights (which were protected due to their presence in the United States), they declined to go further into the question of damages.

However the question gets fuzzier when we look at today’s world that has companies like Google with a multinational presence. Had Google been in this situation and been as obstinate in holding the line as they have been with China in the past we may have seen completely different outcomes. First of all, with Google being headquartered in California the California courts may still have tried to establish jurisdiction in a similar (or, in this hypothetical, identical) case. With penalties being much more easily enforceable in France if Google had a presence there, would damages have been assessed?

It’s possible that the Courts may have taken action to assess damages as Google still has its First Amendment Rights in the United States. However, it seems that there should be some deferment to sovereignty in these cases. Though a citizen of the United States may find it abhorrent to censor this kind of speech no matter how historically or culturally dangerous it may be, France suffered a long and difficult occupation at the hands of Nazi Germany, the scars of which are still evident in laws such as the one that gave rise to the demand that Yahoo! take down access to websites that provide access to that kind of information.

Additionally, in fighting such a case by retreating back to the home territory of the United States Google would be stifling its growth and cutting off a significant market in France. While they may win the battle they would, in essence, be losing the war by sacrificing future influence and profit margins within that jurisdiction, as France would likely be unwilling to harbor and support a company that is unwilling to follow its laws.

Still, the United States has been willing to flex its muscles wherever possible in order to protect its home turf and the entities that reside within it. In the landmark case of United States v. Ivanov the Supreme Court that the United States had jurisdiction over a person who committed a crime- in this case under Title 18 §1030 of the U.S. Code – outside of U.S. borders as long as the harm that occurred or was intended to occur happened within U.S. borders. In essence, the Court found that, in this case, if Ivanov shot a gun in Russia and was aiming it at a person in the United States (ignore the geographical ridiculousness for the sake of this hypothetical), the crime itself would have occurred in its intended landing spot, not where the bullet was fired.

So the question becomes how do we reconcile the respect for national sovereignty while at the same time protecting our own. If we look at these two rulings, the Yahoo! ruling found that Yahoo! was entitled to protection and damages from the French entities because they were harming Yahoo! business within the United States. However this ruling ignores the fact that what gave rise to this cause of action in the first place was Yahoo!’s unintentional collision with French Law, which was recognized by the French Courts.

Wasn’t the initial harm in this case actually done by Yahoo! according to the French Courts? Why should the United States Courts have the ability to override that concern with their own? It seems obvious that a nation’s institutions would put its own citizens first, but the Supreme Court in the 1800’s established a precedent that respected International Sovereignty despite the fact that harm may have occurred (technically) on American soil.

In the case of The Schooner Exchange v. McFaddon, the Supreme Court heard an argument in 1812 regarding a ship that had allegedly been seized by the French government. This ship had put into port in Philadelphia, putting it firmly in United States territory and ripe for the taking if the Courts so chose to allow it. In this case they did not. Although the ship was a United States vessel at the time of its seizure, the Court held that respecting France’s sovereignty was more important than protecting the interests of the former owners of the Schooner Exchange.

This ruling puts into perspective the respect that is allowed fellow sovereigns in most cases. It is a traditional and good custom to uphold as relations between states in an increasingly interconnected world is of high importance. The goals put forth for International Cooperation are paramount to the world’s future and how citizens of all nations are treated within it.

The 9th District of the United States, in its ruling in the Yahoo! case, seem to be enforcing more of a “might makes right” philosophy. Because of the United States’ hold and influence over the internet and the ability to control so much of how access is granted it is difficult to fight assertions of jurisdiction that may overreach. If they had looked back to the McFaddon ruling they may have drawn a line between a case that harmed Americans but was not enforced because of France’s sovereignty, which should allow it to enforce its own rules in its own territory.

It also seems that this lack of recognition runs contrary to the Ivanov ruling as well. In this case it seems that Yahoo!, though without intention, fired the first shot, but then came running home to mommy asking for protection when somebody asked for justice.

Though international law exists more in theory than in practice, the United States often tries to paint itself as a leader of industry, rights, and culture. If it is to uphold that image it will have to start recognizing the rights of fellow nations on the Internet even though their presence and infrastructure may not be up to par with that of the U.S.. The Yahoo! ruling when contrasted with Ivanov and McFaddon show a perfect example of the difference between lex lata (the law as it is) and lex feranda (the law as it should be) and the hypocrisy embodied within.

iThis may seem like an overreaction to what could possibly be a harmless and isolate ruling in a lower court of the United States, but its implications could be far reaching. No, it is not likely that anything as severe as sanctions would be levered against the United States for trying to impose its jurisdiction on the Internet – it may even be expected – but it could have implications on the future position of the U.S. in being a leader in an industry that is growing exponentially.

As other nations grow their own infrastructure it seems likely that the U.S.’s grip on the Internet will slowly loosen to the point where such rulings will not be considered acceptable and may create adverse rulings for American companies in foreign courts. It may be time for the United States and its associated entities to stop hiding behind what power remains and prepare to exist on a level playing field especially if anybody wants to exist in the globalized economy that is taking shape around us.


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