What is extraterritoriality, and why is it a threat?
Extraterritoriality allows a state to apply its laws beyond its borders, often justified in the name of national interest. Under the “effects doctrine” in international law, extraterritorial application of laws is legitimate when actions conducted abroad have direct and substantial effects on the domestic market. For instance, the United States uses laws like the Foreign Corrupt Practices Act (FCPA) or the Countering America’s Adversaries Through Sanctions Act (CAATSA) to extend its jurisdiction. Any foreign company using American financial services or operating in key markets may fall under these laws. However, there is no international arbitration mechanism to resolve disputes, making this tool a form of indirect control over global economies.
China has adopted a similar approach with laws such as the Hong Kong National Security Law, demonstrating that extraterritoriality is no longer exclusive to the United States. The objective is not only to protect national interests but also to redefine global economic power dynamics, often at the expense of European autonomy.
European companies under pressure
European companies are the primary victims of these practices. Consequences include massive fines, exclusion from international markets, and, in some cases, forced transfers of sensitive technologies. The acquisition of Alstom’s energy division by General Electric in 2014, under pressure from U.S. legal actions related to the FCPA, is a prime example. Behind such operations lies a strategy to weaken European industrial leaders.
The extraterritorial application of economic sanctions also disrupts international trade, forcing EU companies to navigate conflicting legal regimes. This increases compliance costs and reduces global competitiveness. With Donald Trump likely to return to the White House and his promise to strengthen the dollar, U.S. aggression in this area is expected to intensify.
A fledgling European debate
In response to these threats, the EU remains paralyzed. Member states struggle to decide whether the response should be coordinated at the European level or left to national governments. On one hand, European institutions like the Central Bank are met with skepticism; on the other, national legal tools are weak and fragmented.
Currently, the EU has only defensive measures, such as the blocking statute, which limits the application of foreign sanctions on European soil. However, this strategy is insufficient. Even the 2023 economic security plan presented by the European Commission lacks offensive measures against extraterritoriality.
Internal divisions among member states exacerbate the issue. Countries like France advocate for a unified response, while others fear undermining transatlantic relations or ceding too much power to Brussels.
Toward an offensive European strategy?
The adoption of new tools like the Anti-Coercion Instrument (ACI) could mark a first step toward a paradigm shift. However, the path remains fraught with challenges, as the EU’s identity is rooted in the idea of avoiding offensive extraterritoriality.
A change may nevertheless be on the horizon. If the EU truly aims to defend its economic and political sovereignty, it must adopt a more assertive strategy. The current geopolitical context requires Europe to overcome internal divisions and act not only to protect itself but also to actively influence the global order. Extraterritoriality may no longer be a choice but a necessity.
Tags:
extraterritoriality, international law, economic sovereignty, EU strategy, FCPA, CAATSA, United States, China, European Commission, European autonomy, global geopolitics, economic sanctions, compliance costs, transatlantic relations, Donald Trump, Anti-Coercion Instrument, industrial competitiveness, Alstom case, international trade, European defense strategy
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