The Law of the Land – A Primer on Jurisdiction

Kelly Ranasinghe JDThe Law of the Land – A Primer on Jurisdiction for American Global Executives ©

By
Kelly Ranasinghe JD

At the core of modern legal systems is jurisdiction, an ancient legal concept which means ‘to speak the law.’ However, the legal definition of jurisdiction and the common lay understanding of jurisdiction are not the same. In fact, there are multiple types of jurisdiction which differentiate between time, space and people. The colloquial understanding of jurisdiction refers to `the power’ of an institution, such as a Sheriff, to take a certain action (as in one having ‘jurisdiction’ to do something). This is only obliquely related to the core concept of legal jurisdiction. The second colloquial understanding of jurisdiction refers to the purview of one’s authority (`this is outside my jurisdiction’) and is also an extension of its legal concept, but actually is more consistent with state authority and the police power than jurisdiction proper.

Jurisdiction in its most simple legal form is the ability of an institution sitting in a given territory to hail a party (an individual or organization) into court. For instance, if a man residing in the town of Blackacre commits a crime, a court within the same territory will generally have jurisdiction to summon that person to answer for his misdeeds. This is the simplest form of legal jurisdiction, and is referred to as territorial jurisdiction. The power over a specific geographic area.

A court may also have jurisdiction outside of its geographic area over a category of people. This is called in personam jurisdiction or `personal jurisdiction.’  It is the ability of a court to, again, hail a party into court because of their specific group status. For instance, members of the military are frequently under the purview of a military court system regardless of where they are stationed. Note however, that simply because a person may be under the personal jurisdiction of one court (such as a United States service member in Japan falling under the jurisdiction of a military court located on his base) that does not absolve one from being under the jurisdiction of another court at the same time. This is called overlapping jurisdiction, and is quite common. For instance, a person residing in San Diego, California falls under the jurisdiction of the state superior court of San Diego, but also falls under the jurisdiction of the federal United States District Court for Southern California. He might also fall under the jurisdiction of a city tribunal which hears zoning violations or city code infractions.

Jurisdiction CategoriesA third category of jurisdiction is called subject-matter jurisdiction, and is the ability of a court to adjudicate a certain kind of case. A court which has the ability to hear all cases in a given area, regardless of their subject, is referred to as a court of general jurisdiction. In contrast, a court which has specific purview over a type of conduct or case is called a court of limited jurisdiction. For instance, a Federal Bankruptcy Court confines itself to cases involving Bankruptcy. In lower level courts, courts of limited jurisdiction are typically ‘carved out’ of a court of general jurisdiction to adjudicate special classes of cases such as family law, domestic violence or probate.

In the arena of international business, jurisdictional questions arise for a variety of reasons, many of them stemming from the concept of in personam jurisdiction extending beyond the country’s borders. While the law of a given country prevails when governing the conduct of an organization doing business in that country, expatriate workers often ‘carry with them’ protections under domestic law which allows them to raise claims of unlawful conduct once they have returned to their country of origin. Said another way, if an expatriate worker defrauds a foreign citizen in a foreign nation, he will be at the behest of foreign law. However, if a U.S. company discriminates against a U.S. worker who is living and working in a foreign country for the U.S. corporation, the company is still bound by U.S. law. (Of course, the worker would be suing in the United States, as foreign countries do not adjudicate claims of U.S. law).

Complicated? Consider this added dimension. Assume that a U.S. citizen and a foreign national work side-by-side in a U.S. company’s operation in a foreign country. Both workers perform the same job, work the same hours, and are administratively equal in their hierarchy. For all intents and purposes, the U.S. citizen and the foreign national are identical in terms of employment and profit. The U.S. citizen however, is protected by the powerful civil rights laws of the United States in his employment, the Title VII Civil Rights Act and the Americans with Disabilities Act. He is protected regardless of where he is working, so long as he is working for a U.S. corporation and as long as his suit is filed within the United States. A U.S. citizen could not, of course, bring suit in a foreign country under United States law. (Interestingly enough, the converse is not necessarily true. A foreign citizen can sometimes bring suit in the United States under principles of international law, generally human rights infractions, under the Alien Tort Claims Act, 28 U.S.C. § 1350).   

However, our foreign national, although he performs precisely the same job for the same company in the same location, is not protected by U.S. civil rights law, even if he did choose to bring suit in the United States.

Now assume that our foreign national is instead, working in an identical position in the United States for a foreign corporation. Not only is the foreign national protected under civil rights laws, but he is also protected from discrimination based on his foreign citizenship.[1] Confused? A foreigner working for a U.S. corporation overseas is not protected. A foreigner working for a foreign company domestically is protected. So a Swiss company operating in Texas, and discriminating against a Mexican national is subject to U.S. law. A United States company, operating in Switzerland, and employing a Mexican national, is not subject to U.S. law. (This is not so much a matter of protection, as United States law holds that the Mexican national would not have ‘standing’ or the legal basis to sue in a U.S. court).   To quote the EEOC directly “Individuals who are not U.S. citizens are not protected against discrimination overseas.”[2]

The discerning factor in each of the above examples is territoriality. A company operating in the United States is subject to United States law, just as a United States company operating in a foreign country is subject to foreign law. However, a United States company operating overseas is also subject to United States law, as it remains with the in personam jurisdiction of the United States.

What does this mean for corporations who wish to explore overseas opportunities? Initially, corporate executives should be mindful that simply because operations are lawful in the United States it does not mean that they will be permissible in a foreign country. A corporation establishing a legal presence in a foreign nation is,  just like an individual,  subject to the laws of that country –  without exception. Those laws may differ substantially in character and substance from American laws, and may also differ structurally and procedurally. For instance, in the United States many court systems have ‘fast-track’ court dockets which expedite civil litigation. A plaintiff in the United States can reasonably expect some form of resolution or settlement in months, certainly in 1-2 years. In India, the court system has a backlog of nearly 30 million cases, which, according to some, would take more than three centuries to clear.[3]  If resolution is desired, it will not be within the legal system.

Somewhat counterintuitive to this concept, is the understanding that a corporate executive must also comply with United States protections if he has United States expatriate workers, in addition, to the legal obligations of the host country.

This can be operationally problematic depending on cultural mores.

For instance, if a female United States citizen working in Muslim nation desires to be elevated to a management position requiring her to work at night with male colleagues and foreign national workers, there is the chance that this action might run afoul of nation/ region-specific sharia  law. Assuming that it does, if the company chooses to comply with the law of the host country and promote a male instead, it is subject to litigation in the United States for violation of Title VII.

The corporation above is left with a legal Catch-22 situation where to comply with socio-religio-cultural mores and foreign law would be tantamount to violating United States law. It is thus left in the unenviable position of being legally ‘boxed-in’.   In addition, it cannot simply ‘withdraw’ from the country or ‘withdraw’ or “remove” the worker as a corrective action. The corporation may very well have to conduct two battles at once, as it is assailed by the U.S. worker domestically, and government agencies internationally.

Interjected into the legal structure of international business relations is the Foreign Corrupt Practices Act (FCPA), codified in Title 15, sections 78 et.seq of the United States Code. The FCPA generally covers  American individuals and business in the United States with operations abroad, and prohibits bribery of foreign officials and governments, but exempts certain payments to officials if they are legally permissible under the law of host country ( ‘grease payments’). Corporations conducting business abroad must, as a matter of operational concern, understand that the FCPA may render them non-competitive if bribery in the host country is such common practice as to become part and parcel of industrial relations. Indeed, Prof. Yockey of Notre Dame has a forthcoming paper on the subject of overdeterrence and the FCPA.[4]

American Corporate executives planning on conducting business overseas should understand , and become expert  , the legal ramifications as they relate to Global business strategy prior to committing themselves or their organization  to overseas ventures.

In recent years there has been much discussion about the benefits of `outsourcing’ with little discussion as to the strategic implications from outsourced operation inside a foreign legal environment. In addition, a company extending itself into a foreign country must be prepared to defend against regional legal attacks, as well as attacks ‘behind the front lines’ in the United States, for civil rights and securities violations.

Absent this preparation, a corporation may remain vulnerable to substantial loss from litigation.

 

REFERENCES


[1]Equal Employment Opportunity Compliance Manual, Section 13, (2011).

[2] Equal Employment Opportunity Compliance Manual, Section 13, fn  63 (2011)

[3] British Broadcasting Corporation, India PM on justice backlog, August 17th 2009, available at, http://news.bbc.co.uk/2/hi/south_asia/8204607.stm

[4] Joseph Yockey, Solicitiation, Extortion and the FCPA, 87 Notre Dame Law Review (Forthcoming) 2011, at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1896282

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