A disturbing threat to cross-border trade and investment is gathering momentum as countries are increasingly applying their laws and regulations to business conduct occurring outside their national territory.

The so-called "extraterritorial" application of national laws is seriously impeding global commerce and stoking conflicts between governments. Voicing the concerns of thousands of enterprises affected by these measures, the International Chamber of Commerce is publishing recommendations to guide policymakers in an effort to stem this growing menace.

"With the expansion of globalization, the rapid spread of e-commerce and increased regulation in response to new security threats, the potential for extraterritoriality problems has grown exponentially" said Dieter Lange, Chairman of the ICC Task Force on Extraterritoriality and Senior European Partner at Wilmer Cutler Pickering Hale and Dorr LLP. "Countries lack confidence in other states to regulate matters such as cartels, organized crime and corporate governance. Instead, they seek to apply their laws and regulations beyond their borders, thereby causing a rash of complications for global business."  

Incidences of extraterritoriality occur in a vast range of areas, including taxation, antitrust laws, security measures, corporate governance and data protection. Companies doing business internationally suffer considerable commercial and legal uncertainty and bear heavy costs resulting from compliance with duplicating - and sometimes conflicting - legal requirements.

ICC foresaw the growing problem of extraterritoriality back in 1987, when the organization published its first report addressing the emerging threats from extraterritoriality and its damaging effects on international commerce. Over recent years ICC has undertaken a series of actions and consistently expressed the concerns of international business, including filing legal briefs before the U.S. Supreme Court in cases where the extraterritorial application of US law represented a threat to global business.

In 2004, ICC established a task force of business representatives, lawyers and other experts to examine the adverse effects of extraterritoriality on world business and to develop recommendations.

In its policy statement, Extraterritoriality and Business, ICC urges policymakers and courts to recognize international comity as a fundamental principle of law and to acknowledge other states' interests when enacting legislation and enforcing rules. As a rule of thumb, ICC notes that the application of national laws and regulations must be limited to matters connected to national territory by a substantial and predictable link.

To reduce the incidence of extraterritoriality conflicts in the future, ICC encourages states to harmonize national laws and mutually recognize equivalent standards. This would avoid conflicting decisions and strengthen regulatory consultation bilaterally and multilaterally.

ICC is submitting this policy statement to national governments worldwide and to relevant international bodies along with a call for action to prevent extraterritoriality from hampering global commerce. Later this year, ICC will publish a more detailed report outlining the full scope of the problem and offering additional remedies.