21 March 1997 - 23 March 1997

Extra-Territorial Application of National Laws Regulating Business Activities

Chair: Mr Keith Highet

Ditchley had considered extra-territoriality before, in 1980 and 1982, when issues concerning respectively post-Shah Iran and the Soviet energy pipeline had brought the United States into legislative contention with its allies. This time our prime focus (though there were other current examples too, relating for example to Libya and again to Iran) was the “Helms-Burton” legislation, seeking inter alia to make foreign nationals working for companies incorporated outside the United States liable to private suit and heavy penal damages in US courts if their companies dealt in property expropriated in Cuba from US nationals when the Castro regime took power.

We readily recognised that despite the historic primacy of the concept of non-intervention in the internal affairs of the sovereign state, master in its own house, there were many instances - far from confined to US action - of extra-territorial legislation domestically justified and internationally accepted on the basis of reasonable practical judgement about in-country effects; in the complex modern world the legitimate concerns of the nation-state could not be confined exclusively within a purely territorial jurisdiction. The mischief in Helms-Burton, as perceived by some within the United States and the great majority outside it, was the adoption of extra-territorial legislation in a unilateral and non-consensual way by a state of great economic power and with effects which the judgement of most others regarded as exorbitant and disproportionate (for all the difficulty of establishing agreed criteria to underpin such characterisations) and also as in breach of  international trade rules. Some participants regarded the allowance of private suit in what were essentially matters of counter-state action as a further feature open to special objection.

Most aspects of this description were nevertheless keenly assailed by a minority of participants. It was denied (even by some who thought Helms Burton an error in policy terms) that it offended against established law or proper international commercial rule. The uncompensated expropriation of private property was a breach of basic international public law and could confer no true title; the first mischief had therefore been any dealing by companies in such stolen property. Dealing in such property, besides its basic illegality, moreover gave economic help to an undemocratic and tyrannical regime which the free democratic West should be combining to bring down - a policy purpose of high moral force underlay the legislation. The United States in the post-Cold-War had unique responsibilities, and a right to look to others for support in their discharge.

This latter line of argument fuelled vigorous further debate. A strong strand of opinion, differentiating sharply between the intrinsic nature of legislation and its wider motivations, held that if Helms-Burton was in its nature illegal or unconscionable (though this was itself contested) then ulterior political purposes, whether or not worthy, could not suffice to justify it. Those ulterior purposes were themselves furthermore challenged. The US was in a clear minority among Western states in judging that Castro’s regime ought to, and would, be successfully brought down by economic exclusion rather than by progressive engagement and openness. It was unreasonable for the United States to try by domestic legislation to impose its own judgement unilaterally upon others in a matter of external policy.            

The problem was aggravated if not created, as many judged, and its resolution was undoubtedly made more difficult, by the fact that the legislation originated from the US Congress, inescapably more open to the influence of special domestic interest-groups like Floridans of Cuban origin than to the pressures of international concern - another example, it was gloomily suggested, of the increasing difficulty which the partners of the United States might face in dealing with a now-unique superpower headed by two markedly different organs of government only one of which could be dealt with like a “normal” government by international dialogue and negotiation. It was suggested - albeit also vigorously controverted - that the character of the Congress was moreover becoming less and less sensitive to external concerns.

What was now to be done? Limited as the real proximate effects of Helms-Burton might so far be, the international political impact, possibly through a degree of faults on both sides, was deplorable. US leadership and respect for it were damaged; resentment and counter-resentment ran high; accepted trade structures were at serious risk; a bruising no-real-win confrontation lay ahead in dispute-resolution process of one kind or another. The impact on the international legal framework too stood to be deeply harmful in undermining comity and cooperation, perhaps with irreconcilably competing criminalisations.

One option was retaliation against the United States in some form; we touched, for example, upon blocking statutes and clawback provision. These could undoubtedly have some leverage (not least as being vigorously expressive of opposition) and in current circumstances could hardly be avoided - other countries too had domestic political imperatives. But they left a sour taste; they could not be a desirable, nor probably an effective, long-run way out. Might methods be found of reducing Congressional support for Helms-Burton (even if, as we suspected, there was a hard core whom nothing less than Castro’s downfall would placate)? It was suggested that more countries should put effort into direct dialogue with Capitol Hill as well as with the Administration; and that the US business community - with a manifest interest in a sound international trading system - ought, and could be persuaded, to bring its weight to bear against at least the full rigours of Helms- Burton (in particular, the claim to bring foreign-incorporated companies within the ambit of US courts purely on the ground of US-located ownership).

But, it was recalled, in politics - and compromise would ultimately have to be found politically, not legally - it was hard to beat something with nothing. What bargaining offsets could be found? One possibility suggested was a commitment - perhaps expressed through bonds of some kind - by Cuba eventually to give compensation; another was a new, more systematic and more secure international convention prohibiting uncompensated expropriation. We knew that no such ideas were easily and realistically available and problem- free, but an imaginative search was needed.

For many participants the core issue was whether the United States was truly interested in having, and was accordingly willing to abide by whether winning or losing, a rule-based international system - and one, crucially, in which questions about whether rules were or were not being broken were determined not by ex parte national opinion but by international due process. This issue underlay our anxious discussion of the European Union’s stated intention to take the matter (not just of Helms-Burton but, in effect, the whole policy of economic embargo against Cuba) to the disputes procedure of the World Trade Organisation (WTO) in face of a declared US refusal to enter at all into any such procedure. Two main aspects of this elicited divergent views. First, there were differing forecasts of how a likely WTO panel would find; it was by no means evident to all that the EU would win its case, or win fully. Second, sharp unease was expressed lest the matter prove an over-severe test for the WTO itself, still not deeply entrenched (and never universally popular with the US Congress). Would it not be prudent for the EU to draw back, to look for other and more political solutions? Against this, it was urged that dispute-resolution procedures existed to resolve disputes; it would be most unwise to establish a precedent whereby a unilaterally-asserted chain of political or security justification conferred entitlement to override trade rules and bargains; and the WTO ought not be asked to back off from any difficult test involving the United States lest the United States (which had itself, when the WTO was set up, positively wanted a robust disputes procedure) kick the table over. The United States should in its own long- run interest, and indeed in line with its own tradition of respect for law, accept being bound as others were bound.

We found, overall, no clear way ahead amid what one participant vividly described as a problem of conflicting outrages. The current political problem over Cuba was a real one, even if Helms-Burton was the wrong way of addressing it. Optimism scarcely ruled as we came to our concluding overview. Maybe Helms- Burton did not really matter enough to go on with the row? - might the EU, Canada and others simply register indignant protest and leave matters at that? No, most of us thought - seriously bad precedent, as perceived, had to be challenged. The world was becoming more and more interactive and interdependent, and the economic activity was less and less capable of being captured and managed in purely national compartments; the underlying issues (ultimately about the orderly governance of global affairs) would inevitably arise again elsewhere, perhaps even more abrasively. Whatever might be done specifically about Helms-Burton, better structures and habits for conflict-management, for dialogue, for reciprocal restraint and for early international consultation (perhaps even, for example, systematised in some way in relation to the US Congress) were needed if extra-territorial action of one kind or another was not to become a recurrent arena of conflict, to the plain detriment of all.

This report reflects the Director’s personal impressions of the conference. No participant is in any way committed to its content or expression.

Chairman : Mr Keith Highet
Partner, McDermott, Will & Emery, Washington DC


Ms Patrice Merrin Best
Senior Vice President, Corporate Office, Sherritt International Corporation, Toronto
The Rt Hon Kim Campbell PC QC
Consul General of Canada, Los Angeles; Prime Minister, 1993
Mr H Scott Fairley
Partner, Lang Michener, Toronto
Mr Richard J Marshall
Special Counsel, International Banking, The Bank of Nova Scotia

Mr Eric Hayes
Head of Unit, United States of America, Directorate-General I, European Commission
Mr Anthonius W de Vries
Directorate-General I, European Commission

Professor Henry Lesguillons
Partner, Jeantet et Associés; Professor of Law, University of Paris X-Nanterre

Judge Rosalyn Higgins DBE FBA QC
A Judge, International Court of Justice, The Hague
Judge Stephen M Schwebel
President, International Court of Justice, The Hague

Dr Andrea Bianchi
Assistant Professor of International Law, University of Siena

Mr Sten Anders Berge
Minister-Counsellor, Royal Norwegian Embassy

Mr Mark A A Warner
Counsellor, Division of Policy Inter-relations, OECD Trade Directorate

Sr Heimengildo Altozano
Partner, law firm Bufete Lupicinio Rodriguez, Madrid

Mr Robert Ayling
Chief Executive, British Airways plc
Mr David Bricknell
Group Legal Adviser, Pilkington Group pic
Mr Andrew Bums CMG
Deputy Under-Secretary of State, Foreign & Commonwealth Office
Mr Stuart Chaifen
Solicitor, BAT Industries pic
Mr Guy de Jonquièrcs
World Trade Editor, Financial Times
Mrs Mariot Leslie
Head of Policy Planning Staff, Foreign & Commonwealth Office
Mr Jeremy Lever QC
Fellow, All Souls College, Oxford
Dr Vaughan Lowe
Reader in Law and Fellow, Corpus Christi College, Cambridge
Professor Maurice Mendelson QC
Professor of International Law, University of London at University College Mr Christopher Roberts CB
Mr Christopher Roberts CB
Deputy Secretary and Director General for Trade Policy, Department of Trade and Industry.
Sir Ian Sinclair KCMG QC
Barrister-at-law; Legal Adviser, Foreign and Commonwealth Office, 1976-84
Mr David Suratgar
Group Director & Deputy Chairman, Morgan Grenfell & Co Ltd
The Rt Hon The Baroness Young PC DL
A Director, Marks & Spencer pic; a Vice-President, West India Committee

Mr D Rhett Brandon
Senior Resident Partner, Simpson Thacher & Bartlett, London
Mr Rodman R Bundy
Partner, Litigation Department, Frere Cholmeley, Paris
Mr Brice M Clagett
Partner, Covington & Burling, Washington
Mr Charles J DiBona
President and Chief Executive Officer, The American Petroleum Institute
Professor Harry First
Professor of Law, New York University School of Law; Counsel, Loeb & Loeb, New York
TheHonorable Monroe Leigh
Partner, Steptoe & Johnson LLP, Washington DC
Mr Clement B Malin
Vice President, International Relations, Texaco Inc
Professor Geoffrey P Miller
Professor of Law and Director, Center for the Study of Central Banks, New York University
MsTherese Raphael
Editorial Page Editor, The Wall Street Journal Europe, Brussels
The Honorable William D Rogers
Senior Partner, international practice, Arnold & Porter (Attorneys), Washington DC
Mr Douglas Rosenthal
Partner, Sonnenschein Nath & Rosenthal, Washington DC
Mr Marc A Thiessen
Spokesman, Committee on Foreign Relations, United States Senate
Mr Richard K Thomas
Chief Economics Correspondent, Newsweek Magazine
The Honorable Diane P Wood
Circuit Judge, United States Court of Appeals for the Seventh Circuit