The World in U.S. Courts: Summer 2015 - White Collar Criminal Law
April.21.2015
"In this case, the United States government urges the application of federal criminal statutes to prosecute foreign defendants for foreign acts involving a foreign governmental entity." The U.S. District Court in California concluded that these facts could not support a prosecution, and so dismissed a multi-count criminal indictment on grounds of impermissible extraterritoriality and a failure to comply with the requirements of the Due Process Clause of the U.S. Constitution.
The indictment alleged various violations of U.S. law in connection with a scheme to corrupt the International Civil Aviation Organization ("ICAO"), a United Nations specialized agency headquartered in Montreal, Canada. Two of the defendants were citizens of Ukraine and St. Kitts & Nevis, respectively; a third held a Canadian passport but was a Venezuelan national. None resided in the U.S. The U.S. claimed that U.S. criminal laws would apply because the U.S. provided approximately 25% of the ICAO's annual funding.
The District Court first reviewed the rule, dating from the Morrison case in 2010, that U.S. statutes are construed not to have extraterritorial effect unless there is a "clear indication" in the legislation to the contrary. Applying this rule, the Court concluded that two of the statutes under which the defendants were charged, covering wire fraud and bribery, were to be given no extraterritorial effect. Thus, because, the indictment alleged no conduct relating to the U.S., no violation could be found. The Court distinguished cases that involved U.S. citizens, events that occurred in or passed through the U.S., and/or events "that directly affect the territory or agencies of the United States." It also noted that there was no allegation that sums paid by the U.S. to ICAO had been "squandered."
The defendants also argued that a prosecution under the other criminal statutes cited in the indictment where there was no significant contact with the U.S. violated the U.S. Constitution's Due Process Clause. The District Court observed that the Constitution required that "there must be a sufficient nexus between the defendant and the United States so that such an application of a domestic statute to the alleged conduct would not be arbitrary or fundamentally unfair." It further concluded that this requirement limits the assertion of jurisdiction to claims where a defendant "should reasonably anticipate" that he or she may be held answerable for it. The Court found that this test was not met in the case at bar, because in addition to the facts cited previously there was no allegation that the defendants intended to cause injury in the U.S. The Court concluded that neither the U.S. financial contribution to ICAO, nor the fact that ICAO's work related to civil air transportation might implicate U.S. security interests, created a sufficient "nexus" to satisfy Due Process requirements.