February 27th, 2021


U.S. law is so great even Europeans want to use it

Noah Feldman

By Noah Feldman Bloomberg View

Published March 22, 2016

In recent years, the Supreme Court has been loath to apply U.S. law abroad, fearing that becoming an international sheriff would alienate other nations and interfere with foreign policy. But what if foreign countries ask U.S. courts to step in? That's what is happening in European Community v. RJR Nabisco, a case that was argued Monday.

The European states that are plaintiffs in the underlying case want the Supreme Court to apply the Racketeer Influenced and Corrupt Organizations (RICO) law to a drug enterprise that took place outside the U.S. and caused injury in Europe. The basis of their argument is that RJR participated in money laundering within the U.S. -- and that they, America's loyal allies, want the law to apply in this case.

The case is particularly piquant because it involves the distinctive U.S. version of conspiracy law -- which is mostly rejected by European legal systems. The European countries are suing in the U.S. not only because RJR is based here, but also because their conspiracy-based legal theory might not fly in the court systems of their own countries.

The European countries allege the existence of a criminal enterprise that's clever but not especially complicated. Russian and Colombian cartels sell drugs in Europe for euros. The drug gangs employ "money brokers" who exchange the euros for rubles or Colombian pesos, which go to the cartels.

The money men then launder the tainted euros by selling them at a discount to cigarette importers, who buy cigarettes from wholesalers, who in turn buy them from RJR -- which sends the cigarettes directly to the importers without asking too many questions about where the money came from. In the process, the dirty euros are turned into cigarettes, and RJR does big business, and everyone is happy, except law enforcement.

According to the Europeans, RJR facilitated the scheme by giving handling instructions "intended to conceal the true purchaser of the cigarettes." The Europeans also claim RJR filed false documents and engaged in other kinds of chicanery both inside the U.S. and outside. RJR denies the allegations.

The structure of a RICO claim is that the plaintiff or the prosecutor alleges that some of the defendants committed what are called "predicate acts" under the statute, specified crimes that then trigger the statute's key function, which is to declare a whole web of relationships as a criminal enterprise.

The European plaintiffs don't go so far as to claim that RJR itself is a criminal enterprise, the way U.S. prosecutors accused FIFA, the international soccer organization, in the high-profile RICO charges brought last year. But they do say that RJR committed predicate acts for the RICO charge, and that RJR is therefore liable for civil damages.

A federal district court rejected the argument on the ground that the alleged conspiracy occurred abroad. It relied on Supreme Court precedent that says a law may apply extraterritorially only if Congress explicitly says that it should.

But in an important opinion that provided the blueprint for the FIFA prosecution, the U.S. Court of Appeals for the Second Circuit held that it was enough for the predicate acts to have taken place within the U.S. The opinion was by Judge Pierre Leval, a worldly liberal who can be expected to have taken into account the potential international ramifications of the case.

Now the case is before the justices -- or to be more precise, seven of them, since Justice Antonin Scalia hasn't been replaced yet and Justice Sonia Sotomayor has recused herself, probably because she was on the Second Circuit when the case was first considered.

Given that Scalia's and Sotomayor's votes might well have canceled each other out, the case may still come down to Justice Anthony Kennedy, who gave the deciding fifth vote in the landmark 2013 case Kiobel v. Royal Dutch Petroleum, which limited the extraterritorial reach of federal laws.

For Kennedy, this case could pose a conundrum. On the one hand, he doesn't like the idea of U.S. law applying abroad too much, which arguably seems arrogant and overreaching vis--vis other legal systems. On the other hand, he understands the importance and relevance of good judicial foreign relations.

Here's where it matters that the European Community is the plaintiff in the case. By going to the U.S. courts, the Europeans are making it explicit that they don't consider it an invasion of their turf for RICO to apply abroad. To the contrary, they're saying precisely that they want the U.S. courts to act as adjudicators in cases that involve them.

Technically, for purposes of U.S. jurisprudence, the Europeans' view shouldn't matter; only Congress's opinion should have weight. But in the real world, Europe's position will matter -- in part because Congress's intentions can plausibly be interpreted in different ways.

With the caveat that the court's trend has been against applying U.S. law abroad, I'd wager cautiously that this time, the result will go the other way, and RJR will have to stand trial -- which means the company is likely to settle with the Europeans.

After the FIFA prosecution was announced, I was skeptical about the U.S. acting as a global policeman -- in the field of soccer, no less. But ultimately, no one outside Russia seems to have raised any major objections. The reason is simple: When no one else is doing anything, the world likes the U.S. to be the global sheriff.

If RJR really facilitated a money-laundering scheme, it should be held responsible. And if European countries think that U.S. law is the best way to do it, that's a compliment to America's wide-reaching scheme of conspiracy law and to the American legal system. Expect the Supreme Court to accept the compliment and apply the law.

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Noah Feldman, a Bloomberg View columnist, is a professor of constitutional and international law at Harvard University and the author of six books, most recently "Cool War: The Future of Global Competition."