SEC 32 OF THE COMPETION

ACT,2002
EXTRATERRITORIAL
JURISDICTION AND ITS
EFFECT ON GLOBAL SCALE.

SOUMYA KUMARI
BHARATIVIDYAPEETH NEW LAW
COLLEGE, PUNE
1 DECEMBER-24
DECEMBER,2016
INTRODUCTION

The need for a competition policy in a free market

economy is to regulate the market so as to promote
the public good.
. If however a monopoly restricts entry and is
inefficient then we need a competition policy and
authority to restraint the monopoly.
The Indian market is one of the largest economies in
the world, and it is therefore vitally important to
ensure that competition persists in it.
In practice, industries facing vigorous opposition are
more successful than those protected by regulations.
The relationship also between competition policy
and trade liberalisation is important.
 A new concept has come into light with the
increase of liberalisation and new developing
competition policies extraterritoriality in
competition law.
Extraterritorial jurisdiction refers to the ability of a
state, via various legal, regulatory and judicial
institutions, to exercise its authority over actors
and activities outside its own territory.
It is easy to define but in applying it to different
regulatory areas, problems often emerge,
especially in relation to abstract legal entities like
companies.
This concept is derived from the application of
objective territoriality principle in the form of the
effects doctrine whereby a state assert
jurisdiction over acts of foreign nationals
committed abroad but having effects in its
SOVEREGINTY
The principle of sovereign equality of States says,
all States enjoy sovereign equality. They have
equal rights and duties and are equal members of
the international community, notwithstanding
differences of an economic, social, political or
other nature.

In United States v. Aluminum Co. of America, 148

F.2d 416 (2d Cir. 1945), the court concurred with
American Banana with the following view: We
should not impute to Congress an intent to punish
all whom its courts can catch, for conduct which
has no consequences within the United States.
American Banana Co. v. United Fruit Co.,
PRINCIPLE OF NON-
INTERFERANCE
The Effects doctrine is therefore contrary to the
international rule of non-interference which is set
forth, in particular, in Article 40 of the Second
Restatement of Foreign Relations Law of the
United States.
That principle of international law prohibits a
State from adopting measures under its national
law if such measures have an adverse effect on
the interests of another State and if those
interests outweigh its own.
The rule of non-interference forbids not only the
prohibition of activities required by another State
but also the prohibition of those which are simply
permitted or approved by that State.
 The rule of non-interference forbids not only the
prohibition of activities required by another State
but also the prohibition of those which are simply
permitted or approved by that State.
This idea is rooted in the fundamental
international law principle of the sovereign
equality of states, the corollary of which is that no
state may interfere in the domestic affairs of
another state.
In United States v. Aluminum Co. of America, 148
F.2d 416 (2d Cir. 1945),
Nevertheless, it is quite true that we are not to
read general words, such as those in this Act,
without regard to the limitations customarily
observed by nations upon the exercise of their
powers...
INTERNATIONAL
COMITY
International comity is the idea that courts of
one country should, in consideration of
international relations, treat the decisions of
foreign governments with a degree of respect and
deference.
Comity requires that courts restrain their
judgment in certain cases even though they may
technically have jurisdiction, a concept also
referred to as negative comity.
This common law notion was traditionally used to
prevent international disputes from arising
through a conflict of jurisdiction caused by the
extraterritorial application of domestic laws.
. The principle of international comity is that one
state, to the greatest extent possible, recognizes
the legislative, executive or judicial acts of
 In HARTFORD FIRE INSURANCE CO. et al. v.
CALIFORNIA et al. 509 U. S. 764 (1993) the court
observed:

The comity they refer to is not the comity of

courts, whereby judges decline to exercise
jurisdiction over matters more appropriately
adjudged elsewhere, but rather what might be
termed prescriptive comity: the respect sovereign
nations afford each other by limiting the reach of
their laws.
Effects doctrine
interpreted narrowly
The Bundesgerichtshof (Federal Court of Justice,
Germany) has held that German competition law
is applicable only if the effect produced on
national territory is sufficient.
That is the case only where undertakings not
parties to the agreement in question are affected
or capable of being affected with regard to their
manufacturing or distribution of the product on
the domestic market.
If those principles were to be transposed into
Community law, Article 85 of the Treaty would
apply to undertakings situated outside the
Community only if the agreements concluded
between them or the practices carried on by them
affected the freedom of action of other
Misuse of
Extraterritorial
Jurisdiction
Excessive extraterritorial application of
competition law tends to bring about serious
conflicts between the involved parties, rather than
encouraging those parties to settle the disputes.
In the Thermal Fax Paper case, the government of
Japan also expressed, in amicus curiae briefs
submitted to the Federal Circuit Court in
November 1996 and to the U.S. Supreme Court in
July 1997, the position that the Department of
Justices extraterritorial application of the criminal
provisions of U.S. competition laws against
conduct by foreign companies outside the U.S. is
not valid under international law.
Conflict Between
Nations
The Barcelona Traction Light and Power Company
Case (ICJ Reports 1970, p. 105), Judge Gerald
Fitzmaurice, in his individual opinion, clearly
acknowledged that international law imposes on
every State an obligation to exercise moderation
with regard to the jurisdiction assumed in cases
having a foreign element, so as to avoid any
conflict with another State.
The best example of conflict between the states
because of extraterritorial jurisdiction is the
Uranium Antitrust case.
One more example is Laker Airways Ltd. v.
Sabena, Belgian World Airlines (78 A.L.R. Fed.
751, 1984 U.S.).
Blocking Legislation
A number of countries have enacted legislation (known as
'foreign blocking statutes') prohibiting undertakings from
complying with requirements imposed by foreign public
authorities.
The basis of all such legislation is the view that the
exercise of jurisdiction on the basis of the effects doctrine
constitutes a violation of international law and an
infringement of the national sovereignty of the other States
concerned.
These blocking statutes forbid private firms from obeying
an order for submitting information and other actions
issued by a foreign government or court.
An effect similar to that produced by such blocking
statutes has sometimes been produced by courts acting
on the basis of more general provisions of domestic law.
The Fruehauf case (1996 V I.L.M. 476) is probably the best
known example.
EU and other States
Criticised ETJ
The United Kingdom points out that the effects
doctrine, which may be defined as a doctrine
allowing a State to claim jurisdiction over conduct
occurring outside its territory but causing direct,
foreseeable and substantial effects within its
territory if those effects are a constituent element
of the infringement, is the subject of controversy
under international law and has never been
accepted as such by the international community.
Moreover, the Commission itself has always
stated that the only two legal bases of jurisdiction
in international law are the principles of
nationality and territoriality
Anti-globalisation
Protectionist policies protect the producers,
businesses and workers of the import-competing
sector in a country from foreign competitors but it
contrasts with the doctrine offree trade, where
governments reduce as much as possible the
barriers to trade. It can also be said that it is anti-
globalisation.
The principle ofcomparative advantageshows
that the gains from free trade outweigh any losses
as free trade creates more jobs than it destroys
because it allows countries to specialize in the
production of goods and services in which they
have a comparative advantage.
In Haridas Exports Vs. All India Float Glass Mfrs.
Association and Ors. AIR2002SC2728...the era of
protectionism is now coming to an end.
 Raghavan Commitee Report
...if a country wants to have extra-territorial reach
of its Competition Law, it should allow other
countries to have extra-territorial reach of their
Competition Laws in its soil.

In Haridas Exports Vs. All India Float Glass Mfrs.

Association and Ors. AIR2002SC2728, Para 74:
For the Commission to have jurisdiction to pass
such an order whether interim or final, it must
come to the conclusion that it is in public
interest to do so. It is so borne in mind that
public interest does not necessarily mean
interest only of the industry.