February 26, 2010

More NAB Developments

The respondents have filed their brief in the National Australia Bank case pending before the U.S. Supreme Court. The case concerns the extraterritorial application of the antifraud provisions of the federal securities laws. Links to all of the briefs filed to date, including the extensive amicus submissions, can be found here.

The respondents argue that the Exchange Act does not contain any language "that clearly expresses an affirmative intention of Congress to apply the statute extraterritorially." In the absence of this language, there is a presumption against extraterritoriality that the Court should apply.

Moreover, acts of Congress should be interpreted to be in conformity with international choice-of-law provisions absent any contrary statement. Based on the law of nations in 1934 (when the Exchange Act was enacted), "Congress must be presumed to have intended that transactions on foreign exchanges must be governed by foreign law." The extraterritorial application of Section 10(b) to foreign transactions also would improperly supplant the substantive laws and remedies that already exist in foreign countries.

Finally, the Court has previously held that because the private right of action under Section 10(b) is judicially created it should be subject to practical limitations. The threat to the sovereign authority of other nations posed by the extraterritorial application of the statute is significant and warrants the limitation of Section 10(b) actions to persons who purchased or sold securities in the United States.

For a summary of the petitioners' arguments, see this earlier post.

Posted by Lyle Roberts at February 26, 2010 11:29 PM | TrackBack
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