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Extraterritoriality of the law: when lawfare serves economic warfare

In July, in the face of the scandal, an American economist gave up her bid to join a key post in the European Commission's Competition Directorate. But in this area, it is also the global application of US law that is causing concern among businesses, specialists and legislators.
Extraterritorialité du droit : quand le « lawfare » sert la guerre économique

On 17 July, Fiona Scott Morton stepped down as chief economist of the European Commission's powerful Competition Directorate-General. This American's career with technology giants such as Microsoft, Apple and Amazon, as well as in the Obama administration's antitrust department, had caused a furore on the continent: how could she now recommend sanctions against these same groups, which are often the target of European investigations?

In a nutshell, this controversy has highlighted the fierce competition between companies on a global scale, and its interplay with the commercial law enacted by governments (or the EU, in this case). From four circles of the national defence perimeterThe second, national defence, covers the measures to be taken to protect against threats to a country's economy in particular. And among these, the extraterritoriality of the law has become increasingly important since the end of the 1990s.

Historically, the United States has been the most proactive nation in this area. As early as the beginning of the 19th century, President Thomas Jefferson issued embargoes against the former British colonial power and Napoleon's France. His successors subsequently adopted them on a regular basis. At the end of the 20th century, embargoes against trade with Cuba and Iran affected many American and foreign companies.

THE UNITED STATES SANCTIONS FOREIGN COMPANIES AROUND THE WORLD

But the texts passed in Washington also target corruption. "There was a time when French companies could deduct bribes paid to win contracts from their taxes", recalls consultant Augustin de Colnet, author of the book "Compétition mondiale et intelligence économique".[1]. "The United States' starting point was the observation that European and other companies were engaging in corruption, and that their companies were therefore losing market share.

Today, US extraterritorial laws make it possible to penalise any foreign company for offences committed anywhere in the world, as long as one of several conditions is met: transactions in dollars; e-mail exchanges or data hosting on servers based in the United States; the presence of a subsidiary in that country; being listed on a financial market there, etc. The field is therefore very broad.

Based on parliamentary reports (such as the Gauvain report submitted to the Prime Minister in 2019), press articles and other publications, Augustin de Colnet has produced a " mapping of the main US extraterritorial sanctions of more than $100 million "These were announced between 2008 and the end of 2022. The pace has accelerated since Barack Obama's presidency, often targeting strategic sectors. Groups based not only in the United States but also in France, Germany, Japan, the United Kingdom and Brazil are filling out Colnet's chart. "But not all countries are affected in the same way", he comments. "Not everyone has multinationals like France. And the sum of the fines imposed on all the American companies is less than the amount paid by BNP Paribas alone.

8.9BN FINE FOR BNP PARIBAS, €3.6BN FOR AIRBUS...

In 2015, the French bank paid a record fine of $8.9 billion for circumventing US sanctions imposed on Cuba, Iran and Sudan between 2004 and 2012. Reacting to the Scott Morton affair in an interview with Le FigaroFrédéric Pierucci estimated that "since 2010, European companies have paid no less than $50 billion in fines (including around $15 billion for French companies) to the US Treasury to close investigations by the DOJ", the US Department of Justice.

A former Alstom executive, Pierucci was arrested on US soil in 2013 and spent a total of 25 months in prison. According to Pierucci, it was these proceedings against the group for bribery of public officials (in Saudi Arabia, Indonesia, Egypt, Taiwan and the Bahamas) that prompted Alstom to sell its energy division to its biggest competitor, the US group General Electric (GE), in 2015. In addition to paying a $772 million fine. As CEO of the French energy company at the time, Patrick Kron "no longer had a choice: if he wanted to escape prison for the next twenty years, he had to sell Alstom to General Electric".

These are the words of Frédéric Pierucci in a recent Arte documentary entitled "The Battle for Airbus", which explores the effects of US legal extraterritoriality. In 2013, the European aircraft manufacturer was also accused of corruption by Washington. This case and others prompted the French government to react. Enacted in 2016, the Sapin II law allows France to conduct anti-corruption procedures in line with US standards, in order to protect French companies from sanctions handed down across the Atlantic. The Airbus case resulted in a settlement between the group and the French, British and American courts. Out of a total fine of around €3.6 billion, France received just over €2 billion, the United Kingdom €984 million and the United States €525 million.

"AS WITH ANY GOAL OF WAR, THERE IS A PRICE TO PAY.

"The Sapin II law more or less transposes the American law," points out the French minister. lawyer Olivier de Maison RougeThe new law, which has a doctorate in law and specialises in business intelligence law, is a clear response to US legislation. "With its extraterritorial effects, it is very clearly a response to American legislation. But ours only affects French companies, not American, Indian or other ones...".

In the BNP Paribas case, the lawyer observes that it is the embargoes decreed by the United States that apply, not the UN sanctions: "Irrespective of international law, they arrogate to themselves the right to be the world's policeman who applies the law, with two types of sanction: for American companies, and for foreign companies. In this case, BNP Paribas could not do without dollar-denominated transactions, which now account for 44% of global transactions". Even if it means paying this staggering fine.

The lawyer uses a martial metaphor: "As with any goal of war, there is a price to pay in the end, and you weaken a target". But he refuses to see a deliberate strategy in the prosecution of Alstom and the subsequent sale of a strategic branch of the group to its main competitor: "Yes, the DOJ was at work and put the company under investigation; but the acquisition followed a fairly classic pattern, and nowhere has it been shown that the corruption charges were put in place for the purpose of this acquisition".

"FOR THE MOMENT, WE DON'T HAVE THE SAME LEVEL OF ARSENAL".

Augustin de Colnet disagrees: "In my view, there is clear collusion between GE and the US Department of Justice. Alstom is in fact the fifth company to be bought by GE after DOJ sanctions. For him, the "legal war" (lawfare is "just another economic weapon" in global rivalries. He also believes that the European Union and France are not arming themselves sufficiently: "We are barely on the defensive. There's nothing in the news to suggest that we're on the offensive. But in the EU, we don't all have the same economic interests. Everything shows that we just don't want to offend our American ally, particularly given its military and commercial clout.

In the meantime, armed with their own laws, the United States is not shying away. Quoted in the Arte documentary, a DGSI memo drawn up at the time of the Airbus affair speaks of an American "strategy of conquest" in the sectors of "aeronautics, health and research", with French companies being subjected to "targeted attacks" through "legal disputes". As former MP Raphaël Gauvain states in the same film: "It's very clear that European companies are the preferred target of the American authorities, and that the heaviest sentences have been handed down to European companies.

For Olivier de Maison Rouge, all this "brings us back to the question of para-economic domination": "Don't the Americans themselves have other ways of distorting competition? Their soft powerIn Europe, the brains are trained in the Anglo-Saxon mindset, a cognitive alignment takes place, and there is no need to pay in one way or another. Even if they also have tax havens whose opacity makes it possible to conceal financial settlements, like the state of Delaware from which Joe Biden hails".

The lawyer is therefore also calling for "reciprocity". For the moment, we don't have the same level of arsenal".

[1] VA Editions, 2021.