A Note on Extraterritoriality

“Extraterritoriality” keeps coming up in interviews and conversations, and as I write about the legalities of data sharing I find this concept has a curious pedigree.

In some instances it is exclusionary.  Diplomatic immunity is the most often cited example, where a host country cannot prosecute foreign dignitaries’ misdeeds under local law, but in certain circumstances his/her native land will waive this right.  The term can also denote inclusion, where states claim national law applies beyond its sovereign borders citing the ‘effects test.’

In both, boundaries are defined and crossed.  They perfectly illustrate the legal and physical dichotomies in the world(s) of information communications technologies, finance, and data, which may be geographically and legally defined, yet transnational in their virtual and physical existence.  As I have been told, “Banking is local” – regulations, attitudes about money and investing reflect local expectations, but in the last 40 years the technologies and many of the staffing and services on which we depend to facilitate these relationships, are not.  This is also a problem for international organizations like the IMF that worry about interstate cooperation and enforcement in a regulatory world – “How are they [the G20] going to deal with extraterritoriality?” The suggested answer – “They only cooperate when they are scared.”  The danger is that instead of compromise and adaptation, states and corporations will resort to a tug of war mentality of interests based on strict definitions and boundaries.

Extraterritoriality asks, “Whose rules apply, to whom, and when?” It addresses setting standards and enforcing them.   In the end, I do not think that that the corporate world or governments will be entirely successful in avoiding a battle of territorialities, but I do hope that there is enough ‘fear’ to motivate them to recognize the importance of compromise to everyone’s interests. Too often, in the aftermath of crisis (whether it be the national security or financial kind) policy-makers and practitioners fall into a lull of comfort, lose sight of the big picture, and start aggressively pushing politics into areas that desperately demand practical solutions.

Next post:  Qualifying and Quantifying “Big Data” (a buzz word that I’m increasingly beginning to loathe)