Canons of statutory interpretation are sometimes said to promote continuity and stability in the law. Yet it is widely acknowledged that canons themselves often change. The presumption against extraterritoriality is a prime example. It evolved from a rule based on international law, to a canon of comity, to a tool for finding legislative intent. The presumption then fell into disuse for nearly forty years until it was reborn in EEOC v. Arabian American Oil Co. (Aramco) and substantially revised in Morrison v. National Australia Bank Ltd.
This Article makes three contributions. First, it describes the evolution of the presumption against extraterritoriality over two centuries, providing a detailed account of change in an important canon of interpretation. Second, the Article describes the new, post-2010 presumption, arguing — contrary to the conventional wisdom — that the current version of the presumption is superior to previous ones. Third, the Article addresses the problem of changing canons. It argues changing canons constitute a form of dynamic statutory interpretation, which imposes certain responsibilities: to justify the changed canon in normative terms, to explain the need for change, and to mitigate the transition costs.
As the Supreme Court has increasingly relied on canons of statutory interpretation over the past three decades, these canons have received a great deal of scholarly attention.1 Canons form an important part of what has recently been dubbed the “law of interpretation.”2 Professor David Shapiro famously defended interpretive canons on the ground that they promote continuity and stability in the law.3 Yet it is widely acknowledged that canons of statutory interpretation themselves change.4 The retroactive application of changed canons to statutes enacted before the changes may result in interpretations that are different from the ones the enacting Congresses would have expected. This problem has received little attention.5
The presumption against extraterritoriality is a prime example of a canon that has changed substantially over time.6 The presumption began in the nineteenth century as an application of the Charming Betsy canon, requiring that statutes be construed to avoid violations of international law.7 When international law evolved to permit greater extraterritorial regulation, the Supreme Court kept the presumption but articulated new rationales — first, international comity8 and then Congress’s primary concern with domestic conditions.9 The American Banana version of the presumption that the Court applied during the first half of the twentieth century turned entirely on the location of the conduct.10 When this approach would have led to results that seemed inconsistent with Congress’s intent, the Court distinguished or ignored the presumption.11 After 1949, the presumption fell into disuse for four decades.12 It was reborn in the 1991 case EEOC v. Arabian American Oil Co.13 (Aramco) and was applied regularly, if somewhat inconsistently, thereafter. The Aramco version of the presumption purported to be a clear statement rule,14 and, like American Banana’s version of the presumption, it turned entirely on the location of the conduct.15
The Supreme Court’s 2010 decision in Morrison v. National Australia Bank Ltd.16 articulated a new presumption against extraterritoriality. First, the Court said explicitly that the presumption was not a “clear statement rule” and that “context can be consulted” to determine whether the presumption has been rebutted.17 Second, Morrison abandoned the presumption’s traditional dependence on the location of the conduct. Whether the application of a statute should be considered domestic or extraterritorial would now turn on whether the object of the statute’s “focus” was found in the United States.18 In RJR Nabisco, Inc. v. European Community,19 the Court formalized Morrison’s approach, adopting “a two-step framework for analyzing extraterritoriality issues” that looks first for a clear indication of geographic scope and, in the absence of one, applies Morrison’s “focus” test.20 This new presumption against extraterritoriality has also been restated in the Restatement (Fourth) of Foreign Relations Law.21
Scholars have been critical of the new presumption against extraterritoriality. It has been called a “runaway canon”22 and a “Frankenstein’s monster.”23 But the Supreme Court shows no inclination to abandon the presumption despite repeated calls to do so.24 The Court’s articulation of a two-step framework for applying the presumption in RJR Nabisco was unanimous, even though the Court split 4–3 on how that framework should be applied to the private right of action in the Racketeer Influenced and Corrupt Organizations Act25 (RICO).26 In WesternGeco LLC v. ION Geophysical Corp.,27 the Court applied the new presumption again, with the addition of two Justices who had not participated in RJR Nabisco and without a word of dissent from the new two-step framework.28 At present, there does not appear to be a single member of the Court who wants to abandon the presumption against extraterritoriality.29
I argue that academic criticisms of the new presumption are misguided. The Morrison/RJR Nabisco version of the presumption is significantly more flexible than its Aramco and American Banana predecessors, and thus decidedly better. In combination with other principles of statutory interpretation and appropriate deference to administrative agencies, the new presumption against extraterritoriality provides a useful tool for courts to determine the geographic scope of federal statutory provisions.
But the problem of changing canons remains. In Morrison, the Supreme Court justified the presumption on the ground that it “preserv[es] a stable background against which Congress can legislate with predictable effects.”30 Nowhere did the Court acknowledge that its focus approach represented a significant departure from the Aramco version of the presumption that it had applied since 1991, to say nothing of the American Banana version that the Court was applying (inconsistently) in 1934, when section 10(b) of the Securities Exchange Act31 was passed. In RJR Nabisco, plaintiffs argued that because Congress modeled RICO’s private right of action on the Clayton Act,32 RICO’s provision should be given the same geographic scope that the Supreme Court had already given the Clayton Act when RICO was passed.33 But the Court rejected that argument, noting that it had subsequently “honed [its] extraterritoriality jurisprudence”34 and instead applying its “current extraterritoriality doctrine.”35 RJR Nabisco seemed to assert the Court’s authority to change the presumption against extraterritoriality, and to apply it retroactively, without regard to the expectations of the enacting Congress.
Rhetorically, the Supreme Court is committed to some combination of textualism and purposivism.36 Changing canons, on the other hand, constitute a form of dynamic statutory interpretation in which courts apply statutes in ways that might not have been anticipated by Congress.37 Currently, the retroactive application of changed canons operates as a “backdoor” form of interpretation that the Supreme Court generally fails to acknowledge or justify.38 This is likely because of the theoretical problems that textualism and purposivism have with applying changed canons retroactively to existing legislation.39 Some scholars have proposed applying changed canons of interpretation only prospectively, but doing so seems inconsistent with the judicial role.
Even if applying changed canons retroactively is an inevitable form of dynamism, the Supreme Court should be obligated to justify the changed canon in normative terms, to explain the need for change, and to mitigate the transition costs of moving from one interpretive regime to another. These obligations will apply differently to different canons, depending largely on the content of the new canon and the extent of reliance on the old one. Applying this framework to the new presumption against extraterritoriality, this Article concludes that its retroactive application to existing federal statutes is appropriate.
The Article makes three contributions to the literature. Part I describes the evolution of the presumption against extraterritoriality over two centuries, providing a detailed account of change in an important canon of statutory interpretation. Professor Adrian Vermeule has noted that “there are very few longitudinal studies tracing the history of particular canons.”40 This Article helps fill that gap.41
Part II describes the new, post-2010 presumption.42 This Part also situates the new presumption in a broader interpretive regime for determining questions of geographic scope, a regime that also includes a principle of reasonableness in interpretation and principles of deference to administrative agencies. Finally, Part II offers an evaluation of the new regime, arguing — contrary to the conventional wisdom — that the latest version of the presumption is a decided improvement over previous ones.
Part III moves beyond the presumption against extraterritoriality to suggest a framework that is applicable to changed canons generally. It argues that changing canons constitute an inevitable form of methodological dynamism43 on a Supreme Court that is rhetorically committed to textualism and purposivism. Instead of ignoring this tension, as the Court has done, this Part proposes ways of living with methodological dynamism. If the Court feels the need to change a canon of interpretation, it should explain why it is doing so using the same factors that it uses to decide when to overrule a precedent.44 Part III also makes specific proposals for mitigating the transition costs of moving to a new interpretive regime by adhering to prior interpretations of specific statutes under old canons, by honoring Congress’s expectations when it borrows language from statutes that have been construed under old canons, and in appropriate cases by treating old canons as part of the context in applying new ones.
This Article concludes with a few words of caution. It notes that whether the new presumption against extraterritoriality fulfills its potential to produce sensible tests for the geographic scope of federal statutes ultimately depends on what the Supreme Court does with it.
* Martin Luther King, Jr. Professor of Law and John D. Ayer Chair in Business Law, University of California, Davis, School of Law. Earlier drafts were presented at the Colloquium on International Law and Politics at UC Berkeley School of Law, at the ASIL International Law in Domestic Courts Workshop at the University of Pennsylvania School of Law, and at UC Hastings College of the Law. My thanks to Kevin Benish, Ashutosh Bhagwat, Pamela Bookman, Curtis Bradley, Hannah Buxbaum, Zachary Clopton, Anthony Colangelo, John Coyle, Jennifer Daskal, Kristina Daugirdas, Scott Dodson, William Eskridge, Maggie Gardner, Franklin Gevurtz, Abbe Gluck, Andrew Kent, John Knox, Harold Hongju Koh, Anita Krishnakumar, Thomas Lee, Julian Mortenson, Austen Parrish, David Pozen, Richard Re, Shayak Sarkar, Reuel Schiller, Darien Shanske, Aaron Simowitz, Brian Slocum, David Sloss, Paul Stephan, Symeon Symeonides, Aaron Tang, Carlos Vázquez, and David Zaring for their comments, suggestions, and insights.