Over the past several years, ever since the United States Supreme Court’s seminal decision in Morrison v. National Australia Bank Limited, the presumption against extraterritoriality has steadily expanded across much of the legal field. In doing so, the presumption has again become the dominant standard in deciding whether Congressional legislation may be used on an extraterritorial basis. This expansion has recently encompassed portions of the Bankruptcy Code, specifically, its avoidance provisions.
The presumption, as noted in detail below, relies on the premise that although the legislature has the authority to regulate beyond the borders of the United States, there is a general presumption against extraterritorial application of U.S. law. The presumption can only be overcome if Congress intended to apply the statute abroad.
Part I of this article will discuss the presumption against extraterritoriality generally; Part II will give a brief overview of the standards used prior to the Supreme Court’s decision in Morrison and will then discuss the Court’s holding in Morrison and it’s reasons for rejecting the prior standards adopted by the Circuit Courts; and finally, Part III will discuss the expansion of the presumption against extraterritoriality to the Bankruptcy Code’s avoidance provisions and some of the current sources of friction between the Circuit Courts over which avoidance provisions were intended by Congress to be used extraterritorially.