'Deriving' an Understanding of the Extraterritorial Applicability of the Commodity Exchange Act

Authors

Gabrielle Schwartz

Document Type

Note

Abstract

(Excerpt)

This Note argues that courts should return to using a holistic approach, similar to the traditional “conducts” and “effects” test previously used by courts to analyze extraterritorial securities and commodities claims, to assess claims brought under the CEA. Furthermore, this Note argues that both the Commodity Futures Trading Commission and private individuals including foreign plaintiffs, should be permitted to bring these claims to uphold Congress’s intent in establishing a regulatory regime and maintaining the integrity of the international derivatives market. Part I discusses the history of derivative regulation and how both court decisions and statutory changes have created the potential for confusion when asserting causes of action in the commodities context. Fueling this confusion, one Supreme Court case in particular, Morrison v. National Australia Bank Ltd., held that the presumption against extraterritoriality is applicable in Rule 10b-5 cases, and eliminated the used of the “conducts” and “effects” test to assess these extraterritorial claims. Part II uses recent case law, specifically a case out of the Second Circuit, Loginovskaya v. Batratchenko, to illustrate the problems and inconsistencies with extending the Morrison decision to commodity and derivative fraud claims under the CEA in a post-Dodd-Frank world. Part III.A argues that courts should return to using a holistic, fact-specific approach, rather than Morrison’s transactional test, when evaluating extraterritorial jurisdiction in commodity and derivative fraud cases. Part III.B argues that, consistent with the use of a holistic test outlined in Part III.A, foreign plaintiffs should continue to be afforded private rights of action for commodity and derivative fraud or manipulation suits in U.S. courts. Lastly, Part III.C addresses the steps that courts must take to correct or address policy misstatements when presented with these claims in the future.