Extraterritorial Application of US Securities Law: Morrison v. National Australia Bank

The US Supreme Court has delivered its judgment in Morrison v. National Australia Bank. The Court held that the Section 10(b) of the US Securities Exchange Act 1934 has no extraterritorial application. The Supreme Court has disagreed with this reasoning, and has extensively discussed the presumption against extraterritoriality. The decision of the Supreme Court impliedly overrules a large number of cases decided by the Second Circuit holding that Section 10(b) had extraterritorial application. In a number of those cases, the Second Circuit had relied on the ‘effects’ test. The Supreme Court of the United States rejects this reasoning in its entirety; and supports an extremely strong presumption against extraterritoriality.

The decision of the US Supreme Court has been analysed in this post on the Opinio Juris blog. Mr. V. Umakanth also highlights the importance of the judgment in this post on the Indian Corporate Law blog. 

(Incidentally, the effects doctrine which was relied on in some cases by the Second Circuit to establish extraterritoriality was also applied by the Bombay High Court in the Vodafone matter, holding Section 195 to have extraterritorial application - it is likely that this issue will come up once again as the Vodafone matter is now listed before the Bombay High Court in early July)