Determining the Territorial Scope of State Law in Interstate and International Conflicts: Comments on the Draft Restatement (Third) and on the Role of Party Autonomy

Abstract

Analyzing a conflict of laws requires thinking both about the scope of potentially applicable law and about priority, or choice, among potentially applicable laws. The Restatement (Second) of Conflict of Laws, published in 1971, contains little guidance on how, or in what order, courts are to address these two inquiries. The draft Restatement (Third), in contrast, differentiates clearly the respective roles of the two analytical elements. It characterizes the resolution of a choice-of-law question as a two-step process. First, the scope of the relevant states’ internal laws must be determined, in order to ascertain which states’ laws might be used as a rule of decision. Second, if more than one state’s law might be used as a rule of decision, and those laws conflict, it must be decided which law is given priority. The draft defines “internal law” to include restrictions on the geographic scope of the law. However, there are two questions the draft does not answer clearly. First, is the definition of internal law meant to include only express restrictions on scope? Second, absent explicit indications of legislative intent, how is the scope of a law to be determined? In particular, should courts employ a presumption against the extraterritorial application of state law?

This article begins by analyzing the role of the presumption against extraterritoriality in supplying implied restrictions on the scope of law. It considers the role of the presumption in both international and interstate conflicts of laws, and argues that the Restatement (Third) should differentiate clearly between those two contexts. It then turns to the question whether geographic scope restrictions should properly be considered part of a state’s internal law. The paper analyzes that question through the lens of a common problem: a contract dispute involving a transaction or event that falls outside the scope of the law chosen by the parties to govern their agreement. On the basis of that analysis, it concludes that forthcoming sections will need to address the implications of the draft’s categorical treatment of legislative scope.

Keywords: Conflict of Laws, Choice of Law, Party Autonomy, Extraterritoriality, Restatement of Conflicts

JEL Classification: K1, K12