This column examines the legal concept that is referred to as “extraterritoriality”. It begins by considering the derivation of the terminology in English and Chinese, and explaining how the concept is adopted and justified in different countries. It then analyses how the concept operates in mainland China in the area of criminal law.
The concept of extraterritoriality
The concept of extraterritoriality generally refers to the assertion of legal authority by a country (or a separate jurisdiction such as a self-governing region of a country) over conduct occurring outside its territory. In English, the term “extraterritorial jurisdiction” is derived from the Latin words extra territorium, meaning “outside the territory”. In Chinese, the meaning can be understood literally from the term that is used.
A related concept is “long-arm jurisdiction”, which generally refers to the assertion of legal authority by the local courts in one country over parties or defendants in a foreign country. This concept enables a court to try a case against a defendant and issue a binding judgment against the defendant, even if the defendant is located in a foreign country.
In criminal law proceedings, the assertion of legal authority by one country over conduct occurring, or persons located, in a foreign country is unlikely to have any practical effect unless the persons return to that country or the legal authority asserted by that country is recognised by the other country pursuant to an international agreement or to some other basis in international law. By comparison, in civil law proceedings (such as a commercial dispute) or administrative proceedings (such as tax recovery proceedings), the assertion of extraterritorial jurisdiction or long-arm jurisdiction will have a practical outcome if there are assets against which the administrative decision or judgment can be enforced.
The assertion of legal authority by one country over conduct or persons in another country is a controversial issue, as it may be treated as an infringement of sovereignty and affect relations between the countries. However, extraterritoriality has become increasingly common in the case of transnational crimes such as crimes against children, bribery of foreign officials, modern slavery, terrorism and war crimes.
Many of these issues are now governed by international treaties. Some commentators argue that all extraterritorial jurisdiction should be treaty-based (rather than unilateral in nature) to protect individual rights and prevent procedural unfairness.
In common law jurisdictions, extraterritoriality is usually only recognised in limited circumstances. Further, in countries such as Australia and the US, the common law has traditionally recognised a presumption against the extraterritorial effect of its criminal laws. In contrast, some civil law countries assert extraterritorial jurisdictions over all crimes by, or against, their citizens. Where extraterritorial jurisdictions are asserted, the criminal law often imposes a requirement that the conduct be treated as a crime in both the foreign country and the country that is asserting extraterritorial jurisdiction.
International law generally recognises at least three principles on which a country may assert extraterritorial jurisdiction. The first is the nationality principle, which recognises that a country may assert extraterritorial jurisdiction over its citizens, whether they are victims of crime (passive nationality) or perpetrators of crime (active nationality). The second is the territoriality principle, which recognises that a country may assert extraterritorial jurisdiction where conduct either takes place within its territory (subjective territoriality) or takes place outside the territory but has an impact within its borders (objective territoriality). The third is the universality principle, which recognises that a country may assert extraterritorial jurisdiction in cases involving international crimes such as piracy or war crimes.
An additional category of extraterritorial jurisdiction is recognised where foreign conduct threatens national security (the protective principle). This principle is often used to justify the assertion of extraterritorial jurisdiction in relation to crimes in areas such as immigration and money laundering.
In the context of criminal law, extraterritorial jurisdiction is recognised by article 8 of the Criminal Law. This provision reflects both the passive personality principle and the protective principle, as it provides that foreigners may be subject to the Criminal Law if they commit a crime outside the territory of China against the People’s Republic of China or against any of its citizens.
Article 8 of the Criminal Law provides as follows:
This Law may be applied to any foreigner who commits a crime outside the territory of the People’s Republic of China against the State of the People’s Republic of China or against any of its citizens, if for that crime this law prescribes a minimum punishment of fixed-term imprisonment of three years or less; however, this does not apply where no punishment would be imposed according to the laws of the place where the crime is committed.
Article 8 requires two elements to be satisfied before it will apply:
(1) the foreign party has committed a crime against the State of the People’s Republic of China or its citizens; and
(2) the crime is a crime for which the Criminal Law imposes a minimum fixed-term imprisonment of three years or less.
Article 8, however, recognises an exception; namely, “where no punishment would be imposed according to the laws of the place where the crime is committed”. Article 8 does not provide any details in terms of interpreting the phrase “where no punishment would be imposed” or, more specifically, identifying the object in respect of which “no punishment would be imposed”. Academic and professional commentary suggests that the test is whether the conduct or activity undertaken by the foreign party is punishable in the foreign country, and that this phrase does not require that the same type of crime be recognised in the place where the crime is committed.
With effect from 1 February 2019, circumstances involving illegal funds payment settlement business and illegal foreign exchange trading are subject to the Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues concerning the Application of Law in the Handling of Criminal Cases regarding Illegal Fund Payment and Settlement Business and Illegal Trading in Foreign Exchange. Article 10 sets out a test for determining the “place where the crime is committed”, and provides as follows:
The places of crime in such criminal cases regarding illegal funds payment and settlement business and illegal trading in foreign exchange include the place where the account used by the criminal suspect or defendant for criminal activities is opened, the place where the funds are received, the place where the account for funds transition is opened, the place where the funds account is operated, as well as the place where the funds of the counterparty are delivered and remitted.
It is likely that the use of article 8 to prosecute foreigners for crimes in the area of funds transfer and foreign exchange will become more common as China cracks down on illegal funds transfer in breach of China’s strict foreign exchange controls, particularly in the area of overseas investment in foreign companies and real estate. As noted above, however, article 8 will only apply in circumstances where the conduct or activity undertaken by the foreign party is punishable in the foreign country. This is likely to be the case in circumstances involving money laundering and the breach of transaction reporting requirements.
A former partner of Linklaters Shanghai, Andrew Godwin teaches law at Melbourne Law School in Australia, where he is an associate director of its Asian Law Centre. Andrew is currently on secondment to the ALRC as special counsel to assist with its inquiry into corporations and financial services regulation. Andrew’s new book is a compilation of China Business Law Journal’s popular Lexicon series, entitled China Lexicon: Defining and translating legal terms. The book is published by Vantage Asia and available at www.vantageasia.com