Between a Rock and a Hard Place: The Sarbanes-Oxley Act and Its Global Impact

19 Pages Posted: 11 Jan 2017

Date Written: 2007


As U.S. corporations progressively move into international markets, many are confronting foreign regulations, which seem to conflict with those governing operations in the U.S, and the Sarbanes-Oxley Act (“Sarbanes-Oxley”) is arguably the legislation presenting the most challenges to publicly traded organizations. Sarbanes-Oxley was hurriedly enacted by Congress to restore investor confidence and curb various corporate excesses after the blight of accounting irregularities and financial turmoil which shook the U.S. corporate landscape and eventually engulfed industry heavyweights such as Enron, WorldCom, Global Crossing or Adelphia. Sarbanes-Oxley was described by President Bush as the “most far-reaching reform of American business practices since the time of Franklin Delano Roosevelt.” However, others have been less than thrilled with the heavy burdens imposed by the Act and its extraterritorial impact – that is, when one country imposes its laws on persons operating outside its territory – since this measure is perceived as imposing substantial, and hidden, costs on international commerce and industry, while creating new conflicts between jurisdictions. Although Sarbanes-Oxley was only intended to address domestic concerns, the importance of U.S. capital markets in the global economy unfortunately resulted in the Act possessing international “spill-over” effects.

This note examines how Sarbanes-Oxley fits within the extraterritorial framework of U.S. securities regulation. Part I provides a brief summary of the bases of extraterritorial application of Sarbanes-Oxley and U.S. securities law. Part II explores the territorial reach of previous U.S. securities law to determine whether Sarbanes-Oxley’s extraterritorial scope is really a departure from previous regulations or not. Finally, Part III analyzes the extraterritorial nature of Sarbanes-Oxley and how its scope diverge from traditional securities regulations. This paper concludes that Sarbanes-Oxley does not actually expand the territorial scope of securities law, but that its regulation of corporate governance is a significant departure from traditional methods of securities regulation.

Keywords: Sarbanes-Oxley, Sarbanes, SOX, extraterritorial, securities, regulation, global, capital markets, international, financial markets, foreign, Enron

Suggested Citation

Lanois, Paul, Between a Rock and a Hard Place: The Sarbanes-Oxley Act and Its Global Impact (2007). University of Pennsylvania Journal of International Law, Vol. V, No. 4, 1-19, 2007, Available at SSRN:

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