Bounded Extraterritoriality

Abstract

Political polarization in the twenty-first century has inspired a new mode of interstate “rivalries and reprisals” consisting not of the tariffs that plagued the Founding, but rather of substantive regulation that state legislatures deliberately target outward, to behavior taking place in other states. Prior commentators have concluded that, because nearly all regulation has spillover effects in other states, there exists no legally or conceptually defensible way to limit to such extraterritoriality. We argue that a state regulates in an unconstitutionally extraterritorial manner when it uses an internally inconsistent jurisdictional basis. A jurisdictional basis is internally inconsistent when use by all states of that same jurisdictional basis would result in duplicative regulation of interstate commerce. We derive the internal consistency test from the Court’s jurisprudence evaluating the extraterritoriality of tax laws, and we explain why the same approach makes sense in regulation cases. The internal-consistency approach to extraterritoriality forces states to narrow the bases upon which they promulgate rules, which encourages them to select a basis with meaningful local impacts, thereby reducing extraterritorial effects and avoiding interstate animosities.

Keywords: dormant Commerce Clause, extraterritoriality, National Pork, Brown-Forman, horizontal federalism, internal consistency