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COMMISSION
OFTHE
EUROPEAN COMMUNITIES
GenerolSecretariatCOM(82 )558final
Brussels,11august1982
FOROFFICIALUSEONLY
NOTE
COMMENTS OPTHE EUROPEAN COMMUNITY ONTHE AMENDMENTS
OP22JUNE 1982 TOTHEUSEXPORT ADMINISTRATION REGULATIONS
COM(82 )558final

NOTE
With reference totheinterim Rules promulgated on22June 1982 bythe
Department ofCommerce under theExport Administration Actof1979 ,
andtotheCommunity 'snote presented on14July 1982 ,theEuropean
Community wishes topresent further Comments onthenewExport
Administration Rules ,with therequest that this note andthese
comments betransmitted totheDepartment ofCommerce inaccordance
with that Department 'sinvitation forpublic comments tobemade by2!
August 1982 .
TheEuropean Community wishes todraw attention totheimportance that
itattaches tothelegal ,political andeconomic aspects oftheUnited
States' measures ,including their impact onthecommercial policy of
theCommunity .Astothelegal aspects ,theEuropean Community
considers theU.S. measures contrary tointernational law ,and
apparently atvariance with rules andprinciples laid down inU.S.
law .
Astothepolitical andeconomic aspects ,itisclear that theU.S.
measures areliable toaffect awide variety ofbusiness activities ,
while their primary purpose istodelay theconstruction ofthe
pipeline tobring Soviet gas toWestern Europe .TheEuropean
Community holds that itisunlikely that theU.S. .ncasures will in
fact delay materially theconstruction ofthepipeline orthedelivery
ofthegas .
Thepipeline from Siberia toWestern Europe canbecompleted using
Soviet technology andproduction capacity diverted from other parts of
their current programme .Furthermore therecent U.S. measures provide
theSoviets with astrong inducement toenlarge their ownmanufacturing
capacity and toaccelerate their ownturbine andcompressor developments ,
thus becoming independent cfWestern sources .Gascould still flow to
theCommunity starting asscheduled in1984 owing totheexistence of
substantial spare capacity intheexisting pipeline system ,sufficient
tocover therequirements oftheearly phases oftheprogramme of
deliveries .

Oneofthemain elements oftheCommunity spolicy ofreducing the
vulnerability ofitsenergy supply isbased ondiversification of
sources .Gasfrom theSoviet Union will help toconserve the
Community 'sownstock ofgas ,oilandother fuels ,andwill reduce the
Community 'sreliance onother foreign sources .UseofSiberian gas
will notcreate adangerous dependence onthat source .Even when gas
isflowing atthemaximum rate ,in1990 ,itwill represent less than
Apercent oftheCommunity 'stotal energy consumption .
Whatever theeffects ontheSoviet Union ,theeffects onEuropean
Community interests oftheU.S. measures ,applied retroactively
andwithout sufficient consultation ,areunquestionably andseriously
damaging .Many companies interested assub-contractors ,or
suppliers ofcomponents ,have made investments andcommitted productive
capacities tothepipeline project ,well before theAmerican measures
were taken .Though they mayuse noAmerican technology ,they will
suffer complete loss ofbusiness iftheEuropean contribution tothe
project isblocked .Some ofthese companies maynotsurvive .Major
European companies that cansurvive theimmediate loss ofbusiness ,
will nevertheless suffer from lower levels ofcapacity utilization
andloss ofproduction andprofits ,while workers will belaid off
temporarily orpermanently .
Inthelonger terra ,European Community companies may bedamaged by
thedisruption oftheir contracts concluded ingood faith ,becau«p they
maycease tobereliable suppliers intheeyes notonly oftheSoviet
Union ,butalso oftheir actual andpotential business partners in
other countries .Oneinevitable consequence would betocall in
question theusefulness oftechnological links between European and
American firms ,ifcontracts could benullified atanytime bydecision
oftheU.S. Administration .Another consequence tobefeared isthat
theclaim ofU.S. jurisdiction accompanying U.S. investment will
create aresistence abroad tothe flow ofU.S. investment .Thus ,
these export control measures runcounter tothepolicy aims ofthe
United States ofeasing thetransfer oftechnology andofencouraging
free trade ingeneral .There will beother far-reaching effects
upon business confidence .These measures thus add totheclim.ire of
uncertainty that isalready pervading theworld economy asawhole .
TheEuropean Community therefore calls upon theUnited States Authorities
towithdraw these measures .

COMMENTS OFTHE EUROPEAN COMMUNITY ONTHE AMENDMENTS
OF22JUNE 1982 TOTHE USEXPORT ADMINISTRATION REGULATIONS
I. INTRODUCTION
1.OnJune 22,1982 ,theDepartment ofCommerce atthedirection of
President Reagan andpursuant toSection 6oftheExport Administration
Actamended Sections 376.12 ,379.8 and 385.2 oftheExport Admin \-tration
Regulations .These amendments amounted toanexpansion ofthe
existing UScontrols ontheexport andre-export ofgoods and
technical data relating tooilandgasexploration ,exploitation ,
transmission and refinement .
TheEuropean Community believes that theUSregulations asamended
contain sweeping extensions ofUSjurisdiction which areunlawful
under international law .Moreover ,thenewRegulations and theway in
which they affect contracts incourse ofperformance seems torun
counter tocriteria oftheExport Administration Actandalso to
certain principles ofU.S. public law .
2.Themain thrust oftheRegulations maybesummarized asfollows :
First ofall ,persons within athird country maynotre-export
machinery for theexploration ,production ,transmission orrefinement
ofoilandnatural gas ,orcomponents thereof ,ifitisofU.S.
origin ,without permission oftheU.S. Government .
Moreover ,anyperson subject tothejurisdiction oftheUnited
States (1)isrequired togetprior written authorization bythe
Office ofExport Administration forexport orre-export tothe
U.S.S.R. ofnon-US goods andtechnical data related tooilandgas
exploration ,production ,transmission andrefinement .
(1)Nowdefined as (i)Anyperson wherever located who isncilizen or
resident oftheUnited States ;(ii)anyperson actually within the
United States ;(iii)anycorporation organized under the laws ofthe
United States ;or (iv)anypartnership ,association ,corporation or
other organization ,wherever organized ordoing business ,that is
owned orcontrolled bypersons specified inparagraphs (i),(ii)or
(iii )•

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Finally ,noperson intheU.S. orinaforeign country mayexport or
re-export totheU.S.S.R. foreign products directly derived from U.S.
technical data (1)relating tomachinery etc .utilized forthe
exploration ,production ortransmission orrefinement ofpetroleum or
natural gasorcommodities produced inplants based onsuch U.S.
technical data .
This prohibition applies inthree alternative situations ,namely :
- ifawritten assurance wasrequired under theU.S. export
regulations when thedata were exported ;
- ifanyperson subject tothejurisdiction oftheU.S.A. (as
defined innote (2)receives royalties orother compensation for ,
orhas licensed ,theuse ofthetechnical data concerned ,
regardless ofwhen thedata were exported from the U.S. ;
- iftherecipient oftheU.S. technical data hasagreed (inthe
licensing agreement orother contracts )toabide byu.S. export
control regulations .
3.Thefollowing comments will discuss firstly theinternational legal
aspects oftheUSmeasures ,including (a)thegenerally recognized
bases onwhich jurisdiction can befounded ininternational lawand
(b)other bases ofjurisdiction which might beinvoked bythe I'.S.
Government ;secondly therules andprinciples aslaid down inii.S.
law ,inparticular theExport Administration Act ,andasapplied by
U.S. Courts ,which would seem tobeatvariance with theAmendments of
June 22,1982 .
(1)This expression isvery broadly defined in15CFRpara .379.1 .
(2)Nowdefined as (i)Anyperson wherever located who isacitizen or
resident oftheUnited States ;(ii)anyperson actually within the
United States ;(iii)anycorporation organized under thelaws ofthe
United Statos orofanyState ,Territory ,Possession orDistrict of
theUnited States ;or (iv)anypartnership ,association ,corporation
orother organization ,wherever organized ordoing business ,that is
owned orcontrolled bypersons specified inparagraphs (i),(ii)or
(iii).

-3-
II.THE AMENDMENTS UNDER INTERNATIO NALLAW
A. Generally accegted_bases ofjurisdiction ininternational law
4.The U.S. measures asthey apply inthepresent case areunacceptable
under international lawbecause oftheir extra-territorial aspects .
They seek toregulate companies notofU.S. nationality inrespect of
their conduct outside theUnited States andparticularly thehandling
ofproperty andtechnical data ofthese companies notwithin the
United States .
They seek toimpose onnon-US companies therestriction ofU.S. lawby
threatening them with discriminatory sanctions inthefield oft1;ae
which areinconsistent with thenormal commercial practice established
between the U.S. and the E.C.
Inthis way theAmendments ofJune 22,1982 ,runcounter tothotwo
generally accepted bases ofjurisdiction ininternational law ;the
territoriality andthenationality principles (1).
5.Theterritoriality principle (i.e. thenotion that astate should
restrict itsrule-making inprinciple topersons andgoods within its
territory andthat anorganization like theEuropean Cor.jnunity should
restrict theapplicability ofitsrules totheterritory towhich the
Treaty setting itupapplies )isafundamental notion ofinternational
law ,inparticular insofar asitconcerns theregulation ofthesocial
andeconomic activity inastate .Theprinciple that each state -and
mutatis mutandis theCommunity insofar aspowers have been transferred
toit-hastheright freely toorganize anddevelop itssocial and
economic system hasbeen confirmed many times ininternational fora .
TheAmerican measures clearly infringe theprinciple ofterritoriality ,
since they purport toregulate theactivities ofcompanies inthe
E.C. ,notunder theterritorial competence oftheU.S.
6.Thenationality principle (i.e. theprescription ofrules for
nationals ,wherever they are )cannot serve asabasis forthe
extension ofU.S. jurisdiction resulting from theAmendments ,i.e.
(i)over companies incorporated inE.C. Member States onthebasis of
some corporate link (parent-subsidiary )orpersonal link (e.g.
shareholding )totheU.S. ;(ii)over companies incorporated inE.C.
Member States ,either because they have atietoaU.S.-incorporated
(1)SecRestatement (2nd)oftheForeign Relations LawoftheU.S. (1972),
paras .17and 30respectively .

company ,subsidiary orother U.S. controlled company through a
licencing agreement ,royalty payments ,orpayment ofother compensation ,
orbecause they have bought certain goods originating intheU.S.
ad (i)theAmendments intwoplaces purport tosubject toU.S.
jurisdiction companies ,wherever organized ordoing business ,which
aresubsidiaries ofU.S. companies orunder thecontrol ofU.S.
citizens ,U.S. residents oreven persons actually within theU.S.
This implies that theUnited States isseeking toimpose itscorporate
nationality oncompanies ofwhich thegreat majority areincorporated
andhave their registered office elsewhere ,notably inE.C. Member
States .
Such action isnot inconformity with recognized principles ofinter­
national law .IntheBarcelona Traction Case ,theInternational Court
ofJustice declared but twotradional criteria fordetermining the
nationality ofcompanies ;i.e. theplace ofincorporation and the
place oftheregistered office ofthecompany concerned ,hadbeen
"confirmed bylong practice andbynumerous international instruments ".
TheCourt also scrutinized other tests ofcorporate nationality ,but
concluded that these had not found general acceptance .TheCourt
consequently placed primary emphasis onthetraditional place of
incorporation and theregistered office indeciding thecase in
point (1).This decision wastaken within theframework ofthe
doctrine ofdiplomatic protection ,butreflects ageneral principle of
international law .
ad (ii)Thenotion inherent inthesubjection toU.S. jurisdiction of
companies with notietotheU.S. whatsoever ,except for atechnological
link toaU.S. company ,orthrough possession ofU.S. origin goods ,
canonly bethat this technology orsuch goods should somehow be
considered asunalterably "American "(even though many ofthepatents
involved areregistered intheMember States oftheEuropean Community ).
This seems theonly possible explanation fortheU.S. Regulations
given thefact that national security isnot atstake here (seebelow
under B).
Goods andtechnology donothave anynationality andthere areno
known rules under international law forusing goods ortechnology
situated abroad asabasis ofestablishing jurisdiction over the
persons conctc'ling them .Several Court cases confirm that U.S.
jurisdiction does notfollow U.S. origin goods once they have been
discharged intheterritory ofanother country (2).
ICJReports 1970 ,3,.at43.American President Lines v.China Mutual Trading Co.,1953 A.M.C. 1510 ,
1526 (Hong Kong Sup .Ct.)andMoens v.Ahlers North German Lloyd ,30
R.W. 360 (Tr :'m.il ufCoiiimcfc Autv«»rp ( .

-5-
9.TheAmendments of22June 1982 ,therefore ,cannot bejustified under
thenationality principle ,because they ignore the twotraditional
criteria fordetermining thrnationalitv ofcompanies reconfirmed by
theInternational Court ofJustice andbecause they purport togive
some notion of"nationality "togoods andtechnologies soasto
establish jurisdiction over persons handling them .
Thepurported direct extension ofU.S.jurisdiction tonon-US incorporated
companies notusing U.S. origin technology orcomponents isafortiori
objectionable totheE.C. ,because neither ofthese (inthemselves
invalid )justifications could apply .
10.The last mentioned case exemplifies towhat extent thewholesale
infringement ofthenationality principle exacerbates theinfringement
oftheterritoriality principle (1).Thus even E.C. incorporated
companies intheexample mentioned above according totheAmendments
would have toask special written permission of-not theE.C. ;but the
U.S. -authorities inorder toobtain permission toexport goods
produced intheE.C. andbased onE.C. technology from theterritory
towhich theE.C. Treaties apply totheU.S.S.R. Thepractical impact
oftheAmendments totheExport Administration Regulations isthat
E.C. companies arepressed into service tocarry outU.S. trade policy
towards theU.S.S.R. ,even though these companies areincorporated and
have their registered office within theCommunity which has itsown
trade policy towards theU.S.S.R.
Thepublic policy ("ordre public ")oftheEuropean Community andof
itsMember States isthus purportedly replaced byU.S. public policy
which European companies areforced tocarry outwithin theE.C. ,if
they arenot tolose export privileges intheU.S. ortoface other
sanctions -.This isanunacceptable interference intheaffairs ofthe
European Community .
11.Furthermore ,itisreprehensible that present U.S. Regulations
encourage non-US companies tosubmit "voluntarily "tothis kind of
mobilization for U.S. purposes .
(1)Theapplication ofthenationality principle would imply ipso facto some
overlapping with theapplication oftheterritoriality principle and
this isacceptable under international law ,insome instances ,butwe
are not insuch asituation inthis case .

-6-
Even when submission toaforeign boycott isentirely voluntary ,such
submission within the U.S. has been considered tobeundesirable and
contrary toU.S. public policy (1). Bythesame token itmust have
been evident totheU.S. Government that thestatutory encouragement
ofvoluntary submission toU.S. public policy intrade matters within
theE.C. isstrongly condemned bytheEuropean Community .Private
agreements should notbeused inthis wayasinstruments offoreign
policy .IfaGovernment inlawand infact systematically encourages
theinclusion ofsuch submission clauses inpriv-.te contracts the
freedom ofcontract ismisused inorder tocircumvent the limits
imposed onnational jurisdiction byinternational law .
Itisself-evident ,moreover ,that theexistence ofsuch submission
clauses incertain private contracts cannot serve asabasis forU.S.
regulatory jurisdiction which canproperly beexercised solely
inconformity with international law .Norcan acompany prevent a
state from objecting toanyinfringement which might occur ofthe
jurisdiction ofthestate towhich itbelongs .
B. Other bases ofjurisdiction
12.There are twoother bases ofjurisdiction which might beinvoked by
theU.S. Government ,butwhich have found less than general acceptance
under international law .These are :
a)theprotective principle (para .33ofthe2ndRestatement ),which
would give aState jurisdiction toproscribe acts done outside
itsterritory butthreatening itssecurity ortheoperation of
itsgovernmental functions ,ifsuch acts aregenerally recognized
ascrimes byStates with reasonably developed legal systems ;
b) theso-called "effects doctrine ",under which conduct occurring
outside theterritory butcausing direct ,foreseeable and
substantial effects -which are also constituent elements ofa
crime ortort -within theterritory maybeproscribed (para .18
ofthe 2ndRestatement ).
(1)Cf.Section 8oftheExport Administration Act andbelow under
II.A.

-7-
13.However ,itisclear abinitio that theextension ofU.S. jurisdiction
implicit intheAmendments cannot bebased ontheprinciples mentioned
under 12(a )or (b).
The "protective principle "hasnotbeen invoked bytheU.S. Government ,
since theAmendments arebased onSection 6(Foreign Policy Controls )
andnotonSection 5(National Security Controls )oftheExport
Administration Act .The U.S. Government itself ,therefore ,has not
sought tobase theAmendments onconsiderations ofnational security .
The "effects doctrine "isnotapplicable .Itcannot conceivably be
argued that exports from theEuropean Community totheU.S.S.R. for
theSiberian gaspipeline have within theU.S.A. direct ,foreseeable
andsubstantial effects which arenotmerely undesirable ,butwhich
constitute anelement ofacrime ortort proscribed byU.S. law .Itis
more than likely that they have nodirect effects onU.S. trade .
14.For thereasons expounded above ,itisclear that theU.S. measures of
June 22,1982 donotfind avalid basis inanyofthegenerally
recognized -oreven themore controversial -principles ofinternational
lawgoverning state jurisdiction toprescribe rules .Asamatter of
fact themeasures bytheir extra-territorial character simultaneously
infringe theterritoriality andnationality principles ofjurisdiction
and are therefore unlawful under international law .
III .THE AMENDMENTS UNDER U.S. LAW
A. U.S. Reactions tomeasures similar tothe June 22Amendments
15.Ifaforeign country were totake measures like theJune 22Amendments ,
itisdoubtful whether they would beinconformity with U.S. lawand
they would therefore probably not berecognized andenforced byU.S.
courts .
Thekind ofmobilization ofE.C. companies forU.S. purposes towhich
theCommunity objects wassubject tostrong American reactions and
legislative counter-measures ,when U.S. companies were similarly
mobilized for theforeign policy purposes ofother atatcaj .

-8-
Theanti -foreign -boycott provisions ofSection 8oftheExport
Administration Actaretestimony tothat .Inthesame wayastheU.S.
could notaccept that itscompanies were turned into instruments of
theforeign policy ofother nations ,theE.C. cannot accept that its
companies must follow another trade policy than itsownwithin itsown
territorial jurisdiction .
Itisnoteworthy that theanti-boycott provisions oftheExport
Administration Actcanbeinvoked inresponse toaboycott that
takes aless direct form than theJune 22Amendments ,namely aboycott
which merely tries todissuade persons from dealing with athird
country byrefusing totrade with such persons .Anexport restriction
patterned ontheJune 22Amendments ,incontrast ,would directly
prohibit aperson from dealing with aparticular country under the
threat ofgovernment-imposed penalties .Therefore ,thelatest
Amendments would appear tobeeven more far-reaching than aboycott
which might give rise totheapplication oftheanti-boycott provisions .
16.Even ifforsome reason theforeign boycott provisions oftheExport
Administration Actwere notconsidered applicable ,aforeign country
imposing such restrictions asthose imposed bytheJuno 22Amendments
would probably beviewed byU.S. Courts asattempting toextend its
laws beyond itsterritory without sufficient nexus with theU.S.
entity tojustify such anextension .This certainly would bethecase
with respect toamere licensee ofaforeign concern .
Ifaforeign government complained that aU.S. licensee ofaforeign
company wasnotcomplying with that foreign government 'sexport
restrictions prohibiting such exports ,aU.S. federal court would
decline jurisdiction ,because U.S. Courts will notenforce foreign
penal Statutes (1).
Iftheobservance ofaforeign export control byaU.S. subsidiary or
licensee were tobecome anissue inlitigation between thelatter and
itsforeign parent company orlicensor ,afederal orstate court would
probably notrefuse jurisdiction ,butwould decline toenforce the
export restrictions oftheforeign country onthegrounds that i& .
would becontrary tothestrong public ppli.cy oftheforum andnotin
the interest .oftheUnited States todoso (2).
(1)Wisconsin v.Pelican Insurance Company ,127US.265 ,290 (1888 );
Restatement (2nd )Conflict ofLaws para .89.
(2)Restatement (2nd)Conflict ofLaws pp.90.

-9-
This being thereaction oftheU.S. legislator andjudiciary to
foreign measures comparable toitsownmeasures ofJune 22,theU.S.
Government should not have inflicted these measures onthe E.C.
companies concerned inthevirtual knowledge that these measures would
beregarded asunlawful andineffective bypublic authorities inthe
E.C.
B. Conflicts ofjurisdiction andAccommodation ofInterest
17.Incases where theconflicting exercise ofjurisdiction toprescribe
leads toconflicts ofenforcement jurisdiction between states ,each
state ,according topara .40oftheRestatement (2nd)Foreign
Relations LawoftheU.S. ,isrequired byinternational law to
consider ,ingood faith ,moderating theexercise ofitsenforcement
jurisdiction .Inthis connection thefollowing factors should be
considered :
"a)vital national interests ofeach ofthestates ;
b) theextent and thenature ofthehardship that inconsistent
enforcement actions would impose upon theperson ;
c)theextent towhich therequired conduct istotake place inthe
territory oftheother state ;
d)thenationality oftheother person ...".
18.Over thepast years various U.S. Courts ofAppeal have pronounced
themselves infavour ofthis "balancing ofinterests "approach .
Inthecase oftheTimberlane Co.v.Bank ofAmerica (1)Judge Choy
suggested comity demanded anevaluation andbalancing ofrelevant
factors ,andcontinued :"theelements tobeweighed include thedegree
ofconflict with foreign laworpolicy ,thenationality orallegiance
oftheparties ,andthelocations orprinicpal places ofbusinesses or
corporations ,theextent towhich enforcement byeither state canbe
expected toachieve compliance ,therelative significance ofeffects
ontheUnited States ascompared with those elsewhere ,theextent to
which there isexplicit purpose toharm oraffect American conmerce ,
thoforeBoonbi 1ityofsuch effect ,and therelative importance tothe
violations charged ofconduct within theUnited StatcH n«conip /irod
with conduct abroad ". .
(1)Timberlane Lumber Co.v.Bank ofAmerica ,1977-1 Trade Cases No.61.233

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Asimilar approach was followed inMannington Hills(1)and isset
out inparagraph 40oftheSecond Restatement .
IftheU.S. .Administration proceeds tomake Regulations like those of
June 221982 itshould according toU.S. lawexercise restraint in
doing soonthebasis ofanaccommodation ofinterest with states
along thelines suggested inpara .40ofthe (2nd)Restatement .
19.Although this "balancing ofinterest "approach applies inthefirst
place tocourts ,there aregood reasons why theU.S. Government should
exercise such restraint already attherule-making stage .
20.First ,Section 6oftheExport Administration Act inseveral places
enjoins thePresident toconsider theposition ofother countries
before taking orextending export controls .
Thus para ,(b):"... thePresident shall consider :(3)thereaction of
other countries totheimposition orexpansion of... e:>ortcontrols
bytheUnited States ".
Inpara ,(d):"... thePresident shall determine that reasonable
efforts have been made toachieve thepurposes ofthecontrols through
negotiations orother alternative means ".
Finally inpara ,(g):"... thePresident shall take allfeasible steps
toinitiate !andconclude negotiations for thepurpose ofsecuring the
cooperation ofsuch foreign governments incontrolling theexport to
countries andconsignees towhich theU.S. export controls apply of
anygoods ortechnology comparable togoods ortechnology controlled
under this section ".
21.Inthesecond place ,these Amendments totheExport Administration
Regulations maynotbesubject tosubstantive judicial review .This
means that U.S. Courts maynot beable toapply their balancing of
interests approach inaclash ofenforcement jurisdictions .Itis
therefore appropriate fortheexecutive toapply itattherule-making
stage .
22.Finally ,thedirection inwhich informed ilegal opinion intheU.S. is
moving onthis issue isdemonstrated bythte.new draft Restatement
(3rd )oftheForeign Relations Law oftheU.S.
(1)Mannington Mills Inc .v,Congoleum Corp. 1979-1 Trade Cases No.62.547 .

-li­
ltdoes away with therather artificial distinction between theright
toassert ajurisdiction toprescribe andrestraint inexercising it.
Itsimply considers that theexercise ofajurisdiction toprescribe
maybeunreasonable ;todecide whether this issoornotdraft
para .403 (1)enjoins theevaluation ofsuch factors asplace ofthe
activity toberegulated ,links ofpersons falling under theregulation
with other states ,consistency with thetraditions oftheinternational
system ,interests ofother states inregulating theactivity concerned ,
andtheexistence ofjustified expectations tobeaffected bythe
regulation .
23.Whatever approach isadopted bytheU.S. Government inbalarr.i-ig U.S.
interests against theinterests oftheEuropean Community ,the
following considerations have been neglected .
- The interest oftheEuropean Community inregulating theforeign
trade ofthenationals oftheMember States intheterritory to
which theCommunity Treaties apply isparamount over anyforeign
policy purposes that athird country mayhave .
- Theconduct required bytheAmendments istotake place largely
interritory towhich theE.C. Treaties apply andnot inU.S.
territory .
- Thenationality andother ties ofmany persons whose conduct is
purportedly regulated bytheJune 22Amendments link them
primarily toE.C. Member States andnot totheU.S.
There arejustified expectations onthepart ofE.C. companies
which areseriously hurt bytheU.S. measures .
C. Criteria under Section 6^b)oftheExport Administration_Act
24.Itcanhardly beclaimed that theU.S. measures satisfy thecriteria
laid down intheExport Administration Act ,andtherefore itis
doubtful whether therestrictions areproperly applied interms of
U.S. law .Criterion 1refers totheprobability that thecontrols
will achieve theintended foreign policy purposes .Soviet Authorities
have clearly stated their intention to .deliver gas toWestern Europe
asscheduled ,andthere islittle reason todoubt thoir ability todo
so,even without American orEuropean equipment since -theexisting
Soviet pipeline system already hassufficient spare capacity ,atleast
i
(1)Cited inHarold G.MAIER ,Extraterritorial Jurisdiction ataCrossroads :
anIntersection between Public and Private International Law ,
76AJIL 1982 ,280 ,at300-301 .
I »
j 1 i

-12-
tocover therequirements oftheearly phases oftheprogramme of
deliveries .Ifthepipeline isbuilt with Soviet technology andthe
gasflows ontime ,these U.S. export controls areatbest ineffectual ,
andmaywell beself-defeating ,asinstruments offoreign policy .
25.Criterion 3requires that thereaction ofother countries tothe
imposition orexpansion ofsuch export controls betaken into account .
Inview oftheextra-territorial application ,andretroactive effect
ofthe U.S. measures ,theEuropean Community cannot fail todenounce
themeasure asunlawful under international law ;and inview oftheir
damaging economic andpolitical consequences ,hasalready protested in
thestrongest terms .
26.Criterion 4requires consideration oftheeffects oftheproposed
controls ontheexport performance oftheUnited States .Here again ,
confirmation ortheU.S. measures despite criterion 4would involve
complete disregard fordamaging effects notonly immediately ,butalso
inthe longer term ,owing tothegrave doubts that are bound toarise
infuture about th.<j i..S. asareliable supplier ofequipment under
contract ,orasareliable partner intechnology-licensing arrangements .
This danger hasalready been pointed out tothePresident ofthe
United States bytheU.S. Chamber ofCommerce .
D. Compensât ion_f ordama£e_resul t romU^S - suros
27.The U.S. measures inasmuch asthey refer toexports from countries
outside theU.S. areall themore objectionable ,asthey affect
contracts that were free from restrictions imposed bytheU.S.
Authorities atthe time oftheir conclusion .
Themain contractors oftheSiberian pipeline ,anumber ofmajor sub-con -
tractors and suppliers ,aswell asother exporters ,will suffer
substantial economic and financial looses forwhich nocompensation is
provided .Formany sub-contractors who forthemost part have nothing
todowith American goods ortechnology forgastransport ,the
practical consequences oftheAmendments will beparticularly severe
andmayactually force them outofbusiness .Lay-offs ofaconsiderable
number ofworkers will result inany case from theAmendments .
I
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28.The idea that compensation isdue incase private property orexisting
contracts areseriously affected bygovernment action isalso familiar
intheU.S. legal system .IfU.S. Government takes private property
byeminent domain ithas tocompensate theowner .TheSupreme Court
hasindicated many times that ifregulatory legislation virtually
deprives aperson ofthecomplete useandenjoyment ofhisproperty
thelawofeminent domain applies (1).
Justice Brandeis haswritten :"Itistrue that thepolice power
embraces regulations designed topromote public convenience orthe
general welfare ... Butwhen particular individuals aresingled out
tobear thecost ofadvancing thepublic convenience ,that imposition
must bear some reasonable relation tothe evils tobeeradicated or
theadvantages tobesecured "(2).Itisself-evident that for
European contractors andsub-contractors within theE.C. thecost
imposed upon them bytheAmendments does notbear areasonable
relation totheadvantage offurthering American export policy .
29.This lack ofprovision forcompensation orprotection isall themore
disconcerting ,because theAmendments ofJune 22purport toregulate
notmerely U.S. external trade (3),but E.C. external trade aswell .
Moreover ,these areconsiderations which obviously have played arole
intheimposition offoreign trade embargoes inthepast :both the
Cuban Assets Control Regulations (1981 )and theIranian Assets Control
Regulations (1979 )exempted toalarge extent foreign incorporated
firms with ties toU.S. firms from otherwise stringent oreven
absolute trade prohibitions (4).Furthermore ,these areconsiderations
which obviously have played arole intheimposition offoreign trade
embargoes inthepast :both thetrade embargo connected with theIranian
hostage crisis and theembargo ongrain shipments totheU.S.S.R.
permitted most existing contracts tobehonoured .
(1)Most recently Goldblatt v.Town ofHempstead ,369 1JS590 ,594 (1962 ).
(2)Nashville C.and St. L.Ryv.Walters ,294US405 ,429 (1935 ).
(3)Buttfield v.Stranahan ,192US470 ,493 (1904 )indicates that insofar
asitconcerns U.S. external trade itmaybedifficult toassert Fifth
Amendment rights .
(4)This isnot tosaythat theE.C. agrees inprinciple totheway in
which these Regulations handle theproblem ofextra-territoriality .

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IV.CONCLUSION
30.TheEuropean Community considers that thoAmendments totheExport
Administration Regulations ofJune 22198?areunlawful since they
cannot bevalidly based onanyofthegenerally accepted bases of
jurisdiction ininternational law .Moreover ,insofar asthese
Amendments tend toenlist companies whose main ties are totheE.C.
Member States forpurposes ofAmerican trade policy vis-a-vis the
U.S.S.R. ,they constitute anunacceptable interference inthe
independent commercial policy oftheE.C. Comparable measures by
third states have been rejectod bytheU.S. inthepast .
31.Even from thestandpoint ofU.S. law ,theEuropean Community considers
that theUnited States hasnotadopted aproper "balance ofinterests "
approach .TheEuropean Community further considers that theAmendments
areofdoubtful validity under thecriteria oftheExport Administration
Act of1979 .
32.For these reasons ,theEuropean Community calls upon theU.S.
Authorities towithdraw these measures .