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Issue Paper
January 2024

Extraterritoriality:
a Blind Spot in the EU's Economic Security Strategy

Authors
Georgina Wright
Resident Senior Fellow and Deputy Director for International Studies

Georgina Wright is Resident Senior Fellow and Deputy Director for International Studies at Institut Montaigne.

Louise Chetcuti
Project Officer - United States and Transatlantic Affairs

Louise Chetcuti has been US and Transatlantic Affairs Project Officer since February 2023.

Cecilia Vidotto Labastie
Former Project Manager - European Union

Cecilia Vidotto Labastie was former Project Manager for the European Union between 2021 to 2023.

European competitiveness is under threat. Demographic and digital trends are transforming European societies and economies. Inflation is high and politics are more fractured. The US-China tech rivalry is intensifying and companies are feeling the squeeze. European governments, like countries around the world, are under intense pressure to safeguard their interests. Many are turning to law to achieve this.

Extraterritoriality - that is, the application of national laws abroad - is not a new phenomenon, but it is gaining traction. In many ways, it is necessary: to uphold international law where multilateral organizations and treaties prove ineffective; to sanction bad behavior; and to prevent hostile actors from posing a risk to others. Extending the reach of national laws helps to stop sanctions evasion, protect consumers and ensure financial stability.

But its excessive use can also pose risks to individuals, companies and governments. Billions of dollars' worth of fines, lengthy and costly legal proceedings, diplomatic spats between governments and handover of business plans to foreign authorities. In the last few years, it has even come to be seen as a tool to secure political power and influence. Despite this realization, the European debate on extraterritoriality is virtually nonexistent. It was also entirely absent from the European Commission’s June 2023 strategy on economic security.

Institut Montaigne's latest issue paper provides a framework for understanding the global debate on extraterritoriality and the EU's response to it. It stems from in-depth research and over 50 interviews with senior officials from EU institutions, member-state governments and third countries; as well as discussions with senior representatives from the private sector, public sector and academia. In 2024, a new European Parliament and European Commission will be formed. Extraterritoriality is one of the EU's blind spots: the time to act is now.

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