Kim Dotcom and America's Debatable Hegemony

On Feb. 29, a New Zealand judge reminded the United States government that its power has limits. Washington is unlikely to heed the message.

The issue before the Auckland High Court was whether Kim Dotcom (previously Kim Schmitz) should be given bail for house arrest and electronic monitoring pending his August extradition hearing. The US Justice Department, alleging that Dotcom’s Megaupload family of web sites constituted a criminal conspiracy to infringe copyrights, demanded that Dotcom be held in a Kiwi jail until formally transported to the States for trial.

In his judgment, Justice Timothy Brewer rejected the Americans’ argument, noting “the presumption at law that Mr. Dotcom should have his liberty,” and ordered that the defendant remain out of prison. Justice Brewer, a junior bench officer who has held his post for less than two years, found that Dotcom was not a proven flight risk since, among other factors, the US and allied governments had seized about US$25 million in assets, which Dotcom would presumably fight to regain.

The judge, addressing only the specific issue before him, did not ask the larger question: How exactly was the United States claiming authority over Dotcom, a European operating in Asia and Oceania?

It is a good question. American prosecutors allege that Dotcom, known for his extravagant lifestyle, engaged in criminal copyright infringement. But federal courts have made it clear that US copyright laws apply only within the physical territory of the United States and do not apply outside the country.

“Copyright laws do not have extraterritorial operation,” according to the federal appeals court in New York. Its coordinate court in California agreed, thereby setting the rule for the country’s entertainment industry.

Consequently, the US assertion of jurisdiction against Dotcom is problematic on its face. A review of the factual allegations in the Justice Department’s 72-page indictment reveals that the case is based on a weak jurisdictional foundation, specifically that Dotcom allegedly had a banking relationship with PayPal and that he allegedly stored some data on a few servers in Virginia (possibly without his knowledge). In other words, it is obvious from the prosecutors’ own one-sided version of events that Dotcom operated outside the United States and that investigators were charged with digging deep to find one or two gotchas on which the US could premise its exercise of personal jurisdiction.

While other nations are limited by resources and principles from exerting their will outside of their borders, the US has not been shy about attempting to dictate global rules. In 1977, Congress passed the Foreign Corrupt Practices Act in which it commanded that US nationals doing business abroad were required to adhere to American anti-bribery standards regardless of the economic impact or the on-the-ground reality.

In 2003, anti-pedophile hysteria resulted in the PROTECT Act, which prohibits US travelers from engaging in sexual intercourse with persons under 18 anywhere in the world no matter the local age of consent. Recently, US expats have been subject to financial reporting requirements that strip them of banking privacy.

While the extraterritorial reach of those laws was justified by the drafters on the grounds that they applied only to US nationals, the Dotcom case is a flat-out assertion by the United States that its laws can be applied to anyone anywhere -- even when, as with the Copyright Act, federal judges have plainly said that they can’t.

Dotcom appears to have had nothing to do with the United States, and if he did, the Justice Department would have said so. Rather, Dotcom holds passports from Germany and Finland under different names (all of which are legal, as the New Zealand judge noted). His businesses are headquartered in Hong Kong. He lives with his children and pregnant wife in New Zealand.

Yet the US government has used the shakiest of jurisdictional pretexts to close his business, freeze his assets and arrest him, all of which happened without an adversarial hearing on the merits. In a routine civil copyright case, an injunction or attachment of assets can issue only after notice and an opportunity to test the plaintiff s evidence in open court. Here, the US government avoided those safeguards.

In an equally troubling development, multiple foreign governments have assisted the US in its prosecution. For example, at the bail hearing before Justice Brewer, the United States was represented not by independently retained counsel but by the New Zealand government’s Crown Law Office.

When executing the initial arrest warrant, the Kiwi police were armed, an unnecessary show of deadly force when dealing with a businessman accused of a property crime. In the Chinese territory of Hong Kong, police are reported to have dispatched about 100 officers to raid Dotcom’s offices and residences.

The United States is re-writing the very concept of borders. Previously, a nation’s ability to exert its authority was limited by physical restraints which stopped at, or, in some cases, well short of a line on a map. With modern electronics and communications equipment (not to mention mobile armed forces), a wealthy nation can exert pressure where ever it wants against whomever it targets.

Assertions of extraterritorial jurisdiction by major powers may become one of the most controversial legal issues of the decade.

(Paul Karl Lukacs is legal affairs correspondent for Asia Sentinel.)