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Suppose there is a foreign manufacturer who observes say, anti-pollution laws in his home country, but engages in practices that would be clearly illegal under U.S. environmental laws. Suppose the company also has legitimate business interests in the U.S. that do not violate U.S. law. Can the United States sanction the legitimate business for "illegal" acts that took place outside the U.S.?

My question was inspired by this link about how the pharmaceutical industry wants to force U.S. ISPs to stop providing services to companies that manufacture and sell pharmaceuticals outside the U.S. in "violation" of U.S. law. These manufacturers do not sell in the U.S.; some of their customers might illeally re-sell in the U.S., but that's a different violator.

Is this possible, and if so how (that is under what theory or doctrine)?

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    It is possible under the "Because I Say So And I Have An Army" doctrine, but this probably isn't the kind of legal theory you want an answer based on. – Nij Mar 4 '17 at 23:29
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The main question is whether the US has jurisdiction outside the US, which means either "in another country" or "in no country" (viz. the high seas or outer space). It has generally been felt (legally) that the US has no jurisdiction over foreign countries, see especially Banana v. Fruit, 213 U.S. 347 "the general rule is that the character of an act as lawful or unlawful must be determined wholly by the law of the country where it is done". This is known as the "presumption against extraterritoriality": it is a presumption, not a rigid absolute rule.

However, there are exceptions. The Alien Tort Statute (one of the first laws of the US) says "The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States". An application of that law is Filártiga v. Peña-Irala, where defendant tortured and murdered plaintiff's daughter, all parties being in Paraguay at the time: the court held that the US did have jurisdiction, under the ATS.

Nevertheless, in Sosa v. Alvarez-Machain, 542 U.S. 692 which involves an extraterritorial kidnapping, SCOTUS seems to have said that this law is primarily about granting jurisdiction, and not about creating new torts, and they indicate that the wrongful acts within the scope of the ATS are, specifically, "offenses against ambassadors, violation of safe conducts, and piracy" (at any rate, it's clear that damage arising from pollution would not be within the class of bad acts referred to by ATS). Kiobel v. Royal Dutch Petroleum Co. reaffirms the limit on what torts can be pursued under ATS. In this case, the issue is whether RDP might be corporately liable for acts that could be illegal under US law, and the court says "[w]hen a statute gives no clear indication of an extraterritorial application, it has none" (citing Morrison v. National Australia Bank Ltd.). Accordingly, Taylor Jr. was held liable for his role in torture in Liberia, since the Torture Victim Protection Act does specifically allow for actions against individuals acting in their official capacity, outside the US, for torture and extrajudicial killing.

"Sanctions against" is kind of open-ended. The US government can (under some circumstances) prevent US persons from doing things with respect to some other country, such as the restrictions against doing business with or visiting Cuba, Albania, North Korea etc. as have existed withing the past quarter century. Were I interested in sending money to a person in Iran vs. a person in Canada, I would have more problems in the former case owing to "sanctions". I think we can safely conclude that the US cannot (in terms of US law) declare that "whatever acts of a foreign entity overseas offend the federal government shall be litigated as though the acts were committed within the proper jurisdiction of the US" (or, more simply, "the proper jurisdiction of the US government is the universe").

Congress has not yet passed such a law about extraterritorial pollution, so until it does, it cannot sanction overseas polluters. When/if it does, it presumably can, though enforcement is another (political) matter.

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Under the theory or doctrine that a government can make anything illegal (subject to constitutional limitations) and can impose those laws on anyone subject to its power to enforce them.

If the US government were to create a list of prescribed persons (with all the required constitutional protections about getting on/off the list) with who it was illegal to trade then civil or criminal sanctions could be imposed on people who did trade with them. QED.

US sanctions on Cuba and Russia are examples.

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