The remarks of Assistant Secretary Darryl Jackson of the Bureau of Industry and Security at the West Coast update conference in March were just posted on the BIS website. Most of the remarks were predictable big-stick waving from BIS with threats of increased enforcement and enhanced penalties.

But these remarks were somewhat more conciliatory:

I am very pleased today to announce publicly for the first time that BIS will shortly implement refined practices for the charging and settlement of administrative enforcement cases brought under the new PATRIOT Act provisions. . . . As you will hear in more detail from the Enforcement Panel, in cases to which the higher penalties apply that settle before issuance of a charging letter, BIS will only charge the most serious violation per transaction.

We have complained before (see here for example) about BIS’s tendency to charge single transactions as multiple violations in order to increase penalties imposed upon those making voluntary disclosures. Assistant Secretary’s remarks suggest that BIS may be retreating from that policy.

The Bureau of Industry and Security has a new target: foreign employees of U.S. companies. BIS just posted an order, effective April 2, 2007, imposing a seven-year denial of export privileges on Stephen Lincoln, a citizen and resident of the United Kingdom. The order was the result of a settlement agreement between Lincoln and BIS.

According to BIS, Lincoln shipped U.S. origin software with an encryption module to Iran while he was the Sales Manager of the UK office of Buehler, Ltd., a U.S. company that manufactures scientific instruments and supplies for material analysis. The charging letter does not allege that Mr. Lincoln ever set foot in the United States or had any connection to the United States other than his employment by a U.K. subsidiary of a U.S. company.

Of course, issues as to the extraterritorial application of U.S. laws are merely legal niceties with which BIS cannot be bothered. However, U.S. law restricts extraterritorial application of U.S. law to two cases. First, a statute may have extraterritorial application where it clearly states an intent to have such application. EEOC v. Arabian American Oil Co., 499 U.S. 244, 248 (1991). Second a statute may have extraterritorial application where it is being used to punish extraterritorial misconduct that was intended to have an effect in the United States. Ford v. United States, 273 U.S. 593, 623 (1927). The classic paradigm of this second situation is where someone fires a shot across a border and kills somebody in the other country.

Nothing in the Lincoln case suggests that the second factor, extraterritorial effect, can justify punishment of a U.K. citizen for an export from the U.K. to Iran. Nor do the EAR or IEEPA, the authorizing statute, manifest a clear intent to exercise extraterritorial jurisdiction over foreign citizens in their home countries. Section 734.5 of the EAR is the only provision of the EAR that directly addresses the jurisdiction of the EAR over foreign persons outside the U.S. That section — titled “Activities of U.S. and foreign persons subject to the EAR” — provides that foreign persons are only subject to the EAR for violations of an order issued under the EAR. No order had been issued against Mr. Lincoln at the time of Mr. Lincoln’s shipment of the software, and so that shipment violated no order under the EAR. Of course, now that Mr. Lincoln has consented to an order denying him export privileges, his future conduct may be held to be covered by the EAR.

But even if the U.S. could in theory exercise jurisdiction over Mr. Lincoln for his shipment of software to Iran, the U.S. couldn’t exercise this jurisdiction in practice unless it could extradite him. The recently-adopted extradition treaty between the U.S. and the U.K., however, makes extradition seem at best a distant possibility. Article 2(4) deals with crimes committed outside the territory of the “Requesting State,” which, in this instance would be the United States. Under the treaty, the crime would be an extraditable offense only if the laws of the U.K provide for punishment of U.S. citizens for extraterritorial violations of U.K. export laws, a dubious proposition at best.

So why didn’t Mr. Lincoln tell the BIS simply to take a hike? Here we can only speculate, but my guess is Disneyland. Or perhaps the Grand Canyon. Mr. Lincoln didn’t want to risk being arrested if he visited the U.S. on holiday so he thought that agreeing to the order, particularly inasmuch as he didn’t have to pay a fine, was a simple way to avoid that problem.

Unfortunately, complying with the Order may be more difficult for Mr. Lincoln than he imagines. The Order entered is a typical BIS order that prohibits the person subject to the order from, inter alia, “receiving [or] using . . . any item exported or to be exported from the United States that is subject to the Regulations.” Under section 734.3(a)(2), an item subject to the Regulations includes all “U.S. origin items wherever located.”

Now this language makes perfect sense for an order denying export privileges to someone in the United States. It makes no sense whatsoever when applied to Mr. Lincoln, who will violate the terms of the order if he orders a Budweiser at the local pub, rents a DVD of “Casino Royale” at his neighborhood video store, or uses a computer running a Windows operating system. And by agreeing to the order, he has obviously made himself subject to U.S. jurisdiction as well as the absurd requirements of this order.

Perhaps Mr. Lincoln should rethink that trip to Disneyland.