(1) Even when one of the bases for jurisdiction under s 402 is present, a state may not exercise jurisdiction to prescribe law with respect to a person or activity having connections with another state when the exercise of such jurisdiction is unreasonable.
(2) Whether exercise of jurisdiction over a person or activity is unreasonable is determined by evaluating all relevant factors, including, where appropriate:
(a) the link of the activity to the territory of the regulating state, i.e., the extent to which the activity takes place within the territory, or has substantial, direct, and foreseeable effect upon or in the territory;
(b) the connections, such as nationality, residence, or economic activity, between the regulating state and the person principally responsible for the activity to be regulated, or between that state and those whom the regulation is designed to protect;
(c) the character of the activity to be regulated, the importance of regulation to the regulating state, the extent to which other states regulate such activities, and the degree to which the desirability of such regulation is generally accepted.
(d) the existence of justified expectations that might be protected or hurt by the regulation;
(e) the importance of the regulation to the international political, legal, or economic system;
(f) the extent to which the regulation is consistent with the traditions of the international system;
(g) the extent to which another state may have an interest in regulating the activity; and
(h) the likelihood of conflict with regulation by another state.
(3) When it would not be unreasonable for each of two states to exercise jurisdiction over a person or activity, but the prescriptions by the two states are in conflict, each state has an obligation to evaluate its own as well as the other state's interest in exercising jurisdiction, in light of all the relevant factors, including those set out in Subsection (2); a state should defer to the other state if that state's interest is clearly greater.
a. Reasonableness in international law and practice. The principle that an exercise of jurisdiction on one of the bases indicated in s 402 is nonetheless unlawful if it is unreasonable is established in United States law, and has emerged as a principle of international law as well. There is wide international consensus that the links of territoriality or nationality, s 402, while generally necessary, are not in all instances sufficient conditions for the exercise of such jurisdiction. Legislatures and administrative agencies, in the United States and in other states, have generally refrained from exercising jurisdiction where it would be unreasonable to do so, and courts have usually interpreted general language in a statute as not intended to exercise or authorize the exercise of jurisdiction in circumstances where application of the statute would be unreasonable. See Comment g.
Some United States courts have applied the principle of reasonableness as a requirement of comity, that term being understood not merely as an act of discretion and courtesy but as reflecting a sense of obligation among states. This section states the principle of reasonableness as a rule of international law. The principle applies regardless of the status of relations between the state exercising jurisdiction and another state whose interests may be affected. While the term "comity" is sometimes understood to include a requirement of reciprocity, the rule of this section is not conditional on a finding that the state affected by a regulation would exercise or limit its jurisdiction in the same circumstances to the same extent. Some elements of reciprocity may be relevant in considering the factors listed in Subsection (2). See Reporters' Note 5.
b. Considerations not exhaustive. The list of considerations in Subsection (2) is not exhaustive. No priority or other significance is implied in the order in which the factors are listed. Not all considerations have the same importance in all situations; the weight to be given to any particular factor or group of factors depends on the circumstances.
c. Regulation of different subjects and by different organs of state. Criteria such as those in Subsection (2) may lead to different conclusions according to the subject of the regulation. For instance, regulation by the United States of the labor relations of a foreign vessel that regularly calls on the United States may be unreasonable; regulation of the vessel's safety standards may not be unreasonable. Compare s 512, Reporters' Note 3. A state may exercise jurisdiction to prescribe through a variety of law-making or regulatory organs; the reasonableness of the exercise of jurisdiction may differ with the level at which the decision is taken. For example, a directive by Congress to an agency such as the Securities and Exchange Commission to investigate payments by United States corporations in foreign countries may be a reasonable exercise of jurisdiction to prescribe (see s 414, Reporters' Note 5); a decision to initiate such an investigation taken by the Commission, or by an official of the Commission, under a general mandate might not be justified.
d. Reasonable exercise of jurisdiction by more than one state. Exercise of jurisdiction by more than one state may be reasonable--for example, when one state exercises jurisdiction on the basis of territoriality and the other on the basis of nationality; or when one state exercises jurisdiction over activity in its territory and the other on the basis of the effect of that activity in its territory; or when a given activity or transaction, such as international trade or transport, takes place in or affects more than one state. In such situations, the factors in Subsection (2) apply to both states. The fact that one state has exercised jurisdiction with respect to a given person or activity is relevant in applying Subsections (2)(g) and (h), but is not conclusive that it is unreasonable for the other state to do so. Nor is it conclusive that one state has a strong policy to permit or encourage an activity which the other state wishes to prohibit. For the case of conflicting regulations, Subsection (3), see Comment e.
e. Conflicting exercises of jurisdiction. Subsection (3) applies when an exercise of jurisdiction by each of two states is not unreasonable, but their regulations conflict. In that case, each state is required to evaluate both its interests in exercising jurisdiction and those of the other state. When possible, the two states should consult with each other. If one state has a clearly greater interest, the other should defer, by abandoning its regulation or interpreting or modifying it so as to eliminate the conflict. When neither state has a clearly stronger interest, states often attempt to eliminate the conflict so as to reduce international friction and avoid putting those who are the object of the regulations in a difficult situation. Subsection (3) is addressed primarily to the political departments of government, but it may be relevant also in judicial proceedings. See Reporters' Notes 6 and 7.
Subsection (3) applies only when one state requires what another prohibits, or where compliance with the regulations of two states exercising jurisdiction consistently with this section is otherwise impossible. It does not apply where a person subject to regulation by two states can comply with the laws of both; for example, where one state requires keeping accounts on a cash basis, the other on an accrual basis. It does not apply merely because one state has a strong policy to permit or encourage an activity which another state prohibits, or one state exempts from regulation an activity which another regulates. Those situations are governed by Subsection (2), but do not constitute conflict within Subsection (3).
Ordinarily, a state may not require a person to do something in another state that is prohibited by that state. See ss 441 and 442.
f. Criminal and civil jurisdiction. The principles governing jurisdiction to prescribe set forth in s 402 and in this section apply to criminal as well as to civil regulation. However, in the case of regulatory statutes that may give rise to both civil and criminal liability, such as United States antitrust and securities laws, the presence of substantial foreign elements will ordinarily weigh against application of criminal law. In such cases, legislative intent to subject conduct outside the state's territory to its criminal law should be found only on the basis of express statement or clear implication.
g. Interpreting United States law to avoid unreasonableness or conflict. A United States statute is to be construed to apply to a person or activity only to the extent consistent with s 402 and this section, unless such construction is not fairly possible. See s 114, and Reporters' Note 2 to that section. Similarly, if one construction of a United States statute would bring it in conflict with the law of another state that has a clearly greater interest, Comment e, or would subject a person to conflicting commands, s 441, while another construction would avoid such a conflict, the latter construction is clearly preferred, if fairly possible. This rule of construction applies not only to courts, but also to Executive Branch officials and regulatory bodies in interpreting the authority granted to them in legislation, and the President may rely on it in considering a bill submitted to him for approval. If construction of a statute that accommodates the intent of Congress within the limits of international law is not fairly possible, the statute is nevertheless valid, but its application may give rise to international responsibility for the United States. See s 115 and Comments a and b to that section.
h. Principles applied. The principles set forth in s 402 and in this section are illustrated in succeeding sections of this chapter in selected contexts: jurisdiction to tax, ss 411-13; jurisdiction over foreign subsidiaries, s 414; antitrust, s 415; securities regulation, s 416; the effect of foreign government compulsion, s 441; and the reach and limits of transnational discovery of evidence, s 442. The same principles are applicable also to areas not here illustrated, such as regulation of food and drugs, communications, commodities trading, or any other activity in which more than one state has a legitimate interest.