Displaced Sovereignty: U.S. Law and the Transformation of International Financial Space
A century ago, foreign governments and their actions were essentially beyond U.S. judicial reach. In the 1950s, however, U.S. courts began to govern more and more activities of foreign governments leading to a transformation in the modality of U.S. power directed abroad. Legal historians describe this as a transition from an “absolute” to a “restrictive” practice of sovereign immunity, and one dominant narrative explains the transition as a pragmatic move away from an obsolete model of “territorial sovereignty” to a more flexible, “de-territorialized” or even “de-spatialized” sovereignty better suited for a globalized economy. Through tracing key U.S. legal changes involving foreign sovereign governments from 1898 to 2014, with a focus on sovereign debt law, I argue that transnational sovereign economic activity in fact remains dependent as ever on national borders — albeit borders that are continually reconfigured through minute changes in U.S. common law.
Far from representing a homogeneous de-territorialization of the contemporary international legal order, I show that there has been an uneven re-territorialization that reduces the authority of most countries over their own economic decisions while expanding the judicial reach of a few — primarily the United States — and that New York state law has been especially important in this process. This has resulted not in a general restriction of state sovereignty in the face of “globalization,” but in a differential displacement of economic sovereignty from post-colonial, poor and indebted states to rich, industrialized ones. The legal structures developed since the 1960s have aimed at entrenching and extending U.S. dominance over the global capitalist order and presently function to perpetuate exploitative relations between sovereign debtors and private creditors.
U.S. judicial power has been a crucial and largely overlooked pillar of post-war U.S hegemony. I show how judicial transformations of the past half-century have occurred in relation to changing economic conditions, including threats to U.S. property posed by Third World nationalizations in the 1950s to the 1970s, rising indebtedness since the 1970s, and an ongoing overaccumulation crisis. The expansion of U.S. judicial power has simultaneously been driven at every step by U.S. geopolitical interests, including, importantly, the desire to contain Communism and maintain the colonial status quo in the context of the Cold War, widespread de-colonization and Third Worldist movements, and the reconstruction of U.S. dollar hegemony in the 1980s.
I argue that the expansion of U.S. judicial power in the past half-century should be understood as territorial insofar as it has defined the space over which the state (in the form of courts) may exercise authority. Through a critical analysis of this legal history I show how the reconceptualization of key legal dichotomies — most importantly, foreign/domestic, public/private, and political/legal — has been a fundamental spatial mechanism through which these legal territories are produced and contested. Since the 1960s, U.S. — especially New York — courts have increasingly reclassified foreign sovereign transnational activities as “private” (rather than “public” or “sovereign”) and therefore as properly within the scope of U.S. judicial (“legal”) rather than executive (“political”) authority. Foreign sovereign activities have also increasingly been reclassified from “foreign” (meaning outside the United States) to “domestic” (meaning inside the United States). Together, these interlinked changes have been used to bring activity that would previously have been considered beyond the authority of U.S. courts within U.S. judicial reach. This has expanded U.S. authority as a whole through the modality of judicial power, while simultaneously de-politicizing important social questions and removing them from even the possibility of democratic debate.
Until recently, this process has unfolded with explicit support from the U.S. executive branch, but tensions between the interests of the U.S. executive and those of the U.S. judiciary have grown. In NML Capital v. Argentina, despite strenuous objections from the executive branch, the New York and U.S. Supreme Courts inverted the reigning spatial logic of U.S. law in order to extend U.S. judicial authority over most of the world outside Argentina – with important ramifications for U.S. economic and geopolitical interests, for sovereign debt crises and restructurings, and for the global financial order. The critical genealogy of the expansion of U.S. juridico-economic territory since WWII that I present in this dissertation is crucial for understanding the transnational operation of U.S. judicial power today and how it might most effectively be contested.