First published in Global Competition Litigation Review, July 2009.
In the first appellate consideration of extra-territorial jurisdiction under the Commerce Act 1986, the Court of Appeal has dismissed appeals from a High Court decision that the New Zealand courts have jurisdiction to hear proceedings against three overseas residents.
The case, Harris v Commerce Commission  NZCA 84, concerned proceedings brought by the Commerce Commission seeking pecuniary penalties under the Commerce Act for alleged price-fixing and exclusionary conduct in markets for timber-preservative chemicals. Although concerned with regulatory action, the court's decision is equally applicable to private antitrust claims for damages which are brought under the same substantive legislation and procedural rules for service out of the jurisdiction (the High Court Rules).
Section 4(1) of the Act provides that, "This Act extends to the engaging in conduct outside New Zealand by any person resident or carrying on business in New Zealand to the extent that such conduct affects a market in New Zealand." The appellants contended that the legislative history and terms of section 4(1), reinforced by common law principles of restraint in the extra-territorial application of domestic laws, indicated that it specified the only circumstances in which the Act could apply to conduct occurring outside New Zealand. Since the Commission accepted that they had not engaged in conduct in New Zealand (with only one alleged exception for one appellant) and were not resident or carrying on business in New Zealand, the Act did not apply.
The court rejected this contention. It concluded that "if overseas parties agree outside New Zealand to implement a course of conduct in New Zealand which contravenes ss 27 and 30, and a person in New Zealand takes action to give effect to that agreement, the overseas parties can properly be regarded as acting in New Zealand through the New Zealand actor, certainly in circumstances where they have some authority over him or her, as is alleged here. The liability of the overseas persons does not depend on the liability of the New Zealand actors – they may be innocent agents". On that basis, the overseas residents could be regarded as having engaged in conduct in New Zealand and section 4(1) was irrelevant.
In reaching its conclusion, the court drew assistance from common law principles of territoriality in criminal conspiracy cases and was clearly influenced by the view that "legal analysis must reflect the reality of increased globalisation", which the court described as "a particularly powerful factor in a case such as the present". The court stated its belief that, consistent with the policy and scheme of the Act, entities entering into anti-competitive arrangements overseas directed at markets in New Zealand should not be able to insulate themselves from liability by operating though local entities and taking care not to hold meetings in or send communications to New Zealand.