For years now, the US has lobbied with the Dutch government to institute controls on the export to China of chipmaking machines produced by ASML, Europe’s most valuable tech company. In 2019, Washington effectively pushed the Netherlands to prevent the export of one of ASML’s most advanced “Extreme Ultraviolet” (EUV) lithography machines to China. And in January 2023, the US succeeded in forging a deal with Japan and the Netherlands to institute further export controls on semiconductor manufacturing equipment.
Yet for the Biden administration, the Dutch controls did not go far enough. Therefore, on 17 October 2023, the US extended the reach of its domestic export controls legislation to prevent ASML from exporting technology to China not covered under Dutch controls. The unilateral measures – part of a wider regulatory tranche to restrict the transfer of critical technologies to the Asian industrial powerhouse – led to a scramble for ASML products by Chinese companies, as Anh Nguyen describes in a previous post.
While Nguyen’s post questions the legality of the US’s extraterritorial application of its export controls under principles of jurisdiction and the WTO framework, she does not come to a clear conclusion as to whether the US measures contravene international law. In this post, I will argue that they do, and conclude that the Netherlands should take a stance against the measures.
The Problem of Extraterritoriality
As Nguyen rightly points out, the US widening the scope of its export control legislation to products of a Dutch company is problematic under the international customary law principles of jurisdiction. In question is legislative (or prescriptive) jurisdiction, which relates to the authority of a state to “make law applicable to persons, property, or conduct” (see Restatement (Fourth) § 401(a)). In principle, the exercise of legislative jurisdiction is territorial in nature and limited by the sovereign territorial rights of other states.
However, a state may extend the scope of its legislation beyond its borders based on a permissive rule of international law. The underlying thought behind exceptions to the territoriality of legislative jurisdiction is that there must be a “genuine connection” between the subject of the legislation and the state claiming jurisdiction (see, e.g., the Nottebohm judgment). This is reflected in the four generally accepted principles of jurisdiction: the territoriality principle, the nationality principle, the protective principle, and the universality principle (Voetelink 2023, p. 23).
Nguyen writes that, considering the “400 000+ components in ASML’s machines”, it may not be challenging to find US content to “establish some justification under the territoriality or nationality principle”. However, the justification should be based on a “genuine link”, which does not exist merely because of a few components having US origin. In fact, other scholars have outright dismissed the possibility of asserting nationality jurisdiction over goods, stating that the practice “defies ordinary powers of analogy” (Genard 2014, p. 4). Furthermore, the recent adjustments lower the threshold of US content to 0%, as Nguyen explains. In my view, to speak of a genuine link in the case of 0% US-origin content would, to quote Sir Humphrey Appleby, “lay upon the logical and semantic resources of the English language a heavier burden than they can reasonably be expected to bear.”
The Protective Principle
The most plausible principle that the US could call upon to justify its far-reaching export controls is the protective principle (Voetelink 2023; Matsushita et al., p. 551). This principle allows for extraterritorial jurisdiction when conduct beyond national borders threatens national security, and traditionally relates to crimes directed against the security of the state (e.g. espionage and counterfeiting). Indeed, the US justifies its controls of semiconductor exports to China on national security grounds. Problematic, however, are the US’s “rather amorphous perceptions of its national security … interests” (Michigan Law Review 1983, p. 1328). According to the US, all exports of goods that might negatively affect its “leadership in the science, technology, engineering, and manufacturing sectors” are harmful to its national security (50 U.S. Code § 4811 – Statement of Policy)).
In the case of the 17 October 2023 export controls of ASML tools, the US has not substantiated how US national security would be in danger when the specific lithography equipment in question is exported to China. As the “Deep Ultraviolet” (DUV) machines concerned are relatively old models from 2013 and 2015, experts critique that the measures create an “inevitably leaky export control regime that fails to deny China advanced node chip production for potential military end-use” and could even push China to “develop its own technology in advanced chipmaking machines”.
Rather, the idea behind preventing China from getting its hands on more ASML equipment seems to be to “eradicate, root and branch, China’s entire ecosystem of advanced technology,” as the New York Times writes. This serves the US’s goal of “maintaining as large of a lead as possible” rather than “maintaining relative advantages” over competitors in key technologies. Whatever one may think of the legitimacy of this approach of economic nationalism, it relates to the pursuance of geoeconomic/foreign policy interests, and those are not generally accepted as grounds to assert extraterritorial jurisdiction (see also Bianchi 1992; Bowman 2013).
National Security under WTO Rules
As for the conformity of the US’s controls targeting ASML under the WTO framework, there is little question that the rules are both discriminatory against China (therefore depriving the WTO member of its “most favoured nation” treatment) and impose quantitative restrictions on the export of goods to the country, which is in principle prohibited under resp. Article I:1 and X:1 GATT 1994 (see also Rajput 2022). Again, the question arises whether the rules can nonetheless be justified on grounds of national security: we find ourselves within the remit of Article XXI (Security Exceptions). The most likely justifications that Article XXI offers are subparagraphs (b)(ii) and (iii), which relate inter alia to “traffic in … goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment” and action “taken in time of war or other emergency in international relations”.
While Nguyen points out that the issue of extraterritorial export controls of the US in particular has yet to be tested before the WTO Dispute Settlement Body (DSB), several WTO Panel reports, including two Panel reports relating to the US’s trade war against China (United States – Origin Marking Requirement & US – Steel and Aluminium Products), have recently shed light on the scope of the national security exceptions of Article XXI. In general, the Panels have consistently rejected the US’s view that Article XXI is “entirely self-judging” and therefore non-justiciable. In addition, all Panel reports took a narrow approach towards subparagraph (b)(iii), finding that an “emergency situation in international law” refers to “a state of affairs of the utmost gravity, in effect a situation representing a breakdown or near-breakdown in the relations” and in principle does not encompass “political or economic conflicts” (see Voon 2023; Choer Moraes 2023, p. 703). Following such a construction, none of the Panel reports accepted the US’s invocation of national security grounds.
Considering the foregoing, in addition to the arguments made in the last paragraph, it seems to me that an appeal by the US to subparagraph (b)(iii) as a justification for the ASML export controls is unlikely to succeed. This leaves subparagraph (b)(ii), relating to “supplying a military establishment” – a rarely talked about or invoked provision. Although it is unclear if the US will rely on this provision in the dispute regarding semiconductor export controls launched with the DSB by China, the chances of the Panel going along with such an argument appear slim, given the generally narrow approach towards interpreting Article XXI sketched above. The danger of allowing a broad interpretation of subparagraph (b)(ii) is obviously that the phrase “traffic … carried on … indirectly for the purpose of supplying a military establishment” could be taken to include any trade in goods if one tried hard, thus nullifying the limiting function of the clause (I suffice by referring to an extensive discussion by Ikeda).
A Strategic Response is Needed
In conclusion, where Nguyen questions the legality of the US’s extraterritorial export controls regarding ASML equipment, I would go as far as to say that they are clearly an overreach beyond the permissible boundaries of international law. The question remains: how should the Netherlands respond? The Dutch government, while calling for a more European approach, has so far not opposed the measures, even though experts as well as lawmakers in the Netherlands and the EU have strongly expressed their criticism of the US’s unilateral actions. Critics decry the detrimental effects of US jurisdictional overreach on Dutch sovereignty, core economic interests, and the reputation of the Netherlands as a reliable trading partner.
Elsewhere I have argued that, as the Netherlands gets increasingly caught up in Great Power competition between the US and China due to its critical position in the global semiconductor supply chain, the Dutch government should be more assertive in defending its core economic interests. The Netherlands and the EU are not without legislative teeth to defend trade interests and strategic autonomy and could consider – apart from voicing objections to Washington – putting into action the new EU Anti Coercion Instrument (ACI), dusting off the EU Blocking Statute, and/or launching a complaint with the WTO DSB. While there are drawbacks to these options (as e.g. Nguyen succinctly points out), acquiescing in the US’s flouting of the rules of liberal trade would likely come at an even higher cost for the Netherlands in the long run.
Caught in a Geopolitical Crossfire: Questioning the Legality of US-Imposed Export Controls on Dutch Computer Chip Machines
Written by Daan KingmaFor years now, the US has lobbied with the Dutch government to institute controls on the export to China of chipmaking machines produced by ASML, Europe’s most valuable tech company. In 2019, Washington effectively pushed the Netherlands to prevent the export of one of ASML’s most advanced “Extreme Ultraviolet” (EUV) lithography machines to China. And in January 2023, the US succeeded in forging a deal with Japan and the Netherlands to institute further export controls on semiconductor manufacturing equipment.
Yet for the Biden administration, the Dutch controls did not go far enough. Therefore, on 17 October 2023, the US extended the reach of its domestic export controls legislation to prevent ASML from exporting technology to China not covered under Dutch controls. The unilateral measures – part of a wider regulatory tranche to restrict the transfer of critical technologies to the Asian industrial powerhouse – led to a scramble for ASML products by Chinese companies, as Anh Nguyen describes in a previous post.
While Nguyen’s post questions the legality of the US’s extraterritorial application of its export controls under principles of jurisdiction and the WTO framework, she does not come to a clear conclusion as to whether the US measures contravene international law. In this post, I will argue that they do, and conclude that the Netherlands should take a stance against the measures.
The Problem of Extraterritoriality
As Nguyen rightly points out, the US widening the scope of its export control legislation to products of a Dutch company is problematic under the international customary law principles of jurisdiction. In question is legislative (or prescriptive) jurisdiction, which relates to the authority of a state to “make law applicable to persons, property, or conduct” (see Restatement (Fourth) § 401(a)). In principle, the exercise of legislative jurisdiction is territorial in nature and limited by the sovereign territorial rights of other states.
However, a state may extend the scope of its legislation beyond its borders based on a permissive rule of international law. The underlying thought behind exceptions to the territoriality of legislative jurisdiction is that there must be a “genuine connection” between the subject of the legislation and the state claiming jurisdiction (see, e.g., the Nottebohm judgment). This is reflected in the four generally accepted principles of jurisdiction: the territoriality principle, the nationality principle, the protective principle, and the universality principle (Voetelink 2023, p. 23).
Nguyen writes that, considering the “400 000+ components in ASML’s machines”, it may not be challenging to find US content to “establish some justification under the territoriality or nationality principle”. However, the justification should be based on a “genuine link”, which does not exist merely because of a few components having US origin. In fact, other scholars have outright dismissed the possibility of asserting nationality jurisdiction over goods, stating that the practice “defies ordinary powers of analogy” (Genard 2014, p. 4). Furthermore, the recent adjustments lower the threshold of US content to 0%, as Nguyen explains. In my view, to speak of a genuine link in the case of 0% US-origin content would, to quote Sir Humphrey Appleby, “lay upon the logical and semantic resources of the English language a heavier burden than they can reasonably be expected to bear.”
The Protective Principle
The most plausible principle that the US could call upon to justify its far-reaching export controls is the protective principle (Voetelink 2023; Matsushita et al., p. 551). This principle allows for extraterritorial jurisdiction when conduct beyond national borders threatens national security, and traditionally relates to crimes directed against the security of the state (e.g. espionage and counterfeiting). Indeed, the US justifies its controls of semiconductor exports to China on national security grounds. Problematic, however, are the US’s “rather amorphous perceptions of its national security … interests” (Michigan Law Review 1983, p. 1328). According to the US, all exports of goods that might negatively affect its “leadership in the science, technology, engineering, and manufacturing sectors” are harmful to its national security (50 U.S. Code § 4811 – Statement of Policy)).
In the case of the 17 October 2023 export controls of ASML tools, the US has not substantiated how US national security would be in danger when the specific lithography equipment in question is exported to China. As the “Deep Ultraviolet” (DUV) machines concerned are relatively old models from 2013 and 2015, experts critique that the measures create an “inevitably leaky export control regime that fails to deny China advanced node chip production for potential military end-use” and could even push China to “develop its own technology in advanced chipmaking machines”.
Rather, the idea behind preventing China from getting its hands on more ASML equipment seems to be to “eradicate, root and branch, China’s entire ecosystem of advanced technology,” as the New York Times writes. This serves the US’s goal of “maintaining as large of a lead as possible” rather than “maintaining relative advantages” over competitors in key technologies. Whatever one may think of the legitimacy of this approach of economic nationalism, it relates to the pursuance of geoeconomic/foreign policy interests, and those are not generally accepted as grounds to assert extraterritorial jurisdiction (see also Bianchi 1992; Bowman 2013).
National Security under WTO Rules
As for the conformity of the US’s controls targeting ASML under the WTO framework, there is little question that the rules are both discriminatory against China (therefore depriving the WTO member of its “most favoured nation” treatment) and impose quantitative restrictions on the export of goods to the country, which is in principle prohibited under resp. Article I:1 and X:1 GATT 1994 (see also Rajput 2022). Again, the question arises whether the rules can nonetheless be justified on grounds of national security: we find ourselves within the remit of Article XXI (Security Exceptions). The most likely justifications that Article XXI offers are subparagraphs (b)(ii) and (iii), which relate inter alia to “traffic in … goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment” and action “taken in time of war or other emergency in international relations”.
While Nguyen points out that the issue of extraterritorial export controls of the US in particular has yet to be tested before the WTO Dispute Settlement Body (DSB), several WTO Panel reports, including two Panel reports relating to the US’s trade war against China (United States – Origin Marking Requirement & US – Steel and Aluminium Products), have recently shed light on the scope of the national security exceptions of Article XXI. In general, the Panels have consistently rejected the US’s view that Article XXI is “entirely self-judging” and therefore non-justiciable. In addition, all Panel reports took a narrow approach towards subparagraph (b)(iii), finding that an “emergency situation in international law” refers to “a state of affairs of the utmost gravity, in effect a situation representing a breakdown or near-breakdown in the relations” and in principle does not encompass “political or economic conflicts” (see Voon 2023; Choer Moraes 2023, p. 703). Following such a construction, none of the Panel reports accepted the US’s invocation of national security grounds.
Considering the foregoing, in addition to the arguments made in the last paragraph, it seems to me that an appeal by the US to subparagraph (b)(iii) as a justification for the ASML export controls is unlikely to succeed. This leaves subparagraph (b)(ii), relating to “supplying a military establishment” – a rarely talked about or invoked provision. Although it is unclear if the US will rely on this provision in the dispute regarding semiconductor export controls launched with the DSB by China, the chances of the Panel going along with such an argument appear slim, given the generally narrow approach towards interpreting Article XXI sketched above. The danger of allowing a broad interpretation of subparagraph (b)(ii) is obviously that the phrase “traffic … carried on … indirectly for the purpose of supplying a military establishment” could be taken to include any trade in goods if one tried hard, thus nullifying the limiting function of the clause (I suffice by referring to an extensive discussion by Ikeda).
A Strategic Response is Needed
In conclusion, where Nguyen questions the legality of the US’s extraterritorial export controls regarding ASML equipment, I would go as far as to say that they are clearly an overreach beyond the permissible boundaries of international law. The question remains: how should the Netherlands respond? The Dutch government, while calling for a more European approach, has so far not opposed the measures, even though experts as well as lawmakers in the Netherlands and the EU have strongly expressed their criticism of the US’s unilateral actions. Critics decry the detrimental effects of US jurisdictional overreach on Dutch sovereignty, core economic interests, and the reputation of the Netherlands as a reliable trading partner.
Elsewhere I have argued that, as the Netherlands gets increasingly caught up in Great Power competition between the US and China due to its critical position in the global semiconductor supply chain, the Dutch government should be more assertive in defending its core economic interests. The Netherlands and the EU are not without legislative teeth to defend trade interests and strategic autonomy and could consider – apart from voicing objections to Washington – putting into action the new EU Anti Coercion Instrument (ACI), dusting off the EU Blocking Statute, and/or launching a complaint with the WTO DSB. While there are drawbacks to these options (as e.g. Nguyen succinctly points out), acquiescing in the US’s flouting of the rules of liberal trade would likely come at an even higher cost for the Netherlands in the long run.
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