By Peggy McInerny, Director of Communications

UCLA geographer Shaina Potts places her analysis of the wide geographic application of U.S. commercial law after World War II within a specific framework of imperialism: one that cloaks the exertion of state power in economic and legal terms, effectively removing financial issues from the political sphere.

UCLA International Institute, July 14, 2025 — Shaina Potts, associate professor of geography and global studies at UCLA, discussed her book, “Judicial Territory: Law, Capital and the Expansion of American Empire” (Duke, September 2024), at an event cosponsored by the Burkle Center for International Relations and the department of political science in late spring 2025. Maggie Peters, associate professor and vice chair for graduate studies, political science department, and faculty member, global studies program of the International Institute, served as moderator for the talk.

Potts’ monograph, which received the 2025 American Association of Geographer’s Meridian Book Award, examines why and how the commercial law of the U.S. — and that of New York state in particular — became the de facto law governing international financial agreements, as well as that governing an increasing number of commercial disputes over what had formerly been considered “sovereign” issues, in the 20th century.

The UCLA geographer places her analysis of the wide geographic application of U.S. commercial law within a specific framework of imperialism: one that cloaks the exertion of state power in economic and legal terms, such as promoting economic liberalism and the rule of law, thereby effectively removing financial issues from the political sphere. In addition, she pointed out that the geographic extension of American judicial authority raises important questions about sovereignty and how it is defined.

“Broadly speaking,” she explained, “the book traces the extension of U.S. judicial authority beyond official U.S. political borders since roughly World War Two, looking specifically at how judicial authority has increasingly been exercised over the [transnational] economic activities of sovereign governments — mostly postcolonial states.”

The scholar’s thinking on the topic was sparked by the long, drawn-out judicial fight over Argentina’s default on its sovereign commercial debt in 2001.

“U.S. hedge funds, often referred to as ‘vulture funds,’ were hold-out creditors,” she explained. “They had purposely purchased defaulted commercial debt after Argentina’s economic crisis in 2001 — when they were able to get it very, very cheaply on secondary debt markets — with the intention of suing Argentina for full recovery, rather than participating in the IMF-led restructurings in the way most creditors did.”

New York courts ruled that Argentina had to repay the vulture funds. When the country refused to do so, said Potts, “They forbade Argentina from paying any of its other creditors until they paid the vulture funds first. They also issued an injunction saying that any financier anywhere in the world outside of Argentina that helped Argentina make payments to other creditors would be held in contempt of court in New York City.”

The case dragged on for years, with the Supreme Court eventually upholding lower New York district and circuit court rulings. Argentina eventually paid off the vulture funds in full in 2016, “to the tune of close to $10 billion,” said Potts.

“One primary function of [U.S.] judicial expansion has been to discipline developmental or interventionist activities of postcolonial states,” she remarked, from the nationalization of U.S.-owned assets in Cuba through attempted alternative economic development policies to developing nations’ approaches to the 1980s debt crisis.

In purely private commercial transactions, explained Potts, governing law clauses are the primary mechanism for ensuring the applicability of U.S. law. “It’s very normal, for example, for a French company signing an agreement to do something in Zimbabwe to choose New York governing law and New York courts,” given that both are very friendly to investors, she remarked.

However, the legal doctrine of foreign sovereign immunity and the act of state doctrine had long considered it unacceptable for U.S. courts either to hear suits or issue judgments against foreign sovereigns or foreign sovereign officials with respect to sovereign public acts or sovereign public property.

To get around the strictures of these doctrines, specifically sovereign immunity, the U.S. used two primary legal strategies: it created a commercial exception to foreign sovereign immunity and extended the spatial reach of U.S. judicial authority.

The Foreign Sovereign Immunities Act of 1976 became the keystone of the legal strategy, she added, because it specified that “U.S. courts could extend their jurisdiction over foreign governments not only when those acts or those officials came into the boundaries of the U.S., but if their acts had a direct effect on the United States.” Litigation over the ensuing decades proceeded to interpret “direct effect” more and more flexibly.

During the “third world” debt crisis of the 1980s, U.S. courts also reversed the longstanding definition of the site, or “situ,” of commercial debt, shifting the site of debt from the debtor to the creditor. In the case of developing countries, the “situ” of their debt thus became New York or another creditor country, noted Potts.

Then, in the 1990s, “[T]he U.S. Supreme Court redefined sovereign debt as a private act, [defining the activity of] issuing debt as a ‘garden-variety economic activity.’” As a result, sovereign immunity no longer applied to sovereign debt.

The redefinition of the public and private acts of a sovereign state, she continued, “helps constitute a type of neoliberal vision of the economy as a bounded and separate sphere, and institutionalizes a certain understanding of the relationship between states on the one hand, and markets on the other.

“One of the most striking things about this whole phenomenon is that it’s precisely at the moment after World War Two, when the remaining colonial European empires are disbanding — a moment of widespread decolonization — when formal national sovereignty is recognized.” For many new states, concluded Potts, this redefinition of public and private acts of a state translated into a change in the rules of sovereignty.

“I think it’s useful to see this as an imperial modality of power in the way that it’s about expansion and extraction, and [in the way] that law brings with it a number of what we could call hegemonizing functions,” she said.

“[O]ne of the reasons why the [spatial expansion of U.S. judicial authority] has been so useful is precisely the depoliticizing character of recasting what used to be considered foreign policy issues as merely legal issues, and the way in which the discourse of the rule of law obscures some of the underlying geopolitical tensions that really drive, in my opinion, these kind of dynamics.”

Watch event video.

Published: Monday, July 14, 2025