Originally from Transnational Litigation and Commercial Arbitration - 3rd Edition 

2.5. EXTRATERRITORIAL JURISDICTION UNDER AMERICAN LAW

2.5.1. Long-Arm Jurisdiction, State and Federal Courts, and Due Process of Law

Suppose plaintiff (A) seeks to commence legal proceedings in an American court — (e.g.) a court located within the State of New York — against a non-domiciliary (B), i.e., a defendant who resides outside New York State territory, (e.g.) in California or in Germany.

As in the case of similar regional or transnational litigation in European courts, we need first to ask whether the New York court has jurisdiction, that is to say, the power to enter a judgment which binds the foreign defendant or affects his or her interest in property. As noted previously, this kind of court power is sometimes referred to as jurisdiction to adjudicate;1 it is also sometimes referred to as juridical jurisdiction. In situations where the “long arm” of State law “reaches out,” so to allow its courts to exercise jurisdiction over defendants outside State territory, we can also describe the phenomenon as the exercise of extraterritorial jurisdiction.2

The United States functions as a federal system: a system based on the allocation and sharing of power between the fifty individual States and the Federal government in Washington. The exercise of (extraterritorial) juridical jurisdiction by American courts also reflects this sharing of power.

After the American Revolutionary War, but before the new American Constitution was signed in 1789, each of the original 13 “States” (then colonies) enjoyed full sovereign status. And although these entities — by agreeing to adopt the Constitution and thus granting certain powers to the new central government — relinquished some portion of their sovereignty, all powers not specifically granted by the Constitution to the Federal government were retained by the individual States.