Court Rules Sox Whistleblower Protection Only Applies in US

January 6, 2005 ( - For the first time, a federal appellate court has ruled that the Sarbanes-Oxley Act's whistleblower protection provision does not apply to foreign citizens working outside of the United States for the foreign subsidiaries of covered companies.

The US 1st Circuit Court of Appeals in Boston upheld a lower court decision and ruled Ruben Canero could not pursue his lawsuit against his former employer, subsidiaries of Natick, Massachusetts-based Boston Scientific Corp, Business Insurance reported.

Carnero, an Argentinean citizen who had worked for the two Latin American Boston Scientific subsidiaries, had charged in his lawsuit he was fired in retaliation for reporting to supervisors that the subsidiaries had created false invoices and had inflated sales figures.

The 1 st Circuit panel asserted that whatever help to investors the overseas application of the whistleblower law might provide is offset by not having an indication Congress intended it to apply overseas and by a variety of indications that Congress thought the statute was limited to the territorial jurisdiction of the United States, the decision said.

Carnero had argued that “to limit the operations of the statute to purely domestic conduct in the United States would improperly insulate the foreign operations of covered companies” and “frustrate” the basic purpose of the Sarbanes-Oxley Act, which is to protect both investors in US securities markets and those markets’ integrity, said the decision.

However, “While Carnero’s argument has some force, it faces a high and we think insurmountable hurdle in the well-established presumption against the extraterritorial application of Congressional statutes,” the decision concluded.

The 1 st Circuit opinion is  here .