As a general rule, federal statutes are limited in application to the territory of the United States, unless Congress, in the statute or its legislative history, clearly indicates an intent to the contrary. Nevertheless, even where a statute is silent with respect to extraterritorial application, courts have sometimes not limited the statute's application to the United States. In trying to determine whether a given statute, otherwise silent with respect to extraterritorial application, should be applied beyond the borders of the United States, the Second Circuit has framed the question as whether Congress would have intended for the federal courts to extend their limited resources with a specific international controversy.

In resolving that question, the Second Circuit has developed two alternative tests for determining whether a statute should have extraterritorial effect. Under the "conduct" test, a statute is applied to a foreign-related controversy if a material part of the alleged wrongdoing occurred in the United States even though such conduct directly caused losses to foreign parties. Under the "effects" test, a statute is applied beyond the borders of the United States whenever "a predominantly foreign transaction has substantial effects within the United States." Both the conduct and effects tests were developed in the context of the federal securities laws. Antitrust is another area in which courts have addressed the extraterritorial application of federal laws.

The Racketeer Influenced and Corrupt Organization Act ("RICO") is silent with respect to its extraterritorial application. Although there is much less case law in this area than in securities or antitrust cases, the Second Circuit has decided two cases in which the extraterritorial application of RICO has been addressed: Alfadda v. Fenn, 935 F.2d 475 (2d Cir. 1991) and North South Finance Corp. v. Al-Turki, 100 F.3d 1046 (2d Cir. 1996). These cases demonstrate the Second Circuit's continuing effort to arrive at an appropriate test for determining whether and when to apply RICO to foreign parties and to conduct occurring beyond the borders of the United States. Although in Alfadda the Second Circuit appeared to adopt the conduct test, its later decision in Al-Turki suggests that it may now consider the effects test to be more appropriate. At present, the issue of how the Second Circuit will determine whether to apply RICO extraterritorially is still open.