Analysis: Many of the international rules which have held sway for decades are now ignored or challenged by governments seeking regulatory sovereignty
By Marek Martyniszyn, Queen's University Belfast
Two ideas have shaped the global order for decade. The first was a rules-based system built under US leadership, where states were formally equal and disputes were settled through law rather than force. The second, gaining ground in the 1980s, was the belief that open markets and global integration would deliver prosperity and peace.
These ideas overlapped, but were not identical. The rules-based order provided a legal framework for co-operation and conflict resolution. The neoliberal project went further, championing deregulation, privatisation and minimal state intervention. Together, they drove an era of rapid globalisation.
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We are now in a new era. The optimism of the 'end of history' period and the peak of globalisation has faded. The belief that open markets and integration alone could secure prosperity and peace has largely disappeared. The rules-based system that once provided stability is also showing cracks. Many rules are being ignored, abandoned or openly challenged as governments turn to unilateral action.
This marks the rise of the Expansive State, replacing the decades-long dominance of the Limited State, a model built on trust in markets and light-touch regulation. In this unsettled landscape, states are fighting for regulatory sovereignty. Who writes the rules that bind global firms, and whose rules prevail when they clash?
From light touch to heavy hand
For much of the late 20th century, governments kept their distance. They relied on courts and competition authorities to enforce market rules, while policymakers focused on liberalising trade and opening markets. That was an era of the Limited State.
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But now, the state is back. Governments are intervening directly, using industrial policies and tougher rules to pursue strategic goals. Power is shifting from courts to cabinets and, at times, to informal bargaining behind closed doors or even on the golf course. Export controls, subsidies, and restrictions on foreign investments are now popular tools of economic policy. This is a profound change, with global consequences.
Competition law shows this transformation clearly. In trade, countries built multilateral rules through organisations like the World Trade Organisation (WTO). But in competition law, they did not and there is no global competition court.
In the absence of shared rules, the US took the lead. Through the effects doctrine, it asserted that US law would apply if foreign firms harmed US consumers wherever those firms were based. Other countries initially protested and then adopted the same approach. Over time, extraterritoriality became a normal tool for protecting domestic markets.
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This worked while US firms were the enforcers and not the targets. That changed as other regulators grew more confident. The European Commission’s interventions in Boeing/McDonnell Douglas and later GE/Honeywell showed Brussels could restrain American companies by applying EU law to global deals. Washington grumbled but ultimately accepted these decisions. Law, not political leverage, settled the disputes. It was a win for a rules-based order.
When the rules bite back
The mood today is very different. When foreign authorities regulate US tech platforms or introduce digital services taxes, Washington increasingly bypasses legal dispute mechanisms. Instead, it uses tariffs, export controls and other threats to deter laws and policies it sees as harmful to American firms.
The country that once championed extraterritoriality now resists it when others use it. This represents a shift from rules-first governance to one where might makes right. Extraterritoriality works best for large markets and few global firms can afford to ignore the US or China.
Smaller jurisdictions face two big hurdles. The first is leverage. A dominant platform can threaten to leave a small market rather than comply with its laws. Australia’s battle with platforms over news payments showed this dynamic in action and Nigeria's recent clash with a major social media company echoed the same problem.
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The second hurdle is capacity. Cross-border cases are complex and resource-intensive. Even a legal win can be hollow if the company simply exits the market or has no assets to seize. This does not mean smaller states should retreat and extraterritoriality remains lawful and necessary, but it shows why coalitions, cooperation and shared rules are vital.
Why the Expansive State returned
The Limited State delivered growth, but it also deepened inequality, allowed concentrations of economic power, and left dangerous regulatory gaps. Financial crises, the pandemic, energy shocks and the rise of digital gatekeepers exposed these flaws. Long global supply chains created choke points. Dependencies became vulnerabilities. Many citizens, especially those left behind, lost faith in the old order.
Governments are responding with a more hands-on approach. The EU’s Digital Markets Act and Digital Services Act, US export controls, and vast subsidies for semiconductors and clean energy all reflect this new reality. The Expansive State can bring benefits by reining in entrenched market power and tackle risks that spill across borders, but it also generates new frictions, trade disputes and regulatory clashes.
The battle for regulatory sovereignty will shape the next decade
Where does this leave us?
We are now in a contest over who writes, applies and projects rules. The US once pioneered extraterritoriality to protect its consumers. Today, it resists the same approach when others use it to hold American firms to account or to set limits on their actions.
This is no longer just a fight over tech or tax. It marks a broader shift away from shared rules and towards raw bargaining power, often backed by coercion.
The battle for regulatory sovereignty will shape the next decade. If fought only with power, smaller states and ordinary users will lose out. If grounded in rules – or even some shared understanding – there remains hope.
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Prof Marek Martyniszyn is a Professor of Competition Law and Policy in the School of Law at Queen's University Belfast
The views expressed here are those of the author and do not represent or reflect the views of RTÉ
