The U.S. Supreme Court case American Railroad Company of Porto Rico v. De Castro in 1906 revolved around the issue of whether a Puerto Rican court had jurisdiction over an American company operating on the island. The plaintiff, De Castro, was injured while working for the railroad company and sought compensation under local law. However, the defendant argued that as a federally chartered corporation it was immune from such claims under Puerto Rican law. The Supreme Court ruled in favor of De Castro, stating that although federal laws apply to territories like Puerto Rico, this does not exempt corporations from adhering to local laws unless they directly conflict with federal statutes or constitutional provisions. Therefore, even though the railroad company was incorporated by an act of Congress and operated under its authority in Puerto Rico - which at that time was considered foreign territory - it still had to comply with applicable local regulations regarding worker's compensation. This decision affirmed both territorial courts' jurisdiction over federally created entities operating within their boundaries and workers' rights to seek redress for injuries sustained on job sites irrespective of employers’ corporate status.

In the dissenting opinion for the American Railroad Company of Porto Rico v. De Castro case, it was argued that Puerto Rico should be considered a foreign territory in relation to tariff laws. The dissenting justices held that Congress had no constitutional authority to impose internal taxes on goods transported between U.S states and unincorporated territories like Puerto Rico. They contended that such taxation violated principles of uniformity as required by the Constitution's Tax Uniformity Clause, which mandates equal treatment across all jurisdictions under U.S control. Furthermore, they disagreed with the majority's interpretation of Downes v. Bidwell (1901), arguing instead that this precedent established only Congress' power over customs duties in these territories - not its ability to levy direct taxes thereon without violating constitutional norms.