In a world of increasing interdependence, state sovereignty is inherently limited to protect the equal sovereignty of other states. However, identifying the precise limits states are subject to is a different question. It is traditionally answered by the Lotus principle, which consecrates a freedom to act unless explicitly prohibited by international law. The principle has rightly come under attack because of its incompatibility with the needs of a modern international community. This is usually followed by calls to disregard the precedential value of the PCIJ’s Lotus case on which it is based. This paper defends the Lotus judgment, but argues that the principle is the wrong reading of the majority opinion and that it fails to create the right conditions for inter-state co-existence and co-operation, which the majority identified as twin goals of international law. The paper then examines the meaning of ‘co-existence’ for contemporary international law, and weighs up the concept of ‘locality’ as an additional criterion that ought to be considered in the allocation of jurisdiction between different states.