Similarly, a Ukrainian tycoon, Rinat Akhmetov, has sued in London against a Ukrainian newspaper, the Kyiv Post, owned by an American, even though it's not published in the UK, on the grounds that 100 subscribers are located in Britain. Akhmetov has also successfully sued Obozrevatel (Observer), a Ukrainian Internet news site that's not even in English, in the UK.
I think New York has the right idea. Better yet would be if Britain reforms its libel and insult laws.
UPDATE (May 23, 2008): The Crown Prosecution Service has declined to prosecute the boy with the "cult" sign, stating that "Our advice is that it is not abusive or insulting and there is no offensiveness (as opposed to criticism), neither in the idea expressed nor in the mode of expression." Yet abuse, insult, and offense should not be the standard in any case.
Ed Brayton has now commented on that story at Dispatches from the Culture Wars.