Alien Tort Statute cannot be used to sue foreign corporations

Alien Tort Statute cannot be used to sue foreign corporations

Publication April 26, 2018

In an opinion issued on April 24, 2018, Jesner v. Arab Bank, PLC, a divided US Supreme Court held that litigants cannot use the Alien Tort Statute, 28 U.S.C. § 1350, to sue foreign corporations. The decision put an end to a circuit split among the Fourth, Seventh, Ninth, Eleventh, Second, and DC Circuits. The decision also reinforces the Court’s long-standing suspicion of ATS litigation and its narrowing of the ATS’s application.

Background

The Alien Tort Statute (“ATS”), which is also referred to as the “Alien Tort Claims Act,” was included as part of the Judiciary Act of 1789, but was rarely invoked by litigants during its first 200 years. ATS suits became more frequent following the Second Circuit’s decision in Filartiga v. Pena-Irala in 1991, which permitted plaintiffs to bring ATS actions based on modern human rights laws. However, the US Supreme Court clarified in its 2004 decision in Sosa v. Alvarez-Machain that the ATS did not create a separate cause of action for violations of the laws of nations, but instead gave courts jurisdiction over traditional law-of-nations cases. The Court stressed in Sosa that ATS litigation implicated serious separation-of-powers and foreign-relations concerns.

The Court doubled-down on its narrow reading of the ATS in its 2013 decision in Kiobel v. Royal Dutch Petroleum. The plaintiffs there alleged that a Nigerian company was complicit in human rights abuses by the Nigerian government, which resulted in death, torture, unlawful detainment, deprivation of property, or exile to the plaintiffs or their relatives. The plaintiffs argued that liability should attach to corporate actors, just as it would to private actors. The case was heard by the Second Circuit, which held that the ATS does not apply to corporations. Second Circuit Judge Leval, however, concurred and in a separate opinion disagreed with the proposition that a corporation was not subject to suit under the ATS. Later decisions in the Courts of Appeals for the Seventh, Ninth, and District of Columbia Circuits agreed with Judge Leval and held that corporations can be subject to suit under the ATS.

The Supreme Court in Kiobel did not answer the question of corporate liability under the ATS. Instead, it held that the presumption against extraterritorial application of US law applies to ATS claims. A plaintiff can only rebut the presumption with a claim that “touches and concerns” the US with “sufficient force.” Because the Kiobel plaintiffs did not meet that standard, the Court upheld the Second Circuit’s decision affirming dismissal of the case.

The Jesner case

The petitioners in Jesner were survivors, family members, and estate representatives of victims of terrorist attacks that occurred in Israel, the West Bank, and the Gaza Strip between 1995 and July 2005. The petitioners filed an ATS suit against Arab Bank in New York federal court alleging that the bank—incorporated and headquartered in Jordan—had provided various financial services to the terrorists organizations responsible for the attacks. The alleged services included processing wire transfers through its New York branch to terrorist groups. The trial court dismissed the ATS claims based on the Second Circuit’s holding in Kiobel. The Second Circuit affirmed, and the case was appealed to the Supreme Court.

The Supreme Court first noted that the “relatively minor connection between the terrorist attacks and the alleged conduct in the United States illustrates the perils of extending the scope of ATS liability to foreign multinational corporations[.]” The Court also noted that Jordan—like other foreign sovereigns whose nationals were sued in prior ATS cases—had raised objections to the ATS litigation on sovereignty grounds, which was causing “considerable diplomatic tensions” between Jordan and the US. This tension was the kind that Congress had meant to avoid when it enacted the ATS. Finally, the Court expressed doubt over the ability of courts to make policy judgments implicated by foreign corporate liability, and held that it should defer to the other political branches regarding judgments of that type.

Accordingly, the Court explained that “judicial deference requires that any imposition of corporate liability on foreign corporations for violations of international law must be determined in the first instance by the political branches of the Government.” The Court therefore held that “foreign corporations may not be defendants in suits brought under the ATS.”

Impact of decision

The Court’s decision in Jesner offers clarity for foreign corporations regarding their potential liability under the ATS. Foreign corporations are no longer at risk of being made defendants in ATS suits. The decision also demonstrates the Court’s continued unwillingness to expand the ATS and the Court’s deference to Congress regarding liability for human rights abuses.

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