Briefing
Landmark Supreme Court Opinion Shuts Door to ATS Suits Against Foreign Corporations
Introduction
Since the “rediscovery” of the U.S. Alien Tort Statute (ATS) in 1980, and the subsequent growth of ATS litigation seeking compensation in U.S. courts for human rights abuses committed abroad, a key question facing litigants in cases brought under the ATS has been whether or not plaintiffs can bring international law claims against corporate defendants, as opposed to only against individuals. Several years ago, the U.S. Supreme Court granted certiorari in Kiobel v. Royal Dutch Petroleum to decide this question, only to resolve the case by applying the presumption against extraterritoriality, leaving plaintiffs and defendants alike uncertain as to the scope of corporate liability under the ATS. Last week, nearly five years to the day since Kiobel was decided, the Supreme Court issued a 5-4 opinion in Jesner v. Arab Bank Plc., foreclosing foreign plaintiffs’ ability to bring human rights claims against foreign corporations under the ATS. The opinion promises to reshape the landscape of human rights litigation in the United States and could have a substantial impact on lawsuits brought by terror victims.
Key Takeaways
- The ATS does not provide jurisdiction for U.S. courts to adjudicate claims brought against foreign corporate entities . . .
- . . . however, claims may be brought against corporate directors, officers and employees, who may be the beneficiaries of indemnification arrangements and/or corporate insurance policies.
- Notwithstanding the ability to bring human rights claims against corporate directors and officers under the ATS, we expect that human rights plaintiffs will also consider bringing human rights claims outside the United States, while seeking broad U.S.-style discovery from corporate defendants pursuant to Section 1782.
- Meanwhile, the Supreme Court’s opinion appears to leave open the question of whether claims can be brought under the ATS against U.S. corporate entities, although the Court’s reasoning and the views of the plurality with respect to the question of corporate liability under international law strongly suggest that such claims are unlikely to succeed in the absence of congressional action.
Background
As previously discussed here and here, Jesner involved claims brought against Jordan-based Arab Bank by U.S. and non-U.S. nationals injured by, or related to victims of, terrorist attacks in Israel, the West Bank and Gaza. In essence, the plaintiffs alleged that Arab Bank had facilitated terrorist attacks by Hamas and the Islamic Jihad by maintaining accounts linked to those organizations, and making “support” payments to family members of individuals engaged in terrorism. Plaintiffs alleged, inter alia, claims under the ATS, a law enacted more than 200 years ago that permits non-U.S. citizens to pursue civil claims in U.S. courts for a “violation of the law of nations or a treaty of the United States.” 28 USC § 1350.
Relying on previous Supreme Court precedent in Sosa v. Alvarez-Machain, which held that an action brought pursuant to the ATS had to “rest on a norm of international character accepted by the civilized world and defined with . . . specificity,” the defendant argued that a corporate entity cannot be held liable under the ATS because international law does not sufficiently recognize the concept of corporate liability. The Second Circuit Court of Appeals accepted the defendant’s argument. However, other courts in the United States have concluded otherwise, holding that corporations can be held liable for tort claims under international law. The Supreme Court granted certiorari to resolve the conflict.
The Supreme Court’s Decision
The Supreme Court affirmed the Second Circuit’s judgment. In a fragmented decision, a majority of the Justices held the plaintiffs had failed to sufficiently demonstrate that “international law imposes liability on corporate entities,” and concluded that the question of corporate liability for international torts must be determined by Congress, not by the Courts.
In so holding, the plurality relied on World War II-era jurisprudence in what has come to be known as the Farben case, where U.S. military authorities prosecuted the directors of IG Farben, a privately held German chemical company that manufactured, among other products, Zyklon B, the poison gas used in Nazi extermination camps. Noting that, while the case has become known as the “Farben” case, it was actually brought against individual directors of the corporate entity rather than the corporate entity itself (which was not held liable), the Supreme Court concluded that international law historically did not recognize corporate liability in this context. Similarly, the Supreme Court observed that statutes authorizing the “modern” international criminal law tribunals provide only for jurisdiction over natural persons.
The Supreme Court then held that the question of whether U.S. courts should sit in judgment over foreign corporations in adjudicating human rights claims was best left to Congress. Noting the Supreme Court’s “general reluctance to extend judicially created private rights of action,” a reluctance that extends “to the question [of] whether the courts should exercise the judicial authority to mandate a rule that imposes liability upon artificial entities like corporations,” the Court concluded that “[n]either the language of the ATS nor the precedents interpreting it supported” extending ATS liability to foreign corporate entities. In justifying this holding, the Supreme Court observed that “allowing plaintiffs to sue foreign corporations under the ATS could . . . discourage[] American corporations from investing abroad, including in developing economies where the host government might have a history of alleged human-rights violations.” Given the material policy considerations inherent in exposing foreign corporate entities to civil liability, the Court deferred to Congress the question of whether foreign corporations should be held liable.
Jesner’s Impact
While Jesner is unquestionably a “win” for international corporations, its ultimate impact is difficult to predict.
In focusing on the facts before them, the Justices did not address explicitly the question of whether domestic corporations can be sued under the ATS. However, the Supreme Court’s reasoning, as well as the conclusions of the three-Justice plurality concerning the treatment of corporate entities under international law, suggest that such claims may face an uphill climb.
On the other hand, while shielding foreign corporations from ATS liability, the Justices simultaneously drew a path for human rights activists by suggesting that they target the “human agents” of corporate conduct (i.e. corporate directors, officers and employees). And whereas plaintiffs may suspect that individuals lack the “deep pockets” and therefore decide not to bring ATS claims against these individuals, the existence of indemnification and litigation insurance policies may obviate this concern. Thus, the Jesner decision may not so much end human rights litigation under the ATS as redirect it against corporate directors and officers. Whether those efforts succeed will depend in large part on plaintiffs’ ability to identify individual defendants over whom U.S. courts will have personal jurisdiction.
Leaving aside plaintiffs’ ability to bring actions against individuals, it is unlikely that Jesner will be the last word on corporate liability in the human rights space, or on the role of U.S. courts in adjudicating such claims. We are monitoring attempts by human rights activists to bring claims outside the United States, while seeking discovery in aid of those claims within the country. The Kiobel case provides a useful illustration. Kiobel involved claims brought by Nigerian plaintiffs against Royal Dutch Shell, alleging that Dutch, British and Nigerian corporations had aided and abetted the Nigerian Government in committing violations of the law of nations in Nigeria. In 2013, the Supreme Court applied the presumption against extraterritoriality to dismiss Kiobel, finding that the plaintiffs had failed to allege sufficient contacts with the United States. Undeterred, the plaintiffs brought a similar case in the Netherlands. But, unable to obtain discovery in the Netherlands, they also commenced Section 1782 proceedings seeking discovery (documents and copies of deposition transcripts) from Shell’s U.S. counsel. We expect future plaintiffs to employ a similar strategy, including potentially bringing claims against foreign affiliates of U.S. corporations in foreign jurisdictions, while seeking Section 1782 discovery from their corporate parents in the United States.
Whether U.S. courts ultimately permit such litigation tactics remains to be seen; what is clear is that Jesner changes, but does not eliminate, the risk of human rights litigation for corporate defendants. The dual prospect of foreign proceedings asserting human rights claims and claims that remain viable under U.S. law, whether brought against the corporation itself or its officers, directors or employees, strongly suggests the need for corporate entities to monitor carefully their compliance with evolving human rights standards and obligations.
