U.S. Supreme Court Excludes Foreign Companies From Alien Tort Statute
On 24 April 2018, the U.S. Supreme Court (the Supreme Court) handed down its judgment in Jesner v. Arab Bank, holding that foreign (i.e. non-U.S.) companies cannot be sued under the Alien Tort Statute (the ATS). The case builds on the Supreme Court’s judgment in Kiobel v. Royal Dutch Shell, in which the Supreme Court held that U.S. federal courts did not have jurisdiction under the ATS to hear claims for violations of international law that took place wholly outside the territory of the United States. After Kiobel, however, the question of whether the ATS also applied to corporations remained open. This question has now been settled in the present case.
The ATS (which is provided for by the Judiciary Act of 1789) allows foreign citizens to seek remedies in U.S. courts for civil wrongs committed (i) outside the United States, and (ii) “in violation of the law of nations or a treaty of the United States“. Historically, the objective of the ATS for the United States was to avoid diplomatic tensions by ensuring the availability of a federal forum where the failure to provide one might cause another nation to hold the United States responsible for an injury to a foreign citizen. Most recently, it has been used by non-U.S. citizens to sue in tort for damages arising from human-rights violations.
The applicants in the case at hand were a large group of foreign citizens who had suffered injuries (including the loss of family members) in terrorist attacks in Israel and Palestine from 1995-2005. They claimed that the Arab Bank (the Defendant), a company headquartered in Jordan, was at least partly liable for these injuries as it held accounts for individuals and organisations that supported and funded Hamas and other terrorist organisations. They claimed jurisdiction in the United States through the alleged activities of the Defendant’s New York branch in clearing transactions and laundering money for a U.S.-based charitable organisation with links to Hamas.
Writing for the majority, Justice Kennedy first recalled the history of the ATS (which dates back to 1789) and stressed that “over 190 years or so after its enactment, the ATS was invoked but a few times“. Justice Kennedy then applied the two-part test set out in Sosa v. Alvarez-Machain (one of the few cases in which the Supreme Court applied the ATS):
– First the Supreme Court had to ask whether the law of nations imposes liability on corporations for human-rights violations committed by its employees;
– Second, the Supreme Court must ask whether it has authority and discretion in an ATS suit to impose liability on corporations without a specific direction from Congress to do so.
In order to answer the first question, Justice Kennedy relied on the jurisdictional reach of recent international tribunals, such as the international criminal tribunals for Rwanda and Yugoslavia and the Rome Statute of the International Criminal Court whose jurisdiction is limited to natural persons Based on those examples, Justice Kennedy concluded that it did not follow “that current principles of international law extend liability – civil or criminal – for human-rights violations to corporations or other artificial entities“. In any event, Justice Kennedy found that there was “at least sufficient doubt on [this] point to turn to Sosa‘s second question“.
Justice Kennedy then turned to the second part of the Sosa test and analysed the proper division of powers between the Supreme Court and Congress in recognising new causes of action. On this point, he concluded that – given the foreign policy considerations of the ATS – the extension of liability under the ATS to foreign corporations was not a matter for the Supreme Court. Instead, it should be a matter for the legislative branch of government*.
At the end of the day, the Supreme Court held that the ATS (in its current form) precludes the possibility of foreign corporations being liable for harmful activity committed outside the U.S.
It is worth noting that the Supreme Court decided the case by a narrow 5:4 majority, with a number of partially concurring and dissenting opinions. In particular, the minority (led by Justice Sotomayor) criticised the broad exclusion of corporate liability as being disproportionate. It remains to be seen whether the ATS may nonetheless apply to U.S.-domiciled corporations in certain – narrower – circumstances.
* This view clearly echoes the late Justice Scalia’s dissenting opinion in Sosa v. Alvarez-Machain: “We Americans have a method for making the laws that are over us. We elect representatives to two Houses of Congress, each of which must enact the new law and present it for the approval of a President, whom we also elect. For over two decades now, unelected federal judges have been usurping this lawmaking power by converting what they regard as norms of international law into American law. […] This Court seems incapable of admitting that some matters – any matters – are none of its business”.