On September 28, 2016, the U.S. Congress voted to override President Barack Obama’s veto of the "Justice Against Sponsors of Terrorism Act," or "JASTA," by wide margins in both the Senate and the House of Representatives. As a result, JASTA is now the law of the land in the United States, with two key effects. First, JASTA broadens the types of civil claims that may be brought in U.S. court for acts of international terrorism under the Anti-Terrorism Act or "ATA." Second, and more controversially, JASTA creates a new exception to sovereign immunity under the federal Foreign Sovereign Immunities Act ("FSIA") for situations in which ATA claims are brought against foreign governments or individual foreign officials in relation to acts of terrorism that cause injury in the United States. These new rules apply to all terrorism claims currently pending or on appeal in U.S. court, as well as any new claims that may be brought.
Consideration, Veto, and Override of JASTA
As noted in Allen & Overy’s June 2016 client alert, JASTA was passed by the Senate in June by unanimous voice vote and then moved to consideration in the House. The House held Committee hearings on JASTA during the summer, but no amendments were made before the bill was brought to the House floor on September 9 and again passed by a unanimous voice vote.
JASTA was formally presented to President Obama on September 12. While the White House had maintained a consistent but muted opposition to the bill through the legislative process, the President outlined detailed arguments against the bill in the message accompanying his veto on September 23. In addition to the need for comity in treatment of foreign sovereigns, the White House emphasized the potential conflicts that the bill would create between the federal courts and the executive branch in the sensitive area of counterterrorism policy, such as the executive authority to designate “State Sponsors of Terror.” President Obama anticipated that the use of such claims might ensnare "even our closest partners," including "for example, the country where an individual who later committed a terrorist act traveled from or became radicalized," and that the threat of U.S. court -ordered discovery might deter needed information-sharing in counterterrorism efforts with these allies.
Despite these objections, veto override votes in the Senate and House occurred in swift succession, and the President’s veto was reversed by substantial margins. At 97 to 1, the vote to override the veto in the Senate was nearly unanimous, with only Minority Leader Harry Reid, the top Democrat in the chamber, voting to sustain. The vote in the House was 348 to 77, substantially exceeding the 290 votes needed to override. While Congressional leaders have already raised the possibility of revisiting the issue with additional legislation after the election, at present, JASTA has been duly enacted into law.
JASTA: Its Effect and Who Should Care
As noted in Allen & Overy’s June 2016 update, JASTA (i) expands civil liability for entities with colorable links to U.S. designated terrorist organizations, potentially including indirect links via charitable organizations, and (ii) significantly curtails the ability of sovereign states and their agencies and instrumentalities to invoke sovereign immunity principles in defending themselves against such civil liability.
While media reports have focused on the intent of the bill’s supporters to allow victims of the September 11 terrorist attacks and their families to bring suit for damages against Saudi Arabian government officials, JASTA will have potentially far-reaching consequences for corporations, financial institutions, and sovereign states around the world.
Corporations and Financial Institutions
The ATA creates a private right of action for U.S. nationals (and their estates, survivors, and heirs) injured by reason of an act of international terrorism. The ATA provides that successful plaintiffs may recover treble damages against defendants as well as legal costs, including attorney fees.
JASTA widens the scope of the ATA by further imposing liability on "any person who aids and abets, by knowingly providing substantial assistance, or who conspires with [a] person" who commits an act of international terrorism, where such act is committed, planned, or authorized by a foreign terrorist organization (as designated by the U.S. Department of State) and injures the person or property of U.S. persons or entities. To establish a civil conspiracy, plaintiffs would have to show, inter alia, that the defendant was "generally aware" of its role as part of an overall agreement to participate in illegal or tortious activity. For aiding and abetting liability, the focus is rather on whether the defendant was knowing in the provision of substantial assistance to the designated terrorist entity. In accordance with general principles of U.S. tort law, reckless indifference as to the identity or tortious intent of a counterparty may be enough to satisfy the mental state requirement in certain circumstances, even where actual knowledge cannot be proven.
These changes embrace and enlarge upon the most of expansive views of ATA liability voiced by U.S. courts to date, bringing a significant increase in the litigation and reputational risks facing corporations and financial institutions that may have relationships that could be construed as the provision of assistance to entities connected to terrorism. ATA claims have previously been brought, for example, against financial institutions or corporations doing business with Hamas-linked charitable organizations, with limited success. JASTA’s amendments to the ATA increase plaintiffs’ chances of success against defendant corporations or financial institutions.
JASTA applies to any civil action (i) pending on, or commenced on or after, JASTA’s enactment date of September 28, 2016, and (ii) arising out of an injury to a person, property, or business on or after September 11, 2001, thus significantly increasing the applicable statute of limitations. This imposition of retroactive liability may raise constitutional concerns.
Sovereign States and Their Agencies and Instrumentalities
While sovereign states and their agencies and instrumentalities are theoretically subject to ATA claims, in practice, these entities enjoy sovereign immunity from civil suit under the FSIA. The FSIA provides the exclusive rules under which a U.S. court may exercise jurisdiction over a foreign sovereign entity or its assets, including both "jurisdictional immunity" (i.e., protection from the subject matter jurisdiction of a U.S. court over the foreign state as a party) and "execution immunity" (i.e., protection of the foreign state’s assets from attachment for a previously rendered judgment). As the FSIA defines "foreign state" to include both "political subdivisions" and "agencies or instrumentalities" of a foreign state, the statute’s sweep includes immunity for many types of entities, including state-owned enterprises and other state special purpose entities.
Where an act of international terrorism occurs in the United States and causes injury to persons or property in the United States, JASTA creates a new exception to foreign states’ immunity. This exception allows a foreign sovereign to be haled into U.S. court for damages claims for acts of terrorism in the United States, where (i) those claims are based on an alleged tortious acts of a state official within the scope of employment and (ii) the alleged conduct is grossly negligent or intentional, not merely negligent. Actions taken by employees outside the scope of employment do not fall within the scope of JASTA’s amendments to the FSIA. The line between “gross negligence” and “negligence” is imprecise and highly dependent on the facts and circumstances of particular cases.
Although the attack must occur at least in partly in the United States for the FSIA exception to apply, the tortious conduct on which the claim is based may occur anywhere in the world. Thus, the expansion of the ATA to cover the aiding and abetting of terrorist actors could ensnare foreign sovereigns whenever that actor goes on to commit violent acts in the United States. While retroactive liability for the September 11 attacks is understood to be the principal target of this measure, a similar fact pattern could conceivably arise out of more recent terrorist attacks in the United States, such as the San Bernardino and Orlando shootings. Much of the concern expressed by the Obama Administration over JASTA stems from the fact that generous U.S. pleading standards could make it easy for plaintiffs to allege claims against the authorities of U.S. allies in which perpetrators of terrorism lived or through which they transited prior to committing attacks in the United States.
JASTA, however, did not create a new exception to execution immunity under the FSIA that corresponds to the new exception from jurisdictional immunity. Thus, even assuming a party can use the new terrorism exception to jurisdictional immunity to obtain a judgment against a sovereign entity, it will not necessarily be able to execute on sovereign assets within the United States to satisfy the judgment. Under the FSIA, U.S. property of foreign states is immune from attachment and execution unless an exception applies (e.g., waiver of immunity or use of the property in the commercial activity on which the relevant claim is based). The property of state agencies or instrumentalities of a foreign state engaged in commercial activity in the United States also enjoys attachment immunity, albeit subject to slightly broader exceptions than those available to state entities themselves.
Furthermore, JASTA has no effect on the ability of parties to seek pre-judgment attachment of (or to “freeze”) the assets of foreign sovereign entities. Obtaining pre-judgment attachment of assets typically presents a high bar for plaintiffs in the United States, even in cases where a sovereign entity is not involved, and foreign sovereign assets enjoy additional protection from pre-judgment attachment under the FSIA. Not only would a plaintiff seeking pre-judgment attachment against any foreign sovereign entity need to establish the applicability of a general exception to FSIA execution immunity, but—in the case of foreign state—the plaintiff additionally would need show that the foreign state had an explicitly or constructively waived its immunity to prejudgment attachment.
Responding to the objections previously raised by the White House, JASTA does include a provision allowing the U.S. Attorney General to intervene in civil cases where a foreign state is subject to the jurisdiction of a federal court under the terms of JASTA. Such a stay may be granted by the court if the U.S. Secretary of State certifies that the United States is engaged in "good faith discussions concerning the resolution of the claims against the foreign state, or any other parties." Media commentators have questioned whether this stay provision could provide a "back door" for quashing politically or diplomatically controversial claims. However, the provision mandates that the State Department re-certify the existence of such "good faith discussions" every 180 days, meaning that the clause could, in practice, be used by the government as a lever to compel settlement.
While it remains to be seen how courts will apply JASTA to terrorism-related litigation in the months and years to come, there are reasons to believe that its impact will be wide-ranging, greatly reducing predictability of the outcome of such claims. The increased scope of ATA liability—paired with the curtailed immunity protections for sovereign entities—could give rise to significant litigation risk and the attendant reputational risk for any entity colorably linked to "substantial assistance" of an act of international terrorism. Congress’s stated intent to "provide civil litigants with the broadest possible basis" to seek relief against "persons, entities, and foreign countries" that support terrorism may encourage courts to interpret the new provisions broadly. Corporates, financial institutions, and sovereign states are encouraged to monitor the development of JASTA-related claims closely.