On May 17, 2016, the U.S. Senate passed the "Justice Against Sponsors of Terrorism Act," or "JASTA," by unanimous voice vote. As detailed below, the bill would both (i) expand civil liability for entities with colorable links to designated terrorist organizations (e.g., Hamas or Hezbollah), potentially including indirect links via charitable organizations, and (ii) significantly curtail the ability of sovereign states and their agencies and instrumentalities to deploy sovereign immunity principles in defending themselves against such civil liability. While media reports have focused on the bipartisan legislation’s apparent intent to allow victims of the September 11 terrorist attacks and their families to bring suit for damages against Saudi government officials, JASTA, if enacted, would have potentially far-reaching consequences for Allen & Overy’s corporate, financial institution, and sovereign clients in the Middle East and around the world.
To become law, JASTA must first be passed by the U.S. House of Representatives and signed by President Obama, whose administration has threatened to veto the bill. Although House Speaker Paul Ryan (R-WI) has previously expressed reservations about JASTA and has not yet made any moves to bring the bill to a vote on the House floor, JASTA has collected a bipartisan group of over 30 co-sponsors in the House membership, including leadership figures in both parties. The bill is currently under consideration by the House Committee on the Judiciary. Senator Charles Schumer (D-NY), the likely future leader of the Senate Democratic caucus, has stated that he would vote in favor of a rare veto override (requiring a two-thirds majority of the Senate) in the event that President Obama were to exercise his veto authority, which could entice sympathetic Republicans to press for a vote. Thus, there is a significant likelihood that JASTA will become law in the near future.
JASTA: What It Proposes and Who Should Care
If enacted, JASTA would "provide civil litigants with the broadest possible basis" to seek relief against "persons, entities, and foreign countries, wherever acting and wherever they may be found, that have provided material support, directly or indirectly, to foreign organizations or persons that engage in terrorist activities against the United States." In practice, JASTA would be of particular concern to (i) corporations and financial institutions and (ii) sovereign states and their agencies and instrumentalities.
Corporations and Financial Institutions
Under current law, the U.S. Anti-Terrorism Act (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 would substantially increase the scope of the ATA by 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 a 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.
These changes would embrace and enlarge 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 with financial or other ties to entities connected to terrorism. Past ATA claims have 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 would increase plaintiffs’ chances of success against defendant corporations or financial institutions.
JASTA significantly expands both the personal jurisdiction for ATA claims and also imposes retroactive liability for acts occurring on or after September 11, 2001. JASTA would also grant U.S. federal district courts personal jurisdiction of any person who commits or aids and abets an act of international terrorism or otherwise sponsors such act to the maximum extent permissible under the U.S. Constitution. The revisions would apply to any civil action (i) pending on, or commenced on or after, JASTA’s enactment date 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.
Sovereign States and Their Agencies and Instrumentalities
At present, sovereign states and their agencies and instrumentalities are theoretically subject to ATA claims; in practice, such entities currently have the benefit of sovereign immunity from civil suit under the U.S. Foreign Sovereign Immunities Act (the "FSIA").
JASTA would amend the FSIA to eliminate immunity for acts conducted by foreign government officials in an official capacity and would also extend the scope of the FSIA to cover conduct occurring principally outside the United States. 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 entity, including state-owned enterprises and other state special purpose entities.
Late amendments to the version of JASTA passed by the Senate would remove foreign states’ immunity from damages claims in terrorism cases, provided that the claim centers on an alleged tortious act of a state official committed within the scope of employment. Although negligence is explicitly excluded by the statute, JASTA would extend liability to foreign sovereigns in cases of intent or gross negligence.
The Senate amendments to JASTA also 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. As a political matter, the inclusion of this provision seems calculated to respond to those, including President Obama and Speaker Ryan, who have expressed skepticism of JASTA’s potential effects on U.S. diplomatic affairs, thus potentially increasing the probability that the bill may become law.