In brief

  • A recent US Second Circuit Court of Appeals decision has concluded that corporations cannot be sued in the US under the Alien Torts Statute for alleged violations of customary international law.
  • The decision will make it more difficult time to sue companies in the United States over human rights abuses overseas. Corporations should not however assume that they can operate with ‘immunity’.
  • The decision may be appealed to the US Supreme Court, or Congress may amend the ATS.
  • Individual officers or employees of a corporation may also still be sued under the ATS, and other statutes still operate to enforce corporate obligations under customary international law.  

Background

The Alien Torts Statute (ATS)1 is a United States law which grants federal district courts jurisdiction over:

  1. tort actions
  2. brought by aliens (only)
  3. for violation of the law of nations (also called ‘customary international law’) and treaties of the United States.

It is a jurisdictional provision which is ‘unlike any other in American law and of a kind apparently unknown to any other legal system in the world’2.

In essence, it allows ‘aliens’ ie non-United States citizens, to bring suits in United States courts against foreign entities for actions in breach of customary international law. The breaches of customary law which have been the focus of such suits have been international crimes universally recognised by the nations of the world including such crimes as war crimes, crimes against humanity (such as genocide) and torture.

The ATS was first passed in 1789 and after lying largely dormant for over 170 years, the ATS has given rise to an abundance of litigation since the 1980s. It has been particularly used to target a number of large US companies engaged in resources exploration and production projects, particularly in partnership with foreign governments, for alleged international crimes committed overseas.

Court’s finding

A recent decision of the Second US Circuit Court of Appeals3 has limited the scope of application of the ATS. The plaintiffs, who were residents of Nigeria, alleged that the defendants, Shell companies, aided and abetted the Nigerian government in committing human rights abuses directed at the plaintiffs.

The court dismissed the claim on the basis that ATS claims could only be filed against individuals and not companies.

The court reached that decision on the basis that the clear preponderance of international jurisprudence has been to the effect that offences against customary international law for violations of human rights can be charged against states and against individual men and women but not against juridical persons such as corporations. Accordingly, the Court concluded that claims brought by the plaintiffs under the ATS against corporations for alleged violations of customary international law fell outside the jurisdiction provided by the ATS.

In a strong dissent, Justice Leval stated that the ‘majority opinion deals a substantial blow to international law and its undertaking to protect fundamental human rights’. According to Justice Leval, the effect of the majority’s decision was that ‘one who can earn profits by commercial exploitation of abuse of fundamental human rights can successfully shield those profits from victims’ claims for compensation simply by taking the precaution of conducting the heinous operation in the corporate form’.

What does it mean for corporations?

Plaintiffs will have a more difficult time suing companies and other multinational groups in the United States over human rights abuses overseas. Corporations should not however assume that they can operate with ‘immunity’ or that they are free from potential suit.

The US Supreme Court has not yet ruled on the issue of corporate liability under the ATS and it may well do so given the importance of the issues at stake and the dissenting opinion of Justice Leval. It is also possible that Congress may amend the ATS to give courts jurisdiction over corporations. Companies should monitor both developments closely.

In addition, the majority expressly stated that the decision does not foreclose suits under the ATS against a corporation’s employees, managers, officers, directors or any other person who commits or purposefully aids and abets, violations of international law.

Nor does the opinion limit or foreclose corporate liability under any body of law other than the ATS, including the domestic statutes of other states.