Today, the Supreme Court issued its long-awaited decision in Kiobel v. Royal Dutch Petroleum (pdf) on the scope of the Alien Tort Statute (“ATS”), 28 U.S.C. § 1350, a law that creates federal jurisdiction for civil actions brought by aliens for torts committed in violation of the law of nations or a U.S. treaty. In Kiobel, the Court held that presumption against applying federal statutes extraterritorially applies to the ATS, and affirmed the dismissal of an ATS complaint alleging violations of international law in Nigeria. Kiobel thus is a very welcome development for businesses that have been targeted by lawsuits under the ATS, an increasingly common vehicle for unjustified class actions in recent years.

See additional discussion below the fold.

Kiobel’s resolution of a rather basic question about the scope of the ATS was a long time coming. The ATS was enacted in 1789, but was overlooked until human-rights activists dusted it off in the late 1970s to bring lawsuits against a few war criminals and international human-rights violators. Then, in the last decade or so, some elements of the plaintiffs’ bar noticed that the ATS provided a vehicle for packaging large damages claims as campaigns for human rights.

This cynical strategy was straightforward. One simply needed to trawl through the newspapers for a story involving human rights abuses abroad and then file a class action against any companies doing business in that country, alleging that their workaday transactions in fact aided and abetted the human rights abuses in some far-fetched fashion. These suits raise complex questions and—because of their inflammatory allegations—enable plaintiffs to drum up substantial negative publicity. Combine the potentially significant brand damage with the fortune it costs to conduct discovery in remote corners of the globe, the gargantuan threatened liability, and the fact that early ATS cases have dragged on for a decade, and you’ve got the perfect recipe for coercing a settlement of meritless claims.

Unsurprisingly, plaintiffs have filed dozens and dozens of ATS class actions based on conduct occurring in more than 60 countries. The pace of filings has slowed recently as appellate courts have grappled with some of the fundamental issues raised by these cases, such as whether the fact that international law doesn’t recognize corporate liability and has not reached a consensus as to civil aiding-and-abetting liability precludes ATS suits against corporations for allegedly aiding and abetting human rights violations. (Mayer Brown has filed briefs on behalf of defendants and amici supporting defendants in a significant number of ATS cases.)

The Supreme Court initially granted certiorari in Kiobel last term to answer some of these questions. The plaintiffs in Kiobel are Nigerians who sued Dutch, British, and Nigerian corporations engaged in oil exploration in Nigeria for allegedly aiding and abetting the Nigerian government in violently suppressing protests against oil exploration. The Second Circuit held that the ATS claims should be dismissed because “no corporation has ever been subject to any form of liability under the customary international law of human rights,” and, therefore, the ATS “simply does not confer jurisdiction over suits against corporations.”

During oral argument in the Supreme Court, however, Justice Alito asked the parties whether the ATS applies to conduct that occurred abroad. That led to additional briefing of that question and the case being reargued this term.

Today, the Court issued its decision, which focused solely on the extraterritoriality issue. Writing for the five-justice majority, Chief Justice Roberts explained that nothing in the text or history of the ATS overcomes the presumption against construing statutes to reach “conduct in the territory of another sovereign.” Indeed, he pointed out that the ATS was enacted in order to avoid diplomatic incidents—the law was inspired by two early incidents in which foreign ambassadors were assaulted on U.S. soil but had no domestic forum for seeking relief—but allowing ATS suits to be based on conduct occurring abroad could “generate” “diplomatic strife.”

The majority went on to explain that “all the relevant conduct” in Kiobel “took place outside the United States,” and so the case should be dismissed. The majority added that “even where the claims touch and concern the territory of the United States, they must do so with sufficient force to displace the presumption against extraterritorial application. Corporations are often present in many countries, and it would reach too far to say that mere corporate presence suffices.”

The majority’s opinion should finally close the door on lawsuits where the harm from the violation of international law is inflicted in a country other than the U.S. But the plaintiffs’ bar is already arguing that Kiobel’s holding should be read much more narrowly because Justice Kennedy, who joined the majority opinion, also wrote a concurrence noting that “the proper implementation of the presumption against extraterritorial application may require some further elaboration and explanation” in future cases.

Defendants should brace themselves for a fight about the meaning of Kiobel in the lower courts. But the outcome of that fight should be clear: Nothing in Justice Kennedy’s concurrence suggests that he would permit claims based on violations occurring outside the United States—he refers only to cases not covered by “the reasoning and holding of today’s case.” And the majority’s reasoning plainly precludes all claims where the conduct allegedly violating international law occurred outside the United States. Indeed, it is precisely those claims that risk creating diplomatic tensions because they would interfere with the ability of foreign sovereigns to regulate conduct occurring within their borders.

In the few short hours since the decision was issued, the plaintiffs’ bar has already advanced two lines of attack. First, that Kiobel applies only to claims against non-U.S. corporations; businesses domiciled in the U.S. supposedly remain subject to suit for claims based on non-U.S. conduct. But that view gained support from only four Justices: Justice Breyer, joined by Justices Ginsburg, Sotomayor, and Kagan. Rather than apply the presumption against extraterritoriality to the ATS, they argued that principles of foreign relations law permitted ATS actions based on conduct outside the United States where “the defendant is an American national” or “the defendant’s conduct substantially and adversely affects an important American national interest, and that includes a distinct interest in preventing the United States from becoming a safe harbor (free of civil as well as criminal liability) for a torturer or other common enemy of mankind.”

The majority’s focus on the site of the “violation of the law of nations” precludes the imposition of liability on U.S. companies for violations occurring outside the U.S. Indeed, the majority framed the question as whether the ATS permits lawsuits “for violations of the law of nations occurring within the territory of a sovereign other than the United States” and it answered that question “no.” Nothing in Justice Kennedy’s concurrence indicates the slightest bit of support for Justice Breyer’s approach.

Even if Justice Kennedy’s concurrence could be read as a limitation on the scope of the majority opinion, which it expressly is not, it would not open the door for continuation of aiding-and-abetting claims against U.S. businesses. Justice Kennedy refers to cases with “allegations of serious violations of international law principles,” and aiding-and-abetting claims against companies, which are not even permitted under international law, plainly do not fall within that category.

An exception for claims against U.S.-domiciled companies also would make no sense. In our globalized economy, companies may locate in any of a number of different countries; if the price of a U.S. domicile were subjecting the business to numerous ATS class actions, any reasonable chief executive would have to consider relocating to another country. That would hardly be a sensible or beneficial result for the U.S. economy.

Second, the plaintiffs’ bar is claiming that if the conduct giving rise to the ATS claim is somehow tied to the U.S.—such as through an allegation that it was approved or tolerated by senior executives of the company who were located in the U.S.—then there is a sufficient connection with the U.S. to allow the claim to go forward. The flaw in that argument is that the claim against the company will in virtually every case be a claim for aiding and abetting primary wrongdoing by agents of a foreign government (because virtually all international-law norms apply only to government actors). The international-law violation therefore will have occurred outside the U.S., and the fact that there is alleged to be some tie between the U.S. and the aiding-and-abetting conduct will not be sufficient to permit an ATS claim.

Indeed, this argument is very similar to one rejected by the Court in Morrison v. National Australia Bank Ltd., 130 S. Ct. 2869 (2010), in which the Court held that federal securities laws do not apply extraterritorially. There, the plaintiffs contended that because some of the conduct underlying the alleged securities fraud occurred in Florida, permitting those who purchased securities outside the U.S. to invoke federal law did not constitute the extraterritorial application of that law. The Court rejected that argument, holding that because the “focus of congressional concern” in enacting the statute in question, Section 10(b) of the Securities Exchange Act, was fraud in connection with the purchase and sale of securities rather than “deceptive conduct” in the abstract, the purchase and sale must occur within the United States.

Here, where the focus of the ATS is violation of international-law principles, the international-law violation must occur within the U.S. Indeed, it is no coincidence that Chief Justice Roberts cited Morrison in explaining that “even where the claims touch and concern the territory of the United States, they must do so with sufficient force to displace the presumption against extraterritorial application.” The effort by plaintiffs’ lawyers to bootstrap an ATS claim on the basis of peripheral conduct in the U.S. is doomed to failure.

But it is likely that another few rounds of litigation in the lower courts, and perhaps even in the Supreme Court, may be necessary to put these spurious arguments to rest.

Finally, we are likely to hear complaints in the coming days about the Court’s supposed “judicial activism” in applying the presumption against extraterritoriality and limiting the statute’s reach to the conduct within the U.S. But this is a statute that was enacted in 1789 and not invoked until it was revived in 1980 by a federal court of appeals (with the support of the Carter Administration) as a vehicle for the pursuit of alleged human-rights violators from anywhere in the world. The activism here was the creation of this new form of liability in the first place—without any clear direction from Congress about how liability should be configured, and without any supervising role for the Executive Branch, despite the obvious diplomatic tensions that result from a broad cause of action under which U.S. courts would adjudicate the “legality” under vague international-law standards of actions by governments and private parties throughout the world.

Those who believe such a cause of action is needed— in addition to the one Congress created in 1991 by enacting the Torture Victim Protection Act, which provides a remedy for victims of torture—would be well-advised to go to Congress. That body—because it acts holistically and does not proceed on an issue-by-issue basis as do the courts—is far better equipped to balance all of the relevant policy concerns and, if the case for new liability is made, construct a cause of action that provides appropriate roles for the U.S. courts, the Executive Branch, and the courts and governments of other countries. Continuing to try to convince the U.S. courts to seize that role unbidden makes no sense as a policy matter and is doomed as a matter of legal principle.