On 24 April 2018, a divided United States Supreme Court (the “Court”) held that foreign corporations may not be defendants in suits brought under the Alien Tort Statute (the “ATS”).

The highly-anticipated ruling in Jesner et al. v. Arab Bank, PLC is notable as much for what it did not decide as for what it did decide. For a second time, the Court declined to decide whether corporations categorically can or cannot be sued under the ATS. The Court had left that question open in the 2013 case Kiobel v. Royal Dutch Petroleum. Presented with the question again in Jesner, the Court held that foreign domiciled corporations are not proper defendants in ATS cases but made no finding with respect to US domiciled corporations.

Justice Kennedy wrote a plurality opinion, which was joined by Chief Justice Roberts and Justice Thomas. Justices Alito and Gorsuch filed opinions concurring in the judgment, but not all aspects of the plurality opinion. Justice Sotomayor wrote a dissenting opinion, which was joined by Justices Ginsburg, Breyer and Kagan. The decision can be accessed here.

Background:

The Supreme Court’s decision in Jesner arises out of claims filed under the ATS alleging that the Arab Bank, PLC (the “Bank”), a Jordanian financial institution with a branch in New York, caused or facilitated acts of terrorism by Hamas between 1995 and 2005 in Israel, the West Bank and Gaza. The plaintiffs alleged that they or their family members were injured or killed by those terrorist acts. They claimed that the Bank was responsible for the deaths and injuries because it allegedly had used its New York branch to clear dollar-denominated transactions that benefited Hamas through the Clearing House Interbank Payments System (“CHIPS”) and to launder money for a Texas-based charity allegedly affiliated with Hamas.

The plaintiffs brought their claims under the ATS, a statute adopted during the first session of the First United State Congress in 1789. The ATS provides that federal courts have jurisdiction over “any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” 28 U.S.C. § 1350. The District Court dismissed the plaintiffs’ claims, finding that foreign corporations cannot be sued under the ATS. The Court of Appeals for the Second Circuit affirmed that decision and on Tuesday the Supreme Court followed suit.

Key Findings:

In the opinion of the majority, the political branches, not the Judiciary, have the responsibility and institutional capacity to weigh foreign-policy concerns and therefore, absent further action from Congress, it would be inappropriate for courts to extend ATS liability to foreign corporations. The majority reasoned, inter alia, that as the ATS is “strictly jurisdictional”, it does not, by its own terms, provide or delineate the definition of a cause of action for international law violations. To create a common-law cause of action ‑ such as one that extends to corporations – federal courts must apply the test announced in the Court’s 2004 ATS decision, Sosa v. Alvarez-Machain.

Justice Kennedy, joined by Chief Justice Roberts and Justice Thomas, considered that the Sosa test requires, first, that the plaintiffs demonstrate that the alleged international law violation is “of a norm that is specific, universal and obligatory” and, second, if the first test is met, whether the proper exercise of judicial discretion or caution requires the political branches to grant specific authority before corporate liability can be imposed. The plurality decided that it did not have to resolve the first limb of the Sosa test (i.e., whether corporate liability is a question governed by international law or whether that law imposes liability on corporations). Instead, it proceeded straight to the second limb of the Sosa test and held that, in respect of foreign domiciled corporations, the Judiciary must defer to Congress to determine whether a universal norm of corporate liability for international law violations has been recognised and, if so, whether it should be enforced in ATS actions.

The plurality looked to analogous statutes for guidance on the appropriate boundaries of judge-made causes of action. It referred to the Torture Victim Protection Act of 1991 (the “TVPA”) which established the only ATS cause of action created by Congress. Under the TVPA, liability is limited to “individuals” (i.e., natural persons). The plurality concluded that “Congress’ decision to exclude liability for corporations in actions brought under the TVPA is all but dispositive of the present case.”

In a portion of Justice Kennedy’s opinion joined by the majority, the Court also observed that the ATS was “intended to promote harmony in international relations by ensuring foreign plaintiffs a remedy for international-law violations when the absence of such a remedy might provoke foreign nations to hold the United States accountable.” Extending the scope of the ATS to cover foreign corporations may provoke just the sort of diplomatic strife that the ATS was designed to avoid. The majority emphasised that courts are not well suited to make the required policy judgments implicated by foreign corporate liability. It concluded that “like the presumption against extraterritoriality, judicial caution … guards against our courts triggering … serious foreign policy consequences, and instead defers such decisions, quite appropriately, to the political branches.”

The Dissent

In her dissent, Justice Sotomayor disagreed with the judgment and the reasoning in the plurality and concurring opinions. According to the dissent, the text, history and purpose of the ATS, as well as the long and consistent history of corporate liability in domestic tort law, confirm that tort claims for law-of-nations violations may be brought against corporations under the ATS. Nothing about the corporate form in itself raises foreign-policy concerns that require the Court, as a matter of common-law discretion, to immunise all foreign corporations from liability under the ATS. Justice Sotomayor likened the majority’s approach to using “a sledgehammer to crack a nut” and argued that there was no reason to adopt such an ill-fitting and disproportionate response. She said that “[f]oreclosing foreign corporate liability in all ATS actions, irrespective of circumstances or norm, is simply too broad a response to case-specific concerns that can be addressed via other means.”

Commentary:

Jesner is the third in a series of Supreme Court cases which have clarified and limited the types of claims that may be brought before United States courts under the ATS for violations of international law. In its 2004 Sosa decision, the Court held that only claims concerning conduct that violates “specific, universal, and obligatory” international norms fall under the ATS. In its 2013 Kiobel decision, the Court held that the presumption against extraterritoriality applies in cases under the ATS and now, in Jesner, the Court has decided to exclude foreign corporations from claims under the ATS.

As noted above, the question remains whether the ATS can be invoked to sue corporations domiciled in the United States. This leaves US domiciled corporations in a position of considerable uncertainty, not knowing whether they can be sued under the ATS for international law violations based on the conduct of a foreign subsidiary. Jesner may not foreclose those kinds of suits, although it does appear to foreclose a vast array of other types of claims by foreign plaintiffs in US courts for torts against corporations based on international law.