An introduction to the Alien Tort Statute and corporate liability: In Plain English
on Jul 24, 2017 at 10:57 am
Founded in Jerusalem nearly a century ago, Jordan’s Arab Bank now has over 600 branches on five continents. The bank describes itself as “an active and leading partner in the socio-economic development” of the Middle East – a description borne out by its work with the U.S. Agency for International Development, Oxfam, Save the Children and Catholic Relief Services. The Israeli government uses the bank as a conduit to transfer taxes that it collects for the Palestinian Authority, and the United States government has characterized the bank as a “constructive partner” in its efforts to combat money laundering and the financing of terrorism. But on October 11, the Supreme Court will hear oral argument in a case brought by victims of terrorist attacks that occurred between 1995 and 2005 in Israel, the West Bank and Gaza. They allege that Arab Bank maintained accounts for known terrorists, accepted donations that it knew would be used to fund terrorism, and distributed millions of dollars to families of suicide bombers – known as “martyrdom” payments. The question before the justices isn’t whether the victims’ allegations are true, but instead whether the bank can be sued in U.S. courts at all.
The victims have brought their lawsuits in U.S. courts under the Alien Tort Statute, a federal law that gives federal courts 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.” Judge Henry Friendly once described the ATS, which was enacted as part of the Judiciary Act of 1789, as a “kind of a legal Lohengrin,” after the mythical German knight who arrives in a boat pulled by swans, because “no one seems to know whence it came.”
The ATS went mostly unused until 1980, when a Paraguayan doctor and his daughter filed a lawsuit in the United States against Americo Pena-Irala, a former Paraguayan police official living in New York. The plaintiffs, Joel and Dolly Filartiga, alleged that Pena-Irala had kidnapped Joel’s son and Dolly’s brother, Joelito, and tortured him to death in retaliation for Joel’s opposition to the Paraguayan government. The Filartigas argued that the ATS gave U.S. courts jurisdiction over their lawsuit; the U.S. Court of Appeals for the 2nd Circuit agreed, observing that torture violates the law of nations.
In the years since the Filartiga decision, plaintiffs increasingly relied on the ATS as the basis for lawsuits filed in U.S. courts seeking compensation for human-rights violations that occurred overseas. These lawsuits were brought not only against foreign government officials, but also against multinational corporations for their role in “aiding and abetting” human-rights violations by foreign governments.
The defendants in these lawsuits pushed back against what they saw as efforts to make the United States, as Chief Justice John Roberts once put it, the “moral custodian” of the world. In 2004, the Supreme Court indicated that the kinds of claims that could be brought under the ATS are relatively limited. In Sosa v. Alvarez-Machain, the court ruled that the ATS itself is only jurisdictional – that is, it merely gives courts the power to hear cases, but does not itself provide a cause of action. The court also concluded that the drafters of the ATS would have intended any such cause of action to come from the common law, which is not enacted by the legislature but instead formulated by judges. And the common law at the time would have allowed lawsuits alleging “a narrow set of violations of the law of nations” – violations of safe-passage guarantees, violations of an ambassador’s rights, and piracy – that could have had serious repercussions for foreign relations.
Claims brought under the ATS now, the court cautioned, should go forward only if they both are widely accepted as a violation of international norms and can be defined as specifically 18th-century wrongs like piracy. The court added two additional caveats. First, it noted, “the determination whether a norm is sufficiently definite to support a cause of action should (and, indeed, inevitably must) involve an element of judgment about the practical consequences of” allowing litigants to rely on that norm. Second, courts considering claims under the ATS should also take into account not only whether international law recognizes the norm that has allegedly been violated, but also whether international law would allow this particular defendant to be held liable for violating it, “if the defendant is a private actor such as a corporation or individual.”
The ATS returned to the Supreme Court nearly a decade later, in Kiobel v. Royal Dutch Petroleum Co. The lawsuit was filed by Nigerians living in the United States, who alleged that Royal Dutch and its related companies had solicited help from the Nigerian government to suppress opposition from local residents to the companies’ environmental practices, leading to serious human-rights abuses by Nigerian government forces. The U.S. Court of Appeals for the 2nd Circuit dismissed their complaint, ruling that corporations cannot be held liable under the ATS. The Supreme Court agreed to review the case and even heard oral argument, but the justices then asked the two sides to address another question: whether claims can be brought under ATS for conduct that occurs in another country. In an opinion by Roberts, the court reasoned that the principles underlying the general presumption that U.S. law does not apply outside the United States extend fully to the ATS. Because the conduct at the heart of the Nigerian plaintiffs’ claims happened outside the United States, the court concluded, U.S. courts did not have the authority to hear the case.
Although the court in Kiobel did not decide whether corporations can be held liable under the ATS, that question is now squarely back before it in Jesner v. Arab Bank. The plaintiffs in the case, who are not U.S. citizens, contend that Arab Bank “violated the law of nations insofar as it financed terrorism, and also insofar as it directly and indirectly engaged in genocide and crimes against humanity.” In their view, the text of the ATS confirms that it can be used to hold corporations liable for violations of the law of nations. When Congress enacted the law, the plaintiffs observe, it was “unquestionable” that corporations could be held liable for torts, and nothing has changed since then. Indeed, although the ATS clearly puts restrictions on who can be a plaintiff in a lawsuit under the ATS – only “aliens” – it does not do so for defendants, even though Congress did limit classes of defendants in other provisions of the same act.
The history and purpose of the ATS, the plaintiffs continue, reinforce that the ATS applies equally to corporations. Congress passed the Judiciary Act, they explain, to ensure that federal courts had jurisdiction over lawsuits alleging violations of the law of nations, such as an assault on a French diplomat. There is no reason to believe that Congress wanted to avoid foreign-relations problems created by individuals but not by corporations.
More generally, the plaintiffs add, it is essential to be able to hold corporations liable to compensate for and deter ATS violations. “When an individual acts on behalf of an entity,” they reason, “it often is necessary to hold the entity accountable to provide an ‘adequate remedy’ and to meaningfully deter future misdeeds.” And in cases like these involving terrorism financing, they conclude, “corporate liability is the only meaningful option” to address the wrongdoing: Even if you can identify the individuals involved (which is itself a difficult task), “securing jurisdiction and collecting judgments against them would be even more difficult.”
The plaintiffs have support from a wide range of “friends of the court,” including a bipartisan brief from Senators Lindsey Graham and Sheldon Whitehouse. The senators emphasize that the ATS is the only avenue for civil lawsuits “against financial entities that use U.S. operations to aid terrorist attacks on foreign nationals overseas.” Indeed, they stress, specific allegations that Arab Bank “used its U.S. office to launder funds for Hamas are at the very core of this case.” And if defendants like Arab Bank cannot be sued under the ATS for their U.S.-based transactions, it will create “a dangerous gap that terrorists and their funders may exploit.”
Pointing to the Supreme Court’s 2004 decision in Sosa, Arab Bank counters that the plaintiffs’ claims can go forward only if they can show “that corporate liability is universally recognized in international law.” But this, the bank emphasizes, they have not done, as they have failed to “point the Court to a single instance of a corporation being held liable by an international tribunal under customary international law.” And indeed, the bank adds, even U.S. law does not allow corporations to be held liable in similar areas of the law – such as private lawsuits under the Supreme Court’s 1972 decision in Bivens v. Six Unknown Named Agents, seeking damages for civil-rights violations in the United States.
And the bank dismisses the senators’ suggestion “that the decision below will ‘create a troubling gap in U.S. global counterterrorism efforts’” as “pure hyperbole.” Other remedies are available to combat terrorism, it suggests, including federal criminal law – which bars material support to terrorists – and federal regulations and sanctions programs. Moreover, the bank emphasizes, those remedies allow prosecutors and regulators to exercise “discretion in an area fraught with foreign policy considerations” – discretion, they add, “to which the Plaintiffs’ bar in a private suit will pay no heed.”
The U.S. Chamber of Commerce and other business groups echo some of the bank’s arguments against corporate liability. They tell the justices that ATS lawsuits against corporations have run rampant in recent decades, pointing the court to “more than 150 ATS lawsuits against U.S. and foreign corporations doing business in two dozen industry sectors,” arising out of corporate activity in “more than 60 countries.” Allowing corporations to be sued under the ATS could create an imbalance that Congress certainly could not have intended, they add, because a related federal law – the Torture Victims Protection Act – only allows lawsuits against individuals. A ruling for the plaintiffs in this case, the business groups argue, would mean that noncitizens could bring lawsuits against U.S. corporations for torture but U.S. citizens could not.
The federal government takes a middle ground in its brief, filed in late June. It rejects the bank’s argument that the ATS forecloses corporate liability. But at the same time, it is skeptical that the lawsuits in this case should go forward, arguing that the mere fact that the bank may have routed foreign transactions in dollars through the bank’s U.S. branch does not establish the kind of connection to the United States that the Supreme Court requires. The purpose of the ATS, the government contends, is to ensure that private lawsuits for damages can be brought “in circumstances where other nations might hold the United States accountable if it did not provide a remedy.” But the “dollar’s prevalence as the currency of choice for unlawful actors does not,” the government concludes, “in itself present such a circumstance.”
The bank made similar arguments last year in its efforts to ward off Supreme Court review: It argued, among other things, that “there is no need to reach the question of corporate liability because” the plaintiffs’ claims “do not have a sufficient nexus to the United States to be litigated in U.S. courts.” But the justices nonetheless agreed to take on the case, which strongly suggests that – at least with regard to the need to tackle the corporate liability question – they disagree. How they will answer that question is less clear, but we are likely to know sometime next year.