By David Livshiz and Emily Holland 

Can a corporation be held liable in the United States under the Alien Tort Statute (ATS) for violations of international law?

That is the question currently pending before the United States Supreme Court in Jesner v. Arab Bank, PLC (Case No. 16-499). While most courts to consider the issue have ruled that corporate liability is possible under the ATS, the Supreme Court has yet to rule on the issue, leaving open the possibility that corporations—which have become popular targets of lawsuits brought pursuant to the ATS by plaintiffs alleging corporate complicity with human rights abuses around the globe—may yet be immunized from ATS litigation.

However, if Arab Bank PLC (Arab Bank) is to convince the Justices that corporations should not be subject to civil liability under the ATS, it will have to do so without the support of the U.S. government. In an amicus brief filed on June 27, the U.S. government argues that because corporations can be held liable for a tort under US law, they can be held liable under the ATS.[1] However, in an argument that is likely to find favor with foreign financial institutions, the Administration also argues that the mere clearing of dollar denominated transfers through the Federal Reserve is not sufficient to displace the presumption against the extraterritorial application of the law.

Background of the case 

Freshfields has previously discussed Jesner and other high-profile ATS litigation, including here and here. 

As a reminder, in Jesner, the plaintiffs – U.S. and non-U.S. nationals injured, or whose family members were killed or injured in specific terrorist attacks carried out in Israel – seek to hold Jordan-based Arab Bank responsible for allegedly financing and facilitating Hamas’ terrorist activities. The plaintiffs allege a number of claims, including some under the ATS, which allows both resident and non-resident aliens to assert torts in violation of the law of nations against a defendant in a U.S. court.

Plaintiffs have previously brought suit under the ATS alleging claims for inter alia child and forced labor, human trafficking, crimes against humanity, and genocide. Here, in moving to dismiss the ATS case, the defendant has asserted that a corporation cannot be held liable under the ATS, and even if it could, the plaintiffs’ claims are barred by the presumption against extraterritoriality. (The presumption against extraterritoriality is a canon of statutory interpretation which states that although U.S. Congress possesses authority to regulate the conduct of U.S. citizens and nationals outside the territorial boundaries of the U.S., there is a general presumption against the extraterritorial application of U.S. law.)

Extraterritoriality is certainly at issue in Jesner, but the case reached the Supreme Court on a much more fundamental question: can a corporation ever be sued under the ATS? The Second Circuit would limit ATS liability to natural persons; several other Circuit Courts of Appeals have ruled that corporations can be held liable under the ATS. The Supreme Court had granted certiorari on the issue in the well-known ATS case, Kiobel v. Royal Dutch Petroleum, but ultimately decided Kiobel on extraterritoriality grounds. Jesner now presents a second opportunity.

Corporate liability question 

Amicus curiae participation by non-parties in U.S. Supreme Court litigation serves a number of functions: it provides the Court with additional information, including as to the range of stakeholders potentially affected by a decision, and when the United States government participates as an amicus, its submission can highlight significant political and/or diplomatic dynamics. The United States government exerts particular influence as an amicus filer, especially when issues of foreign relations are implicated.

In its brief, the U.S. adopts the position that a corporation may be sued under the ATS because: (1) civil actions under the ATS are claims defined by U.S. federal common law (i.e., law-making by federal courts), not international law, and the common law has long recognized corporations as proper defendants in tort suits; (2) at the time the ATS was adopted, corporations could be held liable for torts; (3) a tort in violation of the law of nations is a wrong done in contravention of specific and universal international law standards, which can apply both to corporations and to individuals; and finally, (4) the Congressional goal in enacting the ATS was to furnish a private damages remedy, and excluding corporate defendants could result in plaintiffs having no opportunity to recover if a defendant, who was a natural person, was judgment-proof.

Extraterritoriality question 

Having articulated its position on corporate liability, the brief next urges the Court to remand the case to the Second Circuit with instructions that the court examine whether the alleged conduct is sufficiently domestic as to displace the extraterritoriality presumption. In so doing, the United States argues that the banks’ clearing of US dollar transactions through the United States should not, standing alone, displace the presumption.

In making this argument, the United States’ position is in some tension with certain recent case law in the Second Circuit and in New York state which has found that the purposeful use of correspondent banking to clear a dollar denominated transaction may—standing on its own—satisfy the purposeful availment test for a U.S. court’s exercise of personal jurisdiction over a defendant. For example, in Al Rushaid v. Pictet & Cie, the New York Court of Appeals found that the “repeated, deliberate use” of a correspondent bank account on behalf of and for a customer’s benefit was sufficient to establish personal jurisdiction over the foreign bank.

The United States’ position on this issue is also notable in that it seeks to draw a distinction between the ATS and certain criminal statutes (i.e., the federal money laundering statutes and the Racketeer Influenced and Corrupt Organizations Act)—arguing that while merely clearing a transaction through the United States may be sufficient to permit a criminal prosecution, it should not suffice to expose a foreign defendant to a U.S. civil action. Whether the Supreme Court accepts this distinction in the context of the ATS, only time will tell.

We will continue to monitor.