Opinion analysis: Court bars lawsuits against foreign corporations under Alien Tort Statute

Nearly seven years ago, the Supreme Court agreed to decide whether corporations can be sued under the Alien Tort Statute, an 18th-century law that allows foreigners to bring lawsuits in U.S. courts for serious violations of international human-rights laws. The justices ultimately did not resolve the corporate liability question in that case, ruling instead that claims cannot normally be brought under the ATS based on conduct that occurred in another country. But today they did settle the issue, holding by a vote of 5-4 that foreign corporations may not be sued under the ATS. The decision will almost certainly put a halt to efforts, often controversial, by foreign plaintiffs to hold foreign corporations responsible in U.S. courts for human rights violations abroad.

The case decided today, Jesner v. Arab Bank, was filed in the United States by victims of terrorist attacks that occurred between 1995 and 2005 in Israel, the West Bank and Gaza. They allege that the bank kept 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. The victims relied on 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.” The U.S. Court of Appeals for the 2nd Circuit dismissed the victims’ case, holding that the ATS does not allow lawsuits against corporations, and today the Supreme Court affirmed.

Justice Anthony Kennedy wrote for the majority, in a decision that splintered along ideological lines. The court emphasized that when Congress enacted the ATS, its primary goal was to avoid foreign-relations problems by making sure that federal courts were available to review lawsuits by foreign nationals alleging violations of international law “where the failure to provide one might cause another nation to hold the United States responsible for an injury to a foreign citizen.” But in this case and others, the court continued, allowing a lawsuit to go forward in U.S. courts was having precisely the opposite effect, creating “significant diplomatic tensions with Jordan, a critical ally in one of the world’s most sensitive regions.” Moreover, the justices added, the court should generally refrain from creating or extending new grounds for lawsuits, especially when dealing with a subject, like the ATS, that may create foreign-policy concerns and is therefore more properly dealt with by Congress and the executive branch.

Even as the court’s five more conservative justices agreed that the lawsuit against Arab Bank should be thrown out, they did not always agree on the reasoning. Justice Neil Gorsuch, in particular, would have gone even further than his colleagues and ruled that one foreign national cannot sue another under the ATS; at a minimum, he believes, lawsuits under the ATS should require a U.S. defendant. Gorsuch stressed that “the decision to impose sanctions in disputes between foreigners over international norms” belongs to Congress and the president, rather than the courts. “If they wish our help,” Gorsuch concluded, “they are free to enlist it, but we should not ever be in the business of elbowing our way in.”

Justice Sonia Sotomayor filed a 34-page dissent, which was joined by Justices Ruth Bader Ginsburg, Stephen Breyer and Elena Kagan. Sotomayor castigated her colleagues for absolving “corporations from responsibility under the ATS for conscience-shocking behavior.” On the one hand, Sotomayor wrote, the text, history and purpose of the ATS  all support the idea that corporations can be sued under the law. By contrast, she continued, there are less drastic ways to address the foreign-policy concerns voiced by the court. For example, there is a presumption that U.S. law does not apply outside the United States. Alternatively, a court could determine that a foreign plaintiff must first try to sue a foreign corporation in her home country. Instead, Sotomayor complained, the court “prefers to use a sledgehammer to crack a nut.” And although the court suggests that Congress and the executive branch are better suited to consider the foreign-policy implications of holding a foreign corporation liable under the ATS, she observed, both the U.S. solicitor general and members of Congress have nonetheless urged the Supreme Court to hold that corporations can be held liable. With today’s ruling, she concluded, “the Court ensures that foreign corporations—entities capable of wrongdoing under our domestic law—remain immune from liability for human rights abuses, however egregious they may be.”

This post was originally published at Howe on the Court.