April 24, 2018 / 8:56 PM / a year ago

In Arab Bank, justices say it’s up to Congress – not courts – to police foreign corporations

(Reuters) - The U.S. Supreme Court’s majority opinion in the international human rights case Jesner v. Arab Bank is relatively brief, despite the 91 pages of writing the justices produced to address the question of whether foreign corporations can be held responsible in U.S. courts for international human rights violations. The answer, according to the five justices who joined Justice Anthony Kennedy’s majority opinion, is no.

The majority said Congress didn’t draft the Alien Tort Statute back in 1789 to give foreign victims of atrocities committed abroad a private right of action against foreign corporations – and separation of powers doctrine precludes U.S. courts from creating that right. If Congress and the executive branch want to make U.S. courts a haven for foreign plaintiffs hoping to hold foreign corporations accountable for human rights abuses, it’s up to them, the Supreme Court said. It’s not up to the courts.

“The political branches, not the judiciary, have the responsibility and institutional capacity to weigh foreign-policy concerns,” Justice Kennedy wrote for the majority. “That the ATS implicates foreign relations ‘is itself a reason for a high bar to new private causes of action for violating international law,’” he wrote, quoting the court’s 2004 decision in Sosa v. Alvarez-Machain (542 U. S. 692). “There is an argument that a proper application of Sosa would preclude courts from ever recognizing any new causes of action under the ATS. But the court need not resolve that question in this case. Either way, absent further action from Congress it would be inappropriate for courts to extend ATS liability to foreign corporations.”

It’s important to remember that the court’s holding is only that the ATS does not provide U.S. jurisdiction for foreign nationals suing foreign corporations. The justices did not decide whether U.S. corporations can be sued under the ATS, even though the court granted review to decide whether the statute “categorically forecloses corporate liability.” As you probably remember, the justices previously imposed geographical restrictions on ATS cases in 2013’s Kiobel v. Royal Dutch Petroleum (133 S.Ct. 1659), which said the statute only applies when claims “touch and concern” the U.S. After Kiobel, federal courts have allowed ATS suits against U.S. corporations, including Exxon, Dole, Del Monte and Drummond, to move forward.

I don’t think Tuesday’s ruling dooms those cases because it only bars ATS claims against foreign corporations, which raise complicated foreign policy concerns. Moreover, as the justices in the majority pointed out repeatedly, the ATS is supposed to be just a jurisdictional statute and, according at least to Justice Samuel Alito, plaintiffs suing U.S. corporations can establish jurisdiction in U.S. courts in other ways. “Because this case involves a foreign corporation, we have no need to reach the question whether an alien may sue a United States corporation under the ATS,” Justice Alito said in a footnote in his concurrence. “And since such a suit may generally be brought in federal court based on diversity jurisdiction, it is unclear why ATS jurisdiction would be needed in that situation.”

The Supreme Court’s focus on foreign corporations and the ATS, rather than all corporations, reflects arguments by the U.S. Solicitor General’s Office as an amicus in the case. Nominally, the Justice Department sided with the 6,000 foreign nationals who sought to sue Arab Bank under the ATS for performing banking services for alleged terrorists. DOJ, as it had in 2012, when the Supreme Court was mulling corporate liability under the ATS in the Kiobel case, argued that the statute does not categorically preclude suits against corporations, asserting that “nothing in international law discountenances civil claims against corporations.” But the Justice Department also highlighted the foreign policy headaches of ATS litigation against corporations based in countries allied with the U.S. Arab Bank’s home country, Jordan, which has helped U.S. anti-terrorism efforts for decades, DOJ said. Our courts should think hard about undermining foreign policy by allowing suits built on the flimsy foundation of automated banking services, said Justice.

Arab Bank’s Supreme Court counsel, Paul Clement of Kirkland & Ellis, elaborated on that theme in the bank’s brief. “The serious and evolving challenges of combating terrorist financing are addressed by substantial and adaptable national regulatory regimes,” the brief said. “The very notion that the proper solution to the modern and constantly evolving problem of terrorism financing lies in a common-law action under a 200-year-old jurisdictional statute, rather than in sophisticated national regulatory regimes, defies common sense and the teaching of this court in Sosa and Kiobel.”

The Supreme Court majority agreed in Tuesday’s ruling. Justices Alito and Neil Gorsuch did not join long portions of the opinion, in which Justice Kennedy discussed whether the norms of international law apply to corporations themselves, rather than people who work for corporations, and even whether international law governs the question of corporate liability under the ATS. But Alito and Gorsuch joined with Chief Justice John Roberts and Justices Kennedy and Clarence Thomas on the great irony of ATS history: The statute was drafted in the early days of the American Republic to “promote harmony in international relations” by promising recourse to foreign plaintiffs, yet modern ATS cases like the Arab Bank litigation are undermining U.S. relations with foreign sovereigns. That fact alone shows that the statute has slipped its bounds.

“The relatively minor connection between the terrorist attacks at issue in this case and the alleged conduct in the United States well illustrates the perils of extending the scope of ATS liability to foreign multinational corporations like Arab Bank,” the majority said. “As demonstrated by this litigation, foreign corporate defendants create unique problems. And courts are not well suited to make the required policy judgments that are implicated by corporate liability in cases like this one.”

Justice Sonia Sotomayor’s long dissent, joined by Justices Ruth Bader Ginsburg, Stephen Breyer and Elena Kagan, argued that modern ATS plaintiffs haven’t asked the courts to create a new cause of action against foreign corporations but merely to apply the cause of action the original U.S. Congress created in 1789. “Whether the ATS provides a cause of action for violations of the norms against genocide, crimes against humanity, and financing of terrorism is not the question the parties have asked the court to decide,” Justice Sotomayor wrote. “(Lawmakers in 1789) granted the federal courts jurisdiction over claims based on ‘the law of nations,’ a body of law that Congress did not understand to be static.”

I’ve followed the Arab Bank Supreme Court case as closely as any outside observer, and I have to say this outcome surprised me. I was expecting the justices to rule that corporations can be haled into court under the ATS, as the chief justice implied in his opinion in Kiobel. Arab Bank’s best hope, I said in reporting on briefs in this case, was to change the subject from corporate liability to international banking or foreign relations. Somehow, the bank did just that.

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