After Jesner v. Arab Bank: Looking Beyond the Alien Tort Statute to Hold Foreign Corporations Accountable

Jason Raymond

Vol. 40 Associate Editor

A few months ago, in Jesner v. Arab Bank, the United States Supreme Court categorically foreclosed foreign corporate liability under the Alien Tort Statute (ATS). Absent further action from Congress, the Court said, foreign corporations may not be defendants in suits brought under the law.[1] In past decades, foreign plaintiffs had relied on the ATS to sue foreign corporations or the foreign subsidiaries of U.S.-based corporations for violations of international law and human rights abuses.[2] Plaintiffs had accused corporations as varied as Unocal, IBM, Caterpillar, and Coca-Cola of aiding and abetting alleged international law violations including torture and crimes against humanity.[3] Found in Title 28 of the U.S. Code, the ATS reads: “The district courts shall have original jurisdiction of 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.”[4] It was passed by the First Congress as a part of the Judiciary Act of 1789.[5] Though its original meaning and purpose are uncertain, the ATS may have been enacted in response to a number of international incidents caused by the non-availability of remedies for foreign citizens in the United States.[6] For example, in 1784, the French consul François Barbé-Marbois was assaulted in Philadelphia, and a public controversy arose over the consul’s means of civil redress.[7] Mr. Barbé-Marbois would later negotiate the Louisiana Purchase as Minister of Finance under Napoleon.[8] From 1789 until 1980, only twice did federal courts rely on the ATS for jurisdiction.^[9] But in 1980, the Second Circuit decided Filártiga v. Peña-Irala, breathing new life into the law to the approval of human rights lawyers and advocates.[10] The Second Circuit held that official torture violated the universally accepted norms of international law, so that whenever an alleged foreign torturer is found and served with process by an alien within the borders of the United States, the Alien Tort Statute provided federal jurisdiction.[11] However, in 2004, the Supreme Court significantly limited the scope of the ATS and tempered the enthusiasm of the human rights community. In Sosa v. Alvarez-Machain, the Court held that the law did not create a cause of action for arbitrary arrests and detentions.[12] Instead, the law merely “furnish[ed] jurisdiction for a relatively modest set of actions alleging violations of the law of nations.”[13] The Court held that any claim based on the present-day law of nations must rest on a norm of international character accepted by the civilized world and defined with a specificity comparable to the offenses that Congress had in mind when it enacted the law—offenses against ambassadors, violations of safe conduct, and piracy.[14] The Court did not categorically foreclose liability for foreign corporations under the ATS—just as long as the claim against the corporation rested on a “norm of international character.”[15] But the Supreme Court further restricted the scope of the ATS in Kiobel v. Royal Dutch Petroleum in 2013, holding the Court’s presumption against extraterritoriality applies to claims brought under the law.[16] Despite noting that it would be implausible to suppose that the First Congress wanted to make the United States a “uniquely hospitable forum for the enforcement of international norms,”[17] the Court held that the presumption against extraterritoriality can be displaced by a claim brought under the ATS that touches and concerns the territory of the United States with “sufficient force.”[18] With such a rebuttal, the door remained open—if just barely ajar—to cases against foreign defendants if the plaintiff was a U.S. national or the harm occurred on U.S. soil.[19] The Court never reached the question of whether the ATS applied to Royal Dutch Petroleum, a foreign corporation. But in Jesner v. Arab Bank, the Court firmly barred the doors of American courts to suits against foreign corporations under the ATS—even if the plaintiff was a U.S. national and the harm occurred on U.S. soil. Writing for a plurality of the justices in a 5-4 decision, Justice Kennedy determined that when the First Congress enacted the ATS, it did so to provide a federal remedy for a narrow category of international law violations committed by individuals, not foreign corporations.[20] “Foreign corporate defendants create unique problems,” Justice Kennedy wrote, “[a]nd courts are not well suited to make the required policy judgments that are implicated . . . .”[21] A clear mandate from Congress was required before a suit against a foreign corporation could be allowed under the ATS in light of the diplomatic friction such suits can create.[22] Human rights lawyers and advocates loudly protested the Court’s opinion in Jesner.[23] Many echoed the sentiments expressed by Justice Sotomayor in her dissent, chiefly that “the unique power that corporations wield can be used both for good and for bad.” “Just as corporations can increase the capacity for production,” Justice Sotomayor continued, “so, too, some can increase the capacity for suffering.”[24] Corporations take advantage of the corporate form and enjoy fundamental rights without having to shoulder attendant fundamental responsibilities.[25] Some scholars, however, have encouraged human rights advocates to look beyond the ATS as a means of vindicating international norms.[26] After all, the ATS was an imperfect and limited vehicle for pursuing private human rights litigation, narrowing concern to only the most outrageous violations.[27] More broadly, the Jesner decision raised the political question of whether the human rights movement that made the ATS central through its rise and fall should pivot beyond their familiar priorities.[28] Looking beyond the ATS, the United States could still enforce international law and hold foreign corporations criminally liable for human rights abuses abroad. Extraterritorial substantive prohibitions are already codified in several federal criminal statutes, including provisions criminalizing genocide,[29] torture,[30] and war crimes.[31] All three provisions cover acts by U.S. nationals, while the former two also cover crimes abroad by persons who subsequently enter the United States. As written, these statutes could give rise to domestic or foreign corporate criminal liability pursuant to an application of the respondeat superior doctrine long accepted by federal courts.[32] But to further empower human rights advocates in holding foreign corporations accountable for violations of international law, two law school professors from the University of Virginia have proposed an innovative solution. Inspired by the Foreign Corrupt Practices Act (FCPA), Professors Pierre-Hugues Verdier and Paul Stephan have offered an alternate approach for vindicating international human rights in American courts.[33] The FCPA makes it unlawful for certain classes of persons and corporations to make payments to foreign government officials to assist in obtaining or retaining business.[34] The approach outlined by Professors Verdier and Stephan builds off the principal characteristics of the FCPA: (1) its application is limited to U.S. and foreign companies that list their stock on a U.S. stock exchange; (2) it does not include a private cause of action, but rather provides for civil and criminal prosecution of foreign bribery, enforced by public authorities; and (3) it functions in tandem with the Securities and Exchange Act’s disclosure and compliance obligations.[35] Legislation from Congress is required to make this approach effective. Congress should enact a statute that covers corporations organized under U.S. law as well as foreign companies listed on U.S. exchanges.[36] Civil or criminal liability would be imposed under the statute when a covered corporation “knowingly assist[s] the commission of the relevant crimes for a business purpose.”[37] Further, this FCPA-based regime would require firms to disclose their involvement in human rights violations and take active measures to discover and discourage acts by their employees, agents, and business partners that bring about violations of international human rights law.[38] The regime would not include a private cause of action, but it instead would rely on the Department of Justice and the Securities and Exchange Commission for enforcement—federal agencies that could impose administrative, civil and criminal sanctions modeled on those available for FCPA violations.[39] Like the FCPA, this regime would sanction profit-motivated acts that violate a legislative standard of conduct, but now in a human rights context: specifically, acts knowingly committed by corporations that violate the genocide, torture, or war crimes provisions found in the U.S. Code.[40] With Justice Kennedy’s Jesner invitation to Congress apparently in mind, Professors Verdier and Stephan write, “If we want Congress to act, it is better to suggest a path that focuses on corporate incentives, limits the rents and other transaction costs associated with private enforcement, and requires U.S. government lawyers to own the problem.”[41] Such a way forward is both reasonable and effective—and builds on a tried-and-true bribery regime that has been replicated throughout the world. With foreign corporate liability foreclosed under the ATS in Jesner, this approach looks beyond that antiquated law and proposes a new regime that would reopen the doors of American courts and vindicate international human rights.

[1] Jesner v. Arab Bank, 138 S.Ct. 1386, 1403 (2017). [2] William B. Panlilio & Laurie Strauch Weiss, Supreme Court Limits ATS Litigation—But Door Remains Slightly Ajar, American Bar Association (July 8, 2013), https://www.americanbar.org/groups/litigation/committees/ corporate-counsel/articles/2013/spring2013-supreme-court-limits-ats-litigation-but-door-remains-slightly-ajar/. [3] Id. [4] 28 U.S. Code § 1350. [5] An Act to Establish the Judicial Courts of the United States, 1 Stat. 73, 77 (1789). [6] Haberstroh, John (2004). The Alien Tort Claims Act & Doe v. Unocal: A Paquete Habana Approach to the Rescue, 32 Denv. J. Int’l L. & Pol’y 231, 239–41. [7] Ron Kampeas, What does a 1784 Philly fistfight have to do with Israeli terror victims?, The Jewish News of Northern California (Oct. 25, 2017), https://www.jweekly.com/2017/10/25/1784-philly-fistfight-israeli-terror-victims/. [8] Eds. of Encyc. Britannica, François, marquis de Barbé-Marbois, Encyc. Britannica, https://www.britannica.com/biography/Francois-marquis-de-Barbe-Marbois (last visited Nov. 6, 2018). [9] Hufbauer, Gary Clyde; Mitrokostas, Nicholas K. (2004). International Implications of the Alien Tort Statute. 16 St. Thomas L. Rev. 607, 609. [10] Stephen P. Mulligan, The Alien Tort Statute (ATS): A Primer, Congressional Research Service (June 1, 2018), https://fas.org/sgp/crs/misc/R44947.pdf. [11] Filártiga v. Peña-Irala, 630 F.2d 876 (2d Cir. 1980). [12] Sosa v. Alvarez-Machain, 542 U.S. 692, 734 (2004). [13] Id. at 720. [14] Id. at 725. [15] See id. [16] Kiobel v. Royal Dutch Petroleum Co., 569 U.S. 108, 117 (2013). [17] Id. at 123. [18] Id. at 125. [19] Oona Hathaway, Kiobel Commentary: The door remains open to “foreign squared” cases, SCOTUSblog (Apr. 18, 2013, 4:27 PM), http://www.scotusblog.com/2013/04/kiobel-commentary-the-door-remains-open-to-foreign-squared-cases/. [20] Jesner, 138 S.Ct. at 1407. [21] Id. [22] Adam Liptak, Supreme Court Bars Human Rights Suits Against Foreign Corporations, N.Y. Times (Apr. 24, 2018), https://www.nytimes.com/2018/04/24/business/supreme-court-foreign-corporations-lawsuits.html. [23] Todd N. Tucker, Is the Supreme Court going too easy on overseas corporations?, POLITICO (May 8, 2018), https://www.politico.com/agenda/story/2018/05/08/supreme-court-overseas-corporate-accountability-000659. [24] Jesner, 138 S.Ct. at 1437. [25] Id. [26] Samuel Moyn, Time to Pivot? Thoughts on Jesner v. Arab Bank, Lawfare Blog (Apr. 25, 2018, 1:55 PM), https://www.lawfareblog.com/time-pivot-thoughts-jesner-v-arab-bank. [27] Id. [28] Id. [29] 18 U.S.C. § 1091. [30] 18 U.S.C. § 2340A. [31] 18 U.S.C. § 2441. [32] See New York Central & Hudson River Railroad Co. v. United States, 212 U.S. 481 (1909). [33] Pierre-Hughes Verdier & Paul Stephan, After ATS Litigation: A FCPA for Human Rights?, Lawfare Blog (May 7, 2018, 7:00 AM), https://www.lawfareblog.com/after-ats-litigation-fcpa-human-rights. [34] 15 U.S.C. § 78dd-1, et seq. [35] Verdier & Stephan, supra note 33. [36] Id. [37] Id. (emphasis added.) [38] Id. [39] Id. [40] Id. [41] Id. The views expressed in this post represent the views of the post’s author only.