On April 24, 2018, in a 5-4 decision, the U.S. Supreme Court held that foreign corporations cannot be sued in the United States under the Alien Tort Statute, 28 U.S.C. § 1350 ("ATS"). This case – Jesner v. Arab Bank1– appears to eliminate the ATS as a vehicle for plaintiffs to bring claims against foreign multinational companies for their employment practices overseas.
What is the ATS?
The very first U.S. Congress passed the ATS as part of the Judiciary Act of 1789. The statute is short, and 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." The Court in Jesner recognized, consistent with existing precedent, the ATS is "strictly jurisdictional" and does not by its own terms create cause of action for international law violations. Instead, most commentators believe the framers in 1789 envisioned that the statute would allow for limited common law torts "in violation of the law of nations," including violations of safe conduct extended to aliens, interference with ambassadors, and piracy.
What was the State of ATS Litigation Leading to Jesner?
Over time, courts expanded the types of international law violations subject to the ATS. Modern ATS litigation developed to the point that foreign plaintiffs brought ATS cases against foreign companies for actions occurring outside and with arguably little connection to the U.S., setting the stage for the Supreme Court's pre-Jesner decision of Kiobel v. Royal Dutch Petroleum Company.
In Kiobel, Nigerian villagers brought an ATS suit in a New York federal court, claiming that several corporate entities aided and abetted extrajudicial killing, rape and other human rights abuses committed by Nigerian military forces in connection with the corporations' oil exploration in Nigeria.2 On appeal, the U.S. Supreme Court dismissed the suit, holding that the ATS cannot be used to bring claims in U.S. courts against corporations for actions in foreign jurisdictions since the ATS is a strictly jurisdictional statute that does not provide a private right of action. However, the Court left open the possibility of ATS suits if foreign conduct gives rise to claims that "touch and concern" the U.S. "with sufficient force [so as] to displace the presumption against extraterritorial application" while also failing to resolve whether a corporation could be sued under the ATS. Notably, the Court had been slated to determine the issue of corporate liability under ATS decided in Jesner prior to shifting course to address the issue of the ATS's extraterritorial application.
In light of these open questions, foreign plaintiffs continued to seek redress under the ATS, and the decisions following Kiobel reached varying conclusions.3 In one prominent post-Kiobel case, three anonymous plaintiffs alleged that certain corporate defendants had "aided and abetted" slavery through their pursuit of low-cost cocoa in the Ivory Coast.4 A California federal court dismissed the most recently amended complaint, finding that the complaint seeks an impermissible extraterritorial application of the ATS, and the plaintiffs appealed to the Ninth Circuit Court of Appeals.5
Jesner arrived on the scene against this backdrop.
What is the Jesner Case About?
In Jesner, foreign plaintiffs filed suit in the U.S. District Court for the Eastern District of New York, alleging that they, or the persons on whose behalf they assert claims, were injured or killed by terrorist acts committed in Israel, Palestine and the West Bank, and that those acts were facilitated by defendant, Arab Bank, PLC, a Jordanian financial institution with a branch in New York. They claimed the bank used its New York branch to clear dollar-denominated transactions that benefited terrorists through the Clearing House Interbank Payments System (CHIPS) and to launder money for a Texas-based charity allegedly affiliated with Hamas.
The District Court dismissed the suit, and the Second Circuit Court of Appeals affirmed, holding that, based on Kiobel, corporations could not be sued under the ATS. The Supreme Court recognized that Kiobel had not squarely resolved the broader question of corporate liability and accordingly found the time was now ripe to analyze that question in Jesner.
What Did the Supreme Court Hold in Jesner?
The issue before the Supreme Court was whether courts should exercise their authority to impose ATS liability on corporations for acts that contravene the "law of nations". Indeed, the Court did not resolve whether Arab Bank's alleged activities actually contravened an accepted international norm. Instead, its ultimate decision hinged on whether the Court could properly exercise its discretion in recognizing corporate liability under the ATS, or whether "caution requires the political branches to grant specific authority before corporate liability can be imposed."
The Court's opinion, delivered by Justice Kennedy,6 started with the recognition that – as it held in Kiobel – the ATS does not create a private right of action. It held that courts are reluctant to extend judicially-created private rights of action – especially when those actions implicate foreign relations, which is the province of the president and Congress, and not the judiciary. The Court noted that the ATS was intended to promote harmony in...
