Foreign banks breathe easier in the US after Supreme Court’s decision on scope of the Alien Tort Statute.

 

 

The US Judiciary Act of 1789, 28 U. S. C. §1350. which is now known as the Alien Tort Statute, provides: “The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of of the law of nations or a treaty of the United States.” For nearly forty years it has been used as the gateway to bring suits in the US District Courts against individuals and corporations based on alleged violations of norms of international law. The Supreme Court has twice considered the scope of the ATS, in Sosa in 2004, and in Kiobel in 2013, each time limiting its scope. It has now spoken for a third time in Jesner v Arab Bank when it gave judgment last Tuesday, in a majority decision that foreign corporations could not be subject to liability under the ATS.

In Jesner v Arab Bank  foreign plaintiffs sued a Jordanian bank, Arab Bank, alleging that it had helped facilitate financial transactions to terrorist organisations which had then committed attacks in Israel, West Bank and Gaza Strip between 1995 and 2005 during which plaintiffs or their family members were injured. It was alleged that Arab Bank had used its New York branch to clear US dollar transactions which had led to money being sent to the terrorist organisations.

The question framed before the Supreme Court was whether corporations could be held liable under the Alien Tort Statute. The Second Circuit in 2010 in Kiobel had found that corporations could not be held liable under the ATS, and the question was referred to the Supreme Court. However, in 2013 the Supreme Court left the question unanswered and affirmed the Second Circuit’s dismissal by reference to a new question it had raised during argument before it in 2012 concerning the extra-territorial scope of the ATS. The Supreme Court concluded that the presumption that US statutes should not have extra-territorial effect applied to the ATS and would only be rebutted if the claim were to ‘touch and concern the territory of the United States…with sufficient force’.

In Jesner, the Supreme Court gave a partial answer to the question initially framed in Kiobel. The Supreme Court referred to its 2004 decision on the scope of the ATS in Sosa  which set out a two part test. First, was the alleged violation of the law of nations a violation of a norm that  is ‘specific, universal and obligatory’?  Second, would allowing the case to proceed be an appropriate exercise of judicial discretion?

On the first question of whether there is a specific, universal and obligatory norm that corporations are liable for violations of international law, Justice Kennedy expressed the view that there was not such norm, citing the fact that international criminal tribunals had never been given jurisdiction over corporations, but only over natural persons. Justice Roberts and Thomas concurred but this view did not obtain majority support.

The case was decided on the basis of the application of the second Sosa test. By a 5-4 majority the Supreme Court concluded that extending liability under the ATS to foreign corporations should be a matter for Congress to decide, rather than the judiciary. Congress’s intent could be deduced from the fact that a similar statute, the 1991 Torture Victims Protection Act, had been specifically limited to suits against ‘individuals’.  Accordingly, the Supreme Court affirmed the Second Circuit’s dismissal of the suit under the ATS against Arab Bank, a foreign corporation.

The upshot of the decision is that the scope of the Alien Tort Statute has been further restricted in that it no longer permits claims against foreign corporations. The decision may put the final nail in the ATS coffin. However, claims against US corporations, and foreign and US natural persons, could still be made, although the ‘touch and concern’ requirement set out in Kiobel means that there must be a strong link to the US for the claim to proceed. Some Circuits have interpreted the ‘touch and concern’ requirement to mean that the primary violation of international law must have taken place within the US, so excluding claims based on secondary violations for aiding and abetting by US corporations. The Supreme Court has twice denied certiorari to clarify this issue.

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