Can Corporations be Held Liable under the Alien Tort Statute?

Can Corporations be Held Liable under the Alien Tort Statute?

Legal Sidebari

Can Corporations be Held Liable under the
Alien Tort Statute?
Updated April 24, 2018
Update: In a 5-4 opinion written by Justice Kennedy, the Supreme Court held that foreign corporations
(including Arab Bank) may not be defendants in suits brought under the Alien Tort Statute. A Sidebar
discussing the ruling and an update to this broader report on the Alien Tort Statute are forthcoming.
The original post from November 3, 2017, follows below.
Recently, the Supreme Court heard oral argument in Jesner v. Arab Bank PLC—a case filed under the
Alien Tort Statute against one of the largest financial institutions in the Middle East. Originally passed by
the First Congress as part of the Judiciary Act of 1789, the Alien Tort Statute provides federal district
courts with “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.” This single-sentence statute has been described as “unlike any
other in American law” and “unknown to any other legal system in the world.” Despite its brevity,
questions about jurisdiction under the statute have been the subject of debate for several decades (as
discussed in this CRS primer.) In Jesner, the Supreme Court is set to address an issue that has caused a
recent split among U.S. circuit courts of appeals: can corporations be liable for torts in violation of the
law of nations under the Alien Tort Statute?
Jesner and the Corporate Liability Circuit Split
Jesner involves claims by approximately 6,000 foreign nationals (or their families or estate
representatives) who were injured, killed, or captured by terrorist groups in Israel, the West Bank, and
Gaza. The plaintiffs allege Arab Bank aided and abetted the terrorist organizations allegedly responsible
for the attacks by maintaining bank accounts that Arab Bank knew would be used to fund terrorism and
by identifying the relatives of suicide bombers so that they could be compensated with so-called
“martyrdom payments.” As one court described the allegations, Arab Bank allegedly served as a
“paymaster” for terrorist groups through the institution’s branch offices in the West Bank and Gaza.
The U.S. Court of Appeals for the Second Circuit (Second Circuit) dismissed the case on the sole ground
that the Alien Tort Statute does not permit liability against corporations. However, the Second Circuit is
the only U.S. court of appeals to reach this conclusion. All other circuits that considered the issue
determined that corporate liability is available under the Alien Tort Statute. The Second Circuit
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acknowledged the “growing consensus among [its] sister circuits” allowing corporate liability, but it
declined to overrule its prior circuit precedent on the issue.
Although the Supreme Court will review the Second Circuit’s decision, this is not the first time the Court
has taken a case involving corporate liability under the Alien Tort Statute. In 2011, the Supreme Court
granted certiorari in Kiobel v. Royal Dutch Petroleum on the same topic. But the Court ultimately resolved
Kiobel on the ground that the case did not displace the “presumption against extraterritoriality”—meaning
the case was not connected sufficiently to the United States to overcome the presumption that claims
arising overseas cannot be brought in U.S. courts. In Jesner, the Second Circuit purposefully declined to
address the presumption against extraterritoriality and all other arguments for dismissal except corporate
liability, creating another opportunity for the Supreme Court to resolve the circuit split.
A Possible Two-Step Approach for Resolving Alien Tort Statute Questions
Some commentators have differed in their interpretation of the October 11 oral argument in Jesner and
whether the Supreme Court may definitively resolve whether corporations may be liable under the Alien
Tort Statute. But several members of the Court—Justices Alito, Kagan, and Kennedy—intimated that the
Court may use a two-step approach for resolving the dispute. This two-step framework is informed by an
earlier Supreme Court decision interpreting the contours of the Alien Tort Statute, Sosa v. Alvarez
Machain.
Sosa Step One
In Sosa (discussed in more detail here), the Court concluded that the Alien Tort Statute does not provide
jurisdiction for all claims asserting violations of the standards of conduct (often called “norms”) required
by international law. Rather, under Sosa, only those norms that are “accepted by the civilized world” and
defined with a high degree of specificity are actionable under the Alien Tort Statute. During oral argument
in Jesner, Justice Kennedy harkened back to this holding, and stated that in “Sosa step 1” the Supreme
Court “ask[s] if there’s a specific universal norm” that is implicated in the case. Applied to Jesner, this
inquiry could implicate a complex and currently unresolved question of whether domestic law or
international law governs corporate liability under the Alien Tort Statute.
Under long-standing American domestic jurisprudence, corporations generally are “deemed persons” that
may “sue and be sued” for torts. But the Alien Tort Statute creates jurisdiction only for torts that violate
treaties or the law of nations, and the issue of corporate liability in international law is far less clearly
defined than domestic law. Proponents of corporate liability contend that, although international law
defines substantive standards of conduct that cannot be violated, international law delegates to each
individual nation the responsibility of selecting the means of enforcing international norms. In other
words, proponents argue, international law simply returns the question of how to remedy a violation of an
international norm to the domestic law of the United States, which has a long-standing history of
recognizing corporate liability. Opponents of corporate liability respond that U.S. law does not permit
corporate tort liability in all cases, including some potentially analogous circumstances, such as implied
constitutional causes of action and claims under the Torture Victim Protection Act.
Ultimately, this choice-of-law question is not easily resolved, but could be a decisive feature in Jesner.
Sosa Step Two
The Supreme Court’s holding in Sosa had a second facet. In addition to limiting jurisdiction under the
Alien Tort Statute to widely accepted and well-defined international norms, Sosa explained that, because
claims under the statute could lead to adverse foreign policy consequences, courts should act as “vigilant
doorkeepers” and exercise “great caution” before deciding that a norm is actionable. Discussing this
concept during oral argument in Jesner, Justice Alito described Sosa step two as raising the question of
whether courts “should recognize” a particular norm is actionable based on a balancing of the
“international repercussions” that could result from the decision.

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At the step two level, there would appear to be at least some adverse foreign policy consequences if the
Supreme Court were to allow the claims against Arab Bank to go forward: the Kingdom of Jordan (where
Arab Bank is headquartered) filed an amicus brief calling the exercise of jurisdiction in Jesner a “grave
affront” to its sovereignty.
Congressional and Other Interest in Jesner
Jesner has generated attention in a number of interested communities, including legal scholars and
historians, human rights groups, national security specialists, and business interest groups. Senators
Sheldon Whitehouse and Lindsey Graham filed an amici brief in support of the Jesner plaintiffs’ efforts to
recognize corporate liability. The Senators argue that the Alien Tort Statute serves as part of a larger
legislative scheme to address terrorism, and that a limitation on corporate liability in the statute would
leave “gaps in the United States’ counterterrorism framework.” Citing existing criminal prohibitions on
material support to terrorism and financial regulations administered by the Office of Foreign Asset
Control, Arab Bank counters that the Alien Tort Statute is a not an essential element of U.S. anti-terrorism
efforts.
In its brief for the United States, the Solicitor General takes a middle approach in support of
neither party. The Solicitor General asserts there is no categorical prohibition on corporate
liability in the Alien Tort Statute, and that the Second Circuit’s decision should be vacated. But
the Solicitor General also argues that Jesner should be remanded to consider whether the case
should be dismissed on the alternative ground that the claims are not sufficiently connected to the
United States to satisfy the presumption against extraterritoriality.

Author Information

Stephen P. Mulligan

Legislative Attorney

Disclaimer
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