November 15, 2021

NSO Group Loses Immunity Claim at the Ninth Circuit

[Cross-posted from Just Security]

By William S. Dodge

In 2019, the messaging platform WhatsApp sued NSO Group, alleging that the Israeli company sent spyware through WhatsApp’s servers to approximately 1,400 mobile devises in violation of state and federal law. NSO argued that it was immune from suit because it was working on behalf of undisclosed foreign governments. Yesterday, the Ninth Circuit rejected that argument. (Disclosure: I submitted an amicus brief in support of WhatsApp, along with Sarah Cleveland and Chimène Keitner).

The Ninth Circuit held that the Foreign Sovereign Immunities Act (FSIA) “occupies the field of foreign sovereign immunity as applied to entities and categorically forecloses extending immunity to any entity that falls outside the FSIA’s broad definition of ‘foreign state.’” In Samantar v. Yousuf, the Supreme Court held that the FSIA does not apply to foreign officials, whose immunity is governed instead by federal common law. Based on Samantar, NSO argued that it too could claim immunity even though it fell outside the FSIA. As the Court of Appeals noted, however, “[w]hile the FSIA was silent about immunity for individual officials, that is not true for entities—quite the opposite. . . . If an entity does not fall within the Act’s definition of ‘foreign state,’ it cannot claim foreign sovereign immunity. Period.”

Because the Ninth Circuit held that the FSIA comprehensively addresses the sovereign immunity of entities, it did not reach the question whether NSO would otherwise have been entitled to immunity under the common law. The answer to that question is also “no.” Chimène Keitner and I have recently argued that U.S. courts developing the federal common law of foreign official immunity should not extend more immunity than is clearly required by customary international law. In any event, as explained in the amicus brief, there is no support in either international law or U.S. case law for extending foreign official immunity to companies. To echo the Court of Appeals, foreign official immunity is for foreign officials. Period.

As WhatsApp’s civil suit against NSO moves forward, it is also worth noting the Commerce Department’s decision last week to add NSO and another Israeli company to the Entity List for supplying spyware to foreign governments that used it to target government officials, journalists, activists, and others, a decision that effectively prevents the NSO from receiving U.S. technology. NSO is learning the hard way that having government clients does not shield it from the consequences of its actions.

August 23, 2021

Mexico v. Smith & Wesson: Does U.S. Immunity for Gun Manufacturers Apply Extraterritorially?

[Cross posted from Just Security]

By William S. Dodge and Ingrid Wuerth

Earlier this month, Mexico sued six U.S. gun manufacturers, one foreign manufacturer, and a Boston-area wholesaler in federal court in Massachusetts. According to the complaint, the defendants design, market, and sell guns in ways they know will arm Mexican drug cartels. Although Mexico has strict gun laws and prohibits the importation of guns without a permit, it is estimated that more than half a million guns flow from the United States into Mexico each year. During the first five months of 2020, statistics show that nearly half the guns recovered from crime scenes in Mexico were made by the defendant manufacturers. Most of Mexico’s claims are tort claims, including negligence, public nuisance, and defective design, but Mexico also alleges that the defendants have been unjustly enriched and have violated unfair business practices statutes in Connecticut and Massachusetts.

In 2005, Congress acted to immunize gun manufacturers and dealers from liability based on the criminal use of guns. The Protection of Lawful Commerce in Arms Act (PLCAA), 15 U.S.C. §§ 7901-7903, prohibits bringing in state or federal court any “qualified civil liability action.” That term is defined as a civil action by any person against a gun manufacturer or seller for damages or other relief “resulting from the criminal or unlawful misuse of a qualified product by the person or a third party,” but Congress also created several exceptions including certain actions based on violations of federal or state law. The complaint asserts that PLCAA does not apply “because it bars certain claims against gun manufacturers and distributors only when the injury occurred in the U.S. and the criminal’s misuse of the gun was unlawful under U.S. domestic law” (¶23). Although other experts have suggested that the suit is almost certainly barred by PLCAA, we disagree. The plaintiffs have a strong argument that PLCAA does not prohibit some of their claims, including those brought under Mexican law.

The Presumption Against Extraterritoriality

To determine the geographic scope of federal statutes, courts apply a rule of statutory interpretation known as the presumption against extraterritoriality. The current version of the presumption proceeds in two steps: (1) a “clear indication” step and (2) a “focus” step. At step one, the court looks for a “clear indication” of the provision’s geographic scope. If Congress has clearly indicated when it wants a provision to apply, the court will, sensibly, follow Congress’s direction. But if there is no clear indication of the provision’s geographic scope, the court moves to step two and determines the “focus” of the provision. The focus might be conduct Congress wishes to prohibit, effects it wishes to prevent, or transactions it wishes to protect. If the focus of the provision occurs in the United States and (as the Supreme Court recently held) if conduct relevant to the provision’s focus occurs in the United States, then applying the provision is considered “domestic” and permissible. Otherwise, applying the statute is considered “extraterritorial” and impermissible.

An example not involving PLCAA shows how the presumption works at both steps. In RJR Nabisco, Inc. v. European Community, the European Community sued U.S. cigarette manufacturers under the Racketeer Influenced and Corrupt Organizations Act (RICO), alleging that RJR had engaged in money laundering for organized crime groups in Europe. RICO criminalizes patterns of racketeering activity in connection with an enterprise. Racketeering activity includes certain offenses under federal and state law that are known as predicate acts. Although RICO itself says nothing about its geographic scope, several of RICO’s predicate acts (including money laundering) apply extraterritorially. At step one of the presumption analysis, the Supreme Court found that RICO’s reference to these other statutes was a clear indication that its criminal provisions apply extraterritorially to the same extent as the predicate acts alleged in the particular case. The Court said that “an express statement of extraterritoriality is not essential” and that a clear indication of geographic scope could be found in the “context” of the provision. Because the Court found a clear indication of geographic scope at step one, it refused to proceed to step two. RJR argued that RICO’s focus was on the enterprise affected by the racketeering activity, so that RICO only applied to U.S. enterprises, but the Court found that argument irrelevant. Because “there is a clear indication at step one that RICO applies extraterritorially,” the Court said, “we . . . do not proceed to the ‘focus’ step.”

In addition to criminalizing patterns of racketeering activity, RICO provides a private right of action for “[a]ny person injured in his business or property.” Applying the presumption against extraterritoriality separately to this provision, the Supreme Court found no clear indication of geographic scope at step one. Proceeding to step two, the Court concluded that the focus of the private right of action was on injuries to business or property and, because the European Community had not alleged any such injuries in the United States, RICO’s private right of action did not apply.

The Presumption and PLCAA

PLCAA, like RICO, has no express statement about its geographic scope. But it does refer to other laws. Specifically, PLCAA bars civil actions for damages or other relief “resulting from the criminal or unlawful misuse of a qualified product by the person [bringing the action] or a third party” (emphasis added).

Looking at the “context” of PLCAA, as the Supreme Court has instructed, it seems clear that “criminal or unlawful” refers to U.S. federal and state law and not to foreign law. First, in Congress’s definition of the civil actions that are prohibited, one finds a series of exceptions, two of which refer explicitly to federal and state law. Section 7903(5)(A)(i) permits actions against persons convicted of transferring guns knowing that they will be used in violent crimes or drug crimes in violation of the federal statute “or a comparable or identical State felony law,” whereas Section 7903(5)(A)(iii) permits actions against manufacturers or sellers of guns who “knowingly violated a State or Federal statute applicable to the sale or marketing of the product.” If Congress intended PLCAA to apply to the misuse of guns that is criminal or unlawful under foreign law, it seems likely that Congress would have drafted these exceptions to refer to foreign law as well.

The conclusion that “criminal or unlawful” refers only to federal and state law finds confirmation in Congress’s codified findings and purposes. Congress’s findings begin by referring twice to the Second Amendment right to bear arms. 15 U.S.C. § 7901(a)(1) & (2). Congress also notes that guns “are heavily regulated by Federal, State, and local laws,” id. § 7301(a)(4), with no mention of foreign laws. Congress specifically identifies the civil actions with which it is concerned as those “commenced or contemplated by the Federal Government, States, municipalities, and private interest groups and others are based on theories without foundation in hundreds of years of the common law and jurisprudence of the United States.” Id. § 7901(a)(7). There is no mention of suits by foreign governments or theories of liability based on foreign law.

Lest there be any doubt about Congress’s purposes, PLCAA expressly provides that it is intended “[t]o preserve a citizen’s access to a supply of firearms and ammunition for all lawful purposes, including hunting, self-defense, collecting, and competitive or recreational shooting.” 15 U.S.C. § 7901(b)(2) (emphasis added). The statute’s goal of ensuring that U.S. citizens have adequate access to firearms clarifies the references to “foreign commerce” in the findings and purposes. Section 7901(a)(5) refers, for example to businesses “in the United States” that are engaged in “foreign commerce” through the “importation” of firearms. Indeed, the findings and purposes explicitly refer five times to importers or the importation of guns, but never once to exporters or exportation. The failure to refer to “exportation” might seem like mere oversight, but it is entirely in keeping with Congress’s focus on the Second Amendment rights of U.S. citizens—Congress was simply not concerned with keeping guns in the hands of Mexican citizens in Mexico.

The Supreme Court faced a similar interpretive question in Small v. United States. A federal statute made it unlawful for a person “who has been convicted in any court of, a crime punishable by imprisonment for a term exceeding one year” to possess a firearm. 18 U.S.C. § 922(g)(1). The Court held that “any court” referred only to courts in the United States. It began with the “commonsense notion that Congress generally legislates with domestic concerns in mind,” an understanding the Supreme Court has repeatedly relied on in determining the geographic scope of federal statutes. The Court found confirmation in the statute’s exceptions and other references to federal and state laws, similar to the references in PLCAA discussed above. In fact, the argument for applying PLCAA only domestically seems stronger than the argument in Small because the statute at issue in that case did not contain the extensive findings and purposes that confirm PLCAA’s concern with domestic conditions.

As in RJR Nabisco, PLCAA’s context provides a clear indication of its scope, specifically that PLCAA applies only to actions based on the misuse of a gun that is criminal or illegal under federal or state law. Under the Supreme Court’s two-step framework for the presumption against extraterritoriality discussed above, if there is a clear indication of a statute’s scope at step one, then a court must apply the statute as Congress has indicated without going on to step two.

PLCAA’s clear indication of scope distinguishes PLCAA from Section 230 of the Communications Decency Act, which has been held by some courts to provide immunity from certain extraterritorial claims. Section 230 provides that interactive computer service providers, like Facebook and Google, shall not be treated as the publisher of information provided by someone else. The Second and Ninth Circuits have held that Section 230 immunizes such providers against liability for claims under the federal Anti-Terrorism Act arising outside the United States. Gonzalez v. Google LLC, 2 F.4th 871, 888 (9th Cir. 2021); Force v. Facebook, Inc., 934 F.3d 53, 72-74 (2d Cir. 2019). In both cases, the court reasoned that the “focus” of Section 230 was on limiting liability, which necessarily occurred in the United States. The gun manufacturers and other defendants in Mexico’s suit may be expected to make a similar argument. But in the Section 230 cases, the courts examined the focus of that provision only because there was no clear indication of scope at step one of the analysis. With PLCAA, by contrast, the court should never reach the second, “focus” step because there is a clear indication of PLCAA’s scope—PLCAA applies only to actions based on the misuse of guns that is criminal or unlawful under federal or state law.

What Claims Can Mexico Bring?

PLCAA would appear to be no bar to tort or restitution claims under Mexican law. Most of Mexico’s claims based on U.S. law, by contrast, would appear to be foreclosed by PLCAA. Most, but not all.

It is possible that some of Mexico’s claims under U.S. state law might fit within the one of PLCAA’s exceptions. Mexico has brought a claim for defective design (¶¶ 520-22), and PLCAA has an exception for defects in design or manufacture, 15 U.S.C. § 7903(5)(A)(v), although it is not clear that Mexico’s allegations fit the contours of the exception. Mexico has also brought a claim for negligence per se (¶¶ 523-526), and PLCAA has an exception for such claims, although the exception is limited to actions against sellers. 15 U.S.C. § 7903(5)(A)(ii). And Mexico has brought claims for violations of the unfair business practices statutes in Connecticut and Massachusetts (¶¶ 542-556), which might fit within PLCAA’s exception for actions against gun manufacturers or sellers who “knowingly violated a State or Federal statute applicable to the sale or marketing of the product.” 15 U.S.C. § 7903(5)(A)(iii).

If both Mexican law and U.S. state law are applicable to the same claim, a federal court in Massachusetts would have to apply Massachusetts choice-of-law rules to decide which law to apply. In tort cases, Massachusetts generally applies the law of the place of the injury, which would be Mexican law. So, it seems that Mexico’s suit, with perhaps a few exceptions, will require the federal court to apply Mexican law.

Why Isn’t This Case in Mexico?

The Mexican government is suing under Mexican law for injury sustained by Mexican citizens in Mexico in a case involving Mexico’s laws governing firearms. Mexico might seem like the best—or perhaps the only—appropriate forum for the litigation. The defendants are U.S. corporations, however, and, as noted above, nothing in U.S. or international law prevents foreign plaintiffs (including foreign governments) from suing U.S. defendants in U.S. courts, even for harm that occurred abroad.

Indeed, the Mexican government may not have been able to sue in Mexico at all—Mexican  courts might lack personal jurisdiction over the defendants. We are not experts on Mexican civil procedure, but most civil law countries rely on domicile as the primary basis for personal jurisdiction. There are, however, additional bases for personal jurisdiction even in civil law countries, sometimes including the place where the injury occurs in a tort action. But our (admittedly cursory) review of an unofficial translation of Código Federal de Procedimientos Civiles [CFPC], art. 24, Diario Oficial de la Federación [DOF] 24-02-1943, últimas reformas DOF 08-06-2021 (Mex.), did not suggest that Mexican law permits jurisdiction on that basis.

Even assuming that the suit could have been brought in Mexico, the government may have chosen to sue in the United States out of a concern that U.S. courts would not recognize a Mexican judgment, perhaps because a U.S. court would not have personal jurisdiction over Mexican defendants under comparable facts. See Restatement (Fourth) of U.S. Foreign Relations Law § 483(b) and Comment e. We both think that there is no constitutional bar to the exercise of jurisdiction over Mexican defendants by U.S. federal courts under comparable facts, but the Fifth Amendment-based due process limitations on personal jurisdiction have not been addressed by the Supreme Court and are somewhat unclear.

Alternatively, the Mexican government may have sued in the United States because the suit is based upon the unlawful use of firearm by criminal gangs, and perhaps Mexican judges would be intimidated or afraid to rule against the gun manufacturers.

Whatever reason the Mexican government had for suing in the United States, the case might still wind up in Mexico if the defendants move to dismiss for forum non conveniens—district courts may dismiss the case if there is an adequate foreign forum and if private and public interest factors favor that forum. Mexico is likely to be deemed an adequate forum, as other cases have held, and the Mexican government would probably not want to argue that its judicial system is so compromised as to be inadequate. Some of the private and public factors would also favor dismissal: the harm occurred in Mexico, Mexican law applies to the claims that survive PLCCA, some witnesses and evidence are located in Mexico, and the general deference afforded to the plaintiff’s choice of forum is reduced for foreign plaintiffs.

Personal jurisdiction turns up here, too, however. Mexico is not a true alternative forum if it lacks personal jurisdiction over the defendants. If defendants move to dismiss for forum non conveniens, a court would likely grant the motion only on the condition that the defendants stipulate to personal jurisdiction in Mexico. Consent is a proper basis for personal jurisdiction in Mexico (and in the United States), so a stipulation would resolve the personal jurisdiction issue in Mexico and probably render the judgment of a Mexican court enforceable in the United States. Texaco famously moved to dismiss an environmental case in favor of Ecuador as an alternative forum, won that motion, and then lost the case in Ecuador and had a $9.5 billion judgment entered against it. The judgment against Chevron (which had purchased Texaco) was not enforced because it was procured by fraud. Still, a forum non conveniens motion carries substantial risks for the defendants, and the stakes are high whether the case ends up in U.S. or Mexican courts.

About the Author(s)

William S. Dodge

William S. Dodge is Martin Luther King, Jr. Professor of Law and John D. Ayer Chair in Business Law at the University of California, Davis, School of Law. He served as Counselor on International Law to the Legal Adviser at the U.S. Department of State from 2011 to 2012 and as Co-Reporter for the American Law Institute’s Restatement (Fourth) of Foreign Relations Law from 2012 to 2018.

Ingrid Wuerth

Ingrid Wuerth (@WuerthIngrid) holds the Helen Strong Curry Chair in International Law at Vanderbilt Law School where she directs the Branstetter Litigation and Dispute Resolution Program. From 2012-2018 she served as Co-Reporter for the American Law Institute’s Restatement (Fourth) of Foreign Relations Law. She is a contributing editor at Lawfare.

June 18, 2021

The Surprisingly Broad Implications of Nestlé USA, Inc. v. Doe for Human Rights Litigation and Extraterritoriality

[Cross-posted from Just Security]

By William S. Dodge

In Nestlé USA, Inc. v. Doe, the U.S. Supreme Court took up the question of corporate liability for human rights violations under the Alien Tort Statute (ATS) for the third time. The Court again failed to resolve the question, holding instead that application of the ATS cause of action would be impermissibly extraterritorial in this case because nearly all the defendants’ relevant conduct occurred in Ivory Coast. At first glance, this holding appears narrow, which is no doubt why it attracted the votes of eight Justices. But the decision has potentially broad implications for ATS suits against individuals and for the extraterritorial application of federal statutes in other areas. This article will briefly discuss the questions of corporate liability and limiting the ATS cause of action before exploring the Court’s extraterritoriality holding and its potentially dramatic implications.

Background

The defendants are U.S. companies that buy cocoa from Ivory Coast. The plaintiffs are individuals from Mali who were trafficked to Ivory Coast as child slaves to work on cocoa farms. Plaintiffs alleged that defendants aided and abetted their slavery by providing the farms that held them with technical and financial resources despite knowing or having reason to know that the farms were using children as slaves. Plaintiffs alleged that the defendants made all their major operational decisions from the United States.

The ATS is a jurisdictional provision that was part of the First Judiciary Act of 1789. As codified today, it gives federal district courts jurisdiction over “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.” In 1980, the Second Circuit held in Filartiga v. Pena-Irala, 630 F.2d 876 (2d Cir. 1980), that non-U.S. citizen plaintiffs could use the ATS to sue a foreign police inspector who had come to the United States to recover damages for torture that occurred abroad, reasoning that the plaintiffs were “aliens,” that torture is a tort, and that torture violates modern customary international law.

In Sosa v. Alvarez-Machain, 542 U.S. 692 (2004), the Supreme Court rejected arguments that a statutory cause of action should be required for claims under the ATS and that claims should be limited to the three violations of the law of nations that the First Congress had in mind in 1789 (violations of safe-conducts, infringement of the rights of ambassadors, and piracy). The Court recognized an implied, federal-common-law cause of action for violations of modern international law that are as generally accepted and specifically defined as the three historical paradigms, although the Court found that Alvarez-Machain’s claims of arbitrary detention did not meet that standard.

In 2010, the Second Circuit held in Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111 (2d Cir. 2010), that corporations could never be sued under the ATS because corporate liability for human rights violations did not meet the Sosa standard. The Supreme Court granted review on the corporate liability question, but after reargument the Court declined to answer the question. Instead, the Court applied the presumption against extraterritoriality to the ATS cause of action, holding that ATS claims must “touch and concern the territory of the United States . . . with sufficient force to displace the presumption against extraterritorial application” and that “mere corporate presence” in the United States is insufficient. Kiobel v. Royal Dutch Petroleum Co., 569 U.S. 108, 124-25 (2013). The Court tried again to answer the corporate liability question in Jesner v. Arab Bank, PLC, 138 S. Ct. 1386 (2018). Again, it failed, holding only that the ATS cause of action does not extend to foreign corporations. Id. at 1407.

The Nestlé case presented the Court with a third opportunity to decide the corporate liability question because the defendants were U.S. corporations not protected by Jesner. But once again, the Court disposed of the case on other grounds. Justice Thomas concluded in Part II of his opinion (joined by every member of the Court except Justice Alito) that applying the ATS cause of action would be impermissibly extraterritorial because the plaintiffs had not alleged sufficient relevant conduct in the United States. Justice Thomas went on in Part III to propose that the ATS cause of action should be limited to the three historical paradigms that the First Congress had in mind, but he was joined only by Justices Gorsuch and Kavanaugh. Justice Sotomayor (joined by Justices Breyer and Kagan), agreed with Justice Thomas about extraterritoriality but disagreed about limiting the ATS cause of action. She also reiterated her view that the ATS cause of action should extend to corporations. Justices Gorsuch and Alito agreed with Justice Sotomayor that there was no basis for limiting the ATS cause of action to natural persons (which, yes, makes five Justices on that point of law). Justice Gorsuch (joined by Justice Kavanaugh), however, would have overruled Sosa, whereas Justice Alito would not have reached the extraterritoriality question before deciding other issues he though should be preliminary.

Corporate Liability

The Court granted review in Nestlé to decide the corporate liability question that it left open in Kiobel and Jesner. In Jesner, the plurality and the dissent fundamentally disagreed on how the question should be framed. Justice Kennedy’s plurality opinion asked whether there was a “norm of corporate liability” under international law, whereas Justice Sotomayor’s dissent read Sosa to require an international consensus about the prohibited “substantive conduct” but not about the “forms of liability.” As I have previously explained at Just Security, Justice Sotomayor’s framing is most consistent with international law, which prohibits certain violations of human rights but leaves it to each nation to decide whether and how to provide remedies for such violations. (Full disclosure: I wrote an amicus brief on this question in Jesner and a similar brief in Nestlé.) The Trump administration reversed the position on corporate liability under the ATS that the United States had taken in Kiobel and Jesner, arguing that the Supreme Court should reject corporate liability—not on international law grounds but because the decision should be left to Congress.

Although the majority opinion in Nestlé did not address the question of corporate liability, five Justices saw no reason to distinguish between corporations and natural persons as defendants. Justice Gorsuch wrote: “The notion that corporations are immune from suit under the ATS cannot be reconciled with the statutory text and original understanding.” Justice Alito added in dissent that “corporate status does not justify special immunity.” And Justice Sotomayor (joined by Justices Breyer and Kagan) agreed (n. 4). There was no discussion in any of the Nestlé opinions of the need for a “norm of corporate liability” under international law, and one hopes that this spurious argument has finally been put to rest.

Limiting Sosa

In Part III of his opinion, Justice Thomas (joined by Justices Gorsuch and Kavanaugh) would have held “that federal courts should not recognize private rights of action for violations of international law beyond the three historical torts identified in Sosa.” In Justice Thomas’s view, “creating a cause of action to enforce international law beyond [the] three historical torts invariably gives rise to foreign-policy concerns,” warranting deference to Congress. Congress had also shown itself willing and able to address human trafficking by amending the Trafficking Victims Protection Reauthorization Act (TVPRA) to add a private right of action, he explained. With respect to torts beyond the three historical paradigms, Justice Thomas concluded, “there always is a sound reason to defer to Congress.” In Part II of his concurrence, Justice Gorsuch (joined by Justice Kavanaugh) largely echoed Justice Thomas but suggested more explicitly that the Court should overrule Sosa or, as he put it, avoid “adhering to a precedent that seized power we do not possess.”

Justice Sotomayor spent her concurring opinion, in which Justices Breyer and Kagan joined, defending Sosa against Justice Thomas’s attack, which would have overruled that decision “in all but name.” It was the First Congress’s assessment, she noted, “that diplomatic strife is best avoided by providing a federal fo­rum to redress those law-of-nations torts that, if not reme­died, could bring international opprobrium upon the United States.” “Barring some extraordinary collateral consequence that could not have been foreseen by Congress,” she continued, “federal courts should not, under the guise of judicial discretion, second-guess that legislative decision.” Although Congress could have limited the ATS to the three historical paradigms with which it was familiar, it did not do so. Instead, Congress relied on “international law [to] suppl[y] the substantive contours of actionable torts.” Justice Sotomayor concluded that to “suggest that identifying actionable torts risks upsetting the careful balance of interests struck by the lawmakers is ahistorical at best” (quotation marks and alterations omitted).

Extraterritoriality

The Justices found more room for agreement on the question of extraterritoriality, with eight Justices joining Part II of Justice Thomas’s opinion. Only Justice Alito dissented, reasoning that the extraterritoriality question should not be addressed before other questions that the Court had not considered.

The Court did not apply Kiobel’s “touch and concern” test but rather the two-step framework for the presumption against extraterritoriality subsequently articulated in RJR Nabisco, Inc. v. European Community, 136 S. Ct. 2090 (2016). Under that framework, as I have explained at length elsewhere, courts determine the geographic scope of a statutory provision by looking for a clear indication of that scope (step one) or by looking to the focus of the provision (step two).

In Kiobel, the Supreme Court found that there was no clear indication of geographic scope with respect to the ATS cause of action and did not address the focus question. In Nestlé, the parties disagreed about the focus of the ATS, but the Court found it unnecessary to resolve the focus question because it was still up to the plaintiffs to “establish that ‘the conduct relevant to the statute’s focus occurred in the United States’” (quoting RJR, 136 S. Ct. at 2101). The Court in Nestlé noted that “nearly all the conduct that [the plaintiffs] say aided and abetted forced labor—providing training, fertilizer, tools, and cash to overseas farms—occurred in Ivory Coast.” Plaintiffs had alleged that the defendants made their major operational decisions in the United States, but the Court concluded that “allegations of general corporate activity—like decisionmaking—cannot alone establish domestic application of the ATS.”

The key language from RJR on which the Nestlé decision turned is worth quoting in full:

If the statute is not extraterritorial, then at the second step we determine whether the case involves a domestic application of the statute, and we do this by looking to the statute’s “focus.” If the conduct relevant to the statute’s focus occurred in the United States, then the case involves a permissible domestic application even if other conduct occurred abroad; but if the conduct relevant to the focus occurred in a foreign country, then the case involves an impermissible extraterritorial application regardless of any other conduct that occurred in U.S. territory.

In RJR, the language about “conduct relevant to the statute’s focus” was dictum (as I have explained in greater detail at pp. 49-50 here). When the Court in RJR came to apply the second step of the analysis to RICO’s private right of action, the Court made no mention of the need for conduct in the United States, holding simply that the provision “requires a civil RICO plaintiff to allege and prove a domestic injury to business or property and does not allow recovery for foreign injuries.” RJR, 136 S. Ct. at 2111. Similarly, in Morrison v. National Australia Bank, Ltd., 561 U.S. 247 (2010), the Supreme Court found the location of the conduct irrelevant in applying the presumption against extraterritorially, adopting a “transactional test” for the geographic scope of Section 10(b) of the Securities Exchange Act that turns entirely on the location of the transaction. Id. at 269-70. Based on these decisions, the Restatement (Fourth) of Foreign Relations Law rejected a separate requirement of conduct in the United States when the focus of the statutory provision is on something other than conduct as it was in RJR and Morrison, providing simply: “If whatever is the focus of the provision occurred in the United States, then application of the provision is considered domestic and is permitted” (§ 404 cmt. c).

Nestlé’s reliance on RJR’s dictum has potentially broad implications both for ATS cases and for the Court’s approach to extraterritoriality more generally. With respect to ATS cases, if plaintiffs must show relevant conduct in the United States, it is hard to see how traditional ATS cases against individual defendants can continue. The Second Circuit’s seminal decision in Filartiga, for example, involved torture by a Paraguayan police inspector in Paraguay. The connection to the United States was the fact that the inspector later came to the United States. That fact might have been sufficient to satisfy Kiobel’s “touch and concern” test. See, e.g., Jane W. v. Thomas, 354 F. Supp. 3d 630, 639 (E.D. Pa. 2018) (finding residence sufficient to satisfy “touch and concern” test). But it seems unlikely to satisfy Nestlé’s requirement of relevant conduct in the United States.

Of course, many cases against individual defendants are now covered by the Torture Victim Protection Act (TVPA), which provides an express statutory cause of action against natural persons for torture and extrajudicial killing under color of foreign law. Claims for torture and extrajudicial killing may therefore continue under the TVPA, subject to federal common law rules governing foreign official immunity. But the TVPA does not cover other well-established human rights violations like genocide and war crimes. Genocide and war crimes do sometimes involve torture and killing, but the TVPA’s color-of-foreign-law requirement would nonetheless preclude those suits against non-state actors. The TVPA also does not cover piracy. Almost everyone seems to agree that piracy was within the First Congress’s contemplation when it passed the ATS, but piracy does not involve conduct in the United States and so would not be actionable under Nestlé. It seems odd that Justices Breyer, Sotomayor, and Kagan would join the majority’s extraterritoriality analysis without some consideration of its implications for ATS claims against individuals.

Beyond the human rights context, adding a requirement of relevant conduct in the United States is likely to disturb the law concerning extraterritoriality in other areas—and in ways that might concern other members of the majority too. For example, Morrison rejected the Second Circuit’s conduct and effects tests for securities fraud claims, finding those tests to be “unpredictable and inconsistent,” in favor of a more easily administrable test that turns on the location of the transaction. Lower courts have expressly held that Morrison’s transactional test does not require conduct in the United States. See Absolute Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60, 69 (2d Cir. 2012). Nestlé upsets that understanding by suggesting that conduct relevant to the transaction must also occur in the United States. Lower courts will now have to consider not only whether a separate conduct requirement applies to securities fraud claims but also what kind of conduct is relevant to the transaction and how much conduct is required, making the application of Section 10(b) in transnational cases unpredictable and inconsistent once again. Nestlé will not unsettle every established test for geographic scope, because some tests are based on clear indications of congressional intent (e.g. Title VII of the 1964 Civil Rights Act) and others were fixed before the presumption against extraterritoriality was reborn in 1991 (e.g. the effects test for antitrust law). But Nestlé is likely to make life more complicated for the lower courts considering questions of extraterritoriality than the Justices anticipated. Indeed, if the Justices had anticipated these downstream effects, they would have presumably provided some guidance to avoid them.

Conclusion

Nestlé certainly does not mean the end of human rights litigation in U.S. courts. Cases against individual defendants may continue under the TVPA, the TVPRA, and similar statutes granting express causes of action. But Nestlé does seem to mark the end of the Filartiga line of ATS cases against individual defendants whose relevant conduct occurs outside the United States. It also appears to limit the ATS cause of action to claims against U.S. corporations based on conduct in the United States that goes beyond making decisions about how to conduct operations abroad. There may be cases that fit that description, but they are likely to be few and far between.

June 10, 2021

New York Court Denies Enforcement of Chinese Judgment on Systemic Due Process Grounds

[Cross-posted from Conflictoflaws.net]

By William S. Dodge (Professor, University of California, Davis School of Law) &

Wenliang Zhang (Associate Professor, Renmin University of China Law School)

In Shanghai Yongrun Investment Management Co. v. Kashi Galaxy Venture Capital Co., the Supreme Court of New York (New York’s court of first instance) denied enforcement of a Chinese court judgment on the ground that the judgment “was rendered under a system which does not provide impartial tribunals or procedures compatible with the requirements of due process of law.” The decision disagrees with every other U.S. and foreign court to have considered the adequacy of the Chinese judicial system in the context of judgments recognition. In recent years, there has been a growing trend in favor of the recognition of Chinese judgments in the United States and U.S. judgments in China. See William S. Dodge & Wenliang Zhang, Reciprocity in China-U.S. Judgments Recognition, 53 Vand. J. Transnat’l L. 1541 (2020). Unless this recent decision is overturned on appeal, it threatens to reverse the trend, to the detriment of judgment creditors in both countries.

In 2016 Shanghai Yongrun purchased an interest in Kashi Galaxy. In 2017, Kashi Galaxy agreed to repurchase that interest for RMB 200 million, an agreement that Kashi Galaxy allegedly breached by paying only part of the repurchase price. The agreement was governed by Chinese law and provided that suits could be resolved by courts in Beijing. In 2018, Shanghai Yongrun sued Kashi Galaxy, Maodong Xu, and Xu’s wife in the Beijing No. 1 Intermediate People’s Court. After a trial in which defendants were represented by counsel, the court granted judgment in favor of Shanghai Yongrun. The Beijing Higher People’s Court affirmed the judgment on appeal, but it could not be enforced in China because no assets were available within the court’s jurisdiction.

In 2020, Shanghai Yongrun brought an action against Kashi Galaxy and Xu in New York state court, seeking to have the Chinese judgment recognized and enforced. Article 53 of New York’s Civil Practice Law and Rules (CPLR) has adopted the 1962 Uniform Foreign Money-Judgments Recognition Act (1962 Uniform Act), which provides that final money judgments rendered by foreign courts are enforceable in New York unless one of the grounds for non-recognition set forth in CPLR 5304 is established. These grounds include that the foreign court did not have personal jurisdiction, that the foreign court did not have subject matter jurisdiction, that the defendant did not receive notice of the foreign proceeding, that the judgment was obtained by fraud, that the judgment is repugnant to the public policy of the state, that the judgment conflicts with another final judgment, that the judgment is contrary to a forum selection clause, that personal jurisdiction was based only on service, and that the judgment is for defamation and provided less protection for speech than would be available in New York. The defendants raised none of these grounds for non-recognition. Instead, they raised the broadest and least frequently accepted ground: that “the judgment was rendered under a system which does not provide impartial tribunals or procedures compatible with the requirements of due process of law.” CPLR 5304(a)(1).

To find a systemic lack of due process in the Chinese judicial system, the New York court relied entirely on the State Department’s Country Reports on Human Rights Practices for 2018 and 2019. In particular, the court quoted the observations that Chinese “[j]udges regularly received political guidance on pending cases, including instructions on how to rule, from both the government and the [Chinese Communist Party], particularly in politically sensitive cases” and that “[c]orruption often influenced court decisions.” The court held that these country reports “conclusively establish as a matter of law that the PRC judgment was rendered under a system that does not provide impartial tribunals or procedures compatible with the requirements of due process of law in the United States.”

The implications of this ruling are broad. If the Chinese judicial system suffers from a systemic lack of due process, then no Chinese court judgments may ever be recognized and enforced under New York law. What is more, ten other states have adopted the 1962 Uniform Act, and an additional twenty-six states have adopted the updated 2005 Uniform Foreign-Country Money Judgments Recognition Act (2005 Uniform Act), which contains the same systemic due process ground for non-recognition. If followed in other jurisdictions, the New York court’s reasoning would make Chinese judgments unenforceable throughout much of the United States.

But it seems unlikely that other jurisdictions will follow suit or that the New York court’s decision will be upheld on appeal. U.S. decisions denying recognition on systemic due process grounds are rare. The leading cases have involved extreme and unusual circumstances: a Liberian judgment rendered during that country’s civil war when the judicial system had “collapsed,” Bridgeway Corp. v. Citibank, 201 F.3d 134, 138 (2d Cir. 2000), and an Iranian judgment against the sister of the former Shah, Bank Melli Iran v. Pahlavi, 58 F.3d 1406 (9th Cir. 1995). Although other courts have considered State Department country reports to be relevant in considering claims of systemic due process, none has found them to be dispositive. For example, the Fifth Circuit rejected a claim that Moroccan courts suffered from systemic lack of due process notwithstanding a statement in the 2009 country report that “in practice the judiciary . . . was not fully independent and was subject to influence, particularly in sensitive cases.” DeJoria v. Maghreb Petroleum Exploration, S.A., 804 F.3d 373, 381 (5th Cir. 2015). This language about Moroccan courts is quite similar to the country report statements about China that the New York court found conclusive.

With respect to China specifically, no U.S. court had previously denied recognition based on a systemic lack of due process. To the contrary, a prior New York state court decision held that “the Chinese legal system comports with the due process requirements,” Huizhi Liu v. Guoqing Guan, Index No. 713741/2019 (N.Y. Sup. Ct., Jan. 7, 2020),  and a federal court in California concluded that “the Chinese court was an impartial tribunal.” Qinrong Qiu v. Hongying Zhang, 2017 WL 10574227, at *3 (C.D. Cal. 2017). Other U.S. decisions have specifically noted that the party resisting enforcement had not alleged systemic lack of due process as a ground for non-recognition. See Global Material Technologies, Inc. v. Dazheng Metal Fibre Co., 2015 WL 1977527, at *7 (N.D. Ill. 2015); Hubei Gezhouba Sanlian Industrial Co. v. Robinson Helicopter Co., 2009 WL 2190187, at *6 (C.D. Cal. 2009).

China has been promoting the rule of law, and its legal system is modernizing to follow internationally accepted standards. The independence of China’s judiciary is guaranteed by its Constitution and other laws. To promote international trade and investment, China has emphasized the independence and impartiality of its courts. Other countries have repeatedly recognized and enforced Chinese judgments, including Australia, Canada, Germany, Israel, the Netherlands, New Zealand, Singapore, South Korea, and the United Kingdom. When parties have questioned the integrity of the Chinese judicial system as a whole, courts have rejected those arguments. Recently, in Hebei Huaneng Industrial Development Co. v. Deming Shi, [2020] NZHC 2992, the High Court of New Zealand found that the Chinese court rendering the judgment “was part of the judicial branch of the government of the People’s Republic China and was separate and distinct from legislative and administrative organs. It exercised a judicial function. Its procedures and decision were recognisably judicial.” When claims of improper interference are raised in the context of judgments recognition, the New Zealand court suggested, “the better approach is to see whether justice was done in the particular case.”

The New York court’s decision in Shanghai Yongrun is not only contrary to past decisions involving the enforcement of Chinese judgments in the United States and other countries. It also threatens to undermine the enforceability of U.S. judgments in China. Under Article 282 of the Civil Procedure Law of the People’s Republic of China, foreign judgments are recognized and enforced “in accordance with the principle of reciprocity.” For U.S. judgments, Chinese courts in cases like Liu v. Tao (Reported on by Ron Brand) and Nalco Co. v. Chen have found China’s reciprocity requirement to be satisfied by U.S. decisions that recognized and enforced Chinese judgments. If U.S. courts change course and begin to hold that China’s judiciary can never produce enforceable judgments, Chinese courts will certainly change course too and deny recognition to U.S. judgments for lack of reciprocity.

Maintaining reciprocity with China does not require U.S. courts to enforce every Chinese judgment. U.S. courts have denied recognition and enforcement of Chinese judgments when the Chinese court lacked personal jurisdiction, Folex Golf Indus., Inc. v. O-Ta Precision Industries Co., 603 F. App’x 576 (9th Cir. 2015), or when the Chinese judgment conflicted with another final judgment, UM Corp. v. Tsuburaya Prod. Co., 2016 WL 10644497 (C.D. Cal. 2016). But so far, U.S. courts have treated Chinese judgments the same as judgments from other countries, applying the case-specific grounds for non-recognition in an evenhanded way. The systemic due process ground on which the New York court relied in Shanghai Yongrun is fundamentally different because it holds Chinese judgments to be categorically incapable of recognition and enforcement.

New York may be on the verge of expanding the case-specific ground for non-recognition by adopting the 2005 Uniform Act to replace the 1962 version that is currently in place. A bill to adopt the 2005 Act has passed both the Assembly and the Senate in New York. The 2005 Act adds two grounds for non-recognition not found in the 1962 Act: (1) that “the judgment was rendered in circumstances that raise substantial doubt about the integrity of the rendering court with respect to the judgment”; and (2) that “the specific proceeding in the foreign court leading to the judgment was not compatible with the requirements of due process of law.” These grounds, already found in the laws of twenty-six other states that have adopted the 2005 Uniform Act, would allow New York courts to review foreign judgments for corruption and for lack of due process in the specific case without having to condemn the entire foreign judiciary as incapable of producing recognizable judgments. It is worth noting that the defendants in Shanghai Yongrun did not claim that there was any defect in the Chinese proceedings that led to the judgment against them.

Many court systems around the world are imperfect. The case-specific grounds for non-recognition found in the 1962 and 2005 Uniform Acts allow U.S. courts to refuse enforcement to foreign judgments on a range of case-specific grounds from lack of jurisdiction or notice, to public policy, to corruption or lack of due process. These case-specific grounds largely eliminate the need for U.S. courts to declare that an entire judicial system is incapable of producing valid judgments.

June 1, 2020

Trump administration reverses position on corporate liability under Alien Tort Statute

[Cross-posted from Just Security]

By William S. Dodge

In a brief filed last week, the Trump administration reversed its position on corporate liability under the Alien Tort Statute (ATS), urging the Supreme Court to grant certiorari in Cargill, Inc. v. Doe I and to hold that domestic corporations are not subject to suit for human rights violations under the ATS. The brief further urged the Court to reject the possibility of aiding-and-abetting liability under the ATS or, in the alternative, to hold that aiding-and-abetting liability is not available when the principal offense occurs outside the United States. Three months after the Canadian Supreme Court held that Canadian corporations may be sued in Canadian courts for human rights violations abroad, the Trump administration is advocating that the U.S. Supreme Court turn in precisely the opposite direction.

The ATS is a provision of the 1789 Judiciary Act giving federal courts jurisdiction over “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.” In Sosa (2004), the Supreme Court recognized an implied cause of action under the ATS for well-established norms of human rights law. The Second Circuit subsequently held in Kiobel (2010) that corporate liability for human rights violations was not well-established enough to meet the Sosa standard. The Supreme Court granted certiorari to resolve the corporate liability question, but instead disposed of the case by applying the presumption against extraterritoriality to the ATS cause of action in Kiobel (2013). The Court granted certiorari again to decide the corporate liability question in Jesner (2018), but again avoided the question by holding that the ATS cause of action does not apply to foreign corporations.

The plaintiffs in Cargill have alleged that Cargill and Nestle operated a cocoa supply chain based on child slave labor, providing financial support and technical aid to growers in Ivory Coast while knowing that these growers used children as slaves. The Ninth Circuit noted that Jesner precluded ATS claims against foreign corporate defendants but not against the U.S. corporate defendants Cargill and Nestle USA. The Ninth Circuit further held that applying the ATS cause of action to these facts would be domestic rather than extraterritorial because the focus of the ATS includes conduct that aids and abets human rights violations, and plaintiffs had alleged that such conduct occurred in the United States.

In Kiobel and Jesner, two different administrations argued in favor of corporate liability under the ATS for human rights violations that meet the Sosa standard. In Kiobel, the Obama administration filed an amicus brief noting that actionable norms of international human rights law apply equally to natural persons and to corporations (at pages 20-21) and arguing that “[h]olding corporations liable in tort for violations of the law of nations” is “consistent with the common law backdrop against which the ATS was enacted and subsequently amended” (at page 26). In Jesner, the Trump administration filed an amicus brief reiterating that international-law norms of human rights apply equally to natural persons and to corporations (at pages 13-14) and arguing that “[t]he history of the ATS reinforces that it permits courts, in appropriate cases, to recognize common-law claims against corporations for law-of-nations violations” (at page 15).

The new brief from the Trump administration changes its position from just three years earlier. Significantly, the brief does not argue against corporate liability based on the content of customary international law. Although the Second Circuit in Kiobel (2010) framed the question as whether there is a “norm of corporate liability” under customary international law, I have explained both in scholarship and in an amicus brief that such a question makes no sense. The customary international law of human rights establishes norms of conduct; it does not dictate to States how those norms should be enforced. It is clear beyond doubt that international human rights norms (including the prohibition against slavery) apply to corporations. And therefore, it is open to the United States to apply those norms to corporations.

Instead, the new Trump administration brief argues against corporate liability solely as a matter of U.S. domestic law. Invoking separation-of-powers concerns, it argues that the decision to extend the ATS cause of action to corporations should be left to Congress (at pages 9-10). In a footnote, the administration explains its change of position on the ground that Jesner “rejected not only the government’s conclusion [with respect to corporate liability] but also its basic framework for analysis” (at page 9, note 3). This is not true. As I have noted previously at Just Security, the only parts of Justice Anthony Kennedy’s opinion in Jesner that commanded a majority were expressly limited to foreign corporations, and the concurring opinions by Justices Samuel Alito and Neil Gorsuch that provided the majority’s fourth and fifth votes explained that there are significant differences between ATS suits against foreign defendants and those against U.S. defendants.

It seems that I may not be the only one troubled by the unsupported change in the position of the United States. Deputy Solicitor General Edwin Kneedler, who was counsel of record for the United States in both Kiobel and Jesner, does not appear on the cover of the new Trump administration brief. That fact is particularly striking given his appearance on the covers of three other briefs filed the same day (herehere, and here).

It makes little sense to think that the act of incorporation should provide a shield from liability for human rights violations. Judge Pierre Leval’s separate opinion in Kiobel pointed out that, under the approach of the Second Circuit majority,

businesses will now be free to trade in or exploit slaves, employ mercenary armies to do dirty work for despots, perform genocides or operate torture prisons for a despot’s political opponents, or engage in piracy—all without civil liability to victims.

It is not fanciful to think that U.S. corporations might engage in some of these activities. U.S. corporations have been sued under the ATS for torture and war crimes. And, of course, Cargill itself involves allegations that U.S. corporations aided and abetted slavery.

The new Trump administration brief also argues that the Supreme Court should reject the possibility of aiding-and-abetting liability under the ATS, although the petition for certiorari did not ask for review of this question and the Courts of Appeals have unanimously recognized such liability. As with corporate liability, the brief does not argue against aiding-and-abetting liability based on customary international law. The brief acknowledges that aiding-and-abetting liability is well-established under international law (at pages 14-15), as Chimène Keitner has also discussed in detail (at pages 81-94). Instead, the new Trump administration brief again invokes separation-of-powers concerns to argue that the decision whether to recognize such liability should be left to Congress (at pages 15-17).

It is important to recognize that the Trump administration’s position on aiding and abetting is not limited to suits against corporations but would apply equally to suits against natural persons. One of the leading international-law cases on aiding and abetting liability is the so-called Zyklon B case, in which individuals were tried and convicted by a British military tribunal for supplying poison gas to concentration camps “well knowing” that the gas would be used for extermination. Bruno Tesch was hung for aiding and abetting war crimes. But under the Trump administration’s position, he would not have been civilly liable.

In the alternative, relying on the presumption against extraterritoriality, the brief argues that aiding-and-abetting liability should not be permitted when the human rights violation itself occurred outside the United States (at pages 18-19). As I have recently explained, under the Supreme Court’s current approach, the presumption analysis proceeds in two steps. At the first step, a court asks whether the presumption has been rebutted by a clear indication of geographic scope. If not, then at the second step, a court asks whether applying the provision should nevertheless be considered domestic because whatever is the focus of the provision occurred in the United States (at pages 1608-09). Typically, ancillary criminal statutes, like aiding-and-abetting statutes, are given the same geographic scope as the underlying criminal offense (at pages 1616-17).

But the analysis with respect to the ATS cause of action is different. In Kiobel, the Supreme Court applied the presumption against extraterritoriality to the ATS cause of action. At step one, Kiobel concluded that the ATS had no clear indication of extraterritoriality. But oddly the Court never reached the focus question at step two. If it had done so—I have argued in the same article (at pages 1607-08)—it should have concluded that the focus of the ATS was either on providing redress for violations of international law by U.S. citizens or on providing redress for violations of international law more generally. In either case, the focus of the ATS cause of action would be nongeographic, and the location of the human rights violation would not matter. Of course, that is not what the Kiobel Court did. Instead, it simply announced that the claims in an ATS case must “touch and concern” the territory of the United States. Courts are divided on exactly what that means (as I have discussed here), but the Second and Ninth Circuits have reasonably concluded that conduct in the United States that aids and abets violations of human rights violations abroad is sufficient.

What should we make of the Trump administration’s basic argument that any decision to extend the ATS cause of action should be left to Congress? It is worth recalling that the second Bush administration argued in Sosa that any decision to create an ATS cause of action should be left to Congress. The Supreme Court in Sosa expressly rejected that argument as inconsistent with the understanding of the first Congress in 1789 that the common law would provide a cause of action for torts in violation of the law of nations, a legal category that would inevitably evolve and expand over time. The “leave it to Congress” argument has now been recycled as a refusal to extend the existing cause of action rather than as a refusal to create a new one.

Sosa held out the promise of an ATS cause of action whose contours were shaped coherently by customary international law. Such a cause of action would apply to a limited set of human rights norms, but it would apply to corporations (because international law does) and it would recognize aiding-and-abetting liability (because international law does). Such a cause of action would give effect to the understanding of the first Congress in 1789 that no express cause of action was required for torts in violations of the law of nations, but would of course be subject to control by today’s Congress, which could grant an express cause of action (as it did in 1992 with the Torture Victim Protection Act) or limit the implied cause of action (as it has never done so far).

Instead, the Supreme Court has produced an ATS cause of action that draws incoherent distinctions to dispose of particular cases under the guise of deferring to Congress. In Jesner, the Court distinguished between U.S. and foreign corporations—a distinction that even the new Trump administration brief complains is inconsistent with congressional intent (at page 11). The Trump administration is now urging the Court to draw further incoherent distinctions between corporations and natural persons and between liability as an aider and abettor and liability as a principal.

The Trump administration’s Jesner brief argued that the First Congress “did not have a good reason to distinguish” between suits against natural persons and suits against corporations. Pointing to a 1787 incident involving infringement of the rights of the Dutch ambassador, Jesner brief argued that infringement of such rights by a company “could perhaps best be vindicated (and compensation paid) through a private suit against that company” (at page 17).

There is similarly no good reason to think that today’s Congress would want to protect a modern-day Bruno Tesch, who aids and abets human rights violations, or would want to allow the act of incorporation to shield U.S. defendants from liability for torture or slavery. Those, however, are the distinctions that the Trump administration would have the Supreme Court draw, supposedly in deference to Congress.

March 26, 2020

Supreme Court of Canada recognizes corporate liability for human rights violations

[Cross-posted from Just Security]

By William S. Dodge

Late last month, in Nevsun Resources Ltd. v. Araya, the Supreme Court of Canada held that Canadian corporations may be sued in tort for violations of international human rights law that occur abroad. The Canadian Supreme Court thus resolved under Canadian law an issue that the U.S. Supreme Court has struggled with unsuccessfully since 2012. Nevsun is part of a growing trend of court decisions in other countries recognizing corporate liability under various theories. These decisions illustrate a basic point that is too often overlooked in the debate over corporate liability — that international law leaves it to each domestic legal system to decide how to enforce norms of international human rights.

Nevsun Resources Ltd. is a Canadian company that owns a mine in Eritrea. The plaintiffs suing Nevsun claimed that they were conscripted by the Eritrean military into a regime of forced labor at the mine and subjected to cruel, inhuman, and degrading treatment. They brought suit in British Columbia seeking damages for breaches of customary international law prohibitions against forced labor, slavery, cruel, inhuman, or degrading treatment, and crimes against humanity. They also sought damages for domestic torts such as battery and unlawful confinement. Nevsun moved to strike the pleadings based on the act of state doctrine and moved to strike the customary international law claims on the ground that it was plain and obvious that such claims had no reasonable prospect of success.

This post describes the central holdings and contentious questions in Nevsun and compares the approach adopted by the Canadian Supreme Court with approaches to corporate human rights liability in the United States and other countries. While the Nevsun decision should be viewed as part of a trend outside the United States toward the recognition of corporate liability for human rights violations, the approach adopted in Nevsun is just one of the roads that domestic legal systems might take.

Corporate Liability for Human Rights Violations

By a vote of five to four, the Canadian Supreme Court held in Nevsun that claims for violations of international human rights norms abroad may be brought in Canadian courts. The majority based its decision on the doctrine of “adoption” (called “incorporation” in English law), which the Court traced to William Blackstone’s famous Commentaries of the eighteenth century. (para. 87). The Court explained:

[A]s a result of the doctrine of adoption, norms of customary international law — those that satisfy the twin requirements of general practice and opinio juris — are fully integrated into, and form part of, Canadian domestic common law, absent conflicting law … . Legislatures are of course free to change or override them, but like all common law, no legislative action is required to give them effect. (para. 94).

The Court further held that because customary international law is part of Canadian law, its content need not be proved as a fact and is appropriate for judicial notice. (para. 98). The norms alleged to have been breached in this case — those prohibiting crimes against humanity, slavery, forced labor, and cruel, inhuman, and degrading treatment — were all found to be well established as jus cogens in customary international law. (paras. 99-103).

The majority made short work of the defendant’s argument that norms of international human rights law do not apply to corporations. It noted that some norms of customary international law “prohibit conduct regardless of whether the perpetrator is a state” (para. 105) and that norms applicable to private actors could cover corporations. (para. 111). The majority therefore concluded: “it is not ‘plain and obvious’ that corporations today enjoy a blanket exclusion under customary international law from direct liability for violation of ‘obligatory, definable, and universal norms of international law,’ or indirect liability for their involvement in … ‘complicity offenses.’” (para. 113).

Invoking the general principle that there must be a remedy where there is a right (para. 120), the majority held that courts could develop “a civil remedy in domestic law for corporate violations of the customary international law norms adopted in Canadian law.” (para. 122). Treating human rights violations only as ordinary domestic torts like battery and unlawful confinement would not be sufficient “to adequately address the heinous nature of the harm caused by this conduct.” (para. 125). The Court left it to the trial judge to determine in the first instance whether to recognize new domestic torts like slavery based on customary international law or to apply customary international law directly to the defendant’s conduct, but the majority expressed a clear preference for the direct application of international law as more consistent with the doctrine of adoption and as more appropriate to the gravity of the offenses. (paras. 127-129).

Two dissenting opinions took issue with the majority on a number of points relevant to corporate liability. Both opinions asserted that customary international law does not recognize corporate liability for human rights violations (paras. 191, 269). Quoting the U.S. Court of Appeals decision in Khulumani, Justices Brown and Rowe went on to note that international law “leaves to each nation the task of defining the remedies that are available for international law violations.” (para. 197). In their view, criminal law was better suited to remedy violations of international human rights norms. (paras. 208, 218). They noted that Parliament could chose to create a civil cause of action for violations of international human rights, but for the Supreme Court to do so as a matter of common law broke “the unwritten constitutional principle of legislative supremacy” (para. 225). Finally, with respect to the possibility that the trial court might recognize new domestic torts rather than applying customary international law directly, Justices Brown and Rowe questioned whether Canadian law properly applied to conduct in Eritrea, because under Canadian conflict of laws rules “[i]t is the law of the place of the tort that will, normally, govern.” (para. 252).

The majority opinion in Nevsun recognizing corporate liability for human rights violations resolves as a matter of Canadian law a question that the U.S. Supreme Court has repeatedly failed to answer as a matter of U.S. law. As I have previously recounted on Just Security, the U.S. Supreme Court recognized an implied cause of action under the Alien Tort Statute (ATS) for well-established norms of human rights law in Sosa (2004). The Second Circuit subsequently held in Kiobel (2010) that corporate liability for human rights violations was not well-established enough to meet the Sosa standard. The Supreme Court granted certiorari to decide the corporate liability question, but instead disposed of the case by limiting the ATS cause of action in Kiobel (2013) to claims that “touch and concern” the territory of the United States. The Court granted certiorari to decide the same question in Jesner (2018), but again avoided the question by limiting the ATS cause of action to U.S. corporations. The U.S. Supreme Court has been asked to take up the corporate liability question a third time in Nestle v. Doe, a case alleging that a U.S. corporation aided and abetted child slavery abroad. The Court has called for the views of the Solicitor General on whether certiorari should be granted.

As the Nevsun majority pointed out, the argument that customary international law itself does not recognize liability for human rights violations “misconceives modern international law.” (para. 105). Customary international law prohibits violations of fundamental human rights, but it does not provide the means of enforcing those norms. The means of enforcement are supplied by states, which may act either collectively through treaties or individually by creating criminal or civil liability in their own domestic laws. Therefore, Justices Brown and Rowe were correct to observe that international law leaves to each nation the task of defining remedies for international law violations. (para. 197).

But the two Justices failed to see how that observation undercuts their separate assertion that customary international law does not recognize corporate liability (para. 191). Because each nation is free to decide for itself what remedies to provide, a lack of consensus about remedies for human rights violations says nothing about the content of the customary international law norms. As the amicus brief of International Law Scholars in Jesner explained, to argue that customary international law does not recognize corporate liability because international criminal tribunals limit their jurisdiction to natural persons, or because many nations have not created civil remedies, is to mistake limits on enforcement mechanisms for limits on the norms themselves. The question the Second Circuit posed in Kiobel — whether there is a “norm of corporate liability under customary international law” — is a question that simply does not make sense.

The question that does make sense is whether particular norms of human right law apply to particular actors. But international law seems quite clear that human rights norms do apply to corporations. In Kiobel, the amicus brief filed by the Obama Administration noted (at pages 20-21) that the prohibitions against torture, genocide, and war crimes apply equally to natural persons and to corporations. In Jesner, the amicus brief filed by the Trump Administration took the same position (at pages 13-14). A separate amicus brief of the Yale Law School Center for Global Legal Challenges expanded the analysis to other customary international law norms, including the prohibitions against crimes against humanity, financing terrorism, extrajudicial killing, slavery, and piracy, concluding in each case that these norms apply to corporations. On the question whether human rights norms apply to corporations, the majority in Nevsun was clearly correct.

Whether the Supreme Court of Canada should have created a civil damages remedy for breaches of human rights norms under Canadian common law is a separate question. I have long been skeptical of the argument that court-created remedies for human right violations are inconsistent with legislative supremacy, because legislatures may of course alter those remedies.

The traditional way of addressing human rights violations like those alleged in Nevsun is through domestic tort law. But as Justices Brown and Rowe correctly pointed out, this raises the question of whether Canadian or Eritrean tort properly applies. A less traditional way of addressing human rights violations is to apply customary international law directly as the rule of decision, which is what U.S. courts have done in ATS cases. This approach avoids the choice of law question because international human rights law is equally applicable to conduct in every nation, but it may raise other questions of domestic law. In the United States, the decision to take the road “less travelled by” led to questions about the proper scope of an implied cause of action under the ATS that the U.S. Supreme Court has answered in an increasingly limited way. In Canada, the questions are likely to be different because Canada does not have an ATS and because the Canadian Supreme Court has authority over Canadian common law that the U.S. Supreme Court lacks with respect to U.S. common law. In deciding how to implement the decision in Nevsun, Canadian courts may learn from the U.S. experience, but they need not make the same decisions.

Act of State Doctrine

The Canadian Supreme Court also denied Nevsun’s motion to strike the pleadings under the act of state doctrine by a vote of seven to two. The Court criticized the act of state doctrine under English law as an “unwieldly collection of principles, limitations and exceptions.” (para. 29). Although Canadian common law has “grown from the same roots” as English law, the Supreme Court of Canada held that “the principles underlying the act of state doctrine have been completely subsumed” by conflict of laws doctrines and judicial restraint. (para. 44). The Court explained:

Our courts determine questions dealing with the enforcement of foreign laws according to ordinary private international law principles which generally call for deference, but allow for judicial discretion to decline to enforce foreign laws where such laws are contrary to public policy, including respect for international law.” (para. 45).

In sum, the Court concluded, “[t]he doctrine is not part of Canadian common law.” (para. 59).

Despite their disagreement with the majority concerning the plaintiffs’ customary international law claims, Justices Brown and Rowe concurred in the majority’s analysis of the act of state doctrine. (para. 135). Only Justices Côté and Moldaver would have held that the doctrine “bars the adjudication of civil actions which have their foundation in allegations that a foreign state has violated public international law.” (para. 272).

In the United States, the act of state doctrine has occasionally been raised as a defense against human right claims, but almost never successfully. U.S. courts have typically held that violations of jus cogens norms cannot be considered acts of state. It is also doubtful that most human rights cases fall within the narrowed scope of the U.S. act of state doctrine after Kirkpatrick. In Kirkpatrick, the U.S. Supreme Court unanimously held that the act of state doctrine applies only when a suit requires a court to declare invalid as a “rule of decision” the official act of a foreign country. Finding that a foreign government has violated customary international law is different from declining to apply foreign law as a rule of decision. I therefore disagree with Justice Côté’s invocation of Kirkpatrick in support of her position. (para. 308).

Because the act of state doctrine is a doctrine of international comity, not international law, each country is free to adopt whatever version of the doctrine it sees fit. As I have previously explained, the U.K. act of state doctrine differs from that of the United States. Canada could have adopted the U.K. version, the U.S. version, the version urged by Justice Côté, or no version at all. Nevsun’s holding that the act of state doctrine has been subsumed by other conflict of laws rules is commendable, and perhaps particularly worthy of consideration in the United States, where the doctrine persists as an odd federal intrusion into the authority of U.S. states over conflicts rules.

Corporate Liability Outside North America

Nevsun is part of a growing trend of decisions recognizing the possibility of corporate liability for human rights violations abroad. Last year, the U.K. Supreme Court, in Vedanta Resources PLC v. Lungowe, allowed claims to go forward against a U.K. corporation and its Zambian subsidiary seeking damages for toxic emissions from a mine in Zambia. The Court observed that the parent company may have intervened sufficiently in the management of the mine to have assumed a duty of care under Zambian common law or fault-based liability under Zambian legislation. U.K. courts had jurisdiction over the parent company because it was domiciled in the U.K. and over the subsidiary because the claims against it were closely connected to those against the parent and because there was a real risk that substantial justice could not be obtained in Zambian courts. Although Vedanta involves environmental claims, it is clear that the same theories of jurisdiction and liability could apply to human rights claims against corporations.

A few weeks later, a Dutch district court in The Hague held, in Kiobel v. Royal Dutch Shell, that it had jurisdiction over claims by widows of activists executed in Nigeria alleging that Dutch and U.K. parent companies and their Nigerian subsidiary were accessories to the unlawful arrests, detentions, and executions of their husbands. The suit involved the same plaintiffs as the U.S. Kiobel case, but the claims before the Dutch court alleged violations of fundamental rights under Nigerian law, rather than violations of customary international law. Having recognized its jurisdiction to hear the claims, the Dutch court rejected most of them for lack of evidence, permitting further discovery only on the claim that the Nigerian subsidiary had bribed witnesses.

In sum, as the U.S. Supreme Court has repeatedly limited the scope of the ATS cause of action against corporate defendants, other countries have begun to recognize the possibility of corporate liability for human rights violations. It is noteworthy that the Canadian, Dutch, and U.K. cases all involved claims against parent companies domiciled in those countries, companies over which personal jurisdiction was clearly proper. In the Dutch and U.K. cases, liability was premised on the domestic law of the country where the alleged torts occurred. In Nevsun, by contrast, the Canadian Supreme Court suggested that the trial court should apply customary international law directly, similar to what U.S. courts have done under the ATS.

As noted above, it seems clear that international human rights norms apply to corporations just as they apply to natural persons. But it is up to each nation to decide whether and how to provide redress for corporate violations of those norms in its own legal system. The road that the Canadian Supreme Court chose to take in Nevsun is a good one. But it is not the only one.

 

August 23, 2019

Second Circuit Gets Civil Forfeiture under the Foreign Sovereign Immunities Act Wrong

[Cross-posted from Just Security]

By William S. Dodge and Ingrid Wuerth

Are foreign states and their property immune from civil forfeiture suits brought by the U.S. government? The Second Circuit recently held that the Foreign Sovereign Immunities Act (FSIA) does not bar in rem civil forfeiture suits, but the Court’s reasoning was flawed in several respects.

The case, United States v. Assa, involves a 36-story skyscraper, 650 Fifth Avenue, in midtown Manhattan, as well as other real property and bank accounts. The case began in 2008, when the U.S. government brought a civil forfeiture action alleging that Assa Co. Ltd and Assa Corporation (together “Assa”) were owned and controlled by the government of Iran and had provided services to Iran in violation of U.S. sanctions. Based on uncontroverted evidence, the district court found that Assa served as “a front for Bank Melli [the central bank of Iran], and thus a front for the Government of Iran.” The district court granted summary judgment and ordered much of the property forfeited. After appeals by other defendants and a subsequent trial, the district court entered judgment against Assa in 2017. The property at issue in the forfeiture action has been the subject of much litigation, as summarized by the Second Circuit in In re 650 Fifth Ave. and Related Properties.

On appeal, Assa argued that if it is so controlled by Iran that it is Iran’s alter ego – as the Second Circuit held in a related case – then it is a foreign state entitled to the protections of the FSIA. If so, the district court lacked subject matter jurisdiction, a defense that may be raised at any time. The FSIA confers immunity on foreign states in two relevant provisions: 28 U.S.C. §§ 1604 and 1609. Section 1604 deals with the immunity of foreign states from suit, whereas Section 1609 deals with the immunity of a foreign state’s property from legal measures constraining that property known as attachment and execution. The Second Circuit held that neither of these sections applies to civil forfeiture suits. Because it held that Assa was not entitled to immunity at all, the court did not need to address whether any exceptions to immunity apply.

Section 1604 provides that “a foreign state shall be immune from the jurisdiction of the courts of the United States and of the States except as provided in sections 1605 to 1607” of the FSIA. The Second Circuit reasoned that Section 1604 does not bar in rem civil forfeiture suits because such suits are actions against the propertyof a foreign state, not against the foreign state itself. That reasoning ignores the FSIA’s treatment of other in rem proceedings. Specifically, Sections 1605(b)-(d) permit suits against foreign states to enforce maritime liens and preferred ship mortgages, subject to certain notice requirements, when a suit in rem could have been brought if the vessel had been privately owned. Under these provisions, the suit against the foreign state is technically in personam, but it follows the law and practices for in rem suits. The fundamental premise of these FSIA provisions is that maritime actions should be brought in personam, not in rem, because of the international friction that results from thein rem actions against foreign state property. The Second Circuit’s reasoning would render these provisions ineffective. If actions in rem never entitle foreign states to immunity, then plaintiffs may still use the in rem proceedings that the FSIA sought to eliminate.

The FSIA’s goal of eliminating in rem actions against foreign state vessels and cargos is underscored by the operation of the original language in Section 1605(b). As described in the legislative history, it ensured that “if the vessel or its cargo is arrested or attached, the plaintiff will lose his in personam remedy and the foreign state will be entitled to immunity—except in the case where the plaintiff was unaware that the vessel or cargo of a foreign state was involved.” Under the Second Circuit’s reasoning, by contrast, the foreign state would notbe entitled to immunity because neither Section 1604 nor Section 1609 (discussed below) would confer immunity at all in an in rem action. The language of 1605(b) has since been amended, but not in ways that change the operation of Sections 1604 and 1609.

Section 1609 provides that the “property in the United States of a foreign state shall be immune from attachment arrest and execution” subject to certain exceptions. The Court reasoned that this language“refers to quasi in rem suits meant to enforce in personam judgments against a foreign state” but not to in rem proceedings. But the text of Section 1609 draws no such distinction. Instead, it broadly confers immunity “from attachment arrest and execution,” subject only to the enumerated exceptions found in Sections 1610 and 1611. Those provisions contain no exception for civil forfeiture. Moreover, in the admiralty context, courts have held that Section 1609 confers immunity in in rem cases. See, e.g., Coastal Cargo Co. v. M/V GUSTAV SULE, 942 F. Supp. 1082, 1085 (E.D. La. 1996) (noting that “the arrest of the vessel” violated Section 1609).

It is true, as the Second Circuit noted, that one goal of the FSIA was to eliminate the attachment of property for the purpose of establishing jurisdiction. But that goal is accomplished by Section 1610(d)(2), which permits prejudgment attachment only when “the purpose of the attachment is to secure satisfaction of a judgment that has been or may ultimately be entered against the foreign state, and not to obtain jurisdiction.” Section 1609 sweeps more broadly.

Finally, interpreting Section 1609 to apply to civil forfeiture actions is probably necessary to avoid violations of customary international law. As the International Court of Justice has noted, the customary international law rules governing immunity from execution are distinct from, and generally broader than, the customary international law rules governing immunity from suit. See Jurisdictional Immunities of the State (Germ. v. It.), 2012 I.C.J. 99, para. 113 (Feb. 3). Customary international law provides immunity to state-owned corporations only in limited circumstances, but the Second Circuit held (in the related case of Kirschenbaum v. Assa Corporation) that Assa should be treated as the foreign state itself under U.S. law because Iran extensively controlled Assa’s operations. International law may not require that Assa receive the immunity to which Iran is entitled, an issue upon which we do not offer an opinion. But in any event, the Second Circuit’s reasoning covers situations in which the property subject to civil forfeiture is owned directly by a foreign government, which would almost certainly violate customary international law in at least some circumstances.

The Second Circuit erred in this case. It should seriously consider withdrawing and amending its opinion. To hold that foreign states enjoy no immunity at all from suit or execution in civil forfeiture suits is contrary to both Section 1604 and Section 1609 of the FSIA, and it may put the United States in violation of customary international law.

April 30, 2018

Jesner v. Arab Bank: The Supreme Court Preserves the Possibility of Human Rights Suits Against U.S. Corporations

by William S. Dodge

[Cross-posted from Just Security]

On April 24, the U.S. Supreme Court decided Jesner v. Arab Bank, a case raising the question whether corporations can be sued for human rights violations, including acts of terrorism, under the Alien Tort Statute (ATS). For a preview of the arguments in the case, see here.

Justice Kennedy delivered the judgment of the Court, writing a broad and rambling opinion that might have foreclosed ATS liability for all corporations. But only Chief Justice Roberts and Justice Thomas joined Kennedy’s opinion in full. Justice Alito and Justice Gorsuch joined only those parts of the opinion that were limited to foreign corporations, and their separate concurring opinions emphasized the differences between ATS suits against foreign defendants and those against U.S. defendants. The four other Justices would have permitted ATS suits against both U.S. and foreign corporations, with Justice Sotomayor writing a devastating dissent on their behalf. So while the Supreme Court dismissed the plaintiffs’ claims against Arab Bank, the question of corporate liability in suits against U.S. corporations remains to be decided.

The ATS gives federal district courts jurisdiction over “any civil action by an alien for a tort only, in violation of the law of nations or a treaty of the United States.” The First Congress passed the ATS in 1789 with the eighteenth century law of nations in mind. But in Sosa v. Alvarez-Machain (2004), the Supreme Court held that federal courts could recognize causes of action under the ATS for violations of modern human rights law that are as generally accepted and specifically defined as the eighteenth century paradigms (infringement of the rights of ambassadors, violations of safe-conducts, and piracy). In Kiobel v. Royal Dutch Petroleum Co. (2013), the Supreme Court applied the presumption against extraterritoriality to ATS causes of action, holding that plaintiffs could only bring suits that “touch and concern” the United States. The plaintiffs in Jesner alleged that Arab Bank, a foreign corporation, had financed terrorist attacks in Israel by funneling money through its New York branch. The Second Circuit dismissed the claims under circuit precedent holding that only natural persons and not corporations can be sued under the ATS.

Framing the International Law Question

Writing only for three in Part II.A, Justice Kennedy seemed to accept the Second Circuit’s framing of the corporate liability question as whether there was a “norm of corporate liability under currently prevailing international law” that would meet the Sosa standard (p. 15). As Justice Sotomayor pointed out in dissent, however, this framing of the question “fundamentally misconceives how international law works” (p. 2). (I should disclose that I wrote the amicus brief of International Law Scholars in Jesner, on which Justice Sotomayor relied in this part of her opinion.)

The dissent correctly observed: “Although international law determines what substantive conduct violates the law of nations, it leaves the specific rules of how to enforce international-law norms and remedy their violations to states, which may act to impose liability collectively through treaties or independently via their domestic legal systems” (p. 3). Thus, Sosa’s requirement of a generally accepted and specifically defined norm of international law refers to norms of “substantive conduct,” not “forms of liability” (pp. 3-4). Because of this distinction, the plurality’s reliance on jurisdictional limits found in the charters of international criminal tribunals (pp. 14-15) was also misplaced, the dissent explained, because it “confuses the substance of international law with how it has been enforced in particular contexts” (p. 8). In other words, limits on jurisdiction are not limits on substantive law. Assuming that the international law prohibition against terrorist financing met the Sosa standard—a question the dissent would have remanded to the Second Circuit to resolve in the first instance—“nothing in international law suggests a corporation may not violate it” (p. 7).

Perhaps because of the power of the dissent, Justices Alito and Gorsuch did not join the part of Justice Kennedy’s opinion claiming that “there is a distinction in international law between corporations and natural persons” (p. 17). And even Justice Kennedy seemed to back away from his own argument in the end, concluding that “the Court need not resolve . . . whether international law imposes liability on corporations” (p. 17-18). This makes Justice Kennedy’s mistaken approach to international law nothing more than dictum in a plurality opinion.

Limiting the Holding to Foreign Corporations

The only analytical parts of Justice Kennedy’s opinion that commanded a majority of the Supreme Court were those invoking separation of powers concerns against creating new causes of action (pp. 18-19) and foreign relations difficulties (pp. 25-27). Significantly each of these parts was expressly limited to suits against foreign corporations. The first concluded with the observation that “absent further action from Congress it would be inappropriate for courts to extend ATS liability to foreign corporations” (p. 19). The second said even more explicitly: “the Court holds that foreign corporations may not be defendants in suits brought under the ATS” (p. 27).

The reasons for this limitation to foreign corporations may be found in the concurring opinions written by Justices Alito and Gorsuch. Justice Alito emphasized the foreign relations implications of suits against foreign corporations: “Creating causes of action under the Alien Tort Statute against foreign corporate defendants would precipitate exactly the sort of diplomatic strife that the law was enacted to prevent” (p. 1). In a footnote, Justice Alito expressly stated, “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” (p. 3). He could not have been clearer.

As he telegraphed at oral argument that he might, Justice Gorsuch interpreted the ATS “to require a domestic defendant” (p. 6). Here, Justice Gorsuch largely followed the approach of A.J. Bellia and Brad Clark, which I have previously criticized. But of course, this approach to the ATS does not preclude suits against U.S. corporations for violating the law of nations. Justice Gorsuch explained: “It is one thing for courts to assume the task of creating new causes of action to ensure our citizens abide by the law of nations and avoid reprisals against this country. It is altogether another thing for courts to punish foreign parties for conduct that could not be attributed to the United States and thereby risk reprisals against this country” (p. 13). ATS suits against U.S. corporations clearly fall into the former category.

After the Supreme Court’s 2013 decision in Kiobel, my colleague Anupam Chander observed that the impact of that decision would be to free foreign corporations, but not U.S. corporations, from the risk of being sued under the ATS. In a sense, Jesner simply makes this point explicit.

I do not want to be overly sanguine about the prospects for corporate liability in ATS suits against U.S. corporations. Justice Gorsuch wrote that Sosa’s decision to give the ATS continuing relevance by permitting a limited class of human rights claims to proceed was a mistake (pp. 2-5). Justice Alito agreed (p. 3). And even Justice Kennedy strangely suggested that “there is an argument that a proper application of Sosa would preclude courts from ever recognizing any new causes of action under the ATS” (p. 19)—a position that the majority in Sosa (including Justice Kennedy) expressly rejected. ATS suits against U.S. corporations also face a host of other obstacles, from the fact that such corporations often operate abroad through foreign subsidiaries to the standard for aiding and abetting liability. My point is simply that Jesner does not settle the question of corporate liability for U.S. corporations, and such cases constitute the bulk of litigation against corporations under the ATS. 

March 9, 2018

The Customary International Law of Jurisdiction in the Restatement (Fourth) of Foreign Relations Law

by William S. Dodge

[Cross-posted from Opinio Juris.)

In a recent post, Dean Austen Parrish took issue with some statements about the customary international law governing jurisdiction in the Restatement (Fourth) of Foreign Relations Law. The occasion for his comments was United States v. Microsoft, a case currently pending before the U.S. Supreme Court in which Dean Parrish has filed an amicus brief. I have given my thoughts on the case and on the amicus brief elsewhere and will not repeat them here. In this post, I seek to correct a few misimpressions about the Restatement (Fourth) and the customary international law governing jurisdiction.

First, it may be helpful to sketch briefly the process for producing the Restatement (Fourth). In 2012, the Council of the American Law Institute (ALI) authorized three projects—on treaties, jurisdiction, and state immunity—under the umbrella of the Restatement (Fourth). A team of reporters was assigned to each project. I was made a co-reporter for the jurisdiction project, along with Anthea Roberts and Paul Stephan.

The ALI process begins with a Preliminary Draft prepared by the reporters, which is discussed at a meeting with the project’s counselors, advisers, and members consultative group. Based on this feedback, the reporters prepare a Council Draft, which is discussed at a meeting of the ALI Council. Based on this further feedback, the reporters prepare a Tentative Draft for discussion with the ALI membership at its annual meeting. For the jurisdiction project, three tentative drafts, covering different topics, were approved by the membership and now represent the ALI’s official position. The reporters are currently in the process of combining all the tentative drafts for the three projects together into one volume, which (as indicated below) has resulted in renumbering many of the provisions. Final publication of the Restatement (Fourth) is expected later this year.

On questions of customary international law, the Restatement (Fourth) was blessed with a great deal of expertise from U.S. and foreign lawyers and scholars. Our counselors included three former Legal Advisers of the U.S. State Department, one former Legal Adviser to the U.K. Foreign and Commonwealth Office, and one Judge of the International Court of Justice. Our advisers included designated representatives from the State Department Legal Adviser’s Office. We also had the benefit of a separate international advisory panel of academics and lawyers from outside the United States. A full list of the counselors, advisers, foreign advisers, and members consultative group for the Restatement (Fourth) is here. Not all of these people will agree with every statement in the Restatement (Fourth). The point is that every question of customary international law addressed in the Restatement (Fourth) was vetted with a broad group of U.S. and foreign experts, and the statements about the customary international law of jurisdiction in the Restatement (Fourth) represent the best judgment of the ALI as to what that law is today.

The first misimpression to correct is Dean Parrish’s statement that “the Fourth Restatement does not purport to set out international law.” Quite the opposite is true. Sections 407-413 of the Restatement (Fourth) (Section 211-217 in Jurisdiction Tentative Draft No. 2) restate the customary international law governing jurisdiction to prescribe. Section 432 of the Restatement (Fourth) (Section 402 in Jurisdiction Tentative Draft No. 3) restates the customary international law governing jurisdiction to enforce. The Restatement (Fourth) does not have a corresponding section restating the customary international law on jurisdiction to adjudicate because, as the Introductory Note to Chapter 2 (Introductory Note, Part III, in Jurisdiction Tentative Draft No. 2) observes, “[w]ith the significant exception of various forms of immunity, modern customary international law generally does not impose limits on jurisdiction to adjudicate.” (The Restatement (Fourth) does have a chapter on state immunity, although its focus is U.S. domestic law under the Foreign Sovereign Immunities Act rather than customary international law.)

With respect to jurisdiction to prescribe, Section 407 states the basic rule: “Customary international law permits exercises of prescriptive jurisdiction if there is a genuine connection between the subject of the regulation and the state seeking to regulate.” Sections 408-413 set forth the most common bases establishing a genuine connection: territory, effects, active personality, passive personality, protection, and universal jurisdiction. These sections discuss foreign practice at length, citing the practice of more than 50 other countries. The specific bases for prescriptive jurisdiction set forth in the Restatement (Fourth) are largely the same as those found in Sections 402 and 404 of the Restatement (Third).

The Restatement (Fourth) does not continue the position of Restatement (Third) Section 403, which stated that customary international law requires an assessment of the reasonableness of exercising prescriptive jurisdiction in each case. As the reporters’ notes to Section 407 of the Restatement (Fourth) explain, “state practice does not support a requirement of case-by-case balancing to establish reasonableness as a matter of international law.” The Restatement (Fourth) does contain a provision on “Reasonableness in Interpretation”—Section 405 in the Restatement (Fourth) (Section 204 in Jurisdiction Tentative Draft No. 3). This is a domestic principle of statutory interpretation, like the presumption against extraterritoriality and the Charming Betsy canon, under which U.S. courts may “interpret[] a statute to include other comity limitations if doing so is consistent with the text, history, and purpose of the provision.”

With respect to jurisdiction to enforce, Section 432 states the traditional rule that enforcement jurisdiction is strictly territorial: “Under customary international law . . . a state may not exercise jurisdiction to enforce in the territory of another state without the consent of the other state.” To apply this rule, of course, one must determine where enforcement occurs in various situations. When a U.S. court requires a person in the United States to produce information located abroad, as in the Microsoft case for example, does the enforcement occur in the United States or abroad? As the reporters’ notes to Section 431 (dealing with U.S. practice with respect to jurisdiction to enforce) explains, U.S. court orders to produce information located abroad “have not provoked the protests from other states that might be expected if such orders constituted extraterritorial exercises of jurisdiction to enforce.” In the Microsoft case, the fact that none of the foreign governments filing amicus briefs—including Ireland—has characterized the warrant in question as an extraterritorial exercise of jurisdiction to enforce seems conclusive.

Dean Parrish directs most of his criticism at the Restatement (Fourth)’s statement that, “[w]ith the significant exception of various forms of immunity, modern customary international law generally does not impose limits on jurisdiction to adjudicate.” Dean Parrish’s says this is inconsistent with the Restatement (Third), but in fact the Restatement (Third)’s position was more ambiguous than is commonly appreciated. Its Introductory Note for the chapter on jurisdiction to adjudicate, the Restatement (Third) admitted “it is not always clear whether the principles governing jurisdiction to adjudicate are applied as requirements of public international law or as principles of national law.” It characterized the provisions that followed as “international rules and guidelines.” The substance of Section 421 strongly resembled the U.S. domestic law of personal jurisdiction as of 1986, and the reporters’ notes relied heavily on U.S. practice with some reference to U.K. law and the Brussels Regulation. There was no analysis of opinio juris—whether any of the practice was followed out of a sense of international legal obligation.

An honest look at state practice and opinio juris today reveals no limitations on jurisdiction to adjudicate outside the area of immunity. Some bases for adjudicative jurisdiction are certainly considered exorbitant—tag jurisdiction in the United States or jurisdiction based on the nationality of the plaintiff in France, for examples—but these bases are not considered to violate customary international law. The clearest evidence of this is the Brussels I Regulation (Recast) in the European Union, which prohibits the use of exorbitant bases against defendants from other EU member states, but expressly permits the use of exorbitant bases against defendants from non-EU member states and requires EU member states to enforce judgments against such defendants resting on such bases. If states do not refrain from exercising jurisdiction on exorbitant bases of jurisdiction out of a sense of legal obligation, there can be no rule of customary international law prohibiting their use.

The Restatement (Fourth) of Foreign Relations Law also discusses many rules of U.S. domestic law addressing different aspects of jurisdiction, including the presumption against extraterritoriality, personal jurisdiction, forum non conveniens, the act of state doctrine, the doctrine of foreign state compulsion, and the recognition of foreign judgments. (For an overview written for a private international law audience, see here.) The Restatement (Fourth) also tries to distinguish clearly between rules of domestic law and rules of customary international law, and to state rules of customary international law only when they are supported by state practice and opinio juris. But Restatement (Fourth) does address the customary international law of jurisdiction, and it draws on a deep well of expertise in doing so.

 

February 21, 2018

Symposium: Advancing International Law Under the Trump Administration–Some Cautionary Thoughts About Litigation

By William S. Dodge

[Cross-posted from Opinio Juris.]

[William S. Dodge is Martin Luther King, Jr. Professor of Law at the UC Davis School of Law. From 2011 to 2012, he served as Counselor on International Law to the Legal Adviser at the U.S. Department of State.]

Among Harold Koh’s many academic achievements, perhaps his most influential has been to articulate a theory of transnational legal process that explains why nations obey international law. According to this theory, public and private transnational actors generate interactions that lead to interpretations of international law that in turn become internalized in domestic law. Once internalized, such interpretations become difficult to change.

In a recent lecture at Washburn University School of Law, Harold used the lens of transnational legal process to examine “The Trump Administration and International Law.” His tour d’horizon is a tour de force, examining the entrenchment of international law with respect to immigration and refugees, human rights, climate change, Iran, North Korea, Russian hacking and cybersecurity, Ukraine, al Qaeda and IS, and Syria. As he writes, “no single player in the transnational legal process—not even the most powerful one—can easily discard the rules that we have been following for some time.”

Harold’s purpose is not simply descriptive. He also sets forth a “counter-strategy” to resist Trump’s assault on international law and international institutions. This strategy includes an “inside strategy” that government officials can use to engage other states, translate international law norms, and leverage those norms as smart power to advance U.S. interests. And it includes an “outside strategy” that non-governmental actors can use “to generate interactions that force interpretations that promote internationalizations of international norms even by resisting governments.”

I want to focus on the “outside strategy,” and particularly its reliance on litigation. “Lawsuits are the paradigmatic example” of the outside strategy, Harold explains. “[I]f a government policy moves in a legally noncompliant direction, an outside nongovernmental group can sue (generate an interaction) that yields a judicial ruling (an interpretation) that the government defendant must then obey as a matter of domestic law (norm internationalization).” There is no doubt that litigation is a critical tool to promote compliance with international law. But litigation can also serve as a catalyst for interpretations that constrain international law.

In an insightful article that should be required reading for any lawyer entering government service, Professor Rebecca Ingber has examined how different interpretation catalysts shape executive branch interpretations in the area of national security. She writes: “Once the government is implicated in a lawsuit, particularly over a matter of national security, nearly all forces align to push the executive to advocate an expansive view of its own authority, to defend past action, and to request a judgment in favor of the government on the broadest possible grounds so as to preserve executive flexibility to the greatest extend possible.” After the executive branch takes a position in the context of litigation, that interpretation can be quite difficult to change.

I witnessed this dynamic first hand when I served as Harold’s Counselor on International Law at the State Department and participated in the interagency process that produced the two amicus briefs for the United States in Kiobel v. Royal Dutch Petroleum. With respect to the question of corporate liability for human rights violations, which posed no direct litigation risk to the United States or its officials and on which the United States had not previously taken a position, it was possible to reach consensus on a position that advanced international law (a position that became entrenched and that the Trump administration repeated in its amicus brief in Jesner v. Arab Bank). But with respect to questions of extraterritoriality, it proved difficult to move away from positions adopted by the Bush Administration in the shadow of the “War on Terror” and allegations of human rights violations by U.S. government actors.

In her article, Rebecca gives the example of the Bush Administration’s “War on Terror” policies. “The Bush years are often cast as a time of momentous Supreme Court pushback against administration policies in areas where presidents had previously been awarded great deference. That is one narrative, and there is truth in it.” But she explains that there is another narrative in which “repeated years of litigation . . . did not radically alter the legal architecture for the Bush Administration’s policies in its ‘War on Terror.’ Instead, this litigation entrenched it.” Despite the desire of the Obama Administration to move in a different direction, the existing executive interpretations made it “exceedingly difficult for the new Administration to change course and suddenly take new positions in litigation, above all those that might constrain government action or fail to defend past government policies.”

Litigation can be an important interaction in the transnational legal process framework. But it can produce narrow interpretations of international law by the executive, which are only sometimes overturned by broader interpretations in the courts. And narrow executive interpretations can become internalized, just as broader judicial interpretations can.

One may be more likely to get broader judicial interpretations when the courts do not trust a particular administration, at least not on a particular issue. That factor may have played some role in the Bush Administration’s losses at the Supreme Court in the “War on Terror” cases, and it could certainly be relevant in litigation challenging some of the Trump Administration’s policies. The probability of a good interpretation from the courts may offset the probability of a bad interpretation from the executive.

Whether litigation is the right counter-strategy also depends, of course, on the alternatives. As Rebecca rightly notes, “litigation may well be the only way to force the executive’s hand.” This may be particularly true for the Trump Administration, in which other potential catalysts (like reports to treaty bodies) are likely to have less impact and other potential interpreters of international law (like the State Department) have already been marginalized.

Finally, one must consider the impact of litigation not just on the executive branch and the courts but also on the broader public mind. A case in point is the litigation challenging the Trump Administration’s Travel Bans, in which the clinics at Yale Law School have played an important role. One by-product of the litigation was a devastating declaration of former national security officials, which later became an amicus brief, confirming that the Travel Ban would likely harm counterterrorism and law enforcement efforts. The litigation has also helped galvanize resistance from members of Congress and state and local governments. Even if this litigation generates narrow executive branch interpretations of international law, and even if courts uphold some of those interpretations, the political impacts of the litigation may yet prove worthwhile.

Transnational legal process provides an important framework for understanding why nations obey international law and how to frame strategies to ensure that the Trump Administration does as well. But it is wise to remember that executive branch interpretations tend to be most regressive when made in the context of defensive litigation, and that internalization can apply to bad interpretations as well as to good ones.