Latest Scholarship

October 2, 2017

Corporate Liability for Human Rights Violations: A Preview of Jesner v. Arab Bank, PLC

By William Dodge

[Cross-posted from Just Security]

On October 11, the U.S. Supreme Court will hear oral argument in Jesner v. Arab Bank, PLC on the question whether corporations can be sued for human rights violations under the Alien Tort Statute (ATS). This will be the second time the question of corporate liability has come before the Court. In 2011, the Supreme Court granted cert to consider the same question in Kiobel v. Royal Dutch Petroleum Co., but after oral argument the Court asked for additional briefing on the geographic scope of the ATS cause of action. Ultimately, the Supreme Court affirmed dismissal of the claims in Kiobel on the ground that they did not "touch and concern" the United States with sufficient force to displace the presumption against extraterritoriality. The Court did not reach the question of corporate liability under the ATS, leaving the Second Circuit's categorical rule against such liability intact.

Victims of terror attacks in Israel, the West Bank, and Gaza-both U.S. citizens and non-U.S. citizens-alleged that Arab Bank knowingly funneled millions of dollars through its New York branch to finance these attacks and reward the families of suicide bombers. The U.S.-citizen plaintiffs sued under the Antiterrorism Act (ATA), while the non-U.S.-citizen plaintiffs sued under the ATS. In the ATA suit, the district court found that Arab Bank knowingly provided financial services to persons that it knew to be terrorists. In the ATS suit, the district court dismissed, and the Second Circuit affirmed the dismissal, on the sole ground that under circuit precedent ATS cannot be brought against corporations.

The arguments in Jesner fall into three groups:

1) whether customary international law permits corporate liability;

2) whether, as a matter of U.S. domestic law, the ATS cause of action should be interpreted to permit corporate liability;

3) whether the case against Arab Bank should be dismissed on some other ground.

Whether Customary International law Permits Corporate Liability

Whether customary international law permits corporate liability is in some sense the threshold question, because the ATS gives federal courts jurisdiction over actions "by an alien for a tort only, in violation of the law of nations or a treaty of the United States." In Kiobel, the Second Circuit held that corporations could never be held liable under the ATS because there is no "norm of corporate liability under customary international law." The Second Circuit relied heavily on the fact that international criminal tribunals from Nuremberg to the ICC had been given jurisdiction only over natural persons. 

The detailed analysis in the amicus brief of Nuremberg Scholars, however, shows it was understood at Nuremberg that juridical persons could violate international law and be held legal accountable for doing so. The amicus brief filed by Ambassador David Scheffer, who led the U.S. delegation in the negotiations that established the ICC, explains that corporations were excluded from the Rome Statute because of a lack of consensus on criminal, rather than civil liability, which posed problems under the ICC's principle of complementarity. The amicus brief filed on behalf of International Law Scholars argues more generally that limitations on the jurisdiction of particular courts are not limitations on customary international law norms themselves. It explains that customary international law prohibits violations of fundamental human rights but leaves it to nations to enforce such norms-collectively through mechanisms like international criminal tribunals and suppression conventions, and individually through their own domestic laws. (Full disclosure: I am counsel of record for the International Law Scholars.)

The amicus brief filed by the United States agrees that international law "establishes substantive standards of conduct but generally leaves each nation with substantial discretion as to the means of enforcement within its own jurisdiction." The United States adds that the norms actionable under the ATS, like torture, genocide, and war crimes, "neither require nor necessarily contemplate a distinction between natural and juridical actors." The amicus brief of the Yale Law School Center for Global Legal Challenges fleshes out the latter point, showing that eight customary international law prohibitions-genocide, crimes against humanity, financing terrorism, torture, extrajudicial killing, war crimes, slavery, and piracy-both meet the Sosa-standard for actionable norms under the ATS and extend to corporations. And the amicus brief of Canadian International and National Security Law Scholars elaborates on financing terrorism as a violation of international law.

Respondent Arab Bank and the amicus brief filed by the Chamber of Commerce do little to meet these arguments, largely limiting themselves to repeating what the Second Circuit said in Kiobel. The amicus brief filed on behalf of Professors of International Law, Foreign Relations Law, and Federal Jurisdiction makes an additional argument that the ATS should be limited to claims for violations of international law that, if left unaddressed, might give other countries just cause for war against the United States. This argument finds no support in the text of the ATS, however, which refers without limitation to torts "in violation of the law of nations or a treaty of the United States." This argument also fails to account for piracy, which the Supreme Court recognized in Sosa v. Alvarez-Machain as one of the three paradigm offenses the ATS was intended to address and which (unlike violations of safe-conducts and infringement of the rights of ambassadors) would not have given other countries cause for war if left unaddressed.

Whether the ATS Cause of Action Should Permit Corporate Liability

Whether the ATS cause of action recognized in Sosa v. Alvarez-Machain should apply to corporations as a matter of U.S. domestic law is a separate question from whether customary international law permits it to do so. Petitioners note that while the language of the ATS limits potential plaintiffs to aliens, it does not limit potential defendants in any way. Petitioners also argue that the ATS's use of the word "tort" supports corporate liability because tort actions could presumptively be brought against corporations both at the time the ATS was enacted and today. And petitioners note the history of holding entities like ships directly responsible for piracy, one of the paradigm violations of the law of nations that the ATS was intended to reach. Amicus briefs filed by Professors of Legal History and by Procedural and Corporate Law Professors discuss the liability of juridical entities at the time the ATS was enacted and today.

In Sosa v. Alvarez-Machain, the Supreme Court suggested that it would look for "legislative guidance" in shaping the federal-common-law cause of action under the ATS. Petitioners note that most federal statutes authorize corporate liability. But they point in particular to the ATA-the statute that U.S.-citizen plaintiffs successfully used to sue Arab Bank-which creates a cause of action for victims of terrorism and, like the ATS, does not distinguish between corporations and natural persons as defendants. Respondent Arab Bank, on the other hand, argues that the Supreme Court should look for guidance to the Torture Victim Protection Act (TVPA), which Congress passed in 1992 to create an express cause of action for torture and extrajudicial killing. In Mohamad v. Palestinian Authority, the Supreme Court held that Congress limited liability to natural persons by using the word "individual," a word not found in the ATS.

The amicus brief filed by the United States agrees with petitioners that the ATS cause of action should reach corporate defendants. The United States notes that the TVPA is expressly limited to natural persons by virtue of the word "individual," while the ATS does not distinguish among classes of defendants. The United States also points to the long history of corporate tort liability in England and the United States. Finally, the United States notes the early understanding that corporations could be plaintiffs under the ATS and that excluding corporations as defendants would be in "considerable tension" with that understanding.

The last point suggests a more general reason why the Supreme Court may be reluctant categorically to exempt corporations from ATS claims. The Court has been criticized in recent years for extending the rights of natural persons to corporations in cases like Citizens United v. FEC. Whether or not such criticism is justified, it would certainly seem odd to many Americans to say that corporations can have the rights of natural persons but cannot be held liable like natural persons when they violate human rights.

Other Grounds

Respondent Arab Bank argues that if the Supreme Court overturns the Second Circuit's categorical prohibition of ATS suits against corporations, it should affirm dismissal of the claims in this case on other grounds because of the harm this case is causing to Jordan and by extension to U.S. foreign policy in the Middle East. This is an argument seconded in various ways in amicus briefs filed by the Kingdom of Jordan, the Central Bank of Jordan, the Union of Arab Banks, the Institute of International Bankers, and Former State Department Officials. On the other hand, Senators Sheldon Whitehouse and Lindsey Graham, Former Counterterrorism and National Security Officials, and Financial Regulation Scholars argue that civil liability for terrorist financing is essential to combatting terrorism.

As for specific alternative grounds, Arab Bank argues that routing wire transfers through New York is not sufficient to satisfy Kiobel's "touch and concern" test, that deciding the case "would force federal courts to wade into profoundly sensitive foreign-policy issues," and that financing terrorism is not an actionable violation of customary international law under the Sosa standard. The United States also suggests that routing wire transfers through New York may not be sufficient to meet the "touch and concern" test in ATS cases, though its brief cautions that "the government could potentially rely on such activity as the basis for a criminal indictment or civil enforcement action." To prevent prolonging the suit, the United States suggests that the "touch and concern" issue should be resolved directly by the Second Circuit on remand. Petitioners simply argue that the other grounds raised by Arab Bank should be handled by the lower courts on remand under the ordinary procedures of appellate review.

Arab Bank's heavy emphasis on other grounds might make one doubt its confidence in its arguments with respect to corporate liability. But if the Supreme Court were to reverse the Second Circuit's categorical ban on corporate liability in ATS suits, Arab Bank would still have a number of ways to argue that this particular suit should be dismissed. More generally, as I have explained elsewhere, ATS suits against corporations will continue to face a number of significant challenges, from establishing personal jurisdiction, to meeting the mens rea standard for aiding and abetting liability, to satisfying Kiobel's "touch and concern" test. Sosa also raised the possibility of "case-specific deference to the political branches" if the State Department files a statement of interest addressing foreign policy concerns, something it has not done in Jesner.

Four years ago, in Kiobel, the Supreme Court did what Arab Bank now suggests. It avoided the corporate liability question and resolved the case on other grounds. The circuit split that the Court preserved is now six years old. Every other circuit to have addressed the question has concluded that the Second Circuit is wrong.  Rather than duck the question again and have to grant cert for a third time, the Supreme Court should take this opportunity to decide whether the ATS categorically forecloses corporate liability.