JESNER v Arab Bank plc 584 U.S. __ (2018) is the second time that the US Supreme Court has been asked to rule on whether corporations can be sued for violations of international norms under the Alien Tort Statute, 28 USC §1350 (“ATS”). Enacted in 1789, the Statute gives US federal courts jurisdiction over “any civil action by an alien for a tort only, committed in violation of the law of nations”. In Sosa v Alvarez-Machain 542 U.S. 692 (2004), the Supreme Court held that federal courts may recognise a right of action for contemporary ATS claims where the international norm alleged to have been violated is “specific, universal, and obligatory” provided that courts also exercise “judicial caution” (p. 725). In 2010, the Court of Appeal for the Second Circuit sparked an intense debate when it held that corporations cannot be sued under the ATS because international law does not recognise a specific, universal and obligatory norm of corporate liability (Kiobel v Royal Dutch Petroleum 621 F.3d 111 (2d Cir. 2010)). Other circuit courts disagreed, deciding that, although the conduct-governing norm is drawn from international law, it is federal common law that determines whether there is any liability for breaches of that norm. On appeal, the Supreme Court affirmed the Second Circuit decision but not by resolving the question of corporate liability. Instead, the Court held that the presumption against extraterritoriality applied to claims under the ATS and, as “all the relevant conduct” in Kiobel took place outside the US, the presumption was not displaced (Kiobel v Royal Dutch Petroleum 569 U.S. 108 (2013), 124; noted [2013] C.L.J. 487). It added that, “even where the claims touch and concern the territory of the United States, they must do so with sufficient force to displace the presumption” (pp. 124–25).

In Jesner v Arab Bank plc, victims and the surviving relatives of victims of terrorist acts committed abroad claimed that Arab Bank facilitated those acts in violation of international law. It was alleged that the Jordanian financial institution had maintained accounts for terrorists and their families, used its New York branch to clear dollar-denominated transactions for the benefit of terrorists, and laundered money for a Texas-based charity allegedly affiliated to Hamas. The Second Circuit dismissed the claims following the circuit precedent (i.e. Kiobel v Royal Dutch Petroleum 621 F.3d 111 (2d Cir. 2010)). In a sharply divided and diffuse majority judgment given by Justice Kennedy, the Supreme Court ruled that foreign corporations may not be defendants in ATS claims, leaving open the question whether claims can be brought against US companies. Justice Kennedy emphasised that Congress is better positioned to consider whether a right of action is in the public interest and that “political branches, not the Judiciary, have the responsibility and institutional capacity to weigh [the] foreign-policy concerns” that arise in ATS cases (pp. 18–19, per Kennedy J.). In his view, the ATS was enacted to “promote harmony by ensuring foreign plaintiffs a remedy for international-law violations in circumstances where the absence of such a remedy might provoke foreign nations to hold the United States accountable” (p. 25, ibid.), but claims involving foreign corporations have achieved the opposite result. Jordan considered the present case to be a “grave affront” to its sovereignty that “threatens to destabilize Jordan's economy and undermines its cooperation with the United States” (p. 26, ibid.).

On the question of corporate liability under the ATS, Justice Kennedy (joined only by Chief Justice Roberts and Justice Thomas) expressed support for the majority of the Second Circuit in Kiobel, albeit without reaching a firm conclusion. He considered that the decision of states to limit the jurisdiction of international criminal tribunals to natural persons “counsels against a broad holding that there is a specific, universal, and obligatory norm of corporate liability under currently prevailing international law” and that “it is far from obvious why the question whether corporations may be held liable for international crimes of their employees is a mere question of remedy” (pp. 15–17, per Kennedy J.). In a remarkable passage, Justice Kennedy also expressed concern that allowing plaintiffs to sue foreign corporations under the ATS would imply that other states “could hale our [corporations] into their courts for alleged violations of the law of nations”, which in turn “could subject American corporations to an immediate, constant risk of claims seeking to impose massive liability for the alleged conduct of their employees and subsidiaries around the world, all as determined in foreign courts” (p. 24, ibid.). The threat of liability might discourage American corporations from investing abroad and “deter the active corporate investment that contributes to the economic development that so often is an essential foundation for human rights” (ibid.).

Although the question whether ATS cases can be brought against US corporations was left open, the majority expressed deep reservations about the judicial power to recognise a private right of action. Justice Kennedy 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, per Kennedy J.), even though this would appear to contradict the position he took as part of the majority in Sosa. In concurring opinions, Justices Alito, Gorsuch and Thomas made plain their aversion to judicial recognition of causes of action under the ATS (p. 1, per Thomas J.; p. 13, per Gorsuch J.; p. 3, per Alito J.), with Justice Gorsuch excoriating in his criticism: “there are degrees of institutional incompetence and constitutional evil. It is one thing for courts to assume the risk 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 should be attributed to the United States and thereby risk reprisals against this country” (p. 13, per Gorsuch J.). In his view, “[t]o the extent Sosa continued to claim for federal judges the discretionary power to create new forms of liability on their own, it invaded terrain that belongs to the people's representatives and should be promptly returned to them” (p. 3, ibid.).

It is true that ATS cases give rise to real foreign-policy and separation-of-power issues, but the majority are also selective in their deference to the political branches. As pointed out by Justice Sotomayor in a powerful dissenting opinion (joined by Justices Ginsburg, Breyer and Kagan), the Solicitor General – and some Members of Congress – have implored the Court not to reject corporate liability. During oral argument, counsel for the US told the Court that “the way to deal with international friction is by carefully defining … the types of violations that are remediable” and that beyond this, he “[did not] see a sound reason to categorically exclude corporate liability” (Jesner v Arab Bank plc, No. 16-499, Transcript of Oral Argument, 11 October 2017, 29). In his view, foreclosing corporate liability might actually give rise to “the possibility of [international] friction” (pp. 33–34). In addition, Congress has “never seen it necessary to immunize corporations from ATS liability even though corporations have been named as defendants in ATS suits for years” (p. 24, per Sotomayor J.). It is also relevant that objections by foreign states have been to the exercise of extraterritorial jurisdiction and not to corporate liability in principle. As the facts in Jesner have a relatively minor connection to US territory, the case could arguably have been dismissed on the basis that it did not “touch and concern the territory of the United States … with sufficient force” to displace the presumption against extraterritoriality (Kiobel v Royal Dutch Petroleum 569 U.S. 108 (2013), 124–25). In other words, foreign-policy concerns could be addressed “with a tool more tailored to the source of the problem than a blanket ban on corporate liability” (p. 19, per Sotomayor J.).

Justice Kennedy's support of the Second Circuit decision in Kiobel mischaracterises international law and its relationship with domestic law and elides the distinction between substantive norms and international responsibility. International law does not impose civil liability on either natural or juridical persons, and while it is true corporations cannot be defendants before international criminal tribunals, it only follows from this that states have decided not to enforce international criminal responsibility against corporations at the inter-state level. Not only are states generally free to decide how to enforce international norms within their domestic legal systems (subject to jurisdictional rules and human rights law) but international law actually requires states to impose domestic liability on corporations for certain conduct, including the financing of terrorist acts (International Convention for the Suppression of the Financing of Terrorism 1999, 2178 U.N.T.S. 197, Art. 5). Finally, Justice Kennedy's marked deference to corporations and to a liberal world view of free trade stands in stark contrast to that of some other domestic courts. In a case where a corporation was alleged to have been involved in torture, the Court of Appeal of British Colombia stated that “it is not necessarily the case … that the recognition of a [customary international law] norm against torture as the basis of some type of private law remedy in this instance would bring the entire system of international law crashing down” (Araya v Nevsun Resources Ltd. 2017 BCCA 401, at [189]).

In Citizens United v Federal Election Commission 558 U.S. 310 (2010), the Supreme Court famously upheld the right of US corporations to free speech. Although ATS cases raise very different issues – the exercise of extraterritorial jurisdiction, the constitutional separation of powers, and the role of Congress and the executive in the area of foreign policy – the overarching picture is nevertheless striking: fundamental corporate rights are protected but corporate liability for human rights abuses remains elusive.