This week, the Supreme Court issued ruling in the matter of Jesner v. Arab Bank, holding that Alien Tort Statute does not allow for U.S. originated lawsuits against foreign corporations with a domestic presence.

The decision upholds a lower court ruling that rejected lawsuits by plaintiffs killed in overseas terrorist attacks.

Petitioners are plaintiffs in five ATS lawsuits filed against Arab Bank in the United States District Court for the Eastern District of New York between 2004 and 2010. A significant majority of the plaintiffs in these lawsuits—roughly 6,000 of them—are foreign nationals whose claims arise under the ATS.

Petitioners had filed suits under the Alien Tort Statute (ATS), alleging that they, or those on whose behalf they assert claims, were injured or killed by terrorist acts committed abroad. Those acts, they claimed, were caused or facilitated by Arab Bank, a Jordanian financial institution with a branch in New York. The plaintiffs sought to impose liability on the bank for the conduct of its high-ranking officials. 

Plaintiffs also claimed that the bank used its New York branch to clear dollar-denominated transactions that benefited terrorists through the Clearing House Interbank Payments System and laundered money for a Texas-based charity allegedly affiliated with Hamas.

A “friend of the court brief” filed by the Institute of International Bankers explained that in New York each day an estimated 440,000 of these transfers occur, in dollar amounts totaling about $1.5 trillion. The “clearance activity is an entirely mechanical function; it occurs without human intervention in the proverbial blink of an eye,” they wrote, adding that the speed and volume of these transactions mean that individual supervision is simply not a systemic reality.

An amicusbrief filed by the U.S. government says that for 13 years, this litigation has “caused significant diplomatic tensions” with Jordan, “a critical ally in one of the world’s most sensitive regions.”

“Jordan is a key counterterrorism partner, especially in the global campaign to defeat the Islamic State in Iraq and Syria,” the government wrote.

The Alien Tort Statute is a U.S. federal law first adopted in 1789 that gives the federal courts jurisdiction to hear lawsuits filed by non-U.S. citizens for torts committed in violation of international law. 

While the Arab Bank litigation was pending, the Supreme Court held, in Kiobel v. Royal Dutch Petroleum Co., that the ATS does not extend to suits against foreign corporations when “all the relevant conduct took place outside the United States.” It left unresolved, however, the Second Circuit’s broader holding in its Kiobel decision: that foreign corporations may not be sued under the ATS. Deeming that broader holding binding precedent, the District Court dismissed petitioners’ ATS claims and the Second Circuit affirmed. 

“When the Alien Tort Statute was rediscovered in 1980, it was seen as a narrow vehicle for suits by foreign-citizen victims of torture against their perpetrators,” says O’Melveny appellate partner Anton Metlitsky, principal author of an amicus brief by the U.S. Chamber of Commerce in the case. “Lawsuits under that statute, however, proliferated dramatically when foreign citizens began suing corporations as alleged accomplices to human rights violations in the late 1990s. The recent decision is the Court’s second effort in the past several years to stem that tide.”

Justice Anthony Kennedy, writing an opinion on behalf of the majority, was concerned by separation-of-powers issues, “that counsel against courts creating private rights of action apply with particular force in the context of the ATS, which implicates foreign-policy concerns that are the province of the political branches.”

“The ATS was intended to promote harmony in international relations by ensuring foreign plaintiffs a remedy for international law violations when the absence of such a remedy might provoke foreign nations to hold the United States accountable,” he wrote. “But here, and in similar cases, the opposite is occurring.” 

“At a minimum, the relatively minor connection between the terrorist attacks and the alleged conduct in the United States illustrates the perils of extending the scope of ATS liability to foreign multinational corporations like Arab Bank,” the majority opinion says. “For 13 years, this litigation has caused considerable diplomatic tensions with Jordan, a critical ally that considers the litigation an affront to its sovereignty. And this is not the first time that a foreign sovereign has raised objections to ATS litigation in this Court. These are the very foreign-relations tensions the First Congress sought to avoid. Nor are the courts well suited to make the required policy judgments implicated by foreign corporate liability.” 

“Accordingly, the Court holds that foreign corporations may not be defendants in suits brought under the ATS,” the majority of justices concurred.

The opinion suggested that Congress could redress any issues related to matters raised by the case. “That the corporate form can be an instrument for inflicting grave harm and suffering poses serious and complex questions for the international community and for Congress,” it says. “This complexity makes it more important that Congress determine whether victims of human-rights abuses may sue foreign corporations in federal court.”

Justice Neil Gorsuch, who sided with the majority, offered why the lawsuit must be dismissed.

“A group of foreign plaintiffs wants a federal court to invent a new cause of action so they can sue another foreigner for allegedly breaching international norms. In any other context, a federal judge faced with a request like that would know exactly what to do with it: dismiss it out of hand,” he wrote. “Not because the defendant happens to be a corporation instead of a human being. But because the job of creating new causes of action and navigating foreign policy disputes belongs to the political branches.”

“I would end ATS exceptionalism. We should refuse invitations to create new forms of legal liability. And we should not meddle in disputes between foreign citizens over international norms,” he added. 

Justice Sonia Sotomayor wrote the minority opinion.

“Our nation has an interest not only in providing a remedy when our own citizens commit law of nations violations, but also in preventing our nation from serving as a safe harbor for today’s pirates,” she wrote. “Nothing about the corporate form in itself justifies categorically foreclosing corporate liability in all ATS actions.”

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