human rights & business (and a few other things)

Unnecessary, Wrong, and Misguided – the US Supreme Court’s Blanket Ban on All ATS Suits against Foreign Corporations in Jesner v Arab Bank


I  was waiting for it. I discussed it at length with students and colleagues. I envisaged many scenarios, even the worst possible one: the end of all claims against all corporations under the Alien Tort Statute (ATS) (see my previous post here). Yesterday, on  24 April 2018, it finally came: the US Supreme Court’s decision in Jesner v Arab Bank.

The question that was asked was whether the ATS categorically forecloses corporate liability. In a 5-4 decision, the Court issued a blanket ban on all ATS suits against foreign corporations. It said little about the liability of US corporations under the ATS so we can assume it remains a possibility, and that we dodged a bullet on this point. Regardless, this is the end of business and human rights ATS litigation against non-US companies, and a setback for those who seek to strengthen corporate accountability.

After a first read, here are my thoughts. The decision was unnecessary and amounts to, in the words of Justice Sotomayor writing for the dissenting minority, “us[ing] a sledgehammer to crack a nut.” The decision is also wrong, as it conflates the existence of a norm of international law and the possibility of its enforcement at the international level. Finally, the decision is misguided. The Court expresses concerns about the treatment of US corporations abroad if ATS suits against foreign corporations were allowed to continue. This argument attempts to oversimplify what is a complex matter. It is as if the Court aimed to appease those who believe US corporate giants cannot possibly do wrong, but actually have little understanding of how multinational corporations operate.

Ending all claims against foreign corporations was unnecessary

US federal courts have a set of tools at their disposal to address the legitimate concerns the facts of this, and other similar cases, raise. One of those tools is the “touch and concern” test that the US Supreme Court established merely five years ago in Kiobel, and whose raison d’être is now in question. The case could have been dismissed on forum non conveniens grounds or on the basis of nonjusticiability concerns such as the act of state, political question and comity doctrines. Instead of trusting lower court’s determinations on a case by case basis, the Court went for an absolute ban. I simply cannot find a good reason for this approach.

Conflating the existence of a norm of international law with the possibility of its enforcement is wrong

The Court discusses at length the existence of a norm on corporate liability for gross human rights violations under international law. It concludes that such liability is not recognised in international criminal tribunal’s statutes and that it therefore does not exist. Anyone who has taught an introductory international law course will tell you the same story: students often make a similar mistake when they first encounter international law. They mix up the existence of a norm and the possibility of its enforcement. International law is not really law, they assume, because it cannot be enforced in the same way domestic law is. While beginners can be forgiven for this mistake, to see one of the most prestigious judicial institutions in the world fall into that trap is mind-boggling. There is no question that certain norms of international law, particularly in international criminal law, apply to corporations. How they are held liable depends on states and is done precisely through mechanisms such as the ATS. To use this argument to prevent corporate liability at the domestic level is wrong.

The Court’s belief that ATS suits against foreign corporations jeopardize US corporations’ overseas operations is misguided

Towards the end of the judgement, the Court addresses another issue, that of the potential consequences of ATS suits against foreign corporations for US corporations. This, it argues,

“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, thereby ‘hinder[ing] global investment in developing economies, where it is most needed.’

In other words, allowing plaintiffs to sue foreign corporations under the ATS could establish a precedent that discourages American corporations from investing abroad, including in developing economies where the host government might have a history of alleged human-rights violations, or where judicial systems might lack the safeguards of United States courts. And, in consequence, that often might deter the active corporate investment that contributes to the economic development that so often is an essential foundation for human rights.”

To think that the mere possibility of an ATS lawsuit against foreign corporations could “ discourage” US corporations from investing abroad is misguided. Such lawsuits were possible until yesterday. Have US corporations ever stopped, or even refrained from, investing abroad for that reason? I doubt it. In any event, establishing this would require in-depth research that the Court does not even hint at. This argument is also ridiculous in light of the protections international investment law affords, and of the fact that no ATS lawsuit against a corporation has ever succeeded. The final point about how US corporations contribute to the realisation of human rights is also misguided. Of course it is true in certain circumstances but this is not the point. The point is that when corporations engage in human rights violations it is only right that they are held liable. Having done some good must not prevent liability. By suggesting otherwise, the Court reinforces the dangerous and misconceived idea that human rights standards are an inconvenience for the business world.

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