In a 5-4 ruling, the U.S. Supreme Court ruled today that the Alien Tort Statute cannot be used to sue foreign corporations. With Justice Kennedy writing for the majority, the Court affirmed the Second Circuit’s decision to dismiss a lawsuit against Arab Bank PLC, a Jordanian financial institution with a New York branch. The litigants claimed that the bank had facilitated transactions that had benefited terrorists that had committed attacks in Israel and the Palestinian territories. Kennedy was joined in his opinion by the four other conservative justices on the Court.
Ensconced in the Judiciary Act of 1789, the ATS reads: “The district courts shall have original jurisdiction of 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.” Kennedy notes that the ATS was relatively obscure and only enacted sparingly over its first 190 years; after the horrors of World War II and the ensuing Nuremberg trials, however, the courts “began to give some redress for violations of international human-rights protections that are clear and unambiguous.” (9)
The petitioners in the Arab Bank case are plaintiffs in five lawsuits suits filed against Arab Bank in the U.S. District Court for the Eastern District of New York. The majority of plaintiffs are foreign nationals, and the majority of accusations they levy against the bank involved actions that occurred entirely overseas. In particular, the plaintiffs allege that the bank maintained accounts for terrorist and militant groups, notably Hamas, and their front groups, as well as that the bank allowed the funds to be used to compensate the families of suicide bombers. The only allegation that involves actions committed on U.S. soil relates to the claim that the bank used its New York branch to clear dollar transactions that ultimately benefited terrorists.
Up until now, there had been a circuit split on whether the ATS applies to foreign corporations. While the Fourth, Seven, Ninth, and D.C. Circuits have all ruled that the ATS does apply to foreign corporations, the Second had ruled that the Supreme Court should decide the question. The Supreme Court, in ruling in favor of Arab Bank, ultimately concluded that the ATS does not extend liability, whether it be criminal or civil, for international human rights violations to foreign corporations.
The case is Jesner v. Arab Bank. For the full opinion of the Court, see here. There will be more analysis of the full opinion in the April issue of the International Enforcement Law Reporter.