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October Term, 2012

April 17, 2013

Today the Supreme Court issued one decision, described below, of interest to the business community.

Alien Tort Statute and Torture Victim Protection Act—Extraterritoriality

Kiobel v. Royal Dutch Petroleum, No. 10-1491 (previously discussed in the October 17, 2011, Docket Report)

The Alien Tort Statute grants federal-court jurisdiction over a tort claim brought by an alien (i.e., a non-U.S. citizen) who alleges that the tort was “committed in violation of the law of nations or a treaty of the United States.” 28 U.S.C. § 1350. In Kiobel v. Royal Dutch Petroleum, the plaintiffs, who are residents of Nigeria, brought a claim under the Alien Tort Statute against Dutch, British, and Nigerian corporations engaged in oil exploration in Nigeria, alleging that those corporations committed human-rights violations in Nigeria. Today, the Supreme Court held that the Alien Tort Statute did not provide the federal courts with jurisdiction over the case. Writing for the Court, Chief Justice Roberts explained that “the presumption against extraterritoriality applies to claims under the ATS,” and that, in this case, “all the relevant conduct took place outside the United States.” The Court held that “mere corporate presence” within the United States does not suffice to “displace the presumption against extraterritorial application” of U.S. law.

The Second Circuit had dismissed the complaint, holding that the ATS does not recognize corporate liability. After hearing oral argument on that question in February 2012, the Supreme Court ordered supplemental briefing and reargument on the additional question “[w]hether and under what circumstances the [ATS] allows courts to recognize a cause of action for violations of the law of nations occurring within the territory of a sovereign other than the United States.” The Supreme Court resolved the case on the basis of that additional question, and did not address whether the ATS recognizes corporate liability.

The Court held that “nothing in the text of the [ATS] suggests that Congress intended causes of action recognized under it to have extraterritorial reach.” It also concluded that the historical context of the ATS did not support extraterritorial application. The Court noted that, at the time of the ATS’s passage, offenses against the law of nations fell into three categories: violation of safe conduct, infringement of the rights of ambassadors, and piracy. The first two “have no necessary extraterritorial application,” and the “notorious episodes” in those categories that led to passage of the ATS involved alleged offenses within the United States. The Court also reasoned that the third offense, piracy, is unique because pirates “generally did not operate within any jurisdiction” and “may well be a category unto themselves.” The Court thus concluded that “there is no indication that the ATS was passed to make the United States a uniquely hospitable forum for the enforcement of international norms.”

Stressing the need to avoid adverse foreign-policy implications, the court held that the ATS applies only when the relevant conduct occurred within the United States. The Court noted 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 against extraterritorial application.” “Mere corporate presence” is insufficient to displace the presumption.

Justice Kennedy joined the majority opinion, providing the necessary fifth vote, but also wrote a separate concurrence. He noted that the majority opinion was “careful to leave open a number of significant questions regarding the reach and interpretation of the [ATS]” and that “[o]ther cases may arise with allegations of serious violations of international law principles protecting persons, cases covered neither by the [Torture Victim Protection Act] nor by the reasoning and holding of today’s case; and in those disputes the proper implementation of the presumption against extraterritorial application may require some further elaboration and explanation.”

Justice Breyer, joined by Justices Ginsburg, Sotomayor, and Kagan, concurred in the judgment but disagreed with the Court’s reasoning. Justice Breyer argued that the ATS should apply when (1) the alleged tort occurs on American soil, (2) the defendant is an American national, or (3) the defendant’s conduct substantially and adversely affects an important American national interest (including a distinct interest in preventing the United States from becoming a safe harbor for a torturer or other common enemy of humanity). He concluded that the conduct at issue in Kiobel did not meet any of those criteria.

Kiobel is of substantial importance to any business that operates outside the United States. Although the Court’s opinion is framed broadly, members of the plaintiffs’ bar are likely to argue—indeed, have already been arguing in the hours since the decision was issued—that the Court’s holding is limited and does not remove the possibility of suit under the ATS for conduct that occurred outside the United States. They are contending, for example, that U.S.-domiciled companies remain subject to suit for their conduct outside the United States, but that rule was endorsed by only four Justices and is entirely inconsistent with the majority’s analysis.

Even if Justice Kennedy’s concurrence could be read as a limitation on the scope of the majority opinion, which it expressly is not (Justice Kennedy references cases not covered “by the reasoning and holding of today’s case”), it would not open the door to continuation of aiding-and-abetting claims against U.S. businesses. Justice Kennedy refers to cases with “allegations of serious violations of international law principles,” and aiding-and-abetting claims against companies, which are not even permitted under international law, plainly do not fall within that category.

An exception for claims against U.S.-domiciled companies also would make no sense. In our globalized economy, companies may locate in any of a number of different counties. If the price of a U.S. domicile was subjecting the business to numerous ATS class actions, any reasonable chief executive would have to consider relocating to another country. That would hardly be a beneficial result for the U.S. economy.

Any questions about this case should be directed to Andrew J. Pincus (+1 202 263 3220) or Alex C. Lakatos (+1 202 263 3312) in our Washington DC office.

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