Suing Corporations for Violating International Law: A Step Forward

Suing Corporations for Violating International Law: A Step Forward

[Doug Cassel is Emeritus Professor of Law at Notre Dame Law School.]

The U.S. Supreme Court ruled this month in Nestle USA Inc. v. Doe that “general corporate activity” in the U.S. is not a sufficient domestic basis to warrant Alien Tort Statute (ATS) jurisdiction over claims against a U.S. corporation for alleged human rights violations overseas. The media response generally echoed that of the New York Times, which characterized the decision as “the latest in a series of rulings imposing strict limits on lawsuits brought in federal court based on human rights abuses abroad.”

This description, although correct, was incomplete.  Often overlooked was a second aspect of Nestle USA: five Justices opined that U.S. corporations can be sued under the ATS for torts committed in violation of international law.  Corporations are not immune from civil suits for damages for allegedly violating applicable international law.  No Justice expressed a contrary view. 

A de facto majority of the Court thus settled, albeit arguably in dicta, a long-running controversy among U.S. courts of appeals.  The Justices may also have eased the path for future legislation and litigation, in the U.S. and elsewhere, against companies involved in violations of international human rights law. 

The ATS provides jurisdiction to hear claims by al­iens for torts “committed in violation of the law of na­tions or a treaty of the United States.” The view that U.S. corporations can be sued for such international law violations under the ATS was not some off-the-cuff surmise.  Only one year before Nestle USA asked the Court to review its case, the Court had ruled in Jesner v. Arab Bank that foreign corporations cannot be sued under the ATS; Nestle USA hoped to extend that bar to domestic corporations as well.  

The company presented only two questions for review.  One was whether “general corporate activity” in the U.S. is enough to overcome the presumption against extraterritorial application of the ATS.  The second was “[w]hether the Judiciary has the authority under the Alien Tort Statute to impose liability on domestic corporations.” According to Justice Alito, the second question — whether U.S. corporations can be sued — was “primary.”

Not only the parties but also numerous amici on both sides engaged the question of corporate liability.  In support of Nestle USA, for example, the U.S. Chamber of Commerce argued, “Domestic corporations are not proper ATS defendants.” In support of the plaintiffs, a group of international human rights organizations countered, “Corporate liability is a general principle of law recognized by legal systems around the world.”

The result was a thorough briefing of the corporate liability issue.  Although the 8-1 opinion of the Court addressed only the extraterritoriality issue, corporate liability was addressed in three separate opinions, by five justices, on both sides of the Court’s usual philosophical divide. 

Joined by Justice Alito, Justice Gorsuch addressed corporate liability at some length.  “Nowhere,” he wrote, does the text of the ATS “suggest that anything depends on whether the de­fendant happens to be a person or a corporation.” Reviewing the long history of tort suits against corporations, he summarized: “Causes of action in tort normally focus on wrongs and injuries, not who is responsible for them.”

In a separate opinion, Justice Alito added that “if a particular claim may be brought under the ATS against a natural person who is a United States citizen, a similar claim may be brought against a domestic corporation. … Corporate status does not justify special immunity.”

            In a footnote cited with approval by Justice Alito, Justice Sotomayor, joined by Justices Breyer and Kagan, was pleased to agree: “As JUSTICE GORSUCH ably explains, there is no reason to insulate domestic corporations from liability for law-of-nations violations simply because they are legal rather than natural persons.”

Lest there be any doubt, she noted pointedly that “four other Justices” (Gorsuch, Alito, Breyer and Kagan) shared her view that corporations can be sued under the ATS.  None of the remaining Justices – Barrett, Kavanaugh, Roberts and Thomas – expressed any view on the question. 

Perhaps one or more of the silent four was merely holding her fire for another day.  Because the Court’s holding was on extraterritoriality, not on corporate liability, the views of the five Justices do not technically constitute stare decisis.  Thus, if there is a change in the composition of the Court or in the views of individual Justices, a future Court would not have to overturn a precedent in order to rule that U.S. corporations cannot be sued under the ATS. 

However, until that day comes (if ever), an unchallenged majority of the U.S. Supreme Court is of the view that domestic corporations can be sued for violations of international law.  Their view is both correct and portentous.

Looking Back

No significant judicial opinion seems to have argued that corporations cannot be sued for damages for violations of applicable international law, until Judge José Cabranes of the U.S. Court of Appeals for the Second Circuit so ruled in 2010 in Kiobel v. Royal Dutch Petroleum.  Judge Cabranes argued mainly that, since international criminal courts do not allow corporations to be criminal defendants, international law does not allow them to be defendants in civil suits either.

Judge Cabranes’ novel view did not go unrebutted at the time.  In dissent on the same three-judge panel, Judge Pierre Leval recognized that international law generally does not by itself make corporations civilly liable for violations, but leaves the question of corporate civil liability for damages to each individual State.  The Supreme Court initially agreed to review the issue of corporate liability in Kiobel.  However, after hearing oral argument, the Court directed that the case be reargued on the extraterritoriality issue.  It then decided Kiobel on that basis, without reaching the issue of whether corporations can be sued under the ATS.

Since 2011, the Courts of Appeals of at least three circuits [here, here and here] have agreed with Judge Leval and held that corporations can be sued under the ATS. 

In 2018, writing for the Supreme Court in Jesner v. Arab Bank, Justice Kennedy was respectful to both sides of the issue: “The respective opinions by Judges Cabranes and Leval are scholarly and extensive, providing significant guidance for this Court in the case now before it.”  However, Jesner confined its ruling to foreign corporations, not domestic U.S. corporations.  Kennedy explained that the Court “need not resolve the questions whether corporate liability is a question that is governed by international law, or, if so, whether international law imposes liability on corporations. There is at least sufficient doubt on the point” that the Court decided instead to reject foreign corporate liability on a different ground (deference to Congress in creating causes of action that could affect foreign relations).  The issue of U.S. domestic corporate liability remained open.

Justice Kennedy’s ambiguity in Jesner set the stage for the issue of domestic corporate liability to be addressed in Nestle USA.  As noted above, the Court’s holding avoided the issue, but five of the nine Justices expressed the view that U.S. corporations can be sued for damages under the ATS.

Looking Forward

There are at least five ways that the views expressed by five Justices without contradiction in Nestle USA, that domestic U.S. corporations can be sued under the ATS, could have significant practical consequences in the future.

First, corporate liability could matter in cases where extraterritoriality is not at issue.  Consider, for example, a suit in which foreign detainees sue a U.S. corporation which has a contract to manage a prison or detention center located in the U.S.  If the view of Judge Cabranes had prevailed, any such international law claim would be dismissed.  But after Nestle USA, it might go forward.

Second, consider human rights suits in U.S. State courts. They are not necessarily limited by the presumption against extraterritoriality of federal statutes that was the basis of the U.S. Supreme Court decisions in Kiobel and Nestle USA.  If a U.S. corporation is sued in a State court for an interational human rights violation committed overseas, and the case falls within the State’s permissible jurisdiction, there would be no corporate immunity from such a suit, if the State court follows the views of the five Justices in Nestle USA.

Third, a future Congress might decide to enact legislation allowing civil suits for international law violations committed overseas.  If it does, legislators would have a strong argument, following the views of the five Justices in Nestle USA, that U.S. corporations have no immunity from such suits. (Indeed, the Anti-Terrorism Act already permits suits against corporate entities.)

Fourth, the views of the five Justices might be considered as a persuasive element by common law courts in other countries.  For example, the Canadian Supreme Court recently ruled in Nevsun v. Iraya that it is not “plain and obvious” that Canadian companies cannot be sued for human rights violations overseas, and remanded for a determination of whether a suit should go forward under a new or existing common law tort, or directly on the basis of customary international law.  If, on remand or in future, a party attempts to argue that corporations cannot be sued in Canadian courts for violating international law, the views of the U.S. Justices might add to the weight of the arguments that they can indeed be sued.

Finally, the views of the U.S. Justices – including two of the most conservative Justices on the Court – may reinforce the overall trend toward greater corporate accountability for abuses of internationally recognized human rights.  If even Justices Gorsuch and Alito believe that corporations are not immune from suit for violations of international law, then legislators, jurists and diplomats worldwide may be more open to establishing new forms of corporate liability, than they might be if the views of Judge Cabranes had prevailed.

There is no guarantee, of course, that any of these pathways to corporate liability will materialize.  But, after Nestle USA, the odds are improved.

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Business & Human Rights, Courts & Tribunals, Environmental Law, Featured, General, International Human Rights Law, Law and Sustainability
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