October 2, 2017

Supreme Court Should Reject Corporate Impunity for Financing Terrorism

by John M. Eubanks, Member, Motley Rice LLC, Petitioners’ Counsel in Jesner v. Arab Bank

Imagine a situation where an international bank with a presence in Manhattan holds accounts for known terrorists and serves as the end-payor to beneficiaries of a fund created for the explicit purpose of supporting an armed uprising typified by suicide bombings and indiscriminate killing of civilians carried out by known terrorist organizations with whom the bank’s accountholders are directly affiliated. Then, picture this international bank being immune from lawsuits filed by the victims of these suicide bombings and indiscriminate killings solely on the basis of its corporate form. This is precisely the issue with which the Supreme Court will grapple in Jesner v. Arab Bank, to be argued before the Court on October 11, 2017.

Jesner addresses the same question that was raised in Kiobel v. Royal Dutch Petroleum Co. during the October Term 2011. That question is whether the Alien Tort Statute (ATS),  creates a categorical bar to corporate liability for violations of the law of nations, or customary international law. The U.S. Court of Appeals for the Second Circuit – from which this appeal came – is the only federal court of appeals to determine that corporations are immune from the reach of the ATS, finding itself in conflict with the U.S. Courts of Appeals for the Seventh, Ninth, Eleventh, and District of Columbia Circuits. While the Supreme Court had the opportunity to decide this issue in Kiobel, the Court instead answered a distinct question of whether claims under the ATS are subject to the presumption against extraterritoriality – that is, laws do not cover conduct that takes part outside the territorial confines of the United States absent explicit language to that effect. The Supreme Court carved out a test for overcoming this presumption under the ATS – “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.”

Assuming the presumption against extraterritoriality is displaced, the question becomes – do we want corporations to be able to violate customary international law, including human rights law, with impunity? The language of the ATS does not explicitly exempt corporations. In fact, the text of the statute is only 33 words long. It specifically lays out who can sue (“an alien”), but it provides no limitation for who can be sued. Under standard statutory interpretation, the ATS – as the Supreme Court noted in 1989 – “does not distinguish among classes of defendants.” In other words, if Congress sought to limit the scope of potential defendants in a statute, it knew how to do so, and it did not do that in the ATS. In fact, the use of the word “tort” to describe the type of action immediately invokes the concept of corporate liability as corporations have been liable for tort actions since long before the United States became a country. And as the Supreme Court has held, “when Congress creates a tort action, it legislates against a legal background of ordinary tort-related … liability rules and consequently intends its legislation to incorporate those rules.” One of those rules is this long-held concept of corporate liability for torts.

While seemingly cut-and-dried from a statutory interpretation standpoint, a 2004 Supreme Court case helped create the corporate immunity split in law. In Sosa v. Alvarez-Machain, the Supreme Court held that the ATS provided jurisdiction in the federal courts for a modest number of violations of customary international law that were well-established norms on par with norms that existed when the ATS was first enacted in 1789. However, the decision also included a discussion on violations of customary international law that could only be committed by sovereigns and those that could be committed by “private actors.”  In addressing this difference, footnote 20 of the opinion stated that “[a] related consideration is whether international law extends the scope of liability for a violation of a given norm to the perpetrator being sued, if the defendant is a private actor such as a corporation or individual.”  While this footnote clearly grouped both corporations and individuals under the heading of “private actors” as opposed to sovereigns, the Second Circuit determined that this footnote required that international law must recognize claims against corporations for violations of the law of nations in order to provide ATS jurisdiction.

The application of customary international law in the criminal context against private actors began in its current form in the post-World War II Nuremberg proceedings where an international tribunal was convened to adjudicate claims against individuals within the Nazi regime for having participated in, among others, crimes against humanity and war crimes. In these criminal proceedings, the defendants were limited to natural persons rather than corporations (or “juridical entities”). The trend of permitting international criminal tribunals to have jurisdiction solely over individuals and not over corporations has continued to this day through such modern international criminal tribunals as the International Criminal Court, the International Criminal Tribunal for the Former Yugoslavia, and the International Criminal Tribunal for Rwanda. The reasons for why these criminal tribunals limit their scope to the actions of individuals are complicated, but they revolve around a singular concept – corporations cannot be incarcerated, and the various countries who establish these tribunals have differing views on corporate criminal liability and how such justice may be meted out. Furthermore, in Nuremberg, corporate entities such as IG Farben – which manufactured Zyklon B that was used to gas Jews in the infamous concentration camp “showers” – were dismantled based on their role in violations of the law of nations including the Nazis’ “Final Solution.” The dismantling of these corporate interests was akin to a corporate death penalty for these corporations not unlike many of the convictions doled out against the individuals who were tried before the tribunal.

The converse to this trend in criminal law is the fact that all civilized countries in the world permit corporate civil liability. The fact that the ATS provides jurisdiction for a civil cause of action rather than a criminal one is a determining factor. The question then becomes whether corporate liability needs to be a part of the international norm to be recognized under the ATS or whether corporate liability is part of the remedy and thus subject to ordinary tort-related rules, which would allow such liability under the ATS. The United States Solicitor General has weighed in saying that it is part of the remedy, and corporations may be subject to liability under the ATS.

So this brings us back to the initial scenario – where a corporation engages in conduct that it knows will facilitate violations of the law of nations such as terrorism, crimes against humanity, or even genocide, can that corporation be held liable under the ATS to the victims of those violations? The answer is a simple “yes” based on the statutory text and common law’s interpretation of tort liability, and it is up to the Supreme Court to make this determination.

Access to Justice, Constitutional Interpretation