On December 1, 2020, the US Supreme Court heard an oral hearing on two related cases asking questions about the scope of the Alien Tort Statute (ATS), which has been widely discussed in front of the court in recent years. In Nestle USA, Inc. v Doe I and Cargill, Inc. v Doe I, plaintiffs allege they fell victim to abuses that aided and abetted the defendants by buying cocoa beans from farms in Côte d’Ivoire, despite the fact that they had were aware of widespread use of child labor and the provision of advance payments and personal spending money to Ivorian farmers to maintain their loyalty as exclusive suppliers.
The ATS, a separate provision of the Judiciary Act of 1789, provides federal courts with jurisdiction over lawsuits brought by foreigners who are appealing for alleged violations of international law. In the first two centuries after it came into force, the ATS was used only a few times by applicants, possibly because its terms – which are not accompanied by legislative history – leave the main purpose of the law unclear.
However, in the early 1980s, the plaintiffs’ attorney began using the law as a means for non-US citizens to bring international human rights claims against companies in US federal courts. In some situations, they were directed against companies believed to have no direct causal relationship with the alleged damage and events that had little or no connection to the United States. As more cases scrutinized the limits of jurisdiction under the law, the Supreme Court intervened several times to restrict the applicability of ATS.
Notably in 2004, the Court of Justice ruled in the Sosa v Alvarez-Machain case that the ATS had not created a federal plea, but merely “had jurisdiction over a relatively modest set of actions for violations of international law”. In its 2013 opinion in the Kiobel v Royal Dutch Petroleum Co. case, the Court concluded that the general presumption against the extraterritorial application of US law extends to claims made under the ATS: thereby limiting ATS-based lawsuits for conduct outside the United States. Days later, in another ATS case – Rio Tinto PLC v. Sarei – the court issued a deed that raised the question of whether ATS claims could even be made against companies (as opposed to individuals). The Tribunal, however, left the opportunity to consider the issue and instead immediately set aside the lower court’s decision and remitted the case for further consideration in the light of the principles of extraterritoriality set out in Kiobel. Most recently, the Court of Justice raised part of this issue in Jesner v Arab Bank, PLC (2018), stating that the ATS does not grant federal jurisdiction over claims against foreign companies, but leaves unresolved the question of whether domestic companies are similar.
Both Nestle and Cargill have domestic companies (Nestle also has several international affiliates) and the petitioners are trying to resolve two issues. With reference to Kiobel, the companies first ask whether the plaintiffs have overcome the presumption against the extraterritorial applicability of the ATS. They argue that the allegation is based on allegations of general business activity in the United States and that plaintiffs cannot directly attribute the alleged harm to a defendant. The companies are moving for the claims to be dismissed because their alleged conduct is so far removed from the damage the plaintiffs suffered in that foreign country. Second, the petitioners re-raise the question unresolved by Rio Tinto and Jesner: does the ATS grant federal court jurisdiction over claims against domestic companies?
The court’s decision on the first question could provide important clues as to what a plaintiff must assert and demonstrate in order to secure federal jurisdiction over an ATS-based claim. Often times, ATS applicants cannot claim that a US resident defendant committed behavior directly related to the injuries they allegedly suffered overseas. They therefore allege that a US defendant either knew about the alleged wrongdoing when it occurred, or that a defendant “should have known” or “could have known” the alleged wrongdoing. In short, the court’s decision on the threshold of an ATS plaintiff and the burden of proof on domestic defendants would address an issue that arises in a substantial portion of ATS cases.
It can be more difficult to make a clear decision on the second issue – whether US companies are even subject to ATS-based claims. As mentioned earlier, the Tribunal avoided addressing this issue directly at both Rio Tinto and Jesner. In part of his Jesner majority opinion, which was followed by Judge John G. Roberts Jr. and Judge Clarence Thomas, Judge Anthony M. Kennedy described the ATS as “a federal agent for a narrow category of international law” violations of individualsThis suggests that all companies are outside of the law. On the other hand, Judges Sonia Sotomayor, Stephen G. Breyer, and Elena Kagan disagreed with the majority stake in Jesner, so they are likely to claim domestic companies can be sued under the law. In his concurring position on Jesner, Judge Samuel A. Alito Jr. suggested that U.S. federal courts could hear ATS-style claims against domestic companies under the principles of diversity jurisdiction, eliminating the need for ATS-based jurisdiction in such cases.
The other judges’ positions are less clear, although some judges, including Judges Neil M. Gorsuch and Brett M. Kavanaugh, appeared to have raised concerns during the hearing about Nestle and Cargill, effectively making domestic companies immune to ATS-based claims make Leaving the law with little purpose. This observation has worked, as ATS-based measures typically require compensation from well-capitalized companies. The plaintiffs’ attorney has shown little interest in suing individuals. As is clear from some questions put by the judges during the hearing, the Court could resolve the first question in favor of the accused and avoid the need to determine the second question. This outcome would have less impact on future ATS litigation, but would provide additional useful guidance for the application of the extraterritoriality principles announced by Kiobel.