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The Second Opinion: U.S. Supreme Court Limits Extraterritorial Reach of Alien Tort Claims

A Commentary on Recent Legal Developments by the Opinions Group of McCarthy Tétrault LLP

Posted in The Second Opinion
Brandon Kain

In Kiobel v. Royal Dutch Petroleum Co., released last Wednesday, the U.S. Supreme Court significantly restricted the claims that may be brought against foreign actors under the Alien Tort Statute (“ATS“).  The ATS is a one-sentence statute enacted in 1789 which provides that “[t]he 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”.  Since being “rediscovered” in the 1970s, the ATS has been used to launch numerous class actions against non-U.S. corporations for alleged human rights abuses carried out abroad.  The Kiobel decision is therefore an important one for Canadian businesses that engage in significant operations in developing countries.

Background

The Kiobel litigation involved a proposed class action by Nigerian nationals who were resident in the United States.  They alleged that the defendant Dutch, British and Nigerian corporations aided and abetted the Nigerian Government in committing violations of the law of nations in Nigeria while they were engaged in oil exploration and production activities there.

As discussed in a previous post, the claim was originally dismissed by the U.S. Court of Appeals for the Second Circuit on the ground that the law of nations does not recognize corporate liability.  The Supreme Court granted certiorari to address that issue.  However, after hearing oral arguments, the Court asked the parties to file supplemental briefs addressing whether and when the ATS applies to violations of the law of nations occurring in a territory outside the United States.

The Kiobel Decision

The majority of the Court, per Chief Justice Roberts, held that the ATS does not apply to claims in which all the relevant conduct took place outside the United States.  Applying the presumption against extraterritoriality, the majority found there was nothing in the text, history or purpose of the ATS to suggest that it was intended to apply to foreign conduct.  Generic terminology like “any civil action” was insufficient to rebut the presumption, and a violation of the “law of nations” affecting an “alien” could occur within the United States.  Interestingly, the Court also drew upon William Blackstone’s Commentaries on the Laws of England to find that, at the time when the ATS was enacted, only three principal offences against the law of nations had been recognized: (1) violation of safe conducts; (2) infringement of the rights of ambassadors; and (3) piracy.  The first two offences had no necessary extraterritorial application.  Further, applying U.S. law to piracy “does not typically impose the sovereign will of the United States onto conduct occurring within the territorial jurisdiction of another sovereign, and therefore carries less direct foreign policy consequences”.

The majority therefore concluded that “[t]here is no indication that the ATS was passed to make the United States a uniquely hospitable forum for the enforcement of international norms”.  It also expressed concern over the possibility that “accepting petitioners’ view would imply that other nations, also applying the law of nations, could hale our citizens into their courts for alleged violations of the law of nations occurring in the United States, or anywhere else in the world”.  However, in an ambiguous closing paragraph, Chief Justice Roberts may have left open the possibility that foreign conduct can engage the ATS where the defendant possesses other connections to the United States:

On these facts, all the relevant conduct took place outside the United States. And 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. … Corporations are often present in many countries, and it would reach too far to say that mere corporate presence suffices. …

Significance

In the wake of Kiobel, Canadian corporations will likely be subject to fewer U.S. class actions alleging human rights abuses in developing countries (e.g., as in Presbytarian Church of Sudan v. Rybiak (2006), 275 DLR (4th) 512 (Ont. C.A.)).  However, as Justice Kennedy noted in his concurring opinion, the majority judgment in Kiobel “is careful to leave open a number of significant questions regarding the reach and interpretation of the Alien Tort Statute”.  First, Kiobel did not address the issue on which the U.S. Supreme Court originally granted certiorari, i.e., whether the ATS applies to corporations at all.  Second, the degree to which the ATS can apply to foreign conduct by corporations having a U.S. connection beyond “mere corporate presence” remains unresolved.

It is possible that the U.S. Supreme Court will clarify these issues when it hears the upcoming appeal in DaimlerChrysler AG v. Bauman.  The Court granted certiorari from this 9th Circuit ruling on Monday, shortly after releasing its decision in Kiobel.  Like Kiobel, the DaimlerChrysler appeal involves an ATS claim against a foreign company for alleged human rights abuses occurring abroad (in this case, Argentina).  The issue for the Supreme Court is whether it is appropriate to exercise personal jurisdiction against the foreign defendant based solely on the fact that its indirect corporate subsidiary performs services on its behalf in the United States.

The McCarthy Tétrault Opinions Group consists of members of the firm’s litigation department whose practices focus on written advocacy and the provision of strategic advice and opinions in the context of complex business disputes and transactions.  The members of the Opinions Group are Anthony Alexander, Martin Boodman, Brandon Kain, Hovsep Afarian and Kirsten Thompson.