US Supreme Court rejects extraterritorial application of the Aliens Offenses Act to US companies – corporate / commercial law
United States: US Supreme Court rejects extraterritorial application of the Aliens Offenses Act to US companies
To print this article, all you need to do is register or log in to Mondaq.com.
On Thursday, the US Supreme Court ruled in favor of two US corporations1– Nestlé USA and Cargill – charged with aiding and abetting forced child labor in Ivory Coast in violation of the Alien Tort Statute (ATS) – a 1789 law that gives federal district courts jurisdiction over civil claims made by foreigners for “infringement”[s] of international law or a treaty of the United States. “2
In an 8-1 ruling, the Supreme Court ruled that the Ninth District wrongly agreed to plaintiffs’ lawsuits if plaintiffs alleged insufficient relevant conduct in the United States to establish an ATS jurisdiction.
In a letter to the majority, Justice Clarence Thomas noted that “nearly all” of plaintiffs alleged conduct in support of slave labor who provided technical and financial resources in the form of training and cash to cocoa bean suppliers in Ivory Coast took place in the United States.
Conversely, the domestic activities of the companies – purchase and financing decisions which the plaintiffs described as “important operational decisions” but Judge Thomas viewed as “general corporate activity” – could not by themselves justify the domestic application of ATS.
The decision of the Supreme Court in Nestle and
Cargill is the latest in a series of decisions restricting the extraterritorial application of the ATS for all corporate activities carried out abroad.
in the Kiobel v. Royal Dutch Petroleum Co., 569 US 108 (2013), the court rejected extraterritorial application of the ATS to plaintiffs’ corporate aid claims if almost all of the conduct complained of was overseas and the defendant was a foreign company.3 For the majority, Chief Justice John G. Roberts Jr. wrote that “[e]even if the claims affect and affect United States territory. . . they must do this with sufficient force to dispel the presumption against an extraterritorial application. “4th
Later in the Jesner v. Arab Bank, the court ruled in favor of a Jordanian bank accused of conducting financial transactions for terrorist groups through a branch in New York.5 The court ruled that foreign companies could not be sued in federal courts under the ATS and warned that creating a new plea under the ATS would necessarily have foreign policy implications and undermine the role of the executive branch.6th
In particular, the Court did not address directly the question of whether domestic companies can even be sued under the ATS, a question raised by. was left open Jesner and dressed up in subsequent ATS suits, including Doe versus Cisco Sys. (A decision is currently waiting in the Ninth District pending the outcome of the Nestle and Cargill cases).
Judge Gorsuch, who was writing at the same time, noticed this omission. While agreeing with the outcome of the decision and that the ATS should not allow the judiciary to create new grounds of action, Judge Gorsuch (and four other judges) concluded that companies for ATS purposes should not be treated any differently from natural persons .
The decisions of the court in Nestle and
Cargill Relief for US companies doing overseas business. Although the Court, in accordance with its decisions in Kiobel and
Jesner, the Court of Justice has severely restricted the scope of ATS jurisdiction for the conduct of companies abroad. Extraterritorial behavior such as the provision of training courses or financing for foreign suppliers does not establish federal jurisdiction within the framework of the ATS. Also, general corporate activities in the United States, such as decision-making or financing, will not create domestic application of ATS for aid or claims for complicity or complicity of companies which make up the bulk of the total ATS claims. In addition, the Court’s limited view of the role of the judiciary in assessing alleged violations of international law abroad vis-à-vis the legislature or executive is likely to further limit the scope of ATS litigation for the foreseeable future.
1. Nestlé USA, Inc. v DOE et al., No. 19-416 (U.S., June 17, 2021).
2. 28 USC § 1350.
3,569 US 108 (2013).
4,569 US at 124-25.
5,584 U.S. __ (2018).
I would. at 18-19.
Disclaimer: This warning is prepared and posted for informational purposes only and is not offered as legal advice, nor should it be construed as such. Further information can be found in the office full disclaimer.
POPULAR ARTICLES ON: United States Corporate / Commercial Law