Kiobel's New Focus on Extraterritoriality under the Alien Tort Statute Could Put Resolution of the Corporate Liability Issue Indefinitely out of Reach

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A large part of White & Case LLP's litigation practice lies in the representation of foreign interests sued in U.S. courts. Foreign corporations are concerned about their ability to anticipate their U.S. litigation and regulatory enforcement risk, which necessarily requires clear legal parameters. The Alien Tort Statute (ATS) (1) presents unique challenges in this regard.

The U.S. Supreme Court in Sosa v. Alvarez-Machain left "the door ... ajar" for U.S. courts effectively to discover new actionable violations of the "law of nations" as a matter of federal common law, thus creating significant uncertainty about the scope of potential liability under the ATS. (2) A number of key issues under the ATS are not well-settled. Apart from the questions of corporate liability and extraterritorial jurisdiction currently before the Court in Kiobel v. Royal Dutch Petroleum Co., (3) these issues include whether secondary liability exists under the ATS and, if so, what degree of knowledge or intent would be required to support such claims; whether and to what extent state action must be shown for various causes of action; and whether plaintiffs should be required to exhaust local remedies.

If the Supreme Court in Kiobel provides greater clarity on the scope and application of the ATS, this certainly would be welcomed by corporations. But a ruling on extraterritoriality may not provide such clarity (especially for domestic corporations) and instead could defer indefinitely a decision on the critical question of corporate liability.

In any disposition of the question of extraterritorial application of the ATS, consideration of the Supreme Court's opinion in Morrison v. National Australia Bank Ltd. would appear inevitable. (4) In Morrison, Justice Scalia, speaking for the Court, made clear that "[w]hen a statute gives no clear indication of an extraterritorial application, it has none." (5) Absent an extraterritorial mandate, courts "must presume [a statute] is primarily concerned with domestic conditions." (6)

Given the apparent interest of various justices in the extraterritorial application of the ATS, it would appear that a majority of the Court, based on the presumption against extraterritoriality articulated in Morrison, may be skeptical that the ATS reaches claims with no U.S. connection and might support a holding that limits the overall reach of the ATS.

But in the context of Kiobel, it is very possible that what is afoot is a search for some narrower ground. The new question presented recently framed by the Court may signal that some Justices could attempt to limit Kiobel to its facts, which are wholly extraterritorial to the United States. Limiting the claims in this way could avoid the need to determine precisely what "domestic conditions" are the focus of the ATS and whether any alleged "domestic activity" involved in the case brings the claims within that focus. (7) In addition, resolution on this ground would likely preserve for another day the question of whether the ATS allows claims for violations of international law to be asserted against corporations generally, and would leave untouched recent Circuit Court decisions allowing international law claims to proceed against corporations in cases with fact patterns involving U.S. companies. (8)

Unless the Supreme Court in Kiobel articulates unambiguously what degree of "domestic activity" would be sufficient to render international law claims under the ATS actionable in U.S. courts, it could take years of litigation in the lower courts before such a standard emerges. Indeed, it is not inconceivable that certain ATS cases currently pending before the Court could be remanded to allow plaintiffs an opportunity to plead facts relevant to such domestic conditions. At bottom, it is possible that after Kiobel only a fraction of ATS suits would be clearly precluded, and litigation under the ATS could persist with continued uncertainty as to, among other things, the Statute's application to corporations. …