Supreme Court Ruling Limits Extraterritorial Application Of Alien Tort Statute

by Bilzin Sumberg Baena Price & Axelrod LLP
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U.S. companies with, or that were seeking to acquire, foreign operations often fretted over the possibility that plaintiffs in the foreign jurisdiction would seek to invoke the Alien Tort Statute ("ATS"), 28 U.S.C. § 1350, and commence actions in the U.S. in an attempt to seek redress for egregious conduct (violations of the "laws of nations") committed by the foreign subsidiary or affiliated companies.

Recently, ATS cases have involved foreign plaintiffs seeking redress for atrocities purportedly committed by state actors on behalf of the foreign corporations and for the damages and costs associated with cleaning up environmental pollution that purportedly was caused by the foreign corporations.

WHAT THIS DECISION COULD MEAN FOR YOU

As discussed below, the U.S. Supreme Court decided that the ATS cannot be invoked as a basis for federal jurisdiction where the "relevant conduct" occurred within the territory of a sovereign other than the U.S. This substantial narrowing of the scope of the ATS likely will cause putative ATS plaintiffs to think twice about bringing their claims, since they likely will have to make a strong showing that the "relevant conduct" that led to the injury occurred in the U.S. Since the majority of ATS cases have involved acts that occurred in foreign countries, corporate clients likely will have to worry less about the possibility of ATS litigation relating to their foreign operations.

WHAT YOU NEED TO KNOW

By its April 17, 2013 decision in Kiobel v. Royal Dutch Petroleum, 569 U.S. __ (2013), the U.S. Supreme Court significantly curtailed foreign plaintiffs' access to U.S. federal courts to seek redress for injuries that occurred overseas. In particular, Chief Justice Roberts, writing for the majority, held the presumption against extraterritoriality to apply to the ATS and essentially found that, to successfully invoke the ATS, the "relevant conduct" must have taken place in the U.S. Mere presence - of a multinational corporate with operations in both a foreign country and the United States, for example - does not suffice.

It seems, though, based on Kiobel and existing Supreme Court precedent, that the proverbial door has nonetheless not been totally slammed shut, in the event that future plaintiffs can allege that at least some relevant, actionable facts and circumstances (i.e., plus factors beyond presence, such as the planning, financing, or support for the tort) occurred in or somehow materially affected the United States.

Impact on Corporations & Individuals Doing Business Overseas

The Kiobel opinion is likely to have a substantial impact on corporations and individuals doing business overseas, as well as those looking to do so. Most immediately, companies and individuals operating abroad will be protected from tort claims in U.S. federal court, forcing injured plaintiffs to bring their claims elsewhere. Foreign jurisprudence, especially in civil-law countries, is generally far less favorable and substantially less generous to plaintiffs than U.S. tort law, which might act as a deterrent to the institution of claims in the first place.

Impact on Transactional World and Beyond

This shift will also have ripple effects in the transactional world, as potential purchasers of multinational companies - especially those with operations in hot-button areas - may have fewer potential or threatened claims against the target company to worry about. Finally, Kiobel shows that the Supreme Court isn't gun shy about exercising limits on the extraterritorial application of U.S. laws, which might one day have implications for other breeds of would-be actionable conduct, such as FCPA or money laundering, occurring abroad.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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