The Alien Tort Statute was written into the Judiciary Act of 1789 but sat dormant for almost 200 years until the 2nd Circuit established in 1980 in Filartiga v. Pena-Irala the use of the ATS as a remedy for violations of international law, allowing civil claims from Paraguayan plaintiffs against a Paraguayan official to be heard in a U.S. court. Plaintiffs’ lawyers latched onto the statute and began filling class actions based on human rights violations in foreign countries. Since then, the number of ATS lawsuits has grown steadily. The history of the ATS took another turn in the 1990s, when lawyers thought to apply it to suits against multinational companies.

“After some favorable rulings in the 11th, 9th and 2nd Circuits, it’s become something of a cottage industry now,” says William Jeffress, a partner at Baker Botts. “It’s hard to find an energy company now that hasn’t been sued under the ATS, and other companies have been sued as well–food companies like Coca-Cola, Dole and Chiquita. It’s a major source of litigation at the moment.”

In the 2nd Circuit, however, that cottage industry is facing uncertainty following a landmark ruling by the appeals court in Kiobel v. Royal Dutch Petroleum, a case in which Nigerian plaintiffs claim the defendant oil companies cooperated in human rights violations by the Nigerian government. Compared to other recent ATS claims against corporations, the case isn’t novel, but the outcome is a departure for ATS cases. In a 2-1 panel decision, on Sept. 17 the court held that corporations can’t be sued under the ATS because the statute invokes the law of nations–and international law, the majority ruled, doesn’t provide for civil claims against corporations.

The court dismissed the claims for lack of subject matter jurisdiction, and in doing so threw into question the use of the ATS against corporations.

“It throws down the gauntlet for a potential new Supreme Court decision in this area,” says Kenneth Anderson, a law professor at American University’s Washington College of Law and a research fellow at Stanford University’s Hoover Institution on War, Revolution and Peace. “The last Supreme Court decision to address the ATS (Sosa v. Alvarez-Machain) was incredibly wishy-washy, using Delphic, vague language to say that lower courts had to be very careful about expanding the kinds of cases they might hear in this area without giving any hard and fast rules for doing that–naturally it had very little effect. The 2nd Circuit has come along on a seminal issue and taken a hard and fast line. It’s a blockbuster opinion, not in the sense that it’s necessarily setting the law–but at a minimum it sets it up for a big confrontation down the road.”

Imposing Limits

Many agree with the 2nd Circuit that the ATS’s scope should be limited.

“The State Department has never liked this statute and has opposed its use,” Jeffress says. “The State Department thinks this interferes with our foreign relations–when you sue over conduct abroad, you have to allege that the state was involved in violations of human rights under international law, and that’s a source of controversy.”

Others simply believe that cases involving foreign plaintiffs and foreign defendants should be handled by foreign courts–after all, the U.S. is the only civilized nation that opens its courts to torts that occurred entirely abroad.

In Sosa the Supreme Court took a step toward narrowing the ATS, holding that ATS claims should be limited to claims recognized as international law at the time the statute was drafted in 1789. Citing William Blackstone’s Commentaries on the Laws of England, the Sosa court outlined these as violation of safe conduct, infringement of the rights of ambassadors, and piracy. It also allowed for ATS claims in a handful of serious human rights violations, such as genocide, crimes against humanity and slavery.

“The court intended to put barriers around what could be brought as an ATS claim, but it backfired,” Anderson says. “Plaintiffs lawyers realized they had a potential new goldmine and adjusted … so they’ll take a fairly ordinary oil spill or labor dispute and jam it under the [heading of] crimes against humanity, genocide or slavery. They were pretty routine claims–even if they were serious and should be compensated–but the acts were getting redescribed.”

Where Sosa narrowed the potential class of claims under the ATS, the 2nd Circuit’s decision in Kiobel narrows the class of potential defendants to states, governments and individuals.

International Analysis

Corporations can face lawsuits in the U.S. because U.S. law recognizes corporate personhood. But the 2nd Circuit said in Kiobel that customary international law determines the scope of liability under the ATS. “Because customary international law consists of only those norms that are specific, universal and obligatory in the relations of States inter se, and because no corporation has ever been subject to any form of liability (whether civil or criminal) under the customary international law of human rights, we hold that corporate liability is not a discernable–much less universally recognized–norm of customary international law that we may apply pursuant to the ATS,” Judge Jose Cabranes wrote for the majority.

He cited the Nuremberg trials and other international criminal tribunals.

“In the Nuremberg trials, criminal charges were brought against individual Nazi leaders, and in some cases the leaders of corporations, but not the companies themselves–that’s typical over the course of international law,” says Jeffrey Sarles, a partner at Mayer Brown. “The 2nd Circuit also was in line with the Supreme Court’s view [in Sosa] that this statute should be narrowly applied, otherwise courts would be flooded with lawsuits from plaintiffs that should be brought in their own countries.”

Marco Simons, the legal director of EarthRights International, helped prepare an amici filing in Kiobel on behalf of plaintiffs in another ATS claim against a corporation, Wiwa v. Royal Dutch Petroleum, a companion to Kiobel. He sees some flaws in the 2nd Circuit’s mode of analysis.

“The court’s reliance on international criminal tribunals and international criminal prosecutions was deeply misguided,” Simons says. “Judge Cabranes essentially said no international tribunal has ever had jurisdiction over corporations. That’s true, but you could say the same thing about torture when the 2nd Circuit decided Filartiga–no one has ever been prosecuted by the international system for torture.”

In addition, he says, the analysis ignores the fact that corporations are created by states.

“If the international system were to allow a state to create a [corporate entity] that controls assets but is not subject to liability, there would be a tremendous hole in the enforcement of international human rights and any number of issues,” he says.

But Simons also points out that the ATS is not the exclusive, or even the primary, means of holding corporations accountable for transgressions around the world. Corporations are still liable under common law principles for torts and thus can be sued in U.S. courts. Often ATS claims are dismissed early on in proceedings, he says, while common law claims–which the Kiobel plaintiffs didn’t bring–are allowed to go forward.

Kiobel‘s Wake

If the 2nd Circuit’s panel decision is upheld, however, it will have dramatic impact on ATS claims.

“If this opinion were to be affirmed by the Supreme Court, it would fundamentally alter what is currently the face of ATS litigation today,” says Russell Jackson, a partner at Skadden, Arps, Slate, Meagher & Flom. “Some cases are brought against individuals, but the trend has been toward suits against corporations for human rights violations, which often are tort issues, environmental issues or even issues of political upheaval in foreign locales. Under Kiobel you could not sue a corporation for alleged human rights violations, period.”

The 2nd Circuit’s opinion still leaves open the ability of plaintiffs to sue individual company officers and executives under the ATS, but the potential damages in such cases come nowhere near the huge verdicts that courts can dole out against giant multinational corporations.

It’s likely that if Kiobel stands in the 2nd Circuit, ATS plaintiffs will take their claims to another circuit that still allows ATS claims against corporations.

“One of the weird parts of this is that because these plaintiffs and defendants are free-floating outside the U.S., you can file where you want to,” Anderson says. “If the 2nd Circuit makes life hard you can go to the 11th Circuit for a more favorable rule. That in itself creates reasons why the Supreme Court will be forced to take some kind of case like this.”