Supreme Court limits suits against foreign corporations in the US

The Supreme Court, in a 5-4 decision, ruled Tuesday that foreign corporations cannot be sued in US court under the Alien Tort Statute for violations of international law.

The ruling is a loss for some 6,000 foreign citizens who were victims of terrorist attacks and sought to sue the New York branch of the Arab Bank, the largest bank in Jordan.

The case had pitted human rights groups and victims of terrorism against multinational corporations that had argued they should not be sued in US courts, especially because the allegations lack the necessary nexus to the US.

Lawyers for the victims alleged the bank “knowingly and willingly” used its New York branch to transfer millions of US dollars that were used to finance terrorist attacks, which occurred between 1995 and 2005 in Israel, the West Bank and Gaza. The victims did not claim the bank was involved in the planning of the attacks, only the processing of financial transactions.

“Today’s decision is a big blow for accountability for human rights violations in US courts,” Steve Vladeck, CNN Supreme Court analyst and professor of law at the University of Texas School of Law. “Although the Supreme Court had opened the door to such suits in its 2004 ruling, in the Sosa (v. Alvarez-Machain) case, today’s decision limits those suits to cases in which the defendant is an individual or a US corporation. Needless to say, those suits are fewer and further between.”

Justice Anthony Kennedy wrote for the majority, while Justice Sonia Sotomayor wrote the dissenting opinion.

“Foreign corporate defendants create unique problems. And courts are not well suited to make the required policy judgments that are implicated by corporate liability in cases like this one,” Kennedy wrote, later adding that that issue should be addressed by Congress and the Executive Branch.

Sotomayor said the ruling “absolves corporations from responsibility under the (Alien Tort Statute) for conscience-shocking behavior.”

At the center of the case is the scope of the Alien Tort Statute, a 1789 law passed during the First Congress to address certain violations, including piracy and the infringements on the rights of ambassadors.

The law says that “the 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.”

It lay mostly dormant for years until human rights groups turned to it in the 1980s.

The victims sought to invoke the law and hold the Arab Bank accountable for providing “a range of financial services to terrorists and terrorist front groups posing as charities” and for allegedly funneling dollars through the New York branch to compensate the terrorists’ family for the attacks.

“While some of these clients had not yet been placed on terrorist watch lists when they opened their accounts, the Bank has admitted that it processed 282 fund transfers — a total amount of $2,563,275 — for individuals that (the) United States had designated at the time of the transfers as terrorist(s),” Jeffrey Fisher, a lawyer for the victims, wrote in court papers.

“When corporate activity violates the law of nations, imposing liability directly upon the corporation serves those objectives,” Fisher said.

Lawyers for the bank argued that the plaintiffs in the case had “no direct connection” to the United States.

“The defendant is a foreign bank, a cornerstone of the Jordanian economy that the United States government has labeled a constructive partner in fighting terrorist financing,” Paul Clement, a lawyer for the bank, argued in briefs.

Clement argued that instead of suing in courts in Israel, the victims sued “only a single foreign corporation, seeking to recover 100% of their injuries plus punitive damages from respondents alone.”