Pitfalls and Promises of the Alien Tort Statute: In Pursuit of Corporate Accountability

Since its adoption in 1789, the Alien Tort Statute (ATS) has evolved from a little-known jurisdictional provision to a linchpin of human rights litigation. The ATS gives U.S. district courts jurisdiction over “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.” [1] After its enactment, the ATS lay dormant until 1980, when the U.S. Court of Appeals for the Second Circuit revitalized the statute. In Filártiga v. Peña-Irala, the court held that the ATS applied to a wide range of international human rights abuses. [2] The following decades saw a consequent surge in ATS lawsuits against U.S. and multinational corporations. Starting in 2004, however, a series of three Supreme Court cases began to narrow the scope of the ATS in the interest of “avoiding diplomatic strife.” [3] 

Given the increasing magnitude of the U.S.-China relationship, it is worth examining the implications of these rulings, as well as the Court’s asserted interest in diplomacy, against the backdrop of the ongoing U.S.-China trade war. A closer look at this diplomatic breakdown suggests that whether the ATS retains its remaining strength or not, the federal government ought to be prudent in weakening legal means to enforce corporate accountability, especially when consequential bilateral relations are at stake.

Sosa v. Alvarez-Machain (2004), the first of the three Supreme Court rulings, held that not all international law violations are actionable under the ATS: only those that are as universal and specific as the 18th-century paradigms; cases involving foreign ambassadors, safe passage, and piracy. [4] But the Court’s failure to define universality allowed for the continued increase in ATS lawsuits, especially those filed against multinational corporations. [5] This reflected the general consensus at the time, expressed by the 11th Circuit Court of Appeals in Romero v. Drummond Company, that “[t]he text of the Alien Tort Statute provides no express exception for corporations.” [6]

This broad reading of the ATS was scrutinized in Kiobel v. Royal Dutch Petroleum (2013), when the Second Circuit Court of Appeals held that “[t]he concept of corporate liability for violations of customary international law has not achieved universal recognition or acceptance as a norm.” Sidestepping the issue of corporate liability, however, the Supreme Court resolved the case on the alternative ground that the claims did not “touch and concern the territory of the United States… with sufficient force to displace the presumption against extraterritorial application.” [7] 

In its most recent ATS case, Jesner v. Arab Bank, PLC (2018), the Supreme Court held that foreign corporations may not be sued in U.S. courts for complicity in foreign human rights abuses. With this ruling, the Court unequivocally shut the door on ATS lawsuits against foreign corporations, completing the trajectory that the Sosa Court had begun in 2004. Justice Alito’s concurring opinion in Jesner reiterated earlier concerns that a broad application of the ATS may very well lead to diplomatic strife, which is exactly what the ATS had been enacted to prevent. [8] In the context of increasingly strained U.S.-China relations, however, the validity of this rationale is put to the test.

It’s no secret that major Chinese tech companies actively engage in privacy violations and internet censorship at the behest of the Chinese government. [9] [10] In the past, the ATS has proven to be a useful instrument to enforce corporate accountability in this regard. In Xiaoning v. Yahoo! (2007), Yahoo! China was sued under the ATS for violating a Chinese dissident’s privacy by disclosing his identity to the Chinese government. [11] The company was ultimately compelled to reach a settlement and establish a fund “to provide humanitarian and legal aid to dissidents who have been imprisoned for expressing their views online.” [12] The facts of the case clearly met the Sosa standard, which requires the international law applied to be universal and specific. Both the right to privacy and freedom of expression are universally recognized rights enshrined in many international treaties, including the Universal Declaration of Human Rights, which China has ratified. [13]

The human rights violations of Chinese tech companies also satisfy Kiobel’s “touch and concern” requirement, overcoming its presumption against extraterritoriality on at least three fronts. Firstly, in today’s Internet age, the products of Chinese tech companies directly reach U.S. consumers. Secondly, Chinese high tech companies have aggressively tapped into U.S. capital market, where most of them are traded on American stock exchanges as American Depository Receipts. Thirdly, as the human rights violations of Chinese companies go unchecked, the Chinese government will continue to view law-abiding U.S. companies as troublemakers and ban them from competing in China’s lucrative market. Those that agree to the Chinese government’s terms do not fare so well either. In fact, the American Chamber of Commerce in China says that 4 out of 5 of its member companies report suffering business losses from Internet censorship. [14]

In this era of globalization, not actively holding foreign companies accountable for violating privacy rights and suppressing freedom of expression can very well harm American companies, workers, and consumers alike, sowing the seeds for eventual conflicts that could escalate into trade wars. When Chinese cloud companies cater to their government’s demands for free access to customer data, which includes intellectual property, the Chinese government is further incentivized to ban uncooperative U.S. cloud companies. It’s no coincidence that this issue has become a part of U.S.-China trade negotiations. [15]

While a closer look at the worsening state of U.S.-China relations challenges the Court’s argument that narrowing the ATS forestalls international conflict, there’s no denying that Supreme Court rulings, especially Jesner, have dealt a heavy blow to the reach of the ATS. Nonetheless, the potential to enforce corporate accountability under the still-murky statute remains. 

The main point of analysis in Justice Kennedy’s plurality opinion in Jesner is that “absent further action from Congress it would be inappropriate for the courts to extend ATS liability to foreign corporations.” [16] The key word here is foreign. While limiting the ATS cause of action to exclude suits against foreign corporations, Jesner remains silent on the statute’s application to U.S. corporations operating abroad. Moreover, while territorial jurisdiction can typically be captured by a binary of territoriality vs. extraterritoriality, the presumption defined by the Kiobel opinion does not neatly place the ATS into either category. This ambiguity leaves room for applying the ATS to both U.S. corporations and individual employees of foreign companies.            

While the Jesner Court avoided the blanket statement that corporations are not accountable to international norms of human rights law, the question will likely arise in a future case. Such a suit will have to (1) implicate the U.S. corporation, not just its foreign subsidiary, (2) meet the standard for “aiding and abetting” claims, and (3) satisfy Kiobel’s “touch and concern” test. [17] As debates over the best response to Jesner continue, only time will tell whether the Alien Tort Statute or a new legislative paradigm will be the vehicle for holding corporations accountable.

[1] Alien Tort Statute, 28 U.S.C. § 1350 (2000)

[2] Filartiga v. Pena-Irala, 630 F.2d 876 (2d Cir. 1980).

[3] Jesner v. Arab Bank, 138 S. Ct. 1386 (2018) 

[4] Sosa v. Alvarez-Machain, 542 U.S. 692, 718–19 (2004) 

[5] Mulligan, Stephen P. “The Alien Tort Statute (ATS): A Primer,” Congressional Research Service (1 June 2018), online at www.everycrsreport.com/reports/R44947.html (visited November 26, 2019).

[6] Romero v. Drummond Co., 552 F.3d 1303, 1315 (11th Cir. 2008)

[7] Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1659, 1663 (2013)

[8]  Jesner v. Arab Bank, 138 S. Ct. 1386 (2018)  

[9] Lin, Liza, and Josh Chin. “China's Tech Giants Have a Second Job: Helping Beijing Spy on Its People.” The Wall Street Journal, Dow Jones & Company, 30 Nov. 2017, online at www.wsj.com/articles/chinas-tech-giants-have-a-second-job-helping-the-government-see-everything-1512056284 (visited November 26, 2019).

[10] Economy, Elizabeth C. “The Great Firewall of China: Xi Jinping's Internet Shutdown.” The Guardian, Guardian News and Media, 29 June 2018, visited at www.theguardian.com/news/2018/jun/29/the-great-firewall-of-china-xi-jinpings-internet-shutdown (visited November 26, 2019).

[11] Wang Xiaoning v. Yahoo! Inc., No. C07- 02151 CW (N.D. Cal. July 30, 2007)

[12] Boles, Corey, and Scott Morrison. “Yahoo Settles Suit Over Jailed Chinese Dissidents.” The Wall Street Journal, Dow Jones & Company (14 Nov. 2007), online at www.wsj.com/articles/SB119497419315091540 (visited November 26, 2019).

[13] UN General Assembly. "Universal Declaration of Human Rights." 217 (III) A. Paris (1948), online at http://www.un.org/en/universal-declaration-human-rights/ (visited November 26, 2019).

[14] Denyer, Simon. “China's Scary Lesson to the World: Censoring the Internet Works.” The Washington Post, WP Company, 23 May 2016, online at www.washingtonpost.com/world/asia_pacific/chinas-scary-lesson-to-the-world-censoring-the-internet-works/2016/05/23/413afe78-fff3-11e5-8bb1-f124a43f84dc_story.html (visited November 26, 2019)

[15]  “U.S., China in Talks to Add Concession on Cloud Computing in Trade Deal.” Bloomberg.com, Bloomberg (10 Apr. 2019), online at www.bloomberg.com/news/articles/2019-04-10/u-s-china-said-to-further-talks-on-cloud-access-in-trade-deal (visited November 26, 2019).

[16] Jesner v. Arab Bank, 138 S. Ct. 1386, 3 (2018)  

[17] Dodge, William S. “Corporate Liability Under the US Alien Tort Statute: A Comment on Jesner v Arab Bank: Business and Human Rights Journal.” Cambridge Core, Cambridge University Press (19 Oct. 2018), online at www.cambridge.org/core/journals/business-and-human-rights-journal/article/corporate-liability-under-the-us-alien-tort-statute-a-comment-on-jesner-v-arab-bank/BBCA3593EE2E7C05A98E6C6294698B62/core-reader (visited November 26, 2019).