The Conundrum of Corporate Liability Under the Alien Tort Statute

• Publication year: 2011
• Citation: Vol. 40 No. 1

The Conundrum of Corporate Liability Under the Alien Tort Statute

Joel Slawotsky^*

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Table of Contents

I. Introduction...............................................................................177

II. A Brief Overview of Alien Tort Litigation..........................181

A. The Kiobel Decision: Corporations Cannot Have Liability....................................................................................184

1. Majority Opinion...............................................................184
2. Judge Leval's Concurrence...............................................187
3. Post-Ruling Procedural Developments in Kiobel..............189
4. The View from the D.C. and Seventh Circuits: Kiobel Is Wrong.............................................................................190

III. Do Corporations Have Liability Under the ATS?...............194

A. The Absence of Proof That the Drafters Intended to Exclude Corporations............................................................................194
B. Do Courts Need to Examine the Question of Whether Corporations May Have Liability Under International Law?.........................................................................................196

1. Sosa Does Not Require Courts to Examine International Law to Determine Whether a Corporation Can Be a Defendant...........................................................................196
2. Under International Law, States Implement and Enforce Standards of International Law According to Their Own Domestic Legal Systems.....................................................198

C. Do Corporations Have Obligations Under International Law?.........................................................................................200

1. Criminal Liability..............................................................201
2. Civil Liability.....................................................................207

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D. The Sharp Line of Demarcation Between States and Corporations No Longer Exists: The Corporation as a Quasi-Public Actor...................................................................210

1. Corporations Acting in the Public Sphere.........................213
2. States Acting in the Private Sphere....................................215

IV. Conclusion...................................................................................218

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I. Introduction

The Alien Tort Statute (ATS),¹ invoked by human rights advocates as a dynamic means of enforcing customary international law (international law),² permits aliens (non-U.S. citizens) to file civil claims in U.S. courts for violations of international law.³ Not all violations of international law are cognizable under the ATS; only misconduct that exhibits a particularly identifiable and strong transnational dimension (e.g., impacting the mutual interests of nations) and that is sufficiently egregious is actionable pursuant to the ATS.⁴ The type of misconduct alleged usually involves human rights abuses.⁵ As a type of litigation that touches a spectrum of issues, including corporate governance, international law, and complex human rights issues, ATS litigation has engendered intense analysis and spirited scholarship.⁶

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For more than two decades, U.S. courts have held that, in addition to individuals,⁷ private corporations owe duties under customary international law and have liability under the statute.⁸ In recent years, corporations have become prime defendants and the focus of ATS litigation.⁹ Clearly, presuming that they may face potential liability under the ATS, corporations have both settled and proceeded to trial, rather than moving to dismiss.¹⁰ Both Yahoo!¹¹ and Shell Oil¹² settled ATS suits filed against them, while Chevron¹³ and Drummond Corporation¹⁴ proceeded to trial and obtained defense verdicts.

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Overturning its precedent,¹⁵ the Second Circuit in Kiobel v. Royal Dutch Petroleum Co.—a virtual earthquake of an opinion—held that corporations do not have obligations under international law and, thus, cannot have liability under the ATS.¹⁶ In Kiobel, the majority held that pursuant to Supreme Court ordered guidance in the Sosa opinion,¹⁷ federal courts are to examine international law to decide the question of whether that " 'law extends the scope of liability for a violation of a given norm to the perpetrator being sued.' "¹⁸ The Kiobel court, relying upon that footnote, examining international law, and citing to international criminal tribunals,¹⁹ treaties,²⁰ and scholarship,²¹ found such law did not encompass corporate liability.²² The court held "[f]rom the beginning . . . the principle of individual liability for violations of international law has been limited to natural persons—not 'juridical' persons such as corporations."²³ According to the Second Circuit, it is now up to Congress to decide whether the statute can impose corporate liability, but "[f]or now, and for the foreseeable future, the [ATS] does not provide subject matter jurisdiction over claims against corporations."²⁴ Lower courts in the Second Circuit have dismissed cases based upon the Kiobel decision.²⁵

Taken to its logical conclusion, Kiobel holds that corporations can conduct business any way they deem proper without concern of liability under the statute. As noted by Tyler Giannini and Susan Farbstein, "the decision create[d] unprecedented opportunities for corporate actors to shield

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themselves from liability for clear abuses of international law through incorporation."²⁶

Kiobel's ruling has academic support. For example, Julian Ku supports the Kiobel ruling and argues against corporate liability under the ATS.²⁷ Ku argues that international law is applicable only to states. He believes that although individuals "may" have liability under certain limited circumstances, corporations cannot.²⁸ "Non-state parties, such as private individuals, organizations, or corporations, owe duties under only domestic laws and cannot violate international law directly."²⁹

Notwithstanding this scholarly support, there are compelling reasons to conclude that corporations should have liability under the ATS. There is nothing to indicate that corporations were excluded by the statute and the available evidence indicates that, to the contrary, corporations were always envisioned as part of the class of potential ATS defendants.³⁰ In addition, the zealous reliance by Kiobel on the Sosa footnote is misplaced. The footnote does not stand for the proposition that federal courts should examine international law to find whether a class of defendants, such as corporations, can be sued under the statute. Rather, the Supreme Court merely articulated that international law should be examined to determine whether the type of misconduct at issue can be allocated to various actors such as public or private entities.³¹ Moreover, international law does not mandate the manner of its enforcement; such mechanisms are reserved for the individual states to implement.

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Regarding international law and corporate liability, the Kiobel court's reliance on international criminal rulings to prove corporations are not liable under international law is misplaced because criminal law is fundamentally different from civil tort law and the ATS is a civil liability statute. Moreover, corporations are subject to civil law and, increasingly, criminal law. International law unquestionably protects corporate rights, and, therefore, corporations should be subject to obligations. Finally, the distinction between "states" and "corporations" cited by liability opponents is outdated and does not comport with our globalized world. The distinction is blurred as the roles of states and corporations are interchangeable.

This Article is divided as follows: Part II provides an overview of the ATS including a review of the recent major appellate decisions on corporate liability. In Part III, the Article addresses the question of whether corporations should be liable under the ATS. The Article points out that several persuasive reasons militate in favor of finding corporate liability. These reasons include the following: the fact that nothing in the ATS suggests that corporations should be excluded; the absence of proof that courts need to consult international law on the issue; the fact that corporations do have obligations under international law; and the erosion of the formalistic distinction between "state" actors and "private" actors. Part IV provides a brief conclusion.

II. A Brief Overview of Alien Tort Litigation

The ATS provides: "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."³² The statute allows non-U.S. citizens to sue defendants in federal court for tortious conduct constituting a violation of international law or a treaty. For nearly two hundred years, relatively few cases were filed pursuant to the ATS.³³ This relative dormancy ended when, in Filartiga v. Pena-Irala, the Second Circuit issued a landmark ruling whereby the statute was relied upon to find that state-sponsored torture was actionable.³⁴ The issue in Filartiga was whether torture constituted a " 'violation of the law of nations' '' and was, thus, cognizable under the ATS.³⁵ For the case to be actionable, plaintiffs needed to establish that there was an international consensus with respect to torture

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being a violation of international law.³⁶ According to the Second Circuit, "It is only where the nations of the world have demonstrated that the wrong is of mutual, and not merely several, concern, by means of express international accords, that a wrong generally recognized becomes an international law violation within the meaning of the [ATS]."³⁷

Filartiga held that, in determining whether specific conduct constitutes a violation of international...