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Corporate Liability for Overseas Torts -- Finally?

By William Vogeler, Esq. on October 16, 2017 | Last updated on March 21, 2019

It 'beggars all belief,' attorney Paul Clement told the U.S. Supreme Court.

The lawyer dragged out the medieval phrase to rail against a centuries-old law, the Alien Tort Statute. It was enacted in 1789, and Clement said it was unbelievable that his corporate client was being sued for torts abroad under the statute.

Corporations may have to become believers, however. Even though the Supreme Court has scaled back corporate liability recently, the justices listened carefully to arguments in Jesner v. Arab Bank.

Terrorist Activity

The case came up from the U.S. Second Circuit Court of Appeals. It involves five lawsuits against Arab Bank by about 6,000 petitioners -- largely survivors of terrorism abroad or relatives of those who died in attacks.

The Second Circuit rejected their lawsuits based on Kiobel v. Royal Dutch Petroleum Co., which said corporations were not liable unless claims "sufficiently touch and concern" the United States with "sufficient force to displace the presumption against extraterritorial application."

In Jesner, the plaintiffs claim the bank knowingly used its New York branch to serve as a "paymaster" for international terrorists. The bank paid hundreds of millions of dollars "to finance suicide bombings and to make so-called 'martyrdom' payments -- payments rewarding families of the perpetrators for killing innocent civilians," the petition says.

Clement, in response, said the litigation has done little more than cause a "decade of diplomatic friction."

Extraterroriality Question

During arguments, the National Law Journal reported, the justices seemed wary of imposing corporate liability. "I'm concerned about the foreign entanglement issue," Chief Justice John Roberts Jr. said.

Katherine Gallagher, senior attorney at the Center for Constitutional Rights, said the outcome was not "crystal clear." However, she said the High Court will confront the issue directly.

"We are unlikely to end up in a situation where the court does not address corporate liability head-on," she said.

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