U.S. Supreme Court building. (Photo: Diego M. Radzinschi/ALM)

Handing a win to business interests, the U.S. Supreme Court on Tuesday ruled that foreign corporations cannot be held liable in U.S. courts for overseas wrongdoing under the Alien Tort Statute.

The splintered 91-page decision in Jesner v. Arab Bank narrows the reach of the Alien Tort Statute and finishes a task the court left incomplete in its 2013 ruling in Kiobel v. Royal Dutch Petroleum.

By a 5-4 vote with five justices writing separate opinions, the court found that foreign corporations may not be defendants in suits under the ATS statute.

“The ATS was intended to promote harmony in international relations by ensuring foreign plaintiffs a remedy for international-law violations in circumstances where the absence of such a remedy might provoke foreign nations to hold the United States accountable,” Justice Anthony Kennedy wrote for the majority. “But here, and in similar cases, the opposite is occurring.”

Writing separately, Justice Neil Gorsuch said, “We should refuse invitations to create new forms of legal liability. And we should not meddle in disputes between foreign citizens over international norms … Whatever powers courts may possess in ATS suits, they are powers judges should be doubly careful not to abuse.”

Justice Sonia Sotomayor. (Photo: Jason Doiy/ALM)

Justice Sonia Sotomayor, joined by Justices Ruth Bader Ginsburg, Stephen Breyer and Elena Kagan, wrote a dissent asserting that the majority decision “absolves corporations from responsibility under the ATS for conscience-shocking behavior. I disagree both with the court's conclusion and its analytic approach … Nothing about the corporate form in itself raises foreign-policy concerns that require the court, as a matter of common-law discretion, to immunize all foreign corporations from liability under the ATS, regardless of the specific law-of-nations violations alleged. I respectfully dissent.”

Sotomayor wrote:

“In categorically barring all suits against foreign corporations under the ATS, the court ensures that foreign corporations—entities capable of wrongdoing under our domestic law—remain immune from liability for human rights abuses, however egregious they may be.”

The case originated with five lawsuits filed between 2004 and 2010 against the Jordan-based bank, claiming that the institution “provided a range of financial services to terrorists and terrorist front groups posing as charities.” The roughly 6,000 plaintiffs were non-United States citizens injured in Israel by the Palestinian uprising known as the Second Intifada.

The plaintiffs claim that the bank's activities, some of which passed through its New York branch, violated the Alien Tort Statute, enacted in 1789. The law gave federal 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.”

The statute was rarely invoked for two centuries, but human rights groups began using it as a way to redress claims of abuse overseas.

A brief filed by the U.S. Chamber of Commerce and other business groups asserted that more than 150 lawsuits have been filed against corporations under the act in the last 20 years. “These lawsuits have maligned business activities in more than 60 countries as alleged human-rights abuses actionable in U.S. courts.”

Stanford Law School professor Jeffrey Fisher, who represented the plaintiffs, wrote in his brief that the statute was enacted to “ensure federal courts were able to impose liability upon enemies of all mankind.”

Kirkland & Ellis partner Paul Clement, arguing for the bank, countered that “the notion that a 1789 jurisdictional statute authorizes this extraordinary effort to recover from a foreign bank for foreign injuries … beggars all belief.”

Arab Bank said in a statement on the Supreme Court's ruling: “Arab Bank is pleased with the court's decision, which ends this litigation and affirms the bank's belief that there is no basis to hold corporations liable under international law. The bank looks forward to focusing its full attention on its business, its commitment to safe and sound banking and its dedication to the service of its customers across the globe.”

In the 2013 case Kiobel v. Royal Dutch Petroleum Co., the Supreme Court avoided the issue of corporate liability, instead ruling that the law did not cover conduct that took place outside the United States.

The Kiobel case arose from the U.S. Court of Appeals for the Second Circuit, which had ruled against corporate liability. When the Jesner case came through the Second Circuit, the court invoked its own Kiobel ruling in ruling against the plaintiffs, setting the stage for the high court review.