Business, human rights, and extraterritoriality in American law

Beyond Borders: Non-US plaintiffs continue to make inroads towards holding multinational corporations liable under US law for alleged human-rights violations occurring beyond US borders. How can that be?

The Alien Tort Claims Act (ATS) is an eighteenth-century statute that gives federal courts jurisdiction to hear tort claims by non-US plaintiffs for violations of international law committed outside the territorial boundaries of the US. This statute was originally intended to allow a federal cause of action against the predations of US-based privateers on the high seas. Today, it is increasingly being used in an effort to hold corporations doing business on a transnational basis liable for alleged human-rights abuses.

ATS Litigation in a Nutshell

The US Supreme Court supposedly put an end to ATS litigation with its decision two years ago in Kiobel v. Royal Dutch Petroleum Co. But to paraphrase American humorist Mark Twain, the reports of its death have been greatly exaggerated. As is often the case with opinions issued by America's judicial oracle, the Kiobel decision is written in cipher. Only this much is clear: (1) the ATS is presumed not to apply extraterritorially, and (2) the presumption against extraterritoriality precludes ATS liability when all the relevant conduct occurs outside the US and the defendant is a foreign corporation. To answer the many questions left open by this narrow ruing, the Kiobel court announced the so-called "touch and concern" test, cryptically noting that some ATS claims might "touch and concern the territory of the United States … with sufficient force to displace the presumption against extraterritorial application." The task of breaking this code has fallen to the laboratory of the lower federal courts.

Application of the "Touch and Concern" Test

In a previously sealed decision issued earlier this month and made public recently, a federal district court judge in the nation's capital has ventured his interpretation of the "touch and concern" test, refusing ExxonMobil's bid to dismiss ATS claims by a group of Indonesian claimants based on the presumption against extraterritoriality, and granting plaintiffs' motion to file an amended complaint. More specifically, the court held that plaintiffs had alleged enough scienter (and other things) on the part of ExxonMobil regarding atrocities committed by Indonesian military personnel the company employed in the Aceh Province during a period of civil unrest in that region, to state viable claims as a matter of law -- under both the ATS and state common law theories of liability. See Doe v. ExxonMobil Corp. (D.D.C. July 6, 2015). 

Of note, the court held:

• Corporate Liability. Corporations "may be held liable for causes of action arising under the ATS."
• State Action. Plaintiffs sufficiently alleged state action since their injuries were said to have been caused by Indonesian soldiers "provided for Exxon's use as security personnel by the Indonesian government via Pertamina, a state-owned oil and gas company."
• Extraterritoriality. The presumption against extraterritorial application of US law was rebutted because plaintiff had alleged "substantial and specific domestic conduct" by Exxon "relevant to a violation of the ATS" that "touch[ed] and concern[ed]" the US with "sufficient force" to displace the presumption. (Details below.)  Of note, however, and in line with Kiobel, the court held that "[a] defendant's United States citizenship is insufficient on its own to displace the presumption."
• Aiding and Abetting Liability. An "aider and abettor need not provide the actual tools used in carrying out a violation of customary international law if they facilitate directly the ultimate commission of the underlying offense" (actus reus), and a defendant may be "liable so long as they are 'aware that one of a number of crimes will probably be committed, and one of those crimes is committed'" (mens rea). Further, "'specific direction' is not an element of aiding and abetting liability."
  The court held that plaintiffs had sufficiently alleged the requisite elements of aiding and abetting liability -- and satisfied the "touch and concern" test -- based on claims of key decision-making in the US, including that Exxon "executives in the United States received briefings on abuses committed by Exxon security personnel in Aceh against the local population," that these "executives knew of past crimes by Exxon security personnel like those at issue in this suit," that they "received reports that Exxon security personnel were committing human rights violations on Exxon property, using Exxon equipment," and that Exxon executives in the United States not only "planned and authorized the deployment of military security personnel" but "ordered the provision of supplies and vehicles" used by the Indonesian security personnel to commit the underlying violations of international law.

This decision comes close on the heels of another by the federal court of appeals for the Ninth Circuit in San Francisco (covering many Western states), which controversially reversed, vacated, and remanded a lower court's dismissal of ATS claims against Nestle USA and other global buyers of cocoa, which was grounded on allegations that those companies aided and abetted human trafficking by purchasing chocolate from Ivorian plantations known to practice child slavery and providing those suppliers with financial and non-financial assistance.  The lower court was instructed on remand to allow plaintiffs an opportunity to amend their complaint in light of Kiobel. See Doe v. Nestle USA, Inc., No. 10-56739 (9th Cir. May 6, 2015).  We discuss this case here.

Business Implications

Plaintiffs' class-action bar in the US has been trying to pry the ATS door open for a number of years now, without much success. More recent decisions, however, suggest that these claims are gaining traction. One by one, several of the long-standing obstacles to ATS litigation against multinational corporations, such as doubts about corporate ATS liability, seem to be falling away. While liability is not yet a fait accompli, plaintiffs are knocking at the door. More immediately, the ExxonMobil decision will give plaintiffs access to more discovery, which is a worrying prospect from a defense perspective given what plaintiffs have apparently managed to unearth to date in support of their claims.

For further information, please contact David Wallace, Partner, Stéphane Brabant, Partner or your usual Herbert Smith Freehills contact.