Courts are wary to extend or create private causes of action even in the realm of domestic law, where a decision to create a private right of action is one better left to legislative judgment in the great majority of cases. That is because the Legislature is in the better position to consider if the public interest would be served by imposing a new substantive legal liability. Thus, if there are sound reasons to think Congress might doubt the efficacy or necessity of a damages remedy, courts must refrain from creating the remedy in order to respect the role of Congress. This caution extends to the question whether the courts should exercise the judicial authority to mandate a rule that imposes liability upon artificial entities like corporations.
Petitioners filed suits under the Alien Tort Statute (ATS), alleging that they, or the persons on whose behalf they assert claims, were injured or killed by terrorist acts committed abroad, and that those acts were in part caused or facilitated by respondent Arab Bank, PLC, a Jordanian financial institution with a branch in New York. They sought to impose liability on the bank for the conduct of its human agents, including high-ranking bank officials. They claimed that the bank used its New York branch to clear dollar-denominated transactions that benefited terrorists through the Clearing House Interbank Payments System (CHIPS) and to launder money for a Texas-based charity allegedly affiliated with Hamas. While the litigation was pending, the U.S. Supreme Court held, in Kiobel v. Royal Dutch Petroleum Co., 569 U. S. 108, that the ATS does not extend to suits against foreign corporations when “all the relevant conduct took place outside the United States,” but it left unresolved the Second Circuit's broader holding in its Kiobel decision: that foreign corporations may not be sued under the ATS. Deeming that broader holding binding precedent, the District Court dismissed petitioners' ATS claims. On appeal, the Second Circuit affirmed.
Can foreign corporations be sued under the Alien Tort Statute?
The Court held that foreign corporations may not be defendants in suits brought under the Alien Tort Statute (ATS), thus, affirming the lower courts’ judgment. According to the Court, the courts are not well suited to make the required policy judgments implicated by foreign corporate liability. Like the presumption against extraterritoriality, judicial caution under Sosa guards against the courts triggering serious foreign policy consequences, and instead defers such decisions, quite appropriately, to the political branches. The Court ruled that because foreign-policy concerns were involved, absent further action from Congress, it was inappropriate for courts to extend ATS liability to foreign corporations.