Supreme Court Limits Suits Against Foreign Corporations In U.S.

by Ike Obudulu Posted on April 24th, 2018

Washington, D.C., USA: The Supreme Court ruled Tuesday, that foreign corporations, even ones with branches in the U.S., cannot be held liable for damages stemming from claims they participated in some way in or facilitated terrorist attacks and other human rights violations abroad.

The court’s 5-4 decision affirmed a lower court ruling that dismissed a lawsuit that 6,000 victims of a terrorist attack tried to bring against Arab Bank, PLC – a Jordanian financial institution with a branch in New York – under the Alien Tort Statute (ATS) for allegedly financing terrorist attacks in the Middle East.

The ruling is a loss for some 6,000 foreign citizens who were victims of terrorist attacks and sought to sue the New York branch of the Arab Bank, the largest bank in Jordan.

In Jesner v. Arab Bank, Arab Bank, PLC is accused of allowing terrorists to maintain bank accounts and helping finance terror attacks.

The victims claimed the Jordanian bank used its New York branch to clear dollar-denominated transactions that benefitted terrorists through the Clearing House Interbank Payments System and to launder money for a Texas-based charity allegedly affiliated with Hamas, a Palestinian militant Islamist group.

In delivering the court’s opinion, Justice Anthony Kennedy on Tuesday called the connection between the terrorist attacks at issue in this case and the alleged conduct in the U.S. relatively minor and said that most of the petitioner’s allegations involve conduct that occurred in the Middle East.

“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,” Kennedy wrote.

“But here, and in similar cases, the opposite is occurring.”

Chief Justice John Roberts and Justices Clarence Thomas, Samuel Alito and Neil Gorsuch joined Kennedy in the majority.

Justice Sonia Sotomayor dissented from the court’s ruling along with Justices Ruth Bader Ginsburg, Stephen Breyer and Elena Kagan.

Justice Sonia Sotomayor said the court’s ruling absolves corporations from responsibility under the ATS for “conscience-shocking behavior.”

This decision in JESNER ET AL. v. ARAB BANK, PLC will effectively put an end to human-rights lawsuits against overseas corporations that have ties to the U.S.

The decision also clears up a question not addressed in the Supreme Court’s 2013 decision, Kiobel v. Royal Dutch Petroleum. That prior decision adopted a presumption that the Alien Tort Statute doesn’t reach human rights violations committed in other countries.

After the Supreme Court said in 2013 that the Alien Tort Statute does not apply to conduct beyond U.S. borders, lower courts dismissed 70 percent of the 40 pending cases.

Author

Ike Obudulu

Ike Obudulu

Versatile Certified Fraud Examiner, Chartered Accountant, Certified Internal Auditor with an MBA in Finance And Investments who has both worked for and consulted with some of the world's largest companies on main street and wall street in over 20 countries, Ike brings his extensive reporting and investigations experience to bear on his role as Chief Editor.
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