Company Exposure to Human-Rights Suits Gets U.S. High Court Look

(Bloomberg) -- The U.S. Supreme Court agreed to use a case stemming from Middle Eastern terrorism to decide whether victims of overseas atrocities can use a two-century-old federal law to sue corporations for complicity.

The case is the latest Supreme Court test of the 1789 Alien Tort Statute, a measure that in recent decades has become a favorite tool of human-rights activists. The court scaled back the law in 2013, saying it generally doesn't apply to conduct beyond U.S. borders.

The new case involves alleged wrongdoing in New York. Victims of attacks in Israel and the Palestinian territories over a 10-year period say Arab Bank Plc's New York branch distributed millions of dollars to terrorists and their families.

Multinational companies have faced dozens of suits accusing them of playing a role in human rights violations, environmental wrongdoing and labor abuses. Exxon Mobil Corp., Coca-Cola Co., Pfizer Inc., Unocal Corp., Chevron Corp., Daimler AG and Ford Motor Co. have all been sued under the Alien Tort Statute.

The issue of corporate liability under the law has been simmering for years. The Supreme Court tried to resolve it earlier this decade when it took up a case involving alleged involvement by units of oil major Royal Dutch Shell Plc in torture and execution in Nigeria.

That case instead produced the 2013 decision that said the alleged wrongdoing had to have a significant connection to U.S. territory.

Corporate Liability

Most federal appeals courts to consider the issue have said the law allows suits against corporations, as well as individuals. The exception is the New York-based appeals court that threw out the Arab Bank case.

The victims argued in their appeal that the appeals court's “categorical rule against corporate liability impedes the ATS from providing relief for horrific actions in and affecting the United States, including the terrorist-related activities at issue here.”

Jordan-based Arab Bank urged the Supreme Court not to hear the appeal, saying the corporate-liability issue has far less practical importance after the 2013 ruling.

“Many ATS claims against corporations can now be, and have been, dismissed on extraterritoriality grounds regardless of whether the ATS reaches corporations,” the bank argued.

The law, enacted in part because of an attack on a French diplomat in Philadelphia, contains only 33 words. It reads: “The district courts shall have original jurisdiction of 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.”

Arab Bank contends that language doesn't cover corporations because there's no consensus around the world that they can be found liable under international law. The victims point to the general principle in U.S. law that corporations can be held liable for wrongdoing.

The court will hear arguments and rule during the nine-month term that starts in October.

The case is Jenner v. Arab Bank, 16-499.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net.

To contact the editors responsible for this story: Kevin Whitelaw at kwhitelaw@bloomberg.net, Laurie Asseo, Ros Krasny