CORPORATE RESPONSIBILITY UNDER THE ALIEN TORT STATUTE BY: ALI BUGRA GOKAGACLI

1. INTRODUCTION

The Alien Tort Statute (ATS in short) refers to the law that grands the US courts universal jurisdiction over matters related to the international law.[1] The law reads as: “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.”

There are many speculations about why the US legislator felt the need to enact such a legislation. The most prominent view is that, the ATS was enacted in 1789, thirteen years after the establishment of the US itself; seen as a rebellious republic, the US felt the need of getting universal acknowledment, thus tried to promote itself as a law-abiding member of the international community and so provided a legal infrastructure on which aliens, who suffered from international law violations, can seek redemption. Naturally, the cases that were in the minds of the original law-makers related to the piracy or violations concerning the diplomatic relations as the international law in the 18^th century was still in its infancy and limited to those issues.[2] When the modern international community, along with the modern international law, came into the existence in the middle of the 20^th century, however, the scope of the ATS has radically expanded as to enclose matters such as human rights violations, state-sponsored sexual harassment, environmental torts, and corporate responsibilities etc. Unfortunately, it is impossible to cover all these matters in such a brief paper. Therefore, in this paper, the main focus is going to be given to conditions of corporate responsibility arising from the ATS by putting special emphasis on specific circumstances such as how to establish ATS jurisdiction over companies and how does the ATS jurisdiction correlates with the notion of separate legal personality. The reason why the writer choses to examine these issues, is because he believes that when addressed, these issues can be used to promote American commerce and business greatly.

1. ESTABLISHING JURISDICTION / ACCOUNTABILITY STANDARDS

Reasonably, to litigate under the ATS one first requires to establish jurisdiction. Nonetheless, in practice, it may prove to be an arduous task to establish ATS jurisdiction for a litigator. This flows from two facts one of them being the relative lack of legislative records and the other is the rare utilization of the ATS over two centuries.[3] As a result, there are multiple opinions on how to establish jurisdiction under the ATC and coming up with an accountability standard. For that reason, taking into account the briefness of the paper, the author will solely focus on the one which he deems to have more practical value.[4]

The great majority of the courts have adopted a standard named “Definable, Universal, and Obligatory Standard”.[5] This standard was first introduced in the case of Filartiga v. Pena-Irala. In this case the Court of Appeals for the Second Circuit held that:

“It is only where the nations of the world has demonstrated that the wrong is mutual, and not merely of several concern, by means of express international accords, that a wrong is generally recognized becomes an international law violation within the meaning of the statute.”

This position of the Court later adopted by two prominent American scholars called Jeffrey M Blum, Ralph G. Steinhardt. In an article published in the Harvard International Law Journal, they introduced a three step test for establishing jurisdiction under the ATS. They suggested that to establish jurisdiction under the ATC the conduct needs to be 1) definable and identifiable conduct in as a tort committed by individuals, 2) core norms must be textually obligatory, 3) universal so that derogations are not defended as “exercise of legitimate political diversity.”[6]  

This test (contrary to the common law tradition) later acknowledged by the Courts as well in cases such as Tel-Oren v. Libyan Arab Republic and Forti v. Suarez – Mason. 

Obviously, the wordings of the ATS also requires a meticulous interpretation for the purpose of founding ATS jurisdiction. First of all, the Statute provides jurisdiction for torts that are at the same time in breach of the international law. What sorts of law amount to be in breach of international law is left to the discretion of the Courts which are most probably to apply the Definable, Universal, and Obligatory Standard to find that out. Secondly, the plaintiff, needs to be an alien. The legislative work on the ATS demonstrates that the word “alien” means “foreigner”[7] i.e. any person that does not bear American Nationality or to have not duly incorporated under the US law. Thirdly, the act needs be a “tort”. In comparative law, some jurisdictions do not provide for a distinct separation of torts and breach of contract. However the American approach does possesses a strict distinction between these two different sources of obligation. Thus, if a contractual relation exist between the plaintiff and the defendant the tenancy of the court out not to establish jurisdiction under the ATS.[8]

1. THE PERSONAL JURISDICTION (RATIONE PERSONAE)

In most instances, where the ATS, will be employed by a litigator, the primary motive is to get easier access to the defendant’s assets found in the US. Sometimes this may be due the fact that a foreigner would store or deposit its assets in the US simply because s/he thinks that doing so would be economically and legally reasonable. Most of the times, however, the reason for such scenario will be that the committer of the tortious act would be a dummy-subsidiary of an American mother corporation. In such instances, establishing ATS jurisdiction becomes vital for the plaintiff in order to be paid in damages.

The leading precedent on the liability for the acts of a subsidiary with regards to ATS is Bowoto v Chevron[9]. To understand the Bowoto case, however, we first need to get an inside on the basics of corporation protection and the limited liability of the shareholders under the American law. The Supreme Court’s holding in United States v. Bestfoods underpins the notion of limited liability. In Bestfood, the Supreme Court expressly held that:

“[i]t is a general principle of corporate law deeply ingrained in our legal system that a corporation is not liable for the acts of its subsidiaries.”

Therefore, in principle, it is impossible to hold a mother company liable for the acts of its subsidiary. Regardless, in Bowoto case the plaintiff found a way to circumvent the limitation caused by the principle of limited liability via asserting a simple yet ingenious argument. The plaintiff propounded that the subsidiary was an agent of the defendant mother company and that the actions of the subsidiary had a binding effect on the mother company[10]. The ruling judge (Judge Illston) determined whether such relation exist by assessing the facts on five criteria.[11]

First, the judge assessed whether there was an “extraordinarily close relationship” between the defendant and its subsidiary by examining the content and degree of communication between the subsidiary and the defendant. Then the judge moved on to determine if the monitoring exercised by the defendant on the subsidiary’s daily was close. Third, the judge, being mindful of the separate legal entity doctrine, pointed out that the management of the subsidiary and the defendant was parallel. Fourth, Judge Illston looked into the importance of the subsidiary’s business over the business of the defendant. Fifth, the evidences, in whole, were assessed by the judge to decide whether they add weight to the agency argument.[12]

Although Judge Illston granted the plaintiffs motion to proceed, there is still no evident case law on how to establish personal jurisdiction over mother companies for the acts of their subsidiaries. However, it is fair to claim that most American Courts are pretty reluctant when it comes to piercing the corporate veil and tent to be quite fastidious in terms of treating the mother companies as the principles of their subsidiaries. Nonetheless, it is also fair to argue that corporate shielding is not an ultimate obstacle in terms of relying on the ATS.

1. CONCLUSION

The Alien Tort Statute was enacted by the US legislator for promoting the United States among its peers. While its primary focus was on ensuring that crimes such as privacy or violations of diplomatic rules did not go without a redemption it came to play a broader and, as some would argue a much more, noble role. Today, the ATS is largely relied upon by the human rights organizations for remedying the breaches on human rights. However, to the opinion of this paper’s writer, the ATS is employable for commercial matters as well. When an action hurts a private party and simultaneously in breach of international law which also includes the (commercial) treaties that the US is party to, the wronged party can tap ATS for suing the wrongful party and demand compensations in the US. This is an extremely important aspect of the ATS. Any party that knows the assets of American based counter party is in its reach and that his rights under international law can be realized by the US courts will be more likely to conduct business with the American enterprises. This would ultimately lower transaction costs for the American based companies as well and therefore further promote the US presence in the World which is aligned with the original purpose of the ATS. Nevertheless, there are some challenges to this argument. First of all there is no tangible definition of what constitutes a tort that breaches the international law, and secondly, hence most international transactions are carried out via subsidiaries, in most instances the assets of an American based company will be protected by the corporate veil. Such issues, although not in commercial context, have been tried before the US courts and some solutions have been offered. The Courts generally establish ATS jurisdiction when a definable, universal, and obligatory act is against the international law and an American based mother company is the principle of its subsidiary. Nonetheless, a litigator needs to be very cautious to rely on ATS as the case law has not been well established yet.

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[1] www.law.cornell.edu/wex/alien_tort_statute

[2] www.cja.org/what-we-do/litigation/legal-strategy/the-alien-tort-statute/

[3] Koebele, Brill, 2014, page:18

[4] For more on this see: Koebele, Brill, 2014, Chapter I

[5] Koebele, Brill, 2014, page:20

[6] Koebele, Brill, 2014, page:20

[7] Cf William R. Castro “ The Federal Courts Protective Jurisdiction over Torts Committed in Violation of the Law of Nations”

[8] This might be important especially for actions that fall under the protection of Multi or Bilateral Investment Treaties and there is a contractual relation (such as a concession contract) in between the plaintiff investor and the defendant state.

[9] Koebele, Brill, 2014, page:280

[10] In most civil law countries such argument would not suffice for establishing jurisdiction as the agency law is deemed applicable merely to contractual relations.

[11] Koebele, Brill, 2014, page:298

[12] For the whole reasoning see: Corporate_Responsibility_under_the_Alien_Tort_Stat…_—-_(PART_IV_DEFENSES_AND_LIMITATIONS).pdf