Update 18 January 2017. Ms Kiobel is now apparently using Dutch courts to try and sue Shell over the case. (Evidently unrelated to the pursuit of Shell in The Netherlands on environmental grounds). See here for background to the case.
The central question in Kiobel turned out to be this: whether and under what circumstances US courts may recognize a cause of action under the Alien Torts Statute, for violations of the law of nations, occurring within the territory of a sovereign other than the United States. In focusing on this question (and replying in the negative), the SC did not entertain the question which actually led to certiorari, namely whether the law of nations recognises corporate liability.
I have a paper with Charlotte Luks over on ssrn, which discusses the ATS (and related developments in the EU). The Alien Tort Statute, a product of the United States’ first congress, creates a domestic forum for violations of international law. The relevant text 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.”
Since the path-breaking Doe v. Unocal litigation in 1997, more than 50 cases have been brought in the United States against companies under the Alien Tort Statute alleging corporate involvement in human rights abuse abroad. However In Kiobel v Royal Dutch Petroleum, the United States Court of Appeals for the Second Circuit held that corporations cannot be sued under the Alien Tort State for violations of customary international law because “the concept of corporate liability […] has not achieved universal recognition or acceptance of a norm in the relations of States with each other.” In denying re-hearing, Chief Judge Jacobs argued in February 2011 that
All the cases of the class affected by this case involve transnational corporations, many of them foreign. Such foreign companies are creatures of other states. They are subject to corporate governance and government regulation at home. They are often engines of their national economies, sustaining employees, pensioners and creditors–and paying taxes. I cannot think that there is some consensus among nations that American courts and lawyers have the power to bring to court transnational corporations of other countries, to inquire into their operations in third countries, to regulate them–and to beggar them by rendering their assets into compensatory damages, punitive damages, and (American) legal fees. Such proceedings have the natural tendency to provoke international rivalry, divisive interests, competition, and grievance–the very opposite of the universal consensus that sustains customary international law.
Certiorari at the Supreme Court was keenly awaited by the corporate social responsibility (CSR) community, for ATS litigation by default had become the flag bearer for pursuing alleged violations of international law (whether in human rights or environment) by multinational corporations.
Extraterritorial application of US law was most recently the issue in Morrison v National Australia Bank, in the area of securities. In Kiobel, the SC relies on its extensive review of exterritoriality in Morrison. It did so even if in Morrison (and other cases before it), the question of exterritoriality was one of merits (aka jurisdiction to prescribe): i.e. whether an Act of Congress regulating conduct, applies abroad. By contrast, in Kiobel, the question concerns jurisdiction pur sang (aka jurisdiction to adjudicate). For the SC, this did not dent precedent value of Morrison: ‘we think the principles underlying the canon of interpretation similarly constrain courts considering causes of action that may be brought under the ATS’.
In Morrison, the SC held that when a statute gives no clear indication of an extraterritorial application, it has none. In Kiobel, the Court did not find convincing argument in either text, history, or purpose of the ATS, which could rebut the presumption against extraterritoriality. The closest such rebuttal arguably lay in the historic (and more current) examples of employing ATS against piracy: as the SC notes, ‘piracy normally occurs on the high seas, beyond the territorial jurisdiction of the United States or any other country, [however] applying U. S. law to pirates does not typically impose the sovereign will of the United States onto conduct occurring within the territorial jurisdiction of another sovereign, and therefore carries less direct foreign policy consequences.‘
The latter of course is where the core of the argument lies, and where public, and private international law principles of comity come into play: the degree to which in upholding jurisdiction, the courts in ordinary might be obstructing US foreign policy. As an aside and not having completed my thinking on this: Judge Jacobs’ frank assessment of the respective roles of public and private international law, referred to above, is particularly interesting when one considers the communis utilatis roots of modern conflict of laws The conviction in Dutch conflict of laws in the 17th century (later exported via Scotland to the US), that foreign laws needed to be applied if and when they so wanted, on the basis of reciprocity, and in line with communis utilitatis has now been turned on its head: comity is now being used as a presumption against such application of foreign laws or, here, public international law.
The SC concludes as follows:
The Court therefore answers Kiobel-type cases (a foreign plaintiff suing a foreign defendant for acts or omissions occurring wholly outside of the United States that allegedly violate the law of nations), however it does leave open many questions which fall outside the factual Kiobel box. Does the reference to ‘claim’ and ‘territory’ of the US refer to the tortious action (thus requiring that to take place in the US) or would a US defendant suffice (in all likelihood: no)? What ‘link’ would be enough for the action to take place in the US: in particular, lack of corporate oversight over foreign subsidiaries? In all likelihood, further distinguishing will take place by lower courts (and might eventually end up at the SC again), however it is clear that the scope for ATS litigation has been severely diminished. This means that attention may now be re-ignited in what has been brewing in the EU for some time: using national courts to apply national law for conduct abroad: in other words, classic private international law /conflict of laws coming to the limelight once again.