The Supreme Court Just Gave Unscrupulous American Corporations Another Reason to Expatriate

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The Supreme Court ruled this morning that foreign corporations cannot be sued in U.S. courts under the U.S. Alien Tort Statute (ATS). The ATS only allows suits for the worst violations of international law – like genocide, torture, and crimes against humanity. So, as the four dissenting justices stated, the Court’s decision “absolves corporations from responsibility under the ATS for conscience-shocking behavior.”

The case, Jesner v. Arab Bank, was brought by victims of terrorism against a Jordanian bank which was found to have abetted suicide bombings in the Middle East. They brought suit in New York because Arab Bank used its New York branch to route these transactions. A jury found Arab Bank liable. (ERI filed amicus briefs in the case).

I won’t get into the Court’s reasoning now; much of it parallels the fundamental misunderstandings of international law in the Second Circuit’s opinion in the Kiobel case, which found that all corporations could not be sued for severe violations of international law.

Instead, I merely want to point out that the distinction the Court draws between foreign corporations and U.S. corporations is ridiculous. There are lots of areas of the law where we distinguish between foreign conduct and U.S. conduct – many U.S. laws do not apply outside the U.S., for example. But there are very few areas where we say that a U.S. person (or corporation) can be sued for something, but a foreigner cannot be sued for exactly the same thing – regardless of whether they took actions in the United States.

And there’s a very good reason for that: corporation citizenship is somewhat arbitrary, mostly a matter of paperwork, and it can be changed. So now, in order to carry out severe human rights abuses with impunity, a U.S. corporation just needs to change its citizenship. Many U.S. corporations have already moved abroad for tax reasons; this will give some of them even more incentive to make the move.

I am not saying all, or even most, U.S. corporations are in the business of violating human rights. Most U.S. corporations, just like most people, are good citizens. But this decision gives the worst of them a new way to avoid accountability.

At some point, Congress needs to step in. Why on earth would we want to give foreign corporations special privileges to violate the law without consequence – and give U.S. corporations additional incentives to expatriate?

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