Transnational

01/01/2019

Over the past 15 years, there has been a sharp rise in lawsuits brought against American companies, as well as foreign companies with a substantial U.S. presence, that are premised on alleged personal or environmental injuries occurring abroad. These cases raise the question of whether U.S. courts should be the venue for cases concerning conduct occurring outside the territory of the United States. They have also been characterized by controversial and abusive tactics by plaintiffs and their lawyers.

Many of those transnational lawsuits have been filed in the U.S. by plaintiffs’ class action firms, public interest attorneys and non-governmental organizations. Some have been filed in federal courts under the 200-year old Alien Tort Statute (ATS), while many more have been brought in state courts under common law theories of liability. 

These cases raise several concerns. One is the use of U.S. courts for adjudicating disputes that occurred outside of the country. It is a generally established principle that U.S. courts should not hear cases involving foreign conduct unless there is a significant nexus to the United States. By undermining this principle, these cases set a precedent that could be used to expose Americans to litigation in foreign courts over conduct occurring in the United States.

Equally troubling are the tactics used in these cases. According to ILR’s study Think Globally, Sue Locally, transnational cases are characterized by a number of features, including aggressive media tactics, organized protests and boycotts of corporate defendants, political pressure and, in some cases, outright fraud and abuse by plaintiffs’ lawyers. In the major transnational case against Chevron in Ecuador, four federal courts have found the proceedings tainted by fraud.

In April 2013, the U.S. Supreme Court ruled in Kiobel v. Royal Dutch Petroleum that claims of wrongful conduct on foreign soil cannot be brought in U.S. courts under the ATS. This ruling has substantially limited the use of the ATS in transnational cases, but does not deter cases brought under state common law. A complete list of lawsuits against corporations under the Alien Tort Statute can be found here

 

Alien Tort Statute (ATS)

Enacted in 1789 as part of the Judiciary Act, the Alien Tort Statute (ATS) provides federal jurisdiction over lawsuits brought by non-U.S. nationals for torts “committed in violation of the law of nations or a treaty of the United States.” The ATS was intended to give federal courts of the new nation the power to resolve disputes arising from a very limited number of international law violations, such as piracy or assaults on ambassadors on U.S. soil, that might have caused diplomatic tension if left unaddressed by state courts. Despite its original intent, the ATS has served for the past two decades as the fountainhead of litigation against multinational companies for human rights violations allegedly committed by foreign governments or other foreign actors in countries all over the world.

More than 150 ATS suits have been filed against companies in practically every industry sector for business activities in over sixty countries—from Unocal in Burma, to Pfizer in Nigeria, Coca-Cola in Colombia, and Yahoo! in China. The largest ATS suit to date was filed in 2002 against more than fifty companies, including Ford and IBM, for business dealings in South Africa during the apartheid era. ATS suits are typically litigated for a decade or more, chilling international investment and imposing substantial legal and reputational costs on corporations that operate in developing countries.

The Supreme Court has twice reined in expansive interpretations of the ATS. In 2004, the Supreme Court ruled in Sosa v. Alvarez-Machain that the ATS covers only a small handful of international law crimes, not the broad panoply of suits being filed by plaintiffs’ lawyers. The Court cautioned lower courts to refrain from incorporating new violations that had not garnered universal acceptance under international law. In April 2013, the Supreme Court ruled in Kiobel v. Royal Dutch Petroleum that the ATS is limited by the legal presumption that U.S. laws do not extend beyond U.S. borders unless Congress says otherwise. Accordingly, the ATS typically does not apply when “all the relevant conduct took place outside the United States.” This decision ended the majority of ATS suits against U.S. and foreign companies, which had been sued for their overseas activities (or, more often, for the activities of their foreign affiliates).

The Supreme Court appeared to leave the door open, however, to a small set of ATS cases “where the claims touch and concern the territory of the United States” with “sufficient force.” The Court did not elaborate on what claims would satisfy this new test, but explained that “mere corporate presence” in the United States is not enough. Since Kiobel, lower courts have reached different conclusions about how to apply the “touch and concern” test. Most courts have interpreted Kiobel to require that the international law violation must itself take place within the United States, while others have held that significant contacts with the United States may be sufficient, even if the violation occurred overseas.

Recent decisions limiting the ATS have rebuffed plaintiffs’ attempt to use the ATS to bring lawsuits with little or no connection to the United States—a proposition that would have been unthinkable to the law’s framers in 1789. Thomas J. Donohue, president and CEO of the U.S. Chamber of Commerce, has applauded judicial limits on the ATS that “ensure that trial lawyers cannot continue to use the American judicial system to expose global businesses to frivolous and costly lawsuits.” To help restore the ATS to its original purpose, the U.S. Chamber Institute for Legal Reform (ILR) and the National Chamber Litigation Center (NCLC) have advised and represented U.S. companies in ATS litigation for over a decade. NCLC has filed dozens of briefs in major ATS cases urging dismissal of suits that exceed the law’s intended scope, including Jesner v. Arab Bank, in which the Supreme Court will decide in Spring 2018 whether corporations can be sued under the ATS. ILR likewise monitors developments in ATS cases, publishes research, and advocates policies that would restore the ATS to its original purpose.

 

Foreign Judgment Enforcement (FJE)

In recent years, plantiffs have filed many lawsuits against businesses and individuals in U.S. courts for alleged conduct occurring outside the United States. The Supreme Court’s recent rulings limiting such cases including Daimler AG v. Bauman (2014), Kiobel v. Royal Dutch Petroleum (2013) and Morrison v. National Australia Bank (2010) will likely mean a new strategy for plaintiffs and their lawyers: bringing lawsuits in foreign courts, followed by attempts to enforce any judgment in U.S. courts and seizing a company’s U.S. assets. This raises the troubling prospect of abusive and improper foreign judgments being enforced in the United States in violation of the spirit and principles of the U.S. Constitution and our justice system. 

In an effort to standardize state laws governing foreign judgment enforcement, the Uniform Law Commission (ULC) developed model statutes in 1962 and 2005. While some states have adopted laws based on these models, others have gone their own way. And even those states adopting a model law have differing judicial interpretations. These differing standards open the door to forum shopping by plaintiffs who can seek enforcement under the most lax state standard.

The inadequacy of some state standards was highlighted by recent legal proceedings involving a $9 billion judgment against Chevron issued by an Ecuadorean court. Multiple U.S. courts have found that the Ecuadorian proceedings were tainted by fraud. But when Chevron sought an injunction against enforcement in U.S. courts, the Second Circuit Court of Appeals rejected the company’s request, holding that New York’s enforcement law did not allow a company to preemptively challenge the legitimacy of a foreign judgment. (Ultimately, the U.S. District Court for the Southern District of New York ruled that the Ecuadorian judgement was the product of fraud and racketeering, and declared the judgment unenforceable under civil racketeering statutes.) Since then, the plaintiffs have sought to enforce the Ecuadorian judgment against Chevron in Canada. Those proceedings are ongoing.

To prevent abusive forum shopping, Congress should adopt uniform federal standards to govern the recognition and enforcement of foreign judgments. In addition, states that have not yet adopted the 2005 model act should consider doing so. Congress and the states should include a provision to allow judgement debtors like Chevron to bring a preemptive declaratory judgment action for non-recognition of abusive foreign judgements.

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