How the U.S. Supreme Court Moved the Goalposts on Corporate Liability

On Wednesday, April 17, the U.S. Supreme Court handed down its long-awaited decision in Kiobel v. Royal Dutch Shell, a case brought by 12 Nigerians against the multinational oil company over its role in human rights abuses in their home country in the 1990s. The Court upheld a decision dismissing the complaint, which relied upon the 1789 Alien Tort Statute; the decision was a major setback to efforts by human rights advocates who have relied on the statute to hold multinational companies accountable in U.S. courts for human rights abuses committed abroad.

The Court’s dismissal was unanimous, although Chief Justice John Roberts’ opinion of the Court was joined by three concurring opinions by Justice Anthony Kennedy, Justice Samuel Alito, and Justice Stephen Breyer. Justice Roberts’ majority opinion relies heavily on distaste for the notion that the United States should be the world’s moral authority, arguing that to do so “would imply that other nations… could hale our citizens into their courts” for human rights abuses. 

But whether U.S. federal courts should hear cases of extrajudicial killing, torture, cruel treatment, and arbitrary detention that happen outside its borders was not the issue the Court was asked to consider.

In 2010, the U.S. Second Circuit court dismissed Kiobel on the grounds that international law did not provide for corporate liability. The Supreme Court agreed to review that decision.

The Supreme Court is permitted to review the lower court decision because the Constitution provides the Court appellate jurisdiction over the case which presents a question of federal law—in this instance, whether the Alien Tort Statute, part of the federal Judiciary Act of 1789, permits cases against corporate defendants.

After oral arguments on corporate liability under the Alien Tort Statute, the Court asked for a “supplemental” hearing on whether the ATS applies to acts that occur outside of the United States.

However, the second hearing was not “supplemental,” as the decision issued Wednesday reveals. The decision focuses entirely on the application of U.S. procedural law in adjudicating offenses abroad, effectively initiating and deciding a different question from the one raised by the parties in the lower courts.

The Constitution provides that the Supreme Court is only able to decide on cases that have not already been heard by a lower court when they are “affecting ambassadors, other public ministers and consuls, and those in which a state shall be party,” which Kiobel does not.

The audacity of the decision does not stem from this usurpation of the powers of the lower courts alone. It comes when the Court then uses the seized platform to assert that applying the ATS to harms that occur abroad would be an “unwarranted judicial interference in the conduct of foreign policy.”

Despite a history of cases where the ATS provided relief for abuses that occurred outside of the US, and cases in other countries with the same effect, the decision concludes there is “no indication that the ATS was passed to make the United States a uniquely hospitable forum for the enforcement of international norms.”

Justice Stephen Breyer, writing for the liberal minority, goes along with the switched focus onto geography. Breyer at least recognizes the plain extraterritorial history and nature of the statute, and the sound policy for hearing cases in which American nationals or interests are directly and significantly implicated. But in the end his opinion applies Roberts’ conclusion that Shell’s connection to the U.S. amounts to an insufficient “mere corporate presence.”

In the earlier ATS cases noted by Breyer, Filartiga and Marcos, both parties were foreign and the conduct at issue took place outside of the United States. The only connection to the United States, in both cases, was that the defendant resided in the United States for less than a year before the respective case was initiated. In Kiobel, Breyer concludes the defendant’s “only presence in the United States consists of an office in New York City.”

Even if Shell’s only presence were a New York office, it would fit with the earlier cases. But Shell’s presence in the United States is far greater than in those cases, with the company employing 23 percent of its workforce in the country, employing 22,000 people across all 50 states. 

As for the involvement of American interests in this case, the United States is Nigeria’s biggest oil market, absorbing 33 percent of its exports, while in 2011, Nigeria was the United States’ fourth largest foreign source of oil. Shell is Nigeria’s largest producer, accounting in recent years for up to half of its output. If abuses carried out to secure a significant portion of a country’s energy supply is not enough to “touch and concern” it, it is hard to tell what will be.

By deciding first that it would opine on a different controversy than what was presented for review, the Court enables the “safe harbor” for abuses that Justice Breyer argues America has an interest to prevent.