Ed. note. This article is the latest in our series on the U.S. Supreme Court case Jesner. v. Arab Bank, a case that is slated to resolve the question of whether corporations can be sued under international law for human rights violations and terrorism.

On Wednesday, the U.S. Supreme Court heard oral arguments in Jesner v. Arab Bank, PLC, which presents the question whether corporations can be sued for human rights violations in U.S. courts under the Alien Tort Statute (ATS). The plaintiffs alleged that Arab Bank knowingly funneled millions of dollars through its New York branch to finance terrorist attacks in Israel, the West Bank, and Gaza. In a parallel suit brought by U.S. citizens under a separate federal statute, the Antiterrorism Act, Arab Bank was found liable for doing just that. The Second Circuit rejected the plaintiffs’ claims, however, on the ground that corporations can never be sued under the ATS. I previewed the arguments made in the briefs here. I also filed a brief on behalf of International Law Scholars in support of the plaintiffs.

At oral argument, the Justices seemed to be looking at the question in two steps: (1) whether customary international law permits corporate liability; and (2) assuming it does, whether the ATS cause of action should be interpreted to permit corporate liability. Arab Bank’s lawyer Paul Clement joked about Chevron, the Supreme Court’s doctrine for deference to administrative agencies, which famously has two steps (p. 53). And the Supreme Court has recently articulated a two-step framework for applying the presumption against extraterritoriality. So perhaps the ATS will be next.

Justice Kennedy suggested that “what parties are bound” by a norm of international law should be part of the question at “Sosa step 1, where we ask if there’s a specific universal norm” (p. 24). (Sosa is the 2004 case in which the Supreme Court recognized a cause of action for claims brought under the ATS.) Plaintiffs’ counsel Jeffrey Fisher responded that rules of corporate liability, like respondeat superior, are questions of domestic law (p. 25). While that is true, it may be useful to distinguish two different corporate liability questions. Whether a particular norm of international law applies to corporations is a question of international law to be addressed at step one, as Justice Kennedy suggested. And as the U.S. government argued in its amicus brief, the norms that are actionable under the ATS do not distinguish between natural persons and corporations. As a second-order question, precisely what form corporate liability should take (Justice Kennedy mentioned strict liability, vicarious liability, and respondeat superior as examples) is a matter of domestic law. Indeed, Arab Bank’s counsel seemed to concede in a later exchange with Justice Kagan that the particular form of corporate liability—whether joint and several liability is available, for example—“might get you closer to a remedial question” to be addressed at step two of the analysis (p. 55).

Justice Breyer spent some time discussing various treaties that impose liability on corporations with Mr. Clement, Arab Bank’s lawyer (pp. 43-45, 47, 50-51, 56-57). But the details of these treaties are really beside the point. This is not just because the treaties are designed to operate through domestic law, as Mr. Clement pointed out (p. 57). It is also because plaintiffs have not brought their claims under the treaties but rather under customary international law. To be sure, some of these treaties may be relevant as evidence of customary international law. But the key question at step one of the ATS analysis is whether the customary international law norms that are actionable under the ATS distinguish between natural persons and corporations. As the amicus brief for the Yale Law School Center for Global Legal Challenges shows in detail, none of these norms do.

At the second step in the analysis, some of the Justices expressed concern about the foreign relations implications of holding corporations liable for human rights violations. Chief Justice Roberts noted that the ATS was passed “to avoid foreign entanglements” but wondered “if extending it to corporate liability is, in fact, going to have the . . . problematic result of increasing our entanglements” (p. 7). Justice Alito suggested that at “step 2 of Sosa,” on “the question of whether we should recognize a federal common law claim under particular circumstances,” the Court might “balance the international repercussions” of allowing suits against corporations against the repercussions of not doing so (p. 10). Mr. Fisher, lawyer for the plaintiffs, agreed that ATS suits could have “international implications,” but responded that the Court could address those concerns with “other kinds of doctrines that more directly deal with those concerns” like extraterritoriality, forum non conveniens, and political question (p. 11). Justice Sotomayor also mentioned personal jurisdiction under Daimler as a limitation (pp. 5-6), and Justice Ginsburg added the possibility of an exhaustion requirement (pp. 23-24). Denying corporate liability, Fisher argued, was simply “a mismatch” with concerns about foreign relations (p. 13).

Arguing for the United States as amicus, Brian Fletcher agreed with plaintiffs that the Second Circuit’s “categorical rule” against corporate liability was “wrong” (p. 27). He pointed out that this case would not have produced “less friction if it had been brought against the high-ranking officers and employees of the bank rather than against the bank itself” (p. 28). Later in the argument, Justice Kagan described the question of corporate liability as “completely orthogonal” to the foreign relations concerns raised by Arab Bank (p. 64). Mr. Clement responded that corporate liability and foreign relations overlapped in practice because “the real impact of corporate liability” is on foreign corporations in which foreign governments have an interest, “like Arab Bank” (p. 65). In fact, the suit against Arab Bank is an unusual one; foreign corporate defendants are the exception not the rule today. The Supreme Court’s decision in Kiobel to limit the geographic scope of the ATS cause of action to cases that “touch and concern” the United States has resulted in a large number of dismissals, as Mr. Fisher pointed out (p. 5), including virtually all of the suits against foreign corporations.

Justice Gorsuch repeatedly asked whether the ATS cause of action should be limited to U.S. defendants (pp. 16, 34, 71-72). He invoked an argument by Professors Anthony Bellia and Bradford Clark that the First Congress was concerned that “some action by an American citizen . . . might be tagged to the United States itself and be cause for just war by a foreign power” (p. 16). Justice Gorsuch also suggested that “you need an American defendant in order to have diversity jurisdiction” under Article III (p. 16).

With respect to Bellia and Clark’s argument, both Mr. Fisher for the plaintiffs (p. 16) and Mr. Fletcher for the U.S. government (p. 34-37) noted that limiting the ATS to American defendants would fail to account for the 1784 Marbois incident, which the Supreme Court in Sosa recognized as one of the events that inspired the provision. Chief Justice Roberts and Justice Alito accepted in their own questions that the ATS was intended to reach cases like the Marbois incident (pp. 7, 14). Justice Sotomayor noted that the nationality of the defendant would also have been irrelevant in cases of piracy (pp. 37-38). And Mr. Fisher concluded by referring to the text of the ATS, which limits the citizenship of plaintiffs to aliens but places no limits on the citizenship of defendants (pp. 70-71).

There are other problems with the Bellia-Clark theory that were not mentioned at oral argument. Under their theory, the ATS was intended to address only situations where the United States would be in breach of international law if it did not provide redress to aliens injured by U.S. citizens. In such situations, the violation of the law of nations would occur not at the time of the tort but later, when the United States failed to provide redress. But this is hard to square with the text of the ATS, which refers to suits “by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” The word “committed” suggests that the international law violation occurs at the time of the tort, rather than some time later. Another problem with the Bellia-Clark theory is that the United States’ obligation under international law to provide redress would have been fully satisfied by other statutes (including the 1790 law mentioned by Mr. Clement (p. 35)), which provided criminal liability for assaults on ambassadors and the like. The ATS was clearly designed to go beyond what was necessary to satisfy the United States’ obligations under international law. None of the other Justices seemed interested in the Bellia-Clark theory at oral argument, and it will be surprising if it garners more than one vote.

Justice Gorsuch’s concern over Article III is also misplaced. First, there is strong historical evidence that the phrase “Laws of the United States” in Article III’s arising-under grant was understood at ratification to include the law of nations. Among other things, the phrase in Article III is broader than the corresponding phrase in the Supremacy Clause of Article VI, which refers more narrowly to laws of the United States made in pursuance of the Constitution. But the Supreme Court would not have to adopt this interpretation to satisfy Article III, because ATS suits now arise under the federal-common-law cause of action that Sosa recognized. Both of the Supreme Court’s prior cases under the ATS have involved one alien suing another, as have most of the successful cases across the federal courts since the landmark ATS decision by the Second Circuit in Filartiga over 35 years ago.

If the Justices stick to the question of corporate liability, the Second Circuit may be reversed by a large margin. The concerns expressed at oral argument by the more conservative Justices have little to do with corporate liability. But if the vote is a close one, it is likely to be decided by Justice Kennedy, whose concurring opinion in Kiobel stressed the narrowness of that decision and aimed to keep the door open both for suits against corporations and for suits where some of the relevant conduct occurred abroad.

Justice Kennedy was surprisingly quiet at oral argument, asking just two questions about whether the identity of the party bound by the customary-international-law norm should be part of the analysis at step one. The question is a good one, and I believe the answer is yes—the particular norm of customary international law must apply to a corporation before a corporation may be sued under the ATS for violating that norm. And as the amicus brief for the United States explains, all of the norms actionable under the ATS do apply to corporations. Recognizing this fact should lead Justice Kennedy to adopt the position urged by the United States on the question of corporate liability and to reverse the Second Circuit.