The unsettled question of whether corporations may be held liable for international human rights abuses may finally, after a tortuous deviation, be addressed by the Supreme Court in the case of Jesner v. Arab Bank.

The case, on appeal from the United States Court of Appeals for the Second Circuit in New York, contains allegations that the Arab Bank processed financial transactions on behalf of groups linked to terrorism. The plaintiffs are victims of terror attacks.  Among other things, plaintiffs alleged that the Jordan-based bank “knowingly used its New York branch to collect donations, transfer money, and serve as a ‘paymaster’ for international terrorists.”

Central to the case is the Alien Tort Statute, a 1789 law that allows United States federal district courts to hear “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.” The phrase “violations of the law of nations” has been construed by federal courts to cover human rights violations that are “obligatory and universal.” Examples of such acts have included extrajudicial killing, genocide, war crimes, crimes against humanity, cruel, inhuman or degrading treatment, forced labor, and other similarly peremptory norms.

The question of whether a corporation (such as a bank) could be held liable for such international human rights violations was raised in Kiobel v. Royal Dutch Petroleum in 2013. In that case, Nigerian plaintiffs had filed ATS claims against Dutch and U.K. entities that operated in Nigeria and had aided and abetted human rights abuses by the Nigerian government. The Second Circuit dismissed the case on the grounds that corporate liability was not a norm of customary international law, and therefore a plaintiff could not bring an ATS suit against a corporation. The matter was appealed to the Supreme Court, where it then took a surprising turn when the Court asked the parties to brief the fundamental issue of whether the human rights abuses abroad could be heard by American courts in the first place. Relying on the “presumption against extraterritoriality,” a canon stating that US statutes should not automatically be read to apply to conduct abroad, the Court held that the suit should be dismissed under the ATS because it lacked the requisite territorial ties to the United States. In other words, because “all the relevant conduct took place outside the United States,” the case did not “touch and concern the United States…with sufficient force” to be heard domestically.

Subsequent cases brought under the ATS then explored the contours of when human rights violations abroad satisfied the “touch and concern” requirement of the United States. Where the sole link was that a party was a US national, courts have held that the link was not sufficient. Where the conduct was planned, directed, or committed in the United States, or was directed at the United States, then the case satisfied the territoriality requirement.

As for the narrow question of whether corporations could be held liable for human rights violations abroad, because it was never directly addressed by the Supreme Court, the initial holding of the Court of Appeals of the Second Circuit remained in place. Thus, in Jesner, the court rejected the notion that the ATS allowed for corporate liability, even despite an “observation that there is a growing consensus among our sister circuits to that effect.”

It will be interesting, therefore, to see the Supreme Court at long last tackle the issue of corporate liability. A decision will have significant implications for corporations with links, financially or operationally, to entities perpetrating human rights violations abroad. Extractive companies should pay particular heed, as many ATS claims have been brought for chemical and environmental damages abroad. An affirmative finding of potential corporate liability may signal increased litigation.

The case is scheduled for arguments at the Supreme Court in October 2017. As always, we will continue to monitor the situation and update our guidance accordingly.