In House - The FindLaw Corporate Counsel Blog

SCOTUS to Decide If U.S. Corporations Can Be Liable for Overseas Terrorism

Arab Bank in New York thought it couldn't be held liable for customers overseas -- even those who were known terrorists.

After all, the U.S. Supreme Court had ruled that liability presumptively does not reach corporations in America for human rights violations committed in other countries. Moreover, the U.S. Second Circuit Court of Appeals had thrown out the cases against Arab Bank based on that ruling.

But that was then, and this is now.

"[T]his case presents the issue in as gripping a context as this Court is likely to see: proven corporate financing of terrorism, partly from a perch in the United States that was indispensable to the terrorist scheme," the petitioners said in urging the Supreme Court to hear Jesner v. Arab Bank.

"Extraterritoriality"

The high court granted their petition, and will consider how the "extraterritoriality" presumption in Kiobel v. Royal Dutch Petroleum applies. The case also revisits the court's interpretation of the 1789 Alien Torts Act, which human rights and environmental activists have used against companies like Exxon, Coca-Cola and Chevron.

Although the court had scaled back corporate liability in 2013, it left open the question for claims that "sufficiently touch and concern" the United States. Arab Bank is worried it might be close enough.

"Many ATS claims against corporations can now be, and have been, dismissed on extraterritoriality grounds regardless of whether the ATS reaches corporations," the defendant bank argued against the petition.

6,000 Petitioners

But the Supreme Court granted certiorari, a consolidated appeal of five lawsuits against the bank by about 6,000 petitioners -- largely survivors of terrorism abroad or relatives of those who had died in attacks.

They claim the bank knowingly used its New York branch to serve as a "paymaster" for international terrorists. The bank paid hundreds of millions of dollars "to finance suicide bombings and to make so-called 'martyrdom' payments -- payments rewarding families of the perpetrators for killing innocent civilians," the petition says.

To the contrary, the bank said it has cooperated with the United States in fighting terrorism. The bank said only four transactions -- due to human error -- out of 500,000 involved terrorists.

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