US decision will reduce claims against companies for alleged human rights abuses abroad, says expert

Litigation expert John Gilbert of Pinsent Masons, the law firm behind Out-Law.com, was commenting as the Supreme Court ruled that the country's Alien Tort Statute (ATS) did not apply to the actions of non-US companies beyond US borders. The ATS, which dates back to 1789, allows US courts to hear cases brought by foreign citizens for conduct committed outside the US which violates "the law of nations".

In its judgment (35-page / 208KB PDF), the Supreme Court said that a company's "mere corporate presence" in the US was not enough to bring it within the scope of the ATS. The statute's application was limited by the "presumption against extraterritoriality", which prevented the Supreme Court from ruling against the actions of UK, Dutch and Nigerian oil companies owned by Royal Dutch Shell.

Gilbert said that the governments of the UK and the Netherlands had argued for the Supreme Court to dismiss the case on a number of grounds including under the principle that states should be responsible for regulating corporate behaviour in their own territory or subject to their jurisdiction under a traditional international law basis.

"The effect of the case will be to reverse a trend started in the 1970s towards a greater number of cases with increasingly slight connections with the US under the ATS," he said. "Although the judgment leaves some room for uncertainty about when there will be sufficient connection with the US for claims to be made, the scope for claims against non-US companies relating to events outside the US has been significantly reduced. For multinational companies based outside the US, the judgment is likely to be welcomed as limiting the possibilities of facing litigation in the US Federal Courts."

"It is also noteworthy because the Supreme Court reached its decision on the basis of conclusions regarding the extraterritorial application of the ATS rather than whether companies - as opposed to natural persons – can be liable under the statute. The question of corporate liability had been the issue on which the case had been fought in the lower courts," he said.

The case had been brought by Nigerians who had claimed that Shell had been complicit in torture and execution in the country's Ogoni region between 1992 and 1995. They had claimed that the Anglo-Dutch holding company had forced its Nigerian subsidiary to cooperate with the Nigerian military government in its campaign to curb resistance to aggressive oil development in the region. They argued that Shell also "aided and abetted" the military by providing food, transportation and compensation.

In his leading judgment, Chief Justice Roberts said that accepting that the ATS applied to the case would "imply that other nations, also applying the law of nations, could hale our citizens into their courts for alleged violations of the law of nations occurring in the United States, or anywhere else in the world". The presumption against extraterritoriality "guards against our courts triggering such serious foreign policy consequences", he said.

"Even where the claims touch and concern the territory of the United States, they must do so with sufficient force to displace the presumption against extraterritorial application," he said. "Corporations are often present in many countries, and it would reach too far to say that mere corporate presence suffices. If Congress were to determine otherwise, a statute more specific than the ATS would be required."

Litigation expert John Gilbert said that the judgment came at a time when there was a "focus on the duty of multinational companies to respect human rights wherever they operate". The UN adopted a set of Guiding Principles on Business and Human Rights in 2011, as a global standard for preventing and addressing the risk of adverse impacts on human rights linked to business activity.

"For some, the removal of a potential route to a remedy for those affected by human rights abuses will be seen as a retrograde step, particularly where there are no – or no effective – remedies in the states where the events took place or where the company in question is resident," he said.