Transnational

01/01/2019

Over the past 15 years, there has been a sharp rise in lawsuits brought against American companies, as well as foreign companies with a substantial U.S. presence, that are premised on alleged personal or environmental injuries occurring abroad. These cases raise the question of whether U.S. courts should be the venue for cases concerning conduct occurring outside the territory of the United States. They have also been characterized by controversial and abusive tactics by plaintiffs and their lawyers.

Many of those transnational lawsuits have been filed in the U.S. by plaintiffs’ class action firms, public interest attorneys and non-governmental organizations. Some have been filed in federal courts under the 200-year old Alien Tort Statute (ATS), while many more have been brought in state courts under common law theories of liability. 

These cases raise several concerns. One is the use of U.S. courts for adjudicating disputes that occurred outside of the country. It is a generally established principle that U.S. courts should not hear cases involving foreign conduct unless there is a significant nexus to the United States. By undermining this principle, these cases set a precedent that could be used to expose Americans to litigation in foreign courts over conduct occurring in the United States.

Equally troubling are the tactics used in these cases. According to ILR’s study Think Globally, Sue Locally, transnational cases are characterized by a number of features, including aggressive media tactics, organized protests and boycotts of corporate defendants, political pressure and, in some cases, outright fraud and abuse by plaintiffs’ lawyers. In the major transnational case against Chevron in Ecuador, four federal courts have found the proceedings tainted by fraud.

In April 2013, the U.S. Supreme Court ruled in Kiobel v. Royal Dutch Petroleum that claims of wrongful conduct on foreign soil cannot be brought in U.S. courts under the ATS. This ruling has substantially limited the use of the ATS in transnational cases, but does not deter cases brought under state common law. A complete list of lawsuits against corporations under the Alien Tort Statute can be found here

 

Alien Tort Statute (ATS)

Enacted in 1789 as part of the Judiciary Act, the Alien Tort Statute (ATS) provides federal jurisdiction over lawsuits brought by non-U.S. nationals for torts “committed in violation of the law of nations or a treaty of the United States.” The ATS was intended to give federal courts of the new nation the power to resolve disputes arising from a very limited number of international law violations, such as piracy or assaults on ambassadors on U.S. soil, that might have caused diplomatic tension if left unaddressed by state courts. Despite its original intent, the ATS has served for the past two decades as the fountainhead of litigation against multinational companies for human rights violations allegedly committed by foreign governments or other foreign actors in countries all over the world.

More than 150 ATS suits have been filed against companies in practically every industry sector for business activities in over sixty countries—from Unocal in Burma, to Pfizer in Nigeria, Coca-Cola in Colombia, and Yahoo! in China. The largest ATS suit to date was filed in 2002 against more than fifty companies, including Ford and IBM, for business dealings in South Africa during the apartheid era. ATS suits are typically litigated for a decade or more, chilling international investment and imposing substantial legal and reputational costs on corporations that operate in developing countries.

The Supreme Court has twice reined in expansive interpretations of the ATS. In 2004, the Supreme Court ruled in Sosa v. Alvarez-Machain that the ATS covers only a small handful of international law crimes, not the broad panoply of suits being filed by plaintiffs’ lawyers. The Court cautioned lower courts to refrain from incorporating new violations that had not garnered universal acceptance under international law. In April 2013, the Supreme Court ruled in Kiobel v. Royal Dutch Petroleum that the ATS is limited by the legal presumption that U.S. laws do not extend beyond U.S. borders unless Congress says otherwise. Accordingly, the ATS typically does not apply when “all the relevant conduct took place outside the United States.” This decision ended the majority of ATS suits against U.S. and foreign companies, which had been sued for their overseas activities (or, more often, for the activities of their foreign affiliates).

The Supreme Court appeared to leave the door open, however, to a small set of ATS cases “where the claims touch and concern the territory of the United States” with “sufficient force.” The Court did not elaborate on what claims would satisfy this new test, but explained that “mere corporate presence” in the United States is not enough. Since Kiobel, lower courts have reached different conclusions about how to apply the “touch and concern” test. Most courts have interpreted Kiobel to require that the international law violation must itself take place within the United States, while others have held that significant contacts with the United States may be sufficient, even if the violation occurred overseas.

Recent decisions limiting the ATS have rebuffed plaintiffs’ attempt to use the ATS to bring lawsuits with little or no connection to the United States—a proposition that would have been unthinkable to the law’s framers in 1789. Thomas J. Donohue, president and CEO of the U.S. Chamber of Commerce, has applauded judicial limits on the ATS that “ensure that trial lawyers cannot continue to use the American judicial system to expose global businesses to frivolous and costly lawsuits.” To help restore the ATS to its original purpose, the U.S. Chamber Institute for Legal Reform (ILR) and the National Chamber Litigation Center (NCLC) have advised and represented U.S. companies in ATS litigation for over a decade. NCLC has filed dozens of briefs in major ATS cases urging dismissal of suits that exceed the law’s intended scope, including Jesner v. Arab Bank, in which the Supreme Court will decide in Spring 2018 whether corporations can be sued under the ATS. ILR likewise monitors developments in ATS cases, publishes research, and advocates policies that would restore the ATS to its original purpose.

 

Foreign Judgment Enforcement (FJE)

In recent years, plantiffs have filed many lawsuits against businesses and individuals in U.S. courts for alleged conduct occurring outside the United States. The Supreme Court’s recent rulings limiting such cases including Daimler AG v. Bauman (2014), Kiobel v. Royal Dutch Petroleum (2013) and Morrison v. National Australia Bank (2010) will likely mean a new strategy for plaintiffs and their lawyers: bringing lawsuits in foreign courts, followed by attempts to enforce any judgment in U.S. courts and seizing a company’s U.S. assets. This raises the troubling prospect of abusive and improper foreign judgments being enforced in the United States in violation of the spirit and principles of the U.S. Constitution and our justice system. 

In an effort to standardize state laws governing foreign judgment enforcement, the Uniform Law Commission (ULC) developed model statutes in 1962 and 2005. While some states have adopted laws based on these models, others have gone their own way. And even those states adopting a model law have differing judicial interpretations. These differing standards open the door to forum shopping by plaintiffs who can seek enforcement under the most lax state standard.

The inadequacy of some state standards was highlighted by recent legal proceedings involving a $9 billion judgment against Chevron issued by an Ecuadorean court. Multiple U.S. courts have found that the Ecuadorian proceedings were tainted by fraud. But when Chevron sought an injunction against enforcement in U.S. courts, the Second Circuit Court of Appeals rejected the company’s request, holding that New York’s enforcement law did not allow a company to preemptively challenge the legitimacy of a foreign judgment. (Ultimately, the U.S. District Court for the Southern District of New York ruled that the Ecuadorian judgement was the product of fraud and racketeering, and declared the judgment unenforceable under civil racketeering statutes.) Since then, the plaintiffs have sought to enforce the Ecuadorian judgment against Chevron in Canada. Those proceedings are ongoing.

To prevent abusive forum shopping, Congress should adopt uniform federal standards to govern the recognition and enforcement of foreign judgments. In addition, states that have not yet adopted the 2005 model act should consider doing so. Congress and the states should include a provision to allow judgement debtors like Chevron to bring a preemptive declaratory judgment action for non-recognition of abusive foreign judgements.

Suggested Resources

Research

All Results for Transnational

  1. Stopping the Sale on Lawsuits: A Proposal to Regulate Third-Party Investments in Litigation

    October 24, 2012 | Research

    Third-party investments in litigation represent a clear and present danger to the impartial and efficient administration of civil justice in the United States. Such third-party litigation financing ("TPLF") occurs when a specialized investment company provides money to a plaintiff (or counsel) to finance the prosecution of a complex tort or business dispute. In exchange for this financial assistance, the plaintiff (or counsel) agrees to pay the investor a portion of any proceeds obtained through the litigation.... Read More

  2. Litigation Funding in Australia: Identifying and Addressing Conflicts of Interest for Lawyers

    February 08, 2012 | Research

    Litigation funding in Australia is a contractual arrangement whereby a third party (usually a corporate entity and not a legal practitioner) provides financing and some level of management of the dispute, and in return, if the case succeeds, receives a percentage of the proceeds. Litigation funding has been argued to be an important and legitimate development that provides access to justice, allows for the spreading of the risk of complex litigation and can improve the efficiency of litigation by bringing commercial considerations to bear. Equally there have been concerns that litigation funding results in the Court's processes being misused for commercial gain.... Read More

  3. U.S. Chamber Applauds Introduction of FOCUS Act in U.S. Senate

    February 03, 2012 | Press Release

    WASHINGTON, D.C.-Lisa A. Rickard, president of the U.S. Chamber Institute for Legal Reform (ILR), made the following statement about the introduction of the Freedom from Over-Criminalization and Unjust Seizures (FOCUS) Act of 2012 in the U.S. Senate. The bill would, among other things, amend the Lacey Act to remove foreign law violations as a basis for prosecution in the United States and limit punishment for violations under the Act to civil penalties. ... Read More

  4. Trends We Don't Want To Continue: A Look at the Latest Lawsuits and Theories from The Trial Bar

    October 26, 2011 | Video | Watch

  5. Confronting the New Breed of Transnational Litigation: Abusive Foreign Judgments

    October 26, 2011 | Research

    This article demonstrates why comity - when properly understood - requires that U.S. courts deny recognition and enforcement to foreign judgments that violate the U.S. Constitution and other deeply rooted domestic principles.... Read More

  6. Think Globally, Sue Locally: Out-of-Court Tactics Employed by Plaintiffs, Their Lawyers, and Their Advocates in Transnational Tort Cases

    June 21, 2010 | Research

    There has been a sharp rise in lawsuits brought against United States companies, as well as foreign companies with a substantial U.S. presence, that are premised on alleged personal or environmental injuries that occur overseas. Most of those transnational tort lawsuits have been filed in the United States by plaintiffs' class action firms, public interest attorneys, and Non-Governmental Organizations ("NGOs"); some have been brought in federal courts, while many more have been filed in state courts under traditional bases of jurisdiction. A growing number of notable actions also have been filed in foreign courts, with the plaintiffs seeking to obtain judgments they can enforce in the United States.... Read More

  7. Third Party Financing: Ethical and Legal Ramifications in Collective Actions

    November 19, 2009 | Research

    This paper begins with an overview of third party litigation financing. It next examines the current third party financing practices of a number of European jurisdictions. Then, it sets forth ILR's critique of the practice, particularly the incentives it creates to engage in frivolous and abusive litigation. ILR also presents a case study of the Commonwealth of Australia, the first jurisdiction to permit third party litigation funding, where such funding has dramatically increased litigation and given investors pervasive - even total - control over a claimant's case. Finally, the paper concludes that such funding should be prohibited altogether in collective litigation.... Read More

  8. Legal Reform Summit Calls for Jobs, Not Lawsuits

    October 28, 2009 | Press Release

    Calling the next few years a transformational time that could define the future of our civil justice system, speakers at the U.S. Chamber Institute for Legal Reform's (ILR) 10th Annual Legal Reform Summit urged U.S. decision makers to consider the costs of expanding liability for job creators during the economic recovery.... Read More

  9. Selling Lawsuits, Buying Trouble: The Emerging World of Third-Party Litigation Financing in the United States

    October 28, 2009 | Research

    This paper begins with an overview of third-party litigation financing. It next examines current third-party financing practices in the United States. It then sets forth a critique of the practice, particularly the incentives it creates to engage in frivolous and abusive litigation. In this section, the paper also presents a case study on the Commonwealth of Australia, the first jurisdiction to permit third-party litigation funding, where such funding has dramatically increased litigation and given investors pervasive - even total - control over a plaintiff's litigation. Finally, the paper proposes that third-party litigation financing be prohibited in the United States to prevent these abuses. At the very least, the paper concludes, such funding should be banned in class actions and other forms of aggregate litigation.... Read More