Presumption against extraterritoriality prevents apartheid victims from suing US corporations

Balintulo v. Ford Motor Co., 796 F.3d 160 (2d Cir. 2015)

Summary

The US Court of Appeal held that it did not have jurisdiction under the Alien Tort Statute to hear the plaintiffs’ claim that Ford and IBM aided and abetted crimes committed against them during South African apartheid. The decision confirmed that the presumption against extraterritoriality will only be displaced where the relevant conduct touches and concerns the US and constitutes a violation (or aiding or abetting a violation) of customary international law. In order to demonstrate that a defendant has aided or abetted a violation the plaintiff must show that the defendant engaged in the conduct for that purpose.

Facts

The plaintiffs sued Ford and IBM for aiding and abetting crimes under customary international law committed against them during South African apartheid. Under the Alien Tort Statute 28 USC § 1350 (ATS) “district courts shall have original jurisdiction of 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 question arose whether the ATS gave the district court jurisdiction to hear this claim, given that the conduct occurred outside the US.

The District Court initially allowed the claim. On appeal the case was remanded to the District Court for dismissal, in light of a Supreme Court decision in another case, Kiobel v Royal Dutch Petroleum Co, 133 S. Ct 1659 (2013) (Kiobel II), which had been handed down in the interim. In Kiobel II the Supreme Court held that the presumption against extraterritoriality applies to claims against the ATS such that it cannot be applied to conduct in another sovereign territory. On remand in the District Court, the plaintiffs submitted the following proposed amended complaints in order to fall under the new conception of ATS jurisdiction:

In relation to Ford:

  • that it had provided specialised vehicles to South African police and security to enable them to enforce apartheid;
  • that it had shared information with the South African regime about anti-apartheid and union activists, facilitating suppression of anti-apartheid activity; and
  • that it aided and abetted the suppression of its own workforce in South Africa.

In relation to IBM:

  • that it had provided training, support, expertise to the South African government in using IBM’s specialised technologies;
  • that it had bid on, and executed contracts in South Africa with unlawful purposes such as denationalisation of black South Africans; and
  • that it had designed technologies essential for racial separation under apartheid and denationalisation of black South Africans.

The District Court denied the plaintiffs leave to file a revised pleading on the grounds that the new complaints were futile as a matter of law and did not displace the presumption against extraterritoriality. The plaintiffs appealed to the Circuit Court of Appeal.

Decision

In order to have jurisdiction over the plaintiffs’ action under the ATS the court held that it would need to satisfy the following criteria:

  • the complaint pleads a violation of the law of nations;
  • the presumption against the extraterritorial application of the ATS, as articulated in Kiobel II, does not bar the claim;
  • customary international law recognises the defendants’ liability; and
  • the theory of liability alleged by the plaintiffs (ie aiding and abetting) is recognised by customary international law.

Judges Cabranes, Hall and Livingston held that the complaints did not displace the presumption against extraterritoriality and that they therefore did not need to consider the other jurisdictional requirements.

In finding against the plaintiffs the court applied the two-stage analysis from Mastafa v Chevron Corp, 770 F 3d 170 (2d Cir, 2014) (Mastafa test). It held that in assessing the extraterritorial application of the ATS it must isolate each defendant’s relevant conduct and then ask the following two questions:

  • Does the conduct sufficiently “touch and concern” the US so as to displace the presumption against extraterritoriality?
  • Does the conduct state a claim for a violation of the law of nations or aiding and abetting another’s violation of the law of nations?

Claims against Ford

The court held that the claims against Ford failed the first question in the Mastafa test as the conduct occurred wholly in South Africa at the hands of Ford’s South African subsidiary. Consistent with previous analogous cases the court rejected the plaintiffs’ assertion that Ford could be held vicariously liable. Further it held that Ford was not directly liable as courts will only pierce the corporate veil “in extraordinary circumstances, such as where the corporate parent excessively dominates its subsidiary”. The presumption against extraterritoriality was therefore not displaced in relation to Ford.

Claims against IBM

Similarly, claims based on IBM’s subsidiary’s training and support of government and execution of contracts with unlawful purposes, occurred wholly within South Africa and therefore failed the first question in the Mastafa test.

But in one of the contract claims, IBM itself (not a subsidiary) bid on a contract with an unlawful purpose, meeting the first limb of the Mastafa test. However, IBM lost that bid and the court held that bidding on and a losing contract that allegedly assists an asserted violation of customary international law is not a violation of the law of nations. This conduct therefore failed the second limb.

The court held that IBM’s development of technology in the US which assisted racial separation did sufficiently “touch and concern” the US, again meeting the first limb. In applying the second part of the Mastafa test the court held that aiding and abetting theory requires the plaintiff to show that the defendant:

  • provided practical assistance to the principal which had a substantial effect on the perpetration of the crime; and
  • it did so with the purpose of facilitating the commission of that crime (where mere knowledge is insufficient).

The court held that the plaintiffs had not shown that IBM developed its technology with the purpose of denationalising black South Africans. This claim therefore failed the second limb.

Commentary

The decision demonstrates the significant barriers faced by victims of human rights violations in pursuing remedies against corporations in the US. In particular, the mens rea requirement that the defendant’s conduct must have been for the purpose of violating customary international law highlights the difficulty in holding corporations accountable.

The full text of the decision can be found here.

Erika Codognotto is a Law Graduate at King & Wood Mallesons

MichelleBennettDiscrimination & Equality