THE SHIFTING TIDES OF US JURISDICTION OVER FOREIGN CORPORATIONS

Few rulings draw as much attention from a non-US audience – in particular, non-US investors and corporations with some operations or assets in the United States – as the US Supreme Court’s rulings relating to the jurisdictional reach of United States courts. In particular, the US Alien Tort Statute has been the focus of several recent rulings that together will likely bring about significant change in the extraterritorial reach of US courts.

The Alien Tort Statute was passed in 1789 and was largely unused until the 1980s, when plaintiffs’ lawyers saw it as an opportunity to use the US judicial system to pursue tort claims against foreign corporations.

When transnational tort claims are filed in US courts under state tort laws, jurisdictional motions are a key early battleground because US courts are empowered to decide claims arising out of conduct that occurred outside of the forum state only if the court has personal jurisdiction over the defendant. The US recognises two types of personal jurisdiction: specific jurisdiction, which often arises if the acts at issue occurred in the forum state, and general jurisdiction, which typically arises if the defendant has sufficient contacts with the forum state to be susceptible to suit, even if the acts at issue occurred elsewhere.

Non-US corporations generally seek to limit their litigation exposure in the US by doing business in the US only through subsidiaries and limiting their own direct contact with the US. Simply owning the stock of a US subsidiary is not generally sufficient to bring a foreign parent corporation within the general jurisdiction of a US court.

Apr-Jun 2014 issue

Gibson, Dunn & Crutcher LLP