On July 7, 2023, the US Court of Appeals for the Ninth Circuit ruled that proceedings against Cisco System under the Alien Tort Statute (ATS) can proceed. In this decade long trial, practitioners of Falun Gong – a Chinese religious movement – alleged that they or family members were victims of human rights abuses including torture, arbitrary detention, forced labour, extrajudicial killing and forced disappearance committed by the Chinese Communist Party and Chinese government officials. According to the claimants, the alleged abuses were enabled by technological assistance of Cisco System, a US company which designed, implemented and helped to maintain a surveillance and internal security network (the Golden Shield system) for Chinese officials, greatly enhancing their capacity to identify Falun Gong practitioners and persecute them. In 2011, claimants sued Cisco for aiding and abetting Chinese officials in violation of the ATS.
Both the District Court and the Court of Appeal stayed the case pending several Supreme Court’s decisions related to the ATS.
In 2014, the US District Court for the District of Maryland dismissed the claim under the ATS, ruling that claimants did not conduct sufficient to satisfy the standard for aiding and abetting liability under international customary law and to overcome the presumption against the extraterritorial application for the ATS.
The Court of Appeal reaffirmed aiding and abetting liability under the ATS and held claimants’ allegations against Cisco sufficient to meet the applicable aiding and abetting standard. The Court also concluded that the case involved a permissible domestic application of the ATS against Cisco, as most of the defendant’s alleged conduct constituting aiding and abetting occurred in the US.
After several Supreme Court rulings drastically limiting the possibility to use the ATS for corporate accountability this ruling is a ray of light coming through an almost closed door.
Alien Tort Statute and corporate accountability: a door still ajar but subject to vigilant door keeping
The Alien Tort Statute provides federal courts 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.” Enacted in 1789 to promote harmony in international relations by ensuring foreign plaintiffs, in particular ambassadors, a remedy for international law violations in cases where the absence of such remedy might provoke foreign nations to hold the US accountable, the precise contours of the ATS remained largely undefined for nearly two hundred years.
In the last two decades, four Supreme Court’s rulings progressively narrowed the scope of the ATS, three of which related to cases brought against companies for their alleged role in human rights abuses.
In Sosa v Alvarez Machain (2004), the Court delineated a high bar for recognition of new causes of action under the ATS. Noting that at the time the ATS was enacted, common law recognised only three causes of action (violation of safe conducts, infringement of the rights of ambassadors and piracy), the Supreme Court concluded that under the ATS only claims that “rest on a norm of international character accepted by the civilised world and defined with a specificity comparable to” those causes of action may be recognised. The Supreme Court also required courts to consider foreign policy consequences and separation of power concerns before recognising a cause of action or allowing a particular case to proceed.
In Kiobel v Royal Dutch Petroleum (2013), the Court ruled that the ATS does not apply extraterritorially and that “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.” In addition, in Nestle USA v Doe (2021), the Court specified that allegations of general corporate activity in the US, including corporate decision-making, were insufficient to show domestic conduct warranting application of the ATS.
Finally, in Jesner v. Arab Bank (2018), the Court ruled that foreign corporations could not be sued under the ATS.
Cisco, the case that passes all the tests
Aiding and abetting liability
As defined in Sosa and reiterated in Jesner, any new cause of action must meet a two-part test: (1) the international norms must be specific, universal and obligatory and (2) the court must determine whether allowing a case to proceed is a proper exercise of judicial discretion.
Reviewing the types of international law sources identified in Sosa and Article 38(I) of the Statute of the International Court of Justice (which outlines authoritative sources of international law), as applicable to aiding and abetting liability, the Court of Appeal found that customary international law recognises aiding and abetting liability as a specific and universal form of liability. The Court recalled that several courts have held that aiding and abetting liability claims may proceed under the ATS in addition to its own prior holdings on the matter. It concluded that aiding and abetting liability is sufficiently definite and universal to be a viable form of liability under the ATS, then satisfying the first prong of the two-part test.
Regarding the second prong, the Court analysed foreign policy consequences and deference to Congress to assess proper exercise of judicial discretion.
First, the Court considered that recognising aiding and abetting liability did not trigger foreign policy concern – that ATS claims could impose liability on sovereign nations for behaviour with respect to their own citizens – and that such recognition well served the original goals of the ATS. The Court noted that “international concern with violations of human rights or the failure to provide an adequate forum for their vindication may also be of some relevance – in this instance, potential scrutiny by the international community generally for a failure to provide a forum in which U.S. citizens and corporations can be held accountable for violating well-defined and universal international norms, including aiding and abetting liability”. The Court also pointed out that no foreign government or Executive Branch agency had submitted an amicus brief, declaration or letter objecting to this lawsuit while there had been plenty of time to do so.
Second, after reviewing regulations and congressional actions the defendant cited, the Court concluded that there were no sound reasons to think Congress might doubt the efficacy or necessity of recognising aiding and abetting liability under the ATS. “Congress and the Executive’s decision not to regulate or prohibit generally the export of computer networking software does not conflict with the recognition that U.S. corporations may be liable, in designing and selling certain software under certain circumstances, for aiding and abetting violations of international law.”
Judge Christen dissented considering that, while holding Cisco liable would not directly impose liability on the Chinese government for its conduct, it would necessarily require a showing that Chinese authorities violated international law. According to the judge, such a finding could have “serious ramifications for Sino-American relations, fraught as they already are.”
Despite this dissenting opinion, the Court concluded that aiding and abetting liability is a norm of customary international law with sufficient definition and universality to establish liability under the ATS which does not raise separation of powers or foreign policy concern so that such liability is cognisable under the ATS.
Standard for accomplice liability
The Court then assessed whether the standard for accomplice liability was determined by customary international law.
Regarding the actus reus, the Court noted that the parties did not dispute that assistance with substantial effect on the perpetration of an international law violation was the correct standard, but they disagreed on the meaning of “assistance with substantial effect”. Cisco argued that customary international law requires claimants to allege that a defendant’s conduct is “specifically directed” toward the commission of a crime. The Court referred to international tribunals case law (Yugoslavia and Sierra Leone Tribunals) to reject Cisco’s view and affirm that the current consensus is that aiding and abetting liability requires only that a defendant provide assistance, of any kind, with substantial effect on the perpetration of an international law violation.
Given Cisco’s significant technological assistance (the use of such technology to identify, detain and torture Falun Gong practitioners) and the timing of that assistance (at that time, Chinese authorities did not have equivalent technological tools), the Court concluded that claimants plausibly alleged that Cisco provided assistance with substantial effect on Chinese authorities’ violations of international law.
As for the mens rea, the Court first noted the absence of a domestic consensus as to the mens rea requirement of aiding and abetting under international law. While two courts held that customary international law requires a defendant to act with the purpose of facilitating the crime, one court disagreed concluding that aiding and abetting liability only requires knowledge that a defendant’s actions will assist in the commission of the crime; the principal disagreement between those courts being the weight each accorded to the Rome Statute.
When analysing international case law, the Court found that all major international tribunals to try individuals for aiding and abetting liability for war crimes after World War II used the knowledge standard and that more recently, international criminal tribunals interpreting and applying customary international law have continued to use and refine the knowledge standard. Then, the Court analysed the Rome Statute which refers to the purpose standard in Article 25(3)(c). While the Court agreed that the Rome Statute as a treaty could be an authoritative source of international law, it stressed that several considerations cautioned against applying the Statute’s purpose standard to the ATS. Referring to the negotiation process of the Statute as well as to its Articles 10 and 22(3), the Court affirmed that the Rome Statute is not customary international law and that using the purpose standard would go against the universality and specificity criteria required by the Supreme Court (“Adopting a single provision at odds with nearly every other authority subverts the international law inquiry required by Sosa”). The Court therefore concluded that knowledge is the standard required by customary international law.
Claimants argued that Cisco had knowledge of the intended uses of the Golden Shield system, particularly its use in the persecution of Falun Gong as defendant’s marketing materials and internal reports showed. Further, persecution of Falun Gong practitioners was documented by reports from independent news outlets in the US and Europe and government entities such as the US State Department which issued reports on the Falun Gong situation as early as 1999 and every year since. Additionally, several shareholders resolutions documented concerns regarding abuses arising from the provision of technology abroad, “especially in China”. Therefore, the Court concluded it was a plausible claim that Cisco provided essential technical assistance to the persecution of Falun Gong practitioners with awareness that torture, arbitrary detention, disappearance and extrajudicial killing were substantially likely to take place.
Extraterritoriality
As stated in Kiobel and reaffirmed in Nestle, claimants must demonstrate that the conduct at skate occurred in the United States as the ATS does not apply extraterritorially.
Claimants argued that Cisco designed, developed and optimised important aspects of the Golden Shield surveillance system in California, that Cisco manufactured hardware for the Golden Shield system in California and that employees in California provided ongoing maintenance and support. The Court found that such arguments well exceeded “mere corporate presence” or simple corporate oversight and direction, so the case involved a permissible domestic application of the ATS.
State action
Finally, in its defence Cisco argued that the claim required a showing of state action and that plaintiffs failed to demonstrate that Cisco acted under colour of state law.
State action refers to the requirement for a claimant to have standing to sue over a law being violated to demonstrate that the government was responsible for the violation.
While the Court agreed that certain conducts violate international law only when undertaken by states actors or those acting under colour of state law, the Court pointed out that not all violations of international law require state action. It further explained that claimants needed not establish that Cisco itself acted under colour of state law, but rather, for at least some of the alleged international law violations, that Cisco aided and abetted the offenses of a state actor.
According to claimants, Cisco not only aided and abetted the Chinese Communist Party (which is distinct from the Chinese state), but also Chinese state law enforcement known as Public Security which participated extensively in the development and use of the Golden Shield surveillance system. As such allegations were plausible, the Court concluded that the state action requirement was satisfied.
Conclusion
By allowing proceedings to continue, the Court of Appeal gives some hope back to those who thought human rights litigation and corporate accountability under the ATS was a dead end. Although cases like the Cisco case that will meet Sosa, Jesner, Kiobel and Nestle tests are rare, this ruling is a reminder to all US companies that they cannot ignore human rights and neglect the impacts of their activities and business relationships.
Finally, this case perfectly illustrates why conducting downstream human rights due diligence is critical, particularly (but not only) for companies selling or licensing technologies.