In June, the judgment of  the US Supreme Court (SCOTUS) in NESTLE USA, INC. v. DOE ET AL diminished the impact of the US Alien Torts Act on US based corporations with international supply chains.

As is known, the case involved human rights abuses outside the territory of the United States. The six respondents from Mali alleged that they had been trafficked as child slaves to work on cocoa farms on the Ivory Coast. They stated that the produce from these farms was bought by US based companies, Nestlé USA, Inc., and Cargill, Inc. It was also stated that these companies provided “technical and financial resources” to these farms. The respondents accordingly were seeking  extraterritorial application of the Alien Tort Statute (ATS) to sue Nestlé USA and Cargill in the States. The ATS, a US federal law, provides federal courts with jurisdiction to hear cases that have been brought by non – US citizens for torts committed in violation of the law of nations or a treaty of the United States.

By an 8-1 majority, Justice Clarence Thomas delivered the majority judgment allowing the appeal. According to SCOTUS, the respondents had failed to sufficiently establish domestic application of ATS. Justice Thomas stated that the respondents could not ascertain “sufficient connection between the cause of action and the domestic conduct” of these companies that are based out of US. The respondents’ case, dismissed at first instance then upheld in part by the Ninth Circuit, was that Nestlé USA and Cargill “knew or should have known” that the farms had been exploiting child slaves. SCOTUS disagreed, holding that what was being claimed as significant involvement of the companies in the form of “technical and financial resources” like “training, fertilizer, tools, and cash” by respondents was only “mere corporate presence”. Further, the fact that the companies had exclusive right to buy cocoa from the Ivory Coast farms was also not found to be a strong enough argument against the companies. Their involvement amounted to “operational decisions” at the farms and that the allegations about “aiding and abetting forced child labour” were described as “generic allegations” by the court.

The reasoning of the court was based on the earlier cases brought under the ATS. In Sosa v. Alvarez-Machain, it was stated that court may in future create new causes of action under ATS if the claim involved violation of international norms. However, the court instead relied  on a more recent ATS decision of Jesner v. Arab Bank wherein it was ruled that the creation of a cause of action under the ATS would give rise to “foreign policy concerns”. Further, as per  Kiobel v. Royal Dutch Petroleum there is a general presumption against the extraterritorial application of US law.  SCOTUS also referred to the ‘touch and concern’ test to determine whether petitioners could sue defendants for violations of law of nations that occurred outside the territory of US. Justice Alito and Justice Thomas concurred that claims bought under the ATS must touch and concern the territory of the US and this must be done with sufficient force so as to shift the presumption against extraterritorial application. Justice Thomas held that the allegations brought before the court are in the nature of “general corporate activity like decision-making” and do not establish domestic application of the ATS.

The Nestlé decision has again left a gap when it comes to deciding corporate liability of US based companies in cases of human rights harms. Justice Thomas suggested limiting the invocation of ATS to the causes of action as decided by the First Congress. Through this case, SCOTUS may have extensively limited the scope of ATS when the cause of action involves a US based corporation whose conduct affects and impacts individuals abroad.

The issue of child labour in the cocoa industry in Africa has been recognized by the US for over a decade. In June 2001, Congressman Eliot Engel (D-NY) and then-Senator Tom Harkin (D-IA) had drafted and introduced legislation that required chocolate products that were being sold in the United States to have a “slave-free” label. The intention was to introduce a labelling system to assure the consumers in the country that no forced labour had been employed in production of chocolate products. This protocol was signed by leading chocolate companies and endorsed by the Côte d’Ivoire government, the child labour office of the International Labour Organization, Free the Slaves, the Child Labour Coalition, the International Cocoa Organization and the National Consumer League.It is important to note here that this protocol was not binding but merely a statement of intent.

Farms in Côte d’Ivoire and Ghana combined produce more than 60% cocoa for the world and according to the U.S Bureau of International Affairs, cocoa plantations in these two places alone employ more than 1.65 million children with 43% of them engaging in hazardous work.

Civil society has taken an important role in ensuring corporate accountability in the cocoa supply chains. In a lawsuit filed by the Corporate Accountability Lab (CAL) in October 2021. CAL has sued the Hershey Company and the Rainforest Alliance Inc. for making false and deceptive marketing representations of Hershey’s Rainforest Alliance certified chocolate products as “sustainable” and “responsible” when in fact the supply and production of these products contributes to the grievous and unsustainable labour abuses that are endemic in the cocoa industry. This is a consumer protection case brought under the Consumer Protection Procedures Act (a statute in the Washington DC providing non-profit organizations working for the public interest the opportunity to bring claims on behalf of the public and last codified on November 13, 2021).

CAL has contended that Rainforest Alliance’s certification with respect to responsible sourcing of the product and Hershey’s deceptive marketing of its products certified by Rainforest alliance is deceiving consumers. CAL also contended that Hershey’s Rainforest Alliance certified Products have a well-documented connection to child labour and other exploitative labour practices, and the certification does little to guarantee sustainability in the cocoa supply chain.

CAL in its complaint has also given evidence of child labour being employed by the farms in West Africa including Hershey’s admission in spring 2019 that it “could not guarantee that any of their chocolates were produced without child labour.”

Over the past year, CAL’s investigators have also documented instances of hazardous child labour on Rainforest Alliance certified farms in different parts of Cote d’Ivoire and spoken with farmers who explain that they don’t earn enough from cocoa farming to support their families.

It is interesting to note that CAL has claimed that the Superior Court of District of Columbia has personal jurisdiction over the Hershey Company and the Rainforest Alliance Inc. on the grounds that they were engaged in deceptive acts that were directed at people residing in the District of Columbia. Further, the consumers in the District had access to their products and services since their marketing and sales was happening in the District which made them subject to the laws of the District.

The CAL case aims at US consumers. Failure to exercise their influence or choosing to overlook what happens on these farms clearly will have not only legal but reputational risks for these companies as well.  With significant resources being provided by the companies as seen in Nestlé’s case, these companies can clearly exert their influence to ensure human rights violations and in particular that child labour is not employed on these farms. While the CAL case is yet to be decided, it is clear that the decision given in the earlier cases will not act as a deterrent to non-profit organisations.

More recent legal developments in the United States include the US House of Representatives in December 2021 passing the Bill that will ban imports from Xinjian region of China made with forced labour. An older draft Bill entitled the “Corporate Human Rights Risk Assessment, Prevention, and Mitigation Act of 2019” was introduced two years ago in the form of an amendment to the Securities Exchange Act, 1934 in the pre-Biden administration. It was introduced before a hearing of the U.S. House Subcommittee on Investor Protection, Entrepreneurship and Capital Markets. If it achieves renewed momentum, this would require publicly listed companies in the United States to conduct human rights due diligence on their supply chain and report their findings to the U.S Securities and Exchange Commission.  Overall, despite the setback in June, there is some hope in a Biden-led Administration for developments in business and human rights in the United States. 

Sanjini Jain is a Business and Human Rights Lawyer currently based out of India. She holds an LL.M. in Sustainable International Development Law from University of Washington School of Law, Seattle, and B.A.LL.B. (Hons) from India.

Bhavinee Singh is a Lecturer and Assistant Dean at Jindal Global Law School, OP Jindal Global University, India. She holds an LL.M. in Human Rights Law and International Humanitarian Law from Emory University, School of Law, Atlanta, and B.A.LL.B. (Hons) from India.