Sunday, September 19, 2010

US Appellate Court Rules Corporations Not Subject to ATS Suits

In June 2009, we reported on this blog that Royal Dutch Shell had reach a multi-million dollar settlement in a lawsuit alleging that its Nigerian subsidiary colluded with the former military government in Nigeria to silence environmental and human rights activists who protested the construction of a pipeline in the Ogoni region of Nigeria.  That post can be fround here.  The suit was brought by family members of the victims in U.S. District Court in New York under the Alien Tort Statute (ATS), 28 U.S.C. sec. 1350. 

That settlement did not end all the litigation, however, On Friday, the U.S. Court of Appeals for the Second Circuit affirmed a decision by the lower district court that corporate entities are not liable under customary international law for tortious behavior.  Kiobel et al. v. Royal Dutch Shell, Docket Nos. 06-4800-CV, 06-4876-CV (Sept. 17, 2010).  In response to plaintiffs' claims that defendant corporations may be held liable for aiding and abetting in violations of the law of nations, the Second Circuit stated:

"We hold, under the precedents of the Supreme Court and our own Court over the past three decades, that in ATS suits alleging violations of customary international law, the scope of liability—who is liable for what—is determined by customary international law itself.  Because customary international law consists of only those norms that are specific, universal, and obligatory in the relations of States inter se, and because no corporation has ever been subject to any form of liability (whether civil or criminal) under the customary international law of human rights, we hold that corporate liability is not a discernable—much less universally recognized—norm of customary international law that we may apply pursuant to the ATS. Accordingly, plaintiffs’ ATS claims must be dismissed for lack of subject matter jurisdiction."

The Court's holding certainly deals a significant blow to a number of ATS suits brought against corporations.  It also does not help to advance the development of international law with respect to non-state parties.  However, the Court is probably correct that there is not a rule of customary international law that is well accepted and defined within the meaning of the U.S. Supreme Court's decision in Sosa v. Alvarez-Machain that imposes liability on corporations for collusion in tortious behavior under international law.  Corporations are certainly liable for their behavior under many domestic laws.  And, the Court pointed out, it may be possible to hold individual directors, officers and employees of the corporation liable for any tortious behavior in which they personally engaged (depending upon domestic laws shielding directors and officers from corporate liability). 

On the other hand, it may be argued that the Court's analysis fails to separate the tortious behavior from the actor that engages in the behavior.  The ATS says nothing about who commits the tort.  It only requires that a tort in violation of the law of nations is committed. Thus, if the Court were to find that the alleged behavior constitutes a tort in violation of the law of nations, the ATS leaves open the possiblity that a corporate entity may be held liable for that tort.  Resolution of this issue may await a decision by the U.S.Supreme Court.

The court's decision is perhaps a call for international action.  While there are several non-binding codes of corporate responsibility, most human rights treaties and other documents do not speficially address the role and responsibilities of corporate entities.  Multinational corporations use and are subject to customary international law every day.  In fact, the laws of international business and trade grew out of customary law of merchants.  If corporations can take advantage of international law to aid in the development and growth of their business, they should also be subject to international law in other respects, including respect for human rights obligations.  Corporate responsibility under international law is an area of law where much work remains to be done. 


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This is shocking in view of the many U.S. and foreign decisions recognizing rights and duties of companies and corporations under internaitonal law, including a 1795 Opinion of the U.S. Att'y Gen. recognizing company rights under the ATCA, a 1907 Opinion of the U.S. AG recognizing company liaiblity under the ATCA for violating a treaty, and an 1899 U.S. Supreme Court case recognizing that a company had a right under a treaty, etc.
JJ Paust

Posted by: Jordan Paust | Sep 20, 2010 10:16:59 AM

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