A court case that could invite specious international damage claims to the U.S.
(published in The Wall Street Journal, Feburary 28, 2012)
This Tuesday the Supreme Court will hear arguments in two cases that should interest every U.S. company doing business overseas, and especially those operating in the developing world. Kiobel v. Royal Dutch Petroleum Co. and Mohamed v. Palestinian Authority raise the issue of whether corporations can be sued for violations of international law under U.S. statutes, including the Alien Tort Statute.
The ATS was adopted in 1789 by the first U.S. Congress. The statute permits suits by aliens in federal courts for certain alleged international-law violations, but it was moribund for nearly 200 years and its purpose remains opaque. The best guess is that Congress wanted to provide a means by which the U.S. could fulfill its international obligations to vindicate a very discrete set of damage claims by diplomats and other foreign nationals injured or abused by Americans.
Beginning in the 1980s and 1990s, however, activists and plaintiffs’ lawyers began using the law as a means of suing foreign nationals, and then U.S. nationals and companies, in federal court for alleged human rights abuses overseas. They included abuses perpetrated not by the defendant corporations but by the foreign governments with which the companies have done business. This type of “aiding and abetting” liability reached its high-water mark in Khulumani v. Barclay National Bank Ltd. (2002), a case brought in Manhattan’s federal district court against dozens of U.S. companies that had done business with the South African government during that country’s apartheid years.
The trial judge properly dismissed the case, but the U.S. Court of Appeals for the Second Circuit partially reversed that decision, permitting the ATS claims to go forward. The Supreme Court initially agreed to review the case but then changed its mind because too many Justices would have had to recuse themselves, being shareholders in one or more of the defendant companies. The Second Circuit decision that corporations could be sued under the ATS merely for doing business with the wrong government stands.
In Kiobel and Mohamed, the Supreme Court will again have the opportunity to bring some certainty and sanity to this area of the law. Those cases involve international tort (or damage) claims against nonnatural “persons”—oil companies alleged to have aided and abetted international law violations by Nigeria’s government in Kiobel, and by the Palestinian Authority for torture and extrajudicial killing in Mohamed.
Traditionally, international law applied only to nation states. As Emmerich de Vattel, an early and influential scholar much admired by the Constitution’s Framers, explained in the 18th century: “The law of nations is the science of the law subsisting between nations or states, and of the obligations that flow from it.” Exceptions for individuals involved piracy and attacks on diplomats or those traveling under “safe conducts,” the very claims the ATS was likely meant to address.
Yet these exceptions applied only to natural persons. The recognition of corporate entities as legal “persons” is a relatively recent development. There is no basis in customary international law—the actual practice of states in their dealings with each other—for corporate liability on the international level.
Even the dissolution of German companies implicated in Nazi atrocities after World War II was not a judicial action. The corporate entities did not stand in the dock at Nuremberg. Their punishment was a political decision by the victorious Allies intent on creating a new, democratic Germany.
Extending ATS violations to corporate entities would go beyond what international law supports. It would open U.S. courthouse doors to international disputes in which the U.S. itself may have little if any interest and/or which are more appropriately dealt with at the diplomatic level.
Permitting ATS actions against corporate entities would also expand a new frontier for plaintiffs’ lawyers, seeking out wrongs committed by foreign governments overseas and then bringing actions for money damages against U.S. companies who may have dealt with, or even simply operated in, those countries. It will add to the litigation explosion that already has done much harm to the U.S. economy and society.
Messrs. Rivkin and Casey served in the Justice Department under Presidents Reagan and George H.W. Bush. They have filed amicus curiae briefs in opposition to corporate liability in both the Kiobel and Mohamed cases.