By Timothy P. Harkness & Carlos Ramos-Mrosovsky
(Timothy P. Harkness is a litigation partner, and Carlos Ramos-Mrosovsky is an international arbitration associate, at Freshfields Bruckhaus Deringer US LLP. The authors have both represented clients in cases arising under the Alien Tort Statute.)
Plaintiffs have increasingly used the U.S. Alien Tort Statute (ATS) to sue multinational corporations over their alleged role in abuses ranging from genocide in the Sudan to South Africa’s apartheid. This may change with the U.S. Supreme Court’s anticipated decision in Kiobel v. Royal Dutch Petroleum.
In Kiobel, Nigerian plaintiffs accuse the Royal Dutch Petroleum and its affiliate Shell Transport and Trading Company PLC, of complicity in the arrest, torture and killing of protestors by government forcesin Nigeria’s oil-rich Ogoni region. Kiobel puts two crucial issues before the Supreme Court: (1) whether corporations may be held liable for violations of international human rights norms under the ATS, and (2) whether the ATS allows U.S. federal courts to hear claims based on activity in a foreign country.
The Supreme Court’s decision is expected in the first half of 2013.
The ATS gives U.S. federal courts jurisdiction over “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, the ATS was mostly ignored until the 1980 decision of the 2nd U.S. Circuit Court of Appeals in Filartiga v. Peña-Irala(630 F.2d 876).The Filartiga Court interpreted the ATS to allow the parents of a Paraguayan citizen tortured and killed by a Paraguayan security official to bring suit against the alleged perpetrator, then present in the United States, on the basis of the customary international law prohibition against torture. Dozens of cases seeking redress for human rights abuses in many of the world’s most violent regions followed.
In recent years, however, ATS plaintiffs have often targeted corporate defendants, often on the theory that a defendant corporation “aided and abetted” human rights abuses committed by governments or other armed groups in a country where it does business. Multinational corporations are attractive defendants. They have deep pockets and cannot easily avoid the jurisdiction of U.S. courts. Nor can they raise the sovereign immunity defenses available to the governmental defendants who may be directly responsible for abuses.
Corporate defendants have faced an extraordinary variety of ATS claims. Defendants are usually multinational companies operating in developing countries, often, but not exclusively, in the extractive industries. Corporate defendants have been accused of aiding and abetting genocide through the payment of royalties on oil production to violent regimes, and, as in Kiobel, of complicity in abuses committed by government forces against protestors opposed to oil and gas development. Corporate defendants have also been sued over claims of forced labor on African rubber plantations and for allegedly collaborating with death squads to have labor organizers murdered in Colombia. Plaintiffs have also brought claims for labor trafficking in the Middle East and even for allegedly suborning war crimes in the context of internal conflicts over control of resources. In another case, plaintiffs sued dozens of the world’s largest corporations on the theory that they aided and abetted apartheid by doing business with South Africa’s apartheid era government and indirectly helping to keep it in power.
Most of these cases are eventually dismissed and there has yet to be a jury verdict against a multinational corporate defendant in an ATS case. That said, at least two such cases have actually gone to a jury, and there have been several multi-million dollar settlements. More to the point, the reputational costs for a company sued over human rights abuses are enormous, regardless of whether the company ultimately is, should be, or even can be found liable in court.
THE SUPREME COURT HAS GIVEN LITTLE GUIDANCE ON THE ALIEN TORT STATUTE
ATS cases are not simple cases. Courts applying the ATS must wrestle with the practical difficulties of adjudicating emotionally- and politically-charged cases about violent events that took place far away. They must also ascertain—and in the process participate in defining—the content of “customary international law,” and all while avoiding interference with the Executive Branch’s conduct of U.S. foreign policy.
Despite, or perhaps even because of, these difficulties, the Supreme Court has largely left the ATS to be hashed out by lower courts. Before Kiobel, the Supreme Court had examined the scope of liability under the ATS only once, in the 2004 case of Sosa v. Alvarez-Machain. In Sosa, the Court cautiously endorsed the post-Filartiga understanding of the statute, but imposed a crucial (and confusing) limit. Under Sosa, only violations of international law norms as “specific, universal, and obligatory” as were the international law norms against piracy, violation of safe conducts and infringement of the rights of ambassadors at the time of the ATS’ enactment, may support an ATS action. This complicated formulation may have been meant to discourage plaintiffs’ more creative legal theories, but left many questions unanswered. Among these was the extent to which corporations may be held civilly liable in an ATS action premised on international law.
After the Second Circuit broke with other courts to rule against corporate ATS liability in Kiobel, the Supreme Court announced that it would hear the case.
KIOBEL BEFORE THE SUPREME COURT
During an initial round of briefing and argument in February of 2012, lawyers for the Kiobel petitioners insisted that the question of what kinds of defendants could be held liable under the ATS was to be determined by U.S. law, under which corporate liability is unremarkable. Counsel for Royal Dutch Petroleum disagreed, arguing that the question of what kind of defendant may be held liable for a violation of international law is itself a matter of international law. They further pointed to the lack of international legal authority supporting specifically corporate liability for human rights abuses to argue that the Kiobel plaintiffs’ claims should be dismissed. The ATS itself, a one sentence statute, is not particularly helpful in resolving this debate.
Rather than decide Kiobel on corporate liability, the Supreme Court asked another question. It ordered supplemental briefing and re-argument as to “whether and under what circumstances the Alien Tort Statute . . . allows courts to recognize a cause of action for violations of the law of nations occurring within the territory of a sovereign other than the United States.” The Court’s Order raised the stakes: while a decision finding corporate liability unavailable under the ATS would have created a serious hurdle for future plaintiffs, a ruling that the ATS is simply inapplicable to conduct in foreign countries could all but bring post-Filartiga ATS litigation in U.S. courts to an end.
HOW WILL THE COURT DECIDE?
How the Court will decide Kiobel remains to be seen. Having interpreted the ATS only once before, the Justices are writing on a nearly blank slate. The Justices returned no less than four separate and overlapping opinions in Sosa, however. Unanimity seems equally unlikely in Kiobel.
But the Justices’ remarks during both rounds of argument do suggest a shared concern about U.S. courts becoming a forum for politically-sensitive foreign disputes with little connection to the United States. Justice Alito warned that ATS litigation could generate “international tension,” and repeatedly asked why a case like Kiobel, in which Nigerian plaintiffs have sued an Anglo-Dutch oil company over conduct alleged to have occurred in Nigeria,belonged in a U.S. court. Justice Kennedy, who often holds the balance between the liberal and conservative wings of the Court, likewise pressed counsel for the Kiobel petitioners to explain what connection their case had to the United States.
Members of the Court’s liberal wing also hinted that they might be willing to at least rein in the ATS, although they will likely be concerned to preserve some scope for international human rights litigation in U.S. courts. Justice Ginsburg asked counsel for Royal Dutch on how the Court might distinguish Kiobel so as to avoid overruling Filartiga outright. Meanwhile, Justices Kagan and Sotomayor expressed interest in adopting an “exhaustion” requirement that might require plaintiffs to seek relief abroad before turning to the ATS as a “last resort.” The U.S. Department of Justice, participating at the Court’s invitation, likewise urged the Court to dismiss Kiobel but avoid a “categorical rule foreclosing” the application of the ATS to conduct occurring in a foreign country. The Court may combine any of none of these alternatives with a decision on corporate liability, on which issue the Justices also appear to have varying views.
Statements during argument are an unreliable predictor of the Supreme Court’s decision, but there seems to be no constituency on the Court in favor of allowing the Kiobel petitioners’ particular claims to go forward. Barring a major surprise, the question is then the basis on which the Court will affirm their dismissal. The most favorable outcome for corporations concerned about ATS liability would of course be a ruling that the ATS applies neither to corporations nor outside the United States. But even if the Court does not go quite that far—a plurality may settle on an approach that dismisses Kiobel but leaves some room for claims that show a closer U.S. “nexus” — Kiobel is still likely to be a significant win for corporate defendants in ATS cases.