International Business Law Advisor Insights on International Litigation & Transactions

Corporate Liability Goes Before U.S Supreme Court. Troubling Paradox May Result.

Posted in Corporate Governance, International Litigation

Several weeks ago, I presented a webinar for the Florida Bar’s International Law Section Webinar Series titled 5 Ways Corporations Can Avoid International Liability. One of the five areas I focused on was corporate liability under the Alien Tort Claims Act (ATCA).

It seems the timing could not have been better, as the U.S. Supreme Court is set to hear oral arguments on Tuesday on whether corporations may be sued in the same manner as “individuals” under the ATCA for torts committed abroad in violation of international law or U.S. treaties.

If the issue sounds familiar, it’s because the U.S. Supreme Court answered a similar question in the context of campaign finance in Citizens United.

Kiobel v. Royal Dutch Petroleum Co.  will be the first case to address the “personhood” of a corporation since Citizens United was decided.

This case will be heard in tandem with Mohamad v. Palestinian Authority, which raises a similar question involving claims against non-natural persons under a different statute — the Torture Victim Protection Act.

ATCA Background.

The ATCA originally appeared in Section 9 of the first Judiciary Act of 1789, which created the U.S. court system.

The statute provides that “the district courts shall have original 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.”

While the law was originally intended to protect US financial interests from piracy on the high seas, it was revived in the early 1980s to seek accountability for overseas human rights violations, such as extrajudicial killings.  The early-1990s saw the first ATCA case filed against corporations, and now dozens of companies face such suits.

In fact, according to Marcia Coyle of the National Law Journal “since its enactment in 1789, about 150 Alien Tort Statute cases have been brought. Of that total, about 50 are pending at any one time in federal district and circuit courts.”

Coyle further notes that, in recent years, settlements and judgments have ranged from $1.5 million to $80 million.

At present the majority of the circuits hold that corporations may be subject to liability under the ATCA.

The outlier is the split decision in Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111 (2d Cir. 2010), set to be heard tomorrow.

In Kiobel, a three-judge panel addressed head-on the question of corporate liability under the ATS in a case brought by Nigerian residents against Dutch, British and Nigerian oil companies for allegedly aiding and abetting the torture and killing of residents who protested the environmental effects of the companies’ drilling in their region.

Two of the judges concluded that “although customary international law has sometimes extended the scope of liability for a violation of a given norm to individuals, it has never extended the scope of liability to a corporation.

In other words, no corporate liability–corporate defendant wins.

Thus, the U.S. Supreme Court will decide in the next few months whether the Kiobel court got it right.

Corporations Are People And They’re Not.

In light of the Court’s decision in Citizen’s United, a decision affirming the 2nd Circuit in Kiobel, would lead to a troubling  paradox, no?

On the one the hand, because it’s a person, a corporation can make unlimited political contributions.

Yet on the other hand,  because it’s also not a person, a corporation is immune from prosecution for the most atrocious international human rights violations, i.e. murder, torture and rape.

Or as Maxwell Kennerly explains it in his excellent post, Originalism and Corporate Personhood Meet The Alien Tort Statute:

‘Corporations may soon have “rights without responsibilities.’ They will have the unrestrained right to influence your government, but not the slightest responsibility to compensate the victims of their own human rights violations.”

A troubling paradox indeed.