The 2nd U.S. Circuit Court of Appeals rejected outright Friday the theory that corporations can be held liable in the United States under the Alien Tort Statute for violations of international law in foreign countries.
In a sweeping decision rebuffing a lawsuit against The Royal Dutch Petroleum Co. and others for allegedly aiding and abetting human rights violations during oil exploration in Nigeria, the court declared that "corporate liability is not a discernible -- much less universally recognized -- norm of customary international law that we may apply pursuant to ATS (Alien Tort Statute)."
Judge Dennis Jacobs joined Judge Jose A. Cabranes' 50-page majority opinion in settling an open question in the circuit. Judge Pierre Leval concurred only in the judgment as he issued an 88-page opinion of his own saying the majority opinion "deals a substantial blow to international law and its undertaking to protect fundamental human rights."
The court in Kiobel v. Royal Dutch Shell, 06-4800-cv, affirmed the dismissal of several claims by Southern District of New York Judge Kimba Wood but also said that the remaining claims, including aiding and abetting crimes against humanity, should be thrown out as well.
Plaintiffs were Nigerian citizens who claimed that Dutch, British and Nigerian corporations should be held liable for human rights violations committed by the Nigerian military with the companies' assistance, including attacks on people in the Ogoni region who were protesting the environmental effects of oil exploration in the area.
They claimed the companies provided transport to the troops, allowed company property to be used as staging areas for attacks and provided food to the soldiers and paid them. The plaintiffs sued for torture, extrajudicial killing and other violations under the Alien Tort Statute, 28 U.S.C. §1350, which imposes liability for a "violation of the law of nations."
The U.S. Supreme Court has not ruled on the issue of corporate liability under the statute, which was passed in 1789 to allow non-U.S. citizens to seek redress in American courts for violations of the law of nations such as piracy, attacks on ambassadors and violations of the rights of safe passage.
But the Supreme Court has rarely addressed the statute, which Judge Cabranes said lay "dormant" until it was revived by the 2nd Circuit in 1980, when it ruled U.S. courts could entertain a foreign citizen's suit claiming torture in a foreign country in Filartiga v. Pena-Irala, 630 F.2d 876 (1980).
Many lower courts have assumed that there can be corporate liability under the statute but that will change following Friday's decision.
On Friday, Cabranes wrote that the circuit was holding that, under U.S. Supreme Court precedent, Sosa v. Alvarez-Machain, 542 U.S. 692 (2004), and the 2nd Circuit's own precedents over the past 30 years, "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 the State 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," Cabranes said, the court lacks jurisdiction under the ATS.
The judge said, "A legal culture long accustomed to imposing liability in corporations may, at first blush, assume that corporations must be subject to liability under the ATS, just as corporations are generally liable in tort under our domestic law," but the ATS only opens up liability for violations of international law.
"By conferring subject matter jurisdiction over a limited number of offenses defined by international law, the ATS requires federal courts to look beyond the rules of domestic law -- however well-established they may be -- to examine the specific and universally accepted rules that the nations of the world treat as binding in their dealings with one another."
The judge said "the singular achievement" of international law since World War II has been in the area of human rights, where the subjects of international law now include not merely states, but also individuals."
Beginning with the Nuremberg trials, he said, the guiding principle has been to focus "not on abstract entities" but on the individual men and women who have committed international crimes such as war crimes, genocide and torture.
He said customary international law "has steadfastly rejected the notion of corporate liability for international crimes, and no international tribunal has ever held a corporation liable for a violation of the law of nations."
Cabranes noted "nothing in this opinion limits or forecloses suits under the ATS against the individual perpetrators of violations of customary international law -- including the employees, managers, officer, and directors of a corporation -- as well as anyone who purposefully aids and abets a violation of customary international law."
Paul Hoffman of Schonbrun DeSimone Seplow Harris Hoffman & Harrison in Venice, Calif., argued for the plaintiffs.
Rowan D. Wilson of Cravath, Swaine & Moore argued for the defendants.
Jonathan Drimmer of Steptoe & Johnson in Washington, D.C., who lectures on the Alien Tort Statute at Georgetown Law School and advises multinational corporations on complying with the ATS, said, "This is a major decision that is going to knock down corporate ATS actions, obviously in the 2nd Circuit, but it will also have broad-reaching application outside the circuit."
Drimmer, who was not involved in this case, said, "You read the decision, and, if you accept the premise that it is international law that governs the question, then the analysis seems pretty persuasive."
Ralph Steinhardt, a professor at George Washington Law School who served as co-counsel in the Sosa case, said there are a number of previous decisions that "would not have been possible" without the assumption that corporations can be held liable under the ATS.
This issue "has thrown the circuit into disarray," said Steinhardt, who is not involved in this case. "Filartiga itself, the fountainhead of ATS litigation, would have been impossible if Judge [Irving] Kaufman had looked to other examples of torturers being held civilly liable. Filartiga understood that the law of nations had changed."
Steinhardt said "at a minimum, the 2nd Circuit needs to hear this en banc to try and bring some order out of this chaos."