Litigation SECOND CIRCUIT REJECTS CORPORATE LIABILITY UNDER THE ALIEN TORT STATUTE

Transcription

1 Milbank Litigation New York Los Angeles Washington, DC London Frankfurt Munich Beijing Hong Kong Singapore Tokyo São Paulo SECOND CIRCUIT REJECTS CORPORATE LIABILITY UNDER THE On September 17, 2010, a panel of the Second Circuit ruled 2-1 in Kiobel v. Royal Dutch Petroleum Co. 1 that the jurisdiction granted by the Alien Tort Statute ( ATS ) 2 extends only to civil actions against individuals, and not to actions against corporations. Over the past two decades, many ATS cases in the Second Circuit and in other federal courts have been brought against corporations for violations of international law committed abroad, engendering an ongoing debate over the applicability of the ATS to corporate entities. Writing for the majority, Judge Jose Cabranes noted that despite a domestic legal culture long accustomed to imposing liability on corporations... customary international law has steadfastly rejected the notion of corporate liability for international crimes. 3 Background of the Case Kiobel was initially filed as a class action complaint in 2002 by plaintiffs from the Ogoni Region of Nigeria, against corporate defendants Royal Dutch Petroleum Company, Shell Transport and Trading Company, and their subsidiary, Shell Petroleum Development Company of Nigeria, Ltd ( SPDC ). SPDC had been involved in oil exploration and production in the Niger Delta since 1958, and its activities were protested by residents of the Ogoni Region, who formed a group called the Movement for Survival of the Ogoni People. 4 Plaintiffs allege that the defendant corporations aided and abetted the Nigerian government in violent suppression of the protests, which included beating, raping, and arresting residents, and destroying or looting property... 5 Plaintiffs specifically claimed that defendants aided and abetted (1) extrajudicial killing, (2) crimes against humanity, (3) torture or cruel, inhuman, or degrading treatment, (4) arbitrary arrest and detention, (5) violation of the rights to life, liberty, security, and association, (6) forced exile, and (7) property destruction. 6 1 F.3d, Nos cv, cv, 2010 WL U.S.C Kiobel, 2010 WL at *1, *3. 4 at *5. 5 at *5. 6 For further information about this Client Alert, please contact: Sander Bak sbak@milbank.com Felix Weinacht fweinacht@milbank.com Alka Pradhan apradhan@milbank.com You may also contact any member of Milbank s Litigation Group. Contact information can be found at the end of this Client Alert or in the Practice Areas section at www. milbank.com. This Client Alert is a source of general information for clients and friends of Milbank, Tweed, Hadley & McCloy LLP. Its content should not be construed as legal advice, and readers should not act upon the information in this Client Alert without consulting counsel. 2010, Milbank, Tweed, Hadley & McCloy LLP. All rights reserved. Attorney Advertising. Prior results do not guarantee a similar outcome.

2 2 The District Court dismissed plaintiffs claims for aiding and abetting property destruction, forced exile, extrajudicial killing, and violations of the rights to life, liberty, security, and association, stating that customary international law does not provide sufficiently specific definitions for these crimes. 7 However, the District Court declined to dismiss the remaining claims, and certified its order for interlocutory appeal before the Second Circuit panel. The Court s Reasoning Judge Cabranes first noted that the question of corporate liability under the ATS has been lurking for some time, 8 arising occasionally before the Second Circuit without being directly addressed, and in several instances being assumed for the purpose of the decision. 9 Analysis of the issue by the majority was two-pronged: first, determining whether international law or domestic law governs the question; and second, examining international law for pronouncements on corporate liability. 10 The majority found that, per the language of the statute and the Supreme Court s decision in Sosa v. Alvarez-Machain, claims may be filed based on the present-day law of nations. 11 Additionally, Sosa provided that, in determining whether a norm is sufficiently defined to support a cause of action, a related consideration is whether international law extends the scope of liability for a violation of a given norm to the perpetrator being sued, if the defendant is a private actor such as a corporation or an individual. 12 Judge Cabranes recounted that the Second Circuit previously looked to international law to determine other questions of subject-matter jurisdiction under the ATS. 13 Therefore, he concluded, we are required to look to international law to determine whether corporate liability for a violation of the law of nations, is a norm accepted by the civilized world and defined with a specificity sufficient to provide a basis for jurisdiction under the ATS Judge Cabranes then embarked upon an exhaustive analysis of international law from established sources, 15 including international tribunals, international treaties, and the work of legal scholars and jurists. Beginning with the International Military Tribunal at Nuremberg (which was authorized to try natural persons only 16 ) and the subsequent United States Military Tribunals (which prosecuted corporate executives for their roles in violating customary international law during the Second World War, but not the corporate entities themselves 17 ), the majority found that international tribunals have, without exception, refrained from imposing liability on corporations. This practice has been continued by the International Criminal Tribunal for the Former Yugoslavia (ICTY) and the International Criminal Tribunal for Rwanda (ICTR). According to Judge Cabranes, examination of the drafting of the Rome Statute of the ICC, confirm[ed] the absence of any generally recognized principle or consensus among States concerning corporate liability for violations of customary international law Kiobel v. Royal Dutch Petroleum Co., 456 F.Supp. 2d 457 (S.D.N.Y. 2006). 8 Kiobel at *6. 9 See, e.g., Presbyterian Church of Sudan v. Talisman Energy, Inc., 582 F.3d 244, 261 n.12 (2d Cir. 2009); Khulumani v. Barclays Nat l Bank Ltd., 504 F.3d 254, (2d Cir. 2007); Abdullahi v. Pfi zer, Inc., 562 F.3d 163 (2d Cir. 2009); Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88 (2d Cir. 2000). 10 Kiobel at *6. 11 at *7 (quoting Sosa v. Alvarez-Machain, 542 U.S. 692, 725 (2004)). 12 at *8 (quoting Sosa at 732 n.20). 13 See, e.g., Filartiga v. Pena-Irala, 630 F.2d 876, 880 (2d Cir. 1980) (foreign government officials may be liable for crimes under the ATS); Kadic v. Karadzic, 70 F.3d 232, (2d. Cir. 1995) (private individuals may be liable for crimes under the ATS); Talisman, 582 F.3d at (aiders and abettors may be liable for crimes under the ATS). 14 Kiobel at *11 (quoting Sosa at 725). 15 As provided by Article 38(1) of the Statute of the International Court of Justice, identifying the authoritative sources of international law as international conventions, international custom, general principles of law as recognized by civilized nations, and judicial teaching and teachings of highly qualified publicists. 16 Kiobel at * at *14 (citing Trials of War Criminals Before the Nuremberg Military Tribunals Under Control Council Law No. 10 (The Farben Case) (1952)). 18 at *16.

3 3 Next, Judge Cabranes parsed through international treaties. At the outset, he noted that the mere fact [t]hat a provision appears in one treaty (or more)... is not proof of a well-established norm of customary international law, 19 as custom requires the creation of legal obligations upon states, as well as widespread state compliance. 20 Based on this standard, the majority disqualified several international treaties relied upon in previous district court decisions. Further, the handful of treaties imposing obligations on corporations that have been ratified by a majority of states do not, according to the majority, establish a norm of customary international law. 21 The majority also expressed concern that [u]nilaterally recognizing new norms of customary international law... would potentially create friction in our relations with foreign nations and, therefore, would contravene the international comity the statute was enacted to promote. 22 Finally, Judge Cabranes examined the statements of legal scholars and jurists, citing in particular two renowned professors of international law, Professor James Crawford and Professor (now Judge) Christopher Greenwood for the proposition that corporate liability does not exist under international law. 23 Judge Greenwood, Judge Cabranes pointed out, stated unequivocally that there is not, and never has been, any assertion of the criminal liability of corporations in international law. 24 Judge Cabranes concluded by noting that this decision does not confer immunity on corporations, but rather compels potential plaintiffs to file suit against a corporation s employees, managers, officers, directors, or any other person who commits, or purposefully aids and abets, violations of international law. 25 In the meantime, [t]he Alien Tort Statute does not provide subject matter jurisdiction over claims against corporations. 26 Judge Leval s Separate Opinion The third member of the panel, Judge Pierre Leval, concurred with the majority insofar as he believed that the plaintiffs failed to properly plead their claims with sufficient facts. However, Judge Leval s separate opinion so strongly criticized the majority that it effectively amounts to a dissent. He pointed out that one of the major ramifications of the decision was that compensatory damages may be awarded under the ATS against the corporation s employees, natural persons who acted in the corporation s behalf, but not against the corporation that commanded the atrocities and earned profits by committing them. 27 Further, Judge Leval stated that international law, having established norms, leaves the manner of enforcement, including the question of whether there should be private civil remedies for violations of international law, almost entirely to individual nations. 28 The United States, in enacting the Alien Tort Statute, provided such a civil remedy, and draws no distinction in its laws between violators who are natural persons and corporations. 29 Judge Leval also noted that in his opinion, the majority s decision conflicted with the humanitarian objectives of international law at * (citing Flores v. S. Peru Copper Corp., 414 F.3d 233, 256 (2d Cir. 2003)). 21 at * at *19. See, e.g., Khulumani, supra n at *20-* (citing Second Declaration of Christopher Greenwood 13, Presbyterian Church of Sudan v. Talisman Energy, Inc., No. 01 Civ (S.D.N.Y. July 10, 2002)) at * at * at * at *29.

4 4 Conclusion Judge Cabranes acknowledges the passion with which Judge Leval disagrees with [the] holding, which is likely to encourage an appeal to the Second Circuit to hear the case en banc, if not an attempt to take the case to the Supreme Court. 31 Because previous ATS decisions within the Second Circuit (as well as in several other circuits) have relied upon the assumption that corporations are liable under the ATS, the majority s decision creates a schism within the existing case law. An appeal is likely to first debate the question of whether international or domestic law should govern jurisdiction under the ATS, and then argue that domestic law allows for corporate liability, and that there is a nascent norm of corporate liability in international law. Although this decision may constitute a victory for corporations in that they would no longer be subject to claims under the ATS, it may be reasonably assumed that, should the panel s decision be upheld, the majority of ATS actions will be reformulated to target corporate executives and other employees. However, it is arguably more difficult for plaintiffs lawyers to satisfy the requisite pleading standards when alleging the liability of corporate individuals in committing or aiding and abetting crimes under the ATS, than it is to assemble evidence of corporate liability (at least in the preliminary stages of litigation) for often well-publicized violations of international law. 31 at *4.

5 5 Please feel free to discuss any aspect of this Client Alert with your regular Milbank contacts or with any member of our Litigation and Arbitration Group listed below. New York Wayne M. Aaron Thomas A. Arena Sander Bak James N. Benedict, Chair James G. Cavoli Christopher E. Chalsen Scott A. Edelman David R. Gelfand John M. Griem, Jr Douglas W. Henkin Michael L. Hirschfeld Lawrence T. Kass Robert J. Liubicic Sean M. Murphy Michael M. Murray Daniel Perry Stacey J. Rappaport Richard Sharp Alan J. Stone, Practice Group Leader Errol B. Taylor Andrew E. Tomback Fredrick M. Zullow Washington, DC David S. Cohen Robert J. Koch Andrew M. Leblanc Michael D. Nolan Los Angeles Linda Dakin-Grimm Jerry L. Marks Mark Scarsi London Julian Stait OFFICES WORLDWIDE NEW YORK LOS ANGELES WASHINGTON, DC LONDON FRANKFURT MUNICH BEIJING HONG KONG SINGAPORE TOKYO SÃO PAULO