Translate Lex Sustineo

Sunday, May 5, 2013

Anna Kirkpatrick: Kiobel v Shell - What the decision says and what it left out

Anna Kirkpatrick of Norton Rose in London England discusses the recent US Supreme Court decision in Kiobel v. Shell, and the implications of the decision for business and human rights expectations and litigation in the United States. 
This decision is particularly of interest for Equator Principles (EP) financings in light of the human rights due diligence requirements of the new IFC Performance Standards on Environmental and Social Sustainability, incorporated by reference into the EP.

Read on for Anna's discussion of what the decision says and what remains to be determined in US law.


On 17 April 2013 the US Supreme Court ruled unanimously that all the claims of the petitioners in the case of Kiobel v Royal Dutch Petroleum Co. et Al No. 10-1491 fell outside the jurisdiction of the Alien Tort Statute, 28 U.S.C. §1350 (ATS). The court held that the ATS does not have territorial effect unless claims “touch and concern” the US with sufficient force to rebut the presumption that the ATS does not have extraterritorial effect. Here, all the relevant conduct took place outside the US: there was no reason to rebut the presumption.

For Esther Kiobel and the other petitioners, this marks the end of one potential avenue of redress for human rights abuses they suffered in the early 90s. Moreover, they failed to hold Shell accountable for its alleged part in those abuses. This also marks the end of a long wait for authoritative guidance on the future of the scope of the ATS, a jurisdictional statute dating from 1789 that permits civil actions in the US courts by non-US citizens to pursue remedies for torts that violate either international law or a treaty that the U.S. has signed.

Though unanimous, the Supreme Court’s decision was reached on strikingly different bases by the different judges. Moreover, one of the key questions addressed to the Supreme Court: whether there exists corporate liability for breaches of international law, remains unanswered.

For now, the decision bars all cases where there is no connection between the claim and the conduct or the injury suffered or the domicile of the defendant to the US (so called “F-cubed” cases). However, it would be na├»ve to suggest that ATS litigation will have no further application or, indeed, influence on the interconnected worlds of business and human rights.

Ogoni’s grievances

The petitioners were residents of Ogoniland, in the Niger delta area of Nigeria. The respondents, Royal Dutch Petroleum Company and Shell Transport And Trading Company plc, were holding companies incorporated in the Netherlands and England respectively. Their joint subsidiary, respondent Shell Petroleum Development Company of Nigeria, Ltd (SPDC) was incorporated in Nigeria.

In 1995 after concerned residents of Ogoniland began protesting the environmental effects of SPDC’s practices, SPDC allegedly enlisted the Nigerian Government to violently suppress the growing demonstrations regarding the oil pollution in the Niger Delta. It is alleged that throughout the early 1990’s, Nigerian military and police forces attacked Ogoni villages, beating, raping, killing and arresting residents and destroying or looting property.

SPDC allegedly aided and abetted this by, among other things, providing the Nigerian forces with food, transportation and compensation, as well as by allowing the Nigerian military to use the SPDC’s property as a staging ground for attacks. Nine of the protestors, including Ken Saro-Wiwa and Dr Barinem Kiobel, were hung by the government. Following these alleged atrocities, 12 petitioners including Esther Kiobel (the wife of the late Dr Kiobel) moved to the United States as refugees, where they reside as citizens.

Issues before the Court

In 2004, the petitioners filed suit in the United States District Court for the Southern District of New York, alleging jurisdiction under the ATS and requesting relief under customary international law against the wrongs allegedly committed by the respondents in aiding and abetting the Nigerian Government in several crimes. The District Court dismissed four of the claims, reasoning that the facts alleged to support those particular claims did not give rise to a violation of the law of nations.

On appeal the issue before the court was whether corporations, and not merely individuals, can be held liable under the ATS. In a split decision in 2010, the Second Circuit dismissed the entire complaint, reasoning that the law of nations does not recognise corporate liability in respect of international law.[1]

The Supreme Court of the United States granted certiorari on this issue. Multiple amicus briefs were submitted on behalf of the respondents and the petitioners and also on a neutral basis. These included a brief by Mr John Ruggie, the then UN Special Representative on Business and Human Rights. In March 2012, the Supreme Court took the unusual step of ordering supplemental briefing on the further issue of whether and under what circumstances the ATS allows courts to address violations of the law of nations (also known as customary international law) that occur outside the United States.

Splintered Decision

The majority decision, delivered by Chief Justice Roberts held that the presumption against extraterritoriality applies to claims under the ATS, and nothing in the statute rebuts that presumption. He reasoned that the principles underlying the presumption against extraterritoriality constrained the courts in exercising their power under the ATS. The Court gave four key propositions of law in support of its conclusion. Firstly, the presumption against extraterritoriality applies to claims under the ATS. Secondly, nothing in the statute rebuts that presumption. Thirdly, there was no clear indication in support of extraterritorial application here where all the relevant conduct took place outside the United States and where the claims did not touch and concern the territory of the United States with sufficient force to displace the presumption. Lastly, since corporations are often present in many countries, it would reach too far to say that mere corporate presence suffices to displace the presumption.

The majority considered the purposes and intention of the statute of itself. In particular, the majority considered but dismissed arguments that the ATS’ reach over piracy (a violation of the international law of nations at the time that the ATS was created) evinces such an intention. The Court was clearly mindful not to stray into making foreign policy decision.

The minority judgment of Justice Breyer, with which Justice Ginsburg, Justice Sotomayor and Justice Kagan concurred, agreed with the majority’s conclusion but, importantly, did not agree with its reasoning. Justice Breyer started by commenting that the presumption against territoriality is not helpful in determining the jurisdictional reach of the statute. Instead Justice Breyer took as his starting point the Supreme Court’s judgment in Sosa v Alvarez-Machain 542 U.S. 692, 732 (2004).

He first analysed the purpose and intention of the ATS. This required an understanding of the substantive “grasp” of the statute. His view was that the ATS was enacted with “foreign matters” in mind. In particular, in relation to jurisdiction over piracy, the intention of the statute was to provide compensation to those who have suffered harm at the hands of pirates, the “enemy of all mankind”.

Justice Breyer referenced the general obligation not to provide a safe harbour for their own nationals who commit serious crimes abroad with certain states allowing suit against foreign nationals by foreign nationals based on conduct abroad. Moreover, he noted that the US has committed to finding and punishing perpetrators of serious crimes against foreign persons abroad.

Taking Sosa’s lead, Justice Breyer answered the question of who are today’s pirates: torturers and perpetrators of genocide. By allowing claims to be brought by those aggrieved by acts of piracy, the purpose of the statute today is to provide compensation for those injured by today’s pirates. This substantive analysis (which included an analysis of international law) should inform the initial question of whether jurisdiction can be found. Therefore, he stated that he would have found jurisdiction under the ATS in the three instances below:
  1. The alleged tort occurs on American soil,
  2. The defendant is an American national, or
  3. The defendant’s conduct substantially and adversely affects an important American national interest, and that included a distinct interest in preventing the United States from becoming a safe harbour for a torturer or other common enemy of mankind.
This approach is, Justice Breyer noted, justified since it is consistent with the approach taken in international customary law (i.e. by other states), and also with the substantive decision taken in Sosa. Notably, instances 2 and 3 both allow jurisdiction where the majority’s decision would not since the majority appears only to allow cases under instance 1, unless the presumption against extraterritoriality can be rebutted. That said, he also said that the test is limited by principles of forum non conveniens, comity and the exercise of due consideration of the role of policy makers. Most importantly, it is limited by the need for a distinct American interest to be in play. For Justice Breyer, nothing should allow the US courts to turn a blind eye to victims of heinous crimes, and it is a distinctly US matter not to allow the US to become safe harbour for perpetrators of those crimes.

Nevertheless, despite this differing reasoning, Justice Breyer also found no jurisdiction on the facts of this case: there was no conduct by the respondents that was within the jurisdiction, nor were they American nationals (instance 1 or 2 did not apply). As to instance 3, it would be “farfetched”, given the minimal corporate presence that the respondents had on US soil in this case, to think that a finding of jurisdiction here would prevent a “modern day pirate” from using the US as a safe harbour, against US national interests.

Justice Alito, Justice Thomas and Justice Kennedy agreed with the decision of the majority, but also made clear that the the “touch and concern” test that the court rested on, was narrow and also leaves much unanswered.

The two main reasonings have different effects (even though the outcome was the same on these facts). The effect of Justice Roberts’ decision is to limit the use of the US as a stage for the world’s grievances over corporate related human rights abuses. Justice Breyer also considers it important not overstep the line into policy making. That said, by placing importance on the wish that US does not become a safe harbour for perpetrators of heinous crimes as an American interests, and by looking at the effect of the remedy that that the ATS could offer to guide whether jurisdiction should vest, Justice Breyer’s decision places the impact of corporate actions on the ability of victims of human rights abuses to seek redress at the heart of the debate. This chimes with the types of considerations that the UN Guiding Principles on Human Rights seek to promote. That said, in this instance, it is Justice Roberts’ decision (and not Justice Breyer’s) that has binding effect.

Scope for future litigation

It is clear that cases with no connection to the US will no longer be able to proceed under the ATS. That said, litigation will still be required to further define the scope of the ATS. When will the presumption against extraterritorial application of the ATS be overcome? On the majority’s reasoning, what claims do “touch and concern” the US with “sufficient force”?

Within the US, the effects of this case on pending US cases are already being felt with a number of cases being dropped or reconsidered. For example, following Kiobel the Supreme Court has ordered a reconsideration of a ruling in the case Rio Tinto v. Sarei, 11-649 granting jurisdiction over the case, should be reconsidered. On 2 May 2013, Turkcell announced that it has dropped its case against MTN Group Ltd under the ATS, given the outcome in the Kiobel case.

What will be the effect of this case outside of the US? One commentator has already noted that this may well “help usher in a brave new world of transnational litigation where federal, state, and foreign courts compete to regulate international human rights claims.”[2]

Without question, the issue of corporate responsibility for human rights responsibilities is currently high up on the agenda. Those interested in seeking redress for human rights abuses have suffered a setback, but it is unlikely to be the end of the story.


[1] Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111, 123 (2d Cir. 2010). In particular: “because customary international law imposes individual liability for a limited number of international crimes — including war crimes, crimes against humanity (such as genocide), and torture — we have held that the ATS provides jurisdiction over claims in tort against individuals who are alleged to have committed such crimes. As we explain in detail below, however, 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.”

[2] Kiobel commentary: An ATS answer with many questions (and the possibility of a brave new world of transnational litigation), D. Childress, 18 April 2013.

No comments: