Human rights activists may no longer be able to raise actions against companies in US courts

The US court decision came as a bombshell. Corporate liability is not recognised under international law and therefore multinational corporations are no longer susceptible to human rights claims filed by victims living outside US borders.

The September ruling by the US court of appeals for the second circuit in Kiobel v Royal Dutch Shell reverses nearly two decades of case law premised on a 200-year-old statute, the Alien Tort Claims Act, establishing jurisdiction for torts “committed in violation of the law of nations or a treaty of the United States”. The second circuit is one of 11 US appeals courts, covering cases in Connecticut, New York and Vermont.

The decision was a complete surprise to human rights campaigners who had used the law as a pass-through mechanism linking the US judicial system to a limited set of human rights claims involving violations of international norms that are “specific, universal and obligatory”.

In these cases, mere corporate presence in a zone of abuses is not enough to establish liability, says Beth van Schaack, an associate professor at Santa Clara University School of Law specialising in human rights law. Barring direct responsibility linked to employment status, van Schaack says, one needs to show “both that there’s been material and substantial support of the violations and that the corporation knew that its support would further those violations”.

The court’s rationale rests heavily on the notion that “no international tribunal has ever held a corporation liable for a violation of the law of nations”.

“Part of the problem is that human rights treaties are not drafted with corporations in mind,” says van Schaack. International law has traditionally addressed state actors and individuals as the perpetrators of such crimes – not “juridical” persons such as corporations.

Previously powerful

Application of the alien tort statute (ATS) to corporations first passed muster in a 2001 ruling in which Unocal was found complicit in the Burmese military’s use of violence and intimidation to relocate and force villagers to work on a pipeline project.

“There are lots of cases where courts have allowed ATS claims to proceed forward, and the main reason is that lawyers didn’t make the right argument,” says Joe Cyr, an attorney with the law firm Hogan Lovells.

“Campaigners may wish the 200 sovereign states on this planet uniformly accept and adopt the idea that international law recognises corporate liability but it’s not true,” Cyr says. “They don’t.”

But if parties to corporate alien tort cases feel they’re now on the defensive, the game isn’t quite yet over.

As circuit judge Pierre N Leval observes, it can also be argued that no international tribunal has ever held that a corporation could not be liable for a violation of the law of nations, an inverse reasoning based on the logical extension of existing norms.

Motions to dismiss ATS claims are expected and since the US supreme court has declined to hear the Kiobel case on appeal, attorneys are now bracing for a long fight ahead.

Van Schaack points out that judges in the other regional circuits are not bound by the second circuit ruling. “Many of the multinational corporations that have been subject to suit are subject to jurisdiction all over the country,” he says. “But it will be authoritative and it will be read very carefully by judges.”

See p39 for more analysis of this decision.

“According to the rule my colleagues have created, one who earns profits by commercial exploitation of abuse of fundamental human rights can successfully shield those profits from victims’ claims for compensation simply by taking the precaution of conducting the heinous operation in the corporate form,” Leval declares.

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