Trying an Old Law

In one case, Royal Dutch Shell is expected to appear before a federal court this week to answer charges of human rights abuses in Nigeria, where the company operated, in the 1990s. An even larger case, in which South African plaintiffs accuse several American, European and Asian companies of aiding and abetting the apartheid system that prevailed in South Africa until 1994, has been cleared to proceed to trial.

 

The basis for both lawsuits is the Alien Tort Statute of 1789, which was designed largely to protect diplomats. Since 1980, however, victims of human rights abuses outside the United States have begun to use this obscure statute to seek justice in U.S. courts.

 

The language of the statute is expansive. It grants federal courts jurisdiction to hear tort cases brought by aliens where the tort was “committed in violation of the law of nations or a treaty of the United States.”

 

The cases follow a common pattern. A company does business in a country where the government abuses human rights. The government cannot be sued in U.S. courts because of sovereign immunity, but the company is accused of aiding and abetting the government’s policies.

 

Examples of claims include allegations of forced labor in Burma to build a pipeline, forced relocation of local populations in Sudan to facilitate oil exploration, violence against protesters in Nigeria and the anti-apartheid case.

 

The consolidated South Africa case is exceptional both in scope and in time. The initial lawsuits included claims against more than 20 multinational corporations in industries ranging from armaments and transportation to finance and computer technology. Some of the claims date back to 1960.

 

Critics of extraterritorial tort liability want the U.S. Congress to repeal or restrict the law, complaining that its jurisdiction is far too broad. They also argue that courts should not interfere with foreign policy decisions of the U.S. government.

 

However, the very existence of the statute, passed by the first Congress and signed by President George Washington, is evidence of a legislative intent to allow courts to decide cases that may have a foreign policy dimension.

 

Yet companies are correct in arguing that they need clearer guidance about what activities are proscribed.

 

For example, the judge in the South African case found that companies that provided transportation and computer services could be legally liable, but international banks that may have provided financing for these activities could not be. The next judge to hear a similar case might well draw the line in a different place.

 

A fundamental problem is that virtually any commercial business that is conducted with a government accused of systematic human rights abuses will free up resources that can be used by that government to commit bad acts.

 

Asking judges to establish retroactive liability rules on a case-by-case basis is a recipe for disaster. Plaintiffs will engage in forum shopping; different courts will come to different conclusions, leading to unfair outcomes, and business investment into developing countries will fall.

 

The vagueness of the Alien Tort Statute also does a poor job of protecting victims of human rights abuses because the lack of substantive standards makes it difficult to win in court and does little to encourage responsible business standards in a global economy.

 

That vagueness may also create friction with other countries to the extent that it is seen as a grant of extraterritorial or even universal jurisdiction to U.S. federal courts, making companies and individuals around the world subject to U.S. law without their knowledge or consent.

 

It would make more sense for the Group of 7 or the Organization for Economic Cooperation and Development (OECD) to launch a comprehensive review of corporate responsibility and liability. Such an initiative should be launched at the head-of-state level to avoid the fate of other efforts that have foundered for lack of political follow-through.

 

We already have a model of how this might work. After consultation with American companies in the late 1970s, the U.S. government promulgated the Foreign Corrupt Practices Act, a legal standard prohibiting bribery of foreign officials by U.S. companies or individuals. Since then the number of bribes paid by U.S. corporations has declined significantly. The OECD has since adopted an anti-bribery convention that has now been adopted by 38 countries.

 

The final goal for corporate liability reform should be a multilateral convention that provides clear guidelines for business along with consistent legal standards and enforcement mechanisms in each signing country.