04 May The ATS Corporate Power Vacuum
Kudos to Northwestern’s Searle Center on Law, Regulation, and Economic Growth for a wonderful conference on ATS litigation last week. The papers by David Scheffer & Caroline Kaeb, John McGinnis & Ilya Somin, Jide Nzelibe, Michael Barsa & David Dana, Anthea Roberts, and Eugene Kontorovich were all outstanding. There are many topics worthy of retelling, but I wanted to focus on one issue that animated much of the discussion.
Not surprisingly, the topic of corporate liability featured prominently in the discussion. Corporations are quite exercised about their potential liability, and they are proving extremely sophisticated in their response.
What are the ramifications of this new wave of litigation against corporations? One would think that holding corporations liable for aiding and abetting government abuse will have a deterrent effect on future corporations. But the discussion last week seemed to suggest that an unintended consequence of this new trend may be for corporations to simply avoid certain parts of the world, leaving an ATS corporate power vacuum to be filled by competitors from China or India that do not have a U.S. nexus, do not share the same corporate values, and, shall we say, have a heightened appetite for risk.
For example, Talisman Energy has long been a favorite whipping boy for ATS litigation. But what may have gone unnoticed by most observers is that Talisman sold its investment in Sudan in 2002 to an Indian corporation, ONGC Videsh Ltd. As reported here, “Talisman attributed the decision to sell to shareholder fatigue and to the concern that its shares were being discounted based on perceived political risk. The divestment did not, however, achieve the results desired by its proponents. Talisman’s sale of its indirect interest in the project did not interrupt or even slow oil production (in fact, oil production is higher today than when Talisman sold its indirect interest in the project) and concerns regarding human rights violations in Sudan continue. The corporate responsibility initiatives and transparency that Talisman brought to the project have disappeared.”
Anecdotally, I have heard similar comments from defense counsel in the extraction industry, who state that if they are found liable for aiding and abetting human rights violations, they will simply stop doing business in certain parts of the world, leaving those areas to their brutish competitors.
Of course, one should not paint with a broad brush when speaking about the future. It may well be that the extraction industry is unique and that in other industries, such as textiles or agriculture, corporations may simply move their operations elsewhere if they cannot secure government cooperation for minimum labor and environmental standards.
But a key message of the conference was that the ramifications of holding corporations liable for human rights abuses may not be as salutary as one would expect. If western corporations are found liable for dirty deeds in the dark corners of the world, the unintended consequence may be that a corporate power vacuum will be filled by even worse actors who are beyond the long arm of the ATS law.
Second what Roger says above – great meeting, and my thanks to the organizers. Also, I share what Roger says substantively above. The meeting identified a number of instabilities in ATS jurisprudence, some of which are essentially Sosa-derived and thus fundamentally about US law. But two crucial ones were an important topic of discussion in the meeting and they are, so to speak, “prior” to Sosa in the sense that they are not about how US courts should address these questions, but instead go to the question of what is the “law of nations.” Can there be a law of nations if (a) you are a corporation and it is not traditionally believed, outside of the ATS case law, that you can even violate international law as a corporate entity, and (b) the nature of the violation, the international law violation itself, is civil and not criminal, given that there is not general agreement outside of the ATS jurisprudence that there is such a thing as general civil liability. I of course have expressed strong views on each of those propositions, but had somewhat assumed that it was a dead discussion within the context of ATS cases citing each other,… Read more »
It’s sad to see that U.S.-based companies, while perhaps not as cruel or difficult as others, are still treating workers poorly wherever they can. Until they caught by Americans, of course.
Ken,
I assume you agree that individuals can violate international law. I assume you would also agree that a corporation is a legal fiction that is recognized under some particular domestic law and is made up of various individuals: managers, shareholders etc., Your question then about a corporation violating international law as a corporate entity is really a question about whether the act of incorporation under domestic law has the effect of immunizing a corporation from respecting the obligations that the individuals behind the corporation have.
It’s all well and good to say that traditionally corporations have not been seen as actors in international law (although the same could be said of individuals until relatively recently). But at some point isn’t it incumbent on those who are resisting the expansion of international law to corporations to justify the strict demarcation between corporations and individuals that seems to make very little logical sense? There were very serious discussions as part of the Rome Conference to extending the ICC’s jurisdiction to legal persons so it is not as though the concept of corporate liability for international law violations only occurs within the ATS bubble.
Is there any empirical basis for a belief that corporate actors from non western countries may be worse ?
I don’t believe so, Mr. Bulbulia, I think the implication is that they’re at least as bad, and not accountable to the ATS or public shareholders in general, hence, the ATS has had a negative effect on actual human rights as a whole.
“The corporate responsibility initiatives and transparency that Talisman brought to the project have disappeared.””
Well we are going to get some guidance from the Supreme Court in the Pfizer case. And…possibly in Talisman where the pls have filed a cert request (Apr 15) claiming the Second Circuit erred in applying int’l law vis a vis secondary liability and regardless even under int’l law the proper standard is knowledge not purpose. So we are going to get minimum 1 Court ruling possibly two with respect to corp liability. This of course does not include Khulumani where a decision from the 2nd Circuit is pending. Interesting times for this area of the law.
To follow up Milan’s comment on corporate criminal responsibility, there has been a lot of interesting scholarship during the last five or so years on to the question of whether and how to bring corporations as “legal persons” and not just their individual directors, managers and employees under the jurisdiction of international criminal law. There have been interesting articles on the topic in the Criminal Law Forum, and the Oxford Journal of International Criminal Justice. According to an Editorial in the March 2010 issue, upcoming Vol. 8, # 3 of the JICJ will be a special issue devoted to corporate criminal liability (edited by Florian Jessberger and Julia Geneuss), the theme of the Conference organized by the Journal in association with Humboldt University in Berlin in May 2009. Those interested in this development should check out the announcement of the award of the Antonio Cassese Prize for International Criminal Law Studies , 2003-2008 to James G. Stewart, Assistant Professor, Faculty of Law, University of British Columbia, Vancouver, in part to further the completion of his book project, ‘Atrocity, Commerce, and Accountability: The International Criminal Liability of Corporate Actors’. The full text of the announcement and a Prof. Stewart’s detailed book proposal can be… Read more »
Relevantly to Milan’s excellent comment on the corporation as an association of persons, that strikes me as very similar to the reasoning of the USSC in <i>Citizens United</i>. especially Scalia J’s reasons.
So maybe there is indeed life in that dog yet.
Is Abdullahi v Pfizer still ongoing? Thought Pfizer decided to settle.
We might see the Talisman case before the Supreme Court, that would certainly be… interesting. I don’t hold out much hope of the plaintiffs winning their case should they survive dismissal, however.
Dear M Gross,
I presume you are asking because I referred to Pfizer in my post above. You are correct Pfizer did settle but with the Nigerian state of Kano which had sued Pfizer in Nigeria. I believe the federal govt of Nigeria also sued nigeria although I am uncertain of the status of that Nigerian litigation.
With respect to Talisman its a tough call. The Harvard human rights clinic filed an amicus in support of pls cert petition which was well written and researched and really makes a powerful case for the claim that the standard under international law for aiding and abetting is knowledge and not purpose. But of course getting cert is not in the bag so at this point the only case we know for sure the Sup Ct will hear is Pfizer. There are plenty of unresoved ATCA issues in Pfizer.