Author Archive for
Roger Alford

Ancillary Discovery in Aid of Foreign or International Proceedings

by Roger Alford

I have posted on SSRN my latest article, “Ancillary Discovery to Prove Denial of Justice” just published in the Virginia Journal of International Law. It analyzes Section 1782 discovery proceedings in the context of BIT arbitration and argues that there is now uniform agreement among federal courts that investment arbitration panels are “international tribunals” within the meaning of Section 1782.

But the article has salience outside that context, and could be applied to many foreign or international proceedings. One plaintiff involved in a French proceeding, for example, served a discovery subpoena on a French party while he was visiting a museum on vacation in the United States, thereby incorporating American discovery into the French proceeding. A German defendant in a German proceeding issued a Section 1782 discovery subpoena on the American plaintiff, and thereby incorporated non-reciprocal American-style discovery into the German proceeding.

The article presents several conclusions regarding the growing use of ancillary discovery in international adjudication, particularly in the context of investment arbitration claims against respondent states.

First, ancillary discovery under Section 1782 reflects a congressional intent to allow interested parties to avail themselves of liberal discovery under the Federal Rules of Civil Procedure, resulting in the indirect incorporation of American-style discovery into foreign or international proceedings. If this trend continues, American discovery will become an important ancillary mechanism to gather evidence, in addition to and perhaps in lieu of the traditional evidence gathering procedures utilized by foreign or international tribunals. For example, I outline in the article how all the important fraud information Chevron received against Ecuador came from Section 1782 proceedings, not evidence gathering pursuant to foreign or international proceedings.

Second, liberal discovery pursuant to Section 1782 promotes evidentiary forum shopping, encouraging parties to pursue ancillary discovery in the United States rather than rely on the discovery procedures available in foreign or international proceedings. If parties can rely on the liberal discovery standard of FRCP Rule 26, requiring only that the requested information is “reasonably calculated to lead to the discovery of admissible evidence,” then why opt for narrow discovery approaches of foreign or international tribunals?

Third, the use of Section 1782 in aid of international tribunals reflects sensitivity to the comity of courts, not the comity of nations, such that federal courts determining whether to order ancillary discovery should consider the international tribunal’s receptivity to such assistance, but not the attitude of the foreign sovereign responding to allegations of international law violations. International tribunals thus far have been extremely passive in their role in this regard, whereas respondent state’s have protested vigorously, but to no avail.

Fourth, in the specific context of investment arbitration, providing foreign investors with a remedy for denial of justice, together with a robust means to prove such a violation, alters the host State’s incentives and requires it to play a two-level game that reconciles international obligations with domestic political preferences. Robust evidence gathering at the international level increases the likelihood that respondent states will be liable for international law violations.

Finally, the article outlines the possible abuse of ancillary discovery under Section 1782. Chevron’s recent subpoena of Kevin Jon Heller’s email logs is an example. Email providers such as Google, Yahoo, and Microsoft are becoming obvious targets for discovery by parties seeking access to email account information of individuals involved in domestic, foreign, or international proceedings. Section 1782 is particularly vulnerable to abuse where one party is situated (or transiently found) in the United States, while all the relevant information of the other party is located abroad.

“I Have Big Heels to Fill”

by Roger Alford

Secretary of State John Kerry made a few opening remarks (video here) yesterday at the State Department that are worth quoting.

“So here’s the big question before the country and the world and the State Department after the last eight years: Can a man actually run the State Department? (Laughter) I don’t know. (Applause) As the saying goes, I have big heels to fill. (Laughter)”

He then presents a poignant historical account of his childhood memories as a diplomat’s son in Berlin:

“I was back in Boston two weeks ago and I was rummaging through some old stuff and I found the first evidence of my connection to this great diplomatic enterprise – my first diplomatic passport. (Applause.) There it is. Number 2927 – there weren’t a lot of people then. (Laughter.) And if you open it up, there’s a picture of a little 11-year-old John Kerry and no, you will not get to see it. (Laughter.) And then in the description it says, “Height: 4-foot-3.” (Laughter.) “Hair: Brown.” So as you can see, the only thing that’s changed is the height. (Laughter.)

And the first stamp in it, the first arrival, was 1954 in Le Havre. And back then the State Department, we went over – we spent six days at sea on the S.S. America and the State Department and the United States Government sent us over, the entire family, first class. Don’t get any ideas. (Laughter.) Anyway, I – we went to Berlin, and this was not too long after the war, and I used to ride my bicycle around Berlin, it was my pastime, my passion, and rode everywhere, the Grunewald, around the lakes, up and down the Kurfurstendamm, the church where the steeple burned down, past the Reichstag, burned out, past Brandenburg Gate, past Hitler’s tomb with these amazing, huge concrete slabs blown up. And I just roamed around. It was stunning how little control there was.”

And one day – in my sense of 12-year-old adventure, I think it was then – I used this very passport to pass through into the East Sector, the Russian sector, and I bicycled around, and I’ll tell you, as a 12-year-old kid, I really did notice the starkness, the desolation. In fact, I was thinking about it the other day. If the tabloids today knew I had done that, I can see the headlines that say, “Kerry’s Early Communist Connections,” something like that. (Laughter.) That’s the world we live in, folks.

But I would reassure them by saying I really noticed the difference between the east and west. There were very few people. They were dressed in dark clothing. They kind of held their heads down. I noticed all this. There was no joy in those streets. And when I came back, I felt this remarkable sense of relief and a great lesson about the virtue of freedom and the virtue of the principles and ideals that we live by and that drive us.”

He then makes the case for the virtues of working for the State Department:

“We get to do great things here. This is a remarkable place. And I’m here today to ask you, on behalf of the country, I need your help. President Obama needs your help, to help us to do everything we can to strengthen our nation and to carry those ideals out into the world.

Here, we can do the best of things that you can do in government. That’s what excites me. We get to try to make our nation safer. We get to try to make peace in the world, a world where there is far too much conflict and far too much killing. There are alternatives. We get to lift people out of poverty. We get to try to cure disease. We get to try to empower people with human rights. We get to speak to those who have no voice. We get to talk about empowering people through our ideals, and through those ideals hopefully they can change their lives. That’s what’s happening in the world today. We get to live the ideals of our nation and in doing so I think we can make our country stronger and we can actually make the world more peaceful…. That’s as good as it gets. And I’m proud to be part of it with you. So now let’s get to work.”

Not a bad start.

Dutch Court Issues Mixed Ruling on Shell’s Liability for Nigerian Environmental Claim

by Roger Alford

As we wait with bated breath for the Supreme Court’s decision in Kiobel, it is worth remembering that there are viable alternatives to ATS litigation. That was particularly evident last week when The Hague District Court in the case of Akpan/Royal Dutch Shell. Here’s the Judicial Press Release (translated by Pieter Bekker):

Four Nigerian farmers and fishermen, together with Milieudefensie, commenced the lawsuits in The Netherlands, because they hold four entities within the Shell group, with its headquarters in The Hague, accountable for the damage resulting from four specific oil spills near their villages in Nigeria. The district court has found that the four oil spills were not the result of poor maintenance by Shell, but were caused by sabotage by third parties. Based on the applicable Nigerian law, an oil company in principle is not liable for oil spills resulting from sabotage. On this principal ground, all claims in four out of the five cases have been dismissed. With regard to the four lawsuits regarding an oil spill near the village of Goi in 2004 and an oil spill near the village of Oruma in 2005, the district court is of the view that Shell Nigeria took sufficient measures to prevent sabotage of its submerged oil pipelines. For this reason, and applying the general rule of Nigerian law, the Hague district court has dismissed the claims of plaintiffs Oguru, Efanga and Dooh in those four lawsuits.

In the lawsuit concerning two oil spills near the village of Ikot Ada Udo, the district court has ruled that Shell Nigeria has violated its ‘duty of care’ under applicable Nigerian law and has committed the ‘tort of negligence.’ In 2006 and 2007, an act of sabotage was committed in a very simple way near that village by using an English wrench to remove above-ground heads of an oil well abandoned by Shell Nigeria. Shell Nigeria could and should have easily prevented the sabotage by installing a concrete plug prior to 2006, whereas it only did so in 2010 while the lawsuit was pending. Consequently, the district court has ordered Shell Nigeria (i.e., Shell Petroleum Development Company of Nigeria Ltd, the Nigerian subsidiary of the Shell group) in that case to pay compensation to the Nigerian plaintiff, Mr. Akpan. The amount of compensation will need to be determined in a separate procedure, because to date the parties have only litigated the issue of liability, and the level of damages has not been addressed. Milieudefensie has brought the lawsuits together with the Nigerian plaintiffs. In the view of the district court, Milieudefensie has standing to defend environmental interests in Nigeria before the courts in The Netherlands. However, according to Nigerian law the oil spills in Nigeria are not unlawful vis-à-vis Milieudefensie and for this reason the claims of Milieudefensie have been dismissed.

Dutch courts and the parent companies of Shell The cases have been adjudicated by the Dutch court, because the claims are not only directed at Shell Nigeria, but also target the current British parent company of Shell, which has its headquarters in The Hague. The former parent companies of the Shell group in London and The Hague have also been sued. In interim rulings issued in 2009 and 2010, the district court ruled that it is justified to adjudicate the lawsuits against all Shell entities in The Netherlands, because those lawsuits are all closely connected.

In its final rulings of 30 January 2013, the district court has dismissed all claims against the parent companies, because (in short) under Nigerian law a parent company in principle is not obligated to prevent its subsidiaries from injuring third parties abroad and in the present case there are no special reasons to deviate from the general rule.

Here is a portion of Bekker’s commentary on the ruling (reprinted from OGEMID listserve with Pieter Bekker’s permission):

On January 30, 2013, the district court in The Hague, The Netherlands, announced in a press release that it has ruled that Shell Petroleum Development Company of Nigeria Ltd. (SPDC or “Shell Nigeria”), a member of the Royal Dutch Shell group of companies, is liable to pay compensation to plaintiff Friday Alfred Akpan, a resident of the Nigerian village of Ikot Ada Udo situated in Akwa Ibom State in the Niger Delta. Applying Nigerian law, the Dutch court found that Shell Nigeria had breached its duty of care and had committed the tort of negligence by failing to take sufficient measures to prevent sabotage by third persons to Shell Nigeria’s submerged pipelines near the Nigerian village in 2006 and 2007. The amount of compensation will be determined in a subsequent phase of the proceeding. The full text of the ruling (in Dutch) is yet to be released.

The lawsuit against Shell constitutes the first time that a Dutch multinational has been sued before a civil court in The Netherlands in connection with allegations of damage caused abroad by a subsidiary and appears to be part of a trend of plaintiffs from the developing world turning to the courts in developed countries for redress against multinationals.

Four Nigerian farmers and fishermen, along with Milieudefensie, the Dutch branch of the environmental group Friends of the Earth, had brought five separate lawsuits against four Shell entities and their parent company before the District Court in The Hague, claiming compensation for oil pollution damage suffered locally by the Nigerian plaintiffs in four incidents between 2004 and 2007, and allegedly caused by poor maintenance on the part of the Shell defendants.

The Hague court dismissed all claims in all but one proceeding after finding that the oil contamination was caused by sabotage by third persons as opposed to Shell’s poor maintenance of its local oil installations and that there was no evidence of Shell’s negligence in those cases. Under Nigerian law, an oil company in principle is not liable for oil pollution damage caused by third-party sabotage.

Importantly, the court dismissed all claims against Shell Nigeria’s co-defendant and parent company, Royal Dutch Shell plc, which has its headquarters in The Hague, referring to the general rule of Nigerian law according to which a parent company is not obligated to prevent foreign subsidiaries from injuring third parties abroad and finding no special reasons to deviate from the general rule. The court had found in interim rulings that it had jurisdiction over the claims against all of the Shell defendants because those claims were closely connected.

While the court accepted the Dutch environmental group’s standing to defend environmental interests in Nigeria before the courts in The Netherlands alongside the Nigerian plaintiffs, it rejected the NGO’s claims because oil pollution in Nigeria is not unlawful vis-à-vis the Dutch-based group under Nigerian law.

All plaintiffs have announced that they will appeal the district court’s ruling insofar as it concerns the court’s dismissal of the four other lawsuits and its rejection of the claims against the parent company.

The full text of the opinion (in Dutch) is available here. For more on Dutch human rights and environmental rulings similar to Akpan, see this amicus brief.

As I will discuss in greater detail later, such cases strongly suggest that domestic tort laws may be a viable alternative solution to ATS litigation. There is a wealth of cases (including US cases) applying tort law and conflict of laws that address many of the same factual scenarios that are presented in ATS litigation. Such cases will be particularly important if, as I suspect, the Supreme Court narrowly construes the ATS in Kiobel.

UPDATE: An English translation of the decision is available here.

Legal Systems of the World (Updated)

by Roger Alford

After reviewing the comments from my last post expressing general dissatisfaction with the chart showing the legal systems of the world, I decided to do a little more research to find a more accurate chart.

Fortunately, those efforts paid off in spades, with a series of wonderful charts produced by the University of Ottawa. As you can see, these charts are much more accurate, and in the case of mixed systems provide much greater detail on the nature of each mixed system.

Here are charts for the World, for Africa, North America, and Asia.

Legal Systems of the World Updated

African Legal Systems

North America Legal Systems

Asia Legal Systems

The Legal Systems of the World

by Roger Alford

Legal Systems of the World

In case you ever wanted a snapshot of the legal systems of the world, this handy chart is worth a look. If you follow the link you can get a brief explanation of the legal system of each country, including the historical roots. The orange is common law, the blue civil law, the green mixed, and the red Muslim law.

The biggest surprise from this chart is how many countries are identified as mixed systems. I would have thought that most former British colonies would be identified as common law countries, that most former French, Spanish or Dutch colonies would be identified as civil law, and that most Middle Eastern countries would be identified as Muslim. Not so. The overwhelming majority of nations in Africa, the Middle East, and Asia are mixed systems.

UPDATE: In light of the comments, I have posted a new set of charts that more accurately depicts the legal systems of the world.

David Caron Appointed New Dean at King’s College London Law School

by Roger Alford

Dean CaronMy friend and colleague David Caron, C. William Maxeiner Distinguished Professor of Law at the University of California, Berkeley, has been named the new Dean at the Dickson Poon School of Law at King’s College London. The press release is here.

I have known David Caron for over twenty years and always thought he would make an excellent Dean or Judge. He has tremendous administrative experience, having served at the highest levels at ASIL, the ABA’s Section on International Law, the Law of Sea Institute, and the Institute for Transnational Arbitration.

He also brings a wealth of international law knowledge to the subject, including public and private dispute resolution, international courts and tribunals, the United Nations, the law of the sea, and international environmental law. On top of his academic chops, he remains seriously engaged with the legal profession. He served at Pillsbury Madison & Sutro before joining the academy, regularly consults with law firms around the world, and serves as an arbitrator in various commercial and investment matters.

David not only has a great head he also has a great heart. His enthusiasm is infectious, his laughter contagious, and his genuine warmth toward students and colleagues a model for us all. When I was starting my career twenty years ago in The Hague, he’s the kind of person that I looked to and thought to myself, “I want to be like that some day.”

He will be a great Dean, and will substantially contribute to the global reputation of King’s College.

The Growth of International Law Scholarship

by Roger Alford

There are a variety of ways one can measure the growing importance of international law scholarship. One metric that I have never seen discussed is simple: how often has the term “international law” been used in academic scholarship? Using Westlaw’s JLR library I calculated how often “international law” was referenced from 1987 to 2011. The results are impressive. Twenty-five years ago there were only 706 articles that included that term, compared with 4,300 today. That’s an annual growth rate of 7.5 percent. At that pace, in ten years there will be over 8,800 references to international law, and over 26,000 references in a quarter century.

Growth of International Law

It’s also noteworthy that today’s academic scholarship references “international law” more often than other core terms. Based on a Westlaw JLR search for 2011, “international law” (4,300 references) appears more often than “criminal law” (3,918 references), “intellectual property” (3,233 references), “constitutional law” (3,198 references), “torts” (2,709 references), and “professional responsibility” (1,092 references).

I knew that international law scholarship was popular, but I would not have guessed it has shown such sustained growth across the decades.

UPDATE: Further to Stuart Ford’s comments on January 9, I thought I would post the graph he is discussing. Very interesting as a point of comparison.

Google NGram2

Kiobel Oral Argument: Why the ATS as We Know it is in Jeopardy

by Roger Alford

My initial impression of the Kiobel oral argument is that the Supreme Court is going to do its best to do an historical analysis of the ATS and use that history to find ways to limit its scope. It could do so by holding that the ATS does not apply extraterritorially, or that it does not apply unless there is some U.S. nexus, or that it does not apply to corporations, or that it does not apply without exhausting local remedies, or that it does not apply to certain types of conduct (such as aiding and abetting). But one way or the other, I predict that the ATS as it currently is applied by lower courts will be severely limited.

I say that by reading the tea leaves of the Justices’ votes that are up for grabs. Justice Kennedy asked, among other things, about whether there was a U.S. nexus in this case (page 4), about risks of reciprocal claims brought against U.S. corporations in foreign courts (page 5), about the risk of ATS litigation causing complications with foreign governments (page 10), and about the scope of the presumption against extraterritoriality (p. 37). Several Justices, including Chief Justice Roberts, asked about the possibility of vindicating one’s rights in another forum that has a closer connection to the events or the parties, including the defendant’s domiciliary forum (the United Kingdom or the Netherlands) or the place of injury (Nigeria). None of the swing Justices seemed interested in the concept of universal jurisdiction, except to preserve the Sosa paradigm that embraced piracy on the high seas as an actionable international law violation.

The good news for the plaintiffs is that Paul Hoffman did an exceptional job of trying to make the ATS sound unexceptional. One of his best arguments was that courts have all the tools they need to address the concerns about friction with foreign nations, including the political question doctrine, the act of state doctrine, international comity, forum non conveniens, and personal jurisdiction. In other words, these concerns about tensions with foreign nations are legitimate, but courts already have developed doctrines sensitive to those concerns. When pressed, he was even willing to make more concessions, such as the possible need to exhaust local remedies. The bad news is that the swing Justices did not appear to be buying the argument that the arrows currently in the quivers of the courts are enough to limit the reach of the ATS.

As for extraterritoriality, Hoffmann’s key argument was that the presumption against extraterritoriality is overcome where the purpose of the statute requires its extraterritorial application. The presumption, he argued, “would undermine the very purposes of the statute” which is “the best evidence that we have about what it meant in the era” (page 52). He cogently cited the Bradford opinion as an historical example of what the drafters were thinking in this regard.

To be sure, there is ample Supreme Court case law to support an argument that sometimes the purpose of a statute requires its extraterritorial application. See United States v. Bowman, Blackmer v. United States, United States v. Flores, Cook v. Tait, Browder v. United States. One way to articulate this is to say that the clear intent of Congress is expressed in drafting a statute that necessarily requires extraterritorial application. Whether or not the swing Justices will interpret the ATS in this fashion is anyone’s guess.

Kathleen Sullivan’s key argument was that the presumption against extraterritoriality required clear congressional intent, which she argued was lacking in this case. She then fumbled by trying to argue that the Court’s recognition of piracy in Sosa did not undercut this argument. She should have stuck with her argument about the purpose of the presumption against extraterritoriality—to avoid encroachment on the sovereign prerogatives of other nations to regulate conduct in their territory—and conceded the point about piracy on the high seas as falling within the scope of the ATS. Instead, she argued that pirate ships are mini-foreign countries and tried to argue that that the presumption applied even to pirate ships. It was not a fatal mistake, but it was painful to read.

Sullivan also struggled with Justice Kagan’s creative reverse Marbois question, (page 30-32) which aptly addresses the possibility that foreign tensions can arise from an American’s misconduct against a foreign national on foreign soil, just as much as an American’s misconduct on domestic soil. Sullivan argued that other remedies were available, such as extradition or state law torts for assault. That may be true, but that is also true for an American’s misconduct on domestic soil. Her argument didn’t address the critical question of why Congress believed the ATS was necessary in the first place, and why it should only apply to domestic misconduct by Americans. If concern about foreign friction is what is driving the ATS, she should have taken a page from Hoffman and conceded points that were not essential to her case, such as the possibility that the ATS applied to foreign conduct by an American non-corporate defendant. (That seemed to be Solicitor General Verrilli’s position: that the ATS should only apply where there is a clear U.S. nexus, such as misconduct by an American national on foreign soil or misconduct by a foreign national on U.S. soil.)

So I predict that the ATS as we know it will be curtailed. I don’t know exactly how it will be curtailed, but based on the oral argument today I predict that the future of foreign plaintiffs using the ATS to sue foreign corporations for conduct on foreign soil is in serious jeopardy.

New Study Analyzes the Best Law Schools and Top Faculty for Comparative and International Law

by Roger Alford

James Phillips and John Yoo have just published a thoughtful analysis critiquing Brian Leiter’s approach to ranking faculty relevance. They suggest that what we should be looking at is all-stars, not superstars. If you measure a school based on their all-star line-up rather than their superstars, the results are dramatically different. Here’s how they put it:

Faculty can be thought of in two ways—all-stars and super-stars. All-stars are one of the best in their area, and a well-rounded faculty, like a well-rounded baseball team, has as many all-stars in as many positions as possible. Just like baseball all-stars, professors need to be evaluated against their peers in their area (or position), and not against professors in other areas (to compare the homerun totals of a second baseman with a first baseman would not be fair as the latter are expected to hit more homeruns while the former are expected to have a higher batting average and steal more bases). Super-stars are the elite, beyond just all-star status, a Roy Halladay for the Philadelphia Phillies or Tom Brady for the New England Patriots. Like a baseball team, they may be bunched in just one or two positions—often the hottest or most attractive, such as constitutional law or law and economics. There is probably a higher degree of correlation between winning and the number of all-stars than the number of super-stars, though both are nice to have…. This study argues that the all-star rankings is a more solid method of ranking faculties than the super-star method, average citations counts (either Leiter or this paper’s version), or the U.S. News’s academic ranking based on peer perception because it measures faculties more broadly, has less bias regarding attributes such as faculty age or size (Leiter method), takes into account peer-reviewed scholarship, and is objective rather than subjective (U.S News).

Analyzing the top sixteen law schools, Phillips and Yoo have devised a new and interesting approach that differs from the Leiter methodology in two important respects. First, they use a simple citations per professor per year average calculated by adding up all of the citations for the faculty and dividing by the number of years of experience for the faculty. This approach, they argue, “diminishes bias in favor of longevity and prolificacy, bias against immediacy, the disregarding of citation rate half-lifes, and ignoring interdisciplinary impacts.”

Second, they include citation counts from non-law journals using the Web of Science, which includes the Science Citation Index Expanded, the Social Sciences Citation Index, and the Arts & Humanities Citation Index. They argue that “as the legal academy has been evolving for some time regarding the educational pedigree of professors (more JD/PhDs) and the focus of its scholarship (more interdisciplinary work), and citation studies need to be modernized to reflect this trend.”

So what are the results based on their new methodology? Based on the Phillips and Yoo survey, here are the results for the best law schools for international law and comparative law:

Here are the international law and comparative law all-star faculty members from the top sixteen law schools:


UPDATE: Brian Leiter responds to Phillips and Yoo here. Here’s the crux of his response:

The two most interesting things they do are consult citations in the “Web of Science” database (to pick up citations for interdisciplinary scholars–this database includes social science and humanities journals) and calculate a citations-per-year score for individual faculty. A couple of caveats: (1) they look at only the top 16 schools according to the U.S. News reputation data, so not all law schools, and not even a few dozen law schools; and (2) they make some contentious–bordering in some cases on absurd–choices about what “area” to count a faculty member for. (This is a dilemma, of course, for those who work in multiple areas, but my solution in the past was to try to gauge whether three-quarters of the citations to the faculty member’s work were in the primary area in question, and then to also include a list of highly cited scholars who did not work exclusively in that area.) Many of those decisions affect the ranking of schools by “area.” The limitation to the top 16 schools by reputation in U.S. News also would affect almost all these lists. See also the comments here.

I liked their discussion of “all stars” versus “super stars,” but it was a clear error to treat the top fifty faculty by citations per year as “super stars”–some are, most aren’t. Citations measures are skewed, first off, to certain areas, like constitutional law. More importantly, “super stars” should be easily appointable at any top law school, and maybe a third of the folks on the top fifty list are. Some aren’t appointable at any peer school. And the citations per year measure has the bizarre consequences that, e.g., a Business School professor at Duke comes in at #7 (Wesley Cohen, whom I suspect most law professors have never heard of), and very junior faculty who have co-authored with actual “super stars” show up in the top 50.

(…)

A couple of readers asked whether I thought, per the title of the Phillips & Yoo piece, that their citation study method was “better.” I guess I think it’s neither better nor worse, just different, but having different metrics is good, as long as they’re basically sensible, and this one certainly is. On the plus side, it’s interesting to see how adding the Web of Science database affects things, and also how citations per year affects results. On the negative side, a lot of “impact” that will be picked up in the Web of Science database may be of dubious relevance to the impact on law and legal scholarship. And the citations-per-year measure has the odd result of elevating very junior faculty with just a year or two in teaching into elevated positions just because they may have co-authored a piece with a senior scholar which then got a few dozen citations. No metric is perfect (what would that even mean?), but this one certainly adds interesting information to the mix.

Legislative Fixes to the Problem of Executing Terrorist Judgments Against Iran

by Roger Alford

Having followed the terrorism litigation against Iran for years, I was fascinated to read of the recent legislation—Section 502 of the Iran Threat Reduction and Syria Human Rights–that creates a legislative fix for victims of one particular group of terrorist victims but not thousands of others.

The law in question grants plaintiffs/judgment creditors in one and only one case—Peterson v. Iran—the right to attach Iranian assets held in the United States, notwithstanding any other provision of law, including sovereignty immunity laws and laws recognizing the separate corporate identities of Iranian government entities.

As reported by Basil Katz of Reuters here, the case involves a $2.65 billion damage award obtained by the victims of Beirut Marine Corps barracks in 1983. The U.S. Treasury discovered $1.75 billion in a Citibank account that was deposited by Clearstream, an entity that holds Iranian funds in Luxembourg potentially subject to attachment.

There are several interesting wrinkles to this case.

First, it certainly is not clear that the $1.75 billion held at Citibank are Iranian assets held in the United States. Clearstream is arguing precisely that. The statute gets around this problem by broadly defining what constitutes an Iranian asset held in the United States. According to the statute, such an asset is one that is:

“(A) held in the United States for a foreign securities intermediary doing business in the United States, (B) a blocked asset [defined as those involving Peterson v. Iran] … and (C) equal in value to a financial asset of Iran, including an asset of the central bank or monetary authority of the Government of Iran or any agency or instrumentality of that Government, that such foreign securities intermediary or a related intermediary holds abroad.”

In other words, if a third party financial institution holds Iranian assets abroad, and also holds the equivalent amount in the United States, that money is a financial asset subject to attachment by the Peterson claimants.

Second, the statute supersedes “any other provision of law, including any provision of law relating to sovereign immunity, and preempting any inconsistent provision of State law.” Thus, the normal rules under the FSIA regarding immunity from jurisdiction or enforcement simply do not apply to the Peterson claims against Iran. The same goes for the Algiers Accords, which obligate the United States to transfer all Iranian assets held in the United States.

Nor do the normal rules apply with respect to the separate corporate identities of Iranian government entities. Clearstream’s financial assets held in Luxembourg belong to Bank Markazi (a.k.a. the Central Bank of Iran). But the statute defines “Iran” as “the Government of Iran, including the central bank or monetary authority of that Government and any agency or instrumentality of that Government.”

Third, the statute appears to privilege one group of victims to the exclusion of others. As most of our readers know, U.S. courts have awarded billions of dollars in judgments to thousands of victims of Iranian terrorism. Of all the acts of Iranian terrorism—the bus bombings in Jerusalem and suicide bombings at shopping malls in Tel Aviv, the targeted assassinations of Iranian dissidents in Paris, the victims of the Khobar Towers bombings in Saudi Arabia—why does this one group of victims deserve special statutory protection while the other victims do not?

The pragmatic answer, of course, is that counsel for the Peterson family was able to secure a legislative fix that other victims could not. That hardly appears satisfactory given the stakes involved. Frankly, there is something unseemly about a statute that so clearly privileges one set of terrorist victims at the expense of others.

The Reuters report suggests that there is an agreement between the Peterson victims and the other victims to share any judgments recovered, but it provides no details. Such a contractual solution is somewhat encouraging, but I seriously doubt that the other terrorist victims/judgment creditors will stand on an equal footing as the Peterson family based on this agreement. They, after all, have no leverage other than moral suasion.

Section 502 does state that a court must determine that “no other person possesses a constitutionally protected interest in the assets described in subsection (b) under the Fifth Amendment to the Constitution of the United States.” It’s not clear whether this refers to the Takings Clause—which seems likely—or to other clauses, such as the Due Process Clause prohibiting deprivations of life, liberty or property without due process of law. Regardless, I fail to see how the other victims of Iranian terrorism could fall within that exception.

Who knows where all this is headed. Litigation of this $1.75 billion dollar question is pending in New York. I will keep you posted.

Are Democracies Less Corrupt? The Answer May Surprise You

by Roger Alford

As part of my research on international corruption in a forthcoming article in the Ohio State Law Journal, I came across some interesting studies on the relationship between corruption and democracies. One would think that democratic regimes are less corrupt than autocratic regimes because in democracies public officials are subject to political accountability. But the evidence suggests otherwise. Empirical research confirms that the relationship between corruption and democracy is nonlinear. Only countries that are fully institutionalized democracies consistently rank well on Transparency International’s Corruption Perception Index scores. There is no measurable improvement in corruption rankings between mixed political regimes and partial democracies. Moreover, in many cases institutionalized autocracies have better corruption scores than partial democracies.

As one study noted, “corruption is likely to be slightly lower in dictatorships than in countries that have partially democratized. But with more complete democratization … countries experience much lower levels of corruption.”

Another study found that “[h]ow well any government functions simply hinges on how good citizens are at making their politicians accountable for their actions…. [I]t is only when citizens effectively discipline policymakers to serve them that public goods are delivered in an efficient manner and corruption is curtailed.” This requires not simply free and fair elections, but also informed citizens capable of curbing corruption.

Of course, fully-fledged democracies do not spring forth overnight. Studies indicate that a “long period of period of exposure to democracy lowers corruption.” It is common for countries in transition toward democracy to experience a growing problem with corruption. But in the battle against corruption, patience is a virtue. As one study put it, the “[g]reatest rewards (in the form of a clean and transparent state) [a]re granted to countries that [a]re able not only to realize but also to maintain the strongest and healthiest democratic institutions.”

In short, lukewarm democracies are not effective at combating corruption, and often do a worse job at it than tin-pot dictators. Only when democracy has fully flowered is there a strong positive correlation between a democratic form of government and low-levels of perceived corruption. The good news is that fully-fledged, well-established democracies are the cleanest governments on earth.

How to Jump Start Enforcement of Anti-Bribery Laws

by Roger Alford

Since the late 1990s, thirty-nine nations have signed the OECD Anti-Bribery Convention. So far so good. But unfortunately, the treaty essentially is toothless, requiring nations to implement national laws that prohibit foreign bribery, but doing little more. Only a handful of countries are effectively enforcing their anti-bribery laws. Which ones? Well, the answer seems to be the countries where the United States has gone after their corporations.

Under the FCPA, of course, the United States has jurisdiction over foreign companies that bribe foreign officials, provided they issue shares on a U.S. stock exchange. That is a very large category of foreign corporations. The United States can also go after foreign corporations if there is some territorial nexus. The DOJ and the SEC take an expansive interpretation of territoriality, such that the payment of a bribe through a U.S. correspondent bank or the sending of an email sent through a U.S.-based email account is considered a sufficient territorial nexus to permit prosecutions of foreign companies for bribing foreign officials on foreign soil.

So precisely how does the extraterritorial application of U.S. anti-bribery laws affect the regulatory behavior of other nations? That was the question of a recent study by Sarah Kaczmarek and Abraham Newman published in International Organization. The findings are fascinating, and strongly support the idea that an FCPA prosecution will jump-start corruption enforcement in other OECD countries.

The study by Kaczmarek and Newman found “strong statistical evidence linking extraterritoriality to national policy implementation.” Thus, if the U.S. prosecuted a German or British firm under the FCPA, the enforcement behavior of the German and British authorities increased dramatically. “[T]he odds of a country enforcing its first case are twenty times greater if a country has experienced extraterritorial application of the FCPA as compared to countries that have not.”

In other words, the regulatory behavior of OECD Parties changes dramatically following an FCPA prosecution of one of its nationals. This convergence trend suggests that, as the study put it, “lead regulators from large markets may alter domestic enforcement decision making in other jurisdictions, underscoring the subtle legal authority enjoyed by bureaucracies from powerful states to influence international markets.”

American corporations have long complained of the comparative disadvantage they have vis-à-vis other corporations because of U.S. anti-bribery laws. The OECD Convention went a long way toward leveling the playing field. But if you really want a level playing field, one of the best ways to achieve it is for the United States government to go after foreign corporations under the FCPA. This will increase the likelihood that other countries will launch their first corruption case under their own domestic laws by a factor of twenty!

If our world is a global village, I guess we could say that as long as there is one sheriff in town serious about government corruption, others will join the posse.