The ATS, Incentives, and Tradeoffs

Yesterday was a busy day in International-Foreign-Relations-Law-Land, between the Eric Holder speech on national security and targeted killing at Northwestern University and the quite unexpected announcement that the Alien Tort Statute case of Kiobel will be re-argued in the Supreme Court. Let me add a comment from former DOS Legal Adviser John Bellinger at Lawfare:

The Court’s order may reflect that a majority or plurality of the justices would like to decide the case on the larger issue of whether the Alien Tort Statute even applies to torts committed in other countries, rather than on the narrower issue of corporate liability, and that other justices want to have more briefing on the issue, which was not addressed by the Second Circuit. As I noted in my post about last week’s oral argument, Justices Kennedy, Roberts, and Alito focused almost all of their questions on the diplomatic tensions and problems under international law caused by extraterritorial application of the ATS. This was also the issue that I addressed in my own amicus brief, and that was the focus of the amicus briefs of the Netherlands, Britain, and Germany ….

This development will put the Obama Administration in a difficult position. In its original amicus brief in support of the petitioners, the Administration argued in favor of corporate liability, but made no mention of the numerous diplomatic complaints about the ATS filed by other countries. Assuming that the Administration files a new amicus brief, it will face a dilemma. It will either have to argue against extraterritorial application, contrary to the position of human rights groups and undercutting its prior argument in favor of corporate liability. Or it will have to argue in favor of extraterritorial application of the ATS (at least in some circumstances), which is contrary to the position of many foreign governments and inconsistent with international law principles of jurisdiction. As three members of the International Court of Justice said in the Congo Arrest Warrant case, “[w]hile this unilateral exercise of the function of guardian of international values has been much commented on, it has not attracted the approbation of States generally.” Moreover, the Obama Administration would have to reverse the arguments against extraterritorial application of the ATS made by the Bush Administration in its brief to the Supreme Court in 2008 in the Apartheid case (which the Solicitor General may be reluctant to do). This may be one reason why the Administration asked the Supreme Court not to address the issue of extraterritoriality in its original amicus brief.

One might also add that the amicus brief drafted by Jack Goldsmith in support of defendant corporation Shell seems to have had an effect; Goldsmith and his amicus brief were mentioned by name in the oral argument.  The Goldsmith brief was not primarily about extraterritoriality – it was much more about whether this was international law as such, or instead some kind of well-intentioned but nonetheless faux-international law committed to the hands of US courts.  (I have sometimes referred to it here at Opinio Juris as the “law of the hegemon” which US district courts have been persuaded by ATS plaintiffs’ lawyers, mistakenly  in my view, to regard as “international law.”)

This then combines with a general worry on the part of Justice Alito – but not he alone – that particularly the alien-to-alien cases taking place in an alien land simply have no reason to be in US courts, and that what little can be gleaned about the history and purpose of the statute does not support extraterritorial application, at least in the territory of another sovereign.  Piracy on the high seas, yes – and hence presumably the importance of the qualifier in the Court’s briefing instructions to address not extraterritoriality as such, but instead territory of another sovereign. (But see Jordan Paust and Eugene Kontorovich each commenting separately on the piracy issue, below.)

There are things that run to consequences and incentives that I wish could be got in front of the Justices that I, as a non-litigator, don’t really know how to frame in briefing terms.  One is this confusion of international law and “law of the hegemon”; OJ readers understand that I am Good With Hegemony, but worry about whether the judiciary should set about enforcing it without further instruction and structure from Congress.  Another is that there are many real-world problems of perverse incentives created by the breadth of the ATS.  The most obvious is that the best is the enemy of the good.  Is it really such a good idea to push Western countries’ corporations out of places like Sudan and leave them to the investment practices of Chinese corporations?  It is of course true that the concerns about perverse incentives also run the other way, such as the incentive to locate in some place with weak environmental or labor regulation in the first place; my view is that those are more widely understood as background assumptions than these other less visible incentives problems, and I think the ones I raise here are more important than commonly understood, so I concentrate on them.

This problem of pushing out pretty good companies that are subject to real human rights pressures in a regulatory way – provided that they don’t conclude that the risk of damages, bad publicity, etc., makes it more prudent to sell to Chinese companies – is exacerbated by Sosa standards, ironically.  Sosa says the norms alleged to have been violated have to be really serious – genocide, crimes against humanity, slavery, piracy, that sort of thing.  So: you are the senior executives and board of directors of some American or Canadian company that has invested in a rubber plantation in Africa somewhere; well aware of the public relations, legal, and damages issues involved in various labor practices, particularly child labor, you have various systems in place, but you know perfectly well they won’t be perfect.

When the ATS lawsuit comes, however, in order to make it out under Sosa, your company and perhaps you personally are accused of slavery and maybe crimes against humanity.  Not merely violations of labor practices under some jurisdiction – but slavery.  We are all aware of the bad publicity problems for the company – but often neglected is the fact that these executives think these charges are horribly unfair and vicious to them personally, and way outside of the scope of litigation that ought to be applied – labor regulatory standards, at a level suited to determining if there are adequate safeguards in place, fines, sure, serious deterrents, sure, but slavery?  They take it personally.  Occasionally they fight, because they want to clear their own names.  But often business prudence prevails and they settle quietly.  But – they often decide, if they hadn’t decided long before, to avoid the whole ugliness and sell the business.  Is that such a good idea?

It is quite true that this argument can easily backfire – says the company, don’t enforce these standards, because even the slightly better is still the enemy of the not-very-good, and if you do anything to force us to a level of behavior marginally above the level of the worst actor, we’ll leave.  That’s a form of hostage-taking argument.  But the point is that there are tradeoffs, and I have doubts that US district courts are the right institutions to make them.  Back in the 1990s, for example (and this is not an ATS case), a human rights organization asked me to go to Guatemala, a country I knew well, to look at the labor practices of a shirt manufacturer that operated maquiladoras there.  The head of the company was a leader in labor and environmental standards in his business, and the organization made a point of inviting him onto its board in an experiment in trying to find common ground with progressive business leaders.  Now his company was accused of child labor violations and various other things.

So I went down to look and didn’t find much; there might have been some instances of teens working in the plant underage, but no one disputed policy and there was a system of inspectors in place.  Again, this wasn’t about the ATS, though it might have morphed into a suit.  Instead what remains most important today out of that situation was the conversation I had with the then-labor minister in Guatemala, an ex-leftist who had been with the opposition during the civil war and whose not merely progressive, but revolutionary, credentials were impeccable.

When I told him that there was pressure for this company to close its plant, he was aghast.  He said, in impassioned terms, this would be terrible.  The company might have had an occasional child labor violation, he said, but it had inspectors who were clean, it offered child care, a clinic, and sent the kids of the women to school, and provided milk for the families.  None of the Asian maquiladoras would ever consider such a thing – on the contrary, they fired the Indian girls immediately if they found out they were pregnant (what he actually said was, I know of one maquiladora from Asia where the security guard threatens to punch the women in the stomach when they come in the door to start work to see if they will say no because they are pregnant).  I have hundreds of illiterate peasant girls streaming into the city every month, he said – I want your American company to open dozens more plants to absorb them, on these terms.  It’s that or prostitution.

The American company decided the potential bad publicity wasn’t worth it and closed the plant; I’m sure the marginal, if tiny, increase in Central American labor costs had something to do with it as well.  But note:  the human rights advocates were not unhappy with that decision.  Since they had no welfare obligations for the Indian women at stake, they could afford to stand on perfect principle; no hard tradeoffs for them.  Not so the labor minister.

Now, this is not about the ATS as such and I have no idea how one gets that notion of forward looking incentives before the Court.  But I would hope that these kinds of incentives questions could be inserted into the discussion somehow.  At a minimum, one might wonder whether the 18th century ATS – a one-sentence statute – is sufficient ground for the judiciary to supervise these incentives and tradeoffs, or whether these are deep policy questions which Congress would have to commit more explicitly, and in some kind of serious statutory framework, over to the District Courts for adjudication.

(There are other incentives one could mention as well.  For example, what about the effect of damage awards that might much higher in the US than would typically be awarded in other jurisdictions? Shouldn’t the Justices be aware of the economic incentives that might exist for forum-shopping?  How would something like this get raised, if at all?  Again, I am concentrating on the ones I know best and am most interested in, which run mostly to defendant-side arguments; I’m sure that there are lots of hidden ones that can be raised as well from the side of plaintiffs.)