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In win for Shell, U.S. top court curbs human rights claims

A Shell logo is seen at a petrol station in Ankara March 6, 2012. REUTERS/Umit Bektas
A Shell logo is seen at a petrol station in Ankara March 6, 2012. REUTERS/Umit Bektas

By Lawrence Hurley

WASHINGTON (Reuters) - In a major victory for multinational companies, the U.S. Supreme Court on Wednesday limited the ability of human rights plaintiffs to invoke a 224-year-old federal law when suing companies over alleged collusion with violent foreign governments.

The nine justices ruled unanimously that a federal court in New York could not hear claims made by 12 Nigerians who accused Anglo-Dutch oil company Royal Dutch Shell Plc of complicity in a violent crackdown on protesters in Nigeria from 1992 to 1995.

The ruling immediately sparked another debate, not least in concurring opinions written by justices in response to Chief Justice John Roberts' majority opinion, about exactly what claims can still be made under the Alien Tort Statute. The 1789 law had been dormant for nearly two centuries before lawyers began using it in the 1980s to bring international human rights cases in U.S. courts.

What is clear is that the ruling is a major win for multi-nationals such as Royal Dutch that do business in the developing world and become embroiled in local political controversies.

Those companies, which are still subject to lawsuits in foreign courts, fear U.S. courts because of the possibility of large damage awards.

The ruling is "good news for businesses all around the globe that were being punished in U.S. courts with costly, reputation-damaging litigation," said Lily Fu Claffee, chief legal officer at the U.S. Chamber of Commerce.

The decision does not just benefit foreign-based corporations. U.S. corporations could also find it easier to defend themselves against similar claims, although it could depend on the extent plaintiffs can show actions overseas were directed from the United States, legal experts said. The court also appeared to leave open the possibility of certain claims against individuals over conduct overseas.

The ruling is likely to affect other cases, including those involving similar claims against Anglo-Australian mining company Rio Tinto Plc over its conduct in Papua New Guinea; Exxon Mobil Corp over its activity in Indonesia; and Daimler AG concerning alleged abuses in Argentina. The companies have all vigorously contested the claims.

Esther Kiobel, the named plaintiff in the Royal Dutch case and now a U.S. citizen, brought her lawsuit in 2002 on behalf of victims of the crackdown in Nigeria, including her husband, Barinem, who was executed in 1995.

Chief Justice Roberts wrote in the majority opinion that a presumption against extraterritorial application of federal laws applies to the Alien Tort Statute.

The court did not decide the question originally before it in the case: Whether corporations can ever be liable under the statute.

DIFFERENCES OF OPINION

Although all nine justices concurred with the outcome, only four agreed with the chief justice's reasoning. Justice Stephen Breyer wrote a separate opinion in which he was joined by three other justices.

Roberts indicated in his opinion that the court was leaving the door slightly open for some overseas-related claims under the Alien Tort Statute, including against corporations, as long as there is a sufficient connection with the United States. The claims must have "sufficient force to displace the presumption" against extraterritorial application, he added.

But he made it clear it would be a high bar, saying it would "reach too far to say that mere corporate presence suffices."

Justice Anthony Kennedy and Justice Samuel Alito wrote separately in agreement with Roberts, with both making clear that the court had not resolved for good the question of under what circumstances individuals and corporations can be liable.

In his concurring opinion, Justice Breyer said he would not have applied the presumption against extraterritoriality. Regardless, he said, in the Shell case, "The parties and relevant conduct lack sufficient ties to the United States."

Sandy Weisburst, one of Royal Dutch's lawyers at Quinn Emanuel Urquhart & Sullivan, said the ruling was a "vindication of Shell's primary position in this case." Future cases against other defendants would, he said, determine "when is there sufficient U.S. conduct" to give U.S. courts jurisdiction.

Plaintiffs' attorneys sought to play down the impact, pointing out that claims can still be made in state court, even when federal courts do not have jurisdiction.

Paul Hoffman, the lawyer representing the Shell plaintiffs, said it "seems pretty clear" that corporations are covered by the statute and "there will be corporate cases in the future" in some circumstances.

Marco Simons, a lawyer with Earthrights International who represents plaintiffs in human rights cases, pointed at one of his own cases, against Chiquita Brand International as a possible example of a claim that could go forward because there was a sufficient U.S. nexus. In that case, plaintiffs claim the company made decisions in the United States about funding paramilitaries in Colombia.

That case is currently before the Atlanta-based 11th U.S. Circuit Court of Appeals. John Hall, a lawyer with the Covington & Burling firm that represents Chiquita, said Wednesday's ruling served to emphasize that "claims like those against Chiquita - which concern violent acts committed by Colombians in Colombia, allegedly with the complicity of the Colombian government - should not be heard in an American court."

In a recognition of the creativity of plaintiffs' lawyers, attorneys representing corporate interests said they expected litigation to continue on a wide array of issues, including the extent of U.S.-based conduct in existing cases.

"In the coming months, plaintiffs can be expected to try to re-plead their cases and say that their cases involve conduct taking place in the United States, not abroad, and thus are not governed by today's decision," said Neal Katyal, a partner at Hogan Lovells.

The case is Kiobel v. Royal Dutch Petroleum Co, U.S. Supreme Court, No. 10-1491.

(Reporting by Lawrence Hurley and Jonathan Stempel; Editing by Howard Goller, John Wallace, Steve Orlofsky, Cynthia Osterman and Andre Grenon)

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