Ruling may spell end of Alien Tort cases for firms

Attempts to apply the US Alien Tort law to corporations accused of human rights abuses might soon come to an end after a New York court ruling that the legislation cannot be used to hold multinationals liable for breaches of international law abroad.

Sixty cases have been brought under the Act in recent years as NGOs and victim support groups have sought to establish that the legislation can be used to punish companies for ethical misdemeanours outside of US territory. Results have varied, with partial defeats for companies, out-of-court settlements and the occasional victory for prosecutors.  But the overall picture has remained unclear, and it is believed that the latest decision, if upheld, will create a precedent.

The case in question arose from claims by Nigerian families that Shell was involved, during the mid-1990s, in the torture and murder of dissidents under the then military government. The case was related to but separate from the Wiwa v Shell case, recently settled out of court.

In handing out its judgment, the federal appeals court went far beyond a decision on the case  itself, ruling that companies such as Shell are not covered by the Alien Tort legislation, and that the law can only be applied to violations of international law by individuals.

The result could be overturned by the entire appeals court, which reviews decisions from federal courts in New York, Vermont and Connecticut. And it could even go to the Supreme Court. However, Judge Jose Cabranes, one of three judges in the case, said: ‘The principle of individual liability for violations of international law has been limited to natural persons – not “juridical” persons such as corporations – because the moral responsibility for a crime so heinous and unbounded as to rise to the level of an “international crime” has rested solely with the individual men and women who have perpetrated it.’

The judges ruled by two to one that the decision to dismiss the Shell case rested on the point that the Alien Tort Statute applies only to individuals. The dissenting Judge Pierre Leval agreed the Shell case should be dismissed but said ‘the majority opinion deals a substantial blow to international law and its undertaking to protect fundamental human rights’.

Jonathan Drimmer, a partner at the US law firm Steptoe & Johnson, argued the decision will ‘alter the landscape of existing and contemplated cases’. He said: ‘Assuming this ruling stands, and even while it remains in effect, there are going to be motions to dismiss Alien Tort Statute claims cases by corporations.’

Companies engaged in continuing disputes under the Alien Tort Statute, such as the mining giant Rio Tinto, are likely to use the decision as leverage for the dismissal of their cases.