Global Policy Forum

US Court Upholds Key Shell Ruling in Nigeria Case

Kiobel v Royal Dutch Petroleum Co. looks set to have a considerable impact on the Alien Tort Claims Act.  The plaintiffs' case alleges that Royal Dutch Petroleum violated international customary law by aiding and abetting the Nigerian government in suppressing protests against oil exploration and production activities in Ogoni, Nigeria.  In September 2010, the 2nd U.S. Circuit Court of Appeals dismissed the case, finding that corporations cannot be liable for violations of international customary law - a remarkable break with precedent.  The plaintiffs were denied a rehearing by the Second Circuit in February 2011, leaving the original decision intact.  It is now likely the case will go to the Supreme Court to clarify the important question of corporate liability under the Act.

By Jonathan Stempel

February 4, 2011

A U.S. appeals court refused to reconsider a lawsuit that accused Royal Dutch Shell Plc (RDSa.L) of helping Nigerian authorities violently suppress protests against oil exploration in the 1990s.

In a divided vote that prompted a bitter debate among some of its judges, the court left intact what some legal experts call a landmark ruling in September that companies cannot be liable in U.S. courts for violations of international human rights law.

The plaintiffs, families of seven Nigerians who were executed by a former military government for protesting Shell's exploration and development, had sought to recover from the oil giant under a 1789 U.S. law known as the Alien Tort Statute.

That law recently has gained favor among plaintiffs as a way to sue companies in U.S. courts for acts committed abroad.

The full 2nd U.S. Circuit Court of Appeals in New York declined to hear the case by a 5-5 vote. The tie leaves intact the original 2-1 panel ruling from September. Separately, the judges in that panel voted 2-1 not to rehear the case.

But this may not be the end of the lawsuit.

"The 2nd Circuit is alone among federal circuit courts in concluding that corporations cannot be responsible under U.S. law for human rights violations," said Ralph Steinhardt, an international law professor at George Washington University.

"This clears the way for the plaintiffs to seek review at the Supreme Court," he added.

Paul Hoffman, a lawyer who has represented the families, and Shell, did not immediately return requests for comment.

The 2nd Circuit ruling applies in New York, Connecticut and Vermont.

The Alien Tort Statute has underpinned other human rights cases. In one, mining company Rio Tinto Plc (RIO.L) was accused of forcing workers in Papua New Guinea to live in "slave like" conditions, and pushing the government to exact retribution after a mine was sabotaged.

In another, plaintiffs sought to hold Ford Motor Co (F.N), General Motors Co (GM.N) and International Business Machines Corp (IBM.N) liable for helping South African authorities when apartheid was in force more than two decades ago.

In the Shell case, the company was accused of violations related to the 1995 hangings of the activist Ken Saro-Wiwa and eight other protesters by Nigeria's then-military government.

Shell denies allegations it is involved in human rights abuses.

Friday's split ruling showed major differences in the judges' thinking.

Chief Judge Dennis Jacobs, part of the September panel that ruled for Shell, wrote that the original ruling "has no great practical effect except for the considerable benefit of avoiding abuse of the courts to extort settlements."

He chided what he called fears by dissenting Judge Pierre Leval that "slavers and pirates will now rush into corporate transactions," resulting in "absolution to moral monsters. For the record: even moral monsters are humans, and I would happily see them hanged."

Leval countered that Jacobs' opinion evinces an "intense, multi-faceted policy agenda" underlying an effort "to exempt corporations from the law of nations."

Other judges who favored a rehearing by the entire court said the case presented "a significant issue," and that September's ruling conflicted with a 2008 ruling from the 11th Circuit appeals court, which sits in Atlanta.

The case is Kiobel et al v. Royal Dutch Petroleum Co et al, 2nd U.S. Circuit Court of Appeals, Nos. 06-4800 and 06-4876.

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