Aliens, Apartheid and US Courts

2. Background to the ATCA

The ATCA was enacted in 1789 and remained largely unused for almost two hundred years until 1980 (BRADLEY, 2002, p. 588).⁷ The case of Filartiga v. Pena-Irala (UNITED STATES OF AMERICA, 1980, p. 887)⁸ was the first to use the ATCA to hold human rights abusers accountable for torture and murder through civil claims for ‘a tort…committed in violation of the law of nations.’ However, its use against corporate defendants was first granted in 1997 by a District Court in the case of Doe I v. Unocal (UNITED STATES OF AMERICA, 1997). The plaintiffs were Burmese villagers alleging that Unocal was complicit in gross human rights violations, such as rape and torture, committed by the Burmese military tasked on behalf of Unocal to secure the natural gas pipeline project there (UNITED STATES OF AMERICA, 2004a, p. 729-732).⁹ This case paved the way for similar corporate defendant claims in Federal and District Courts where plaintiffs relied on the ATCA to pursue litigation based on indirect liability.¹⁰

Finally, in 2004, the U.S. Supreme Court addressed the ATCA in the case of Sosa v. Alvarez-Machain (UNITED STATES OF AMERICA, 2004a) (referred to as Sosa below). The court affirmed the preceding line of cases in so far as it held that violations of international norms which were ‘specific, universal and obligatory’ would be actionable under the ATCA (UNITED STATES OF AMERICA, 2004a, p. 732) . The court went on to note that ‘practical consequences’ could be considered as part of ‘the determination [of] whether a norm is sufficiently definite to support a cause of action.’ (UNITED STATES OF AMERICA, 2004a, p. 732-733) . It was also stated in a footnote that a ‘possible limitation’ upon the application of the ATCA could be ‘case-specific deference to the political branches’ so as to avoid interference with U.S. foreign policy (UNITED STATES OF AMERICA, 2004a, p. 733, footnote 21).¹¹ Critically, the court did not consider whether the statute encompassed aiding and abetting liability specifically.

Numerous District and Circuit Courts have held that corporate aiding and abetting liability is available under the ATCA. However, a clear doctrine has yet to be established for the definition of and basis for such liability, which remain controversial. This paper does not seek to add to the debate, however, a brief summary is warranted highlighting the conclusions reached by Judge Scheindlin.

In terms of the basis for aiding and abetting liability the debate is whether it should be governed by federal common law or international law or whether it even makes a difference (BRADLEY; GOLDSMITH; MOORE, 2007, p. 120). The Supreme Court created uncertainty by stating that while ATCA claims are ‘claims under federal common law’; to be actionable ‘a specific, universal and obligatory’ norm of international law had to be violated (UNITED STATES OF AMERICA, 2004a, p. 729-732) . Judge Scheindlin, acknowledging uncertainty in the law, interpreted the Supreme Court’s statement as requiring courts to look to international and not federal law as the basis for liability in determining both the ‘existence of substantive offences’ and the ‘contours of secondary liabilit y as well.’¹² Some writers argue that courts should apply international law through the ATCA cautiously and incrementally (DHOOGE, 2009, p. 280) .

In terms of the definition of aiding and abetting liability the debate is whether the required mental or subjective element is knowledge or intent. The uncertainty in the law is evident as three judges of the Second Circuit Court hearing the Khulumani case had different views on the issue.¹³ It is argued that Judge Hall’s opinion requiring ‘knowledge’ would open the door more widely for liability to be imposed while Judge Katmann’s opinion requiring ‘purposeful’ conduct would make liability difficult to prove but discourage suits against corporations for merely doing business in countries where human rights abuses are committed (NEMEROFF, 2008, p. 283-284) . Judge Scheindlin emphasized that ‘knowledge’ was required for aiding and abetting liability under the ‘vast majority’ of international law.¹⁴ She concluded that in the absence of other relevant legal materials requiring specific intent, customary international law required ‘that an aider or abettor know that its actions will substantially assist the perpetrator in the commission of a crime or tort in violation of the law of nations’ and that this was the standard to be applied in deciding whether conduct amounted to aiding and abetting liability under the ATCA.¹⁵

3. Background to the Khulumani Case

The preceding section outlined the history of ATCA litigation and the points of contention surrounding aiding and abetting liability. The next section summarizes the procedural background to the Khulumani case as well as the arguments against liability submitted by the U.S. and South African governments. The case originally comprised of ten separate actions by three groups of plaintiffs against about fifty major multinational banks and corporations that did business with the Apartheid government. The plaintiffs instituted their initial claims under the ATCA, Torture Victims Protection Act and Racketeer Influenced and Corrupt Organizations Act.¹⁶ The bases for their allegations are summarized as follows: the defendants knew of the racist policies of the Apartheid government and the human rights violations committed as a result but never the less did business there, the defendants made a profit from cheap labour and provided the government with resources such as technology, oil, money and vehicles which were used to maintain and enforce Apartheid policies; had the defendants not done this Apartheid would have ended sooner and the plaintiffs would not have suffered some or all of their injuries.¹⁷

In 2004 the claims were consolidated before Judge John E. Sprizzo in the Southern District Court of New York who dismissed all the claims and contrary to a large body of law held that the ATCA did not provide a basis for aiding and abetting liability (UNITED STATES OF AMERICA, 2004c, p. 550) . The plaintiffs appealed the dismissal upon which the Second Circuit Court partially vacated the dismissal in terms of the ATCA claim, finding that aiding and abetting liability may be pleaded under the statute and allowing the claim to proceed.¹⁸ The defendants appealed to the U.S. Supreme Court, which issued an order on 12 May 2008 affirming the Second Circuit’s decision (UNITED STATES OF AMERICA, 2008) . The circumstances of the affirmation were that four justices had recused themselves and so the court lacked the necessary quorum to issue an opinion.¹⁹

The Supreme Court order affirmed the Second Circuit’s order vacating the denial of leave to amend and declining to dismiss the case on the policy grounds of international comity and political question and directed that the District Court consider these doctrines in light of the amended pleadings.²⁰ Before the District Court, the defendants again sought to rely on these doctrines together with the submissions of the South African government and Bush administration calling for dismissal of the claims.²¹ In short, the U.S. government argued aiding and abetting liability would discourage investment in developing countries and that this conflicted with their foreign policy of constructive engagement. The South African government argued the litigation would infringe upon their sovereignty and discourage foreign investment. These arguments are outlined below.

3.1 The submissions of the United States government

In 2003, under the Bush administration, the Department of State advised the District Court that ‘continued adjudication of the above-referenced matters risks potentially serious adverse consequences for significant interests of the U.S.’²² It also argued that South Africa ‘is broadly representative of the victims of the Apartheid regime [and] is uniquely charged with a popular mandate to deal with the legacy of Apartheid.’ (UNITED STATES OF AMERICA, 2009a) .

The submission also stated that such litigation would hamper foreign investment in South Africa and other developing countries, a goal which was central to the U.S. foreign policy of ‘constructive engagement’ (UNITED STATES OF AMERICA, 2009a) .

The U.S. government similarly argued in an amicus brief submitted to the Second Circuit Court that ‘[o]ne of the practical consequences of embracing aiding and abetting liability under ATCA claims would be to create uncertainty that would in some cases interfere with the ability of the U.S. government to employ the full range of foreign policy options when interacting with regimes with oppressive human rights practices. One of these options is to promote active economic engagement as a method of encouraging reform and gaining leverage. Individual federal judges exercising their own judgment after the fact by imposing aiding and abetting liability… would generate significant uncertainty regarding private liability, which would surely deter many businesses from such economic engagement.’²³

3.2 The submissions of the South African government:

In 2003 former president Thabo Mbeki in a public announcement stated ‘we consider it completely unacceptable that matters that are central to the future of our country should be adjudicated in foreign courts which bear no responsibility for the well-being of our country and the observance of the perspective contained in our Constitution of the promotion of national reconciliation.’²⁴ He further stated that the litigation interfered with the ‘sovereign right to determine, according to internal political and constitutional order, how best to address Apartheid’s legacy.’ (UNITED STATES OF AMERICA, 2009a, p. 91) . Shortly after, the Minister of Justice at the time, Penuell Maduna filed a declaration with the U.S. District Court stating the litigation had the potential to discourage foreign investment in South Africa and that the court should not hear the case as doing so would ‘interfere with [a] foreign sovereign’s efforts to address matters in which it has predominant interest.’²⁵

3.3 The submissions of the Truth and Reconciliation Commission (‘TRC’):

The arguments advanced by the South African government were not supported by the TRC Commissioners. The chairman of the TRC, Desmond Tutu, submitted an amicus brief to the Second Circuit Court stating: ‘[t]here was absolutely nothing in the TRC process, its goals or the pursuit of the overarching goal of reconciliation, linked with truth that would be impeded by this litigation. To the contrary, such litigation is entirely consistent with these policies and with the findings of the TRC.’ (UNITED STATES OF AMERICA, 2009a, p. 94) . This is so because nothing in the TRC Act or Commission Reports amounted to the explicit or implicit granting of amnesty to corporations. The Promotion of National Unity and Reconciliation Act 34 of 1995 which established the TRC stated in its preamble that amnesty could be afforded to ‘persons who make full disclosure’ the implication being that corporations did not qualify for amnesty under the Act nor did any apply for such amnesty (UNITED STATES OF AMERICA, 2009a, p. 95) . In light of this, in its final report, the TRC stated that business ‘must be held accountable’ outside of the amnesty mechanisms of the TRC (UNITED STATES OF AMERICA, 2009a) .²⁶

4. Policy considerations as a basis for dismissal

The next section considers whether, and if so on what bases, the arguments outlined above merit dismissal of the case and whether such policy arguments should preclude aiding and abetting liability under the ATCA in general. This was the issue on remand for Judge Scheindlin to decide. The task is a complex one as a judge is not only faced with questions surrounding the relationship between international and domestic law but also the relationship between the judiciary and the executive branches of government. This is further complicated by executive submissions requesting dismissal or expressing disapproval. The submissions in the Khulumanicase outlined above are an example of this. Courts have had to address the question of how to treat executive submissions in human rights litigation and in doing so have relied largely on the political question doctrine and to a lesser extent the international comity and act of state doctrines.²⁷ In applying them a court is tasked with balancing the need to preserve judicial independence while giving executive submissions due deference and being mindful not to ‘undermine the constitutional balance of power’ (STEPHENS, 2004, p. 170) . The following section will outline the political question and international comity doctrines as understood in the context of ATCA litigation followed by Judge Scheindlin’s opinion as to their application in the Khulumanicase.

4.1 Deference and the Political Question Doctrine

The political question doctrine seeks to uphold the separation of powers and operates when ‘a court declines to hear a case that deals with issues more properly belonging before one of the “political” branches of government’ (BAXTER, 2006, p. 826) . The Supreme Court in Baker v. Carr(UNITED STATES OF AMERICA, 1962) held that its application involves a ‘case by case’ inquiry of whether one or more of six factors are present.²⁸ It was stated in Kadic v. Karadzic (UNITED STATES OF AMERICA, 1995, p. 249)²⁹ that the first three factors did not apply to litigation dealing with international law but the latter factors could be applicable where the impact of litigation on foreign relations needed to be assessed (SUTCLIFFE, 2009, p. 301) . It has been noted that executive submissions on how litigation will impact policy decisions on foreign relations fall within at least one of the required factors and so trigger the application of the doctrine. Despite the Supreme Court’s warning that not ‘every case or controversy which touches on foreign relations lies beyond judicial cognizance’ (UNITED STATES OF AMERICA, 1962, p. 211) lower courts initially applied the doctrine automatically where executive submissions against litigation were presented. The first ATCA case involving the evaluation of executive submissions was Sarei v. Rio Tinto (UNITED STATES OF AMERICA, 2002b, p. 1208-1209)³⁰ where the District Court automatically dismissed all the claims under the political question doctrine. The courts’ deference to the views of the executive has been attributed to a lack of case law on the issue and the vague and ambiguous factors laid down in Baker v. Carr (UNITED STATES OF AMERICA, 1962; BAXTER, 2006, p. 836) .

In response to the growing number of ATCA cases and the ambiguity surrounding the proper treatment of executive submissions against such litigation the Supreme Court attempted to offer some guidance. First in Republic of Austria v. Altmann (UNITED STATES OF AMERICA, 2004d, p. 701-702) where the court distinguished between questions of law and policy stating that questions of statutory interpretation ‘merit no special deference’ but submissions by the executive on a question of foreign policy ‘ might well be entitled to deference [emphasis added]’. Second in Sosa v. Alvarez-Machain (UNITED STATES OF AMERICA, 2004a) the court noted two possible limitations on the statute’s application the one involving a question of law, the other a question of policy. First that the recognition of an actionable norm (that is a tort in violation of customary international law) involved ‘an element of judgment about the practical consequences of making that cause available to litigants’ that is ‘whether a norm is sufficiently definite to support a cause of action.’ (UNITED STATES OF AMERICA, 2004a, p. 732-733) . Second (as stated in footnote 21) that certain cases may require ‘a policy of case-specific deference to the political branches’ and that ‘courts should give serious weight to the Executive Branch’s view of the case’s impact on foreign policy.’ (UNITED STATES OF AMERICA, 2004a, footnote 21) . However, it must be noted that in both these cases, the question of deference was not an issue the court had to decide and so the statements are not binding on lower courts. While the two possible limitations rightly affirmed the principle that courts and not the executive should decide questions of law and that the application of the doctrine requires evaluation and not automatic application no guidance was provided to lower courts on how to conduct such an assessment.

Judge Scheindlin made three comments in this regard: ‘First, footnote 21 merely provides guidance concerning the need for deference with regard to foreign policy matters; it does not mandate summary dismissal…[s]econd, the Executive Branch is not owed deference on every topic; rather this court will give serious consideration to the Executive’s views only with regard to the case’s ‘impact on foreign policy’, [t]hird, deference does not mean delegation; the views of the Executive Branch – even where deference is due – are but one factor to consider and are not dispositive.’ (UNITED STATES OF AMERICA, 2009a, p. 99) . Further, ‘judges should not reflexively invoke these doctrines to avoid difficult and somewhat sensitive decisions in the context of human rights.’ (UNITED STATES OF AMERICA, 2009a, p. 102).³¹

Regarding the Baker v. Carr (UNITED STATES OF AMERICA, 1962) factors courts have more recently held that they ‘appear to be relevant only if judicial resolution of a question would contradict prior decisions taken by a political branch in those limited contexts where such contradiction would seriously interfere with important governmental interests.’ (UNITED STATES OF AMERICA, 2009a, p. 100).³² As noted by Judge Scheindlin courts have generally moved away from an automatic application of the doctrine to instead asses the executive submission itself (UNITED STATES OF AMERICA, 2009a, p. 102) . In doing so courts have dismissed submissions ‘presented in a largely vague and speculative manner [or not] severe enough or raised with the level of specificity required to justify…a dismissal on foreign policy grounds.’ (UNITED STATES OF AMERICA, 2009a).³³

4.2 The International Comity Doctrine:

The international comity doctrine has been understood differently in different contexts and is thus difficult to define (RAMSEY, 1998, p. 893) . In the context of ATCA litigation it is generally understood as ‘the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws.’ (UNITED STATES OF AMERICA, 2009a, p. 103).³⁴ In its narrowest sense the doctrine operates as a basis for dismissal ‘only when there is a true conflict between American law and that of a foreign jurisdiction.’ (UNITED STATES OF AMERICA, 2009a, p. 104).³⁵ This strict formulation has since been relaxed as in addition to looking at whether a conflict would arise; courts have assessed the degree of offense to the foreign sovereign, steps taken by them to address the issue in dispute and the U.S’s interest in the issue (UNITED STATES OF AMERICA, 2009a, p. 104-105) . Thus understood, the application of the doctrine is a matter of discretion requiring the court to weigh the interests of the foreign nation and the international community in deciding whether adjudication would be improper (RAMSEY, 1998, p. 894) .

The political question and international comity doctrines differ in that the former aims to uphold the separation of powers while the latter focuses more directly on international relations. However, the two are similar as both can and have been used to assess the impact of litigation on foreign affairs (SUTCLIFFE, 2009, p. 326) .

Commentators in favor of the flexibility of the more relaxed international comity doctrine and the ‘balancing test’ it requires, have argued it should be used to inform the application of the political question doctrine to assist in avoiding undue deference (SUTCLIFFE, 2009, p. 326) .

4.3 Application by the court:

In the Khulumani case the issue on remand by the Supreme Court was whether the political question and international comity doctrines merited dismissal in light of the submissions of the U.S. and South African governments. Judge Scheindlin held that the political question doctrine did not provide a basis for dismissal for three reasons. First the claims did not contradict U.S. foreign policy in a way that ‘would seriously interfere with important governmental interests’ and so the latter three Baker v. Carr (UNITED STATES OF AMERICA, 1962) factors did not apply (UNITED STATES OF AMERICA, 2009a, p. 105) . Second the claims did not challenge the political branch’s foreign policy of ‘constructive engagement’ with Apartheid-era South Africa nor seek to hold defendants liable for acting in line with this policy (UNITED STATES OF AMERICA, 2009a, p. 105) . Third the argument of the U.S. government as relied on by the defendants was based on the false premise that the plaintiffs sought to allege ‘wrongful commerce’ as a basis for liability and that the political question doctrine was automatically invoked (UNITED STATES OF AMERICA, 2009a, p. 105) . For these reasons Judge Scheindlin noted that the submissions required ‘considerably less deference.’ (UNITED STATES OF AMERICA, 2009a, p. 105) .

On the other hand, to survive dismissal the plaintiffs had to claim ‘that the defendants “substantially assisted” violations of the law of nations and knew that their assistance would be substantial’ as merely engaging in commerce did not attract liability (UNITED STATES OF AMERICA, 2009a, p. 106) . Liability properly understood as ‘knowingly providing substantial assistance to violations of the law of nations’ would only compromise foreign policy in so far as it actually deterred investment (UNITED STATES OF AMERICA, 2009a, p. 106-107) . In this regard no real evidence was found to have been presented (UNITED STATES OF AMERICA, 2009a, p. 107).³⁶

Lastly, it was noted that the case did not involve allegations against the acts of the U.S. government itself as ‘[a]t no point did the Government instruct or authorize the defendant’s conduct’ and that ‘resolution of the case neither requires this court to pass judgment on the policy of constructive engagement or the United State’s relationship with apartheid-era South Africa.’ (UNITED STATES OF AMERICA, 2009a, p. 108).³⁷ Thus the political question doctrine did not require dismissal of the suit.

It was also held that international comity did not provide a policy basis for dismissal based on ‘[t]he absence of conflict between this litigation and the TRC process.’ (UNITED STATES OF AMERICA, 2009a, p. 109-110) . The reasons advanced included that the defendants did not appear before the TRC nor were they granted amnesty and ‘a policy of blanket immunity for corporations’ was never given by the South African government (UNITED STATES OF AMERICA, 2009a, p. 109-110) . There was found to be no bar to holding the defendants legally liable under civil law with the TRC Report itself calling for corporate liability outside the TRC Process (UNITED STATES OF AMERICA, 2009a, p. 109-110) . Further neither the defendants nor the South African government argued that ‘an adequate forum existed in the objecting nation.’ (UNITED STATES OF AMERICA, 2009a, p. 109-110) . Lastly the litigation did not conflict with the goals of the TRC and so would not require dismissal even in the absence of an alternative forum (UNITED STATES OF AMERICA, 2009a, p. 109-110) . Judge Scheindlin concluded that ‘the purposes of the TRC and this lawsuit are closely aligned: both aim to uncover the truth about past crimes and to confront their perpetrators.’ (UNITED STATES OF AMERICA, 2009a, p. 109-110) . Therefore the international comity doctrine did not require dismissal of the suit.

Since neither doctrines provided a basis for dismissal Judge Scheindlin held that the views of the U.S. and South African governments did not require resoliciting for the case to proceed (UNITED STATES OF AMERICA, 2009a, p. 111) .

5. The evaluation of Executive submissions

The decision by Judge Scheindlin to dismiss the views of the executive has formed part of an emerging trend in U.S. courts particularly in the context of ATCA litigation (STEPHENS, 2008, p. 773) . Since the first case of Doe I v. Unocal (UNITED STATES OF AMERICA, 1997) in 1997 allowing the use of the ATCA against corporations, approximately fifty ATCA cases have been filed against corporate defendants (STEPHENS, 2008, appendix B) . The Bush administration has filed letters or amicus briefs in ten of them stating such litigation would undermine U.S. foreign policy (STEPHENS, 2008, p. 773-774, appendix C) .³⁸ In eight of these the objections were considered by the court.³⁹ In only two cases was the foreign policy argument accepted as a basis for dismissing the suit.⁴⁰

This trend shows that despite a historically deferential approach, in the context of ATCA litigation U.S. courts have since permitted almost all the cases to proceed despite arguments that it would interfere with foreign policy or deter investment. This shift indicates that courts do not find the submissions reasonable or convincing. Reasons for rejection include undue claims for deference, unfounded predictions of harm, unsupported economic claims and perceived bias toward corporations (STEPHENS, 2008, p. 802) . Judge Scheindlin similarly based dismissal of the submissions upon a lack of evidence as well as the presence of incorrect assumptions. The reasons given by the courts support the argument that ‘the shift is not the result of a change in the way the courts have exercised their authority, but rather a judicious recognition that the Bush Administration’s views are unreasonable, and therefore undeserving of deference.’ (STEPHENS, 2008, p. 809) .

Most courts have focused largely on the text of the submission itself and engaged in a factual enquiry as to its correctness, specificity and the evidence submitted to support it.⁴¹ In favour of this approach some commentators have argued that courts are under a constitutional duty to assess the credibility of the executive’s factual claims and to reject them where not supported by the evidence (STEPHENS, 2004, p. 170) . Others have argued that this can be problematic as courts are ill-equipped to make factual findings as to the correctness of policy decisions as they have limited access to evidence and could be vulnerable to manipulation in this regard (SUTCLIFFE, 2009, p. 315) . It is agreed that an assessment which focuses only on the factual validity and specificity of submissions is undesirable and too superficial. Indeed the Supreme Court’s view that executive submissions need to be ‘weighed’ implies that a range of factors and not just the submission itself should be taken into account.

In this regard, some commentators have argued that the problem lies in the fact that the political question doctrine is too limited and vague a standard by which to assess executive submissions and that ‘a more fluid balancing test’ should be developed by the courts (SUTCLIFFE, 2009, p. 320) . Multi-layered guidelines or standards for assessing whether a submission merits deference have been proposed. These includes that ‘in order to merit deference, an administration submission must: (1) articulate the relevant policy interests; (2) explain how the litigation could harm those interests; (3) tie the anticipated harm to one of the recognized foreign policy justiciability doctrines; and finally, (4) offer explanations that are reasonable, drawing conclusions that are well-founded and supported by the facts.’ (STEPHENS, 2008, p. 775) . While such a doctrinal discussion is beyond the scope of this paper the next section takes this criticism into account by undertaking a more substantive analysis in looking at how the foreign policy, foreign investment and sovereignty arguments raised in favour of dismissal of ATCA suits have failed. This approach goes beyond the submission itself to look at some of the legal and practical implications aiding and abetting liability could have. Doing so demonstrates just how unconvincing and unreasonable the arguments against such liability in fact are.

5.1 The argument that liability would undermine U.S. foreign policy:

The argument is that the mere existence of aiding and abetting liability will deter investment in foreign countries and thereby undermine the U.S. foreign policy of ‘constructive engagement’. To evaluate the merits of this argument and so also the correctness of its dismissal, it is necessary to outline the ‘constructive engagement’ model and examine the effect aiding and abetting liability would have on it. The model is largely based on the idea that foreign investment by corporations in countries with repressive regimes will encourage reform and promote democracy and human rights.⁴² The model is highly controversial and has generated much debate which goes beyond the scope of this paper. There have been contradictory empirical studies, one concluded that in some cases constructive engagement and investment actually had the opposite effect by encouraging and increasing repressive behavior (FORCESE, 2002, p. 10-17) while another concluded that foreign investment was associated with increased respect for civil and political rights (RICHARDS, 2001, p. 231-232) .

What is of relevance is that since one of the purported goals of constructive engagement is to promote freedom and democracy; a corporation which aids or abets human rights violations would undermine the model and further the very abuses it claims to help eradicate. Moreover, complicit corporations may have huge legal and economic interests in maintaining or supporting oppressive regimes and without the threat of liability as incentive to encourage reform face no consequences.

In this regard aiding and abetting liability could be used as a tool to ensure that individual corporations who defy the policy of constructive engagement are held accountable. It could also encourage corporations to conduct business in ways which promote the goals of democracy and human rights in general. Thus aiding and abetting liability could actually facilitate rather than undermine the model and the argument of the U.S. government must fail.

The commentator Richard Herz has presented similar arguments and noted further inconsistencies. First, the U.S. government seems to be applying a ‘double standard’ by criticizing oppressive regimes but protecting corporations for aiding or abetting abuses committed by them and that this casts doubt on how committed the government in fact is to brining about reform in advancing democracy and human rights.⁴³ Second, by protecting corporations from liability on foreign policy grounds the government may in fact ‘encourage or subsidize’ complicity. This is so as without the possibility of being held accountable corporations could decrease costs involved with taking measures to avoid complicity and without the possibility of litigation avoid being liable for compensating successful victims. Such corporations could have a competitive edge over other corporations who refuse to operate in countries with oppressive regimes.

It could be argued that the risks of litigation are too marginal to deter corporations from being complicit in abuses where comparatively huge economic profit is at stake. However, as Herz correctly points out, the U.S. government’s argument is that the risk of liability under the ATCA would be so substantial so as to deter investment. Assuming that the risks of liability would be too marginal to deter complicity, the underlying rationale of the government’s argument would fall away. On the other hand if the risk of potential litigation were substantial enough to deter corporations from being complicit in abuses committed by oppressive regimes, the U.S. government’s opposition of liability could reward and encourage investment which directly undermines the model upon which their foreign policy is based. These inconsistencies as noted by Herz provide additional convincing support for rejecting the views of the U.S. government (HERZ, 2008, p. 207) .

The preceding section argued that aiding and abetting liability could promote rather than undermine U.S. foreign policy. By opposing liability corporations would be shielded and perhaps even encouraged to engage in practices which would undermine the purported goals of the ‘constructive engagement’ model. For these reasons Judge Scheindlin was correct in dismissing the argument that aiding and abetting liability would undermine U.S. foreign policy.

5.2 The argument that liability would deter foreign investment:

The argument is that corporations will refuse significant investment opportunities or pull out of existing projects, based on the possibility that they may be held liable for aiding or abetting human rights violations. Judge Scheindlin concluded that since no evidence was given to support this argument it had to be dismissed. Commentators have argued that liability would not deter foreign investment and could in fact encourage positive growth. Joseph Stiglitz, a Nobel laureate and former Chief Economist of the World Bank, filed a letter with the court rejecting the economic analysis relied on by the U.S. and South African governments (UNITED STATES OF AMERICA, 2009a, p. 88) . He argues that corporations should be held liable and that doing so would contribute to confidence in the market system, create a more favourable business climate and encourage positive growth and development in South Africa.⁴⁴ Stiglitz is widely regarded as one of the world’s foremost economists and since his views directly contradict those of the U.S. and South African governments they assist in presenting a stronger argument in favour of rejection.

The commentator Beth Stephens similarly argues that liability would promote rather than undermine positive investment (STEPHENS, 2008, p. 773) . Since merely doing business in a country where abuses are being committed does not attract liability under the ATCA, the argument that liability will deter foreign investment only applies to corporations who may aid or abet violations of established international norms (STEPHENS, 2008, p. 806) . There is also the possibility that companies will continue to invest and adopt policies and procedures which seek to avoid aiding and abetting such abuses (STEPHENS, 2008, p. 806) . Stephens argues this kind of reform is more likely than deterrence as most ATCA cases have involved corporations in the extraction industry⁴⁵ who have already made large investments and are highly unlikely to pull out based on the possibility of liability (STEPHENS, 2008, p. 806) . In other words the costs of litigation compared with the large profits multinational corporations are making will not likely deter or decrease investment (STEPHENS, 2008, p. 807) .

The argument is not that no corporation will be deterred from investing; presumably only those with dubious human rights practices will refuse. As already stated this would promote the policy of constructive engagement and human rights in general. Thus even if some potentially beneficial investment is deterred this must be weighed against the greater benefits ATCA liability may achieve by assisting to deter the aiding and abetting of human rights violations. In short and as noted by commentators, over deterrence of the serious human rights abuses attracting liability under the ATCA surely outweighs the marginal possibility that innocent yet beneficial companies will refuse to invest. It has been argued that courts are left with two options: either under-deterrence which will allow more investment which encourages human rights abuses or over-deterrence which will discourage investments where corporations may run the risk of participating in human rights violations, even if the investments would not encourage abuses, given the seriousness of alleged offenses under ATCA cases the latter option is clearly preferable (HOFFMAN; ZAHEER, 2003, p. 81) .

The preceding section demonstrates not only that the foreign investment argument lacks supporting evidence but suggests that aiding and abetting liability could be used to encourage positive investment and growth. Thus Judge Scheindlin was correct in dismissing the argument that aiding and abetting liability would deter foreign investment.

5.3 The argument that liability would infringe upon sovereignty:

The South African and U.S. government argued that the litigation would infringe upon South Africa’s sovereignty. This argument falls broadly within the doctrine of international comity outlined above. As suggested in Sosa (UNITED STATES OF AMERICA, 2004a) , a court should consider ‘whether the exercise of jurisdiction under the ATCA is consistent with those notions of comity that lead each nation to respect the sovereign rights of other nations by limiting the reach of its laws and their enforcement.’ (UNITED STATES OF AMERICA, 2004a, p. 73) . However, as noted by the Second Circuit Court in Khulumani ‘although the views of foreign nations are important under the doctrine of international comity, we have not held them to be dispositive.’ (UNITED STATES OF AMERICA, 2007a, p. 265) . In other words the weight given to the views of foreign governments under the comity doctrine is not as great as the weight given to the views of the U.S. executive under the political question doctrine. On the other hand the argument that judges must be careful not to act in ways which undermine legitimate political and legal process appears stronger in cases such as Khulumani where a democratically elected government decides not to allow similar liability claims domestically (NEMEROFF, 2008, p. 283) .

What is fatal to the sovereignty argument is that the conduct being adjudicated is that of defendant corporations and not sovereign principals. In their submissions both governments failed to appreciate this distinction and in so doing confused the extraterritoriality argument with the doctrine of comity (KEITNER, 2008, p. 101) . Since claims under the ATCA seek to hold corporations liable as accomplices, and not sovereign principals, the litigation does not directly infringe the principal’s sovereignty under the Foreign Sovereign Immunities Act of 1976 (KEITNER, 2008, p. 102) . Finally, while an agent of a foreign government would also be immune under this Act, courts cannot be deprived of jurisdiction over defendant corporations under this doctrine as they have no agency relationship with the foreign government in whose country they are operating (KEITNER, 2008, p. 102) .

The preceding section demonstrates that the sovereignty argument while falling broadly with the doctrine of international comity was conceptually confused. Thus Judge Scheindlin was correct in dismissing the argument that aiding and abetting liability would infringe upon the sovereignty of South Africa.

6. The South African and U.S. governments’ turnabout and subsequent developments

The preceding analysis reflects the recent trend in courts’ dismissal of executive submissions upon finding their opposition to ATCA suits to be unreasonable and unfounded. Judge Scheindlin’s opinion further solidified this by not only dismissing the submissions but allowing the suit to continue without requiring the government’s views to be resolicted as requested by the plaintiffs.⁴⁶ While the plaintiffs may have requested resubmission in the hope that the new Zuma and Obama administrations would be more sympathetic to their cause, Judge Scheindlin effectively ruled that it did not matter what either government thought.

On 22 April 2009, the defendants filed a motion for reconsideration. This was denied upon which the defendants then filed a notice of appeal on 25 June 2009 with the Court of Appeals for the Second Circuit for the interlocutory review of Judge Scheindlin’s decision to allow the litigation to proceed to trial.⁴⁷ The review was set for hearing on 11 January 2010.

On 1 September 2009, under the recently elected Zuma government, Justice Minster Jeff Radebe sent an unsolicited letter to Judge Scheindlin with a copy to the Court of Appeals for the Second Circuit. The letter in effect reversed the South African government’s opposition of the litigation under former President Thabo Mbeki. In this regard, the Justice Minister observed that the suit no longer involved claims against corporations that merely did business in South Africa during that time and instead limited the claims to those ‘based on aiding and abetting very serious crimes, such as torture, [and] extrajudicial killing committed in violation of international law by the apartheid regime.’ (MATABOGE, 2009) . The Minister also informed the court that ‘[t]he government of the Republic of South Africa, having considered carefully the judgment of the…Southern District of New York, is now of the view that this Court is an appropriate forum to hear the remaining claims of aiding and abetting in violation of international law.’ (MATABOGE, 2009) . However, the letter also stated that the government would be ‘willing to offer counsel to the parties in pursuit of a settlement.’ (MATABOGE, 2009) . Justice Department spokesperson Tlali Tlali said the government’s turnabout was based on the realization that there was no ‘appropriate forum’ in South Africa for such litigation and that ‘the US court is an appropriate forum to hear these matters’ but that the ‘government is, however, available to facilitate [out-of-court] settlements if the litigants are amenable to that option.’ (MATABOGE, 2009) .

On 30 November 2009, the U.S. government as amicus curiae submitted to the Court of Appeals for the Second Circuit a brief supporting the plaintiffs as appellees (UNITED STATES OF AMERICA, 2009e) . In short, the brief argues that since the U.S. did not explicitly request that the case be dismissed on foreign policy grounds (UNITED STATES OF AMERICA, 2009e, p. 2)⁴⁸ and since Judge Sheindlin did not deny defendants’ motion to dismiss despite such request, the collateral order doctrine was not satisfied and the court should dismiss the appeal by the defendants for lack of jurisdiction (UNITED STATES OF AMERICA, 2009e, p. 12).⁴⁹

Both recent submissions clearly indicate a drastic turnabout. The effect of these new submissions remains uncertain as judgment from the 11 January 2010 hearing by the Court of Appeals as to whether the litigation may proceed remains reserved until later this year. Another uncertainty is that while Judge Scheindlin’s opinion effectively excluded executive submission on the issue, it is unclear whether the Supreme Court if faced to hear the case will follow a similarly undeferential approach. If not, the new statements issued by the Zuma and Obama administration may well assist the plaintiffs’ case provided an out-of-court settlement does occur before the matter can be heard. It is argued that such an outcome would be disappointing and undesirable.⁵⁰

7. Conclusion

The possibility of indirect liability for aiding and abetting violations of international law under the ATCA not only has the potential to promote U.S. foreign policy and encourage beneficial investment but also to afford justice to litigants who are entitled claimants. Litigating in U.S. courts is particularly beneficial as many multinational corporations have sufficient ties with the U.S. allowing plaintiffs to establish jurisdiction (NEMEROFF, 2008, p. 251) . Corporations are also more likely to have sufficient assets to pay successful claimants and are unlikely to abandon their operations in the U.S. to avoid paying damages (NEMEROFF, 2008, p. 251) . Defendant corporations should be held liable where they have knowingly participated in a violation of an international norm. Upon Judge Scheindlin’s formulation for imposing liability, which this paper supports, plaintiffs would bear the onus of showing that a corporation knowingly provided substantial assistance to a regime that committed human rights violations which infringed established international norms (UNITED STATES OF AMERICA, 2009a, p. 54) . Under this standard it is highly unlikely nor has it ever been the case, that a company will be held liable for merely doing business in a country with a poor human rights record.⁵¹

Establishing a clearer doctrine for aiding and abetting liability under the ATCA will provide better guidance to potential plaintiffs as to whether they have a claim as well as how to structure it and thereby avoid unnecessary litigation. It has been noted that ‘critics of ATCA suits have long complained that courts have used the statute to make decisions based more on personal preference than legal principle. This critique has been fueled by most American lawyers’ lack of familiarity with international law and by courts’ failure to produce a clear methodology for adjudicating ATCA cases…courts can and should define a specific methodology for deciding issue of international law in U.S. courts…[as] a forum for the settlement of disputes involving foreigners…ATCA litigation need not consist of the application of amorphous standers and judicial fiat. Instead the litigation of international norms in U.S. courts can be grounded in well-established legal doctrine’ (HOFFMAN; ZAHEER, 2003, p. 83) . So too it could provide guidance to corporations in ensuring that they take preventative measures to reduce exposure to litigation. However, despite current uncertainty corporations are not left without defences (some not discussed in this paper), such as forum non conveniens , exhaustion of local remedies and properly founded arguments under the political question and international comity doctrines. The high evidentiary burden plaintiffs carry in such cases also operates in favour of corporate defendants (DHOOGE, 2009, p. 289) .

The doctrine of aiding and abetting liability under the ATCA appeared to be gaining momentum culminating in Judge Scheindlin’s opinion however, since then; various federal courts have handed down decisions pointing the other way.⁵² Perhaps most significantly, the Second Circuit’s ruling in Presbyterian Church of Sudan v. Talisman Energy Inc (UNITED STATES OF AMERICA, 2009e) that in order to establish aiding and abetting liability under the ATCA, a plaintiff must show ‘that a defendant purposefully aided and abetted a violation of international law.’ In changing the standard from mere knowledge to purpose, the Second Circuit has placed a heavier burden on plaintiffs bringing ATCA claims.

It should also be noted that despite the Bush administration’s submissions, the U.S. Congress has never sought to amend the ATCA to either expressly include or exclude indirect liability. This congressional silence could be from a lack of interest or consensus or a desire to defer to the Supreme Court. It has been argued that Congress’s failure to amend the ATCA to include aiding and abetting liability despite judicial precedent does not indicate legislative intention in favour of liability and that the lack of Congressional approval combined with the absence of explicit reference to aiding and abetting liability in the statute itself should prevent the imposition of aiding and abetting liability against corporate defendants (DHOOGE, 2009, p. 282) . The limited guidance provided by the Supreme Court in this regard has forced lower courts to make decisions as to the application of the ATCA. Since the more recent federal court decisions appear to be closing the door and limiting the statute’s application in favour of defendants, the outcome of theKhulumani case will prove to be crucial.

In this regard, an out-of-court settlement would prevent the setting of further precedent and frustrate the process of crystallization set in motion by Judge Scheindlin at a most crucial period. While Judge Scheindlin provided much needed clarity to the political question and international comity doctrines as well as the standard of intent required, the issue of aiding and abetting liability under the ATCA still needs to be addressed by the Supreme Court. Whether the litigation is allowed to proceed and whether it will reach a Supreme Court with the necessary quorum to hear the matter remains to be seen.