Certiorari – gavc law – geert van calster

Update 26 July 2019 the English version of the judgment is now available here.

In January 2017 I reported that Ms Kiobel, following failure to convince the USSC of jurisdiction under the Alien Tort Statute, subsequently initiated proceedings in the Dutch courts to try and sue Shell over the case. (Evidently unrelated to the pursuit of Shell in The Netherlands on environmental grounds – a case which is still pending upon appeal).

The court in first instance at the Hague on 1 May accepted jurisdiction against

both the mother holding. That was not at all under discussion: this is done via Article 4 Brussels Ia’s domicile rule. Use of Article 33 /34’s forum non conveniens-light mechanism was not suggested;
two English-incorporated Shell daughters using Article 8(1) of the Brussels I a Regulation; and
the Nigerian daughter company. Against the Nigerian daughter company, jurisdiction needs to be anchored unto the Dutch mother holding using Article 7 of the Dutch CPR, which is a near carbon copy of Article 8(1) Brussels Ia, whose CJEU authority is followed by Dutch courts in the interpretation of the Dutch residual rule.

Coming so soon after the UKSC in Vedanta the Dutch case has received quite a bit of attention. After first not considering an English translation (not surprisingly; these are the Dutch courts, not a World Service), the clerks have now announced that there will be one, coming up some time soon.

Readers of the blog will expect me to hold the judgment against a clear jurisdictional and conflict of laws lens – in doing so, I fear I have to be a little bit less optimistic than media soundbites following the case.

Jurisdictional issues were in the end dealt with fairly summarily. Most attention went to issues of evidence and discovery, as well as a first review of the substance of the case.

Of note is:

At 4.3: acceptance by all parties of of Nigerian law as the lex causae; if need be, choice of law by all parties for Nigerian law as the lex causae. Rome II is not applicable ratione temporis. The case has this in common with the Milieudefensie case against Shell. This being a civil law jurisdiction, ius novit curia applies. The court has taken into account parties’ submissions on Nigerian law yet has also conducted its own research. Foreign law is ‘law’ in the civil law; not ‘fact’ as in the common law.
Claimants suggest that in the events in Ogoniland Shell acted as one organisation and treated the issue as one engaging the Shell concern as a whole (4.7 in fine);
Claimants purposedly do not wish their claim to be qualified as one engaging piercing of the corporate veil; duty of care; shareholders responsibility; or tort of negligence. Rather, as one engaging the Shell concern directly in a suit on infringement of human rights included in the African Charter on Human and Peoples Rights (ACHPR) and the Nigerian constitution. Tort is only suggested as an alternative should the court not follow the arguments on the basis of human rights (4.8).
At 4.12 the Court accepts the horizontal direct effect of human rights under Nigerian law, referring for that finding to Nigerian case-law. At 4.19 the Court notes the absence of statutes of limitation for human rights violations under Nigerian law: thus qualifying this as an issue of substance (lex causae), not procedure (lex fori). It revisits the statute of limitation issue at 4.47 ff (holding that under Nigerian law the suits can still be brought).
At 4.26 the court applies A8(1) BIa and A7 Dutch CPR in globo, given the same lines of interpretation, and finds succinctly that all conditions (Kalfelis; Roche Nederland; The Tatry) are met. It remarks at 4.26 in fine that given the same situation of law and fact, it was predictable for all parties that they might end up being sued in any of their corporate siblings’ domicile.
At 4.27 the court discussed summary dismissal. As seen in Vedanta, despite Owusu European courts are within their rights to reject the case in summary judgment if there is no ‘real issue’ to be tried against the anchor defendant. However this only applies against non-EU based defendants. Application of Article 8(1) does not allow such summary dismissal for EU-based defendants (see also C-103/05 Reisch Montage). The Hague court reviews summary dismissal only vis-a-vis the Nigerian defendant but finds succinctly that the suit is not prima facie without merit. There is a serious issue to be tried.
At 4.28 interestingly the Court rejects relevance of the High Court and the Court of Appeal‘s dismissal of jurisdiction in Okpabi, arguing that these courts employed ‘English law’. This underscores the argument I have made elsewhere, that there is a serious blank in the discussion on lex causae for the duty of care or, depending on the case, the piercing issue. The Dutch court here notes without hesitation that the English courts apply lex fori to that test, and so therefore, I am assuming, should they (meaning Dutch law in their case)?
At 4.29 it looks as if the Court considers some kind of reflexive argument which defendants seem to have made. Namely that the Dutch courts should respect the exclusive jurisdictional head under the Fundamental Rights (Enforcement Procedure) – FREP Rules, for the Federal High Court in cases involving alleged infringement of human rights. However the Dutch court considers this a mere internal jurisdictional distribution rule, which does not hinder the Dutch courts in their assessment of the claims. There is no written or unwritten rule in Dutch private international law which suggests such deference to a Nigerian civil procedure rule.

Importantly, a great deal of attention at 4.30 ff goes to the debate on the use of documents obtained in US discovery, in the Dutch proceedings. A fair amount of these had to be returned following a confidentiality agreement in the US proceedings. Claimants make recourse to Article 6 ECHR to regain access for use in the Dutch proceedings however the Dutch court curtails much of that. Common law discovery rules are notoriously more claimant friendly than those of the civil law (a comment also made by Marsh CM in Glaxo v Sandoz). It leads to Shell not having to turn over quite a large part of the documents claimants had hoped to use. [Note 18 May 2019 in my original post of 17 May I had ‘common’ law and ‘civil law’ accidentally mixed up in the previous sentence].

At 4.58 ff the Court then turns to the substance of the case for case management reasons, with a view to determining which parts of the claim may be made subject to further proof. It holds in a way which I imagine must have been very disappointing for claimants. Only limited claims (of the Nigerian daughter’s involvement in the bribing of witnesses) will be allowed to continue.

The court held that claims of controlling meddling in the Nigerian court proceedings were not proven with sufficient force for these claims to continue – instead it held that Shell’s policy of silent diplomacy, in line with its business policies, had been consistently carried out.

All in all I would suggest claimants have scored clear points on jurisdiction, minor points on discovery and a disappointing outcome for them on substance. Albeit that the witness bribe leg may still lead to a finding of human rights infringement.

Geert.

(Handbook of) European private international law, second ed. 2016, Chapter 8, Headings 8.3.1.1., 8.3.2.

Update 18 January 2017. Ms Kiobel is now apparently using Dutch courts to try and sue Shell over the case. (Evidently unrelated to the pursuit of Shell in The Netherlands on environmental grounds). See here for background to the case.

The central question in Kiobel turned out to be this: whether and under what circumstances US courts may recognize a cause of action under the Alien Torts Statute, for violations of the law of nations, occurring within the territory of a sovereign other than the United States. In focusing on this question (and replying in the negative), the SC did not entertain the question which actually led to certiorari, namely whether the law of nations recognises corporate liability.

I have a paper with Charlotte Luks over on ssrn, which discusses the ATS (and related developments in the EU). The Alien Tort Statute, a product of the United States’ first congress, creates a domestic forum for violations of international law. The relevant text reads, “The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.”

Since the path-breaking Doe v. Unocal litigation in 1997, more than 50 cases have been brought in the United States against companies under the Alien Tort Statute alleging corporate involvement in human rights abuse abroad. However In Kiobel v Royal Dutch Petroleum, the United States Court of Appeals for the Second Circuit held that corporations cannot be sued under the Alien Tort State for violations of customary international law because “the concept of corporate liability […] has not achieved universal recognition or acceptance of a norm in the relations of States with each other.” In denying re-hearing, Chief Judge Jacobs argued in February 2011 that

All the cases of the class affected by this case involve transnational corporations, many of them foreign. Such foreign companies are creatures of other states. They are subject to corporate governance and government regulation at home. They are often engines of their national economies, sustaining employees, pensioners and creditors–and paying taxes. I cannot think that there is some consensus among nations that American courts and lawyers have the power to bring to court transnational corporations of other countries, to inquire into their operations in third countries, to regulate them–and to beggar them by rendering their assets into compensatory damages, punitive damages, and (American) legal fees. Such proceedings have the natural tendency to provoke international rivalry, divisive interests, competition, and grievance–the very opposite of the universal consensus that sustains customary international law.

Certiorari at the Supreme Court was keenly awaited by the corporate social responsibility (CSR) community, for ATS litigation by default had become the flag bearer for pursuing alleged violations of international law (whether in human rights or environment) by multinational corporations.

Extraterritorial application of US law was most recently the issue in Morrison v National Australia Bank, in the area of securities. In Kiobel, the SC relies on its extensive review of exterritoriality in Morrison. It did so even if in Morrison (and other cases before it), the question of exterritoriality was one of merits (aka jurisdiction to prescribe): i.e. whether an Act of Congress regulating conduct, applies abroad. By contrast, in Kiobel, the question concerns jurisdiction pur sang (aka jurisdiction to adjudicate). For the SC, this did not dent precedent value of Morrison: ‘we think the principles underlying the canon of interpretation similarly constrain courts considering causes of action that may be brought under the ATS’.

In Morrison, the SC held that when a statute gives no clear indication of an extraterritorial application, it has none. In Kiobel, the Court did not find convincing argument in either text, history, or purpose of the ATS, which could rebut the presumption against extraterritoriality. The closest such rebuttal arguably lay in the historic (and more current) examples of employing ATS against piracy: as the SC notes, ‘piracy normally occurs on the high seas, beyond the territorial jurisdiction of the United States or any other country, [however] applying U. S. law to pirates does not typically impose the sovereign will of the United States onto conduct occurring within the territorial jurisdiction of another sovereign, and therefore carries less direct foreign policy consequences.‘

The latter of course is where the core of the argument lies, and where public, and private international law principles of comity come into play: the degree to which in upholding jurisdiction, the courts in ordinary might be obstructing US foreign policy. As an aside and not having completed my thinking on this: Judge Jacobs’ frank assessment of the respective roles of public and private international law, referred to above, is particularly interesting when one considers the communis utilatis roots of modern conflict of laws The conviction in Dutch conflict of laws in the 17th century (later exported via Scotland to the US), that foreign laws needed to be applied if and when they so wanted, on the basis of reciprocity, and in line with communis utilitatis has now been turned on its head: comity is now being used as a presumption against such application of foreign laws or, here, public international law.

The SC concludes as follows:

On these facts, all the relevant conduct took place outside the United States. And even where the claims touch and concern the territory of the United States, they must do so with sufficient force to displace the presumption against extraterritorial application. See Morrison, 561 U.S. ___ (slip op. at 17–24). Corporations are often present in many countries, and it would reach too far to say that mere corporate presence suffices. If Congress were to determine otherwise, a statute more specific than the ATS would be required.

The Court therefore answers Kiobel-type cases (a foreign plaintiff suing a foreign defendant for acts or omissions occurring wholly outside of the United States that allegedly violate the law of nations), however it does leave open many questions which fall outside the factual Kiobel box. Does the reference to ‘claim’ and ‘territory’ of the US refer to the tortious action (thus requiring that to take place in the US) or would a US defendant suffice (in all likelihood: no)? What ‘link’ would be enough for the action to take place in the US: in particular, lack of corporate oversight over foreign subsidiaries? In all likelihood, further distinguishing will take place by lower courts (and might eventually end up at the SC again), however it is clear that the scope for ATS litigation has been severely diminished. This means that attention may now be re-ignited in what has been brewing in the EU for some time: using national courts to apply national law for conduct abroad: in other words, classic private international law /conflict of laws coming to the limelight once again.

Geert.

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