Marco Simons's blog

A new report from Corporate Europe Observatory and the Transnational Institute details problems with the system of investor-state arbitration and charges that the arbitration industry - including law firms and arbitrators - are contributing to the injustices in the system.

Enshrined in a number of investment treaties between governments, investor-state arbitration allows private companies from one country who invest in another country to file a complaint against the host government if they feel they're being treated unfairly. The complaint is heard outside any court system, by a panel of arbitrators who issue a decision that is usually confidential and is supposed to be binding.

We have previously noted how arbitration is being abused by companies, including cases in which the US mining company Doe Run filed a complaint against the government of Peru arguing that it's unfair to subject them to Peruvian environmental laws, and a case in which Chevron has already succeeded in getting an arbitration panel to tell the government of Ecuador to prevent enforcement of a judgment for massive contamination of the Amazon, arguing that the Ecuadorian government has treated it unfairly in litigation in Ecuadorian courts.

The new report, "Profiting from injustice," studies the arbitration system in detail and concludes that both the policymaking of the arbitration process and the decisions in arbitration cases have essentially been captured by an industry that benefits from the increased use, and scope, of investment arbitration. A small club of arbitrators and investment lawyers control the discussion about the arbitration system, encouraging the inclusion of arbitration provisions and broad interpretations of these provisions, and profiting from the explosion of investor-state arbitration in recent years. And, the report charges, these lawyers even generate their own cases, pitching companies with ideas of suing governments.

On Friday, the U.S. government announced that imports of goods from Myanmar/Burma, which had previously been prohibited, are now allowed. (Legally, this is done by General License No. 18 issued by the Treasury Department, which is attached below.) The only exceptions are rubies and jadeite, the main gems produced in Myanmar; the U.S. says that some "concerns" remain about the production of gems in Burma.

The license does allow direct imports of timber, including teak. Ironically, however, that may soon be banned from the other end - the Myanmar government has stated that it's planning to ban exports of timber starting in 2014. But, as the Irrawaddy reports, that may not help curb the illegal logging trade, which is a significant cause of deforestation in Myanmar.

Last week, as everyone in my office geared up for yesterday's Kiobel v. Shell Supreme Court argument, I hopped on a plane to Thailand. This morning, I discussed ERI's groundbreaking Alien Tort Statute (ATS) case, Doe v. Unocal, with a remarkable group of 27 young lawyers from inside Burma (Myanmar), who are working to protect rights in their native country. But whether a case like Unocal will be possible in the future will depend on the outcome of Kiobel, so at 1am Thai time I was eagerly reading the argument transcript.

Words on paper obviously don't compare to being in the courtroom for the argument, but I share Rick's optimism about the outcome. In particular, I was surprised by the overreach of Shell's lawyer, Kathleen Sullivan, and the incoherence and inconsistency of the position of the US government.

Sullivan, who's been ridiculed for her insistence at the original Kiobel argument that a corporation that committed piracy - the proverbial "Pirates, Inc." - could not be held responsible, doubled down on her position this time. According to Sullivan, not only could Pirates, Inc., not be sued - but actual pirates could not be sued, either, because the ATS does not extend to any claims outside the United States. And Sullivan affirmed that Shell's position was that the seminal Filartiga case, which began modern US human rights litigation and which the Supreme Court has previously approved, was wrongly decided. She gave no ground on the position that the ATS should not apply to any acts outside the United States, period.

Earlier this year, the US government argued on the side of victims of human rights abuses at the US Supreme Court. In Kiobel v. Royal Dutch Petroleum (Shell), the government argued that corporations should not be exempt from responsibility for committing human rights abuses. But when the Supreme Court ordered a rehearing in the case, and asked whether human rights lawsuits could be brought when the abuses happened outside the US, we wondered whether the Obama administration would continue to side with the victims.

Today, the government submitted its brief (below) - and it's on the wrong side. I have rarely been so disappointed in my government.

In this case, which involves victims of crimes against humanity in Nigeria who allege that Shell was complicit in the violent suppression of a nonviolent movement, the Obama administration argues that courts should not allow the human rights claims to proceed. The administration doesn't urge a blanket rule against all cases arising in foreign countries, but it does argue that in a case like Kiobel, where the defendant is a foreign company doing business in the US, and where the abuses were committed by government forces within their own territory, the courts should deny the victims justice.

This position undoubtedly provoked severe controversy within the administration. How do we know? Some of the government's lawyers appear to have refused to sign the brief. Last time, the government's brief was signed by lawyers in the Department of Justice as well as the State Department and the Commerce Department. This time, only the Justice Department is on the brief. Notably, Harold Koh, the top lawyer in the State Department and a longtime human rights advocate, did not put his name to the brief.

Why is Obama's position wrong? Several reasons. First, the government acknowledges that ordinary lawsuits, involving things like dangerous retail products or fraud, could be brought in US courts by foreigners against any company doing business in the US. It urges the Supreme Court to adopt a different rule for the most egregious human rights abuses, arguing that those victims, unlike victims of everyday wrongs, should be denied access to US courts.

Yesterday, the Ninth Circuit Court of Appeals confirmed that Maynas Carijanao v. Occidental Petroleum, our case on behalf of indigenous Peruvians against Oxy for oil contamination in the Amazon, can proceed in U.S. courts. If this sounds familiar, it's because the Ninth Circuit has done this twice before - but this time, it's for good.

What's going on here? The short answer is that Oxy filed several petitions to get the Ninth Circuit to reconsider its decision (asking for a "rehearing"), and the final petition was just rejected. This petition was for rehearing "en banc," which means that the full court - twenty-seven active judges in the Ninth Circuit, although one was recused - votes on whether to reconsider the decision, and if they vote in favor, the case would go to a panel of eleven judges. En banc rehearing is the final stage at the appeals court, so the only option remaining to Oxy is the Supreme Court.

Why did this take so long? The Ninth Circuit issued its original decision a year and a half ago, in December 2010. The three judges hearing the case then considered Oxy's first rehearing petition, and modified their opinion slightly and reissued it in June 2011. But then after Oxy filed their petition for en banc rehearing, it took months for the final order denying the petition.

What happened is probably explained by the opinions that were issued along with yesterday's order. Chief Judge Kozinski, who's usually described as libertarian, wrote a dissent, saying that the court should have reheard the case; he was joined by four of the court's more conservative judges. Judge Wardlaw, the presiding judge on the original three-judge panel, wrote an opinion in response. The actual en banc voting process usually doesn't take more than a couple months, so the back-and-forth opinions are probably responsible for most of the delay.

As I noted last week, the U.S. Supreme Court ruled in Mohamad v. Palestinian Authority that only human beings - not corporations or organizations - could be sued under the Torture Victim Protection Act (TVPA). Yesterday, the Supreme Court denied our petition for certiorari in Bowoto v. Chevron Corp., which means an end to that lawsuit.

The decision on the Bowoto petition was expected, because the only issue in the petition was whether corporations could be sued under the TVPA. The Ninth Circuit Court of Appeals had ruled that the Bowoto plaintiffs could not sue Chevron under the TVPA because it is a corporation, and ERI asked the Supreme Court to overturn this decision.

Bowoto arose out of a 1998 incident in which, after environmental protestors occupied an offshore Chevron oil platform, Chevron called in Nigerian military and police forces to violently attack and evict the demonstrators, killing two people and injuring many others. Unfortunately, after a jury found in Chevron's favor in a 2008 trial, this petition to the Supreme Court was the plaintiffs' last chance for a new trial.

What are the other implications of the Mohamad decision? The case considered only the question of whether the term "individual" in the TVPA could include corporations and other entities. As my colleague Jonathan noted in his recent radio interview, the decision is outrageous because it suggests that the Supreme Court believes that corporations can be individuals under circumstances that benefit the corporation, but not when it would lead to additional liabilities. In a previous case, the court had ruled that corporations were "individuals" when it allowed them to challenge a federal statute, because it would be "absurd" to limit such challenges to human beings; in Mohamad, the court found nothing "absurd" about limiting responsibility for egregious human rights violations to human beings.

The U.S. Supreme Court ruled today in Mohamad v. Palestinian Authority that the Torture Victim Protection Act (TVPA), which allows suits in federal court for torture and extrajudicial killing, only allows suits against human beings - not corporations or other entities.

We'll have more on this later, but among the impacts of this decision is one that hits very close to home here at ERI: the final appeal in Bowoto v. Chevron Corp., which also raised the question of suing corporations under the TVPA, now appears to be at an end.

However, because this decision was based on the particular text of the TVPA, it doesn't necessarily indicate anything about what the Supreme Court might do about corporate liability under the Alien Tort Statute (ATS) in the Kiobel case, which was heard the same day as Mohamad but will be reheard by the court in its next term.

Update: My colleague Jonathan was interviewed on WBAI about the Mohamad decision.

Court orders Kiobel case reargued and asks whether human rights cases arising in other countries can be heard

A few hours ago, the Supreme Court issued a highly unusual order in the Kiobel case: the Court will not decide that case, on whether corporations can be sued for human rights violations such as torture and crimes against humanity, during this term. Instead, the Court will re-hear the case, and will receive entirely new briefing, to focus on a different issue: whether Alien Tort Statute cases can be brought in U.S. courts over abuses which occurred in other countries.

A few quick thoughts about this order: First, this may have been issued because the Supreme Court doesn't want to rule in favor of corporate immunity for torture, but still wants to address some outstanding issues in these cases. They had another means of addressing this question if they wanted to: on Friday the Court considered taking the Sarei v. Rio Tinto case, which expressly raised the question of whether the ATS applied abroad. The Court didn't rule on taking Rio Tinto. Instead, they kept Kiobel.

Second, there is little reason to believe that the Supreme Court will rule that no cases can be brought for torture abroad. When this issue was raised at the Kiobel argument, Justice Ginsburg noted that the seminal ATS human rights case, the Filartiga case, arose outside the U.S., and that the Supreme Court's Sosa decision had indicated its approval of Filartiga. "I thought that -- that Sosa accepted that Filartiga would be a viable action under the tort claims act."

Significantly, Justice Kennedy, who may well be the deciding vote on this issue, seemed to agree: "I agree that we can assume that Filartiga is a binding and important precedent for the Second Circuit." So the Court may be taking up this issue to clarify the law.

Third, this means that for those of us who have been fighting about Kiobel, the saga isn't over! There will be another round of briefing, including amicus briefs, and a new argument, and this time the stakes might be even higher.

Update: Katie Redford, our US Office Director, has posted her thoughts on the Huffington Post.

Editorial Note: This morning the U.S. Supreme Court heard oral arguments in Kiobel v. Royal Dutch-Shell, a case which we have blogged about extensively over the past 18 months. Several of our staff members were in attendence, and four of them wrote brief initial impressions. This is one of those four.

I was struck by two things at today's argument. First, although several of the justices - especially Justice Alito - asked difficult questions that suggested a skepticism about using the ATS for transnational human rights cases, they did not ask pointed questions that supported applying different rules to human beings and corporations. 

Justice Alito focused in particular on whether the ATS should apply to acts outside the United States, or acts committed by foreigners. When it was pointed out that theFilartiga case, which is the seminal modern ATS human rights case, involved torture by a Paraguayan official against a Paraguayan citizen in Paraguay, Justice Kennedy (who is often the deciding vote on controversial cases at the Supreme Court) stated that he thought we could assume that Filartiga was a valid precedent.

Second, although there were many interesting questions, statements, and examples (not least of which was Justice Breyer's hypothetical involving Blackbeard claiming that his stolen gold was exempt from recovery because it really belonged to Pirates, Inc.), the single line that impressed me the most was delivered by Kathleen Sullivan, the attorney for Shell. She stated: "We do not urge a rule of corporate impunity here."

What she meant was that even if the corporation itself could not be sued, any responsible corporate officers or employees could be sued. Of course, what she was urging is exactly that: corporate impunity. Shell's position would prevent the corporate treasury from ever being used to compensate victims of corporate-abetted human rights abuses, even if the corporation itself profited from those abuses.

Sullivan was clearly uncomfortable with the position that there should be no liability for corporate wrongdoing, and so she tried to claim that allowing suits against corporate officers and employees was sufficient. Nobody wanted to justify the position that corporations do, in fact, enjoy impunity when it comes to the most egregious violations of international human rights law.

On Wednesday, Marissa noted that the Lago Agrio plaintiffs - the 30,000 victims of Chevron's toxic legacy in the Ecuadorian Amazon - had taken the step of filing a petition against the Ecuadorian government with the Inter-American Human Rights Commission, asking the Commission to ensure that Ecuador compels Chevron to pay the court-ordered costs of cleaning up its mess. Yesterday, a private arbitration panel demonstrated exactly why this petition is necessary. The arbitrators' award orders the Ecuadorian government, including the court system, to take all measures to prevent enforcement of the court judgment against Chevron.

This is an egregious and apparently unprecedented decision. These arbitration panels, convened under investment treaties, are supposed to decide whether a government has treated a foreign investor fairly - usually in the context of a state expropriation of assets, for example. Never before has such a panel, which is made up of private lawyers who act as arbitrators in a lucrative side business, attempted to reach into a country's judicial system and order the domestic courts around.

The worst aspect of the new award is that it completely fails to take into consideration the rights of the Lago Agrio plaintiffs, who continue to suffer from the toxic contamination. Until the judgment is enforced, the contamination won't be cleaned up. Chevron is claiming that it was mistreated by the Ecuadorian government in the Lago Agrio lawsuit, but this award doesn't affect the rights of the Ecuadorian government; it only affects the rights of the victims themselves.

This is an extremely troubling development in investment arbitrations.

Update: According to the Lago Agrio plaintiffs' lawyers, the Ecuadorian courts have put due process and human rights above the investment treaty arbitration. Today the judgment against Chevron was certified by the court, which specifically rejected the notion that the investment treaty could override Ecuador's human rights obligations. A rough translation of part of the court's order: