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Is Shell The Equivalent Of Nazi-Era Firm? Legally, Perhaps

2/24/2012 @ 11:38AM

Daniel Fisher

Daniel Fisher, Forbes Staff

Next Tuesday, the U.S. Supreme Court will hear arguments in Kiobel v. Royal Dutch Petroleum, a case that asks whether former residents of Nigeria’s Ogani region can sue Shell in U.S. court over human-rights abuses committed by local government forces.

The decision may hinge on how justices view the skin-crawling comparison between Shell and I.G. Farben, the German chemicals conglomerate that actively participated in Nazi crimes. No one’s accusing Shell of being another I.G. Farben, exactly — the German company prospered in part on the labor of 50,000 slaves.

But Jennifer Greene, a human-rights expert at the University of Minnesota Law School, came close in a recent article in which she argued that Shell is in the same legal position as the Nazi-era company when it comes to its potential liability for wrongdoing in Nigeria.

The lesson from cases after the close of World War II is that “corporations as well as human beings must be responsible for violations of universally recognized international law norms,” Greene wrote. Plaintiffs in the Shell case are trying to sue under the Alien Tort Claims Act, a 1789 law that allows non-citizens to sue in U.S. federal courts for torts “committed in violation of the law of nations or a treaty of the United States.” They argue that applying the “law of nations” was amply demonstrated after World War II when Allied forces stripped companies like Farben of their assets as punishment for aiding the Nazis with their crimes.

The Second Circuit Court of Appeals in New York rejected this view in Kiobel, finding that the ATC was intended to apply to individuals, not corporations. But the Second Circuit doesn’t get much support on that point.

The federal government and judges in two other federal appeals courts — including the influential conservative Judge Richard Posner in Chicago — have rejected the idea that corporations are immune from liability under the ATC. In a brief supporting the plaintiffs, State Dept. Legal Advisor Harold Koh argues that even back in 1789 corporations as well as individuals were understood to be liable for tort damages in court. (It’s a somewhat controversial position for the Obama administration to take, given liberal outrage at the Citizens United decision equating the free-speech rights of individuals with corporations.)

More important for the plaintiffs is Posner’s decision from last July in Flomo vs. Firestone. Firestone won the case when Posner upheld the dismissal of a lawsuit on behalf of Liberian children allegedly pressed into labor because of the way Firestone paid for rubber produced in plantations there. But in so doing, Posner rejected the Second Circuit’s reasoning, particularly on whether Nazi firms like I.G. Farben had been subjected to legal sanctions for violating international law. Of course they had, Posner said: Allied authorities “dissolved German corporations that had assisted the Nazi war effort, along with Nazi government and party organizations—and did so on the authority of customary international law.”

Sounding almost like a human-rights activist himself, Posner went on to write:

And suppose no corporation had ever been punished for violating customary international law. There is always a first time for litigation to enforce a norm; there has to be. There were no multinational prosecutions for aggression and crimes against humanity before the Nuremberg Tribunal was created.

Shell says it has repeatedly asked Nigerian officials to respect human rights,  “continues to be strongly opposed to violence” and “would not operate behind a military shield” in Nigeria. When asked whether Shell really has anything in common with I.G. Farben, Greene demurred.

“There were actions taken under international law against I.G. Farben,” she told me. “There’s the same principal at stake in the Shell case.”

Shell’s supporters say the case, if allowed to proceed, will open the door to shakedown lawsuits against any company doing business in a difficult part of the world where government authorities don’t follow the rule of law. But Greene said that minimizes the difficulty of assembling a case that will survive the initial scrutiny of a judge.

“The test is you have to show much more than doing business in a bad place,” she said. “The standard is you have to show knowledge — the company knowingly provided substantial assistance.”

The plaintiffs in the Firestone case failed that test, Posner wrote. While child labor is illegal under a broad variety of international laws, he said, there was no agreed-upon international standard for determining whether Firestone’s policy of setting high daily production quotas for rubber forced parents to enlist their children as helpers. The connection was too diffuse.

But Greene thinks she made a better case in a lawsuit against Unocal over alleged rights abuses when it was building a pipeline in Burma. Unocal was in a joint venture with a government-owned entity and its executives “knew about forced labor and accepted it as a standard way of doing business,” said Greene, one of the lead attorneys on the case. The Ninth Circuit allowed the case to proceed in 2002, and Unocal finally settled in 2010 for terms Greene declined to discuss. (Unocal had earlier called the claims “absolutely false and clearly absurd to anyone familiar with the project.”)

“It’s only the compaies that are complicit in these violations that can have lawsuits brought against them,” Greene said.

On Tuesday the Supreme Court has two questions to answer. One is the narrow procedural question of whether the Second Circuit was right to decide, as a matter of law, that the Alien Tort Claim Act didn’t govern corporations. If the court rules for the plaintiffs on that, it can either send the case back for a broader review of the liability of corporations under the ATC. Or it can find for the plaintiffs directly on the second question of whether the ATC applies, and then the Shell plaintiffs will at least have a chance to make the case that their lawsuit has enough evidence to proceed.

Greene hopes the court’s conservative justices are convinced by the reasoning of their fellow traveler, Posner, in the Firestone case.

“He was right, I agree with him,” she said. Except, perhaps, for how it ended for the plaintiffs.

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