Corruption, corporations, and the new human right.

• Author: Spalding, Andrew Brady
• Position: III. A New Cornerstone: Rebuilding Corporate Liability after Kiobel through Conclusion, with footnotes, p. 1402-1428

3. A NEW CORNERSTONE: REBUILDING CORPORATE LIABILITY AFTER KIOBEL

The ATS was always a strange candidate to serve as the cornerstone of a federal statutory regime for deterring overseas corporate rights violations. But we would not let the perfect be the enemy of the good, seizing upon that ambiguous statute because it seemed the best available for pursuing this compelling goal.

That perception is wrong-headed. This Part argues that the ATS never has been and, after Kiobel, never will be the principal federal statute by which corporations are held liable for overseas human rights violations. The FCPA represents a better statutory model for deterring overseas, rights-related corporate misconduct. Post-Kiobel, scholars should come to recognize the FCPA as the principal federal statute for deterring such conduct, and should direct their energies to better understanding how the FCPA can more effectively achieve this goal.

Part III.A will compare the two statutes to illustrate how the FCPA is a more legally sound and practically effective cornerstone on which to build a federal statutory regime of corporate liability for human rights abuses. But if the FCPA is to fully achieve its goal, two sets of reforms are needed: first, we must develop a scheme for remedying the harms that known incidences of large-scale corporate bribery caused; and second, we must work more effectively to create uniform enforcement among the capital-exporting nations. But neither of these reforms is unprecedented in federal law: to discern the first we can look to environmental law, and for the second to intellectual property.

1. The FCPA as the A TS Might Have Been

   The ATS has been the crux of what Harold Koh famously called "transnational legal process," in which domestic courts are used to develop standards of international law. (200) Koh argued that bringing suits under international law in U.S. courts result in the development, and perhaps the incorporation, of international human rights norms into U.S. law. (201) His followers urged usage of this strategy to create a "dialogic process of transnational judicial dialogue itself--of interaction, interpretation, and internalization among the world's judges--that ensures the generation and proliferation of norms that are 'legitimate' on the international plane." (202) The ATS has been widely thought to provide a means of achieving this goal and indeed, among U.S. statutes is perhaps uniquely situated to do so.

   But the ATS's strength may have proven to be its liability. The process of incorporating international human rights standards into U.S. law through the ATS has yielded a number of legal issues that go to the very essence of the statute's purpose. Scholars, litigants, and judges have vigorously disputed such fundamental questions as why Congress enacted the statute in the first place; the origin of its cause of action; whether jurisdiction is universal; whether the presumption against extraterritoriality, recently affirmed by the Supreme Court in Morrison, (203) should apply to the ATS, and if so, to what extent; whether liability extends to corporations or is limited to natural persons; what the ATS's impact on foreign relations could be; and whether that impact should be relevant to the courts' construction of its application. (204) The ATS has thus proven to be a rather shaky foundation on which to build a regime of corporate liability for overseas human rights violations.

   The FCPA, by contrast, is vulnerable to none of these disputes. It eschews the attempted incorporation of international law into federal common law by the federal judiciary in favor of a clear congressional directive based on undisputed constitutional authority and well-established common-law liability.

   The first U.S. Congress enacted the ATS as part of the 1789 Judiciary Act, the full text providing merely that "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." (205) From its enactment until 1980, the law was invoked only twenty-one times, (206) and only two courts had ever upheld jurisdiction under the statute. (207) With the watershed case of Filartiga v. Pena-Irala (280) in 1980, the statute found new life and perhaps even assumed a new identity: an instrument for allowing aliens to hold persons liable for overseas human rights abuses in U.S. courts.

   From 1997 until 2010, the courts regularly used the ATS to hold corporate defendants liable for rights violations. (209) Though the Supreme Court had subtly raised the question of whether corporations could be liable in a footnote to its only decision on the ATS, (210) no lower court accepted the court's invitation to overturn corporate liability until 2011. Then, in Kiobel v. Royal Dutch Petroleum, (211) the Second Circuit heard the appeal of a Nigerian national who has sued three international companies for allegedly arranging with the Nigerian government to militarily suppress resistance to the companies' oil drilling. The Second Circuit held that corporations are not liable under the ATS because the principle of corporate liability has not been established specifically in international law. (212)

   The Supreme Court granted Kiobel's writ of certiorari and held an initial hearing in February 2011 on the question of whether corporations could be liable for human rights violations under customary international law. During the hearing, some justices expressed concern about whether the statute authorized U.S. courts to hear cases alleging violations of international law that occurred on foreign soil, and the Court took the extraordinary step of ordering a second round of briefing and argument to explore that precise topic. (213) Though Congress plainly has the constitutional authority to enact statutes with application beyond the U.S. borders, (214) courts have developed a presumption against extraterritorial application that may only be rebutted by "the affirmative intention of the Congress clearly expressed" in the language of the relevant act. (215) The Supreme Court affirmed this presumption in 2010, finding that Section 10b of the 1934 Exchange Act lacked such a statement of congressional intent and therefore did not provide a cause of action to foreign plaintiffs suing a foreign company for fraud in relation to securities purchased on a foreign exchange. (216)

   The Supreme Court in Sosa ominously warned of courts using the ATS to "claim a limit on the power of foreign governments over their own citizens." (217) That warning proved prescient. The Court's April 2013 Kiobel opinion never even reached corporate liability under international law, instead ruling entirely on extraterritorial application. Finding that "the presumption against extraterritoriality applies to claims under the ATS, and that nothing in the statute rebuts that presumption," the Nigerian petitioners' claim was barred. (218) In dicta, the Court further stated that for an ATS claim to be valid, the conduct in question must "touch and concern" the territory of the U.S. with "sufficient force to displace the presumption against extraterritoriality." (219) But although the Court provided almost no guidance on how that test should apply in practice, the vast majority of the cases historically brought under the ATS would almost certainly fail this test. Kiobel thus does not quite eliminate liability for overseas rights violations, but comes terribly close.

   By contrast, there may be no better example of a clear expression of affirmative intention to apply extraterritorially than the FCPA. The statute prohibits making payments to "foreign officials," (220) and this is understood by all to routinely occur on foreign soil. Moreover, unlike the ATS, the FCPA's legislative history makes abundantly clear that the statute is designed specifically to address bribes that actually did occur there. Indeed, the FCPA represents the quintessential congressional grant of extraterritorial application that the Supreme Court did not find in the Exchange Act or the ATS.

   One can imagine, however, an ATS case involving a corporate defendant that did indeed satisfy the touch and concern test. That case would likely then become the occasion to revisit the original question before the Court of corporate liability. And this issue remains highly unsettled. In the wake of the Second Circuit's ruling, scholars and advocates have raised a staggering number of sub-issues on which little agreement seems to exist. Did the framers who ratified the 1789 Judiciary Act intend to exempt any class of defendant? (221) Does the proper source today for determining whether corporations are liable lie in international or federal common law? (222) If the former, is corporate liability now recognized in international human rights law? (223) Is corporate liability even desirable as a matter of policy, (224) and would it promote or deter investment in developing countries? (225) Here, the weaknesses of transnational legal process are perhaps clearest; looking to international law to establish corporate liability has proven a minefield.

   The FCPA does not invite such disputation. There is no doubt that both juridical and natural persons may be both civilly and criminally liable for violations. The statute makes this explicit, (226) and is supported by a century of case law that has extended criminal liability to corporations. (227) While questions remain concerning whether criminal law specifically may deter investment in developing countries, these disputes are academic and would gain no traction in a court of law. And even among academics, there is no question that corporations must be at least civilly liable if the statute is to have any meaning whatsoever. But more to the point, none can deny that the statute makes both civil and criminal liability explicit and that they both rest on the sound legal...