BSR Insight | New Uncertainty About Corporate Liability for Human Rights
In a case involving allegations of complicity in the executions of environmental protesters against a Shell subsidiary in Nigeria, a U.S. appeals court ruled that the U.S. Alien Tort Statute (ATS)—which allows foreigners to seek damages in the United States for human rights violations committed abroad—should not apply to companies. Dozens of cases have been filed against corporations under the law, and this ruling contradicts an earlier decision by another appeals court that had accepted the possibility of corporate liability. Given this new uncertainty, it’s possible that this case will go to the U.S. Supreme Court.
While all judges in the Shell case agreed that the lawsuit should be dismissed, the majority and dissenting opinions clearly outline the two opposing views on corporate liability under the ATS:
"No corporation has ever been subject to any form of liability under the customary international law of human rights, and thus the [ATS] … does not confer jurisdiction over suits against corporations."
—Second Circuit Judge José Cabranes (Wall Street Journal, September 18, 2010)
"According to the rule my colleagues have created, one who earns profits by commercial exploitation of abuse of fundamental human rights can successfully shield those profits from victims’ claims for compensation simply by taking the precaution of conducting the heinous operation in the corporate form."
—Second Circuit Judge Pierre Leval (Businessweek, September 17, 2010)
Whether or not the U.S. Supreme Court takes on the question of corporate liability under the ATS, companies can mitigate legal risk by adopting strong human rights policies, conducting human rights impact assessments, and providing effective grievance mechanisms where human rights may be impacted.
About the Author(s)
Faris Natour, Director, Human Rights
Faris leads BSR’s human rights practice, advising companies on human rights strategy, policy development, human rights impact assessments, and other elements of human rights due diligence... Read more →
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