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September 2, 2011 11:59 AM

The Global Lawyer: Alien Tort, Alien Shmort

Posted by Michael D. Goldhaber

Royal Dutch Shell has been sued so many times over its conduct in Nigeria that its cases offer a laboratory experiment for human rights litigation.

After thirteen years of arduous U.S. alien tort litigation, Wiwa v. Shell resulted in a piddling $15.5 million settlement in 2009. Kiobel v. Shell has done even worse. Nearly a decade after the case was filed, it has succeeded only in abolishing the corporate alien tort within the Second Circuit, and if the U.S. Supreme Court accepts cert, it may do the same nationwide.

Now comes the "Bodo" case, which emerged from obscurity three weeks ago. On August 3, four months after farmers and fishermen from the village of Bodo filed a common law complaint in London high court, Shell's Nigerian subsidiary admitted liability for a pair of oil spills in return for the parent company's dismissal from the suit. The Financial Times trumpeted the potential for a payout of over $400 million, although the Shell Petroleum Development Company called this number "massively in excess of the true position."

What lies behind this shockingly fast and possibly huge quasi-settlement?

The day after the Bodo deal was reported by the press, a hotly awaited report by the United Nations Environment Programme documented serious contamination in the surrounding region of Ogoniland. Without allocating responsibility, UNEP called on the oil industry and Nigeria to start a 25-to-30-year cleanup with initial funding of $1 billion. A UNEP spokesperson said that the ball is now in the court of the Nigerian government, which asked UNEP to conduct the study, and which said it takes the contamination "extremely seriously."

It's hard to believe that the timing was a coincidence. The Ogoni Report may have given Shell an incentive to accept social responsibility in a rare case where it believed most of the allegations to be true. (Shell, which declined to comment for this story, attributes most oil spills in Ogoniland to sabotage and theft rather than operational failure, which it admits in Bodo. It completely denies the Wiwa and Kiobel allegations of complicity in Nigeria's suppression of Ogoni dissent.)

Still, the Bodo deal was not a one-sided plaintiffs victory. Corporate formalities matter intensely to both Shell and its human rights critics. As Dutch plaintiffs lawyer Liesbeth Zevgeld has put it, "Shell headquarters believes it is untouchable, but we believe it is legally responsible for damage caused in Nigeria."  More generally, parental liability for the conduct of foreign subsidiaries has been called the leading legal question in European business human rights. With Royal Dutch's dismissal from the Bodo suit, that battle shifts to the impending Dutch trial of Oguru v. Shell, which seeks the cleanup of three oil spills elsewhere in the Niger delta. The stakes may be somewhat lower in the Netherlands, because Dutch courts lack the sort of class action rules that let U.K. lawyers aggregate 69,000 villagers' claims for loss of livelihood.

What are the lessons of Bodo for business human rights?

First, the UNEP Report is a brilliant model for fact-finding, whatever the fate of its grand proposals. Funded by Shell Nigeria but conducted by the U.N. with peer scientific review, the 14-month, $10 million, 4,000-sample UNEP Report took a fraction of the time and money of the adversarial assessment conducted by Chevron and its foes in Ecuador, and--miracle of miracles--yielded authoritative results.

Second, the common law model of corporate human rights accountability is starting to make the Alien Tort Statute look pretty weak by comparison. Bodo confirms that plaintiffs may have other options if the corporate alien tort hits a dead end.

Leigh, Day & Co.'s Richard Meeran has argued that the common law model is "not quite as grand as alien tort, but so far it's proved to be more effective in practice." That statement gains credibility with each settlement secured by Meeran (who recently settled the Peruvian Monterrico case) or by his partner Martyn Day (who in addition to Bodo, won a 2009 settlement for Ivorian claimants against Trafigura worth $48 million before fees). In fairness, most of the roughly 15 alien tort settlements have been secret. But if the FT's projection is remotely close, the Bodo settlement will far exceed the $30 million reportedly paid by Unocal to settle Burmese human rights allegations in 2005, which is the largest reported alien tort settlement excluding the sui generis Holocaust agreements.

To be sure, not every common law jurisdiction will prove receptive to human rights suits. Leigh Day attributes its U.K. successes to the combination of friendly legal doctrines and an effective system of litigation funding. The key doctrinal development was the 2005 European Court of Justice ruling of Owusu v. Jackson, which interpreted the 2000 Brussels regulation on jurisdiction to require courts in each European nation to assert jurisdiction over locally headquartered corporations. This effectively abolished the English doctrine of forum non conveniens (which remains alive and well in America).

As for litigation funding, the keys for Leigh Day are the ability to recover from corporations full legal costs, success fees, and litigation insurance premiums. It should surprise no student of interest group politics that all of these mechanisms would be rolled back by the Legal Aid Bill currently under debate in Parliament. Martyn Day, who declined to comment on the Shell case while talks proceed on damages, said that the Legal Aid Bill was "an enormous worry," and would in its current form deter the Bodo plaintiffs of the future.

This suggests a final and, perhaps, unexpected lesson: If would-be Alien Tort Statute plaintiffs go the common law route in the United States, states that are friendliest to litigation may see not only new court filings, but also fierce lobbying.

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