Rethinking Kiobel: Is there Room for Human Rights in FCPA Enforcement?

Today is the one-year anniversary of the U.S. Supreme Court’s decision in Kiobel v. Royal Dutch Petroleum Co. In its decision, the Court narrowed the admissibility of Alien Tort Statute (ATS) claims related to extraterritorial human rights abuses, ruling that such claims are not actionable unless the claim has a sufficient nexus to U.S. territory. What kind of nexus is enough for an ATS case arising from exterritorial conduct? For cases involving foreign multinational companies, such as the defendant Royal Dutch Petroleum in Kiobel, a “mere corporate presence” in the U.S. is not enough.

A striking feature of this holding is the clear contrast between how a “mere corporate presence” in the U.S. is not enough for an ATS claim based on extraterritorial conduct, but is sufficient for a Foreign Corrupt Practices Act (FCPA) prosecution. Although Royal Dutch Petroleum’s “mere corporate presence” in the U.S. was not a sufficient basis for an ATS claim, if these human rights abuses were tied to corruption for the retention or solicitation of business in Nigeria (and involved U.S. interstate commerce — a requirement not difficult for the DOJ and SEC to overcome), Royal Dutch Petroleum could be liable for FCPA violations. As a foreign multinational company, Royal Dutch Shell Company lists its shares on the New York Stock Exchange and prepares filings for the SEC. Such activity is sufficient for establishing FCPA jurisdiction.

This suggests a possible strategy for human rights advocates dismayed by the Kiobel decision: Perhaps it might be possible to more aggressively utilize FCPA enforcement for circumstances in which corporate accountability for human rights abuses is tied to bribery.

One possibility is to make use of the whistleblower provision of the Dodd-Frank Act of 2010. Under this statute, any whistleblower that provides high quality, original information to the SEC, which leads to an SEC enforcement action in which over $1,000,000 in sanctions is ordered, the whistleblower is entitled to a monetary award that is between 10% and 30% of the sanctions recovered by the government. Human rights advocates could pursue independent investigations of the practices of multinationals abroad, and if these investigations unearth evidence of FCPA violations in conjunction with human rights abuses, the human rights advocates could act as whistleblowers, and use the award as compensation for those who suffered human rights abuses related to the corrupt conduct. Admittedly, it would be very difficult for a human rights advocate to gain original and high quality information relevant to an FCPA violation in a manner that an employee could. Nevertheless, even though most FCPA actions arise from voluntary disclosures, some have been uncovered by civil society groups. Human rights advocates could focus their fact-finding strategies on local government actors (such as law enforcement) to seek information indicating bribery occurred.

Another possibility worth considering is statutorily mandated restitution. As indicated in a paper I co-authored, “Access to Remedies for Transnational Public Bribery: A Governance Gap,” survivors of human rights abuses tied to foreign public bribery may seek compensation under the Crime Victim’s Rights Act (CVRA) and the Mandatory Victims Restitution Act (MVRA). Under the CVRA, a crime victim has right to full and timely restitution while under the MVRA, courts may order defendants to make restitution to victims of the offense as long as there is a sufficient connection between the crime and the victim’s harm. In the past, US courts have ordered restitution to foreign governments harmed by FCPA violations. Such precedent indicates that obtaining restitution for human rights abuses connected to an FCPA violation, at least under the MVRA, is worth considering. However, most FCPA investigations end in settlements, and restitution under the CVRA and the MVRA is contingent on prosecution.

Human rights advocates could also encourage the DOJ to increase its practice of distributing compensation for corruption. Under the DOJ’s Kleptocracy Initiative, the US has seized and distributed more than $160 million dollars of bribery proceeds laundered in the US to victims in foreign countries since 2004. A similar practice could be expanded for FCPA violations. Professor Andy Spalding recently wrote an interesting post on the FCPA Blog suggesting that FCPA violators could create a settlement fund to compensate corruption victims in an analogous manner to the existing Supplemental Environmental Projects for EPA violations.

The barriers Kiobel established for corporate accountability for extraterritorial human rights abuses call for creative and strategic approaches. Given the FCPA’s jurisdiction over foreign multi-national companies and its governance of extraterritorial conduct and the DOJ and SEC’s resources for enforcing expensive cases, human rights advocates should explore ways to use the FCPA to promote human rights accountability.

8 thoughts on “Rethinking Kiobel: Is there Room for Human Rights in FCPA Enforcement?

  1. Maryum,

    Thanks for an interesting and thought-provoking post! I’m curious: do you have thoughts on whether and how using the FCPA as a human rights tool could impact FCPA compliance more broadly?

  2. Interesting ideas. One question I had was whether there’s any evidence of FCPA violations in the actual Kiobel case (that is, do we have any evidence, even indirect and unconfirmed, that the company paid bribes in conjunction with its activities that allegedly were linked with human rights violations)? Or are there any other cases you can point to where there’s evidence of corporate FCPA violations in conjunction with corporate participation in human rights abuses? Your claim that they are often linked sounded plausible, but also rather speculative.

    Also, to clarify, is your argument focused more on the need for compensating victims, or on the need to hold companies accountable? Your post focuses more on the former. Is the latter also an issue? Is the concern that there are companies committing FCPA violations (in conjunction with human rights abuses) that are not being penalized, or is the main concern that even if companies are being sanctioned for bribery, they are not paying compensation to victims? If the former is also a problem, it’s not clear what human rights activists could do, except in those rare cases where they can act as whistleblowers (which seems fairly unlikely most of the time).

    • Thank you for your questions and comments Matthew. For your first question and one of Jordan’s comments, there have been claims that bribery was involved in the deaths of Ogani activists who were protesting the environmental damage caused by Shell in Nigeria- these deaths were part of human rights violations alleged in two ATS cases: Kiobel and Wiwa v. Shell. According to the Center for Constitutional Rights (CCR)(https://ccrjustice.org/ourcases/current-cases/wiwa-v.-royal-dutch-petroleum), Shell had worked with the Nigerian military regime for decades to suppress any and all demonstrations that opposed the company’s activities including monetary and logistical support.

      In terms of your second round of questions, I am more focused onusing the FCPA as an option for compensating those who have human rights violations that have a sufficient nexus to an FCPA violation such as a case like Kiobel. While it is true that whistle blowing would be a challenge for human rights activists, I think there is merit in utilizing FCPA enforcement for compensation. When reviewing the original Wiwa complaint from 1996 filed by CCR, the plaintiffs alleged that Shell had engaged in corrupt activity. While this example could be rare, this demonstrates that human rights activists can access information on alleged corrupt activity. One interesting to think about is the timeline of these ATS cases. Both cases were filed before UNCAC came into effect and Wiwa was filed before FCAP enforcement really took off. Perhaps if the timelines of these cases were different, then Shell’s actions would have been investigated by the DOJ and SEC (assuming that such investigation has not already happened).

  3. The idea of using the FCPA as a substitute for ATS litigation has been batted around before (for a good discussion on this topic, see https://www.youtube.com/watch?v=ftkPiGCqGkM). Part of what makes your post interesting, I think, is it deals with one of the major concerns human rights advocates have expressed about using the FCPA: that it doesn’t actually provide a remedy for victims of human rights abuses. If there’s potential for victims to seek restitution in the wake of FCPA violations, that criticism would be significantly weakened.

    Just for the sake of playing devil’s advocate, there are a couple of other concerns I would have about the FCPA in the human rights context. First, as you acknowledge, all of this depends on government FCPA enforcement, and there’s no telling how closely government FCPA investigation decisions track to instances of corporate involvement in human rights abuses. So if human rights groups were serious about this strategy, they might need to develop some kind of mechanism to encourage FCPA prosecutions in the kinds of cases they want to pursue and highlight.

    Second, I wonder about whether FCPA-based actions would have the same expressive value as cases brought under, say, the ATS or the TVPA. Part of what is valuable about these cases is that they can result in public proceedings and judgments showing that defendants participated in violations of human rights. For corporations, the threat of being publicly labeled a human rights violator is a major incentive to institute compliance programs, train local staff, etc. I’m not sure anti-corruption litigation would have the same stigmatizing effect. I raise this point not to say human rights groups shouldn’t be using anti-corruption law, but rather to highlight that if they do pursue it as a primary strategy, they need to think seriously about their organizational goals (compensating victims, versus deterring corporations, versus integrating human rights norms into the U.S. legal system) and how anti-corruption litigation will and will not further them.

    • Sam, I like your point about the expressive value of labeling someone a briber vs. human-rights-abuser, but I’d imagine the response is that often the negative publicity towards a company arises because of the salacious and/or horrifying facts/documents that are unearthed during the discovery process, thus whether those things are found out during a corruption or human rights case is less relevant.

  4. Maryum — great post (and thanks to Sam for sharing another conversation about this idea). A few things that came to me while reading your post:

    1. To just clarify a bit, I don’t think it’s strictly true to suggest that “mere presence” is sufficient under the FCPA. Under 15 U.S.C. § 78dd-1(a), an issuer like Royal Dutch Shell would still have to “make use of the mails or any means of instrumentality of interstate commerce corruptly in furtherance of [a bribe].” So while listing on a U.S. exchange may put the issuer within the reach of U.S. jurisdiction, to prove an actual violation requires that further usage of any means or instrumentality of interstate commerce.

    2. As to Matthew’s question regarding whether any FCPA cases have involved links between corruption and human rights abuses, I am not aware of any such cases up through approximately 2012. There is surely a link between corruption and human rights abuses, but no particular enforcement action comes to mind.

    3. Sam raises some fantastic points that should force us to consider what one would lose in a world where FCPA cases serve as a sort of replacement vehicle for ATS human rights claims. I think he is right that we lose something in the expressive value; in a world where corruption is rampant and often sadly accepted, being labeled a briber is likely not as stigmatizing as being labeled a human rights violator. But I want to highlight something else that Sam briefly mentions: that in moving to the FCPA, one loses an opportunity to seek compensation for the victims. The Kiobel plaintiffs sought damages in their ATS suit. While the government also seeks financial penalties in FCPA actions, DOJ & the SEC generally do not use FCPA settlement funds to compensate victims. With no private right of action under the FCPA, then, this “ATS by way of FCPA” regime would likely vindicate only the public (not the private) interest, providing no recompense to those harmed by the human rights abuses. And there is another complication: the “victims” of corruption and of human rights abuses are likely two different groups (the government vs. the abused citizens.) So even in the (very) rare occasion when the Court orders restitution to a foreign FCPA “victim” — the Haiti Teleco case was largely an anomaly in my view — that victim compensation presumably is only addressed at the “victims” of corruption not of the human rights abuses. Perhaps the FCPA enforcement program could be altered in a way that would ensure victims of human rights violations (outside of foreign government agencies) would be compensated — e.g., by private right of action, policy of establishing charitable funds with settlements, etc. — but that is not the system of today.

  5. Maryum:

    I think your post is thoughtful and creative. Human rights activists have to think creatively after Kiobel and, as Sam’s and Jordan’s posts demonstrate, vindicating human rights through the FCPA has elements of fitting a square peg into a round hole.

    Barring the resuscitation of the ATS or the creation of a new right of action, litigating human rights abuses through the FCPA might produce important data. As Matthew and Jordan point out, there is a more-than-intuitive link between corruption and human rights abuse, but there are no (so far as we know) FCPA actions based on human rights abuse. Maybe the creativity of human rights advocates, wielding the pressure you mentioned in your post, will add another layer to FCPA enforcement.

  6. In response to Matthew question and Jordan’s second point. I do not know of any FCPA cases that invoke human rights allegations directly (so far). I think this is probably a function of the fact that:

    1. Most FCPA enforcement actions settle. There is little to gain for DOJ and the companies to air the sordid details of allegedly human rights violations. Indeed, if DOJ was adamant about publication, it will most likely lower the settlement amount it can extract from companies.

    2. Human rights violations related to FCPA cases are more likely to be of the Kiobel aiding-and-abetting kind, rather than direct violations committed by companies. Viewed in this light, I think it is at least reasonable to extrapolate that companies that paid briberies to a corruption government may have also aided and abetted that same government in human rights violations. A few FCPA enforcement actions related to UN’s Food-for-Oil programme comes to mind. As well as the ATS cases against big firms for apartheid abuses in South Africa.

    3. The incentives for bringing ATS cases (Kiobel) and FCPA are very different. It is not surprising under the current legal regime for ATS and FCPA the cases do not overlap. A strong case under FCPA might not be the best candidate for the ATS (even more so because ATS claims are often bought by human rights groups with little resources, so they have to be very selective), but this doesn’t mean the company charged under FCPA has not abetted human rights violations. I’m undecided on this issue, but arguably one of the reasons to extend FCPA to human rights violations is because the DOJ has way more resources and is already carrying out relevant investigations into these companies. It seems to be an efficiency improving move (but of course, this could also be achieved with information sharing between the DOJ and human rights groups.)

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