In pari delicto, Latin for “of equal fault,” is a legal doctrine that prevented the government that succeeded Saddam Hussein’s from recovering hundreds of millions of dollars in damages from those involved in Saddam and cronies’ corruption. It has deterred other governments taking power after a kleptocrat’s fall from attempting to recover damages as well. Parens patriae, Latin for another legal doctrine, is one way around the result in pari delicto dictates in kleptocracy cases.
Corruption hunters thus have good reason to learn Latin. At least enough to ensure that those who profit from a kleptocrat’s reign don’t escape reckoning when there is a regime change.
The barrier in pari delicto raises to a government recovering damages from a kleptocrat’s accomplices was first revealed in a suit the post-Saddam government filed in 2008.
Saddam’s 1990 invasion of Kuwait prompted the U.N. Security Council to impose stringent economic sanctions on his government. As the hardships the sanctions worked on the Iraqi population became patent, the U.N. initiated a program allowing Iraq to sell oil on the world market provided the proceeds went to purchase food and medical supplies for Iraqi citizens. After Saddam was removed from power in 2003, massive corruption in the oil-for-food program came to light, with companies paying, according to the post-Saddam government, “hundreds of millions in kickbacks and bribes” to buy Iraq’s oil at prices far below the market price.
The new Iraqi government sought damages from those involved. Citing estimates from the United Nations and the U.S. Defense Contracting, it alleged that the defendants’ scheme diverted more than $10 billion in cash and goods from the government and the Iraqi people. But the case never went beyond the initial pleadings. It was dismissed on the grounds of in pari delicto.
The doctrine provides that plaintiffs cannot recover damages that arise from their own illegal or immoral conduct. Everet v. Williams, a 1725 English decision dubbed “the Highwayman’s case,” is the classic common law case. The Court of Exchequer there refused to order a highwayman to share with his partner monies from robberies the two had committed together. The case continues to be cited, including in a recent American decision explaining that bribe-payers can escape liability where the bribe-taker’s employer ignored the bribery.
Where one of the wrongdoers is a corporation, save in exceptional cases in pari delicto bars a new owner from collecting damages from other wrongdoers. A trustee taking control of a corporation thus cannot sue those who conspired with the previous management to defraud shareholders. The former managers wrongful acts are imputed to the corporation, and hence the trustee’s attempt to recover barred by in pari delicto.
An analogous rule applies to nation states. If those in control of a government committed wrongful acts, the successor regime cannot recover damages from those outside government who were involved. Under international law, a successor regime steps into its predecessor’s shoes.
In the Iraqi suit, the trial court found overwhelming evidence that Saddam and cronies had “orchestrated the wrongful conduct with defendants’ assistance,” and as the U.S. Court of Appeals ruled on appeal, under “settled law” that left the trial judge no choice but to dismiss Iraq’s claims.
Iraq had attempted to avoid dismissal on in pari delicto grounds by resort to parens patriae, Latin for “parent of the people.” The doctrine takes its name from early cases where the English government represented children’s interests in court. The Iraqi government sought to invoke it to recover not only for itself but for the citizens of Iraq as parens patriae. The U.S. Supreme Court has expanded the ambit of parens patriae to permit U.S. states and the Commonwealth of Puerto Rico to sue on behalf of their citizens (here), but so far lower courts have rebuffed foreign governments efforts to do so. Following these earlier precedents, the trial court dismissed Iraq’s attempted end-around in pari delicto.
In pari delicto, as the Latin moniker suggests, is a Roman law doctrine, one that has found its way into both civil and common law systems (here). Whatever its merits in private law litigation, it has no place when a regime succeeding a kleptocracy seeks damages from those who were part of the kleptocrat’s corruption. Whether by allowing successor regimes to bring parens patriae actions or by simply enacting legislation scrapping in pari delicto’s application to governments, courts and legislators should ensure accomplices to kleptocratic governments cannot escape reckoning when new regimes replace them.
It is hard to find a better justification for changing the law than what the U.S. Second Circuit Court of Appeals wrote in upholding the dismissal of Iraq’s suit:
“The Republic of Iraq’s allegations in this case paint a sorry portrait of a greedy and ruthless government colluding with venal individuals and business firms to divert funds intended for the benefit of a suffering population and using those funds to cement political power while scoffing at the humanitarian concerns of the international community and the laws of the United States. The principal question here, however, has been whether United States law permits the Republic, through its present government, to recover damages from its former government’s coconspirators on the basis of the actions that they took in response to that former government’s demands. Applying settled principles of state responsibility and statutory interpretation, we have concluded that it does not.”
It’s surely time for nations to scrap “settled principles” that deny a post-kleptocracy government the right to recover damages from those who abetted a kleptocrat’s corruption. Given the prominence of the Iraqi case, the U.S. should lead the way.