Kiobel v Royal Dutch Petroleum: a lesson on business and human rights?

On 1 October 2012, the United States Supreme Court will hear further arguments in the case of Kiobel v Royal Dutch Petroleum Co, bringing the issue of business and human rights to the fore and raising the question of how businesses can protect themselves against allegations of complicity in governmental human rights abuses in connection with their operations.

The case of Kiobel concerns a claim by a group of Nigerian citizens that Shell aided and abetted the commission of gross human rights violations by the Nigerian military dictatorship in the 1990s in order to suppress lawful protests against the exploitation of oil in the Niger Delta. The claim is brought under the Alien Tort Statute ("ATS"), a law from 1789, which allows foreign nationals to bring a civil claim for violations of international law in US courts.  The Court was initially concerned with the issue of whether the liability of a corporation for human rights violations can be founded under the ATS. The Court however broadened the question and the arguments on 1 October will concern the extraterritorial application of the ATS.

Kiobel undoubtedly highlights the risk of a company or organisation being seen to be complicit (not necessarily in the legal sense, but in the court of public opinion) in the acts of unstable or authoritarian governments, if those acts are perceived to have benefitted the company.  The Kiobel case is being heard against the backdrop of opportunities for investment in countries emerging from conflict or authoritarian rule such as Democratic Republic of the Congo and Myanmar.  The question facing investors is how to invest responsibly, including how to minimise the risk of any perception of complicity with any future alleged human rights violation by state actors.  The answer starts with considering the UN Guiding Principles on Business and Human Rights, which is the authoritative global standard for identifying, preventing and addressing the risk of adverse human rights impacts linked to business activity.  In summary, the UN Guiding Principles set out the need for businesses to put in place policies and processes to know and show that they respect human rights.  This includes being able to demonstrate the steps the business has taken to avoid involvement with alleged human rights abuse by others with which it has business relationships, such as governments. Assessments of human rights risks should be undertaken before a project gets underway and periodically throughout the life of the project, especially if there is a change in the operating environment, for example regime change.

Herbert Smith will be running a client webinar on this topic, invitations for which will be sent out shortly.

The Kiobel case

The first time Kiobel came before the Supreme Court was in February this year. The question before the Court then was whether corporations can be held liable for human rights violations under the ATS. The arguments before the Supreme Court came down to whether international or domestic law is the applicable law in determining corporate liability under the ATS.

However, it was clear from the Justices' questions during the hearing in February that the emphasis of the Court's concern has shifted to the broader issue of whether a US statute, such as the ATS, can apply to circumstances in which the parties are foreign and the conduct occurred abroad – in other words where there is no connection with the US.

On the basis of these concerns, the Supreme Court ordered that Kiobel be reargued and requested that the parties file supplemental briefs addressing the question whether and under what circumstances the ATS allows US courts to recognise a cause of action for the violation of international law occurring outside of the US.

The case has received a considerable amount of public attention. The large number of amicus briefs filed (82 at last count) is indicative of the importance of the issues at stake to a variety of stakeholders (including international human rights organisations, public policy research foundations and multinationals operating in various industries and jurisdictions around the world).

Increasing attention to Business and Human Rights

The Kiobel class action is only one of a number of similar claims brought against corporations in the last few years and is symbolic of the increasing recognition of the responsibility of businesses whose operations or operating contexts pose risks of severe human rights infringement. The UN Guiding Principles on Business and Human Rights, whilst not international law, are recognised as the global standard on this issue.

The corporate responsibility to respect human rights means avoiding infringing on the human rights of others and addressing adverse human rights impacts with which they are involved.  To meet this responsibility businesses should have in place policies and processes appropriate to their size and circumstances, including a human rights policy, a human rights due diligence process to identify, prevent, mitigate and account for how the business addresses their impacts on human rights and processes to enable remediation of any adverse impacts which they cause or to which they contribute. In the case of projects it is important to put in place an operational level grievance mechanism to resolve relatively minor grievances before they escalate into serious human rights issues.

The UN Human Rights Council has established a multi-stakeholder Forum on Business and Human Rights on the issue of human rights and transnational corporations and other business enterprises to: “discuss trends and challenges in the implementation of the [UN Guiding Principles] and promote dialogue and cooperation on issues linked to business and human rights, including challenges faced in particular sectors, operational environments or in relation to specific rights or groups, as well as identifying good practices.” The Forum is open to a broad range of stakeholders, including transnational corporations and other business enterprises.  The first Forum meeting is taking place in Geneva on the 4 and 5 December, 2012.