UK: International Litigation: Where Is Your Risk?

Last Updated: 31 July 2013
Article by Nilam Sharma and Rachel Bernie

Underwriting multinational risks presents potential problems but detailed due diligence and analysis of where the exposure may arise goes some way towards minimising that risk. Recent court decisions in the US, however, illustrate how difficult this task can be in a shifting legal landscape.

On 17 April 2013, the US Supreme Court issued its decision in Kiobel v Royal Dutch Petroleum No. 10-1491 (U.S. 2012). This case was brought by Ester Kiobel, who filed a class action lawsuit alleging that Royal Dutch Shell had "aided and abetted" attacks on Ogoni civilians by providing vehicles, food, transportation, compensation and staging areas for attacks.

The basis for this action was the Alien Tort Statute (ATS), a US law enabled in 1789, which granted jurisdiction to federal courts for "any civil action by an alien for a tort only committed in violation of the law of nations or a treaty of the United States". The legislative history behind this statute is unclear but scholars suggest that it was designed to allow US courts to hear human rights cases brought by US citizens in relation to conduct committed outside the US. From 1789 until 1980 the ATS was not commonly used; there are only two reported decisions dating from this period. In more recent times, however, two questions have arisen. The first is whether the ATS allows non-US as well as US citizens to bring actions and the second is whether it permits claims to be brought against US corporations as well as against individuals.

In 1980, the US Court of Appeals for the Second Circuit dealt with the first question when they decided Filartiga v Pena-Irla 630 F.2d 876 (2d Cir. 1908), a case which has encouraged a revival in the use of the ATS. This case was brought by two Paraguayan citizens against a Paraguayan former police chief who was living in the US. The court held that, through the ATS, they did have jurisdiction in a case between two aliens. This case therefore allowed a non-US individual to use the ATS to bring a claim in the US courts.

In Kiobel the court was required to consider the second question: whether the ATS could be used to bring a claim against a US corporation. The court held that it should not. For an ATS claim to survive a motion to dismiss, the court said that it must touch and concern activities occurring inside the territory of the US with sufficient force to displace the presumption that the ATS would not apply.

However, whilst Kiobel was a case in which it was relatively easy for the court to apply the above rules (as all the relevant conduct took place outside the US) it was noted that "it would reach too far to say that mere corporate presence [in the US] suffices". The court therefore left it open for claimants to bring cases with a greater nexus to the US than was present in Kiobel.

The case currently causing controversy is DaimlerChrysler AG v Bauman (docket 11-965). It has been brought by 22 residents of Argentina, who have sued DaimlerChrysler, a German corporation, in a federal court in California. The claimants allege that one of DaimlerChrysler's subsidiaries, Mercedes-Benz Argentina, is guilty of human rights violations.

DaimlerChrysler has no facilities in the US, although it does have a subsidiary, Mercedes-Benz US, which distributes DaimlerChrysler's manufactured vehicles in California.

The Supreme Court is expected to explore whether a wholly-owned US subsidiary can be used to create a territorial nexus between a foreign corporation and the US sufficient to justify the exercise of jurisdiction in circumstances where the subsidiary had no involvement in the alleged violation.

The District Court originally dismissed the case for lack of jurisdiction, reasoning that there was no agency between DaimlerChrysler and its wholly owned subsidiary, Mercedes- Benz US. However, the Ninth Circuit Appeals Court reversed this decision.

DaimlerChrysler's petition now urges the Supreme Court to overturn the Ninth Court's ruling. DaimlerChrysler argues that it is a German public stock company which does not manufacture or sell products, own property or employ workers in the US. It is undisputed that DaimlerChrysler and its US subsidiary, Mercedes-Benz US, adhere to all the legal requirements necessary to maintain their separate corporate identities.

The respondents in turn request the Supreme Court to uphold the Ninth Circuit's ruling as they contend that DaimlerChrysler maintains a very close control over its subsidiary. They assert, for example, that the companies have the same chairman and that Mercedes-Benz US is unable to replace key personnel, alter management control or set prices without DaimlerChrysler's permission.

Summary

Although there have been exceptions, the trend in US litigation has previously appeared to show a reluctance to encourage jurisdiction shopping. In Kiobel, the Supreme Court concluded that the presumption against extraterritoriality closed the door on ATS suits brought against corporations which have no nexus in the US. The case left a window open, however, as to what could displace this presumption in the event that a corporation could demonstrate a relevant connection to the US "with sufficient force".

DaimlerChrysler means that there is a real danger that foreign corporations will be able to use the ATS as a tool to bring claims against non-US companies. The US courts are expected to use this case as an opportunity to explore the issue of corporate presence and determine when the ATS might apply to foreign companies.

As has been frequently seen in the past, lawyers for the claimant can be very creative and there is no doubt that they will continue to find ways of issuing proceedings on behalf of claimants against foreign corporations where there is a chance of obtaining more compensation than in the claimant's home jurisdiction. The unfortunate thing is that the courts may agree...

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.