12/15/2010 02:20 pm ET Updated May 25, 2011

Five Ways to Protect Corporate Executives From Catastrophic Liability

Individual corporate executives and directors of multinational corporations will soon face high-stakes lawsuits for alleged human rights violations by their corporations and third parties, including the actual foreign governments of the countries in which they do business.

In a recent piece in The Huffington Post, I argued that the U.S. Court of Appeals for the Second Circuit's decision in Kiobel v. Royal Dutch Petroleum, 2010 WL 3611392 (2d Cir. Sept. 19, 2010), holding that corporations cannot be held liable for human rights violations under the Alien Tort Statute ("ATS"), is hardly the panacea that many corporate counsel think it is. Rather, plaintiffs will merely find new targets, namely the individual executives who serve those companies. My argument is far from outlandish; indeed the court itself discusses at length the manner in which individual liability became a shibboleth of the modern international human rights movement after the Nuremberg Tribunals. See id. at *8. The panel also stated unequivocally that "nothing in [its] opinion limits or forecloses suits under the ATS against . . . employers, managers, officers, and directors of corporations . . . ." Id.


The most important role of corporate counsel with respect to ATS litigation stems directly from Kiobel. The Second Circuit's temporary inoculation of corporations vis-à-vis civil liability under the ATS does not apply to individuals. While Kiobel gives a defendant corporation an arrow in its procedural quiver if the corporation is sued under the ATS, Kiobel provides no protection against the myriad suits that are now sure to be brought against individual corporate officers. To the contrary, it all but invites such suits.

The fundamental question thus becomes: How should corporate counsel remain proactive vis-à-vis ATS litigation? My own research for Consero and a conversation with Harvard Law School Professor Jack Goldsmith led me to the pre-Kiobel work of Jonathan Drimmer, a partner in the Washington office of the law firm Steptoe & Johnson and an Adjunct Professor at Georgetown University Law Center who is an expert on the ATS. Drimmer's advice is straightforward and astute, and should serve as the basis for all corporate counsel who endeavor to protect their individual corporate executives from catastrophic liability.

1. Create a Corporate Code of Conduct. The likelihood of individual executives being sued for human rights violations under the ATS may be related to a corporation's ethos in this area of law. Commit in the broadest terms to promoting and protecting human rights. While no corporate code of conduct can foresee every ATS claim, it should broadly target various types of conduct, underscoring a company's formal commitment to supporting human rights. That commitment should embody industry-specific prescriptions (e.g., anti-child labor measures in factories). It should also incorporate relevant international law and treatise provisions. Enforce your corporate code in a meaningful way. For example, provide guidance to all levels of management about conduct that could result in ATS suits. Such enforcement may demonstrate to a judge or jury that the company's executive leadership and directors are committed to preventing human rights abuses. Given the extraordinary potential consequences of an ATS suit, it is wise to cast all parties as responsible international citizens, and to back reinforce that image with genuine action.

2. Define Your Company's Relationships with Private Third Parties. Drimmer advises that ATS lawsuits "start with alleged misdeeds that were not committed by multinational corporations or their employees. Instead, they often arise based on acts of third parties, with victims seeking to attribute the wrongdoings to the company itself." Agreements with third parties should be drafted in order to inoculate one's company from liability. Drimmer adds that conducting business wisely may also require outside groups to adhere to the company's code of conduct and declaring your expectation that the third parties will adhere to local civil and criminal codes.

3. Define Your Company's Relationships with Government Entities. Violations of the law of nations traditionally have been limited to misconduct by states or state officials. For example, in Kiobel, the plaintiffs, residents of Nigeria, claimed that Dutch, British, and Nigerian corporations that were engaged in oil exploration aided and abetted the Nigerian government in committing violations of customary international law. Indeed, most ATS suits involve a triggering state action or wrongful acts by government agents or private actors acting with the imprimatur of or in conjunction with government personnel. Drimmer advises that "direct reliance for services on government entities or regimes with records of human rights abuses should be minimized." Where such reliance is unavoidable, companies should treat governments like third parties and pursue contracts with them that expressly delineate respective roles and responsibilities. You should memorialize explicitly that your company does not have authority to supervise government employees if that is the case. Drimmer adds: "Prudence further dictates including provisions reflecting an understanding that all parties will comply with pertinent domestic and international human rights laws and conventions, and that violations of those laws will be reported to appropriate authorities."

4. Watch Closely for Suspected Wrongdoings. Do not turn a blind eye to suspected wrongs on the part of your employees, third parties, government officials, or anyone else who might entangle your company in the ATS web. Create meaningful oversight and compliance mechanisms to discourage, investigate carefully, and also discipline potential abuses. Corporations should also implement whistleblowing mechanisms for employees to flag potential human rights violations confidentially and without fear of retribution.

5. Monitor the Law Vigilantly. The underlying rationale of the Second Circuit's opinion in Kiobel could not have been more clear: Corporate liability is not currently recognized as a norm of customary international law. That may change. Before Nuremberg, the notion of holding individuals liable for the actions of states was as foreign a concept as holding a corporation liable as a juridical person, as evidenced by the Nuremberg Tribunal's handling of the actions brought against corporate entity I.G. Farben. Notwithstanding that company's collaboration with the Nazi State to manufacture an insecticide knowingly used as a lethal asphyxiating agent in the gas chambers at Auschwitz, the Tribunals refused to hear any claims on the basis of corporate liability, yet charged I.G. Farben's individual executives with war crimes. Events may unfold that demand unforseeable changes in the norms of international law. General counsel must be vigilant about studying the state of affairs--and the operative standard of the laws of states inter se, as opposed to merely domestically--in international law in substantive areas such as corporate liability. They should also study the works of prominent scholars in this area, another source that helps define the scope and norms of customary international law, as specifically recognized in Article 38 of the International Court of Justice Statute and by the Second Circuit in Kiobel.


The norms of customary international law will continue to change, just as they did dramatically in the second half of the 20th century. The law that governs how companies interact amongst themselves (inter se) will evolve. Scholarship with respect to the scope of the law of nations will too. And while such change will occur slowly, it will happen indeed. Kiobel may rule the day, but it is no stretch to say that corporate liability for violations of human rights will be recognized by high federal courts.

In the short term--today--corporate counsel must confront the fact that their individual corporate executives now face the specter of crippling litigation under the ATS. They should respond swiftly, yet deliberately, to protect their colleagues.

Ben Kerschberg is a Founder and the Chief Operating Officer of Consero Group LLC. Mr. Kerschberg has a Bachelor of Arts in Foreign Affairs and German, summa cum laude and Phi Beta Kappa, from the University of Virginia and a Juris Doctor from Yale Law School, where he was as a Coker Fellow. He clerked for the Honorable Gilbert S. Merritt, Chief Judge of the U.S. Court of Appeals for the Sixth Circuit.