Privateer Corporations and Agency Liability: A Response to the Cato Institute’s Amicus Brief in Kiobel

The Cato Institute’s amicus brief in Kiobel v. Royal Dutch Petroleum, along with a couple of other amici, repeatedly enact a straw man (straw law?) version of international law as it existed prior to 1789. The ATS, they argue, should be applied in the context of the law of nations of the Enlightment era, which is conceived to have been a limited, formalist creature, with no concern for individuals, dealing only with kings vis-à-vis kings. This idealist version of international law is then contrasted with international law as it exists today, which, in their view, is apparently some kind of bloated, sovereignty-munching leftist obsession with human rights. But while it is the case that international human rights law did not exist prior to the 20th century, Cato’s idealist version of international law ignores the fact that, for many centuries, the law of nations was an omipresent force of domestic legal systems in a manner which today’s domestic courts would scarcely be able to recognize. Domestic enforcement of private claims under international law was far more prevalent in 1789 than it was in 1989.

The Cato amicus’ delicate selections of quotes from Grotius are particularly inept at proving that international law in the 17th century matched Cato’s positivist depictions of it. Cato goes so far as to argue that in Kiobel “the Second Circuit employed an analysis based on the principles enunciated by Grotius,” which is that “under the law of nations corporations are not answerable in tort.” It is exceedingly unclear what precise “principles” Cato is referring to here, because Grotius certainly never made any direct assertions to that end. Grotius fully recognized that sub-sovereign entities were subject to rights and obligations under the law of nations, corporate entities included. In fact, Grotius got his start working as counsel for the Dutch East India Company, defending the company from claims that it had taken Portuguese prizes in violation of international law. His early works in particular were more advocacy pieces than treatises, intended as a defense of the Company’s right to engage in trade in the East Indies, and its powers to wage private war and take prizes.

In On the Law of War and Peace, which Cato quotes from, Grotius repeatedly acknowledges that private entities are capable of violating the law of nations, and can further be personally liable for those violations:

“But if a soldier or any other person, even in a just war, has burned houses belonging to the enemy, has devastated fields, and caused losses of this character without orders, when, furthermore, there was no necessity or just cause, the theologians rightly hold that he is bound to make good the losses. I am, however, justified in adding, what was omitted by them, ‘when there was no just cause’; for if there is such a cause he will perhaps be answerable to his own state, whose laws he has transgressed, but not likewise to the enemy, to whom he has done no legal wrong.” Book III, Ch. 18, Sec. VI, The obligation resting upon a person, who has done harm to the enemy without orders, is set forth with a distinction.

“[A] sovereign cannot answer for every injury done to the subjects of a friendly power by his naval or military forces; especially if it is plain that they acted in violation of his orders.
But in what cases any one is released from being answerable for what is done by his subordinate agents, is a point not so much for the law of nations, as for the municipal law, and particularly the maritime code of each country to decide.” Book II, Ch. 17, Sec. XX – XXI, On Damages Occasioned by Injury and the Obligation to Repair Them.

And,

“It is strange that legal authorities have been found who would teach that the obligation was binding when an agreement was made publicly with the enemy, but that agreements made by private persons were not binding in like manner. For since private citizens have private rights, which they can place under obligation, and enemies are capable of acquiring right, what can stand in the way of the obligation?” Book III, Ch. 23: On Good Faith of Private Persons in War.

Like Grotius, domestic courts considering claims under international law likewise had no problem with derivative liability. And although back in the 18th Century domestic principles of agency law were frequently invoked in examining the law of nations, it is of little surprise and of less relevance that there are no clear pre-1800 examples of a corporate entity, specifically, being liable for a tortious violation of international human rights law. This is fairly predictable outcome, considering that: (a) private multinational corporations were exceedingly rare creatures, limited in form and scope, (b) international human rights law did not exist, and (c) and “torts” consisted of a very limited set of recognizable claims, compared to the expansive set of tort claims recognizable today.

And yet, the appellees in Kiobel and many of their supporting amici invoke this lack of pre-1789 corporate liability as proof that corporations, which did not exist in a similar fashion pre-1789, cannot be held liable now. They also seem to think they hold a trump card in the fact that international criminal tribunals do not typically issue orders finding corporate liability for international torts. But international criminal prosecutions and domestic claims for international tort liability are not comparable legal proceedings, and they do not have any particular relevancy to one another aside from the fact both contain the word “international” in their descriptions. The respective forums for each type of proceeding are starkly different in their purpose, history, jurisdictional reach, and source of adjudicative jurisdiction.

Instead, the legal proceedings that domestic courts should be drawing precedent from when adjudicating civil claims asserting a cause of action under international law are — wait for it — the proceedings of other domestic courts adjudicating civil claims asserting a cause of action under international law.

And there is plenty of that to go around. Prior to the 20th century, U.S. and European courts frequently examined civil liability under international law. True, very little of it involves examples of modern-day corporate forms being held liable for international law violations, but the cases did involve the proto-corporate forms as existed at the time.

Domestic principles of agency law played the same role as the law of corporate attribution does today. And courts using international law as the applicable rules of decision regularly evaluated how agency principles affected liability for violations of international law, in mercantile and maritime cases, in circumstances well beyond the repeatedly invoked cases of piracy, violations of safe conducts, or assaults on ambassadors.

As I’ve harped on at length in prior posts, when it comes to the proper scope of ATS jurisdiction, I think the prevailing obsession with the whole Blackstone Three thing is a crock. The Blackstone Three are a narrow aberration of criminal violations which “fall within a narrow compass, as offences against the law of nations can rarely be the object of the criminal law of any particular state.” The Blackstone Three, like international criminal tribunals, are a poor source of precedent for domestic courts in civil cases; criminal punishment and civil liability have little in common, whether the source of the law is domestic or international.

And in the 18th Century, international law had free rein in domestic courts, when it came to civil matters. As Blackstone noted, “in civil transactions and questions of property between the subjects of different states the law of nations has much scope and extent.” It was only in criminal cases that Blackstone believed the Law of Nations was subject to “vigilant door-keeping;” in contrast, “[i]n mercantile questions, such as bills of exchange and the like; in all marine causes, relating to freight, average, demurrage, insurances, bottomry, and others of a similar nature; the law-merchant, which is a branch of the law of nations, is regularly and constantly adhered to. So too in all disputes relating to prizes, to shipwrecks, to hostages and ransom-bills, there is no other rule of decision but this great universal law, collected from history and usage, and such writers of all nations and languages as are generally approved and allowed of.”

For tort claims related to ransoms and safe-conducts, ship collisions and privateers, the concept of agency liability under international law was a straightforward affair, and corporate liability under international law would have unquestionably been accepted by the courts of Blackstone’s day.

Court decisions involving privateers are particularly relevant in this area, as privateering in the 18th century was a corporate venture, as often as not — not only did firms and collective groups own privateers, but speculation in shares of privateers abounded, and privateering was often considered to be a lucrative investment opportunity. Privateers, however, are bound by the law of nations, and all too often a privateer would commit a tort in violation of international law, either by making an illegal prize capture, or worse still, by outright turning pirate. After wasting a great deal of time hunting about in old prize cases, I could not find a single example of a court that, in considering a tort claim against a privateer that had violated the law of nations, expressed concern about the nature of the privateer’s ownership. It did not matter whether a privateer was owned by a person, a firm, or a corporation — if the law of agency permitted the acts of the privateer to be attributable to the owner, the owner was liable for the damages.

For instance, in Dias, et al. v. The Owners of the Privateer Revenge, decided by the Third Circuit in 1814, the court considered the question of whether the owners of a privateer are liable for the damages caused by the privateer ship having turned pirate, in violation of the law of nations. Privateers were bound not to make seizures beyond what was permitted by international law, as

the employment of a privateer, and the trust confided to her officers and crew, is to subdue and seize the vessels and effects of the enemy found at sea, as well as all other vessels and effects, to whomsoever belonging, which may be liable thereto, according to the law of nations

But where such a violation of international law does occur, the victim was entitled to seek compensation not merely from the limited funds of the officers and crew who committed the actual violation, but from the funds of the ship’s owners. The court in Dias found that the owner of a privateer ship

is liable for all damages which others may sustain, by the mistakes or willful misconduct of those he employs, in executing the business with which he has entrusted them. Against a claim for full compensation for injuries illegally inflicted upon third persons, it is not competent to the owner to shield himself, by saying that the privateer constitutes a part of the naval armed force of the nation; that she acts under the President’s instructions; and therefore, he is not liable.

The private owner of a privateer ship is therefore personally, civilly liable, for captures made in violation of the law of nations, or if the damages caused by the privateer are attributable to the owner’s negligence in selecting the ship’s master. Although an owner of a privateer ship is not liable if the ship master, unpredictably and of his own accord, decides to turn pirate, an owner remains liable for a privateer’s actions as a privateer. Where the privateer violates international law, anyone damaged by such a act could bring a tort claim against the privateer’s owner. See also Del Col v. Arnold, and The Amiable Nancy.

Whether the owner of a privateer ship is a natural or a juridical person is entirely irrelevant to this analysis. Although in Dias v. the Privateer Revenger, the ownership of the Revenge is not specified to have been a corporation, it is fully possible that a privateer’s owners can be a firm or other corporate entity. In fact, under 1814 New York state law [PDF], the existence of privateer corporations was specifically provided for.

It is also notable in Dias that the court relied on Bynkershoek in making its analysis. Bynkershoek, unlike Grotius, was a true positivist — and even Bynkershoek had no difficulty in accepting derivative liability for international torts.

Marine torts likewise provide plenty of examples of agency principles being applied to ascertain liability for torts in violation of international law. In the British case of Cope v Doherty (1858), it was held that the domestic legislature could not, through enacting a scheme of limited liability, thereby deny an alien that has been damaged by a citizen the recovery that the alien would be normally be entitled to under international law. The British law in dispute in Cope was a law that “in effect forms a contract that, whereas by the natural law the owner of the ship or property that has been injured would be entitled to damages to the full extent of the loss he has sustained, all those persons upon whom the Legislature can impose such a contract, that is to say, all its own subjects, shall forego that which the natural law—the common law, as we should call it in England—would give them, and shall be entitled only to the amount of the value of the ship by which the injury has been inflicted, and of the freight due or to grow due in respect of such ship during the voyage.”

The Court found that such an artificial limitation of liability was not permitted by international law. A collision at sea was a matter governed by the law of nations — and a single state could not unilaterally make its citizens immune for their torts in violation of international law, by enacting a domestic statute finding that owners of ships can only be liable in the amount of their ship’s total value. The Court held:

“[T]he question at once arises in … whether the Legislature of this country has a right to restrict the privileges which foreign owners would enjoy under the general law of nations, and say, ‘Whenever you are run down by a British ship upon the high seas, if you seek your remedy under the general law of nations, which would entitle you to full damages in respect of all the injury you have sustained, you are to be tied down by the municipal law of this country to the limited relief we have thought proper to give.’ [S]uch a construction would … be the last I ought to adopt. It would be to impute to the British Legislature an attempt to legislate for foreigners, by taking away those rights and privileges which they enjoy by the general law, which gives full compensation for damages, and to tie them down to a remedy limited to a portion of the property of the owner of the particular ship which has inflicted the damage.”

In other words, by creating corporations or other liability forms, a domestic state does not have the unilateral power to immunize those citizens that have a corporate form from all torts in violation of the law of nations. In the 19th Century, under international law, the owners of ships were liable for those ship’s torts. Then as now, where international law provided for the tort and remedy, domestic law could not artificially limit the reach of international law through domestic statutes purporting to create a special, exempt class of citizens, whether it be ship owners or corporations. Grotius agrees with this assessment to, finding that domestic schemes of liability could not immunize a claim under international law: “Also in this aspect of the good faith of private persons we shall make no exception for a minor who has sufficient intelligence to understand his act. For the privileges which favor minors arise from municipal law, but we are treating of the law of nations.” Book III, Ch. 23, Sec. III. See also The Nostra Signora de los Dolores , 1 Dodson, p. 290 (finding that in a Court of International Law, a person may be considered as a part-owner, though his name has not been inserted in the bill of sale or ship’s register; and the representative of a person so deemed a part-owner is responsible for costs and damages decreed against the owners generally, though the party of whom he is the representative was not the actual wrong-doer.); The Girolamo; and The Queen v Keyn.

Although the legal entities at issue today are different, the substantive result is the same; the modern form of this rule would be that Shell Oil cannot escape liability for the international torts of its agents by claiming those damaged by the tort are limited to recovering from the individual agents. It does not matter whether that principal is a natural or juridical person, either way it is liable for the full amount of the damages caused by its agent’s violations of international law.

-Susan

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One thought on “Privateer Corporations and Agency Liability: A Response to the Cato Institute’s Amicus Brief in Kiobel

  1. Pingback: Why Royal Dutch Petroleum is Wrong About the Liability of Pirates, Inc. | The View From LL2

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