The German perspective on extraterritorial jurisdiction in transnational business & human rights litigation

April 19, 2012

By Robert Grabosch, Attorney at law

Claimants from all over the world have brought various lawsuits against non-US companies because of human rights being violated outside of the United States. Currently, a supposed clash of extraterritorial jurisdiction of civil courts with the international law principle of state sovereignty, or non-intervention, has put all litigation under the US Alien Tort Claims Act to a halt. The Notepad repeatedly commented on this kind of litigation (see the ATCA / ATS tags). In a post over at grabosch-law.eu, I try to explain that provisions of extraterritorial jurisdiction – i.e. jurisdiction in cases which have no or hardly any connection to the forum state – are well known in legal systems outside of the United States. At least from a German understanding of international law, civil courts’ jurisdiction is not at odds with the principle of non-intervention.

Shortly put, extraterritorial jurisdiction (aka “exorbitant jurisdiction”) is well known in several legal systems around the world. In particular, Section 23(1) of the German Code of Civil Procedure (ZPO) can provide German courts with jurisdiction in lawsuits brought by foreign victims of human rights violations involving companies based outside of the European Union. According to Section 23(1), for complaints regarding monetary claims brought against a person who has no place of residence in Germany, the court shall be competent in the jurisdiction of which any assets belonging to that person are located.

Based on this 135 year old provision, German civil courts have accepted jurisdiction in entirely extraterritorial cases simply because the defendant had once left a book or, in another case, a fruit basket on German soil. In a judgment of 1991, the Federal Court of Justice of Germany ruled that no principle of international law restrains such an extensive jurisdiction of civil courts. It was due to a historical-teleological interpretation of the statute itself that the Court restricted the application of Section 23(1) to cases that are at least somehow connected to Germany. What kind of connection exactly would be sufficient, the Court did not say. However, it hinted at a possible connection by a claimant’s domicile or habitual residence within Germany at the time of the proceeding. It seems arguable that a connection can furthermore be seen in the distribution of products originating from the foreign defendant supplier or subsidiary company to German companies. In those cases, the foreign defendant company likely has monetary claims (under sales or company law) against a German buyer or parent company, claims which Section 23(2) ZPO regards as assets “located” in Germany.

One may find such rules of extraterritorial jurisdiction favourable or unappealing. However, German scholars agree that both a civil court proceeding and the resulting judgment have no effect whatsoever abroad. Recognition and enforcement of judgments abroad is entirely up to courts and governments abroad. Extraterritorial jurisdiction of courts can hence not be regarded as a matter of meddling into foreign affairs and violating a foreign state’s sovereignty.

For details, please read the original post: Extraterritorial jurisdiction, sovereignty, and the German perspective.

Robert is Rechtsanwalt (Attorney at law) and Ph.D. student in Berlin, Germany, and specialises on the responsibility of transnational corporations for human rights violations in the Global South. He studied law at the Humboldt University of Berlin and the Catholic University of Leuven, Belgium, and obtained an LL.M. (International Law) at the University of Cape Town, South Africa, in 2009.

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7 Responses to “The German perspective on extraterritorial jurisdiction in transnational business & human rights litigation”

  1. Joshua Says:

    I’m a little confused about your description of Section 23. I was under the impression that it can be read as you describe, but is meant for lawsuits concerning property claims. That is a far cry from million-dollar cases for human-rights violations occurring halfway across the world. Similarly, I was under the impression that Section 23 ZPO has to be narrowly interpreted, such that the dispute (like you said) has to have a sufficient national connection. Shouldn’t this “national connection” be denied if the focus of the legal relationship in dispute is clearly located in a foreign country?

    • Robert Grabosch Says:

      The Section-23 venue does indeed apply to lawsuits for payment of damages which do not involve any “property” in the sense of tangible or intellectual property. This can get lost when translating Section 23 ZPO into English. Section 23(1) ZPO (German version) applies to complaints concerning vermögensrechtliche Ansprüche, i.e. claims of Vermögen. Vermögen means most of all assets (including contractual and non-contractual claims for damages) other than ownership. That is monetary claims, as distinguished from ownership and property (Eigentum). German courts do indeed apply Section 23 without hesitation to lawsuits concerning claims for damages that have nothing to do with owning a property. The 1991 judgment of the Federal Court of Justice concerned the reimbursement of a payment as a contractual obligation or one of unjust enrichment – property was not at issue.

      It is a bit unfortunate that the official translation of Section 23(1) speaks of “complaints under property law”. The term Vermögen can relate to all kinds of assets, including property and claims for money based on contract or tort. The English term “property” is too narrow and might lead anglo-american lawyers to wrongly believe that Section 23 applies predominantly to lawsuits for the ownership of things.

      To avoid that misunderstanding, I would translate Section 23 ZPO as follows:

      Section 23: Special jurisdiction of asset and of an object
      For proprietary and for monetary complaints [vermögensrechtliche Ansprüche] brought against a person who has no place of residence in Germany, the court shall be competent in the jurisdiction of which assets belonging to that person are located, or in the jurisdiction of which the object being laid claim to under the action is located. The location of a claim for payment under the law of obligations shall be the debtor’s place of residence and, if an object is liable for that claim as collateral, also the place at which the object is located.

      As to the second part of your comment: Yes, according to the Federal Court of Justice, Section 23 requires a “sufficient national connection”. The Court explicitly refused to decide what such connection would be. It hinted that for instance the domicile or habitual place of residence of the claimant in Germany might be sufficient. The way in which the Court (and other courts) leaves the question unanswered suggests that other connecting factors should also be considered.

      As you say, “the focus of the legal relationship in dispute” may be “clearly located in a foreign country”. This is often the case when human rights are litigated against transnational corporations. And yet, the legal relationship might at the same time touch Germany. Could you imagine a “sufficient national connection” where the defendant company’s goods were produced in the course of the plaintiff’s injury and these goods were then distributed to a German buyer, on the German market, perhaps a buyer company which had more or less significant influence on the mode of production? Some might also see a connection to Germany if the foreign defendant company is owned and more or less controlled by a German parent company. One might even argue that (some) human rights violations per se concern an interest of the German state, namely because states have an international law duty to protect, inasfar as reasonable, even aliens against human rights violations. I tried to make these points in the long version of the post, which I linked to in the abstract above.

  2. Joshua Says:

    I read the longer version of the post, as well. Please forgive my misplaced reliance on the official translation of Section 23 ZPO.

    I recognize and admire your entering the conversation regarding the Alien Tort Statute (ATS) and providing a useful guidepost in the form of Section 23. Nevertheless, it still would appear that Section 23’s exorbitant jurisdiction (demonstrated by the recent decision against Standard & Poor’s), is the exception, not the rule. Indeed, the comparative commentaries I’ve read have described Section 23 as rather unusual.

    The reason that this is informative, though, is because it should aid the U.S. Supreme Court in figuring out what is customary international law with respect to exercising jurisdiction over “foreign-cubed” cases. The usual canon of statutory interpretation in the United States is to presume that they are not meant to apply to actions from other jurisdictions unless Congress explicitly provides for that effect. This canon itself stems from the American tradition of trying to read U.S. law to be in compliance with customary international law (i.e., the law of nations). While interesting, Section 23 ZPO is still just one example and far from being “customary” in the normal sense of that term.

    Finally, the U.S. Supreme Court’s prior interpretation of the Alien Tort Statute (Sosa v. Alvarez-Machain, 542 U.S. 692 (2004)) reflects that the only actionable norms under the statute are those that are both universally recognized and obligatory. Although I take your point that some human rights violations could implicate and provide for universal jurisdiction without there being any nexus (i.e., a sufficient connection), it does not appear to me that assuming universal jurisdiction over such cases is, as of yet, either a universal phenomenon or obligatory. See, e.g., Arrest Warrant of 11 Apr. 2000 (Dem. Rep. Congo v. Belg.), 2002 I.C.J. 3, 37-38 (Feb. 14) (separate opinion of Pres. Guillaume).

    I guess what I’m saying is this: (1) the ATS refers to the “law of nations,” and (2) Section 23 ZPO is applied in the manner you’re advocating for by one nation. Those two things do not seem to match.

    • Robert Grabosch Says:

      I agree, the ATCA / ATS is most likely unique in its way, and even Section 23 is not like it. But is it this precisely what Judge Kennedy et al take an issue with? Does it surprise anyone that domestic laws are quite different and many even unique in the way they operate, their underlying reasoning and conceptual framework? The issue instead seems to be whether the ATCA’s alleged effect is unique, i.e. its effect of establishing civil courts jurisdiction over claims in damages in Kiobel even though the case shows no connection to the forum besides perhaps the claimants’ habitual residence and the location of some kind of defendant asset. And I am saying that Section 23 ZPO would likely have that same effect, never mind its indifference to a notion of “law of nations”. Why shouldn’t your courts accept jurisdiction like our courts would? We surely wont complain about your ATCA’s bizarre reasoning being so different to our Section 23’s bizarre reasoning.
      Btw, Swedish law also knows a specific jurisdiction of asset very similar to Section 23 ZPO. Annex 1 to the Brussels Regulation 44/2001 on jurisdiction lists a dozen more rules of exorbitant jurisdiction of EU Member States – all of them very different to Section 23 and unique in their way, but perhaps some of them in their own way providing jurisdiction in a case like Kiobel.
      Moreover, take a look at this scenario: A Nigerian company becomes complicit in a violation of Nigerians’ rights within Nigeria. A few years later, the company moves its seat or its principal place of business to an EU Member State. It is very clear that this already establishes the jurisdiction of the civil courts of that Member State according to Articles 2(1), 60(1), 66(1) of the Brussels Regulation 44/2001 on jurisdiction. The disputed claim for damages under tort law has no connection to the EU, and yet the Member State’s courts must hear and decide the lawsuit. (Since the 2005 Owusu judgment of the ECJ, forum non conveniens is inapplicable within the scope of the Brussels Regulation.) The matter doesn’t even need to be related to human rights or international law. It has therefore been pointed out in the legal literature that in such a scenario, Art. 2(1) of the Brussels Regulation goes even beyond the ATS.
      Contrary to this, there is for various reasons a constant lament among NGOs and media about the lack of prospects of business & human rights litigation in Europe. But scholars are clear in that at least our rules of jurisdiction are often entirely unproblematic. For some, the exorbitant jurisdiction under Art 2(1) of the Brussels Regulation even goes too far, and yet everything looks like it will not be touched during the current revision procedure. Exorbitant jurisdiction of courts simply raises no concerns with State sovereignty or any other principle of international customary law.
      (And even if almost no State’s courts would find a clear jurisdictional basis for hearing a case like Kiobel – it is still a far step to opinio iuris, i.e. a sense of having to refrain from exercising jurisdiction.)
      I am wondering how Judges Kennedy and Alito would have reacted, had Counsel Hoffman brought this up in reply to them and Chevron’s brief…

      • Joshua Says:

        I think the frustration evident in Justices Kennedy, Roberts, and Alito’s questioning stems from how the ATS is from 1789 but is being stretched to include theories of universal jurisdiction that are still extremely controversial today. Even with Section 23 ZPO, the only reason to use the 1991 interpretation of “sufficient direct connection” (although I doubt “bezug” can best be translated as a “connection”–“nexus” would be my preferred translation) is to place some sort of limit on the provision’s jurisdictional scope. The operative background for American statutes is that it is not normal for the United States Congress to legislate for the whole world. Although the examples and new efforts you point to are certainly noble and notable, they cannot reasonably claim to be customary international law. You can argue that allowing for such universal jurisdiction might be permissible under international law (cf., the Lotus case), but that is not the same thing as saying that it is now the custom of many nations.

        I have no doubt that your goals are laudable and just. I simply don’t believe that the United States Congress in 1789 meant to include them in the ATS. Stretching the statute to ignore the primary international-law issue of the eighteenth century (i.e., respecting equal sovereignty) is counter to what the statute was meant to accomplish. Moreover, I don’t believe that that legislature (who just successfully revolted from the British six years earlier) would have wanted to act like the British and tell everyone else in the world how they should conduct themselves or their affairs.

        The justices you cite are undoubtedly concerned about using an eighteenth-century statute to justify the projection of American power on disputes that have nothing to do with the United States. They are looking for examples of what the common practice is in other countries to make sure that they respect the “law of nations” as that is the body of law the ATS directs them to follow. I am confident that Mr. Hoffman doesn’t (or, at least, didn’t) know any of the jurisdictional provisions you are pointing to because it is generally best for an advocate in his position (i.e., an American human-rights plaintiffs’ lawyer) to ignore international jurisdictional practices. Similarly, the American judges who often decide these cases hardly ever cite to other nations’ decisions.

      • Robert Grabosch Says:

        You are suggesting that Kiobel et al would need to show that extraterritorial jurisdiction is the custom of many nations. But it’s the other way round. International law does not generally mind “unusual” behavior of states. Everything goes, unless there’s a rule prohibiting it. As to the exercise of jurisdiction by courts over foreign cases, I don’t see what speaks against it (except of course that it makes some persons uncomfortable, and that you think it’s “extremely controversial”). So extraterritorial jurisdiction of courts is permissible, unless someone demonstrates both state practice and opinio juris against it.

        Whether Congress meant the ATS / ATCA to be applied extraterritorially? One would probably need to look at historic documents. Piracy, i think, happened quite often outside of US waters.

        Aren’t you exaggerating a bit when you say “tell everyone else in the world how they should conduct themselves or their affairs”, “to legislate for the whole world”, “American power”…? The case really is about a monetary civil court judgment due to a violation of international law (not US law), to be executed within the US. The judgment may well be ignored outside the US. And don’t forget that the US courts were asked by plaintiffs to hear the case — not the typical case of hegemonic meddling into others’ business, is it?

  3. Joshua Says:

    The problems with your argument stem from a crucial difference between international law as it can be applied and “the law of nations” that United States federal courts–courts of limited jurisdiction–have jurisdiction to adjudicate through the ATS. Your arguments would work if you were working with a blank slate and some new court system. They don’t because of the background principles of American law when interpreting federal statutes.

    Under American canons of statutory construction, Kiobel would indeed have to show that extraterritorial jurisdiction is now customary international law. See Murray v. The Charming Betsy, 6 U.S. (2 Cranch) 64 (1804) (“It has also been observed that an act of Congress ought never to be construed to violate the law of nations if any other possible construction remains…”); see also Morrison v. Nat’l Austl. Bank Ltd., 130 S. Ct. 2869, 2878 (2010) (“When a statute gives no clear indication of an extraterritorial application, it has none.”); Microsoft Corp. v. AT&T Corp., 550 U.S. 437, 454 (2007) (noting “[t]he presumption that United States law governs domestically but does not rule the world . . . .”).

    As for the historical aspects, all of the historical incidents used to inform the First Congress occurred either between aliens on U.S. soil or against an alien by a U.S. citizen. With regard to your other point on this issue, you are absolutely correct about piracy and how it very often occurs extraterritorially. Too bad that the Supreme Court isn’t addressing that issue at all. Instead, their directions were for the parties to address: “Whether and under what circumstances the Alien Tort Statute, 28 U.S.C. § 1350, allows courts to recognize a cause of action for violations of the law of nations occurring within the territory of a sovereign other than the United States.” Thus, “within the territory of a sovereign other than the United States” is now the operative issue–and goes directly to when sovereignty claims might conflict with one another. Thus, analogizing to piracy (which, by definition, occurs outside of the territorial sovereignty of States) to do the heavy lifting will now get you nowhere.

    As for the imperialism argument, I don’t actually believe it is an exaggeration. At its core, you are correct that the case is about awarding money to plaintiffs who forum shopped and came to the United States for a payout. But at the beginning of that line of reasoning is the statute, and your argument presumes that the First Congress of the United States intended for this law from 1789 to essentially legislate universal norms that weren’t even conceived of until the twentieth century. I find that presumption startling given the extremely sensitive footing the United States was on at that time. The only difference between the United States then and now is that it has become far mightier today in global affairs. Unfortunately, “might makes right” isn’t a recognized canon of construction in the United States. This is even the case when the right that the might is trying to accomplish is actually right. The answer to the plaintiffs’ problems is to have Congress pass an updated statute, as they proved was still possible in 1992.


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