Federal Judge John Sprizzo delivered what the US business community wanted to hear late last year when he ruled that international corporations could not be sued in his court over working in apartheid South Africa.

"In a world where many countries fall considerably short of ideal economic, political and social conditions, this court must be extremely cautious in permitting suits here based upon a corporation's doing business in countries with less than stellar human rights records," Judge Sprizzo wrote in his judgment dismissing the suits (In re South African Apartheid Litigation MDL 1499).

The class-action litigation - brought by Ed Fagan, the flamboyant New York attorney - relied on the controversial Alien Tort statute (ATS) of 1789, which has been used since the mid-1990s to bring legal actions against companies over alleged complicity in human rights abuses abroad.

"The decision should set the tone for similar lawsuits targeting US companies doing business abroad," said Bill Reinsch, president of the National Foreign Trade Council, which has campaigned against efforts to apply the statute to corporate behaviour.

But if the business community felt it had won a victory in the apartheid litigation, it suffered something of a set-back a few weeks later.

In mid-December, Unocal, the US oil company, announced it had reached a decision in principle to settle Alien Tort litigation over alleged complicity in human rights abuses in Burma.

The Unocal case, which was filed in 1996 on behalf of a group of Burmese villagers, was the most advanced of the corporate ATS cases. It had wide support from the US human rights community - unlike the apartheid case, which was widely expected to face rapid dismissal. The US government had filed arguments supporting Unocal's position.

The settlement in principle was welcomed as a victory by the human rights lobby (although moves to sell the company to CNOOC, the Chinese state-controlled oil group, might have helped as the company tried to clear outstanding issues). But it removed an opportunity to achieve some clarity on the question of corporate liability under the statute.

"The issue of aiding and abetting [violations of international law] and its availability under the Alien Tort statute was squarely presented," says Paul Hoffman, of the Center for Justice and Accountability, who argued for the plaintiffs. "Now, because that is not going to be decided, there is going to be a period of greater uncertainty for corporations."

Terry Collingsworth of the International Labor Rights Fund, who also represented the Burmese plaintiffs, argues that the outcome of the two cases undermines claims that the Alien Tort statute exposes companies to excessive litigation risks.

"Just because a company is selling its product in a country, there is no way we could sue them …no matter how much we might despise the politics of that country," he says. "The courts in Unocal required us to demonstrate a link between the acts of Unocal and the human rights violations suffered by our clients."

Both cases followed last summer's Supreme Court ruling on the Alien Tort statute, which gives foreigners the right to seek redress in US federal courts for wrongs abroad that are "committed in violation of the law of nations or a treaty of the United States".

The Supreme Court ruled the statute could only be used against violations that are "specific, universal and obligatory" under international law.

"It's a short list," says Mr Collingsworth. "It includes genocide, extra-judicial killing, torture, war crimes, slavery and extreme arbitrary detention."

Judge Sprizzo's ruling represents a narrow reading of the Supreme Court's position. In particular, he rejected the idea that the principle of aiding and abetting could be applied under the statute, an argument previously cited in several other cases.

"He clearly captured the spirit of the Supreme Court ruling in terms of taking a very narrow eye to figuring out what claims are actionable in international law," says Owen Pell, of New York-based White & Case, which represented the companies in the apartheid case.

However, Judge Sprizzo's rejection of aiding and abetting arguments may be challenged by other federal judges. Mr Hoffman says: "My own view is that it would be very surprising if the courts reject forms of aiding and abetting liability in these cases."

Meanwhile, Unocal's settlement in principle also increases pressure on several other energy companies facing similar cases that have survived motions to dismiss - including ChevronTexaco, Shell and Talisman oil.

Mr Pell at White & Case argues that theoutstanding ATS cases involving oil and mining companies "probably represent what is now the cutting edge" of the struggle over the statute, but that risk of the sort of mass action attempted in the apartheid case has been removed.

He also warns that human rights litigation may in future target individual company officials and directors if the door to action against corporations under the Alien Tort statute is definitively shut.

Meanwhile - and despite the Sprizzo decision - corporate and human rights lobbyists are eyeing each other for signs of attempts by the business community to push for legislation to curtail the scope of the statute in the new US Congress.

Even Republican senators, however, may be wary of giving US business absolute immunity to legal action at home over involvement in egregious breaches of international law abroad.

"I think a signal has been sent," says Mr Pell of last summer's Supreme Court decision. "You companies are capable of knowing right from wrong, and what we are telling you is that if you put yourselves on the side of wrong, then there is some room under this statute for you to get sued. So you better be careful to make sure you are on the right side."

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