Judgment of Solomon Trips Up Iraq Again

MANHATTAN (CN) - Iraq can neither be sued nor seek damages related to the United Nations Oil for Food scandals, federal courts on both coasts have found.

The U.N. Security Council set up the oil-for-food program by resolution on April 14, 1995, to alleviate civilian suffering caused by international economic sanctions against Iraq. The program permitted the sale of Iraqi oil to raise money to buy humanitarian goods for the Iraqi people.

But the Saddam Hussein regime, with the participation of thousands of corporations and prominent international politicians, diverted billions of dollars in cash, goods and services from their humanitarian purposes.

U.N. investigator Paul Volcker outlined the extent of the corruption in multiple reports. One report concluded that Oil for Food program director Benon Sevan had accepted bribes from the former Iraqi regime. That charge led to Sevan's suspension in 2005.

On behalf of its citizens in 2008, Iraq sued the Zurich-based robotics giant ABB AG and dozens of other entities with which it had done business, claiming breach of contract and violations of U.S. anti-racketeering law and the Foreign Corrupt Practices Act, as well as other charges.

One group of defendants that Iraq had named included several entities of BNP Paribas, the French bank that administered the program.

U.S. District Judge Sidney Stein in the Southern District of New York had refused to compel arbitration of those claims, and the 2nd Circuit affirmed that ruling last year.

Stein closed entirely last week, finding that Iraq lacked standing to sue for the suffering caused by the U.N. Oil for Food Program.

"The court concludes that the complaint alleges conduct by the Hussein regime that, as a matter of law, is attributable to plaintiff itself, the Republic of Iraq," the 49-page order states. "The alleged misconduct has a governmental character. Therefore, the conduct comes within the default rule that a regime's governmental conduct redounds to the sovereign. The court rejects Iraq's view that it may sidestep responsibility because the conduct was illegal or the actors held power illegitimately. Sovereigns, however, cannot escape the consequences of their representatives' governmental misconduct. Questions of attribution are distinct from questions of lawfulness or legitimacy."

Stein insisted that he was resolving "legal, not political," questions.

"The grave allegations of the complaint paint a picture of a people oppressed and of a repressive government resolved to frustrate the international community's efforts to intervene to assist the Iraqi people," he wrote.

"But the complaint unmistakably alleges that the wrongful conduct of the Hussein regime was of a governmental character, pursued for purportedly public purposes, and undertaken by the governmental authorities in Iraq," Stein added. "As a result, that government, however deplorable it may have been, represented Iraq and its acts, however allegedly depraved, are attributable to the sovereign."

The same jurisdictional issues that prevented Iraq from recovering damages shielded the country from liability last year.

In July 2012, the 9th Circuit threw out a lawsuit by two Cypriot companies suing Iraq for broken oil contracts under the U.N. program. That ruling inspired a fiery dissent that slammed Iraq for seeking damages over the program while denying liability.

"Iraq may not honestly say there is jurisdiction in New York and deny that there is jurisdiction of similar claims in San Diego," Judge John Noonan wrote at the time.

After the court later refused to rehear the case en banc, Noonan compared the maneuver to the biblical parable of the two women who fought before King Solomon over a baby.

"This ancient story comes to mind as the Republic of Iraq seeks to split a whole case in two," Noonan wrote in January. "One doesn't need to be a Solomon to know that a single lawsuit should not be split in half."

Now both suits have met the same fate.

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit