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Does a Presidential Iraq Executive Order Take Away Tort Victims' Right To Sue?
Protecting Halliburton at the Expense of Injured Workers


Monday, Nov. 03, 2003

In May, President Bush issued Executive Order 13303 ("EO 13303"). Previously little noticed, EO 13303 is now receiving scrutiny from watchdog groups. They fear that it may be used to limit the accountability of corporations doing business in Iraq.

Their fears are reasonable, as we will explain. In particular, it is possible the Executive Order will be used to cut off tort victims' ability to sue corporations working in Iraq.

And that's not the only problem with the Executive Order; there are two others. First, EO 13303 sets a terrible precedent for the abuse of the executive's power over private litigation in the context of national security. Second, it is yet another example of what Professor Sebok has described on this site as the Republican penchant for "sneaky tort reform."

What the Executive Order Says

EO 13303 is entitled, "Protecting the Development Fund for Iraq and Certain Other Property in Which Iraq Has an Interest." It prohibits all judicial process -- including, but not limited to, "attachment, judgment, decree, lien, execution, [and] garnishment" -- with respect to the Development Fund for Iraq and all interests in Iraqi oil products.

The language describing the latter category -- interests in Iraqi oil products -- is very broad. It encompasses not only the oil and the interests, but also all "proceeds, obligations, or any financial instruments . . .in which any foreign country or a national thereof has any interest, that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of United States persons."

Put simply, this means that no court or litigant can touch any of the oil products, interests in them, or proceeds. And in effect, it also means that it is useless to sue any company or person to try to get any of this -- for even if a court were to issue an opinion saying you were entitled to it, that holding could never be enforced. (Indeed, the order explicitly says that a creditor cannot collect on a legally enforceable claim arising from Iraqi oil production.)

How the Executive Order May Be Interpreted

What else does EO 13303 do, besides making claims arising from Iraqi oil production unenforceable? Arguably, it may also prohibit a plaintiff from bringing a tort claim for damages caused by a company's negligence in a project arising from Iraqi oil production.

That would apparently be true even if the company (say, Halliburton), and the accident victim (say, an American worker working for an independent subcontractor) were American, and if the victim tried to sue in a U.S. court (say, in Texas.) And that leads to an unfortunate anomaly.

The same worker might get a multimillion-dollar verdict in the U.S. if he had been injured here. But by going to Iraq, to work there, he may not be able to recover a dollar in court, and be at the mercy of Halliburton's decision as to how much -- or even whether -- to compensate him.

Some have suggested that the Executive Order was prompted by recent Alien Tort Claims Act (ATCA) suits, and the resulting fear that American companies in Iraq could be sued in U.S. Courts by Iraqis or other foreign citizens invoking the ATCA. Under the Executive Order, even if such suits are brought, there can be no enforcement against the categories of property the Order lists.

One can argue about whether that is, or is not a good idea. But one thing is certain: The Executive Order goes much further than simply preventing ATCA suits by foreign citizens. It also appears to prevent ordinary tort suits, by ordinary Americans, who happen to be working in Iraq to rebuild the country -- as America has called upon them to do.

And that is the "sneaky tort reform" aspect of the Executive Order: It gives to a small set of corporations the sort of tort reform that they have not been able to get past the Senate for years. Halliburton doubtless wishes it could insulate itself from tort suits in the United States. With respect to its Iraq operations, at least, it has gotten its wish.

Historical Precedents: Similar Measures by Past Presidents

Is the Executive Order valid? Certainly, Presidents and executive agencies have issued similar orders in the past, justifying their actions by invoking the International Emergency Economic Powers Act (IEEPA).

For example, following the Iranian Hostage Crisis, President Carter blocked Iranian assets in the U.S. After he did, the Treasury Department limited judicial process with respect to any non-Iranian interest in property -- meaning that, if Iran owed you money, you were out of luck, even though you had nothing at all to do with the hostage crisis. (Carter subsequently also ordered the transfer of all Iranian assets in the U.S. to the Federal Reserve Bank in New York.)

President Reagan followed up with an executive order suspending the enforcement, in the United States, of all claims that were to be presented to the U.S.-Iran Claims Tribunal.

Both Carter and Reagan's orders were challenged, before the U.S. Supreme Court, in Dames & Moore v. Regan. To defend the orders, they invoked both IEEPA, and another federal statute, the Hostage Act. (In contrast, President Bush's recent Order invokes not only IEEPA, but also the National Emergencies Act; section 5 of the United Nations Participation Act (UNPA); and 3 U.S.C. 301.)

The Supreme Court found that in IEEPA and the Hostage Act, Congress had provided specific authorization for Carter's nullification of non-Iranian interests in the Iranian property in the U.S., and for Carter's decision to transfer Iranian assets to the Federal Reserve.

But what about Reagan's suspension of claim enforcement? There, the Court found no specific statutory authority. But it did find that -- as evidenced by the relevant statutes -- Congress had intended to grant the President broad discretion in this area.

Indeed, more than this, the Court found that Congress also intended to invite the President to act independently of Congress, especially in areas where there is a history of congressional acquiescence. And in the area of executive claim settlement, the Court held, there was such a history. In many instances, it pointed out, sovereigns had sought to settle the claims of their nationals.

For all these reason, the Court upheld the actions of both Presidents. But would the same result occur if the Court were to review President Bush's recent Executive Order? That is a more difficult question.

The Key Question: Does the Order Divest the Courts of Jurisdiction?

In Dames & Moore, the Court stressed that the claim suspension order did not "divest the federal court of 'jurisdiction' " -- it only imposed a temporary delay while jurisdiction was resolved. So suppose it was decided that the Iran-U.S. Claims Tribunal did not have jurisdiction over a claim. Then the claim could be brought in U.S. court after all.

What about President Bush's Executive Order? Does it "divest the federal court of jurisdiction," or not? Arguably, it does, for two reasons.

First, while it prohibits the transfer of Iraqi property, just as Reagan's claim suspension order did, it also goes further -- to prohibit process against persons, too. If the products and interests at issue "come within the possession or control of United States persons," they are protected. When the court can't hear a suit against a particular person, it has arguably been divested of jurisdiction over that potential defendant. (Indeed, the U.S. Constitution defines some of the Supreme Court's own original jurisdiction based on who the parties are in the case.)

Second, President's Bush's Executive Order, unlike President Reagan's does not merely suspend claims -- it purports to extinguish them entirely. There is no alternative tribunal at which the claimant may find justice. He or she is simply out of luck.

The Argument For Extinguishing, Rather Than Suspending, Claims Is Weak

It might be reasonable for the government to suspend claims against Iraqi oil products and related interests. After all, Iraq is in transition, and is being rebuilt. But what is the justification for extinguishing these claims entirely?

To begin, it's important to note that Congress has not expressly authorized the measures contained in the Executive Order. If it had, that might be a different matter, for several reasons.

First, the Constitution gives Congress power to "constitute tribunals inferior to the Supreme Court." Under this power, it long ago created the federal courts. And along with the power to create these courts, comes at least some power to limit their jurisdiction.

Second, proposed Congressional legislation is subject to public debate, and the legislative process. An Executive Order --which is simply a directive signed by the President -- is not. Thus, with respect to the recent Executive Order, Vice President Cheney did not have to take any flak in Congress for giving a break to his old company, Halliburton, before the Executive Order was issued; in Congress, in contrast, it might have been a different story.

Apart from the question of whether Congress or the President should have done this, moreover, there is also the question of whether it should be done at all. Perhaps some protection of Iraq-related property and interests might have been offered in exchange for Saddam Hussein's willing exile. But that didn't happen.

Instead, the reason for the Executive Order seems more connected to domestic than international politics. Its apparent impact, as noted above, will be to shield U.S. companies from suits brought by U.S. citizens -- including accident victims who may have been grievously injured -- in U.S. courts.

Why stop these suits? The real reason for it, it seems to us, is simple: To do so, lowers the cost of reconstruction.

From the companies' perspective, it is as if they've received a tax break to companies who do business in Iraq. Giving such tax breaks might -- or might not -- make sense.

But from tort victims' perspective, the effect of the Executive Order is very different. Rather than making every taxpayer pay for Iraqi reconstruction, it makes tort victims, among others, pay. That is a grave injustice -- for accident victims are the least appropriate persons to pick out to bear the lion's share of a financial burden. The money taken out of their pockets may be for medical treatment, rehabilitation, and other genuine, important, and perhaps desperate needs.

Anthony Sebok is a Professor of Law at Brooklyn Law School, where he teaches Torts, among other subjects. Professor Sebok has written several columns on mass tort litigation for FindLaw; they can be located in the archive of his columns on the site. Claire R. Kelly is an Assistant Professor of Law at Brooklyn Law School.

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