September 18, 2014 / 3:53 PM / 3 years ago

Iraq loses U.S. appeal in U.N. oil-for-food lawsuit

NEW YORK (Reuters) - A U.S. federal appeals court on Thursday rejected Iraq’s effort to sue dozens of companies for allegedly conspiring with the Saddam Hussein regime to subvert the United Nations’ oil-for-food programme and deprive Iraqi citizens of humanitarian aid.

By a 2-1 vote, the 2nd U.S. Circuit Court of Appeals said Iraq’s government could not recoup damages under a U.S. anti-racketeering law over Hussein’s effort to defraud the U.N. programme, despite repudiating that effort and his regime’s legitimacy.

Circuit Judge Amalya Kearse said the allegations “paint a sorry portrait of a greedy and ruthless government colluding with venal individuals and business firms to divert funds intended for the benefit of a suffering population, and using those funds to cement political power.”

But she said the “in pari delicto” doctrine, meaning “in equal fault,” left Iraq accountable for Hussein having been a “dominant force” in efforts to subvert the U.N. programme, with responsibility “at least as great as that of any defendant.”

More than 80 companies, subsidiaries and affiliates were named as defendants in the 2008 lawsuit over the $64.2 billion (£39.1 billion) oil-for-food programme, which ran from 1996 to 2003 and was designed to help citizens hurt by international trade sanctions.

Among the defendants were the French bank BNP Paribas SA, which oversaw a U.N. escrow account for the programme; Swiss engineering company ABB Ltd; U.S. oil company Chevron Corp; British drugmaker GlaxoSmithKline Plc and German electronics company Siemens AG.

Iraq claimed that Hussein defrauded the programme by selling oil at below-market prices while receiving kickbacks, and overpaying for food and medicine in exchange for side payments.

It said the defendants’ actions deprived Iraqi citizens of more than $10 billion of essential aid from the escrow account.

In his dissent, Circuit Judge Christopher Droney said shielding the defendants from liability was contrary to public policy and deprived the “ultimate victims,” Iraqi citizens, of any remedy for Hussein’s human rights abuses.

Christian Siebott, a lawyer representing Iraq, did not immediately respond to requests for comment.

Thursday’s decision upheld a February 2013 ruling by U.S. District Judge Sidney Stein in Manhattan.

“The majority decision is clearly correct,” said Robert Bennett, a lawyer for BNP Paribas. “It is unfortunate that people suffered, but would be unfair to the bank to expect it to cure those problems.”

The 2nd Circuit also ruled unanimously that Iraq could not pursue claims under the Foreign Corrupt Practices Act, saying the law’s antibribery provision did not allow private lawsuits.

A scathing 2005 U.N. report on the oil-for-food programme, from a panel led by former U.S. Federal Reserve Chairman Paul Volcker, linked oil surcharges to contracts of 139 companies, and humanitarian kickbacks to contracts of 2,253 companies.

Hussein lost power in 2003 and was executed in 2006.

The case is Iraq v. ABB AG et al, 2nd U.S. Circuit Court of Appeals, No. 13-618.

Reporting by Jonathan Stempel in New York; Editing by G Crosse and Bernadette Baum

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