In a decision yesterday, Judge Stein ruled that the government of Iraq could not recover against dozens of companies accused of manipulating the U.N. Oil-for-Food Program. The program “was designed to permit Iraq to sell its oil to third parties, as long as the proceeds were used to purchase food and medical supplies for the Iraqi population.” The defendants were accused of a scheme that Judge Stein described as “both intricate and simple: the Hussein Regime priced its oil below the market price in order to facilitate kickback payments from buyers, and it overpaid for food and medicine in order to facilitate side payments to it from sellers in the form of surcharges.” Judge Stein found that 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,” but nevertheless dismissed the case based on (among other reasons) the Iraq government’s own role in the scheme:
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 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. The legal relationship between Iraq and Hussein frames the case, but does not decide it. The issues that do are more commonplace. For example, the core claims of the action—RICO and RICO conspiracy—focus on extraterritorial conduct. And even if those claims were not extraterritorial, they would founder on the defense of in pari delicto or absence of allegations of proximate causation. Having engineered the wrongdoing alleged in the Complaint, and having alleged that the wrongdoing directly harmed the Programme, Iraq cannot recover from that wrongdoing.