Turkcell vs MTN

New York - On February 28, during oral arguments at the US Supreme Court in an Alien Tort Statute suit by a group of Nigerians who accused Shell of complicity in state-sponsored torture in their country, Justice Samuel Alito interrupted the Nigerians' lawyer, Paul Hoffman of Schonbrun DeSimone Seplow Harris Hoffman & Harrison.

"What business does a case like this have in the courts of the United States?" Alito said.

Enough justices agreed with Alito that days after the argument in the case, called Kiobel v Royal Dutch Petroleum, the supreme court decided it was more interested in the extraterritorial application of the Alien Tort Statute than in the nominal issue in Kiobel, which concerned corporate liability under the ATS.

In an extraordinary post-argument order, the justices called for additional briefing from both sides on the question of "whether and under what circumstances the Alien Tort Statute allows courts to recognise a cause of action for violations of the law occurring within the territory of a sovereign other than the United States".

Whoever defends South Africa's MTN Group [JSE:MTN] in a new suit in federal court in Washington is going to be very interested in the answer the supreme court eventually delivers to that question.

In a 70-page complaint filed on March 28, the Turkish cellular services company Turkcell is asserting the Alien Tort Statute against MTN Group. According to Turkcell's lawyers at Patton Boggs, MTN engaged in all sorts of corporate skullduggery, from bribery to peddling votes at the United Nations, to wrest away Turkcell's contract to provide private cellphone service in Iran.

Turkcell said that MTN's conduct is a "violation of the law of nations", and has demanded $4.2bn in damages.

The Turkish company's allegations were explosive enough to have led to a 6% fall in MTN's share price since the suit was filed. "MTN used its high-level political influence within the South African government to offer Iran the two most important items that the country could not obtain for itself: (1) support for the Iranian development of nuclear weapons; and (2) the procurement of high-tech defense equipment," the complaint said.

"MTN developed a scheme to trade these items - nuclear votes and illicitly procured arms - for (Turkcell's)licence. MTN furthered its scheme by bribing and trading in influence with government officials in both Iran and South Africa in exchange for the license...

"MTN went so far as to create a code name for its corrupt scheme - 'Project Snooker'. Between February 2004 and November 2005, MTN Group worked feverishly to 'snooker' its business competitor through these corrupt arrangements."

I have no idea of the merits of Turkcell's assertions. But I don't think Turkcell's case has much chance of surviving as a cause of action in the US courts, which are increasingly resistant to the idea that they're an appropriate forum for disputes with little connection to this country.

Turkcell tries hard to make a case for US jurisdiction. (In fact, I don't think I've ever before seen such a strenuous venue argument in an opening complaint.) MTN, the suit said, is headquartered in South Africa, but its shares also trade as American Depository Receipts, and the company derives significant revenue from sales of phone cards and cell services to US customers.

Two of the company's directors are US residents, according to the complaint, which also said MTN has received financing from US lenders and uses US banks. Moreover, according to Turkcell, MTN allegedly breached a non-disclosure agreement it signed in Washington, in the course of settlement talks at the beginning of 2012.

All of that doesn't change the fundamentals of the litigation, however: this is a Turkish company suing a South African company for allegedly tampering with an Iranian contract through illegal conduct that took place outside the United States. To quote Alito in the Nigeria case: "What business does a case like this have in the courts of the United States?"

As an initial matter, MTN is sure to assert a forum non conveniens defence, arguing that the United States isn't the proper venue for this case and under the doctrine of international comity, it's not the role of US courts to decide international disputes.

Turkcell's counsel at Patton Boggs could counter that this country is the only jurisdiction to offer a civil cause of action for extraterritorial violations of the law of nations, which is what the MTN suit asserts.

As ATS expert Hoffman told me Monday, no court has yet ruled that the Alien Tort Statute doesn't apply to overseas conduct, however likely it is that the supreme court will erect such a bar when it eventually decides Kiobel.

But even if the Turkcell case survives outright dismissal, it will probably be stayed until the supreme court issues its Kiobel ruling, Hoffman said. If the justices are as reluctant to extend the extraterritorial application of the Alien Tort Statute as they were of US securities laws in Morrison v National Australia Bank, that would seem to portend the end of Turkcell's suit.

And even if Turkcell manages to clear all of those hurdles, there's still a big question about its assertion of the Alien Tort Statute in what amounts to a business case.

Most ATS cases, after all, are brought on behalf of human rights victims, not multinational corporations. "The courts are not very receptive to using the Alien Tort Statute to settle business disputes," said Hoffman, pointing back to a 1975 ruling by the 2nd Circuit Court of Appeals in ITT v Vencap.

I left a message with Turkcell counsel Read McCaffrey of Patton Boggs but didn't hear back. I also left messages with Lanny Davis of Dilworth Paxson and Tim Coleman of Freshfields Bruckhaus Deringer; the Turkcell complaint said that Davis and Freshfields represented MTN in settlement talks with Turkcell.

Those messages weren't returned either.

 - Reuters Africa News blog