Federal judges in New York on Thursday found against the war-torn Republic of Iraq, ruling that it had no right to sue nearly 100 major corporations accused of looting hundreds of millions of dollars in humanitarian funds from the United Nations Oil-for-Food program.

However the decision was split, with a single appeals judge finding that the majority had wrongly held the current government in Baghdad responsible for the actions of the former government of Saddam Hussein.

From 1997 to 2003, Iraq’s Baathist government, which was under heavy international sanctions, sold $65 billion in oil through a U.N. program meant to allow the country to purchase humanitarian supplies and pay war reparations to Kuwait after the invasion of that country in 1990.

But a U.N. committee found in 2005 that more than 2,000 participating companies, or nearly half, had paid Iraqi officials hundreds of millions of dollars in bribes to win a slice of the pie.

The result in many cases was spoiled medicine, bad food and shipments delivered late, if at all, while Saddam’s grip on power only tightened and citizens were reduced to food rations.

Lawyers for Iraq called it “the largest financial fraud in human history.”

Many of the participants, such as Chevron Corp., Siemens AG, Johnson & Johnson and General Electric Co., were prosecuted by the United States for foreign bribery, reaching settlements for hundreds of millions.

But Iraq itself also sued in 2008, seeking to recover damages from the companies that had defrauded the Iraqi treasury and U.N. funds.

A federal trial judge in 2013 dismissed Iraq’s case, finding in particular that Iraqi government could not complain about wrongdoing that it, or its predecessor regime, had helped instigate.

In appeals arguments, lawyers for Baghdad had argued that Saddam and his cohort had sought to enrich themselves personally — the former dictator was reportedly found hiding with $750,000 in 2003 — rather than acting in the interests of the state.

Two judges on Thursday said this was “meritless.”

“Our law has long recognized that the legal position of a foreign state survives changes in government,” wrote Circuit Judges Amalya L. Kearse and Ralph K. Winter.

In a dissent, however, Circuit Judge Christopher F. Droney said that such a principle had never been recognized when the conduct at issue was also a violation of U.S. law.

According to Droney, the majority believe Iraq “should be treated as complicit in the [Saddam] Regime’s fraud on a humanitarian relief program specifically designed to aid the civilian population while not enriching the regime.”

While absolving the defendants, whose conduct was clearly illegal, this served “to deprive the ultimate victims of the defendants’ conduct of any remedy,” Droney wrote.

Iraq’s embassy in Washington and Mark Maney, a Houston lawyer representing the country, did not respond to requests for comment.

It was unclear whether they would persist in the case.
Update: On October 2, 2014, the Iraqi government asked the Second Circuit Court of Appeals to rehear its case.

Lawyers for Iraq believe they may prevail if the appeals court’s full 11-judge bench considers their arguments and then sides with Droney, who found that two of his fellow judges had incorrectly applied the legal doctrine of in pari delicto, or equal in the offense.

Iraq’s lawyers say the majority’s “conclusion rests entirely on its unprecedented theory that absolutely attributes all conduct of a former government to the nation.”

“The majority’s disagreement with the dissent frames a stark legal question—Can a dictator, who sets government policy, ever be held civilly liable for his wrongs to the nation?” they asked.

Douglas Gillison

Douglas Gillison

Douglas Gillison is a former staff writer for 100Reporters. His investigative projects have included the declassification of 1,300 pages of FBI records from a 1997 political massacre and the exposure of payments by a publicly traded mining company that are now the subject of an international criminal bribery investigation.