UPDATE 2-U.S. judge throws out Iraq lawsuit over UN aid program

Jonathan Stempel
Reuters Middle East

* Iraq says companies conspired with Saddam Hussein regime

* Citizens said to be deprived of food, medicine, supplies

* Kickbacks, surcharges found in 2005 report led by Volcker

NEW YORK, Feb 6 (Reuters) - A U.S. judge on Wednesday

dismissed Iraq's lawsuit accusing dozens of companies of

conspiring with Saddam Hussein's regime to frustrate the United

Nations' oil-for-food program, and depriving Iraqis of roughly

$10 billion of essential aid.

U.S. District Judge Sidney Stein in Manhattan said the

government of Iraq could not recover damages and other remedies

under an anti-racketeering law because most of the wrongful

conduct took place in foreign countries.

He also said Iraq failed to allege the companies' conduct

was a key reason for the injury, and that laws governing

sovereign nations did not let the current government escape

responsibility for Hussein's abuses.

"The court rejects Iraq's view that it may sidestep

responsibility because the conduct was illegal or the actors

held power illegitimately," he wrote.

More than 90 companies, subsidiaries and affiliates were

named as defendants in the 2008 lawsuit over the $64.2 billion

oil-for-food program, which ran from 1996 to 2003.

Among them were French bank BNP Paribas SA, which

administered a U.N. escrow account for the program; Swiss

engineering company ABB Ltd ; Dutch chemicals company

Akzo Nobel NV ; U.S. oil company Chevron Corp ;

German automaker Daimler AG ; British drugmaker

GlaxoSmithKline Plc , and German electronics

company Siemens AG.

"It is clearly the right decision," said Robert Bennett, a

lawyer representing BNP Paribas. "I am enormously pleased."

Lawyer James Gillespie, representing ABB, said Stein

"followed the arguments in the defendants' papers very closely,

and in our view correctly applied the law."

Christian Siebott, a lawyer representing Iraq, did not

immediately respond to requests for comment.


The U.N. program let Iraq sell oil to finance the purchase

of food, medicine and other goods for citizens hurt by

international trade sanctions.

Many of the current government's allegations had been drawn

from a scathing October 2005 U.N. report by a panel led by

former U.S. Federal Reserve Chairman Paul Volcker.

According to the report, Iraq had sold $64.2 billion of oil

to 248 companies under the oil-for-food program, while 3,614

companies sold $34.5 billion of humanitarian goods to Iraq.

Oil surcharges were paid in connection with the contracts of

139 companies, and humanitarian kickbacks in connection with the

contracts of 2,253 companies, the report said.


In its lawsuit, Iraq said the Hussein regime defrauded the

program by selling oil at below-market prices in exchange for

kickbacks, and paying too much for food and medicine in exchange

for side payments.

It said the defendants' involvement deprived Iraqi citizens

of essential supplies that should have been paid from the escrow


While noting the parties' agreement that Hussein had been

responsible for the alleged injustices, Stein rejected Iraq's

effort to hold corporate defendants liable under the federal

Racketeer Influenced and Corrupt Organizations Act, or RICO.

The judge said the alleged racketeering took place outside

the United States, even though the United Nations is

headquartered in New York, and that applying RICO to such

"extraterritorial" activity would be improper.

Stein also rejected Iraq's effort to recover under the

Foreign Corrupt Practices Act, saying federal law does not

afford a private right of action.

Hussein lost power in 2003 and was executed in 2006.

The case is Iraq v. ABB AG et al, U.S. District Court,

Southern District of New York, No. 08-05951.

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