## Facts

- The United Nations Oil-for-Food Program allowed Iraq to sell oil for humanitarian goods, with proceeds held in a U.N.-controlled escrow account to prevent misuse.
- Iraq alleged that the former Saddam Hussein regime corrupted the program by demanding illicit surcharges and kickbacks from companies seeking oil or humanitarian-goods contracts.
- Iraq claimed numerous multinational companies and financial institutions paid unlawful surcharges, falsified contract documents submitted to the U.N., and helped divert funds from humanitarian purposes.
- After the Hussein regime fell, the Republic of Iraq sued the alleged participants in federal court, asserting common-law claims and federal claims under the Foreign Corrupt Practices Act (FCPA) and the Racketeer Influenced and Corrupt Organizations Act (RICO).
- Iraq asserted it sued both on its own behalf and as parens patriae on behalf of its citizens for harm from the diversion of humanitarian-relief funds.

## Issues

1. Whether the FCPA creates a private right of action permitting a foreign sovereign to sue private entities for bribes and kickbacks.
2. Whether RICO could be applied to predominantly foreign conduct connected to the Oil-for-Food Program.
3. Whether in pari delicto barred Iraq’s claims by imputing the former regime’s admitted wrongdoing to the Republic despite a change in government.
4. Whether pleading parens patriae on behalf of Iraqi citizens avoided imputation and the in pari delicto bar.
5. Whether the district court properly declined supplemental jurisdiction over remaining state-law claims after dismissing all federal claims.

## Decision

- The Second Circuit affirmed dismissal of the FCPA claim because the statute provides no private right of action.
- The court affirmed dismissal of the RICO claim because the alleged racketeering activity was predominantly foreign and did not constitute a sufficiently domestic application of RICO.
- The court also held that, even if RICO applied, in pari delicto independently barred recovery because Iraq’s former government participated in the same wrongdoing alleged against defendants, and that misconduct was imputed to the Republic.
- The court rejected Iraq’s parens patriae theory as insufficient to avoid imputation and in pari delicto.
- The court affirmed dismissal of state-law claims without prejudice based on the district court’s decision not to exercise supplemental jurisdiction once federal claims were dismissed.

## Legal Principles

- The FCPA authorizes enforcement by the Department of Justice and the Securities and Exchange Commission and does not authorize suits by private litigants.
- Federal statutes are presumed not to apply extraterritorially absent a clear congressional indication; RICO requires a sufficiently domestic application when the alleged enterprise and conduct are largely foreign.
- In pari delicto bars a plaintiff who participated in the alleged wrongdoing from recovering damages for that misconduct.
- Under principles of state continuity, a change in government does not create a new state; successor governments are generally accountable for predecessors’ acts, allowing the predecessor’s misconduct to be imputed to the continuing sovereign for in pari delicto purposes.
- Parens patriae allegations do not avoid in pari delicto when the asserted sovereign plaintiff remains the same legal person whose prior government engaged in the admitted misconduct.
- When all claims within original federal jurisdiction are dismissed, a district court acts within its discretion in declining supplemental jurisdiction over remaining state-law claims.

## Conclusion

The Second Circuit affirmed dismissal of Iraq’s federal claims arising from alleged Oil-for-Food corruption, holding that the FCPA provides no private cause of action and that RICO was unavailable due to extraterritorial limits and the in pari delicto bar based on imputation of the former regime’s misconduct to the continuing Iraqi state; it also affirmed dismissal without prejudice of the state-law claims after the district court declined supplemental jurisdiction.


Republic of Iraq v. ABB AG, 768 F.3d 145 (2d Cir. 2014)