     13-0618
     Republic of Iraq v. ABB AG


1                              UNITED STATES COURT OF APPEALS

2                                   FOR THE SECOND CIRCUIT

3                                                ------

4                                         August Term, 2013

5    (Argued: February 18, 2014                                         Decided: September 18, 2014)

6                                         Docket No. 13-0618

7    _________________________________________________________

8    THE REPUBLIC OF IRAQ, including as Parens Patriae on behalf of the Citizens
9    of the Republic of Iraq,

10                                               Plaintiff-Appellant,

11                                      - v. -

12   ABB AG; ABB AUTOMATION; ABB ELEKTRIC SANAYI AS; ABB
13   INDUSTRIE AC MACHINES; ABB INDUSTRIE CHAMPAGNE; ABB NEAR
14   EAST TRADING LTD.; ABB SOLYVENT-VENTEC; AGCO DENMARK A/S;
15   AGCO S.A.; VALTRA DO BRAZIL; AIR LIQUIDE ENGINEERING; AKZO
16   NOBEL N.V.; N.V. ORGANON; INTERVET INTERNATIONAL B.V.; ASTRA
17   ZENECA AB.; MAIS CO. FOR MEDICAL PRODUCTS; ATLAS COPCO
18   AIRPOWER N.V.; ATLAS COPCO CMT; AWB, LTD.; B. BRAUN MEDICAL
19   FRANCE; B. BRAUN MELSUNGEN A.G.; B. BRAUN MEDICAL
20   INDUSTRIES SDN BHD (MALAYSIA); AESCULAP AG AND KG;
21   AESCULAP MOTRIC S.A.; AESCULAP SURGICAL INSTRUMENTS SDN;
22   BOSTON SCIENTIFIC S.A.; BNP PARIBAS USA; BNP PARIBAS (SUISSE)
23   SA; BNP PARIBAS HONG KONG; BNP PARIBAS PARIS; BNP PARIBAS
24   UK HOLDINGS LIMITED; BNP PARIBAS LONDON BRANCH; BNP
25   PARIBAS (SUISSE) SA; BUHLER LTD.; DAVID B. CHALMERS, JR.;
26   CHEVRON CORP.; DAEWOO INTERNATIONAL CORP.; DAIMLER-
27   CHRYSLER AG; DOW AGROSCIENCES; EASTMAN KODAK S.A.; EBEWE
28   PHARMA GES M.B.H.; ELI-LILLY EXPORT S.A.; EL PASO CORP.;
29   EVAPCO EUROPE S.R.L.; FIATAVIO; FLOWSERVE CORP.; FLOWSERVE
30   POMPES; FLOWSERVE B.V.; GLAXOSMITHKLINE WALLS HOUSE;
31   GLAXOSMITHKLINE EGYPT SAE; GLAXO WELLCOME EXPORT LTD.;
32   GLAXO WELLCOME SA (SOUTH AFRICA) (PRY) LTD.; SMITHKLINE
 1   BEECHAM INTERNATIONAL; ABG ALLGEMEINE BAUMASCHINEN-
 2   GESELLSCHAFTMBH DRESSER INTERNATIONAL INGERSOLL-RAND
 3   ITALIANA, SPA.; THERMO KING IRELAND LIMITED; INGERSOLL-
 4   RAND BENELUX, N.V.; INGERSOLL-RAND WORLD TRADE LTD.; CILAG
 5   AG INTERNATIONAL; JANSSEN PHARMACEUTICAL; KIA MOTORS;
 6   LIEBHERR EXPORT AG;LIEBHER FRANCE, SA; SERONO PHARMA
 7   INTERNATIONAL; MERIAL; NOVO NORDISK; PAUWELS; RAILTECH
 8   INTERNATIONAL; F. HOFFMAN LA ROCHE; ROCHE DIAGNOSTICS
 9   GMBH; ROHM AND HAAS FRANCE, S.A.; SECALT S.A.; SIEMENS S.A.A.
10   OF FRANCE; SIEMENS SANAYI VE TICARET A.S. OF TURKEY; OSRAM
11   MIDDLE EAST FZE; SOLAR TURBINES EUROPE; ST. JUDE MEDICAL
12   EXPORT GMBH; SULZER BURCKHARDT ENGINEERING WORKS LTD.;
13   SULZER PUMPEN DEUTSCHLAND GMBH; SULZER TURBO LTD.;
14   TEXTRON, INC.; UNION PUMP S.A.S., formerly known as David Brown
15   Guinard Pumps S.A.S.; DAVID BROWN TRANSMISSIONS OF FRANCE S.A.;
16   RENAULT TRUCKS SAS; RENAULT AGRICULTURE & SONALIKA
17   INTERNATIONAL; RENAULT V.I.; VOLVO CONSTRUCTION
18   EQUIPMENT AB, a successor company to Volvo Construction Equipment
19   International; THE WEIR GROUP; OSCAR S. WYATT, JR.; VITOL, S.A.;
20   WOODHOUSE INTERNATIONAL; YORK AIR CONDITIONING AND
21   REFRIGERATION FZE,

22                                       Defendants-Appellees.*
23   _________________________________________________________


24   Before: KEARSE, WINTER, and DRONEY, Circuit Judges.

25                  Appeal from a judgment of the United States District Court for the Southern District

26   of New York, Sidney H. Stein, Judge, dismissing the amended complaint of plaintiff The Republic

27   of Iraq under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961 et seq., the

28   Foreign Corrupt Practices Act, 15 U.S.C. §§ 78dd-1 et seq., and common law, seeking recovery for

29   defendants' alleged conspiracy with Iraq's then-president Saddam Hussein and Iraq's ministries to

30   corrupt and plunder the Oil-for-Food Programme, an international humanitarian program administered




     *      The Clerk of Court is directed to amend the official caption to conform with the
            above.

                                                    -2-
 1   by the United Nations during the final years of Hussein's rule. The district court dismissed the

2    amended complaint on the grounds, inter alia, that plaintiff was in pari delicto with defendants and

3    that the Foreign Corrupt Practices Act does not confer a private right of action; finding that plaintiff's

4    remaining common-law claims arose under state rather than federal law, the court declined to exercise

5    supplemental jurisdiction over them. See 920 F.Supp.2d 517 (2013).

6                    AFFIRMED.

7                    Judge Droney concurs in part and dissents in part, in a separate opinion.

 8                           MARK MANEY, Houston, Texas (Roliff Purrington, Maney &
 9                               González-Félix, Houston, Texas; Stanley D. Bernstein,
10                               Christian Siebott, Bernstein Liebhard, New York, New York,
11                               on the brief), for Plaintiff-Appellant.

12                           BRANT W. BISHOP, Washington, D.C. (Thomas D. Yannucci, John
13                               R. Bolton, Robert B. Gilmore, Kirkland & Ellis, Washington,
14                               D.C., on the joint brief), for Defendants-Appellees Siemens
15                               S.A.A. of France, Siemens Sanayi ve Ticaret A.S. of Turkey,
16                               and OSRAM Middle East FZE.

17                           ROBERT S. BENNETT, Washington, D.C. (Christopher T. Handman,
18                               Ellen S. Kennedy, Hogan Lovells, Washington, D.C.; Jennifer
19                               L. Spaziano, Skadden, Arps, Slate, Meagher & Flom,
20                               Washington, D.C., on the joint brief), for Defendants-
21                               Appellees BNP Paribas USA, BNP Paribas (Suisse) SA, BNP
22                               Paribas Hong Kong, BNP Paribas Paris, BNP Paribas UK
23                               Holdings Limited, and BNP Paribas London Branch.

24                           AXINN, VELTROP & HARKRIDER (John D. Harkrider, New York,
25                                New York, Gail L. Gottehrer, Hartford, Connecticut, on the
26                                joint brief), for Defendant-Appellee Secalt S.A.

27                           WILLIAMS & CONNOLLY (Robert A. Van Kirk, Katherine M.
28                                Turner, Washington, D.C., on the joint brief), for Defendants-
29                                Appellees Textron, Inc., Union Pump S.A.S., and David Brown
30                                Transmissions of France, S.A.

31                           PILLSBURY WINTHROP SHAW PITTMAN (John F. Pritchard,
32                                 Edward Flanders, Ranah L. Esmaili, New York, New York, on

                                                       -3-
1           the joint brief), for Defendants-Appellees Atlas Copco
2           Airpower N.V. and Atlas Copco CMT.

3    KIRKLAND & ELLIS (James P. Gillespie, Karen McCartan DeSantis,
4         Washington, D.C., on the joint brief), for Defendants-
5         Appellees ABB AG, ABB Automation, ABB Elektric Sanayi
6         AS, ABB Industrie AC Machines, ABB Industrie Champagne,
7         and ABB Near East Trading Ltd.

 8   TROUTMAN SANDERS (Elliot Cohen, New York, New York, on the
 9       joint brief), for Defendants-Appellees AGCO Denmark A/S,
10       AGCO S.A., and Valtra do Brazil.

11   LEADER & BERKON (Michael J. Tiffany, New York, New York;
12        Christopher S. Riley, Barnes & Thornburg, Elkhart, Indiana, on
13        the joint brief), for Defendant-Appellee ABB Solyvent-Ventec.

14   BAKER & McKENZIE (Darrell Prescott, New York, New York, on
15       the joint brief), for Defendant-Appellee Air Liquide
16       Engineering.

17   COVINGTON & BURLING (Nancy Kestenbaum, New York, New
18        York, Mark H. Lynch, Washington, D.C., on the joint brief),
19        for Defendants-Appellees Akzo Nobel N.V., N.V. Organon,
20        Intervet International B.V., Astra Zeneca AB., Cilag AG
21        International, Janssen Pharmaceutical, and Merial.

22   ALSTON & BIRD (Karl Geercken, New York, New York, on the joint
23        brief), for Defendants-Appellees B. Braun Medical France, B.
24        Braun Melsungen A.G., B. Braun Medical Industries SDN
25        BHD (Malaysia), Aesculap AG and KG, Aesculap Motric S.A.,
26        and Aesculap Surgical Instruments SDN.

27   CRAVATH, SWAINE & MOORE (Robert H. Baron, Timothy G.
28       Cameron, New York, New York, on the joint brief), for
29       Defendant-Appellee AWB, Ltd.

30   PARK & JENSEN (Tai H. Park, New York, New York, on the joint
31        brief), for Defendant-Appellee Boston Scientific S.A.

32   PEPPER HAMILTON (Robert L. Hickok, Barak A. Bassman,
33        Philadelphia, Pennsylvania, Kenneth J. King, New York, New
34        York, on the joint brief), for Defendants-Appellees
35        GlaxoSmithKline Egypt SAE, Glaxo Wellcome Export Ltd.,

                             -4-
 1          Glaxo Wellcome SA (South Africa) (PRY) Ltd., and
 2          SmithKline Beecham International.

 3   SPAGNOLETTI & CO. (Francis I. Spagnoletti, David S. Toy,
 4        Houston, Texas, on the joint brief), for Defendant-Appellee
 5        David B. Chalmers, Jr.

 6   SHEARMAN & STERLING (Philip E. Urofsky, Washington, D.C.,
 7        Danforth Newcomb, H. Miriam Farber, New York, New York,
 8        on the joint brief), for Defendants-Appellees Buhler Ltd.,
 9        Daimler-Chrysler AG, ABG Allgemeine Baumaschinen-
10        GesellschaftmbH, Sulzer Pumpen Deutschland GmbH, Sulzer
11        Turbo Ltd., Renault Trucks SAS, Renault V.I., and Volvo
12        Construction Equipment AB.

13   JONES DAY (Meir Feder, Thomas E. Lynch, New York, New York,
14        on the joint brief), for Defendant-Appellee Chevron Corp.

15   GIBBONS (Thomas R. Valen, Newark, New Jersey, on the joint brief),
16        for Defendants-Appellees Daewoo International Corp. and Kia
17        Motors.

18   FULBRIGHT & JAWORSKI (Mark A. Robertson, New York, New
19        York, on the joint brief), for Defendant-Appellee El Paso Corp.

20   CADWALADER, WICKERSHAM & TAFT (Jason Jurgens, Nathan
21       M. Bull, New York, New York, on the joint brief), for
22       Defendant-Appellee Dow AgroSciences.

23   BOWIE & JENSEN (R. Michael Smith, Towson, Maryland, on the
24        joint brief), for Defendant-Appellee Evapco Europe S.r.l.

25   KELLEY DRYE & WARREN (Thomas B. Kinzler, David Zalman,
26        Melissa E. Byroade, New York, New York, on the joint brief),
27        for Defendants-Appellees Flowserve Corp., Flowserve Pompes,
28        and Flowserve B.V.

29   ROTHWELL, FIGG, ERNST & MANBECK (Robert P. Parker,
30       Washington, D.C., on the joint brief), for Defendant-Appellee
31       Ingersoll-Rand Benelux, N.V.

32   SIDLEY AUSTIN (Richard D. Klingler, Steven J. Horowitz,
33        Washington, D.C., Dorothy J. Spenner, New York, New York,
34        on the joint brief), for Defendants-Appellees Eli-Lilly Export

                             -5-
 1          S.A., Ingersoll-Rand Italiana, SpA., Thermo King Ireland
 2          Limited, Ingersoll-Rand World Trade Ltd., and Novo Nordisk.

 3   WILLCOX & SAVAGE (Brett A. Spain, Norfolk, Virginia, on the
 4        joint brief), for Defendants-Appellees Liebherr Export AG and
 5        Libher France, SA.

6    NIXON PEABODY (Michael S. Cohen, Jericho, New York, on the
7         joint brief), for Defendant-Appellee Serono Pharma
8         International.

 9   EPSTEIN BECKER & GREEN (Peter L. Altieri, David J. Clark, New
10        York, New York, on the joint brief), for Defendant-Appellee
11        Railtech International.

12   HARKINS CUNNINGHAM (John G. Harkins, Jr., Philadelphia,
13        Pennsylvania, on the joint brief), for Defendant-Appellee
14        Rohm and Haas France, S.A.

15   ALSTON & BIRD (John P. Doherty, New York, New York, on the
16        joint brief), for Defendant-Appellee Pauwels.

17   DAVIS POLK & WARDWELL (Brian S. Weinstein, New York, New
18        York, Jason McCullough, Washington, D.C., on the joint
19        brief), for Defendants-Appellees F. Hoffman La Roche and
20        Roche Diagnostics GmbH.

21   BAKER & HOSTETLER (Gregory L. Baker, Washington, D.C., on
22       the joint brief), for Defendant-Appellee Solar Turbines Europe.

23   CARTER LEDYARD & MILBURN (Judith A. Lockhart, New York,
24        New York, on the joint brief), for Defendant-Appellee St. Jude
25        Medical Export GmbH.

26   DRINKER BIDDLE & REATH (Clay J. Pierce, New York, New
27        York, on the joint brief), for Defendant-Appellee Renault
28        Agriculture & Sonalika International.

29   CANALES & SIMONSON (J.A. Canales, Corpus Christi, Texas, on
30       the joint brief), for Defendant-Appellee Oscar S. Wyatt, Jr.

31   BAKER & McKENZIE (Larence Walker Newman, New York, New
32       York, on the joint brief), for Defendant-Appellee Sulzer
33       Burckhardt Engineering Works Ltd.

                             -6-
 1                          JONES DAY (Michael H. Ginsberg, Pittsburgh, Pennsylvania, on the
 2                               joint brief), for Defendant-Appellee The Weir Group.

 3                          SULLIVAN & CROMWELL (Penny Shane, Andrew P. Giering, New
 4                               York, New York, on the joint brief), for Defendant-Appellee
 5                               Vitol, S.A.

 6                          K&L GATES (Walter P. Loughlin, New York, New York; Andrew
 7                               Siegel, Christopher A. Payne, Sandler Siegel, Dallas, Texas, on
 8                               the joint brief), for Defendant-Appellee Woodhouse
 9                               International.

10                          REED SMITH (Casey D. Laffey, New York, New York, on the joint
11                               brief), for Defendant-Appellee York Air Conditioning and
12                               Refrigeration FZE.




13   KEARSE, Circuit Judge:

14                  Plaintiff The Republic of Iraq (or the "Republic") appeals from a judgment of the

15   United States District Court for the Southern District of New York, Sidney H. Stein, Judge, dismissing

16   its claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C.

17   §§ 1961 et seq., the Foreign Corrupt Practices Act (or "FCPA"), 15 U.S.C. §§ 78dd-1 et seq., and

18   common law, against numerous defendants who are alleged to have conspired in 1997-2003 with

19   Iraq's then-president Saddam Hussein and Iraq's ministries and state-owned enterprises to corrupt and

20   plunder an international humanitarian program administered by the United Nations (or "U.N."),

21   known as the Oil-for-Food Programme (or the "Programme"). Defendants moved to dismiss the

22   Republic's First Amended Complaint (the "Amended Complaint" or "Complaint") principally pursuant

23   to Fed. R. Civ. P. 12(b)(1) and 12(b)(6). They moved to dismiss pursuant to Rule 12(b)(1) on the

24   grounds that the Republic's claims are nonjusticiable by reason of the act-of-state doctrine and the


                                                     -7-
 1   political-question doctrine and on the ground that the Republic lacked standing to seek relief.

 2   Defendants moved to dismiss pursuant to Rule 12(b)(6) for, inter alia, failure to state a claim on which

 3   relief can be granted, arguing that RICO does not apply to a conspiracy involving primarily foreign

 4   actors and foreign acts, that the FCPA does not provide a private right of action, that the Republic was

 5   in pari delicto with defendants, and that the Complaint failed to allege proximate causation. The

 6   district court granted the Rule 12(b)(6) motions on those grounds; it also ruled that the Republic's

 7   remaining claims arose under state law rather than federal law, and it declined to exercise

 8   supplemental jurisdiction over them.

 9                  On appeal, the Republic challenges these rulings. As to the in pari delicto ruling, the

10   Republic contends principally that that doctrine was inapplicable on the ground that the conduct of

11   Hussein and Iraq's ministries is not attributable to the Republic because that conduct was adverse to

12   the interests of Iraq and its citizens. For the reasons that follow, we conclude that (1) the RICO claims

13   were properly dismissed on the basis of in pari delicto; (2) the Republic does not have a right of action

14   under the FCPA; and (3) the common-law claims arose under state law, and the district court properly

15   declined to exercise supplemental jurisdiction over them. We affirm the judgment on these bases and

16   need not address the Republic's challenges to the district court's other rulings.



17                                            I. BACKGROUND



18                  The principal legal premise of the Republic's Amended Complaint is that the "Hussein

19   Regime," defined as "Saddam Hussein and his representatives" (Amended Complaint ¶ 2), although

20   it "was in de facto control of the nation, . . . was not a de jure or legitimate government" (id. ¶ 220).


                                                       -8-
 1   The factual allegations of the Amended Complaint, together with public documents that were before

 2   the district court, may be summarized, as relevant to this appeal, as follows.



 3   A. Saddam Hussein's Regime in Iraq

 4                  Saddam Hussein, the former president of The Republic of Iraq, rose to power in 1979

 5   in a military coup and remained in power for more than two decades. Hussein consolidated his

 6   authority over Iraq by harshly and "systematically remov[ing] all opposition" and "install[ing]

 7   officials under his direct control in all areas of the government." (Amended Complaint ¶¶ 217-218.)

 8   The Hussein Regime further suppressed opposition by means of, inter alia, imprisonment and

 9   execution of dissidents, and use of chemical weapons and force against civilian opponents, causing

10   birth defects and many thousands of deaths.

11                  In 1980, Hussein caused the Iraqi army to invade Iran, staring an eight-year war in

12   which Iraq used chemical weapons against Iranian troops and ballistic missiles against Iranian cities.

13   On August 2, 1990, Iraq invaded Kuwait, beginning a seven-month occupation during which Iraq

14   killed and committed numerous abuses against Kuwaiti civilians. Ultimately, after his regime was

15   deposed in 2003, Hussein was convicted in an Iraqi court for crimes against humanity, having been

16   found responsible for the systematic and widespread attack on civilian inhabitants of an Iraqi town,

17   and was executed by Iraqi authorities.

18                  In the meantime, the international community's reaction to Iraq's invasion of Kuwait

19   was swift and censorious. The United Nations Security Council ("Security Council"), on the day of

20   the invasion, "[c]ondemn[ed] the Iraqi invasion of Kuwait," "[d]emand[ed] that Iraq withdraw

21   immediately and unconditionally all its forces to the positions in which they were located on 1 August


                                                     -9-
 1   1990," and "[c]all[ed] upon Iraq and Kuwait to begin immediately intensive negotiations for the

 2   resolution of their differences." S.C. Res. 660, ¶¶ 1-3, U.N. Doc. S/RES/660 (Aug. 2, 1990)

 3   ("Resolution 660") (italics in original). On August 3, 1990, the President of the United States--which

 4   had established diplomatic relations with the Hussein-led government of Iraq in 1984, see U.S.

 5   Department of State, Office of the Historian, A Guide to the United States' History of Recognition,

 6   Diplomatic,      and    Consular     Relations,     by    Country,     since    1776:       Iraq,   at

 7   http://history.state.gov/countries/iraq (last visited September 16, 2014); 1984 PUBLIC PAPERS OF

 8   THE PRESIDENTS OF THE UNITED STATES: RONALD REAGAN 1834 (1987)--issued an

 9   Executive Order finding that "the policies and actions of the Government of Iraq constitute an unusual

10   and extraordinary threat to the national security and foreign policy of the United States" and

11   "declar[ing] a national emergency to deal with that threat" (Amended Complaint ¶ 248 (internal

12   quotation marks omitted)). On August 6, 1990, Iraq not having complied with the Resolution 660

13   demands, the Security Council adopted a resolution to impose on Iraq economic sanctions of

14   "unparalleled" "scope and intensity" (Amended Complaint ¶ 293 (internal quotation marks omitted)),

15   calling on all States to embargo trade and financial transactions with Iraq. See S.C. Res. 661, ¶¶ 3-5,

16   U.N. Doc. S/RES/661 (Aug. 6, 1990) ("Resolution 661").               The United States government

17   implemented these sanctions, and soon thereafter designated Iraq as a state sponsor of terrorism.

18                  In February 1991, an international military coalition repelled Iraqi forces from Kuwait.

19   After United Nations fact-finding missions to Iraq in March 1991 found immense suffering in the

20   Iraqi population, the Security Council adopted a resolution that, while continuing most of the

21   sanctions imposed by Resolution 661, would have allowed the export of foodstuffs to Iraq if Iraq

22   agreed to certain conditions. See S.C. Res. 687, ¶ 20, U.N. Doc. S/RES/687 (Apr. 3, 1991). Two


                                                      -10-
 1   other Security Council resolutions in 1991 would have allowed the Hussein Regime to sell Iraqi oil

 2   in return for food and medicine. The Hussein Regime, however, was unwilling to participate in such

 3   humanitarian transactions on the conditions required by the United Nations; instead, it used the

 4   suffering of the Iraqi people as a negotiating tool in pressing for an end to the economic sanctions.

 5   For years, the Iraqi people continued to suffer and starve.



6    B. The Oil-for-Food Programme

7                   The impasse ended in 1996, when the Hussein Regime agreed, in a Memorandum of

8    Understanding ("MOU"), to participate in a new United Nations plan, the Oil-for-Food Programme.

 9   See S.C. Res. 986, U.N. Doc. S/RES/986 (Apr. 14, 1995). Iraq was to be allowed to sell its petroleum

10   and petroleum products (collectively "oil") to foreign purchasers and to use the proceeds of those sales

11   to purchase from foreign vendors food and other humanitarian goods to benefit Iraq's civilian

12   population. From the perspective of the United Nations, the Programme was intended "as a means

13   for reconciling strong sanctions against a corrupt Iraqi regime with [the] need[ to get] supplies of food

14   and medicines to an innocent and vulnerable population." (Amended Complaint ¶ 296 (internal

15   quotation marks omitted).)

16                  The Programme, overseen by a United Nations international committee called the

17   "661 Committee"--named in reference to Resolution 661--was designed to prevent Iraqi leaders from

18   using proceeds of oil sales for political and personal ends. The Programme's features included

19   requirements for U.N. approval of every contract for Iraq's sale of oil and every contract for Iraq's

20   purchase of goods, and for the establishment of an "Escrow Account," at a bank selected by the

21   United Nations, through which all payments to and by Iraq would be made.


                                                       -11-
 1                    Each purchaser of Iraqi oil was required to make full disclosure of the terms of the

 2   contract; every contract incorporated U.N. regulations. The price to be paid, known as the "Official

 3   Selling Price" or "OSP," was set monthly by the United Nations in an attempt to reflect fair market

 4   value. The contract price was supposed to represent the entire purchase price for the oil. The oil

 5   purchases were guaranteed by letters of credit in favor of the Escrow Account, into which all moneys

 6   would be paid.

 7                    The Programme permitted Iraq to use Escrow Account funds to purchase "medicine,

 8   health supplies, foodstuffs and materials and supplies for essential civilian needs," to be distributed

 9   equitably to "the Iraqi population throughout the country." (Amended Complaint ¶ 280 (internal

10   quotation marks omitted); see id. ¶ 328.) Iraqi government ministries and state-owned enterprises

11   negotiated contracts for the purchase of these goods. The 661 Committee or its delegatee reviewed

12   each contract to see that it was in accordance with "normal commercial practice," acceptable "price

13   and value," and United Nations policies. (Id. ¶¶ 328, 335 (internal quotation marks omitted).) After

14   each contract was approved, the United Nations authorized the execution of a letter of credit against

15   the Escrow Account, from which payment would be made to the vendor upon delivery of the goods

16   in Iraq.

17                    During the Programme's seven years, $64.2 billion was deposited into the Escrow

18   Account from the sale of Iraqi oil. Approximately $37 billion was spent to purchase humanitarian

19   goods, and another $18 billion was disbursed to satisfy Kuwaiti claims against the Iraqi government.

20   (See id. ¶ 306.) Following the downfall of the Hussein Regime, the remaining balance in the Escrow

21   Account was transferred to an account owned by the Republic.




                                                      -12-
 1   C. Subversion of the Programme

 2                   Notwithstanding United Nations goals for and oversight of the Programme, the Hussein

 3   Regime, which was concerned with maintaining its power, found ways to turn the Programme to its

 4   own advantage and to undermine the economic sanctions. The fact that the Programme permitted the

 5   Iraqi government to choose with whom it dealt allowed the Hussein Regime to make covert side

 6   arrangements both with foreign buyers of oil and with sellers of humanitarian goods and to divert

 7   money intended for the welfare of the Iraqi people.

 8                   First, the Hussein Regime "curr[ied] political favor" and rewarded political allies

 9   abroad by selling them oil at prices below fair market value. (Amended Complaint ¶¶ 355-361.) It

10   accomplished this, in part, by having allies provide a U.N. committee with "false market data" and

11   "lobb[y]" that committee to set an OSP that was artificially low. (Id. ¶¶ 384-385.) Such low prices

12   allowed purchasers to assign their interests (which was impermissible without U.N. approval) or to

13   resell at a profit, with no risk or effort.

14                   Thereafter, Iraq began requiring that anyone who wanted to purchase oil under the

15   Programme pay "surcharges"--"illicit" side payments added to the per-barrel price of the oil sold. (Id.

16   ¶ 363; see, e.g., id. ¶¶ 395, 423, 440, 468, 512.) In addition, the Hussein Regime began imposing new

17   surcharges characterized as "port fees," demanding those payments before permitting cargo ships to

18   load oil at Iraqi ports. (Id. ¶ 365 (internal quotation marks omitted).) The purchasers of Iraq's oil paid

19   the surcharges through "bank accounts owned or controlled by the Hussein Regime" in foreign

20   countries. (Id. ¶ 363; see, e.g., id. ¶¶ 426, 473, 512.) The approved contract prices for the oil were

21   sufficiently below the market price to allow these kickbacks to be paid and still allow the purchasers

22   to resell the oil and enjoy "excessive profits." (Id. ¶ 384.) Thus, instead of negotiating contracts for


                                                       -13-
 1   the sale of oil at market value, all of the proceeds of which would have gone, via the Escrow Account,

 2   toward the purchase of humanitarian goods, the Hussein Regime diverted a portion of that market

 3   value into the Regime's coffers.

 4                  The Complaint alleged that the underpricing of oil ended in 2002 after the United

 5   Nations became fully aware of it and instituted "retroactive oil pricing to ensure oil was purchased

 6   at market rates." (Amended Complaint ¶ 378; see id. ¶ 1108.) Before that change, the surcharges that

 7   would have been part of a market-value purchase price, but were paid to the Hussein Regime instead

 8   of to the Escrow Account, totaled approximately $228.8 million. (See id. ¶ 1101.) In all, the

 9   underpricing, which ranged from $1 to $4 per barrel, resulted in losses to the Escrow Account of at

10   least $1.8 billion. (See id. ¶¶ 1103-1104.)

11                  The Hussein Regime found even more lucrative ways to profit from the purchasing side

12   of the Programme. First, the Hussein Regime required all of Iraq's ministries to fabricate "non-

13   negotiable 'transportation fees' on goods requiring inland delivery." (Id. ¶ 527.) Although the vendors

14   included charges for such transportation in their contract prices, and they received payments for those

15   charges from the Escrow Account, no legitimate transportation services were provided, and the fees

16   thus included were kicked back to the Hussein Regime (see id. ¶¶ 530-535).

17                  Thereafter, the Hussein Regime added so-called "after-sales-service-fee[s]" on all

18   purchase contracts under the Programme. (Id. ¶ 558 (internal quotation marks omitted).) These fees,

19   which were also included in the contract prices, were "mandatory kickback[s]" (id. ¶ 566 (internal

20   quotation marks omitted)) to the Hussein Regime, and ranged from 2 to 30 percent of the purchase

21   price of the goods (see id. ¶¶ 561, 563).




                                                      -14-
 1                   Both sets of fees violated the terms of the Programme, which permitted the payment

2    only of legitimate service fees for "services . . . ancillary to the supply of material goods" (id. ¶ 572

3    (internal quotation marks omitted)). The suppliers of humanitarian goods paid the kickbacks to the

4    Hussein Regime "in one of three ways: cash, transfers to Regime-controlled accounts, or payments

5    to front companies controlled by individuals or companies loyal to the Hussein Regime." (Id. ¶ 565;

6    see, e.g., id. ¶ 536 (cash); id. ¶¶ 599, 859 (foreign bank accounts); id. ¶¶ 530, 536 (front companies).)

 7   The sham transportation and after-sales-service fees totaled some $1.55 billion. (See id. ¶¶ 555, 620,

 8   1111.)

 9                   In addition to paying sham fees using escrowed funds, the vendors profited by pricing

10   their goods above fair market value, as well as by delivering substandard goods. (See Amended

11   Complaint ¶¶ 640-655.) The Complaint estimated that the cost to the Escrow Account of the delivery

12   of substandard and overpriced goods was at least $7 billion. (See id. ¶¶ 655, 1112.)



13   D. The Claims Against Defendants

14                   On the basis of these events, the Amended Complaint asserted claims against three

15   groups of defendants. Five defendants are characterized as "Oil Purchasing Defendants." They

16   include defendants David B. Chalmers, Jr., and Oscar S. Wyatt, Jr., who had personal ties to the

17   Hussein Regime and who have pleaded guilty to conspiracy offenses related to Programme corruption.

18   (See Amended Complaint ¶¶ 397-407, 478-492.) The other three Oil Purchasing Defendants are

19   energy firms, one of which was affiliated with Wyatt. These firms purchased Iraqi oil through the

20   Programme, either directly or indirectly, and paid surcharges, either directly or indirectly, to the Iraqi

21   government. (See id. ¶¶ 421-475.) Two of these firms entered into non-prosecution agreements with


                                                       -15-
 1   the Department of Justice, and the third pleaded guilty in state court to grand larceny, in relation to

 2   their roles in the Programme corruption. (See id. ¶¶ 424, 442, 462-464.)

 3                  Six other defendants, BNP Paribas USA and five affiliates (collectively "BNP"), are

 4   banking entities. BNP was the bank at which the United Nations established the Escrow Account

 5   through which the Oil Purchasing Defendants paid for Iraqi oil and through which Iraq paid for the

 6   humanitarian goods it purchased. The Escrow Account was located at BNP Paribas USA in New

 7   York City. (See Amended Complaint ¶¶ 286, 975, 978.) Under the terms of its agreement with the

 8   United Nations and a United States government license to deal in Iraqi funds, BNP was obligated to

 9   conform its conduct to the Programme's rules. Notwithstanding this obligation, BNP, which issued

10   letters of credit for a majority of the oil purchases under the Programme, contravened Programme

11   regulations and its agreement with the United Nations by, inter alia, "cooperati[ng] with the Oil

12   Purchasing Defendants to hide material information from the UN" including its knowledge that "oil

13   purchasers were paying a substantial premium over the OSP" and that some oil purchasers "were

14   financing the purchase of oil . . . by others" (id. ¶¶ 1022-1024); "ma[king] payments of Escrow funds

15   without proper authorization from the United Nations" (id. ¶ 1038); and being "involved in the

16   transfer of approximately $10 million in illicit surcharges paid to the Hussein Regime" (id. ¶ 1050).

17                  All of the remaining defendants discussed in the Complaint are characterized as

18   "Vendor Defendants." Their businesses involved the sale of foodstuffs, pharmaceuticals, medical and

19   agricultural supplies, industrial machinery, and vehicles; all of these defendants are alleged to have

20   participated in the scheme to overcharge for their products and to pay part of the overage back to the

21   Hussein Regime. (See Amended Complaint ¶¶ 800-974.) Several of the Vendor Defendants have

22   admitted--in deferred prosecution agreements, plea agreements, or other public admissions--that they

23   secretly paid illegal kickbacks on Programme contracts. (See id. ¶¶ 662-799.)

                                                      -16-
 1                  The Complaint principally asserted claims against all defendants under RICO. It

 2   alleged that the Oil-for-Food Programme was a RICO enterprise, either in itself or as associated in

 3   fact with, inter alia, defendants and the 661 Committee; the Complaint alleged that defendants

 4   conducted or participated in the conduct of the enterprise through a pattern of racketeering activity

 5   involving, inter alia, mail and wire fraud, money laundering, and bribery, in violation of 18 U.S.C.

 6   § 1962(c), and conspired to do so in violation of id. § 1962(d). The Complaint also alleged that, by

 7   paying kickbacks to the Hussein Regime, the Vendor and Oil Purchasing Defendants violated the

 8   Foreign Corrupt Practices Act, 15 U.S.C. §§ 78dd-1 et seq.

 9                  The Complaint asserted, inter alia, common-law claims against BNP for breach of its

10   fiduciary duty to Iraq; claims against two of the Oil Purchasing Defendants for inducing BNP to

11   breach that fiduciary duty; claims against all defendants for fraud and conspiracy to commit fraud in

12   dealing with the United Nations in connection with the Programme, for breach of their contractual

13   commitments to the United Nations, and for unjust enrichment resulting from the excessive profits

14   made as a result of their illegal kickbacks to the Hussein Regime; and claims against all defendants

15   for inducing the Hussein Regime to breach its fiduciary duties to the Iraqi people.



16   E. The District Court Decision

17                  Defendants moved to dismiss the Amended Complaint pursuant to Rule 12(b)(1) on

18   a variety of jurisdictional grounds, and pursuant to Rule 12(b)(6) for failure to state a claim for a

19   variety of reasons. In a thorough opinion reported at 920 F.Supp.2d 517, the district court rejected

20   defendants' jurisdictional arguments; but it granted defendants' motions to dismiss the Republic's

21   RICO claims on the alternative grounds of (1) lack of extraterritorial applicability of RICO, (2) the

22   defense of in pari delicto, and (3) the Amended Complaint's failure to allege that defendants'

                                                     -17-
 1   racketeering activity was the proximate cause of the Republic's injuries. See id. at 542-50. The court

 2   also agreed with defendants that "the FCPA offers no private right of action." Id. at 551. And,

 3   concluding that the Republic's common-law claims arose under state rather than federal law, the court

 4   declined to exercise supplemental jurisdiction as to those claims. See id.

 5                  In addressing the in pari delicto defense, the district court stated in part as follows:

 6                          Iraq has attempted to fit this wrongdoing into the mold of a civil action.
 7                  At its heart, Iraq says, its case amounts to a principal seeking to recover for the
 8                  harms caused to it by a wayward agent--Saddam Hussein--and his co-
 9                  conspirators the defendants in this action. . . .

10                          Defendants have now moved to dismiss Iraq's First Amended
11                  Complaint ("Complaint") on a variety of theories, almost all of which touch on
12                  the relationship of Iraq to the wrongs for which it seeks relief. The parties
13                  agree that the injustices alleged were instigated and directed by Hussein and
14                  his Regime. But the parties dispute whether the Republic of Iraq must bear
15                  responsibility for the acts of the Hussein Regime and, if so, what that
16                  responsibility means for this action.

17                          The Court concludes that the Complaint alleges conduct by the Hussein
18                  Regime that, as a matter of law, is attributable to plaintiff itself, the Republic
19                  of Iraq. The alleged misconduct has a governmental character. Therefore, the
20                  conduct comes within the default rule that a regime's governmental conduct
21                  redounds to the sovereign. The Court rejects Iraq's view that it may sidestep
22                  responsibility because the conduct was illegal or the actors held power
23                  illegitimately. Sovereigns . . . cannot escape the consequences of their
24                  representatives' governmental misconduct. Questions of attribution are distinct
25                  from questions of lawfulness or legitimacy.

26                         The legal relationship between Iraq and Hussein frames the case . . . .
27                  Having engineered the wrongdoing alleged in the Complaint, and having
28                  alleged that the wrongdoing directly harmed the Programme, Iraq cannot
29                  recover from that wrongdoing.

30   920 F.Supp.2d at 524 (emphases added).

31                  The district court noted that "the U.S. Government treated the Hussein Regime as the

32   effective government during the relevant time period," that "[t]he United Nations also treated the

33   Hussein Regime as the effective Iraqi government," and that plaintiff's counsel during oral argument

                                                       -18-
 1   stated, inter alia, "'We agree his regime was the president of Iraq, the government of Iraq, the agent

 2   of Iraq.'" Id. at 535.

 3                           The legal relationship between the sovereign Republic of Iraq, the
 4                   Hussein Regime, and the Iraqi people frames this litigation. That relationship
 5                   rests on time-tested principles:

 6                    #       The change in governments--from the Hussein Regime; to the
 7                            Coalition Provisional Authority that governed subsequent to the fall of
 8                            Saddam Hussein; to the contemporary Republic--did not create an
 9                            entirely new state. Rather, those changes altered the leadership and
10                            government of a continuously existing state. Therefore, the Republic
11                            of Iraq is the same sovereign entity as the one controlled by the
12                            Hussein Regime. . . .

13                    #       [T]he rights of a sovereign state are vested in the state rather than in
14                            any particular government which may purport to represent it. . . . That
15                            is, Hussein, the Hussein Regime, and the Republic of Iraq are not one
16                            and the same; they are different governments over time that represent
17                            the same sovereign state. . . .

18                    #       Notwithstanding the distinction between a state and its government, a
19                            government may bind the sovereign it represents. . . .

20   920 F.Supp.2d at 535-36 (internal quotation marks omitted). Based on these principles, the court

21   concluded that "as a matter of law, the Republic of Iraq bears responsibility in this action for the

22   Hussein Regime's corruption of the Programme." Id. at 536.

23                           Because sovereigns operate through their governments, both domestic
24                   and international law ordinarily impute to a sovereign the acts of its
25                   government. For example, governments set policy, hold property, and conduct
26                   foreign affairs. The consequences of these governmental acts trace back to the
27                   sovereign. . . . So do wrongful acts by those governments. "A state is
28                   responsible for any violation of its obligations under international law resulting
29                   from action or inaction by [ ] the government of the state. . . ." Restatement
30                   (Third) of Foreign Relations Law of the United States § 207 (1987) . . . .

31                          Moreover, the consequences of one government's acts may redound to
32                   the sovereign even after that government has been replaced.

33   920 F.Supp.2d at 536. While noting that "it is possible for the persons who comprise the government


                                                       -19-
1    to act without acting as the government," id. at 537, the court recognized that "a sovereign may be

2    held to account for the governmental conduct of the persons serving as its government." Id. (emphasis

3    in original). The court concluded that the "the Hussein Regime's Programme misconduct" alleged in

 4   the Amended Complaint was governmental. Id. at 538.

 5                          The Complaint alleges conduct by the Hussein Regime done under the
 6                  color of its authority as the government of Iraq. Therefore, the Programme
 7                  conduct of the Hussein Regime should be attributed to Iraq for the purposes
 8                  of this action.

 9                         First, the Complaint alleges that the Hussein Regime's "main goal" was
10                  to "undermine UN sanctions and the U.S. law prohibiting transactions with
11                  State Sponsors of Terrorism." (Compl. ¶ 7.) Hussein declared the Iraq
12                  Sanctions Program to be a form of "economic occupation" implemented by the
13                  "enemy." (Id. ¶ 302.) Thus, the alleged misconduct represents choices made
14                  by the Regime in the conduct of its foreign affairs. . . .

15                           Second, the Complaint alleges that the Hussein Regime implemented
16                  its scheme by using its powers to engage with the UN. The Hussein Regime
17                  made the corruption possible, not just because it was in a position to corrupt
18                  the Programme, but because it agreed to the creation of the Programme in the
19                  first place: it did so in its capacity as the Government of Iraq. (See MOU § 10
20                  (signature of Abdul Amir Al-Anbari "for Government of Iraq").) Additionally,
21                  the Complaint alleges that the Hussein Regime (and defendants) effectuated
22                  their scheme by submitting false contracts to the UN. The Hussein Regime
23                  could negotiate those contracts only by virtue of its status as the effective
24                  government of Iraq. Thus, the Regime engaged in international transactions
25                  of an official character.

26                         Third, the Complaint alleges that the Hussein Regime acted through
27                  government offices and officers to pursue its goal of frustrating the Iraq
28                  Sanctions Program:

29                   #     Hussein ordered government agencies to effectuate the scheme. "[O]n
30                         October 25, 2000, all Iraqi ministries were informed that Saddam
31                         Hussein had ordered the imposition of kickbacks of at least 10% in
32                         order to subvert the policies of the UN and the United States
33                         government." (Compl. ¶ 302.)

34                   #     Government agencies negotiated the transactions. "The Iraqi State Oil
35                         Marketing Organization (SOMO) was the legal entity that entered into
36                         the contracts with companies purchasing oil under the Programme."

                                                     -20-
 1                          (Id. ¶ 323.) On the goods side of the Programme, "a company wishing
 2                          to sell humanitarian goods under the Programme contracted with the
 3                          appropriate Iraqi Ministry or State-Owned Enterprise. . . ." (Id. ¶ 329.)

 4                    #     Government agents and agencies received the illicit funds. The
 5                          Hussein Regime collected surcharges in accounts held "under the
 6                          names of two SOMO employees" and then transferred the funds to
 7                          "accounts of the Central Bank of Iraq." (Id. ¶¶ 473-74.) [The
 8                          Complaint] alleges that the Iraqi vice president directed that the after-
 9                          sales-service fee revenue "be transferred to general treasury." (Id.
10                          ¶ 568.) It also alleges that various governmental units or government-
11                          owned businesses collected fees and bribes. (E.g., id. ¶ 546 (Iraqi
12                          Ministry of Transportation); ¶ 550 (payments "going back to the Iraq
13                          Government"); ¶ 565 ("payments were transferred to Iraq in cash").)

14                  In sum, Iraq alleges that its injuries resulted from the Hussein Regime's
15                  prosecution of its foreign affairs policy. The Complaint alleges a public goal,
16                  undertaken with public resources, pursued for political purposes, and using
17                  means available only to state actors. These features lead the Court to conclude
18                  the Hussein Regime acted under the color of its authority as the government
19                  of Iraq for the purposes of this motion.

20   920 F.Supp.2d at 538-39.

21                  The district court concluded that "the Complaint alleges that the Hussein Regime

22   conceived and orchestrated the wrongful conduct with defendants' assistance and thus it cannot

23   proceed due to the defense of in pari delicto." Id. at 550.



24                                             II. DISCUSSION



25                  On appeal, the Republic challenges most of the district court's unfavorable rulings.

26   With respect to the dismissal of its RICO claims on the basis of in pari delicto, the Republic contends

27   principally that that doctrine was inapplicable, arguing that the conduct of the Hussein Regime is not

28   attributable to the Republic because that conduct was adverse to the interests of Iraq and its citizens.

29   The Republic also argues that the question of comparative fault is a fact question that could not

                                                      -21-
 1   properly be resolved on a Rule 12(b)(6) motion; alternatively, it argues that the district court should

 2   have allowed it to amend its Amended Complaint. The Republic challenges the dismissal of its claims

 3   under the Foreign Corrupt Practices Act, arguing that the "line of authority" relied on by the district

 4   court for the proposition that the FCPA does not provide an implied private right of action "is in error"

 5   (Republic brief on appeal at 56) and that the legislative history demonstrates that Congress intended

 6   that such an implied right of action be recognized by the courts. The Republic also contends that,

 7   given the interest of the United States in speaking with a single voice on matters affecting foreign

 8   relations, the district court erred in ruling that the Republic's nonstatutory claims arose under state law

 9   rather than federal common law.

10                   Defendants, in addition to endorsing the district court's Rule 12(b)(6) rulings, renew

11   their challenge to the Republic's standing under Article III of the Constitution to recover for injuries

12   to the Republic's proprietary interests, arguing that "Iraq itself instigated the alleged wrongs and

13   received the illicit payments" (Defendants' brief on appeal at 31). We reject this standing argument

14   for substantially the reasons stated by the district court, see 920 F.Supp.2d at 531-32.

15                   With respect to the RICO claims, we affirm the district court's dismissal on the basis

16   of the in pari delicto doctrine, and we thus need not address the Republic's challenges to the other

17   grounds on which the district court dismissed those claims. This dismissal was properly based on the

18   Republic's pleading, and we see no abuse of discretion in the district court's denial of leave to amend

19   the Amended Complaint. We also reject the Republic's challenges to the dismissal of its FCPA claims

20   and its nonstatutory claims.



21   A. The RICO Claims

22                   The doctrine of in pari delicto, a term meaning "of equal fault," reflects the principle

23   that a plaintiff who has participated in wrongdoing equally with another person may not recover from

                                                        -22-
 1   that other person damages resulting from the wrongdoing. The principal contexts in which the

 2   Supreme Court has discussed the applicability of in pari delicto to a cause of action created by federal

 3   statutes are the antitrust laws, see Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134

 4   (1968) ("Perma Life"), overruled on other grounds by Copperweld Corp. v. Independence Tube Corp.,

 5   467 U.S. 752 (1984), and the securities laws, see Bateman Eichler, Hill Richards, Inc. v. Berner, 472

 6   U.S. 299 (1985) ("Bateman Eichler"); Pinter v. Dahl, 486 U.S. 622 (1988) ("Pinter").

 7                   In Perma Life, the Supreme Court reversed lower-court rulings that had upheld an in

 8   pari delicto defense asserted by a franchisor, Midas Muffler ("Midas"), against franchisees who

 9   alleged that their franchise agreements violated the antitrust laws. While stating that "the doctrine of

10   in pari delicto, with its complex scope, contents, and effects, is not to be recognized as a defense to

11   an antitrust action," 392 U.S. at 140, the Court noted that even a narrower defense of shared fault

12   would have been inapplicable in the case before it because the record showed that "the illegal scheme

13   was thrust upon the[ franchisees] by Midas," id. at 141. Five Justices, however, opined that a defense

14   to an antitrust claim should be recognized if the plaintiff really bore at least substantially equal

15   responsibility for the violation. See id. at 146 (White, J., concurring); id. at 147 (Fortas, J., concurring

16   in result); id. at 149 (Marshall, J., concurring in result); id. at 156 (Harlan, J., joined by Stewart, J.,

17   concurring in relevant part and dissenting in part).

18                   In Bateman Eichler, the Supreme Court described Perma Life in part as follows:

19                   In reversing . . . , the opinion for this Court emphasized that there was no
20                   indication that Congress had intended to incorporate the defense into the
21                   antitrust laws, which "are best served by insuring that the private action will
22                   be an ever-present threat to deter anyone contemplating [illegal] business
23                   behavior." [392 U.S.] at 139. Accordingly, the opinion concluded that "the
24                   doctrine of in pari delicto, with its complex scope, contents, and effects, is not
25                   to be recognized as a defense to an antitrust action." Id., at 140. The opinion
26                   reserved the question whether a plaintiff who engaged in "truly complete
27                   involvement and participation in a monopolistic scheme"--one who
28                   "aggressively support[ed] and further[ed] the monopolistic scheme as a
29                   necessary part and parcel of it"--could be barred from pursuing a damages

                                                        -23-
 1                  action, finding that the muffler dealers had relatively little bargaining power
 2                  and that they had been coerced by the franchisor into agreeing to many of the
 3                  contract's provisions. Ibid.

 4                           In separate opinions, five Justices agreed that the concept of "equal
 5                  fault" should be narrowly defined in litigation arising under federal regulatory
 6                  statutes. "[B]ecause of the strong public interest in eliminating restraints on
 7                  competition, . . . many of the refinements of moral worth demanded of
 8                  plaintiffs by . . . many of the variations of in pari delicto should not be
 9                  applicable in the antitrust field." Id., at 151 (MARSHALL, J., concurring in
10                  result). The five Justices concluded, however, that where a plaintiff truly bore
11                  at least substantially equal responsibility for the violation, a defense based on
12                  such fault--whether or not denominated in pari delicto--should be recognized
13                  in antitrust litigation.

14   Bateman Eichler, 472 U.S. at 308-09 (footnote omitted) (emphases added).

15                  The Bateman Eichler Court concluded that "the views expressed in Perma Life apply

16   with full force to implied causes of action under the federal securities laws." 472 U.S. at 310; see also

17   Pinter, 486 U.S. at 635 (same with respect to express causes of action). The Bateman Eichler Court

18   distilled a two-pronged standard incorporating both consideration of the plaintiff's relative degree of

19   fault and concern for minimizing the frustration of law-enforcement goals. Thus, it stated that "a

20   private action for damages" under the securities laws

21                  may be barred on the grounds of the plaintiff's own culpability only where (1)
22                  as a direct result of his own actions, the plaintiff bears at least substantially
23                  equal responsibility for the violations he seeks to redress, and (2) preclusion
24                  of suit would not significantly interfere with the effective enforcement of the
25                  securities laws and protection of the investing public.

26   472 U.S. at 310-11. As the Court noted in Pinter, "[t]he first prong of this test captures the essential

27   elements of the in pari delicto doctrine," 486 U.S. at 633. Not only must the plaintiff "be an active,

28   voluntary participant in the unlawful activity that is the subject of the suit," but it is necessary that

29   "the degrees of fault [be] essentially indistinguishable or the plaintiff's responsibility [be] clearly

30   greater." Id. at 636. "The second prong . . . embodies the doctrine's traditional requirement that



                                                       -24-
 1   public policy implications be carefully considered before the defense is allowed," thus "ensur[ing] that

 2   . . . judge-made law does not undermine . . . congressional policy." Id. at 633.

 3                  Applying its two-part test in the context of claims for violations of federal securities

 4   laws, the Supreme Court in Bateman Eichler affirmed the rejection of an in pari delicto defense

 5   against plaintiff investors who claimed that a broker-dealer gave them false and misleading

 6   information that was represented to be accurate inside information. It concluded that an investor who

 7   engaged in trading on the basis of an insider tip is not necessarily as blameworthy as a corporate

 8   insider or broker-dealer who discloses the information for personal gain. See 472 U.S. at 312-14. In

 9   Pinter, considering claims between sellers of unregistered securities, the Court remanded for a

10   determination of relative fault. See 486 U.S. at 639-41. Comparison of the parties' degree of fault,

11   and thus the applicability of the first prong of the Bateman Eichler test, will often depend on findings

12   of fact as to the circumstances plaintiff's involvement. See, e.g., id.; Gatt Communications, Inc. v.

13   PMC Associates, L.L.C., 711 F.3d 68, 80-81 (2d Cir. 2013) (noting that "several of our sister circuits

14   [that] have recognized an in pari delicto defense in civil antitrust litigation . . . have generally done

15   so on appeal from summary judgment or after trial, when the extent and circumstances of the culpable

16   plaintiff's involvement have been factually developed, and the possibility that the plaintiff's behavior

17   was motivated by economic duress--a factor that could relieve the plaintiff of an in pari delicto bar--

18   has been examined"). But a court may "appl[y] the in pari delicto doctrine at the pleadings stage . . . .

19   where . . . the outcome is plain on the face of the pleadings." In re Bernard L. Madoff Investment

20   Securities LLC., 721 F.3d 54, 65 (2d Cir. 2013), cert. denied, 134 S. Ct. 2895 (2014).

21                  Neither the Supreme Court nor this Court has decided whether in pari delicto is a valid

22   defense to a civil RICO claim. The courts of appeals that have reached this question have concluded

23   that it is. See Official Committee of Unsecured Creditors of PSA, Inc. v. Edwards, 437 F.3d 1145,


                                                       -25-
 1   1152-56 (11th Cir.) ("Edwards"), cert. denied, 549 U.S. 811 (2006); Rogers v. McDorman, 521 F.3d

 2   381, 387-91 (5th Cir. 2008).

 3                   RICO itself, while expressly authorizing a person injured in its business or property

 4   to bring a civil action for treble damages, see 18 U.S.C. § 1964(c), is silent as to the availability of

 5   any common-law defense. Such silence does not necessarily mean that such defenses are unavailable,

 6   however, because "Congress is understood to legislate against a background of common-law

 7   adjudicatory principles." Astoria Federal Savings & Loan Ass'n v. Solimino, 501 U.S. 104, 108

 8   (1991). "Thus, where a common-law principle is well established, . . . the courts may take it as given

 9   that Congress has legislated with an expectation that the principle will apply except when a statutory

10   purpose to the contrary is evident." Id. (internal quotation marks omitted).

11                   The in pari delicto principle is well established. The Bateman Eichler Court traced the

12   "classic formulation" of the doctrine back to the eighteenth century. 472 U.S. at 306-07 & n.12; see,

13   e.g., Nisselson v. Lernout, 469 F.3d 143, 151 (1st Cir. 2006) (in pari delicto "has long been woven

14   into the fabric of federal law"), cert. denied, 550 U.S. 918 (2007). The Pinter Court noted that the in

15   pari delicto defense "traditionally has been applied in any action based on conduct that transgresses

16   statutory prohibitions," 486 U.S. at 634 (internal quotation marks omitted), and stated that it will be

17   "available when Congress expressly provides for private remedies," id. at 635, so long as application

18   of the defense would not frustrate the purpose of the federal statute in question, see id. at 633, 637-38.

19                   Applying the Bateman Eichler test to the Republic's RICO claims in the present action,

20   we have no difficulty concluding that the district court's dismissal on the basis of in pari delicto was

21   correct.




                                                       -26-
 1           1. Prong One: Responsibility

 2                   The very premise of the Republic's Complaint is that the Hussein Regime "designed

 3   and instigated" the corruption of the Oil-for-Food Programme. (Amended Complaint ¶ 4.) The

 4   Complaint is replete with descriptions of demands made on the Oil Purchasing Defendants and the

 5   Vendor Defendants to pay all manner of "mandatory kickback[s]" (id. ¶ 566 (internal quotation marks

 6   omitted)) and illicit surcharges. (See Part I.C. above.) Even a defendant who had close personal ties

 7   to the Hussein Regime was forced against his will to pay illegal kickbacks in order to do business with

 8   Iraq in the Oil-for-Food Programme. (See Amended Complaint ¶¶ 352, 499-503.) Under the Hussein

 9   Regime's policy, "[n]o company [was to] be exempted for any reason." (Id. ¶ 502 (internal quotation

10   marks omitted).) The Complaint portrays BNP as having concealed from the United Nations

11   information about contract irregularities and having facilitated improper payments of escrowed funds,

12   thereby assisting the Hussein Regime to achieve its "corrupt and wrongful intentions" (id. ¶ 980; see,

13   e.g., id. ¶¶ 1022-1024, 1038). Because it is evident from the face of the Complaint that the Hussein

14   Regime was the instigator and dominant force behind the scheme to subvert the Programme, the

15   conclusion is inescapable that the Hussein Regime bears at least substantially equal responsibility for

16   the Programme's corruption.

17                   The Republic attempts to escape the ramifications of this responsibility through an

18   argument that the Regime's wrongdoing should not be attributed to the Republic. That argument is

19   meritless. Our law has long recognized that the legal position of a foreign state survives changes in

20   its government. Thus, a foreign state's proprietary rights, and its causes of action in our courts, persist

21   following a change in its form of government. See The Sapphire, 78 U.S. (11 Wall.) 164, 168 (1871);

22   Lehigh Valley R. Co. v. State of Russia, 21 F.2d 396, 399-401 (2d Cir.), cert. denied, 275 U.S. 571

23   (1927). Similarly, the obligations of a foreign state are unimpaired by a change in that state's


                                                        -27-
 1   government. See Comanche County v. Lewis, 133 U.S. 198, 205 (1890). Because "the rights of a

 2   sovereign state are vested in the state rather than in any particular government which may purport to

 3   represent it," Guaranty Trust Co. v. United States, 304 U.S. 126, 137 (1938) ("Guaranty Trust"), when

 4   a foreign "government changes, the nation remains, with rights and obligations unimpaired," United

 5   States ex rel. Kessler v. Watkins, 163 F.2d 140, 143 (2d Cir.) (internal quotation marks omitted), cert.

 6   denied, 332 U.S. 838 (1947).

 7                   The Republic's own allegations demonstrate that, during the times relevant to the

 8   Complaint, Saddam Hussein's regime constituted the government of Iraq. The Complaint alleged that

 9   Hussein and his political party "controlled Iraq" from the time of a 1979 "military coup" until the

10   regime was "ousted" in 2003. (Amended Complaint ¶¶ 7, 216, 219.) During his years of power,

11   Hussein--whose title was President--"installed officials under his direct control in all areas of the

12   government" (id. ¶ 218), whom he used to control "all Iraqi ministries and agencies" (id. ¶ 562; see

13   id. ¶ 302). As described in the Complaint, these included the ministries of oil (see id. ¶¶ 412, 490,

14   575, 742, 747), transportation (see id. ¶ 527), finance (see id. ¶ 569), and defense (see id. ¶¶ 569, 656).

15   The Hussein Regime also controlled the State Oil Marketing Organization (see, e.g., id. ¶ 323), which

16   was integral to the scheme to corrupt the Programme, and various state-owned enterprises that

17   purchased goods from the Vendor Defendants (see id. ¶ 329). The Hussein Regime acted as the

18   "Government of Iraq" (id. ¶ 490), as the United Nations and the United States acknowledged, and as

19   was universally understood. As the Republic acknowledged before the district court, the Hussein

20   Regime was "the president of Iraq[ and] the government of Iraq." 920 F.Supp.2d at 535 (internal

21   quotation marks omitted).

22                   The Republic insists that although the Hussein Regime "was in de facto control of the

23   nation, it was not a de jure or legitimate government." (Amended Complaint ¶ 220.) It alleged that


                                                        -28-
 1   the Hussein Regime assumed and retained power in contravention of domestic laws, and committed

 2   vile and genocidal acts, thereby making the Regime "[il]legitimate" from domestic and international

 3   perspectives (id. ¶¶ 220, 223). These allegations, however, are irrelevant to the question of whether

 4   the acts of the Hussein Regime were acts of Iraq. A foreign government's actions are attributed to the

 5   state regardless of whether they are "legal under the municipal law of the foreign state," Banco de

 6   Espana v. Federal Reserve Bank of New York, 114 F.2d 438, 443 (2d Cir. 1940); see, e.g., Bernstein

 7   v. Van Heyghen Freres Societe Anonyme, 163 F.2d 246, 248-49 (2d Cir.), cert. denied, 332 U.S. 772

 8   (1947); Westfield v. Federal Republic of Germany, 633 F.3d 409, 418 (6th Cir. 2011), and whether

 9   they "are done by the authority of a de jure or titular, or of a de facto, government," Underhill v.

10   Hernandez, 65 F. 577, 582 (2d Cir. 1895), aff'd, 168 U.S. 250 (1897). Thus, the district court properly

11   ruled that the actions of the Hussein Regime, while it acted as the government of Iraq, are to be

12   attributed to The Republic of Iraq.

13                   Of course, not every action that happens to be taken by officials of a foreign state is

14   properly attributable to that state. For instance, in considering the applicability of the act-of-state

15   doctrine--the affirmative defense that "precludes the courts of this country from inquiring into the

16   validity of the public acts a recognized foreign sovereign power committed within its own territory,"

17   Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 401 (1964) ("Sabbatino")--courts distinguish

18   "between public and private acts of a foreign official," Republic of the Philippines v. Marcos, 806

19   F.2d 344, 359 (2d Cir. 1986) ("Marcos"), cert. denied, 481 U.S. 1048 (1987); see, e.g., Jimenez v.

20   Aristeguieta, 311 F.2d 547, 557-58 (5th Cir. 1962), cert. denied, 373 U.S. 914 (1963).

21                   But this distinction, although useful in determining whether a foreign official's conduct

22   is attributable to his government or sovereign state, is beside the point where the alleged acts are those

23   not of an individual governmental official, but instead acts coordinated pursuant to the policies of an


                                                       -29-
 1   entire government. It is apparent from the Complaint that the Hussein Regime's effort to subvert the

 2   Programme was the policy of the Iraqi government. The Republic alleged that "the fundamental goal

 3   of the Hussein Regime [was] to maintain and extend its power." (Amended Complaint ¶ 299.) "From

 4   the perspective of the Hussein Regime, the main goal of the conspiracy was to undermine UN

 5   sanctions" and thus to obtain foreign currency that would allow the Regime to "remain[] in power."

 6   (Id. ¶ 7; see also id. ¶ 362 (referring to Hussein Regime goal of "generat[ing] . . . illicit income . . . ,

 7   which the Regime could use for non-humanitarian purposes").) As the district court aptly concluded,

 8   "[t]he Complaint allege[d] a public goal, undertaken with public resources, pursued for political

 9   purposes, and using means available only to state actors." 920 F.Supp.2d at 539. We agree, and thus

10   conclude that the actions of the Hussein Regime are attributable to The Republic of Iraq.

11                   We are not persuaded by the Republic's argument that, under general principles of

12   agency law, a government's actions should not be attributed to the state it governs when the

13   government abuses its power to contravene the national interest. As a preliminary matter, we note

14   that the question of whether to attribute the conduct of a foreign government and its officials to their

15   state is a matter of federal law because "all questions relating to an act of state are questions of federal

16   law," Republic of Iraq v. First National City Bank, 353 F.2d 47, 51 (2d Cir. 1965) ("First National"),

17   cert. denied, 382 U.S. 1027 (1966). The parties here, who are in agreement that this issue is a matter

18   of federal law, have not identified material differences between state and federal law, and we are not

19   aware of any.

20                   General principles of agency law, such as those upon which the Republic relies, are

21   relevant to the question of whether the conduct of an official should be attributed to the state he

22   represents. See First Fidelity Bank, N.A. v. Government of Antigua & Barbuda--Permanent Mission,

23   877 F.2d 189, 193 (2d Cir. 1989). However, we are not aware of any cases in which agency principles


                                                        -30-
 1   of attribution were deemed relevant to the relationship between a government and its state. The

 2   Republic relies on the case of The Sapphire, which incidentally used the word "agent" while holding

 3   that a successor government stands in the legal shoes of its predecessor, see 78 U.S. (11 Wall.)

 4   at 168-69. But that case does not stand for the proposition that a government is to be treated as a

 5   separate entity that is an agent of its state. Nor should it be, because a government and the sovereign

 6   state it rules do not have separate legal personalities. See Guaranty Trust, 304 U.S. at 137 ("the rights

 7   of a sovereign state are vested in the state rather than in any particular government which may purport

 8   to represent it").

 9                   Even assuming that Iraq could be regarded as a principal and the Hussein Regime its

10   agent, under the general rule of agency the agent's actions are normally attributed to the principal.

11   To escape application of this general rule, the Republic seeks to invoke what is known as the "'adverse

12   interest' exception," under which "acts of the agent will not be charged to the [principal] if although

13   the agent purportedly acts for the [principal], he is really committing a fraud for his own benefit," In

14   re Bennett Funding Group, Inc., 336 F.3d 94, 100 (2d Cir. 2003) (internal quotation marks omitted).

15   However, "this [is the] most narrow of exceptions," "reserve[d] . . . for those cases--outright theft or

16   looting or embezzlement--where the insider's misconduct benefits only himself or a third party; i.e.,

17   where the fraud is committed against a [principal] rather than on its behalf." Kirschner v. KPMG

18   LLP, 15 N.Y.3d 446, 466-67, 912 N.Y.S.2d 508, 519 (2010) ("Kirschner") (emphasis in original).

19                   "To come within the exception, the agent must have totally abandoned his
20                   principal's interests and be acting entirely for his own or another's purposes.
21                   It cannot be invoked merely because he has a conflict of interest or because he
22                   is not acting primarily for his principal" . . . .

23   Id. at 466, 912 N.Y.S.2d at 519 (quoting Center v. Hampton Affiliates, Inc., 66 N.Y.2d 782, 784-85,

24   497 N.Y.S.2d 898, 900 (1985)) (emphases in Kirschner). "Thus, [s]hould the agent act[ ] both for



                                                       -31-
 1   himself and for the principal, . . . application of the exception would be precluded . . . ." Kirschner,

 2   15 N.Y.3d at 467, 912 N.Y.S.2d at 519 (internal quotation marks omitted). "This rule avoids

 3   ambiguity where there is a benefit to both the [agent] and the [principal] . . . ." Id. at 466, 912

 4   N.Y.S.2d at 519 (internal quotation marks omitted).

 5                  The adverse-interest exception is inapplicable to the Republic in light of the

 6   Complaint's allegations of Hussein Regime conduct that, rather than totally abandoning Iraq's

 7   interests, in part benefited Iraq. The Complaint alleged, for example, that millions of dollars of secret

 8   illegal surcharges were paid "to the Government of Iraq" (Amended Complaint ¶ 483 (internal

 9   quotation marks omitted)) to enable "the Government of Iraq to achieve its objective of collecting the

10   illegal surcharges on oil" (id. ¶ 482 (internal quotation marks omitted)). The Complaint also alleged

11   that the Vice President of the Hussein Regime had ordered that all of the sham after-sales-service

12   fees--which totaled "about $1.02 billion . . . by March 2003" (id. ¶ 620)--"'be transferred to general

13   treasury'" (id. ¶ 568 (emphasis added)). Thus, even if Iraq were regarded as a principal and the

14   Hussein Regime its agent, the adverse-interest rule would be inapplicable because some of the

15   misconduct was committed on behalf of Iraq.

16                  The Republic argues that in order to "support application of the adverse interest

17   exception," it should have been allowed to amend the Amended Complaint to clarify and amplify

18   allegations that "Hussein utilized his control over the Iraqi government to serve his personal goals."

19   (Republic brief on appeal at 31.) But even in making that argument the Republic reveals its futility.

20   The Republic states that it would allege that "Hussein and his family stole a material portion of the

21   funds paid illegally to the Hussein Regime by the Defendants." (Republic brief on appeal at 35

22   (emphasis added).) As the Republic has alleged that the Hussein Regime ordered some of the illegally

23   obtained funds to be deposited in Iraq's treasury and used for political purposes, the interests of Iraq


                                                       -32-
 1   were not totally abandoned. The adverse-interest exception cannot apply to allegations that Saddam

 2   Hussein's government and its coconspirators obtained funds by fraud on behalf of, among others, the

 3   Iraqi State.

 4                  Finally, the fact that Saddam Hussein's government was deposed in favor of a

 5   constitutional democracy provides no basis to avoid imputing its conduct to the Republic. The change

 6   in the structure of a foreign government "works no change in the national sovereignty or its rights,"

 7   The Sapphire, 78 U.S. (11 Wall.) at 168, because those "rights . . . are vested in the state rather than

 8   in any particular government which may purport to represent it," Guaranty Trust, 304 U.S. at 137.

 9   Likewise, where a plaintiff in Iraq's position bears fault, it does not escape the consequence of its

10   wrongdoing on the basis of a change in leadership. Cf. Baena v. KPMG LLP, 453 F.3d 1, 9-10 (1st

11   Cir. 2006) (doubting an exception to in pari delicto for cases "where prior management was at fault"

12   even where "the claim [is] asserted on behalf of [innocent] creditors or shareholders").

13                  In sum, the Complaint reveals that the government of Iraq was the instigator and

14   dominant party in the frauds and breaches that corrupted the Oil-for-Food Programme.                 Its

15   responsibility for the wrongs perpetrated was at least as great as that of any defendant. The district

16   court properly attributed that responsibility to the Republic.



17           2. Prong Two: Policy

18                  The second prong of the Bateman Eichler test asks whether recognition of the in pari

19   delicto defense to a federal statutory cause of action would comport with the purposes of the statute.

20   The Eleventh Circuit has aptly explained why "the application of in pari delicto to bar [a

21   coconspirator's RICO claim] advances the policy of civil liability under the federal RICO statute,"

22   Edwards, 437 F.3d at 1155:


                                                      -33-
 1                   Under RICO, "[i]t shall be unlawful for any person employed by or associated
 2                   with any enterprise . . . to conduct or participate . . . in the conduct of such
 3                   enterprise's affairs through a pattern of racketeering activity or collection of
 4                   unlawful debt." 18 U.S.C. § 1962(c) (emphas[e]s added). It would be
 5                   anomalous, to say the least, for the RICO statute to make racketeering
 6                   unlawful in one provision, yet award the violator with treble damages in
 7                   another provision of the same statute. Congress intended RICO's civil
 8                   remedies to help eradicate organized crime from the social fabric by divesting
 9                   the association of the fruits of ill-gotten gains. . . . [Plaintiff]'s recovery under
10                   RICO would not divest RICO violators of their ill-gotten gains; it would result
11                   in a wealth transfer among similarly situated conspirators.

12   437 F.3d at 1155 (other internal quotation marks omitted). We agree. Thus, it is consistent with the

13   purpose of RICO to recognize an in pari delicto defense in cases where, as a direct result of the

14   plaintiff's "affirmative wrongdoing," id., the plaintiff bears "at least substantially equal responsibility,"

15   Bateman Eichler, 472 U.S. at 310, for the RICO violations of which it complains.

16                   We see no error in the district court's ruling that application of the in pari delicto

17   doctrine in the present case does not offend public policy. We conclude that the Republic's RICO

18   claims were properly dismissed on the basis of that doctrine.



19           3. A Few Words About the Dissent

20                   Our dissenting colleague's disagreement with our affirmance of the district court's

21   dismissal of the Republic's RICO claims on the basis of the in pari delicto defense prompts us to make

22   several observations as to the dissent's analysis of that defense and of the effect of its application.



23                   a. The Dissent's Interpretation of Bateman Eichler

24                   The dissent appears to accept that, in determining whether "the in pari delicto defense

25   is allowed," we should look to the two-pronged test set out in Bateman Eichler, Dissenting Opinion

26   post at 20-21. However, we disagree with the dissent's interpretation of each prong of that test.


                                                         -34-
 1                   As to the first prong, we do not agree that the in pari delicto defense--as contrasted

 2   with the doctrine of unclean hands--is "founded 'upon the court's repugnance to the suitor personally,'"

 3   id. at 27 (quoting Art Metal Works, Inc. v. Abraham & Straus, Inc., 70 F.2d 641, 646 (2d Cir. 1934)

 4   ("Art Metal Works I") (L. Hand, J., dissenting), on reconsideration, dissent adopted by Art Metal

 5   Works, Inc. v. Abraham & Straus, Inc., 107 F.2d 944 (2d Cir.) ("Art Metal Works II"), cert. denied,

 6   308 U.S. 621 (1939) (collectively "Art Metal Works")), or with our dissenting colleague's view that

 7   "in pari delicto 'has nothing do with the rights or liabilities of the parties,'" Dissenting Opinion post

8    at 22 (quoting Art Metal Works I, 70 F.2d at 646 (L. Hand, J., dissenting). Art Metal Works I was

 9   decided on the basis of the doctrine of unclean hands. See 70 F.2d at 644 (majority opinion)

10   ("[a]pplying th[e] principle of equity" that "one coming into a court of equity must do so with clean

11   hands"); id. at 646 (L. Hand, J., dissenting) ("The doctrine is confessedly derived from the

12   unwillingness of a court, originally and still nominally one of conscience, to give its peculiar relief

13   to a suitor who in the very controversy has so conducted himself as to shock the moral sensibilities

14   of the judge.").

15                   Although the doctrines of unclean hands and in pari delicto are often mentioned in the

16   same breath, they are "distinct terms for . . . distinct situations," Perma Life, 392 U.S. at 153 n.1

17   (Harlan, J., concurring in part and dissenting in part). Only the former was at issue in Art Metal

18   Works, and only the latter is at issue here. The in pari delicto doctrine was not mentioned in any of

19   the Art Metal Works opinions, and indeed could not have had application in that case. As the

20   Supreme Court has described the Bateman Eichler test, the in pari delicto doctrine does not depend

21   upon the plaintiff's morality, but instead permits the "defendant [to] escape liability" to the plaintiff

22   based on the plaintiff's "at least substantially equal responsibility for the underlying illegality," Pinter,

23   486 U.S. at 635-36 (emphasis added); see id. at 636 ("Plaintiffs who are truly in pari delicto are those


                                                         -35-
 1   who have themselves violated the law in cooperation with the defendant." (internal quotation marks

 2   omitted) (emphasis ours)). In Art Metal Works, a case involving patent infringement, there was no

 3   suggestion that the plaintiff shared any responsibility for the defendant's infringement.

 4                   We agree, of course, that the in pari delicto "doctrine[] require[s] that the plaintiff be

 5   . . . 'an active, voluntary participant in the unlawful activity that is subject of the suit,'" Dissenting

 6   Opinion post at 27 (quoting Pinter, 486 U.S. at 636). But we are aware of no authority in federal law

 7   requiring such responsibility to be "personal[]" rather than "derivative," Dissenting Opinion post at

 8   27 (internal quotation marks omitted), especially in the context of a government's action, given the

 9   principle, discussed above, that the rights and liabilities of a sovereign state are unaltered by the

10   upheaval of its government.

11                   We also disagree with the dissent's interpretation of the second prong of the Bateman

12   Eichler test. The dissent focuses on the United States policy interest in providing humanitarian aid

13   to the people of Iraq. However, the appropriate focus for a court considering the applicability of the

14   in pari delicto defense to a federal cause of action is the public policy that underlies the particular

15   statute that provides that cause of action. See, e.g., Pinter, 486 U.S. at 638 (considering "the

16   underlying statutory policies . . . . of the Securities Act"); Bateman Eichler, 472 U.S. at 315

17   (considering "the primary objective of the federal securities laws"); Edwards, 437 F.3d at 1155

18   (considering "the policy of civil liability under the federal RICO statute"). The dissent's approach

19   would free courts to disregard the in pari delicto defense on the basis of any "policy" articulable by

20   a creative plaintiff.



21                   b. Additional Observations

22                   We are compelled to make three additional observations as to views expressed by the

23   dissent as to the effect of our decision. First, the view that our decision "deprive[s] the ultimate

                                                       -36-
 1   victims of the defendants' conduct of any remedy," Dissenting Opinion post at 5 (emphasis added),

2    appears to focus on the Republic's original attempt to pursue this action in parens patriae. The district

 3   court ruled that the Republic "does not have parens patriae standing, [and] it may not pursue claims

4    in this action for harms to its quasi-sovereign interests or general harm inflicted on the people of Iraq,"

5    920 F.Supp.2d at 533 (emphases added). The Republic has not challenged this ruling on appeal.

 6                   Second, the dissent appears to endorse the view of the Republic "that it was the victim

 7   of a fraud," Dissenting Opinion post at 37 (emphasis added). However, as the Amended Complaint

 8   reveals, the government of Iraq was not the fraud's victim but its perpetrator and enforcer.

 9                   Finally, we reject the dissent's notion that our decision "release[s]" and "immunize[s]

10   the defendants from liability for conduct that was illegal under U.S. law," Dissenting Opinion post

11   at 5, 36. Plainly, our conclusion--that RICO's treble damages provision is not meant to enrich the

12   entity that instigated and coordinated the illegal scheme--does not preclude either more appropriate

13   civil lawsuits or the criminal prosecution of lawbreakers.



14   B. The Foreign Corrupt Practices Act

15                   The Amended Complaint alleged that the surcharges and kickbacks paid by the Vendor

16   and Oil Purchasing Defendants violated the antibribery provisions of the FCPA. The Republic

17   contends that the district court should have recognized an implied private right of action for violations

18   of those provisions despite a consistent line of cases holding to the contrary. The Republic is

19   particularly critical of Lamb v. Phillip Morris, Inc., 915 F.2d 1024 (6th Cir. 1990) ("Lamb"), cert.

20   denied, 498 U.S. 1086 (1991), the leading case declining to recognize such a cause of action. The

21   Republic argues that Lamb erred in its analysis of the legislative history of the FCPA and that that

22   history suggests that the reason Congress did not expressly provide for a private right of action was

23   to avoid creating a "negative inference" (Republic brief on appeal at 58 (internal quotation marks

                                                        -37-
 1   omitted)), that would dissuade judicial recognition of implied private rights of action under other

 2   provisions of the Securities Exchange Act of 1934, to which the FCPA was an amendment. We are

 3   unpersuaded.

 4                  "[P]rivate rights of action to enforce federal law must be created by Congress."

 5   Alexander v. Sandoval, 532 U.S. 275, 286 (2001) ("Sandoval"). A federal statute may create a private

 6   right of action either expressly or, more rarely, by implication. In considering whether a statute

 7   confers an implied private right of action, "[t]he judicial task is to interpret the statute Congress has

 8   passed to determine whether it displays an intent to create not just a private right but also a private

 9   remedy." Id. To discern Congress's intent, "we look first to the text and structure of the statute."

10   Lindsay v. Association of Professional Flight Attendants, 581 F.3d 47, 52 (2d Cir. 2009), cert. denied,

11   130 S. Ct. 3513 (2010). To "illuminate" this analysis, id. at 52 n.3, we also consider factors

12   enumerated in Cort v. Ash, 422 U.S. 66 (1975), which include the following:

13                  First, is the plaintiff one of the class for whose especial benefit the statute was
14                  enacted, . . . --that is, does the statute create a federal right in favor of the
15                  plaintiff? Second, is there any indication of legislative intent, explicit or
16                  implicit, either to create such a remedy or to deny one? . . . . Third, is it
17                  consistent with the underlying purposes of the legislative scheme to imply such
18                  a remedy for the plaintiff?

19   Id. at 78 (emphasis in Cort v. Ash) (internal quotation marks omitted). In our analysis, we are mindful

20   that "the Supreme Court has come to view the implication of private remedies in regulatory statutes

21   with increasing disfavor." Hallwood Realty Partners, L.P. v. Gotham Partners, L.P., 286 F.3d 613,

22   618 (2d Cir. 2002).

23                  The antibribery provisions of the FCPA prohibit certain entities and persons from, inter

24   alia, corruptly making payments to foreign officials for the purpose of influencing official action in

25   order to obtain business. See 15 U.S.C. §§ 78dd-1(a), 78dd-2(a), 78dd-3(a). The text of the statute

26   contains no explicit provision for a private right of action, although it does provide for civil and


                                                       -38-
 1   criminal penalties, see id. §§ 78dd-2(g), 78dd-3(e), 78ff(c), and permits the Attorney General to seek

 2   injunctive relief, see id. §§ 78dd-2(d), 78dd-3(d). Because "[t]he express provision of one method

 3   of enforcing a substantive rule suggests that Congress intended to preclude others," Sandoval, 532

 4   U.S. at 290, the structure of the statute, by focusing on public enforcement, tends to indicate the

 5   absence of a private remedy.

 6                   The Cort v. Ash factors also do not support recognition of a private right. The statute's

 7   prohibitions focus on the regulated entities; the FCPA contains no language expressing solicitude for

 8   those who might be victimized by acts of bribery, or for any particular class of persons. "Statutes that

 9   focus on the person regulated rather than the individuals protected create no implication of an intent

10   to confer rights on a particular class of persons." Sandoval, 532 U.S. at 289 (internal quotation marks

11   omitted).

12                   Nor does the legislative history of the FCPA demonstrate an intention on the part of

13   Congress to create a private right of action. As discussed in Lamb, 915 F.2d at 1029, a bill introduced

14   by Senator Church in the 94th Congress included an express right of action for competitors of those

15   who bribed foreign officials, see S. 3379, 94th Cong. § 10, 122 Cong. Rec. 12,605, 12,607 (1976);

16   that provision, however, was deleted by a committee of the Senate, see S. Rep. No. 94-1031, at 13

17   (1976).

18                   In the 95th Congress, which finally enacted the FCPA, a committee of the House of

19   Representatives, in reporting out a bill that did not provide expressly for a private right of action,

20   made a statement that the House "Committee intends that the courts shall recognize a private cause

21   of action based on this legislation . . . on behalf of persons who suffer injury as a result of prohibited

22   corporate bribery," H.R. Rep. No. 95-640, at 10 (1977). We have three main problems with the

23   Republic's reliance on this statement, and other aspects of the FCPA's legislative history, as

24   justification for judicial implication of a private right of action in its favor.

                                                        -39-
 1                   First, the House committee's statement was not repeated (and no endorsement of its

 2   substance was in any way suggested) in the reports of either the Senate committee considering the

 3   FCPA or the conference committee that reconciled the views of the House and Senate to produce the

 4   language of the FCPA as it was ultimately enacted. See S. Rep. No. 95-114 (1977); H.R. Rep. 95-831

 5   (1977). Indeed, in the debate on the conference committee report, one conferee stated that the

 6   question of whether "courts will recognize [an] implied private right of action . . . . was not considered

 7   in the Senate or during the conference, and thus [it] cannot be said that any intent is expressed at all

 8   on this issue." 123 Cong. Rec. 38,601, 38,602 (1977) (statement of Sen. Tower) (emphasis added).

 9                   Second, although the legislative history contains additional references to the

10   desirability of a private right of action, they do not provide any clear indication of congressional intent

11   to create one. See generally Siegel, The Implication Doctrine and the Foreign Corrupt Practices Act,

12   79 Colum. L. Rev. 1085, 1105-12 (1979) (canvassing the legislative history in detail and finding "no

13   conclusive evidence of congressional intent to grant private actions").

14                   Third, we note that this case illustrates the wisdom of Lamb, which avoids the question

15   of what class of parties the FCPA was designed to protect. Although we agree that the statute was

16   "primarily designed to protect the integrity of American foreign policy and domestic markets," Lamb,

17   915 F.3d at 1029, one might argue that it is principally the foreign governments whose processes

18   might be corrupted. The Republic's claim highlights the obvious problem with the latter concern here:

19   The foreign government supposedly to be "protect[ed]" by the FCPA was the entity that demanded

20   the bribes in the first place.

21                   Finally, we note that although it has been nearly a quarter of a century since Lamb was

22   decided, and although Congress has more recently amended the FCPA, see International Anti-Bribery

23   and Fair Competition Act of 1998, Pub. L. No. 105-366, 112 Stat. 3302 (1998), Congress has not

24   chosen to override Lamb. We conclude that there is no private right of action under the antibribery

                                                        -40-
 1   provisions of the FCPA and that the district court did not err in dismissing the Republic's FCPA

 2   claims.



 3   C. The Common-Law Causes of Action

 4                   The nonstatutory causes of action asserted in the Amended Complaint included claims

 5   of fraud, breach of fiduciary duty, breach of contract, and unjust enrichment. The district court,

 6   having dismissed the Republic's statutory causes of action, declined to exercise supplemental

 7   jurisdiction over these common-law claims. The Republic, citing First National, 353 F.2d 47, and

 8   Marcos, 806 F.2d 344, contends that the court should have entertained the nonstatutory claims as a

 9   matter of federal common law, in the interest of having "the nation . . . speak with a united voice" in

10   order avoid complicating "foreign relations." (Republic brief on appeal at 59 (internal quotation

11   marks omitted).) The Republic's reliance on these cases is misplaced.

12                   "There is no federal general common law," Erie R. Co. v. Tompkins, 304 U.S. 64, 78

13   (1938), although federal common law has been held to displace state law in a few "narrow areas"

14   involving "uniquely federal interests," including where the "international nature of the controversy

15   makes it inappropriate for state law to control," Texas Industries, Inc. v. Radcliff Materials, Inc., 451

16   U.S. 630, 641-42 (1981) (internal quotation marks omitted). However, courts are to recognize the

17   "judicial creation of a special federal rule" only in those rare "situations where there is a significant

18   conflict between some federal policy or interest and the use of state law." O'Melveny & Myers v.

19   FDIC, 512 U.S. 79, 87 (1994) (internal quotation marks omitted).

20                   In First National, we simply applied the existing rule that the applicability of the act-

21   of-state doctrine is a question of federal law. See 353 F.2d at 50-51. It has long been established that

22   the question of whether to "pass[] on the validity of foreign acts of state" is a "uniquely federal" issue,

23   Sabbatino, 376 U.S. at 423-24. In Marcos, we concluded that there was federal jurisdiction over a suit

                                                        -41-
1    brought by a foreign state against its former president to "regain proper[t]y allegedly obtained as the

2    result of acts when he was head of state"; we so held for a number of reasons, one of which was "the

3    necessary implications of such an action for United States foreign relations." 806 F.2d at 354. Such

4    a consideration, quite similar to that underlying the act-of-state doctrine, is not present here.

5                   In the present case, the Complaint's assertion of nonstatutory wrongs describes

6    traditional types of torts by private entities. The Republic identifies no uniquely federal interest in

7    the rules of decision to be applied, nor any conflict between a federal policy or interest and the use

8    of state law. We conclude that the district court correctly determined that these claims arose under

9    state law rather than federal common law. And having dismissed the federal statutory claims "at the

10   very beginning of the case," Brzak v. United Nations, 597 F.3d 107, 114 (2d Cir.), cert. denied, 131

11   S. Ct. 151 (2010), the district court properly declined to exercise supplemental jurisdiction over the

12   state-law claims.



13                                              CONCLUSION



14                  The Republic of Iraq's allegations in this case paint a sorry portrait of a greedy and

15   ruthless government colluding with venal individuals and business firms to divert funds intended for

16   the benefit of a suffering population, and using those funds to cement political power while scoffing

17   at the humanitarian concerns of the international community and the laws of the United States. The

18   principal question here, however, has been whether United States law permits the Republic, through

19   its present government, to recover damages from its former government's coconspirators on the basis

20   of the actions that they took in response to that former government's demands. Applying settled

21   principles of state responsibility and statutory interpretation, we have concluded that it does not.


                                                      -42-
1                  Having considered all of the Republic's arguments on this appeal, we find in them no

2   basis for reversal. The judgment of the district court dismissing the Amended Complaint is affirmed.




                                                   -43-
                                                                                        




 1    DRONEY, Circuit Judge, concurring in part and dissenting in part: 

 2           In  response  to  Iraq’s  1990  invasion  of  Kuwait,  the  United 

 3    Nations Security Council implemented economic sanctions—widely 

 4    characterized  as  the  most  far‐reaching  in  history—against  the 

 5    regime of Saddam Hussein (the “Hussein Regime” or the “Regime”). 

 6    The U.S. Congress enforced the sanctions through the Iraq Sanctions 

 7    Act  of  1990,  which  made  all  trade  for  economic  gain  with  the 

 8    Hussein  Regime  a  criminal  offense.  Pub.  L.  No.  101‐513,  § 

 9    586E(2)(B),  104  Stat.  1979,  2049,  50  U.S.C.  §  1701,  note.  To 

10    “reconcile[e]  strong  sanctions  against  a  corrupt  Iraqi  regime  with 

11    [the] need[] . . . [to provide] food and medicines to an innocent and 

12    vulnerable      population,”      the    U.N.     Security     Council      then 

13    implemented—again  with  the  U.S.’s  support—the  Oil‐for‐Food 

14    Programme  (the  “Programme”).  The  Programme  permitted  Iraq  to 

15    sell  oil  on  the  international  market  on  the  condition  that  all  of  the 

16    proceeds were placed into a U.N. escrow account established at the 
 1    New  York  branch  of  the  Banque  Nationale  de  Paris  (“BNP”),  to  be 

 2    used  only  for  the  humanitarian  needs  of  the  Iraqi  people, 

 3    administrative  costs  for  the  Programme,  and  war  reparations  to 

 4    Kuwait.  

 5          The invasion of Iraq and overthrow of the Hussein Regime by 

 6    a U.S.‐led coalition of forces in the spring of 2003 revealed pervasive 

 7    corruption  in  the  Programme,  described  by  some  as  the  “largest 

 8    financial fraud in human history.” The corruption of the Programme 

 9    was  documented  in  detail  in  a  report  of  the  U.N.  Independent 

10    Inquiry  Committee  into  the  United  Nations  Oil‐for‐Food 

11    Programme.  Based  largely  on  this  report,  the  defendants  in  this 

12    litigation—two  individuals,  along  with  numerous  business 

13    entities—are alleged to have conspired with the Hussein Regime to 

14    violate the sanctions and subvert the Programme. By purchasing oil 

15    from  the  Regime  at  below‐market  prices  or  selling  humanitarian 

16    supplies (often of sub‐standard quality) to it at above‐market prices 




                                          2
       
 1    while  making  side‐payments  to  the  Regime—or,  in  the  case  of  the 

 2    BNP  defendants,  facilitating  such  payments—the  defendants 

 3    allegedly  diverted  at  least  ten  billion  dollars  intended  for 

 4    humanitarian  aid  to  the  Regime.  The  two  individual  defendants 

 5    named here have already pled guilty to criminal charges relating to 

 6    their  role  in  corrupting  the  Programme,  and  many  of  the  business 

 7    entity  defendants  have  entered  into  non‐prosecution  or  deferred 

 8    prosecution  agreements  with  the  U.S.  Department  of  Justice  in 

 9    which they admit to involvement in the scheme.  

10          The majority nevertheless concludes that the Republic of Iraq 

11    (the “Republic”) may not bring suit, through its current government, 

12    to  recover  funds  allegedly  unlawfully  siphoned  off  from  the  U.N. 

13    escrow account. Because the Hussein Regime orchestrated the fraud, 

14    the majority reasons, the Republic participated in the fraud as well, 

15    and thus stands in equal fault (in pari delicto) with the defendants. I 

16    disagree. In pari delicto is an “equitable defense . . . [,] rooted in the 




                                          3
       
 1    common‐law notion that a plaintiff’s recovery may be barred by his 

 2    own wrongful conduct.” Pinter v. Dahl, 486 U.S. 622, 632 (1988). But 

 3    the  majority’s  analysis  does  not  rest  on  the  Republic’s  “own 

 4    wrongful  conduct.”  Instead,  the  majority  begins  its  analysis  with  a 

 5    general principle of state responsibility under which “the obligations 

 6    of  a  foreign  state  are  unimpaired  by  a  change  in  that  state’s 

 7    government,”  Maj.  Op.,  ante,  at  28—a  principle  that  we  have  never 

 8    before  recognized  in  this  context,  where  the  conduct  that  the 

 9    defendants  are  alleged  to  have  engaged  in  with  a  foreign 

10    government  was  illegal  under  U.S.  law  from  the  beginning.  The 

11    majority  then  concludes,  based  on  this  purported  principle  of  state 

12    responsibility,  that  the  post‐Hussein  Republic  should  be  treated  as 

13    complicit  in  the  Regime’s  fraud  on  a  humanitarian  relief  program 

14    specifically  designed  to  aid  the  civilian  population  while  not 

15    enriching  the  Regime.  The  in  pari  delicto  defense  is  founded  on  the 

16    twin  premises  that  ”courts  should  not  lend  their  good  offices  to 




                                            4
       
 1    mediating  disputes  among  wrongdoers  .  .  .  [and]  that  denying 

 2    judicial  relief  to  an  admitted  wrongdoer  is  an  effective  means  of 

 3    deterring illegality.” Bateman Eichler, Hill Richards, Inc. v. Berner, 472 

 4    U.S.  299,  306  (1985).  Yet  here  it  functions  to  release  defendants  of 

 5    liability for conduct that, if true, constituted a clear violation of U.S. 

 6    law  and  subversion  of  U.S.  policy,  and  to  deprive  the  ultimate 

 7    victims of the defendants’ conduct of any remedy.  

 8           I  therefore  concur  only  in  the  majority’s  holding  that  the 

 9    Foreign  Corrupt  Practices  Act  does  not  create  a  private  right  of 

10    action; otherwise, I respectfully dissent.    

11                                          I.  

12           The  majority  presents  its  decision  as  deriving  from  the  long‐

13    established  principle  that  “the  legal  position  of  a  foreign  state 

14    survives  changes  in  its  government.”  Maj.  Op.,  ante,  at  28.  In 

15    articulating this principle, the majority draws on two distinct lines of 

16    cases. The first concerns foreign sovereigns’ conduct within the U.S.: 




                                             5
       
 1    it holds that, when a foreign sovereign acts under U.S. law—such as 

 2    by  litigating  in  U.S.  courts  or  entering  into  transactions—it  does  so 

 3    through  its  then‐recognized  government  and  the  government’s 

 4    designated  representatives,  such  as  ambassadors.  See,  e.g.,  Guar. 

 5    Trust  Co.  of  N.Y.  v.  United  States,  304  U.S.  126,  137‐41  (1938).  The 

 6    second—the  act  of  state  doctrine—concerns  foreign  governments’ 

 7    conduct  within  their  own  territory:  it  holds  that  generally  “the 

 8    courts  of  this  country  [will  not]  inquir[e]  into  the  validity  of  the 

 9    public  acts  [of]  a  recognized  foreign  sovereign  power  committed 

10    within  its  own  territory.”  Banco  Nacional  de  Cuba  v.  Sabbatino,  376 

11    U.S. 398, 401 (1964). Neither of these doctrines applies here.  

12                                          A. 

13           The principle that a foreign state acts under U.S. law through 

14    its  recognized  government  has  long  been  established.  In  The 

15    Sapphire,  the  Supreme  Court  held  that  the  deposition  of  Emperor 

16    Napoleon III did not abate a tort suit previously brought by France 




                                             6
       
 1    to recover for damages caused to a French ship in a collision in San 

 2    Francisco harbor. 78 U.S. 164, 168 (1870). “The reigning Emperor, or 

 3    National Assembly, or other actual person or party in power, is but 

 4    the  agent  and  representative  of  the  national  sovereignty,”  the 

 5    Supreme  Court  held,  such  that  “[a]  change  in  such  representative 

 6    works no change in the national sovereignty or its rights.” Id. at 168. 

 7    Similarly, in Lehigh Valley Railroad Co. v. Russia, this Court held that 

 8    the  then‐recognized  representative  of  the  provisional  Russian 

 9    government  could  bring  suit  to  recover  for  the  destruction  of 

10    Russian‐owned  ammunition  and  explosives  while  in  transit  in  the 

11    United States. 21 F.2d 396, 401 (2d Cir. 1927). Although the explosion 

12    occurred in 1916, under the Imperial Russian Government, we held 

13    that  “[t]he  suit  did  not  abate  by  the  change  in  the  form  of 

14    government in Russia; the state is perpetual, and survives the form 

15    of  its  government.”  Id.  at  401.  Finally,  and  by  the  same  logic,  in 

16    Guaranty  Trust  Co.  of  New  York  v.  United  States,  the  Supreme  Court 




                                            7
       
 1    held  that,  where  the  prior  recognized  government  of  a  foreign 

 2    sovereign  allowed  the  statute  of  limitations  for  a  claim  to  run,  the 

 3    U.S.’s  subsequent  recognition  of  a  new  government  did  not  revive 

 4    the time‐barred claim. 304 U.S. at 141. Again, because “the rights of a 

 5    sovereign  state  are  vested  in  the  state  rather  than  in  any  particular 

 6    government  which  may  purport  to  represent  it,”  the  change  in  the 

 7    recognized government effected no change in the time‐barred claim. 

 8    Id. at 137. 

 9           The  majority  identifies  no  decisions,  however,  in  which  this 

10    principle  of  state  “responsibility”  operates—as  it  does  here—to 

11    release  a  non‐state  defendant  from  liability  for  conduct  that  was 

12    illegal  under  U.S.  law  from  its  inception.  Such  a  conclusion  is 

13    inconsistent  with  the  premise  underlying  the  rule  articulated  in 

14    Guaranty Trust. There the Supreme Court rejected the argument that 

15    recognition of a new government of a foreign sovereign “renders of 

16    no  effect  transactions  here  with  a  prior  recognized  government  in 




                                             8
       
 1    conformity  to  the  declared  policy  of  our  own  government.”  Id.  at 

 2    140. It rooted this conclusion both in the separation of powers and in 

 3    the need to protect legitimate reliance on the finality of a recognized 

 4    government’s  acts.  “What  government  is  to  be  regarded  here  as 

 5    representative of a foreign sovereign state is a political rather than a 

 6    judicial  question,  and  is  to  be  determined  by  the  political 

 7    department of the government,” the Court observed. Id. at 137. “The 

 8    very  purpose  of  the  recognition  by  our  government,”  the  Court 

 9    continued,  “is  that  our  nationals  may  be  conclusively  advised  with 

10    what  government  they  may  safely  carry  on  business  transactions 

11    and  who  its  representatives  are.  If  those  transactions,  valid  when 

12    entered  into,  were  to  be  disregarded after  the  later  recognition  of  a 

13    successor government,” the Court concluded, “recognition would be 

14    but an idle ceremony, yielding none of the advantages of established 

15    diplomatic  relations  in  enabling  business  transactions  to  proceed, 




                                             9
       
 1    and  affording  no  protection  to  our  own  nationals  in  carrying  them 

 2    on.” Id. at 140‐41. 

 3           Here, however, the United States had no diplomatic relations 

 4    with the Regime during the relevant time, and the side‐agreements 

 5    allegedly  entered  into  between  the  defendants  and  the  Hussein 

 6    Regime  were  not  in  any  sense  “valid  when  entered  into”  or  “in 

 7    conformity [with] the declared policy of our own government.” On 

 8    the contrary, the side‐agreements stood in clear violation of U.S. law 

 9    and violated the U.S.’s trade embargo policy towards Iraq. The rule 

10    articulated  in  Guaranty  Trust  serves  to  prevent  courts  from 

11    questioning  determinations  properly  left  to  the  political  branches, 

12    and  to  protect  legitimate  reliance  “upon  the  finality  and  legality  of 

13    [a]  government’s  acts.”  Banco  de  Espana  v.  Fed.  Reserve  Bank  of  N.Y., 

14    114 F.2d 438, 444 (2d Cir. 1940). But the political branches prohibited 

15    transactions  with  the  Hussein  Regime,  except  those  that  took  place 

16    through  the  Programme.  The  defendants  here  could  have  no 




                                             10
       
 1    legitimate  expectations  in  the  “finality”  or  “legality”  of  a  side‐

 2    agreement with the Hussein Regime. Indeed, attempting to enforce 

 3    one  of  these  alleged  agreements  in  a  U.S.  court  would  likely  entail 

 4    admitting  to  a  felony.  Under  these  circumstances,  the  rule 

 5    articulated in Guaranty Trust has no application. 

 6                                          B. 

 7           The  majority  further  asserts  that  the  actions  of  the  Hussein 

 8    Regime are properly attributed to the Republic because the Regime 

 9    “acted  as  the  government  of  Iraq.”  Maj.  Op.,  ante,  at  30.  This 

10    conclusion  again  relies  on  a  principle  that  does  not  apply  to  this 

11    case. The decisions that the majority cites in support of this assertion 

12    primarily  involve  the  act  of  state  doctrine,  which,  in  its  traditional 

13    formulation,  holds  that  “the  courts  of  one  country  will  not  sit  in 

14    judgment on the acts of the government of another, done within its 

15    own  territory.” Underhill  v.  Hernandez,  168 U.S.  250, 252  (1897).  The 

16    court  below,  however,  found  that  the  act  of  state  doctrine  did  not 




                                             11
       
 1    preclude  the  Republic’s  claims,  Republic  of  Iraq  v.  ABB  AG,  920  F. 

 2    Supp. 2d 517, 533‐34 (S.D.N.Y. 2013), and the majority does not reject 

 3    this conclusion. 

 4           The district court was correct in its determination that the act 

 5    of  state  doctrine  does  not  preclude  the  Republic’s  claims. 

 6    Adjudicating  Iraq’s  claim  would  not  require  a  court  to  “inquir[e] 

 7    into  the  validity  of  the  public  acts  a  recognized  foreign  sovereign 

 8    power committed within its own territory.” Banco Nacional de Cuba, 

 9    376 U.S. at 401. In W.S. Kirkpatrick & Co. v. Environmental Techtonics 

10    Corp.,  International,  an  unsuccessful  bidder  for  a  contract  with  the 

11    Nigerian government sued a successful bidder, contending that the 

12    successful  bidder  violated  RICO,  the  Robinson‐Patman  Act,  and 

13    New Jersey state anti‐racketeering laws in procuring the contract by 

14    paying  bribes  to  Nigerian  officials.  493  U.S.  400,  402  (1990).  The 

15    successful bidder argued that the act of state doctrine precluded the 

16    litigation,  since  the  facts  necessary  to  establish  that  the  bribery 




                                           12
       
 1    occurred  would  also  “support  a  finding  that  the  contract  [was] 

 2    invalid under Nigerian law.” Id. at 406. The Supreme Court rejected 

 3    this argument. Id. “Act of state issues only arise when a court must 

 4    decide—that is, when the outcome of the case turns upon—the effect 

 5    of  official  action  by  a  foreign  sovereign,”  the  Court  found.  Id. 

 6    (emphasis  in  original).  “When  that  question  is  not  in  the  case, 

 7    neither is the act of state doctrine.” Id.  

 8                  Here,  similarly,  although  a  finding  against  the  defendants 

 9    would  tend  to  imply  that  the  Hussein  Regime  violated  its 

10    international obligations by corrupting the Programme (a conclusion 

11    that,  in  any  event,  seems  beyond  dispute),  no  aspect  of  the 

12    Republic’s  claims  turns  on  the  validity  of  the  Hussein  Regime’s 

13    conduct.  The  Republic’s  complaint  challenges  the  conduct  of  non‐

14    state  defendants  under  U.S.  law.1  Indeed,  if  adjudicating  the 

                                                                  
      1  That  the  Republic’s  claims  are  based  on  domestic  law,  and  are  asserted  against  non‐
      state defendants, also explains the inapplicability of the rule that “[a] state is responsible 
      for  any  violation  of  its  obligations  under  international  law  resulting  from  action  or 
      inaction by [] the government of the state.” Restatement (Third) of Foreign Relations Law 
      of  the  United  States  §  207  (1987).  The  district  court  cited  this  rule  in  support  of  its 




                                                                     13
       
 1    Republic’s  claims  against  the  defendants  required  an  inquiry  into 

 2    the  validity  of  the  Hussein  Regime’s  official  acts,  then  the  criminal 

 3    convictions  of  the  two  individual  defendants  and  the  non‐

 4    prosecution  agreements  entered  into  between  the  Department  of 

 5    Justice  and  various  corporate  defendants  would  stand  on  faulty 

 6    premises: a U.S. court could never adjudicate such charges without 

 7    violating the act of state doctrine. 

 8                  Furthermore,  the  Republic’s  claims  do  not  implicate  acts  by 

 9    the  Hussein  Regime  performed  solely  on  Iraqi  territory.  See 

10    Underhill,  168  U.S.  at  252;  Banco  de  Espana,  114  F.2d  at  443  (“It  has 

11    been  squarely  held  that  the  courts  of  this  country  will  not  examine 

12    the  acts  of  a  foreign  sovereign  within  its  own  borders,  in  order  to 

                                                                                                                                                                        
      conclusion  that  the  Hussein  Regime’s  conduct  redounds  to  the  Republic,  see  Republic  of 
      Iraq, 920 F. Supp. 2d at 536, but the majority does not appear to rely on it. The majority is 
      correct  not  to  base  its  decision  on  this  rule.  The  rule  governs  state  responsibility  for 
      violations of “obligations under international law”; it is a rule of international law. As the 
      Third Restatement observes, “[t]he principal persons under international law are states,” 
      and  it  is  primarily  states  that  “have  legal  personality  and  rights  and  duties  under 
      international law.” Restatement (Third) of Foreign Relations Law of the United States pt. 
      II, intro. note (1987). I see no basis for applying a principle of state responsibility under 
      international  law  to  immunize  non‐state  defendants  from  liability  for  conduct  under 
      domestic law.   




                                                                                    14
       
 1    determine whether or not those acts were legal under the municipal 

 2    law of the foreign state.” (emphasis added)); see also Bernstein v. Van 

 3    Heyghen  Freres  Societe  Anonyme,  163  F.2d  246,  249  (2d  Cir.  1947) 

 4    (barring,  under  the  act  of  state  doctrine,  U.S.  court  from  hearing 

 5    claim  based  on  conversion  of  property  committed  in  Germany  by 

 6    German  officials).  Instead,  the  Republic  contends  that  the 

 7    defendants—individuals and corporations located outside of Iraq—

 8    conspired  with  the  Hussein  Regime  to  subvert  an  international 

 9    humanitarian  relief  program,  run  out  of  the  U.N.  headquarters  in 

10    New York, in ways that diverted money that would otherwise have 

11    been  placed  in  an  escrow  account  established  at  a  bank  branch  in 

12    New  York.  Indeed,  the  requirement  that  all  transactions  be 

13    approved by the U.N. and pass through an escrow account outside 

14    of  Iraqi  control  was  plainly  crucial  to  the  functioning  Programme, 

15    since  it  was  designed  to  ensure  that  the  proceeds  of  oil  sales  were 

16    not  diverted  from  humanitarian  uses.  Because  “[a]cts  of  foreign 




                                            15
       
 1    governments  purporting  to  have  extraterritorial  effect  .  .  .  by 

 2    definition[]  fall[]  outside  the  scope  of  the  act  of  state  doctrine,”  the 

 3    conduct of the Hussein Regime in subverting the Programme cannot 

 4    be  encompassed  by  the  doctrine.  Allied  Bank  Int’l  v.  Banco  Credito 

 5    Agricola de Cartago, 757 F.2d 516, 522 (2d Cir. 1985).  

 6           Even  if  the  act  of  state  doctrine  were  implicated  in  this  case, 

 7    that  would  not  end  the  analysis.  Once  a  court  determines  the 

 8    doctrine’s  “technical  availability,”  it  then  considers  whether  “the 

 9    policies underlying the act of state doctrine” indicate that it “should 

10    nonetheless not be invoked.” W.S. Kirkpatrick & Co., 493 U.S. at 409. 

11    Key  among  these  considerations  is  whether  “the  government  that 

12    committed  the  challenged  act  of  state  is  no  longer  in  existence.”  Id. 

13    (internal  quotation  marks  omitted).  Even  in  cases  that—unlike  this 

14    case—do  require  a  U.S.  court  to  assess  the  validity  of  a  foreign 

15    government’s  acts  within  its  own  territory,  therefore,  we  do  not 

16    apply  an  inflexible  rule  that  imputes  the  conduct  of  a  former 




                                              16
       
 1    government  to  a  current  government.  Because  the  act  of  state 

 2    doctrine protects against litigation that would “embarrass or hinder 

 3    the executive in the realm of foreign relations,” it would contravene 

 4    the  doctrine’s  purpose  to  prevent  the  current  government  of  a 

 5    foreign state from repudiating the conduct of a prior government on 

 6    the  foreign  state’s  territory.  Bigio  v.  Coca‐Cola  Co.,  239  F.3d  440,  452 

 7    (2d  Cir.  2000).  In  Bigio  v.  Coca‐Cola  Co.,  for  instance,  we  found  that 

 8    the  act  of  state  doctrine  did  not  bar  plaintiffs’  action  to  recover 

 9    property  that  a  former  Egyptian  government  had  confiscated 

10    because  the  plaintiffs’  were  Jewish.  239  F.3d  at  453.  We  noted  that 

11    the  Nasser  regime,  which  effected  the  property  seizure,  was  “long 

12    gone,”  and  that  “the  current  government  .  .  .  has  apparently 

13    repudiated the acts in question and has sought to have the property 

14    or its proceeds returned to the [plaintiffs].” Id. Here, not only is the 

15    regime  that  committed  the  wrongdoing  no  longer  in  existence,  but 

16    its successor government is itself the plaintiff in this matter. Indeed, 




                                              17
       
 1    a conclusion that the Republic is barred from seeking redress against 

 2    these  defendants  in  the  U.S.  courts—even  as  the  U.S.  government 

 3    itself extracts fines from many of the same defendants for the same 

 4    conduct—arguably  poses  a  greater  risk  of  “interfer[ing]  with  the 

 5    relationship  between  [the  Republic  of  Iraq]  and  the  United  States” 

 6    than allowing the litigation to proceed. Id.  

 7           Because  the  Republic’s  claims  do  not  require  that  the  court 

 8    assess  the  validity  of  the  Iraqi  government’s  acts  on  Iraqi  territory, 

 9    the act of state doctrine does not apply to this case. And because the 

10    act  of  state  doctrine  does  not  apply,  the  fact  that  “the  Hussein 

11    Regime’s effort to subvert the Programme was the policy of the Iraqi 

12    government” does not preclude the Republic’s claims. Maj. Op., ante, 

13    at 30. Indeed, the majority’s reliance on act of state case law leads to 

14    the  paradoxical  conclusion  that  defendants  are  insulated  from 

15    liability  to  the  Republic  for  their  conduct  precisely  because  they  did 

16    not merely aid a single corrupt Iraqi official in embezzling funds for 




                                             18
       
 1    personal benefit, but instead conspired with an entire authoritarian 

 2    regime  in  a  concerted  scheme  to  violate  U.S.  law  and  subvert  U.S. 

 3    foreign policy. In concluding that the alleged conspiracy pursued a 

 4    “public goal,” the majority notes that the Hussein Regime regarded 

 5    the  corruption  of  the  Oil‐for‐Food  Programme  as  crucial  to 

 6    undermining the sanctions and remaining in power. Maj. Op., ante, 

 7    at  31.  But  it  was  the  public  goal  of  our  government  to  weaken  the 

 8    Hussein  Regime  through  economic  sanctions  while  minimizing, 

 9    through  the  Oil‐for‐Food  Programme,  the  suffering  of  the  Iraqi 

10    civilian  population.  I  see  no  basis  in  our  law  for  treating  the 

11    defendants’ conduct differently simply because they conspired with 

12    a foreign government to achieve a “public goal” that was directly at 

13    odds with U.S. policy. 

14                                          II. 

15           The  absence  of  a  rule  that  treats  the  Republic  as  complicit  in 

16    the  Regime’s  wrongdoing  and  the  deleterious  impact  of  the 




                                            19
       
 1    defendants’ alleged actions on U.S. policy have special salience here. 

 2    The  doctrinal  mechanism  through  which  Iraq’s  purported 

 3    “participation”  in  the  Regime’s  conduct  operates  to  bar  the 

 4    Republic’s  claims—in  pari  delicto—has  been  recognized  under 

 5    federal  law  only  in  its  traditional  formulation,  in  which  it  “was 

 6    narrowly limited to situations where the plaintiff truly bore at least 

 7    substantially equal responsibility for his injury.” Bateman Eichler, 472 

 8    U.S.  at  307.  The  Supreme  Court  has  emphasized,  moreover,  that 

 9    “public policy implications [must] be carefully considered before the 

10    defense is allowed” to “ensure[] that the broad judge‐made law does 

11    not undermine the congressional policy  favoring private suits as an 

12    important  mode  of  enforcing  federal  []  statutes.”  Pinter,  486  U.S.  at 

13    633  (internal  citation  omitted).  Under  federal  law,  therefore,  the  in 

14    pari delicto defense is allowed “only where (1) as a direct result of his 

15    own  actions,  the  plaintiff  bears  at  least  substantially  equal 

16    responsibility  for  the  violations  he  seeks  to  redress,  and  (2) 




                                            20
       
 1    preclusion of suit would not significantly interfere with the effective 

 2    enforcement  of  the  .  .  .  laws.”  Id.  at  310‐11.  The  defendants  here 

 3    satisfy neither of these two prongs.  

 4           To  satisfy  the  first  prong,  the  defendant  must  establish  that 

 5    the plaintiff was an “an active, voluntary participant in the unlawful 

 6    activity  that  is  subject  of  the  suit.”  Pinter,  486  U.S.  at  636.  This 

 7    requirement reflects the in pari delicto doctrine’s equitable origins in 

 8    the idea that a party that has morally tainted itself in a matter cannot 

 9    invoke  the  court’s  equitable  powers.  For  instance,  Judge  Learned 

10    Hand wrote for this Court that the closely related “unclean hands” 

11    defense is “derived from the unwillingness of a court . . . to give its 

12    peculiar  relief  to  a  suitor  who  in  the  very  controversy  has  so 

13    conducted  himself  as  to  shock  the  moral  sensibilities  of  the  judge.” 

14    Art  Metal  Works,  Inc.  v.  Abraham  &  Straus,  70  F.2d  641,  646  (2d  Cir. 

15    1934) (Hand, J., dissenting), original decree vacated and dissent adopted 

16    as  opinion  of  the  court  on  reh’g,  107  F.2d  944  (2d  Cir.  1939)  (per 




                                             21
       
 1    curiam). Accordingly, for “immoral conduct to be relevant,” it “must 

 2    touch and taint the plaintiff personally”; actions that are “imputed to 

 3    [the plaintiff] legally[] do not impugn his conscience vicariously.” Id.   

 4          The Republic’s supposed participation in the fraud derives, in 

 5    the majority’s analysis, from the principle that “the obligations of a 

 6    foreign  state  are  unimpaired  by  a  change  in  that  state’s 

 7    government.”  Maj.  Op.,  ante,  at  28.  But,  like  the  unclean  hands 

 8    defense, in pari delicto “has nothing to do with the rights or liabilities 

 9    of the parties.” Art Metal Works, 70 F.2d at 646 (Hand, J., dissenting). 

10    Even  if  the  principle  of  state  responsibility  that  the  majority 

11    identifies  had  any  applicability  under  the  circumstances  of  this 

12    case—where  the  agreements  that  the  foreign  government  allegedly 

13    entered into were illegal under U.S. law from the very beginning—it 

14    does  not  establish  the  direct  responsibility  demanded  by  the  first 

15    prong of the in pari delicto defense.  




                                          22
       
 1          To  apply  the  defense  in  the  absence  of  direct  conduct  is 

 2    especially inappropriate here, where the “agent” is an authoritarian 

 3    regime  and  the  “principal”—to  which  the  agent’s  “sins”  are 

 4    imputed—is the state that the regime tyrannized. The majority does 

 5    not cite to—nor do I know of—any decisions where the in pari delicto 

 6    defense  has  been  applied  against  a  foreign  sovereign  based  on  its 

 7    prior  government’s  conduct,  much  less  under  the  extraordinary 

 8    circumstances as issue here, where the wrongful conduct imputed to 

 9    the  foreign  sovereign  involved  the  subversion  of  a  humanitarian 

10    relief  program  designed  to  benefit  the  people  of  the  foreign 

11    sovereign.  Courts  have,  however,  long  rejected  efforts  to  invoke 

12    equitable  defenses  against  the  U.S.  government  and  its  agencies, 

13    concluding  that  such  defenses  may  not  be  “applied  to  frustrate  the 

14    purpose of [the United States’] laws or to thwart public policy.” Pan‐

15    Am. Petroleum & Transp. Co. v. United States, 273 U.S. 456, 506 (1927); 




                                           23
       
 1    see, e.g., United States v. Philip Morris, Inc., 300 F. Supp. 2d 61, 75‐76 

 2    (D.D.C. 2004).  

 3           The  majority  cites  to  New  York  case  law  holding  that  the 

 4    wrongdoing  of  corporate  managers  and  agents  may  be  imputed  to 

 5    the  corporation  in  the  application  of  the  in  pari  delicto  defense.  See 

 6    Maj. Op. at 32‐33 (discussing Kirschner v. KPMG LLP, 15 N.Y.3d 446, 

 7    466‐67 (2010). But even in that context courts are not uniform in their 

 8    views.  In  deciding  whether  to  give  effect  to  the  in  pari  delicto 

 9    doctrine,  other  states  have  “draw[n]  a  sharp  distinction  between 

10    those who deal in good faith with the principal‐corporation . . . and 

11    those  who  do  not,”  concluding  that  “the  ordinary  rationale 

12    supporting  imputation  breaks  down  completely  in  scenarios 

13    involving secretive, collusive conduct between corporate agents and 

14    third  parties,”  such  as  where  an  auditor  conspires  with  corporate 

15    management  to  defraud  a  corporation.    Official  Comm.  of  Unsecured 

16    Creditors  of  Allegheny  Health  Educ.  &  Research  Found.  v. 




                                             24
       
 1    PricewaterhouseCoopers,  LLP,  605  Pa.  269,  305‐06  (2010).  “[B]ecause 

 2    imputation rules justly operate to protect third parties on account of 

 3    their  reliance  on  an  agent’s  actual  or  apparent  authority,”  these 

 4    courts  reason,  “such  principles  do  not  (and  should  not)  apply  .  .  . 

 5    where  both  the  agent  and  the  third  party  know  very  well  that  the 

 6    agent’s  conduct  goes  unsanctioned  by  one  or  more  of  the  tiers  of 

 7    corporate governance.” Id. at 307; see also NCP Litig. Trust v. KPMG 

 8    LLP,  187  N.J.  353,  371  (2006)  (“[T]he  imputation  defense  exists  to 

 9    protect innocent third parties from being sued by corporations whose 

10    agents  have  engaged  in  malfeasant  behavior  against  those  third 

11    parties.” (emphasis added)). The same logic applies here, where the 

12    defendants  allegedly  engaged  in  secretive,  collusive  conduct  with 

13    the Hussein Regime, while knowing full well that their conduct was 

14    illegal under U.S. law.  

15           The  relationship  between  a  corporation  and  its  officers  also 

16    differs  in  several  obvious  respects  from  the  relationship  between  a 




                                            25
       
 1    sovereign  state  and  its  government—particularly  where  that 

 2    government  is  an  authoritarian  regime—rendering  the  policy 

 3    justifications  that  might  support  imputation  in  the  former  context 

 4    altogether inapplicable in the latter. The New York Court of Appeals 

 5    has  justified  imputing  the  acts  of  corporate  officers  to  the 

 6    corporation itself by observing that “imputation fosters an incentive 

 7    for a principal to select honest agents and delegate duties with care.” 

 8    Kirschner, 15 N.Y.3d at 466. But Saddam Hussein seized power in a 

 9    military coup; his regime maintained its control over the Iraqi state 

10    through “extensive, systematic, and continuing human rights abuses 

11    .  .  .  ,  including  summary  executions,  mass  political  killings, 

12    disappearances,  widespread  use  of  torture,  arbitrary  arrest  and 

13    prolonged  detention  without  trial  of  thousands  of  political 

14    opponents,  forced  relocation  and  deportation,  denial  of  nearly  all 

15    civil  and  political  rights  such  as  freedom  of  association,  assembly, 

16    speech, and the press, and the imprisonment, torture, and execution 




                                           26
       
 1    of children.” § 586F(a)(4), 164 Stat. at 250. Allowing the in pari delicto 

 2    defense  under  these  circumstances  excises  the  doctrine’s 

 3    requirement that the plaintiff be an “an active, voluntary participant 

 4    in the unlawful activity that is subject of the suit,” Pinter, 486 U.S. at 

 5    636—transforming a defense founded “upon the court’s repugnance 

 6    to  the  suitor  personally,”  Art  Metal  Works,  70  F.2d  at  646  (Hand,  J. 

 7    dissenting), into a rule of derivative guilt.  

 8           Insulating  the  defendants  from  liability  to  the  Republic  for 

 9    their alleged wrongdoing is, moreover, contrary to public policy, the 

10    second prong of the in pari delicto test. RICO’s express private right 

11    of action is designed to aid “in eradicating organized crime from the 

12    social  fabric”  by  “divest[ing]  the  [defendant]  of  the  fruits  of  its  ill‐

13    gotten gains.” United States v. Turkette, 452 U.S. 576, 585 (1981). This 

14    goal  is  especially  important  when  the  alleged  conspiracy 

15    undermined a trade embargo established—with the support of both 

16    political  branches—in  response  to  “an  unusual  and  extraordinary 




                                              27
       
 1    threat  to  the  national  security  and  foreign  policy  of  the  United 

 2    States,” Exec. Order No. 12,722, 55 Fed. Reg. 31,803 (Aug. 2, 1990); § 

 3    586C, 104 Stat. at 2048, and corrupted a humanitarian relief program 

 4    designed to alleviate the “near apocalyptic results” that the embargo 

 5    and the Hussein Regime’s ongoing brutality had on the Iraqi people. 

 6    The  in  pari  delicto  defense  is  “based  not  on  solicitude  for  the 

 7    defendant,  but  on  concern  for  the  public  welfare,  and  thus  when 

 8    application  of  the  doctrine  would  not  be  in  the  public  interest,  the 

 9    courts  will  permit  recovery.” In  re  Leasing Consultants  Inc.,  592  F.2d 

10    103, 110 (2d Cir. 1979). Accordingly, I do not believe that we should 

11    allow  the  defense  where  it  leads  to  results  so  clearly  at  odds  with 

12    U.S. public policy.  

13           Indeed, the application of the in pari delicto defense in this case 

14    leads  to  a  result  that  directly  contradicts  U.S.  policy  towards  Iraq 

15    throughout the relevant time. U.S. policy towards Iraq did not treat 

16    the  Iraqi  state  as  collectively  complicit  in  the  Hussein  Regime’s 




                                            28
       
 1    conduct. From the beginning, the economic sanctions recognized an 

 2    exception  for  “donations  of  articles  intended  to  relieve  human 

 3    suffering,  such  as  food,  clothing,  medicine  and  medical  supplies 

 4    intended  strictly  for  medical  purposes.”  Exec.  Order  No.  12,722  § 

 5    2(b);  see  also  §  586C(b),  104  Stat.  at  2048;  Exec.  Order  No.  12,724  § 

 6    2(b),  55  Fed.  Reg.  33,089  (Aug.  9,  1990);  S.C.  Res.  661,  para.  4,  U.N. 

 7    Doc. S/RES/661 (Aug. 6, 1990) (recognizing exception for “payments 

 8    exclusively for strictly medical or humanitarian purposes”). The core 

 9    premise  of  the  Oil‐for‐Food  Programme  was  that  the  Hussein 

10    Regime  should  be  permitted  to  sell  its  oil  on  the  international 

11    market,  provided  “that  all  States  .  .  .  take  any  steps  that  may  be 

12    necessary  .  .  .  to  ensure  that  the  proceeds  of  the  sale  [were]  not 

13    diverted  from”  the  authorized  purposes.  S.C.  Res.  986,  paras.  8,  14, 

14    U.N.  Doc.  S/RES/986  (Apr.  14,  1995).  Far  from  treating  the  entire 

15    state  as  complicit  in  the  Regime’s  conduct,  in  1998,  in  the  midst  of 

16    the trade embargo, the U.S. Congress approved the appropriation of 




                                              29
       
 1    five  million  dollars  to  support  “Iraqi  democratic  opposition” 

 2    through  “such  activities  as  organization,  training,  communication 

 3    and  dissemination  of  information,  developing  and  implementing 

 4    agreements among opposition groups, [and] compiling information 

 5    to support the indictment of Iraqi officials for war crimes . . . .” 1998 

 6    Supplemental  Appropriations  and  Rescission  Act,  Pub.  L.  No.  105–

 7    174, § 10008, 112 Stat. 58, 101.  

 8           The  majority’s  discussion  of  the  second  prong  of  the  in  pari 

 9    delicto defense concludes in general terms that “it is consistent with 

10    the  purpose  of  RICO  to  recognize an  in  pari  delicto  defense  in  cases 

11    where,  as  a  direct  result  of  the  plaintiff’s  affirmative  wrongdoing, 

12    the  plaintiff  bears  at  least  substantially  equal  responsibility  for  the 

13    RICO  violations  of  which  it  complains.”  Maj.  Op.,  ante,  at  35 

14    (internal citations and quotation marks omitted). Other circuits that 

15    have  recognized  the  in  pari  delicto  defense  in  the  RICO  context, 

16    however,  did  so  in  circumstances  where  allowing  the  plaintiff  to 




                                             30
       
 1    recover  “under  RICO  would  not  divest  RICO  violators  of  their  ill‐

 2    gotten  gains;  it  would  result  in  a  wealth  transfer  among  similarly 

 3    situated  conspirators.”  Official  Comm.  of  Unsecured  Creditors  of  PSA, 

 4    Inc. v. Edwards, 437 F.3d 1145, 1155 (11th Cir. 2006); see also Rogers v. 

 5    McDorman,  521  F.3d  381,  391  (5th  Cir.  2008)  (recognizing  in  pari 

 6    delicto  defense  to  RICO  claims  where  the  “scheme  could  not  work 

 7    without  [the  plaintiffs’]  active  participation,”  and  observing  that 

 8    “[t]his is not a situation where an innocent or passive victim is being 

 9    deprived  of  a  RICO  remedy”).  Here,  by  contrast,  allowing  the 

10    Republic  to  recover  under  RICO  from  the  individuals  and 

11    corporations  that  allegedly  conspired  to  subvert  the  Programme 

12    would divest RICO violators of their illegal profits, and would allow 

13    compensation  for  the  ultimate  victims  of  the  defendants’  alleged 

14    fraud.  

15           The  application  of  the  in  pari  delicto  defense  demands  that 

16    courts  carefully  scrutinize  the  specific  plaintiff’s  alleged  conduct  in 




                                            31
       
 1    relation  to  the  relevant  public  policy.  In  Perma  Life  Mufflers,  Inc.  v. 

 2    International  Parts  Corp.,  for  instance,  the  Supreme  Court  addressed 

 3    the question of whether Midas Muffler franchisees who knew about 

 4    allegedly  anti‐competitive  clauses  in  their  franchise  agreements 

 5    could  later  bring  an  antitrust  claim.  392  U.S.  134,  140  (1968). 

 6    Observing that “the purposes of the antitrust laws are best served by 

 7    insuring  that  the  private  action  will  be  an  ever‐present  threat  to 

 8    deter  anyone  contemplating  business  behavior  in  violation  of  the 

 9    antitrust laws,” the Court declined to bar antitrust plaintiffs’ claims, 

10    concluding that, in light of the economic power of the franchisor, the 

11    franchisees’  “participation  was  not  voluntary  in  any  meaningful 

12    sense.”  Id.  at  139‐40.  In  Bateman  Eichler,  Hill  Richards,  Inc.  v.  Berner, 

13    the Supreme Court again declined to apply the in pari delicto defense, 

14    this  time  in  the  context  of  a  securities  action  brought  by  investors 

15    who  made  trades  on  the  basis  of  “inside  information”  that  turned 

16    out to be false. 472 U.S. at 301‐02, 317. Noting the important role that 




                                              32
       
 1    private actions play in the securities enforcement system, the Court 

 2    rejected  the  suggestion  “that  an  investor  who  engages  in  [insider] 

 3    trading  is  necessarily  as  blameworthy  as  a  corporate  insider  or 

 4    broker‐dealer  who  discloses  the  information  for  personal  gain,” 

 5    concluding that such a finding would ignore “important distinctions 

 6    between the relative culpabilities of tippers, securities professionals, 

 7    and  tippees.”  Id.  at  312‐13.  Finally,  in  Pinter  v.  Dahl—another 

 8    securities  action,  this  time  involving  claims  based  on  the  unlawful 

 9    sale  of  unregistered  securities—the  Supreme  Court  rejected  the 

10    suggestion  that  “a  purchaser’s  knowledge  that  the  securities  are 

11    unregistered can[], by itself, constitute equal culpability, even where 

12    the investor is a sophisticated buyer who may not necessarily need 

13    the  protection  of  the  Securities  Act.”  486  U.S.  at  636.  “Because  the 

14    [Securities]  Act  is  specifically  designed  to  protect  investors,”  the 

15    Court  reasoned,  “even  where  a  plaintiff  actively  participates  in  the 

16    distribution of unregistered securities, his suit should not be barred” 




                                            33
       
 1    except where his role was “more as a promoter than as an investor.” 

 2    Id. at 638‐39. 

 3           Aside  from  demonstrating  how  narrowly  the  in  pari  delicto 

 4    defense  is  circumscribed  in  light  of  public  policy  considerations, 

 5    these decisions reflect the specificity with which the Supreme Court 

 6    determines  the  defense’s  availability.  The  question  answered  in 

 7    these  decisions  is  not  simply  whether  the  in  pari  delicto  defense 

 8    operates in the context of an antitrust or securities claim. Rather, the 

 9    question  is  whether  the  Court  should  recognize  a  “broad  rule  of 

10    caveat tippee,” Bateman Eichler, 472 U.S. at 315, or whether the in pari 

11    delicto defense bars a claim by “a plaintiff [who] actively participates 

12    in  the  distribution  of  unregistered  securities”  but  whose 

13    “promotional efforts are incidental to his role as an investor,” Pinter, 

14    486 U.S. 638‐39.  

15           Even  if  the  in  pari  delicto  defense  may  properly  be  applied  to 

16    bar a plaintiff’s RICO claims in some circumstances, therefore, I do 




                                            34
       
 1    not  believe  that  it  should  here.  The  U.S.  public  policy  behind  the 

 2    economic  sanctions  against  Iraq  and  the  Programme  was  critically 

 3    important to our national interests. There are, moreover, “important 

 4    distinctions  between  the  relative  culpabilities”  of  the  defendants, 

 5    which allegedly participated in the fraud of their own choosing and 

 6    for  vast  profits,  and  the  Republic,  whose  “responsibility”  for  a 

 7    scheme  that  deprived  its  own  civilian  population  of  desperately 

 8    needed humanitarian relief is entirely derivative of an authoritarian 

 9    regime that has now been overthrown. Bateman Eichler, 472 at 312‐13. 

10                                   *      *      * 

11           Courts  should  proceed  cautiously  in  cases  that  implicate 

12    foreign relations, cognizant that the “courts[’] . . . powers to further 

13    the  national  interest  in  foreign  affairs  are  necessarily  circumscribed 

14    as compared with those of the political branches.” Banco Nacional de 

15    Cuba, 376 U.S. at 412. But allowing the Republic’s claims to proceed 

16    in this case would not cross the guideposts that have long operated 




                                            35
       
 1    to ensure that the courts do not encroach on areas properly reserved 

 2    for the political branches. Allowing the Republic’s claims to proceed 

 3    would  not  violate  the  doctrine  that  U.S.  nationals  may  safely  carry 

 4    on  business  transactions  with  the  recognized  government  of  a 

 5    foreign state, confident that the validity of such agreements will not 

 6    be called into question based on the legitimacy of the government or 

 7    its subsequent overthrow. See Guar. Trust Co. of N.Y., 304 U.S. at 137. 

 8    Nor  would  allowing  the  Republic’s  claims  to  proceed  in  any  way 

 9    conflict  with  the  act  of  state  doctrine,  since  adjudicating  the  case 

10    would not “require[] a court in the United States to declare invalid 

11    the  official  act  of  a  foreign  sovereign  performed  within  its  own 

12    territory.” W.S. Kirkpatrick & Co., 493 U.S. at 405. 

13           But  I  see  no  reason  to  embrace  a  novel  application  of  the  in 

14    pari  delicto  defense  to  immunize  the  defendants  from  liability  for 

15    conduct that was illegal under U.S. law from the very beginning and 

16    that  undermined  an  important  U.S.  policy.  The  Supreme  Court  has 




                                            36
       
 1    cautioned against “expanding judicial incapacities” to hearing cases 

 2    simply because they have an international dimension, observing that 

 3    “[c]ourts  in  the  United  States  have  the  power,  and  ordinarily  the 

 4    obligation,  to  decide  cases  and  controversies  properly  presented  to 

 5    them.” Id. at 409. The plaintiff here alleges that it was the victim of a 

 6    fraud.  The  vast  scale  of  the  alleged  fraud  does  not  render  the 

 7    Republic’s  allegations  any  less  proper  for  judicial  resolution,  and  I 

 8    believe  it  is  more  consistent  with  principles  of  equity  to  hold  the 

 9    defendants  accountable  for  their  own  role  than  to  impute  to  the 

10    plaintiff the wrongdoing of its former authoritarian regime. 




                                            37
       
