STEYNING, United Kingdom -- U.S. nonproliferation officials and experts are exploring the potential use of civil litigation as a new way to penalize those involved in the illicit export of nuclear-related technology (see GSN, Oct. 16).
(Oct. 30) -
Former top Pakistani nuclear scientist and proliferator Abdul Qadeer Khan, shown in April. Experts say civil litigation could be one possible tool for countering smugglers of nuclear technology and materials (Rizwan Tabassum/Getty Images).
This is just one of a variety of fresh tools aimed at combating the international proliferation of sensitive nuclear-related materials. Others recommended at a conference here include measures to more effectively track sensitive exports and to encourage divestment in companies that have violated export controls (see related GSN story, today).
"Civil litigation has the potential to ... be a powerful tool in holding proliferators accountable, and in some cases even deterring them," said Orde Kittrie, an Arizona State University professor specializing in international law and nonproliferation.
Interest in civil litigation is growing based on the view that successful lawsuits might yield even stronger penalties for proliferators than criminal prosecution has typically produced. Criminal convictions have been difficult to achieve because of high courtroom standards for evidence, and sentencing has been relatively light for those few found guilty to date.
"The immense profits [of] such activities often easily outweigh the penalties imposed," said Victor Comras, an attorney and consultant on international sanctions and export control issues.
"Prosecutions are critical but they are very hard to pull off and too often don't result in substantial penalties," according to Leonard Spector, deputy director of the James Martin Center for Nonproliferation Studies at the Monterey Institute of International Studies. "So we need to be using other tools in addition."
For day-to-day enforcement, the U.S. Commerce Department has used an array of civil enforcement mechanisms to curb proliferation of dual-use and sensitive items, according to Kevin Delli-Colli, acting assistant commerce secretary for export enforcement. Those include warning letters, monetary fines of up to $250,000 per transaction, and denial of export privileges, he said.
Dual-use commodities controlled by U.S. Export Administration Regulations include items -- like specialized ball bearings or pumps -- that have both commercial and military applications. Other restricted items include particular kinds of software and militarily sensitive technologies, Delli-Colli said.
To sell these goods abroad, U.S. companies are required to obtain an export license under certain circumstances. In some instances, export would be prohibited, such as to proscribed destinations like Iran or North Korea.
One successful U.S. government prosecution was against Asher Karni, an Israeli citizen working in South Africa, for being part of a conspiracy to sell nuclear-weapon materials to Pakistan. The case focused on the sale of 200 triggered spark gaps, a technology with civil applications that can also be used in detonating nuclear devices. In 2005, a U.S. federal court sentenced Karni to three years in prison (see GSN, Aug. 7, 2008).
Taking proliferators to civil court could hold the additional promise of raising the financial stakes for trafficking in illegal nuclear weapons technology, according to experts. That, in turn, might act as a serious deterrent to lax or unscrupulous exporters.
"There is growing recognition in many countries that victims should ... have the means to hold those culprits responsible for their injuries civilly and [financially] responsible for the damage they cause," Comras said.
Civil cases might piggyback onto successful criminal prosecutions -- heightening the penalty for violators -- or represent the sole financial punishment in cases where criminal prosecution has failed.
At the conference here last week, more than three dozen U.S. and European government officials and issue experts appeared to agree that the world's nonproliferation efforts stand at a perilous tipping point.
If global regimes such as voluntary inspections and U.N. sanctions are unable to prevent Iran from developing a nuclear weapon, barriers to further proliferation in the region and around the globe could fall rapidly, several participants remarked. The possibility that Iran or others might transfer nuclear-weapon materials or technologies to terrorists is another looming worry.
Ground rules for the Wilton Park conference on new approaches to penalizing nuclear smuggling, held south of London in the West Sussex countryside, were that participants offering remarks would not be named. Those specifically identified in this article gave Global Security Newswire permission to do so.
A number of recent developments have prompted heightened interest in the potential use of civil litigation to help stem illicit nuclear-related trafficking.
One is the U.S. Treasury Department's success in freezing Iranian assets and preventing U.S. citizens from doing business with banks or other entities that support Iran's suspected nuclear-weapon program. These actions have limited Tehran's ability to secure credit for energy project transactions, among other things (see GSN, Oct. 9).
Drawing authority from executive orders issued by the White House, Treasury's crackdown began in 2006 during the Bush administration and is likely to continue under President Barack Obama, a key department official recently testified (see GSN, Oct. 7).
Meanwhile, civil litigation has demonstrated some success in a related arena: countering terrorism.
A federal court in September 2007 found Iran responsible for supporting terrorists in the 1983 bombing of the U.S. Marine Corps barracks in Beirut, Lebanon, and blocked Tehran's ability to access $2.6 billion of its funds in U.S. banks. The civil lawsuit was filed by relatives of the 241 U.S. military personnel killed in the bombing.
Though plaintiffs' attorneys are still fighting to win U.S. government approval for release of Iranian funds to victims' families, the court has already acted to freeze these huge investment accounts. That alone has imposed a steep financial penalty on Iran, experts said.
The impact of such actions is beginning to add up, according to Iran-watchers. Last year, 60 Iranian economists issued an open letter warning that Tehran's confrontational approach was costing the nation "a heavy price" in lost trade and investment.
A key lesson learned from these developments is that taking direct action to hamstring a nation's economic institutions can be speedier and more effective than the application of traditional sanctions, under which typically slow-to-act national or international political entities block the shipment of goods (see GSN, Feb. 23).
Going To Court
How would civil litigation work?
"Lawsuits by innocent corporations whose goods have been diverted to Iran or North Korea by unscrupulous middlemen might be [an] avenue, if the target had held on to substantial profits from the deal," said Spector, whose center helped organize the Wilton Park conference.
For example, conferees suggested that a potential future plaintiff might be a U.S. company that sells a dual-use technology to another company that has misrepresented the identity of the end-user. Company No. 2 goes on to sell the technology to an Iran or North Korea for its nuclear-weapons program.
Revelations about the illicit transaction could result in heavy fines for Company No. 1 and damage to its reputation. So, under this scenario, Company No. 1 sues Company No. 2 or the end-user for damages.
In a variation on this example, a lawsuit might be directed against the "financial institutions that negligently allowed themselves to be used to facilitate such transactions," said Comras, referring to entities that provide credit, which is often vital to making such deals work.
However, these illustrations are merely notional, experts hastened to say. Some conference participants were somewhat reluctant to spell out exactly what the future basis might be for litigation related to clandestine nuclear technology transfers.
"All cases are fact driven," said Steven Perles, lead counsel in the Beirut bombing lawsuit. "Each fact pattern would have to be independently assessed."
Unlike the Beirut terrorism case, a civil lawsuit against a nuclear-technology trafficker would presumably be filed after a clandestine or sting transaction, but before any atomic weapon could be detonated that would create victims.
One participant in last week's conference noted that the absence of "blood in the courtroom" could hamper successful litigation in such cases, since the harm stemming from illicit technology transfers would be somewhat speculative. A court victory would depend more on demonstrating the potential for harm than on illustrating the damage caused by an actual blast.
Yet, Kittrie underscored the need for Washington to act more aggressively to prevent such a catastrophe.
"It has been estimated that a detonation of one crude nuclear weapon in a U.S. city would kill as many as half a million people and cause as much as a trillion dollars in damage," he said. "That risk should be motivating the United States to place a far higher priority on catching, punishing and otherwise deterring WMD traffickers."
In the absence of a nuclear blast, a dearth of plaintiffs might be the greatest challenge for civil litigation, another conferee remarked. Few companies might want to step forward to file a lawsuit if it meant acknowledging that their legal compliance team erred in approving a sale, this participant explained.
Identifying defendants with deep enough pockets to justify the lawsuit might also prove difficult, some experts said. The threshold for filing a case could be damages sought of $20 million or more, based on the typically long duration of such litigation and a desire to impose penalties high enough to deter future smuggling.
According to one speaker, viable bases for lawsuits -- termed "causes of action" in legal vernacular -- might include:
-- Damage to reputation;
-- Breach of contract, if a purchaser agreed to comply with export control laws;
-- Fraud or misrepresentation, assuming a buyer provided false information about the end-user's identity or how the product would be used;
-- Misappropriation of trade secrets or patented technologies, if a licensing agreement is violated;
-- Public injury, perhaps comparable to the basis for consumer fraud or public morals cases; or
-- Securities fraud, for instances in which a publicly traded company knowingly trafficked in controlled merchandise.
Potential Obstacles and Drawbacks
Risks associated with using civil litigation more aggressively include the possibility that a foreign nation such as China -- which holds roughly $800 billion in U.S. debt -- might turn the tables and freeze Washington's access to credit. For this reason, the United States should embrace the tool only under limited circumstances, according to one conference speaker.
Another potential hitch is that, with growing risks of financial penalties for U.S. companies, technology business might simply shift overseas, a second participant said. Ironically, the export-control burdens on legitimate companies could also provide more business for black-market suppliers, benefitting the very organizations that U.S. and allied policies seek to impair.
The greatest potential benefit of civil litigation in this realm lies in the overlap between private gain and public good, said Harvey Rishikof, a professor of national security law at the National War College. He noted that the views expressed were his own and should not be associated with the college.
"Civil litigation presents a very interesting new potential tool if it is part of a 'public-private' partnership that furthers both the interests of the plaintiffs and a governmental interest," said Rishikof, who chairs the American Bar Association's Standing Committee on Law and National Security.
In such cases, the government might assemble much of the evidence and then share it with civil litigants, who take the case from there.
Nonetheless, the U.S. government might resist such a partnership out of a concern about ceding some of its foreign policy control, Kittrie said.
Specifically, once such litigation is launched, it could be difficult for the U.S. government to rein in or stop it, some conference participants noted. In an instance in which Iran became more compliant on nonproliferation issues, continued litigation against Tehran could become counterproductive, several experts said.
However, some conferees cited the bargaining power that such civil cases might offer the U.S. government in negotiating with a nation of concern. Winning plaintiffs typically rely on federal action to allow the release of frozen assets, so a diplomatic settlement might involve U.S. agreement on a lower financial penalty in exchange for ending the nation's nuclear weapons development program.
If necessary, the U.S. Congress could act to restrain the use of civil litigation, another expert said. If litigation remedies are unavailable, the U.S. government could compensate victims directly, as it has done for victims of the Sept. 11, 2001, terror attacks, this conference participant said.
Even so, "civil litigation against state sponsors of terrorism has been seen by some, including some executive branch officials, as unduly complicating or even reducing the president's discretion to conduct foreign policy," Kittrie said. "To some degree, that opposition stems from a lack of creativity."
As with litigation over terrorist acts, public-private collaboration on lawsuits aimed at stanching nuclear weapons proliferation holds "significant unexplored potential to achieve results that would benefit both the overall national interest and the interests of victims," he said.