The U.S. Supreme Court said Monday it will consider a lawsuit against Royal Dutch Shell PLC (RDSA, RDSA.LN) to decide whether corporations can be sued in U.S. courts for allegedly aiding human-rights abuses overseas.

The case examines whether corporations can be held liable under a 1789 law passed by the first U.S. Congress. The law, the Alien Tort Statute, allows foreign citizens to file U.S. lawsuits based on alleged violations of international law.

The law was rarely used for two centuries, but plaintiffs have relied on it in recent years to target companies for their alleged complicity in abuses committed in other countries.

The court also agreed to consider a second abuse case, involving torture allegations against the Palestinian Authority and the Palestine Liberation Organization, that could affect lawsuits against corporations.

At issue in the Shell case is a lawsuit brought by a group of Nigerians from the country's Ogoni region who allege the oil giant was complicit in human-rights abuses from 1992 to 1995. The plaintiffs allege that Shell subsidiaries enlisted the aid of the Nigerian government to suppress local opposition to oil exploration there. They allege government forces killed and abused Ogoni residents, and destroyed their property.

Shell has denied the allegations. A Shell spokeswoman said it would be inappropriate to comment on the matter while it is before the court.

The Second U.S. Circuit Court of Appeals in New York threw out the lawsuit last year, ruling 2-1 that corporations can't be sued under the Alien Tort Statute. The court's majority ruled that international law does not recognize corporate liability for international crimes.

Two other appeals courts issued rulings this summer that explicitly disagreed with the Second Circuit on corporate liability.

In one case, a Washington-based federal appeals court in July reinstated a lawsuit by Indonesian villagers that seeks to hold Exxon Mobil Corp. (XOM) liable for alleged killings and torture committed by Indonesian soldiers guarding its natural-gas operations. Exxon has said the claims are baseless.

In a case involving allegations against Firestone Natural Rubber Co., a subsidiary of Bridgestone Corp. (BRDCY, 5108.TO), a Chicago-based federal appeals court ruled in July that corporations can be liable under the Alien Tort Statute. However, that court proceeded to rule for Firestone on other grounds, saying the plaintiffs' allegations, involving charges of child labor at a Liberian rubber plantation, were inadequate.

The Supreme Court will hear oral arguments in the Shell case early next year, with a decision expected by the end of June. Even if the high court rules against Shell on the question of corporate liability, the company still may prevail in the underlying case.

At the Second Circuit, Judge Pierre Leval was highly critical of the court's ruling that corporations can't be sued for international law violations, but he went on to say that Shell should win anyway. Leval said the lawsuit did not support a plausible assertion that Shell gave assistance to the Nigerian military and police for the purpose of facilitating human rights abuses.

The case is Kiobel v. Shell Petroleum N.V., 10-1491.

In the related Palestinian case, the court will consider a lawsuit brought by the family of Palestinian-American Azzam Rahim, who alleged he was tortured and killed while in the custody of Palestinian Authority intelligence officers.

Palestinian authorities have denied any liability for Rahim's death.

The justices will use the case to examine a different and more recent law, the Torture Victim Protection Act, which allows abuse victims to seek financial damages from individuals who committed torture. The question is whether the law, enacted in 1992, also allows claims against organizations.

A federal appeals court in Washington ruled the Palestinian Authority and the PLO could not be sued because the torture-victim law only allows lawsuits against natural persons. If the Supreme Court agrees, such a decision likely would mean that corporations can't be sued under the 1992 law.

Lower courts have been more willing to allow lawsuits against corporations under the Alien Tort Statute than under the torture victim law.

-By Brent Kendall, Dow Jones Newswires; 202-862-9222; brent.kendall@dowjones.com

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