Opinio Juris

A recent op-ed published in the New York Times suggested that the states of the United States should do just that. Thomas W. Evans, who had been an adviser to Presidents Ronald Reagan and George H. W. Bush, argued that OPEC's actions violate U.S. antitrust law and artificially raises the prise of gasoline. However, he noted that the act of state doctrine may present a problem in terms of suing a foreign government:

Despite this illegal conduct, not everyone can sue OPEC and succeed. In 2002, a federal court dismissed a class-action lawsuit brought against OPEC by a gas station owner. An appeals court agreed, noting that “under the current state of our federal laws the individual member states of OPEC are afforded immunity from suit brought for damage caused by their commercial activities when they act through OPEC.”

The “current state of our federal laws” refers to the “act of state doctrine,” which was first enunciated by the Supreme Court in 1897 with the following words: “Every sovereign state is bound to respect the independence of every other sovereign state, and the courts of one country will not sit in judgment on the acts of the government of another, done within its own territory.”...

Fortunately, there is another way to sue OPEC. Even if actions by individual citizens fail, a seldom-used provision of Article III of the Constitution grants original jurisdiction to the Supreme Court over lawsuits brought by states against “foreign states” and, as expanded by the United States Code, over “aliens.”

The attorneys general of the various states should sue OPEC as an alien or, pleading alternatively, as a foreign state.

He then argued that:

The states should contend that Article III of the Constitution outweighs the act of state doctrine. Respect for the sovereignty of a foreign government for acts “done within its own territory” does not, even if very liberally construed, protect decisions reached by a cartel based in Austria that directs 13 nations to sell their product at inflated prices to customers outside their boundaries.

Really? Because it seems like courts have been holding the other way. (He does suggest, however, presidential letters of support to make it more likely for courts to take jurisdicition.) I was under the impression that someone who was a Reagan and Bush adviser would be wary of asking courts to toss out accepted legal precedent so that they could then step into a poltical dispute between our country and one or more foreign countries. But then again, I guess we are addicted to oil and addicts can go to great lengths to get a fix...

Anyway, for a rejoinder to Evans' op-ed, see this post by Matt Stone at the Global Buzz explaining six reasons why suing OPEC is a bad idea. I will quote one reason:

As Thomas Walde, a professor at the University of Dundee, [has explained], OPEC is not a "cartel" in the legal sense of the word because it is a collection of governments, not private companies. A plausible defense could be that OPEC actions constitute a "joint resource conservation effort" and not market manipulation per se.

And, I would also add that if we want to focus on regulatory efforts, perhaps instead of diving into the contentious judicial power/ foriegn policy debate, we should start closer to home and look at smarter regulation of the (possible) effects of oil speculation in the New York Mercantile Exchange. The effects of oil speculation are still debated. However, to give a sense of their possible effects, I rememember back in the good old days when oil was just hitting $100 per barrel (what was that, April?), one research firm estimated that about a 20% of the price was due to speculation in oil-denominated securities by investment banks, hedge funds, and pension funds, not by foreign governments as Evans implied. But see also this piece, which is skeptical of whether increased oversight of the futures market would actually affect the price of oil.

I doubt the "sue OPEC" idea has much traction (or much of a chance of success). The market regulation angle seems to be getting at least some support from both sides of the aisle and from both candidates. But it remains to be seen if this would actually affect oil prices. Stay tuned (and off the roads...).