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U.S. judge throws out Iraq lawsuit over U.N. aid program

By Jonathan Stempel

NEW YORK (Reuters) - A U.S. judge on Wednesday dismissed Iraq's lawsuit accusing dozens of companies of conspiring with Saddam Hussein's regime to frustrate the United Nations' oil-for-food program, and depriving Iraqis of roughly $10 billion of essential aid.

U.S. District Judge Sidney Stein in Manhattan said the government of Iraq could not recover damages and other remedies under an anti-racketeering law because most of the wrongful conduct took place in foreign countries.

He also said Iraq failed to allege the companies' conduct was a key reason for the injury, and that laws governing sovereign nations did not let the current government escape responsibility for Hussein's abuses.

"The court rejects Iraq's view that it may sidestep responsibility because the conduct was illegal or the actors held power illegitimately," he wrote.

More than 90 companies, subsidiaries and affiliates were named as defendants in the 2008 lawsuit over the $64.2 billion oil-for-food program, which ran from 1996 to 2003.

Among them were French bank BNP Paribas SA, which administered a U.N. escrow account for the program; Swiss engineering company ABB Ltd; Dutch chemicals company Akzo Nobel NV; U.S. oil company Chevron Corp; German automaker Daimler AG; British drugmaker GlaxoSmithKline Plc, and German electronics company Siemens AG.

"It is clearly the right decision," said Robert Bennett, a lawyer representing BNP Paribas. "I am enormously pleased."

Lawyer James Gillespie, representing ABB, said Stein "followed the arguments in the defendants' papers very closely, and in our view correctly applied the law."

Christian Siebott, a lawyer representing Iraq, did not immediately respond to requests for comment.

SURCHARGES AND KICKBACKS

The U.N. program let Iraq sell oil to finance the purchase of food, medicine and other goods for citizens hurt by international trade sanctions.

Many of the current government's allegations had been drawn from a scathing October 2005 U.N. report by a panel led by former U.S. Federal Reserve Chairman Paul Volcker.

According to the report, Iraq had sold $64.2 billion of oil to 248 companies under the oil-for-food program, while 3,614 companies sold $34.5 billion of humanitarian goods to Iraq.

Oil surcharges were paid in connection with the contracts of 139 companies, and humanitarian kickbacks in connection with the contracts of 2,253 companies, the report said.

RACKETEERING ALLEGED

In its lawsuit, Iraq said the Hussein regime defrauded the program by selling oil at below-market prices in exchange for kickbacks, and paying too much for food and medicine in exchange for side payments.

It said the defendants' involvement deprived Iraqi citizens of essential supplies that should have been paid from the escrow account.

While noting the parties' agreement that Hussein had been responsible for the alleged injustices, Stein rejected Iraq's effort to hold corporate defendants liable under the federal Racketeer Influenced and Corrupt Organizations Act, or RICO.

The judge said the alleged racketeering took place outside the United States, even though the United Nations is headquartered in New York, and that applying RICO to such "extraterritorial" activity would be improper.

Stein also rejected Iraq's effort to recover under the Foreign Corrupt Practices Act, saying federal law does not afford a private right of action.

Hussein lost power in 2003 and was executed in 2006.

The case is Iraq v. ABB AG et al, U.S. District Court, Southern District of New York, No. 08-05951.

(Editing by Jeffrey Benkoe and Doina Chiacu)

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