Shiawase Corporation v. Nuclear Regulatory Commission (2001), also known as the Shiawase Decision, was a landmark 2001 Supreme Court of the United States case that established corporate extraterritoriality. The decision made Shiawase Corporation the first megacorporation.
Facts of the Case
Nuclear Regulatory Commission v. Shiawase Corporation (2000)Edit
In 1997, Shiawase Corporation opened an aluminum production factory in California. The plant was powered by the regional utility grid. Electricity prices went through a 550% rise over six months.
In 1998, Shiawase filed a request to the United States Nuclear Regulatory Commission (NRC) to build a nuclear power plant. They planned to install a small nuclear reactor, similar to a research reactor, would have had a limited output only dedicated to power the factory.
Shiawase’s request was turned down by the NRC. The commission was arguing the hazard presented by nuclear power plant were acceptable only if they were balanced by public interest ; for this reason, they refused to allow a nuclear reactor that did not have a direct commercial or research purpose. The case was brought to justice, up the Supreme Court. Shiawase claimed it was fulfilling all the requirements for such plant, and its output would answer to their existing needs. It accused the commission of overriding its prerogatives by intervening not on the electricity market, but on the aluminum market.
The NRC thought they had a strong legal basis : Wickard v. Filburn (1942) had long established the government power to regulate trade allowed it to regulate non-commercial activities that had an impact on trade. Aware of their opponent’s strategy, Shiawase lawyers shattered it as the trial started. Wickard v. Filburn allowed the government to prevent overproduction to drive up agricultural price, while in this case, both the electricity and aluminum production were unable to reach the demand, and rising price weren’t, the government itself admitted it, a goal they pursued.
Predictably, the NRC lost in the district court and the Ninth Circuit court of appeal.
The case went to the Supreme Court. In the summer of 2000, judges again validated Shiawase lawyers line of reasoning on trade regulation, authorizing the building of the nuclear plant. But the case also made the Supreme Court review all the requirements the NRC had put on. Among them, the NRC required local police forces to be permanently involved in the plant security. This regulation had been put into place precisely to get around United States v. Seretech (1999), who made the authorities the last resort when a corporation was unable to fulfill its obligations. The Supreme Court, seemingly disgruntled to see their recent holding – the Seretech Decision – already contested by the executive power, struck down the demand, reaffirming the corporations’ responsibility in securing their activities ahead of any government involvement.
The TerraFirst! Attack
The lawsuit of Shiawase against the NRC brought media attention on the Shiawase factory and power plant, which was completed within months as most of its elements had already been built in Singapore.
Shiawase completed construction of its power plant in late 2000. The Supreme Court decision garnered the power plant much attention, making it an attractive target for eco-terrorists. The ecoterrorist group TerraFirst! attempted to breach the reactor, allowing nuclear material to contaminate the area. The special forces team assigned to the task used military-grade weapons and had enough explosives to carry out their plans. Well-equipped and prepared, they were able to reach the outside of the containment zone before they were detected and fatally neutralized in total by Shiawase security forces before they reached the containment building,
TerraFirst! later gathered evidence that Shiawase had conspired with other corporations to stage the attack, but the evidence was destroyed when the terrorist group’s California office was bombed; an act believed by many to be the first shadowrun.
The Nuclear Regulatory Commission prosecuted Shiawase Corporation for criminal negligence and reckless endangerment. The NRC’s case was that Shiawase maintained inadequate security measures, allowing the terrorists to penetrate the outer perimeter of the plant. Shiawase offered in its defense evidence that they could have defended against a group three times the size of the TerraFirst! team. It also contended that it was NRC regulations that prevented Shiawase from implementing more effective security measures in the first place, and the terrorists have been able to enter the site only because the NRC had forced Shiawase to separate the nuclear power plant security system from the aluminium production factory. Shiawase argument also detailed several dozen of regulations and laws whose enforcement were weakening the power plant security level.
Following the recent decisions United States v. Seretech (1999) and Nuclear Regulatory Commission v. Shiawase (2000), Shiawase reminded it had security obligations when exploiting a nuclear power plant. If the government was enacting laws and regulations who prevented the adequate level of security for a nuclear plant, then it couldn’t allow its exploitation. It was implicitly doing it by not allowing a private person to built a nuclear reactor. Calling upon both Lochner v. New York (1905) and West Coast Hotel Co. v. Parrish (1937), the corporation’s lawyers were reminding the Supreme Court permitted the government to restrict the liberty of contract guaranteed by the Fifth and Fourteenth Amendments only for specific reasons, to protect security, health, morals and the welfare of the people. When a regulation or a law resulted in actually threatening security, health, morals or the welfare of the people, the government should no longer retain such permission. Shiawase gave the court and the government a choice: shut down all the nuclear power plants in the US, or give their owners complete freedom to fulfill the security requirements. Their argument used for the first time the concept of corporate extraterritoriality to ask for a differentiated enforcement of the law inside corporation facilities.
After several weeks of deliberation, the Supreme Court gave its verdict, in favor of Shiawase. Foreseeing the consequences of their decision, the judges attempted to limit its reach. They detailed the activities for which jurisprudence allowed to affirm they could affect without doubt security, health, morals and welfare. In addition to nuclear power plants, they extended the reasoning to chemicals, waste processing, armaments and services related to national security, water and food supplies, and hospitals. In these activities, the corporations and their providers and subcontractors were having from then on a complete freedom of contract. The government could no longer regulate beyond customers contracts. Salaries, working hours, security procedures and measures, and use of equipment or process were now free of any sort of regulations as long as it did not affect the product or the service sold. The judges also restricted this freedom of contract to the working place, thus preventing employers to infringe on employees rights outside: corporate property was sovereign and not subject to the jurisdiction of the surrounding nation-state.. They were establishing the extraterritoriality principle Shiawase lawyers had exposed.