U.S. court rules against victims over Marcos money

WASHINGTON (Reuters) - The U.S. Supreme Court ruled on Thursday against nearly 10,000 victims of human rights abuses during the regime of Philippine ruler Ferdinand Marcos in a dispute over $35 million in an account held by the late dictator.

The decision was a victory for the government in Manila, which had argued the dispute over the money must be dismissed from the U.S. court system and should be settled in Philippine courts.

The justices overturned a ruling by a U.S. appeals court based in California that had sided with the victims. The high court decided the case must be dismissed.

Marcos, who ruled the Philippines for two decades until his overthrow in a "people power" uprising in 1986, and his family are accused of stealing up to $10 billion from the Philippines. Only a fraction of that amount has been recovered.

The dispute involved a New York brokerage account at Merrill Lynch & Co that Marcos set up in 1972 in the name of a suspected dummy corporation with a $2 million deposit.

The amount in the account has grown to more than $35 million. The shares of the suspected dummy corporation have been held in escrow by a Philippine bank until the courts in that country rule on ownership.

Lawyers for the victims argued they should get the $35 million as part of a $2 billion judgment in U.S. courts against the Marcos estate over human rights abuses under his rule.

Marcos, a key ally to the United States in Asia during Cold War fears of expanding communism, died in Hawaii in 1989.

When Merrill Lynch asked U.S. courts to decide the dispute, the Philippine government invoked sovereign immunity, the doctrine that bars a legal proceeding against a government without its consent. But a U.S. federal judge and the appeals court ruled in favor of the victims.

Lawyers for the Philippine government argued that invoking sovereign immunity represented an automatic rule for dismissing the U.S. case.

The Bush administration supported the Philippine government, while Philippine human rights groups and international law professors supported the victims.

The Supreme Court's majority opinion, written by Justice Anthony Kennedy, agreed with the Philippine government. Justices John Paul Stevens and David Souter dissented from part of the ruling, saying the case should go back for more proceedings before a federal judge.

(Reporting by James Vicini, Editing by David Alexander and John O'Callaghan)