A suite of the world’s best-known corporations, among them oil companies, pharmaceuticals manufacturers and makers of tyres and soft drinks, are finding that they have more in common than brand name recognition. All of them are, or have been, named as defendants in claims alleging complicity in human rights or environmental abuses in the developing world. Breaches of international law that, if they were committed at all, occurred out of sight but not out of mind.

The statute that brought them to the courtroom, the Alien Tort Claims Act (ATCA), has acquired a reputation for controversy. Seen through the prism of a confusing number of court decisions, the Act is either a powerful tool for policing corporate social responsibility or a spanner in the wheels of free trade and investment. It may even be, according to the Bush administration in the US, a handicap in the ‘war on terror’.

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Bad publicity

One thing is beyond doubt: the publicity that could accompany cases brought under ATCA is not favourable to those in the dock. Coca-Cola, for example, stands accused of inciting the Turkish militia to tear gas and beat workers who were sacked for joining a union. Firestone is alleged to have encouraged rubber tappers to use child labour to meet quotas on their plantations in Liberia.

Being sued for corporate malfeasance does not imply liability, however. Many, perhaps all, of these respondents will emerge from the courtroom either legally vindicated or only lightly bruised. But the potential for the statute to dredge something unsavoury from the corporate closet may be gathering speed.

ATCA was not drafted to be a tool with which to clobber wrongdoing corporations. The Act states that “[the district courts] shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States” and was originally conceived as a means of bringing to book acts of piracy and attacks on ambassadors committed outside the US. It remained dormant until 1979, when lawyers acting for the family of a 17-year-old Paraguayan, who was tortured to death in 1976 by the then inspector general of police, Américo Peña-Irala, dragged it out of obscurity.

The family of the young Paraguayan man, Joelito Filártiga, having moved to Brooklyn in New York, found that his killer had also become a New York citizen. They successfully sued for $10m and, although they never recovered a cent, they claimed a moral victory.

Scope for lawsuits

Lawyers acting for foreign plaintiffs saw possible scope to bring suits against corporate bodies using ATCA, and subsequent case law seemed to suggest that, in theory at least, they could. In the process, a number of companies fought and won but the legal possibility of using ATCA in this way was not forgotten.

In 1997, a group of Burmese villagers, assisted by lawyers in the US, brought a suit against Unocal for alleged complicity in human rights violations meted out by the Burmese military. As US litigations do, the case of Doe v. Unocal swung back and forth through the court system: allowed to proceed in 1997 by a federal district court, dismissed by the same court, then reversed by a circuit court. It was then stayed pending the resolution of another key ATCA case, Sosa v. Alvarez-Machain, in the Supreme Court.

There was no corporate liability issue in Sosa but the potential ramifications were still considerable. The defendants claimed that ATCA did not permit US courts to hear claims under the statute in the absence of Congress passing new legislation. If they won the point, many of the cases against corporations would be set back.

“Several institutions – not party to the litigation – filed amicus briefs during Sosa”, one of the attorneys involved told fDi. “It was clear that they could see how this could play out if the court found the ‘wrong’ way.”

Critically, the US department of justice argued that were ATCA to establish a private right of action, it would have “serious consequences for both the development and expression of the nation’s foreign policy”, potentially affecting government actions abroad – a consequence that it suggested was “further heightened by the nation’s ongoing war against terrorism”. The National Foreign Trade Council argued that ATCA applied “the misguided principle of vicarious liability to corporations that simply engage in legitimate business activity”.

Despite these high-level briefs, the Supreme Court decided in favour of the plaintiffs, giving a jurisprudential green light to the Unocal case, and the others further back in the queue, to proceed.

The Unocal case

The key allegations in Doe v. Unocal were that the Californian oil company, with its project company Total, hired the Burmese military to construct and secure a gas pipeline through the Yadana region of Burma, despite previous knowledge of the military’s use of slave labour and of the military’s human rights record, and that the project (Unocal and Total) “hired the military to provide security… [A] military that forced villagers to work and entire villages to relocate for [its] benefit…; that the military, while forcing villagers to work and relocate, committed numerous acts of violence; and that Unocal knew or should have known that the military did commit, was committing, and would continue to commit these tortious acts”.

In evidence, the plaintiffs called a US State Department official, who recalled: “When foreigners come on daily helicopter trips to inspect work sites, involuntary labourers are forced into the bush outside camera range.” Though, according to one of the lawyers involved, the arguments revolved less around facts than the law: command responsibility, the definition of aiding and abetting, and jurisdiction particularly.

Reverberations

In April 2005, prior to a scheduled key hearing, Unocal settled the case (and a separate but related action in the California state court), although without admitting liability. (In a press release at the time, Unocal announced: “Although the terms are confidential, the settlement will compensate plaintiffs and provide funds enabling plaintiffs and their representatives to develop programs to improve living conditions, health care and education and protect the rights of people from the pipeline region. Unocal reaffirms its principle that the company respects human rights in all of its activities and commits to enhance its educational programs to further this principle.”)

Earthrights, the advocacy group that brought the case on behalf of the Burmese villagers, said the settlement would “reverberate in corporate board rooms around the world and [would] have a deterrent effect on the worst forms of corporate behaviour”.

Awakening monster

In a report published in 2003, a Washington, DC, think-tank, the Institute for International Economics (IIE), described ATCA as “an awakening monster” that could expose multinational corporations to the possibility of being sued in US courts for “abetting China’s denial of political rights”, or observing Chinese bans on unions, or damaging the Chinese environment.

The IIE said that while corporations might have to stump up punitive damages of up to $20bn, the real victim would be the global economy. It argued that the scope of awards under ATCA would be such that “investment and trade in developing countries will be seriously threatened… the ultimate losers will be millions of impoverished people denied an opportunity to participate in global markets”.

ATCA supporters argue that if the benefits of globalisation include the kinds of events that emerged during the Unocal case, the statute should be used to close the gap between corporate citizenship puff and reality.

Clearer scope

At least the limits of ATCA’s scope are becoming clearer. Rick Herz, a New York-based attorney who was part of the team representing the Burmese villagers, told fDi that Sosa established that corporations are only liable where they are found to be aiding and abetting a state actor in acts that violate customary international law: that is, including acts of genocide, kidnapping, rape and torture.

Nonetheless, he says, that still leaves cases against a number of well-known companies. Canadian oil company Talisman, for example, is charged by plaintiffs with having aided and abetted or facilitated and conspired in ethnic cleansing of Sudanese villagers by Islamic Sudanese forces, so as to “clear and protect” areas around Talisman oil concessions. (Talisman, which sold the indirect interests it held in Sudan in 2003, describes the case as “entirely without merit” and says that it is vigorously defending the case and that its presence in Sudan was “a force for good”.) Other companies are accused of conducting unregulated clinical trials in the developing world and of complicity with state security forces culminating in the torture of labour activists.

The US administration argues that bringing ATCA cases could be detrimental to its efforts to build friendly relations in its ‘war against terror’ and believes that cases would be more accurately prosecuted in the jurisdictions in which they arose.

Collateral damage

The corporations themselves are concerned by the possibility of collateral damage. As fDi went to press, Coca-Cola – which acknowledges that the events described in the suit did occur but denies that it or its agents were responsible – was still assessing whether to fight or settle. Bad publicity has already taken some of the fizz out of the Coke machine: the company’s products have been banned on several campuses in the US and there is a growth industry in anti-Coke campaigns and literature.

Firestone denies that there is anything in the charges against it, which a spokesman told fDi were “very hurtful, painful [given] everything that the company has done for [Liberia]”. The spokesman suggests that there are “other agendas” at work behind the suit and that contrary to being an employer of child labour, Firestone provides schooling for 7000 of its employees’ children and has a “zero-tolerance policy” of labourers bringing children into the plantations to assist them. Either way, the case has already had considerable international press coverage.

Powerful perceptions

The lawyers bringing ATCA cases and their counterparts on the other side of the courtroom understand that perception is more powerful than any underlying reality. Karen Asner, a partner at the New York office of law firm White & Case, warns that the statute could have “a chilling effect or cast a shadow” on corporate activities in some parts of the world, if the scope of ATCA is “not interpreted very narrowly”. She says: “The fact that the legal standard is hard to meet will not stop the plaintiff’s bar from making claims.” White & Case is counsel for a bank in an ATCA claim for apartheid reparations.

The potential to make companies think in greater depth about their activities is not something that Paul Hoffman, a plaintiff’s bar veteran and one of the lead counsel for the Unocal case, believes is a negative. He told fDi: “These cases have already had some effect. The threat of liability has made corporations think about their connection to human rights violations, and this was the whole point of the exercise anyway.” He says that he has heard anecdotally that in-house lawyers are pointing out the possible significance of ATCA to their employers and that they are taking it on board.

Decisive cases

The next round of ATCA cases will be the most decisive. The Sosa case was claimed as a qualified victory by both sides. While it established that ATCA suits could be prosecuted without Congress passing new legislation, it also laid out that only a handful of kinds of conduct – conduct that breaches customary international law – is actionable.

Mr Hoffman suspects that although this will probably include genocide, torture and killing, and might apply to slavery and forced labour, it is “questionable” whether it applies to cruel and degrading treatment, and environmental claims are “pretty much dead”. “The real struggle is going to be in defining the concept of ‘aiding and abetting’,” he says, and in re-evaluating some of the theories of causation that were used to decide liability in the Nuremberg trials.

The ATCA debate is not without a context, though, says Mr Hoffman. Increased public awareness of the interface between business and politics, media coverage of corporate excess or wrongdoing, and companies themselves pushing or being seen to push an agenda of social responsibility suggest that ATCA is one strand of a wider debate about the role of corporations in a shrinking global economy.

“I don’t think you change the world by litigating but I do think that litigation can inspire legislation that can change the world… international legislation will, at the end of the day, be a better means of curbing corporate behaviour than law suits,” says Mr Hoffman.

In the mean time, the attorneys for a roll call of brand names are gearing up to see him in court.