Date of publication: October 30, 2007
Source: Legal Times
» http://www.law.com/jsp/ihc/PubArticleIHC.jsp?id=1193648628752 [1]
How much attention must multinational corporations really pay to potential human rights abuses in overseas operations?
Though a recent verdict in a high-profile Alien Tort Claims Act case in Alabama resulted in a resounding victory for Drummond, the international mining company, multinational corporations still have great concerns. While the jury took just four hours to reject the plaintiffs' claims that Drummond had hired paramilitary forces to kill three labor leaders who worked at the company's coal mine in Colombia, the case represents the first corporate ATCA lawsuit to survive dismissal motions and proceed through trial.
That trial, along with a growing wave of high-stakes ATCA lawsuits against multinational corporations and their executive officers, means that companies and their in-house counsel are going to have to focus on ATCA issues more than ever.
On the books since 1789, the ATCA permits foreign claimants to file actions in U.S. federal courts based on a discrete set of egregious torts -- "violations of the law of nations" -- committed abroad. The act remained dormant until 1980, when Paraguayan citizens filed suit in New York under the ATCA against a Paraguayan police official for acts of torture and murder in Paraguay. When the lawsuit was permitted to proceed, many others followed. It was not until 1993, however, when Texaco was accused of environmental devastation in Ecuador, that the act was directed against a corporation for its overseas activities.
DOZENS OF COMPLAINTS
Since then, dozens of companies have faced complaints. Recent subjects of scrutiny include Bridgestone Firestone, for treatment of workers in Liberia; Yahoo, for providing information about dissidents to the Chinese government; Nestlé, Archer Daniels Midland and others, for allegedly trafficking children to cultivate and harvest cocoa beans in the Ivory Coast; and Dole Foods, Dow Chemicals and others, regarding the use of a pesticide on fruit plantations in West Africa that allegedly left workers sterile. The potential corporate liability in such highly charged cases, often involving allegations of torture, abuse, murder and other human rights violations committed against large classes of claimants, obviously is substantial.
Despite the number of corporate ATCA cases that have been filed since 1993, only one has survived dispositive motions and proceeded to trial: Estate of Rodriquez v. Drummond Co. Filed in 2002 in federal court in Birmingham, the estates of three murdered union leaders alleged that Drummond's management in Colombia provided financial and other support to paramilitary and military units to eliminate the union from the company's huge open-pit mine near the town of La Loma. Rejecting the company's motions to dismiss and then for summary judgment, the court allowed the estates to present their claims to a jury. On July 26, after several weeks of testimony, the jury ruled in Drummond's favor.
Despite that outcome, Drummond is unlikely to dampen the number and scope of corporate ATCA lawsuits. To the contrary, the case may even stimulate further actions. Drummond established that a corporate ATCA action, seeking tens of millions of dollars in damages, can overcome dismissal motions and reach a jury. The case also may have been closer than the rapid jury verdict suggests. Four key witnesses for the plaintiff were unable to testify, and attorneys for the estates argue that any one of them would have provided evidence of a direct link between Drummond and the paramilitaries, a link that was missing from the estates' trial presentation. Indeed, the case has hardly served as a deterrent -- in the middle of the trial, a new ATCA action was filed against Chiquita for its own alleged role in funding and arming paramilitary groups in Colombia.
WHAT CAN A COMPANY DO?
Given the atmosphere and the stakes in these high-profile, high-damage lawsuits, the Drummond verdict should provide only marginal comfort to companies with overseas operations. It is still vitally important for multinational companies and their in-house counsel to plan carefully and pay close attention to ATCA concerns. Here are four modest suggestions for helping companies weather the ATCA storm.
1. Create a code of conduct. As a first step, many multinational companies have instituted codes of conduct to emphasize their commitment to promoting and protecting human rights. Such a code should be crafted in broad terms. In 2004, the Supreme Court, seeking to define the law's scope, declared that the "law of nations" as provided in the ATCA applied to "a narrow set" of international harms that are universally recognized, mandatory and clearly defined. Despite that effort to clarify the act, lower courts have struggled in applying the Court's definition, resulting in a jumbled body of sometimes confusing and inconsistent rulings as to what constitutes the "law of nations."
In light of the "disparity of results and differences of opinion," in the words of one court, a corporate code of conduct cannot reasonably cover, or anticipate, every specific ATCA cause of action. Instead, it should broadly target various types of conduct, underscoring the company's formal commitment to supporting human rights. While there is no precise formula, at a minimum, the code should be tailored to the company's specific industry or industries. For example, if the company manufactures clothing, the code might include specific provisions related to factory conditions. It also should at least incorporate relevant provisions contained in applicable international laws and treaties, such as the Voluntary Principles on Security and Human Rights and the United Nations' International Covenant on Civil and Political Rights.
Such a code can aid a company in many tangible ways, provided that it is meaningfully enforced. For instance, it can provide specific guidance to managers, employees and subsidiaries about conduct that is proper and improper, thus potentially preventing actions that could sprout into ATCA lawsuits. It can also demonstrate to a judge or jury that the company is attentive to preventing human rights abuses. And it can help cast the company as a solid international citizen, an image that every multinational entity should strive to achieve but is particularly consequential in the ATCA context, given the injury to a company's reputation that often accompanies these lawsuits.
2. Define your relationships with those outside the company. The code of conduct also can be used in agreements with overseas venturers, partners and contractors. Many ATCA lawsuits start with alleged misdeeds that were not committed by multinational corporations or their employees. Instead, they often arise based on acts of third parties, with victims seeking to attribute the wrongdoings to the company itself.
Given that threat, multinational companies and their subsidiaries should tailor their contracts with third parties accordingly. Agreements might include clauses that require outside groups to adhere to the company's code of conduct in whole or relevant part, making prohibited practices a breach of the agreement. They might also include a provision declaring the company's expectation that the third party will adhere to local civil and criminal codes. Agreements also might clearly identify the multinational company's degree of responsibility over, and rights in, the third party. If no such responsibilities or rights exist, a particularly helpful fact in terms of ACTA litigation, the agreements certainly should reflect that.
3. Also make clear your relationships with government entities. That approach to relationships with third parties should encompass government entities. "Violations of the law of nations" traditionally have been limited to misconduct by states or state officials. Consistent with that approach, most causes of action under the ATCA have a state action requirement, limiting claims to alleged wrongful acts by government agents or private actors acting with the imprimatur of or in conjunction with government personnel.
Accordingly, a company's formal and informal relationships with government and quasi-government entities must be closely scrutinized. As a rule, direct reliance for services on government entities or regimes with records of human rights abuses should be minimized. That is particularly true for security services, as corporate ATCA cases frequently arise based on actions committed by police, military or other quasi-governmental units allegedly operating on a company's behalf.
Of course, companies operating abroad may have no choice but to rely on such foreign government entities, especially in remote or undeveloped regions with little infrastructure. In those instances, companies should take an approach similar to that with private third parties. They should strive to enter contracts or memorandums of understanding with the government that expressly delineate respective roles and responsibilities. If the company lacks the authority to supervise or direct government employees, as most do, that should be made explicit. Prudence further dictates including provisions reflecting an understanding that all parties will comply with pertinent domestic and international human rights laws and conventions, and that violations of those laws will be reported to appropriate authorities.
4. Keep a watchful eye. This is more important than any contractual or corporate formalities: Multinational companies cannot turn a blind eye to suspected wrongs done on their behalf by employees, third parties, government officials or anyone else.
Companies should work to establish meaningful oversight and compliance mechanisms to discourage, diligently investigate and discipline potential abuses. That includes pertinent training for employees on key aspects of the code of conduct, establishing mechanisms for employees and nonemployees to report potential abuses, and creating an atmosphere where it is known that such reports will be seriously considered and not lead to retribution. The activities of contractors and allied government personnel should be closely monitored.
Where potential misdeeds occur, appropriate actions -- such as instituting remediation plans or informing appropriate authorities -- should be taken. Although some alleged transgressions may be probed and handled internally, for more serious allegations, independent external inspections by legal counsel may be appropriate.
Through such planning and oversight, the hazards posed by a litigious corporate ATCA landscape can be minimized. Though the potential for an ATCA lawsuit may remain, the possibility of obtaining an early dismissal or a positive jury verdict akin to that in Drummond can be increased. In other words, while ATCA lawsuits may continue to grow, corporate exposure need not.
Jonathan Drimmer is counsel in the litigation department at Steptoe & Johnson and teaches courses related to war crimes and the ATCA at Georgetown University Law Center.