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August 17, 2007
To Avoid Risk of Alien Tort Claims Act Cases, Companies Must Improve Human Rights
by Bill Baue
The first-ever corporate ATCA verdict of not guilty does not diminish the ongoing liabilities
companies face in US courts for human rights violations committed overseas.
SocialFunds.com --
Late last month, a federal jury delivered the verdict in the first corporate Alien Tort Claims Act
(ATCA) case to make
it through trial, finding Drummond coal company not complicit in the 2001 murder of three
union leaders at one of its mines in Colombia. Drummond�s reprieve may be temporary, however, as
the plaintiffs filed appeals protesting the judge�s exclusion or limitation of eye-witness
testimony linking the company�s Colombian operations with the murders by right-wing paramilitary
troops.
A host of other companies face legal,
reputational, and financial risks as defendants in cases based on the 1789 law that allows
non-citizens to seek legal recourse in US courts for violations of international law. While the
law was originally intended to protect US financial interests from piracy on the high seas, it was
revived in the early 1980s to seek accountability for overseas human rights violations, such as
extrajudicial killings. The early-1990s saw the first ATCA case filed against corporations, and
now dozens of companies face such suits.
Earlier this week, a federal judge blocked a
motion by Chevron, whose subsidiary Texaco faced the first corporate ATCA case in 1993, to dismiss
an ATCA case in which EarthRights
International alleges company complicity in torture and wrongful death of Nigerian villagers.
And last month, EarthRights filed an ATCA case against Chiquita, which earlier this year
admitted to the US Justice Department that it paid right- and left-wing paramilitaries in Colombia,
which are officially deemed terrorists, money to protect its workers.
Other companies,
including Coca-Cola, Exxon-Mobil, Firestone, Shell, and Wal-Mart, face ATCA cases, and they should
not necessarily consider the Drummond not guilty verdict as setting a precedent predisposing them
toward winning their cases.
�One negative jury verdict is not that important: look at the
tobacco litigation, where for twenty years the few cases that went to trial were unsuccessful,�
said Cynthia Williams, a business law professor at Toronto�s York University on leave from
University of Illinois. �It is significant that these cases can withstand motions to dismiss and
go into discovery and ultimately trial--the process of discovery will allow a procedure for getting
the facts developed under oath and getting access to internal documents, e-mails, and other
material, potentially giving valuable evidence of companies' internal operations.�
�Moreover the process of ATCA litigation generally will affect and broaden--slowly, no doubt,
but probably inexorably--the scope of claims that will be cognizable under the ATCA,� Prof.
Williams told SocialFunds.com.
This is one of the primary points Prof. Williams makes in a
paper she co-authored
with John Conley of the University of North Carolina, �Is There an Emerging Fiduciary Duty to
Consider Human Rights?� Profs. Williams and Conley propose three dynamics driving this emerging
attenuation to human rights: laws, specifically ATCA; market forces, particularly institutional
investor activism; and norms, namely the UN Global Compact promoting corporate responsibility.
ATCA operates on all three levels, the authors note: in the legal venue of the courtroom,
in the marketplace of public opinion responding to allegations, and in the normative sphere where
the ever-present threat of ATCA encourages companies to improve their human rights policies and
practices to avoid litigation.
�The risks to business reputation from credible
allegations of human rights abuses create incentives for companies and directors to consider these
issues seriously, irrespective of whether an ultimate finding of liability is likely,� the authors
write.
The paper, written before the Chiquita ATCA case, cites Chiquita for developing
best practice in corporate social responsibility (CSR) in response to shareowner activism by
socially responsible investors (SRIs) in the early 1990s over its environmental and human rights
record in Latin America. The company partnered with the Rainforest Alliance to develop the Better Banana �Seal of
Approval� and also met S
A 8000 social and environmental standards.
The EarthRights ATCA case filed against
Chiquita last month hinges on the company�s admission that it had paid $1.7 million from 1997 to
2004 to right- and left-wing paramilitary groups to protect its workers. The company paid both the
rightist United Self-Defense Forces of Colombia, known as AUC for its Spanish initials, as well as
leftist Revolutionary Armed Forces of Colombia, or FARC--both deemed terrorist organizations by the
US government-�depending on which controlled its banana-growing areas at the time.
�We
think Chiquita�s admission makes this an open-and-shut case,� said Rick Herz, litigation
coordinator for EarthRights. �What they admitted to is a federal crime, and they were complicit
with AUC, the architect of some of the worst massacres in the Western hemisphere in the last 20
years, so whatever good they�ve done, it certainly pales in comparison to the evil they�ve done in
Colombia.�
�What they didn�t admit to in this criminal indictment is that they were also
running guns to the AUC--that was documented by the Organization of American States,� Herz told
SocialFunds.com.
Chiquita maintains that the payments were solely intended to protect its
workers.
�I think that the way the company handled the problem of having paid protection
money in Columbia demonstrates responsibility because of my view that no one--no person, no
company--is perfect, and thus we'll make mistakes,� Williams said. �The question is, what do we
expect from people and companies in advance to try to limit the number of mistakes, and what do we
expect ex-post to address them?�
�Here, I think that Chiquita became involved in
operations in Colombia before its CSR culture took hold, and then did not act to extricate itself
fast enough, which was a mistake in judgment, in retrospect,� Williams continued. �But they were
the ones who came forward to the Department of Justice, which is what government regulators like to
see, and it does demonstrate responsibility, to my mind, and as far as I can tell have they been
honest about the problems with their stakeholders.�
Rainforest Alliance agrees.
�We think that Chiquita did the right thing by reporting these payments to the government and
accepting the consequences,� Julianne Baroody?of Rainforest Alliance said. The company paid a $25
million fine to the US government, and sold its Colombia subsidiary at a significant financial
loss--though it ensured that the farms maintained their social and environmental certification.
Herz is less sanguine about the consequences for Chiquita.
�Companies engaged in
human rights abuses the way Chiquita was pay not just a moral price, but also a corporate price,
because when people see Chiquita bananas, they�re going to say, �this funded death,�� said Herz.
�I�d rather eat bananas that don�t have blood on them.�
©
SRI World Group, Inc. All Rights Reserved.
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