US Supreme Court dims a light in corporate accountability

A recent US judgment is a setback in efforts to improve corporate accountability, but promising developments elsewhere are creating new opportunities.

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1 May 2013

A man in Uganda stands by a digger sitting next to a dirt road.

As the spread of economic globalisation continues to extend its reach, competing interests backed by unequal negotiating power are coming into contest. From the oilfields of Nigeria to the farmland of Laos through to the copper mines of Papua New Guinea, local villagers find their claims to land and resources squeezed by concessions for petroleum, mining, forestry or agricultural developments.

Legal recourse as a pathway to accountability

Local-to-global alliances of affected villagers, federations of producer organisations, activists, NGOs, diaspora associations and public interest lawyers are pursuing multiple strategies to hold governments and companies to account.

Legal recourse in national, international and transnational legal arenas provides opportunities for villagers to seek justice and accountability – as discussed in a recent IIED report exploring accountability in the global rush for Africa’s land, for example.

In recent years, communities who have felt wronged by large natural resource projects have brought their claims to national courts, to regional and global human rights bodies, and to grievance mechanisms that companies, lenders and multi-stakeholder bodies estalished to deal with complaints.

Transnational court litigation – that is, suing a company in its home country, or in a third country for the activities of its subsidiaries overseas – has also emerged as an important part of this wider set of legal strategies. But the contours of transnational court litigation are changing fast. 

US courts shine a light

For the past three decades, the United States has provided a unique legal arena for efforts to hold companies to account through transnational litigation. The Alien Tort Statute, a statute adopted in 1789, gives US courts jurisdiction for violations of customary international law. This statute was mainly intended to fight piracy, and remained an obscure and little-used law for centuries. 

But in 1980, successful litigation brought by a Paraguayan national against a Paraguayan government official for alleged human rights violations that took place in Paraguay changed the relevance of the statute, because US courts held that they had jurisdiction to hear cases involving conduct with no or minimal connection to US territory.

This case opened the door to a flurry of transnational litigation against companies accused of ‘aiding and abetting’ foreign governments in violating human rights overseas.

Transnational litigation based on this law has provided relief to victims of human rights violations in different parts of the world. There are many reasons why claimants may want to litigate in the United States, instead of their own country. Claimants may have little faith in the independence or effectiveness of their national courts. They may have inadequate legal support in their country, and they may be able to obtain higher damages and more easily enforceable judgements in the United States. There is also symbolic value in bringing a case against a parent company in a highly visible public arena.

The wind is changing

In recent years, however, US courts have taken an increasingly restrictive approach to interpreting the Alien Tort Statute. In 2010, an appeals court found that companies could not be sued under the statute, arguing that there is no clear norm of customary international law that makes companies responsible for human rights violations – though other judgements held otherwise.

On 17 April 2013, the Supreme Court issued a long-awaited judgement on a high-profile claim brought by Nigerian nationals against a European oil giant. Years ago, the African Commission on Human and Peoples’ Rights found that the Nigerian government had violated fundamental rights of the Ogoni people in the 1990s, when the Ogonis were struggling against the marginalisation and environmental degradation associated with oil developments in the Niger Delta.

In the US lawsuit, the claimants accused Shell of supporting the Nigerian government in its repression of Ogoni leaders. The Supreme Court dismissed the complaint unanimously, though judges differed in the reasoning.

The majority opinion held that laws should be presumed not to have extraterritorial application unless they explicitly state otherwise, and that there was no evidence that the Alien Tort Statute was intended to depart from this presumption. Because the alleged human rights violations occurred entirely outside US territory, and because the suit was brought against a company based outside the US, the court held that it had no jurisdiction to hear the case.

A fatal blow?

This change in interpretation is a major blow for human rights activists, and for victims of human rights abuses worldwide. Only a few years ago, the same oil company agreed to pay $15.5 million to settle a related claim brought under the Alien Tort Statute by relatives of other Ogoni leaders, who were killed in the 1990s as part of the Nigerian government’s crackdown on the Ogonis. The company denied any wrongdoing, but said it hoped the settlement would aid reconciliation.

Many pending cases filed under the Alien Tort Statute are now likely to be dismissed. The Supreme Court has already ordered that a ruling that affirmed US jurisdiction in a lawsuit against a UK-based mining company be reconsidered. The lawsuit was brought against the company for alleged human rights violations in Papua New Guinea.  

But this is not the end of transnational litigation under the Alien Tort Statute.The statute could still be relied on in future lawsuits against US companies.The court held that claims must be connected to US territory ‘with sufficient force’, but it did not provide clear guidance on what level of connection might be required. 

Human rights activists will no doubt work to push the boundaries of this opening. But it is equally possible that US companies will lobby harder against the use of legislation that now puts them at a disadvantage compared to their international competitors.

Also, depending on the jurisdiction, transnational litigation could be brought under the ordinary law of torts – the norms whereby any person who wrongfully harms others must bear responsibility for the actions. Those who suffer damage as a result of activities carried out by subsidiaries operating overseas may try to sue the parent company in its home state under these norms. There is experience with this type of litigation in some jurisdictions, for example in the United Kingdom, though there are also considerable legal and practical barriers.

Looking east

But the notion that transnational litigation can provide a legal arena for the pursuit of corporate accountability is spreading beyond western countries. In Thailand, the National Human Rights Commission has been prepared to hear complaints involving natural resource investments (such as the building of dams or agricultural plantations) made by Thai companies operating in Myanmar, Laos and Cambodia.

For example, in July 2012 the Thai human rights commission found that it had jurisdiction to examine a complaint filed by the Cambodia Legal Education Center, a Cambodian public interest law group, on behalf of villagers affected by a Thai-owned sugar cane plantation and processing facility in Cambodia. The lawsuit involved allegations of illegal confiscation of land from local people, the use of force, threats and intimidation in evicting villagers from their land and the killing of their livestock.

As the balance of global economic power and the source of investment flows are shifting east, new openings for transnational litigation in emerging economies are undoubtedly a positive development.  

Read Accountability in Africa's land rush: what role for legal empowerment

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