In a watershed case that could affect how multinationals do business in developing countries, a federal appeals court will consider on Tuesday whether the energy giant Unocal should stand trial in connection with human rights abuses that the government of Myanmar is accused of inflicting on villagers during construction of a natural-gas pipeline.
The crucial question before the unusually large panel of 11 judges is whether to apply international legal standards that hold parties responsible for aiding and abetting human rights abuses. The case is in the 9th US Circuit Court of Appeals in San Francisco.
PHOTO: NY TIMES
The plaintiffs are a group of villagers from Tenasserim, a region in southeastern Myanmar. They say Unocal paid the military to provide security for the project and supported the government, widely considered one of the world's most repressive, which forced villagers to help build the US$1.2 billion pipeline in the 1990s and threatened those who refused with rape and other atrocities. Unocal denies the accusations.
If the court allows the civil suit to go to a jury trial, "this will raise the stakes for multinationals that do business with repressive regimes," said William S. Dodge, an international law professor at the Hastings College of the Law in San Francisco. "There are plenty of repressive regimes around the world, and there are plenty of multinationals that do business with them. The question is, how far can a corporation like Unocal go in cooperating with such a regime before the company bears some legal responsibility?"
The case is among a growing number based on the once-obscure Alien Tort Claims Act, a 1789 law originally intended to help prosecute international pirates in American courts. Since the early 1980s, it has been used to argue cases successfully against foreign military and police personnel accused of human rights abuses. More recently, human rights and labor groups have seized on it to do battle with oil, mining and other multinational companies that work with governments that they say engage in torture, genocide and similar violations of international law.
There have been more than a dozen alien tort cases filed against companies since the mid-1990s, but none have so far gone to a jury trial. Some have been dismissed on procedural grounds, while others are pending. The possibility of trials has raised concerns among both corporations and the Bush administration over potentially embarrassing testimony -- and worry that a verdict could set a precedent that encourages thousands of foreign plaintiffs to seek damages for crimes committed by their own governments.
"You get a perfect storm of sympathetic plaintiffs, trial lawyers and anti-globalization activists working together to bring these suits," said William A. Reinsch, president of the National Foreign Trade Council, an industry group based in Washington. He cites cases like one recently filed against dozens of companies that did business in South Africa under apartheid.
"It could be disastrous for global trade," he added.
Shaking in their boots
Though there has not been a single verdict against them, companies are feeling the impact of the litigation, which they must increasingly factor into investment decisions.
"It's causing companies to run away from situations like [Myanmar]," said Errol Mendez, a law professor at the University of Ottawa and recently a co-author of Global Governance, Economy and Law (Taylor & Francis), which details the impact of such lawsuits on multinational companies.
He and others point to a variety of recent corporate decisions to demur or pull back from projects in countries where governments have been accused of human-rights abuses, including Nigeria, Indonesia and Sudan as well as Myanmar.
Although Unocal, based in El Segundo, Calif., continues to do business in Myanmar, "this has created a great deal of uncertainty about future investing," said Charles O. Strathman, its vice president and chief legal officer. "It's not just the legal fees involved; it's also very disruptive and a big time commitment."
While corporate officials emphatically defend their human-rights records overseas, "business leaders are getting very nervous about these lawsuits," said Catherine J. Boggs, a lawyer at Baker & McKensie in Chicago, who advises companies about security arrangements with local governments. "Some think the best way to deal with them is to try to repeal the law altogether, or at least modify it."
To that end, pro-trade groups and the Justice Department filed briefs in May in the Unocal case, arguing that the alien tort statute had been misapplied by plaintiffs and that such lawsuits could undermine American business interests and the war or terrorism. The lawsuit bears "serious implications for our current war against terrorism" and permits similar claims to be easily asserted against allies in that war, an assistant attorney general, Robert D. McCallum, wrote in the government's brief.
Company officials worry that the aiding-and-abetting standard, which can include "knowing practical assistance, encouragement or moral support" to the perpetrator of the abuse, is so broad that practically any involvement with the government of Myanmar could be misconstrued as complicity.
The plaintiffs argue that Unocal was well aware of the military's poor human rights record in Myanmar and should have known that its security forces would engage in brutal practices, like forcing villagers who lived in the path of the pipeline not only to relocate, but to help build it.
A lawyer who represents the plaintiffs, Katharine J. Redford of EarthRights International in Washington, said: "Their own consultants told them they could be implicated as a willing partner in the abuse. That's exactly our allegation." Even if the suit fails to prove that such actions amounted to aiding and abetting Myanmar's military, legal experts say that potentially embarrassing evidence made public during a jury trial could embolden potential plaintiffs in other cases to come forward. "It's similar to what happened with tobacco," Sebok said. "The very fact that they were able to see the corporate files raises the threat value, so the next time around there would be greater willingness to settle at some price."
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