Lawsuits by ‘third world’ claimants a new weapon against multinationals

Empowering Weak & Oppressed

M.A. Shaikh

Rabi' al-Thani 09, 1422 2001-07-01

Features

by M.A. Shaikh (Features, Crescent International Vol. 30, No. 9, Rabi' al-Thani, 1422)

Until recently it was unknown for multinational corporations to be prosecuted for corruption in developing countries, and for local claimants to sue the giant companies in their own states. In Africa, Asia and the Middle East governments, anxious to create an impression of honesty, normally prosecute the odd local official but not the foreign companies that routinely pay bribes to secure lucrative contracts; in the multinationals’ home countries legal principles have traditionally protected them against lawsuits by claimants seeking compensation for wrongs committed in other jurisdictions. But things are beginning to change, as the unprecedented anti-corruption case brought against European and Canadian companies by the southern African kingdom of Lesotho shows, and as several court decisions in the favour of litigants in developing countries also indicate.

The main problem is that governments in the industrialised as well as ‘developing’ countries are corrupt, and are unlikely to encourage prosecutions for corruption, while private claimants do not have the resources to seek justice in the courts of any jurisdiction. The dearth of resources — both legal and financial — is far worse in poor countries, which explains why multinationals are rarely sued. In fact, when in the past courts in rich countries, where resources are more available, ruled that claims brought by foreign litigants against multinationals should have been filed in local courts, the matter ended there and the defendants escaped trial. One example of this was the decision of a New York court that the claims against Union Carbide by the Indian victims of the chemical explosion in Bhopal should be tried in India. The decision effectively killed those claims.

The good news is that multinationals can now be sued in their own countries and are no longer able (at least in principle) to escape responsibility for the wrongs that they commit abroad. The practical difficulties that prevent litigants in Muslim countries from utilising the change in legal principles in rich countries can be tackled by Islamic charities, research institutes and the handful of governments that are not beholden to western interests or governments. What is needed is not only financial backing for litigants but also the information.

Keeping a database of multinationals that have been sued successfully, and of the legal teams that represented the litigants, will encourage more people to seek justice and perhaps discourage multinationals from committing similar wrongs in the future. The internet is an ideal tool for disseminating the necessary information and publicity, and to exert pressure on the governments of developing countries to depend less on multinationals.

The recent legal developments in rich countries are certainly encouraging. Compensation-claims for mercury poisoning brought in Britain by workers in Natal, South Africa, against the Margate-based multinational Thor Chemicals have overcome the defence argument that the case should be filed in South Africa, not Britain.

And last July a landmark decision in the House of Lords, Britain’s highest court, allowed the claims of 3,000 South African asbestos-victims to proceed in England with their claims against Cape plc (the case known as Lubbe v. Cape plc). The court was applying the principle — which it had established in the Connelly v. RTZ case in 1997 — that the absence of funding for lawyers and experts in southern Africa meant that “substantial justice” could not be obtained there. This decision opened the door for unprecedented claims for compensation, and not only against multinationals. Members of the Masai tribe in Kenya, for instance, were able to file claims in Britain that their children had been maimed by explosives left behind after British Army manoeuvres in Kenya.

But successful claims against multinationals are not confined to British courts. In the US, for instance, a case recently brought against Shell by members of the Ogoni tribe in Nigeria was ruled by the supreme court to be inadmissible. In this case, relatives of executed opponents of Shell’s oil-operations in Nigeria are claiming compensation on the grounds that Shell was jointly responsible for the activists’ executions because it failed to exercise its influence to prevent them from being carried out by the Nigerian military, thereby tacitly approving them. The case was brought under the Alien Tort Claims Act, which enables American courts to exercise extraterritorial jurisdiction over specific claims, including certain categories of human-rights violations. As the Act was partly designed to catch foreigners accused of human-rights violations, it is fitting to use it to indict Americans for abuses committed in other countries.

New legal developments are also occurring at a state level, as the prosecution of several western multinationals in Lesotho shows. Four British companies (Balfour Beatty, Sir Alexander Gibb and Co., Stirling International Civil Engineering and Kier International) and Canadian, French and German companies are about to go on trial, charged with bribing a local official to obtain lucrative contracts for one of the continent’s biggest engineering projects, the construction of huge dams designed to supply water and electricity for South Africa. The companies are charged with paying £3 million to Masufa Sole, who was appointed chief executive of the Lesotho highlands development authority in 1986, when the dam project began. Sole’s main responsibility was to award contracts worth hundreds of millions of pounds to foreign construction companies. The dams project is worth about £1 billion in all.

If Sole and the companies are found guilty, the case will throw much-needed light on relations between foreign contractors and local officials, and will greatly embarrass the World Bank and the IMF, which finance development projects and normally turn a blind eye to corruption at that level. World Bank and IMF officials have an unenviable reputation for this type of unscrupulous dealing. The case will certainly be watched with interest in many countries, especially by those who believe that legendary corruption in high places in developing countries is substantially induced by the multinationals and governments of industrialised states.

But significant legal developments in recent months are not confined to issues of corruption and claims against multinationals. The decision of the relatives of the victims of the Shatila pogroms to take Israeli prime minister to the war crimes tribunal at the Hague is a landmark development. Islamic activists and campaigners face the exciting challenge of developing these new weapons for justice.

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