On the off chance that business interests prevail in the U.S. Supreme Court reargument of Kiobel v. Royal Dutch Petroleum , alien tort plaintiffs may wish to review the record of corporate human rights litigation in English courts. This author’s study, published in fuller form in the year-end issue of the UC Irvine Law Review , suggests that companies might find themselves missing alien tort law.
In the mid-1990s, activist lawyers on both sides of the Atlantic sought a way to hold companies liable for human rights and environmental abuse committed in other nations. U.S. lawyers primarily chose the Alien Tort Statute. U.K. lawyers began to file old-fashioned common law tort suits. Notwithstanding the rivers of ink devoted to alien tort, common law theory has been surprisingly effective.
All told, 148 alien tort disputes have been resolved against business entities, according to research by Jonathan Drimmer, assistant general counsel at Barrick Gold Corporation. By this author’s count, 14 ended in a settlement or default judgment, for a success rate of 9.5 percent. Most of the settlements are confidential, but the six sums that have leaked into the public domain total about $80 million, for an average of $13.3 million. The highest was Unocal Corporation’s 2004 settlement of suits alleging that it used forced labor to build a Burmese gas pipeline, for a mere $30 million. (I am excluding Holocaust settlements, which mounted into the billions, but depended in significant part on diplomatic pressure and negotiation.)
Measured by both the size and probability of settlement, the common law approach to business human rights compares quite favorably with alien tort. At least one U.K. settlement was larger than the largest-known alien tort settlement, and although the sample size is small, the rate of settlement in English courts is impressive. In the five or six U.K. disputes litigated to completion, plaintiffs won four or five settlements, for a success rate of at least 80 percent. Thus, U.K. business human rights suits are historically more than eight times likelier than corporate alien tort suits to result in a payout. This may reflect poor case selection by U.S. plaintiffs lawyers or greater resistance by U.S. defendants—or simply the vulnerability of an antiquated 1789 statute that requires sympathetic interpretation to serve the modern goal of corporate accountability for human rights abuse overseas.
The law firm Leigh Day & Co., spearheaded by Richard Meeran and Martyn Day, has so far held a monopoly on U.K. human rights litigation. It has pushed five or six corporate human rights disputes to completion. Only one case ( Connelly v. RTZ ) was defeated on legal grounds. The rest have resulted in settlements, including one or two of substantial size.
Leigh Day’s biggest known win is the 2009 settlement of £30 million ($48 million) from the commodities trader Trafigura Beheer B.V. on behalf of nearly 30,000 Ivorians allegedly sickened by toxic waste dumped off the coast of Abidjan. Later litigation revealed that the £30 million allotted for victims was in addition to an insurance premium of nearly £10 million, and tens of millions more in legal fees. (By contrast, the U.S. lawyers’ contingency fees were subtracted from the $30 million headline figure in the Unocal settlement.)
There may have been an even greater windfall for plaintiffs in Bodo Community v. Shell Petroleum Development Company of Nigeria . In August 2011 Shell’s Nigerian subsidiary admitted liability for a pair of oil spills in return for the parent company’s dismissal from the suit. The Financial Times trumpeted the potential for a payout of over $400 million, but the Shell Petroleum Development Company called this number massively exaggerated. Since then, the parties have declined to answer questions about the case. Although the final outcome of the Bodo case is unclear, even a massively exaggerated $400 million after four months compares awfully well with the ruin wrought by Kiobel v. Shell after a decade of litigation. And if the Financial Times is correct, Bodo would surpass the long-standing corporate human rights record, non-Holocaust division. In 1996 BHP Ltd. agreed to clean up the Ok Tedi River in Papua New Guinea at an estimated cost of about $350 million, to resolve human rights litigation in the Australian courts.
Last spring, the movement for corporate accountability experienced a little-noticed breakthrough in English court. Nearly all the U.K. cases rely on a theory known as foreign direct liability. Broadly, the notion is that when a parent company is directly involved in its subsidiary’s operations, or exercises de facto control, then it owes a duty of care to its employees or anyone affected by its operations. Accordingly, it may be held liable for harm flowing from its failure to competently perform the functions it controls, or to give foreign subsidiaries sound advice on environmental, worker safety, and human rights policies. The legal proposition had never been directly addressed in court, but on April 25, 2012, the English Court of Appeal endorsed the theory of foreign direct liability in the case of Chandler v. Cape. (The case was not appealed, and the question has yet to make it to the U.K. Supreme Court.)
Human rights plaintiffs barely had time to celebrate before the Legal Aid, Sentencing and Punishment of Offenders Act received royal assent, on May 1—and wreaked havoc with their model of litigation funding. Until now, the key for Leigh Day has been the ability to recover from defendants full legal costs, success fees, and litigation insurance premiums (which protected plaintiffs against the risk of covering a victorious defendant’s costs). But the new law has generally eliminated the recovery of success fees and insurance premiums, while limiting cost recovery to “proportionate” costs. Parliament somewhat softened the blow by mostly eliminating the “loser pays” rule for personal injury (but not environmental) plaintiffs.
On the whole, the new restrictions on litigation funding make it less likely for Leigh Day to bring human rights claims with small numbers of claimants. It also makes corporate human rights a less attractive field for new U.K. plaintiffs law firms to enter.
But the news of the year for business human rights claimants across the Atlantic is that the English courts have ratified their basic legal theory. In that respect, the contrast to America could hardly be greater.