CHAPTER 7 MASS TORT RISKS INHERENT IN INTERNATIONAL NATURAL RESOURCE DEVELOPMENT

• Jurisdiction: United States

International Resources Law and Projects
(Apr 1999)
CHAPTER 7
MASS TORT RISKS INHERENT IN INTERNATIONAL NATURAL RESOURCE DEVELOPMENT
John C. Reynolds
Jones, Walker, Waechter, Poitevent & Denegre, L.L.P.
New Orleans, Louisiana, USA

I. INTRODUCTION

Beginning in approximately 1993, mass tort class actions have been filed against multinational corporations on behalf of foreign indigenous people ostensibly represented by activist NGOs and public interest law associations. These suits allege environmental damage, mass personal injuries and international human rights violations. Even a cursory examination of the allegations suggests that the goals of these similar claims are to restrict the development of natural resources around the globe, to impose monetary awards and to circumvent the existing political and economic relations between the United States, foreign states and the international business community.

This new genre of United States based litigation is premised on alleged violations of international law raising fundamental sovereignty and jurisdictional issues.¹ These claims would have the United States judiciary involve itself in the regulation of natural resource development and management by a sovereign state; the regulation of real property rights under a foreign sovereign's control; the development and implementation of environmental standards without universal acceptance by the community of sovereign nations and the awarding of monetary relief against multi-national corporations for human rights violations through fantastic allegations of torture, extrajudicial killing, genocide and environmental eco-terrorism, all based on concepts of derivative liability. As of now, no multi-national corporation has been held liable under these NGO generated suits.²

The attempt to expand the accepted norms of international law and the jurisdictional reach of United States courts through this litigation is coupled with equally serious, non-judicial attacks. In each instance referred to herein, the corporate defendant has been subjected to repetitive, inaccurate and hyperbolic political statements by NGOs, unions and individuals through the use of the Internet, sympathetic media contact, planted articles, legitimate news reporting and coordinated international propaganda. The attacks have gone so far as to involve the submission of anti-natural resource development shareholder resolutions and attempts to disrupt financial arrangements through direct contact with financial/banking institutions. Therefore, the multi-national corporations involved in natural resource development must not only not be prepared to defend themselves in a court setting, but must be prepared to pay particular attention to the structure of all transactional agreements, to their foreign corporate subsidiary structure, to the structure of all agreements with

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foreign governments and must ensure that all legal requirements are carefully met in each jurisdiction where they operate. They must also be prepared to take a more proactive role in social and community development, participate in the development of acceptable standards for multinational corporate behavior and be prepared to deal transparently with reasonable media communication. They must also be prepared to take affirmative legal action to defend against NGOs and other entities that mount vague and factually unfounded campaigns against specific development projects and the parties thereto.³

This developing litigation in United States courts reveals a self-righteous, intemperate polemic by activist groups against the political and economic determinations of foreign governments using the corporate defendants as surrogates, seeking judicial intervention into foreign policy and economic issues constitutionally reserved to the United States Executive and legislative branches of government.

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II. UNITED STATES ADJUDICATION OF PRIVATE INTERNATIONAL LAW TORT CLAIMS

A. Historical Background of the Alien Tort Statute and the "Law of Nations" as Applied by U.S. Federal Courts

A United States statute, known as the Alien Tort Statute ("ATS"),⁴ created as part of the Judicial Act of 1789, designates United States district courts as the forum in which aliens can seek damages for tortious violations of international law. Although this statute existed in obscurity for nearly two centuries, in recent years it has become an effective means of securing jurisdiction in United States federal courts over claims asserted by NGOs.

The ATS provides that United States "district court shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States." ⁵ To fall within the jurisdictional requirements of the ATS, three elements must be unequivocally established. First, an alien must bring the claim. Second, the claim must be for a tort. Third, the claim must either violate a United States treaty or the "law of nations." The ambiguity that historically limited the application of the ATS was the requirement that the tort in question be a violation of the "law of nations." Until the landmark decision of Filartiga v. PenaIrala⁶ in 1980, United States courts were unwilling to find the requisite international legal violation.

In part this was in recognition of the classic concept that the "law of nations" is primarily statist and as such was defined as "the body of rules and principles of action which are binding upon civilized states in their relations with one another."⁷ The result was the principle that individuals' rights and responsibilities under the Law of Nations "run through states" and that international law therefore did not authorize individuals to vindicate rights in either international or municipal tribunals.⁸

In Filartiga, a Paraguayan plaintiff sued a Paraguayan police official in the Eastern District of New York, alleging that defendant had tortured their son to death. The trial court dismissed the action for lack of subject matter jurisdiction, narrowly construing the "law of nations" clause so as

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to exclude human rights violations.⁹ The Court of Appeals reversed, holding that "deliberate torture perpetrated under the color of official authority violates universally accepted norms of the international law, regardless of the nationality of the parties."¹⁰ In so holding, the Court noted that the "law of nations" is not a static doctrine that binds the ATS to those violations that existed in 1789.¹¹ The ATS was created to ensure that matters of international concern would be within the jurisdiction of the federal courts rather than the myriad state courts. Thus, "where the nations of the world have demonstrated that the wrong is of mutual, and not merely several, concern, by means of express international accords, ... a wrong generally recognized becomes an international law violation.¹² A claim under the ATS based on a violation of the "law of nations" depends, therefore, on a clear international consensus. As stated in Filartiga:

[t]he requirement that a rule command the "general assent of civilized nations" to become binding upon them all is a stringent one. Were it not so, the courts of one nation might feel free to impose idiosyncratic legal rules upon others, in the name of applying international law.¹³

Relying on Filartiga, the same court in Zapata v. Quinn, held that the ATS "applies only to shockingly egregious violations of universally recognized principles of international law."¹⁴ In any claim asserted under the ATS, the essential initial inquiry is whether the tort alleged is a tort committed in violation of the "law of nations."

To determine whether a tort violates the "law of nations" courts "must first decide whether there is an applicable norm of international law ... and [then] whether it has been violated in the particular case."¹⁵ In reaching such a decision, courts are guided by "the usage of nations, judicial

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opinions and the works of jurists" as "the source from which customary international law is derived."¹⁶ For further guidance regarding the norms of international law, courts look to whether the standard can be said to be "universal, definable and obligatory."¹⁷ In the absence of a clear consensus with regard to the egregious nature of the conduct alleged, such conduct will not be a violation of the law of nations. For example, in the NGO suit against Freeport, the NGOs took issue with the mining waste management system employed at the site in Indonesia, which met local sophisticated environmental regulations, requesting that the United States court declare that a zero waste policy was the international standard and that the failure to implement such a policy violated the "law of nations". Because no such single, universal definable and obligatory environmental standard exists and in fact, the United Nations clearly recognizes the rights of individual nations to chart their own course in environmental matters,¹⁸ the NGO's environmental claims against Freeport were dismissed.¹⁹

The fact that there are no universally accepted environmental standards today does not mean they will not emerge in the future. As the Filartiga court has forewarned, the "law of nations" is dynamic, rather than static, and, therefore, in the future there may be a consensus in the international community regarding specific environmental practices. Accordingly, multi-national corporations should take a proactive role in the development of acceptable standards for trans-national corporate behavior and ensure compliance with standards as they emerge.²⁰

Presently, the issue facing multi-national corporations is that of responsibility for social and economic changes and impacts that accompany natural resource development.²¹ Characterizing

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social and economic development as human rights abuses, the NGOs seek to impose an...