Legal accountability of multinationals: the current state of play in the UK

FOCUS □ BUSINESSAND HUMANRIGHTS Legal accountability of multinationals: the current state of play in the UK I Whether lawyers jurisdiction may principle, courts States, Access on host inability be legal the the corruption, will intimidation, or State Canada to impeded home conveniens UK, forum applied to expertise justice Australia depends exercise to muster United courts State fund and non by or in in hostStatecourts maybe impeded by intimidation, corruption, or inability tofund lawyers ortomuster legalexpertise Whether homeState courts willexercise jurisdiction depends ontheforum non conveniens principle, appliedin theUK, United States,Canadaand Australia RICHARD MEERAN has been partner atLeigh Day since 1991 and represented the claimants in the cases referred to in this article Holding legally, oping country multinationals forharm operations arising ('MNCs') from used their to to account, be develan Holding legally, forharmarising from their developing country operationsused to be an almostimpenetrable challenge.However,over thepasteighteen yearsthere hasbeena progressiveimprovement inMNCvictims' access to justiceintheUK courts. Thisis consistent withthe growing recognition overthesameperiodofthe responsibility of businessto respectthehuman rights ofthoseaffected bytheir operations. That said,thegreat leap forward hastakena fewsteps backwards intheUK as a result ofthecombined effect ofrecent UK legislation on therecovery of costsincivilcasesanda changeinEuropeanlaw, whichhavepassedlargely undertheradar. The two keylegal obstacles Accessto justicein victims' local courtsmaybe impededby intimidation, corruption, or victims' invariable inability tofundlawyers andtomuster thelegalresources andexpertise necessary tolitigateagainsta well-resourced MNC. Access to adequate legal resources, more particularly lawyers whoareina position andwilling totake on complex,protracted and expensivelitigation, has resulted in victims filing claimsin theMNC homecourts wheretheMNCparent is based and overwhichthehome courtscan exercisejurisdiction . In thepastthisapproachhas been confronted bytwokeyobstacles. First, whether the home courtswill agree to exercisejurisdiction or halttheproceedings on thegrounds thatthevictims local courtsare the appropriate venueforthecase. Thisforumnon conveniens ('FNC') principleis applied by the courts ofcommon lawstates inparticular theUK, UnitedStates,Canada and Australia. It was an FNCapplication thatcaused thesevenand half thousandSouthAfrican asbestosminers'claims tobe bouncedup anddowntheUKcourt system for four yearsbyCape pic,purely on theissueof wherethecase shouldbe heard, before thelandmark ruling oftheHouse ofLordsintheir favour in 2000.Tragically, duringthatperiodapproximatelyone thousandof the claimantsdied. Thankfully, following a rulingof the European Court ofJustice in2005FNCisno longer an issue incasesagainst EU-domiciled defendants suchas UK-basedMNC parentcompanies.It is forthis reasonthatclaimssuchas thosebrought in2009 bythirty twoindigenous Peruvians, alleging that UK-registered Monterrico Metalspic was complicit intheir torture bythePeruvian police,have beenable toprogress without lengthy and costly disputes overvenue. Secondly,it is universally difficult, legally,to 'piercethecorporate veil'thatprotects a shareholder (such as an MNCparentcompany)from liability forthe conductof othercompaniesin whichitinvests (inthecase ofa multinational, its overseassubsidiaries). This 'corporate veil' has beenusedtoprotect theheadoffice parent company , and MNC group structures have been devised accordingly. Of course,the degreeto whichan MNCparent company controls orinfluences its worldwideactivities variesfromone MNC groupto another, but an MNC parentis rarelya mere 'hands-offshareholder. In an attempt tocircumvent thecorporate veilobstacle ithasbeenarguedina seriesofcasesthat theliability oftheMNCparent arisesnotbyvirtue ofits shareholding inthesubsidiary butrather because ofa breachofa legal'duty ofcare'.Thisdutyis allegedtoflowfrom thenature oftheMNCparent 'srelationship withanddegreeofcontrol over relevant functions ofthesubsidiary andtheharm that itoughttohaveforeseen might arisefrom its subsidiary's activities. Usingthisapproach,the liability oftheMNCparent isbaseddirectly on its own conductand functions rather thanforthe conductofitssubsidiary. Parentcompany 'dutyofcare' In theThorChemicals litigation (1994-1997 and 1997-2000)itwas allegedthatthreedeathsand numerous seriouscases ofmercury poisoning at Thor'sKZNfactory hadresulted from theUKparent 's negligencein designingand exporting unsafetechnology to SouthAfrica and in failing tosupervise andmonitor health andsafety atthe factory adequately. Thefirst waveoftwenty cases was settled for£1.3million andthesecondwave of twenty was settledforan undisclosedsum within weeksoftrial. A claim broughtagainstRio Tinto pic by EdwardConnelly,a Scottish workerwho had contracted throat cancerallegedly from dustduring his workat the RössingUranium minein Namibiaalleged thatthe London parenthad devised the Namibiansubsidiary's policy on health,safety and theenvironment, and thatits employeeshad supervised health, safety and/or environmental protection at the mine. Having won on jurisdiction intheHouse ofLords(1997) theclaimwas struck outon timebargrounds. The centralallegationin the Cape pic case (1996-2003)was thatthe London-based parent hadbeenineffective control oftheSouthAfrican miningoperationsin particular withregardto healthof miners, dustcontrol in theworkplace and intothe local environment. It was alleged thatepidemicscale of asbestosisin theminers and of mesothelioma in theminers and people living intheimmediate vicinity was theresult of theparent's failure to carry outitsfunctions toa reasonable standard.Followingits jurisdiction INTERNATIONAL union rights Pa9e 18Volume 19Issue 4201 2 FOCUS □ BUSINESS ANDHUMANRIGHTS defeat, Cape picranintofinancial difficulties and the litigation had to be settledbeforetrialfor approximately£10.5million. In thelitigation againstMonterrico Metalspic (2009-2011)referred to above...

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