CASTAN CENTRE FOR HUMAN RIGHTS LAW

Part 1: Overview of Multinational Corporation Accountability

Corporate accountability: why?

The ever increasing worldwide influence of corporations on society has been accompanied by the diminishing influence of governments. But the fact of the matter is that many multinationals ("MNCs") are wealthier than many countries. Globalisation has also increased the penetration of multinationals worldwide. According to the UN in 1999, there were 60,000 multinationals.

So it was perhaps not that surprising that in August last year, the UK Government nearly dropped its own Environment Minister from its team of delegates to the World Summit in Johannesburg - a team that includes representatives from Anglo American and Rio Tinto, two of the worlds largest mining MNCs.

My objective here is not to denigrate corporations but rather to focus on the importance of corporate accountability to society. The lack of proper accountability has been a significant factor in the detrimental effects of corporations on society. Proper corporate accountability is fundamental to ensuring the right balance between development, on the one hand, and the protection of the well being of people and our environment, on the other.

History is replete with examples of untrammeled corporate power: consider industrial disasters such as Thor Chemicals, Cape Plc, the explosion at Union Carbide's chemical plant in Bhopal, the environmental damage caused by the mining operations of Rio Tinto in Bougainville; the dumping of obsolete drugs in Asia; the intensive promotion by Nestle, of powdered baby milk as a substitute for breast feeding in regions where water required to mix the powder is contaminated; the forceful promotion by other food companies such as Monsanto, of genetically modified products, and their attempts to acquire ownership of the genetic code of food - eg turmeric and basmati rice - and herbal medicines, that have been cultivated in developing countries for thousands of years.

A particularly controversial feature has been the exploitation of people living under oppressive regimes and of people living in countries where health and safety and environmental protection standards are less stringent or less stringently enforced.

Allegations of such "double standards" have arisen in relation to: the activities; of Unocal and Shell in Burma and Nigeria; of Thor Chemicals and Cape Plc in South Africa. Ask yourself whether such conduct would have been tolerated in the UK and the US? Why was it that Cape closed its UK asbestos factories in 1968, but continued operating in South Africa for a further 20 years?

But such events are not merely a phenomenon of the past. Last year I was in Djibouti where the port had been polluted by a spillage of hazardous toxic wood preservatives. These had been produced by a UK company. Nine months later the chemicals are still there. The UN Food Programme had to suspend distribution of grain from a nearby silo destined for Ethiopia, because they were concerned it might have been contaminated. The UK company did nothing.

Similarly, some twelve years after it was imported from the US and Europe by Thor Chemicals, thousands of drums of toxic waste still remains on the Cato Ridge site in Natal.

Nor are these issues confined to corporations or industries which are traditionally regarded as bad: Clothing companies such as Nike, Reebok and Adidas, that depend on a responsible public image have been badly stung by allegations surrounding the use of child labour and unacceptable working conditions in the Far East factories which supply them with their products.

It implicit from this state of affairs that MNCs have not been subjected to a proper system of accountability. The root causes are various but include the following specific factors:

Firstly, the conventional attitude among most corporations that their primary, indeed sole duty, is to further the interests of their shareholders.

Secondly, the failure of governments and international organisations to control the conduct of corporations sufficiently.

Thirdly, deficiencies in the legal mechanisms for holding corporations to account.

Fourthly, the absence of practical access to justice for those on the receiving end of corporate wrongdoing.

Dealing with each of those issues in turn:-

Primary duty to shareholders

Of primary concern is the fact that unlike democratically elected governments which are accountable to the electorate, companies have been regarded as accountable only to their shareholders.

Corporations do however increasingly claim to recognise their responsibilities as "corporate citizens" in society and not just to their shareholders. And as noted by Sir Geoffrey Chandler, a former Chair of Amnesty International UK's Business Group;

"..there is an emerging consensus within society that companies should be held responsible for the impact on their stakeholders of the operations over which they can exercise legitmate influence"

As long ago as 1954, Anglo American's founder stated:-

"The aim of the group is, and will remain, to make profits for our shareholders, but to do it in such a way as to make a real and lasting contribution to the communities in which we operate".

The question, poignantly raised by Amnesty International, is whether such statements "should be perceived as a genuine aspiration or as a disingenuous attempt to pull the wool over the eyes of an increasingly discerning and critical public?"

Indeed it is often hard to reconcile stated intention with actual practice. Extensive criticism was directed at the environmental, health and social impact arising from the manner in which Anglo American conducted copper mining activities in Zambia. It was reported that its Environmental Management plans for the mines, stipulated levels of dust exposure which contravened Zambian regulations but which were passed on the grounds that this was the best that could be achieved if profits were to be maintained at an acceptable level. For instance the idea of installing a state of the art flash furnace to reduce hazardous emissions down to safe levels, was rejected on the grounds of cost. As noted by OXFAM:

"Corporate socially responsible behaviour is heavily circumscribed by BATNEEC principles - "best available technology not entailing excessive cost". In other words the company's financial health takes precedence over the physical health of the workforce and local residents"

Even so at the very least, corporate social responsibility statements are a recognition of moral responsibility by the corporations that make them. As such they may provide a valuable indicator in a legal context of how a corporation ought to have behaved or what it ought to have known. Thus they might also be viewed as a stepping stone towards imposition of legal liability on corporations which fail to observe such principles.

A high profile corporation which claims to subscribe to such principles and is then exposed for failing to observe them, could also be badly damaged. In that sense for certain corporations, endorsement of principle of good corporate practice may provide a powerful incentive to comply.

But are such statements of business principles - noble though they undoubtedly are - sufficient to ensure accountability? The fact that they are voluntary, unspecific and not legally binding provides the answer.

Control of the conduct of corporations by governments and international organisations

Governments

The only really effective way for governments to control the conduct of corporations is through internationally binding regulations, national legislation and importantly, law enforcement. These are aspects which I shall discuss in a later section.

Here I wish to give some illustrations of government policy, how corporations have influenced this and also of the principled stance taken by some governments in the opposite direction.

In the case of MNCs, one needs to consider the approach taken by the home country governments eg Europe and the US and the host country governments and also the role of international organisations.

One might be forgiven for asking rhetorically, why when so much criticism has been directed against the eviction of farmers in Zimbabwe, multinational operations that have caused widespread human rights abuses of local communities and destruction of their environment, have not been similarly criticised?

For instance, what did the US government do or say regarding the Unocal pipeline in Burma? What did the UK government do or say in relation to Shell's operations in Nigeria ?

What about the US government's decision not to ratify the Kyoto Protocol on Climate Change, that would have forced US corporations like Exxon to reduce greenhouse gas emissions? In global terms it is hard to imagine a more blatant alignment with the interests of big business against the world community and our environment.

The confrontation between the US and South African governments over the generic manufacture of AIDS drugs was a powerful reflection of the determination of developed countries to protect the intellectual property interests of multinationals, and the equally dogged determination of a developing country to protect the right to life and health of its citizens.

Ultimately the World Trade Organisation decided that in certain circumstances countries should be permitted to override the patent protection of large pharmaceutical companies by allowing the manufacture of cheap generic drugs in order to protect health.

The Connelly v RTZ case involved a throat cancer victim employed at a mine in Namibia. We represented Mr Connelly, contending that he ought to be allowed to proceed with his case in England where he had been granted legal aid, whereas there was effectively no legal aid in Namibia. In July 1997 in a landmark ruling, the House of Lords agreed with us.

Shortly afterwards, following lobbying by the multinationals, the UK Lord Chancellor proposed legislation to reverse the ruling in the Connelly case. He expressed concern that the ruling might cause multinationals to shift their operations from the UK.

In its review of UK company law, the government advisory committee barely referred to the issue of corporate accountability.

In a unique feat of resistance, the Guatemalan government specifically enacted legislation designed to frustrate the power exercised by the US courts of refusing to deal with cases brought in the US courts against US companies, on the grounds that it was more appropriate for them to be dealt with locally.

The general picture that emerges is one where developing countries desperate for investment have felt compelled to accept the situation and Western governments have either positively encouraged or turned a blind eye to the exploitative conduct of their MNCs.

But there have been notable exceptions. I have already mentioned the South African and Guatemalan governments. As far as developed countries are concerned, there has also been some inspiration:

In considering whether UK legal aid ought to be provided to the South African asbestos victims in the Cape Plc case, the UK Legal Services Commission classified the case as one of "high/exceptionally high" public interest.

Recently Michael Meacher, the UK Environment Minister, committed the UK Goverment, to the cost of clean up of the chemical pollution of the port of Dijibouti, on the grounds that the "polluter should pay". It is not clear whether the same principle will be applied by the UK Government in relation to the toxic waste at the Thor plant in Natal.

International organisations

Historically richer countries have been more concerned to develop a system that protects and favours their MNCs in their overseas operations, than it has with imposing responsibilities on them arising from those operations.

In the past, military force to secure these objectives was common. Later such force was recognised as incompatible with the rule of law and new principles of international law began to emerge in the practice of richer countries in disputes with developing states that hosted MNCs. The aim was to establish rules that would bind host states under international law, and in the process protect the commercial position of multinationals.

These objectives of richer states were not however universally accepted. Poorer states were anxious to retain the power to regulate the activities of multinationals in accordance with their own national objectives. These included the commercial interests of local businesses but also environmental and worker protection.

However, by and large the treaties proposed have focused on creation of favourable markets for multinationals in developing countries.

But more recently there have been negotiations regarding codes of conduct for multinationals. This led to the 1977 OECD Guidelines on Multinational Enterprises, and the 1977 International Labour Organisation Tripartite Declaration on Multinational Enterprises and Social Policy. Both of these impose an obligation on governments to protect public health and safety and the environment in a manner consistent with the goal of sustainable development. But neither are legally binding.

In July 2000, UN Secretary-General Kofi Annan proposed the "Global Compact", encouraging companies to build nine core human rights, labour and environmental principles, into their business strategies for the developing world. Several multinationals, including Shell, BP and Rio Tinto, have signed up to the Compact. (www.globalcompact.org).

Draft Fundamental Human Rights Principles for Business Enterprises have also been formulated by a working group of the UN sub-group on the Promotion and Protection of Human Rights. These are based on the Universal Declaration of Human Rights, the cornerstone of international human rights law and effectively seek to extend the international human rights obligations of countries to MNCs. The rationale was eloquently distilled by Sir Geoffrey Chandler:

"The responsibilities of transnational corporations...need to be defined by established instruments, such as the Universal Declaration of Human Rights...If companies press for multi-lateral trade and investment agreements for their financial protection, then they should be expected to accept a reciprocal international duty of care for their impact on the human, social and physical environment"

A committee of the European Parliament has come out in favour of voluntary codes of conduct for MNCs and proposed a European Directive requiring multinationals to participate in a compulsory system of "social reporting", on the social and environmental impacts of their businesses.

The drawback of voluntary, non-legally binding, codes of conduct, and international guidelines is that they are not legally binding. They are not enforceable and do not impose any sanction for non-compliance. The argument in their favour is that they are necessary stepping stone toward legally binding rules.

In any event, all this seems somewhat at variance with the following views expressed in a confidential memorandum 1991 by Dr Lawrence Summers, former Chief Economist at the World Bank, in the lead up to the Rio Summit (www.whirledbank.org/ourword/summers.html):

First, he pointed out that the life of a worker in a poor country is cheaper economically than that of a worker in a richer country;

"From this point of view, a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that."

Secondly, he suggested that it was logical for underpopulated and unpolluted parts of Africa to bear the brunt of pollution.

Thirdly, he suggested that people living in poor countries where the effects of poverty create a whole host of problems, including short life expectancy, were likely to be less concerned about environmental pollution, than more affluent people in developed countries.

Nevertheless, the World Bank has recently withdrawn from the controversial Sardosarovar dam project in Madhurpradesh in India, on environmental human rights grounds.

Corporate accountability: the legal position

International law

In general, apart from specific prescribed fundamental human rights violations, for example; genocide and forced labour, only countries are subject to international law. Claims under the US Alien Tort Claims Act have been pursued in the US under this legislation against Unocal and Shell on behalf of Burmese and Nigerian citizens respectively on the basis that the corporations allegedly conspired with the military governments to commit human rights violations.

In 1997, in a landmark decision against Unocal corporation, the US courts concluded that the Act did potentially cover claims brought against oil companies which were alleged to have tacitly accepted, if not conspired with, the military regime of Burma in connection with human rights violations, such as forced labour and torture, surrounding the construction of a pipeline. The case is set for trial next month.

The US Supreme court also gave the go-ahead for the claim brought by the relatives of Ogoni opponents of Shell's oil operations in Nigeria who were executed by the Abacha regime. The relatives include the brother of Ogoni leader, activist and writer, the late Ken Saro-Wiwa.

Civil liability under national law

Corporations are obviously subject to the domestic law of the countries in which they are based. But MNCs - whose operations straddle national boundaries have invariably been able to elude legal responsibilty; the parent company is based in one country and the operating subsidiary is based in another. The parent company contends that it is only a shareholder and can't be held responsible for the wrongdoing of its subsdiaries.

The concept of "corporate veil" is thus used to protect the parent. The subsidiaries are probably virtually insolvent and uninsured.

The Thor Chemicals and Cape Plc cases were pursued against the UK parent companies, by South African workers, in the English courts. It was contended on behalf of the claimants that the parent companies were directly liable for their own wrongdoing; In the Thor Chemicals case, for negligent design, set-up and monitoring of hazardous technology and system of work; In the Cape case, for negligence in relation to a whole process from mining of asbestos to production of asbestos products.

Claims on behalf of 30,000 Papua New Guinean landowners were pursued in Australia against Austalian based mining company BHP. The claims arose from the collapse of a tailings dam around the OK Tedi river and were settled for substantial compensation.

The legal approach to these cases was designed to circumvent the "corporate veil" obstacle. It could be regarded as analogous to the principle of "product liability", by which a manufacturer of a defective product is liable for injury to its consumers.

Civil cases brought against parent companies face the additional obstacle "forum non conveniens" - the doctrine applied by US and UK courts to shift cases brought within their jurisdiction to a more "appropriate" forum. The delay in resolving the Cape and Thor cases was mainly due to a series of protracted legal arguments over the venue of the cases. Indeed these cases made no less than 9 full appearances in the UK Court of Appeal and 2 in the House of Lords. But this was not a total waste of time since, in the process, significant progress in developing the law was achieved.

Liability of directors

The spectre of multinationals avoiding their responsibilities has led to demands that directors should be held liable. The conceptual obstacle here is again "corporate veil": assigning liability on directors personally is objectionable to the commercial world because it penalises the very people who are meant to profit from the limited liability of corporations.

Having said that, directors may be held personally liable where there has been direct specific involvement in a particular issue. The possibility of extending this liability is under review in the UK and no doubt elsewhere.

In the Thor case, we sued the Chairman Cowley personally, as well as the parent company. He himself had designed the Thor technology and had played a key role in the operations.

The Turin State Prosecutor charged the Italian subsidiary of Cape Plc and its Managing Director with manslaughter. The charge against the MD was suspended when he was diagnosed with Alzheimer's Disease. Alzheimer's Disease has also occurred in other cases brought against Directors. In one case, the Director made a miraculous recovery from this irreversible disease some years later!

The impact and role of civil compensation claims on multinational accountability

The Cape and Thor Chemicals cases are unique examples of multinationals being held accountable for injuries in a developing country, despite the corporate veil.

The dissenting judgment of Lord Hoffmann in the the 1997 ruling of the House of Lords in the Connelly case, warned of the risks of the ruling for other MNCs.

Following one of the rulings in the Thor case, a City lawyer told me that one of his commercial clients was reconsidering whether or not to invest in South Africa. My response was that his client had nothing to fear if it was a responsible corporation.

Following the House of Lords' decision in the Cape case, a commercial lawyer was quoted by Lloyds of London and saying that;

"It is not that this decision has suddenly increased everyone's liabilities, it has just made it more likely that the cases will be heard in England".

What he was effectively acknowledging was that whilst MNCs operating in developing countries may have been legally liable in theory, this theoretical liability had previously been ignored with impunity, as the victims had no means of enforcing their rights in practice.

Bear in mind that these positive effects on the commercial world arose from rulings that simply meant that MNCs could be sued in England for alleged overseas wrongdoing. They were not the result of any ruling on the merits of the cases.

The Cape litigation provided the impetus and model for similar cases against other mining companies, in particular the recent case against Gencor in the South African Courts.

MNC accountability is very much on the international political agenda, as is clear from the plethora of economic and legal conferences and publications worldwide on this topic. The Cape, Thor & Connelly cases have been a central aspect of the debate.

Whatever principled objections one may have to the concept of compensation claims, it is a fact that the payment of substantial compensation and legal costs in these cases, constitutes a salutary warning to MNCs. They may undoubtedly be a powerful deterrent against bad practice and therefore a crucial instrument in the quest for MNC accountability.

In achieving their deterrent effect, civil compensation claims utilise the mechanism of shareholder accountability:the threat of a costly legal claim will cause shareholders to use their influence to ensure responsible behaviour on the part of a company.

But the limitations of compensation claims must be understood:

Compensation claims are primarily for the benefit of the individuals who pursue the claims. The asbestos mining devastation caused by Cape Plc affected communities and their environment generally, as well as victims of asbestos-related disease. But the compensation settlement was for the ARD victims only.

A poignant illustration of the individual focus of civil compensation claim arose in the Cape Plc case:from the perpective of establishing a legal principle, winning at trial would have been the preference. But this would not have been in the Claimants ' interests because; Cape would have become insolvent;the Claimants might have lost the trial;the UK legal aid authorities would not have funded a trial given the offer that had been made.

Criminal liability

Criminal proceedings eg for breaches of health & safety and environmental pollution are brought too infrequently and are often ineffectual. This is due to a variety of factors including;

• the high standard of criminal proof required to secure a conviction;
• the lack of resources allocated to regulators;
• the inadequacy of criminal fines posing no deterrent. In the light of the R13,000 fine of Thor by the Pietermaritzburg Magistrates' Court, another MNC commented that it was hard to justify high expenditure on health & safety to shareholders;

In the case of MNCs: the parent companies are beyond the criminal jurisdiction of the local courts;

Access to Justice

A key obstacle to practical legal accountability of MNCs is access to justice. Up until recently MNCs have virtually avoided justice altogether when it comes to their developing country operations.

It is primarily due to the vast disparities in access to justice that MNCs now want cases heard in developing country local courts, whereas victims want cases heard in the MNC home base courts.

The key factor is funding. In many developing countries there is no legal aid system and public interest lawyers operate on "shoe-string" budgets. It would simply be impossible to run a difficult case on that basis, on anything like a "level playing field" against a well-resourced multinational.

Whilst, as in South Africa for instance, it may be lawful for lawyers to act on a "no-win no fee" basis, there is little incentive for lawyers to take on a complicated, expensive and protracted legal action against a multinational - defeat could ultimately lead to financial ruin.

The funding problem is exacerbated by the corporate veil obstacle. If it was possible, in practice, to sue multinational local subsidiaries, then these would be the obvious target for legal action.

Since, in most legal systems, an employer owes a legal duty of care to ensure the safety of its worker, a claim by a worker against the subsidiary company employer, would be relatively straightforward. All that would need to be established is that the worker had a work-related injury that had arisen from the employer's failure to take appropriate safety precautions.

It could well be feasible for local, under-funded, public interest lawyers to run such simpler, and hence less costly, cases.

However multinationals invariably arrange their corporate structures so that the subsidiaries are asset-less and uninsured, and hence not worth suing.

Further in countries such as South Africa and Namibia, workmens' compensation legislation probably precludes claims against a local subsidiary company "employer".

It is for this reason (rather than to advance the principle that a parent company should be held legally accountable at home) that the Cape Plc and Thor Chemicals Claimants.

Establishing legal liability against a multinational parent company however, is a novel, complicated and hugely expensive challenge.

Determining the nature and extent of the parent company's involvement in key aspects of the overseas operations, and of the parent company's state of awareness of the conditions at the overseas operations, requires detailed and expensive investigations into, and analysis of the relationship between, the parent company and its subsidiaries.

Thus, the fact that the only practical target of legal action is a parent company, makes funding of a case in a developing country, and hence access to justice there, a virtually impossible prospect.

Consequently, lack of legal resources and the corporate veil obstacle are fundamental, inextricably linked components of the inability to obtain access against MNCs access to justice in developing countries.

The corporate veil obstacle will present itself wherever a case against a parent company is brought, whether in the US, UK or local courts. However, the availability, to overseas victims, of legal aid or lawyers willing to act on a contingency basis enables claimants to obtain access to justice in the US and UK.

In the US and UK the obstacle to justice has been the application by the courts of the US and UK of the doctrine of forum non conveniens. The decisions in the Connelly, Thor and Cape cases have largely eroded this obstacle.

The complexity of MNC cases and lengthy procedural arguments over jurisdiction have also resulted in another critical deficiency in access to justice namely delay.

The fact that the Cape case may have been settled will be of no value to the hundreds of vicitms who died while the legal arguments dragged on. But this path is likely to be smoother in the future.

In other European Union countries, Article 2 of the 1968 Brussels Convention precludes the application of forum non conveniens where a defendant is based in the EU. Consequently, French or German etc companies can be sued in France or Germany without the risk of long running disputes over venue.

A coordinated response

The US consumer lobby working in concert with US plaintiff lawyers, arguably constitutes the most formidable form of deterrence in the area of product safety. However, this is primarily in relation to products that might harm US consumers, rather than activities which might be damaging to the health or environment of people in developing countries, though they may benefit, incidentally.

Similarly, the reluctance of Europeans to consume products containing genetically modified foods, is primarily due to concern over the possible adverse health risks to the consumer, rather than the economic impact of the technology on developing world farmers.

Thus it was legal action by US and European consumers for their own injuries, and concern for their own well being, that led to the demise of the asbestos industry.

From the perspective of the corporations, termination of asbestos mining was due entirely to considerations of profit and anxiety over the financial impact of legal actions.

Concern for the well being of South African asbestos miners, hardly featured in the equation, either on the part of the industry, or on the part of consumers.

Community groups, unions, politicians, campaigners and lawyers, can however form a powerful alliance in; initial evidence gathering and evaluation; laising between claimants and lawyers; lobbying government and shareholders; publicity.

The Cape case brought together lawyers and an array of NGOs, unions, community groups, politicians and human rights organisations including; Action for Southern Africa; International Ban on Asbestos Secretariat; Amnesty8/18/02 International; World Development Movement; One World Action; National Union of Mineworkers; Transport & General Workers Union; International Chemical Engineering & Mineworkers' Union.

Most crucially the South African Government intervened in the case on behalf of the claimants at a critical stage.

It is doubtful whether the outcome of the legal action would have been as favourable (or could even have been pursued) without the involvement of these organisations.

Conclusion

The following statement by UK Chancellor of the Exchequer, Gordon Brown, in 2001, encapsulates the key point and gives cause for optimism:

"One of the main fears of anti-globalisation campaigners is that lax regulation is a precondition of commercial engagement in developing countries, resulting in a downward spiral of poor labour and regulatory standards..where multinationals are unaccountable across borders - and sometimes seem more powerful than the developing countries in which they operate - companies and governments must do more to restore the right balance, increase stakeholder awareness and achieve cross-border accountability."

Clearly progress in this area requires significant change at a governmental and corporate level.

Voluntary codes, consumer action, criminal law and civil compensation claims provide a means of approaching the issue of MNC accountability from different angles. But they do not provide the ideal solution, either individually or collectively.

An international convention on MNC accountability, as proposed by organisations such as Friends of the Earth and Christain Aid, is the goal. In the case of MNCs, this might impose strict liability or a legal duty of care on parent companies. For a convention to be effective, it is vital that sufficient resources be committed to ensuring enforcement.

Part 2: Access to courts for corporate accountability: recent developments

A series of three cases litigated over the last seven years have developed English law with respect to access to justice for overseas victims of multinational corporations ('MNCs') and multinational accountability. All three cases - referred to here as the Thor case, the RTZ case and the Cape PLC case and described more fully in the appendix to this article - are compensation claims brought against the parent company of the multinational in its home courts in England.

The three cases have been heard by the Court of Appeal seven times and the House of Lords twice, mainly on issues of jurisdiction.(1) Of those nine appearances, only two defeats were sustained by the claimants, in the Court of Appeal, and both of those were overturned by the House of Lords. The cases seem increasingly to have encouraged a 'sea change' in the attitude of the English courts towards these types of cases. The intensity of the litigation solely on the issue of venue highlights what is at stake for MNCs and the claimants merely by the claims being allowed to proceed in England.

The most recent and definitive judgment was given by the House of Lords in a case brought by more than 3,000 South African asbestos victims.(2) This was based squarely on the principle laid down earlier by the Lords in the case of Connelly v Rio Tinto Plc,(3) namely that, in a complex case, if a claimant could establish that there was no funding available to obtain legal and expert representation in his/her local courts, then the claim would be allowed to proceed in the English court.

Reasons for suing in parent company domicile

The claimants' reasons for suing the parent company in the three cases, rather than the local operating subsidiaries, reflect the difficulties faced by victims of MNCs generally and can be summarised as follows: MNCs invariably organise themselves to protect the financial position of the parent company (see 'corporate veil' below); local subsidiaries are insolvent or at least not worth suing and/or uninsured; the claimants have no means of obtaining practical access to justice in their home courts; workmen's compensation schemes in place at home often preclude claims against an 'employer'.(4)

Forum non conveniens

Where a defendant is based in England, the English courts have jurisdiction to deal with the claim, as is the case throughout the European Union, by virtue of Article 2 of the European Union-wide Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters of 1968.(5) However the 'forum non conveniens' principle has been developed by the courts of England and the US to halt a claim brought (properly) within their jurisdiction, on the grounds that there is a 'more appropriate' forum (venue) elsewhere. The rationale is that the principle should ensure that a case is tried in the jurisdiction with which it has the closest connection, or rather that courts should avoid infringing the sovereignty of other states by exceeding their jurisdiction. Forum non conveniens, described by one of its eminent architects as 'one of the most civilised of legal principles',(6) has been the main legal battleground in the three cases so far.

'Forum Shopping'

The pejorative label 'forum shopper' has often been applied to foreign claimants attempting to sue in the United States. Analysis of the reality has demonstrated this label to be unwarranted.(7) In the cases described below, the reason for suing in the UK has been to obtain access to justice. The position has been stark: either the claimants were to be permitted to sue in England or they could not sue at all. The notion that the claimants' primary objective in suing in England is to get more money is simply wrong.

A City lawyer, quoted in a Lloyds of London statement following the July 2000 decision of the House of Lords in the Cape case, stated: 'It is not that this decision has suddenly increased everyone's liabilities, it has just made it more likely that the cases will be heard in England...'(8) This revealing statement thus effectively acknowledged that whilst multinationals operating in developing countries may have been legally liable, in theory, for injuries to workers, this theoretical liability was previously ignored with impunity because the victims had no means, in practice, of enforcing their rights in their local courts, invariably due to lack of funding to pay lawyers to represent them. It also highlights the reliance previously placed by MNCs on being able to avoid justice by utilising the forum non conveniens procedure.

'Reverse forum shopping'

By seeking to displace a claim from a place where it is natural to sue - the MNC domicile - to a venue where the MNC knows the claimants will probably be denied access to justice altogether (certainly not with anything like the 'equality of arms' provided for under Article 6 ECHR), it seems equally justifiable to accuse the MNCs of 'forum shopping'. By permitting an MNC to pick and choose when and where it wishes to be sued, the courts are effectively sanctioningforum shopping by MNCs, thereby making a mockery of forum non conveniens.

It was for this reason that Evans LJ, in the first Court of Appeal in the Cape case (9) described Cape's application as 'almost a case of forum shopping in reverse'. In its intervention before the House of Lords, the Republic of South Africa ('RSA') submitted:

Cape will be in the position, in future actions by South African claimants, to elect English or South African jurisdiction as its sole option, without regard to the interests of justice overall or the public interest. It is undesirable as a matter of public policy that one party to litigation should be able to elect its forum in this way, when it could decline so to elect in an identical future case. It is not in the interests of justice to allow such arbitrary 'forum shopping', by either party to litigation.

Nevertheless, in their judgment in the Cape case, the House of Lords overruled the Court of Appeal on this point, so that the practise of 'reverse forum shopping' by a defendant, appears to have been expressly sanctioned. However, as a result of the terms of the Cape and Connelly decisions, the prospect of defendants being able to benefit from this device in the English courts has, for practical purposes, been significantly reduced.

Article 2 Brussels Convention

Perhaps even more importantly, as a result of the July 2000 decision of the European Court of Justice in the Group Josi case,(10) the device of forum non conveniens is all but 'dead in the water', as far as UK-based defendants are concerned. Article 2 of the 1968 Brussels Convention (to which all EU states are party) provides that a defendant 'shall' be sued in its domicile. However, the Court of Appeal had previously held, in the Harrods (Buenos Aires) Ltd case, that this did not preclude a stay of proceedings, brought against a UK-domiciled defendant, where the alternative venue was in a state which was not a contracting party to the Convention (such as South Africa).(11) On the other hand, it was due to Article 2 that Cape was unable to prevent the continuance of claims brought against it in England by 4 Italian asbestos victims, formerly employed in its Turin factory.

Article 2 was raised by the claimants in the Cape case, who contested the Harrods ruling. Lord Bingham, who had been a member of the Court of Appeal in the Harrods case, indicated that if the claimants had not succeeded on their forum non conveniens case, the Court would have referred the matter to the European Court of Justice. There, in view of the Group Josi decision, it seems very likely that Article 2 will be held to preclude the application of forum non conveniens altogether where a defendant is domiciled in the EU.

Hague Conference on Private International Law

A word of caution however: behind the scenes negotiations and drafting have been ongoing for a few years now towards a global convention on jurisdiction, the 'Hague Conference'.(12) Whilst positive improvements have been made to the current position for example in the area of 'tag' jurisdiction, to ensure that oppressive dictators, such as Pinochet, cannot easily evade justice, forum non conveniens has effectively been allowed back in, largely on the insistence of the US government. It is unclear if and when the new Hague Convention will come into effect. Therefore, for the time being at least, MNCs have effectively been stripped of forum non conveniens as layer of defence.

Cases in other jurisdictions

A recent decision of the US Supreme Court ended the long running forum non conveniens dispute in a human rights case against multinational corporation, Shell. The US courts have given the go-ahead for the claims, brought by the relatives of Ogoni opponents of Shell's oil operations in Nigeria, executed by the Abacha regime. The relatives include the brother of Ogoni leader, activist and writer, the late Ken Saro-Wiwa. Shell had argued that the claims ought instead to be tried in England or the Netherlands, where its headquarters are situated.

The case was brought under the 1789 Alien Tort Claims Act ('ATCA'), a statute which enables the US courts to exercise extra-territorial jurisdiction over specified claims, including particular categories of human rights violation. Essentially, the claimants allege that Shell was jointly responsible for the executions of the activists, in that it tacitly endorsed the actions taken by the Nigerian military regime against the Ogoni activists and failed to exercise its influence to halt the executions.(13)

However, a case brought on a virtually identical legal basis, by Burmese claimants against oil company Unocal, has been halted by the California courts on the grounds that it ought to be tried in Myanmar. The claimants allege that Unocal conspired with the military regime in human rights violations, such as forced labour and torture, surrounding the construction of a pipeline.(14)

Other countries may have no equivalent of the ATCA, but that has not prevented similar landmark cases against multinationals elsewhere. Claims brought in Australia against mining company BHP, by 30,000 Papua New Guineans whose land had been polluted, overcame the venue hurdle and were settled for substantial damages, including costs of clean-up.

The 'corporate veil' barrier

Jurisdictional barriers having been largely overcome in the UK cases, the issue of whether or not MNC parent companies will be assigned with a legal duty of care towards those affected by their overseas operations remains the only real barrier between the claimants and justice. Having said that, there also remains a concern that, in the case of smaller MNCs, attempts might be made to avoid payment of compensation by the disposal of assets or shares by the corporate entity being sued.(15)

The problem is best illustrated by considering the Rio Tinto and Cape corporate trees. The parent companies, at the top of the trees own, directly or indirectly, all (in the case of Cape) or the majority (in the case of Rio Tinto) of the shares of the subsidiary companies in the rest of the group. Notwithstanding that the subsidiaries are actually divisions of the group business, each is actually a separate legal entity.

Legal liability of limited companies does not conventionally attach to their shareholders, save in exceptional circumstances (e.g. fraud) or where the company in question can be shown to be a 'sham' or the agent of a shareholder.(16) By organising their structure as separate legal entities, MNCs have been able to depend on this separation of legal identity ('corporate veil') between subsidiaries, even though, somewhat ironically, at the time it was formulated, it was unlawful for one company to own shares in another.(17)

So rigid have the courts been in upholding the corporate veil that in Adams v Cape,(18) the Court of Appeal refused to 'pierce' it, even though it was found that 'Cape ran a single integrated mining division with little regard to the corporate formalities as between members of the group...'.

And yet in the eloquent and powerful words of the submission of the Indian government in the Bhopal case: (19)

Key management personnel of multi-nationals exercise a closely held power which is neither restricted by national boundaries nor effectively controlled by international law. The complex corporate structure of the multi-national, with networks of subsidiaries and division, makes it exceedingly difficult or even impossible to pinpoint responsibility for the damage caused by the enterprise to discrete corporate units or individuals. In reality, there is but one entity, the monolithic multinational, which is responsible for the design, development and dissemination of information and technology world-wide, acting through a forged network of inter-locking directors, common operating systems, financial and other controls.

In this matter, the multinational carries out its global distribution and marketing systems, financial and other controls. Persons harmed by the acts of a multinational corporation are not in a position to isolate which unit of the enterprise caused the harm, yet it is evident that the multinational enterprise that caused the harm is liable for such harm.

The multinational must necessarily assume this responsibility. For it alone has the resources to discover and guard against hazards and to provide warnings of potential hazards.

A legal 'duty of care' for MNC parent companies?

Whereas claims against Unocal and Shell in the US have been based on infringements of human rights law, the Thor, Rio Tinto and Cape cases have been based on more conventional tort/negligence principles. The key issue raised is whether an MNC parent company owes a legal duty of care to those injured by its overseas operations. The first Court of Appeal in the Cape case described the duty of care issue as a 'substantial question of law'. (20)

There is presently no precedent on this apparently controversial issue of the existence of a 'duty of care' owed by an MNC parent to those affected by overseas operations. Whilst the potential adverse financial consequences for MNCs are obvious, there seems no justifiable reason, in principle, why the tortious liability of an MNC should be any less than that of any other legal individual.

Furthermore, as noted above, (21) given that, at the time the concept of limited liability was formulated, it was unlawful for one company to hold shares in another, it is arguable that the separation of corporate legal identities should not be a barrier against the imposition of a duty of care across corporate boundaries.

Donoghue v Stevenson (22) was novel in its time, but the concept of 'product liability', by which a manufacturer is assigned with a duty of care towards consumers of its products, is now firmly established: By analogy, it can be argued that a parent company which designs, orchestrates and controls a worldwide 'process', comprised of interdependent integrated divisions, and which appreciates the risks to which workers employed on a hazardous process are being exposed, should be assigned with a duty to take reasonable steps to protect workers against those foreseeable risks. Where a parent company is responsible for health and safety and medical policy and for supervising and monitoring those aspects across a group, 'assumption of responsibility' is likely to result in the imposition of a duty of care.(23)

'Distributive Justice'

As well 'proximity' and 'foreseeability' (of harm), 'reasonableness' and 'fairness' are also key factors in determining whether or not a legal duty of care was owed by a defendant. The relevance of the conduct and motives of the defendant and the issue of double standards in determining whether a legal duty of care was owed and the nature and scope of any duty is reinforced by the embracing of the 'distributive justice' approach into English law of negligence.

This appears to have started with the decision of the Court of Appeal in Frost v Chief Constable of South Yorkshire Police.(24) There had been a public outcry at the decision that, whereas police officers suffering from Post-Traumatic Stress Disorder (PTSD) following their involvement in a football stadium disaster were considered to have been owed a duty of care, relatives of victims of the tragedy were not. By declining the police officers' claims, the House of Lords was engaged in a practical attempt to preserve the general perception of the law as a system of rules which was fair between one citizen and another. The upshot of the Lords' ruling was that to achieve this objective, the situation must be viewed from the perspective of the 'man on the Underground'. One wonders what such a person might make of the suggestion that MNCs such as Cape and Thor might be able to avoid liability to their South African workers, by structuring themselves in such a way as to take full advantage of the corporate veil.

'Double standards'

Interlinked with the above approach to legal liability based on fairness, is the principle that practising 'double standards' in relation to health and safety is morally indefensible and should be legally indefensible too. It is frequently suggested, on behalf of MNCs, that MNCs need only comply with the laws of the countries in which they operate. However, whether or not a risk of injury ought to have been foreseen by a defendant does not depend on local laws or regulations. The liability of a parent company based in England ought to be judged against its knowledge and experience of what was required to be done to protect against risks in England.

If standards are less stringent overseas, it would be entirely artificial to base liability on such lesser standard if in fact the MNC had a greater awareness of the risks, based on the practices and knowledge acquired at home. Consequently whilst compliance with local standards may ensure no prosecutions for contravention of local laws, they cannot and should not be a defence to a claim brought in negligence. MNCs themselves appear to recognise the moral obligation not to apply double standards and to have stated their policies accordingly.(25)

Continuing to practice 'double standards' should be unattractive, provided the levels of compensation and costs are sufficiently high to outweigh any financial incentive to cut corners on health and safety expenditure. Although the compensation claim brought against Thor in England was settled in April 1997 for £1.3 million, an earlier criminal prosecution, in South Africa, of the subsidiary and its managers, had resulted in a £3,000 fine. Multinationals might well comment that the levels of the fines make it hard to justify to shareholders significant expense on health and safety.

Levels of compensation

MNCs assert that claimants living in developing countries, where the cost of living is lower, should be paid less compensation since their needs are less. The levels of compensation awarded by courts in developing countries are indeed significantly lower. Indeed if one compares the levels with those awarded, for instance, by the US courts, the differentials are astronomical. But this has nothing to do with need.

An important function of civil compensation should be to act as a deterrent, that is, to provide a sufficient disincentive against future infringements by the defendant in question or others. Paltry levels of damages paid to claimants in developing countries will have the reverse effect. From a commercial perspective it creates an 'unlevel playing field' between MNCs depending on where they operate. There would be an incentive for multinationals to employ more people in developing countries because of the different levels of compensation. In any event, the law in England seems quite clear: Quantification of damages is a matter of procedure to be determined in accordance with the law of the state which is trying the case.(26)

Desirability of suing MNCs at home

It has been suggested, on behalf of MNCs, that holding MNCs accountable at home by reference to home standards undermines the legal system of the local state and effectively amounts to an infringement of its sovereignty.(27) The inability to obtain practical access to justice in local courts and the location of the MNC domicile are ample justification for bringing these claims in the courts of the MNC home base.

In its written representations to the House of Lords in the Cape case, the RSA stated that:

The South African public interest is in the speedy and fair determination of these proceedings, not their being determined in its courts. There is no public interest in requiring the new constitutional order, with the financial pressures, to bear the costs of litigation arising from the operation of an English domiciled company under the old constitutional regime.

Conclusion

Starting from the premise that the objective is to develop a system whereby multinationals can be held legally accountable for damage and injuries caused, wherever in the world they happen to be operating, where does the above review lead to in terms of a proposal for the way forward?

The key obstacle to accountability is access to justice. It is primarily due to the vast disparity of access to justice that the multinationals want the cases heard in the developing country local courts whereas the victims want the cases heard in the multinational's home courts. The key factor in relation to access to justice is funding. In many developing countries there is no legal aid system and public interest lawyers operate on 'shoe-string' budgets. They would simply be unable to run a case on anything like a 'level playing field' against a well-resourced multinational. Similarly where, as in South Africa for instance, it is lawful for lawyers to act on a 'no win no fee' basis, there is little incentive for lawyers to take on a complicated, expensive and protracted legal action against a multinational - defeat could ultimately lead to financial ruin.

The funding problem is exacerbated by the corporate veil obstacle. If it was possible, in practice, to sue multinational overseas subsidiaries, then these would be the obvious target for legal action. Since, in most legal systems, an employer owes a legal duty of care to ensure the safety of its worker, a claim by a worker against the subsidiary company employer would be relatively straightforward. All that would need to be established is that the worker had a work-related injury which had arisen from the employer's failure to take appropriate safety precautions. Whilst fighting even this simpler type of a case on a level playing field would not be possible, it would nevertheless be feasible for local, under-funded, public interest lawyers to run such cases. However, as discussed above, multinationals frequently arrange their corporate structures so that the subsidiaries are asset-less and uninsured, so not worth suing. In countries such as South Africa, Namibia, New Zealand and Canada, workmen's compensation legislation precludes claims against an 'employer'.

It is for this reason (rather than to advance the principle that a parent company should be held legally accountable at home) that legal recourse to the parent company, based in the UK or the US and with substantial assets, has been sought. Establishing legal liability against a multinational parent company however, may be a novel, complicated and hugely expensive challenge. It requires a detailed investigation into and analysis of the relationship between the parent company and its subsidiaries with a view to determining the nature and extent of the parent company's involvement in key aspects of the overseas operations and the parent company's state of awareness of the conditions at the overseas operations. Thus the fact that legal action, wherever it is brought, would have to be taken against a parent company, makes funding of a case in a developing country, and hence access to justice there, a virtually impossible prospect. Consequently lack of legal resources and the corporate veil obstacle are both fundamental components of the inability to obtain access to justice in a developing country.

The corporate veil obstacle may also be present in a case brought against a parent company in the US or the UK. However, the availability, to overseas victims, of legal aid or lawyers willing to act on a contingency basis enables claimants to obtain access to justice. Here the obstacle to justice has been the exercise by the US and UK courts of the doctrine of forum non conveniens. In other European Union states (and also probably now in the UK too) Article 2 of the Brussels Convention precludes the application of forum non conveniens where a defendant is based in the EU.

Unless substantial funds are to be made available to ensure that victims are able to obtain proper access to justice in their local courts, access to multinational home courts in Europe and the US needs to be allowed in order to avoid a denial of justice. Apart from the possibility of allocating funds to public interest lawyers in developing countries for this purpose, legislation imposing legal liability directly on a multinational parent company would, for the reasons indicated above, enable cases to be run on a modest budget.

Lawyers will be more inclined to take the risk of acting on a contingency basis when there are good prospects of settlement without the considerable outlay involved in a full trial. Experience from the US suggests that the prospect of high damages awards and positive verdicts by juries creates a powerful incentive on a corporation to settle. Higher damages awards in developing countries would also increase this incentive and in turn would increase the willingness of lawyers to take on cases. Whilst juries may not be a realistic possibility, reducing the legal obstacles, by legislating to remove the corporate veil barrier, could achieve the same result.

Legislation to remove the corporate veil barrier, increase damages awards in developing countries, and allocate funding to enable cases to be fought in developing countries, would enhance the deterrent objective of legal action and would also encourage more uniform application of standards of health and safety and environmental protection across the globe. This would assist in the goal of ensuring greater multinational accountability and in making double standards a practice of the past.

Richard Meeran
Partner, Leigh Day & Co; representing the claimants in the Cape, Thor and RioTinto cases.

Appendices

Appendix 1: The Thor Case (28)

During the 1980s, Thor manufactured mercury-based chemicals in Margate, South East England. Health and safety at the Margate factory came under considerable criticism over a prolonged period from the Health and Safety Executive due to elevated levels of mercury in the blood and urine of the workers. About 1986, the company terminated mercury-based processes in Margate and shifted its Margate mercury operations (including key personnel and plant) to Cato Ridge, Natal, South Africa.

In February 1992, mercury poisoning of South African workers came to light. Three workers died and many others were poisoned to varying degrees. An inquiry by the Department of Manpower followed by a criminal prosecution in the local (Pietermaritzburg) Magistrates' Court led to the equivalent of a £3,000 fine. Compensation claims against the parent company and its Chairman were commenced in the English High Court on behalf of 20 workers. The claims alleged that the English parent company was liable because of its negligent design, transfer, set-up, operation, supervision and monitoring of an intrinsically hazardous process.

Thor unsuccessfully applied to stay the action on forum non conveniens grounds and its appeal was struck out by the Court of Appeal. [Footnote 1]. This was the first recorded case of this type. In 1997, following a series of hearings concerning the acceptability of Thor's disclosure of documents and an unsuccessful strike-out application by Thor, the claim was settled for £1.3 million.

A further 21 claims were commenced by workers from the same factory. In July 1998, Thor's application to stay proceedings on forum non conveniens grounds was dismissed. In January 1999, the Court of Appeal granted Thor permission to continue with its defence of the proceedings.

It then emerged from company documents filed in December 1999 that Thor's parent company, 'TCL' had undertaken a demerger which involved transfer of subsidiaries valued at £19.55 million to a newly formed company, 'Tato Holdings Limited' ('Tato'). Two weeks before the start of the three month trial, an application to the Court was then made, on behalf of the Claimants, for a declaration under S 423 Companies Act 1986 that the dominant purpose of the demerger was to defraud creditors, such as the Claimants and it was thus void. Thor and its chairman disputed that this was the purpose, but the Court of Appeal held that in the absence of information to the contrary, the inference that the demerger of Thor was connected with the present claims was 'irresistible'. The Court ordered Thor to pay £400,000 into court within seven days and to disclose documents concerning the demerger. The case was settled on the first day of trial.

A claim for compensation was brought in England by Edward Connelly, a laryngeal cancer victim employed at RTZ's Rossing uranium mine in Namibia. It was alleged that key strategic technical and policy decisions relating to Rossing were taken by the English-based RTZ companies. For example directors of their English companies were directly responsible on the ground, for substantially increasing the output of uranium - and the consequent dust levels - without ensuring that effective precautions were taken to protect workers against the hazards of uranium dust exposure.

In March 1995, RTZ succeeded, initially, in persuading the Court that Namibia was the 'natural forum' for the case. Thereafter, the argument was limited to the relevance of Mr Connelly's inability to obtain funding to bring a claim in Namibia whereas in the UK funding was available, in the form of legal aid or lawyers willing to act on a 'no win, no fee' basis.

The case went to the Court of Appeal twice before reaching the House of Lords. On the first occasion, in August 1995, the Court of Appeal held that, in determining whether Namibia was an 'available forum', s.31 of the 1988 Legal Aid Act precluded the court from having regard to the fact that the plaintiff was unable to obtain funding to litigate in Namibia, but had legal aid to litigate in England. Mr Connelly applied to lift the stay on the grounds that the funding of his English action had switched to 'no win, no fee' conditional fee agreements (the UK variant of contingency fees) having been made lawful in August 1995. His application was rejected at first instance in October 1995. However, in May 1996 the Court of Appeal, referring specifically to Article 6 European Convention on Human Rights and Article 14 International Covenant on Civil and Political Rights, allowed the appeal. Bingham MR stated:

But faced with a stark choice between one jurisdiction, albeit not the most appropriate in which there could in fact be a trial, and another jurisdiction, the most appropriate, in which there never could, in my judgement, and interests of justice tend to weigh, and weigh strongly in favour of that forum in which the Plaintiff could assert his rights.

The House of Lords held, by a 4-1 majority, that Mr Connelly's inability, in practice, to litigate in Namibia meant that the case should be allowed to proceed in England. In the lead judgment, (30) Lord Goff stated:

The question, however, remains whether the plaintiff can establish that substantial justice will not in the particular circumstances of the case be done if the plaintiff has to proceed in the appropriate forum where no financial assistance is available.

A further claim was subsequently brought by the widow of another (oesophageal) cancer victim employed at Rossing, Peter Carlson. Mr Carlson worked at Rossing during the same period, and for a substantial period in the same areas of the mine, as Mr Connelly. Almost immediately after the House of Lords reversed the stay, RTZ applied to strike out the Connelly claim (including on limitation grounds) and to stay the Carlson action on the ground of forum non conveniens. In December 1998 the court struck out Mr Connelly's claim on limitation grounds but dismissed RTZ's application to stay the Carlson action on the grounds that Mr Carlson's widow could not obtain funding to achieve substantial justice in Namibia.

Appendix 3: The Cape plc case (31)

The asbestos mined in South Africa has caused a chain of injuries world-wide. Victims, include asbestos miners and millers, people involved in transportation of asbestos, stevedores loading/unloading ships, ship workers, workers at factories in South Africa, the UK and the US, as well as people living in the vicinity of these operations. Whereas victims in the US and the UK can and have been compensated, victims in South Africa have not.

Cape plc, formerly 'The Cape Asbestos Company Limited', was involved in mining blue and brown asbestos in the Northern Cape and Northern Provinces respectively from 1890 until 1979. Until 1948, the operations in the North Western Cape were carried out directly by the parent company but for the remainder of the period, through wholly-owned subsidiaries. Having closed down its UK factory in Barking, due to the level of asbestosis in the workforce, in 1968, Cape continued to operate in South Africa until the 1980s.

In February 1997, compensation claims were commenced in the English High Court on behalf of three workers at the Penge mine in the Northern Province who had also lived near the mine and two residents of Prieska who had lived in the vicinity of Cape's mine in that town.(32) The former suffered from asbestosis and the latter from mesothelioma, an asbestos-related cancer of the lining of the lung. The claims were based principally on the negligent control of the company's world-wide asbestos business from England and failure to take measures to reduce asbestos exposures to a safe level. Claims were also lodged on behalf of four Italian workers, employed at Cape's Turin manufacturing operation, purportedly run by another wholly-owned subsidiary, Capamianto.(33)

Cape applied to stay the South African claims on forum grounds. In January 1998, following an eight day hearing spread over six months, their application was granted, but on appeal in July 1998, the Court of Appeal reversed this decision. The Court paid particular heed to the fact that 'the alleged breaches of...duty of care...took place in England rather than South Africa', and the fact that since the company no longer had any connection with South Africa (and hence the South African courts only acquired jurisdiction by virtue of Cape's offer to submit to the jurisdiction), to grant a stay would effectively be allowing Cape to 'forum shop in reverse'. The court also indicated that on the basis of the pleaded case there were good arguments in favour of the application of English or South African law (34) but that, prima facie, the 'duty' owed by an English Company should be determined by English law.

Following an oral hearing in December 1998, the House of Lords dismissed Cape's petition. In January 1999 two further actions comprising almost 2,000 claims were commenced in England against Cape plc by South African claimants exposed to asbestos in the same geographical regions of South Africa.(35)

Cape applied to stay the 2,000 claims on forum grounds contending that the emergence of the group was a sufficiently material change to warrant a different conclusion from that of the Court of Appeal in the first five cases. Cape also sought a stay of the first five cases on the grounds that the Court of Appeal had been misled as to the true nature of the case. At first instance, the court granted a stay of all the actions including the five Lubbe claims. Buckley J said he was also 'comforted' by decisions of the US Courts in which 'public interest' considerations had influenced the decision of the courts to stay proceedings in favour of the alternative forum.(36) The specific reference to the Bhopal case was perhaps surprising given that it is widely known that the settlement of these cases in India was approved by the Indian courts on the grounds of expediency, (37) and did not result in compensation being paid to more than a small number of claimants and even then in paltry amounts. The Connelly funding point was a major issue, but Buckley J held that legal aid was likely to be available to the claimants to litigate in South Africa.

Subsequently legal aid was withdrawn in South Africa for all damages claims. Furthermore, it emerged that Cape had offered a public interest law centre money to fund the Claimants' case against itself. Nevertheless, in November 1999, the Court of Appeal dismissed the claimants' appeal, holding that South African lawyers would undertake the case on a no win no fee basis and specifically endorsing the 'public interest' ruling of Buckley J. The claimants appealed to the House of Lords and the Republic of South Africa was given permission to intervene on the public interest issue.

In July 2000, in a unanimous, landmark decision, in favour of the claimants, all five Law Lords held that the case should be allowed to continue in the English High Court. Applying the principle it had developed exactly three years earlier in Connelly v RTZ, the Court held that a case of such magnitude required expert legal representation and experts on technical and medical issues, none of which could be funded in South Africa.

Reversing the finding of the Court of Appeal, the Lords declined to follow the US authorities (Gilbert, Piper and Bhopal) which had introduced and applied their own, conveniently partial criterion of 'public interest' as a reason for denying access to foreign claimants. Nor did the Lords adopt the interpretation of 'public interest' advanced by the claimants and the Republic of South Africa. Rather, the Court held that 'in applying this principle [of forum non conveniens] judicial amour propre and political interest or responsibility have no part to play.'

1 See Connelly v RTZ Corporation Plc [1996] 2 WLR 251; Ngcobo and Others v Thor Chemicals Holdings Ltd and Others (TLR 10/11/95); Connelly v RTZ Corporation Plc and Another (TLR 12/7/96) / Connelly v RTZ Corporation Plc & Another [1997] 3 WLR 376 / Lubbe v Cape Plc (1998 CLC 1559) / Sithole & Others v Thor Chemicals Holdings Ltd and Another (TLR15/2/99) / Lubbe and others v Cape Plc (2000) 2 Lloyd's Rep 383; [2000] 1 WLR 1545) / Sithole & Others v Thor Chemicals & Others (LTL 3/2/99).
2 Lubbe & Others v Cape Plc [2000] 1 WLR.
3 [1997] 3 WLR 376.
4 For example, in the case of Cape Plc, all these factors applied.
5 Following the Connelly ruling, the present Lord Chancellor proposed legislation to reverse the effect of the decision, inter alia because of concern that it might cause MNCs to shift their operations away from the UK. It is of interest that subsequently, in a merger between Rio Tinto and Australian mining company, CRA, CRA shifted its head office to London.
6 Lord Goff in Airbus v Patel [1999] 1 AC 119.
7 David W. Robertson, 'Forum Non Conveniens in America and England: A Rather Fantastic Fiction' [1987] 103 LQR 398 at 400.
8 See Meeran, R. 'Lloyds of London Reacts to Recent Legal Decision', International Journal of Occupational and Environmental Health, Volume 6 No 4, Oct/Dec 2000, 249-254.
9 Lubbe v Cape Plc (1998) CLC 1559.
10 Group Josi Reinsurance Co SA v Universal General Insurance Co (UGIC) [2000] All ER (EC) 653.
11 In Harrods (Buenos Aires) Ltd (No.1), [1991] 4 All ER 334, the Court of Appeal held that the court retained jurisdiction to stay where the alternative forum was in a non-contracting state, notwithstanding the mandatory language of Article 2. The decision was referred to the ECJ by the House of Lords (Ladenimor SA v Intercomfinanz SA, case C314/92). Submissions opposing the Court of Appeal ruling were lodged by the German government and the European Commission. However, the case was settled before any ruling was delivered by the ECJ.
12 The first draft of the Proposed Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters was produced by the first Diplomatic Conference of the Hague Conference on Private International Law in Jun 2001. For the text of the draft and updates on the negotiations, visit http://www.cptech.org/ecom/jurisdiction/hague.html#cptdocs.
13 Wiwa v. Royal Dutch Petroleum (Shell), Docket Nos. 99-7223[L], 99-7245[XAP] United States Court of Appeals for the Second Circuit 2000 U.S. App. LEXIS 23274. Cert. denied Mar 26 2001.
14 Doe v. Unocal, 973 F.Supp. 880 (CD Cal 1997).
15 See the Thor case, in the Appendix.
16 Salomon v Salomon & Co Ltd [1897] AC 22.
17 Philip I. Blumberg, The Multinational Challenge to Corporation Law (Oxford University Press, Oxford, 1993).
18 Adams v. Cape Industries Plc. [1990] Ch. 433; [1991] 1 All ER 929.
19 Re Union Carbide Corporation Gas Plant Disaster at Bhopal, India in Dec 1984 (1987) 809 F 2d 195, (SDNY 1986) 634 F. Supp 842.
20 See n. 1 above. The topic was also the subject of a half day workshop, chaired by Lord Hoffmann, of the annual conference of the International Law Association in July 2000.
21 See n.16 above.
22 (1932) AC 562.
23 Williams v Natural Life Health Foods 1998 1WLR 830.
24 1999 2 AC 455.
25 See statement of Sir Anthony Tuke, former Chairman of Rio Tinto; also Turner and Newall who were Britain's leading manufacturer of asbestos products, Annual Report 1980; and the representation of the RSA to the House of Lords in the Cape case.
26 Boys v Chaplin (HL) [1971] A.C. 356, Hulse v Chambers LTL 15/5/2001; ILR 25/6/2001; TLR 13/7/2001.
27 Andrew Henderson, 'Lubbe and Others v Cape Plc a step forward or a slap in the face for South African justice' De Rebus (Law Society of South Africa), Nov 2000.
28 Sithole & Ors v Thor Chemicals Holdings Ltd & Anor TLR 15/2/1999.
29 Connelly v RTZ [1996] 3 WLR 373.
30 Ibid at 389.
31 Lubbe & Ors v Cape Plc [2000] 1 WLR 1545; 2 Lloyd's L. Rep 383.
32 Ibid.
33 Capamianto was liquidated in 1977 and manslaughter proceedings were brought in 1993 by the Turin State Prosecutor against the Managing Director. These proceedings have been suspended as the Managing Director was diagnosed with Alzheimer's disease.
34 The nature of the allegations pleaded were expressly distinguished from those in Durham v T&N plc unreported (1 May 1996): A Canadian asbestos victim employed by the English defendant's wholly-owned Canadian subsidiary sued the English parent company on the basis of employers' and occupiers' liability allegations. The Court of Appeal held that Canadian law applied to the tort.
35 Afrika and 1539 Others v Cape plc - 1999 A No 40 and Mphahlele & 336 Others v Cape plc - 1999 M No 146.
36 In the Union Carbide litigation bought by the Indian Government on behalf of Bhopal victims in the New York District Court, Keenan J held that the US Public interest was not as great as the Indian public interest in dealing with the case and accordingly the action was stayed (In re Union Carbide Corp. Gas Plan Disaster (643 F.Supp.842 SD NY 1986)
37 Union Carbide Corporation v Union of India etc 4 May 1989 Supreme Court Reports (128-143)