Transnational corporate accountability
Insights from South Africa
People in developing countries are increasingly affected by the activities
of multinational companies, yet it is difficult for them to hold those
companies to account in court. What lessons can be learnt from two recent
foreign direct liability cases brought against northern multinationals?
Globalisation implies that accessible justice has a transnational character
in some cases. Foreign direct liability cases - when parent companies
are sued at home over health and safety issues or environmental impacts
in developing countries - provide some important insights.
A report from the Royal Institute of International Affairs looks at two
personal injury actions brought by South Africans against parent companies
of English multinationals in the London High Court. Lack of financial
support and restrictive workers' compensation legislation were among the
most serious obstacles to accessing justice in South Africa. In England,
the claimants were given legal assistance from public funds.
Cape plc was once the world's largest asbestos mining company, operating
in South Africa under apartheid. An English action by 7 500 South Africans
suffering from asbestosis and mesothelioma was backed by the South African
Government. After a long legal battle over whether the case should continue
in South Africa or England, terms for a negotiated settlement were reached
in England in December 2001.
Another set of actions was brought against the parent company of a small
English chemicals multinational, Thor Chemicals, whose South African activities
included the manufacture and processing of mercury-based chemicals. Many
workers suffered symptoms of mercury poisoning. Three died. In the UK,
Thor Chemicals had been criticised by the Health and Safety Executive
- before mercury-based operations intensified in South Africa.
In England, three separate actions were brought against Thor Chemicals'
parent company by former workers of the South African plant. The cases
were eventually settled out of court, but not before a long battle over
whether or not the actions should have been brought in South Africa. Meanwhile,
the Thor group demerged, putting assets beyond the reach of claimants.
In both cases against Thor Chemicals and Cape plc, English litigation
emerged as a better bet for redress for a limited group of individuals.
But it also has drawbacks. Personal injury claims cannot provide community-level
remedies. Even a clear precedent on parent company liability could simply
lead to corporate restructuring. And foreign direct liability cases do
nothing to build access to justice or to tackle public governance weaknesses
in host countries.
Thor Chemicals and Cape plc point to:
- the need to develop a contemporary understanding of home and host
country responsibilities for negative impacts of foreign direct investment
- a need to get beyond the current 'regulatory versus voluntary' policy
divide to develop a balance between parent company accountability and
intergovernmental co-operation towards access to justice in developing
countries
- the value of an intergovernmental initiative on information sharing
or notification where companies that have been the subject of censure
at home establish operations in other countries
- a need to look at whether laws that allow challenges to corporate
restructurings are adequate to deal with possible future personal injury
or environmental claims by companies' involuntary creditors
- the importance of establishing clear understanding on when parent
companies can be held accountable for negative impacts in developing
countries - recognising that sometimes liability is right.
Halina Ward
International Institute for Environment and Development
3 Endsleigh Street
London WC1H ODD
UK
T +44 (0)20 7872 7257
Halina.ward@iied.org
See also
'Corporate accountability in search of a treaty? Some insights from foreign
direct liability', Royal Institute of International Affairs Sustainable
Development Programme Briefing Paper No. 4, by H. Ward, 2002 www.riia.org/pdf/research/sdp/Corporate_Accountability_Insights.pdf
'Transnational Corporations and Environmental Damage: Is Tort Law the
Answer?', Washburn Law Journal, vol. 41, no. 3, by M. Anderson, 2002.
http://washburnlaw.edu/wlj/41-3/articles/ande.pdf
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