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U.S. Ruling Says Firms Liable for Abuse Abroad

Published by MAC on 2002-09-19

U.S. Ruling Says Firms Liable for Abuse Abroad

By Lisa Girion,

The Los Angeles Times (September 19, 2002)

Courts: Suit by villagers claims Unocal abetted rights violations at a project in Myanmar.

In a setback for multinational corporations, a federal appeals panel ruled Wednesday that they can be held liable in U.S. courts for aiding and abetting human rights violations committed by others abroad.

The ruling, which the panel said was unprecedented, came in a case that accuses El Segundo-based Unocal Corp. of turning a blind eye to alleged human rights abuses, including murder and rape, against Burmese villagers.

Myanmar government soldiers allegedly forced the villagers to work on a $1.2-billion natural gas pipeline.

The decision by a panel of the U.S. 9th Circuit Court of Appeals in Pasadena was seen as a breakthrough for foreigners seeking to hold multinational corporations accountable for their alleged complicity with repressive regimes in human rights abuses.

At least 10 similar lawsuits are pending around the country against corporations, including ChevronTexaco Corp. and Coca-Cola Co., and human rights lawyers have several other cases involving multinational companies waiting in the wings. With Wednesday's ruling, they probably will move forward.

Officials at Unocal were considering their options for appealing and were confident the company would prevail.

Robert Benson, a Loyola Law School professor and longtime critic of Unocal's participation in the Myanmar pipeline, called the ruling "an enormously big decision."

Similarly, lawyers for 13 Burmese villagers pressing their grievances from a refugee camp in Thailand said the decision was a huge victory for them and an example for courts in similar lawsuits.

"Unocal was saying you can't hold us liable because we didn't hold the gun," said Terry Collingsworth, a lawyer for some of the plaintiffs. "That's the classic Nuremberg defense: We weren't the Nazis. We merely profited from them. Now this court has clarified that you cannot knowingly assist a crime and claim you are not responsible."

Corporations usually succeed in getting such cases dismissed before trial, but the Unocal case, thrown out of federal court, was refiled in state court and is set to go before a Los Angeles jury Feb. 4.

"What the case is about is whether a private American company can be held responsible for the actions of a foreign military regime when the company itself didn't do any of the offending conduct," said Daniel M. Petrocelli, a lawyer Unocal brought into the case about a month ago.

A French company ran the pipeline project and Unocal's involvement was as an investor, he said.

"No Unocal person participated in any acts of wrongdoing," Petrocelli said. "Unocal does not have, nor ever had, any control over the actions of the Myanmar military. The company does not direct, countenance or condone the violation of any person's human rights, and it certainly did not aid or abet the violation of anyone's human rights. And if that is the standard that is applied in this case, we are confident we will meet that standard."

The legal battle began six years ago when Burmese villagers filed a suit in U.S. federal court demanding that Unocal pay tens of millions of dollars in damages for alleged abuses committed by soldiers along the Yadana pipeline. A federal judge found that the evidence suggests "that Unocal knew that forced labor was being utilized and that the joint venturers benefited from the practice." But he threw out the case because the company's conduct did not rise to the level of "active participation"--a liability standard the court borrowed from the Nuremberg war crimes trials involving the role of German industrialists in the Nazi forced-labor program.

Lawyers for the Burmese villagers responded by filing a new lawsuit in Superior Court in Los Angeles, making many of the same charges under state law. That case is set for trial in February. The lawyers also appealed the federal judge's dismissal, which led to Wednesday's ruling.

Although the appeals panel sent the case back to the lower federal court for trial, the villagers' lawyers said they would ask Superior Court Judge Victoria Gerrard Chaney to apply the new liability standard in the state trial.

The decision was issued by a three-judge panel sitting in Pasadena for arguments in December. Although the judges agreed that Unocal should face trial, they disagreed over what standard of liability should apply. In the majority opinion, Judges Harry Pregerson and A. Wallace Tashima said Unocal should be held to an international law standard developed by recent war crimes tribunals in Yugoslavia and Rwanda.

Given the "sufficient evidence in the present case that Unocal gave assistance and encouragement to the Myanmar Military ... we may impose aiding and abetting liability for knowing practical assistance or encouragement, which has a substantial effect on perpetuation of the crime," they wrote.

Those are the circumstances for liability that the plaintiffs had asked for, said Paul Hoffman, a Los Angeles lawyer representing some of the plaintiffs.

"That's going to be of enormous significance in the cases pending across the country," Hoffman said. "People around the world have been waiting for this decision to come down."

Loyola's Benson said holding companies liable for aiding and abetting is not a new notion in the United States. "It's very ordinary, routine American tort law that companies are responsible for the actions of those they hire to do things for them," he said. "So it doesn't stretch legal principles at all. But it does make new law in this particular area of international law, in holding transnational companies responsible. It makes this a path-breaking decision."

The ruling may encourage multinational corporations to apply U.S. workplace standards to operations abroad, said Christine Rosen, an associate professor at UC Berkeley's Haas School of Business.

"It should be a wake-up call to companies that they may be held to American standards of liability, that it now makes even more sense for them to apply American standards in labor relations and environmental affairs and so forth in the developing world."

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