Business targeted for rights abuse

Case against Unocal tests whether big global firms can be sued for aiding regimes, such as Burma, labeled as human-rights violators.

To make way for a natural gas pipeline, the Burmese military displaced whole villages a decade ago, forced residents to work against their will, and allegedly raped or murdered some who refused.

Those are the charges laid by some human rights groups. But instead of targeting Burma's [Myanmar's] government, the victims of those alleged abuses turned to a federal court in California for relief. They sued one of Burma's corporate partners, the US oil company Unocal, using a controversial 1798 statute that may have originally been designed to deal with pirates.

The case has potentially far-reaching implications. To human rights activists, it could set a precedent for efforts to crack down indirectly on some of the world's worst regimes. But business groups warn it could damage the engine of the world economy by making corporate forays into the developing world riskier. And the Bush administration is worried that US courts may wind up interfering with its foreign policy as they deal with growing numbers of international plaintiffs ranging from prisoners of war to torture victims.

The case is currently stalled behind the marbled-covered walls of the Ninth US Circuit Court of Appeals here in San Francisco, which must decide the pivotal question whether the lawsuit against Unocal can go to trial. At the center of the controversy is the 205-year-old Alien Tort Claims Act (ATCA) and whether it can be used to hold multinational corporations liable for business partners' human rights abuses.

Dusting off an old statute

The statute is so old that legal experts aren't sure about its original purpose. The act gives federal courts broad jurisdiction over violation of "the law of nations or a treaty of the US." No legislative history survives so the best guess is that it was originally intended to handle suits against pirates and foreign diplomats.

ATCA was dusted off in the late 1970s by lawyers trying to haul individual human rights abusers into American courts. Individuals from Paraguay to the Philippines and the former Yugoslavia were found liable for torture under the act during the 1980s.

In the 1990s, the next derivation of suits targeted corporations extracting natural resources in developing countries - such as Texaco in Ecuador, Shell in Nigeria, and Unocal in Burma.

The Unocal suit was filed in 1996 on behalf of 11 rural villagers by Earthrights International, a human rights group in Washington and Thailand. The suit charged that Unocal hired the Burmese military to provide security during the construction of a natural gas pipeline, despite knowing about the government's record of human rights abuses. It also alleges the company knew about forced labor practices and benefitted from them. A separate lawsuit against Unocal is pending in California state court.

Federal trial courts dismissed the suits against Unocal as well as Texaco and Shell on the grounds the companies didn't have a close enough connection to the abuses. But a three-judge panel of Ninth Circuit judges last year reversed a lower ruling and allowed the Unocal case to move forward.

The Ninth Circuit panel found that the grounds to convict would be sufficient if the company aided and abetted the Burmese military in perpetrating abuses, as opposed to meeting the tougher standard, used by the trial courts, of proving that the firm actually directed the abuses.

Red-lining rogue regimes?

Supporters say a successful suit resulting in money damages would force companies to adopt stricter codes of conduct. It would also function as a de facto sanction against a regime the US government has already tried to isolate. "You would be, in effect, red-lining the most abusive regimes from foreign investment," says Kenneth Rodman, a professor at Colby College in Waterville, Maine.

The legal question coincides with other pressures on Unocal. On Tuesday, the chief financial officers of New York State and California urged the oil giant to pull its operations from Myanmar or assure shareholders that the company complies with human rights protections.

Uncertainty for corporations

Business groups say companies shouldn't be held liable for the actions of governments they can't control - particularly in unstable countries where governments may change overnight. "It's guilt by association," says Daniel O'Flaherty, vice president of the National Foreign Trade Council.

Other business groups warn that allowing the Unocal case go to trial could open the floodgates to new lawsuits against corporations. Suits against hundreds of companies that traded with apartheid-era South Africa are still pending, The Institute for International Economics envisions a "nightmare scenario" in which firms doing business in China could be sued on the basis of that nation's treatment of political prisoners and the environment.

Bush administration's view

Such concerns prompted the Bush administration to file a brief on behalf of Unocal earlier this year. It argues allowing the case to go to trial could interfere with US foreign policy and even disrupt the war on terrorism.

"This is guerrilla warfare by interest groups using unconventional methods to impose corporate responsibility," says Professor Rodman. "From the vantage point of the State Department, where foreign policy is about reconciling divergent national interests, this can be a significant irritant."

Many legal experts say corporate fears are overblown. Courts remain wary about applying ATCA broadly, they say.

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