Making a Federal Case Out of Overseas Abuses

An obscure law paves the way for suits against multinationals

Should U.S. multinationals be held liable for the human-rights abuses of foreign governments? Victim advocates charge, for instance, that Burma's military rulers forced peasants at gunpoint to help build a pipeline for Unocal Corp. (UCL ), torturing and killing those who resisted. The company knew and approved, they claim. Unocal denies it.

This emotional issue lies at the heart of a dozen lawsuits that seek to hold companies liable if they work with repressive regimes. Plaintiffs in several of these suits, including the one against Unocal, recently have made strides in establishing legal grounds for such claims under an arcane 1789 statute called the Alien Tort Claims Act. Early courtroom victories have set off alarms among business groups, which worry that the likes of IBM (IBM ), Citibank (C ), and Coca-Cola (KO ) may be socked with huge jury damages for the misdeeds of Third World governments. Ultimately, up to 1,000 U.S. and foreign companies could be named as defendants in the pending suits, experts on both sides say.

To head them off, business groups have called a closed-door strategy session in Washington on Nov. 18 to consider everything from possible legislation to filing a slew of amicus curiae briefs. Already, some companies have been lobbying the Justice Dept. to intervene. Last summer, the State Dept. warned a judge that a case against Exxon Mobil Corp. (XOM ) in Indonesia "could potentially disrupt" the fight against terrorism and should be dropped. Business groups fear that further plaintiffs' successes could chill U.S. companies' activities around the globe. "Large jury awards will send a message that if you are going to do business in a country where the government is violating human-rights or labor standards, you may be sued," warns J. Daniel O'Flaherty, vice-president at the National Foreign Trade Council, which represents U.S. exporters.

The Alien Claims act on which the suits are based was originally intended to reassure Europe that the fledgling U.S. wouldn't harbor pirates or assassins. It permits foreigners to sue in U.S. courts for violations of "the law of nations." It remained little used until 1976, when a Paraguayan doctor brought suit in U.S. court against a former Paraguayan police official for the murder of the doctor's son. In 1980, a federal appeals court ruled that the law allowed foreigners to bring suit in U.S. court over acts committed abroad.

In the early 1990s, human-rights lawyers began applying the law to U.S. corporations. Their contention: that companies can be liable for aiding wrongdoing by authorities or can be "vicariously liable" for the damages caused. For example, a Colombian labor union has brought a U.S. lawsuit against Coca-Cola Co. for allegedly hiring paramilitary units that murdered union organizers. And South Africans have sued Citigroup and other as-yet-unnamed companies for allegedly profiteering from apartheid. "These lawsuits hold the corporate world responsible for the ultimate actions of what their products and money do," says Edward Fagan, a New York lawyer helping the plaintiffs.

Human-rights activists think they have the best shot in the Unocal case. It was filed in Los Angeles in 1996 on behalf of Burmese citizens who claim that the California energy giant used the army of Burma to force villagers to clear jungle for the company's natural-gas pipeline. A lower court dismissed the case, but in September the often liberal Ninth Circuit U.S. Court of Appeals reinstated it. The court suggested that Unocal could be liable if it "provided practical assistance or encouragement" to the Burmese military--or even if Unocal simply knew that crimes were occurring.

The case still faces plenty of legal hurdles, but it has progressed to the point where Unocal may soon have to face torture survivors in court--a publicity nightmare. If that happens, activists are sure to be emboldened to bring more grievances to U.S. courts.

By Paul Magnusson in Washington

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