Environmental and social transparency under the ... - ClientEarth

58 | Environmental and social transparency under the Companies Act 2006Chapter 3: Environmental and social issues: Business issues | 593.2.1 Litigation riskWhere companies adversely affect local communities and environments,and engage in practices that are controversial and disputed, the risk oflitigation remains ever-present. Aside from the impacts that significantlitigation can have on company reputation (see above), it can also carryconsiderable tangible and immediate costs, most obviously compensationpayouts and settlements, any legal and lobbying costs accumulated inattempting to oppose any claim, and any PR costs accrued managing thesituation and addressing the reputational fallout.For any given situation, there may or may not be a legal threat. However,company structures should be transparent enough to ensure that shareholdersare party to information about all relevant practices and potentialmaterial risks, so that they can make informed decisions as to how theywish their investment to be handled, and whether the directors are carryingout their duties appropriately.Royal Dutch Shell: liability for cleanup costs at the RockyMountain ArsenalIn 1983, the State of Colorado filed an action against Shell for damages tothe State’s Natural Resources due to releases of hazardous substances froma chemicals plant at the Rocky Mountain Arsenal. 188 The polluted site hadpreviously been used by the U.S. Army for weapons manufacture, and soresponsibility for pollution was to be apportioned between them. Followingextended litigation, Shell and the U.S. Army signed the Rocky MountainArsenal Settlement Agreement in 1989 which apportioned liability forcleanup costs. 189In a separate court case, a Californian court held that Shell was not coveredby any of its 800 insurance policies for the costs, on account that the companyhad been fully aware that it was polluting at the site. 190Overall, Shell’s cleanup costs are estimated to have totalled $600million. 191It has also settled to pay a further $20million for acquisition, enhancement,and restoration of natural resources in and around the site. 192Newmont and ASARCO payout: liability for localenvironmental damageIn July 2008, under the terms of a ‘consent decree’ filed in a U.S. DistrictCourt, ASARCO agreed to pay $10 million, and Resurrection / NewmontUSA Ltd. to pay $10.5 million, in “natural resource damages”, for an allegedlegacy of polluted streams, fish kills and contaminated groundwater fromdecades of hard rock mining around Leadville. 193 Aside from the $20.5million settlement, the companies had already incurred significant cleanupcosts (they were not obligated to reveal the figures), and Resurrection / Newmontwill also have to spend an estimated $118 million operating a watertreatment at the Yak Tunnel in perpetuity. 194Rio Tinto’s Capper Pass tin smelter: damages payouts forpersonal injuryCapper Pass was once one of the world’s largest tin smelters, on the northbank of the Humber River near Hull. It was acquired by Rio Tinto in 1967.It was surrounded by significant controversy as a result of radioactive, carcinogenicand other toxic discharges allegedly made into the local atmosphereand Humber River, and the associated allegations of having causedincidence of leukaemia, brain tumours and other cancers in workers andother local people. 195For many years Rio Tinto denied responsibility for the health problems. 196 Itcited a number of grounds, including claims that its health and safety practiceshad been completely appropriate; company directors stated repeatedlyto company shareholders, up until 1999, that the company had compliedwith all statutory regulations. 197At Rio Tinto’s UK AGM held in London on 12 May 1999 Robert Wilson,Executive Chairman of Rio Tinto, personally represented to Shareholdersthat the company had, ‘at all material times’, complied with environmentaland Health and Safety Regulations in its Capper Pass Operation. AtRio Tinto’s Australian AGM held in Perth on 27 May 1999 he personallyresponded to a question from a Shareholder representing an organisationholding $8 million of Rio Tinto shares, stating that the Capper Pass Smelteralways operated under approval by the appropriate Authorities. 198In 1988, the British Health and Safety Executive had undertaken an investigationof the plant, and had found that Rio Tinto had contravened, and