Legal empowerment for local resource control

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BOX 8. TRANSNATIONAL TORT LITIGATION
A strategy that may be used to overcome some of the legal constraints
concerning domestic litigation (lack of legal aid, standing issues, lack of
judicial independence, low levels of compensation, etc.) is to bring a lawsuit
(not against the local subsidiary before domestic courts, but) against the
parent company in its home country (transnational litigation). The
effectiveness of this strategy depends on the law in force in the home
country.
In the UK, the possibility of such a strategy was opened by the Spiliada case,
in which the pre-existing “forum non conveniens” doctrine (whereby courts
should refuse to hear a case if they are satisfied that the courts of another
country are a more appropriate forum) was qualified by an exception –
where the court feels that “substantial justice will not be done in the
alternative forum”. This exception was applied in Connelly and in Lubbe v.
Cape – both concerning lawsuits to parent companies for damage caused by
their subsidiaries abroad. In both cases, lack of legal aid in the host country
would have meant that substantial justice could not be done (on these cases,
see Muchlinski, 2001; and Ward, 2001).
In the US, transnational lawsuits have been brought under the Alien Tort
Claims Act (ATCA) of 1789, which gives US courts jurisdiction over civil tort
actions brought by foreigners for acts “committed in violation of the law of
nations” – even if these acts occurred abroad. In the Filartiga case, a US court
held that it had jurisdiction to hear cases concerning violations of
international (human rights) law. Since then, a number of lawsuits have been
brought in the US, concerning primarily human rights violations (see e.g. Doe
v. UNOCAL) but also, more rarely, environmental torts (Aguinda v. Texaco – in
which, however, the court dismissed a lawsuit concerning oil pollution
committed by a US-controlled company in Ecuador).
While the approaches followed by UK and US law differ in various respects
(e.g., application of ordinary tort law in the UK vs need to link the lawsuit to
a violation of international law in the US), they do, potentially, open the door
to litigation for damage to property caused by foreign investment projects.
However, important constraints exist, from both a legal and an extra-legal
point of view – which explains the very limited number of successful cases
brought so far.
From a legal point of view, a first challenge is meeting the test to establish
home country jurisdiction (e.g., in the UK, the two-pronged Spiliada test).
This may be more difficult in the US than in the UK – as plaintiffs would be
required to show that damage to property violated a norm of international
law. Beyond the jurisdiction issue, a key challenge is the “corporate veil” –
legally, the parent company and the subsidiary are separate entities. In order