Memorandum submitted by Richard Hermer
QC and Rachel Chambers
INTRODUCTION
These submissions are premised upon the following
simple but fundamental principles:
— Those who commit, or are complicit in,
human rights abuses must be held accountable.
— The victims of such abuses should be
afforded practical and effective means of redress.
— The above principles should not be dependent
upon the status or the legal personality of the Defendant. It
should be irrelevant whether those who commit, or are complicit
in, human rights abuses are individuals, governments or corporations.
— It should be the responsibility of government
to ensure that practical effect is given to the realisation of
these principles.
These submissions are also based upon the following
facts:
— That human rights law and its concomitant
enforcement mechanisms are at present primarily addressed to the
responsibility of nation-states, an understandable fact in light
of the events of history from which they were borne, but one that
fails to reflect the complexity of the modern world.
— That Multi-National Corporations ("MNCs")
have been identified in many cases as committing or being complicit
in human rights abuses across the globe.
— That existing international human rights
law is currently ill-equipped to deal with this phenomena.
— That the various voluntary agreements
brokered by the UN and the OECD, amongst others, do not provide
adequate enforceable mechanisms for accountability and redress.
As will be seen from the short biographies attached,
the authors are able to assist the Committee with analysis as
to the effectiveness of "regulatory" mechanisms, in
particular experience of the OECD Guidelines in both the United
Kingdom and Australia. This submission focuses in the main however
upon the availability of remedies in tort law. In the absence
of either national legislation providing enforceable mechanisms
for justice, or international frameworks that meet the same aims,
domestic tort law presently provides the most suitable and effective
framework for accountability and redress against MNCs with links
to the UK.
Accordingly, this submission will address questions
seven and eight from the Committee's Call for Evidence. In respect
of number seven it will focus on the existing legal and regulatory
framework and identify obstacles to seeking and obtaining an appropriate
remedy within this framework. The obstacles will be divided into
two categories: legal and practical. The particular problems faced
by individuals from other jurisdictions who have no local options
for seeking remedy and therefore must turn to the UK Courts will
be highlighted within both categories. The submission will go
on to address question 8 using the same sub-headings as those
under question 7.
Question 7: Does the existing legal, regulatory
and voluntary framework provide adequate opportunity to seek an
appropriate remedy for individuals who allege that their human
rights have been breached as a result of the activities of UK
businesses?
Tort law is an imperfect vehicle for ensuring
accountability and redress for victims of human rights abuses.
As set out below, our common law system has yet to develop a clear
body of jurisprudence that addresses many of the major issues
that are capable of arising in litigation of this nature. A series
of cases brought over the past few years has demonstrated that
it can provide, in certain circumstances, effective remedies for
victims. Further law reform is however required.
LEGAL OBSTACLES
Cause of action
The causes of action used in human rights cases
are generally torts relating to trespass to the person such as
battery, assault, false imprisonment and torture; the tort of
intimidation; the tort of negligence; or breach of contract. These
torts are well established in the common law. A difficulty arises
however if an associate of the UK business such as a supplier
or partner commits the trespass rather than the business itself.
In this scenario the UK business may be found to be negligent,
if for example it has failed to observe health and safety precautions,
or it might be found to have acted deliberately by procuring the
tort; conspiring to injure the individual or through agency or
vicarious liability. These are developing areas of law and the
exact requirements to prove the necessary connection between the
business and its associate have yet to be established by the Courts.
Another obstacle arises when the associate that
commits the trespass is a subsidiary. The difficulty in holding
a parent company liable in this (common) scenario is that corporations
are legally distinct from their shareholders. Thus a "corporate
veil" exists which establishes a separate juridical personality
for each corporation and protects shareholders (including corporate
shareholders such as the parent company) from liability for corporate
activities beyond the extent of their investment. The Courts have
shown themselves unwilling to lift the corporate veil in order
to prevent parent companies taking advantage of limited liability
in relation to tort liability, although some exceptions to the
principle have been established. In practice thus far the most
common means of establishing liability of the parent company is
through direct liability. This involves showing that the parent
is so directly involved in the acts leading to the legal claim
as a contracting party or a joint tortfeasor, that it is directly
liable for them. This approach shares the legal uncertainties
described in the paragraph above. The position is even more complicated
in circumstances in which the UK business is merely a shareholder
in a relevant company.
The Courts have yet to assess whether Article
6 of the European Convention on Human Rights will materially
impact upon the ability of the "corporate veil" to protect
parent companies against actions premised on the acts of their
subsidiaries. Much will depend in this respect on whether the
concept is deemed to be a procedural or a substantive bar to access
to the Court (only the former is capable of engaging Article 6).
Choice of laws—substantive law and damages
On 11 January 2009 EU regulation no.
864/2007 on the law applicable to non-contractual obligations
(Rome II) became law in the UK. Article 15(c) provides that the
assessment of compensation will be governed by the law of the
country in which the damage occurs irrespective of the country
in which the event giving rise to the damage occurred. This is
significant given that the damages awarded on the UK scale will
often be substantially more than those awarded under local scales,
particularly those in developing nations. With respect to the
law governing the substantive issues, the Private International
Law (Miscellaneous Provisions) Act 1995 provides that the
applicable law is that of the country in which the tort was committed.
This can present individuals with difficulty if for example tort
law is not well developed in that country or if an amnesty has
been passed exempting violators from liability. Section 12 of
the Act does however provide the UK Courts with a discretion to
displace the general rule where they see fit and section 14 provides
an exemption to the application of foreign laws when they would
conflict with principles of public policy.
Limitation
The Foreign Limitation Periods Act 1984 provides
that the law governing the substantive issues applies to the limitation
period. There is an exception to this principle, based on public
policy, where its application would result in undue hardship for
a person who is or might be made a party to the proceedings. Assuming
that UK law does apply, the limitation period for claims in negligence,
nuisance or breach of duty where the damages claimed include personal
injuries is three years. For simple breach of contract and tort
claims the limitation period is six years (Limitation Act 1980).
A discretion is conferred on the Courts to exclude the time limit
in actions for personal injury or death where they consider it
would be equitable to do so. Victims of human rights violations
must first discover they may have legal recourse through the UK
courts, and then face such difficulties as identifying lawyers
and finding funds to cover costs. In these circumstances issuing
proceedings within the limitation period is often a problem.
The presumption that the limitation period of
the foreign jurisdiction applies has also been entrenched in Rome
II in a manner which might well make it more difficult to apply
the exception clauses.
Group/class action
Provision for such litigation allows a large
number of individual Claimants to bring, before a single Court,
similar claims against a Defendant company. This is relevant given
that there are frequently multiple victims of human rights violations
by MNCs. In ordinary proceedings where representative parties,
as Claimants or Defendants, represent numerous persons having
the same interest in the matter a Court may make a group litigation
order ("GLO").[85]
This provides for the case management of claims which give rise
to common or related issues of fact or law. Any judgment or order
given on a GLO issue is binding upon other parties on the group
register. The GLO is an "opt-in" system (Claimants must
issue proceedings and then apply to join the group register in
order to participate in a GLO), which contrasts with the "opt-out"
systems of Australia, Canada and the United States (where all
potential Claimants are presumed to participate). The GLO schema
does not address various important issues associated with the
conduct of group litigation, such as judicial approval of settlement
agreements and limitation periods (these issues are covered in
the "opt-out" system in Australia).
PRACTICAL OBSTACLES
Funding
Most cases of the type under consideration are
excluded from public funding and must therefore be funded through
a conditional fee agreement ("CFA"). There is an expectation
that a prospective litigant entering into a CFA will, if they
do not already have some form of insurance cover, take out after-the-event
insurance to cover their potential liability for their opponent's
costs. There are several companies which offer this type of insurance;
however it is a hurdle for any victim of a human rights violation
by a UK business to find a willing insurer and the funds to pay
the insurance premium. Individuals seeking to enter into a CFA
must have sufficient prospects of success in the proposed litigation
to make such an agreement financially viable for the legal representative.
The prospects of success will inevitably be lower when there are
jurisdictional difficulties in bringing the claim; when the cause
of action is relatively new or untested; or when it is unclear
who the Defendant is (local subsidiary or parent company). Such
factors might all be present in a claim against UK businesses.
Lawyers willing to take on the cases
This is linked in a large part to the section
above. Since cases are generally funded through CFAs, law firms
must be in a position to take on the risk of losing and to afford
the up-front costs of investigating the claim, commencing the
litigation etc. In these circumstances such costs may well be
substantial due to the fact that the individual Claimants live
overseas and the law of the relevant jurisdiction must be investigated.
At present claims against corporations have invariably been conducted
on behalf of Claimants by Leigh Day & Co—few others
have had the resources or commitment to undertake such work.
Action by UK businesses
There is usually an enormous disparity in resources
available to the parties to litigation. Defendants are often able
to deploy considerable funds to the ligation and utilise the services
of libel lawyers and public relations firms to seek to control
media coverage of the claims.
Question 8: If changes are necessary, should
these include: Judicial remedies (If so, are legislative changes
necessary to create a cause of action, or to clarify that a cause
of action exists; or to enable claims to proceed efficiently and
in a manner that is fair to both Claimants and respondents).
As stated above, the authors of this submission
are in a position to assist the Committee in respect of the need
for regulatory change both at the domestic and international levels.
At this stage however the submissions are confined to tort law.
LEGAL OBSTACLES
Cause of action
In an area as important as this, there should
no room for uncertainty. Companies need to know what they are
permitted to do and what is prohibited. They need to understand
clearly what their obligations are in respect of subsidiaries
and companies in which they are significant shareholders. Uncertainty
prejudices business as well as victims.
There is a need to ensure that there is clarity
as to the legal basis upon which a company can be liable in damages
for its role in the "supply chain" and for the acts
of its subsidiaries (and the basis of that liability) including
the circumstances in which the corporate veil can be pierced.
This cannot be left to the Courts to develop but should be addressed
by Parliament. By way of example only, there could be a reversal
of the burden of proof in certain cases so that the parent company
with a controlling interest in a subsidiary would automatically
be liable for negligence along with that subsidiary unless the
parent can demonstrate it took all reasonable steps to prevent
the damage or injury occurring.[86]
Choice of laws—substantive law and damages
Legislative change would be difficult to effect
given that this area of law derives from European Law. However
the Courts need to be open to exercising the discretion afforded
by the Private Law (Miscellaneous Provisions) Act 1995 in
favour of individuals bringing human rights claims again UK businesses.
As noted above, this discretion enables the judiciary to displace
the general rule (that the applicable law is that of the country
where the tort was committed) when it is clear that the law of
the state in which the violation has occurred will not provide
an appropriate remedy. One possible legislative change is that
the "public policy" exception could be specified as
being applicable where to apply a foreign law (instead of English
law) would allow a Defendant to escape liability for serious human
rights abuses.
The powers to displace the general rule on choice
of law are also contained in Rome II and may therefore be used
to determine the question of the applicable law on the assessment
of damages. The same degree of clarity is required in respect
of ensuring that Rome II does not apply foreign limitation periods
in a manner that will unjustly "shut out" victims of
human rights abuses.
Group/Class Actions
It is not suggested that the US model of "opt
out" class actions would necessarily increase access to justice
for victims nor be capable of being successfully transplanted
into this jurisdiction. There are however elements of the US system
that do offer some advantages. A more expansive approach to "representative
actions", flexibility in locus standi in private law claims
and the use of anonymity for victims in carefully defined circumstances
may well facilitate claims from countries in which victims are
too remote or simply too frightened to fully participate in litigation.
PRACTICAL OBSTACLES
Funding & Lawyers willing to take on the cases
Legislative change is required to expand the
provision of public funding to cases against UK businesses brought
by individuals from overseas, particularly less developed nations,
for whom costs will be a prohibitive factor in their pursuit of
remedy. This is to ensure not only that they may have access to
justice through the UK Courts, but also that they will be able
to find lawyers to represent them. Furthermore in cases in which
after-the-event insurance is unavailable, consideration should
be given to widening the Courts' jurisdiction to impose "Protective
Costs Orders" so that they are available in suitable cases
in which a Claimant has a private interest in the litigation.
Action by UK businesses
There is perhaps little that Parliament can
do directly to curtail the ability of large corporations to seek
to "defend their reputation" by deployment of often
limitless funds. The excesses of such companies in the course
of litigation should however be a matter of concern to the Courts
and might for example be a basis for extending the availability
of exemplary damages and/or a punitive element in costs awards
when such methods have been used in an oppressive manner.
Richard Hermer QC is a specialist in international
and human rights law. He has been instructed in many of the claims
brought against MNCs in the domestic courts in recent years, including
the Colombian case against BP and the pending case against Trafigura
concerning the alleged dumping of toxic waste in the Ivory Coast.
He is an external member of the Advisory Board to the UK's National
Contact Point (OECD Guidelines). In 2000 he was appointed
the first "Human Rights Practitioner in Residence" at
Columbia University New York, where his research field was international
human rights and corporate responsibility.
Rachel Chambers is a practicing barrister. In
2004 she was appointed Research Fellow at Monash University,
Melbourne where she specialised in the accountability of corporations
for human rights violations. Her publications include "The
Unocal Settlement: Implications for the Developing Law on Corporate
Complicity in Human Rights Abuses" 13 No. 1 Hum.
Rts. Brief 14 (2005); "The UN Human Rights Norms
for Corporations: The Private Implications of Public International
Law" co-authored with Professor David Kinley Vol. 6 No.
3 Human Rights Law Review 447 (2006) and "Human
Rights Translated: A Business Reference Guide" (2008)
co-authored with Professor Sarah Joseph. Working with local NGOs
she has issued a complaint under the OECD Guidelines in Australia.
Richard Hermer QC
Rachel Chambers
85 Part 19 of the Civil Procedure Rules 1998. Back
86
This option was proposed in the CORE Paper "Corporate Abuse
in 2007: A discussion paper on what changes in the law need to
happen" (written by Jennifer Zerk). Back
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