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Corporate Legal Accountability Quarterly Bulletin - Issue 27, June 2018

Welcome to our Corporate Legal Accountability Quarterly Bulletin -- highlighting a specific topic each quarter, as well as key developments in corporate legal accountability.  The Corporate Legal Accountability hub on our website provides objective, concise information about lawsuits against companies in which human rights abuses are alleged .
This bulletin and previous issues are available in English, ChineseFrench, GermanRussian and Spanish.

Quarterly Highlight: The use of consumer protection laws as a strategic tool for corporate due diligence and transparency in global supply chain

Forced labour, child labour, discrimination, poverty wages, unsafe working conditions, harassment and other human rights abuses perpetrated across companies’ global supply chains are well documented. Allegations of forced labour practices in the seafood and fishing industry in South East Asia; hazardous working conditions and child labour in African gold, diamond and cobalt mines, which supply multinational corporations; and reported sexual harassment and discrimination  against women working in Asian garment factories are but a few infamous examples.

Supply chains are complex, multi-layered and heavily rely on sub-contracting, thus making it easy for businesses to evade responsibility for human rights abuses under the guise of lack of effective control and/or knowledge of the situation. However, with the rise of ethical consumerism, companies are facing growing pressure from individual consumers who increasingly demand information on the origin, production and supply chains of the goods they are purchasing. Ethical or responsible consumerism, i.e. the purchasing of goods or services that are sourced, produced and distributed with minimum or no harm to human rights and the environment, is making its way through court rooms, thus creating new opportunities for corporate legal accountability across jurisdictions.

Consumers and advocates around the globe are increasingly relying on national consumer protection laws to sue companies and demand greater transparency in their business operations on issues relating to human rights. Rather than attempting to hold a company liable for a particular act or omission that resulted in human rights abuse in its supply chain, these lawsuits seek to prove that the company in question was aware of the abuses taking place in its business operations cycle and knowingly failed to disclose this information to its customers or misled them in any other way. The failure to disclose relevant information regarding a product or service or the provision of misleading information, so these lawsuits argue, violate consumers’ rights. The rise in legislation mandating supply chain disclosures over the past eight years has led to an increasing number of lawsuits arguing that “relevant information” encompasses information that a product or a service has been sourced, produced or distributed unethically.

In France, three NGOs filed a complaint against supermarket chain Auchan in 2014, alleging that the company lied to its customers about working conditions at its suppliers abroad, after labels from its clothing range were found in the rubble of the 2013 Rana Plaza factory collapse in Bangladesh. In Germany, a consumer protection agency won a lawsuit against discount retailer Lidl alleging that the working conditions at textile factories in its supply chain in Bangladesh did not comply with international labour standards. The lawsuit followed a Lidl advertising campaign which claimed that the company advocated for fair working conditions and contracted its non-food orders only from a select group of suppliers. Lidl had to withdraw its public statement claiming that its goods were being produced according to decent work standards and was barred from referring to its Business Social Compliance Initiative (BSCI) membership in the advertising materials.

In the US, a class action lawsuit was filed against wholesale giant Costco and its Thai seafood supplier, CP Foods, alleging that Costco knew that some of the prawns it sold were fed with fish products that were sourced using slave labour and victims of trafficking in Thailand, but did not disclose this to consumers. A similar lawsuit has been filed by consumers against Nestlé, alleging that the company had violated consumer protection laws by failing to disclose that ingredients in its cat food products may have been the product of forced labour. Other recent lawsuits include claims against electronics giant Samsung filed in France and accusing it of misleading advertising because of alleged labour rights abuses in factories in China and South Korea. In the US, lawsuits have been brought against chocolate manufacturers Nestlé, Hershey’s and Mars over their failure to disclose alleged use of child labour in cocoa plantations in Cote-d’Ivoire. 

The strategy of using consumer protection laws to hold businesses to account for human rights abuses committed in their supply chains hold different opportunities and challenges for corporate legal accountability. Contrary to tort claims, consumer protection lawsuits do not need to establish that a company had a duty of care towards the affected persons or to prove a link between the harm caused by an abuse and a particular action or omission of the company.  Moreover, filing a lawsuit based on consumer protection laws is not limited to persons directly affected by an abuse. Instead, anyone who ever purchased a product or a service which originated in a supply chain in question can bring a lawsuit based on consumer protection laws, thus broadening the pool of potential plaintiffs.

Having said that, the success of lawsuits alleging misleading advertising or failure to disclose information will depend on whether or not the plaintiff can prove that the information in question would be material to reasonable consumers and whether concealing such information or providing misleading information harmed them in any way.  Not all of the above mentioned claims have proven to be successful. In a recent decision, a US court ruled that Mars had no legal duty to disclose on its product labels that its chocolate may be the product of child or slave labour. The federal court argued that the company only had to disclose physical defects that “relate to a product’s central function.” However, the court did recognise that manufacturers sourcing materials from around the world may benefit from child and slave labour and that those practices are reprehensible.

Lawsuits arising from consumer protection laws generally do not result in redress for the persons affected by the abuse, nor establish a company’s liability for the harm caused. However, lawsuits can result in requiring companies to include information regarding possible labour and human rights violations in its supply chains on the product labels or to publicly recognise the falsity of their announced ethical commitments, thereby helping to expose human rights abuses perpetrated in global supply chains. Such exposure bares significant reputational risk for companies. Along with regulatory and legislative requirements, these lawsuits create critical pressure on the companies to conduct due diligence throughout their supply chains and to ensure greater transparency regarding their operations. The strategic use of consumer protection lawsuits is therefore a potentially powerful step towards increased transparency and due diligence, which are key to achieving improved corporate behaviour and accountability.
Legal developments

New case profiles

Lawsuit against Samsung (re misleading advertising in France): Between 2013 and 2016, Sherpa, ActionAid France Peuples Solidaires and Indecosa-CGT filed several claims in France against Samsung Global and its subsidiaries, alleging deceptive business practices. The organisations allege that Samsung breached its ethical commitments in light of abuses documented in several factories manufacturing Samsung products in Asia, including instances of child labour, unpaid overtime, compulsory work practices, and lack of adequate safety. The 2013 complaint was dismissed by the Public Prosecutor. In 2018, Sherpa and ActionAid-France filed a new lawsuit against Samsung France and its South Korean parent company, which the prosecutor decided to close in March 2018. In response to the latest dismissal, the organisations filed a civil lawsuit in a Paris court on 25 June 2018. 

Lawsuit against Hershey’s (re child labour in Côte d’Ivoire): In September 2015, consumers in the US filed a class action lawsuit against Hershey’s in a California federal court, alleging that Hershey’s failure to disclose that its cocoa suppliers in Côte d’Ivoire relied on child labour violated California consumer protection laws. The claim was dismissed in March 2016. In February 2018, a similar class action was filed in a Massachusetts federal court, alleging that  Hershey’s failed to disclose risks of child labour in its supply chain, thus deceiving its consumers and breaching its sustainability, human rights and corporate accountability statements as well as state consumer protection laws. In April 2018, Hershey’s filed a motion to dismiss, arguing that Massachusetts law does not require such disclosure at the time of sale. The case is ongoing.

Lawsuit against Tonkolili Iron Ore (re complicity in violence against villagers in Sierra Leone):On 30 November 2015, the law firm Leigh Day filed a lawsuit in the UK High Court on behalf of 142 villagers from Sierra Leone against mining company Tonkolili Iron Ore Ltd . The lawsuit alleges that the company encouraged the police to use violence to quell protests at the mine site on two separate occasions in 2010 and 2012. Plaintiffs allege complicity and direct involvement in assault, false imprisonment, rape and murder among other.  The company denied responsibility for police actions and claimed that the UK court lacked jurisdiction over events which took place in Sierra Leone.  However, the Court agreed to hear the case, affirming its jurisdiction because Tonkolili Iron Ore is a former subsidiary of African Minerals, which was previously headquartered in London.  By January 2017, 101 claims were settled, leaving 41 to proceed in court.  In February 2018, the UK High Court judge travelled to Sierra Leone to hear the victims who were unable to obtain UK visas. The case is ongoing.  

Lawsuit against Grupo Mexico (re toxic spill in Mexico): On 6 August 2014, 40.000 m3 of chemicals from the Buenavista del Cobre mine, a subsidiary of Grupo México, spilled into the Sonora and Bacanuchi rivers, affecting communities across 7 municipalities.  Water and soil contamination allegedly led to health damages, loss of livestock and crops. The company was ordered to pay a total of about USD 1.8 million in administrative fines over 55 environmental and safety violations. On 15 September 2014, the Mexican government and Grupo México agreed to establish a trust fund with an initial balance of 2 billion Mexican pesos to cover the costs of environmental and agricultural remediation projects and provide compensation to the community members affected by the spill.

However, according to a 2017 report of the UN Working Group on business and human rights, these obligations have not been fulfilled. In 2015 and 2016, affected communities filed several complaints against government agencies and Buenavista del Cobre under the 2013 law on the constitutional complaint mechanism (amparo), in relation to the various damages caused by the spill. The claims concerned alleged violations of communities’ right to work, property, healthy environment, access to water, compensation for damages, participation in public matters and access to information. The Supreme Court of Justice dismissed the claim against Buenavista del Cobre in 2018 but is yet to decide if the trust fund can be qualified as a responsible authority under the 2013 amparo law and held liable for human rights violations.
The case is ongoing.

Updates to existing case profiles

Lawsuit by Murray Energy (re alleged defamation against comedian in the USA): In February 2018, a West Virginia judge dismissed the defamation lawsuit brought in June 2017 by Murray Energy and its CEO Robert Murray against John Oliver, HBO, Time Warner, and writers of the show “Last Week Tonight”. Murray Energy said it will appeal the decision.

Lawsuit against Titan Cement (re air pollution in Egypt): On 21 March 2018, an appeals court upheld a January 2018 judgement by the Dekhelia Misdemeanor Court of Alexandria finding Alexandria Portland Cement Company (part of Titan Cement Egypt) responsible for causing environmental pollution and health damages to residents of the Wadi al-Qamar area. Claimants had filed the claim in January 2016 in relation to the company’s emissions resulting from the use of coal.

Lawsuit against Ford (re complicity with dictatorship in Argentina): Public hearings for the trial against former Ford Motor Argentina executives for alleged crimes against humanity began in February 2018. Subsequent hearings were held in April and May 2018. Testimonies given by workers and their families who alleged that Ford was complicit in the illegal detention, torture and disappearance of workers of the company.

Lawsuits by Resolute Forest Products (re alleged racketeering and defamation by environmental organisations in the USA): In November 2017, Resolute Forest filed an amended complaint in the lawsuit against Greenpeace for extortion and fraud under the Racketeer Influenced and Corrupt Organizations (RICO) Act. On 20 March 2018, a federal judge in San Francisco ordered Resolute Forest to consolidate its amended complaint to less than 80 pages before the court will consider the case. On 4 June 2018, a California federal court heard the amended complaint and will decide after 15 June 2018 whether or not to dismiss Resolute’s lawsuit.

Lawsuit against Arab Bank (re terrorist attacks in Israel): On 24 April 2018, the U.S Supreme Court upheld the decision of the Court of Appeals for the Second Circuit and held that foreign corporations cannot be sued in the US for complicity in human rights abuses abroad under the Alien Tort Statute. It specified that explicit congressional authorisation is required in cases involving international human rights cases against foreign defendants.

Lawsuits by Natural Fruit Company (re defamation suits against Andy Hall in Thailand): On 24 April 2018, the South Criminal Court of Bangkok issued an arrest warrant against Andy Hall ordering him to appear in front of the Appeal Court for verdict. On 31 May 2018, the Appeal Court dismissed the criminal defamation charges against Mr. Hall. The computer crimes lawsuits were also dismissed.

Abu Ghraib lawsuits against CACI, Titan (now L-3): On 4 May 2018, a US district judge overseeing the lawsuit over alleged torture by a US military contractor at Abu Ghraib prison in Iraq authorised CACI’s lawyers to conduct a pre-trial questioning of the prison interrogators, requesting that their identities be kept secret.

Lawsuit against BHP Billiton & Vale (re dam collapse in Brazil): In May 2018, shareholders announced they would file a lawsuit against BHP Billiton, alleging that the company was aware of the safety risks prior to the disaster, but failed to take any action to prevent it, thus misleading its shareholders. On 25 June 2018, Vale and BHP Billiton announced they signed a deal with Brazilian authorities that settles a USD 5.3 billion lawsuit related to the 2015 dam collapse. The agreement also sets a two-year timeline to reach a settlement in a separate lawsuit filed in May 2016 which will be put on hold while the parties negotiate.

Lawsuit against the Intl. Finance Corp. (re financing of coal-fired plant in India): On 21 May 2018, the US Supreme Court agreed to hear the case brought against the International Finance Corporation by the Indian fishing communities and farmers in relation to environmental damage from Tata Mundra coal plant. The Court will have to decide on the question of international organisations’ immunity.

Lawsuit against KiK (re factory fire in Pakistan): In May 2018, the families of 209 victims of the Baldia Factory fire incident in Pakistan started receiving long-term compensation from the factory’s main buyer, the German company KiK. The compensation plan is the result of a negotiation facilitated by the International Labour Organization.

Lawsuits against Texaco/Chevron (re environmental pollution in Ecuador): On 17 and 18 April 2018, the Ontario Court of Appeal conducted hearings regarding plaintiffs’ demands to enforce a USD 9.5 billion judgement against Chevron using the assets of its subsidiary in Canada.  On 23 May 2018, the court upheld a January 2017 decision of the Ontario Superior Court, ruling that Chevron Canada could not be held liable instead of the parent company, arguing the former is a separate legal entity. The plaintiffs plan to appeal to the Supreme Court.

Lawsuit against Shell (re oil spills & Bodo community in Nigeria): On 24 May 2018, a UK judge ruled that the Bodo community should retain the option to revive litigation over oil pollution in Nigeria for another year with no conditions attached, in the event that Shell’s clean-up of the oil spill is not completed to an appropriate standard.

Nestlé, Cargill, Archer Daniels Midland lawsuit (re Côte d'Ivoire): On 7 June 2018, a three-judge 9th Circuit panel allowed the US lawsuit against Nestle and Cargill, which alleges that the companies aided and abetted child slavery to source cheap cocoa,  to proceed. The plaintiffs, kidnapped from Mali as children in the 1990s and forced to work on cocoa plantations in Côte d’Ivoire, filed their lawsuit under the Alien Tort Statute, arguing that Nestle's and Cargill's decisions to give the cocoa farmers money and technical support were made at the companies’ US headquarters and, therefore, the lawsuit had a sufficient connection to the US.
Other news

From Business & Human Rights Resource Centre

Turning up the heat: Corporate legal accountability for climate change, Corporate Legal Accountability Briefing 2018 (the executive summary is available in EnglishSpanishFrenchRussianChinese and German), June 2018

Lawyer interview about a notice of intend to sue sent to Shell regarding its climate policies, Laurie Van der Burg, Researcher and Campaigner at Friends of the Earth Netherlands (Milieudefensie), and Roger Cox, Attorney and Partner at Paulussen Advocaten, May 2018

Reports, articles & guidance by leading experts & organizations

+CAL Ethical Intellectual Property Licensing, Corporate Accountability Lab, March 2018
Collection of experts’ blogs on the Jesner v. Arab Bank ruling by the US Supreme Court, April 2018

Procedure and Format - Options for an UN Treaty on Business and Human Rights, Global Policy Forum and Rosa Luxemburg Stiftung, April 2018

NGOs urge UK Supreme Court to allow Nigerian communities to appeal decision that barred them from suing Shell in the UK over oil spill impacts, April 2018

French case shows trafficking charges can be used for ‘labour exploitation’ cases, not just cases of sex slavery or domestic slavery, Shelley Marshal, February 2018

Letter to Paul Polman, Unilever CEO regarding case brought in the UK court by the survivors of post-election attacks at one of its tea plantations in Kenya in 2007, REDRESS, CORE, ACCA, Kituo Cha Sheria; April 2018

Seeking Justice: US Supreme Court Will Hear Case on World Bank Group’s “Absolute Immunity”, CIEL, May 2018

Database: Supply chain due diligence laws, regulations, agreements, initiatives, Shelley Marshall, Irene Pietropaoli, and Madeline Winterbottom (RMIT University of Melbourne), May 2018

Invitation to a series of open consultations on the implementation of resolution 26/9, Open-ended intergovernmental working group on transnational corporations and other business enterprises with respect to human rights, May 2018

Key features of mandatory human rights due diligence legislation, Position paper, European Coalition for Corporate Justice, June 2018

Fact Sheet: Human Trafficking & Forced Labour in For-Profit Detention Facilities,  Alexandra F. Levy, The Human Trafficking Legal Center, 2018
Unpacking mandatory Human Rights Due Diligence developments in Europe - What mHRDD means in different legal contexts and how civil society can advocate for it, Webinars series, ECCJ, Amnesty International, Antislavery, CIDSE, 5 July 2018

Annual Conference of the European Society of International Law, 13 September 2018

International Labour Standards and Corporate Social Responsibility: Understanding workers’ rights in the context of due diligence, International Training Centre of the ILO, 8-12 October 2018

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