Corporate Social Responsibility and the Law : Foley Hoag LLP

Almost one year ago, we wrote about the long history of Sarei v. Rio Tinto, an Alien Tort Statute ("ATS") case filed in 2000 against Rio Tinto Plc involving allegations stemming from the company's mining operations on the island of Bougainville, Papua New Guinea. Last week, on October 25, the Ninth Circuit Court of Appeals reversed the District Court's dismissal of plaintiffs' claims for genocide and war crimes.  In doing so, the Court upheld corporate liability under the ATS.  

Notably, this decision comes shortly after the Supreme Court's decision to grant plaintiffs' petition for a writ of certiorari in Kiobel v. Royal Dutch Petroleum Co. In Kiobel, the Second Circuit held that corporations are not proper defendants in ATS cases. The Ninth Circuit disagreed and emphasized the importance of looking to the statute's "language and purpose." The Court noted that it had previously held that Torture Victim Protection Act's "express language and documented legislative history reflected congressional intent to limit liability under that statute to individuals." (citing Bowoto v. Chevron, 621 F.3d 1116 (2010)). In comparison, the Court found that

The ATS contains no such language and has no such legislative history to suggest that corporate liability was excluded and that only liability of natural persons was intended. We therefore find no basis for holding that there is any such statutory limitation.

The Ninth Circuit thus joins the D.C. Circuit, the Seventh Circuit, and the Eleventh Circuit in upholding corporate liability under the ATS. In response to the Ninth Circuit's ruling, one legal observer stated, "[t]his opinion reiterates that Kiobel is an outlier." 

Notably, one year ago, the case had been referred to a mediator “to explore the possibility of mediation.” Sarei v. Rio Tinto, 02-cv-56256 (9th Cir. October 26, 2010). In February 2011, the case was returned to the en banc Court. Sarei, 02-cv-56256 (9th Cir. February 11, 2011).

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On Monday, October 17, the U.S. Supreme Court granted plaintiffs' petition for a writ of certiorari in Kiobel v. Royal Dutch Petroleum Co. In Kiobel, the Second Circuit Court of Appeals held that corporations cannot be sued under the Alien Tort Statute (“ATS”) for violations of customary international law. The question of corporate liability under the ATS was left unsettled by the Supreme Court in Sosa v. Alvarez-Machain (2004) and the Court's decision to grant certiorari in Kiobel was widely anticipated. 

Cases brought by plaintiffs in the United States under the ATS represent the largest body of domestic jurisprudence on corporate responsibility for violations of international human rights law.  Kiobel itself is one of a series of cases arising from claims that Royal Dutch Petroleum was complicit in human rights abuses against the Ogoni people in Nigeria. Three related cases (the Wiwa cases) settled on the eve of trial in June 2009 for a disclosed settlement of $15.5 million. 

The September 2010 decision in Kiobel was suggested by some legal scholars to be the beginning of the end for ATS litigation again corporate defendants. Since the Second Circuit's ruling, however, the Seventh Circuit and the D.C. Circuit have both issued decisions finding that corporate liability is proper under the ATS. The Eleventh Circuit has also upheld corporate liability under the ATS. 

The Supreme Court also granted certiorari in Mohamed v. Rajoub, in which the D.C. Circuit held that non-natural persons were not proper defendants under the Torture Victims Protection Act. In Mohamed, plaintiffs had sought damages against the Palestine Liberation Organization and Palestinian Authority. In its orders granting certiorari, the Supreme Court directed that Kiobel and Mohamed be argued in tandem.

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Corporate social responsibility and nuclear power? Indeed. In September, the very first code of conduct for the nuclear power plant industry was launched.

The development of the "Principles of Conduct" was facilitated by the Carnegie Endowment for International Peace. Representatives of all of the major exporters of nuclear power plants participated in the drafting process, which was initiated in 2008. I had the honor of being selected by the Carnegie Endowment to help facilitate the negotiations.

The Principles set forth expectations in the following areas: 

1. Safety, Health, and Radiological Protection; 
2. Physical Security;
3. Environmental Protection and the Handling of Spent Fuel and Nuclear Waste;
4. Compensation for Nuclear Damage;
5. Nonproliferation and Safeguards; and
6. Ethics.

While the Principles were initiated prior to the Fukushima nuclear accident, the completed text reflects certain initial lessons learned from that disaster, especially in the area of safety. At the time of the Principles' launch, Richard Giordano, Chairman of the Board of Trustees for the Carnegie Endowment, observed

Whatever lessons particular countries draw from Fukushima over time, new nuclear plants will continue to be built, some in countries that have only recently begun to utilize nuclear power. It is therefore imperative that nuclear energy is implemented safely and responsibly in both emerging and developed markets. 

I was especially involved in the drafting of Principle 6, which focuses on ethics. Principle 6 helps nuclear exporters meet three primary objectives:

1. Safeguarding the environment and the wellbeing of communities near nuclear power plants, including through effective communication with those communities;
2. Respecting human rights, including the fundamental labor rights of employees; and
3. Fighting corruption.

Principle 6 is important because it addresses measures to mitigate the potential effects of nuclear power on communities and the environment. Principle 6 states that the exporters will work with their customers to consult with communities near nuclear power plants regarding the social and environmental effects of planned activities. The exporters also agree to take sustainable development into account in their activities.

Principle 6 also states that the exporters will respect the fundamental labor rights of their employees, including the right to collective bargaining. They also pledge to respect the Universal Declaration on Human Rights -- a commitment which has implications for their interactions not only with employees, but also with communities and other stakeholders.

Finally, Principle 6 addresses the challenge of corruption, which can arise in the context of large infrastructure projects. The exporters commit to having internal programs in place to fight corruption, and to seek a reciprocal commitments from customers.

The Principles represent a significant new development for the nuclear industry.  As stated on the Principles'  website, 

The Principles of Conduct reflect a recent trend in the management of global challenges. Leading industries, including those in the oil and gas, apparel and pharmaceutical sectors, increasingly have recognized the value of their reputations as socially responsible actors to their long-term business success.

Ultimately, the launch of these new Principles reflects a convergence of international expectations regarding corporate behavior and self-discipline: companies in every industry are expected to demonstrate responsible stewardship with regard to the social and environmental impacts of their operations.

To date, the following companies have adopted the Principles:

• AREVA
• ATMEA (an AREVA-Mitsubishi joint venture)
• Atomstroyexport
• Candu Energy (the successor exporting company to Atomic Energy of Canada Limited)
• GE Hitachi Nuclear Energy
• Hitachi-GE Nuclear Energy
• Korea Electric Power Company (KEPCO)
• Mitsubishi Heavy Industries (including Mitsubishi Nuclear Energy Systems, a subsidiary)
• Toshiba
• Westinghouse Electric Company

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The most popular suite of tools to measure and manage greenhouse gases just got a lot more complete -- allowing companies to track the impact of their products from natural resources and raw materials, through manufacturing, use and disposal, and providing a detailed framework to measure companies’ “everything else” Scope 3 emissions.   

The Greenhouse Gas Protocol Initiative (a collaboration between the World Resources Institute and the World Business Council for Sustainable Development) finalized its two newest global greenhouse gas standards on October 4. The GHG Protocol are the most widely used suite of accounting tools for measuring, managing and reporting greenhouse gas emissions -- for instance, in 2010, more than 85% of the nearly 2,500 respondents to the Carbon Disclosure Project survey used these standards. With the addition of the two new standards -- the Corporate Value Chain (Scope 3) Accounting and Reporting Standard and the Product Life Cycle Accounting and Reporting Standard -- companies have more guidance on a methodology and common language to report the impacts of their operations as they span the supply chain and the life cycle of their products. The GHG Protocol website even includes a cute video to explain what Scope 3 emissions are and why they claim these new protocol will save the world.

The new standards, which have taken three years to develop, involved the input of close to 2,500 partners, and were actively road-tested by 60 companies from 17 countries. The final standards have been influenced by the many comments received since they were published in draft form last November, and are intended to build upon the GHG Corporate Standard from 2004 which details how to report Scope 1 emissions (direct emissions from sources a company owns or controls, like factory smokestacks and company-owned cars) and Scope 2 emissions (indirect emissions attributable to the electricity, heat and cooling the company directly consumes).

Scope 3 emissions, which include everything else, are the great unknown variable in greenhouse gas reporting. They contain the vast majority of emissions, and accordingly, have the biggest opportunities for reductions. The authors of these new standards hope that they provide companies with a “treasure map” to identify and locate these opportunities to help both the environment and the business’s bottom line. At the very least, these protocol will simplify and reduce the costs for companies taking on a Scope 3 inventory, and improve the relevance, completeness, consistency, transparency and accuracy of the emissions reported each year. 

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