A Big Win for Human Rights
Experts say this case and the settlement will have a broad impact on corporations and force them to consider their conduct overseas. "It puts companies on notice that their relationships with foreign governments, and in particular with foreign militaries, can become the subject of judicial review in the United States," says Elliot Schrage, a former senior vice president of global affairs at the Gap who teaches business strategy and law at Columbia and is a senior fellow at the Council on Foreign Relations. Companies in the extractive industries--oil, gas and mining--will probably be most affected, since they often agree to have a foreign government's armed forces protect company operations.
"Boards of directors are now on notice that this is a governance issue, too," adds Schrage, who believes the settlement was a prerequisite to ChevronTexaco's merger with Unocal. ChevronTexaco itself is now being sued for alleged complicity in a series of shootings and the destruction of two villages by Nigerian military forces protecting its oil operations in the Niger Delta; without a settlement, Unocal would have doubled ChevronTexaco's potential liability for human rights violations and compounded its public embarrassment. Schrage adds that insurance companies will now also scrutinize more closely clients who do business in countries with repressive governments and abusive militaries. The costs of genocide and slavery insurance could be pretty high.
Catherine Boggs, a partner at the international law firm Baker & McKenzie who advises major oil and mining companies on their overseas operations, agrees that the Unocal case has had a real impact. "Companies will give greater weight to this sort of political risk when they consider going into some of these countries, and will be more careful about how they do business with them."
The recognition that bad corporate conduct overseas can be costly at home is resonating abroad as well. In France, in 2002, Burmese victims sued officials of Total, Unocal's partner in the Burma pipeline and the fourth-largest oil and gas company in the world. And a case against Texaco charging massive environmental contamination in Ecuador is now in trial there [see Eyal Press, "Texaco on Trial," May 31, 1999]. "European corporate lawyers are very worried about such lawsuits," says Menno Kamminga, an international law professor at Maastricht University in the Netherlands, who advises corporations and human rights organizations. "And NGOs definitely want to bring them."
But if the movement for legal accountability is slowly going global, so is the pressure to find more oil. World oil consumption is rising dramatically, as is the price per barrel. With countries like China now competing against the major multinationals for drilling rights, the multinationals are under ever greater pressure to pump more oil, more quickly and more cheaply. Historically, that's meant moving into some of the most unstable and politically dicey resource-rich countries in the world.
Ultimately, experts say, only international standards can get all corporations operating overseas to follow the same rules. To that end, the UN is now drafting a set of norms designed to govern transnational companies. But US officials have already indicated they won't support anything that's enforceable. That leaves the standards to be set by the courts--and at the expense of companies that continue to do big business with bad governments.