THE SECURITY CONUNDRUM: HOW TO MAKE YOUR RESOURCE OPERATIONS SECURE WITHOUT CREATING INTERNATIONAL LIABLITIES (ENGLISH VERSION)

• Jurisdiction: United States

MINING LAW & INVESTMENT IN LATIN AMERICA
(April 2003)
CHAPTER 6A
THE SECURITY CONUNDRUM: HOW TO MAKE YOUR RESOURCE OPERATIONS SECURE WITHOUT CREATING INTERNATIONAL LIABLITIES (ENGLISH VERSION) ^*


Catherine J. Boggs
Baker & MacKenzie ^**
Chicago, Illinois, USA

I. INTRODUCTION

Increasingly, multinational mining and energy companies ("MNCs") operating in developing countries face a serious problem in securing their operations. These MNCs are often required to enter into arrangements with host governments to engage the military or government- affiliated enterprises to provide services to the mining or oil and gas operation, including the provision of security services.¹ In doing so, however, MNCs, may unwittingly be subjecting themselves to civil liabilities and suit under United States laws and in the federal courts of the United States as a result of human rights abuses conducted by host government security forces.² Arguably, by entering into these kinds of arrangements the MNC may potentially be subjecting itself to criminal liability in some countries.³ Historically, problems have arisen when resources are located in zones of conflict, territories where indigenous land rights are contested or inadequately protected, or in countries with oppressive or corrupt governments.⁴ Resource companies do not have the luxury of moving their operations to alternative locations; they must mine where the minerals are. More often than not, these developing countries are where mining and energy companies maintain some of their most valuable assets.

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The Alien Tort Claims Act ("ATCA"),⁵ a previously little-known statute that was originally enacted in 1789 to combat international piracy,⁶ has been seized upon by modern-day plaintiffs seeking recourse for human rights violations, including forced labor, forced displacement of local communities, rape, torture, genocide, and environmental damage occurring in foreign countries. While environmental claims have not historically been found sufficient to create jurisdiction under the ATCA⁷ , and most other suits have been dismissed on procedural grounds, two recent suits allowing human rights claims against two energy MNCs have sent a chilling message to resource companies with projects in countries with questionable human rights records. In Doe v. Unocal⁸ , and Presebyterian Church of Sudan v. Talisman Energy, Inc.,⁹ both the Ninth Circuit and the District Court for the Southern District of New York, respectively, denied preliminary motions to dismiss and summary judgment allowing the actions to proceed again major MNCs for alleged complicity in human rights violations.

This paper will examine: (1) the ATCA and requirements for bringing an action, (2) the recent decisions in the Unocal and Talisman cases, and (3) possible security options for mitigating potential ATCA liability.

II. THE ALIEN TORT CLAIM ACT

The ATCA is a one sentence law, enacted under the Judiciary Act of 1789, the intent and judicial history of which is negligible.¹⁰ It provides,

The district courts shall have original jurisdiction of any civil action by an Alien for a tort only, committed in violation of the law of nations or a treaty of the United States.

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28 U.S.C. § 1350. For almost 200 years, only twenty-one cases alleged jurisdiction under ATCA, with only two actions successfully asserting it.¹¹ That changed in 1980 when the Second Circuit in Filartiga v. Pena-Irala¹² found that the ATCA applied to a claim by a Paraguayan citizen resident in the United States, against a former government official of Paraguay, who was also resident in the United States for causing the wrongful death by torture of the plaintiff's son. The court found that it had jurisdiction under the ATCA because "deliberate torture perpetrated under color of official authority violates accepted norms of the international law of human rights, regardless of the nationality of the parties."¹³

The Filartiga decision clearly established that the ATCA could be used to bring an action in U.S. federal courts when three conditions had been satisfied: (1) the action was brought by an alien, (2) for a tort, (3) that was committed in violation of the "law of nations." Since Filartíga, various courts have further interpreted the requirements for bringing a claim under the ATCA, most significantly in cases against MNC resource companies. Although there are numerous procedural hurdles¹⁴ that plaintiffs must overcome to sustain an ATCA action, including standing, failure to join necessary and indispensable parties, choice of law, exhaustion of local remedies, and international comity, this paper will highlight two of the most significant ones: establishing personal and subject matter jurisdiction. The paper will also consider the most commonly raised defenses of forum non conveniens and justiciability or political question.

(1) Personal Jurisdiction

Courts have found that the key elements of personal jurisdiction include:

• The plaintiff must be an alien. ¹⁵

• The defendant may be of the same nationality as the plaintiff, ¹⁶ but must either be resident in the United States or have established sufficient "minimum contacts" ¹⁷ with the jurisdiction in which the action is brought.

• Transitory jurisdiction may be obtained when individuals are merely passing through the United States and are properly served with process. ¹⁸

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• Nations or agencies of nations are not subject to suit due to various sovereign immunity statutes. ¹⁹

Personal jurisdiction is governed by the Federal Rules of Civil Procedure.²⁰ If the defendant is not resident in the state in which the action is brought, the plaintiff must establish that "sufficient contacts" exist between the MNC and the forum state.²¹ In the human rights case against Unocal, discussed in the next section, which arose from Unocal's activities in Myamnar (Burma), the district court dismissed the action against co-defendant, Total S.A., because Total's contacts with California were insufficient to give rise to jurisdiction.²² The Court found that Total had no contacts in the United States beyond the listing of its stock on various exchanges, the promotion of that stock, and the activities of its subsidiaries, none of which were involved in the relevant activities. Total's contractual relationships with Unocal were insufficient to satisfy California's long-arm statutory requirement of "purposeful availment" of business within California, and the plaintiffs could not demonstrate that the parent corporation acted as the alter ego of Total's California subsidiaries or its other subsidiaries with California contacts, sufficient to establish personal jurisdiction.²³

In contrast, in the Wiwa case the Second Circuit found that it did have jurisdiction over defendants who listed their share on the New York Stock Exchange and maintained an Investor Relations office in New York City.²⁴ The Court agreed that foreign corporations may list their securities on New York stock exchanges and undertake ancillary activities necessary to facilitate and maintain those listings, including making SEC filings and designating a depository for the share, without subjecting themselves to the jurisdiction of the New York Courts for unrelated occurrences.²⁵ But in that instance, the activities of the Investor Relations office, which was created to facilitate the relations of the parent holding companies (who were the defendants in the case) with the New York investment community, were sufficient for the court to exercise

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personal jurisdiction over the defendants.²⁶ More recently, in Talisman, the U.S. District Court for the Southern District of New York found that in addition to Talisman Energy, Inc.'s listing on the New York Stock Exchange, the activities of Talisman's subsidiary, Fortuna, in New York were sufficient to confer jurisdiction on the parent.²⁷

Finally, transitory jurisdiction or "tag" jurisdiction may be established when individuals are only passing through the United States and are personally served with process while in the relevant jurisdiction. Although this type of jurisdiction does not fall within the "minimum contacts" analysis that is ordinarily applied to defendants not resident in the jurisdiction, it has been upheld by the U.S. Supreme Court.²⁸ It was the basis for the Court's assertion of jurisdiction in Kadic v. Karadzic, in which victims of atrocities committed in Bosnia brought claims in the District Court of the Southern District of New York against Radovan Karadzic, the leader of the Bosnian-Serb forces.²⁹ The Second Circuit found that it did have jurisdiction over Karadzic assuming that the plaintiffs could prove that he was personally served with process while he was physically present in New York³⁰

(2) Subject Matter Jurisdiction

The ATCA confers both subject matter jurisdiction and creates an independent cause of action. ³¹ The following elements as developed by the courts are necessary to establish subject matter jurisdiction:

• The claim must arise in tort, not contract. ³²

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• The alleged act must violate the "law of nations" or a "treaty of the United States." ³³

• Defendant's conduct must violate "specific, universal and obligatory" norms of international law. ³⁴

• Defendant has acted under "color of law" ³⁵ or committed express forms of conduct which are deemed to violate international law whether committed by states or private individuals. ³⁶

• A ten-year statute of limitations has been adopted by the Ninth Circuit for ATCA claims. ³⁷

ATCA can only be used to enforce violations of international law that are specific, universally recognized, and obligatory.³⁸ To date, courts have only recognized the following international crimes as meeting this test: torture, summary execution, disappearance, arbitrary detention, cruel or degrading punishment, genocide, piracy, slave trade and...