If the European Commission?s record fine of $1.44 billion on Intel Corporation for anti-competitive behaviour shook the IT industry, an even mightier storm is brewing in Ecuador against the US oil giant, Chevron. A five-year-long lawsuit worth $27 billion by indigenous people against Texaco (a subsidiary of Chevron since 2001) for contaminating the Amazon?s waterways is expected to be awarded ?any day? in favour of the plaintiffs by a court in Nueva Loja.
Such a verdict would be a stunning blow to the second largest American oil company, which is already reeling from the plunge in global oil prices. The damages in Ecuador could wipe off more than a full year of Chevron?s profits and sink its share value. The management of Chevron is now facing pressure from its own shareholders?US pension fund investors?for failing to fully disclose its potential financial liability in the case. One shareholding entity is demanding that Chevron report specific procedures it adopts to conform to host country laws on the environment and human health.
The allegations against Texaco are grave?dumping and spilling billions of gallons of toxic waste and oil from 1964 to 1992 in the Amazonian rainforest that caused a public health catastrophe and eliminated many Ecuadorian aboriginal communities. The government of Rafael Correa, which draws electoral support of the indigenous people, is fully behind the plaintiffs and has been accused of using its political power to push the court to punish Chevron.
The embattled oil major?s lawyers have lobbied the US government to strip Ecuador of trade preferences in retaliation for its failure to force the closure of the judicial proceedings. Thus far, there is little sign that Chevron would be bailed out of trouble by the Obama administration or US Congress through arm-twisting foreign policy towards Ecuador. The law, however derided as unfair by Chevron, is set to take its course and slap the largest civil damages ever in judicial history.
A similar saga of suing the world?s top oil trading MNC, Trafigura of Holland, for dumping tonnes of poisonous toxic waste on the shores of Abidjan, the capital of Ivory Coast, is unfolding in Britain. Dubbed as the UK?s biggest-ever class action lawsuit, the charges include causing mass sickness of over 100,000 local Africans and killing 17 of them via spillage of dumped gases into water systems. The foul stench that enveloped Abidjan soon after the offloading by Trafigura?s ship in 2006 still hovers over the air and is said to be scalping fresh victims.
Fearful that adverse publicity of the case would influence the London High Court?s verdict, Trafigura has threatened to sue British media houses like BBC and The Guardian for libel. The law firm representing the 30,000 Ivorian plaintiffs claims that Trafigura is mounting a massive ?dirty tricks operation? in Abidjan to get key witnesses to change their statements.
Unlike Ecuador?s refusal to collude with Chevron, Trafigura managed to reach an out-of-court settlement with a corrupt Ivorian government in 2007. Once the company could no longer be sued in that country, plaintiffs approached British courts as Trafigura has a London-based subsidiary.
The trial will be held in October and is another closely followed affair because unethical corporate conduct evokes strong emotions. The notion that parts of the ?Third World? are ?under-polluted? and can therefore be exploited as dumping grounds for waste generated in the West has a sad history. The expected court verdicts in Ecuador and Ivory Coast will hopefully negate future scenarios of unethical MNCs getting away with environmental crimes in the Global South.
The key lesson from the travails of Texaco and Trafigura is that people must always be placed at the centre of considerations for the own good of businesses. Social responsibility, now a well-entrenched concept, needs to walk the talk in the age of heightened alertness over corporate misdemeanour.
The author is associate professor of world politics at the Jindal Global Law School