International Business Law Advisor : Miami International Business Lawyer & Attorney : Santiago Cueto Law Firm : Florida and Global Business Litigation

 Being an international litigation attorney based out of Miami, I see a great deal of lawsuits filed by foreign plaintiffs here in the U.S. District Court for the Southern District of Florida. By virtue of its close proximity to Latin America and the Caribbean, Miami is one of the busiest places in the country for foreigners to file lawsuits against multinational corporations in the U.S.

I'm sharing this with you because I’m seeing a great deal of interest in the BP oil disaster by foreign nationals who are concerned that the BP oil spill will eventually reach their shores and wreak havoc on their environment. 

With the failure of BP’s “Top Kill” measure, it’s almost inevitable at this point that the transnational doomsday scenario that so many have feared will indeed play out. The probability that other countries will be harmed by the spill is higher than ever. Indeed, experts now project that the spill will intensify and continue to flow well into August.

Could Foreigners File Lawsuits Against BP in the U.S.?

As I commented in the last post, the spill is not yet a transnational matter because it has not breached or otherwise harmed the sovereign domain of any neighboring country.  

In response to that comment, a reader asked me an interesting question--“what happens if the spill does breach and pollute the waters of another nation?  Will those foreigners harmed by the spill have a legal basis to file lawsuits against BP in U.S. courts?”

Answer

It’s a stretch but theoretically, yes.  It's possible for a foreigner to have legal grounds to sue BP in the U.S. for harm caused by the oil spill under the Alien Tort Claims Act (ATCA), which grants jurisdiction to U.S. Federal Courts over "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."  

However, the likelihood of a foreigner ultimately prevailing on a claim against BP in the U.S. is extremely low. As one commenter noted, “no company – whether through trial or at some earlier stage – has yet to lose an ATCA case. Indeed, despite the growing number of ATCA cases brought against multinational companies since 1993, only two have survived to proceed to trial. Most of the cases have been dismissed, mainly on substantive legal grounds. Only a few have settled.”

Alien Tort Claims Act

So what is the ATCA? The ATCA is a centuries-old law that extends U.S. jurisdiction to cover violations of international law abroad and has been increasingly used by foreigners to sue American companies in the United States for their actions in foreign countries. Companies that have faced ATCA cases include Chevron, Coca-Cola, Exxon-Mobil, Firestone, Shell and Wal-Mart.

While I see all kinds of challenges in filing a claim against BP in this context, I don’t view it as such a bad idea.  If more of these kinds of lawsuits were allowed to proceed, then the ATCA could become a powerful tool to increase corporate accountability. And that's a good thing.

What do you think?

   -Santiago

*Postscript*

One matter predicated on the Alien Tort claims Act that I have written several posts on is the Ecuador v. Chevron litigation that's been underway for the past 17 years. The lawsuit was filed as a result of Chevron's reckless practice of dumping enormous amounts of oil waste into Ecuador's river and streams over the course of many years.

 You can read more about the case in these posts: Chevron's Missteps: How Not to Handle Foreign Litigation, Chevron Files International Arbitration Claim Against Ecuador: Forum Shopping in the Hague? and Ecuador Class Action Plaintifss Strike Back at Chevron's Cynical Game of Musical Jurisdictions.

I first read about the Chevron case in a New York Times article over a decade ago. I was so disturbed by the deliberate corporate pollution of the pristine Amazon rain forest that I wrote a lengthy law journal article that was subsequently published in the Florida Journal of International Law. The article is titled Oil's Not Well in Latin America: Curing the Short Comings of the Current International Environmental Law Regime in Dealing With Industrial Oil Pollution Through Codes of Conduct. The article advanced the idea of corporate codes of conduct as a prerequisite to the grant of drilling concessions. Regarded as a cutting-edge proposition, the article was subsequently cited in leading legal textbooks, law review and journal articles.

I'd like to think that the corporate codes of conduct I advocated in the journal article would have served BP well in conducting its drilling operations in the Gulf Of Mexico.  Yeah, I'd like to think.

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As an international litigation attorney, I’m frequently contacted to advise or comment on international business disputes that are of great interest to the media.

Why isn't the BP Oil Spill an International Matter?

On several occasions in the past few weeks, I’ve been asked the same question:  Why is the BP oil disaster a U.S. domestic matter when the spill occurred 50 miles off the U.S. coast in international waters?

I think it’s a great question given the breadth and scope of the spill.

Here's the Short Answer

The short answer is that the spill is a domestic matter because it occurred within the Exclusive Economic  Zone (EEZ) of the United States. 

While the EEZ is technically in international waters, under the United Nations Convention on the  Law of the Seas, a sovereign state has exclusive marine resource rights extending 200 miles from the baseline of its territorial waters. 

May Become International Matter

While—right now---the spill is technically a domestic matter for the United States, the spill may very well spread to neighboring countries.

If this were to occur, the spill would become a transnational environmental disaster, triggering a host of global conventions, international treaties--and even international lawsuits.

There are some who argue that the BP oil spill  already is an international matter.

Others take the position that such accidents are not addressed in international law at all. According to Tim Stephens, a senior lecturer on the law faculty at the University of Sydney and the co-author of a forthcoming textbook on the law of the sea, the international maritime conventions apply “primarily or exclusively” to accidents involving tankers, not to accidents involving oil platforms, like the Deepwater Horizon spill.

Both interesting and compelling arguments that are worthy of further debate.

But for right now, the international legal community is treating  the BP oil disaster as a domestic matter for the United States.

A very bad domestic matter at that.

    -Santiago

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**Update January 15, 2010**: The Republic of Ecuador and the class Plaintiffs have both challenged Chevron's arbitration claim in New York federal court. You can read about it here and here.

First, the United States. Then Ecuador. Now Holland. Chevron's wanderlust knows no bounds, as it recently filed a parallel international arbitration proceeding in the Hague (Holland).

The Arbitration Claim

As reported in this article in the Wall Street Journal and in this article in the New York Times,  Chevron filed an international arbitration claim before the Permanent Court of Arbitration in The Hague under the Rules of the United Nations Commission on International Trade Law (UNCITRAL). The claim is based on Ecuador's alleged violation of investment agreements, international law, and its treaty with the United States--the Encouragement and Protection of Investments Treaty.

Chevron’s claims relate to the Amazon oil lawsuit I wrote about in an earlier post.  In the arbitration filed in the Hague, Chevron alleges that Ecuador’s judicial process is broken and that the South American nation cannot fairly adjudicate the long-running oil pollution litigation.

Through the filing, Chevron seeks to enforce prior settlement and release agreements that the government of Ecuador entered into with Texaco Petroleum when the consortium was terminated, and to hold Ecuador accountable for its obligations under Ecuadorian law and existing international treaties.

Forum Shopping in the Hague Must be Condemned

Chevron's latest move is the litigation equivalent of three card monty and is yet another tactic to divert attention away from the trial taking place in Ecuador. Filing an international arbitration campaign at this point in time smacks of desperation and is a clear example of forum shopping, as Plaintiffs counsel Steven Donziger stated in this Reuters article.

Chevron first fought successfully to force plaintiffs to try their lawsuit in Ecuador rather than U.S. courts. Then it sought (unsuccessfully) to win indemnification in U.S. courts from a possible judgment in Ecuador. And now it's filed for arbitration seven thousand miles across the Atlantic in Holland. 

The Hague is arguably the most hallowed institution for the resolution of high-profile international disputes. Chevron's latest tactic all but mocks the institution's primary mission to administer justice. The Hague must not be utilized to frustrate legitimate legal proceedings taking place elsewhere.

Forum Shopping Creates Broad Incentives for Abuse

As Chevron's arbitration claim illustrates, the opportunity for one party to game the system and manipulate the outcome of a case by choosing a specific forum over another creates broad incentives for abuse. Among other things, forum shopping :

1. creates legal uncertainty (particularly for the defendant);
2. drains resources by imposing substantial additional costs on defendants, who must transport lawyers, documents, and numerous witnesses to the site of the trial – an expense that is multiplied when the trial is located far from the defendant’s place of business.
3. undermines the authority of substantive state law by calling into question the equity of the legal system.

Although under extremely limited circumstances forum shopping may prove a legitimate means to achieve a more just result, it is disproportionately utilized to avoid a just result by exploiting the points outlined above--as Chevron has done.

Conclusion

While an attorney's obligation to zealously advocate his clients' interest may involve forum shopping as part of the procedural calculus, the obligation must be tempered with a keen understanding of what becomes abusive litigation.

Trend to Watch: Given the High Profile Nature of Chevron's Claim, Look for an Increase in Similar Filings in the Hague

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Some of my recent "how to" posts have offered practical advice and tips concerning various areas of international business law. This post is different--it's a "how not to" article based on Chevron's inept and unethical handling of the oil pollution trial currently taking place in Ecuador. While zealous advocacy is critical to any high caliber practice, it must never cross the line into unethical conduct.

The Lawsuit

To put the case into context, Ecuadorean indigenous groups sued Texaco (which Chevron acquired in 2001) in the U.S. District Court in New York in 1993. The suit alleges the company polluted the Amazon rain forest and rivers, causing damage to the environment and their health. Chevron moved to dismiss the case on grounds of forum non conveniens. The U.S. court dismissed the complaint and held that the case should be resolved by an Ecuadorean court. Based on the ruling, the plaintiffs filed a lawsuit in the small jungle city of Lago Agrio.

After expending an exorbitant amount of resources to have the case dismissed to Ecuador (Chevron submitted numerous Affidavits by top legal experts arguing that Ecuador would be the best venue), Chevron is now arguing that a fair trial in Ecuador is not possible and that the matter should be decided in the U.S.

For an excellent overview of the case, you must read Steven Donziger's recent commentary in Forbes Magazine, The Chevron Way: In an Ecuador Legal Battle Oil Giant Gives U.S. Companies a Bad name. Steven is a New York lawyer representing the Ecuadorean Plaintiffs in the suit against Ecuador.

Corporate Codes of Conduct

I first read about the case in a New York Times article over a decade ago. I was so disturbed by the deliberate corporate pollution of the pristine Amazon rain forest that I wrote a lengthy law journal article that was subsequently published in the Florida Journal of International Law. The article is titled Oil's Not Well in Latin America: Curing the Short Comings of the Current International Environmental Law Regime in Dealing With Industrial Oil Pollution Through Codes of Conduct. The article advanced the idea of corporate codes of conduct as a prerequisite to the grant of drilling concessions. Regarded as a cutting-edge proposition, the article was subsequently cited in leading legal textbooks, law review and journal articles.

The corporate codes of conduct I advocated in the journal article would have served Chevron well in conducting its drilling operations in the Amazon basin. Had Chevron implemented such a code, it would have prevented this decade-old public relations maelstrom.

Chevron's Missteps

Although I believe Chevron committed a serious sin of omission in failing to adopt an appropriate ethical code at the forefront, it pales in comparison to the legal pyrotechnics and machinations it has engaged in during the course of this litigation (including its change of heart concerning venue when the trial did not go its way).

To illustrate this point, the Wall Street Journal recently reported that Chevron released recordings showing the presiding Judge speaking about the case and appearing to have established liability against Chevron even though the trial was yet to finish. A second recording allegedly showed a member of the country's ruling party soliciting bribes in exchange for remediation contracts to be awarded after the verdict. Chevron says the videotapes were a "gift" from two men who, acting independently, used a hidden camera to record the Judge.

Chevron's questionable videotaping is nothing compared to the impending investigation  underway against it, as Steven Donziger reported in his article:

 New York Attorney General Andrew Cuomo--at the request of several Chevron shareholders, including the state's pension fund--has launched an investigation to determine whether Chevron is misleading the financial markets about the risk it faces in Ecuador.

Conclusion

Let's see, there's the decades of oil pollution, abuse of the judicial process, clandestine video taping and now an investigation into misleading the financial markets--all in the name of zealous advocacy? The examples of Chevron's inept and unethical handling of the Amazon lawsuit are boundless. At every step of the lawsuit, Chevron sought to manipulate, abuse and undermine the judicial process. Chevron's handling of the case in the past decade is a case study in how not to handle foreign litigation---or any litigation for that matter.

 Trend to Watch: Corporations Will Watch this Case Closely As The Ground Rules for Foreign Litigation Are Further Developed

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