The legal claims of 3 000 South Africans against a UK-based asbestos company are spotlighting the issue of multinational companies’ accountability for activities in developing countries, writes Richard Meeran
The United Kingdom Court of Appeal has acceded to Cape Public Limited Corporation’s requests to halt the claims of 3 000 South African asbestos victims of the mining, milling and manufacturing operations of English company Cape.
Although the court gave an immediate decision, reasons have not yet been given, but it is safe to assume that the claimants will pursue an appeal in the UK’s highest court, the House of Lords. The outcome of the dispute about the venue of the case is of enormous significance. It is also of fundamental importance to the question of multinational accountability for activities in developing countries.
So far the legal dispute in the Cape case has revolved exclusively around the issue of the appropriate venue – England or South Africa. This issue was also litigated extensively (and very expensively) to the highest level in the Thor Chemicals mercury poisoning case, a claim against RTZ by a throat-cancer victim employed at the Rossing Uranium mine in Namibia and, of course, in the first five Cape claims which the House of Lords last year agreed should be allowed to proceed in England. Why has millions of pounds been spent arguing over the venue issue, which has nothing whatsoever to do with the merits of the case?
It is important to emphasise the distinction between the justification, as opposed to the reasons, for the claimants’ desire to sue Cape in its home base and Cape’s resistance to that. Justification for bringing claims in England was that Cape is and always has been an English- based company. As a matter of legal principle it is usual to sue a company in its home base.
The principle arose to benefit defendants who should be more confident of obtaining justice from their home courts. Under the Brussels Convention, to which all European Union countries are party, it is mandatory to sue a defendant where it is based (the reason why Cape is unable to halt the claims brought in England by the group of victims employed at its Turin factory).
Cape’s stance here is to be contrasted with its response to claims brought in Texas by United States asbestos victims of its products. Cape refused to answer the claims in Texas and although judgment was given, the UK Court of Appeal refused to enforce it. In that instance it did not suit Cape to be sued in the US.
The legal approach in these cases is essentially to make the parent company responsible for injuries which on the face of it resulted from the operations of its South African subsidiaries (which for practical purposes are defunct and uninsured).
However, US and European multinational companies operating in developing countries have consistently been permitted to avoid liability to victims by hiding behind worthless local subsidiaries. The US courts have dismissed many claims, for example those by the Bhopal victims against Union Carbide, and by banana workers from Latin America, the Caribbean, Cte d’Ivoire and the Philippines who had been rendered sterile by the use of pesticides manufactured by US-based Dow Chemicals. Success stories have been few but include the Thor case, and a claim brought in Australia against a mining company, BHP, by 30 000 Papua New Guinean land owners.
The Thor and Cape cases have aroused considerable interest in the English courts because they involve a novel legal approach, which in effect treats the subsidiaries as a “red herring”.
No one would question the principle that a manufacturer is directly liable for injuries caused to consumers of its products. Why should a multinational which exercises control over its overseas operations and knows the hazards not similarly be liable to the workforce and local residents affected by its operations? In a nutshell, this is the approach of the Cape claimants.
It is this control of operations and knowledge of hazards, on the part of Cape in England, and knowledge of the particularly gross conditions at the South African operations, which forms the basis of the Cape claim.
It would also be misguided to regard Cape’s South African operations as a discrete business. They should be viewed as the beginning of a production chain which ended in the UK. Asbestos-related disease occurred among miners, millers and residents nearby the operations, workers transporting the asbestos, stevedores loading the ships in Durban and Port Elizabeth, ship workers, stevedores unloading the ships in the UK, workers at Cape’s London factory and residents around that factory.
Cape’s justification for resisting the English litigation is that the claims have nothing to do with Cape in England. Cape also contends it would be necessary to involve other potential culprits such as the South African government and mining companies for putting asbestos into infrastructure, although the infrastructure around the Cape operations seems to have been built by Cape.
It is surprising that the South African government has not yet attempted to seek reimbursement from Cape for the millions spent on the rehabilitation of the mines, mills and dumps which were abandoned by Cape (leaving a continuing and life- threatening hazard for neighbouring communities).
There is some evidence that Cape may have had public liability insurance cover for environmental damage (though not for personal injury) through General Accident South Africa. The relevant policy documentation can be made freely available if this avenue is considered worthwhile.
The reasons for bringing claims in England stem from the fact that in general the claimants’ motivation is to obtain compensation rather than to invoke principles. As such, their reason for suing in England is a clear perception that they can only obtain justice there. Of paramount importance is the availability of UK legal aid which would enable the claimants to fight the case almost on a “level playing field”.
In South Africa, no funding is available to the claimants, but Cape would be represented by the same army of UK and South African lawyers, including Webber Wentzel Bowens (according to their website, the largest firm in South Africa), Peter Hodes, former chair of the Bar, and Brian Doctor, QC and SC, who has fought Cape’s case in the UK. So much for “equality of arms”.
In addition, about 350 of the 3 000 claimants sue on behalf of the estates of deceased victims. While these claimants may be able to recover compensation for pain and suffering in England, there is no such prospect in South Africa since such claims are not transmitted to an estate under South African law. The termination of the case in the UK would effectively bring an end to their claims. Apparently, according to Cape’s lawyers, this aspect of South African law is not, however, considered unfair.
Obviously Cape’s reasons for resisting the UK proceedings are based on precisely the same considerations. So determined was Cape to avoid a trial in England that political lobbyists were hired to consider ways of derailing the case. They proposed a campaign designed to embarrass the UK government over the granting of legal aid to black workers and to discredit the claimants’ lawyers as “ambulance chasers”.
Cape has contended that the litigation of these claims in England does not accord with UK public policies. The court has been urged by Cape to follow the example of the New York District Court in the Bhopal case. There, the court considered that the interest of the US public (and taxpayer) was against the continuance of the litigation in New York.
It should be noted that in the UK Cape had to comply with the 1931 Asbestos Regulations. Cape was a founder member of the industry-led UK Asbestos Research Council in the 1950s.
Cape closed its principal UK factory in 1968 due to the high incidence of asbestos- related disease. However, it continued to operate bad working practices in South Africa until 1979.
In South Africa, Cape’s operations took full advantage of apartheid, including the extensive use of children, many of whom are claimants in the present case. An inspection of the Penges mine by government doctor GW Scheepers found that “industrial hygiene was deplorable. Exposures were crude and unchecked. I found children … trampling down fluffy amosite asbestos, which all day long came cascading down over their heads. They were kept stepping lively by a burly supervisor with a hefty whip. X- rays reveal several to have asbestosis before the age of 12.”
The question of multinational accountability is now at a critical stage. The latest decision, if upheld, allows the companies to apply double standards in developing countries without fear of being held accountable for damage they cause. As such, no doubt it provides much comfort to companies such as Cape and Thor Chemicals.
Richard Meeran is a legal representative of the South African workers who are suing Cape
@Ghosts paid while people die
Peter Dickson
The Department of Health in the Eastern Cape is battling to maintain hospitals after R15-million was lost through paying salaries to people who had died or resigned.
Not even the much-vaunted volunteer Cuban doctors, deployed in the province by the government in February 1996 to address the shortage of doctors in rural areas, have escaped the cash-flow chaos. At Queenstown’s Frontier hospital, one surgeon has resigned and returned to Cuba after working unpaid for four months.
Another, the hospital’s only qualified anaesthetist, has worked unpaid since January, while other Cuban doctors at the hospital last received payment in July.
Late last week, following the first-ever summons of a permanent secretary to appear before a parliamentary committee by the speaker of a provincial legislature, Department of Health permanent secretary Dr Siphiwo Stamper admit- ted that “between R12-million and R15-million” had been blown on ghost salaries. Stamper was summonsed after sending an apology half an hour before he was due to give evidence before Bisho’s public accounts committee two weeks ago.
Stamper faced two months in jail or a R4 000 fine if he ignored the summons, which included orders to produce reports by accounting consultants, the main ledger for 1998/99, reconciled expense accounts and the appropriation accounts and related statements for 1997/98 and 1998/99, the department’s training plan, and a list of courses/workshops presented to date and the number of officials who had attended them.
The committee had rejected an earlier report from the department, saying it had not answered questions adequately enough for it to be able to report to the legislature.
It also emerged that health department finance director Pakisa Peppetta had not read the auditor general’s report.
Stamper told the committee that up to R15-million had been lost through paying salaries to people who had died, resigned or transferred to other provinces, as well as to people who had received double salary payments.
Compounding this was a “chaotic” revenue collection system. The department was busy removing the ghosts from its payroll and setting up processes to recover the money, he said, before admitting that the depart- ment had not followed proper auditing procedures and that staff shortages in the department’s finance directorate included no deputy directors for financial planning or control and no assistant directors for bookkeeping, revenue collection, transport, provisioning or administration.
Stamper said that the department needed R300-million, which it had not budgeted for and could not afford, to address the staff shortage. He also told legislators that administration had “crumbled” in some hospitals because of the staff shortage and that “unscrupulous” people had taken advantage of the situation.