Shell, Corporate Social Responsibility and Respect for the Law

10/03/2012

This post is by Amol Mehra and Katie Shay

On Monday, the U.S. Supreme Court considered a case that strikes at the core of corporate social responsibility, Kiobel v. Royal Dutch Petroleum (Shell). The Kiobel plaintiffs allege that Shell was complicit in egregious human rights violations including rape, torture, and the extrajudicial killings of peaceful protesters who objected to Shell’s presence in Ogoniland, Nigeria. Shell, a Dutch corporation, argued that the law used to bring the company before a U.S. court, the Alien Tort Statute (ATS), should not apply. The multinational corporation argued that there is too tenuous a connection between what allegedly happened in Nigeria and the United States. Shell is essentially fighting to limit a law that remedies human rights abuses wherever they occur.

If Shell’s arguments win, the Supreme Court will effectively cut off what is often the best available remedy for victims of corporate-related human rights abuses. Outside of the allegations in the case, what the posturing by Shell highlights is the alarming disconnect between corporate social responsibility practices and actual corporate behavior, including the choice of litigation strategy and legal positions. How can a company that purportedly has a commitment to CSR seek to gut a law that brings human rights victims a remedy for harm?

Professor John Ruggie, who drafted the U.N. Guiding Principles on Business and Human Rights, which were unanimously endorsed by the U. N. Human Rights Council last year, raised similar concerns about Shell’s arguments in an issues brief he recently authored on the case. Specifically, Ruggie states:

“Should the corporate responsibility to respect human rights remain entirely divorced from litigation strategy and tactics, particularly where the company has choices about the grounds on which to defend itself? Should the litigation strategy aim to destroy an entire juridical edifice for redressing gross violations of human rights, particularly where other legal grounds exist to protect the company’s interests? Or would the commitment to socially responsible conduct include an obligation by the company to instruct its attorneys to avoid such far-reaching consequences where that is possible? And what about the responsibilities of the company’s legal representatives? Would they encompass laying out for their client the entire range of risks entailed by the litigation strategy and tactics, including concern for their client’s commitments, reputation, and the collateral damage to a wide range of third parties?”

These questions are important for us all to consider, and they suggest an interpretation of CSR as more than just window-dressing, but of being enshrined within and across corporate activities, including legal activities. Ruggie is not alone in questioning these tactics and their import. Other stakeholders, including investors, are calling attention to Shell’s maneuverings in this case.

This week, Boston Common Asset Management took the lead in issuing a public statement on behalf of investors worth more than half a trillion dollars, in support of the ATS. The statement cites Nobel prize-winning economist Joseph Stiglitz, who remarked in his amicus brief in the case, “the ATS may be bad for bad businesses, but it is good for good businesses.” Investors know that companies with strong CSR policies are better able to anticipate and address human rights-related operational risks, which could negatively impact the value of their investments.

The scrutiny of Shell’s actions in this case speaks to a larger concern over the nature of corporations in our society. This is specifically what Professor Ruggie sought to address in developing his Framework on Business and Human Rights. For CSR to truly mean anything, it must include clear commitments to respect human rights. The choice of litigation strategy and legal positions feeds directly into this responsibility, especially when a company is seeking to do more than defend itself from allegations of wrongdoing. No corporation is above the law, and in the quest to find ways of doing well by doing good, companies should carefully consider the range of their activities, from their operational impacts to the legal positions and litigation strategy they adopt.

SOURCE

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