Companies in developing countries are not immune from the wave of ethics-based litigation that is sweeping the globe. South Africa is a good case in point, where a number of multinationals have become targets of civil liability suits in the past few months, with the mining sector having been particularly hard hit. The cases fall into two broad categories: those seeking reparations for alleged malpractice and benefits accrued during the apartheid era, and those with claims for retrospective health damages associated with industrial practices of the past.

The apartheid cases are being driven by Edward Fagan, the US civil damages lawyer who won a US$1.25 billion settlement from Swiss banks for Holocaust victims and a US$5 billion award to compensate slave labourers in Germany during World War 2. As the case kicked off in New York in May 2003, Fagan, in collaboration with South African lawyer John Ngcebetsha, is reportedly seeking more than $100 billion in compensation on behalf of tens of thousands of apartheid victims from 34 multinationals, including such household names as Barclays, Bayer, Citigroup, Credit Lyonnais, Credit Suisse, Deutsche Bank, DuPont, General Motors, IBM, Lilly and UBS. 27

Also among these targeted companies are the South African global mining giants, Anglo American and De Beers, involving a damages claim of up to US$6.1 billion. Ngcebetsha, in an interview with Business Report, said that these companies had been targeted because the Truth and Reconciliation Commission final report had singled them out in their chapter on business and reparations, together with the mining industry, as having engineered the pass laws and migrant labour systems to suit their business plans. He claims that Anglo American and De Beers "treated their employees in a slave-like fashion" and that "their profits were derived in violation of a universal principle of our law." He concludes that "to the extent that they were unjustly enriched, they should be held liable." 28

South African President, Thabo Mbeki, has condemned the litigation, arguing that the government "considers it completely unacceptable that matters that are central to the future of our country should be adjudicated in foreign courts which bear no responsibility for the well-being of our country and the observance of the perspective contained in our constitution of the promotion of national reconciliation." The government's stance, including their rejection of a once-off wealth tax that was recommended by the Truth and Reconciliation Commission, is by their own admission largely predicated on fears that the court cases will damage the investment climate and business confidence in the country. 29

This was not unusual. Halina Ward reported that Papua New Guinea (PNG) enacted new legislation, initially triggered by litigation in Australia against the mining company BHP Billiton, a major PNG investor, that makes it a criminal offence for citizens of PNG to bring legal proceedings in a foreign court for compensation arising from mining or petroleum projects in that country. The Indonesian government also reacted badly to their nationals seeking justice abroad. Regarding the ATCA case against Exxon Mobil's support for military oppression in Indonesia, the government argued that they "cannot accept the extraterritorial jurisdiction of a United States court over an allegation against an Indonesian government institution e.g. the Indonesian military, for operations taking place in Indonesia." In the 1970s countries from the global South were particularly vocal in support of mechanisms for holding corporations accountable to their citizens, and backed a range of initiatives at the international level. Since then, however, these examples show that many governments are now more concerned with gaining foreign investment in the hope of generating revenue to service debts, and reach the goals established for them by international financial institutions - a strategy which is questioned by many development economists.

In the particular South African case, the companies have been denying that there is any justification for the legal claims. Their defence is argued on the basis of their historical contribution to the country and their current active role in promoting affirmative action, black economic empowerment and corporate social responsibility programs, which they claim are more effective means to redress the inequities of the past. However the saga unfolds, one issue is clear: companies can no longer ignore the potentially damaging consequences of operating in countries ruled by oppressive political regimes. Being seen to have supported governments with poor track records of corruption and human rights abuse may very well come back to haunt companies with liabilities in the future.

The other category of cases that have been in the spotlight in South Africa over the past quarter are retrogressive health damage claims, chiefly relating to companies historically involved in asbestos mining. In April 2003, in the largest settlement to date of this nature in South Africa, mining company Gencor agreed to pay compensation of more than US$50 million to the victims and families of those that contracted asbestos-related diseases, while UK-based Cape plc agreed to settle similar claims for £7.5 million. 30 Fresh on the heels of these settlements, a US$7 billion class-action asbestosis case was filed in May 2003 against South African company, Goldfields, which is listed in New York, by the same legal team instituting the apartheid claims (Fagan and Ngcebetsha). 31

Echoing these developments in South Africa, an 'agreement in principle' was reached in April in the United States by an association of about a dozen large companies called The Asbestos Study Group, which includes General Electric and General Motors, to pay US asbestos victims as much as US$100 billion over 30 years in an attempt to end all asbestosis lawsuits. About 700,000 claims have been filed against US companies that used asbestos, including 200,000 in the last two years and asbestos lawsuits have reportedly forced some 70 companies into bankruptcy. 32 Even Swedish-Swiss engineering giant ABB is partly blaming asbestosis claims for it $45 million reported loss in the first quarter of 2003. 33

There is no doubt that we have not seen the last of these 'sins of the fathers' type of liability cases. But the ethical dilemmas abound. Some may question whether it is fair for companies to be tried retrogressively, i.e. held accountable for the consequences of actions that were legal at the time, but have since become unacceptable. Meanwhile others may remind us of the potential impact on discouraging foreign direct investment. Then there is the problem that arises if a company being sued goes bankrupt - has justice been served for the claimants who may not receive any compensation as a result? Whatever the answers to these complex issues, business is going to need to tune its radar increasingly to the horizon of the future, if they are to avoid future liability.