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Rich and Rare are the Gems They War: Holding De Beers Accountable for Trading Conflict Diamonds - International Justice - Global Policy Forum Rich and Rare are the Gems They War:
Holding De Beers Accountable for Trading Conflict Diamonds
Lucinda Saunders *
Fordham International Law Journal
24 Fordham Int'l L.J. 1402
April, 2001
INTRODUCTION
The insurgents n1 broke through the gate to Alpha's house in Freetown, the capital of Sierra Leone. n2 They had cuts on their faces covered with adhesive strips. n3 The insurgents put cocaine [*1403] into their bloodstreams through these incisions. n4 They entered Alpha's house and demanded money from his parents. n5 Alpha's father handed over all the money he had in his possession. n6 The fighters then abducted Alpha and his two younger brothers, along with many other young people in the area. n7 They took their captives up a nearby hill where a young combatant named Tommy chopped off the captives' arms with an axe. n8 Alpha and his brother, Amadu, survived the amputations and were taken in by a family that cared for them. n9 Alpha later found out that his other brother, Dawda, died from loss of blood and that the insurgents burned his parents and sister alive in their house. n10
This incident stands as one of many in an ongoing civil conflict in Sierra Leone. n11 Experts claim that political ideologies do [*1404] not motivate this insurgent group. n12 Instead, they argue that control of diamond production is a root cause behind the war in Sierra Leone. n13
RICH AND RARE ARE THE GEMS THEY WAR
Observers note that in several African nations insurgent groups use diamonds to fund civil wars. n14 The revenue that insurgents [*1405] obtain from smuggling diamonds across borders allows them to buy more arms and to continue fighting. n15 The fighting [*1406] in these nations has led to extensive human rights abuses by these insurgent groups. n16 The insurgents would not have the money to buy arms and commit human rights abuses without the willingness of diamond buyers to trade with them. n17 For these [*1407] diamond buyers, the practice of indirectly funding human rights violations represents a possible violation of international law. n18
This Note focuses on the accountability of corporations for indirectly fueling civil wars by purchasing diamonds from insurgent groups. While many corporations are involved in the diamond industry, n19 De Beers n20 controls a majority of the uncut diamond n21 [*1408] market, including mining, buying, and selling uncut diamonds. n22 Therefore, this Note will analyze whether De Beers may be held liable for knowingly funding war criminals under the Alien Tort Claims Act ("ATCA"). n23
Part I of this Note examines the trade in conflict diamonds n24 in Angola and Sierra Leone and De Beers's involvement [*1409] in this trade. Part II examines case law developments under the ATCA and obstacles to recovery against multinational corporations n25 ("MNCs") under the ATCA. Part II also outlines efforts made by international organizations, the U.S. government, and MNCs to regulate the activities of MNCs in host countries. n26 Part III argues that De Beers should be liable under the ATCA for complicity in war crimes and crimes against humanity by funding insurgent groups engaged in human rights violations. n27 This Note concludes that the ATCA should be amended and offers a proposal for legislation to make MNCs liable for their involvement in human rights abuses. Under an amended ATCA, De Beers could be held accountable for its part in the conflict diamond trade.
I. THE HEART OF THE MATTER: DIAMONDS, DESTRUCTION, AND DE BEERS
A. Conflict Diamonds: The Setting
Observers note that the conflict diamond trade occurs in regions where diamonds are mined by insurgent groups and then sold for arms or cash. n28 While commentators claim that ending the conflict diamond trade may be an important element [*1410] of ending the civil wars in Angola and Sierra Leone, there are serious difficulties with stopping these exchanges. n29 Particularly, no technology currently exists that can identify diamonds by their source once they are on the market. n30 Additionally, smuggling and trading through multiple intermediaries present obstacles to determining where a diamond originated. n31
1. Clarifying the Terms
Conflict diamonds are diamonds mined or stolen by insurgent forces in opposition to the legitimate government. n32 Insurgent [*1411] groups sell diamonds to buy arms and obtain cash flow for their war effort. n33 Commentators speculate that the conflict diamond trade comprises between four and fifteen percent of the world trade in diamonds. n34 Presently, conflict diamonds come from Angola, Sierra Leone, and the Democratic Republic of Congo. n35 Until recently, international law has not deterred traders from engaging in trade with rebels groups. n36
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2. A Rock in a Hard Place
The United States has responded to the trade in conflict diamonds by proposing that all diamonds imported into the United States have certificates of origin. n37 Because many nations' economies profit from legitimate diamond trade, and only certain countries produce conflict diamonds, determining the origin of diamonds is preferable to a total ban on diamonds. n38 Thus, identification of a diamond's source is essential to stopping the conflict diamond trade in these countries. n39
Representatives from the diamond industry have asserted the impossibility of identifying the source of individual rough diamonds without destroying the diamond. n40 Commentators allege, [*1413] however, that experts can identify diamonds from different regions through a variety of techniques, including simply looking at their surface features. n41 Although identifying diamonds by surface features is not a precise science, a combination of identification techniques could be used to determine a diamond's origin. n42 At least one commentator argues that these methods may be equally useful to exclude those regions from where a diamond did not originate. n43
3. Dealer in the Rough
Commentators note that tracing the origin of conflict diamonds is further complicated by the smuggling culture in the diamond business. n44 A recent U.N. report on the Angolan conflict diamond trade explains the complex organizational structure of modern day diamond smuggling. n45 Diamonds are susceptible [*1414] to smuggling because they are small and easy to conceal. n46 Observers state that the diamond industry's lack of transparency makes it difficult to combat smuggling. n47 Smuggling usually involves trading diamonds through multiple buyers, or intermediaries, which presents further difficulties in tracing diamond trade routes. n48
B. The Civil Wars: The Carat and the Stick
The civil wars in Angola and Sierra Leone are examples of insurgent movements using diamonds to finance wars against official governments. n49 The civil war in Angola has continued on [*1415] and off since the 1960s, n50 and diamonds are essential to maintaining the insurgent war effort there. n51 The civil war in Sierra Leone is more recent, beginning in 1991, n52 and insurgent groups there also use diamonds to buy weapons for use in the fighting. n53 Commentators assert that the trade in conflict diamonds has prolonged the length of the violence in Angola and Sierra Leone. n54
[*1416]
1. Angola
The Portuguese colonized Angola and controlled the region until 1975 when the Portuguese government granted Angola's independence. n55 Since Angola's independence, civil war has engulfed Angola as insurgent forces struggle against the Popular Movement for the Liberation of Angola n56 ("MPLA"), the ruling party in Angola. n57 The insurgent forces, called the National Union for the Total Independence of Angola n58 ("UNITA"), occupied a majority of the diamond producing areas in Angola in the 1990s n59 and have used revenues from diamond mining and trading to buy more arms for continued fighting. n60
a. History of Angola
For most of the twentieth century, the Portuguese controlled [*1417] Angola. n61 Although the first Portuguese explorer arrived in Angola in 1483, n62 the Portuguese did not establish a colony in Angola until 1576 when they founded their first town in Angola, called Luanda. n63 Portugal subsequently used Angola as its primary source of slaves in the seventeenth and eighteenth centuries. n64 Portugal continued to gain control over Angolan territory throughout the nineteenth century and by 1930, Portugal considered Angola an important Portuguese colony. n65
The war in Angola began in 1961 as a war of independence against Portuguese colonialism. n66 In the 1950s and 1960s, anti-colonialist sentiment gave rise to three nationalist movements. n67 [*1418] The MPLA, founded in 1956, n68 drew support from urban dwellers n69 and professed a Marxist ideology. n70 The National Front of Liberation of Angola n71 ("FNLA"), originally known as the Union of the Peoples of Northern Angola and subsequently the Union of Angolan Peoples, n72 was composed mostly of Kikongo, or Bakongo, people and had significant ties to Zaire. n73 The third nationalist group in Angola is UNITA, founded by Jonas Savimbi in 1966. n74 UNITA drew most of its support from the [*1419] Ovimbundu people, the largest ethnic group in Angola. n75 Commentators note that the ideology of UNITA is largely an expression of Savimbi's own ideals, which have changed over the years from Maoist to anti-communistic. n76
After years of war between Angolan nationalist groups and Portuguese colonialists, Portugal granted independence to Angola on November 11, 1975. n77 In the time preceding the date of independence, the three nationalist groups turned against each other in a struggle to gain control over Luanda, the capital, by November 11. n78 The MPLA eventually gained control. n79 The FNLA joined forces with UNITA, realizing that neither group could defeat the MPLA alone, and the combined forces declared [*1420] full-scale civil war against the Angolan government. n80
Angola had democratic elections in 1992 as a result of a short-lived peace agreement. n81 The war resumed after Savimbi rejected the election results. n82 In November 1994, UNITA and the government signed the Lusaka Protocol, n83 attempting to end the war, but fighting continues. n84
b. Two Months Salary: Funding a Civil War
Commentators claim that UNITA controlled the majority of diamond production and exportation in Angola in the 1990s. n85 UNITA used the revenue generated from the sale of diamonds [*1421] extracted from their occupied territory to fund the war effort. n86 Commentators speculate that UNITA made several billion dollars in revenue in the 1990s in diamond trade alone. n87
In June 1998, the U.N. Security Council passed Resolution 1176, n88 accelerating Resolution 1173, responding to the conflict diamond trade. n89 These resolutions combined to prohibit the export of diamonds from Angola that are not certified by the government. n90 Nevertheless, there are significant loopholes, through which conflict diamonds may still reach the outside market. n91 [*1422]
2. Sierra Leone
The British colonized Sierra Leone as a settlement sight for freed slaves. n92 In 1961, Sierra Leone achieved independence from the British n93 and functioned as a one party state for many years. n94 The civil war in Sierra Leone began in 1991 as a coup d'etat organized by the Revolutionary United Front ("RUF"). n95 The RUF insurgents have occupied many of the diamond producing areas in Sierra Leone n96 and they use the profits from diamond sales to finance their continued fighting. n97
a. History of Sierra Leone
The history of Sierra Leone is unique because Britain's initial involvement with the nation was an effort to repatriate slaves [*1423] from the Western World. n98 These repatriated slaves, known as Creoles, n99 settled in and around Freetown, a city in Sierra Leone, in the late 1700s. n100 The British claimed the Freetown area as a Crown Colony in 1808, n101 and later extended their control over inland areas, declaring the larger region a British Protectorate in 1896. n102 The British maintained control of Sierra Leone until 1961 when Sierra Leone achieved independence. n103
Initially after independence, Sierra Leone experienced a brief period of democratic rule. n104 Siaka Stevens, representing the All People's Congress, n105 was elected prime minister in [*1424] 1967, n106 and he established a one party state in 1978. n107 In 1985, Stevens handed power over to his chosen successor, Major General Joseph Saidu Momoh. n108
The civil war in Sierra Leone started in 1991 as an attempted coup d'etat by the Revolutionary United Front n109 ("RUF"). n110 The RUF never clearly expressed the political objectives of the insurgency. n111 Fighting continued in Sierra Leone [*1425] throughout the 1990s n112 and, in May 1999, the RUF and the Sierra Leone government signed a cease-fire agreement called the Lome Peace Accord. n113
Under the peace agreement terms, Foday Sankoh, the leader of the RUF, became Chairman of the Commission on the Management of Strategic Resources, National Reconstruction and Development, n114 which officially gave him control over the diamond mines that his forces were already controlling. n115 Additionally, the Lome agreement granted Sankoh and his insurgent fighters amnesty for their crimes. n116 Violence continues in Sierra [*1426] Leone n117 and the peace agreement has broken down. n118 The U.N. is establishing a war crimes tribunal for Sierra Leone since the failure of the Lome agreement. n119
b. Two Months Salary: Funding a Civil War
During the 1990s, RUF forces controlled the major diamond mines in Sierra Leone. n120 Commentators discuss that some RUF fighters were illicit diamond miners and traders before becoming combatants. n121 Some observers speculate that control of the diamond mines in Sierra Leone is an important [*1427] underlying reason for the insurgency. n122 On July 6, 2000, the U.N. Security Council imposed an embargo on diamonds from Sierra Leone. n123 This resolution called on nations to take all necessary measures to prevent direct or indirect importation of diamonds from Sierra Leone that are not officially certified by the Sierra Leone government. n124
C. De Beers: Diamonds Scar Forever
Corporate actors facilitate the conflict diamond trade by buying illicit diamonds directly or indirectly from insurgent groups. n125 De Beers's control of the diamond trade makes its involvement with conflict diamonds particularly relevant. n126 For [*1428] years, De Beers has set the price of diamonds for the entire diamond industry by acquiring the majority of diamonds before they reach the market. n127 De Beers is able to acquire these diamonds both through its own mining activities and by purchasing diamonds from sellers outside the organization. n128 Although De Beers no longer operates any buying activities in Angola or Sierra Leone, n129 commentators claim that the organization acquires diamonds from these areas by buying from outside dealers. n130 De Beers has recently guaranteed that their diamonds do not originate in conflict areas. n131
1. Corporate Structure
De Beers is a corporation controlled by the Oppenheimer family. n132 Commentators note that De Beers's corporate structure [*1429] is complex. n133 For the past decade, two closely related public companies, De Beers Consolidated Mines Limited, incorporated in South Africa, and De Beers Centenary AG, incorporated in Switzerland, have controlled the De Beers syndicate. n134 In addition to these two large corporations, the De Beers syndicate controls many other subsidiary companies. n135 Prior to February 2001, De Beers maintained a thirty- five percent interest in the Anglo American Corporation, a large mining company. n136 Some observers have criticized De Beers's corporate structure as lacking transparency. n137 De Beers recently announced its decision to change its organizational form and create a new private company with Anglo [*1430] American. n138 Under the new arrangement, a consortium called DB Investments, with most shares controlled by the Oppenheimer family and Anglo American, will buy out De Beers shareholders. n139 Although the new company will be private, representatives claim that De Beers will not retreat into secrecy. n140
2. Buying Habits
De Beers controls about sixty percent of the world's uncut diamond sales. n141 De Beers has recognized its past position as "custodian of the market," n142 and commentators note that this role has led to a policy of buying all of the diamonds on the market in an effort to control and stabilize the price of diamonds. n143 De Beers recently announced its intention to [*1431] abandon its policy of acquiring all diamonds on the market. n144
Before its change in policy, De Beers obtained diamonds both through production from its own mines and from outside markets, also known as the open market. n145 De Beers does not operate any mines in conflict areas, n146 thus, if De Beers obtains conflict diamonds, the company acquires them through the outside market buying process. n147 This system creates problems of accountability because there are a number of intermediaries involved. n148 In the past, when a government has been unable to [*1432] effectively prevent smuggling, experts argue that De Beers knowingly bought diamonds from smugglers or other third parties in order to maintain its control over the supply of diamonds. n149
3. Rules of Engagement
De Beers's involvement with diamonds from Angola and Sierra Leone reflects their old policy of acquiring the majority of diamonds produced in world in an effort to keep the diamond supply steady and diamond prices stable. n150 De Beers bought diamonds from Angola in the 1990s when UNITA occupied most diamond mines in the country. n151 Additionally, commentators assert that De Beers acquired diamonds from Sierra Leone through outside dealers. n152
a. Angola
Commentators state that De Beers openly bought diamonds [*1433] that originated in Angola in the 1990s, when the UNITA forces controlled the large majority of the diamond mines in the country. n153 Such individuals conclude that De Beers was engaged in trade with UNITA insurgents and thereby provided funds to combatants, who perpetuated strife in the region. n154 The United Nations also reports that De Beers was involved in the Angolan conflict diamond trade. n155 In the late 1990s, De Beers responded with a decision to refrain from buying Angolan diamonds. n156 [*1434]
b. Sierra Leone
Experts discuss that De Beers's involvement in conflict diamonds from Sierra Leone is linked with smuggling into Liberia. n157 Liberia has few diamond mines within its own borders and is a transit country for Sierra Leone diamonds. n158 De Beers asserts that their offices in Sierra Leone and Liberia have been closed for fourteen years. n159 Commentators allege that it is conceivable that De Beers bought illicit Sierra Leone diamonds through intermediaries given De Beers's policy of buying from outside markets combined with its extensive use of intermediaries. n160
4. "I Don't"
In June 2000, De Beers announced its intention to sign formal written contracts with its trading partners to ensure that [*1435] their diamonds do not originate in conflict zones. n161 The World Diamond Council, composed of the industry's two largest groups, also committed itself to ending the trade in conflict diamonds by setting up a global system of identification for all diamonds on the market. n162 These steps to reform the industry are in response to an increase in public awareness about this issue. n163
II. MULTI-FACETED APPROACHES TO CORPORATE LIABILITY
With the increased influence of MNCs in the twentieth and twenty-first centuries, international organizations, national politicians, [*1436] and private actors have developed various techniques for holding MNCs accountable. n164 In the past decade, private individuals have invoked the ATCA as a method for demanding corporate responsibility for human rights violations. n165 More traditionally, international organizations, the United States, and private industry initiatives have developed codes of conduct to guide MNCs in their activities abroad. n166 Although these efforts are meaningful for drawing attention to the need for corporate accountability, no court has found an MNC liable under the ATCA n167 and codes of conduct are generally voluntary and rarely [*1437] enforced. n168
A. Alien Tort Claims Act
The ATCA acts as a tool for holding human rights violators liable to victims seeking redress when options in their own countries are limited. n169 Although the statute is over 200 years old, it [*1438] existed in relative obscurity until the plaintiffs in Filartiga v. Pena- Irala n170 used it to hold a Paraguayan state official liable for torture. n171 Since then, plaintiffs have attempted to use the ATCA against private individuals and MNCs, alleging violations of the "law of nations." n172 Nevertheless, plaintiffs utilizing this approach face many obstacles, making recovery unlikely. n173
1. General Background
The ATCA, initially passed as part of the Judiciary Act of 1789, n174 grants jurisdiction to U.S. district courts over any civil action brought by an alien for a tort committed in violation of the "law of nations" n175 or a U.S. treaty. n176 Commentators speculate [*1439] that the framers of the statute designed the legislation in order to avoid conflicts with other nations over mistreatment of non-U.S. citizens. n177 Although commentators hypothesize as to the possible purpose of this statute, little legislative history exists to indicate the framers' actual intent. n178 For almost 200 years, courts rarely used the ATCA. n179 This changed in 1980, when the Second Circuit court relied on the ATCA in the landmark case Filartiga v. Pena-Irala. n180 [*1440]
2. Case Law Development Under the ATCA
In 1980, the Court in Filartiga v. Pena-Irala found that State- sponsored torture constituted a part of the "law of nations" under the ATCA. n181 Over fifteen years later, a Second Circuit court in Kadic v. Karadzic found that private individuals can be liable under the ATCA where the allegations include war crimes and genocide. n182 Subsequently, plaintiffs began filing suits against MNCs under the ATCA alleging various human rights abuses related to MNC activity. n183 These suits have often targeted MNCs involved in extractive industries, such as oil and mining, n184 but recently, plaintiffs have also attempted to hold banking institutions liable for knowingly profiting off of human rights abuses. n185
a. Filartiga
Filartiga involved a wrongful death suit against a Paraguayan police officer, Americo Norboerto Pena-Irala. n186 The plaintiffs alleged that Pena-Irala kidnapped, tortured, and killed Joelito Filartiga on May 29, 1976. n187 The District Court dismissed the [*1441] case for lack of subject matter jurisdiction, n188 but the Second Circuit Court of Appeals reversed and allowed recovery under the ATCA. n189 The Court looked to international treaties and accords, as well as national laws, to determine whether torture formed a part of customary international law. n190 The Court [*1442] found that State-sponsored torture violates international customary law, n191 and therefore, if the allegations were proved, Pena-Irala could be liable under the ATCA. n192 The Court limited its holding to the issue of State-sponsored torture, recognizing that few other issues are as universally prohibited by the nations of the world. n193 [*1443]
b. Kadic
In 1995, the Second Circuit expanded the ATCA with the ruling in Kadic v. Karadzic. n194 In Kadic, the Court found that acts committed by non- state actors also fell within the realm of the ATCA. n195 The plaintiffs in Kadic, Croat and Muslim citizens of Bosnia-Herzegovina, brought suit against the leader of the rebel military forces that engaged in systematic violations of international human rights law. n196
The District Court held that the ATCA does not extend liability to private individuals and found that Karadzic was a private actor. n197 On appeal, the Court of Appeals held that certain violations of the "law of nations" do not require State action and, thus, private individuals may be held liable under the ATCA for these crimes. n198 The Court found that violations involving genocide [*1444] or war crimes do not require State action and, since these violations were among the allegations, the defendant faced liability as a private actor under the ATCA. n199
The Kadic court's extension of liability for certain crimes to non- State actors has significance. n200 Commentators argue that this expansion of the ATCA has left the application of the ATCA open to further enlargements. n201 Indeed, after Kadic, courts went on to recognize the possibility of extending ATCA liability to MNCs. n202
c. Beanal
In 1996, Tom Beanal, an Indonesian citizen and leader of an indigenous group there, brought suit under the ATCA against Freeport-McMoRan, a U.S. mining MNC operating in Beanal's town. n203 Beanal alleged human rights violations as well [*1445] as environmental abuses committed by Freeport-McMoRan. n204 Although the Court recognized the potential for MNCs to be liable under the ATCA, n205 it dismissed the case for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. n206
Beanal alleged cultural genocide as a basis for finding a violation of international law. n207 Although private actors are liable for genocide without a showing of state action, n208 the Court found that Beanal's allegation did not amount to genocide. n209 Therefore, the Court would not find Freeport-McMoRan liable for acts committed in furtherance of genocide under the facts pled by Beanal. n210
Beanal also alleged other human rights abuses, including torture, arbitrary detention, and destruction of property. n211 [*1446] Freeport-McMoRan's liability for these violations requires State action since these acts were not committed in furtherance of genocide. n212 After examining relevant tests for determining whether a private actor engaged in State action, n213 the Court found that Freeport-McMoRan did not have sufficient connections with the State to establish liability for these allegations. n214
d. Unocal
In 1997, a district court in the Ninth Circuit heard another ATCA case against an MNC. n215 In Doe v. Unocal, farmers from Myanmar sued Unocal and Total S.A., two large oil companies [*1447] operating in Myanmar. n216 The plaintiffs alleged a variety of human rights abuses, including forced labor, torture, and rape, committed by the repressive regime in Myanmar. n217 The claim revolves around Unocal's funding of, knowledge of, and benefit from human rights abuses committed by the State Law and Order Restoration Council n218 ("SLORC") in furtherance of a joint pipeline project between Unocal and SLORC. n219
The Court held that private corporations could be held liable under the ATCA for joint action in complicity with the State. n220 The Unocal Court asserted that joint action is found [*1448] where there is a considerable amount of cooperation between the government and private entities in depriving people of their rights. n221 Furthermore, because the plaintiffs alleged forced labor, the Court found that Unocal might be liable without State action since forced labor can be considered within the ambit of slave trading. n222 The Court denied Unocal's motion to dismiss. n223
At trial in Doe v. Unocal n224 ("Unocal II"), the Court held that Unocal was not liable for the violations because Unocal did not have the necessary degree of connection to the State to establish joint action. n225 The Court acknowledged that Unocal knew of the practice of using forced labor, but it did not take active steps to further such a practice, and, therefore, the Court dismissed the case against Unocal. n226 Although, the initial District Court opinion in Unocal provides a framework for holding corporations [*1449] accountable for their complicity with repressive regimes, n227 the final decision of the Unocal Court reveals that establishing a case against an MNC under this framework will be extremely difficult. n228
e. Swiss Bank Litigation
In late 1996 and early 1997, Holocaust survivors and their descendants filed three suits against Swiss banks alleging that the banks knowingly profited from slave labor and stolen property during the Nazi reign in Germany. n229 They alleged participation and complicity with the Nazi regime in perpetrating crimes against humanity, crimes against the peace, and war crimes, and claimed liability under the ATCA. n230 The Eizenstat Report, n231 officially [*1450] ordered by the U.S. government, speculates that Swiss banks prolonged the war by providing funds to the Nazis. n232
The Holocaust plaintiffs invoked the Nuremberg Principles n233 to prove liability on the part of the banks. n234 The Nuremberg Principles are a restatement of the legal principles developed by the International Law Commission and recognized in the Nuremberg Charter, the decisions of the International Military Tribunal n235 ("IMT") that convicted Nazi war criminals ("Nuremberg Tribunals"), and customary international law. n236 Principle VI of the Nuremberg Principles defines crimes against the peace, war crimes, and crimes against humanity. n237 Principle VII provides that complicity in committing a crime against the [*1451] peace, a war crime, or a crime against humanity violates international law. n238 These Principles are accepted as precedent in international law. n239
At the Nuremberg Tribunals, Frederick Flick, a German industrialist, was convicted of spoliation and plunder for his takeover of a cement plant in France. n240 Although the IMT was hesitant to equate property crimes to crimes against humanity, the IMT found Flick guilty for accepting and retaining property that he knew the Nazi regime had obtained unlawfully. n241 Thus, [*1452] knowingly supporting and accepting looted property from war criminals is a violation of international law under the Nuremberg precedent. n242
The Nuremberg trials in general, and the Flick conviction in particular, strengthen the Holocaust plaintiffs' claims. n243 The Unocal II summary judgment decision, however, required a high degree of cooperation between a State and private actor to find individual liability under the ATCA, presenting a potential problem for the Holocaust plaintiff's claims. n244 The parties to the Holocaust litigation eventually settled, and therefore, no judicial opinion was ever made regarding the legitimacy of the claims under international law. n245
3. Criticisms of ATCA
Courts' willingness to entertain claims n246 against MNCs under the ATCA reveals a changing sentiment towards such suits. n247 Commentators generally agree, however, that the ATCA [*1453] is a weak method of holding corporations accountable for their activities in nations outside their home country. n248 ATCA plaintiffs face several obstacles in bringing suit against an MNC, including meeting the high factual threshold, n249 overcoming a forum non conveniens motion, n250 obtaining personal jurisdiction over the defendant, n251 and showing State action for most human rights allegations. n252
a. High Factual Threshold
The first potential problem with utilizing the ATCA to hold [*1454] MNCs accountable is that the plaintiff must meet a high threshold of factual evidence. n253 Often, a judge will grant a defendant's failure to state a claim motion in ATCA cases. n254 The plaintiff will struggle to satisfy this requirement because evidence of an MNC's participation in violations of international law is often difficult to obtain. n255 Although in some instances courts have allowed limited discovery for the plaintiff to establish the requisite facts, n256 generally courts demand a highly developed factual basis for the continuation of a case under the ATCA. n257
b. Forum Non Conveniens
Defendants also will likely object to an ATCA suit based on forum non conveniens. n258 Forum non conveniens is granted when a case can be pursued more effectively and fairly in another country. n259 The events giving rise to an ATCA claim often [*1455] occur in another nation, and because of this, defendants argue that the United States is not the proper place for a trial. n260
For example, in Wiwa v. Royal Dutch Petroleum, Nigerian plaintiffs brought suit against Shell and Royal Dutch Petroleum, two oil companies, for their direct and indirect involvement in human rights abuses perpetrated by the Nigerian State. n261 The defendants moved to dismiss the case on forum non conveniens grounds. n262 The Second Circuit held that the defendants failed to establish that the claims would be more appropriately addressed in a court outside the United States. n263 The Court also set out additional factors for a forum non conveniens analysis, n264 such as the principle that there should be increased deference to the plaintiff's choice of forum when the plaintiff has substantial ties to that forum. n265 The Court found that since the plaintiffs lived in the United States, changing the forum of the suit would impose a significant hardship on them. n266
Additionally, where the United States has an interest in litigating the claim, courts should strive to maintain the suit in U.S. court. n267 The plaintiff in Wiwa argued against a forum non conveniens dismissal by appealing to the U.S. policy interest in litigating [*1456] human rights claims. n268 The Court recognized that forum non conveniens represents a major setback for victims of human rights abuses seeking redress. n269 The Court claimed that the passage of the Torture Victims Protection Act n270 ("TVPA") in 1991 is acknowledgement by Congress that victims of gross human rights violations need an accessible forum. n271 Allowing defendants to avoid law suits by claiming forum non conveniens would run contrary to Congress's policy reflected in the TPVA. n272
c. Personal Jurisdiction
Another obstacle to an ATCA suit against an MNC is personal jurisdiction, particularly when the MNC is not based in the United States. n273 Courts apply the minimum contacts test to determine whether exercising jurisdiction over the defendant is in accordance with principles of "fair play and substantial justice." n274 The minimum contacts test requires that the court assess [*1457] the degree of contact of the party with the forum state as well as the relatedness of the contacts to the claim at issue. n275
In Asahi Metal Industry Co. v. Superior Ct., the Supreme Court held that where a non-U.S. company simply places a product in the stream of commerce in the United States, minimum contacts have not been met and jurisdiction is improper. n276 The Asahi Court provided examples of activities that may subject a non-U.S. defendant to personal jurisdiction, including advertising in the particular jurisdiction. n277 Jurisdiction over a corporation also is available where the level of activity in the forum state is "continuous and systematic." n278 Notably, in a suit against a defendant that is not a U.S. entity, the court may find that the corporation has sufficient minimum contacts with the United States, rather than any particular state. n279
A possible exception to the minimum contacts test arises if the alleged violation is a "universal offense," n280 such as slave trading, [*1458] hijacking planes, genocide, and war crimes. n281 Any state has jurisdiction over these claims, regardless of the nationality of the parties or the place where the event giving rise to the suit occurred. n282 In an ATCA claim, it is often possible that the allegations will include universal offenses. n283
d. State Action
Traditionally, international law binds States rather than individuals or corporations. n284 To hold a private individual liable under principles of international law, a showing of State action is often necessary. n285 Although courts have held that genocide, war crimes, slavery, and piracy do not require State action, n286 the vast majority of human rights violations will require State action for the ATCA to apply. n287
[*1459] The Unocal II decision applied a joint action test n288 to ascertain whether the corporation had sufficient connections with the State to be liable. n289 The joint action test requires that the State and the MNC work together for the specific purpose of depriving people of their rights. n290 The standard established by Unocal II requires that the private entity actually commit the alleged acts in cooperation with the State or exercise control over the State's action. n291
This standard presents difficulties in holding MNCs liable under the ATCA because often MNCs and States develop a relationship for mutually beneficial business purposes. n292 MNCs that partner with governments, who commit human rights abuses, do so for financial reasons. n293 Similarly, governments enjoy the prominence associated with large MNCs and the money generated by MNC operations in their country. n294 The MNC need not directly commit human rights abuses nor unduly influence an already corrupt government to realize its profits because the government is willing to engage in these practices to maintain the business relationship. n295 The MNC's main goal is profit, [*1460] not violating human rights. n296
Furthermore, State actors are often shielded from liability under the Foreign Sovereign Immunities Act n297 ("FSIA"). n298 One strategy utilized by corporate defendants in ATCA litigation is to win a dismissal for State actors in the suit under the FSIA and then plead indispensable parties under Rule 19 of the Federal Rule of Civil Procedure. n299 If a court finds that a party is essential to the litigation but cannot be joined to the suit, the court then must analyze whether the case should proceed with the remaining parties considering the potential prejudice to any party, the possible relief available without the absent party, and alternative locations for trial. n300 When a government is dismissed under the FSIA and an MNC successfully claims that the [*1461] government actor is an indispensable party, the MNC avoids liability through the benefit of the State partner's sovereign immunity. n301
B. Methods of Regulating MNCs
Little uniform binding law exists to regulate MNC activity when they operate outside their country of incorporation. n302 International organizations, governments, and private industry actors have recognized the need for corporate accountability in MNC activities outside their home country and have responded to this need with corporate codes of conduct. n303 Codes of conduct are helpful to MNCs operating in countries other than their home nation because they provide standards and guidelines for respecting human rights. n304 Codes of conduct, however, are often criticized for being unenforceable due to their voluntary nature. n305
[*1462]
1. General Background
While some scholars have claimed that the only responsibility of a business is to use its resources to the fullest extent to raise profits while staying within the bounds of the law, n306 others argue that MNCs have increasing social obligations. n307 Presently, MNCs do not have many legal obligations with respect to the countries in which they are operating. n308 Corporate regulations are particularly necessary for MNCs operating in countries engaged in civil war, since absence of rule of law often creates an economic opportunity for MNCs that can be detrimental to the [*1463] local citizens who live in the instability. n309 In response to the lack of regulation, there have been several attempts to design codes for the protection of both foreign investment and host countries. n310
2. Approaches
The Organisation for Economic Co-operation and Development ("OECD"), International Labour Organisation ("ILO"), and the United Nations all have developed guidelines for MNCs operating in countries other than their home country. n311 The U.S. government also has encouraged MNCs to observe certain minimum standards in their operations abroad with respect to fundamental rights. n312 Additionally, turbulent political situations in certain regions, such as South Africa and Northern Ireland, have given rise to private efforts to develop standards for MNC activities in those areas. n313
a. International Efforts
Recognizing the growing importance of international investment, the OECD developed their Declaration on International [*1464] Investment and Multinational Enterprises ("Declaration"). n314 The ILO developed standards for MNC activities with respect to treatment of workers in 1978. n315 The United Nations similarly has attempted to develop a code of conduct for MNCs, but the General Assembly never adopted the proposed draft. n316
i. Organisation for Economic Co-operation and Development
In 1976, the OECD introduced their Declaration. n317 This Declaration calls on MNCs to respect the policy choices of the nation in which they are operating, to provide any information requested by national authorities while taking account of business confidentiality, to work closely with local businesses and communities, to refuse bribes in all circumstances, and to refrain from participation in political activities. n318 These standards are voluntary and unenforceable. n319
ii. International Labour Organisation
The ILO developed international standards for MNCs with the Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy ("Tripartite Declaration"). n320 The Tripartite Declaration urges MNCs to create employment opportunities in the countries where they operate, promote [*1465] equality of opportunity, ensure stable employment, provide vocation training in cooperation with national government, guarantee favorable work conditions and workplace safety, and protect freedom of association and the right to collective bargaining. n321 These standards, like the OECD Guidelines, are also voluntary and they lack an enforcement mechanism. n322 Acknowledging the deficiencies of the principles, the ILO initiated a new Declaration on Fundamental Principles and Rights at Work ("Fundamental Principles"). n323 At least one commentator claims that since the Fundamental Principles are relatively new, their potential to ensure observance of human rights is still unclear. n324
iii. United Nations
More recently, the United Nations developed the United Nations Code of Conduct on Transnational Corporations ("Draft U.N. Code"). n325 The Draft U.N. Code makes explicit reference [*1466] to human rights and encourages MNCs to respect the sovereignty of the nations in which they operate. n326 The U.N. General Assembly never officially adopted the Draft U.N. Code and, therefore, the code remains a hortatory document, with no means of enforcement. n327
b. United States Efforts
In May 1995, President Clinton revealed the Model Business Principles n328 ("Model Principles"). n329 The Model Principles set [*1467] standards for the treatment of workers and encourage a corporate atmosphere that values freedom of expression, condemns political oppression, contributes to the local community, and [*1468] promotes ethical conduct. n330 The Model Principles are voluntary and non- binding. n331
c. Private Efforts
Another method of regulating MNCs is through self-imposed codes of conduct. n332 In response to public pressure, some MNCs have individually adopted their own codes of conduct. n333 These efforts vary in specificity and degree. n334 Corporations that have recognized the value of corporate codes of conduct include Levi Strauss, Nike, Gap, and Sears. n335 Occasionally, where a particular nation has consistent human rights problems, companies will adhere to industry- wide codes of conduct, such as the Sullivan Principles in South Africa and the MacBride Principles in Northern Ireland. n336
i. Sullivan Principles
Reverend Leon Sullivan, a General Motors board member, first initiated the concept of an industry-wide code of conduct in [*1469] response to the public outcry against apartheid in South Africa in the 1970s and 1980s. n337 Reverend Sullivan created the Sullivan Principles, establishing standards of corporate responsibility for MNCs operating in South Africa. n338 The Sullivan Principles not only called for the eradication of discrimination in the workplace, but also required MNCs to use their influence to work for the end of apartheid. n339 The MNCs that signed on to the Sullivan Principles also agreed to external audits and public reports to guarantee compliance. n340 Although the Sullivan Principles cannot claim to have caused the demise of apartheid, they served as a basic model for other codes of conduct aimed at corporate responsibility. n341 [*1470]
ii. MacBride Principles
The MacBride Principles address the corporate responsibilities of U.S. MNCs in Northern Ireland. n342 Named after Dr. Sean MacBride, an Irish nationalist and the founder of Amnesty International, n343 these principles attempt to ensure non-discrimination in employment and oblige MNCs to protect the safety of their workers not only at work, but also during their commute to and from work. n344 In February 1995, the MacBride Principles had thirty-two MNC signatories out of the eighty U.S. MNCs operating in Northern Ireland. n345
3. Lack of Legal Enforcement as Criticism to Corporate Codes of Conduct
Codes of conduct often fail to be effective because they are not enforced. n346 Past international efforts have proven ineffective because they lack power to punish those who do not comply. n347 Commentators also criticize Clinton's Model Principles as [*1471] being vague and inadequate because they are voluntary and unenforceable. n348 Additionally, private initiatives are often self- imposed, making it difficult to assess whether a corporation is actually complying with its own code. n349
III. DE BEERS'S LIABILITY UNDER THE ATCA
As governments and the United Nations seek permanent solutions to end these civil wars, n350 attempts will be made to rebuild these societies. In this century, countries have addressed war crimes by setting up tribunals to hold the perpetrators accountable. n351 Still, these tribunals suffer from multiple problems, inhibiting their overall effectiveness. n352
There is no court of human rights in Africa and national courts are not likely to provide a fair forum for the victim. n353 [*1472] The ATCA provides an alternative method for victims of human rights abuses to hold their violators accountable. n354 Therefore, plaintiffs may seek redress in American courts under the ATCA. n355
Although a cause of action against the insurgent groups may seem logical, these groups may be unavailable for suit. n356 Thus, plaintiffs may institute a suit against De Beers for its involvement in the trade in conflict diamonds. The plaintiffs will assert that De Beers knowingly funded war crimes and crimes against humanity. n357 Since complicity in war crimes and crimes against humanity are possible violations of the "law of nations," n358 and the plaintiffs are likely to be aliens, the ATCA provides a cause of action for these plaintiffs in U.S. court.
De Beers will likely object to a suit in U.S. court, claiming forum non conveniens and that the court does not have personal jurisdiction over the company. Given the recent trend of forum non conveniens motions in ATCA cases, n359 the court will probably not accept this objection. Angola and Sierra Leone do not provide adequate forums for these claims. n360 Furthermore, South Africa, De Beers's headquarters, does not present an appropriate forum because of the burden it imposes on plaintiffs, who probably do not reside in South Africa. n361 Courts also have recognized that the United States has an interest in adjudicating [*1473] human rights claims. n362 Thus, De Beers will probably not succeed on a forum non conveniens motion.
Although De Beers is not a U.S. corporation, a court may be able to exercise jurisdiction over the company. Applying the minimum contacts test to De Beers, the plaintiff must establish that De Beers has a high degree of contact with the United States and that the claim is sufficiently related to those contacts. n363 De Beers is not subject to U.S. jurisdiction simply because its diamonds reach the U.S. market. n364 Nevertheless, De Beers's contacts may be established by examining whether De Beers's advertising campaign in the U.S. shows that the company can reasonably expect to be hailed into U.S. court and whether these contacts rise to the level of "continuous and systematic." n365
The second part of the test requires that the claim be related to the contacts. n366 In this situation, the claim revolves around illicit diamonds that De Beers bought from insurgent groups and then marketed to U.S. customers, amongst others. De Beers's advertising campaign in the United States is inherently related to the diamonds that De Beers buys and sells.
To recover under the ATCA against De Beers, the potential plaintiffs must establish that the MNC committed a violation of the "law of nations." n367 First, the Nuremberg Principles establish that complicity in war crimes violates international law. n368 The case against Frederick Flick confirms that knowingly profiting off of war crimes and accepting looted property from known war criminals violates international law. n369 The Holocaust plaintiffs [*1474] also rely on this theory of liability, amongst other theories, in their suit against the Swiss banks. n370
De Beers's policy of buying and controlling all of the diamonds on the market means that they buy both official, legal diamonds and illicit diamonds from the black market. n371 Given De Beers's history of trading with smugglers, it seems likely that De Beers bought diamonds smuggled out of Angola and Sierra Leone by insurgent groups. n372 This trade provided the insurgent groups with the money to continue their wars, subjecting the civilian populations to human rights violations. n373 De Beers's policy of valuing profits and control of the diamond market above all else allowed these terrible crimes to happen in a systematic fashion.
War crimes are included amongst universal offenses, which are punishable anywhere. n374 Although complicity in committing war crimes violates international law, n375 this offense is not a universal offense according to the Restatement. n376 Additionally, complicity to commit war crimes suggests that the plaintiff must show a connection between the war criminals and the entity acting in complicity. The test for complicity may be similar in construction to the joint action test for State action. n377
Plaintiffs will encounter difficulties in showing a substantial connection between De Beers and the insurgent groups because [*1475] of De Beers's use of multiple middlemen in the acquisition of its diamonds. n378 De Beers has dealt with smugglers in the past, particularly where the black market proved more profitable than official trade routes. n379 Due to the lack of transparency in De Beers's operations and the diamond industry as a whole, n380 it is difficult to ascertain exactly how much the company knew about the diamonds it acquired. Although many inferences can be drawn about De Beers's participation in the conflict diamond trade, it is doubtful that a plaintiff will establish the requisite degree of proof necessary to show complicity between De Beers and the insurgent groups. Additionally, since plaintiffs will likely fail to allege the necessary facts to show complicity, a court may dismiss a claim against De Beers on a 12(b)(6) motion for failure to state a claim upon which relief can be granted. n381
Given the increasing influence of MNCs, many commentators claim that MNCs should observe international human rights standards. n382 Efforts by international organizations to regulate MNCs have been ineffective, as have government initiatives. n383 The voluntary nature of these principles and codes is their fatal flaw. n384 Therefore, these initiatives need legally binding force.
The ATCA is a potentially useful tool for preventing human rights abuses by MNCs, but in its present form, the ATCA presents many obstacles for plaintiffs to overcome. n385 As of yet, [*1476] no ATCA case against an MNC has been successful. n386 The ATCA should be re- examined and amended to reach the conduct of MNCs.
Commentators have recognized the limitations of the ATCA and have suggested that new federal legislation called the Foreign Human Rights Abuse Act should be adopted. n387 This proposed legislation should prohibit MNCs from engaging in practices that cause or facilitate human rights abuses, including complicity in war crimes by funding war criminals. The legislation should call on the U.S. government to develop standards that MNCs can use as guidelines in achieving compliance with the new legislation. Violation of the proposed law should give rise to civil and criminal liability. Amending the ATCA in this way to target MNCs will assist aggrieved individuals bringing suit in U.S. court and hold MNCs to higher standards of accountability.
CONCLUSION
Imposing liability on MNCs for knowingly profiting off of human rights abuses will deter MNCs from these unethical practices and encourage states to be more observant of human rights. If states know that they will not attract foreign investment with a bad human rights record, perhaps they will make concerted efforts to improve their practices. Furthermore, MNCs will be forced to take account of human rights when considering its business choices.
The trade in conflict diamonds can be stopped, and could have been stopped years ago if De Beers had decided that human life was more important than profits. The threat of litigation would have made De Beers contemplate the results before engaging in this trade. Amending the ATCA and adopting more comprehensive legislation will make this threat a real possibility, thereby forcing MNCs to carefully consider the lives at stake in their business choices.
*J.D Candidate 1992. In loving memory of George V. Comfort. Much appreciation to Professor Chantal Thomas for her feedback on this Note, and to my family and friends for their support and patience during many long lectures on conflict diamonds.
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