Law applicable to events giving rise to damage occurring after 11 January 2009

KiK - Factory fire in Pakistan (2012)

In September 2012, 280 workers died and hundreds more were injured in a devastating factory fire in Ali Enterprises textile factory in Karachi, Pakistan. The inadequate storage of flammable textile facilitated the spread of a fire caused by an electrical short circuit, and the absence of emergency exits left many workers trapped in the burning building.

The factory’s biggest client was KiK, a German discount retailer, which had bought 70% of the garment produced by the factory in 2011 ⁴ . In the immediate aftermath of the fire, KiK paid USD 1 million compensation, to be distributed by a commission among the survivors and relatives of the deceased. However, Kik refused to accept responsibility for the fire and pay compensation for the loss of income to families affected by the fire. Representatives of these families tried negotiating with KiK for 2 years in order to receive compensation, but the negotiations ended in December 2014 with KiK firmly refusing to pay. Consequently, on 13 March 2015, four of the victims of the fire filed a claim against KiK at the Regional Court in Dortmund, Germany, seeking compensation for all the affected families. The claimants alleged that they were owed a direct duty of care by Kik, and that Kik had breached this direct duty of care.

In the meantime, after a negotiation facilitated by the International Labour Organisation in September 2016, KiK agreed to pay $5.15 million to all the affected families and survivors, which they have received every month since May 2018. However, KiK continued to deny responsibility for the fire, stating that no safety issues were reported by auditors. On 10 January 2019, the Court in Dortmund rejected the lawsuit on the basis that the statute of limitations provided for in Pakistani law had expired.

Under Article 63 (1) of Brussels 1 Regulation and paragraphs 12 and 17 of the German Code of Civil Procedure, international civil cases may proceed in the courts of the defendant’s home state, in this case Germany. Moreover, Article 4(1) of Rome 2 Regulation establishes that in this case, the applicable law is the law of the state where the damages occurred. This is why the German court applied Pakistani Law to establish whether KiK was liable for human rights violations. But Pakistan’s common law establishes that the statute of limitations for claims involving personal injury is two years from the date of the injury.

As a result, the court concluded that the two-year limitation period under Pakistani law had expired before the claims were filed and that the statute of limitations had neither been waived nor suspended. According to the court, compensation already paid by KiK in this case was merely a voluntary “ex gratia” payment that did not amount to a written acknowledgment of liability, which could have extended the applicable limitation period. The court further noted that the parties’ settlement negotiations before the claims were filed did not amount to an agreement on the applicability of German law in accordance with Article 14(1) of Rome 2 Regulation, which could have subjected the claims to the longer three-year limitation period under German law ⁵ . In the end, the court dismissed the case on procedural grounds and thus did not pronounce a decision on the merits. This contradicts the previous ruling in the "Vedanta Resources lawsuit” ⁶ , a similar case from 2016 in which it was stated that English courts should have jurisdiction over this kind of claims because otherwise the victims would not be able to obtain substantial justice in the country of the law of the place in which torts occurred.

Trafigura Beheer BV & Trafigura Limited in Côte d’Ivoire ⁷

These cases began on the night of 19 to 20 August 2006 when the Probo Koala, chartered by Trafigura Ltd., the UK subsidiary of the Dutch company Trafigura, discharged 500 tons of toxic waste into several landfills in Abidjan, Côte d’Ivoire. Puma Energy, an Ivorian subsidiary of Trafigura, had contracted with Société Tommy, an alleged Ivorian shell company registered one month before the Probo Koala’s arrival in Abidjan, to handle the waste. The Probo Koala had docked earlier at the port of Amsterdam, where Trafigura refused to pay the additional costs Dutch authorities charged to dispose of the toxic waste. After being exposed to fumes from the waste in Abidjan, more than 100,000 people sought medical care, creating a major health crisis in Côte d’Ivoire. For the most part, patients suffered from nausea, headaches, skin sores and nosebleeds. Official Ivorian sources say that 16 people died after inhaling or otherwise coming into contact with the toxic products.

According CIAPOL (Center for Anti-Pollution Control in the Ivory Coast) the waste contained at least three substances: hydrogen sulphide, H2S and mercaptans. The test identified by-product a large amount of sulphur resulting from H2S refinery in the waste which was potentially dangerous. A Rotterdam laboratory which conducted tests on several samples of waste dumped in Abidjan identified no toxic substances. Doubts remain about the authenticity of the results, however, because the samples were neither sealed nor marked.

On 12th February 2007, Trafigura settled with the Ivorian government. While denying liability for the disaster and insisting that it did not deserve to pay damages, Trafigura agreed to build a waste treatment plant, contribute to health care for the victims and pay U.S.D 198 million to create a victim compensation fund in exchange for a promise from the Ivorian government not to sue the company. Following the settlement, the Ivorian government released Trafigura and Puma Energy representatives who had been arrested and imprisoned after arriving in Côte d’Ivoire to ascertain the incident. ⁸

In November 2006, the High Court of Justice in London agreed to hear a suit against Trafigura brought by some 30,000 victims, represented by the law office of Leigh Day & Co. The plaintiffs qualified the chemicals defendants as hazardous waste under the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal. The European Union has indeed banned the export of hazardous waste from its Member States to developing countries. According to the plaintiffs, Trafigura brought the untreated waste to Côte d’Ivoire knowing the lack of facilities to treat the waste on site.

Trafigura has denied the toxicity of the chemicals and rejected all liability, arguing that the waste resulted from the normal operation of a ship. The company emphasized that it had entrusted the disputed event to Société Tommy and that there was no reason to doubt that company’s abilities. According to Trafigura’s findings, only 69 individuals actually suffered physical problems. On 23 March 2009, after Trafigura attempted to persuade victims to alter their statements, the court ordered the company to end contact with them.

In September 2009, the parties to the UK civil proceedings reached a settlement whereby Trafigura agreed to pay each of the 30,000 applicants the sum of U.S.D 1,500. In return, the victims acknowledged that no link had been established between exposure to the discharged chemicals and the various acute and chronic illnesses they have documented. The settlement also included a final waiver of all claims against Trafigura. Trafigura held that its compensation to the victims is illustrative of its social and economic commitment in the region, and is in no way a recognition of guilt. In a press release, the company insisted that, in the worst-case scenario, the Probo Koala could “only have caused a range of short term, ’flu like’ symptoms and anxiety”. ⁹

In December 2009, BBC London was ordered to pay Trafigura the sum of GBP 28,000 in damages after Trafigura filed a libel suit. BBC London had accused Trafigura of causing the health problems which occurred following the discharge of toxic waste in Abidjan. The BBC retracted its allegations and had to apologize on the air.

Recurrent complications with material compensation

At the request of Claude Gohourou, the head of a group of local associations called The National Coordination of Victims of Toxic Waste (CNVDT), in late October 2009, Ivorian courts froze the bank accounts into which the victims’ compensation had been transferred. On 4th November 2009, the High Court of Justice in London expressed “profound concern” that the money was not being redistributed. On 22nd January 2010, the Court of Appeal in Abidjan unfroze the victims’ funds, but ordered the money transferred to the account of Claude Gohourou’s group. On 14th February 2010, the victims’ law firm, Leigh Day & Co, signed an agreement with Claude Gohourou granting Leigh Day & Co control of the funds to ensure that all the victims effectively obtain redress. Claude Gohourou insisted that the terms of the agreement remain confidential. Although the money should have been transferred to the victims, by in mid-March 2010, the process is laborious because complications continue to crop up. By July 2010, around 23.000 people also received their compensation, however the process was interrupted again shortly after. A new distribution started on September 2010 by CNVDT soon interrupted by a post-election crisis ¹⁰ and some 6,000 people were left unpaid. The millions of dollars left in the fund disappeared. As a result, an investigation was opened in 2011 into the misappropriation of the compensation money was opened in 2011. In May 2012, Côte d’Ivoire’s Minister of African Integration, Adama Bictogo, who had become involved in the process in 2010, when he reportedly tried to facilitate a settlement between the claimants’ UK lawyers and the CNVDT, was removed from his position over allegations that he had received part of the compensation money as a ’commission’ for his role as facilitator ¹¹ .

In the meantime, over 4000 victims who had not received their share of the compensation funds received following the settlement between Leigh Day and Trafigura, represented by Harding Mitchel Solicitors, brought an action before the High Court of Justice in London against Leigh Day. They argued that the latter had committed professional misconduct through negligence in not foreseeing that there would be a high risk to the compensation funds if they were transferred in one tranche to a bank account in Côte d’Ivoire. Furthermore, Leigh Day was aware of the corruption and instability of the regime in 2009. Harding Mitchell Solicitors further argued that Leigh Day did not attempt to recover the funds when it was still possible to do so and Leigh Day therefore breached their duty to the victims. Leigh Day denied negligence. On June 2016, the High Court ruled in favour of the victims and concluded that Leigh Day had breached their duty of care to the victims ¹² .

Following actions against Trafigura on the same issue

In February 2015, the Stichting Union des Victimes de déchets Toxiques d’Abidjan (UVDTAB) and in January 2016, the Stichting Victimes des déchets toxiques Côte d’Ivoire (VDTCI) brought two civil proceedings against Trafigura before the District Court of Amsterdam. Both foundations set up in accordance with Dutch law, claimed to represent victims not yet represented in the previous Leigh Day settlement and seeking financial compensation ¹³ .

A. Stichting Union des Victimes de déchets Toxiques d’Abidjan (UVDTAB)

On 30 November 2016, the District Court of Amsterdam dismissed the claim presented by UVDTAB since the court made adverse findings about the propriety, effective administration and conduct of UVDTAB, and regarding its capacity to represent and safeguard the interests of those it claimed to represent ¹⁴ . The Stichting decided to appeal this decision before the Court of appeal in Amsterdam. However, in October 2018, this Court found that the dispute was indeed subject to Dutch jurisdiction, but that there was an irreversible procedural error and thus the appeal made by UVDTAB was declared inadmissible ¹⁵ .

B. Stichting Victimes des déchets toxiques Côte d’Ivoire (VDTCI)

Meanwhile, in January 2016, the Stichting Victimes des déchets toxiques Côte d’Ivoire (VDTCI) also introduced a civil proceeding against Trafigura before the District Court of Amsterdam. Nevertheless, their claim was dismissed on April 18, 2018 by this court for procedural reasons. In July 2018 the VDTCI decided to appeal and on April 14, 2020, the Amsterdam Court of Appeal ruled in favour of the VDTCI, overturning the judgement of the District Court and declaring the Dutch judge competent to hear the request for Trafigura to answer for their actions regarding the dumping of waste from the Probo Koala in Abidjan ¹⁶ .

At the same time, the court also decided that the proceedings against Trafigura Limited should continue in the Amsterdam Court and the proceedings against Trafigura Beheer B.V. in the Court of Appeal. The court also authorized both parties to appeal for cassation. Accordingly, on July 14, 2020, Trafigura notified VDTCI, that it would file an appeal before the Supreme Court against the favourable decision of the Court of Appeal of 14 April 2020. The Supreme Court will have to decide whether the decision of the Amsterdam Court of Appeal is well-founded. If Trafigura’s appeal is dismissed, the company will then have to answer for the Probo Koala waste dumping in Abidjan in the Dutch courts ¹⁷ .

Criminal Procedures

This case has been and continues to be the subject of criminal proceedings. In June 2007, FIDH’s Legal Action Group filed a suit in France against two Trafigura group executives. The complaint was dismissed. In Côte d’Ivoire, Trafigura and its Ivorian subsidiary, Puma Energy, have not been fully prosecuted as proceedings against them were stayed at trial. The complaint filed in Côte d’Ivoire, however, did result in the September and October 2008 criminal trial of Société Tommy representatives involved in the disaster. ¹⁸ Criminal proceedings against Trafigura also took place in Dutch courts, as discussed in the corporate criminal liability section of this guide.

The case of France

According to the French Code of Civil Procedure, in litigations relating to non-contractual obligations, plaintiffs may sieze jurisdiction:

• Where the defendant lives (the place where the company is established or domiciled), ²³
• Where the event giving rise to damage occurred, or
• Where the damage was suffered. ²⁴

Any foreign victim of a human rights violation committed by a French company abroad may address the French courts provided the company is domiciled in France. The victim enjoys the same jurisdictional grounds as those designated in Regulation 44/2001. In addition, the doctrines of forum non conveniens, act of state and political question found in the US legal system do not apply in France.

Under Rome II, the law applicable to transnational tort litigation (for events giving rise to damage occurring on or after 11 January 2009) is the law of the place in which the direct damage occurred. A foreign victim who brings action against a French company for harm suffered abroad may not benefit from French law. In effect, the French forum court will apply the law of the place the damage occurred, i.e. the foreign law. Most often, however, when victims bring action outside the jurisdiction of their country, they seek the benefit of a more flexible foreign law which will protect the victims’ right to compensation. French courts cannot guarantee this unless exceptions to the principle of lex loci damni bring the case under French law.

France’s Highest Court of Justice, the Court of Cassation has, however, ruled that foreign laws not conforming to the ”principles of universal justice considered in French public opinion as being of absolute international value” ²⁵ must be rejected. This condition is unclear and it remains to be seen whether future French courts will opt to apply French law when an otherwise applicable foreign law does not offer essential guarantees of the right to compensation.

Many examples of corporate atrocities like the Rana Plaza disaster in Bangladesh or the Brumadinho dam failing tragedy in Brasil illustrate the fact that voluntary standards, even when developed at an international level, are not sufficient to prevent the human rights abuses and environmental damages committed by companies. A legally binding framework is therefore necessary. The French law of 27 March 2017 on due diligence s is the first legislation in the world proposing to engage the civil liability of a multinational for the impact of its activities - including those of its subsidiaries, suppliers and subcontractors.