United States: The Trafficking Victims Protection Reauthorization Act emerges to replace the Alien Tort Statute

A salient battlefield in U.S. human rights litigation is the Trafficking Victims Protection Reauthorization Act (TVPRA). For the past four decades, many plaintiffs relied on the Alien Tort Statute to sue corporations based on harms committed by third parties overseas, allegedly in violation of “the law of nations.”  In 2021, Hogan Lovells achieved a significant victory on behalf of Nestlé USA after 16 years of hard-fought litigation when the Supreme Court held 8-1 that the Alien Tort Statute does not apply extraterritorially. Nestlé USA, Inc. v. Doe, 141 S. Ct. 1931 (2021). But at the same time the Supreme Court was restricting the scope of liability under the ATS, plaintiffs’ attorneys were already looking to a relatively new statute under which to bring similar claims: the TVPRA.

At its core, the TVPRA is a criminal statute. It imposes enhanced criminal penalties for certain offenses related to peonage, slavery, involuntary servitude, sex trafficking, and forced labor. The statute also includes a civil remedies provision, which allows an individual who is a victim of a TVPRA violation to “bring a civil action against the perpetrator [ ] or whoever knowingly benefits, financially or by receiving anything of value from participation in a venture which that person knew or should have known has engaged in” a TVPRA violation. 18 U.S.C. § 1595(a).

Some U.S. Plaintiffs’ attorneys who previously pursued ATS claims are increasingly turning to the TVPRA. Just as with the ATS, many of these lawsuits do not target the actual perpetrators of the alleged harms; instead, these attorneys  sue multinational companies based on conduct happening abroad, often many levels removed in their supply chains. Just as with the ATS, plaintiffs have tried to use companies’ efforts to combat global problems against them in these suits, using them as a purported basis for claiming that companies are aware of human rights problems in their supply chains. And just as with the ATS, these cases threaten corporations with potential reputational harm.

Hogan Lovells is at the forefront of defending these matters. Since our success in Nestlé, we have obtained significant dismissals in two district court cases seeking to hold several multinational companies in the technology and food sectors liable for alleged labor issues in their supply chains. Both cases are currently on appeal.

United Kingdom (England & Wales): The scope of business human rights litigation faced by multinational corporates is growing, as claimant firms explore new frontiers of possible liability

Claimant firms are finding new and innovative ways to litigate against English parents of multinationals, exploring the limits of BHR litigation in the English Courts. For many years, Claimant firms have brought claims against English parent companies for the acts or omissions of their overseas subsidiaries, for example for their failure to avert environmental issues.

But increasingly, Claimant firms are seeking to establish liability beyond the parent-subsidiary relationship – alleging the UK company owes a duty to those impacted by other parties in its supply chain – and beyond environmental damage – for social and human rights concerns, including labor issues. Whilst none of these cases is yet to proceed to a full trial, the time, expense and negative PR of fighting them is enough to suggest even the best prepared corporates need to be on their guard.

So how are UK Claimant firms seeking to expand the scope of liability?

Beyond subsidiaries

In a line of cases¹, the Supreme Court did not limit or specify the circumstances in which a duty of care of an English company may arise in respect of claimants impacted by its overseas subsidiary, but set out a number of factors to be considered.

• The parent company manages or jointly manages the operations of the subsidiary.

• The parent company promulgates group-wide policies which, when implemented, cause harm to third parties.

• The parent company issues group-wide compliance polices to its subsidiaries and takes active steps in this implementation. ‘Active steps’ includes training, supervision and enforcement.

• The parent company publicly holds itself out as having control of or supervising the actions of its subsidiary companies, but the parent does not in fact exercise such control or supervision.

While this case related to a UK parent’s control of an overseas subsidiary, many of these factors are not dependent on the group relationship. And cases recently filed demonstrate that Claimant firms are leveraging this position to try and hold UK companies accountable for acts or omissions of other third parties in their supply chain and not just their subsidiaries. These allege that the English company had sufficient influence over its suppliers, or held itself out as having so, that it owed a duty of care to its supplier’s employees. To date, these cases relate to such issues as forced and/or child labor on African smallholder farms to labor conditions in a supplier’s manufacturing plant.

Beyond the “E” of ESG – exploring the “S”

Social and labor issues overseas are increasingly the focus of Claimant firms, who argue the English parent has sufficient control of the overseas subsidiary or supplier to trigger a direct duty of care to the workers overseas. This goes well beyond environmental or health and safety issues, which have typically been the subject of these claims. Cases have now been brought for alleged damages from failing to safeguard employees from political or police violence² to gender discrimination and harassment. Claimant firms often use the press to increase pressure on defendants, often trying to paint a household brand as a wealthy exploiter of vulnerable overseas workers.

The English group action regime makes English Courts well placed to tackle very complex international claims brought by large groups, which inevitably give rise to difficult case management issues.

Hogan Lovells has deep experience in this area, having acted on some of the largest and most significant cases brought under this regime.

Hogan Lovells is here to help. In recent years, we have seen a rise in creative legal strategies seeking to hold companies liable for conduct committed many levels removed in their supply chains by overseas actors. Plaintiffs sometimes attempt to use corporations’ public-facing communications and good acts against them in a backwards effort to prove knowledge and intent to perpetrate problematic labor practices. We have deep experience successfully litigating these issues.

We can also help with:

• reviewing your corporate group structures, policies and procedures, and advising on an effective strategy to mitigate litigation risk emanating from group subsidiaries and other third parties in your supply chain; 
• creating or refining effective operational grievance mechanisms for your subsidiaries, which align with the UN Sustainable Development Goals and provide effective redress for individuals on the ground, to try and mitigate the risk of litigation against the local and/or parent company;
• advising on potential ESG disclosures and other communications to minimize risk of future BHR/ESG litigation; and
• reviewing and commenting on the prospects of any BHR/ESG litigation which has been or is likely to be brought against your company or a member of its corporate group.

Please contact David Foster (U.S.) or Matthew Felwick (UK) to learn more.

Authored by David Foster, Matthew Felwick, Danielle Stempel, Emmie Le Marchand.

References

1 Vedanta Resources Plc v Lungowe [2019] UKSC 20; Okpabi v Royal Dutch Shell Plc [2021] UKSC 3

2 Kalma v African Minerals Ltd [2020] EWCA Civ 144; AAA v Unilever Plc [2018] EWCA Civ 1532