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4 Jul 2016

Philipp Wesche, German Institute for International and Security Affairs

Corporate human rights abuses and access to justice in Germany – why so little tort-litigation?

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Germany is one of the world’s largest and most interconnected economies: it accounts for hundreds of billions of dollars in international trade and foreign direct investment and its companies control thousands of foreign affiliates operating abroad. Yet, in contrast to other large-scale economies, the trend towards transnational tort litigation has largely bypassed German courts thus far.

In the United States, tort complaints against companies involved in overseas human rights abuse have been filed for more than twenty years. In England, there has been litigation against multinationals such as Trafigura, Anglo American South Africa, BP or Shell, which agreed to a £55 million settlement with Nigerian claimants in January 2015. Shell’s activities in Nigeria have also been subject to a number of complaints before Dutch courts, one of them resulting in a conviction of its local subsidiary. In Germany, in contrast, transnational tort litigation only arrived last year, with the case of Jabir vs. KiK.

Is this because German companies act more responsibly than their foreign competitors when operating abroad? Recent scandals such as Dieselgate, but also the statistical evidence that we have on corporate human rights abuses suggest otherwise. In fact, Germany is among the countries hosting the largest numbers of companies accused of such abuses. So why then is there so little tort litigation?

Lack of legal advocacy

The answer to this question has two aspects. The first is a lack of advocacy organizations using the law to enforce human rights. In fact, there is only one such organization in Germany: the European Center for Constitutional and Human Rights (ECCHR) in Berlin, which has developed a number of criminal cases concerning corporate human rights abuse and also leads the case against KiK. This is in stark contrast, for example, to the United States, with its strong civil rights movement and long tradition in public interest litigation, which hosts many such organizations. Notwithstanding ECCHR’s remarkable work, there are obviously limits to what a single non-profit organization with about fifteen regular staff members, five of them working on corporate accountability, can achieve: it can only address a very small number of strategically interesting cases. 

Poor legal framework

The second aspect explaining the lack of tort-litigation in Germany is the legal framework governing such litigation. In this respect, the problem is not so much a lack of jurisdiction or of a cause of action in German law. In fact, German courts can exercise jurisdiction over companies domiciled in Germany, irrespective of where the damage occurred, and the law does provide a legal basis to hold companies accountable for damages to core human rights caused by negligent conduct. Arguably, it also provides for parent company liability for subsidiaries operating under effective control. The problem is rather due to the fact that German material law does not apply to these cases and, more importantly, to a number of procedural barriers that make litigation very difficult in practice.

First, in contrast to common law systems, German procedural law does not provide for discovery procedures that enable claimants to obtain large amounts of documents from within companies. In order to obtain a document, claimants have to specifically name and describe it, which makes it hard to obtain evidence on, let’s say, corporate control structures or health and safety practices. Second, there is a lack of collective actions enabling lawyers to litigate on behalf of large groups in a cost-efficient manner: representative proceedings or class actions do not exist. This implies that law firms either have to invest a lot of resources in these cases, which, considering the high risks involved, is often not a reasonable option, or can only represent a small number of victims. However, in the latter case, the statutory lawyers’ fees (dependent on the value of the matter in dispute) are often too low to cover the costs of developing cross-border litigation. In the KiK case, for example, several fact finding missions and client meetings had to be conducted in Pakistan, while lawyers’ fees only amount to approximately €5,000.

As a result, law firms have little incentive to undertake litigation, which is only feasible with organizational and financial support of advocacy organizations. For persons unable to find such support, this means that they are de facto excluded from achieving compensation through judicial proceedings in Germany, even where they have a legitimate claim against a German company within the jurisdiction of a German court.

How to increase access to remedy?

So what can the German government do to increase access to compensation for persons affected by the overseas activities of German companies? First of all, it can take a look at the existing international initiatives that take up the UN Guiding Principles on Business and Human Rights (UNGPs) and provide operational recommendations to improve access to remedy. These include Council of Europe’s recommendation on human rights and business of March 2016, the Human Rights Council’s resolution on improving accountability and access to remedy for victims of business-related human rights abuse of May 2016, and, most recently, the European Council’s conclusions on business and human rights of June 2016.

Second, it can ensure that its National Action Plan on the UNGPs does not end the debate on strengthening judicial mechanisms at the interministerial level, but leads to a follow-up process on this issue. This process should involve the production of an expert opinion on the material and procedural barriers to litigation in German law, conducted by an impartial body, and should identify strategies to lower these barriers with which all stakeholders, including business, could live.

As Europe’s biggest economy, Germany should take the lead in addressing access to remedy and should work for an integrated approach across the European Union. This could also imply to find a more constructive position towards the UN treaty process than the EU currently holds. 

German civil society, on the other hand, should not wait for the government to take action, but should increase its own support to litigation, which, due to its high media impact and its potential to change the law from bottom up, constitutes a very powerful policy advocacy instrument. What is needed are more funding to develop litigation, stronger transnational cooperation among civil society organizations, including national human rights institutions and unions, and more para-legal expertise among non-legal organizations working with stakeholders in third countries.