This is big news in the realm of corporate liability for supply chain human rights risk. Cisco Systems is being sued in California for aiding and abetting human rights violations by the Chinese government. According to the Plaintiffs, Cisco contracted with the Chinese government to help build the country’s “great firewall” in addition to developing surveillance systems used by the government to commit human rights abuses. The case has been pending since 2014 while a series of appeals were processed after an initial dismissal by the trial court. Recently, however, the 9th Circuit ruled that the case can proceed. The court stated:
“The action was brought by practitioners of Falun Gong who alleged that they or family members were victims of human rights abuses by the Chinese Communist Party and Chinese government officials and that these abuses were enabled by technological assistance of U.S. corporation Cisco Systems, Inc., and two Cisco executives.”
The lawsuit and subsequent appeals center on the Plaintiffs’ use of the Alien Torts Statute (ATS), a law that allows non-US citizens to sue US companies for certain unlawful activities committed abroad. This law was also recently used in the high-profile Chiquita suit where the company was found liable for $38.2 million in damages due to their affiliation with the terrorist organization Autodefensas Unidas de Colombia (AUC). The history and application of the ATS is long and complicated, but the 9th Circuit’s decision could lead to more companies being sued under the law for enabling unlawful conduct, not just perpetrating it. This has major implications for U.S. companies operating internationally, especially those that contract with entities that may be violating human rights. Given the potential risk, it would be prudent to consider expanding your company’s supplier human rights due diligence assessment process to your foreign customers.
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