Wednesday, March 21, 2012

Development Decisions

On March 18, 2012, Brazil announced that it would formally charge a number of executives from Chevron based on an oil spill that occurred in November 2011 as a result of Chevron’s oil drilling activities off the Brazilian coast. (map credit)
The decision to formally bring these charges was made after new leaks were recently found. Further, the decision to charge those involved in the oil leak did not end with the Chevron executives. Rather, Brazilian prosecutors will formally charge several executives from Transocean, the drilling contractor used by Chevron on the project.
On the surface, the facts scenario surrounding the Chevron oil leak might sound eerily familiar to the Deepwater Horizon catastrophe in 2010 off the Gulf Coast of the United States. (Prior IntLawGrrls posts available here.)
Fortunately, the Chevron oil leak off the Brazilian coast was not as significant as the Deepwater Horizon incident, the effects of which are still being felt along the Gulf Coast. In the aftermath of the Deepwater Horizon incident, the United States government initially imposed a moratorium on drilling in the Gulf Coast and the issue has been quite controversial ever since. Further, the United States government pursued large economic penalties against BP – the oil company involved – and still has not ruled out the potential for criminal charges for BP executives linked to the oil spill.
In the US context, the Deepwater Horizon project was part of an established pattern of drilling and oil exploration, albeit with dramatically unintended consequences. By contrast, in the Brazilian context the Chevron drilling project was part of a coordinated undertaking by the Brazilian government to create an industry having the potential to further Brazil’s economic standing in the world community. As such, oil exploration and drilling operations by both foreign corporations and the state oil corporation are essential elements of Brazil’s development strategy.
In order to further this development strategy, Brazil stands at a crossroads.
The use of criminal prosecutions of foreign corporate executives does serve a legitimate purpose in that it stresses the government’s dedication to protecting the environment and requiring safe practices within an industry. It also addresses issues of impunity that often accompany foreign investment and operations in developing aspects of a state’s economy. At the same time, however, the use of criminal prosecutions has the potential to hinder Brazil’s development goals in that it could easily serve as a deterrent for other foreign corporate entities to explore for or drill oil in the way that Brazil has anticipated needing for development.
The Chevron situation in Brazil is emblematic of the concerns facing states as they seek to develop industries with the assistance for foreign corporate entities. Some states, such as the US, have enacted laws that criminalize corrupt acts by domestic corporations overseas and some developing states are in the process of creating laws that extend liability for corruption and associated practices to foreign corporations.
On the international level, there are several conventions and agreements that address various forms of bribery and corruption involving foreign corporations’ overseas activities.
Additionally, the prevalence of corporate social responsibility doctrines and the insistence of consumers on ethical corporate practices has brought corporate practices into an increasingly bright spotlight. However, states such as Brazil must assess the needs of their economic development plans against their criminal and environmental interests in order to determine the shape and scope of future development goals and needs.
The Chevron case is illustrative of this need and of the thicket of issues that states must address when they seek to involve foreign entities in the development process.

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