Responsible Investment Officer
TWO SIDES OF THE STORY
In a monthly correspondence, Caspar Snijders (Portfolio Manager Equities) and Ruud Hadders (Responsible Investment Officer) - each from their own perspective - highlight a topical issue. This time:
Portfolio manager Equities
In my spare time I enjoy watching “Last Week Tonight”, the American version of “Zondag met Lubach”. It was recently revealed that two years ago, the programme was sued for its critical coverage of Bob Murray, CEO of America’s largest private coal company. The company tried to thwart further criticism from the programme by bringing a SLAPP lawsuit (which stands for Strategic Lawsuit Against Public Participation) against it.
"While it is evidently the judiciary that has the final say, the question is whether investors shouldn’t speak out against companies that initiate these kinds of lawsuits."
Interesting subject, these SLAPP lawsuits. Essentially, the laws that aim to combat these lawsuits are a fascinating phenomenon. As far as major cases such as the ETP case regarding the Dakota Access Oil Pipeline are concerned, I would say these laws can indeed be necessary. Another example of a major case is the somewhat older “McLibel” case. In this case, journalists were sued for distributing pamphlets containing incorrect information about McDonalds. Despite the prevailing legislation, nuances should be taken into consideration in both examples.
A SLAPP is a strategic lawsuit which intends to make it impossible for a person or an organisation to operate. Winning the lawsuit is often not necessarily the primary goal of the complaining party. Much more often, the strategy is to burden the criticizing party with legal costs that are so high, that it gives up its criticism or opposition.
Although the “SLAPP” phenomenon is still relatively unknown in the Netherlands, lawsuits like this have been conducted around the world for years. Parties expressing criticism of human rights violations or activities that cause environmental damage are increasingly targeted.
"SLAPP lawsuits are a region-specific phenomenon and it could take some time before these reach the Netherlands. As Dutch institutional investors do invest all over the world they should therefore also take a stance on them."
A company may react in different ways when it is criticised by an NGO or a journalist and as a consequence this criticism affects their business operations and potential profits or reputation. It may engage in discussions with the NGO and check if the criticism fits the facts. The company then indicates how it will tackle the issue and shares the outcome of this in a meeting with the NGO. This seems to be the best path to follow. Unfortunately, reality does not always follow this ideal path. Sometimes the so-called facts turn out to be untruths or a dialogue between the company and the other parties involved proves impossible.
The legal proceedings between American energy company ETP and Banktrack are a good example of this. Banktrack is an NGO that expressed criticism of ETP’s violation of human rights during the construction of the Dakota Access Oil Pipeline. Other environmental groups, including Greenpeace, were also named in the proceedings in an attempt to silence criticism related to the consequences of the pipeline for the land and the water resources of the local population.
In those cases, it is essential for a company to be able to respond to this by bringing proceedings.
The financial efforts in initiating a SLAPP lawsuit are nil; the means required are negligible compared to the potential reputational damage that might be inflicted by third parties in a public trial. One such example is the so-called “Toyota Accelerators” case from 2009. The accelerators got stuck as a result of defective software. The costs came to 2 to 5 billion US Dollars. It was later established though that most of the accidents had been caused by human error.
While it is evidently the judiciary that has the final say, the question is whether investors shouldn’t speak out against companies that initiate these kinds of lawsuits. The fact is that freedom of speech is a constitutional right that should not be restricted by threats of prosecution (or legal sanctions). But apart from the moral considerations, do you know if SLAPP lawsuits have any financial consequences for the companies that initiate them?
So the answer to your question about whether investors should speak out against companies that initiate SLAPP lawsuits against third parties is: yes. However, “yes” with a degree of reservation to the effect that this should only occur when all information is publicly available and the facts are clear to everyone and there are no further nuances left to make.
Besides, I think that SLAPP lawsuits are indeed a region-specific phenomenon and it could take some time before these reach the Netherlands (although Dutch institutional investors do invest all over the world and should therefore also take a stance on them). That said - just like you – I enjoy watching “Zondag met Lubach”! It gives you the chance to take your mind off things and to start the new working week bright and fresh.
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