The flaws lurking in the James Hardie compensation deal

“There are two sides to every story and the James Hardie Asbestos Compensation story is no exception.” That is how a recent advertisement ran by James Hardie begins.

This statement should equally apply to the Heads of Agreement (HOA) that James Hardie (pdf file 118kb)  signed with the Australian Council of Trade Unions (pdf file 99kb), Unions New South Wales, asbestos victims groups and the New South Wales Government on December 21, 2004. By and large, only one side of this compensation deal has come out in the media. For example: that “it is the largest-ever compensation offer made in Australian history”; that there is no limit either on the number of people to be compensated, or the amount of compensation; and that the funding would continue for at least the next 40 years. Also in the forefront of the media was that this deal signified a triumph of collective pressure - including threats of boycotts and “naming and shaming” - exerted by unions, consumers, NGOs and the media on a mighty corporation.

All this is true, but it depicts only one side of the story. Unfortunately, the other side of this story has not been brought to the surface and since then, Christmas and New Year celebrations, and the tsunami disaster, have not allowed a closer scrutiny of the deal.

So, what is this HOA all about, and what is the other under-reported side?

The HOA is a “non-binding” agreement that will form the basis of a legally binding Principal Agreement that might be signed by James Hardie and the NSW Government. It must be noted that whether the Principal Agreement is reached in the near future or not is subject to at least four conditions: 

• Any future agreement is subject to the completion of the NSW Government’s Review of Legal and Administrative Costs in Dust Diseases Compensation Claims and the implementation of the resultant reforms; 
• the Board of Directors of James Hardie Industries NV (JHINV) determines - including by considering the affordability of the scheme - that the final agreement is in “its” interests; 
• an independent expert’s report - commenting on whether the voluntary funding proposal is in the interests of JHINV shareholders - confirms the proposal; and
• both lenders and shareholders of JHINV approve the proposal.

None of these “preconditions”, even if it is likely that they would be met, should be taken lightly. The first precondition especially, is nothing but a blunt corporate blackmailing and fear campaign, which is also reflected in repeated assertions that “the financial viability of James Hardie is in the interests of victims as well”. Since James Hardie knows that it is on firm legal (though unsatisfactory) ground, it could employ these inhuman strategies. Although awarding adequate relief to victims of mass torts in an efficient manner is still an unresolved issue, it would be a bit much if we allowed a wrongdoer to dictate the terms of any such reforms, which were then a precondition for providing funding. There is no need to emphasise that any economic efficiency that is achieved should not come at the cost of the adequacy of the financial relief to victims or the fairness of the whole process.

Furthermore, it should not be forgotten that even if a legally binding Principal Agreement is entered and honored, there is no guarantee that all the victims would be paid. James Hardie asserts, “because the number of claimants and the amounts that the courts may award is uncertain and James Hardie may not perform as currently projected, no absolute assurance on [satisfying all future claims] can be given”. Another factor that might bear relevance to this uncertainty is that corporations are not permanent fixtures: James Hardie as we know it today might not exist in the future.

Apart from these technical aspects related to the HOA, one should also consider what this in effect, means for James Hardie in particular, and for corporate human rights irresponsibility in general.

To begin with, as James Hardie has not accepted any legal liability, it is only providing “voluntary funding” and not “compensation” to the victims. The labelling of relief is important for several reasons, including the reason that victims seek not only money, but also justice. In its present form this deal is only a charity or mercy statement on the part of James Hardie (clearly shown by the fact that it has “assumed” the tax deductibility of its payments), rather than an acknowledgment of consistent wrongs that it did. Does it mean then that there is no difference between the victims of James Hardie and the tsunami? It is important that we do not allow corporations to blur the vital distinction between these two.

Such optimum use of terminology, however, should not come as a surprise, at least to the students of corporate human rights irresponsibility. For example, the settlement order in the Bhopal gas disaster had provided that the Union Carbide shall make the “payments … for the benefit of all victims of the Bhopal gas disaster … and not as fines, penalties, or punitive damage”.

Second, apart from the image loss that James Hardie has suffered and may continue to suffer into the future, the HOA does not attribute any responsibility for advertent asbestos-exposure to any natural or legal person. Therefore, it would have little or no deterrent effect in future. On the other hand, James Hardie may, in fact, present this deal as evidence of good corporate citizenship, therefore attempting to occupy the high moral ground.