The demonstration last week outside Occidental Petroleum Corp. headquarters had all the trappings of a sideshow especially given the record $1.8 billion quarterly profit that has pleased investors and boosted shares.

Indigenous Peruvian activists adorned in native clothing or haz-mat suits were joined by actress Daryl Hannah on a busy Westwood street, all in an effort to draw attention to a lawsuit alleging the oil giant had soiled Amazonian water and lands.

But last week’s demonstration, timed to precede Occidental’s annual shareholders meeting on May 2, comes at a time when multinational corporations are on the defensive worldwide as activists challenge their practices in court.

Chevron Corp. is facing a possible $16 billion judgment for allegedly contaminating land in the Amazon itself, while Dole Food Co. recently was hit with a multimillion dollar judgment for its use of herbicides on Nicaraguan banana plantations. The award did little to dent the Westlake Village company’s bottom line but it came with a heavy dose of negative publicity.

“There have been a number of recent cases initiated by third-world peoples in the courts of the United States against U.S. corporations that do global harm,” said Robert Benson, professor of law at Loyola Law School in Los Angeles. “Together, the cases signal a powerful legal trend and oil companies are especially vulnerable.”

In Occidental’s case, leaders of the Achuar people of Peru’s Amazon basin filed a lawsuit against the oil company in Los Angeles federal court last year. The indigenous people claim the company, while operating an oil field from 1975 through 2000, dumped toxic wastewater into the Amazon watershed, causing serious health problems.

In response, Occidental maintains it met all health and safety standards in force at the time and that its liability for any damage ended when it sold its interest in the field eight years ago to Argentinian oil company PlusPetrol S.A, said company spokesman Richard Kline.

As part of that agreement, PlusPetrol agreed to assume responsibility for liabilities past and present, Kline said. And in 2006, PlusPetrol reached an agreement with the Peruvian government to clean up much of the contamination. But Achuar activists contend that a substantial amount of pollution was not covered by that agreement and filed their case in Los Angeles.

“Oxy knowingly poisoned the rainforest homeland of the Achuar people and have refused to clean up their toxic contamination,” said Atossa Soltani, executive director of Amazon Watch, a nonprofit group supporting the Achuar.

Similar case

Occidental won an initial victory late last year when U.S. District Court Judge Philip Gutierrez ruled that the case should be heard in Peru a U.S. ally where many believe the company will likely face a much smaller verdict.

But that decision is subject to appeal. And now, all eyes are turned to a similar case that’s been in the courts for years against San Ramon-based Chevron Corp.

The case stems from a lawsuit filed by the Amazon Defense Coalition in 1993 on behalf of 30,000 people against Texaco. Chevron inherited the liability when it bought Texaco in 2002.

The lawsuit alleges that Texaco’s oil field operations in Ecuador from the mid-1970s until 1992 harmed the environment and the health of nearby residents. The case was first filed against Texaco in New York, but was later sent to Ecuadorian courts.

Like Occidental, Chevron has argued that its legal responsibility for pollution ended when the Ecuadorian national oil company, Petroecuador, took control of the operations in 1992. But just last month an independent expert appointed by the Ecuadorian court found that Chevron should pay up to $16 billion in damages. The court itself has yet to rule.

Yet while there are several similarities to the Occidental case, there’s at least one major difference: the Ecuadorian government has taken a much more adversarial stance against the United States and multinational corporations than the Peruvian government. Indeed, Ecuador has nationalized much of its foreign oil operations, including Occidental’s.

Nonetheless, the case is part of a trend that started four years ago when El Segundo-based Unocal Corp. settled with workers from Myanmar who had sued the company alleging human rights violations while working on a natural gas pipeline. The workers claimed Unocal acquiesced to brutal treatment of the workers by the Myanmar military.

The lawsuit was brought in the U.S. under the Alien Tort Claims Act of 1789, one of the first times this law has been used by victims of alleged international human rights abuses. Unocal settled before the case was set to go to trial for undisclosed terms.

Then, last fall, jurors in Los Angeles ruled that Dole Food should pay former Nicaraguan field workers $5 million in damages for forcing them to use pesticides that caused sterility. Earlier this year, the damage awards were reduced on appeal to a total of $1.5 million.

Wall Street

Despite these trends, Wall Street has so far shown little concern over Occidental’s case.

“In the grand scheme of things, with Occidental’s market capitalization of $70 billion, this is a rather small issue,” said Pavel Molchanov, an analyst with St. Petersburg, Fl.-based Raymond James Financial Inc. “It’s probably more damaging from a PR perspective than from a bottom-line perspective.”

Molchanov added that the negative publicity would have to reach much higher levels comparable to what Exxon Mobil Corp. suffered after the Exxon Valdez tanker spill before Occidental would be compelled to act.

And even if substantial damages were awarded to the plaintiffs by the Peruvian court, Occidental has no assets remaining in Peru that the government can use to force Occidental to pay up.

Unless Occidental agreed to pay the damages, the plaintiffs would have to pursue their damage payments either in the U.S. or international courts, a process that could take years.

Of more concern to the oil industry, Molchanov said, is the possibility of more nationalizations of oil assets, similar to the action taken by Ecuador.

But Benson, the law professor, said that if either of the lawsuits against Chevron and Occidental result in enforceable multimillion dollar verdicts it would set the stage for other lawsuits in the developing world and that would dramatically raise the cost of doing business for oil companies.