Corporations, Human Rights and Public Interest Litigation:
to Establish an Institutional Baseline Order
Xu Hui 
Since the ending of cold war, the market mechanism has been verified by
theories and experience. As the basic matter of society today, the market
economy has become a universal value system and regime. Today, the role and
status of corporations, which are the principal part of the market economy, in
the economic development was exclusively owned by government in the past.
Furthermore, with the process of globalization, the developing role played by
corporations has been continuously reinforced by the globalizing economic
structure in the context where the market economy is emphasized, commercial
control is liberalized, state-owned enterprises are privatized, national barriers
are lifted, and world trade and investment are expanded. But there is an
inevitable concomitant problem as how to define and realize the protection of
human rights in the economic development in the context of market economy
and free trade. This problem has become the most prominent and prevalent
social problem in China’s economic transformation period.
I. Globalization, Transnational Corporations and Human Rights
As a new world economic structure, economic globalization h as promoted the
economic development and fortune increase worldwide. Within this structure,
the world has become a common market where not only the economy and
trade but also commodity circulation and capital flow have broken the
national and regional boundaries—capital has no boundary and the rules and
conventions of market economy have become the common value orientation of
economic and trade activities worldwide. However, the realization of market
economy and free trade is based on the purpose and means of capital
expansion, whereas the direct demand of capital expansion is to suppress the
labor, ‘the rapid changes of the economic environment and the
reestablishment
of
industry
and
corporation
induced
by
the
internationalization (globalization)……have brought about a more divided
labor market, decline of the manufacturing industry and rise of the service
sector, serious structural unemployment, and increase of part-time, unsafe and
low-paid employment.’ 1 Economic globalization has made human rights of

Assistant researcher with the Law Institute of the Chinese Academy of Social Science, executive
director of the Orient Public Interest Legal Aid Law Firm, LL.D.
1 H. Silver, ‘Social Exclusion and Social Solid arity: Three Paradigms,’ IILS Discussion Papers,
1
the labor a global problem, of which the key problem is human rights relating
to the transnational corporations.
The transnational corporations have played an important role in the
development of China’s economy. But the workers are working in the
condition exceeding work intensity, burden, physical ability, and man-hour in
many foreign-invested enterprises. Workers suffered casualty frequently
because of overtiredness. The China’s Labor Law is brazenly violated in some
transnational enterprises’ factories built in China, where the fundamental
human rights of the workers get no protection since the internationally
acknowledged labor rights, including the right of association, collective
negotiation, forbidding forced labor and the right to acceptable work
conditions such as the minimum wage and work safety, are completely ignored.
For example, from February, 1999 to May, 2002, the following facts are found
by an investigation of a shoemaking factory for Nike in Guangdong:
1. Media policy of Nike is that only media approved by Nike are
given access to the factory.
2. ADIDAS asked to cut off the order for many times after the bad
conditions in the factories were revealed.
3. Work pressure is one of the main reasons that caused the unexpected
deaths of 15 workingwomen.
4. The wage the factory paid to the workers is less than 33 cents which
is lower than local minimum wage and inadequate to support a family.
For example, after the completion of all the working procedures of
each pair of shoes such as ‘Model Jordon 5’, the wage paid to each
worker is less than $1.5 dollars, but the price of the shoes is over
$120 in US.
5. The trade union representatives are appointed by the factory and do
not represent the benefit of the workers.
6. With the workers working for 60 hours a week, the factory violates
the Labor Law because the Law provides that workers work only 40
hours a week.
7. The workers have no pension and insurance, and they would be
penniless if unemployed.
8. The factory only employ female workers aged from 18 to 25.
9. The factory uses monitors to watch over the workers.
10. The factory demands the workers to complete excessive workload
within the stated time so as to reduce the cost.
No.69, Geneva: ILO.
2
11. Some of the workers haven’t been back to hometown for more than 5
years.
12. The management personnel in this factory conduct sexual
harassments to female workers.
13. In the factory there is human rights management, which is carried out
by means of deducting the workers’ wages.
14. The factory still uses toluene in some areas.
15. The factory discriminates female workers. 2
Cases that many transnational corporations infringe the rights of the workers
(e.g. sweatshops in Latin America, child labor in India and Pakistan) are in
existence in China and other developing countries. The life and work
conditions of the workers in those factories are cruel from the angel of either
the law or human rights. Also, the international community cannot change
their plight by refusing the export of sweatshops’ products and imposing
pressure on the governments. And it is not a simple problem that can be solved
by defining corresponding laws and international standards. Many
international conventions request the signatory states to promulgate and
enforce laws that protect the labor rights in the labor and capital relation. For
example, Article 11 of the International Convention on the Elimination of All
Forms of Discrimination against Women states that ‘Any signatory states
should adopt more all proper measures to banish discriminations against
females in employment so as to ensure they have the same rights on the basis
of equal rights for both sexes.’ Article 22 of the International Covenant on
Civil and Political Rights prescribes that ‘Any person have the rights to
associate with others including organizing and attending trade unions to
protect their benefits and rights’. And Article 7 of the International Covenant
on Economic, Social and Cultural Rights requests to give all workers equal
pay and same pay for same job within the minimum limit without any
discrimination.
Moreover, the International Labor Organization has made many norms on
employment and work conditions and put forward the call of ‘decent work’.
‘Decent work’ is mainly to obtain rights of getting honorable and productive
employment under the conditions of freedom, justice, safety, and dignity. As a
kind of strategic target, ‘decent work’ includes the improvements of such four
aspects as rights, employment, social protection, and social dialogue. The
Announcement of Basic Principles and Rights of Employment passed in the
2
Li Qiang: Surveys of Foreign-invested Enterprises in China (Nike and Adidas Made in China) , in
Modern Culture Research on www.cul-studies.com.
3
International Labor Assembly in 1998 clearly prescribes that the four labor
rights should be protected in the background of economic globalization, i.e.
valid acknowledgement of the freedom of association and collective
negotiation, elimination of forced or compelled work in all forms, effective
abolishment of child labor, and elimination of discriminations in employment
and profession. For these fundamental rights as the international standards, all
the 174 member countries of the International Labor Organization (including
all the members of the WTO in fact) have undertaken to respect those
fundamental labor rights.
At present, a continuously expanding standard framework has been
established worldwide ranging from the Treaty of Human Rights to the
international laws of the International Labor Organization. And some parts
define the core content of the human rights of labor, which are clear and
absolute and must be obeyed immediately, e.g. the provision of forbidding
forced work. Others are extensive and flexible rules that have considerable
discretion. However, the provisions about the international standards of labor
human rights are fundamental and decisive, yet the protection of human rights
is unapparent in practice. An obvious reason is that international conventions
and international laws are aimed at the governments of the signatory countries,
but corporations are the principal part of market driven by benefit. Therefore,
it is unjustifiable to request corporations to implement the standard accepted
by specific governments
Therefore, the international community transforms this problem toward
corporations’ commercial ethics, asking them for self-discipline. In 1999, on
the issue of human rights of labor caused by economic globalization, Mr.
Annan, Secretary General of UN, proposed to implement ‘global agreement’,
appealing to the international enterprises for controlling their business
effectually; observing independently the international conventions about
commercial ethics, respecting fundamental human rights, working standards
and environment; and bearing more social responsibilities spontaneously, with
the development of the enterprises. On the 34 th annual convention of the
World Economic Forum, Mr. Annan admonished those giant enterprises:
‘Globalization will go on only on the basis of social support it depends
on. Global poverty leads to unstableness. The issue of injustice and
marginalization gets to a dangerous point. Things that I worry about are:
if global market cannot realize equally shared profits and responsible
behaviors, the global economy will become fragile and be easy to
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decline.
That is why I have urged you before to integrate the public good with
your own profit and to build and consolidate those social supports. I
emphasize particularly that your behaviors have direct and important
effects in the areas of human rights, working standards and
environment.’
However, it is doubtful that to what extent the commercial ethics on the basis
of self-consciousness and self-discipline can promote the implementation of
working standards and the protection of human rights. Surveys show that the
enterprises willing to observe the rules on human rights and to bear social
responsibilities are usually medium and small-sized ones without great
influence, whereas many transnational corporations adopt evasive attitude
toward this.
II. Private Enterprises, System Reform of State-owned Enterprises and
Human Rights
Private enterprises have played an important role in the establishment and
development of the market economy in China, but the situation of the human
rights of labor in these enterprises makes people worried. The man-hour
greatly exceeds the time stipulated by the Labor Law; workers often work
overtime and seldom have normal holidays; the working conditi ons and
environment are still unsatisfactory because of polluted environment, the
harmful materials beyond standard; and industrial accidents occurred
frequently for the workers are short of the necessary protection facilities and
equipments. For instance, there are nearly a thousand accidents in which
workers had their figures cut every year in thousands of hardware enterprises
in Yongkang, Zhejiang Province. And another example is a serious accident
that ‘a work girl has been fumed to death by chemical gl ues while making
bags’ at Baigou, Hebei Province. Without social insurance, workers have to
leave if wounded or disabled in an accident. Lucky workers can get only a
little economic compensation while the unlucky ones will become ‘disabled
persons’ forever, leaving the rest of life with great pressure to survive and
spiritual burden. The wages paid by some enterprise are obviously lower than
the average of the same industry. Some enterprises even deprive the workers
of salary by all kinds of compulsory punishment, and some do not pay workers
wages for a long time. And it is a common social phenomenon that private
enterprises owe and delay payment.
5
The life conditions of peasant workers have become a serious social problem
because most of the private enterprises employ peasant workers. Due to all
kinds of restrictive policies, there are discriminations against peasant workers
on various aspects such as employment, school entrance for their children,
guarantee and welfare, the functions of the civil services o f labor and social
security in the governments at all levels still focus on the state -owned and
collective enterprises, the peasant workers are excluded not only from the
civil service of labor and social security but also labor unions, with neither
reporting to civil services of labor for approval nor fulfilling the legal
responsibilities and obligations stipulated by the Labor Law; the private
enterprises can employ workers with signing any labor contract and fire them
at any moment, and this encouraged the illegal practices violating the human
rights in private enterprises. 3
System reform of the state-owned enterprises brought about impacts to the
protection for human rights of labors. After the system reform of minor
state-owned enterprises, the primary status of the employees changes to wage
earner or have the characters of employ in reality; large state -owned
enterprises transformed to stock companies, foreign businessmen and private
enterprisers become shareholders, state as the shareholder emphasize that the
proprietors are the representative of the property rights, the proprietors have
shares of the companies and implement the system of annual salary, the work
of general employees have the character of employ. In the system reform of
the state-owned enterprises, the numbers of workers out of job or unemployed
increased greatly because of the closure, stop, merger, transfer and bankruptcy
of the enterprises, it deprives the labor and work conditions of and the
workers out of job, the workwomen suffered the most in the tide of
unemployment. Furthermore, the workers of the enterprises stopped or half
stopped are out of job in reality, some enterprises adopt policies such as
internal retirement, termination of labor contracts and buying out the working
age with compensation, the workers have no guarantee for the basic rights and
the rights of employment. The situation of human rights of the labor colony
becomes worse, discriminations and exclusions against them have been
accepted, protected and even connived by laws, systems and social customs. 4
In the transition to market economy, as the relations of property rights have
3
Investigation Unit of China Labor Science Institute: Investigation on the Labor Relation in Private
Enterprises.
4 Hong Zhao-hui: On Poverty of Social Rights, in Modern China Research, vol.4, 2002.
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become multiplex and the relations of labor have been commercialized, the
bad life status of the labor reflects the extremity of the en terprises’ objectives
of pursuing money at the beginning of the development of the market
economy. In Yongkang, Zhejiang Province, for example, the serious accidents
such as cutting fingers can be avoided by installing a set of punch protector,
which costs no more than 2000 yuan, but the bosses of hardware enterprises
are unwilling to install such protectors on punches, rather than seeing nearly a
thousand workers have their figures cut every year.
III. Corporations, Consumers and Human Rights
During China’s economic transformation, the protection of consumers’ rights
and interests is also a sharp social problem, in which the problem of food
safety is particularly prominent. In recent years, events related to food safety
such as poison milk powder, poison rice, poison leeks, DDVP pickled
vegetables, ditch oil, and hair-made soy sauce have emerged one after another.
These events seriously endanger consumers’ right to health and right to life.
In Fuyang, Anhui Province, the shoddy milk powder on rural markets are
called ‘innutritious milk powder ’ because the fundamental nutrition it
contains, such as fat, protein, and carbohydrate, is less than one third of the
national standard. The babies who for a long term fed on the ‘innutritious milk
powder’, which contains terribly insufficient protein and cannot cater to the
needs of growing babies, suffered from ‘severe malnutrition symptom’ and
stopped growing during the period when they should have grown fastest. They
are called ‘big-headed babies’ by local people because of their short limbs,
thin and weak body, and particularly big head. The most serious case is that
some of them grew lighter and smaller and finally died of functional
exhaustion of heart, lungs and kidneys. Such ‘big-headed babies’ have been
found in 7 counties of Fuyang since 2003. Fuyang shoddy milk powder has led
to the death of 13 babies and nearly 200 babies suffered from severe
malnutrition symptom. In the countrywide examination following the
disclosure of Fuyang shoddy milk powder, numerous cases that unqualified
milk powder harmed babies were continually found in many areas.
Regarding the tragedies caused by shoddy milk powder, some people blame
consumers for ignorance and anxiety for cheap things. But compared with
highly-organized corporations, consumers apparently are a disadvantaged
group. Owing to unsymmetrical information, consumers are entirely incapable
of distinguishing genuine and good products from the questionable food that
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contains bacteria beyond standard and poison and harmful materials. And the
consequences may be a chronic and lifetime injury and even affect
generations.
The repeatedly emerged cases of food safety revealed that some illegal
manufacturers or sellers are preoccupied solely with making money for
themselves, regardless of others’ life and death. Newspapers also called on
enterprises for commercial conscience, strengthening of commercial ethics,
the establishment of honest and credible business, and a business partner who
coexists harmoniously and fairly with consumers in a win-win manner.
However, in order to ask the profit-driven enterprises to respect human rights
on the basis of self-profit, it does not suffice for appealing to ethics and
morals only. An institutional mechanism must exist to force corporations to
abide by the baseline of human rights including the right to life and the right
to health.
IV. Establishment of an External Mechanism
The problem which we are confronted with now is the crying need to establish
an effective mechanism so as to bind corporations’ behaviors, protect people
from corporations’ infringement of rights, and internalize the concern about
human rights through the exterior mechanism in the process of economic
development.
1. Government Intervention
On the matter of corporations and human rights, what people usually
expect most is government interference. Undoubtedly, protection of
human rights is government responsibility. In economic development,
however, more factors and more complicated ones are likely involved in
the establishment of the exterior standard mechanism of corporations.
As far as its very nature is concerned, market repels government
interference. According to Austrian School, market is a process. As a
process, market has its own logic. When interpreting ‘market logic’,
Friedman maintains that logically a controlled market should not be
called ‘market’. Therefore, to slacken control is the general tendency of
the development of modern market. The advocates of globalization hold
that, within an open market where control is slackened, transnational
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corporations’ activities in developing
people’s living standard and will, for a
human rights in developing countries as
on such specific right as labor right in a
countries contribute to raising
long term, improve the status of
a whole, however their influence
short term is.
Such opinion cannot be confirmed due to the lack of relevant positive
data at present. In respect of the market mechanism, however, Coase
Theorem of Property Right has already demonstrated clearly t hat the
function of government is to determine rights in the principle of fortune
maximum and make them tradable on market, instead of interfering
market, let alone making decision in place of market. Moreover,
government control also demands cost, which is astonishingly high
sometimes.
2. Market Mediation and Rule of Law
Market is based on self-profit. It is market principal part’s pursuit of
self-profit that pushes the fulfillment of social benefit in a more effective
way, about which the classic expression by Adam Smith is repeatedly
quoted. Moreover, the market mechanism naturally demands the
establishment of rule by law in order to overcome the uncertainty and to
realize foreseeability of transaction. For corporations, only in a society
of rule by law and when there exists reliable and foreseeable standard,
can corporations assess the benefits and losses on the basis of the scope
and extent of such limits so as to maximize their benefits. Rule by law is
of vital importance to corporations’ benefits and, accordingly, the
establishment of rule by law seems able to realize the protection of
human rights.
Actually, however, seen from the angle of human rights, only market
mediation and the establishment of rule by law do not suffice. The
economic assumption of win-win does not apply to the matter of
corporations and human rights. Being non-humanistic, market does not
enter the field of public interest. Just at thought of such economic
conception as competitive advantage or ‘hitchhike’, we can infer that
market-oriented resolution mechanism itself does not work. For example,
in terms of the protection of labor right, the collective negotiation does
not dramatically raise the transaction cost for an industry. However, if
other corporations do not abide by the agreement on negotiation, it is
impossible for an individual enterprise to fulfill an agreement
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automatically. Here, outside coercive power is a must.
Then, seen from market’s pushing the establishment of rule by law, can
the protection of human rights be realized? The elements of rule by law
advocated by market, such as independent courts, universally applicable
rules, and reasonable foreseeability, are likely to form a system that
oppresses human rights because reasonable and foreseeable universal
rules may deprive of some fundamental rights. For example, the
apartheid in South Africa coexists with an effectively functioning market
system and a judicial system controlled by the white. It is doubtless that
rule by law may lead to high degree of respect to human rights. But rule
by law is not the ultimate target and rule by law itself does not produce
legitimacy. Human rights are not necessarily secured even if rule by law
is implemented. Therefore, on the matter of corporations and human
rights, it is unwise to believe that market and rule by law can solve the
problem automatically.
3. Right-orientation and Result-orientation
In fact, the research into market, economic development, and
corporations and human rights inevitably involves the difference between
right-oriented approach and utilitarianism or result-oriented approach.
The classic view on this is that the focus is on the protection of rights and
on rights themselves, and rights are absolute and inalienable; and that
rights derive from human’s basic dignity and may not be sold for
economic development; and moreover, rights will promote economic
growth rather than the contrary. However, economists prefer to consider
questions by results. They consider the relation between means and
results in an instrumental style, i.e. whether policy or practice X may
lead to result Y. This resulting approach raises many substantial
questions because in real world there always is a competitive relation
between specific rights and specific economic targets, as one fal ls, the
other rises. This, in practice, blurs the difference between the two
approaches and costs rights absolute necessity.
So, what we are confronted with is neither to arouse entrepreneurs’
conscience, nor to transform corporations into international o r national
human rights agencies, which is not their mission. What we are to do is to
provide an effective mechanism for the protection of human rights of the
labors and consumers who are in disadvantaged position so as to
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determine corporations’ obligations and the means of fulfilling these
obligations and clarify the difference between right-orientation and
result-orientation.
V. Public Interest Litigation: a Possible Solution
Public interest litigation is a system which was extensively established alon g
with the launch of the Public Interest Act Movement in 1960s after U.S
underwent severe social changes. America’s numerous social systems were
facing challenges at that time, so various plans of reform attempts emerged
and many public interest legal institutions and similar advocating systems
were established, which launched activities for labors, the environment,
consumers, women, the colored, underage people and many similar public
interest. And the litigation thereby caused was called public interest l itigation.
Public interest litigation is not a separate form of litigation but one with
public interest lawyers and public interest corporations as the main body and
with disadvantaged groups as the client. Its characteristic is that it embodies a
whole set of principle system, values and targets advocated for the realization
of social justice. Public interest litigation is aimed to turn formal protection of
rights into effective realistic enjoyment. 5
The cases selected in public interest litigation are not against individual event
or transaction but against the conditions of social life and the roles of
large-scale organizations in deciding these conditions. Through establishing a
model of group representatives, it defends the rights of many individuals by
one lawsuit, dispels the social situations threatening the establishment of
major institutional value, and realizes the statutory authority for
disadvantaged groups. As a right-oriented mechanism that takes
disadvantaged groups as the client, public interest litigation is aimed to set up
a baseline order for society. Therefore, it may be an effective resolution to the
matter of corporations and human rights.
In this area, there are many successful cases in America. An example is the
case of American Legal Defense Fund v. Los Angeles Metropolitan
Transportation Company. In 1994, there were about 9 million people living in
an area of 4,000 square kilometers in Los Angeles County. Most residents
have to go a very long way to work, hospitals or activities. For the poor who
Xu Hui: ‘A Number of Basic Theoretical Questions abo ut Public Interest Litigation’, in ‘Journal of
Chinese Academy of Social Science’, Nov.13 t h , 2003.
5
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could not afford a car, they had to completely rely on the public transport
provided by the Metropolitan Transportation Company (hereafter referred to
as the Company) when they went out. Among the passengers of the Company,
94% were bus passengers, among which 80% were the colored whose average
domestic income was below US $15,000. Although nearly all the Company’s
passengers were within the transportation capacity of buses, the Company
invested 70% of its capital in the railway sector which mainly served the rich.
In the summer 1994, the Company declared that it would invest 10 million,
which was intended to be used for the bus sector, in the light railway and that
it would raise bus ticket price and would not sell the cheap monthly ticket in
order to invest more capital in the railway.
In the same year’s fall, along with a community organization that had helped
to set up the Association, the American Legal Defense Fund (hereafter
referred to as the Fund), who acted for the Bus Passengers Association
(hereafter referred to as the Association), prosecuted the Company for the
infringement of the equal protection right of bus passengers and for the
violation of Article six of the Federal Anti-discrimination Law. The Fund won
preliminary injunction by which the Company was ordered to set the price
fairly and restore the monthly ticket system. The litigation proceeded for
another 18 months during which 4 lawyers acted as attorney agents for the
plaintiff and collected a large number of evidence. The evidence demonstrated
apparently that the Company had applied a discriminative policy to the capital
distribution between buses and railways. This resulted in public opinion about
asking for a raise of the transportation capacity of buses. And Los Angeles
Times also called for more equal treatment in terms of the public
transportation policy.
In 1996, a consent decree was made for the Company and passengers,
satisfying the plaintiff ’s major claims including reducing and controlling the
bus ticket price and improving the condition of crowded buses. Also a work
unit which was composed of the representatives from the Association and the
Fund was established and in responsible for the implementation of the public
transport policy of Los Angeles County. The Fund closely watched the
enforcement of the consent decree and appeared in court several times for this.
Finally, the Company’s board of directors adopted a resolution in Oct. 1998
that 2095 new buses would be purchased in the coming 6 years. Soon after, the
Company’s head declared to the public that the Company would build a
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large-size high-speed network of public transport. 6
We can see from the above cases that public interest litigation is a systematic
project which discloses the infringement of human rights and provides victims
with protection. It includes a number of mechanisms such as litigation,
supervision, investigation and recording, research, public education, and
public advertisement. Despite the complicated relation between litigation and
the improvement of corporations’ behaviors, litigation is an effective means of
pushing corporations to seriously consider improving their behaviors.
Litigation cannot change the situation of all disadvantaged groups and solve
all the matters of protecting human rights, but the litigation and supervision
mechanism of public interest litigation can make corporations unable to
damage others’ rights and interests at no cost, by effectively keeping rights
corresponding with responsibilities and incurring human rights cost. It is
obvious that public interest litigation which is filed by public interest
organizations for purpose of asking for the improvement, implementation and
supervision of corporations’ behaviors is better and more efficient than
government interference and able to directly advance the equal position and
free choice of the principal part of market.
Market mechanism, economic development and globalization result directly in
the redistribution of powers between government and corporate entity. The
research into corporations, human rights and public interest litigation is a
dialogue concerning the necessity of the absoluteness of power and the human
rights as baseline, as well as a dialogue between utility and outcome, and
between calculation of benefit and cost-efficiency. Our era is confronted with
challenges from economic field and, more important, from institutional field.
We should apply a new mechanism and means of expression to making human
rights a real common concern of the society, through the establishment of
institutional baseline order.
6
Mary McClymont & Stephen Golub ed, Many Roads to Justice, the Ford Foundation, 2000,102.
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