Multinational Corporations and the Realisation of
Economic and Social Rights
Daniel Aguirre
1.0Introduction
Although the traditional view of human rights law concerns the relationship between
the state and the individual,1 increasing attention has been focused on private actors
and their effect on human rights.
Private actors have duties under international law.
This has been confirmed through judicial decisions and treaty interpretation, and
highlighted by academic commentators.2
Concerning the realisation of social and
economic rights, the Multinational Corporation (MNC)3 is the private actor that is
most relevant.
The MNC is an established and adaptable entity. The MNC benefits from the doctrine
of neo-liberal economics as well as the “home and host” state quagmire, which
combines with limited liability and decentralised decision-making to allow for double
standards in human rights promotion to take place internationally. Furthermore, the
polices of organisations such as the World Bank, the IMF, the OECD and the WTO,
 Irish Centre for human rights
1 Humphrey, John P., “The International Law of Human Rights in the Middle of the Twentieth Century,” in The
Present State of International Law and Other Essays, 75; International Law Association, 1973. Reprinted in
Lillich, Richard B., International Human Rights: Problems of Law, Policy and Practice, Boston, Little, Brown and
Comp., 1991 (2nd ed.) p.1
2
Paust, Jordan J., “The Other Side of Right:
Private Duties Under Human Rights Law,” in 5 Harvard Human
Rights Journal 1992, p.51
3
There are various combinations of two sets of terms to refer to this entity: transnational/multinational and
corporation/enterprise. The various combinations of these four terms are then abbreviated as MNCs, MNEs, TNCs
and TNEs.
See Muchlinski, Peter., Multinational Enterprises and the Law, Blackwell Publishers; (June 1995) at
12-15 (explaining history and content of the disagreements); Menno T. Kamminga & Saman Zia-Zarifi, Liability
of Multinational Corporations Under International Law: An Introduction, in Liability of Multinational
Corporations Under International Law 1, 2-4 (Menno T. Kamminga & Saman Zia-Zarifi eds., 2000) (comparing
varying usages of multinational, transnational, corporation and enterprise)
1
have allowed the MNC to gain a position of considerable influence on economic and
social agendas.
The corporate sector is extremely influential with national
governments. MNCs use this influence to coerce governments to become “more
4
competitive” by implementing national policy conducive to attracting international
business.
Often this means a decline in socio-economic reform.
This article considers the close relationship between the operations of multinational
corporations and the realisation of social and economic rights. 5 The MNCs’ uniquely
powerful and influential position within the international community gives rise to
contradictory capabilities. This position can be used to promote or undermine social
and economic rights, which will either enhance or inhibit the development of an
international community based on stable local communities. This article examines the
obligations of host nations to regulate the activities of all groups and individuals
within their jurisdiction in order to ensure an environment conducive to
socio-economic development and also outlines the obligations of MNCs as emerging
subjects of international human rights law.
Realistically, this article concedes that it makes little difference whether legal
obligations on the part of host governments or MNCs exist or not. With little or no
enforcement and implementation, international law relies heavily on moral and
voluntary reasons for compliance. With this in mind, the article will outline the
business case for the promotion of economic and social rights, appealing to the motive
of profit maximisation in order to demonstrate to international business the
importance of such reinvestment in the development of the societies in which they
conduct operations. This concession is made because it is imperative to harness the
unrivalled abilities of the international business community to promote change in the
international community towards the enjoyment of social and economic rights, and to
counter the negative impact of economic globalisation. MNCs must encourage and
at the very least, not inhibit, the fulfilment of international law commitments by host
national governments.
While MNCs have not replaced the State as the international power, the MNCs’
4
Voon, T., “Multinational Enterprises and State Sovereignty Under International Law” (1999) 21 Adelaide Law
Review 219, 234-41
5
MNCs have similarly strong effects on cultural rights, but this subject is not covered in the article.
2
activities hold considerable sway over the nation-state’s policy-making process. 6
This is not a new phenomenon, but is increasingly visible as the MNCs grow
disproportionately in terms of economic and political might.
The MNC must
recognize their influence over domestic policy in the developing world and take a
positive approach to a rights based development by contributing to instead of
weakening the governments ability to promote economic, social and cultural rights.
The vast economic and geographic expansion of MNCs has presented a plethora of
difficulties for regulation and accountability.
Famously, MNCs have now become
larger economies than many states. One outstanding example is that of General
Motors, which is a larger economy than all but seven nations.7
This economic clout
is reflected across the board and the trend is towards even more expansion. The last
ten years have seen unprecedented growth of multinationals.
In 1991, three MNCs
were among the top 28 economies of the world, compared to 15 in 2000.8
Increasing MNC involvement in the public domain has focused the public’s attention
on their activities. The public, who are the shareholders, employees, consumers and
local populations, suffer the environmental and social impact of the operations of
MNCs. There is growing support for regulation of MNC responsibilities within the
new role that they have assumed. The world order is now determined by economic
deregulation and the minimisation of governmental responsibilities in the public
domain. This has accentuated the need for regulation as the influence of private
organisations is growing, in order to control policies and fill the gap.
This extends to
the traditionally governmental realms of social and political policy, areas in which
MNCs hold particular sway.
Economic Globalisation and the race to be competitive can lead to a reduction of the
state’s capacity to comply with human rights obligations, particularly concerning
economic, social, and cultural rights.9 To improve competitiveness, the World Bank
6
Addo, Michael K., (ed.) Human Rights Standards and the Responsibility of Transnational Corporations.
Kluwer Law International, 1999 p.4
7
Only the economies of the United States, Germany, Italy, the United Kingdom, Japan, France and the
Netherlands are larger than General Motors. See Global Policy Forum, Comparison of Revenues Among States
and TNCs, at http://www.globalpolicy.org/socecon/tncstat2.htm
8
Nations v. Corporations, at http://www.ratical.com/corporations/NvC. html
9
These include, for example, trade union freedoms, the right to work, and the right to social security. It also may
have a disproportionate effect on minorities. See Statement by the United Nations Committee on Economic, Social
3
and IMF impose economic "reform" that results in deregulation, privatisation, and
export-oriented production. States feel compelled to ease labour standards, modify
tax regulations, and relax other standards to attract foreign investment. 10 This
structural adjustment has led to a significant erosion of human rights standards and
the ability of countries to independently determine their development priorities.11
Cooperation internationally and from non-state actors is needed in order to ensure the
fulfilment of basic social and economic rights.
The narrow traditional view of international human rights law is being increasingly
challenged as unrealistic in relation to the world in which people live. It is not viable
to merely dismiss human rights law responsibility for corporations simply because it
has not been directly codified within international law and was not traditionally
envisioned. The international community and its laws must adapt to a dynamic
world and create regulation that protects all sectors of society. The reasons for this
challenge are twofold.
Firstly, the effects of human rights violations upon the
individual are the same whether perpetrated by states or private actors.
Secondly, a
narrow application of human rights law is not conducive to furthering the protection
of human rights, and subtracts from its credibility.12
Nevertheless, it is imperative
that by extending the scope of human rights law to private actors such as MNCs, the
primary responsibility of states for human rights law is not diminished.
2.0 Problems with International Law in relation to MNCs
The international legal system seems completely inadequate to regulate powerful
non-state actors, such as MNCs, as nations battle over sovereignty and are reluctant to
give up power to international regulatory bodies, caring more for the bottom line of
economic growth than human rights.
MNCs consist of international entities beyond national jurisdictions in terms of
economic resources and decision-making responsibility. This legal conundrum has
been obvious for at least thirty years, yet there have been only minor improvements in
and Cultural Rights, Globalization and Economic, Social and Cultural Rights (May, 1998),
ahttp://www.unhchr.ch/tbs/doc.nsf/385c2adt . . . a?OpenDocument&Highlight=O, globalization
10
See Deborah Spar & David Yoffie, “Multinational Enterprises and the Prospects for Justice,” 52 J. INT'L AFF.
557, 557 (1999).
11
Teeple, Gary.
12Addo.
Supra.
Globalisation and the Decline of Social Reform.
note 6,
p.239
4
Garamond Press, 2000 p.87
accountability. 13
The outmoded regulation system and the dynamic MNCs’
considerable economic and political power combine to create a problematical
regulatory task. The MNC has transcended national legal systems and ignored the
feeble international system to make the imposition of human rights norms nearly
impossible.
The negative impact that the phenomenon of economic globalisation has had on state
regulation and peoples’ lives is becoming apparent. The move to more “competitive
nations” often means moving to states who have reduced regulation or lower tax
incentives in order to attract the fickle eye of multinational corporations. This in
turn means other countries must regulate less in order to attract investment and
employment. It has become impossible for nations, even if they are willing, to impose
any obligations upon MNCs to contribute to the communities from which they are
extracting resources and making vast profits. Any attempt to do so would reduce
that nation’s competitiveness. The proceeds of economic development are thus denied
to host national governments which are instead extracted as profits for foreign
investors.
The nation has been weakened in terms of managing human rights
obligations and the first to be abandoned are social, economic and cultural rights, as
the original provision of these rights directly costs money.
The traditional approach to human rights law dictates that they protect the individual
against the state. This doctrine was developed in a time when international business
was less prominent and international economic interdependence was far less
important.
Since international business is now mobile enough to avoid stringent
national regulations,14 or influential enough to persuade against the adoption of such
regulation, international law must move beyond the traditional view towards
regulating all of the organs of the international community.
This historical bias of international law concerning the regulation of interstate
relations has begun to give way to emerging trends conferring rights and duties on
13
Over thirty years ago, Professor Vagts pointed out that "the present legal framework has no comfortable, tidy
receptacle for such an institution," producing a tension between the legal theory of independent corporate units,
each "operating as a native within the country of its incorporation," and the reality of the "economic
interdependence" of the multinational corporation. Vagts, Detlev F. “The Multinational Enterprise: A New
Challenge for Transnational Law,” 83 Harvard Law Revue
14
739, at 743.
Blumberg, Phillip I., The Multinational Challenge to Corporation Law: The Search for a New Corporate
Personality
(1993) p.205
5
non-state actors such as supranational institutions 15 and other actors, including
insurgent or rebel groups, 16 individuals and corporations. 17
This new type of
non-state actor liability and responsibility under international law is emerging in two
ways. The first entails indirect accountability through the horizontal application of
international law and the other through the application of international law directly to
the non-state actors in question.
The lethargic response regarding social, economic and cultural rights by the
international community has been a failure in its duty to enact laws to regulate for the
good of humanity as a whole. This is in part due to the fact that law-makers consider
this “globalisation” phenomena to be a socio-economic problem that they are not
capable of dealing with.
Politicians are equally loath to alter the status quo, as they
fear discouraging profit-maximisation and growth, and thereby impairing their
nation’s economic competitiveness.
Social and economic rights generally imply
positive obligations on the part of the state and private actors such as MNCs, which
cost money, and therefore reduce profit maximization. Furthermore, multinational
financing, operations and joint-ventures have combined with decreasing national
control over international commerce to weaken corporation-state relations, thereby
making regulation even more difficult.18
Until recently, this gap in international law was increasingly widening.
As both
cause and effect of growing corporate economic power, the international and domestic
political systems have increasingly relinquished their control over business. Economic
power holds political influence. The MNCs dominate national planning on issues
such as trade, patent and economic policy. While governments remain divided by
conflicting interests, such as competitiveness versus social reform,19 MNCs have a
clear concise purpose of profit maximization, which speaks loudly and clearly to
15
Reparations for Injuries Case ICJ Reports, 1949, pp.149
16
For Example, Common Article 3 to the Geneva Conventions enjoins insurgent groups and state armies to
protect prisoners and to respect prohibitions relating to attacks of civilians, hostage taking, terrorist attacksor the
use of starvation as a mode of combat.
The Optional Protocal to the Convention on the Rights of the Child on the
Involvement of Children in Armed Conflict, adopted by the UN General Assembly on November 16 2000 also
places an obligation on armed groups including rebel forces to prevent children from participating in armed
conflict.
It also prohibits the recruitment of children into their forces.
17
For example, Autronic AG v. Switzerland, Eur. Ct. H.R. Series A. 178 (1990); 12 (1990) E.H.R.R. 485, para 47
18
Claudio Grossman & Daniel D. Bradlow, “Are We Being Propelled Towards a People-Centered Transnational
Legal Order?”
19Vagts.
9 American University Journal of International
Supra note 13, p. 757
6
Law & Policy 1, 8 (1993).
influential members of national populations.
Fortunately, international and national laws have begun to adapt in order to regulate
effectively in an increasingly dynamic world.
There now exists a wealth of
international regulation that reflects a move away from the traditionalist view of
international law, whereby actions within one state’s jurisdiction are subject to
domestic sovereignty only. 20
Internationally, these include GATT, Draft MAI,
Anti-corruption, Environmental Regulations, the International Criminal Court and
advances concerning individual responsibility for war crimes and crimes against
humanity in the international tribunals for Yugoslavia and Rwanda.
Regulations
within domestic systems have advanced as well with the adaptation of the Alien Tort
Claims Act in the US and the relaxation of Forum Non Conveniens rules in Great
Britain, which allow for MNCs to be held liable for actions of their subsidiaries
committed abroad. However, the gap in international law regarding MNCs, as noted
by a plethora of scholars, clearly still exists.
It is time to move towards solutions.
Solutions are imperative in this regard due to the enormous impact of MNCs on the
enjoyment of economic, social and cultural rights.
3.0 Impact of MNCs’ Operations on Economic and Social Rights
The exploitation of developing countries by MNCs has become intolerable. The
international economic system that emphasizes the free market philosophy,
privatisation and a reduction of the public sector is preventing many poor countries
from enacting a just and equitable development based on human rights.
MNCs have
massive budgets, are driven essentially by profit, use the smallest number of workers
possible, move from jurisdiction to jurisdiction with relative ease, import labour to the
detriment of local labour, and they do not always take into account the social needs of
the country in which they are operating. This impacts directly on the enjoyment of
socio-economic rights, which need particular aid in promotion and observance. As a
result of these factors and many other international economic issues such as
insufficient technology transfer, lack of foreign investment and the brain drain, many
developing countries require regulation within the framework of the United Nations in
order to respond effectively to the situation.21
20
Addo. Supra note 6 p.243
21
United Nations, COMMISSION ON HUMAN RIGHTS, Sub-Commission on the Promotion and Protection of
Human Rights: Fifty-fourth session.
Agenda item 4 , UN Doc. E/CN.4/Sub.2/2002/13, 15 August 2002. p.3
para.12
7
Economic, Social and Cultural rights have habitually taken a back seat to civil and
political rights.
Despite this categorization of human rights into civil/political and
social/cultural/economic, all human rights are interdependent and indivisible as the
United Nations consistently stresses.22
However, economic and social rights are
particularly relevant during development.
Foreign Direct Investment through MNC
operations has become the most important source of funds for development but has
limited the ability of national governments to fulfil their obligations.
The significance of social and economic rights to the operations of MNCs is clear.
These private actors encounter and occasionally violate ESCR rights during the
course of their operations.23
However, the failure to provide for the realisation of
social and economic rights often initiates a chain of events that cause problems with
civil and political rights, as they are interdependent.24
One example is the crisis in
Nigeria in the mid-nineties. Shell’s failure to enact positive measures promoting
social and economic rights and its complicity with the Nigerian government in failing
to promote the right to a safe environment, the right to food,25 to self-determination,
to minority rights,26 to adequate health,27 to education28, to an adequate standard of
living (including adequate social services),29 to work,30 to development, to freedom
of association,31 and freedom from discrimination,32 brought about social conditions
22
“All human rights are universal, indivisible, interdependent and interrelated.
The international community
must treat human rights globally in a fair and equal manner, on the same footing, and with the same emphasis.
While the significance of national and regional particularities and various historical, cultural and religious
backgrounds must be borne in mind, it is the duty of States, regardless of their political economic and cultural
systems, to promote and protect all human rights and fundamental freedoms.”
The Vienna Convention and
Program of Action, Section I, para. 5 The United Nations World Conference on Human Rights: Vienna Declaration
and Programme of Action, adopted June 25, 1993.
23
Addo
24
UN Economic and Social Council, Commission on Human Rights.
Supra. Note 6,
p.241
UN Doc. E/CN.4/Sub.2/1999/9 p.5 para.21
Available at www.unhcr.ch
25
International Covenant on Economic, Social and Cultural Rights, Reprinted in Steiner and Alston (eds.)
International Human Rights in Context. Claredon Press, Oxford, 1996 p. 1175, Art. 11 (ICESCR)
26
Guaranteed by the Universal Declaration of Human Rights, G.A. Res. 217 A (III), Dec. 10, 1948, reprinted in
Steiner and Alston (eds.) Ibid.
p.1156 art. 15(UDHR); International
Reprinted in Steiner and Alston (eds.) Ibid.
Covenant on Civil and Political Rights,
p. 1172, Art. 16 (ICCPR); ICSECR Art. 15
27
ICESCR, Art.12
28
Guaranteed by the UDHR Article 26; ICSECR article 13 and 14
29
Guaranteed by the UDHR Article 25; ICSECR article 11
30
Guaranteed by the UDHR Article 23; ICSECR article 6
31
Guaranteed by the UDHR Article 20; ICSECR article 20
8
that were not in line with the amount of profit that was being made through the
extraction of resources from the local community’s land.
These “social
circumstances” are actually legal circumstances because the Nigerian government had
ratified and is legally bound by the International Covenant on Civil and Political
Rights, the International Covenant on Social, Economic and Cultural Rights as well as
the African Charter of Human and Peoples Rights, thus placing a legal obligation to
prevent this scenario.33
In response to these unfair and inadequate circumstances, the local population
attempted to exercise their civil and political rights.
These included freedom of
opinion, association and expression, 34 and their right to engage in political
participation. 35
These civil and political rights were denied by the Nigerian
government, using techniques that further desecrated human rights law by violating
the right to personal security, freedom from torture,36 arbitrary arrest, unfair trials,
and unlawful killing, which caused international outrage. 37
Unfortunately, the
world’s focus on the violations of civil and political rights overlooked the root cause
of these violations, namely the failure to provide for the realisation of social,
economic and cultural rights, which Shell, a private actor, was in a uniquely effective
position to do.
The international community has a historically based emphasis on civil and political
rights despite the fact that all human rights are universal and interdependent.
The
international community was quick to blame the Nigerian government for not
respecting peoples’ civil and political rights instead of condemning the government
and Shell for environmental degradation, denial of development and lack of revenue
filtering back to the local community from natural resource exploitation. All of the
human rights organisations addressed civil and political rights, including Amnesty
International and Human Rights Watch.
38
32
Guaranteed by Article 2(2) of the UDHR, Article 2(2) of the ICESCR, and Articles 2(1) & 3 of the ICCPR
33
Addo. Supra note 6 p.241
34
Guaranteed by the UDHR Articles 18 and 19; ICCPR Articles 18 and 19
35
Guaranteed by the UDHR Article 21; ICCPR Articles 25
36
Guaranteed by the UDHR Articles 3 and 4; ICCPR Articles 6 and 7
37
Amnesty International Nigeria: The Ogoni Trials and Detentions, AI Index: AFR 44/20/95, 15 September 1995;
Amnesty International, Nigeria: A Travesty of Justice. Secret Treason Trials and Other Concerns, AI Index:
AFR 33/23/95, 26 October, 1995
38
Addo Supra note 6, p.243 FIAN addressed the Ogoni’s right to food, and Environmental Organisations
addressed issues of the environmental degradation of the land.
9
Multinational corporations directly inhibit the development of ESCR when they
deliberately avoid or reduce the level of payments to local communities through
taxation. It is common knowledge that MNCs have teams of accountants hired on
the basis of accomplishing this very objective.
Whether through semi-legal
accounting strategies or by using their tremendous influence to convince host nations
to reduce their tax burden, MNCs limit the enjoyment of ESCR for millions of people
in the developing world.
The repudiation of social, cultural and economic rights caused the slide towards
violence, miscarriage of justice and killing.
MNCs are directly related to the
enjoyment of the rights enshrined in the ICESCR. The chain reaction caused by the
denial of these rights results in wider violations of human rights including the civil
and political rights enshrined in the ICCPR.
In turn, the consequence can be
political turmoil and instability, which is clearly injurious or even fatal to the local
business operations of MNCs. In the case of Shell, they have been forced to reduce
operations to a bare minimum, thereby forfeiting vast profits.
However, it does not
have to be like this. MNCS are in a unique position to promote the realisation of all
human rights and are especially able to promote a foundation of social, economic and
cultural rights.
This can provide the stability they require in order to conduct
operations.
4.0 MNC Unique position for Promotion of Economic and Social
Rights
While there is no doubt that the diplomacy and influence of the international
community is fundamental to changing corrupt regimes, MNCs are in a unique
position to promote change and persuade governments to abide by their human rights
obligations. MNCs can and should enact positive influences resulting from self
interest and the pursuit of profits, for example, increasing employment, increasing
available capital, technology, knowledge, improved management and positive
contributions to labour relations and administration. The standards that MNCs bring
to developing nations should be higher than the incumbent ones.
MNCs can further pressure the governments of such nations by threatening to
withdraw their operations. The world has witnessed this powerful negotiation
technique as many nations have been forced to alter national policy-making in order
10
to privatise deregulate, create tax incentives, lower operating costs and provide an
international system conducive to corporate profit maximisation, and to be more
“competitive.”
If governments, even established developed world democracies, fail
to comply with corporate demands they risk the withdrawal of corporate activity,
which has become increasingly mobile. This results in increased unemployment and
economic woes, which can mean political suicide.
In this way, corporations and
their benefactors have demonstrated their immense ability to influence and even
control nations and the international community.
With this sort of power, capable of
altering the world’s economic and political systems, it must be possible to promote
human rights in general.
In particular, the promotion of social and economic rights is within the MNCs reach.
They are present on the ground in developing nations’ communities and engaged with
the people who live there. The MNCs are often extracting massive profits either
from natural or human resources.
In this situation, an obvious moral duty exists to
reinvest some of these profits in order to construct a decent life for the local
communities. Also, local governments are often unable or unwilling to invest in
social and economic rights, which are the foundation of stability. The MNC is
therefore often the only entity able to contribute to this stability building process
resulting from the realisation of social and economic rights by propping up local
governments financially and encouraging them to use this power in line with their
commitments under international law. While this is not the traditional role of the
MNC, this article argues that there exists a sound business case for this sort of
reinvestment in social and economic rights, as it creates a stable and content society,
which is not likely to descend into political instability and violence that is
significantly detrimental to MNC activity.
Furthermore, the revealing spotlight of a developed civil society, which should
accompany MNCs’ operations in the developing world, can force changes in the
developing “host” nations. The exploitation by local producers of workers can go
unnoticed, but if high profile MNCs engage in such activities, NGOs and activist
groups will sound alarm bells around the world.
MNCs engaged in these societies
have the opportunity to demand adherence to human rights, which local governments
will have little choice but to comply with.
5.0 Responsibility for Economic and Social Rights
11
It is important to note that the primary responsibility for this development rests with
the national governments. However, for various reasons, such as competitiveness,
host governments are unable or unwilling to do so. MNCs, who have tremendous
influence with these governments, can use this ability to induce “host” states to abide
by their duties under international law instead of inducing them to merely deregulate,
and conform to the dominant international economic system of the day.
5.1 Obligation of Governments to Regulate MNCs in accordance with International
Law through Horizontal Application
The Chairperson of the sessional working group on the working methods and
39
activities of transnational corporations
stressed the relationship between
transnational corporations and the State. He recalled the fact that the International
Covenants on Human Rights and the Declaration on the Right to Development
established that States are the primary duty bearers of human rights and that, as a
consequence, each State needed to regulate foreign investment within its jurisdiction.
It is imperative to search for methods of holding MNCs accountable and to regulate
their operations so as to benefit local communities as well as the international
economic system.
In this regard, the strategy involves existing international
regulation implemented and enforced either nationally or internationally.
Since little
political will exists for international regulation, the domestic regulation is paramount.
The international covenants on civil and political rights as well as the social,
economic and cultural rights are ratified by the majority of states,40 and impose an
obligation on these governments to regulate the conduct of MNCs within their
jurisdiction in order to uphold the principles contained within them.
With respect to the implementation of economic, social, and cultural rights, the
Maastricht Guidelines on Violations of Economic, Social and Cultural Rights inform
that a state is responsible to ensure that transnational corporations do not deprive
individuals of these rights.41
39
The UN Committee on Economic Social and Cultural
United Nations, COMMISSION ON HUMAN RIGHTS, Sub-Commission on the Promotion and Protection of
Human Rights: Fifty-fourth session.
Agenda item 4
UN Doc. E/CN.4/Sub.2/2002/13, 15 August 2002. p.3
para.12
40146
41
States have ratified the ICESCR as of May 2, 2003. See, http://www.unhchr.ch/pdf/report.pdf
Maastricht Guidelines on Violations of Economic, Social and Cultural Rights, Adopted in Maastricht, January
1997, para 18
12
Rights is clear that the realm of State responsibility extends not only to the actions of
agents of the State, but also to third parties over whom the State has or should have
International law puts the responsibility on States to guarantee that MNCs’
control.42
operations do not violate human rights law within their own territory. The duty of
governments is clearly expressed in the preamble and first article of the International
Covenant on Economic, Social and Cultural Rights. The Preamble affirms that all
parties to the Covenant agree to the principles:
Recognizing that, in accordance with the Universal Declaration of Human
Rights, the ideal of free human beings enjoying freedom from fear and want
can only be achieved if conditions are created whereby everyone may enjoy
his economic, social and cultural rights, as well as his civil and political rights.
Considering the obligation of states under the Charter of the United Nations to
promote universal respect for, and observance of, human rights and freedoms
(…)
The relationship between this governmental duty to promote human rights and the
regulation of private actors such as MNCs within their sphere is elucidated in Article
1 of the Covenant.
MNCs often undermine local communities’ development of
social economic and cultural rights by exploiting local resources without returning
adequate percentages of the profit. Clearly, according to Article 1, the government is
obliged to temper this situation.
Article 1 of the ICSECR states:
1. All peoples have the right to self-determination. By virtue of that
right they freely determine their political status and freely pursue their
economic, social and cultural development.
2. All peoples may, for their own ends, freely dispose of their natural
wealth and resources without prejudice to any obligations arising out
of international economic cooperation, based upon the principle of
mutual benefit, and international law.
In no case may a people be
deprived of its own means of subsistence.
Again, the case of Shell and the Nigerian government concerning the plight
of the
Ogoni people provides an example of ESCR violation. The Nigerian government’s
failure to protect the population from private actors and exploitation resulting in
42
Craven, Mathew, the International Covenant on Economic, Social and Cultural Rights: A Perspective on its
Development (Oxford, Claredon Press) 1995, p.113
13
deprivation of social and economic rights was challenged before the African
Commission of Human and Peoples Rights (The Commission.)
In the case of the
Social and Economic Rights Action Centre and the Centre for Economic and Social
Rights v. Nigeria,43 the Commission tendered a landmark ruling, which represents a
step forward in the promotion of social and economic rights in Africa.
The case
followed the killing of Ken Saro-Wiwa and eight members of the Movement for the
Survival of the Ogoni People (MOSOP) for the alleged murder of four other youths.44
The plaintiffs’ complaints included discrimination, violations of the right to property,
health, to family and the freedom to dispose of their wealth and resources, as well as
degradation of the environment causing health problems to the Ogoni; and condoning
and facilitating violations of human rights by the Nigerian government against the
Ogoni.
The allegation was that the Nigerian government had failed to provide for
the realisation of these rights, including social and economic rights.
The Commission came to the important conclusion that the Nigerian government was
in breach of Article 16, which holds that every individual has the right to enjoy the
best attainable state of physical and mental health and that State parties to the present
Charter shall take necessary measures to protect the health of their people and to
ensure that they receive medical attention when they are sick, and Article 24, which
states that all peoples shall have the right to a general satisfactory environment
favourable to their development, of the African Charter,45 and it ruled that:
These rights recognise the importance of a clean and safe environment that is
closely linked to economic and social rights in so far as the environment
affects the quality of life and the safety of the individual.46
Importantly, Nigeria was held to be in violation of Article 21 of the Charter. This
Article states that:
1. All peoples shall freely dispose of their wealth and natural resources.
This right shall be exercised in the exclusive interest of the people.
In no
43
Social and Economic Rights Action Center and the Center for Economic and Social Rights v. Nigeria 155/96
44
The charges and trial against the members of MOSOP are widely considered to be contrary to due process and a
cover-up to implicate them for standing up to the Nigerian government and Shell’s exploitation of the environment
and the Ogoni people.
45
Human Rights Watch, www.hrw.org/reports/1999/nigeria/Nigew991-08.htm
African Charter on Human and Peoples’ Rights (ACHR), adopted June 26, 1981, O.A.U. Doc.CAB/LEG/67/3
Rev.5, reprinted in I.L.M. 58
46Nigeria
155/96, para. 51
14
case shall a people be deprived of it.
2. In case of spoliation the dispossessed people shall have the right to the
lawful recovery of its property as well as to adequate compensation.
3. The free disposal of wealth and natural resources shall be exercised
without prejudice to the obligation of promoting international economic
cooperation based on mutual respect, equitable exchange and the
principles of international law.
4. States Parties to the present Charter shall individually and collectively
exercise the right to free disposal of their wealth and natural resources with
a view to strengthening African unity and solidarity.
5. States Party to the present Charter shall undertake to eliminate all forms of
economic exploitation particularly that practised by international
monopolies so as to enable their peoples to fully benefit from the
advantages derived from their national resources.47
The content of Article 21 of the African Charter clearly resembles the intentions of
Article 1 of the ICSECR. This jurisprudence displays the clear linkage between the
operations of multinational corporations, which can deny the local population its
ability to freely dispose of its natural resources, and the denial of social and economic
rights that can result.
Furthermore, it indicates that a government can be held
accountable under international law for failing to ensure that private actors and state
actors together provide a setting in which social and economic rights can be achieved.
To prove this substantive law connection, the plaintiffs cited the cases of Union des
Jeunes Avocats/Chad, 48 Velasquez Rodriguez v. Honduras 49 and X and Y v.
Netherlands.50 Significantly, the plaintiffs cited international law in order to prove
that Nigeria violated its duty, not only to protect citizens through appropriate
legislation and effective enforcement, but also by failing to protect them from
damaging acts done by private parties contrary to the minimum conduct expected of
governments and therefore contrary to the African Charter.51
The ICESCR includes measures that imply international obligations as well as
47
Art. 21 ACHR
48
Union des Jeunes Avocats/ChadCommunication 74/92
49Velasquez
Rodriguez v. Honduras, Inter-American Court of Human Rights, Judgement of July 19, 1988, Series
C, No. 4
50
X and Y v. the Netherlands , 91 ECHR (1985) (Ser. A) at 32
51
Nigeria 155/96, para. 57-8
15
domestic obligations.
In Article 2, the Covenant states that:
Each State Party to the present Covenant agrees to take steps individually and
through international assistance and cooperation, especially economic and
technical, to the maximum of its available resources, with a view to achieving
progressively the full realization of the rights recognized in the present
covenant by all appropriate means, including particularly the adoption of
legislative measures.
This indicates that governments are obligated to seek binding regulation promoting
the realization of social, economic and cultural rights on an international basis.
Considering the close proximity in which MNCs interact with the attainment of these
rights, it seems appropriate that they would be included in such international technical
and economical cooperation.
Taken together, this analysis indicates that governments must take action to uphold,
protect and promote social and economic rights.
This implies creating an
environment conducive to their fulfilment, which necessitates regulating the activities
of private parties that affect the enjoyment of these rights in order to ensure the
development of society with social, economic and cultural rights as the foundation.
If this regulation is achieved, it will go a long way towards realising such ideals.
5.2 International Law as binding on Non-State Actors such as Legal Persons:
In addition to bestowing the aforementioned responsibilities on national governments
for the regulation of MNCs and their activities affecting social and economic rights,
the international community has devised adequate human rights norms applicable
directly to corporations.
While enforcement of these norms, the other pillar of
regulation, remains problematic, the existence of these human rights standards
represents an important foundation for the corporate accountability movement to build
upon. The view that international law binds states only is incorrect and outdated by
developments in international law.
In the past, international law has prohibited
piracy and slave trading, which were committed by non-state actors. Today, human
rights law is expanding to take powerful MNCs into its scope.
It is widely accepted that there are international minimum standards for the rights in
16
this field that are justiciable.52 In fact, considerable international and US precedents
indicate that corporations are potentially liable for violations of international law,
particularly when their actions constitute jus cogens violations. Although this does
not usually imply ESCR, the evolutionary nature of the law and the rise in
prominence of ESCR indicates that liability will eventually reach this group of rights.
Moreover, MNCs would already have policies that conform to such standards but
would not conceptualise these as complying with human rights law. This may cause
difficulty for some MNCs but obeying human rights law is a legal duty.
The
following will analyse the direct responsibility for international law of MNCs by
examining international
conventions,
treaties,
tribunal
precedents
and US
jurisprudence under the Alien Tort Claims Act (ATCA).
5.2.1 Multinational Declarations, Charters, Conventions and Treaties
All individuals within the international community must uphold economic, social, and
cultural rights. The preamble to the ICESCR determines that, “the individual, having
duties to other individuals and to the community to which he belongs, is under a
responsibility to strive for the promotion and observance of the rights recognised in
the present covenant.”53
Therefore, all individuals, including legal persons such as
MNCs, have the duty to abide by this covenant and promote its fulfilment.
Furthermore, the covenant also contains express recognition that it cannot be
interpreted to imply for any “group or person” any right to destroy or limit the rights
of others to a greater extent than is provided.54
The Committee on Economic, Social
and Cultural Rights has stated in its general comments that non-state actors such as
those within the private business sector have responsibilities and obligations for the
fulfilment of these rights.55
This line of reasoning seems to indicate a duty of
non-state actors to go beyond respect for the law and into the realm of positive
obligations.
Perhaps the most comprehensive explanation of who has human rights responsibility
comes in the preamble of the Universal Declaration of Human Rights itself.
52
That is:
Addo, Michael K., “Justiciability Re-examined,” in Beddard and Hill (eds.), Economic, Social and Cultural
Rights.
Progress and Achievement (Macmillan 1992), p.93
53
ICESCR., Preamble.
54
ICESCR, Art. 5 (1)
55
For example, para 20 of the General Comment No. 12 “the Right to Adequate Food” (Art.11) 12 May 1999;
Para 42 of General Comment No. 14 “The Right to the Highest Attainable Standard of Health” (Art. 12) 4 July
2000
17
The General Assembly proclaims this Universal Declaration of Human Rights
as a common standard of achievement for all peoples and all nations, to the
end that every individual and every organ of society, keeping this Declaration
constantly in mind, shall strive by teaching and education to promote respect
for these rights and freedoms and by progressive measures, national and
international, to secure their universal and effective recognition and
observance, both among the peoples of Member States themselves and among
the peoples of territories under their jurisdiction.56
There can be little or no doubt that this statement applies to corporations.
57
MNCs’ operations are conducted within a complex web of conventions and treaties
that make up international law. MNCs cannot be selectively subject to certain
international laws and not others. Therefore they must respect all basic human rights
principles. The United Nations has set many rules for corporations over the years,
thereby indicating that they are indeed subject to international law.
For example,
corporations had to follow certain rules for trading with Iraq during sanctions,58 and
were forbidden from trading with South Africa during the Apartheid.59
Several international declarations support the concept of private-actor responsibility
regarding the realisation of social and economic rights.
For example, the UN
Declaration on the Elimination of All Forms of Racial Discrimination,60 the Rio
56
Preamble, UDHR, G.A. Res. 217 A (III), Dec. 10, 1948
57
“[e]very individual includes juridical persons. Every individual and every
organ of society excludes no one, no company, no market, no cyberspace. The Universal
Declaration applies to them all.” Louis Henkin, “The Universal Declaration at 50 and the
Challenge of Global Markets,” 25 Brooking Journal of International Law 17, 25 (1999).
58
S.C. Res. 986, U.N. SCOR, U.N. Doc. S/RES/986 (1995); Letter dated 26 July 2001 from
the Chairman of the Security Council Committee established by Resolution 661 (1990)
Concerning the Situation Between Iraq and Kuwait, Addressed to the President of the
Security Council, U.N. Doc. S/2001/738.
59
The General Assembly passed a resolution deploring “the continued cooperation by certain States and foreign
economic interests with South Africa in military, economic, political and other fields, as such
cooperation encourages the Government of South Africa in the pursuit of its inhuman policies.” G.A. Res. 2671 F,
U.N. GAOR, 25th Sess., Supp. No. 28, at 33-34, U.N. Doc. A/8028 (1970). Thus, “[w]hile it may appear that
sanctions obligations are confined to U.N. member states, the reality has suggested otherwise.” Steven R. Ratner,
“Corporations and Human Rights: A Theory of Legal Responsibility,” in 111 YALE L.J. 443 (2001). p.484
60
Adopted on 20 November 1963 by General Assembly Resolution 1904 (XVIII) Art. 2
states that “No State,
institution, group or individual shall make any discrimination in matters of human rights…”
18
Declaration on Environment and Development61 and the Copenhagen Declaration on
Social Development and Programme of Action62 all require active promotion of their
mandate from non-state actors.
The African Charter on Human and Peoples Rights,63 the African Charter on the
Rights and Welfare of the Child64 and the American Declaration of the Rights and
Duties of Man 65 impose duties directly on non-state actors.
These actors
specifically include individuals and communities and some duties concern social
economic and cultural rights.66
All of the above mentioned charters and declarations
demonstrate that private actors have duties and responsibilities within international
law.
Numerous treaties impose liability directly upon corporations. For example, the
1960 Paris Convention on Third Party Liability in the Field of Nuclear Energy,67 The
International Convention on Civil Liability for Oil Pollution Damage68 and the 1963
Vienna Convention on Civil Liability for Nuclear Damage69 all impose liability for
61
Adopted by the UN Conference on Environment and Development, Rio De Janeiro, on June 13 1992.
UN
Doc: A/CONF.151.26 (Vol.1) (1992)
62
Adopted by the World Summit for Sustainable Devlopment, Copenhagen on 12 March 1995, UN doc:
A/CONF.166/9 (1995)
63
Adopted by the OAU on 27 June 1981 and entered into force on 21 October 1986.
64
Adopted by the OAU on Jly 11 1990 and entered into force on 29 November 1999
65
American Declaration of the Rights and Duties of Man, O.A.S. Res. XXX, adopted by the Ninth International
Conference of American States (1948), reprinted in Basic Documents Pertaining to Human Rights in the
Inter-American System, OEA/Ser.L.V/II.82 doc.6 rev.1 at 17 (1992).
66
Chirwa, Danwood Mzikenge, “Obligations of Non-State Actors in Relation to Economic, Social and Cultural
Rights Under the South African Constitution,” in Human Rights and Corporate Social Responsibility, International
Conference Mediterranean Masters Programme in Human Rights and Democratisation, Malta, November 13-14,
2002 p.38
67
“The operator of a nuclear installation shall be liable” for, inter alia, “damage to or loss of life of any person
and damage to property.” Convention on Third Party Liability in the Field of Nuclear Energy of 29th July 1960, as
amended by the Additional Protocol of 28th January 1964 and by the Protocol of 16th November 1982, July 29,
1960, Art. 3(a), 956 U.N.T.S. 251.
68
“the owner of a ship at the time of an incident […] shall be liable for any pollution damage caused by oil which
has escaped or been discharged from the ship as a result of the incident.” International Convention on Civil
Liability for Oil Pollution Damage, Nov. 29, 1969, art. 3(1), 26 U.S.T. 765, 973 U.N.T.S. 3.
69
“the operator of a nuclear installation shall be liable for nuclear damage upon proof that such damage has been
caused by a nuclear incident.” Vienna Convention on Civil Liability for Nuclear
Damage, May 21, 1963, art. 2(1), 1063 U.N.T.S. 265. An “operator” includes “any private or public body whether
corporate or not.” See id. at Art. 1(a) and (c).
19
breaches. Several treaties similarly impose liability not upon states, but upon private,
often corporate, actors.70
All of these treaties impose corporate liability for actions
or
omissions by companies that have detrimental effects.
Presumably, these
Conventions were made applicable to corporations because corporations are capable
of violating them.
It has been explained that corporations can violate human rights
and therefore applicable conventions should apply to them as well. Furthermore, if
corporations can be held liable for unintentional torts resulting from contravening the
international law described above, then it would be reasonable for them to be held
liable for torts resulting from intentional violations of international law, such as
complicity in major human rights abuses.71
The application of international law to individuals is established in the modern
system.72
The Apartheid Convention established that the crime of apartheid could be
committed by “organisations, institutions and individuals.” 73
The Genocide
Convention, the Universal Declaration of Human Rights, the International Covenant
on Civil and Political Rights and the International Covenant on Economic, Social and
Cultural Rights all apply to individuals as well as states.74
70
While these conventions
For example, the Brussels Convention Relating to Civil Liability in the Field of Maritime Carriage of Nuclear
Material, Dec. 17, 1971, 974 U.N.T.S. 255; Convention on Civil Liability for Oil Pollution Damage Resulting
from Exploration for and Exploitation of Seabed Mineral Resources, Dec. 17, 1976, reprinted at 16 I.L.M. 1450.
71
The Presbyterian Church of Sudan, Rev. John Sudan Gaduel, Nuer Community Development Services in USA.,
Stephen Kuina, Fatuma Nyawang Garbang, and Daniel Wour Cluol, et all. V. Talisman Energy, Inc. and the
Republic of the Sudan., 244 F.Supp. 2d 289; 2003 US Dist. Lexis 4085 March 19, 2003. p.81 section b.ii.
72
Stephens, Beth., “The Amorality of Profit: Transnational Corporations and Human Rights” in 20 Berkeley J.
Int'l L. 45. 2002, p.17
73
International Convention on the Suppression and Punishment of the Crime of Apartheid, Art. I (2), U.N. Doc.
A/2645 (1953) (entered into force July 18, 1976).
74
The Genocide Convention Art. 4 states that "persons committing genocide shall be punished, whether they are
constitutionally responsible rulers, public officials or private individuals." The Convention on the Prevention and
Punishment of the Crime of Genocide, Adopted by Resolution 260(III)A of the UN General Assembly on
December
9,
1948.
Entered
into
Force
http://www.preventgenocide.org/law/convention/text.htm.
January
12,
1951.
Available
at:
The preamble to the Universal Declaration of Human
Rights states that "every individual and every organ of society" should promote respect for basic human rights.
Universal Declaration of Human Rights, Preamble, Dec. 10, 1948, U.N. Doc. A/810. Both the ICCPR (Dec. 19,
1966, Preamble, para. 5, entered into force Jan. 3, 1976) and the ICESCR (Dec. 19, 1966, Preamble, para. 5,
entered into force Jan. 3 1976) recognize private obligations in their preambles, in the following terms: "Realizing
that the individual, having duties to other individuals and to the Community of which he belongs, is under a
responsibility to strive for the promotion and observance of the rights recognized in the present Covenant."
20
and covenants do not expressly regulate corporations, they certainly cover the conduct
of corporations, as they do not distinguish between natural and juridical individuals.75
Corporations have many rights under international and domestic laws, including
limited liability.
Therefore, they should also be subject to the corresponding
obligations implied by international law.
It is unlikely that a modern interpretation
of the law would protect a corporation that engaged in serious violations of
international law.
International law applies directly to corporations in areas other than human rights.
The United Nations Convention Against Transnational Organized Crime defines the
crimes of participation in an organised criminal group, money laundering, corruption,
and obstruction of justice, all of which apply to corporations as well as natural
persons.76
Many provisions in the treaties that address bribery and corruption apply
to legal as well as natural persons, for example, the Council of Europe Criminal Law
Convention on Corruption,77the Inter-American Convention Against Corruption,78
and the OECD Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions.79 Furthermore, the Basel Convention on the
Control of Transboundary Movements of Hazardous Wastes and Their Disposal,
applies to legal persons.80 These conventions do not all expressly concern human
rights but indicate conclusively that MNCs are subject to international law.
These aforementioned conventions do not have international enforcement
mechanisms.
Instead, they compel states to enact legislation that ensures domestic
enforcement. This method entails the defining and articulating of the international
standard by an international treaty and leaving the enforcement to national systems.
75
Talisman, Supra. note 71, p. 80, b.ii.
76
(Advance copy of the authentic text of the treaty), Arts. 5, 6, 8, 23, available at
http://www.uncjin.org/Documents/Conven tions/dcatoc/final documents 2/convention eng.pdf
As of December 15, 2000, the treaty had been signed by 124 states, including the United States; See U.N. Office
for Drug Control and Crime Prevention, Annexe: United Nations Convention Against Transnational Organized
Crime and the Protocols Thereto, at http://www.undcp.org/crime cicp signatures.html
77
Council of Europe Criminal Law Convention on Corruption opened for signature Jan. 27, 1999, art. 18, Europ.
T.S. No. 173, at 6, 38 I.L.M. 505, 509 (active bribery, trading in influence and money laundering)
78
Inter-American Convention Against Corruption, Mar. 29, 1996, art. 8, 35 I.L.M. 724, 730 (prohibiting offering
an article of monetary value to a government official of another state)
79
OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions
Dec. 17, 1997, Art. 1, available at http://www.oecd.org/daf/nocorr-uption/ 20nov1e.htm
80
Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal, Mar.
22, 1989,
Arts. 2, 4, 28 I.L.M. 657, 662.
21
Therefore, international law is capable of defining norms applicable and enforceable
on corporations.81
5.2.2 Voluntary Guidelines and Corporate Social Responsibility
MNCs are the subject of voluntary international guidelines formulated by
international organisations such as the International Labour Organisation (ILO), the
Organisation for Economic Cooperation and Development (OECD) and the UN’s
Global Compact further indicating their recognition within international law. The
ILO’s Tripartite Declaration of Principles Concerning Multinational Enterprises and
Social Policy82 requests that MNCs respect the UDHR and corresponding covenants
as well as take positive measures relating to human rights.
The OECD Guidelines
for Multinational Enterprises accepts that MNCs have responsibilities concerning
social, economic and cultural rights insofar as upholding the obligations of their host
governments. While these guidelines are not binding, they make up a body of “soft
law” that serves as an excellent foundation for further regulation.
These guidelines
could develop into evidence of a customary rule as they become normal practice.
However, as the evidence of frequent disregard for human rights law suggests, these
guidelines have not been consistently implemented and are often sacrificed in the
name of profit. Furthermore, few if any of these type of iniciatives directly address
ESCR in the context of development and global trade.
Many MNCs, in response to growing pressure from civil society, have nacted codes of
conduct and made commitments to Corporate Social Responsibility (CSR.) This
represents the “privatisation” of human rights regulation as governments are unable or
unwilling to control MNC activity. While private initiatives such as corporate codes
of conduct and voluntary reporting are definitely steps in the right direction,83 and
represent a legitimate attempt by the business community to address ethical concerns,
they have serious deficiencies. The primary concern is with the voluntary nature of
such practices. The non-binding nature of such codes means that an organisation’s
performance does not necessarily correlate with the organisation’s policy.
81Clapham,
Andrew, “The Question of Jurisdiction Under International Criminal Law Over Legal Persons:
Lessons from the Rome Conference on an International Criminal Court,” in Menno T. Kamminga & Saman
Zia-Zarifi (eds.) Supra note 3, p. 178.
82
Adopted by the Governing Body of the ILO at the 20th Session
83
Spar, D., “The Spotlight inn the Bottom Line:
in Geneva 1977.
How Multinationals Export Human Rights” (1988) 77(2)
Foreign Affairs 7.
84
Bart, Kenneth and Baetz, M., The Relationship Between Mission Statements and Firm Performance: An
Exploratory Study (1998) 33 (6) Journal of Management Studies 823
22
84
Additionally, the fear is that while they may be adhered to in economical good times,
the voluntary nature of the codes of conduct will allow them to be the first to go
during an economic downturn or times of international instability. Moreover, the
lack of implementation and enforcement procedures monitored by impartial agencies
gives rise to a perception of the codes as public relations exercises by MNCs.
It is of
significant concern that self-regulation is designed to avoid government or
international regulation from occurring.85
Many codes of conduct fail to address all of the human and labour rights that are
guaranteed to all of humanity. Many codes “volunteer” the corporation to adhere to
standards that are mandatory and binding according to international human rights and
labour laws anyway. Enacting a code of conduct that pledges a company not to use
slavery or child labour should not be necessary.
rights norms to begin with.
MNCs should be abiding by human
However, these non-binding codes of conduct serve as
an acknowledgement by corporations that they are bound by human rights law and
that their activities do affect the enjoyment of human rights within there sphere of
influence. This has caused some corporations great concern as these promises could
become difficult to rescind upon and could create competition between corporations
causing them to concede to external regulation and binding rules.86
Unfortunately,
none of these voluntary codes directly guarantee commitments by MNCs to the
promotion of ESCR and therefore are not effective.
This voluntary approach to regulating MNCs has been furthered by the United
Nations until recently.
The UN’s Global compact, which urges corporations to
adhere to nine basic principles of environmental, labour and human rights norms.
This system has been largely criticized as ineffective as there is no independent
monitoring or enforcement.
Furthermore, the voluntary nature and basic nature of
the norms recommended, allows companies to sign up to this compact, get there name
on the UN website and benefit from the positive publicity without significantly
changing their practice on the ground.
However, this dependence by the international community on voluntary approaches
85
Cunnigham, N. and Rees, J., Industry Self-Regulation: An Institutional Perspective (1997) 19(4) Law & Policy
363, 370
86
Thusing, Rolf., “Codes of Conduct:
A Growing Concern for Multinational Enterprises,” in Blanpain, Richard
(ed.) Bulletin of Comparative Labour Relations: Multinational Enterprises and the Social Challenges of the
XXIst Century.
Kluwer Law International,
The Hague/London/Boston, 2000. p.95
23
seems to be changing.
Multinational corporations could be subject to the same
oversight by U.N. human rights officials as U.N. member nations under the new,
Norms on the Responsibilities of Transnational Corporations under consideration by
the U.N. Human Rights Commission's Sub-commission on the Promotion and
Protection of Human Rights. This draft calls for companies to be "subject to periodic
monitoring and verification" by the United Nations to ensure compliance with
existing human rights, labor and environmental standards.87
The move is the first
step by the United Nations away from the voluntary approach and towards directly
regulating transnational businesses.
Corporations concerned about their future
reputations should immediately promote human rights within their organisations.
5.2.3 International Tribunal Precedent
The Nuremburg Tribunal perhaps best substantiates this notion of applying general
rules of international law to individuals as well as corporations. The Nuremburg
Charter permitted the prosecution of a “group or organisation” and allowed the
tribunal to declare that an entity is a criminal organisation.
The Tribunal became a
foundation of human rights law in stating,
That international law imposes duties and liabilities upon individuals as well
as upon States has long been recognized. ... Crimes against international law
are committed by men, not by abstract entities, and only by punishing
individuals who commit such crimes can the provisions of international law be
enforced.88
In United States v. Flick,89 United States v. Krauch90 and United States v. Krupp,91
the heads of major German corporations were prosecuted for war crimes and crimes
against humanity. While the prosecutions were against individuals, the Tribunal
consistently deliberated in terms of corporate liability. The language used makes it
expressly clear that that the court considered that the corporations had violated
87
UNWIRE, U.N. Rights Committee Considers Monitoring Corporations.
Wednesday, August 13, 2003
Available at: http://www.unwire.org/news/328_426_7479.asp
88
The Nuremberg Trial. Judgment of the International Military Tribunal for the Trial of German Major War
Criminals. Nuremberg, Sept. 30 and Oct. 1, 1946, Cmd. 6964 reprinted in 41 A M . J. I NT ' L L. 172, 173 (1947).
44.
89
United States v. Flick 6 Trials of War Criminals Before the Nuremberg Military Tribunals Under Control
Council Law No. 10, at 1, 1216-23 (1949). http://motlc.wiesenthal.org/pages/t021/t02194.html
90
United States v. Krauch et al. (Case VI), 8 Trials of War Criminals, 1081, 1169-72 (1952).
91
United States v. Krupp Available http://www.ess.uwe.ac.uk/genocide/cntrl10_trials.htm#Krupp
24
international law.
92
These cases also confirmed that corporations could have the
necessary mens rea for the commission of crimes.93
International human rights law has since developed to be applicable to private
actors. 94
system
96
The European Court of Human Rights (ECHR)
95
and the US legal
have confirmed that duties of private individuals and groups exist under
international law. Humanitarian law has also evolved to include private actors, for
example common article 3 of the Geneva Conventions sets minimal rules applicable
to all parties engaged in combat, including private parties. 97
II also applies to private parties.98
Furthermore, Protocol
It is therefore apparent in the aforementioned
examples as well as many other treaties that do not directly express this sentiment, but
can be interpreted in a light favourable to human rights promotion, that individuals as
well as states bare duties under international human rights law.
5.2.4 Complicity
Another method of finding MNCs in violation of international law is through
complicity. This implies that private actors violate international human rights law
when they participate with state actors in acts that are prohibited.
The Torture
Convention, 99 Genocide, 100 and Slavery Conventions, 101 all prohibit complicity in
92
For example, in Krupp, the court states, “The Krupp Firm, through defendents […] voluntarily and without
duress participated in these violations.” Ratner, P.478 Following in this line of jurisprudence, the
I. G. Farben
(US v. Krauch et. Al.) case states, “Such action on the part of Farben constituted a violation of the Hague
regulations.”
93
Talisman, Supra note 71,. P.80 B i.
94
Clapham, Andrew, Human Rights in the Private Sphere, Oxford Monographs in International Law 1996
at
99-102
95
Paust, Jordan J., “Human Rights Responsibilities of Private Corporations”, in Vanderbilt Journal of
International Law, Volume 35, Number 3 May 2002, p.814
96Kadic
97
v. Karadzic, 70 F.3d 232 (2d Cir. 1995)
Geneva Convention Relative to the Protection of Civilian Persons in Time of War, Aug. 12, 1949, art. 3, 6
U.S.T. 3516, 3518-3521, 75 U.N.T.S. 287, 288-289; Geneva Convention Relative to the Treatment of Prisoners of
War, Aug. 12, 1949, art. 3, 6 U.S.T. 3316, 3318-3321, 75 U.N.T.S. 135, 136; Geneva Convention for the
Amelioration of the Condition of the Wounded, Sick and Shipwrecked Members of Armed Forces at Sea, Aug. 12,
1949, art. 3, 6 U.S.T. 3217, 3220-3223, 75 U.N.T.S. 85, 86; Geneva Convention for the Amelioration of the
Condition of the Wounded and Sick in Armed Forces in the Field, Aug. 12, 1949, art. 3, 6 U.S.T. 3114, 75
U.N.T.S. 31, 32.
98
Protocol Additional to the Geneva Conventions of 12 August 1949, and Relating to the Protection of Victims of
Non-International Armed Conflicts, June 8, 1977, art. 13, 1125 U.N.T.S. 609.
99
The Convention Against Torture prohibits torture "inflicted by or at the instigation of or with the consent or
acquiescence of a public official or other person acting in an official capacity." Convention Against Torture and
25
certain proscribed acts.
Complicity in violations of international law is an evolving
subject, but it is not new. The Criminal Tribunals for Nuremburg, Yugoslavia and
Rwanda have all developed the complicity concept and confirmed its place within
international law.
Those who conspire or aid and abet a violation of international
law are criminally liable.
case,
102
One of the first cases in the WWII trials was the Zyklon B
where the industrialists were found guilty because they knew what the
purpose of the gas was.
Similarly, the Flick Case103 found the defendant guilty for
financially supporting the Germans and in US v. Krauch, 104 pharmaceutical
industrialists were found guilty for knowingly supplying materials for German
medical experiments on prisoners. The ICTY and ICTR have developed this concept
of non-state actor complicity and utilised it, thereby creating an international law
definition of aiding and abetting.105
Other Cruel, Inhuman or Degrading Treatment or Punishment, Dec. 10, 1984, art. 1(1), 1465 U.N.T.S. 113, 113
(entered into force June 26, 1987) The Torture Convention requires states to criminalize any act "that constitutes
complicity or participation in torture." id. 4(1)
100
The Genocide Convention, for example, prohibits both complicity and conspiracy to commit genocide, as well
as prohibiting genocide itself. Genocide Convention, supra note 68, art. 3.
101
The Supplementary Slavery Convention establishes liability for "being an accessory thereto" of the
enslavement of another person, or "being a party to a conspiracy to accomplish any such acts."
Supplementary
Convention on the Abolition of Slavery, the Slave Trade, Institutions and Practices Similar to Slavery, Sept. 7,
1956, art. 6 266 U.N.T.S. 3, 43.
102
The Zyklon B Case (Trial of Bruno Tesch and Two Others), 1 Law Reports of Trials of War Criminals 93 (Brit.
Mil. Ct. 1946).
103
U.S. v. Flick, at 1, 1216-23 (1949).
104U.S.
105
v. Krauch et al.,
1169-72 (1952).
See generally Brief of Amici Curiae International Human Rights Organizations and International Law Scholars
in Support of Plaintiffs-Appellants, Doe v. Unocal Corp., 248 F.3d 915 (9th Cir. 2001), at 7-19 (international law
recognizes concept of complicity and does not require actual participation), available at
www.aclu.org/library/iclr/2000/iclr2000 6.pdf
The ICTR actus reus for aiding and abetting is “practical
assistance, encouragement, or moral support which has a substantial effect on the perpetration of the crime,"
Prosecutor v. Furundzija, IT-95-17/1-PT (Dec. 10, 1998), P 249. with moral support constituting “a significant
legitimising or encouraging effect on the principals.” Furundzija, id. p.232. Furthermore, the ICTR concluded
that the mens rea of aiding and abetting is that the accomplice, “have knowledge that his actions [would] assist the
perpetrator in the commission of the crime"; it required neither intent to commit the crime nor even knowledge of
the exact crime to be committed. Furundzija,
id. p.246. Importantly, the ICTR concluded that this definition and
the practice of trying accomplices separately from the principal offender is compatible with all domestic law
systems.
Furthermore, the Statute of the International Criminal Court maintains this concept by holding liable a
person who, "for the purpose of facilitating the commission" of a crime, "aids, abets or otherwise assists in its
commission.” Statute of the International Criminal Court, July 17, 1998, U.N. Doc. A/CONF.183/9 (1998), art.
25, 3(c).
26
It is vital for the protection and the promotion of human rights concerning MNCs that
liability is extended beyond the direct violation of international law. Many of the
most serious infringements of human rights norms by MNCs occur in situations where
they are complicit in the violations.
Imperatively, these violations, done in the
interests or on the behalf of profit maximisation for corporations, must be regulated.
Regulation must insist that not only should MNCs refrain from being complicit, but
should take positive actions to condemn violations of human rights that take place
within their sphere of influence.106
5.2.5 Domestic Court Jurisprudence.
Multinational Corporations violate international law when they directly violate or are
complicit in contravening international law applicable to individuals.107
Principles
that apply to individuals clearly regulate MNCs. The concepts outlined above apply to
corporations (legal persons)108 as well as private individuals (natural persons.)
109
This compliments the widespread recognition of corporate accountability in domestic
legal systems.110
When taken into consideration that international law has been
applied to corporations since the Nuremburg Tribunals, 111 the case for corporate
regulation as well as individuals through international law seems solid.
Even with
reluctance on the part of the international community to apply international criminal
law to corporations, the concept is firmly established.
The USA has been at the forefront of litigation against MNCs for violations of
106
Human Rights Watch, The Price of Oil: Corporate Responsibility and Human Rights Violations in Nigeria's
Oil Producing Communities, Summary, at http://www.hrw.org/hrw/press/1999/ feb/nigsumm.htm (last visited June
5, 2001).
107
Paust, Supra. Note 95, p.803
108
Various international and national documents use the terms "juridical person," "legal person," "juristic persons"
and "corporations" to refer to the organizations recognized as having legal status.
(ed.),
109
Clapham, Andrew in Addo
Supra note 6, p. 152, n.24
Addo, Supra. note 6, p.8-9 (noting the "growing consensus that MNCs are bound by those few rules applicable
to all international actors," including, inter alia, the prohibitions of slavery and forced labour, genocide, torture,
extra-judicial murder, piracy, crimes against humanity and apartheid)
110
It is a general principle of law that corporations are subject to domestic law.
111
Clapham in Addo, Supra note 6 p.160-71 (discussing Nuremberg application of international law to
corporations).
27
Paust, Supra note 89, p.803
international law. The Alien Tort Claims Act (ATCA)112 allows for foreign plaintiffs
to seek civil redress for violations of international law committed abroad. A private
corporation is a juridical person and has no per se immunity under U.S. domestic or
international law. 113
Given that private individuals are liable for violations of
international law in certain circumstances, there is no logical reason why corporations
should not be held liable in the same circumstances.
So far, there has not been a single Supreme Court, Second Circuit or even District
Court case holding that a corporation is “legally incapable of violating the law of
nations.”114
Numerous Second Circuit cases have acknowledged MNC potential
liability for violations that entail individual liability.115 Courts outside of the Second
Circuit have directly addressed the question and found that MNCs can be held
liable.116
112
Moreover, the Courts of Great Britain have begun to relax forum non
In Filartiga v. Pena-Irala, 630 F.2d 876at 887 (2d. Cir. 1980), it was decided that the US courts were bound by
the law of nations and that subject matter jurisdiction did exist.
This allowed the ATCA to become a widely used
tool to vindicate international law violations. In Kadic v. Karadzic, 70 F.3d 232 (2d Cir. 1995), the Court held
that individuals could be held liable for certain violations of international law, whether acting under the auspices of
the state or as private actors.
113
Paust, Supra note 95, p.803
114
Talisman, Supra. Note 71, p.74, 2.a.
115
In Jota v. Texaco Inc., 157 F.3d 153 (2d Cir. 1998) the Court did not address the jurisdictional question
regarding whether MNCs could be held liable and therefore had no reservations about the ATCA reaching
corporations.
Again, in Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88 (2d. Cir. 2000), the court did not
address the question of subject matter jurisdiction over MNCs. This indicates that subject matter does exist.
Similar jurisprudence exists in Bigio v. Coca-Cola Co., 239 F.3d 440 (2d Cir. 2001) and in Aguinda v. Texaco Inc.,
303 F.3d 470 (2d Cir.2002.) Both of these cases were dismissed after painstaking efforts involving whether a
violation of the law of nations took place and forum non conveniens, which would have been completely
unnecessary if subject matter jurisdiction had not existed for MNCs.
116
The Ninth Circuit more explicitly recognized that a corporation could be sued under the ATCA in Doe v.
Unocal Corp., Nos. 00-56603, (9th Cir. Sept. 18, 2002).24 According to the Doe court, “a threshold question in
any ATCA case against a private party such as Unocal, is whether the alleged tort requires the private party to
engage in state action for ATCA liability to attach, and if so, whether the private party in fact engaged in state
action.” The court, citing Kadic, held that because the complaint alleged jus cogens violations (including rape,
torture, and summary execution), no state action was necessary and Unocal could be held liable. Other cases that
held corporations potentially liable are: Beanal v. Freeport-McMoran, Inc., 197 F.3d 161 (5th Cir. 1999);
Abdullahi v. Pfizer, Inc., No. 01 Civ. 8118, 2002 WL 31082956 (S.D.N.Y. Sept. 17, 2002); Wiwa v. Royal Dutch
Petroleum Co., No. 96 Civ. 8386, 2002 WL 319887 (S.D.N.Y. Feb.28, 2002);
Supp. 2d 117, 127-28 (E.D.N.Y.2000);
Bodner v. Banque Paribas, 114 F.
Iwanowa v. Ford MotorCo., 67 F. Supp. 2d 424, 445 (D.N.J. 1999) (“No
logical reason exists for allowing private individuals and corporations to escape liability for universally
condemned violations of international law merely because they were not acting under color of law.”);
Eastman
Kodak Co. v. Kavlin, 978 F. Supp. 1078, 1090-95 (S.D. Fla. 1997) (holding that subject matter jurisdiction existed
28
conveniens rules in order to allow for plaintiffs to bring cases against British
corporations in England rather than in the place where the violation took place.117
This has opened the door for numerous cases concerning health and labour
standards.118
The result of this litigation seems to be a reduction in the gap that exists in
international law concerning MNCs and liability for human rights violations. The
lawyers for MNCs are at least now confronting their victims in court and
acknowledging that these violations of human rights have occurred.
While no
verdicts have been passed in any of these cases, they have drawn international
attention and have permanently damaged some MNCs’ reputations. The Directors of
MNCs must acknowledge that this situation should be avoided at all costs, even if this
means sacrificing short-term profits in order to build stable local communities that
enjoy human rights.
5.2.6 Customary Law
The norms of customary international law regulate the conduct of private individuals
and corporations.119
Customary international law prohibits certain actions whether
the state consents or not and is binding on all.
While the conventions charge the
state with the enforcement of such obligations, international law regulates more than
state actions and is moving to expand the responsibilities and rights of non-state
actors.120 The broad, contextual interpretation of treaties and agreements gives rise to
an evolving context where private rights and duties are increasingly recognised.121
The International Court of Justice endorses this view.
It stated that, "An
international instrument has to be interpreted and applied within the framework of the
entire legal system prevailing at the time of the interpretation," 122 and that
in an ATCA action against a Bolivian corporation)
117
6,
118
Meeran, Richard., “The Unveiling of Transnational Corporations: A Direct Approach,” in Addo, Supra. Note
p. 162
For example, see: Ngcobo and Others v. Thor Chemical Holdings Ltd., TLR 10 November 1995;
Sithole & Others v. Thor Chemical Holdings Ltd. and Another, TLR 15 February 1999; Connelly v. RTZ [1996] 2
WLR 251; Lubbe & Others v. Cape PLC;
Afrika and 1539 Others v. Cape PLC [1999] A no. 40;
Mphahlele &
336 Others v. Cape PLC [1999] M No. 146
119
Paust, Supra note 95, p.811
120
Ibid, Paust, p.810
121
Clapham, Supra note 81, p.98
122
Clapham in, Supra. Note 81 at 99, citing Advisory opinion of the ICJ on the Legal Consequences for States of
the Continued Presence of South Africa in Namibia (South West Africa) [1971] ICJ Rep. 31, P 53.
29
interpreters of international law "must take into consideration the changes which
have occurred in the supervening half century, and its interpretation cannot remain
unaffected by the subsequent development of law."123 This must therefore include
customary international law as well as treaty law.
The doubt expressed about international law covering MNCs is beginning to subside.
Reservation about legal liability was due to the generally restricted and narrow
definition given to the laws, which need not be the conclusive one. There seems to
be improvement in recognition of this fact through criminal law and statutory offences,
as evidenced in US, UK and ECHR jurisprudence, where a measure of dynamism in
interpretation has become evident.
Most legal norms, including the general norms
of law and the specialist regimes devoted to corporations, if given a sufficiently
dynamic interpretation, as recommended by the International Court of Justice, should
address the concerns advocated by the corporate governance movement.
The main
obstacle remains the fact that the law has not evolved enough to find a basis for
corporate criminal responsibility other than one based on individuals.124 Dynamic
interpretation has been applied in the field of international human rights law. The
ECHR and UNHRC have interpreted the law in a broad manner concerning a wide
range of subjects and even applied dynamic human rights law norms to a
corporation.125
The lack of criminal prosecution in this field does not indicate that these norms do not
bind corporations, just as the lack of enforcement of international law in general does
not mean that states are not bound by it.
International law presently must be
enforced through domestic legal systems. For MNCs this will concern its relations
with governments as the government has the duty to secure the rights of everyone by
imposing laws that do so.126
Again, discussion of the enforcement mechanisms, or
lack of them, should not overshadow the fact that the aforementioned actions are
prohibited and corporations, in engaging in or becoming complicit in these actions,
violate international law.
123Ibid.,
Clapham 99
124
Addo, Supra note 6, p.21
125
UNHRC
Allan Singer v. Canada, Communication No.455/1991, UN Doc. CCPR/C/51/D/445?1991,
reprinted in 1995 Vol.2 IHRR, p.148; ECHR
Observer and Guardian v. United Kingdom, Eur. Ct. H.R. Series
A.216; (1992) 14 E.H.R.R., p.153
126
Art. 1 of ECHR; Article 2(1) of ICCPR; Article 1 of the ACHR and Article 1 ACPR (African Charter for
Peoples Rights)
30
Amnesty International states that a corporation has two areas of responsibility. The
first is to protect human rights within their sphere of influence and the second is to
support human rights protection generally.127
This includes public statements on
human rights issues, government lobbying, assisting tin the activity of NGOs on
human rights protection and the inclusion of human rights in all decision making
processes. In particular, companies have human rights responsibilities in the fields of
discrimination, life and liberty, slavery, torture, security of person, privacy, property,
religion, freedom of opinion, association and of labour standards.
Importantly, these
responsibilities not only includes the corporation’s own actions but that the
corporation does not condone or promote infringements of the aforementioned norms
by other parties. This proposition merely reflects a foundation of basic principles
that no corporation under any circumstances should been unable to adhere to.
The effectiveness of law depends on unwritten customs of morality, which should
apply to corporations as well.128
If no one abides by the spirit of the laws, they
become ineffective. Corporations must adhere to principles beyond the law, such as
established business ethics and the rules of social morality in this time of increasing
MNC power and influence. This entails promotion of an environment conducive to
the realisation of full human rights and therefore peace and stability.
The full
realisation of corporate legal responsibility requires a universal response in order to
operate in a global market place. National jurisdictions are becoming increasingly
irrelevant as MNCs transcend them.
A global regime is not impossible.
The
standards espoused through human rights law provide a sufficient foundation for a
global regime of corporate responsibility to be built upon.129
6.0 The Realistic Case for Promotion of Economic and Social Rights
Regulation must be based on a framework of fair global accountability, which
promotes economic growth without victimising the MNCs. Corporate policy makers
must turn away from the notion of the MNC as a purely economic entity with profit
maximization as its only responsibility. MNCs have just as much responsibility as
127
“The Business Case for Human Rights – Amnesty International Perspective,” in
Bottomley, Stephen &
Kinley, David.,(eds.) “Commercial Law and Human Rights”, 1st ed. Dartmouth
Publishing Company Limited, England, p.69
128
Addo, Supra note 6, p.22
129Cassel,
Douglas., Corporate Iniciatives:
A Second Human Rights Revolution, in Fordham International Law
Journal, vol.19 (1996) p.1963
31
private citizens to uphold human rights ideals within a modern liberal society. 130
As
shown in this paper, MNCs are in a unique position to promote human rights by
influencing local “host” governments and by providing funds and expertise towards
developing stable and peaceful local communities. This has been shown in this
paper as within the MNCs’ best interests, as direct liability is rapidly developing in
domestic courts and through efforts at regulation.
The regulation concerning multinational corporations and human rights suffers from
the same malady that afflicts all of international law, that is, the lack of enforcement
mechanisms.
The result is that implementation and compliance are subject to
political desire and based on a moral foundation.
MNCs and states, even if bound by
international law, are themselves responsible for implementing or taking
responsibility for their actions in all but a few high profile cases.
It is therefore
imperative to convince national governments and MNCs of the merits and advantages
of enacting a system of regulation guaranteeing social and economic human rights.
Multinational corporations and the nations capable of regulating their activities have
not yet shown the political will to endorse and enforce regulation concerning human
rights in this area.
Despite the prevailing opposition to regulation within the
international business community, regulation has been effective and implemented on
an international level when the political desire exists.
Obligations concerning
anti-trust, corruption, free trade, terrorism and criminal actions have all regulated the
activities of MNCs. Realistically, it is impossible to formulate and implement an
effective regulation system without the resolve of MNCs and their “home” States, as
these are the most influential organs of society.
Unfortunately, change cannot occur
without their consent.
Presently, the MNCs and their host nations seem to respond only to the bottom line,
that is, profit maximisation and economic growth.
The failure of the voluntary
regime in place within the international community regarding the realisation of social
and economic rights suggests that mandatory and enforceable regulation is imperative.
Voluntary initiatives such and the OECD Guidelines and the ILO’s Tripartite
declaration have been around for nearly thirty years and many MNCs have now had
private codes of conduct for nearly a decade.
Despite CSR and codes of conduct,
human rights abuses associated with the conduct of corporations have not subsided
and social and economic rights are clearly being sidelined. The challenge, therefore,
130
Addo, Supra note 6, p.8
32
is to convince these essential components of society that it is not only in their best
interests regarding the bottom line to abide by such regulation, but that it is also
imperative that they be the driving force behind the move towards such binding
international regulation for the realisation of human rights.
Fortunately, the international political climate is changing and a more demanding,
informed and active public is putting pressure on the aforementioned powers to
consider international human rights law in their economic and political policies. A
new global civil society consisting of Non Governmental Organisations, activist
groups and consumers rights groups has risen and is increasingly focusing on the
activities of MNCs, calling for international regulation in response to information that
is readily available concerning massive human rights violations around the globe.
They have employed strategies such as boycotts, demonstrations and the use of
negative publicity to shame offending corporations and warn other MNCs as to the
dangers of such morally corrupt conduct.
They have forced recognition by financial
institutions, investment banks, credit rating agencies, insurers and pension funds that
supporting companies with poor human rights records negatively affect the value of
their investments.
MNCs have taken notice of the change in the business
environment and, concerned about their reputations, progressive corporations have
taken steps in the right direction, implementing ethical standards and codes of conduct
concerning good corporate citizenship.
In turn, the international community has
begun to respond by moving steadily towards international regulation.
However,
confusion over MNC duties concerning ESCR renders them difficult to regulate.
Progressive MNCs that are on the leading edge of social responsibility could be
punished for adhering to strict codes of conduct that would forbid them from
conducting operations in nations with human rights violations occurring within them.
Less scrupulous MNCs from nations without government support for human rights or
an active demanding civil society would then be able to step up and conduct
operations in that area, to the further detriment of human rights and the MNCs willing
to promote them.
This article suggests that, with this scenario in mind, western
MNCs should exert their vast influence to assist in the movement to formulate and
enforce binding human rights regulations on corporate conduct. Western MNCs are
under the discerning glare of a demanding global civil society and could suffer
boycotts, damage to their reputation, or even lawsuits in extreme cases while their
counterparts from Asia do not operate under the same degree of scrutiny.
It is in the
best interests of high profile western MNCs and the powerful developed nations who
33
benefit from their activities to support regulation and even the playing field before the
competition overtakes them and affects the economic growth in those nations.
Furthermore, it is imperative for MNCs and the western states in which they are
incorporated that the promotion of economic and social rights be a mandatory duty
included in this binding international regulation. It is a well-known fact that the lack
of an environment conducive to the enjoyment of social and economic rights, such as
health, education and environment, leads to an unstable, unsatisfied and potentially
violent community.
This intolerable scenario often degenerates into political
instability and repression resulting in violations of civil and political rights that attract
the attention of the powerful global civil society. Furthermore, civil and criminal
liability may also be a consequence, as Shell, Exxon, Chevron, and Talisman, for
example, have discovered.
These type of developments can result in MNCs being forced to halt or reduce
operations and give up potential profit to competition not monitored by industry codes
of conduct, western based civil society, or direct liability.
aforementioned examples.
It is time to learn from the
In Nigeria, political tensions in the oil producing region
has resulted in the loss of just under half of the nation’s output of oil. If Shell had
insisted upon the realisation of social and economic rights, which is not beyond the
realm possibility, they could be extracting resources from that society and profiting at
a much higher rate.
Furthermore, they would not have suffered the immense
reputational damage that has tarnished their operations and the operations of all
resource extraction industries.
Exxon-Mobil’s operations in Indonesia provide another example that illustrates the
problems associated with failing to create a climate conducive to human rights
enjoyment. Exxon-Mobil in Aceh, Indonesia, who are operating in an area of vast
natural resources, have found that the region has been plunged into violence, making
it impossible to conduct operations. Exxon-Mobil are now in front of US federal
courts for the role that they played in violating human rights law. The violence in
Aceh is part of a long-standing political conflict that is partially fuelled by the
perceived lack of revenue flowing to the region despite the wealth created by
extracting Aceh’s natural resources.
Exxon, instead of declaring that they have nothing to do with the situation, should
take immediate measures to influence the Indonesian government to abide by human
34
rights law and take long-term measures to ensure a stable society built upon a
foundation of human rights.
Instead, the US State Department has intervened in the
case on their behalf, calling for it to be quashed as it interferes with the USA’s foreign
policy and diplomatic relations concerning the “war on terror.” Perhaps there are
fears that if Exxon is forced to pull out, tensions will rise with Indonesia, the world’s
largest Muslim State, and Chinese or Malaysian interests will take over the region’s
natural resources.
If Exxon and the US State Department could learn from the
Nigerian experience, instead of repeating the same mistakes, and begin to devote
considerable capital to social and economic rights development, similar consequences
such as those that affected Shell, including damaged reputation and loss of revenue,
could be avoided.
The competition from Asia does not yet have to abide by such stringent civil society
regulations and is therefore running at a competitive advantage.
The western
governments must step up the pressure for international regulation, and MNCs must
use their considerable influence to ensure the success and implementation of such
measures if they wish to remain competitive and maximise profits.
Aside from these compelling and urgent reasons for regulation of MNCs and
promotion of social-economic human rights, verification has emerged that a good
human rights record makes good business sense.
The benefits of avoiding adverse
publicity and avoiding litigation are obvious, but increasingly, businesses are focusing
on an improved corporate reputation and performance.
It is clear from the corporate
perspective that protecting and promoting human rights is becoming an advantageous
tool for improving business performance. MNCs with good human rights records
earn an enhanced reputation and image, a secure “licence to operate,” improved
recruitment and retention of employees, reduced risk of civil society conflicts and
boycotts, and therefore a competitive advantage.
Furthermore, they do not put the
operations of the MNC at risk by supporting regimes that can throw the local society
into turmoil, creating an impossible business climate. On the contrary, they will help
promote the rule of law, and stabilise civil society and sustainable socio-political
development with a healthy, educated, trusting local workforce.131
The ability to
attract and retain talented employees is regarded as the single most reliable predictor
131
Frankental and House, Human Rights: Is it Any of Your Business? (Amnesty International/Prince of Wales
Business Leaders Forum, London, UK, 2000) p.25
35
of overall excellence in a corporation.132
Shell indicated that its decreased ability to
attract the best employees was the most important and noticeable side effect of the
Brent Spar and Ogoni “difficulties”.
Its policy shift regarding human rights and the
environment were a direct result of this fact.
The Universal Declaration of Human Rights (UDHR) advocates the creation of a
stable rule-based society that is essential to the long-term operations of international
business.
Human rights law can facilitate this scenario by consistently and
impartially applying laws, which are universal and indivisible. This application of
human rights law to multinational business would promote the development of an
unbiased international legal system in which business can be carried out with
contracts enforced fairly, bribery and corruption less prevalent, and affording equal
access of all MNCs to legal process and protection under the law.
Basically, a
stable international human rights regulatory regime would promote a stable
international business environment.
prosperous business.
Predictability is vital to investment and
Denial of human rights in any form often leads to political and
social instability, which results in unpredictable circumstances.
Labour strife,
restrictions on access to resources, delays in production and delivery all hamper a
prosperous business environment.
The foundation of a stable society is built on the
realization of ESCR. MNCs must ensure that the host nations in which they operate
are willing and able to promote these human rights by providing funds through
taxation, expertise and speaking out against ESCR violations.
Failure to address human rights concerns further inhibits international business by
obstructing international trade agreements. Sanctions are imposed on areas rich in
resources, resulting in lost revenues. Efforts to promote trade liberalisation by
organisations like the IMF or WTO are blighted by massive popular protests at every
turn, and this scenario affects all trade initiatives, for example the foiled Multilateral
Agreement on Investment.
MNCs are in a unique position to influence governments
to address human rights problems before they result in such sanctions. They can
actively promote human rights and development before the image of international
business is corrupted further. The system of world trade cannot suffer many more
blows to its reputation like the “battle of Seattle,” which permanently blighted the
image of the World Trade Organisation and led to dramatic downward effects on the
shares of implicated corporations.
132
Avery, Chris., Business and Human Rights in a Time of
p.13-14
36
Change (Amnesty International, London 1999)
The massive public protests against the exploitative environmental and labour practice
of some multinational firms had huge implications.
developments.
Investors reacted strongly to the
Specifically, firms with a reputation for responsibility to the
community, its employees, and the environment were protected from a significant
decline in market value in response to the WTO’s failure in Seattle. Firms that were
not considered socially responsible suffered huge losses.133
There is now evidence
that a reputation for the promotion of social and economic rights pays huge dividends
for MNCs and shareholders.134
7.0 Conclusion
In order to restore civil society’s confidence in the world trade system and to ensure
that all business acts as a force for good, international regulation is required.
Without this, the MNCs that promote human rights will be at a competitive
disadvantage.
It is unfair that high profile, US and EU-based MNCs would be
subject to regulations, civil society pressures and liability if the rest of the world’s
MNCs are allowed to disrespect human rights law.
Legislation should harness the
initiatives taken by corporate leaders to ensure an impartial, fair and unbiased system
with reasonable monitoring and effective enforcement.
This would ensure that
proactive measures taken by exemplary companies are rewarded instead of punished
by setting them back against the competition.
Human rights law is expanding and dynamic. Social, economic and cultural rights
are rapidly being considered in their rightful place as inseparable and indivisible with
civil and political rights.
Furthermore, new actors, such as MNCs have emerged and
the law is coming to terms with the social impacts of their operations and their ability
to protect, promote or deny human rights.
A regulatory regime makes sense for
business, as it would avoid confusion and afford international business a respected
influence in the development and implementation of the law.
Furthermore, the
stability brought about by developing communities that enjoy social and economic
rights is a fundamental requirement for conducting operations. Without this stability,
civil and political instability and even violence in the long term can result, causing
serious disruptions to operations for MNCs. The world is rapidly moving towards
133
Marc J. Epstein and Karen E. Schnietz, Social and Environmental Responsibility Does Pay Off. Ethical
Corporation, 3 April 2003.
134
Available at: http://www.ethicalcorp.com/content.asp?ContentID=475
Ibid.
37
regulation, and it is vital to have a stable and reliable system of human rights
regulation for industry to develop within.
MNCs wishing to cash in on the
reputational enhancement of being perceived as an industry leader in a developing
sphere of international business must take the initiative immediately and press for
regulation and promote human rights within all aspects of their operations.
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