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, 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.4 MNCs use this influence to coerce governments to become more

Irish Centre for human rights 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

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 socioeconomic 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 activities hold considerable sway over the nation-states 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

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. 6 Addo, Michael K., (ed.) Human Rights Standards and the Responsibility of Transnational Corporations. Kluwer Law International, 1999 p.4 2

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 publics 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 states capacity to comply with human rights obligations, particularly concerning economic, social, and cultural rights.9 To improve competitiveness, the World Bank 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
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 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. Globalisation and the Decline of Social Reform. Garamond Press, 2000 p.87 3

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. challenge are twofold. The reasons for this 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 nonstate 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 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
12
13

Addo. Supra. note 6, p.239 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 739, at 743. 4

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 nations 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 non-state actors such as supranational institutions15 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
14

Blumberg, Phillip I., The Multinational Challenge to Corporation Law: The Search for a New Corporate Personality (1993) p.205 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 5

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 nations 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 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 states jurisdiction are subject to domestic sovereignty only.20 Internationally, these include GATT, Draft MAI, Anticorruption, 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
18

Claudio Grossman & Daniel D. Bradlow, Are We Being Propelled Towards a People-Centered Transnational Legal Order? 9 American University Journal of International Law & Policy 1, 8 (1993). 19 Vagts. Supra note 13, p. 757 20 Addo. Supra note 6 p.243 6

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 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

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 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 Supra. Note 6, p.241 7

civil and political rights, as they are interdependent. 24 One example is the crisis in Nigeria in the mid-nineties. Shells 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 that were not in line with the amount of profit that was being made through the extraction of resources from the local communitys 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 worlds 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.
24

UN Economic and Social Council, Commission on Human Rights. 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 Covenant on Civil and Political Rights, Reprinted in Steiner and Alston (eds.) Ibid. 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 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 8

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 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

38

Addo Supra note 6, p.243 FIAN addressed the Ogonis right to food, and Environmental Organisations addressed issues of the environmental degradation of the land. 9

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 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 worlds economic and political systems, it must be possible to promote human rights in general.

10

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

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

11

The Chairperson of the sessional working group on the working methods and activities of transnational corporations39 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 The UN Committee on Economic Social and Cultural 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 control.42 International law puts the responsibility on States to guarantee that MNCs 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

39

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 40 146 States have ratified the ICESCR as of May 2, 2003. See, http://www.unhchr.ch/pdf/report.pdf 41 Maastricht Guidelines on Violations of Economic, Social and Cultural Rights , Adopted in Maastricht, January 1997, para 18 42 Craven, Mathew, the International Covenant on Economic, Social and Cultural Rights: A Perspective on its Development (Oxford, Claredon Press) 1995, p.113 12

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 governments failure to protect the population from private actors and exploitation resulting in 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
43 44

Social and Economic Rights Action Center and the Center for Economic and Social Rights v. Nigeria 155/96 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 Shells exploitation of the environment and the Ogoni people. Human Rights Watch, www.hrw.org/reports/1999/nigeria/Nigew991-08.htm 13

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 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

45

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 46 Nigeria 155/96, para. 51 14

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. Honduras49and 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 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.

47 48

Art. 21 ACHR Union des Jeunes Avocats/ChadCommunication 74/92 49 Velasquez 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

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 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. examining international conventions, treaties, tribunal precedents The following will analyse the direct responsibility for international law of MNCs by 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

52

Addo, Michael K., Justiciability Re-examined, in Beddard and Hill (eds.), Economic, Social and Cultural Rights. Progress and Achievement (Macmillan 1992), p.93 16

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 nonstate 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. That is: 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,

53 54

ICESCR., Preamble. 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 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). 17

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 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 Child 64 and the American Declaration of the Rights and Duties of Man 65 impose duties directly on non-state actors. cultural rights.66 These actors specifically include individuals All of the above mentioned charters and and communities and some duties concern social economic and declarations demonstrate that private actors have duties and responsibilities within international law. Numerous treaties impose liability directly upon corporations. For example, the
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 Responsibilit y, 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 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 InterAmerican 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 18

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 breaches. Several treaties similarly impose liability not upon All of these states, but upon private, often corporate, actors.70 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 While these conventions
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). 70 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 19

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
December 9, 1948. Entered into Force January 12, 1951. Available at: http://www.preventgenocide.org/law/convention/text.htm. 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." 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. 20

standard by an international treaty and leaving the enforcement to national systems. 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 UNs Global Compact further indicating their recognition within international law. The ILOs 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 organisations performance does not necessarily correlate with the organisations policy. 84

81

Clapham, 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 in Geneva 1977. 83 Spar, D., The Spotlight inn the Bottom Line: 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 21

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. MNCs should be abiding by human rights norms to begin with. 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 UNs 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 seems to be changing. Multinational corporations could be subject to the same

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 22

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 international law.
87 92

These cases also confirmed that corporations could have the

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 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. 23

necessary mens rea for the commission of crimes.93 International human rights law has since developed to be applicable to private actors.94 The European Court of Human Rights (ECHR) 95 and the US legal system96 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 Furthermore, Protocol II also applies to private parties.98 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,99Genocide,100 and Slavery Conventions,101 all prohibit complicity in 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

93 94

Talisman, Supra note 71,. P.80 B i. Clapham, Andrew, Human Rights in the Private Sphere, Oxford Monographs in International Law 1996 at 99102 95 Paust, Jordan J., Human Rights Responsibilities of Private Corporations, in Vanderbilt Journal of International Law, Volume 35, Number 3 May 2002, p.814 96 Kadic v. Karadzic, 70 F.3d 232 (2d Cir. 1995) 97 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 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. 24

are criminally liable. One of the first cases in the WWII trials was the Zyklon B case,102 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 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

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). 104 U.S. v. Krauch et al., 1169-72 (1952).
105

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). 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 25

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 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

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. Clapham, Andrew in Addo (ed.) , Supra note 6, p. 152, n.24
109

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. Paust, Supra note 89, p.803 111 Clapham in Addo, Supra note 6 p.160-71 (discussing Nuremberg application of international law to corporations). 112 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. 26

Circuit have directly addressed the question and found that MNCs can be held liable.116 Moreover, the Courts of Great Britain have begun to relax forum non 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

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); Bodner v. Banque Paribas, 114 F. Supp. 2d 117, 127-28 (E.D.N.Y.2000); 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 in an ATCA action against a Bolivian corporation) 117 Meeran, Richard., The Unveiling of Transnational Corporations: A Direct Approach, in Addo, Supra. Note 6, p. 162 118 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 27

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 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
120 121

Ibid, Paust, p.810 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.
123
124

Ibid., Clapham 99 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 28

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. 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 corporations 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

126

Art. 1 of ECHR; Article 2(1) of ICCPR; Article 1 of the ACHR and Article 1 ACPR (African Charter for Peoples Rights) 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.22 129 Cassel, Douglas., Corporate Iniciatives: A Second Human Rights Revolution, in Fordham International Law Journal, vol.19 (1996) p.1963 29

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 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 antitrust, 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 ILOs Tripartite declaration have been around for nearly thirty years and many MNCs have now had
130

Addo, Supra note 6, p.8 30

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, 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

31

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 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. It is time to learn from the aforementioned examples. In Nigeria, political tensions in the oil producing region has resulted in the loss of just under half of the nations 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-Mobils 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

32

perceived lack of revenue flowing to the region despite the wealth created by extracting Acehs 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 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 USAs 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 worlds largest Muslim State, and Chinese or Malaysian interests will take over the regions 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

33

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 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. Predictability is vital to investment and prosperous business. 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
131

Frankental and House, Human Rights: Is it Any of Your Business? (Amnesty International/Prince of Wales Business Leaders Forum, London, UK, 2000) p.25 132 Avery, Chris., Business and Human Rights in a Time of Change (Amnesty International, London 1999) p.13-14 34

image of the World Trade Organisation and led to dramatic downward effects on the shares of implicated corporations. The massive public protests against the exploitative environmental and labour practice of some multinational firms had huge implications. Investors reacted strongly to the developments. 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 WTOs 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 societys 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 worlds 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. Available at: http://www.ethicalcorp.com/content.asp?ContentID=475 134 Ibid. 35

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.

36