The ability of MNCs to violate human rights

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CHAPTER 2 MNCs AND HUMAN RIGHTS IN CONTEXT

INTRODUCTION

Corporations are powerful global players of great political and economic significance. For almost half a century, the international community has struggled to construct a mechanism to hold them accountable for their extraterritorial operations. The debate on MNCs and human rights has over these years been conducted within a matrix of opposites. Whether accountability mechanisms should be located at an international or national level, in the public or private sphere or whether such mechanisms should be voluntary or involuntary has been at the core of the debates. As it will become evident in this chapter, MNCs are a complex phenomenon and therefore no single method of accountability will be adequate to address the accountability challenges they pose. This chapter seeks to situate the discussion of the debate by first giving an overview of the rising power of MNCs and then give an illustration of the challenges posed by such a rise to the state-centric methods of accountability.
The chapter will be presented in five sections. That the power of MNCs is internationally on the rise is no longer a matter of mere speculation. This power has in the course of history manifested itself in a myriad of ways. In the first section, the chapter will discuss the power and ability of MNCs to violate rights. The phenomenon of MNCs has brought with it challenges to both the national and international traditional methods of accountability. The second section of the chapter will discuss some of the challenges that MNCs pose to the traditional methods of accountability. In the third section, the chapter will give a snapshot illustration of the jurisprudence that has emerged from the courts in the United States, the United Kingdom and the European Union. This illustration is aimed at highlighting the weaknesses of the state-centric system of accountability and the hurdles these weaknesses create for plaintiffs seeking to hold MNCs to account. Over the last four decades there have been international attempts to create international norms and standards against which MNCs can be measured in as far as human rights are concerned. The fourth part of this chapter will present the different international initiatives that have been put forward over the four decades.
The fifth section will be a conclusion to the chapter.

THE ABILITY OF MNCS TO VIOLATE HUMAN RIGHTS

MNCs are not just potential violators of human rights; they have a positive social role to play too.¹ They are a major source of investment and job creation; they generate economic growth and reduce poverty and also contribute to the realisation of rights.² In the course of history MNCs have positioned themselves as major drivers of development in society. Since the Second World War, the number of corporations has been on the increase. According to Gatto³ there are about 82000 parent companies worldwide with 810000 foreign affiliates. Most of the parent companies are located in the United States of America, within the European Union and Japan.⁴ This being the case, the world is divided between the global North and the global South. The North is developed while the South is still underdeveloped.⁵ Typically, to say that a country is developing refers also to its levels of education, its legal and regulatory institutions and its economy.⁶ A pattern of investment that has emerged is that parent companies are located in the developed world, while their subsidiaries are mainly in developing countries.⁷ On the face of it, there is nothing wrong with the fact that MNCs are powerful and also increasing in number. In actual fact, given the divisions between developed and developing nations, corporations can become agents of development through foreign direct investment and therefore raise the standard of living of the people in the developing world.⁸ To this end Redmond writes that:
Business has a unique capacity to advance human rights goals. It is a powerful vehicle for economic, social, and cultural amelioration, particularly in developing countries via job creation and diffusion of technology, scientific advances, and management skills. Foreign direct investment may both promote economic development in the host country and powerfully affect the enjoyment of a wide range of human rights, from health, food, and improved living standards to rights of free expression and access to information through new technologies.⁹
In the era of globalisation, corporations are generators of international trade and therefore the main actors in foreign investment.¹⁰ Developing countries are all competing to attract foreign direct investment. This contest, as Kamminga observes, is more visible at the annual World Economic Forum in Davos where state presidents and prime ministers all scramble to attract captains of industry to invest in their respective countries.¹¹ A point of concern, however, is that the area of foreign direct investment is not adequately regulated by law.¹² States in their bilateral treaties are free to design their regulatory environment in a way that can be as appealing as possible to the investors. As a result, some scholars have raised legitimate concerns that in their attempt to attract foreign direct investment, states may be tempted to relax their regulatory environment.¹³ This process of relaxing the regulatory environment purely to attract investment has come to be known as “a race to the bottom”.¹⁴ A corollary to the concept of the race to the bottom is the “run-away shop concept” where corporations deliberately shop around for countries with lower human rights standards.¹⁵
The ability of corporations to abuse power is no longer mere speculation; it is a reality that is well documented.¹⁶ These abuses are not limited to a particular category of rights, but cut across all categories of rights from the first generation to the third generation rights.¹⁷ Even where corporations are themselves not directly involved in the violation of human rights, their complicity in human rights violations can take many forms.¹⁸ In March 2006, the question of corporate complicity led the International Commission of Jurists to appoint a panel on Corporate Complicity in International Crimes. The panel consisted of leading lawyers from five continents, representing both the civil and common law traditions. The appointed panel was given the mandate to explore circumstances under which companies and their officials could be held responsible under criminal and/or civil law when they are involved with other actors in gross human rights abuses. In the introduction to their report, the panel noted that:
The international community has been shocked at reports from all continents that companies have knowingly assisted governments, armed rebel groups or others to commit gross human rights abuses. Oil and mining companies that seek concessions and security have been accused of giving money, weapons, vehicles and air support that government military forces or rebel groups use to attack, kill or “disappear” civilians. Private air service operators have reportedly been an essential part of the government programmes of extraordinary and illegal renditions of terrorist suspects across frontiers. Private security companies have been accused of colluding with government security agencies to inflict torture in detention centres they jointly operate. Companies have reportedly given information that has enabled a government to detain and torture trade unionists or other perceived political opponents. Companies have allegedly sold both tailor-made computer equipment that enables a government to track and discriminate against minorities, and earth-moving equipment used to demolish houses in violation of international law. Others are accused of propping up rebel groups that commit gross human rights abuses, by buying conflict diamonds, while some have allegedly encouraged child labour and sweatshops conditions by demanding that suppliers deliver goods at ever cheaper prices. Although these abuses are, unfortunately, not new, what has changed is the renewed insistence by victims and their representatives on accountability when companies are involved in gross human rights abuses.¹⁹
It is clear that the power of corporations to get involved in activities that have a bearing on human rights does not have limits. Just as international human rights law is premised on the need to protect the individual against state power, scholars concerned with the impact of activities of corporations on human rights protection have argued that the power of corporations must also be regulated. The rise of the power of MNCs forms the basis for arguing for the need to have a regulatory structure for corporate power.²⁰ After all, Bilchitz argues, the very logic of human rights is premised on the fact that obligations must be imposed on those agents who constitute a threat to human rights.²¹ This is so because the need to protect human rights of individuals does not become less important because the violator is a state or a corporation.²²
While the power of MNCs is on the rise, state power is on a decline in certain respects. ²³ As Kamminga points out, through privatisation, deregulation and liberalisation of their international trade, states have reduced their influence on the daily activities of their own citizens.²⁴ In certain instances, states have outsourced some of their functions to MNCs.²⁵ In other instances, as Chirwa observes, state action alone is no longer sufficient to guarantee the enjoyment of rights. About this he writes that access to essential medicine is not only dependent on the decisions and actions of the state but also on the decisions and policies of pharmaceutical corporations. Banks and other financial institutions play a critical role in ensuring access to housing. With increasing privatisation, access to basic services as water, health,  education and electricity is also dependent on the actions and policies of private service providers.²⁶
Inevitably questions of accountability would arise because even though an MNC may have taken over state functions, such MNCs are not held to account by the same standards that states are expected to account to in international law.²⁷ This is where the irony about the concept of international personality becomes stark. Given the subject-object dichotomy, entities need to be subjects of international law so as to be directly accountable under the legal system. Interestingly though, the same entities without legal personality do not need personality to breach the rules of international law.²⁸
People’s daily activities have also not been spared from the power and influence of MNCs. As Subedi notes, directly or indirectly, MNCs have become so powerful that they dictate the type of food people eat, the medicine they take and the clothes they wear.²⁹ Through their aggressive marketing strategies, corporations are capable of inducing people into vices which are foreign to what would ordinarily not be part of their lives. Weeramantry ³⁰ recounts how trading companies disrupted the idyllic lifestyle of the people of the South Pacific islands by distributing firearms and inducing them to smoke. To this end, smoking schools were established where free cigarettes were distributed and the youth were enticed into smoking as a source of pleasure and a status symbol. Once the youth were addicted, they were then introduced to the idea of having to pay for the cigarettes. The same strategy was used in relation to firearms. A selected group of young people were introduced to the power of firearms, and were then given some for free. These youth would then go back to the villages to demonstrate the power of their newly found gadgets. Once a want had been created, local people were then introduced to the idea of trading with these corporations using produce from their countries in exchange for guns and cigarettes. Driven by the desire to satisfy their newly acquired wants the people of the South Pacific islands entered into trading deals with corporations from a weakened bargaining position.³¹
The horrors of the Second World War intensified the need to protect human rights internationally.³² What became clear already then was that states were not the only locus of power. It became apparent that other entities, including MNCs, were equally capable of abusing human rights. As discussed above, the notion that corporations can abuse human rights goes as far back into history. The abuse of power by corporations reached its zenith during the Second World War. The full extent of the participation of corporations during the Holocaust is yet to be revealed. The bit that has already emerged, points to the fact that corporations of all types all participated to their own benefit in the Holocaust. Some corporations benefited directly, while others only benefited indirectly. As Stephens points out, banks and insurance companies made profits from the deposits of the people who were killed during the Holocaust or whose heirs were not aware that their relatives had accounts, or whose family members were unable to supply documentation for their claims.³³ In addition, he contends that other companies exploited the slave labour provided to them by the German army, while pharmaceutical companies supplied medication and chemicals used in the Nazi medical experiments.³⁴
During the transition from an apartheid-led government to a constitutional democracy in South Africa, the democratically elected government established the Truth and Reconciliation Commission which sought to establish the truth of what happened under apartheid. The preamble to the Promotion of National Unity and Reconciliation Act³⁵ which established the Commission, sought to, among others, “establish the truth in relation to past events as well as the motives for and circumstances in which gross violations of human rights have occurred, and to make the findings known in order to prevent a repetition of such acts in future”.

CHAPTER 1: GENERAL INTRODUCTION
1 Introduction
2 The quest for accountability in the era of globalisation
3 The concept of legal personality and its importance in both municipal and international law
4 The lack of accountability of MNCs in international law
5 Factors contributing to the accountability deficit of MNCs
6 Purpose of the study
CHAPTER 2: MNCs AND HUMAN RIGHTS IN CONTEXT
1 Introduction
2 The ability of MNCs to violate human rights
3 Challenges posed by MNCs to the current human rights system of accountability
4 International attempts to deal with the power and influence of MNCs
CHAPTER 3: INDIRECT ACCOUNTABILITY OF MNCs IN INTERNATIONAL LAW
1 Introduction
2 The different categories of corporations
3 International law as a rules based-system
4 State responsibility in international law
5 State responsibility in relation to private conduct
6 Bridging the accountability gaps within the international legal system
7 Conclusion
CHAPTER 4: THE EVOLUTION OF THE CONCEPT OF INTERNATIONAL LEGAL PERSONALITY IN INTERNATIONAL LAW 
1 Introduction
2 The historical context of the use of international personality in international law
3 Source based development of international law
4 Conceptualisation of international personality in international law
5 The acquisition of international personality in international law
6 Towards the international legal personality of NGOs in international law?
7 Conceptualising the international personality of MNCs in international law
8 Conclusion
CHAPTER 5: TOWARDS AN INSTITUTIONAL MECHANISM FOR MNC ACCOUNTABILITY FOR HUMAN RIGHTS VIOLATIONS IN INTERNATIONAL LAW
1 Introduction
2 Legal responses to challenges brought by globalisation
3 Towards a theory of accountability for human rights violations in international law
4 Towards an institutional mechanisms of accountability
5 Conclusion
CHAPTER 6: CONCLUSION
1 Introduction
2 The corporate form and the limits of domestic accountability
3 Globalisation and the shifting patterns of power
4 Towards a conceptual model of accountability
BIBLIOGRAPHY
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