Article by Alix Vadot
In today’s world, where all of us are so interconnected, we have a reached a point where some of the products we use or consume on a daily basis can likely be traced back to some degree of social, environmental or human rights violation. In the wake of the neo-liberal economic model, which put an emphasis on financial sector deregulation, trade liberalization, and privatization of state functions and enterprises, corporations worldwide gained immense power and started taking advantage of developing countries that strengthened legislation to protect investments and weakened labor and environmental laws to attract foreign direct investment. (See here). It is subsequently in these same countries that some of the gravest human and environmental rights violations occurred and persist to this day. Civil society organizations, political actors, and legal scholars around the world are seeking a solution to ensure corporate social responsibility (CSR) moves in the right direction.
The debate around corporate social responsibility revolves around two approaches. The first is the voluntary model of businesses implementing their own best practices, also known as the ‘business case’ for corporate responsibility. In contrast, the regulatory view promotes the notion that corporations that have recognized legal rights must also bear certain legal duties. (See here). Some international treaties and guidelines currently exist, although they are legally non-binding and serve instead as general codes of conduct recommended for multinational corporations. These include the Organization for Economic Cooperation and Development (OECD) Guidelines on Multinational Enterprises (MNEs), the International Labour Organization’s (ILO) Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy, and other soft law treatises such as the European Convention on Human Rights and the International Bill of Human Rights. One of the most important developments, along with the OECD Guidelines, is the Global Reporting Initiative Standards, a set of guidelines focusing on social, environmental and economic standards that multinational enterprises (MNEs) worldwide should strive to meet. Furthermore, according to the Business and Human Rights Resource Center, more than 240 enterprises follow their own guidelines and 5200 or more companies are listed as members of the UN Global Compact. This global compact is aimed at encouraging businesses to respect universal principles of human, labor and environmental rights, as well as anti-corruption practices. (See here)
Civil society organizations and NGOs agree that the voluntary model of corporate responsibility, whereby businesses strive to meet basic human and environmental rights standards as a means to increase profit, has not proven to be effective and is not sufficient to ensure adequate responsibility. In Corporate Human Rights Responsibility: A European Perspective, Jan Wouters and Leen Chanet, set out a framework to address this problem.
First, they propose a legal framework to enable an effective implementation of the voluntary model of CSR. Part of this could be achieved through a better system of transparency within the corporate world. This would ensure that potential customers have easy access to credible information about the corporation’s corporate human rights behavior. Under international law, this might include mandatory reporting laws as well as laws on misleading advertising, to ensure corporations do not lie to the general public regarding their responsible activities. Furthermore, universal corporate responsibility might be achieved by taking corporate human rights behavior into account when making public procurement decisions, thus adding an additional incentive for MNEs to be as responsible as possible.
To follow, Wouters and Chanet also introduce a preliminary framework for a system to provide redress and deterrence, to be used in cases where the enabling framework set out previously fails. Two avenues exist for redress. In civil liability proceedings, states would bring claims against corporations in various courts to receive monetary compensation for damages. In criminal accountability proceedings, however, companies against which claims are brought risk high media attention about their rights abuses, causing them to lose profit.
In Europe, civil liability proceedings can be brought under the 1968 Brussels Convention (also known as the Brussels I Regulation), which allows plaintiffs to bring claims within courts of EU Member States for cases against corporations registered or domiciled in the EU when damage occurs abroad, particularly in developing countries. This is permitted even when the victims are not themselves residents of the EU. This provision is useful because it allows plaintiffs to forum shop. For example, a plaintiff may choose to bring a claim in the UK, where class actions for human rights violations are allowed, unlike in other European states. Although the Brussels Convention forms a useful framework, it is not used frequently. This is because there are less favorable procedural laws in Europe than in the U.S.. For example, in Europe the party that loses a suit is burdened with its own as well as the opposing party’s costs and there is a lack of contingency fee arrangements, which makes litigation a very high risk. In the U.S., corporate accountability suits can be brought under the Alien Tort Act for human rights violations caused by US corporations abroad, for crimes involving the “law of nations.” To this date, however, only 36 suits have been brought against multinational companies in US District Courts, 20 of which were dismissed on the basis that the crime did not fall within the scope of law (which includes torture, genocide, crimes against humanity, and summary executions). Meanwhile other suits were found for the defendant, were settled out of court, or are still pending.
Criminal accountability proceedings, which could be brought in national courts or in the International Criminal Court, could also become a useful strategy if human and environmental rights violations were to be criminalized as are human trafficking and child exploitation, for example. This would lead to better compensation for the victims, an ease of the burden of proof on plaintiffs, and a high deterrence for the specific crime.
Other scholars advocate for a new economic model, rather than legal sanctions, to change the economic system to one that values human and environmental health over profit. In any case, the system must shift to allow for better incorporation of human rights, labor, and environmental standards in multinational corporations’ practices all over the world. A universal UN human rights system could accomplish this, as well as the continued work of civil society organizations to campaign for a new perspective on business. The role of in-house counsel is also crucial: they can ensure that companies do not merely respect the laws in place but go further to encourage their employers to set an example for how best to balance profits and public interest.