Corporate Human Rights Violations

Global Prospects for Legal Action

Stefanie Khoury, David Whyte

• Publisher: Routledge
• Year: 2016
• ISBN:
  9781317216056
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

This book develops an analysis of the historical, political and legal contexts behind current demands by NGOs and the United Nations Human Rights Council to hold corporations accountable for their human rights violations. Based on an analysis of the range of mechanisms of accountability that currently exist, it argues that that those demands are a response to the failure of neo-liberal policies that have dominated the practice of politics and law since the emergence of this debate in its current form in the 1970s.

Offering a new approach to understanding how struggles for hegemony are refracted through a range of legal challenges to corporate human rights violations, the book offers a fresh perspective for understanding how those struggles are played out in the global sphere. In order to analyse the prospects for using human rights law to challenge the right of corporations to author human rights violations, the book explores the development of a range of political initiatives in the UN, the uses of tort law in domestic courts, and the uses of human rights law at the European Court of Human Rights and at the Inter-American Court of Human Rights.

This book will be essential reading for all those interested in how international institutions and NGOs are both shaping and being shaped by global struggles against corporate power.

1 From economic cannibalism to corporate human rights liabilities

Introduction

This chapter explores the historical background to current debates on the relationship between corporations and human rights that is being played out in the UN Human Rights Council and related international fora. The chapter analyses the significance of a range of social forces and pressures for change in the post-War period up to the appointment of a UN Special Representative on business and human rights in 2005. The period following this appointment will be considered in Chapter 2. Here, we set out the reasons for the emergence of this debate in the UN, exploring its origins from the 1950s onwards, and provides an analysis of the key moments in the development of this debate.

It has become received wisdom that the contours of contemporary debates date back to the mid-1990s, when a series of high-profile events placed the issue of business and human rights squarely in the sights of the global media. Hristova’s (2012, p. 92) assertion that ‘The impact of corporate conduct on human rights first attracted the attention of the U.N. in the late 1990s’ reflects an assertion that is commonly repeated by practitioners in this field. Indeed, there is a residual assumption amongst many, particularly in the human rights NGO community, that the problem of corporate human rights first rose to the surface in the 1990s with the series of cases that ended up is the US tort courts (discussed in Chapter 3). This chapter will draw upon evidence and analyses that reveal the origins of the debate as being much earlier. It therefore seeks to develop a much longer historical perspective to understand the emergence of a movement that has sought to identify and challenge corporate complicity in human rights violations. This historical analysis will show that this field of policy has been highly contested and fractious, and will therefore locate the origins of the similarly fractious attempt to build a UN consensus around this policy field in recent years.

Corporations, human rights and the UN

The role played by trade unions in bringing the accountability of transnational corporations to the UN (Stoerman, 1975; Segerlund, 2007) has probably been underestimated. The issue was put on the UN agenda in the 1950s by trade unions such as the International Metalworkers Union and the US union, the United Automobile, Aerospace and Agricultural Implement Workers, whose members were increasingly vocal about the loss of jobs to low-wage economies and the creeping conditions of exploitation. Whilst those trade unions were generally advocating free trade policies, they were also aware of the emergence of a ‘race to the bottom’ or ‘economic cannibalism’ (Segerlund, 2007, p. 6), whereby competition between workers in different countries would be used to drive down wages and conditions. This trade union work led to a number of transnational conferences and proposals on labour standards. By the late 1960s, the International Confederation of Free Trade Unions (ICFTU) was applying pressure on the ILO to focus upon the social impacts of multinational corporations (MNCs). If this trade union effort was significant in the sense that it put those issues on the agenda, the ability of the trade union movement to develop any agenda for effectively reigning in the power of TNCs was constrained by fact that the US unions and the international secretariats maintained enthusiastic support for free trade, industrialisation and economic growth strategies (ibid.).

The challenge to the harmful impact of TNCs in the UN was also driven by a separate but parallel movement for change in the developing world. A resolution passed by the UN Economic and Social Council in 1972 – ECOSOC Resolution 1721 – called for ‘a study of the role of multinational corporations and their impact on the process of development’ (cited in Coleman 2003, p. 340). The Resolution requested that the UN Secretary-General establish a Group of Eminent Persons to study the effects of transnational corporations on world development and international relations. The Group of Eminent Persons conducted hearings with representatives of corporations, governments, intergovernmental organisations (IGOs), trade unions and NGOs. In this respect, their remit and work was very similar to the Working Group set up by the UN in 2011. Another enduring feature of this early part of the process of developing UN policy on TNCs was that a lobbying group was formed by a small number of corporations with the aims of infiltrating and influencing UN mechanisms to ensure that the findings of the Group of Eminent Persons would not be too damaging to the interests of TNCs (Segerlund, 2007, p. 4, fn 6).

Resolution 1721 had been given impetus by the Chilean government, who had taken its concerns about the growing impact of TNCs on the political autonomy of the country to the July 1972 meeting of ECOSOC. The Chilean government of Salvador Allende had been elected in 1970 despite a sustained attempt by the US corporation ITT to undermine Allende’s election. The Allende government was also locked into a struggle with the US copper TNC Kennecott Corporation over disputed ownership of Chile’s copper resources. The wider issue of Chile’s sovereignty had also been recognised by some trade unions. The ICFTU had made a statement condemning corporate interference in Chile’s democracy to the Third Session of the UNCTAD held in Santiago, Chile, in April 1972, only a month after the ITT affair had been exposed to the world’s media by the Chilean government.

The key issue at stake in those UN debates was not merely the harms resulting from corporate activity, or the compromise of human rights by corporations per se, but a much more fundamental undermining of state sovereignty. President Allende had publicly denounced the covert strategies and activities of corporations such as ITT. On 4 December 1972, he addressed the General Assembly of the United Nations taking with him a document written by ITT officers in Chile and New York. The document proved that the company had authored an 18-point plan to strangle Chile economically, to carry out diplomatic sabotage and to create panic amongst the population which would cause social disorder and precipitate a coup. This is indeed what happened (Sampson, 1973). Drawing attention to attempts by Kennecott Corporation to precipitate a worldwide ban on Chilean copper in retaliation for the nationalisation of the industry, Allende argued that these corporate tactics were in contradiction to basic principles of international law because they involved the challenge to a state’s sovereignty over its own internal affairs without any agreement of the international community. Noting the solidarity between Chile and a growing number of African states, Allende argued that there was a growing challenge to the power of TNCs amongst the developing countries, which he described as a new stage in the struggle between imperialism and the relatively weak countries of the ‘Third World’.

The concern with the capacity of corporations to undermine the sovereignty of states in the developing countries in the 1970s was reflected in a profusion of resolutions, in various divisions of the UN at this time, drawing attention to the need to curb the predatory and malevolent actions of corporationse. This activity found expression at the UN General Assembly, when, in May 1974, it adopted a ‘Programme of Action on the Establishment of a New International Economic Order’. The resolution which established the programme noted:

All efforts should be made to formulate, adopt and implement an international code of conduct for transnational corporations:

a To prevent interference in the internal affairs of the countries where they operate and their collaboration with racist regimes and colonial administrations;

b To regulate their activities in host countries, to eliminate restrictive business practices and to conform to the national development plans and objectives of developing countries, and in this context facilitate, as necessary, the review and revision of previously concluded arrangements;

c To bring about assistance, transfer of technology and management skills to developing countries on equitable and favourable terms;

d To regulate the repatriation of the profits accruing from their operations, taking into account the legitimate interests of all parties concerned;

e To promote reinvestment of their profits in developing countries.

(United Nations, 1974, section V)

The language of this resolution directly reflected the concerns of many Latin American and African members of the UN during this period. To use terms such as ‘interference in the internal affairs of countries’, ‘restrictive business practices’ and ‘repatriation of profits’ was consistent with a neo-colonial understanding of international relations. This neo-colonial perspective, perhaps most famously articulated in Kwame Nkrumah’s (1965) book Neo-Colonialism: The Last Stage of Imperialism, argued that the colonial period had not ended in the late twentieth century, but had merely been reconstructed though economic and cultural instruments, obfuscating the need for direct political rule. From the neo-colonial perspective, TNCs were viewed as mechanisms for advancing the colonial power of the developed world in more easily hidden and plausibly deniable forms. Nkrumah, who was President of Ghana, was joined by a number of Pan-Africanist leaders and some leaders of Latin America countries who subsequently organised as the Non-Aligned Movement of States, in the quest for a truly post-colonial economic order. The call for an international code of conduct for corporations in 1974 emerged from this generalised opposition to neo-colonial rule that was widely supported across the developing world at the time.

This very brief and selective introduction to the debate on corporations and human rights in the international community indicates two principle origins of contemporary debates in the UN: if the issue was first brought to the fore by the US and international trade union movements in the developed world in the 1950s, the birth of this debate at the heart of the UN originates in a growing alliance of developing countries that Allende alluded to in 1972. Indeed, as Michalowski and Kramer (1987) note, both of those origins did converge at some point. The international trade union movement centred in Western Europe was an important ally of the Global South countries in the struggle to shape UN policy on TNCs throughout the 1970s. A number of international guidelines and standards also emerged as policy in other international organisations from the early 1970s onwards. Those included the ICFTU Charter of Trade Union Demands for the Legislative Control of Multinational Companies in 1975, the OECD Guidelines on Multinational Enterprises in 1976 (discussed more fully in Chapter 3) and the ILO’s Declaration of Principles Concerning Multinational Enterprises and Social Policy in 1977. This was therefore a period of frenetic activity in which a range of civil society institutions were responding to a general demand for improved corporate responsibility/accountability.

Similar concerns were also rising to the surface in the developed states in which TNCs were domiciled. A series of congressional hearings, notably the US Senate Subcommittee on Multinational Corporations, led a number of detailed inquiries into the conduct of TNCs. Indeed, the first report was on ‘The International Telephone and Telegraph Company and Chile, 1970–1971’. A subsequent set of the US Securities and Exchange Commission Investigations into corporate bribery in the developing world revealed a number of scandals around the world (Sagafi-nejad, 2008). The point that US government process was a significant factor in bringing the problems of TNCs’ conduct to the fore should not be obscured by Washington’s subsequent ‘hostile attitude toward UN efforts to establish a code of conduct for TNCs’ (Emmerij and Jolly, 2009, p. 2). In December 1975, the General Assembly adopted – without vote – Resolution 3514 condemning the corrupt practices of TNCs and encouraging governments to prosecute TNCs engaging in corrupt activities (Coleman, 2003, p. 346).

Such was the success of the developing world in forcing this issue on to the agenda that by the 1970s the US was publicly recognising that some action to curb the power of (its) TNCs was necessary. Henry Kissinger, for example, as Secretary of State acknowledged in 1975 that ‘the United States believes that the time has come for the international community to articulate standards of conduct for both enterprises and governments. The UN Commission on Transnational Corporation, and other international bodies, have begun such an effort’ (statement issued by the US State Department, Bulletin 425, 1975, cited in Rubin, 1976, p. 88).

To the extent that we can identify a consensus being articulated at this time – and the fractious nature of this consensus will be discussed in full below – this consensus is around a broad principle that action on establishing an international standard of conduct for TNCs was necessary. The emergence of an agenda which is expressed in ECOSOC Resolution 1721 and subsequently in the demand for the UN to establish a new economic order was rooted in a concern with the challenge by TNCs to the sovereign autonomy of post-colonial states. Yet this agenda was to be most clearly articulated, as the next section will show, through the development of a ‘code of conduct’.

The UN Code of Conduct in a divided world

The UN Group of Eminent Persons’ report ‘The Impact of Multinational Corporations on Development and International Relations’ was published in May 1974, with a key recommendation for the creation of a commission on transnational corporations attached to ECOSOC. In December of that year, the Commission on Transnational Corporations and the United Nations Centre on Transnational Corporations (UNCTC) were also established. The Commission was composed of 48 members: 33 from Latin America, Africa and Asia, five from Eastern European Soviet bloc states, ten from Western European and ‘other’ states. The Centre was established to execute the decisions of the Commission. The three main objectives of the Centre were:

[t]o further the understanding of the political, economic and social effects of MNC’s activities, especially in developing countries; [t]o secure international arrangements that promote the positive contributions of MNCs to national development goals and world economic growth while controlling and eliminating their negative effects; and [t]o strengthen the negotiating capacity of host countries, in particular developing countries, in their dealings with MNCs.

(United Nations, 1986, cited in Amao, 2011)

March 1975 saw the first meeting of the UNCTC. At its annual meeting the following year, it established as its highest priority the formulation of a code of conduct for TNCs. Following the UN’s Programme of Action on the Establishment of a New International Economic Order, noted above, this meeting was essentially the birth of the UN Code of Conduct for TNCs.

The work of the UNCTC was given some impetus by the Group of 77 of unaligned states who produced a manifesto for a Code of Conduct of TNCs in 1976. The Code included a 21-point list of grievances and criticisms of TNCs. As Coleman (2003, p. 340) points out, the impetus given to the process by the Group of 77 arose from their dominance in the UN General Assembly at the time. January 1977 saw the first meeting of the Intergovernmental Working Group on a Code of Conduct – a group which grew from a special session of the UNCTC with a remit to deliberate on a set of standards and report back to the UNCTC. At the time, Coonrod (1977, p. 274) noted that ‘although the U.N. code would not be the first attempt to control the TNC, its potentially comprehensive subject matter, treatment and global perspective accords it a unique significance’.

Although the UNCTC adopted the UN tendency to avoid voting in favour of consensus decision-making, it held its first vote in 1977, at the third set of meetings. The motion aimed at prohibiting the involvement of TNCs in apartheid South Africa. The developing countries and socialist/communist states on the Commission voted unanimously in favour of the motion. The motion was opposed by France, West Germany, the UK and the United States, whilst seven other developed nations abstained.¹ This pattern of voting was to become a familiar one (Coleman, 2003). And in this context, it is perhaps not surprising in retrospect that it was to be another five years before the UN Intergovernmental Working Group was to actually produce a Draft Code of Conduct.

In the mid-1970s, the Group of 77 quickly realised the strength of resistance in developed countries to a legally binding code. It was this recognition of the need for compromise with the more powerful nations in the UN that led them to support a voluntary code in the first instance, with many seeing this as a first step towards a legal instrument (Michalowski and Kramer, 1987). In fact, the three subsequent Draft Codes of Conduct produced by the UNCTC proposed provisions that would be binding on corporations. The Draft Codes of 1983, 1988 and 1993 all asserted that the duties imposed by human rights law should apply to any business entity and that those responsibilities should encompass civil, cultural, economic, political and social rights, as set forth in the International Bill of Rights (Amao, 2011, p. 33; Aguirre, 2011, pp. 212–13). The Draft Code of Conduct was broadly supported by the developing countries who saw it as a means to enhance their economic autonomy. Yet it was the failure of the most powerful UN member states to support the Code that ultimately ensured its demise.

Although an active participant in the UNCTC and the negotiations on the Code, the US was never fully supportive. In 1986, the Reagan administration signalled its intention to pull out of some of the UNCTC’s activities because it had never responded to the US demand to include (largely Soviet) state-owned enterprises in the Code of Conduct. As Sagafi-nejad (2008) has noted, the US remained involved in the Code negotiations, so as to exert influence, but made its hostility clear, appointing a succession of conservative delegates to the negotiations in order to block its approval. When the UNCTC was eventually disbanded in 1992, it was probably done to appease the US. The Secretary-General at the time, Boutros Boutros-Ghali, ‘needed to hand the American government a few victories in its battle to restore the UN and the UNCTC became a sacrificial lamb’ (ibid., p. 112). The Code of Conduct was the head of that sacrificial lamb.

On being dissolved in 1992, the UNCTC’s work was subsumed into UNCTAD. UNCTAD’s work, either under the banner of the UNCTC or any other division, had never explicitly been unconcerned with corporate human rights liabilities. Any ‘rights’ discourse with the organisation had been almost wholly preoccupied with the ‘rights’ of investors. As Perrone (2015) notes in his analysis of UNCTAD World Investment Reports between 1991 and 2005, advising member states against ‘interfering with foreign investor rights’ was a primary concern of UNCTAD throughout this period.

Corporations as bearers of rights

Of course, the hostility of the US is key, but it reflected a general shift in the international political economy of the time. According to Ratner (2001), the Code of Conduct lost impetus also because of the ‘investment climate’. The same developing countries that fought, supported and pushed for the Code in the mid-1990s found themselves desperately in need of FDI, and the Code was seen as an encumbrance to this. Michalowski and Kramer (1987, p. 42) also note that ‘the economic downturn associated with the 1974 oil crisis and the corresponding increased need of the developing nations for foreign investment tempered the Commission’s work’.

The fate of the Code was obscurity, but a particular kind of obscurity. The UNCTC was eventually renamed as the UNCTAD Division of Investment, Technology and Enterprise Development, and was largely devoted to promoting FDI and developed a much closer and more ‘business-like’ relationship with TNCs (Sagafi-nejad, 2008, p. 116).

The fact that the Code lost some of the momentum behind it, then, can be understood partly as a consequence of the ‘race to the bottom’. Yet there may have been a greater degree of resistance to this model of development than this account suggests. For de Schutter (2006a, pp. 2–3), the reason for the failure of the Draft Code was ultimately down to major disagreements between the developing and the industrialised worlds. Those disputes centred around the status of the Code in international law (in general, the former wanted the Code to be binding, the latter demanded that it remain v...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of figures
• Acknowledgement
• List of abbreviations
• Introduction: the rarefied politics of global legal struggles
• 1. From economic cannibalism to corporate human rights liabilities
• 2. Different shades of voluntarism
• 3. A manufactured consensus
• 4. Tort law and the struggle against corporate human rights violations
• 5. Struggles for corporate accountability in the human rights courts
• 6. ‘Human’ rights for profit
• Conclusion: New mechanisms of accountability for corporate human rights violations?
• References
• Index