Regulating Corporate Human Rights Violations

Humanizing Business

Surya Deva

• Publisher: Routledge
• Year: 2012
• ISBN:
  9781136451164
• Edition: 1
• Topic: Business
• Subtopic: Business Ethics
• Index: Business

Despite the continuous addition of regulatory initiatives concerning corporate human rights responsibilities, what we witness more often than not is a situation of corporate impunity for human rights abuses. The Bhopal gas leak – examined as a site of human rights violations rather than as a mass tort or an environmental tragedy – illustrates that the regulatory challenges that the victims experienced in 1984 have not yet been overcome. This book grapples with and offers solutions to three major regulatory challenges to obligating companies to comply with human rights norms whilst doing business, and asks; why companies should adhere to human rights, what these responsibilities are, and how to ensure that companies comply with their responsibilities.

Building on literature in the fields of law, human rights, business ethics, management, regulation and philosophy, this book proposes a new 'integrated theory of regulation' to overcome inadequacies of the existing regulatory framework in order to humanize business.

This book will be of interest to scholars, students, researchers, policy makers and human rights activists working in the fields of Law, Business and Human Rights.

1 Introduction

This book is about humanizing business by effectively regulating the human rights violative activities of corporations. ‘Humanizing’ is used here in the sense of injecting business with human rights. Humanizing business implies that companies/corporations – the two terms that I will use interchangeably to represent business – ought to comply with their human rights responsibilities while conducting business. This claim raises three sets of fundamental questions, the answers to which are far from settled. First of all, why should companies have such a responsibility? Is it not the responsibility of companies to focus merely on creating wealth and maximizing shareholders’ profits? Are states not the primary custodians of peoples’ rights? If so, what useful purpose will be served by placing independent human rights responsibilities on companies? Are companies suited to carry out these responsibilities? Will this not result in states abdicating or transferring their human rights responsibilities to companies?

Second, what is the exact nature and scope of corporate human rights responsibilities? Are the human rights responsibilities of companies similar to, and as extensive as, those of states? What standards of human rights should apply to companies that operate at a transnational level in vastly diverse political, social, economic and cultural environments? Moreover, do companies violate human rights when they merely benefit from the violations of others, provide support to violators, or remain silent about violations as a business strategy? What about those situations where violations are carried out by their subsidiaries, business partners or suppliers?

Third, how can companies, especially multinational corporations (MNCs), be made accountable for human rights violations? Companies differ from states in several distinct ways. Do these differences pose unique obstacles in enforcing human rights norms against companies? How can those obstacles be overcome? Would this require fundamental changes in the current regulatory paradigms?

These three sets of questions represent the three broad challenges to the goal of humanizing business: why, what and how (the WWH challenges). This book is an attempt to grapple with these three challenges in an ‘integrated’ manner. The existing scholarship as well as regulatory initiatives in this area have not paid adequate attention to the interrelationship between the WWH challenges identified here. This, in my view, partly explains why we still do not have an effective regulatory regime in place to hold companies accountable for human rights violations.

As a remedial response, this book canvasses an ‘integrated theory of regulation’ that should help in overcoming the regulatory obstacles currently experienced in humanizing business. The integrated theory of regulation is developed and defended in Chapters 7 and 8. But at the outset, let me outline the central idea that underpins this theory. The central idea is to seek integration between different variables to either take cognizance of their dynamic relationship or to complement the weaknesses of one strategy with the strength of another. The theory emphasizes the necessity of establishing a balance between the often-conflicting human rights issues and business issues, as both human rights and business are important for the development of individuals as well as society as a whole. It also posits that the WWH challenges should be met in an integrated manner, because one influences the nature of the other. Moreover, since no single regulatory strategy, implementation technique, or sanction is adequate to deal effectively with difficult regulatory targets such as MNCs, there is a need to employ different available levels of regulation, strategies of implementation, and types of sanctions in an integrated manner.

I use ‘Bhopal’ – an Indian city where thousands of people died on the night of 2–3 December 1984 due to a leak of methyl isocyanate (MIC) and other toxic gases from a chemical plant run by Union Carbide India Ltd. (UCIL), a subsidiary of Union Carbide Corporation (UCC)¹ – as a symbol of inhumane business. Bhopal is employed to investigate how MNCs are able to violate human rights and then evade accountability by exploiting the loopholes in existing regulatory initiatives. Although other case studies will be referred to when necessary, Bhopal is the principal case study employed in this book, not only to expose the inadequacy of existing regulatory initiatives but also to explore, test, support, or illustrate various arguments advanced in this book to stress the need to humanize business. The justifications for choosing Bhopal as a representative case study are offered in the next chapter.

Backdrop of globalization

I conceive globalization in terms of interconnectedness and interdependence leading to reciprocal influences as well as changes. This interconnectedness and interdependence is brought by movement – of ideas, goods, services, people and so on – that is taking place now in a relatively easy, speedy and inexpensive manner. Among others, this is what differentiates the globalization of today from the globalization of yesterday.²

Globalization provides two useful contexts to the present work. It has had a significant impact on the changing dynamics of human rights. Globalization has also influenced the WWH challenges to the corporate human rights responsibility discourse. Let me begin by mapping the changing dynamics of human rights. In contemporary times, the debate about human rights is no longer confined to the matrix of individuals and states. Individuals are not the sole beneficiaries of human rights,³ as was once thought⁴ and states are not the only institutions under an obligation to respect, protect and promote human rights.⁵ Globalization of the world economy and trade, especially under the umbrella of the World Trade Organization (WTO), has played its part in changing the dynamics of human rights and also posed new challenges for their realization.⁶ The shift in paradigms is not, however, limited to the changing relationship of ‘right-duty bearers’: there is a change not only in the content, prioritization, and enforcement of human rights but also in the nature of human rights violators.⁷ The growing role, power and influence of companies in public spheres have afforded them more opportunities to violate human rights. Companies, acting alone or in complicity with states, pose a real threat of violating a wide range of civil, political, social, economic and cultural human rights in diverse ways. In short, the impact of day-to-day (and apparently innocuous business) decisions taken by companies is not limited to shareholders alone; it rather affects a larger community.

Let us now consider how globalization has influenced the WWH challenges. An important facet of globalization is the liberalization of economies under which companies enjoy a significant space to operate – from offering public services to running prisons, providing security (including in war zones), controlling tremendous amounts of personal data and impacting on access to basic needs like water and food. This wide spectrum of corporate activities depicts a change in the traditional role and place of companies in society. Historically, companies were instruments to serve public purposes and were tightly controlled by the state.⁸ In contrast, modern companies are widely regarded as wealth-generating entities with no specific mandate to accomplish a given public purpose. Against this background, it is natural to ask why companies should not be responsible for human rights abuses contributed by, or linked to, their business activities.

Globalization has also affected the nature of corporate responsibilities, the what challenge. Unlike overseas operations of chartered companies of the sixteenth and seventeenth centuries,⁹ companies today operate across the globe through a complex web of subsidiaries and affiliate concerns. Companies now also frequently resort to outsourcing key stages of their operations. In these circumstances, various questions are naturally raised about the nature and extent of the human rights responsibilities of companies. For instance, what standards of human rights should a company from a developed country apply when operating in a developing country with vastly different cultural and religious values? For that matter, should a company be responsible for the conduct of its subsidiaries or suppliers?

Similarly, how companies are made accountable has been influenced by globalization in both positive and negative ways. Since companies now operate at a transnational level and can move their operations from one jurisdiction to another, holding them accountable has become more difficult under municipal law, thus indicating the need for supplementing municipal regulation with extraterritorial and/or supra-state regulatory initiatives. At the same time, globalization has enabled the employment of informal means of regulation against companies. Civil society activism is a case in point.

The history of corporate abuses and regulatory attempts

The involvement of corporations in human rights abuses is not a new phenomenon. The British East India Company – a company that was chartered by Queen Elizabeth I to trade into the East Indies on 31 December 1600 – was linked to slave trade, famine deaths and drug trafficking activities as early as in the seventeenth and eighteenth centuries,¹⁰ a time when even the notion of human rights in its present form was unknown. However, both modern corporations and their role in human rights violations differ significantly from their ancestors.¹¹ As noted before, today’s corporations operate at a transnational level as part of a corporate group and are considered indispensable to the development process of nation states. More importantly, in the era of neocolonization, corporations act more as independent entities or in partnership with states rather than as the agents of colonial powers.¹² There is a qualitative difference even in terms of the nature of the human rights violated, the modus operandi of such violations and the places where such violations are occurring: a wide range of human rights are violated; the violations are occurring not only by direct actions of companies but also by providing assistance to states;¹³ and serious violations are taking place mostly in developing countries.¹⁴

How did law and regulatory regimes react to the growing instances of human rights violations by companies, acting alone or in complicity with states? Over a period of time, a plethora of regulatory responses incrementally came onto the scene so much so that it is not possible to mention all of them here. Apart from voluntary initiatives launched by public figures, business leaders, corporations, manufacturers, industry associations and Non-Governmental Organizations (NGOs), national governments also had general laws that had human rights implications for local corporations.¹⁵ However, there was hardly any municipal law which ‘specifically’ elaborated the human rights responsibilities of companies. States not only doubted their capacity to effectively regulate the activities of MNCs, but also showed a degree of unwillingness to act tough against even local subsidiaries of MNCs, primarily because of the fear that this might impair their competitiveness to attract much needed foreign investment for development.¹⁶

An attempt by some countries to enact a specific extraterritorial law to deal with human rights violations by overseas subsidiaries of their companies did not materialize.¹⁷ The innovative use of the Alien Tort Claims Act (ATCA) provided an avenue in the United States (US) courts to make companies accountable for human rights abuses committed abroad.¹⁸ However, litigation under the ATCA has faced serious problems.¹⁹ Apart from a few instances in which an out-of-court settlement has been reached,²⁰ hardly any case has been decided finally against a company on the merits. More critically, in Kiobel v. Royal Dutch Petroleum Co, the Second Circuit Court of Appeals, by majority, has ruled that companies cannot be sued under the ATCA because corporate criminal liability does not exist under customary international law.²¹

At international level, on the other hand, there was no real push for regulating MNCs’ activities until the mid-1970s, despite the involvement of companies in perpetuating human rights abuses during the Second World War²² and other conc...

Table of contents

• Cover
• Title
• Copyright
• Contents
• Table of cases
• Table of statutes
• List of illustrations
• List of abbreviations
• Preface
• 1. Introduction
• 2. Understanding ‘Bhopal’ afresh
• 3. Evaluation of existing regulatory initiatives: An analytical framework
• 4. Existing regulatory initiatives: An evaluation of (in)adequacy
• 5. Just profit or just profit: Why should corporations have human rights obligations?
• 6. How to behave in ‘Rome’?: Determining standards applicable to MNCs
• 7. The integrated theory of regulation: A critical response to ‘responsive regulation’
• 8. Vision of an integrated framework of corporate regulation
• 9. Conclusion
• Bibliography
• Index