Globalization and corporate behaviour
International corporations have been important economic agents driving economic globalization that trades goods and services across continents. This has led to a massive revenue increase for companies, some topping the GDP of several countries. Given their position in international trade and the sheer volume of the goods and services traded, they are causing problems such as the disruption of the socio-economic fabric of a country and the health of the planet. On several occasions, irresponsible company behaviour has called into question the social, economic, environmental and human rights responsibilities of international corporations.
Just think of the role the financial sector played in unleashing the financial crisis of 2008 and the subsequent economic fall-out, the oil spills and gas flaring in the Niger Delta caused by multinational oil companies, the Nestlé milk powder scandal, the irresponsible exploitation and processing of minerals that are fuelling conflicts in poor countries, the continued proliferation of sweatshops across Asia and the appalling labour conditions in plantations across Africa; the eviction of people from their land for logging, mining or agribusiness; the VW-scandal; or the widespread tax avoidance by international corporations costing billions of dollars to host countries (while they also create an enabling environment for companies). This has led to increased public scrutiny of corporate behaviour. Nowadays, many believe that companies have a responsibility that extends beyond their shareholders to all stakeholders, their employees, the environment and the communities where they operate.
J. Stiglitz correctly states that economic globalization has outpaced political globalization. International governance still cannot deal with international economic externalities such as pollution or Human Rights violations that create refugees. More cross-border enforcement should be envisioned to promote a truly effective international governance of globalization and especially its consequences. The economy is global in scale so global laws are required to govern it.
International corporations are in the business of making profits, for which they reduce costs as much as possible, for instance on taxes, salaries or the clean-up of environmental damage. Clearly, a company’s stated objective of profit maximization does not always align with social costs and benefits to society. For instance, a mining consortium consisting of a web of several entities can transfer assets easily from one subsidiary to another. This is problematic when damage payments are required from this company. There are many examples of mining companies exhausting a deposit of minerals or ores in developing countries only to leave the country, handing the bill for the environmental clean-up to the host government. When a legal judgement requires the company in question to pay the costs for the clean-up, it is often impossible for the host state to collect it because the company has declared bankruptcy for the subsidiary holding the mine or holds too few assets in the country.
Therefore, civil society has proposed the creation of a system whereby victims of corporate abuse can sue the company in their home country for damages caused abroad; in this way countries across the world can assist each other in the collection of damages from international companies. This international judicial cooperation would be a first step in holding companies accountable for uncompetitive behaviour, social and environmental damages and tax avoidance. Eventually, however, international legal frameworks and international courts are required to enforce laws that are necessary to make economic globalization work for the benefit of most citizens. The same holds for human rights violations by corporate actors; they should be governed by an international instrument and enforced by both national as well as international courts. Additionally, mechanisms for ensuring access to justice for the poor should be created to promote equity in justice.
The case of Business and Human Rights
In the field of business and human rights, a movement has been growing to govern the human rights impact of businesses, principally through voluntary codes of conduct and more businesses are taking up an HR-due diligence approach. Attention to this issue has also increased in terms of policy-making. At the UN-level, the process to develop a voluntary framework on responsibilities of TNCs and other businesses in human rights started slowly 1999. It was after the appointment of John Ruggie in 2005 and the adoption of the UN Guiding Principles of Business and Human Rights in 2011 that the first voluntary global standard framework took shape.
However, a growing coalition of CSOs, academics, business representatives and countries were asking for this soft law to become binding. This led to a statement from 85 countries in the UN Human Rights Council stating that such soft law instruments are insufficient to grasp all the challenges that relate to business and human rights. Undeniably, in a voluntary approach both enforcement and remedy for victims are difficult to achieve. Moreover, in a voluntary approach companies that do perform adequate HR-due diligence are disadvantaged vis-a-vis their competitors when, for instance, the latter do not perform such due diligence to save costs. Thus, a mandatory approach might create a more level playing field for businesses. On top of that international corporations can often appeal to protection circumscribed in Bilateral Investment Treaties or other investment treaties which can be legally enforced at the ISDS, while victims of corporate abuse can only rely on voluntary enforcement for reparation of damages.
EU: Ignoring the winds of change
At the UN-level, several developing nations under the lead of Ecuador and South Africa pushed for a resolution establishing an open-ended working group on Transnational corporations and other business enterprises with respect to human rights “whose mandate shall be to elaborate an international legally-binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises”. The developed nations resisted the resolution, but they failed to garnish enough support.
The developing nations did acknowledge the contribution of corporations to development, but also the fact that operations of TNCs have led to increased poverty, marginalization and environmental damage for their communities. Therefore, these countries deem it necessary to move beyond merely voluntary codes of conduct because the compliance rate is too low. The high number of HR-complaints filed against companies from industrialized nations gives more body to this argument.
In the meantime, the EU and member states have obstructed any form of progress in this negotiation process by voting against the resolution and performing an empty chair strategy in the first round of negotiations. The European nations deemed that a new initiative would undermine the voluntary UNGP. However, there is broad agreement among participants in the Intergovernmental Working Group (IGWG) that the new binding instrument must be devised to complement the UNGP and the members of the group have emphasized the importance of the UNGP.
Also, the prosecutor of the ICC has recently recognized a similar loophole in international criminal justice, and she has taken a landmark decision by making it possible to hold company executives, politicians and other individuals accountable under international law for crimes related to land grabbing, the illegal exploitation of natural resources and environmental destruction.
The EU and its member states should no longer ignore the growing movement to regulate TNCs and other businesses in a binding way. Therefore, we insist that the EU and its member states engage constructively in the next round of IGWG talks which will be held from 24 to 28 October in Geneva and contribute meaningfully to the establishment of a binding instrument to regulate TNCs and other businesses as regards human rights.
 Jospeh E. Stiglitz, “Making Globalization Work”, 2007.
 United Nations, UN Human Rights Council, “Resolution 26/9: Élaboration d’un instrument international juridiquement contraignant sur les sociétés transnationales et autres entreprises et les droits de l’homme”, 2014.