Multinationals, Human Rights, and UN – III

(Reporting on the Ruggie Report – III)

Can anything concrete come out of the report that Professor John Ruggie prepared for the June session of the UN Human Rights Council? After all, the report offers just a “framework” for business and human rights, not a program of action.

Yet the report is far from a compilation of abstractions. I find that it contains a bundle of specific policy ideas that, if taken seriously by the Council and even only a few major UN members, will improve the protection of individuals, organizations, and weak governments against what Ruggie calls “corporate-related human rights harm.”

Take Ruggie’s incisive criticism of the present foreign investment system. He describes how trade and investment laws have expanded the legal rights of foreign investors without matching responsibilities, and thereby undermined the State’s duty to protect human rights, “skewing the balance between the two.”

This imbalance creates human rights predicaments for both “host States” and “home States.” A major example cited by Ruggie: “host States can find it difficult to strengthen domestic social and environmental standards, including those related to human rights, without fear of foreign investor challenges, which can take place under binding international arbitration” – that is, under a procedure that often favors the investor, a flaw not mentioned by Ruggie.

His report provides enough information on this imbalance to strengthen already existing campaigns to correct it. And the various issues that Ruggie highlights should be instructive to Congress next year when it formulates U.S. trade and investment policy to replace “trade promotion”legislation and other policies conducive to moving jobs offshore. Ruggie’s insights will also be useful in the almost certain renegotiation next year of the 15-year-old North American Free Trade Agreement (NAFTA), which set the pattern for the imbalances written into subsequent U.S. bilateral trade agreements.

Another concrete matter covered in Ruggie’s “framework” concerns the Paris-based Organization for Economic Cooperation and Development (OECD), of which the United States and 39 other industrialized states are members. The OECD Guidelines for Multinational Enterprises are “currently the most widely applicable set of government-endorsed standards related to corporate responsibility and human rights,” as Ruggie points out.

In analyzing the Guidelines, he explains why and how they should be revised to make their human rights provisions more specific, and how their administration needs improvement. The case he makes is sure to assist trade union leaders and others who have long pressed for similar reforms.

So the report does indeed have much potential value on the practical level. Moving from the potential to the actual, of course, will depend on a variety of “actors,” or “stakeholders,” including the institution that commissioned the report, the Human Rights Council.

Ruggie concludes his report with this sentence: “The Human Rights Council can make a singular contribution to closing the governance gaps in business and human rights by supporting the framework, inviting its further elaboration, and fostering its uptake by all relevant social actors.”

Note the term that appears in that sentence and elsewhere in the report – governance gaps. The gaps exist “between the scope and impact of economic forces and actors, and the capacity of societies to manage their adverse consequences….How to narrow and ultimately bridge the gaps in relation to human rights is our fundamental challenge.”

He restates, and reemphasizes, that challenge in his concluding paragraphs: “As has happened throughout history, rapid market expansion has also created governance gaps in numerous policy domains: gaps between the scope of economic activities and actors, and the capacity of political institutions to manage their adverse consequences. The area of business and human rights is one such domain.”

The greatest value of Ruggie’s 28-page report, in my view, is that he contributes much toward an evolving paradigm of business and human rights under globalization. Policymakers need such a conceptual framework to make sustainable progress toward integrating business and human rights in principle and in practice.


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Multinationals, Human Rights, and UN - II

(Reporting on the Ruggie Report – II)

“Unfeasible, unnecessary, and counter-productive.” That’s how the U.S. Council for International Business denounced a 2003 document titled the “Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights,” or Norms. The opposition of the U.S. government, too, was vigorous, so much so that Amnesty International publicly called upon U.S. Secretary of State Condoleezza Rice to put an end to U.S.’s “undermining” the Norms.

The document that provoked so much controversy, pro and con, was the handiwork of the UN Subcommission for the Promotion and Protection of Human Rights, made up of 26 independent human rights experts. A U.S. academic, David Weissbrodt, professor of law at the University of Minnesota, was the expert most responsible for researching and drafting the Norms.

Polarization, human rights organizations vs business, doomed the Norms, but not the basic idea behind it. Three years ago (in April 2005) UN Secretary-General Kofi Annan appointed Professor John Ruggie of Harvard to carry on what is essentially the same project. His mandate includes “identifying and clarifying standards of corporate responsibility with regard to human rights.”

Where to find those standards? Weissbrodt culled them from three dozen UN treaties and other international instruments, including ILO conventions and recommendations. Ruggie started by looking elsewhere. He commissioned a study of 320 cases of alleged corporate-related human rights abuse reported on the website of the Business and Human Rights Centre during a 33-month period that ended in December 2007. He then had each case coded for the rights the alleged abuses impacted from among those listed in seven key UN human rights documents, including the four core worker rights conventions of the ILO.

Ruggie’s empirical study identified 12 labor rights and 17 non-labor rights. That means “there are few if any internationally recognized rights [that] business cannot impact – or be perceived to impact – in some manner.” Ruggie’s conclusion: there are no limits to the rights that companies “should take into account.” On this basis, he judges that the Norms would be inadequate, even for protecting a corporation’s own interests, since they identify only “a limited set of rights for which [a corporation] may bear responsibility.”

As a result, in the report that will be considered at the June session of the Human Rights Council, Ruggie lays a heavy human rights burden on corporations. Part of it is the moral and legal responsibility of exercising "due diligence."

“To discharge the responsibility to respect [human rights] requires due diligence,” Ruggie emphasizes. One of his specific recommendations is that companies should look for guidance in the Universal Declaration of Human Rights and the core worker rights conventions of the ILO. “The principles they embody comprise the benchmarks against which other social actors judge the human rights impacts of companies.”

Drawing on his recent research and consultations, Ruggie sets down four elements of a company’s basic due diligence process:

Written policies: To give the aspirational language meaning, more detailed guidance in specific functional areas is necessary.

Impact assessments: Many problems arise because companies fail to consider the potential human rights implications before new activities are launched. After getting launched, activities should reviewed on an on-going basis.

Integration: Isolating human rights considerations in a company is a mistake that can lead to inconsistent or contradictory actions by product developers, lobbyists, sales teams, or procurement officials. Leadership from the top is essential to embed respect for human rights throughout a company.

Tracking performance: Monitoring and auditing processes are needed to get updates of human rights performance. Confidential channels, such as hotlines, can provide useful feedback.

How will organized business react to Ruggie’s ambitious new framework? No explosion so far. Nobody should be surprised by this report, though. In his speeches, interviews, and previous reports, Ruggie has been clear about where he was heading. His style throughout the past three years has been a model of openness as he went about

-- convening 14 multi-stakeholder consultations on five continents.
-- initiating more than two dozen research projects, some with the assistance of global law firms and other legal experts, nongovernmental organizations (NGOs), international institutions, and committed individuals.
-- generating more than 1,000 pages of documentation as the foundation of his framework.
-- receiving about 20 formal “submissions” (comments) from governments and other stakeholders..
-- presenting two extensive reports on his mandate to the Commission on Human Rights and its successor, the Human Rights Council [in 2006 and 2007], prior to this one]

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Multinationals, Human Rights, and UN - I

As the United Nations prepares to celebrate the 60th anniversary of the Universal Declaration of Human Rights this December, a report commissioned by the UN is challenging governments and business to focus on corporate-related abuses of human rights.

Titled “Protect, Respect, and Remedy: a Framework for Business and Human Rights,” the just-released report is on the agenda of the UN Human Rights Council’s June session in Geneva. Its author, Professor John Ruggie of Harvard, is the Special Representative of the UN Secretary General on the issue of human rights and transnational corporations.

His report describes and endorses “ways to reduce or compensate for the governance gaps created by globalization, because they permit corporate-related harm to occur even where none may be intended.” Governance gaps? It is a key concept of the report. Ruggie defines it as the vacuum “between the scope and impact of economic forces and actors, and the capacity of societies to manage their adverse consequences.” He goes on to explain what it means in one crucial area.

“Take the case of transnational corporations,” he writes, and goes on to illustrate how the gaps have evolved under recent globalization:

[Corporate] legal rights have been expanded significantly over the past generation. This has encouraged investment and trade flows, but it has also created instances of imbalances between firms and States that may be detrimental to human rights. The more than 2,500 bilateral investment treaties currently in effect are a case in point.

While providing legitimate protection to foreign investors, these treaties also permit those investors to take host States to binding international arbitration, including for alleged damages resulting from implementation of legislation to improve domestic social and environmental standards – even when the legislation applies uniformly to all businesses, foreign and domestic. A European mining company in South Africa recently challenged that country’s black economic empowerment laws on these grounds.

At the same time, the legal framework regulating transnational corporations operates much as it did long before the recent wave of globalization. A parent company and its subsidiaries continue to be construed as distinct legal entities. Therefore, a parent company is generally not liable for wrongs committed by a subsidiary, even where it is the sole shareholder, unless the subsidiary is under such operational control by the parent that it can be seen as its mere agent.

Ruggie gives examples of how “the transformative changes in the global economic landscape” are not reflected in current laws, regulations, and bureaucratic procedures. Also vital in contributing to the governance gaps is the reluctance of the host and home countries to risk taking on the transnationals.

“This dynamic is hardly limited to transnational corporations,” Ruggie adds. “To attract investments and promote exports, governments may exempt national firms from certain legal and regulatory requirements or fail to adopt such standards in the first place.”

Under international law, Ruggie points out, “States have a duty to protect against human rights abuses by non-State actors, including business, affecting persons within their territory or jurisdiction,” as also discussed in his earlier (2007) report on his mandate. In this report he finds that “there is increasing encouragement at the national level for home States to take regulatory action to prevent abuse by their companies.”

Here, in opening a long section on “the state duty to protect,” Ruggie makes an implied criticism of human rights experts. “Within governments and beyond,” those experts have a good understanding of the “general duty” of States to protect human rights. But “less internalized is the diverse array of policy domains through which States may fulfill this duty with respect to business activities…at home and abroad.”

In other words, governments have available human rights tools that often remain unused or under-used. Ruggie devotes five pages to them. He urges viewing them as “an urgent policy priority …necessitated by the escalating exposure of people and communities to corporate-related abuses, and the growing exposure of companies to social risks they clearly cannot manage adequately on their own.” Three examples:

-- Revising international investment agreements to ensure that the rights protecting investments abroad are balanced with responsibilities to respect the host country’s domestic environmental and social standards.
-- Adopting policies more proactive in preventing harmful corporate involvement in “conflict zones,” including the use of Security Council-approved sanctions as appropriate to each situation.
-- Redefining fiduciary duties, as the UK recently has done, to require corporate directors to “have regard” to matters such as “the impact of the company’s operation on the community and the environment.”

In concluding his special section on the State duty to protect human rights, Ruggie reaffirms: “The human rights regime rests upon the bedrock role of States. That is why the duty to protect is a core principle of the business and human rights framework. But meeting business and human rights challenges also requires the active participation of business directly.”

He then turns to his second principle, the corporate responsibility to respect human rights. So will I, in my next posting.

4/21/08
Reporting on the Ruggie Report - I

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The Latest on Business and Human Rights

What are the steps that governments could take to bring multinational corporations fully under the rule of law? That paraphrases one of the controversial questions that Professor John Ruggie of Harvard will answer in a report that he has prepared as the Special Representative of the UN Secretary General on Human Rights and Business.

The report, which will be considered by the June meeting of the UN Human Rights Council in Geneva, is expected to be released in the next week or two. Though it won’t make a splash in the media, it is eagerly awaited by many business people and human rights types.

I have been following, and writing about, the controversy ever since it exploded in the former Human Rights Council (then called a commission) when an advisory group of experts published a document entitled “Norms on the Responsibilities of Transnational Corporations with regard to Human Rights,” or Norms for short, in 2003.

The proposed Norms, distilled from UN treaties and agreements, met sharply divided reactions. At one extreme, leaders of organized business strongly opposed them, mainly because they seemed to be obligatory. At the other end, many human rights people (including me) generally favored them as a way to balance the global rights of business with some matching responsibilities.

Professor Ruggie was appointed in July 2005 to resolve the controversy. A political scientist wise in the ways of humans, societies, and the UN, Ruggie has succeeded in calming tempers. For nearly three years now, he has been vigorously proactive, talking with all groups having a stake in the controversy, persuading many of them to comment in writing, arranging for authoritative reports on specific points, and publicly communicating his approach in a series of speeches and articles. One of his first acts was to bury the term “Norms,” which had become overburdened with emotions.

A by-product of Ruggie’s openness and transparency is that the complex issues involved are now on the public record, thanks to an archive maintained by Business and Human Rights Resource Center, headquartered in London with offices in Hong Kong, South Africa, and the United States, and world accessible through a voluminous Website.

So we can already know where Ruggie stands on most points at which business and human rights intersect. Most refreshingly, his stance is one that recognizes the complexities of his project, and does not oversimplify them with easy slogans appealing to one side while infuriating the other.

At an international business forum held at the World Bank last October, Ruggie discussed his perspective on business’s twin roles as rule makers and what he calls “rule takers.” Here is an excerpt from his remarks, lengthy because his insights are not easy to summarize and because they tip off what will almost certainly be a major aspect of his upcoming report:

Business already is deeply involved in global governance—quite apart from its influence on individual governments. Employers associations, along with labor, have been constitutionally represented in the ILO since 1919. Today, business participates as a rule maker in such diverse areas as setting global telecommunications standards and protecting intellectual property rights.

Through bilateral investment treaties and host government agreements, companies can seek to insulate their direct foreign investments from future legislative or regulatory changes in host countries, including policies that promote human rights. And they are able to proceed directly to binding international arbitration, bypassing the host country’s courts, if they believe that their investments are adversely affected by such regulatory changes.

But while business has become a direct participant in the system of global governance, it has proven a far greater challenge to render it subject to international rules for harms committed abroad—to make business a global rule taker, in other words. For example, a parent company generally is not legally liable for wrongs committed by an overseas subsidiary, even where it is the sole shareholder, unless the subsidiary is under such close operational control by the parent that it can be seen as its mere agent. And sourcing goods and services from contracted suppliers generally is considered an arms-length market exchange, even for sole suppliers, not a related-party transaction.

To be sure, each legally distinct entity within a corporate group or network is subject to the laws of the countries in which it operates. But host country governments and courts often are unable or unwilling to confront major global corporate players. And the group or network as a whole is not governed directly by international law.

In short, we see an emerging trend whereby business as rule maker increasingly operates in a single global economic space; but business as rule taker largely continues to operate in the world of separate national jurisdictions, with only a thin overlay of relatively weak international institutions and legal instruments.

In the area of human rights, the main bridges between these two worlds are lawsuits where they are permitted, thus far primarily under the US Alien Tort Claims Act; “naming and shaming” campaigns by NGOs; and self-governance or multi-stakeholder initiatives that corporations adopt voluntarily.

To put it simply: we need stronger bridges. History suggests that such a pronounced divergence between rule maker and rule taker may not be politically sustainable—that pushback against globalization driven by increased populism, protectionism and various forms of fundamentalism is likely to occur unless ways can be found to establish more effective transnational means of governance, covering all key international players, including business.

Many who speak for victims of corporate related human rights abuses have advocated drafting a binding international legal instrument as their preferred answer. But let us recall that the recently adopted United Nations Declaration on the Rights of Indigenous Peoples was twenty-two years in the making—and it is not now, nor will it soon become, a legally binding treaty. So whatever long-term aspirations one has, and however meritorious they may be, victims cannot wait a quarter century—they need help now.

My own approach to this challenge is to build up from what we’ve got—and aim to close “law free” zones where they exist.

Call that a carefully charted path between opposing arguments. It is more accurate, I believe, to say that Ruggie is trying to establish a common ground -- a new paradigm -- for business and human rights that the corporate world would be wise to recognize. His upcoming report promises to outline a major step in that evolving process.

Many people see no need for such a new paradigm for business. They accept the prevailing paradigm as a good one, subject perhaps to some tinkering, but essentially the best achievable, at least for this generation. Naturally, they oppose Ruggie’s enterprise and any cooperation with it.

But many others, although agreeing that the prevailing paradigm does not promote an inclusive globalization, contend that Ruggie’s paradigm is unsatisfactory for one reason or another. They, too, can make a contribution by presenting a paradigm that might be better.

For me this is not a one-time story, but a developing one with dramatic consequences for the future, whichever way it goes. I’ll be following it closely. So keep tuned to Human Rights for Workers Too by bookmarking http://humanrightsforworkers.blogspot.com/. See you there again soon.


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Imbedded in WTO: Human Rights for Some

Does the WTO promote human rights? No, it does not. At least that would be the unqualified answer of the WTO and trade experts generally. But that answer should be qualified, and one trade expert, Susan Ariel Aaronson, nails down a partial qualification in a new study.

“Human rights are seeping into WTO deliberations and activities,” says Aaronson, associate professor in the business and international affairs schools at George Washington University and co-author of "Trade Imbalance: the Struggle to Weigh Human Rights in Trade Policymaking" (Cambridge 2008).

Aaronson makes clear that the WTO has no mandate on human rights and that the various trade and investment agreements under its umbrella make no explicit mention of human rights as such. Yet “a wide range of human rights concerns” arise in day-to-day WTO operations, and she documents examples in the following categories:

-- “Members use trade waivers and exceptions to promote human rights at home or abroad.”
-- “They occasionally bring up human rights during accessions and trade policy reviews.”
-- “They have amended the TRIPS agreement to make it clear that nations can use the public health exception to TRIPS in times of public health emergencies.”
-- “Human rights concerns have even entered into trade negotiations (e.g., food security).”

John Ruggie, the UN secretary general’s special representative on business and human rights, who is preparing a report on business and human rights for the UN Human Rights Council, commissioned Aaronson’s study. Her overall conclusion is that although nation-states are limited by WTO agreements in their ability to advance human rights, they still have a good deal of leeway to do so at home and abroad.

Outside the paramaters of this study is another fascinating dimension to the global network of trade and investment agreements. Here, too, there is no explicit mention of human rights, but that doesn’t mean they are non-existent.

Actually, human rights linkages are evident in a surprising number of WTO trade agreements. That’s especially so for two major WTO concerns: the protection of intellectual property rights and the protection of the rights of foreign investors. Check the Universal Declaration of Human Rights. Its article 27 proclaims the right to the protection of various types of intellectual property; and article 17, “the right to own property alone as well as in association with others” and the right not to be arbitrarily deprived of property.

These particular human rights are implemented at the WTO (or multilateral) level by two key global agreements: more than amply by the “Trade-Related Aspects of Intellectual Property Rights” (TRIPS) agreement and, less satisfactorily (from the typical investor’s perspective) by the “Trade-Related Investment Measures (TRIMs)” agreement.”

Country-to-country (bilateral) agreements carry this implementation even further, with TRIPs and TRIMs protections strengthened beyond WTO requirements. Take, for example, the administration’s trade agreement with Colombia, which Congress has just shelved. The Colombia FTA devotes

-- 33 pages to protecting intellectual property rights, 11 of them on enforcement alone
-- 35 pages to protecting foreign investment, very broadly defined, 13 of them on enforcement through dispute settlement procedures in which only the investor can bring a claim.

Again, there is no mention that the rights involved are human rights. That omission holds true for a bundle of other WTO-protected rights in this FTA, as well as across-the-board in all multilateral and bilateral trade agreements.

This is not a semantic quibble. It is an issue that leads to a fundamental question: is the present global trade regime serving the common good or not?

In response to demands that the WTO start protecting the human rights of workers, the usual answer is that the WTO does not do human rights. The truth is otherwise. The WTO does indeed do some human rights, and that limited mission is imbedded in the policies and rules of the whole trade and investment regime.

Open acknowledgment of this fact – by putting an end to mislabeling – would turn the spotlight on who now benefits from the human rights provisions that the WTO promulgates globally, but under other names. Such transparency would reveal the way that selected human rights are woven into the very fabric of the WTO. It would expose the inequity, the lack of inclusiveness, of a WTO system that ignores the human rights of stakeholders indispensable to the global economy – the world’s working men and women.

My congratulations to Professor Aaronson for her provocative study. It should be complemented by an analysis on how extensively the WTO and its agreements support the human rights of global business without acknowledging the human rights principles of the enterprise.


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Life After Corporate Codes of Conduct?

Even with factory monitoring, corporate codes of conduct can’t be relied on as the tool to eliminate sweatshops, and must be replaced by a new way to achieve that purpose. That’s the conviction of two pioneers in the anti-sweatshop movement:

-- Neil Kearney, head since 1988 of the global labor federation that now represents 10,000,000 garment and shoe workers in 110 countries, and

-- the United Students against Sweatshops (USAS), whose affiliates in more than 200 universities, colleges, and high schools just celebrated their national organization’s 10^th anniversary.

Kearney, who has visited sweatshops in more than 140 countries, assesses the current working conditions in his industry as worse than they were a decade ago. In a talk to a recent European Union conference on corporate social responsibility, Kearney painted what he called “all in all, a pretty depressing picture.” The specifics he cited, according to a press release of his organization, the International Textile, Garment, and Leather Workers’ Federation (ITGLWF):

“While some reduction in child labor had occurred and health and safety had improved, wages in the sector had fallen by 25 percent in real terms over the past decade, and working hours had increased with a 60-hour work week now widely accepted as the norm…Employment was less secure, and abusive treatment of workers was more common.

“On key compliance issues like freedom of association and collective bargaining no progress had been achieved. Indeed, in some cases social auditors are promoting employer-dominated worker committees as alternatives to genuine trade unions.”

Meantime, USAS and the implementing arm it founded, the Worker Rights Consortium, have also been disappointed about achieving their anti-sweatshop goals. Factory violations of codes of conduct persisted. More serious, some key factories adhering to the code closed down in recent years. In the highly competitive global marketplace, they were not rewarded with enough business to keep them afloat.

Increasingly, therefore, especially over the past year or two, both the global garment union and USAS/WRC became convinced that code-dependent systems are too fragile. Instead of just tightening up the language and enforcement of the codes, they concluded that a new approach was needed. Both are preparing for a life beyond corporate codes of conduct. Each is working on a successor system adapted to its own environment.

But could the international labor market of the garment and shoe industries be such a jungle that it can never be civilized? Kearney and his ITGLWF are well into the process of finding out.

Global Cooperation Born of a Tragedy in Bangladesh

It started during a garment factory disaster in Bangladesh in mid-2005. There Kearney had his first direct contact with Inditex, the giant Spain-based global clothing retailer, which imported from a factory whose collapse killed over 61 workers and injured many more. From low-key cooperation to bring relief to families of the dead and to the injured, Inditex and the global union went on to deal with labor problems elsewhere in the multinational’s supply chain.

“Inditex and ITGLWF soon concluded that global problems required global solutions, implemented locally,” says Kearney Late last year the two sides signed what Kearney calls a “trail-blazing international framework agreement.” Under it, Inditex recognizes the ITGLWF as the chain’s global trade union partners throughout its supply chain.

The agreement has typical code provisions -- no child labor, no forced labor, no discrimination, no excessive working hours, no unsafe or unhealthy workplaces – adds another, “payment of a living wage,” and affirms a stronger “right of all workers to unionize and bargain collectively as the cornerstone of decent work.” But to insure that the standards aren’t empty words, the agreement also puts in place a: a labor-management relationship that extends beyond the domestic and into global levels, including not only direct suppliers but contractors and subcontractors.

Does it work? The Inditex Framework Agreement now has five major garment manufacturing companies under its umbrella. About 1,100 workers dismissed for union membership or activity have been reinstated. Moreover, in February, two Inditex suppliers signed company-level agreements with ITGLWF affiliates in Cambodia. Significantly, Kearney outlined these achievements in a presentation in Phnom Penh before Her Majesty, Queen Sophie of Spain, during her visit to Cambodia..

For its part, United Students against Sweatshops has been working for two years on a plan to transform how its anti-sweatshop policies are implemented. Its “Designated Suppliers Program” would require that university logo apparel be made only in factories producing mainly for the collegiate market and certified as paying a living wage and meeting other labor standards. Moreover, it would require licensees, such as Nike, adidas, Wal-Mart) to pay those factories a price sufficient to meet those standards.

Those responsibilities of course need more than a one or two-page code of conduct. In fact, the Designated Suppliers Program needs 11 pages to spell out its requirements on transparency, the living wage standard and how it is determined, licensee obligations, implementation, and enforcement, including binding arbitration.

So far 40 major universities – including Duke, Georgetown, the University of Wisconsin-Madison, and other 1990s pioneers in adopting codes of conduct – have given written support to DSP. So far, that support has not yet reached the critical mass needed to put DSP into operation.

Both ITGLWF and USAS/WRD are engaged in heroic struggles that pit modern Davids against today’s Goliaths. What side is the U.S. government on? In a contorted act, it is on both sides. The rhetoric aims to cheer David and his side. But the administraion’s zeal for Free Trade Agreements puts it firmly on the side of multinational Goliaths.

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