Tuesday, April 15, 2008

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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