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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