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MNCs and International Law

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The advancement of this subject has been reflected in a large body of principles and rules that have been incorporated into several treaties, binding acts of international organization, state practices and soft law commitments, applied bilaterally, regionally and globally. Some principles of international environmental law are embodied or specifically expressed in binding instruments, while others are predominantly based in customary law. Among the most supported and frequently endorsed principles in practice are: (i) State sovereign over natural resources, (ii) responsibility not to cause environmental damage, (iii) principle of preventive action, (iv) principle of co-operation, (v) principle of sustainable development, (vi) precautionary principle/approach, (vii) polluter pays principle and (viii) principle of common but differentiated responsibilities.[1] Some of these principles have their origin in the 1972 United Nation Conference on the Human Environment and the 1992 United Nations Conference on Environment and Development. Both conference produced declarations of principles (Stockholm Declaration[2] and 1992 Rio Declaration[3]), which were adopted by the United Nations General Assembly. After the adoption of these declarations, further developments in international environmental law have taken place that affect the definition, status and impact of principles and concepts in international environmental law. In the mid-1970s, the UN Commission on Transnational Corporations considered, for the first time, the idea of a code of conduct. Nevertheless, it was in the 1990s when there was a proliferation of codes of conduct, resulting from an increased international attention on corporate human right abuses[4] and emphasis on corporate responsibility.[5] PROBLEMS WITH INTERNATIONAL LAW The international legal system seems completely inadequate to regulate powerful non-state actors, such as MNCs, as nations battle over sovereignty and are reluctant to give up power to international regulatory bodies, caring more for the bottom line of economic growth than human rights. MNCs consist of international entities beyond national jurisdictions in terms of economic resources and decision-making responsibility. This legal conundrum has been obvious for at least thirty years, yet there have been only minor improvements in accountability.ener">[6] The outmoded regulation system and the dynamic MNCs’ considerable economic and political power combine to create a problematical regulatory task. The MNC has transcended national legal systems and ignored the feeble international system to make the imposition of human rights norms nearly impossible. The negative impact that the phenomenon of economic globalization has had on state regulation and peoples’ lives is becoming apparent. The move to more “competitive nations” often means moving to states that have reduced regulation or lower tax incentives in order to attract the fickle eye of multinational corporations. This in turn means other countries must regulate less in order to attract investment and employment. It has become impossible for nations, even if they are willing, to impose any obligations upon MNCs to contribute to the communities from which they are extracting resources and making vast profits. Any attempt to do so would reduce that nation’s competitiveness. The proceeds of economic development are thus denied to host national governments which are instead extracted as profits for foreign investors. The nation has been weakened in terms of managing human rights obligations and the first to be abandoned are social, economic and cultural rights, as the original provision of these rights directly costs money. The traditional approach to human rights law dictates that they protect the individual against the state. This doctrine was developed in a time when international business was less prominent and international economic interdependence was far less important. Since international business is now mobile enough to avoid stringent national regulations,[7] or influential enough to persuade against the adoption of such regulation, international law must move beyond the traditional view towards regulating all of the organs of the international community. This historical bias of international law concerning the regulation of interstate relations has begun to give way to emerging trends conferring rights and duties on non-state actors such as supranational institutions[8] and other actors, including insurgent or rebel groups,[9] individuals and corporations.[10] This new type of non-state actor liability and responsibility under international law is emerging in two ways. The first entails indirect accountability through the horizontal application of international law and the other through the application of international law directly to the non-state actors in question. The lethargic response regarding social, economic and cultural rights by the international community has been a failure in its duty to enact laws to regulate for the good of humanity as a whole[11]. This is, in part, due to the fact that law-makers consider the “globalization” phenomena to be a socio-economic problem that they are not capable of dealing with. Politicians are equally loath to alter the status quo, as they fear discouraging profit-maximization and growth, and thereby impairing their nation’s economic competitiveness. Social and economic rights generally imply positive obligations on the part of the state and private actors such as MNCs, which cost money, and therefore reduce profit maximization. Furthermore, multinational financing, operations and joint-ventures have combined with decreasing national control over international commerce to weaken corporation-state relations, thereby making regulation even more difficult.[12] Until recently, this gap in international law was increasingly widening. As both cause and effect of growing corporate economic power, the international and domestic political systems have increasingly relinquished their control over business. Economic power holds political influence. The MNCs dominate national planning on issues such as trade, patent and economic policy. While governments remain divided by conflicting interests, such as competitiveness versus social reform, MNCs have a clear concise purpose of profit maximization, which speaks loudly and clearly to influential members of national populations. Fortunately, international and national laws have begun to adapt in order to regulate effectively in an increasingly dynamic world. There now exists a wealth of international regulation that reflects a move away from the traditionalist view of international law, whereby actions within one state’s jurisdiction are subject to domestic sovereignty only.[13] Internationally, these include GATT, Draft Multilateral agreement on Investment (MAI), Anti-corruption, Environmental Regulations, the International Criminal Court and advances concerning individual responsibility for war crimes and crimes against humanity in the international tribunals. Regulations within domestic systems have advanced as well with the adaptation of the Alien Tort Claims Act in the US and the relaxation of Forum Non Conveniens rules in Great Britain, which allow for MNCs to be held liable for actions of their subsidiaries committed abroad. However, the gap in international law regarding MNCs, clearly still exists. It is time to move towards solutions. Solutions are imperative in this regard due to the enormous impact of MNCs on the enjoyment of economic, social and cultural rights.
[1] PH. SANDS / J. PEEL, (note 19) p. 187. [2] See Declaration of the United Nations Conference on the Human Environment (16 June 1972) UN Doc A/CONF.48/14/Rev.1: http://www.un-documents.net/aconf48-14r1.pdf. [3] See Rio Declaration on Environment and Development (13 June 1992) UN Doc A/CONF.151/26 (Vol. I): http://www.un.org/documents/ga/conf151/aconf15126-1annex1.htm. [4] M. MONSHIPOURI / C. E. WELCH / E. T. KENNEDY, “Multinational Corporations and the Ethics of Global Responsibility: Problems and Possibilities” Human Rights Quarterly, 25, 2003, pp. 965-989. [5] R. JENKINS, Corporate Codes of Conduct. Self-Regulation in a Global Economy, Technology, Business and Society Programme Paper Number 2, 2001, p. 6. [6] Over thirty years ago, Professor Vagts pointed out that "the present legal framework has no comfortable, tidy receptacle for such an institution," producing a tension between the legal theory of independent corporate units, each "operating as a native within the country of its incorporation," and the reality of the "economic interdependence" of the multinational corporation. Vagts, Detlev F. “The Multinational Enterprise: A New Challenge for Transnational Law,” 83 Harvard Law Review 739, at 743. [7] Blumberg, Phillip I., The Multinational Challenge to Corporation Law: The Search for a New Corporate Personality (1993) p.205. [8] Reparations for Injuries Case ICJ Reports, 1949, pp.149. [9] For Example, Common Article 3 to the Geneva Conventions enjoins insurgent groups and state armies to protect prisoners and to respect prohibitions relating to attacks of civilians, hostage taking, terrorist attacksor the use of starvation as a mode of combat. The Optional Protocal to the Convention on the Rights of the Child on the Involvement of Children in Armed Conflict, adopted by the UN General Assembly on November 16 2000 also places an obligation on armed groups including rebel forces to prevent children from participating in armed conflict. It also prohibits the recruitment of children into their forces. [10] For example, Autronic AG v. Switzerland, Eur. Ct. H.R. Series A. 178 (1990); 12 (1990) E.H.R.R. 485, para 47. [11] UNCTAD, World Investment Report 1999: Foreign Direct Investment and the Challenge of Development, Geneva-New York, United Nations Publications, 2009. [12] Claudio Grossman & Daniel D. Bradlow, “Are We Being Propelled Towards a People-Centered Transnational Legal Order?” 9 American University Journal of International Law & Policy 1, 8 (1993). [13]
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