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At the international level, the concept of corporate liability is unfortunately vague, especially on the transnational liability of multinational corporations. There is, till date, no set of binding international principles for determining the liability of multinational corporations under international law which allow for the imposition of sanctions on erring corporations. This paper aims to assess the present liability of Transnational Corporations (TNCs) and shall try to frame an argument to help expand the scope of their liability under international law. Broadly, the paper shall assess the criminal liability of corporations under international criminal law and shall suggest how the “identification doctrine”, the “aggregation doctrine” and the “doctrine of interest” are effective solutions to help bring about the direct accountability of multinational corporations under international criminal law. It shall then assess the liability of TNCs for violation of human rights and their liability for environmental law violations.
The literature on corporate liability is indeed endless. A number of authors have written previously on the subject and a number of conferences and symposiums have been organized on it as well. At the national level, every country has its own laws governing corporate liability, if not with an all encompassing scope, then at least to govern tortious and environmental law principles. In India itself, the Supreme Court has ensured that the Polluter Pays Principle and the Precautionary Principle are now firmly ingrained into Indian environmental jurisprudence.2 It has also formulated the principle of Absolute Liability,3 which has been stated in the landmark Shriram Gas Leak Case4 as:
[W]here an enterprise is engaged in a hazardous or inherently dangerous activity and harm results to anyone on account of an accident in the operation of such a hazardous or inherently dangerous activity…the enterprise is strictly and absolutely liable to compensate all those who are affected by the accident and such liability is not subject to any of the exceptions which operate vis-a-vis the tortious principle of strict liability under the rule of Rylands v. Fletcher.[Emphasis added]5
whether such ancient civilizations actually believed in such a concept of transnational corporation as it is perceived today.10 It is likely that most international trades during the ancient and medieval periods of human history did not revolve around such a concept of a multinational enterprise.“Trade” in those times was synonymous with the import and export of goods which were not produced in one’s own State/Kingdom, for usually rare commodities for the “importer State” could be manufactured or grown in their own territory, rather than the modern concept of setting up a factory or a subsidiary by a corporation in a Country or State other than its own so as to manufacture the same goods there at a lower cost or for other economic considerations.
The modern multinational corporation as we know today first emerged in the seventeenth century with the formation of flourishing trade empires such as the Dutch East India Company and the British East India Company.11 In fact, in many ways the British East India Company can be considered to be the first fully developed transnational corporation, with its economic business empire spanning from West Africa to India to China. Adding to the well documented human rights abuses of the Company,12 one observed the well known trend of a complacent attitude of the corporation have unfortunately, only recently started to draw the serious attention of the international community.
As per the United Nations Conference on Trade and Development(UNCTAD) World Investment Report (2009), there exist currently 82,000 transnational corporations which own at least 810,000 foreign affiliates and subsidiary companies.14 The world stock of Foreign Direct Investment(FDI), which forms the capital base of these operations, is nine trillion US dollars.15 The financial impact of the subsidiary corporations owned by them is also substantial. Exports by foreign affiliates are supposed to account for one third of all goods and services, and the number of people employed by them rose to seventy seven million worldwide in 2008.16 The 2009 report also notes that over the past fifteen years, the largest TNCs have undergone a steady process of internationalization and that there has been a proportionate increase in the number of corporations based in developing countries.17 An UNCTAD survey has even shown that despite “a temporary setback in their investment plans in the short term, large TNCs expect to continue to internationalize and increase their FDI expenditures in the medium term, with a growing focus on emerging markets.”18
The numbers clearly highlight the dependence of the international economy, and consequently, State governments on the business of these TNCs. Developing countries are especially susceptible as TNCs generally have high cash mobility and can easily withdraw investments from State economies in case the circumstances in the economy are not to their favour,19 thus rendering any domestic enforcement action unviable for the State and often resulting in a tacit consent by governments for their condemnable practices and in many cases even active participation by individual members of the government due to financial greed.
This brings about an interpretation of criminal law principles, as generally recognised by States, as having been incorporated under international criminal law.21 Consequently, corporations should logically be considered as criminally accountable under international law for any violations of international criminal law by them. Yet, internationally no corporation has till date been prosecuted directly for any violations of the laws of war or international criminal law.
However, to claim that corporations, transnational or otherwise, have never been held accountable under international law would be incorrect. Under Article 9 of the Charter of the International Military Tribunal for Nuremberg, the Tribunal had the authority to determine the criminal status of an organisation.22 But at the same time, Article 10 ensured that only individual members of such corporations could be held liable rather than the corporation itself.23 While it expressly laid down that in such cases while the criminal nature of the corporation shall not be called into question, the Article also provided that “any signatory shall have the right to bring individuals to trial for membership therein before national, military or occupational courts.”24 Therefore, the direct jurisdiction of the Tribunal over legal persons stood usurped, and that has remained the status
The traditional subject’s doctrine assumed that the only violator of an individual’s human rights could be the State.36 As this is still the predominant view among a large number of intellectuals and in a large number of judicial systems, the role of public international law in regulating the activities of transnational corporations in host States is not fully developed.37 The absence of a binding code of conduct enables TNCs to evade liability at the international level for human right violations.38
The present international human rights law was born from the UN Charter39 and the Nuremberg trials,40 and its construction is structured on the Universal Declaration of Human Rights (UDHR) which itself is not legally binding.41 Human rights were transferred during this period from the domestic jurisdiction of sovereign states to the international arena.42 The responsibility to abstain from and prevent violations of human rights became an obligation of nation states.43 This shift in responsibility positively affected
the international human rights movement by bringing human rights atrocities to international attention. However, the focus on war crimes of World War II limited the scope of the body of law.44 For example, the international obligation does not extend to human rights violations committed by anyone but states or state actors. Nonetheless, a state can be held accountable “for violations by private actors if it fails to exercise due diligence to prevent the violations or to respond to them. But, if a government does not seriously investigate human rights violations committed by private parties, those parties are aided in a sense by the government, thereby making the State responsible on the international plane.”45
The three non-binding codes which intend to respect TNC liability for human right violations are the Organization for Economic Co-operation and Development (OECD) Guidelines,46 the International Labour Organization(ILO) Tripartite Declaration,47 and the United Nations Norms on the Responsibilities of Transnational Corporations and other Business Enterprises with Regards to Human Rights (hereinafter referred to UN Norms).48 These three codes, especially the last, help in interpreting a number of exploitative practices of corporations, including environmental exploitation, within the ambit of human rights.
The UN Norms is the first attempt to establish an international framework for mandatory standards on Corporate Social Responsibility(“CSR”). The UN Norms were intended as assistance to companies in framing the human rights responsibilities for business. In the preamble to the UN Norms, the companies are referred to “as organs of societ” and have the responsibility to promote and protect the human rights set forth in the UDHR. Thus, the UN Norms are intended to provide companies with guidelines as to how to deal with human rights and at the same time give society a management tool concerning the behaviour and activities of companies.
However, the UN Norms seem to be facing two challenges: Firstly,
they are neither binding nor merely guidelines, rather something in between. Due to this uncertainty regarding status, businesses are understandable sceptics of the UN Norms, in its present form, due to risk of litigation. Secondly, they are very wide in scope; going beyond globally accepted minimum standards. The UN Norms will be by far the best international legal instrument to bring about TNC accountability, provided they are made binding and their enforceability mechanism is clarified through amendments.49
Unfortunately, governments of developing countries are often reluctant to restrain the activities of TNCs for fear of economic losses and TNCs are not directly accountable for the violation of human rights under international law.
It is submitted that it is felt that a binding multilateral code of conduct shall be the most effective way to hold transitional corporations accountable for their human right violations. However, it is also acknowledged that an important issue is whether a code should be legally binding instrument, or should it be implemented indirectly through a voluntary process of policy formulation by States.50 However, studies have helped reach the conclusion that a binding code of conduct would protect the interests of States as well as of the TNCs more than a voluntary regulation.51
But realities must also be taken into consideration. It is obvious that any binding international convention shall not emerge in the very near future. Hence, till such binding convention is finally given shape, one must continue to rely on methods presently employed to try and hold TNC’s accountable, i.e., through regulation by host States,52 Non Governmental Organisations (NGOs) pressure,53 self regulation,54 etc.55
Environmental law infringements must be read conjunctively with human rights infringements56 as the two are often interlinked. As observed by M. Sornaraja “the movement in human rights have been paralleled in the area of environmental protection.”57 But unlike human rights abuses, wherein the international community initiative has shown in helping to make TNCs more accountable,58 penalties and enforcement against environmental abuses have still remained within the exclusive domain of State jurisdiction Courts.59 Unfortunately, while there are a large number of States which are able to enforce MNC environmental accountability, there are also a large number of States which cannot, particularly in Africa.60 This has led to the development of the “Pollution Havens Hypothesis”, predicted to arise “if environmental regulations differ between countries, if capital is mobile, and if trade rules allow firms to relocate and still sell their products to the same customers.”61 The pollution haven principle predicts that, under free trade, multinational firms tend to relocate the production of their pollution-intensive goods to developing countries, taking advantage of the low environment monitoring in these countries.62
It is conceded that in order for MNCs to be made more accountable
“Soft law” international instruments, though not binding, can often serve authoritative value and in the case of transnational corporations have been known to help in persuading such corporations to maintain fair business practices for themselves and also for all subsidiary corporations under them. They become particularly effective, despite the lack of enforcement mechanisms, due to their promotion by Non Governmental Organisations which help in generating positive public opinion in favour of compliance by corporations to such soft law international codes.68 It is also acknowledged that a number of corporations have implemented self regulating codes to help govern themselves and to promote compliance of such international codes and compliance with the laws of the host state as well as the state of incorporation.69 A prominent example in India is that of Gap Inc.70 These self regulatory mechanisms have even helped to encourage the governments of the host State to “step up” and build mechanisms to check such violations.71 However, it is submitted that such positive responses by corporations and governments have been noticed only among a
Though fortunately such views are heard less often these days, they have not disappeared entirely and hence it is necessary to maintain binding and enforceable international codes over transnational corporations. Add to this the stark reality is that TNCs now have substantial control over the governments of even the developed countries of their origin74 and therefore we are meeting with the situation where the only viable solution seems to be that of international accountability to organisations of international origin.
exceptionally bright for them. Thus, the most feasible and the most reasonable solution is to allow the growth of such corporations subject to codified and binding international law which shall hold transnational corporations directly accountable for their actions resulting in violations of international criminal law, international environmental law and human rights. A State as well as an individual should be allowed to move against any corporation alleged to have violated such law and can petition for the enforcement of his rights either before a domestic court of the State in which he resides, or an international court, such as the current practice at the European Court of Human Rights (ECHR). However, till such an international redressal mechanism can be established with effective enforceability, it is best to derive interpretations out of the existing international codifications and domestic law doctrines as enumerated above and help to build an international criminal jurisprudence relating to direct accountability of Transnational Corporations.
The literature on corporate liability is indeed endless. A number of authors have written previously on the subject and a number of conferences and symposiums have been organized on it as well. At the national level, every country has its own laws governing corporate liability, if not with an all encompassing scope, then at least to govern tortious and environmental law principles. In India itself, the Supreme Court has ensured that the Polluter Pays Principle and the Precautionary Principle are now firmly ingrained into Indian environmental jurisprudence.2 It has also formulated the principle of Absolute Liability,3 which has been stated in the landmark Shriram Gas Leak Case4 as:
[W]here an enterprise is engaged in a hazardous or inherently dangerous activity and harm results to anyone on account of an accident in the operation of such a hazardous or inherently dangerous activity…the enterprise is strictly and absolutely liable to compensate all those who are affected by the accident and such liability is not subject to any of the exceptions which operate vis-a-vis the tortious principle of strict liability under the rule of Rylands v. Fletcher.[Emphasis added]5
whether such ancient civilizations actually believed in such a concept of transnational corporation as it is perceived today.10 It is likely that most international trades during the ancient and medieval periods of human history did not revolve around such a concept of a multinational enterprise.“Trade” in those times was synonymous with the import and export of goods which were not produced in one’s own State/Kingdom, for usually rare commodities for the “importer State” could be manufactured or grown in their own territory, rather than the modern concept of setting up a factory or a subsidiary by a corporation in a Country or State other than its own so as to manufacture the same goods there at a lower cost or for other economic considerations.
The modern multinational corporation as we know today first emerged in the seventeenth century with the formation of flourishing trade empires such as the Dutch East India Company and the British East India Company.11 In fact, in many ways the British East India Company can be considered to be the first fully developed transnational corporation, with its economic business empire spanning from West Africa to India to China. Adding to the well documented human rights abuses of the Company,12 one observed the well known trend of a complacent attitude of the corporation have unfortunately, only recently started to draw the serious attention of the international community.
As per the United Nations Conference on Trade and Development(UNCTAD) World Investment Report (2009), there exist currently 82,000 transnational corporations which own at least 810,000 foreign affiliates and subsidiary companies.14 The world stock of Foreign Direct Investment(FDI), which forms the capital base of these operations, is nine trillion US dollars.15 The financial impact of the subsidiary corporations owned by them is also substantial. Exports by foreign affiliates are supposed to account for one third of all goods and services, and the number of people employed by them rose to seventy seven million worldwide in 2008.16 The 2009 report also notes that over the past fifteen years, the largest TNCs have undergone a steady process of internationalization and that there has been a proportionate increase in the number of corporations based in developing countries.17 An UNCTAD survey has even shown that despite “a temporary setback in their investment plans in the short term, large TNCs expect to continue to internationalize and increase their FDI expenditures in the medium term, with a growing focus on emerging markets.”18
The numbers clearly highlight the dependence of the international economy, and consequently, State governments on the business of these TNCs. Developing countries are especially susceptible as TNCs generally have high cash mobility and can easily withdraw investments from State economies in case the circumstances in the economy are not to their favour,19 thus rendering any domestic enforcement action unviable for the State and often resulting in a tacit consent by governments for their condemnable practices and in many cases even active participation by individual members of the government due to financial greed.
This brings about an interpretation of criminal law principles, as generally recognised by States, as having been incorporated under international criminal law.21 Consequently, corporations should logically be considered as criminally accountable under international law for any violations of international criminal law by them. Yet, internationally no corporation has till date been prosecuted directly for any violations of the laws of war or international criminal law.
However, to claim that corporations, transnational or otherwise, have never been held accountable under international law would be incorrect. Under Article 9 of the Charter of the International Military Tribunal for Nuremberg, the Tribunal had the authority to determine the criminal status of an organisation.22 But at the same time, Article 10 ensured that only individual members of such corporations could be held liable rather than the corporation itself.23 While it expressly laid down that in such cases while the criminal nature of the corporation shall not be called into question, the Article also provided that “any signatory shall have the right to bring individuals to trial for membership therein before national, military or occupational courts.”24 Therefore, the direct jurisdiction of the Tribunal over legal persons stood usurped, and that has remained the status
The traditional subject’s doctrine assumed that the only violator of an individual’s human rights could be the State.36 As this is still the predominant view among a large number of intellectuals and in a large number of judicial systems, the role of public international law in regulating the activities of transnational corporations in host States is not fully developed.37 The absence of a binding code of conduct enables TNCs to evade liability at the international level for human right violations.38
The present international human rights law was born from the UN Charter39 and the Nuremberg trials,40 and its construction is structured on the Universal Declaration of Human Rights (UDHR) which itself is not legally binding.41 Human rights were transferred during this period from the domestic jurisdiction of sovereign states to the international arena.42 The responsibility to abstain from and prevent violations of human rights became an obligation of nation states.43 This shift in responsibility positively affected
the international human rights movement by bringing human rights atrocities to international attention. However, the focus on war crimes of World War II limited the scope of the body of law.44 For example, the international obligation does not extend to human rights violations committed by anyone but states or state actors. Nonetheless, a state can be held accountable “for violations by private actors if it fails to exercise due diligence to prevent the violations or to respond to them. But, if a government does not seriously investigate human rights violations committed by private parties, those parties are aided in a sense by the government, thereby making the State responsible on the international plane.”45
The three non-binding codes which intend to respect TNC liability for human right violations are the Organization for Economic Co-operation and Development (OECD) Guidelines,46 the International Labour Organization(ILO) Tripartite Declaration,47 and the United Nations Norms on the Responsibilities of Transnational Corporations and other Business Enterprises with Regards to Human Rights (hereinafter referred to UN Norms).48 These three codes, especially the last, help in interpreting a number of exploitative practices of corporations, including environmental exploitation, within the ambit of human rights.
The UN Norms is the first attempt to establish an international framework for mandatory standards on Corporate Social Responsibility(“CSR”). The UN Norms were intended as assistance to companies in framing the human rights responsibilities for business. In the preamble to the UN Norms, the companies are referred to “as organs of societ” and have the responsibility to promote and protect the human rights set forth in the UDHR. Thus, the UN Norms are intended to provide companies with guidelines as to how to deal with human rights and at the same time give society a management tool concerning the behaviour and activities of companies.
However, the UN Norms seem to be facing two challenges: Firstly,
they are neither binding nor merely guidelines, rather something in between. Due to this uncertainty regarding status, businesses are understandable sceptics of the UN Norms, in its present form, due to risk of litigation. Secondly, they are very wide in scope; going beyond globally accepted minimum standards. The UN Norms will be by far the best international legal instrument to bring about TNC accountability, provided they are made binding and their enforceability mechanism is clarified through amendments.49
Unfortunately, governments of developing countries are often reluctant to restrain the activities of TNCs for fear of economic losses and TNCs are not directly accountable for the violation of human rights under international law.
It is submitted that it is felt that a binding multilateral code of conduct shall be the most effective way to hold transitional corporations accountable for their human right violations. However, it is also acknowledged that an important issue is whether a code should be legally binding instrument, or should it be implemented indirectly through a voluntary process of policy formulation by States.50 However, studies have helped reach the conclusion that a binding code of conduct would protect the interests of States as well as of the TNCs more than a voluntary regulation.51
But realities must also be taken into consideration. It is obvious that any binding international convention shall not emerge in the very near future. Hence, till such binding convention is finally given shape, one must continue to rely on methods presently employed to try and hold TNC’s accountable, i.e., through regulation by host States,52 Non Governmental Organisations (NGOs) pressure,53 self regulation,54 etc.55
Environmental law infringements must be read conjunctively with human rights infringements56 as the two are often interlinked. As observed by M. Sornaraja “the movement in human rights have been paralleled in the area of environmental protection.”57 But unlike human rights abuses, wherein the international community initiative has shown in helping to make TNCs more accountable,58 penalties and enforcement against environmental abuses have still remained within the exclusive domain of State jurisdiction Courts.59 Unfortunately, while there are a large number of States which are able to enforce MNC environmental accountability, there are also a large number of States which cannot, particularly in Africa.60 This has led to the development of the “Pollution Havens Hypothesis”, predicted to arise “if environmental regulations differ between countries, if capital is mobile, and if trade rules allow firms to relocate and still sell their products to the same customers.”61 The pollution haven principle predicts that, under free trade, multinational firms tend to relocate the production of their pollution-intensive goods to developing countries, taking advantage of the low environment monitoring in these countries.62
It is conceded that in order for MNCs to be made more accountable
“Soft law” international instruments, though not binding, can often serve authoritative value and in the case of transnational corporations have been known to help in persuading such corporations to maintain fair business practices for themselves and also for all subsidiary corporations under them. They become particularly effective, despite the lack of enforcement mechanisms, due to their promotion by Non Governmental Organisations which help in generating positive public opinion in favour of compliance by corporations to such soft law international codes.68 It is also acknowledged that a number of corporations have implemented self regulating codes to help govern themselves and to promote compliance of such international codes and compliance with the laws of the host state as well as the state of incorporation.69 A prominent example in India is that of Gap Inc.70 These self regulatory mechanisms have even helped to encourage the governments of the host State to “step up” and build mechanisms to check such violations.71 However, it is submitted that such positive responses by corporations and governments have been noticed only among a
Though fortunately such views are heard less often these days, they have not disappeared entirely and hence it is necessary to maintain binding and enforceable international codes over transnational corporations. Add to this the stark reality is that TNCs now have substantial control over the governments of even the developed countries of their origin74 and therefore we are meeting with the situation where the only viable solution seems to be that of international accountability to organisations of international origin.
exceptionally bright for them. Thus, the most feasible and the most reasonable solution is to allow the growth of such corporations subject to codified and binding international law which shall hold transnational corporations directly accountable for their actions resulting in violations of international criminal law, international environmental law and human rights. A State as well as an individual should be allowed to move against any corporation alleged to have violated such law and can petition for the enforcement of his rights either before a domestic court of the State in which he resides, or an international court, such as the current practice at the European Court of Human Rights (ECHR). However, till such an international redressal mechanism can be established with effective enforceability, it is best to derive interpretations out of the existing international codifications and domestic law doctrines as enumerated above and help to build an international criminal jurisprudence relating to direct accountability of Transnational Corporations.