The birth of globalization was followed by the emergence of the international actor -Transnational Corporations (TNCs) worldwide that established interwoven relationships with the society creating unapparent and unexpected consequences. TNCs are the mammoths of the modern globalized day with enormous international political and economical influence. The combined revenues and sales of a few top Transnational Corporations better the GDPs of several countries taken together.[1] Relaxations of trade barriers and expanding markets have been convenient for these corporations to operate with complete disregard to human rights of individuals and international guidelines that provides rules for their conduct. Equipped with greater power than a few states themselves, and profit as the motive, the TNCs gain a lot of latitude to commit gross human right abuses. Some infamous instances which we all might have heard of are of the Union Carbide Corporation and Enron Corporation in India, Unocal Corporation in Myanmar, Nike and Reebok in Asia, Shell Oil Company in Nigeria, Texaco in Ecuador, and Freeport-McMaron in Indonesia, among others.[2] Many a times the TNCs become complicit with the state in committing grievous human right crimes like genocide, forced labour, war crimes and slavery.[3] Legally regulating the TNC activities to be in compliance with United Nations resolutions has proven to be a massive challenge because the national and international laws are ill equipped to hold TNCs accountable for their actions. Hence, formulation of laws becomes the need of the hour. Since this issue is a nascent legal area, there is a scarcity of robust international laws that legally bind the TNCs for the violations they commit[4].

Most under-developed and developing countries encourage TNC operations in their states to bring about development. Some states consider it important that the priorities in their foreign policies include assisting corporations of their country to expand their footing globally and also to try lobbying for relaxation of regulatory barriers in other states.[5] The TNCs also enjoy the privilege of limited liability, and to hold them liable for their perpetrations, the courts take into account various factors in ascertaining whether they should pierce the corporate veil.[6]

The states are responsible under the international law for human right perpetrations committed by the TNCs that can be attributed to them, and their liability extends to the extra-territorial jurisdiction also. However, it is important to note here that this isn’t a solid responsibility imposed on to the state by any international regulatory body. Since a few states have underdeveloped legal mechanisms, legislating on the abuse of human rights by the TNCs becomes increasingly far-fetched. International mechanisms are state-centric as they burden the states to be solely accountable to hold the TNCs liable for their human right perpetrations.

The TNCs are capable of severe transgressions of civil and political rights of the individuals, sometimes inevitably. They might be involved in forced, convict or child labour, torture, arbitrary arrest and detention and also environmental exploitation.

With privatization of corporate entities, attributing their acts to the state becomes particularly onerous. TNCs have resorted to self-regulating their activities, and it hasn’t been much appreciated by most research studies for the obvious reasons that they would have complete control of their own activities, and impose convenient regulations on themselves that might not make any difference.[7] However, it is unfair to burden the state alone with the job of regulating the TNC activities, and I believe that it is the collective effort of the state along with the NGOs, consumers, labour unions, stakeholders, and other actors to bring about a human right friendly TNC behaviour as all these actors influence the TNC functioning ( NGOs and labour unions are of significance in pressurizing corporate adherence to human right norms, dip in profits would be consequential to the consumer dissatisfaction, and the stakeholders’ confidence in the corporation would be indispensible for its smooth operation). The states must aim for the absolute compliance with the international laws with respect to the TNC behaviour, and they must be cautious enough to prevent TNCs from interfering in their domestic affairs. They must also be wary of the operations of the subsidiaries abroad of the TNCs in their territory, and legislate on this subject.[8]  The states must co-operate with other states by entering into bilateral and extradition treaties to curb the human right abuses that the TNCs and their subsidiaries might commit.[9]

The major setback to the regulation of the TNC’s operations by the existing international mechanism is the absence of severe legal consequences in case of violations. The guiding principles by UNHRC itself negates the legal obligations as a consequence of the non-observance of human rights by the TNCs in one of its clauses which states “Nothing in these Guiding Principles should be read as creating new international law obligations, or as limiting or undermining any legal obligations a State may have undertaken or be subject to under international law with regard to human rights.”[10] The OECD guidelines could be a significant instrument in regulating the TNCs for the host countries with regard to the international obligations if read with another paragraph which provides that the enterprises should “contribute to economic, social, and environmental progress with a view to achieving sustainable development.”[11] The UN Norms on responsibilities of transnational corporations and other business enterprises are supposed to be the most detailed and comprehensive of the existing documents, and would have been most essential if they were legally binding.[12] The corporate codes of conduct unfortunately include corporate self-regulation, again without legal consequences, and I believe that ethical approaches to this problem will lead us nowhere.

Therefore, it is imperative for the states to address huge legal lacunas that exist today in legislating legally binding laws that demand the transnational corporations’ respect toward human rights of individuals. The primary initiative is expected from the TNCs themselves as stemming the issues at their source becomes necessary at this point of time.

By: Ashwini Shantharam

References

[1] Multinational Corporations in Least Developed Countries, (Georgetown International Relations Association, Inc). https://www.globalpolicy.org/images/pdfs/modelun.pdf, accessed 3 March 2016.

[2] Surya Deva, ‘Human Rights Violations by Multinational Corporations and International Law: Where from Here?’ Connecticut Journal of International Law  (2003) 19 1, 4.

[3] Robert McCorquodale and Penelope Simons, Responsibility beyond Borders: State Responsibility for Extraterritorial Violations by Corporations of International Human Rights Law , (2007) 70 598 614.

[4] Surya Deva, ‘Human Rights Violations by Multinational Corporations and International Law: Where from Here?’ Connecticut Journal of International Law (2003) 19 1. (“But since the existing international mechanism was not designed to apply to MNCs, its inadequacy is exposed”).

[5] Robert McCorquodale and Penelope Simons, Responsibility beyond Borders: State Responsibility for       Extraterritorial Violations by Corporations of International Human Rights Law , (2007) 70 598

[6] Barber, David H, Piercing the corporate veil, Williamette Law Review, (1980-81) 17 371.

[7] Beth Stephens, ‘The Amorality of Profit: Transnational Corporations and Human Rights’ (2002) 20 45, 47.

[8] Barbara. A. Frey, ‘The Legal and Ethical Responsibilities of Transnational Corporations in the Protection of International Human Rights’ Minn. J. GLOBAL TRADE (1997) 6 153 170.

[9] Robert McCorquodale and Penelope Simons, Responsibility beyond Borders: State Responsibility for Extraterritorial Violations by Corporations of International Human Rights Law , (2007) 70 598 617.

[10] The Guiding Principles on Business and Human Rights, 1 para 4.

[11] Surya Deva pg 5.

[12] Karl-Heinz Moder, ‘Norms on the Responsibilities of Transnational Corporations and other Business Enterprises with regard to Human Rights’ Friedrich Ebert Stiftung [2005] 1.