Business and Human Rights

The Obligations of the European Home States

Dalia Palombo

• Publisher: Hart Publishing
• Year: 2020
• Print ISBN: 9781509954674
• eBook ISBN: 9781509928040
• Edition: 1
• Topic: Law
• Subtopic: Civil Rights in Law
• Index: Law

This book analyses the accountability of European home States for their failure to secure the human rights of victims from host States against transnational enterprises. It argues for a reconfiguration of the relationship between multinational enterprises and individuals, both of which have been profoundly changed by globalisation. Enterprises are now supranational entities with numerous affiliates all over the world. Likewise, individuals are increasingly part of a global community. Despite this, the relationship between the two is deregulated. Addressing this gap, this study proposes an innovative business and human rights litigation strategy. Human rights advocates could file a test case against a European home State, at the European Court of Human Rights, for its failure to secure the rights of victims vis-à-vis European multinational enterprises. The book illustrates why such a strategy is needed, and points to the lack of effective legal remedies against European multinationals. The goal is to empower victims from developing countries against European States which are failing to hold multinational enterprises accountable for human rights abuses.

1

The Case for Legal Reform

The relationship between enterprises and individuals has changed radically over the last hundred years. Enterprises are no longer simple associations of people who get together to conduct business; rather, they are supranational entities leading the global economy.¹ At the same time, in an ever more globalised world, individuals are connected not only to their national dimension, but are increasingly becoming part of a global community.² However, these changes have not been adequately reflected in the law.³ The laws regulating the relationship between enterprises and individuals do not address the responsibility of multinational companies abusing the fundamental rights of people.⁴ Human rights advocates have attempted to blame and shame companies for their adverse impact on the lives of people and the environment and to sue them in domestic courts. However, these attempts are often unsuccessful, because international and domestic laws fail to recognise the responsibility of multinational enterprises for human rights abuses.⁵

This book reacts to these unsuccessful cases filed against companies in domestic courts. It proposes to file suits against the European home states of multinational enterprises for their failure to regulate corporate groups incorporated within their jurisdiction and that abuse human rights extraterritorially. It advocates for the use of international courts as a tool for legal change.

In Europe, human rights advocates could implement this litigation strategy by filing a test case against a European state at the European Court of Human Rights (ECtHR). Under the European Convention on Human Rights (ECHR), states have a positive obligation to secure that private persons respect human rights. Human rights advocates should argue that such an obligation includes the duty to protect individuals against extraterritorial abuses committed by multinational companies and the duty to fulfil corporate socially responsible policies.⁶

The goal of human rights advocates should be to obtain an ECtHR’s decision detailing the positive obligation of states to secure that European corporate groups respect human rights while operating extraterritorially. In the affirmative, European states would have to provide human rights victims with effective remedies against multinational companies in domestic courts. This would open the door to extensive litigation before domestic courts against European multinational enterprises abusing human rights in developing countries.

I.FROM STATES TO NON-STATE ACTORS

Numerous legal and non-legal scholars have analysed the shift in global governance from a state-centric to a multi-actor model. This section outlines the debate, as it is the framework within which this book argues that states should be accountable for their failure to regulate the human rights abuses of non-state actors.

Traditionally, non-state actors did not have a clear voice in shaping the content of international law and determining global governance. Non-state actors, including individuals, non-governmental organisations (NGOs) and communities, were only considered to be objects of international law. States were the only representatives of non-state actors in the international arena. Therefore, the only way for non-state actors to express their views on global and foreign policies was through national elections. By selecting a particular candidate, a citizen could contribute to advancing and supporting a certain global policy.⁷

However, with globalisation, non-state actors have become increasingly able to take direct action in the development of international law and global governance through what Harold Koh defined as the transnational legal process.⁸ This process allows non-state actors to judge and intervene in global political decisions. According to Koh, the transnational legal process is, first, non-traditional as opposed to the traditional process which views states as the subjects and people as the objects of international law; second, it is non-statist as it encourages direct action by non-state actors in the international arena; third, it is dynamic as it encourages action by private instead of public actors; and, fourth, it is normative as the process creates new binding rules. Nowadays non-state actors communicate through networks that allow everyone to have an active voice in the transnational legal process. Different actors, including ‘[t]he Security Council, the GATT, Exxon, Greenpeace, the Paris Club, Amnesty International, and the Lowenstein International Human Rights Clinic at Yale Law School’,⁹ interact in the transnational legal process with the objective and the expectation to change and influence global law and governance. Such an interactive and dynamic process is both legal and political, as private actors may act at both levels in order to shape global governance. The process is normative, as it enforces and creates international norms through the interaction of private non-state actors and public state actors.¹⁰

The question is whether this development from a state-centric to a multi-actor model is positive or negative. Different schools of thoughts are divided on this point. Some, especially those coming from the global constitutional law scholarship, describe globalisation in positive terms. They argue for a complete change of paradigm that would see a departure from a state-centric model to embrace a cosmopolitan reality based on global constitutional principles.¹¹ This would result in a network of private and public entities, such as international organisations, corporations and NGOs, becoming the main architects of global governance.¹² In most of these models, individuals are gaining an increasingly significant role in global governance while restraining states’ authority.¹³

However, when states lose power and non-state actors gain it, new problems arise concerning the interaction between different private actors. States are in fact the only entities that have to respond to their own people and have therefore political responsibility and legal obligations towards them.¹⁴ But this is not the case for private actors, which do not have political responsibility towards a particular community and are free to act in their own self-interest. The question is, therefore, what happens if global governance abandons state hegemony? Who will be the next powerful actor(s) in these portrayed utopias? According to some scholars, the interaction between different private actors has been and will be detrimental to individuals for the benefit of the most powerful non-state actors, such as multinational corporations, which have their own agenda that does not necessarily take into consideration the will of people. Some argue that cosmopolitanism is in fact an imperialistic project.¹⁵ This debate, which started with the no-globalisation movements a few decades ago, is particularly current nowadays with the rise of populism as a backlash against cosmopolitanism and internationalism.¹⁶ The demands for nationalistic policies and a reappropriation of the state’s central role in global governance are increasingly popular.

Multinational corporations are only a part of this complex debate on the role of state and non-state actors in global governance. However, they are a fundamental piece in any possible global architecture, given their power, which is now comparable to that of a number of states. If in the 1970s the mainstream view was that such powerful actors should be welcomed in developing countries and they should take power from the states in order to enable development and liberalisation, the rhetoric has shifted since it became clear that most transnational corporations would use that power to their benefit and to the detriment of the people.¹⁷ For instance, according to John Braithwaite,¹⁸ the shift of power from state to non-state actors has already happened. While analysing the interaction between multinational enterprises and the state, he wrote: ‘[I]t is not best to conceive of the era in which we live as one of the regulatory state, but of regulatory capitalism … 1984 did arrive.’¹⁹

Essentially, the governments of most countries are no longer able to control global governance, because private actors impose their views and standards on both national and international policies. Companies are the current leaders, as they are the most powerful private actors in the global economy²⁰ Braithwaite analyses the history of governance in several passages. At the final stage, huge enterprises control the twenty-century state. The state is no longer able to determine its policies without relying on companies.²¹

Therefore, the traditional global order, based on state sovereignty and non-participation of private actors in the international arena, is gone. A new global order based on the interaction between private actors has arrived. The remaining question is how non-state actors interact with each other, when some parties, such as multinational companies, are more powerful than others, such as individuals.

II.THE LEGAL FRAMEWORK FOR MULTINATIONAL ENTERPRISES

Before analysing the law applicable to multinational enterprises, it is necessary to define the terms enterprise and multinational as they will be used in this book. A multinational enterprise is a non-legal term of art indicating a transnational business constituted of multiple entities. Such entities are typically companies incorporated in different jurisdictions (or other corporate or non-incorporated forms of organising commercial activities). Detlev Vagts borrows the following definition of multinational enterprises from the business literature: ‘[A] cluster of corporations of diverse nationality joined together by ties of common ownership and responsive to a common management strategy.’²² These multiple companies are affiliated by way of a diverse set of corporate arrangements.

First, they may be in a parent and subsidiary relationship, meaning that the parent is a shareholder (or any other holder of equity interest, however they are called under the laws of the relevant jurisdiction) of the subsidiary(ies). The International Accounting Standards provide the following definitions of corporate groups, parent and subsidiary companies: ‘[a corporate] group is a parent and all its subsidiaries’,²³ ‘[a] parent [company] is an entity that has one or more subsidiaries’,²⁴ ‘[a] subsidiary is an entity, including an unincorporated entity such as a partnership, that is controlled by another entity (known as the parent)’.²⁵

Second, their relationship may be contract based when, for example, two or more companies agree to conduct a business activity jointly under the terms of a contract. Such a relationship may take many different forms, starting from a straightforward supply agreement and ending up with complex joint-venture agreements.

Whatever the exact form of such a business organisation, however, these companies, which are, as a matter of law, separate entities, would act as a single business in economic terms. This book uses the terms multinational enterprise, multinational company and multinational group interchangeably to address a single economic unit conducting transnational activities through multiple, legally separate, companies incorporated in different jurisdictions.²⁶

The purpose of this section is to analyse the rules applicable to multinational enterprises and to argue that there is a glaring d...

Table of contents

• Cover
• Dedication
• Title Page
• Acknowledgements
• Contents
• List of Abbreviations
• Table of Cases
• 1. The Case for Legal Reform
• 2. The Obligations of Multinational Companies
• 3. The International Legal Obligations of States
• 4. Extraterritoriality
• 5. An Agenda for Legal Reform
• Bibliography
• Index
• Copyright Page