ACCOUNTABILITY OF MULTINATIONAL CORPORATIONS UNDER INTERNATIONAL LAW

BY GEORGE KASEKENDE


The last decades of economic globalization have provided businesses, in particular large multinational corporations [MNCS], with new and more favorable opportunities, where economic investments easily can be done over borders. Following this development both the number of MNCS has drastically increased and the social and environmental impacts of their operations have gained in their global dimension of consequence. [1] Economic actors, especially MNCS, have a huge role to play in protecting, promoting and respecting human, social and environmental rights. Sometimes more powerful than national governments, they are rarely held to account for the human rights abuses they commit in damaging the environment, harming local communities, forcing workers to accept unfair conditions and/or salaries. [2]

In an effort to hold MNCS accountable under International Law, this paper is divided into three parts: the first part elaborates on the growing influence of MNCS and how this affects human, environmental and labor rights. The second part shall address the question as to why International Law has turned its gaze to MNCS at this time and in this way. The third part shall provide what must be done to remedy the abuses committed by the MNCS.

Even without the help of the international financial institutions, MNCS are capable of exerting an exorbitant amount of power. They are the dominant entities in the world economy, with budgets that dwarf those of most countries. [3] Given the enormous wealth of many MNCS compared to that of developing countries, it is no wonder that these States are extremely susceptible to economic pressures placed on them by these large MNCS.

Compounding this problem is the fact that the Governments of most of the developing countries are corrupt. This enables the MNCS to exert an enormous amount of influence on these Governments to the detriment of human, environmental and labor rights. Why? It is because the Governments in the developing countries are fearful of losing the foreign investments. Infact, some MNCS have not only colluded with the corrupt Governments, they have been perpetrators of human rights, environmental and labor abuses. [4]

In addition, given their transnational nature, MNCS have been successfully avoiding national regulations of both their home and host States and they are seeking to operate in countries with the lowest standards so as to increase their profits. This has resulted in the violation of basic human, environmental and labor rights.

The main reason as to why there is an increasing number of Plaintiffs suing MNCS at this point in time is because of their “large size, wealth and omnipresence in a variety of jurisdictions”. [5] MNCS are the only tortfeasors still available to provide huge amounts of “compensation because the individual bad actors are often dead, missing, beyond the jurisdictional reach of domestic courts, or are unable to satisfy large damage claims”. [6]

Secondly, historically, States were the exclusive subjects of International Law. [7] However, recent developments have shown that “private individuals and non-governmental organizations acting both internationally and domestically are contributing to the emergence of new international norms which confer greater rights and obligations on private individuals and firms”. [8] An example is the current effort by private individuals to hold MNCS accountable for human, environmental and labor rights abuses under International Law. [9]

In order to remedy the MNCS abuses, Corporate Social Responsibility (CSR) has become a fashionable term in recent years. Keith Slack has stated that “the concept encompasses a broad range of activities that MNCS may engage in, with varying degrees of enthusiasm, to demonstrate that they are addressing important human rights, environmental, and labor issues, many of which have been brought to their attention by activist groups”. [10]

There are numerous CSR initiatives [11] designed to promote greater respect for human, environmental and labor rights. “Despite the existence of such initiatives, however, human rights and environmental problems continue to affect a broad range of corporate operations around the world, particularly in the oil and mining sectors. A key problem affecting all of the voluntary CSR initiatives is that they are just that: voluntary, and thus lackany real enforcement mechanism for sanctioning corporations that fail to comply with the principles or standards promoted by the initiatives”. [12]

Robert Wai has advocated for the possibilities of “branding”[13], that is, to name and shame the MNCS as an effective way of pressuring them to stop the abuses. This kind of pressure characterized by consumer boycotts, shareholder pressure, divestment measures, civil protests at corporate events and meetings, disruptive counter-advertising,has been used by non-governmental organizations against MNCS doing business in such countries as Sudan and Burma to protest against both the conduct of the MNCS and their complicity in conduct by State Governments that does not conform to basic human rights and standards. But in order to be more effective, he suggests that this strategy must have some “teeth” that is, accompanied by bringing the MNCS to court and making CSR initiatives mandatory.

Recent efforts to hold MNCS legally accountable for human rights violations via lawsuits in U.S. Federal courts are a positive development, but the legal basis on which such cases have been filed may be too limited to have a broad impact on the corporate sector more generally. Professor Michael Ramsey however questions whether U. S. Federal courts have “personal or subject matter jurisdiction over foreign MNCS and whether they can decide such cases without running afoul of the foreign act of state doctrine/sovereignty”. [14]

Another remedy is provided by Professor Beth Stephens who argues that the “MNCS’ home State can more effectively regulate the conduct of its MNCS and that the host State cannot be expected to control the MNC in the face of regulatory competition”. [15] Powerful States such as the U. S., Canada, Germany, United Kingdom, France, et cetera, are home to most of the MNCS which conduct business in developing countries and should hold the MNCS in their jurisdictions accountable for human, environmental and labor abuses committed in other countries. For this remedy to be successful there must be political will on the part of the powerful States.

In conclusion, as the bulk of MNCS have proven incapable of regulating themselves, there is a need for a binding legal framework that allows private individuals especially in developing countries to protect themselves against the enormous corporate power. Such a framework has to:

  • Guarantee communities a legal right of      redress for activities that adversely affect them, as well as rights to      prior consultation.
  • Guarantee individuals and communities      rights over the resources they need to enjoy a healthy and sustainable      life.
  • Place a duty on directors of corporations      to take account of social and environmental factors when taking business      decisions, and;
  • Require corporations to meet best      environmental, social, labor and human rights standards wherever they      operate.[16]


[1] Friends of the Earth Europe website, retrieved on 28th April 2008 from http://www.foeeurope.org/corporates/news/eu_debate.htm.


[2] Ibid.


[3]According to UNCTAD’s World Investment Report 2004 there are currently at least 61,000 MNCS worldwide with over 900,000 foreign affiliates.MNCS account for 70% of total international trade and their annual earnings are higher than the GDP of many countries.In fact, 51 of the 100 world’s largest economies are MNCS, and only 49 are countries, http://www.globalpolicy.org/reform/2002/modelun.pdf retrieved on 28th April 2008.



[4] Citing examples like Union Carbide’s gas leak in Bhopal, India that killed about 15,000 people and Shell Oil’s link with human rights abuses and pollution in Nigeria, Burmese villagers sued Unocal in a USA federal court for human rights violations arising out of the company’s involvement in a gas pipeline project in Myanmar (Burma).


[5] Joel R. Paul, Holding Multinational Corporations Responsible Under International Law in Hastings International and Comparative Law Review (2000-2001), at page 292.


[6]Ibid, at page 291.


[7]Ibid., at page 285.


[8]Ibid., at page 286.


[9] There has been an increase in actions initiated by individuals to hold MNCS accountable under International Law, particularly in the United States of America under the Alien Tort Claims Act. Individuals are taking International Law into their own hands because States have failed to act.


[10] Keith Slack, Putting Teeth Into Corporate Social Responsibility (Oxfam America) 2006, http://www.policyinnovations.org/ideas/innovations/data/CSRretrieved on the 28th April 2008.


[11] United Nations Global Compact, the Organization for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises, the Voluntary Principles on Security and Human Rights, the Kimberley Process for monitoring the global diamond trade, and the Extractive Industries Transparency Initiative.


[12]Keith Slack, Putting Teeth Into Corporate Social Responsibility (Oxfam America) 2006, http://www.policyinnovations.org/ideas/innovations/data/CSRretrieved on the 28th April 2008.


[13]Robert Wai, Countering, Branding, Dealing: Using Economic and Social Rights in and around the International Trade Regime, 14 EUR. J. INT’L L. 35 (2003), at page s 74-75.




[14]Joel R. Paul, Holding Multinational Corporations Responsible Under International Law in Hastings International and Comparative Law Review (2000-2001), at page 294.


[15]Ibid.


[16]Friends of the Earth Europe website, retrieved on 28th April 2008 from http://www.foeeurope.org/corporates/news/eu_debate.htm.



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