Regulating Multi-national Corporations is as Difficult as it Sounds

March 18, 2015Global Challengesby The Conversation

The UN has been trying to regulate multi-national corporations for 40 years.

Bolivia, Cuba, Ecuador, South Africa and Venezuela proposed a treaty to regulate transnational corporations last year. You’d be forgiven for feeling a sense of déjà vu. It has been a long and complicated road tightening the leash on the giant, global corporations, which can dominate our lives.

The United Nations has had it on the agenda for around 40 years.

The first attempt, the Draft Code of Conduct on Transnational Corporations, was never finalised due to disagreement between developing and developed countries. The second attempt, the draft Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights (it is fertile ground for catchy titles), was also too divisive.

When presenting the norms for approval in 2004, they received a fatal blow: the Human Rights Council said that it had never requested such a document and that the norms had “no legal standing”.

Norms are dead; long live principles

Shortly after, the UN Commission on Human Rights appointed Harvard professor John Ruggie to write a replacement for the norms. After several years of consultations, he produced the Protect, Respect and Remedy Framework for Business and Human Rights and followed it up in in 2011 with the Guiding Principles for its implementation. These require business to respect human rights and hand states the responsibility of protecting them and providing access to effective remedy upon violation.

The Human Rights Council unanimously endorsed both documents and, in contrast to previous efforts, the business community received them relatively enthusiastically. However, some prominent human rights organisations were less optimistic and continued to push for the creation of a binding treaty.

But let’s be clear here. Neither Ruggie’s principles nor a treaty on business and human rights will fix corporate misbehaviour.

Principles vs treaty

According to the guiding principles, the state has the responsibility to create and enforce national regulations to protect the human rights of its citizens against corporate abuses. That all sounds very good, but we have to remember that states are not always willing or able to create and enforce such regulations.

To be fair, Ruggie’s documents intentions were to be an interpretation of existing international human rights instruments, codes of conduct and best practices. They were not to create new regulations or fill any legal gaps. That is why a treaty could be useful: to create new regulations to cope with current challenges.

The treaty route, however, also depends on the will of states. To be of any use, a treaty on transnational corporations should have to count with the support of most states, especially, those that are home to the majority of these companies. So far, most of them have refused to entertain the idea of a treaty. Fourteen countries, including France, Germany, Japan, the UK and the US voted against Ecuador’s resolution and another 20 abstained.

Now, the only thing we have is a resolution that asks for an open-ended working group on a legally binding document. We do not even know what this treaty would look like, but many states – and business groups – are not interested in finding out and insist on building upon the guiding principles, which you suspect they are aware can only take us so far.

The principles certainly have political and diplomatic merit. They made explicit the human rights responsibilities of corporations and by securing the approval of the business community, they have made it much harder for at least the largest and most visible companies to claim ignorance when human rights are violated along their supply chains. They also serve as a tool for NGOs to demand governments to hold companies accountable and to denounce any behaviour that goes against the principles.

Business links

However, the fact that these are non-legally binding agreements creates a risk that signatories could back off with few consequences beyond a bruised public image.

A treaty, if supported by most states, could force companies and states to put human rights considerations above monetary profits and could help clarify what happens when a state is unwilling or unable to create and enforce norms to regulate corporate behaviour.

In truth, what we are likely to see in the near future is the same story we have witnessed for 40 years. Business keeps opposing any prospect of binding international rules, however necessary. We cannot expect a credible commitment to better rules if the governments who are supposed to create and enforce them have such a close relationship with the business sector.

As long as countries place the economic interests of their companies well before human rights, then efforts like that proposed by Bolivia, Cuba, Ecuador, South Africa and Venezuela will continue to be overshadowed.

The Conversation

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