<%-- Page Title--%> Human Rights Monitor <%-- End Page Title--%>

June 13, 2004

Violation of Human Rights by Transnational Corporations
Is there any effective enforcement mechanism?

Barrister Hassan Faruk Al Imran

Under various domestic law and international instruments the states are assuring individual's human rights. Now the question is: How could individual's human rights be protected, if it is breached by Transnational Corporations (TNC) or Multinational Corporations (MNC). Is there any remedy available for such violation?

At the beginning the question is- what is the role of TNC in the present world? TNC have production operations throughout the world. They are investing all over the world and contributing to economy especially in developing countries. The cheap and unorganised labour is one attraction for investing in a developing country as they can pay them barely survival wages. Many private economic institutions, such as large TNC / MNC, often wield significant power and affect numerous human begins both directly and indirectly in various sectors of public and private life. In fact, many TNC wield more effective power and wealth than many nation-states. For example, in 1992 General Motors' world wide sales ($132.4 billion, approximately one third of which was in foreign sales) exceeded the GDP of Indonesia ($126.4 billion), Norway ( $ 115.7 billion), Poland ($83. 8 billion), and Malaysia ($57.8 billion). Moreover, coupled with new technology that allows rapid movements of finance and capital, TNCs use their economic power to gain the most favourable conditions for their activities. If a state introduces environmental laws, TNCs have the capacity to seek new sites for production where regulation is less strength.

TNC/MNCs are violating human rights by their activities. They have been accused of violating human rights to life, including the right to enjoy life, freedom from forced or slave labour, freedom from deprivation of or injury to health, enjoyment of a clean and healthy environment, air pollution, water pollution, environmental damping.. Although in some cases developed countries are protecting TNC's violation of human rights, however, in practice, still the situation is not sufficient, and moreover, in the case of developing countries the situation is different. It is alleged that, "the most notorious MNC abuses occur in the developing world, for example use of forced and child labour, suppression of rights to freedom of association and speech, violations of rights to cultural and religious practice, infringement of rights to property, and gross infringements of environmental rights." Therefore, question may arise- what regulatory challenge posed by TNC?

The distinctive regulatory problem posed by TNCs is their ability to operate as an integrated command and control system through two dis-aggregated institutional structures. The first of these structures is the collection of discrete corporate units- parent, subsidiary, sister and cousin companies- that make up the TNC group. The second dis-aggregated structure housing the TNC is the global system of separate nation-states in which those corporations are registered and do business. Thus, although decision-making within a TNC often occurs within a vertically integrated command structure, that same degree of integration is not available to regulations. Since the parent and subsidiary companies are legally distinct, they must be subject to separate and independent systems of inspection and regulation. But in practice the companies are not subject to the discipline of shared liability, since in most instances the parent company is not liable for the activities of the subsidiary following the principle of House of Lords (UK) decision in Salomon v Salomon, which is followed in most of the countries of the world. In theory, there is no court anywhere in the world that exercises jurisdiction over all the components of TNC doing business in three or four continents. In these circumstances, the TNC enjoys a degree of autonomy from national jurisdiction that is unique in the global legal order.

The regulatory response to environmental damage by TNC has been largely ineffective. International environmental treaties bind state parties, but do not place obligations directly upon companies. There have been some scholarly explorations of holding the "home" state liable for the activities of TNC headquartered within its jurisdiction, but this approach has largely failed due to both political opposition as well as the problems in jurisdiction and company law [Salomon v Salomon]. Anderson, an international environmental law scholar, criticised, "the greatest challenge for both human rights standard and environmental regulation is surely the problem of effective enforcement." The great example of ineffective regulation of TNC is 'Bhopal' case of India. In 1984 a leak of methyl isocyanate gas from a pesticide plant owned by Union Carbide in Bhopal, India, resulted in the loss of over 3,500 lives and the exposure of an estimated 521,000 individuals to the gas that can result in cheonic effects, including depression of immune response. Plaintiffs failed in their attempt to sue in the US, and following much-delayed litigation in India the case was settled for $470 million

Whether tort law is the best way to hold transnational companies accountable? Critics of tort approaches to human rights protection have contended that tort litigation can be slow, costly to mount, and organised in a fragmented, case-by-case basis that undermines that rationality of a consistent regulatory framework. Another problem of the private international law of torts is to decide the proper forum for a suit when the plaintiff and the defendant are in different jurisdiction. Forum non conveniens was originally invoked to protect the defendant from being harassed by a plaintiff choosing a genuinely inconvenient or inappropriate forum. Despite this intent, it has become in many instances a device for parent companies to escape liability for tortious acts committed abroad. There is further problem in the case of tort litigation, which is that the quantum of damages is likely to be lower in developing countries since wages and medicinal treatment are lower, so compensation will be lower as well.

One may argue that the TNC might be liable under customary international law as they are violating human rights. However, there is also a problem; as international law almost exclusively considers that nations will be primarily responsible for the management of human rights. National governments then hold all individuals within their borders responsible for managing human rights according to treaties and customary international law.

Recently, the United Nations Sub-Commission for the Promotion and Protection of Human Rights unanimously approved the "Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with regard to Human Rights" (the Norms) on 13 August 2003. Together with the interpretative Commentary, the Norms constitute an authoritative guide to corporate social responsibility. They are the first set of comprehensive international human rights norms specifically aimed at and applying to transnational corporations and other business entities (companies). They set out the responsibilities of companies with regard to human rights and labour rights, and provide guidelines for companies in conflict zones. Although the norm is a milestone since this is the first time that the companies are being put a notice that they will be expected to meet the basic human rights standards. But it is not clear how the Norms will be binding or what legal principle would be involved.

At present TNC and other private entities are playing an important role in world economy. TNC are growing their business from one country to another, investing capital, creating new jobs, transferring technology and skill from developed country to developing countries. As a result TNC are bringing many benefit to the countries within which they are operating. But there is also dark side of it. TNCs are violating individual's human rights in many ways. Although in some cases developed countries are trying to control TNC's activities by making domestic law, but in practice, still it is not sufficient. Because of veil of incorporation (Salomon v Salomon) the home country of TNC can avoid its liability, and, it is very difficult to bring any breach of human rights allegation against subsidiary company under tort law. Moreover, in the case of developing countries, the situation is worst; because developing countries social, economic and judicial conditions are poor. In some cases the TNC are economically more powerful than many states, as a result the developing countries don't want to lose their investors by making strict law.

Furthermore, there is no international backstop to hold companies accountable when national regulatory systems are insufficient. International law says about state responsibility if it does any internationally wrongful act, but there is no clear indication about TNC's or any private entities. Finally, recently UN Norms on the Responsibilities of Transnational Corporation had been adopted, however, still the problem is how this Norms will be binding? What is the legal consequence of it, if the TNC and any other private entities don't follow this Norms? What would be the remedy for violation of individual's human rights? Therefore, we need to re-think about these issues. And we are waiting for the future when all the victims of human right violation by TNC/MNC will get justice and sufficient remedy.

Barrister Hassan Faruk Al Imran is currently doing his LL.M at University of the West of England, Bristol, UK.