Richard Meeran
Calls are being heard for negotiation of a new international convention on corporate accountability in the run-up to the World Summit on Sustainable Development in Johannesburg in August. Those promoting the idea include Friends of the Earth International and Christian Aid.
Their call has been motivated in part by the intensified social and environmental degradation that has accompanied the efficiencies and productivity increases resulting from globalisation. Their identification of the need for clearer linkages to be made between multinational corporations, human rights and the environment has gained currency. Their efforts have been spurred by, among other things, high-profile examples of degradation, such as the human rights abuses against those opposing the oil operations of Shell and Unocal in Nigeria and Burma; the employment of young children in Vietnamese “sweat-shops” supplying Nike; and the legal case brought by asbestosis sufferers against Cape Plc.
Multinationals are perceived as principal beneficiaries of economic globalisation. Their economic power is often thought to undermine democratic institutions that are properly accountable to electorates, not to shareholders.
From a legal perspective, multinationals have always been a step ahead. Wealthier than many states, they are not subject to public international law because they are not states.
Holding multinationals legally accountable in national courts is fraught with difficulties as was evident in the cases brought in the United Kingdom against Cape and Thor Chemicals. They have generally been able to utilise the concept of limited liability to protect multinational parent companies, on the grounds that the liability for the conduct of subsidiary companies based elsewhere could not attach to the shareholder. And these subsidiaries, directly in the firing line, were invariably insolvent, uninsured and located in states where access to justice by local citizens was practically impossible.
Criminal prosecutions of corporations generally are rare, partly due to the high standard of proof required to secure a conviction. Corporations cannot be imprisoned, and the level of criminal fines meted out, even for serious breaches of health and safety laws, invariably constitute a pitiful deterrent. Following the deaths of workers from mercury poisoning, Thor Chemicals was fined just R13 000 by the Pietermaritzburg Magistrate’s Court.
As far as criminal liability arising from overseas operations is concerned, parent corporations “fall between stools”: their home courts are likely to rule that they have no criminal jurisdiction as the misconduct took effect in another state. Local courts will consider themselves unable to exercise jurisdiction over a foreign corporation.
“Corporate citizenship” and “corporate social responsibility” are in vogue among multinationals. Practising corporate citizenship then means minimising negative impacts of corporate activities and influence, while enhancing the societal benefits that corporations can undoubtedly bring. The expressions embody a notion that business should be understood as part of society, contributing directly to the welfare of society.
As long ago as 1954 the founder member of Anglo-American, Ernest Oppenheimer, laid down the principle that: “The aim of the group is, and will remain, to make profits for our shareholders, but to do it in such a way as to make a real and lasting contribution to the communities in which we operate.”
The question, poignantly raised by Amnesty International, is whether such statements “should be perceived as a genuine aspiration or as a disingenuous attempt to pull the wool over the eyes of an increasingly discerning and critical public”.
Through shareholding, Anglo profited substantially from the asbestos mining operations of Cape Plc, and shared several common directors. Paradoxically, Anglo’s rejection of the request for a contribution towards the Cape Plc asbestos victims’ settlement trust suggests that corporations are less likely to put these principles into practice, the closer they are to home.
The July 2001 European Commission Green Paper on Promoting a European Framework for Corporate Social Responsibility defined the concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment.
A drawback of voluntary codes of conduct is that they are not legally binding, and cannot impose any sanction for non-compliance. A committee of the European Parliament has proposed a European directive requiring multinationals to participate in a compulsory system of “social reporting” on the social and environmental impacts of their businesses. This reporting would encompass every unit of the business, including the supply chain. It is suggested that awarding public contracts and private sector financial support would be influenced by the results of such social reporting.
The power of the United States consumer lobby, working in concert with US plaintiff lawyers, arguably constitutes the most formidable form of deterrence in the area of product safety. However, this is primarily in relation to products that might harm US consumers, rather than activities that might be damaging to the health or environment of people in developing countries.
Thus, the demise of the asbestos industry was the result of reduction in worldwide demand for asbestos products, due to increasing public fears over the health risks. Concern for the South African asbestos miners hardly featured.
Similarly, the antagonism in Europe towards genetically modified food arises from fears of European consumers for their own health, not the economic or environmental consequences for developing countries or their farmers.
However, there is growing awareness of “fair trade” issues among consumer groups, for example boycotts of Nike in US student campuses. For corporations that depend on their public image, adverse publicity from human rights or environmental campaigns can be highly damaging and provide an incentive for remedial action to be taken.
The Cape and Thor Chemicals cases are unique examples of multinationals being held accountable for injuries in a developing country, despite the corporate veil. The payment of substantial compensation and legal costs in these cases provided a salutary warning to multinationals against the application of “double standards” in developing countries.
But binding legal precedents on the issue of multinational liability were not set in those cases because they were settled without trial. While the legal path has been cleared for similar future cases to proceed, the outcome is by no means certain. An unhelpful precedent in another case could reverse the trend.
Where does all this leave us? First, regulations and criminal sanctions are important but have serious practical limitations. Second, civil actions can provide a powerful deterrent, but only if citizens have proper access to justice and damages awards are high enough. Third, codes of conduct are a constructive approach. But it should not be left for companies to decide whether or not they wish to “contribute” to the protection of human life and the environment. And fourth, campaigner and consumer groups have a vital role to play. But US and European consumers should not be relied on to protect the interests of developing countries.
A legally binding convention that is enforceable in practice needs to be formulated to ensure proper multinational accountability, capturing the supply-chain, not just subsidiaries. This convention must be applied internationally and, in a development of international law, apply to corporations as well as states. It is not necessary to reinvent the wheel: for instance, the 1977 Declaration of Principles concerning Multinationals and Social Policy, adopted by the UN International Labour Organisation, could be integrated within a convention.
It must be directly enforceable against corporations, by states or affected citizens. Citizens must be provided with the means to enforce the rights in the convention in practice.
This topic is high on the political agenda and the opportunity to deal with it justly must be seized.
Richard Meeran is the British attorney who acted successfully for South African asbestosis victims against Cape Plc
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