MODULE 25

CORPORATIONS AND ESC RIGHTS
USING MODULE 25 IN A TRAINING PROGRAM

The Purpose of Module 25

The purpose of this module is to clarify the effectiveness of a human rights approach to the control of harm resulting from corporate activities.�

The module

• examines how corporations (in particular transnational corporations) can affect people’s enjoyment of ESC rights;
• clarifies how corporations, which generally do not have enforceable human rights obli�gations, can nonetheless be brought to account through states’ international human rights obligations; and
• addresses other strategies that can be used to compel corporations to act in pursuance of the realization of ESC rights.

Corporations and the Realization of ESC Rights

There is no question that corporations can act to the detriment of people’s ESC rights.� Here are some illustrations:

Right to self-determination (art. 1 of the ICESCR)���

Monopolistic or oligopolistic behavior by transnational corporations (TNCs) can have a grave impact on the right to self-determination of peoples. �An example is the role of Conzinc Rio Tinto Australia (CRT), a subsidiary of RTZ, on the island of Bougainville in the Pacific.� In 1969, the CRT set up Bougainville Copper Limited, which began mining copper on the island.� Since then, over a billion tons of chemical wastes have been dumped into the river system, large areas of forest and crops have been destroyed, and the workers and public have suffered serious environmental and occupational diseases.

Right to work and enjoy just and favorable working conditions (arts. 6 and 7)

Poor and discriminatory wages, arbitrary hire and fire policies, dangerous conditions of work and lack of adequate training all affect the enjoyment of the rights to work and enjoy fair working conditions.� The United Nations has pointed out that "skill acquisition and upward mobility for workers in host countries are limited by the practice of TNCs to internally con�trol and co-ordinate assets owned by them rather than to license the right to their use to in�digenous firms, the tendency of TNCs to draw their suppliers abroad with them and to use expatriate personnel.” [1]

Right to form trade unions and to strike (art. 8)

It goes without saying that compa�nies often try to prevent the or�ganization of trade unions in their work places.� TNCs, in particular, make use of special economic zones set up by gov�ernments to induce foreign investment, in order to prevent workers from organizing trade unions.

Right to an adequate standard of living including food, clothing and housing (art. 10)

Chemical poisoning of land and water (for example, by oil explora�tion) and the forced expropriation of land (for example, by mining com�panies) can severely affect the right to an adequate standard of living.� In addition, the role of new technologies and corporate control of intel�lectual property threaten the right to food.� The United Nations states that "plant pat�enting is al�ready locking up strategic germ plasm in the hands of indus�trial corporations and undercutting the potential for agricultural research and development in the South.” [2]

Right to health (art. 12)

The exposure of a work force and community to dangerous chemicals as well as the production and sale of dangerous goods and products are just two ways in which corpo�rate activities may affect the right to health.� In addition, the United Nations points out that patenting of pharma�ceutical products may result in higher prices for medicines.

Corporations and Human Rights-The Legal Position

Can the activities of companies (in particular, those of transnational corporations) that affect the enjoyment of human rights be considered violations of these rights, and specifically of ESC rights?� The answer to this question depends upon whom one is asking-a layperson or an international lawyer.�

A layperson is likely to be bewildered by the question.� Of course, corporations violate hu�man rights, the layperson might say.� They cause harm to individuals, harm that would be considered a human rights violation if states committed it.� The layperson may cite Union Carbide’s role in the Bhopal disaster, Texaco’s poisoning of people in Amazonia and the A.H. Robins Company’s worldwide marketing of dangerous contraceptives as just a few ex�amples.� Since the harm suffered by an individual victim may well be exactly the same, whether it was caused by a corporation or a government agent, the layperson will argue, cor�porations can clearly violate human rights.� As was noted in the context of the Bhopal disas�ter:

It is of little difference if the death that comes to the sleeping victims in the middle of the night is caused by a politically motivated death squad or by a cloud of poisonous gas.� In either case, the right to life of an innocent person is violated in an inexcusable manner. [3]

A lawyer, however, will give a rather different answer.� Even though companies can cause the same type of harm or loss as states, they cannot legally violate human rights.� This is be�cause, traditionally, international human rights law concerns the relationship of the state to the individual, not relationships between individuals.� The company may have committed serious crimes, or negligent acts requiring compensation, but it will not have committed hu�man rights violations.� So even though a state and a corporation may act in exactly the same way, and cause exactly the same harm or loss, only the state violates that person’s human rights.�

Therefore, a lawyer would answer the question, although companies may well have an ad�verse effect on the realization of ESC rights, when they do so, they are not in violation of human rights obliga�tions.�

Activities of corporations having a negative impact on ESC rights may nonetheless be ad�dressed in varying ways through the approaches suggested in Module 9 in the section on nonstate actors.� To summarize points made there:

• Human rights obligations may be imposed on nonstate actors by national constitutions or laws, and activists should research and identify such applicable constitutional provisions or laws.
• State-owned corporations are considered to be part of the state and held responsible under the state’s obligations.
• The courts in some countries have placed human rights obligations directly on nonstate actors.� Activists should be aware of the jurisprudence in the venue of concern to them.
• Nonstate actors, including corporations, can be held directly responsible according to the provisions of certain human rights treaties, like the Genocide Convention.
• Corporate activities may be addressed indirectly through the state’s "obligation to pro�tect.”

The State’s "Obligation to Protect”

As mentioned in Module 9, human rights law obliges states to regulate the conduct of non�governmental actors, including corporations, to ensure they do not commit human rights abuses.� When people die as a result of a company knowingly exposing workers to dangerous conditions, or knowingly dumping toxic chemicals in the drinking water supply of local communities, it can be argued that companies are "arbitrarily” depriving people of their lives.� The companies and their controlling officers may be committing violent crime-murder or manslaughter.� The state’s failure to prevent companies from acting in this way, and its fail�ure to investigate and bring companies and their controlling officers to account, is a violation of its legal obligation to protect.�

This obligation has been given further force by the Maastricht Guidelines on Violations of Economic, Social and Cultural Rights.� Section 18 of the guidelines states:

The obligation to protect includes the State’s responsibility to ensure that private en�tities or individuals, including transnational corporations, over which they exercise ju�risdiction, do not deprive individuals of their economic, social and cultural rights.� States are responsible for violations of economic, social and cultural rights that result from their failure to exercise due diligence in controlling the behavior of such non-State actors.

An illustrative example

Companies are nongovernmental actors, and the state has an obligation to exercise "due dili�gence” in ensuring that they do not violate the rights of individuals.� What rights might be violated by corporations and when might a state fail to exercise due diligence?

A company is manufacturing a dangerous and potentially fatal chemical.� Although the man�agement of the company knows about the hazards of this chemical, it has decided not to in�form the work force and has failed to provide the employees any safety equipment.� Not only are the employees at risk, but the local community is as well, since the company dumps the hazardous chemicals into a local stream, which the management knows is used for drinking water.�

The state has no proper regulatory mechanisms to inspect the company.� The laws are un�clear, and even when the state factory inspector is informed by a local human rights cam�paigner of what is going on in the company, the inspector takes no action.� Some time passes, and workers begin to suffer terrible headaches and fatigue.� Some lose weight.� Finally a worker dies.� At the same time, members of the local community suffer health problems, and after a while, a young child, with the same symptoms as the workers, dies.� The health prob�lems are reported in the press.� No investigations are undertaken into the health problems or the deaths.�

This sort of example-not uncommon in either developed or developing countries-indicates the interconnections between ESC rights on the one hand and civil and political rights on the other.

Article 7 of the ICESCR states, "The States Parties to the present Covenant recognise the right of everyone to the enjoyment of just and favourable conditions of work which ensure in particular . . . (b) safe and healthy working conditions.”� The ILO has as many as twenty-one conven�tions that define more precisely the state’s obligations in relation to health and safety.�

Article 12 of the ICESCR also states, "States Parties recognise the right of everyone to the enjoyment of the highest attainable standard of physical and mental health . . . The steps to be taken to achieve the full realization of this right shall include those necessary for . . . (b) the improvement of all aspects of environmental and industrial hygiene; (c) the prevention, treatment and control of epidemic, endemic, occupational and other diseases.”

The state’s failure to provide an adequate system to regulate the company, resulting in the ill health of workers and the community, is a potential breach of articles 7 and 12 of the ICESCR.� Even if this particular incident were itself not considered a breach, documenta�tion indicating a pattern of regulatory failure that caused ill health would strengthen the argument that a breach had taken place.

The state’s failure to investigate whether the company or its senior officers have committed criminal offences may also be a breach, particularly if there is evidence to indicate a pattern of impunity.� Depending on the legal system in any particular country, corporate conduct causing injury or ill health may amount to assault or other serious criminal offenses.� A state’s systematic failure to investigate these offences may be judged a violation.�

Violations of ICESCR may not be the only violations of human rights in such cases.� Article 6 of the ICCPR states that every human being "has the inherent right to life.� This right shall be protected by law.� No one shall be arbitrarily deprived of his life.”

The deaths of workers and members of the local community can be seen as failures of the state to exercise due diligence in relation to the right to life.� The extent to which this is the case depends upon how the law is interpreted by the concerned courts or other monitoring bodies, in particular on the following issues:

• Can it be said that the company acted "arbitrarily”?� Is it arbitrary only if com�pany man�agers acted intentionally, or is it sufficient that they acted recklessly or with negligence?
• What should the state have done to prevent the company from taking life in an arbitrary manner?� How inadequate must the laws and enforcement be before the state’s failures breach its "duty to protect”?
• After a death has taken place, what level of investigation is required into the conduct of the company?� How inadequate must the investigation be before the state is found to have breached its obligations?

Domestic and transnational corporations

Does it matter whether the conduct in question is undertaken by a transnational rather than a domestic company?� Discussion about human rights and corporate conduct has mostly con�cerned itself with transnational companies (TNCs) even though domestic companies proba�bly cause more harm overall.� Human Rights Watch, for example, mentions only TNCs in its section, "Corporations and Human Rights,” in the Human Rights Watch World Report 1999.

This focus is perhaps not surprising.� There are 40,000 transnational companies, with over 250,000 foreign affiliates.� They employ 70 million people worldwide, produce 25 percent of all manufactured goods and account for two-thirds of world trade.� They dominate the new globalized economy.� In addition, as individual enterprises, TNCs are very powerful.� They can shift production around the globe with ease and bypass national governments. [4]

The term TNC is a little misleading.� There is no such thing as a transnational company; rather there are transnational enterprises (TNEs), each of which is composed of many differ�ent com�panies.� A TNE can be defined as

a complex of legally discrete entities (i.e., companies) established in several coun�tries, forming a single economic unit (enterprise) which engages in operations tran�scending national borders under the direction of a sole decision-making centre. [5]

In the context of human rights, the most important differences between ordinary companies and those which are parts of transnational enterprises are:

• The subsidiaries of TNCs are often larger than domestic companies, and therefore ca�pable of affecting a greater number of workers, local residents and consumers.
• The host state will often have no control over those who make decisions about how the subsidiary company operates.� This is because those decisions are made by the parent company’s headquarters, which is based in a different jurisdiction, out�side the jurisdiction of the host state.� The local directors and managers running the subsidiary company will often have little control of the company’s actual operations.� Even rou�tine decisions may be made centrally at the headquarters of the parent company and communicated to the local representatives.
• The host state will find it difficult to control the parent company’s subsidiary because of the imbalance of power.� The TNC may have private, administrative structures that are greater than the state’s governance capacity.� TNCs are able to provide the state with foreign currency and access to foreign markets that it may be anxious to gain.� As a result, the state has very limited bargaining power vis-�-vis the TNC.�

Is the legal situation in relation to TNCs any different? The answer again is no.� Although the 1977 ILO Tripartite Declaration of Principles concerning Multinational Enterprises and So�cial Policy sets out a series of specific duties on TNCs, they are not legally binding.

So what about the state’s legal obligations in relation to TNCs?� There are two states to con�sider: the host state and the state where the parent company is based.� The host state contin�ues to have the same obligations, discussed above, whether or not the company is a TNC subsidiary or a domestic company.� It obviously has no obligations in relation to the conduct of the parent company

But what about the state where the parent company is based?� Does it have obligations in re�lation to the conduct of the parent company when the latter violates the rights of people in another country, where the subsidiary is based?� For example, what obligations does a state have with respect to a parent company that fails to inform a subsidiary about the dangers of a chemical and, as a result of this failure, workers employed by the subsidiary company fall ill and die?

There is no clear answer.� It depends on the rules of jurisdiction in different countries.� Eng�lish courts, for example, have jurisdiction over manslaughter committed by British citizens, even when the death takes place in another country.� Therefore, it could be argued that the British state has an obligation to investigate the conduct of a parent company whose actions are alleged to have resulted in deaths of workers in a subsidiary abroad.� It appears that hu�man rights organizations do appreciate this point.� Human Rights Watch in its recent report on sex discrimination in Mexico by subsidiaries of US companies urges the US government to take a number of actions. [6]

However, the United Nations is correct when it states in a 1996 report:

The fact is that though each TNC subsidiary is, in principle, subject to its host coun�try’s regulations, the TNC as a whole is not fully accountable to any single country.� The same is true for responsibilities they fail to assume for activities of their subsidi�aries and affiliates.� The global reach of TNCs is not matched by a coherent global system of accountability.

This, the United Nations states, has led to calls for "a new comprehensive set of rules,” which should "represent standards of conduct for TNCs and set out economic and social du�ties for them with a view to maximizing their contribution to economic and social develop�ment.” [7]

Strategic Implications of the State’s International Legal Obligation to Protect

The legal analysis above indicates that activists can directly use international human rights law in relation to corporate conduct that violates rights.� The allegation would be made against the state rather than the company.� Two levels of evidence would be required:

• Evidence that the corporation violated a right under a human rights convention which the state has ratified
• Evidence that the state failed to observe due diligence to protect an individual against the violation by the company

This information can then be passed to the Human Rights Committee (in relation to violation of the right to life), the CESCR, or the ILO.� Alternatively it can be used as a basis for a case before the European or Inter-American Courts of Human Rights (see Modules 29 and 30).

Does the Legal Situation Matter?

Apart from a few exceptions, the only way to begin to bring corporations to account for hu�man rights violations, using human rights law, is through invoking the state’s obligation to protect.� Only then will human rights courts or monitoring bodies take cognizance of a com�plaint.�

However, lay people may not fully appreciate the distinction between companies that fail to act in furtherance of human rights and companies that directly violate human rights.� Compa�nies are therefore often criticized for violations when this is not strictly legally the case.� However, whatever the legal situation, companies are often sensitive to criticisms and re�spond as though they do have human rights obligations.� It is this fact that underlies cam�paigns to encourage corporations to establish or adopt codes of corporate conduct.� These are voluntary codes to which companies that either operate directly in the Third World or under�take trade with local Third World companies agree.� The British government, for example, has sponsored an organization called the Ethical Trading Initiative (ETI). [8] � ETI has drafted a code that contains a series of provisions, based on internationally agreed-upon standards, which the British companies who accept it must ensure that their trading partners abide by.� Those partners, for example, must not:

• use forced labor
• prevent freedom of association and the right to collective bargaining
• have unsafe or unhygienic working conditions
• use child labor
• fail to provide living wages
• demand excessive working hours
• have discriminatory employment practices

In 1998 Amnesty International produced Human Rights Principles for Companies and Hu�man Rights Guidelines.�� These speak directly to companies.� The Guidelines state:

Companies have a direct responsibility for the impact of their activities on their em�ployees, on consumers of their products and on the communities within which they operate.� This means ensuring the protection of human rights in their own operations.

They further propose that all companies should adopt an explicit company policy on human rights which in�cludes public support for the Universal Declaration of Human Rights.� Companies should establish procedures to ensure that all operations are examined for their poten�tial impact on human rights, and establish safeguards to ensure that company staff are never complicit in human rights abuses . . .

The Amnesty International publications also call on TNCs to "promote similar standards through all third parties who act with them or on their behalf,” including a company’s "con�tractors, suppliers and partners.”� Amnesty repeatedly argues that the sanction for failing to abide by these standards may be damage to a company’s reputation.

The most difficult aspect of these codes of conduct is enforcement.� How is it possible to en�sure that the companies themselves or their local trading partners actually abide by the codes?� The ETI is, for example, struggling to find an effective independent monitoring sys�tem.� The other problem is sanctions.� What sanctions can be used if companies breach the code?� In addition, it may well be that only companies with good working practices sign up in the first place.� However, while these codes are voluntary, not legally binding and can be difficult to monitor independently, they can at least provide an effective structure by which to judge a company’s conduct. [9]

Beyond international human rights law

Using international human rights law is certainly one strategy for trying to force states to control corporations.� However, it is important to keep in mind that there may well also be domestic remedies available.� Even if it may not be legally possible to control corporations under interna�tional human rights law, they must comply with civil, criminal and constitu�tional law at a domestic level, and states have an obligation to see that they do so.� Activists should also keep in mind that domestic and international law are not neces�sarily mutually irreconcilable.

Constitutional Law

Like international law, constitutional law primarily concerns the relationship between the states and individuals.� Depending on the particular rights enshrined in the constitution, it may be possible to argue (using the same logic as above) that the state has violated a person’s constitutional rights by failing to stop a company from acting in a particular way.� There are two possible ways of arguing this:

• The state has failed to act with due dili�gence to stop particular violations.
• The state has failed to undertake criminal inves�tigations of companies or their sen�ior officers, or to lay criminal charges against them where there is sufficient evidence, or to have the systems to en�sure that investigations and prosecutions against them can take place-for exam�ple, in India, relating to Union Carbide, and in Bangladesh, relating to Occidental and a gas leak.

Criminal Law

Deaths, injuries or property damage resulting from corporate activities can be the result of criminal conduct on the part of the company or its senior officers.� Such conduct may call for the prosecution of the company or individual senior company officers for regulatory offenses or conventional crimes of violence.�

If the authorities fail to prosecute, it may be possible to "judicially review” the decision against prosecution.� If this fails, another option is to undertake a private prosecution.

In relation to deaths resulting from the activities of TNCs, it may also be possible for the state where the parent company is based to prosecute the parent company’s directors or sen�ior officers.� This depends on whether the courts have jurisdiction over deaths resulting in different countries.� If the authorities there fail to investigate or prosecute, judicial review or private prose�cution may be possible.

Civil Law

Claims for compensation are another possible remedy.� These can be taken at the national level against the subsidiary company when there is evidence that the company acted negli�gently with resulting harm to person or property.� In some cases it is not necessary even to prove negligence.

Often the subsidiary company does not have enough assets to deal with the claim, or the ac�tions or decisions at the heart of the claim were made by the parent company.� It is possible, depending on the level of control of the parent company over the subsidiary, to sue the parent company.� Even if control is tight, companies often persuade courts that the case should not be heard in the jurisdiction of the parent company-where damage awards are high-but in the courts of the subsidiary’s host country.� In Britain there has recently been an important decision that facilitates a legal suit against the parent company of a British transnational en�terprise. [10]

Author: The author of this module is David Bergman.

USING MODULE 25 IN A TRAINING PROGRAM

NOTES