The international legal system

The international legal system is traditionally constructed as a state-based system with state sovereignty being supreme. Under this dominant positivist view, an entity has international legal personality if it has direct international rights and responsibilities, can bring international claims, and is able to participate in the creation, development, and enforcement of international law, i.e., if it is a ‘subject’ of the international legal system.^{Footnote 18} The International Court of Justice (ICJ) clarified the issues of international personality, and what is a ‘subject’ of the international legal system, in its Reparations for Injuries Opinion concerning the international legal personality of the United Nations (UN) Organization itself:

This is an important statement of international legal principle. It directly links being a subject of international law with international legal personality. It clarifies that there can be subjects of the international legal system that are not states and explains how the international legal system has developed, and continues to develop, in ways that allow non-states to have international legal personality and act independently in the international legal system.^{Footnote 20}

The ‘subject’ v ‘object’ dichotomy has rightly been criticized by a number of writers, not least because it privileges certain voices and silences others.^{Footnote 21} Rosalyn Higgins, a former President of the ICJ, argues that

She offers an alternative approach, being the idea of the ‘participant’ in the international legal decision-making process. Under this view, there are many participants in the international legal system, in the sense that there are many different entities – from states and international organizations, to transnational corporations and natural persons – who engage in international activity (or ‘upon an international plane’ to use the ICJ’s words in the Reparations for Injuries Opinion). Participation may be extensive and over a wide range of international matters or it can be limited to a few issues. Participation will depend on the particular area of the international legal system concerned and the activity and involvement of entities in that area, rather than on the determination by states (and only states) as to whether any non-states are ‘subjects’ for a specific purpose.^{Footnote 23} As the international community changes and the ‘needs’ or areas governed by international law develop, then so will participation in the international legal system.

Therefore, participation is a valuable framework to explore involvement in the international legal system, and thus as a means to see if there are alternative voices in the system other than states. It is becoming an inclusive system with many participants.^{Footnote 24} Such an inclusive approach is consistent with the view that states have lost their privilege as the sole producers of norms in international affairs.^{Footnote 25} It is therefore a valuable approach to see how the international legal system has responded to activities by corporations.

Corporations and the international legal system

In order to explore the role of corporations in the international legal system in terms of their participation, this article will outline how they can participate in the creation, development, and enforcement of international law as independent participants.^{Footnote 26} It will do so by reference to the development of international economic law, which deals with global investment, trade and financial issues, and where corporations are involved.^{Footnote 27} There are now a range of mechanisms under international economic law by which corporations can bring claims against states.^{Footnote 28} These mechanisms include institutional bodies (both treaty-based and non-treaty based) with established procedures, such as under the International Chamber of Commerce and the International Centre for the Settlement of Investment Disputes, and through the model law of the United Nations Commission on International Trade Law. Decisions by these bodies are legally binding and can be enforced through national law, often as a consequence of a treaty obligation (such as the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958).^{Footnote 29} One clear instance is within the European Union (EU), where corporations can bring claims for a breach of EU law direct to the Court of Justice.^{Footnote 30}

Under international economic law it is the state that enables the corporation to bring a claim either by ratifying the relevant treaty and/or through a contract agreed specifically by the state with the corporation. However, in this area of law the ability of the state to refuse to allow individuals to bring international claims is often quite limited. In many instances the state, particularly a developing state, has little ability to resist a corporation’s request to be able to bring an international claim or for the state to ratify the relevant treaty to enable such a claim to be made (if necessary) by the corporation. This is because the economic power of such corporations is often far greater than that of many states.^{Footnote 31} In addition, economically powerful states may place pressure on other states to allow the corporations of those economically powerful states to have access to international dispute mechanisms (e.g. by ratifying a bilateral investment treaty).^{Footnote 32}

Many of the claims brought by states to international economic legal bodies, such as under the dispute settlement procedures of the World Trade Organization (WTO), are initiated, sponsored, and prosecuted in effect by the corporations that are affected by the trade action that is the subject of the claim.^{Footnote 33} Examples of the driving role of corporations in directing litigation under the WTO, include Kodak and Fuji representatives being on the United States (US) and Japanese delegations on a case affecting them, and the large corporations which deal in bananas convincing the US and the EU to litigate about the trade in bananas from the Caribbean, despite the very few bananas that are grown in the US and the EU.^{Footnote 34} Indeed, the drafting of key international economic treaties is often done at either the instigation of, or with the direct involvement of, corporations, as seen in the Agreement on Trade-Related Aspects of Intellectual Property Rights 1994 (TRIPS).^{Footnote 35} Further, the World Bank has created an Inspection Panel, which allows those corporations (and others) which believe that they will be affected detrimentally by a project in a state that is to be funded by the World Bank to ask the Panel to investigate their claim.^{Footnote 36} The Bank can do this even if the state is opposed to such investigation.

Accordingly, the main participants in a number of areas of international economic law are both states and corporations, and they are often participating on equal legal terms. In negotiation of contracts where a transnational corporation is involved, an agreement on a dispute settlement mechanism is vital. Invariably this will be to an international body to which the corporation can bring a claim and obtain an enforceable judgment. For most states that seek to encourage foreign investment, such an agreement allowing international dispute settlement is necessary and is not able to be refused. Further, whilst states can withdraw from these treaties, the highly undesirable political and economic consequences of withdrawal from some of them, such as within the EU, has significantly reduced the ability of most states to take such sovereign action. Thus, for all intents and purposes, corporations now have an independent capacity to ensure that they can bring an international claim in some areas of international economic law.

Therefore, it can be seen that within the current international legal system there are areas that are no longer solely about states, or created and enforced solely by states. There are non-state participants, especially corporations, who do participate in this system. However, the area of international economic law focuses mainly on the legal rights of the corporations and not on their legal responsibilities. To explore the issue of international responsibilities of corporations it is necessary to examine the extent of the development of corporations’ international responsibilities for human rights abuses. This is the area where the SRSG’s Framework is instructive.

The SRSG’s Framework

The SRSG’s Framework has three elements (or ‘pillars’) on which the Guiding Principles are built: the state’s duty to protect against human rights abuses by corporations; the corporate responsibility to respect human rights; and the need for effective access to remedies. The justification for this Framework is stated to be:

The SRSG has since produced other reports that seek to ‘operationalize’³⁸ this Framework,^{Footnote 39} in particular the Guiding Principles.^{Footnote 40} There are some criticisms of this Framework, which will not be considered here as this Framework and Guiding Principles have now been endorsed by the UN Human Rights Council as a way forward.^{Footnote 41}

Under this Framework, each state has a duty, or a legal obligation, to protect against human rights abuses, while a corporation has a social responsibility to respect human rights. There must also be ‘effective grievance mechanisms’ for the actions of both states and corporations, ‘where there is a perceived injustice evoking an individual’s or a group’s sense of entitlement, which may be based on law, explicit or implicit promises, customary practice, or general notions of fairness’,^{Footnote 42} and that these can be judicial and non-judicial.^{Footnote 43}

In relation to states, the Framework and Guiding Principles affirm that their international legal obligation is to protect all people in their jurisdiction from human rights abuses by state officials and from actions by non-state actors, such as corporations, even where a state is not directly responsible for the actual violation of international human rights law, or is less economically powerful than a corporation.^{Footnote 44} In terms of state action, this Framework and its Guiding Principles require that a state must regulate and control corporations that are incorporated or active in that state in such a way that the corporations do not violate human rights and that the corporations face effective sanctions if they do.^{Footnote 45} However, the SRSG recognized that because many states do not comply with their international human rights legal obligations and that many corporations’ actions do affect human rights, then there must be some form of responsibility on corporations. In his terminology:

The SRSG’s Reports draw a deliberate distinction between the state’s ‘duty’ to protect and the corporate ‘responsibility’ to respect, perhaps trying to sharpen the difference between legal and moral obligations. After all, as the SRSG stated, the concept of corporate responsibility is that it is ‘the legal, social or moral obligations imposed on companies’.^{Footnote 47}

On this basis, the Framework and Guiding Principles reinforce the international legal position that corporations do not have any direct international legal obligations in relation to human rights, so corporations cannot be directly responsible for violations of international human rights law.^{Footnote 48} To this extent the Framework and Guiding Principles retain a traditional notion of states as subjects of international law. This also has impacts on the third ‘pillar’, as it may be very difficult to enforce access to a remedy when there are no international legal obligations on the corporation to have any remedy.

In the development of this Framework and Guiding Principles, the SRSG expressly sought to ensure, through consultations with a number of stakeholders, that it was reflective of the demands of civil society, of corporate practices and of states’ international legal obligations.^{Footnote 49} Therefore, what is especially relevant in the consideration of global legal pluralism, are the interactions between the norm-creating processes of civil society, corporations and states in regard to the international obligations of corporations for human rights abuses.

Civil society and norm creation

As seen above, the Framework defines the corporate responsibility to respect human rights in relation to a ‘social expectation’. It is also called a ‘social norm’ on which a corporation’s ‘social licence to operate is based’⁵⁰ and as a ‘standard of expected conduct’.^{Footnote 51} With no clear literature basis being provided by the SRSG for these particular standards in this context, or clarification in the Guiding Principles, it is difficult to determine what is a ‘social expectation’ or a ‘social norm’ in this instance, and how is it determined.^{Footnote 52}

Nevertheless, it is clear that some form of pressure from society is envisaged by the idea of ‘social expectation’ for the purposes of the Framework. In the Guiding Principles, the role of civil society is referred to in terms of the requirement on corporations to have ‘meaningful consultation with potentially affected groups and other relevant stakeholders’⁵³ and to ‘establish and participate in effective operational-level grievance mechanisms for individuals and communities who may be adversely impacted’,^{Footnote 54} so that there is a requirement of continuous engagement and dialogue between the corporation and those affected by its actions. Thus social forces are specifically included within the structure of the Framework and Guiding Principles.

In terms of legal pluralism, it is necessary to determine if, and how, civil society has created social norms about corporate activity regarding human rights. If it can be shown that civil society can produce sufficient pressure to develop those social expectations on corporations then it would indicate that it is an effective norm-creating community in this area.

It is within civil society, especially in local groups or communities, that human rights claims usually arise. As Koen de Feyter notes:

So the role of civil society is crucial in the formulation of any claim. Empirical evidence shows that communities tend to use human rights language (or terminology that equates to human rights) to express their claims, even where the local group has been largely isolated from global media.^{Footnote 56} This local group may then link with a national and/or international group to increase the profile and pressure in relation to their claim. This is what Richard Falk describes as part of ‘globalisation from below’.^{Footnote 57}

In order to examine how civil society has been part of the development of norms concerning corporations’ actions affecting human rights, some examples will be considered here, with a particular focus on two different civil society communities: indigenous groups and trade unions. For example, indigenous groups in Ogoniland in Nigeria began protesting against the human rights impact on their community of the oil and gas corporations, especially Royal Dutch Shell, and these corporations were supported by the Nigerian government. After many years of action, including the death of some of their leaders, and with the support of international non-governmental organizations (NGOs), the social pressure on both the Nigerian government and on Shell was considerable. Ultimately, Shell withdrew from its operations there and has since reached various settlements with the communities, which it justifies on the basis that it hopes ‘to aid the process of reconciliation’.^{Footnote 58} A similar situation is found in parts of South America, where indigenous groups have been active in asserting their human rights in relation to corporate activity, especially in relation to their land rights. This has led to a series of claims for violations of human rights made before national and regional courts, many of which have been successful, such as Cal v Attorney General of Belize,^{Footnote 59}Mayagna (Sumo) Awas Tingni Community v Nicaragua,^{Footnote 60} and Social and Economic Rights Action Center and the Centre for Economic and Social Rights v Nigeria.^{Footnote 61} These indigenous group’s claims were against the state, as only the state has direct international legal human rights obligations (as discussed above). Yet, through the state’s response to these claims, and by broader public information and civil society action, there was pressure brought to bear on the corporations involved.^{Footnote 62}

Similarly, trade union pressures have had an impact on corporations, especially concerning labour rights, including child labour issues. The civil society pressure on Nike is an example. For instance, in 2001 workers at a Korean-owned Nike contractor, located near Puebla, Mexico, demanded their right to form a trade union and called for the improvement of the cafeteria food.^{Footnote 63} The owners sacked the leaders. As a consequence of this situation, and many others around the world, demonstrations occurred at Nike stores, there was a US university campus speaking tour by the leaders, and NGOs called for Nike to enforce its own pre-existing code of conduct on its suppliers and to ensure that they abided by labour laws. The campaign succeeded as independent unions were allowed, and Nike agreed to apply properly its code of conduct, which included upholding these human rights, to all its suppliers.^{Footnote 64} In addition, Nike faced a false advertising case that arose due to its own marketing about its high labour standards, which it settled after losing the case before the Supreme Court of California.^{Footnote 65} Indeed, at the time the CEO of Nike stated that they would change their practices, as ‘[we do not like the fact that] the Nike product has become synonymous with slave wages, forced overtime and arbitrary abuse’.^{Footnote 66}

The example of Nike also shows how there can be civil society action by other stakeholders in a corporation, such as shareholders and consumers. Other examples of stakeholder action include Oxfam International’s campaign – called a ‘Fair Trade Coffee’ – against Kraft Foods and Procter & Gamble, seeking to mobilize public opinion against the low prices paid to coffee growers in Africa, Latin America and Asia. Oxfam used measures such as protesting at shareholder meetings to press for a minimum ‘floor price’ for coffee, and the longer-term effect has been the rapid rise in the production and sale of ‘fair trade’ products.^{Footnote 67}

There is also evidence of the activities of civil society leading to hard law. As noted above, corporations were active in the creation of the treaty that protected intellectual property rights (TRIPS). This clearly benefited large pharmaceutical corporations (and was intended to reflect their costs in conducting research). However, in 1997 the South African government introduced amendments to its Medicines and Related Substances Control Act 1965 to allow cheaper (generic) products to assist in making AIDS/HIV drugs affordable, as the high cost of the pharmaceutical corporation’s drugs made them unavailable to many people relying on public health services.^{Footnote 68} This amendment was challenged by the Pharmaceutical Manufacturers’ Association of South Africa (PMA), acting on behalf of 40 of the world’s largest pharmaceutical corporations, on the basis that the law violated TRIPS. In addition, there were threats of trade sanctions by US and EU governments. Strong civil society action, directed by the Treatment Action Campaign, a South African NGO, organized demonstrations and mass protests in front of relevant corporate headquarters and embassies around the world, enlisting the support of over 250 NGOs outside South Africa, arguing that public health issues and the right to health care must have priority over corporations’ protection of their intellectual property.^{Footnote 69} As a consequence, the threats of sanctions were dropped and the pharmaceutical corporations withdrew their case. In addition, there was a radical new interpretation of the TRIPS agreement, with all states parties agreeing to the Doha Declaration 2001, which provided that ‘the TRIPS Agreement does not and should not prevent [States] from taking measures to protect public health’.^{Footnote 70}

Another example is the creation and impact of the United Nations Declaration of the Rights of Indigenous Peoples 2007.^{Footnote 71} The process of its creation was an inclusive one. For the first time, a UN working group created to formulate a UN Declaration included many representatives of indigenous peoples, who participated fully in the debate.^{Footnote 72} While states had to agree the final Declaration, the drafting process had already led to changes in international law – and the Declaration itself continues to do so – with the help of highly-effective transnational advocacy, with state practice and international courts applying it. These changes in the law include Bolivia incorporating the Declaration into its Constitution on 7 November 2007,^{Footnote 73} the Belize Supreme Court deciding that the property provisions of the Declaration embodied ‘general principles of international law’ that had the same force as would a treaty,^{Footnote 74} and their use by the Inter-American Court of Human Rights^{Footnote 75} and the African Commission on Human and Peoples’ Rights.^{Footnote 76} In many of these cases, the issue concerned activities by corporations. This situation, as well as the circumstances surrounding TRIPS in South Africa above, are instances where civil society has been an active international participant and its norm-generation has led to changes in international law.

However, while some issues raised by parts of civil society have been norm-creating, there are still many aspects of civil society’s role that show limitations on their ability to ensure that their ‘social expectations’ are met. Indeed, even if a ‘social expectation’ can be discerned through empirical evidence, which society is the relevant society for determining the expectation? Is it all the international community (however that is defined)^{Footnote 77} or only communities in the industrialized, consumer-active North? Does it include the rural poor in non-industrialized states? Will it affect those corporations producing consumer goods (especially those with a parent corporation in an industrialized state) more than those that do not produce consumer goods? If there is such a ‘social licence’ for a corporation to operate then, despite some counter-examples, it is highly unlikely that those who are oppressed, are poor and those whose human rights are violated by a corporation, will be in a position to withdraw that ‘social licence’. The actions taken by local communities can sometimes not be taken up internationally or are taken up in a partial or random way by the rest of civil society.

The question also needs to be asked as to who is participating in these processes. Some parts of civil society are criticized for their lack of legitimacy, meagre democratic processes and limited representativeness.^{Footnote 78} They can also reflect the hierarchies and political agendas within states, and can be captive to states and, significantly, to corporate or other power. For example, there are a few NGOs representing corporate interests, such as the International Chamber of Commerce and CSR Europe, which are a corporate strategic response to civil society pressure.^{Footnote 79} In addition, many of the cases brought by civil society groups are settled by corporations out of court, thus depriving civil society (and the rest of the international community) of standard-setting legal principles and of a court-sanctioned record of events, and requiring other groups to bring their own claims with the considerable costs involved.^{Footnote 80} Thus these ‘social expectations’ are open to be defined or manipulated to serve only some entrenched economic interests or selected social partners.

Nevertheless, the Framework and the Guiding Principles confirm explicitly the role of civil society in ensuring that the responsibilities of corporations (and of states) are applied and enforced. These requirements enable some norm-creation by the civil society community in the area, as

Therefore, a normative role for civil society is an accepted part of the Framework and Guiding Principles in relation to the corporate responsibility to respect human rights.

Corporations and norm creation

Corporations have responded to the pressure from civil society through some organized action.^{Footnote 82} The SRSG acknowledged this when he referred to the ‘new multi-stakeholder form of soft law’ developing from corporate coordination and driven by social pressure to close regulatory gaps, such as the Voluntary Principles on Security and Human Rights, the Kimberley Process and the Extractives Industry Transparency Scheme.^{Footnote 83}

Many of these corporations see their CSR policies as being the equivalent to a human rights policy and/or as making them compliant with their human rights responsibilities.^{Footnote 84} Yet having a CSR policy is not the same as providing protection for all human rights. It has been stated that there are

What is important about this definition is that essentially CSR initiatives are management-driven and corporate-determined policies that are designed to assist the corporation’s business, including in terms of its reputation, even if genuinely aimed for a positive social end.

In contrast, human rights protections are person-centred and have legitimate compliance mechanisms (even if these are not strong). Human rights are not voluntary. Human rights are an expression of human dignity and to have that human dignity protected.^{Footnote 86} In addition, where CSR policies do refer to human rights they tend to focus on a limited range of human rights, such as the right to privacy or freedom from torture.^{Footnote 87} While there is now a growing acceptance by many of the major transnational corporations that CSR policies need to align with human rights, it is still vital that this distinction between CSR policies and human rights protections is made clearly and unequivocally to corporations, and that they introduce appropriate human rights focused protection policies and practices.

Nevertheless, a number of industry groups have been created by corporations in a range of sectors to deal with human rights issues. For example, the International Council on Mining and Metals (ICMM) was formed to address human rights concerns in the mining and metals industry,^{Footnote 88} the Electronics Industry Code of Conduct (EICC) is intended to assist electronics corporations in relation to human rights concerns in their supply chains,^{Footnote 89} and the Global Social Compliance Programme (GSCP) was created to address labour, health and safety and environmental considerations in the manufacturing supply chain.^{Footnote 90}

Increasingly corporations are seeing membership in these groups as a way to gain credibility for their human rights efforts and seek to comply with their codes of conduct. Indeed, the SRSG has noted that ‘once in [a human rights code of conduct], exiting can be costly’.^{Footnote 91} For example, Apple joined the Fair Labor Association (FLA) after one of its Chinese suppliers was found to have human rights violations on its facilities, and Apple’s action was seen as an attempt to demonstrate its commitment to upholding human rights standards.^{Footnote 92} In addition, failure to adhere to industry standards can lead to removal from the sector’s relevant body. For example, the Ethical Trading Initiative (ETI) suspended Levi Strauss from its membership after the corporation refused to commit to a living wage standard required under the ETI Code of Conduct.^{Footnote 93} In many cases these industry groups are establishing normative standards of conduct on their corporate members (and to potential members) regarding human rights. It may even be possible for one industry sector to apply its codes of conduct on other industry sectors, such as the finance industry’s application of the Equator Principles, on environmental and social impacts of development, being applied to borrowers.^{Footnote 94}

Corporations have been effective in their attempts to apply their industry codes and norms in the creation of state laws, or to prevent those laws being passed. For example, the financial sector has been effective so far in limiting wide-ranging legislative regulation,^{Footnote 95} and transparency legislation in the EU and US has faced opposition from corporations.^{Footnote 96} At an individual corporate level, a corporation may have its own code of conduct for business partners, which may include reference to national or international human rights law, and which becomes part of a contractual agreement between a company and a supplier of goods or services.^{Footnote 97} As a consequence, the suppliers find themselves subject to international and national human rights laws whose normative content is defined and enforced by the corporation that sources their goods and services and not by states, or by appropriate legislation or case law.^{Footnote 98} This outcome can be an effective means to protect human rights along the supply chain but can have differential effects and can allow corporations to prioritize some human rights.^{Footnote 99}

Further, the corporate codes of conduct, especially when industry-wide, can facilitate binding national and international regulation by beginning a process of consensus-building that can lead to legal regulation.^{Footnote 100} The SRSG promotes this view:

Yet, this view is criticized, especially in the area of transnational labour market regulation:

Thus, the norm-creation of corporate codes of conduct – a form of ‘soft law’ – is not only norm-creating within the corporate community but has an effect on legal regulation beyond that community. This effect can either be seen as a positive development on general social regulation or as one that reinforces the power of the corporations. Indeed, according to Paul Schiff Berman, the legal pluralism framework allows for disparities in power and other differences between normative orders.^{Footnote 103}

Yet the disparities in power can be such that the pluralism of differing norms is weighted towards one community. César Rodríguez-Garavito considers that ‘the struggle for worker rights takes place in a context of legal pluralism in which national laws, ILO [International Labour Organization] Conventions, corporate codes of conduct, social clauses in bilateral and regional trade agreements and unilateral sanctions overlap and clash’.^{Footnote 104} Describing a confrontational situation between Nike and a supplier, he quotes a factory manager as saying, ‘in the last instance, the law that mattered [to the supplier and the state] was Nike’s law’.^{Footnote 105} So a corporation’s norm-creation in this area can amount to powerful corporate-determined economic regulation at the expense of the state’s social regulation, which could reflect a ‘paradigm shift from a regulatory to a governance model’¹⁰⁶ or a ‘shift of power relations in favour of a limited group of corporate actors’.^{Footnote 107} These views highlight that the ‘social expectations’ on corporations could be defined or manipulated to serve only some entrenched economic interests or selected social partners. Indeed, Joel Bakan has argued that:

Therefore, there is strong evidence that corporations are norm-creating communities, with relatively effective regulation and compliance methods within their sectors. These corporate communities are increasingly able to apply their regulations through both voluntary means and use of pressure to influence state-based legal regulation. Yet there is also evidence that those norms are not as far-reaching as state regulation might be and are likely to benefit the corporation rather than the broader community.^{Footnote 109}

Thus the corporation’s responsibility to respect under the Framework and Guiding Principles specifically acknowledges the role of corporations as norm-creation in this area. Yet, by their structure they have allowed corporations to continue to avoid international legal obligations and direct compliance with regard to their abuses of human rights. Instead, the responsibility to respect has to some extent enabled them to (re)define, for their own purposes, the standards by which they measure their performance without challenging the corporation’s powers and placing only some checks on their norm-creating powers through social expectations and state regulation.

States and norm creation

As indicated in the preceding sections, states are the primary participants and norm-creators in the international legal system, but no longer the only ones. The Framework and Guiding Principles restate their binding international human rights legal obligations with regard to the protection of human rights in relation to the activities of corporations. A number of states have introduced national legislation in this area. For example, the Sullivan Principles supported by the US government created a code of conduct for US corporations operating in South Africa during the apartheid era in relation to black workers.^{Footnote 110} More recently, Australia has passed legislation dealing with unfair contracting arrangements in regard to poor labour conditions in textile, clothing and footwear facilities.^{Footnote 111}

States can also advance international law in this area, both hard law (such as the Doha Declaration on TRIPS above) and soft law, such as the OECD Guidelines on Multinational Enterprises,^{Footnote 112} the ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy,^{Footnote 113} and the IFC Performance Standards.^{Footnote 114} These are considered ‘soft law’ as they lack direct legally binding compliance mechanisms. Indeed, the lack of such compliance mechanisms for these international instruments

The Framework and Guiding Principles also lack compliance mechanisms for the corporation’s responsibility to respect. This is in direct contrast to the legally binding compliance mechanisms under international economic law, especially under bilateral investment treaties, discussed above.

Yet, too often, states do not take these regulatory actions at the national or international level. If they do, it may be to protect the corporation rather than their own nationals.^{Footnote 116} Indeed, it has been argued that

Further, the state may be complicit – in breach of its obligation to protect human rights – in a corporation’s activities that have led to human rights violations. The states involved are the home state, being the state of incorporation of the corporation, and the host state, being the state where the corporation is operating. Under international human rights law, if a home state has provided financial backing or other support for a corporation’s activity, then the home state could be found to be complicit in the host state’s breach of the host state’s own international human rights obligations.^{Footnote 118} The home state can be very active in their support of their corporations’ extraterritorial activity, such as through the provision of export credits and political risk insurance, and through developing essential contacts in other states and participating in government trade missions abroad, as well as in entering into bilateral investment treaties that assist their own corporations. For example, the legal (and financial) structures of the corporations (as a consortium) that operate the Baku-Tbilisi-Ceyhan pipeline^{Footnote 119} include agreements between the consortium and the host states that contain ‘stabilization clauses’. These make the host states liable to pay compensation to the consortium where, for example, they make any regulatory changes that adversely affect the ‘economic equilibrium’ of the project and so effectively prohibit the host states from applying certain labour standards to the consortium members or to give an increased human rights protection in their state, even if this is contrary to the host state’s international human rights obligations.^{Footnote 120} It is of note that BP, the leader of the consortium managing the project, responded to civil society concerns by entering into a Human Rights Undertaking, which prevents the consortium from asserting in legal proceedings an interpretation of the governing agreements that is inconsistent with the regulation by host states of their obligations under human rights treaties.^{Footnote 121}

States could be more proactive in creating legally binding international obligations on corporations. For example, they could improve access to remedies for human rights abuses by corporations in areas such as trade, finance and investment, especially as all these areas facilitate global corporate activity.^{Footnote 122} This could mean greater transparency and accountability of states in terms of how they have used international loans, as well as an increase in transparency of corporate activity, including where there is bribery.^{Footnote 123} In addition, all stabilization clauses that could restrict the ability of a state to protect human rights should be removed from bilateral investment treaties (and similar treaties).^{Footnote 124} States could also accept that their obligation to protect against corporations’ abuses of human rights extends to the activities of their corporate nationals beyond the home state and to their subsidiaries, even where those subsidiaries are incorporated in another state. Thus states should regulate their corporate nationals’ obligations through requiring corporate reporting on human rights impact wherever it occurs, and ensuring that access to national public procurement is dependent on good corporate human rights compliance. While this would challenge traditional state sovereignty in that each state is meant to have jurisdiction only over their own corporate nationals, it would extend corporate accountability, and make corporations more responsible for their subsidiaries and not be able to avoid legal responsibility for their actions.

While the record of states, both individually and as a collective, in the creation of legally binding international obligations on corporations has been generally poor, they have created such norms on themselves. As confirmed by the Framework and Guiding Principles, all states have international human rights obligations that require them to regulate corporate activity that abuses human rights. To date this regulation has been compliance-light but the combination of international instruments with national legislation can be a powerful means to ensure that, in due course, corporations do have enforceable international obligations.

Acknowledgements

I am very grateful for the research assistance and astute insights of Joseph Markus and Lara Blecher, and the helpful comments of Thérèse O’Donnell and Andraž Zidar.