Corporations and Human Corporations and Human RightsRights

Dr Joseph MwauraDr Joseph Mwaura

Corporations and Human RightsCorporations and Human Rights

Problem IProblem I

Race to the bottomRace to the bottom

““To attract companies like yours …we have felled To attract companies like yours …we have felled mountains, razed jungles, filled swamps, moved mountains, razed jungles, filled swamps, moved rivers, relocated towns … all to make it easier for rivers, relocated towns … all to make it easier for you and your business to do business here.” you and your business to do business here.”

An advert placed in the An advert placed in the FortuneFortune magazine magazine

by the Philippine government in 1975.by the Philippine government in 1975.

Corporations and Human RightsCorporations and Human Rights

• Union Carbide in India Union Carbide in India

• Shell in the Niger Delta Shell in the Niger Delta

• BAT in KenyaBAT in Kenya

• Ashanti Gold in GhanaAshanti Gold in Ghana

• Coca Cola in IndiaCoca Cola in India

• EPZ’s in Developing Countries etcEPZ’s in Developing Countries etc

Task 1Task 1

0102030405060708090

100

CompanyA

CompanyB

CompanyC

CompanyD

GermanShareholdersBritish

US

The above companies are all registered and doing business in the USA. The US federal government introduces a new tax for all US companies. Which companies would be liable to pay the tax.

Corporate PersonalityCorporate Personality

• A company is a distinct legal entity with a separate A company is a distinct legal entity with a separate existence from its membersexistence from its members

• Corporate veil separates the corporate entity from its Corporate veil separates the corporate entity from its membersmembers

• ExceptionsExceptions– The veil may be lifted:The veil may be lifted:– In times of national emergencyIn times of national emergency – a co whose – a co whose

membership is entirely foreign may be regarded as membership is entirely foreign may be regarded as a foreign co a foreign co Daimler v Continental Tyre & Rubber Daimler v Continental Tyre & Rubber CoCo ( (1916) 2 A.C. 307 1916) 2 A.C. 307 – all shareholders were – all shareholders were German – enemy of the state with inability to sue.German – enemy of the state with inability to sue.

– Fraud – where the formation of a co comprises Fraud – where the formation of a co comprises fraudfraud

Corporate PersonalityCorporate Personality

– Economic entity: a group of companies seen as Economic entity: a group of companies seen as one. The veil is lifted if:one. The veil is lifted if:

•Companies are under the dominant control Companies are under the dominant control of one of themof one of them

•Where the subsidiary acts as an agent of the Where the subsidiary acts as an agent of the parent coparent co

– A statute may expressly authorise the lifting of A statute may expressly authorise the lifting of the veilthe veil•Environmental Protection statutes Environmental Protection statutes •Fraudulent or wrongful trading - director or Fraudulent or wrongful trading - director or

other officer personally liable for carrying on other officer personally liable for carrying on business with intent to defraud creditorsbusiness with intent to defraud creditors

Corporate PersonalityCorporate Personality

– Officers are personally liable in tort where they Officers are personally liable in tort where they exercise personal, rather than corporate, exercise personal, rather than corporate, competence for directing a wrongful act e.g. competence for directing a wrongful act e.g. personally writing to the plaintiff rather than personally writing to the plaintiff rather than using company note paper – conducting using company note paper – conducting negotiations on a personal as opposed to a negotiations on a personal as opposed to a corporate footing corporate footing Airline Shipping Corp v Airline Shipping Corp v AdamsonAdamson

Corporations and Human RightsCorporations and Human Rights

Problem IIProblem II

• International LawInternational Law

• International law imposes direct obligations on International law imposes direct obligations on the statethe state– Some duties imposed indirectly through the Some duties imposed indirectly through the

host statehost state– “…“…makes a mockery of a system which makes a mockery of a system which

claimed to embody international law but claimed to embody international law but didn't cover the behaviour of actors whose didn't cover the behaviour of actors whose role in international transactions- role in international transactions- commercial, cultural, social- already rivalled commercial, cultural, social- already rivalled that of States…”that of States…”(Kamminga, Zia Zarifi 2000 (Kamminga, Zia Zarifi 2000 p.1)p.1)

Corporations and Human RightsCorporations and Human Rights Problem IIIProblem III

• Host State RegulationHost State Regulation

• ProblemsProblems– high cost of litigationhigh cost of litigation– delays in litigationdelays in litigation– corruption, corruption, influential TNCs, lack of judicial influential TNCs, lack of judicial

impartialityimpartiality– Strict regulations lead to loss of investment – TNCs Strict regulations lead to loss of investment – TNCs

relocate to less strict countriesrelocate to less strict countries– lack of legal resourceslack of legal resources– difficulties in piercing the corporate veil to hold a difficulties in piercing the corporate veil to hold a

parent company liable when the subsidiary cannot parent company liable when the subsidiary cannot offer redressoffer redress

– Strict regulation leads to loss of investment – TNCs Strict regulation leads to loss of investment – TNCs relocate to less strict countries - race to the bottom relocate to less strict countries - race to the bottom

Corporations and Human RightsCorporations and Human Rights Problem IVProblem IV

• Home state regulationHome state regulation

• reluctant to enforce breachesreluctant to enforce breaches– Unwillingness to give extraterritorial effect to domestic lawsUnwillingness to give extraterritorial effect to domestic laws– Forum non ConveniensForum non Conveniens– USA Legal System ‘Alien Torts Claims Act 1798’ which USA Legal System ‘Alien Torts Claims Act 1798’ which

permits cases from non American nationals against permits cases from non American nationals against American TNC’s. (Doe V. Unocal). American TNC’s. (Doe V. Unocal).

– Limited usefulnessLimited usefulness– Conduct complained of has to violate the law of nations.Conduct complained of has to violate the law of nations.

•Environmental degradation held not to be a violation of Environmental degradation held not to be a violation of the law of nations.the law of nations.

Forum non Conveniens – inconvenient/inappropriate Forum non Conveniens – inconvenient/inappropriate forumforum

• The more the factors that connect a case to a The more the factors that connect a case to a certain jurisdiction the more appropriate that certain jurisdiction the more appropriate that jurisdiction is:jurisdiction is:– The location where the violation took place The location where the violation took place – the location of potential witnesses the location of potential witnesses – The location of other relevant evidenceThe location of other relevant evidence– the choice of law applicable to the dispute the choice of law applicable to the dispute – possible undue hardship for the defendant – possible undue hardship for the defendant –

courts discretioncourts discretion– the most expeditious use of judicial resources – the most expeditious use of judicial resources –

discretionarydiscretionary– questions of public policy and other similar questions of public policy and other similar

factors - discretionary factors - discretionary

See International campaign for Justice in Bhopal See International campaign for Justice in Bhopal http://www.bhopal.net/index1.htmlhttp://www.bhopal.net/index1.html

Corporations and Human RightsCorporations and Human Rights Problem VProblem V

• Corporate Social ResponsibilityCorporate Social Responsibility

• Corporate Social responsibility – voluntaryCorporate Social responsibility – voluntary– Unenforceable rules set the standards - soft Unenforceable rules set the standards - soft

law (codes of conduct, norms, guidelines) law (codes of conduct, norms, guidelines) – Pressure from shareholders, investors, Pressure from shareholders, investors,

consumers, community etcconsumers, community etc– Useful but effectiveness in protecting human Useful but effectiveness in protecting human

rights limitedrights limited– Spin – a proactive way of deflecting criticismSpin – a proactive way of deflecting criticism

• Task 2: Do corporations have any legal Task 2: Do corporations have any legal duties regarding human rights? duties regarding human rights?

Legal DutiesCompanies Legislation

Common Law

Labour Laws

Anti-Corruption Legislation

Environmental Laws

Constitutions

II International HR Instruments

Companies StatutesCompanies Statutes

• A number of Commonwealth African A number of Commonwealth African Countries still base theirs on the English Countries still base theirs on the English Companies Act 1948.Companies Act 1948.

– Silent on obligationsSilent on obligations– Different interpretations Different interpretations

• A variety of theories applicableA variety of theories applicable

In Whose Interests do Directors Act?In Whose Interests do Directors Act?

Company Directors’Duties

Corporate EntityCorporate Entity +

Shareholders

Corporate Entity,Shareholders,

Stakeholders (Employees,Creditors, Consumers,

Environment, Community,Human rights etc)

Common LawCommon Law• Assuming social responsibilities whose Assuming social responsibilities whose

benefits to the company are clear – intra benefits to the company are clear – intra viresvires

• social responsibilities whose benefits social responsibilities whose benefits to the company are too speculative to the company are too speculative or too remote – breach of duty or too remote – breach of duty ((Evans v Brunner Mond & Co Evans v Brunner Mond & Co [1921] [1921] 1 Ch 359)1 Ch 359)

• Need for Corporate Law ReformNeed for Corporate Law Reform

– Correct defects in the present lawCorrect defects in the present law

•extend the scope of social responsibilityextend the scope of social responsibility

•subscribe to recent international subscribe to recent international developments regarding human rights e.g. developments regarding human rights e.g. UN Norms on TNCs)UN Norms on TNCs)

– Codify the common law Codify the common law – Make the law accessibleMake the law accessible– Raise standards of corporate governance, CSR, Raise standards of corporate governance, CSR,

and human rights and human rights

Human RightsHuman Rights

Universal Declaration of Human Rights Universal Declaration of Human Rights 19481948

• The Preamble: The Preamble:

– ““The General Assembly proclaims this The General Assembly proclaims this Universal Declaration of Human Rights as a Universal Declaration of Human Rights as a common standard of achievement for all common standard of achievement for all peoples and all nations, to the end that peoples and all nations, to the end that every every individualindividual and and every organ of societyevery organ of society, , keeping this Declaration constantly in mind, keeping this Declaration constantly in mind, shall strive by teaching and education to shall strive by teaching and education to promote respect for these rights and promote respect for these rights and freedoms.” freedoms.”

UN Norms on Transnational UN Norms on Transnational CorporationsCorporations

Preamble:Preamble:

“ “ Recognizing that even though States have the Recognizing that even though States have the primary responsibility to promote, secure the primary responsibility to promote, secure the fulfillment of, respect, ensure respect of and fulfillment of, respect, ensure respect of and protect human rights, transnational protect human rights, transnational corporations and other business enterprises, corporations and other business enterprises, as organs of societyas organs of society, are also responsible for , are also responsible for promoting and securing the human rights set promoting and securing the human rights set forth in the Universal Declaration of Human forth in the Universal Declaration of Human Rights.”Rights.”

African Charter on Human and African Charter on Human and Peoples’ RightsPeoples’ Rights

The Preamble to the African Charter on The Preamble to the African Charter on Human and Peoples’ RightsHuman and Peoples’ Rights

““the enjoyment of rights and freedoms also the enjoyment of rights and freedoms also implies the performance of duties on the implies the performance of duties on the part of part of everyone everyone (including legal persons?).”(including legal persons?).”

• How enforceable is the preamble?How enforceable is the preamble?

• The substantive provisions of the charter The substantive provisions of the charter impose responsibility on the states. impose responsibility on the states.

ConstitutionsConstitutions

• Constitutional Reforms in AfricaConstitutional Reforms in Africa

––All fundamental rights being made applicable All fundamental rights being made applicable against companiesagainst companies

– South African Constitution of 1996, Section 8 South African Constitution of 1996, Section 8 (2):(2):

““A provision of the Bill of Rights binds A provision of the Bill of Rights binds a natural a natural or aor a

juristic personjuristic person if, and to the extent that, it is if, and to the extent that, it is

applicable, taking into account the nature of the applicable, taking into account the nature of the rightright

and the nature of any duty imposed by the and the nature of any duty imposed by the right.” right.”

– Ghanaian Constitution of 1992, Section 12:Ghanaian Constitution of 1992, Section 12:

“ “the fundamental human rights and freedoms the fundamental human rights and freedoms enshrined in this chapter shall be respected enshrined in this chapter shall be respected and upheld by the Executive, Legislature, and and upheld by the Executive, Legislature, and Judiciary and all other organs of the Judiciary and all other organs of the government and its agencies and, where government and its agencies and, where applicable to them, by applicable to them, by all natural and legal all natural and legal personspersons in Ghana, and shall be enforced by in Ghana, and shall be enforced by the courts as provided for in this constitution.”the courts as provided for in this constitution.”

– Kenyan Draft Constitution, Section 29 (1):Kenyan Draft Constitution, Section 29 (1):

“ “the Bill of Rights applies to all laws and binds the Bill of Rights applies to all laws and binds all state organs and all state organs and all personsall persons””

ConstitutionsConstitutions

Constitutions Reforms in AfricaConstitutions Reforms in Africa––All fundamental rights applicable against companiesAll fundamental rights applicable against companies- Is there a need to identify a boundary between the - Is there a need to identify a boundary between the

responsibility of states and companies (sphere of responsibility of states and companies (sphere of influence)?influence)?

– Should companies be liable for:Should companies be liable for:•benefiting directly or indirectly from human benefiting directly or indirectly from human

rights violations by others (state, subsidiaries, rights violations by others (state, subsidiaries, suppliers, business partners, joint ventures, sub-suppliers, business partners, joint ventures, sub-contractorscontractors))

• exploiting weak national legislation;exploiting weak national legislation;

•remaining silent whilst human rights violations remaining silent whilst human rights violations occur;occur;

• paying taxes to governments that use paying taxes to governments that use taxpayer’s money to violate human rights. taxpayer’s money to violate human rights.

International Human Rights International Human Rights InstrumentInstrument

Is there a need for a binding international Is there a need for a binding international human rights Instrument to regulate human rights Instrument to regulate corporationscorporations

International court for enforcing corporate International court for enforcing corporate liabilityliability

Lessons from Rome Statute/ICC.Lessons from Rome Statute/ICC.

The FutureThe Future• Corporate lawyers becoming proactiveCorporate lawyers becoming proactive

• Ethical companies are succeedingEthical companies are succeeding

• Technology makes abuses harder to Technology makes abuses harder to hidehide

• Debate may lead to strong legislationDebate may lead to strong legislation– Possibility of having a binding Possibility of having a binding

international human rights instrument international human rights instrument

Pressure groupsPressure groups

• CorpWatchCorpWatch

• Human Rights First Human Rights First

• Amnesty International UKAmnesty International UK

• International Labour OrganisationInternational Labour Organisation

• Columbia Solidarity CampaignColumbia Solidarity Campaign

• EarthRights InternationalEarthRights International

• Christian Aid …….Christian Aid …….

Can you make a difference?Can you make a difference?

• LettersLetters

• Pressure groups e.g. Amnesty take actionPressure groups e.g. Amnesty take action

• Socially responsible Socially responsible investing/jobs/consumptioninvesting/jobs/consumption