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Multinationals and
accountability
By Alan Boyd
SYDNEY - A drive to make multinationals legally
accountable for their investment practices abroad,
including the adoption of acceptable labor and
environmental standards, has attracted unlikely support
from a United Nations human-rights panel.
But
Wall Street is already contesting the central premise
that individual companies could be treated to the same
regulatory scrutiny as sovereign states, which would
strike at the heart of international business law.
Most of the developed nations with seats on the
53-member UN Human Rights Commission are likely to take
the same position, setting up a North-South showdown
with the commission's strong Third World contingent
headed by Asian and African nations.
As
currently envisaged, the draft Norms on the
Responsibilities of Transnational Corporations would
allow the UN to utilize a range of "international and
national mechanisms" to influence the behavior of
corporations operating abroad.
Guidelines would
be issued on the treatment of labor and human rights,
respect for the environment and governance practices,
including the offering of bribes and obligations toward
consumers.
UN officials would also have the
right to investigate and censure firms that didn't
follow these principles. However, the guidelines would
not have any legal basis unless they were also adopted
by the host country.
While human-rights groups
acknowledge this shortcoming, they contend that a
covenant would still help change the corporate culture
by exerting peer pressure on firms that aren't in
compliance.
"The Norms help to level the playing
field for companies that want to do the right thing for
human rights. Now every company's obligations are
detailed and no company can say that it doesn't have
responsibilities in the area of human rights," said
Arvind Ganesan, director of Human Rights Watch's
corporate responsibility division.
"Eventually
we'd like to see binding standards for corporations. But
this is a good first step."
There is already a
voluntary "global compact" between the UN and two
leading business associations, the International Chamber
of Commerce (ICC) and the International Organization of
Employers (IOE), that was brokered by UN Secretary
General Kofi Annan in 1999. Individual signatories
included the International Labor Organization (ILO), the
UN Conference on Trade and Development (UNCTAD), the UN
High Commissioner for Human Rights and the UN
Environment Program (UNEP).
In addition, nearly
three dozen multinationals initialed the compact, in
what the ICC called a historic effort to "uphold a set
of core values" on business practices. Among them were
Siemens, Alcatel, Unilever, Rio Tinto, Norsk Hydro and
Royal Dutch/Shell.
Four years later, there are
still only 42 participating companies in the United
States and 24 in the United Kingdom, while Third World
nations have mostly failed to respond.
Some
individual industries, notably labor-intensive sectors
such as shoes, garments and textiles, have signed their
own covenants, usually in response to threatened market
boycotts by consumer movements in the US and Western
Europe. However, the ILO, which will be one of the key
agencies enforcing the Norms if they are adopted, has
cast doubts on the ability of distant management to
ensure compliance at a country level.
When the
Hong Kong-based Asia Monitor Resource Center
investigated the impact of a code of conduct by foreign
shoe manufacturers in China three years ago, it found
that working conditions had actually deteriorated.
"All categories of the companies' codes of
conduct - health and safety, freedom of association,
wages and benefits, hours of work, overtime
compensation, nondiscrimination, harassment and child
labor - are being violated," the watchdog noted.
"Moreover, most workers do not even know that there is a
code of conduct that the factory is supposed to abide
by. They are unaware of their rights as workers and have
no ways to channel their complaints and opinions."
Another reason voluntary commitments have been
difficult to enforce is that they apply only to
multinationals, while their competitors in local markets
continue to operate without constraint. The Norms would
treat all businesses equally.
Nevertheless, the
Paris-based ICC and two influential US groups, the
International Business Council and the National Foreign
Trade Council, maintain that any shift toward mandatory
compliance would violate accepted international
practices.
The loose corporate alliance has
already shown its teeth by galvanizing congressional
support in Washington against the Alien Tort Claims Act
(ATCA), the only existing legislation that exposes
businesses operating abroad to effective regulatory
scrutiny.
Enacted more than 200 years ago, the
federal law permits non-US citizens to sue in American
courts for violations of international law, and has been
used against corporations and government officials for
such human rights crimes as torture, extrajudicial
killings, forced labor and even genocide.
Ousted
Philippines dictator Ferdinand Marcos was held
accountable under civil laws in the mid-1980s for
falling to prevent human rights abuses, including the
murder of political opponents, during his rule.
Another US court ruled in September that the act
permitted villagers from Myanmar to sue US energy
multinational Unocal over its alleged use of forced
labor in the construction of a gas pipeline.
"Using ATCA to hold corporations accountable for
their actions overseas is not easy. The evidence is hard
to gather and gaining jurisdiction is difficult,"
lobbying group CorpWatch conceded. "Yet ATCA is,
potentially, a crucial instrument for holding US
companies to the basic standards of international law.
It is one of the few deterrents to abusive behavior that
can help protect villagers and indigenous people from
anywhere in the world."
With Republicans
controlling both the White House and Congress, opponents
of the Norms will also get a sympathetic hearing.
Vice President Dick Cheney, the Bush
administration's chief foreign-policies strategist and a
forceful opponent of regulation interference, was head
of oil services conglomerate Halliburton when it helped
build the Unocal pipeline in Myanmar. Although he has
not personally been implicated in any human-rights
abuses that were committed during the construction
phase, Cheney has consistently opposed the imposition of
economic sanctions against Myanmar.
He is also
believed to have been behind efforts by the White House
to block an ATCA lawsuit that was filed last year
against oil giant ExxonMobil for its alleged complicity
in human rights abuses by Indonesian forces in the
dissident province of Aceh. In an unprecedented move,
the State Department wrote to the trial judge and asked
him to dismiss the case because it could compromise US
interests in Indonesia, especially in the war against
terrorism. Casting doubts on the alleged abuses, the
letter argued that the lawsuit could actually harm the
cause of human rights in Aceh by deterring foreign
investments that were in a position to promote strong
business ethics.
In response, Human Rights Watch
(HRW) called on President George W Bush to honor his
commitments to enhanced corporate corporate
responsibility following a series of accounting scandals
in Wall Street that led to several high-profile
bankruptcies, including the collapse of multinational
Enron.
"Corporate responsibility shouldn't stop
at the water's edge. If the Bush administration is
serious about promoting ethical business practices, it
shouldn't be trying to stop this court case from going
forward," said HRW director Kenneth Roth.
(Copyright 2003 Asia Times Online Co, Ltd. All
rights reserved. Please contact content@atimes.com for
information on our sales and syndication policies.)
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