Thursday, July 02, 2015

Sara Seck on "Emerging Market Multinational Home States, Extractive Industries, and the Inside/Outside Problem"

Sara Seck is an Associate Professor at the University of Western Ontario. Professor Seck's research interests include corporate social responsibility, international environmental, human rights, and sustainable development law, climate change, and indigenous law. She is particularly interested in international and transnational legal theory, notably the relationship between Third World Approaches to International Law (TWAIL) and international legal process theories that are informed by constructivist understandings of international relations.

Professor Seck has recently been considering ramifications of the complexities of globalization and the effects of inbound and outbound investment on the problem of assigning state responsibility for managing CSR within global production chains. At the recent Madrid Workshop on a Business and Human Rights Treaty, Professor Seck spoke to "Business &; Human Rights Treaty Debate: Lessons from the International Law Commission"  ("Ultimately, it would be wise to remember that the negotiation of a text – whether a progressive codification of customary international law or a newly agreed treaty text – is only the first step in the hard work of international law making. This is a lesson that the ILC knows only too well. It is also a lesson well known by international environmental lawyers who have actively pushed for the negotiation of civil liability treaties in various contexts, only to be confronted by the reluctance of states to ratify and implement what has been agreed").

For her guest essay today, Professor Seck provides us with an excellent, timely, and provocative essay, Emerging Market Multinational Home States, Extractive Industries, and the Inside/Outside Problem.  The essay seeks to bridge across the conceptual silos which produces the sort of conceptual fragmentation which at times has so fatally affected even the most modest efforts to move forward the necessary project of developing governance structures for the human rights effects of economic activity.  Particularly significant here is the difficulty of developing coherent systems that cut across human rights and environmental protection, and that are made more complicated as states seek to develop one set of rules for outbound investment and another for domestic operations.  The essay follows.

Emerging Market Multinational Home States, Extractive Industries, and the Inside/Outside Problem
Professor Sara L Seck, Western Law

In his concluding remarks to the UN Forum on Business and Human Rights in December 2014, John Ruggie highlighted the need to pay attention to the global importance of emerging market multinationals (EM MNEs). In a recently posted paper of mine in the journal Transnational Corporations entitled “Emerging Market Multinationals, Sustainable Development, and Human Rights: Lessons from the Canadian Experience”, I examined whether Canada’s Corporate Social Responsibility Strategy for Canadian Extractive Companies Operating Internationally could serve as a role model for EM MNE home states. Canada’s CSR Strategy was first introduced in 2009, and revised in November 2014. (My paper refers to the 2009 version of the strategy.) The Strategy promotes a series of international CSR standards to companies operating internationally including the OECD Guidelines for Multinational Enterprises, the International Finance Corporation’s Sustainability Performance Standards, the Voluntary Principles on Security and Human Rights, and the Global Reporting Initiative. In addition to the soft compliance mechanism of the OECD National Contact Point, a CSR Counsellor for the International Extractive Sector was established, although the position was highly criticized in part due to the fact that companies were under no obligation to participate.

In the EM MNE paper, I examined whether the standards promoted as international standards applicable to Canadian extractive companies operating internationally were standards that an EM MNE home state might similarly view as internationally relevant to EM MNEs. These standards were chosen in part after having been endorsed by a multi-stakeholder Canadian Advisory Group in March 2007. In short, I wondered whether the bodies (international organizations or other) that created the standards, and the process of informing the content of the standards, involved EM home states and EM MNEs to the same extent as the home states and MNEs from Western states. In other words, would they be perceived as “legitimate” in the eyes of these stakeholder groups? This is, of course, a distinct research question from one that asks whether the standards are viewed as legitimate by victims of human rights abuses, or, civil society groups. However, it is an important question if the desire is global respect for human rights, and respect for human rights was built into each of the chosen standards, to differing degrees.

The answer was different for each standard, and the details of my analysis are found in the paper. However, several related points of interest deserve attention.

First, the OECD has been actively engaging with EM states since 2007, including with China. Second, while the standards of the World Bank’s International Finance Corporation have been viewed as progressive in terms of their recognition of indigenous rights, including the right to free, prior and informed consent (FPIC) in some contexts, the World Bank’s ongoing review of its safeguard policies upon which the IFC standards are based have been criticized for rolling back indigenous rights protections. Third, in November 2014, the China Chamber of Commerce of Metals Minerals and Chemicals launched Chinese Guidelines for Social Responsibility in Outbound Mining Investment. And fourth, the New Development Bank BRICS development bank has come into existence.

Notably, in November 2014, the Canadian government put forward an enhanced CSR strategy that for the first time explicitly states that the government of Canada expects Canadian companies operating abroad to respect human rights, and adds the UN Guiding Principles on Business and Human Rights to its list of international standards. Yet Canada’s CSR strategy does not explicitly endorse FPIC for indigenous peoples, although the IFC standards to which they refer do, as noted above. The OECD MNE Guidelines do not explicitly endorse FPIC (indeed, they include little reference to indigenous rights), but an April 2015 draft OECD Due Diligence Guidance for Meaningful Stakeholder Engagement in the Extractive Sector was recently posted for public comment, and does refer to FPIC although as a risk management issue rather than an obligation. Meanwhile, the Chinese Guidelines, which were developed in conjunction with, among others, the OECD, do endorse FPIC for indigenous peoples and local communities, although China takes the position that there are no indigenous peoples in China. Canada, on the other hand, clearly recognizes indigenous peoples within Canada, but does not endorse interpretations of FPIC that give aboriginal peoples a veto.

What does this all mean? There is something curious about the home state practice that is emerging in the business and human rights context, assuming one can include the China policy in this category (the CCCMC is described as a subordinate unit of the Ministry of Commerce of China). Both the Chinese and Canadian policies are explicitly designed for foreign direct investment by home state companies (whether state-owned enterprises or nationals) – that is, to apply outside rather than inside state borders (the inside/outside problem). This is not surprising, particularly in the resource extraction context where sovereignty over natural resources – and the right to develop ones own resources in accordance with ones own environmental and developmental policies, is enshrined in international law (see for example the first half of Principle 2 of the 1992 Rio Declaration on Environment and Development). Yet ultimately if a country is serious about its CSR policy, it is impossible to promote a standard to companies operating internationally that one would object to if applied internally. This puts Canada in an awkward position. And makes life easy for China since it denies the existence of indigenous peoples within its borders.

It will be interesting to follow over the next few years the extent to which EM states and EM institutions like the New Development Bank choose to enshrine rights to FPIC for indigenous peoples, as well as whether or not recognition of this right at institutions such as the World Bank is slowly eroded. It will also be interesting to watch whether other states follow Canada and China in promoting CSR guidance to companies operating internationally, and, if so, what the content of this guidance will be. With regard to the issue of indigenous rights, it may very well be that a broader language of stakeholder engagement for all local communities premised upon John Knox’s work on environmental rights (to information and impact assessment, participation in decision-making, and access to justice in event of harm) serves to provide a common ground at least where recognition of indigenous peoples by states is contested. Ultimately, for rights respecting home state practice to emerge in the business and human rights context it will be important for states to embrace a relational model of autonomy so as to help each other to respect rights in our economically and ecologically interconnected world.

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