The state system remains stubbornly grounded in a monocentric view of law and regulation, even as it works to construct increasingly relevant multi-level systems of soft governance. “Here the great difficulty is defining the scope of the obligations to be imposed, formally and socially, on enterprises. There is a great tension between the need for precision and certainty--the great foundation of law systems--and the reality that in practice all activity is intimately interconnected--the foundation of systems of social or customary norm systems.” Larry Catá Backer, On Challenges to Operationalizing a Transnational Framework for Business and Human Rights--the View From Geneva, Law at the End of the Day, Oct. 13, 2009.
Recent comments of John Ruggie have made explicit what has been occurring implicitly over the course of the last decade.
The “protect, respect and remedy” framework lays the foundations for generating the necessary means to advance the business and human rights agenda. It spells out differentiated yet complementary roles and responsibilities for states and companies, and it includes the element of remedy for when things go wrong. It is systemic in character, meaning that the component parts are intended to support and reinforce one another, creating a dynamic process of cumulative progress—one that does not foreclose additional longer-term meaningful measures. John Ruggie, Opening remarks by UN Special Representative John Ruggie, October 5, 2009, at 5.
What Mr. Ruggie has been describing is new territory, one that rejects the monopoly of law systems within states and the marginalization of norm systems as merely non-binding and therefore not of the same dignity or status as “law” produced by “sovereigns.” Within this new governance territory, there is a growing division between law systems and norm systems, and a growing importance of norm systems as an autonomous source of governance for transnational economic actors.
What is described, effectively, is polycentric norm making among multiple systems of functionally differentiated governance communities that are required to interact with each other in complex and dynamic ways. Incompatible systems, law and norm--must effectively find a way to communicate and to harmonize values and relevance for their constituting communities, whether these are citizens, consumer, employees, or investors. Larry Catá Backer, On Challenges to Operationalizing a Transnational Framework for Business and Human Rights--the View From Geneva, Law at the End of the Day, Oct. 13, 2009.
Beyond the usual small group of governance theorists, most resident outside the United States, these emerging notions seem remote and obtuse, hardly relevant to the realities of the primacy of state based governance of economic entities. But recent determinations of an enforcement organ of the Organization of Economic Cooperation and Development (OECD), the United Kingdom National Contact Point (the “UK-NCP” ) have suggested an emerging framework for application of notions of polycentricity in the governance of transnational economic actors. Two important recent decisions of the UK-NCP were discussed in Larry Catá Backer, Case Note: Rights And Accountability In Development (Raid) V Das Air (21
July 2008) And Global Witness V Afrimex (28 August 2008); Small Steps Toward an Autonomous Transnational Legal System for the Regulation of Multinational Corporations, 10(1) Melbourne Journal of International Law 258 (2009).
Very recently, the UK-NCP issued two related statements that quite dramatically illuminate the contours of the emerging polycentric governance framework for multinational corporations. This essay considers in more detail the analysis of the UK National Contact Point and its implications for global corporate governance. The complainant was a U.K. entity, Survival International, a U.K. NGO seeking to support the efforts of tribal peoples all over the globe through advocacy, education and rights protective campaigns. . The object of these statements was entities related to Vedanta Resources, Inc., a U.K. company operating through subsidiaries and joint ventures in India. . The approach of the UK National Contact point was sweeping. Its pronouncements suggest that the narrowly drawn rules of law systems that limit the standing of stakeholders to seek legal redress on behalf of others are being far more broadly drawn. Initial Assessment by the UK National Contact Point for the OECD Guidelines for Multinational Enterprises: Survival International and Vedanta Resources plc, March 27, 2009 (“Initial Assessment”). They also show the advancing application of a governance framework in which non-state actors are obligated to comply with a set of legal duties defined by the states in which they operate, and in addition are also obligated to comply with an autonomously constituted set of social norms the contours of which are defined by a cluster of soft law grounded in international norms and standards. Final Statement by the UK National Contact Point for the OECD Guidelines for Multinational Enterprises: Complaint from Survival International against Vedanta Resources plc, 25 Sept. 2009 (“Final Statement”). It is to those two significant issues—standing under soft law frameworks and the autonomy of global governance regimes that this short essay addresses.
The general facts are these; Vedanta Resources has a nearly 60% stake in Sterlite Industries (India) Limited (“Sterlite Industries”) based in Mumbai, India, and jointly with Sterlite Industries owns all of the shares of Vedanta Aluminum Limited, based in Lanjigarth (Orissa) India (Vedanta owning 70.5% and Sterlite Industries the other 29.5%). Final Statement, supra, at ¶ 7. The complaint focused on the efforts of Vendanta’s controlled entities to construct a bauxite mine near Lanjigarth, in the Kalahandi and Rayagada Districts of Orissa. Id., ¶ 8.
Survival International argued that irrespective of the actions of the Indian State of Orissa or the determination of the Supreme Court of India in the matter, Vedanta and its controlled entities had failed to meet their obligations under the OECD Guidelines for Multinational Enterprises. Survival Inrternational alleged that “Vedanta has failed to consult with an indigenous group affected by its operations, the Dongria Kondh, who live within 4 to 5 Km from the mine but revere as sacred the area on which the mine is being built, and depend for their livelihood on the area affected by the mine’s operations.” Final Statement, supra, at ¶ 10.A. As a result, Vendanta failed to respect India’s obligations under a number f international treaties (Id., at ¶ 10.B) and not withdstanding the actions of te Indian Supreme Court Vendanta and its controlled subsidiaries and venture partners were also in breach of Indian domestic law, “namely the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act 2006.” (Id., at ¶ 10.C). Taken together, these actions violated several of the Guidelines.
Initially, Vedanta challenged the standing of Survival International to bring the complaint and the compatibility of the proceedings in light of the actions of the Indian Supreme Court approving the project. .
The UK-NCP first broadly read its standing rules to allow the case to be asserted by Survival International in its own right as a defender of the indigenous groups whose rights were allegedly directly affected. First it construed its mandate under the Guidelines broadly. It sourced this position on the “commentary on implementation in specific instances (paragraph 14, page 60 of the OECD Guidelines).” Initial Assessment, supra., at ¶ 9.A. Unstated, but related is another set of commentaries, Commentary on the Implementation Procedures of the OECD Guidelines for Multinational Enterprises, DAFFE/IME/WPG(2000)15/FINAL, paragraph 14 of which provides:
The effect of these guidelines could be to suggest a basis of standing other than the one traditionally used to initiate cases before judicial tribunals under domestic law. Instead, rather than injury, the standard is grounded in the merits of the action itself and then on the interest of the party in the matter. As such, interest could be tied more to the ability of the claimant to supply information than to its connection to the claim itself. This is the position taken by the UK-NCP in its own interpretation of its own procedures. It quoted two paragraphs of its procedures:
If the touchstone of the standing rules is “interest” and the measure is an assessment of the ability of a party to bring evidence to the NCP, then interest reduces itself to the ability to supply information. It follows that the “UK NCP process specifically allows for NGOs, such as Survival International to bring complaints under the Guidelines.” Initial Assessment, supra, at ¶ 9.A. Specifically, the UK-NCP based standing on the ability of the claimant to meet three requirements. First, it must be directly affected or have as its organizational mission the protection of the rights of the specific groups adversely affected by a multinational corporation under the Guidelines. Second, it must have access to al the information necessary for the UK-NCP to make an assessment. Third, standing is buttressed (though not dependent) on acquiring the consent of the directly affected party for the complainant to represent them before the NCP.
To some extent, the result may not be surprising under English law. See Bernard Schwartz, Lions Over the Throne: The Judicial Revolution in English Administrative Law (New York: NYU Press, 1987) (arguing that the Law Lords “all but eliminated the standing requirement, virtually converting the review action into an actio popularis, which is available to any citizen who seeks to annul improper administrative action.” Id., at 6). A “sufficient interest” standard, for example, has governed applications for judicial review to the High Court Supreme Court Act of 1981 (c. 54), § 31(3), at least in public interest cases. But the expansiveness of cases like Inland Revenue Commissioners v. National Federation of Self-Employed and Small Businesses [1981] 2 All ER93, [1982] AC 617, has its counter in holdings more narrowly based on the traditional aggrieved party standard, especially in the well known case of R. Sec. of State for the Environment, ex parte Rose Theatre Trust [1990] 1 QB 504. Indeed, one can understand the resolution of the standing issue as part of a larger conversation within English legal and political culture over the extent of persons other than those directly affected, that is those whose interests are more remote, to resort to the courts on behalf of themselves and of those directly injured (to use the American term). See, e.g., John B. Bonine, Broadening ‘Standing to Sue’ for Citizen Enforcement, 5(2) Proceedings Fifth International Conference on Environmental Compliance and Enforcement, Monterey, California 1998 (1999). And, indeed, the UK-NCP appears to adopt a standing standard that is consonant with a view of the Guidelines as infused with principles of stakeholder (rather than merely shareholder) entitlement. And, indeed, there were no references to either English legal conceptions of standing or English cases in the UK-NCP’s assessment. To the extent that the UK-NCP drew on these, they were cultural and discretionary rather than legal and mandatory. The UK-NCP meant to draw its own notions of standing from regulatory sources beyond those of English law, and applicable, potentially, by every National Contact Point within the OECD system.
In any case, when compared with the traditional standing rules in American courts, for example—limited standing to those claimants who can show injury in fact, a relation between the injury and the claim or fault, and a showing that the court is in a position to supply a remedy—standing under the framework adopted by the UK-NCP is extremely broad, perhaps broad enough to be manageable. But this makes sense in a context in which social rather than legal norms are at issue. In this context, any person or organization that is affected in some way by the social or political effects of corporate activity ought to have the ability to seek to hold the corporation to its social-norm duties, much like citizens ought to have the right to compel the state to do its duty. Yet this potentially explosive increase in the character and number of potential claimants, all with different views of the injury or its redress, may reduce the value of the system. Corporations prefer at least some level of certainty and predictability in the running of their enterprises. Without that level of certainty and predictability, the transaction costs of business may become high enough to adversely impact economic decision making. Businesses confronted with too great a push toward uncertainty may either attack the system itself, or in the case of soft law systems, evade them or seek a substitute. In this case, for example, Vedanta might fear that, even after resolution of the complaint brought by Survival International, any number of other groups claiming similar “interest” may seek to file similar complaints. At worst this would prove a drain of time and resources. At worst, it suggests the possibility of inconsistent assessments and a reduced possibility of bringing issues like this to closure. It might have been better, in this case, if there had been a greater effort to tie Survival International to the aggrieved parties so that, in effect, the directly affected parties, the Dongria Kondh in this case, would get one chance to make their complaint, whether directly or through civil society representatives.
At the same time, the UK-NCP initially evidenced some discomfort with the idea of raising standards that might conflict with the determinations of the Indian government and its courts. The Contact Point suggested its allegiance to the notion that the “Guidelines are not a substitute for nor should they be considered to override local law and regulation, rather they represent supplementary principles and standards of behaviour of a non-legal character. While the Guidelines may extend beyond the law in many cases, they should not and are not intended to place an enterprise in a situation where it faces conflicting requirements.” Initial Assessment, supra, at ¶ 9.C. But the UK-NCP ultimately decided to proceed on the basis of its assessment that it was still too early to tell if any conflict existed. “It remains unclear to the UK NCP whether any decision it may make in relation to this matter has the potential to conflict with the decisions of the Court and the State Government as it has yet to receive sufficient evidence as to how closely they relate to the issues raised by Survival International.” Id. It is to that issue that I turn to in the next part of this essay.
The general facts are these; Vedanta Resources has a nearly 60% stake in Sterlite Industries (India) Limited (“Sterlite Industries”) based in Mumbai, India, and jointly with Sterlite Industries owns all of the shares of Vedanta Aluminum Limited, based in Lanjigarth (Orissa) India (Vedanta owning 70.5% and Sterlite Industries the other 29.5%). Final Statement, supra, at ¶ 7. The complaint focused on the efforts of Vendanta’s controlled entities to construct a bauxite mine near Lanjigarth, in the Kalahandi and Rayagada Districts of Orissa. Id., ¶ 8.
This project was originally proposed by Sterlite Industries on the basis of an existing agreement between Vedanta Aluminium Limited and Orissa Mining Corporation Limited, a company owned by the State of Orissa. Vedanta Aluminium Limited applied to the Supreme Court of India for clearance on the project. Following the Supreme Court of India’s Order of 23 November 2007, Vedanta Aluminium Limited’s application was dismissed but Sterlite Industries (and only Sterlite Industries) was granted leave to re-apply. In August 2008, the Supreme Court granted Sterlite Industries clearance for the use of forest land for bauxite mining subject to final approval from the Indian Ministry of Environment and Forests. Sterlite Industries therefore formally retains the lead on the Lanjigarh project. Neither Vedanta nor the complainant dispute that overall responsibility for the Lanjigarh project rests with Vedanta. Id.
Survival International argued that irrespective of the actions of the Indian State of Orissa or the determination of the Supreme Court of India in the matter, Vedanta and its controlled entities had failed to meet their obligations under the OECD Guidelines for Multinational Enterprises. Survival Inrternational alleged that “Vedanta has failed to consult with an indigenous group affected by its operations, the Dongria Kondh, who live within 4 to 5 Km from the mine but revere as sacred the area on which the mine is being built, and depend for their livelihood on the area affected by the mine’s operations.” Final Statement, supra, at ¶ 10.A. As a result, Vendanta failed to respect India’s obligations under a number f international treaties (Id., at ¶ 10.B) and not withdstanding the actions of te Indian Supreme Court Vendanta and its controlled subsidiaries and venture partners were also in breach of Indian domestic law, “namely the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act 2006.” (Id., at ¶ 10.C). Taken together, these actions violated several of the Guidelines.
Chapter II. General Policies. Enterprises should take fully into account established policies in the countries in which they operate, and consider the views of other stakeholders. In this regard, enterprises should: . . . II(2): Respect the human rights of those affected by their activities consistent with the host government’s international obligations and commitments. . . . II(7): Develop and apply effective self-regulatory practices and management systems that foster a relationship of confidence and mutual trust between enterprises and the societies in which they operate.
Chapter V. Environment. Enterprises should, within the framework of laws, regulations and administrative practices in the countries in which they operate, and in consideration of relevant international agreements, principles, objectives, and standards, take due account of the need to protect the environment, public health and safety, and generally to conduct their activities in a manner contributing to the wider goal of sustainable development. In particular, enterprises should:. . . . V(2) Taking into account concerns about cost, business confidentiality, and the protection of intellectual property rights: . . . . (Id., at ¶ 11).
Initially, Vedanta challenged the standing of Survival International to bring the complaint and the compatibility of the proceedings in light of the actions of the Indian Supreme Court approving the project. .
Vedanta Resources plc responded that Survival International does not have the necessary interest in the matter to bring a complaint to the NCP. It also contends that the impact on the local community has been considered by the State Government of Orissa (which is a joint venture partner in the mining project) and the Supreme Court of India, which granted permission for the mining project subject to certain conditions for the benefit of the local community, and that it is therefore inappropriate for the UK NCP to consider. Initial Assessment, supra at ¶ 5.
The UK-NCP first broadly read its standing rules to allow the case to be asserted by Survival International in its own right as a defender of the indigenous groups whose rights were allegedly directly affected. First it construed its mandate under the Guidelines broadly. It sourced this position on the “commentary on implementation in specific instances (paragraph 14, page 60 of the OECD Guidelines).” Initial Assessment, supra., at ¶ 9.A. Unstated, but related is another set of commentaries, Commentary on the Implementation Procedures of the OECD Guidelines for Multinational Enterprises, DAFFE/IME/WPG(2000)15/FINAL, paragraph 14 of which provides:
14. In making an initial assessment of whether the issue raised merits further examination, the NCP will need to determine whether the issue is bona fide and relevant to the implementation of the Guidelines. In this context, the NCP will take into account: . . . the identity of the party concerned and its interest in the matter; . . . . whether the consideration of the specific issue would contribute to the purposes and effectiveness of the Guidelines. Id.
The effect of these guidelines could be to suggest a basis of standing other than the one traditionally used to initiate cases before judicial tribunals under domestic law. Instead, rather than injury, the standard is grounded in the merits of the action itself and then on the interest of the party in the matter. As such, interest could be tied more to the ability of the claimant to supply information than to its connection to the claim itself. This is the position taken by the UK-NCP in its own interpretation of its own procedures. It quoted two paragraphs of its procedures:
2.3.1. According to the Guidelines, any “interested party” can file a complaint. The complainant may be, for example, a community affected by a Company’s activities, employees or their trade union, or an NGO. A complainant may act on behalf of identified other parties.” 2.3.2 The NCP will consider all complaints it receives. However the NCP will need to receive detailed information from the complainant in order to deal with the complaint. Therefore, complainants should have a close interest in the case and be in a position to supply information about it. They should also, in accordance with the principles of the Guidelines, have a clear view of the outcome they wish to achieve. Initial Assessment, supra, ¶ 9.A.
If the touchstone of the standing rules is “interest” and the measure is an assessment of the ability of a party to bring evidence to the NCP, then interest reduces itself to the ability to supply information. It follows that the “UK NCP process specifically allows for NGOs, such as Survival International to bring complaints under the Guidelines.” Initial Assessment, supra, at ¶ 9.A. Specifically, the UK-NCP based standing on the ability of the claimant to meet three requirements. First, it must be directly affected or have as its organizational mission the protection of the rights of the specific groups adversely affected by a multinational corporation under the Guidelines. Second, it must have access to al the information necessary for the UK-NCP to make an assessment. Third, standing is buttressed (though not dependent) on acquiring the consent of the directly affected party for the complainant to represent them before the NCP.
The UK NCP considers that Survival International has an interest in this matter because one of its stated objectives is to promote for the public benefit the human rights of indigenous peoples established by UN covenants and declarations. Furthermore, the UK NCP is satisfied that Survival International has submitted sufficient information for the complaint to be accepted which includes research from UK and India-based organisations as well as research by the complainant. In addition, Survival International has provided details of the support they say they have from members of the Dongria Khond in Orissa, the tribe which is the focus of this complaint. Id.
To some extent, the result may not be surprising under English law. See Bernard Schwartz, Lions Over the Throne: The Judicial Revolution in English Administrative Law (New York: NYU Press, 1987) (arguing that the Law Lords “all but eliminated the standing requirement, virtually converting the review action into an actio popularis, which is available to any citizen who seeks to annul improper administrative action.” Id., at 6). A “sufficient interest” standard, for example, has governed applications for judicial review to the High Court Supreme Court Act of 1981 (c. 54), § 31(3), at least in public interest cases. But the expansiveness of cases like Inland Revenue Commissioners v. National Federation of Self-Employed and Small Businesses [1981] 2 All ER93, [1982] AC 617, has its counter in holdings more narrowly based on the traditional aggrieved party standard, especially in the well known case of R. Sec. of State for the Environment, ex parte Rose Theatre Trust [1990] 1 QB 504. Indeed, one can understand the resolution of the standing issue as part of a larger conversation within English legal and political culture over the extent of persons other than those directly affected, that is those whose interests are more remote, to resort to the courts on behalf of themselves and of those directly injured (to use the American term). See, e.g., John B. Bonine, Broadening ‘Standing to Sue’ for Citizen Enforcement, 5(2) Proceedings Fifth International Conference on Environmental Compliance and Enforcement, Monterey, California 1998 (1999). And, indeed, the UK-NCP appears to adopt a standing standard that is consonant with a view of the Guidelines as infused with principles of stakeholder (rather than merely shareholder) entitlement. And, indeed, there were no references to either English legal conceptions of standing or English cases in the UK-NCP’s assessment. To the extent that the UK-NCP drew on these, they were cultural and discretionary rather than legal and mandatory. The UK-NCP meant to draw its own notions of standing from regulatory sources beyond those of English law, and applicable, potentially, by every National Contact Point within the OECD system.
In any case, when compared with the traditional standing rules in American courts, for example—limited standing to those claimants who can show injury in fact, a relation between the injury and the claim or fault, and a showing that the court is in a position to supply a remedy—standing under the framework adopted by the UK-NCP is extremely broad, perhaps broad enough to be manageable. But this makes sense in a context in which social rather than legal norms are at issue. In this context, any person or organization that is affected in some way by the social or political effects of corporate activity ought to have the ability to seek to hold the corporation to its social-norm duties, much like citizens ought to have the right to compel the state to do its duty. Yet this potentially explosive increase in the character and number of potential claimants, all with different views of the injury or its redress, may reduce the value of the system. Corporations prefer at least some level of certainty and predictability in the running of their enterprises. Without that level of certainty and predictability, the transaction costs of business may become high enough to adversely impact economic decision making. Businesses confronted with too great a push toward uncertainty may either attack the system itself, or in the case of soft law systems, evade them or seek a substitute. In this case, for example, Vedanta might fear that, even after resolution of the complaint brought by Survival International, any number of other groups claiming similar “interest” may seek to file similar complaints. At worst this would prove a drain of time and resources. At worst, it suggests the possibility of inconsistent assessments and a reduced possibility of bringing issues like this to closure. It might have been better, in this case, if there had been a greater effort to tie Survival International to the aggrieved parties so that, in effect, the directly affected parties, the Dongria Kondh in this case, would get one chance to make their complaint, whether directly or through civil society representatives.
At the same time, the UK-NCP initially evidenced some discomfort with the idea of raising standards that might conflict with the determinations of the Indian government and its courts. The Contact Point suggested its allegiance to the notion that the “Guidelines are not a substitute for nor should they be considered to override local law and regulation, rather they represent supplementary principles and standards of behaviour of a non-legal character. While the Guidelines may extend beyond the law in many cases, they should not and are not intended to place an enterprise in a situation where it faces conflicting requirements.” Initial Assessment, supra, at ¶ 9.C. But the UK-NCP ultimately decided to proceed on the basis of its assessment that it was still too early to tell if any conflict existed. “It remains unclear to the UK NCP whether any decision it may make in relation to this matter has the potential to conflict with the decisions of the Court and the State Government as it has yet to receive sufficient evidence as to how closely they relate to the issues raised by Survival International.” Id. It is to that issue that I turn to in the next part of this essay.
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