New Publication: "Corporate Social Responsibility in Weak Governance Zones", Santa Clara J. Int'l L.14: 297 (2016)

(Pix (c) Larry Catá Backer 2015)

I am happy to announce the publication of my article, "Corporate Social Responsibility in Weak Governance Zones", Santa Clara Journal of International Law 14: 297 (2016). The article touches on the emergence of standards, at the international level, to provide guidance to enterprises which operate in territories in which there is conflict or in which the structures of government do not provide a base level of authority or legitimacy. The issue is acute in those regions of the world where conflict or breakdown of rule of law systems has made impossible any reliance on the authority of the state or its institutions. In those cases, the enterprise might well be the only form of organized activity that may have authority to act in the role of the state. The standards suggest the emergence of a general set of internationalized norms or rules that enterprises may apply, drawing from the domestic legal order of the place in which they operate but applying the rules of the domestic legal order in ways that would make them compatible with international consensus--to the extent that such exercise is possible.

The abstract and introduction follow. The full article may be accessed here.

 Larry Catá Backer, "Corporate Social Responsibility in Weak Governance Zones" 

Santa Clara J. Int'l L.14: 297-332 (2016).

Abstract: This article considers the evolution of governance standards for determining the extent of an enterprise’s responsibilities to protect human rights in weak governance zones. The article briefly describes the development of the standard and then evaluates the standard as it has been developed and framed within the U.N. Guiding Principles for Business and Human Rights and in the Organization for Economic Cooperation and Development’s Guidelines for Multinational Enterprises (OECD Guidelines). Particular attention will be paid to the Risk Awareness Tool for Multinational Enterprises which was developed to complement the OECD Guidelines following the call made by 2005 G8 Summit for the development of OECD guidance. The article suggests the ways that CSR has been transformed, in some respects, to a mandate for assuming governance responsibilities in those states unable or unwilling to institute systems of law that conform to international consensus standards on human rights. It also explores the challenges of the approaches of both efforts. Both acknowledge the autonomy of enterprises as directly responsible for the operationalization of international norms wherever they operate. Yet both also open the door to extraterritorial application of law. The same framework that advances the governance autonomy of enterprises also envisions them as the vehicles through which home states may project national power within host states with weak governance regimes. Or it may be understood as an important vehicle for internationalizing the law of states characterized by weak governance. In this respect the weak governance zone principles parallels, on the private side, the efforts at legal internationalization general to many bilateral investment treaties. And this tension built into both frameworks, a tension that goes to the dual character of enterprises as both autonomous governance actors and as creatures of the states in which they are domiciled, that mark the potential and the challenge to the internationalization of regimes of CSR. 

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Multinational corporations (MNEs) operate in virtually every part of the world.1 Their global operations are subject to a variety of rules. This is especially the case in matters touching on emerging global norms for corporate responsibility respecting social, cultural, environmental and human rights.2 The principal conventional obligation of MNEs is to obey the laws of the jurisdictions in which they operate, or which may otherwise assert authority or some aspect of their operations. This obligation poses no particular issue where the state and its institutions are well developed. That is so even where there may be substantial differences between the law of the home states of MNEs and those of its host states. But legal compliance becomes more challenging in weak governance zones, those jurisdictions, ostensibly states, whose governments are unable or unwilling to assume their responsibilities.3 “Characteristics of such zones are likely to include areas of conflict and areas where serious violations of international human rights occur, often in the absence of accountability and with a broad failure of the rule of law.”4

These weak governance zones represent some of the most challenging environments in which enterprises can operate.

In his 2006 report, the Special Representative surveyed allegations of the worst cases of corporate-related human rights harm. They occurred, predictably, where governance challenges were greatest: disproportionately in low income countries; in countries that often had just emerged from or still were in conflict; and in countries where the rule of law was weak and levels of corruption high. A significant fraction of the allegations involved companies being complicit in the acts of governments or armed factions.5

Traditionally, enterprises had little guidance. For many enterprises, that meant operating in a law free zone.6 In such circumstances enterprises would sometimes serve as the only source of regulatory authority within those areas in which they operated and with respect to those people with which they interacted. And sometimes they might find themselves, perhaps out of necessity, as complicit, directly or indirectly, in the human rights wrongs committed within the territories in which they operated. The problem was acute in areas of violent conflict and widespread human rights abuses, particularly in the Democratic Republic of the Congo, South Sudan and Angola at the start of the 21st century.

Business has been leery of any substantial public role, noting early in the process of the genesis of the creation of what was to become the United Nations Guiding Principles of Business and Human Rights (UNGP)7 that their role “also requires recognition of the legal and practical limitations faced by any non-state actor.”8 For business that means nothing more than “to obey the law, even if it is not enforced, and to respect the principles of relevant international instruments where national law is absent.”9 Yet, over the course of the last decade, global actors have been moving toward a rough consensus around the notions of the extent of the responsibilities of business in global governance touching on economic, social, cultural and sometimes political rights among those touched by their activities.10 More specifically, international actors and influential civil society elements have come to understand that enterprises operating in weak governance zones, especially in violent conflict areas, may have responsibilities of a kind quite distinct from a mere duty to comply with local law.11 For civil society, and increasingly, public international organizations, it might mean more than legal compliance, even in the absence of the apparatus of a law-state. Additionally, the corporate social responsibility (CSR) of business in that context might also extend beyond conventional CSR and acquires a more compelling character.12 The notion arises from the embrace of the judgment that such enterprises may inadvertently and indirectly help to provide both the means and the motive for violence or might enable local human rights violations by providing revenues that are channeled through weak fiscal institutions. As a consequence, the framework of transnational regulation of enterprises in such zones has embraced the premise that enterprises ought to bear a responsibility to provide effective protection of the human rights of local populations and to ensure that their activities do not enlarge conflict or serve to enhance or enable human rights violating conduct of governments or of combatants in the area. Current efforts to establish governance frameworks tend to try to mediate between a central role for enterprises grounded on their public and societal13 obligations and a more peripheral role based on the premise that enterprises have a secondary public role.

This article considers the evolution of governance standards for determining the extent of enterprises’ responsibilities to protect human rights in weak governance zones. Part I briefly describes the development of the OECD Risk Awareness Tool for Multinational Enterprises in Weak Governance Zones (the “Risk Awareness Tool”) standard14 and the UNGP for Business and Human Rights (and especially around Principles 7 and 23) and in the Organization for Economic Cooperation and Development Guidelines for Multinational Enterprises (OECD Guidelines).15 The approaches of each are compared. Part II then considers some of the challenges of each system and of both applied simultaneously through the OECD Guidelines. The more significant of these issues are explored: (1) coherence and scope of coverage; (2) issues of definition; (3) risk and complicity; (4) the perils of a heightened managerial care standard; (5) legitimate and illegitimate political activities; (6) the projection of the ideology of legal internationalization into the private sphere; and (7) enforcement and the role of the lawyer. The article suggests the ways that CSR has been transformed, in some respects, from the expression of the social responsibility of enterprises to a mandate for assuming governance responsibilities in those states unable or unwilling to institute systems of law that conform to international consensus standards on human rights. In that respect, weak governance zone principles contribute to both the legitimation of extraterritoriality16 as a justified principle of governance and also to the production of internationalized domestic law that has become an important part of public law through bilateral investment treaties.

NOTES:

1. E.g., JOHN G. RUGGIE, JUST BUSINESS: MULTINATIONAL CORPORATIONS AND HUMAN RIGHTS (2013). For a more critical view, see also, RICHARD FALK, PREDATORY GLOBALIZATION: A CRITIQUE (1999).

2. E.g., JENNIFER A. ZERK, MULTINATIONALS AND CORPORATE SOCIAL RESPONSIBILITY: IMITATIONS AND OPPORTUNITIES IN INTERNATIONAL LAW (2006); accord SURYA DEVA, REGULATING CORPORATE HUMAN RIGHTS VIOLATIONS: HUMANIZING BUSINESS (2012).

3. See OECD, Investments in Weak Governance Zones: Summary of Consultations (Sept. 2015) (“These “government failures” lead to broader failures in political, economic and civic institutions that the OECD Investment Committee refers to as “weak governance”.”” Id., 1), availablehttp://www.oecd.org/corporate/mne/35397593.pdf; see also Susan Rose Ackerman, Governance and Corruption, in GLOBAL CRISES, GLOBAL SOLUTIONS 301-44 (Bjorn Lomborg, 2004).

4. INTERNATIONAL ORGANIZATION OF EMPLOYERS, BUSINESS AND HUMAN RIGHTS: THE ROLE OF BUSINESS IN WEAK GOVERNANCE ZONES: BUSINESS PROPOSALS FOR EFFECTIVE WAYS OF ADDRESSING DILEMMA SITUATIONS IN WEAK GOVERNANCE ZONES (2006), http://www.reports-and-materials.org/sites/default/files/reports-and-materials/Role-of-Business-in-Weak-Governance-Zones-Dec-2006.pdf [hereinafter THE ROLE OF BUSINESS IN WEAK GOVERNANCE ZONES].

5. John G. Ruggie, Protect, Respect and Remedy: A Framework for Business and Human Rights, INNOVATIONS: TECHNOLOGY, GOVERNANCE, GLOBALIZATION 189, 190 (2008), available at http://www.mitpressjournals.org/doi/pdf/10.1162/itgg.2008.3.2.189.

6.The notion of a law free zone ought to be understood in a peculiar sense, not that corporations have no responsibility to comply with law, rather that they have no enforceable legal obligation to do so. Ursula Wynhoven, then of the United Nations Global Compact explained: “Regardless of whether governments are meeting their own duties, corporations must respect human rights; they don’t operate in a law-free zone. However, they don’t have a legal responsibility to do so. That’s the difficulty of holding companies accountable under international law and throughinternational channels.” Danielle Marie Mackey, In a world of borderless business, who may enforce human rights? LE MONDE DIPLOMATIQUE (July 2014), http://mondediplo.com/blogs/in-a-world-of-borderless-business-who-may-enforce. See also, John F. Sherman III, The UN Guiding Principles for the Corporate Legal Advisor: Corporate Governance, Risk Management, and Professional Responsibility (April 4, 2012), http://www.americanbar.org/content/dam/aba/administrative/human_rights/sherman_legal_advisors_paper.authcheckdam.pdf (“however, this business responsibility does not exist in a law free zone . . .”). 14 SANTA CLARA JOURNAL OF INTERNATIONAL LAW 297 (2016)

7.  UNITED NATIONS OFFICE OF THE HIGH COMM’R FOR HUMAN RIGHTS, GUIDING PRINCIPLES ON BUSINESS AND HUMAN RIGHTS: IMPLEMENTING THE UNITED NATIONS ‘PROTECT, RESPECT AND REMEDY FRAMEWORK, (2011) available at http://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf [hereinafter UNGP] (“The Special Representative annexed the Guiding Principles to his final report to the Human Rights Council (A/HRC/17/31), which also includes an introduction to the Guiding Principles and an overview of the process that led to their development. The Human Rights Council endorsed the Guiding Principles in its resolution 17/4 of16 June 2011.’) Id. at iv.

8. THE ROLE OF BUSINESS IN WEAK GOVERNANCE ZONES,supra note 4.

9. Id.

10. E.g., ZERK, supra note 2; John G. Ruggie, Business and Human Rights: The Evolving International Agenda, 101 AM. J. INT’L L. 819 (2007); Andreas Georg Scherer, Guido Palazzo and Dorothée Baumann, Global Rules and Private Actors: Toward a New Role of the Transnational Corporation in Global Governance, 16 BUS. ETHICS QUARTERLY 505 (2015); Peter Muchlinski, Implementing the New UN Corporate Human Rights Framework: Implications for Corporate Law, Governance and Regulation, 22 BUS. ETHICS Q. 145 (2012).

11. E.g. , Virginia Haufler, Governing Corporations in Zones of Conflict: Issues, Actors and Institutions, in WHO GOVERNS THE GLOBE 102 (Deborah D. Avant, Martha Finnemore and Susan K. Sell eds., 2010); Virginia Haufler, The Kimberley Process Certification Scheme: An Innovation in Global Governance and Conflict Prevention , 89 J. BUS. ETHICS 403 (2009); Mungbalemwe Koyame, United Nations Resolutions and the Struggle to Curb the Illicit Trade in Conflict Diamonds in Sub-Saharan Africa, 1 AFR. J. LEGAL STUD. 80 (2005).

 12. Critics have maintained that Enterprise engagement in business in conflict zones especially may pose a threat to those areas by inhibiting the ability of lawful government to assert authority. E.g., Ans Kolk and François Lenfant, Multinationals, CSR and Partnerships in Central African Conflict Countries, 20 CORP. SOC. RESP. & ENVTL. MGMT. 43 (2013).

13. I use the term societal rather than social to distinguish the obligations from something that is discretionary or optional, to something that may be compelled by the rule structures of the systems within which enterprises operate—the governance systems of either enterprise self-constitution, or those of the systemic rules within which the enterprise operates. See, e.g., Gunther Teubner, Self-Constitutionalizing TNCs? On the Linkage of "Private" and "Public" Corporate Codes of Conduct, 18 IND. J. GLOBAL LEGAL STUD. 617 (2011).

14. ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT, OECD RISK AWARENESS TOOL FOR MULTINATIONAL ENTERPRISES IN WEAK GOVERNANCE ZONES, (2006), available at http://www.oecd.org/daf/inv/corporateresponsibility/36885821.pdf [hereinafter OECD RISK AWARENESS TOOL].

15. ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT,  OECD GUIDELINES FOR MULTINATIONAL ENTERPRISES 2011 EDITION, (2011), available at http://www.oecd.org/corporate/mne/48004323.pdf [hereinafter OECD GUIDELINES].

16.  Discussed in Daniel Augenstein & David Kinley,  When Human Rights ‘Responsibilities’ become  ‘Duties’: The Extra Territorial Obligations of states that Bind Corporations, in HUMAN RIGHTS  OBLIGATIONS OF BUSINESS: BEYOND THE CORPORATE RESPONSIBILITY TO RESPECT 271 (Surya Deva & David Bilchitz eds., 2013).