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I take this opportunity to let people know that I have posted a new discussion draft, "Chinese State-Owned Companies and Investment in Latin America and Europe." The abstract describes its objetives:
The Chinese state owned enterprise (CSOE) presents an anomaly in the operation of the well-ordered construction of a self-referencing and closed system of liberal democratic internationalism, especially as that system touches on business responsibilities under national and international human rights and environmental law and markets driven norms. The anomaly is sourced in the increasingly distinct and autonomous framework principles within which it is possible to develop conduct based systems respectful of both human and environmental rights which is emerging as between liberal democratic and Marxist-Leninist systems. This essay considers the forms and manifestations of these disjunctions where CSOEs are used as vehicles for the projection of Chinese economic activity beyond its borders. The essay first situates the CSOE within the political ideology of its home state. The CSOE cannot be understood except as a specific expression of that ideology suited to the times and the context in which it operated. The essay then examines the outward projection of the CSOE national model. To that end the essay focuses on the formal structures for CSOE surveillance by state organs that operationalize the guiding ideology through which they are conceived and operated. This provides the basis for a deeper consideration of the way that the projection of CSOEs abroad is structured within a conceptual cage of policy objectives: specifically the Belt & Road Initiative and emerging conceptions of socialist human rights, including environmental rights and obligations, as these are manifested when CSOEs operate abroad. The focus is on the development of conceptions of risk in that context guiding decisions about the conduct of economic activity. The essay concludes with a suggestion of the greater rift between Marxist-Leninist and liberal democratic approaches—the differences in embracing risk models grounded in prevent-mitigate-remedy strategies.The analysis centers political ideology and its formal expression through law, regulation, guidance, and operational supervision (theory does matter in this context, perhaps a lot). Nonetheless, at its core, the study is about risk--its ideology and the way it is expressed through governance expectations and principles. One speaks here about legal risk (to align the discussion with the 1st Pillar of the UN Guiding Principles), but also of business risk (aligning the markets driven, private law structures of the UNGP 2nd Pillar).
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The Abstract, Introduction and Conclusion follow. The text of the draft may be accessed HERE. Engagement always welcome as this moves from draft tp more finished versions.
Chinese State-Owned Companies and Investment in Latin America and Europe
Larry Catá Backer (白 轲)[1]
Abstract: The Chinese state owned enterprise (CSOE) presents an anomaly in the operation of the well-ordered construction of a self-referencing and closed system of liberal democratic internationalism, especially as that system touches on business responsibilities under national and international human rights and environmental law and markets driven norms. The anomaly is sourced in the increasingly distinct and autonomous framework principles within which it is possible to develop conduct based systems respectful of both human and environmental rights which is emerging as between liberal democratic and Marxist-Leninist systems. This essay considers the forms and manifestations of these disjunctions where CSOEs are used as vehicles for the projection of Chinese economic activity beyond its borders. The essay first situates the CSOE within the political ideology of its home state. The CSOE cannot be understood except as a specific expression of that ideology suited to the times and the context in which it operated. The essay then examines the outward projection of the CSOE national model. To that end the essay focuses on the formal structures for CSOE surveillance by state organs that operationalize the guiding ideology through which they are conceived and operated. This provides the basis for a deeper consideration of the way that the projection of CSOEs abroad is structured within a conceptual cage of policy objectives: specifically the Belt & Road Initiative and emerging conceptions of socialist human rights, including environmental rights and obligations, as these are manifested when CSOEs operate abroad. The focus is on the development of conceptions of risk in that context guiding decisions about the conduct of economic activity. The essay concludes with a suggestion of the greater rift between Marxist-Leninist and liberal democratic approaches—the differences in embracing risk models grounded in prevent-mitigate-remedy strategies.
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中央企业境外投资应当遵循以下原则：* * * （二）依法合规。遵守我国和投资所在国（地区）法律法规、商业规则和文化习俗，合规经营，有序发展。[The overseas investment of central enterprises shall follow the following principles: * * * (2) Compliance with laws and regulations. Abide by the laws and regulations, business rules and cultural customs of my country and the country (region) where the investment is located, operate in compliance with regulations, and develop in an orderly manner].[2]
对于境外特别重大投资项目，中央企业应建立投资决策前风险评估制度，委托独立第三方有资质咨询机构对投资所在国（地区）政治、经济、社会、文化、市场、法律、政策等风险做全面评估。[For particularly major overseas investment projects, central enterprises should establish a pre-investment risk assessment system and entrust an independent third-party qualified consulting agency to conduct a comprehensive assessment evaluation of the political, economic, social, cultural, market, legal, and policy risks of the country (region) where the investment is located].[3]
In all contexts, business enterprises should: (a) Comply with all applicable laws and respect internationally
recognized human rights, wherever they operate; (b) Seek ways to honour the principles of internationally recognized human rights when faced with conflicting requirements; (c) Treat the risk of causing or contributing to gross human rights abuses as a legal compliance issue wherever they operate.[4]
SOEs should observe high standards of responsible business conduct, including with regards to the environment, employees, public health and safety, and human rights. Their actions should be guided by relevant international standards, including: the OECD Guidelines for Multinational Enterprises, which have been adopted by all
OECD member countries.[5]
1. Introduction: Scope of Inquiry: Chinese SOEs, Human Rights, and Sustainability
The Chinese state owned enterprise (CSOE) presents an anomaly in the operation of the well-ordered construction of a self-referencing and closed system of liberal democratic internationalism, especially as that system touches on business responsibilities under national and international human rights and environmental law and markets driven norms. The anomaly is sourced in the increasingly distinct and autonomous framework principles within which it is possible to develop conduct based systems respectful of both human and environmental rights which is emerging as between liberal democratic and Marxist-Leninist systems. The spaces in which that deviation from the common (liberal democratic) rule, that Marxist-Leninist anomalia, produces regulatory and operational friction in two distinct fields of governance at the heart of the UNGPs. The first is formal identified with the UNGP’s 1st Pillar State Duty to Respect Human Rights (and its balancing of the authority of national and international law and norms).[6] These are the terrains of public law. The second is identified with the UNGP’s 2nd Pillar Corporate Responsibility to Respect Human Rights (and its private law based markets driven internationalism).[7] That friction is augmented[8] at the meeting place of public and private spheres—incarnated as the state owned enterprise, the operational premises of which are also divided by ideological basis between the expectations of a liberal democratic sensibility, and that of (Chinese) Marxist-Leninism.[9]
In the early decades of this century, it was possible to finesse difference. During that period, the liberal democratic vision of SOE conduct, of human rights, of internationalism, and of environmental policy and sustainability could suppose itself unchallenged. And that self-reflexive stance was indeed much in evidence within the liberal democratic heartland during those first two decades of this century. The assumption, almost uncontested and accelerated after 1989, was that all states, irrespective of their governing ideologies, would be required, one way or another to receive and conform to the ordering principles of liberal democratic internationalism and their manifestations in rights regimes.[10] In the context of Chinese economic interaction, it was most visible in the context of projecting liberal democratic human rights sensibilities into China through the private law governance regimes of foreign multinational enterprises operating in Chinese territory,[11] and in the use of public law administrative and regulatory extra-territorialism through projects like the once well discussed “Brussels Effect.”[12]
But beneath the surface of this converging internationalism, the currents of opposition were becoming increasingly evident. One more benign strain was interpretive—it signaled adherence to the core documents and principles of internationalism, including those which centered human rights, but insisted on interpretive flexibility.[13] The other presented a more fundamental challenge, and became inevitable when the People’s Republic began operationalizing its post-Mao Zedong era socialist modernization objectives[14] through a Reform and Opening Up Policy,[15] which in its manifestation as its “Going Out” strategy.[16] By 2022, the areas of normative conflict, already smoldering in its post-Soviet manifestation in 1993,[17] produced not just resistance but a more fully formed ideology of Socialist human rights[18] as a more specific manifestation of a broader challenge to liberal democratic normative leadership over the narratives of internationalism.[19] At the same time, one saw manifested a quite robust counter-thrust in the context of Chinese human rights policies and their operationalization in the Xinjiang Uyghur Administrative Region,[20] which itself generated a vigorous push back.[21] In both cases, .
It is in this normative environment, one moving farther and farther from global normative human rights convergence, that one might more effectively consider the tensions and challenges in the human rights and environmental governance of CSOEs both within China and its political governance ideology, and when CSOEs operate abroad in an ideological ecology the application of which may not be compatible with its own. The excerpts at the star of this essay sketched out the borders of that terrain: the nature of CSOPEs as both economic and political actors; the different conceptions of the role of the state shareholder within Marxist-Leninist and liberal democratic regimes; the application of notions of sovereignty to hierarchies of law; the spaces for authoritative governance through public or private legal regimes and the now open contests for the control of the narrative of the SOE when they are projected abroad. CSOEs might be required to obey the laws of the home and hist states, but not international law except to the extent that it has been domesticated. The risk analysis expected of CSOEs before projection of operations abroad-- political, economic, social, cultural, market, legal, and policy risks—embed but do not foreground human rights and environmental norms beyond those of the state. The CSOE may be guided by international and multilateral instruments in the calculus of risk and in the formulation of behavior expectations, but it is clear that those will be interpreted within the guiding ideology and political principles of the home state. Nonetheless, it is unlikely that at the level of pragmatics, the differences will be deeply felt in every case of CSOE operations. Yet when it is, investment protection and exit strategies may serve as the template rather the capstone of the liberal democratic human rights architecture for business—prevent-mitigate-remedy.
The essay first situates the CSOE within the political ideology of its home state. The manifestation of Marxist-Leninist ideology now operationalized through the New Era principles refined and announced at the Communist Party of China’s (CPC) 20th Party Congress, shape the relationship of state tyop0 CSOEs, the responsibilities, authorities and expectations of each in important ways. The theory of CSOEs emerging in the Chinese Leninist New Era from the start of the leadership of Xi Jinping is then considered, situated within the political ideology and objectives of Chinese outbound investment organized through the Belt & Road Initiative and its AIIB financing mechanism. The essay then moves from the structure of CSOEs to the human rights structures within which CSOEs are expected to operate. Again this requires amalgamating political imperative under the leadership of the CPC, with those behaviors identified as human rights. In that context the essay considers the shape and consequences of the new Chinese human rights internationalism. The essay then considers application drawn from CSOE-state interaction in Latin America and Europe.
* * *
6. Conclusion
At this point it would not be unexpected to think about the Chinse human rights CSOE environment in the same way as the confused characters at the 1st Act finale of Rossini’s L’Italiana in Algeri, a cacophony of bells gonging, canons booming, crows cawing, and hammers pounding simultaneously. The sonority produced can be heard on the ears, but at least everyone is on stage. That is the point here. And it reflects the age—a reflection that reveals a movement away from a global consensus about the overarching objective of deep normative convergence, conceptual and operational, to one marked by fracture and dissonance conceptually, though one that may also be marked by pragmatic convergence at the operational level.
This exploration of human rights and environmental sustainability in the CSOEs drives home that conclusion. Conceptually, the CSOE emerges from the foundational concepts property in Chinese Marxist-Leninist theory. They are vessels within and through which the state organs, under the leadership and guidance of the vanguard CPC, may better manage the utilization of the means of production for the accomplishment of the important project of socialist modernization. Socialist modernization, in turn, is itself a conceptual vessel within which the Party-State develops policy the object of which is the perfection of the material, social, cultural, and political to prepare the way for the fulfillment of the core objectives of the revolutionary social leading forces—the establishment of a communist society.
Those vessels, then are operated in a constant iterative state of engagement between their operations, with respect to which they are vested with a certain degree of autonomy in meeting their goals, and supervision by state and CPC organs which are meant to ensure that macro choices and policies are aligned and further short, medium, and long term policy. The relationship between CSOEs and state organs are formal and institutional. The relations between the state organs, the enterprise and the CPC are far more interlinked at all levels of operation. In this way, the CPC can assert a deep supervisory role both directed toward the enterprise at all levels of its operation, and toward state organs at all levels of their supervisory and guidance responsibilities. In this sense, then, the constructs for evaluating and developing policy with respect to SOEs relevant to non-Marxist Leninist SOEs are either profoundly irrelevant or incomprehensible. And it is at this juncture that one encounters the substantial dissonance in the area of trade and trade relations between liberal democratic and Marxist Leninist systems, usually articulated on the so-called “level playing field” discussions.
But the dissonance affects other core normative and operational concepts as well. The first touch on the role and character of markets. Here again a fundamental difference. Liberal democratic systems start with the proposition that economic policy is driven by markets, and that the role of the state is to insure the integrity and good operation of those markets. Chinese Marxist-Leninist systems start with the proposition that markets are instruments that may be used to more efficiently realize state based normative projects. Markets, in this sense, are the means through which asset vessels (CSOEs) may exercise autonomy to best extract value from their activities, but only for and constrained by the overarching (macro) political-policy objectives specified by state and party supervisory organs.
The second touches on human rights and sustainability issues, including climate change. Again liberal democratic states start from the proposition that individual human autonomy must be privileged and that human rights is driven (in the marketplace of ideas) through civil and political rights regimes. Chinese Marxist-Leninism starts from the fundamental notion of the centrality of collective rights driven by the need to realize socialist modernization in the quest to bring the nation closer to the perfection represented by an ideal communist society. If human rights are both collective and driven by development (socialist modernization) then both state and enterprise organs must privilege those objectives over the possible adverse effects of the resulting operations against the rights of individuals. Better put, such rights are understood as a function of the need for collective effort to make the lives of all people better through development strategies. Here one finds the dissonance between Marxist-Leninist and liberal democratic states at their apogee. The mediation between the individual and the collective in this context is possible only through law. Thus, the focus of CSOE human rights on compliance with local law. It can also be mediated through palliative measures—and thus a focus on charitable work targeting populations affected by CSOE operations. Again, in this later case, some convergence is possible, but by focusing on the remedial and mitigative effects of philanthropy rather than by focusing on the conceptual basis for the action. On the other hand, the collectivity and production enhancement embedded in sustainability, environmental princi0les and climate change provide a space where, at least at the level of operational behavior, the possibility for substantial alignment may be realized. But even here, the possible gap between systems that focus on rights and individuals focus, and those that focus on collectives, development and legality, may sometimes produce deviation that may be hard to bridge, especially where the conflict occurs between CSOEs and host states.
As such, one might usefully think about CSOEs as vigorous actors in global market, and as actors sensitive to human rights and sustainability concerns. At the same time they are not actors detached from their state “owners” in the way that s understood in OECD and OECD embracing jurisdictions. The consequences then suggest that at their limit, and because of the strong connection, a necessary connection between the enterprise, state organs and the CPC, may produce increasingly apparent context in which form the perspective of host states, the CSOE might be most usefully treated as an instrumentality of the state engaging in political activity through their economic relations using markets as instruments or means to those ends. At the same time there is a space where it may be possible to develop systems and expectations of operations that satisfy the conceptual and practical objectives of both systems. The conversation about the construction and operation of that space, however, has barely begun.
[1] W. Richard and Mary Eshelman Faculty Scholar Professor of Law and International Affairs; Pennsylvania State University. An earlier version was first presented at the Workshop--Book Project: “Human Rights and environmental sustainability in state-owned enterprises in Latin America and Europe” (21 September 2021) with great thanks to Markus Krajewski and Judith Schönsteiner for their organization and the vision around which this project was organized.
[2] China State-Owned Assets Supervision and Administration Commission of the State Council (SASAC), Measures for the Supervision and Administration of Overseas Investment by Central Enterprises (18 January 2017) [国务院国有资产监督管理委员会 中央企业境外投资监督管理办法], art. 6(2) (hereafter Measures for Supervision of Overseas Investment 2017).
[3] Ibid., art. 25.
[4] UN Office of the High Commissioner for Human Rights, Guiding Principles for Business and Human Rights: Implementing the United Nations ‘Protect, Respect, and Remedy’ Framework (New York and Geneva: United Nations, 2011) (hereafter “UNGP”).
[5] Organization for Economic Cooperation and Development, OECD Guidelines on Corporate Governance of State-Owned
Enterprises (Paris, OECD, 2015), Annotations to Chapter V: Stakeholder relations and responsible business, p. 60 (hereafter OECD-SOE).
[6] UNGP, supra, Principles 1-10.
[7] Ibid., Principles 11-24.
[8] See, e.g., Tom Holland, “China's 'go out' policy means trouble,” South China Morning Post (26 April 2007) (“In recent years Chinese state-backed companies have bolstered their chances of winning lucrative resource contracts by pledging to invest generously in local infrastructure in countries where few other businesses would dare venture.. . By extending no strings attached loans to African governments, Beijing has also been accused of undermining international efforts to promote sound governance.” Ibid.).
[9] Backer, Larry Catá (2017): “The Human Rights Obligations of State-Owned Enterprises (SOEs): Emerging Conceptual Structures and Principles in National and International Law and Policy”, Vanderbilt Journal of Transnational Law, vol. 50, No4: pp. 827-888.
[10] Cf., Anthony J. Langlois, The Politics of Justice and Human Rights: Southeast Asia and Universalist theory (Cambridge University Press, 2001).
[11] See, e.g., Larry Catá Backer, “Economic Globalization and the Rise of Efficient Systems of Global Private Law Making: Wal-Mart as Global Legislator,” Connecticut Law Review 39(4) (2007) 1739-1784
[12] Anu Bradford, “The Brussels Effect,” Northwestern University Law Review 107(1) (2012) 1-67.
[13] See, e.g., Final Declaration of the Regional Meeting for Asia of the World Conference on Human Rights, Report of the Regional Meeting for Asia of the World Conference on Human Rights, A/Conf.157/ASRM/8; A/Conf.157/PC/59 (29 March – 2 April 1993; Bangkok, Thailand) (hereafter, Bangkok Declaration 1993).
[15] Larry Catá Backer, “Central Planning Versus Markets Marxism: Their Differences and Consequences for the International Ordering of State, Law, Politics, and Economy,” Connecticut Journal of International Law 32(1):1-47 (2016).
[16] Paul Nash, “China’s `Going Out’ Strategy,” Diplomatic Courier (10 May 2012).
[17] Bangkok Declaration 1993, supra.
[18] China, State Council Information Office, The Communist Party of China and Human Rights Protection -- A 100-Year Quest (Beijing June 2021). On its contemporary origins, see, Franciszek Przetacznik, “The Socialist Concept of Protection of Human Rights,” Social Research 38(2) (1971) 337-361. For its implications under New Era Marxist-Leninism since 2022, see Larry Catá Backer, The Rise of Socialist Human Rights--Larry Cata Backer Remarks: "Brief Reflections on the Building of a Theory and Practice of Community with a Shared Future for Mankind and Global Human Rights Governance " [建立具有人类共同未来的社区理论和实践以及全球人权治理的简要思考] (English and Chines Versions), Law at the End of the Day (28 September 2022).
[19] 习近平：共同构建人类命运共同体 2021-01-01 [Xi Jinping: Jointly build a community with a shared future for mankind] (“China's plan is to build a community with a shared future for mankind and achieve win-win and shared benefits. . .The key to building a community with a shared future for mankind lies in action. I believe that the international community should make efforts in terms of partnership, security structure, economic development, civilization exchanges, and ecological construction”); Wang Yi, “Striding Forward Holding High the Banner of Building a Community with a Shared Future for Mankind,” Ministry of Foreign Affairs of the People’s Republic of China (1 January 2023); considered in Larry Catá Backer, 外交部副部长谢锋：推动构建人类命运共同体是应对世界之变、时代之变、历史之变的中国方案 [Vice Foreign Minister Xie Feng: Promoting the building of a community with a shared future for mankind is China's solution to changes in the world, times, and history], Law at the End of the Day (21 January 2023).
[20] Office of the UN High Commissioner for Human Rights, “OHCHR Assessment of human rights concerns in the
Xinjiang Uyghur Autonomous Region, People’s Republic of China” (31 August 2022); available [https://www.ohchr.org/sites/default/files/documents/countries/2022-08-31/22-08-31-final-assesment.pdf]
[21] Permanent Mission of the People’s Republic of China to the United Nations Office at Geneva and Other International Organizations in Switzerland, “Fight Against Terrorism and Extremism in Xinjiang: Truth and Facts,” No. GJ/56/2022 (31 August 2022) (prepared by the Information Office of the People’s Government of Xinjiang Uyghur Autonomous Region, August 2022) .
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