A New International Debate on Human Rights and Corporations

Economic Power, Democracy and Human Rights

Gonzalo Berrón

23/06/2014

Opinión

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The 26th Session of the United Nations Human Rights Council (UNHRC) opened in Geneva on June 10th. A major focus on the UNHRC agenda is the issue of binding regulations for Transnational Corporations (TNCs). This demand has been raised by Ecuador and 84 other governments in a Statement to the UNHRC last September 2013.

The urgent need for such a Binding Treaty has been on the agenda of social movements and human rights organisations for a long time who have recently converged in a Treaty Alliance whose statement is supported by more than 500 movements and networks from all regions of the world. There are indications that this demand for a Binding Treaty on TNCs will be a matter of intense negotiations at the UNHRC (as some governments including the US and the EU, seem determined to block this demand. This article places the political tensions converging in Geneva in the context of the broader agenda of corporate capture of political power and the privatisation of democracy.

Economic interests in contemporary global capitalism: a new phase in the privatisation of democracy

We are currently in a phase of global capitalism where certain tendencies appear to be converging to conspire against the ability of several generations to exercise democracy and human rights. On the one hand, the growing concentration of private economic power is overlapping the old North-South geopolitical division and is expressed at the global level in the form of transnational "mega-corporations" and the arrival of the "translatinas"¹ and other corporations based in "emerging" economies. On the other hand, there is a new kind of interdependence between the world of money and the world of politics in what some describe as "corporate capture", or the capture of politics/democracy by economic power. These phenomena cannot be simply reduced to the participation of the "rich" in politics - the old Weberian plutocracy.

Instead, they are the result of greater promiscuity between both worlds due to the dependency of politicians in competitive democratic systems. In other words, politicians' chances of getting elected depend on the economic means at their disposal for election campaigns, while their performance in positions of power (executive and legislative) is conditioned by the commitments they make to guarantee their re-election or a "dignified withdrawal" from public service. Several former European premieres currently act as consultants for major corporations. The growth of economic power arising from its concentration also has impacts on the international level: these mechanisms of capture can also be found in international institutions². Furthermore, to the traditional geopolitical calculations of power on the international scene, one can add the economic calculations of actors from the business world who have organically penetrated mechanisms of the so-called "global governance". They do so actively through the construction of what some call the "architecture of impunity"³ - a framework of free trade agreements and investment treaties, and laws that expand the rights of "businesses" - or by directly occupying positions in international institutions, or exerting pressure via national governments defending the economic interests of their corporations⁴.

Hyper-concentration, the “1%” and rights

Popularised after the 2008 crisis as the "1%", the high concentration of wealth, property and decision-making power in the hands of an increasingly smaller number of actors has been the focus of a growing number of studies published in recent years. If we examine each of these three dimensions, in terms of the concentration of wealth, recent studies report that in the United States, 1% of the population owns 45% of total wealth⁵. According to ECLAC, in Latin America, the "richest quintile owns on average 46%, which ranges from 35% (in Uruguay) to 55% (in Brazil)”⁶. In Europe, in 2012, the income of the 20% of the population with the highest income was 5.1 times higher than that of the 20% of the population with the lowest income; in 2003, this ratio was 4.6⁷. As for the ownership of corporations, the famous ETH Zurich study showed that the global network of companies is currently managed by 17 mega-corporations⁹.

The intensification of certain changes in the morphology of corporate management and ownership has implications for decision-making processes, which increase the probability that human rights violations will occur. Investment funds and the idea of mega-corporations (corporations that are owners of corporations, which are owners of other corporations, and so forth) render responsibility for decision-making increasingly invisible and distance even more those who make decisions from those who are directly affected by them. Moreover, outsourcing the management of corporations by hiring CEOs and executives has the added effect of diluting responsibility and immunizing corporations' real owners against the illegal acts of their managers. The second aspect of this morphology is the pressure to earn profit either through the economic performance of the funds - in which, paradoxically, active and retired workers own bonds - or the performance of executive directors whose success depends on their ability to generate more and more profit.

Political and social actions and responses

We are not dealing with an entirely new phenomenon, but rather a configuration of contemporary capitalism that, as it consolidates in this new morphology, generates distinct and novel effects and reactions. In the process of defending their rights, new and old affected actors - workers, users and consumers, people in general, communities and even States - identify the different types of responsibility involved. They also help to elaborate on the type of problems, gaps and shortcomings that exist in the legal systems that are supposed to protect them. In countries like Brazil, there is a growing social awareness on the role of the abuses of international economic power, due to the privatisations in the 1990s, the globalisation of investments and emblematic cases of corruption and environmental disasters. Similar impacts of corporate operations are also hitting public consciousness - such as massive layoffs and the flexibilisation of labour through relocation (or the threat to relocate), and more recently, the aggressive role of investment and corporations in "extractivist"¹⁰ complexes (agricultural or mineral) and pressure on the environment and natural resources.

In Brazil, the introduction of genetically modified organisms, the Forestry Code reform, the debate on the Mining Code, initiatives to change the method used to demarcate indigenous land, the construction of massive infrastructure projects, and tax exemptions are but some of the manifestations of economic pressure on the State that affect people's rights. The recent case of hosting the Soccer World Cup provides cross cutting exposure of some of the most perverse forms of this phenomenon: violations of state sovereignty by obliging the State to adopt reforms to laws and imposing demands for tax exemptions that are exclusively for the FIFA (laws 12.663 and 12.350); the explosion of infrastructure projects and pressures to meet deadlines that left public administrators in the hands of construction firms, as authorities were forced to accept their exorbitant over pricing, while the supposed beneficial legacy of these works - that is, new social and transportation infrastructure and benefits for urban areas in general - took the back seat. Government authorities also failed to stop the displacement of neighbourhoods and major increases in stadium entrance fees, which have resulted in the privatisation of access to sports stadia that previously were accessible to the public.

This increase in social conflict is an expression of the new contradictions emerging in this recent phase of global capitalism. These contradictions are also present in countries whose governments emerged as a political response to the period immediately prior to the current one, dominated by the hegemony of the so-called Washington Consensus. Though not entirely removed from the resistance movements of that period, new struggles can be characterised as being in direct confrontation with capital, whose systemic responsibility was emblematically exposed by the crisis that erupted in 2008. And, as in the previous period, this conflict is developing on several levels: within States and on the international scene, which I will address below.

The "Ruggie peace" lasted only 3 years: new tensions in the international debate on human rights and corporations

Not long after the victory of corporate interests in the last major round of discussions on the issue of "human rights and business" in the UN, the system is currently in the midst of a new debate that gives hope to those who defend binding rules for corporations. Currently, the UN system has the "Guiding Principles”, approved by the UN Human Rights Council (UNHRC) in 2011. These principles developed in the period 2006-2011, were presented to the UN in the "Guiding Principles on Business and Human Rights: Implementing the United Nations 'Protect, Respect and Remedy' Framework" report, by the Special Representative of the UN Secretary General, John Ruggie. Defended by "optimists", these Guiding Principles (GPs) are general voluntary guidelines on human rights and corporations. They are organised into the three pillars: "protect, respect and remedy". In 2011, in addition to adopting the guidelines, the Council resolved to implement a program to promote them. This program includes various actions and the creation of a Working Group composed of 5 experts (chosen according to the usual UN criteria and balancing "business" affinities with academic and social ones. Among these actions, it is worth highlighting national implementation plans and annual and regional forums. The resolution gave the working group a three-year mandate, which ends in June 2014¹¹.

The Working Group began its work in what appeared to be a period of calm surrounding the "implementation" of the GPs. However, "Ruggie's peace" came to an abrupt end: in September 2013, when Ecuador, together with another 84 governments¹², presented a declaration, in which these governments affirm that:

"The endorsement by the UN Human Rights Council in June 2011 of the “Guiding Principles on Business and Human Rights: Implementing the United Nations Protect, Respect, and Remedy Framework” was a first step, but without a legally binding instrument, it will remain only as such: a “first step” without further consequence. A legally binding instrument would provide the framework for enhanced State action to protect rights and prevent the occurrence of violations.”¹³

This declaration reopens the 40-year debate on the need to effectively regulate the operations and conduct of corporations and protect people and communities from the violations they commit. In this dispute and conflict of interests, corporations and the governments that protect them have won all of the battles so far, blocking attempts to get initiatives on binding norms approved¹⁴. At the same time, as a way to draw attention away from what really counts in terms of protections, corporations promote various initiatives on soft or voluntary codes. These codes, like "corporate social responsibility", offer a response to society that aims to downplay both the exorbitant profits and wealth they obtain from their activities and the violations they usually commit to obtain it.

Those who defend the Ruggie process argue that one has to give the Guiding Principles time and that now is not the time to start discussing this issue again. They try to deny that Ecuador's declaration expresses a demand, always present in society, for the establishment of control over those whose irresponsible actions are seen as being responsible for the global crises (financial, economic, social, energy, environmental and food prices). To defend their position, GP defendants use four main arguments, almost all based on practical or pragmatic issues:

1- The consensus that was possible: the voluntary GPs are an important advance in relation to what there was before. For the first time, the UN unanimously adopted norms on "business and human rights". This was the consensus that it was possible to attain and we must respect it. It is not possible to go beyond this point.

2- Complexity: Generating binding rules for corporations is a Herculean task and, due to the complexity of the international system, it is practically impossible to do.

3- Implementation: Since this is such a complex task, initiating a negotiating process that could take years would reduce efforts to effectively implement the Ruggie Principles and, along with it, delay the concrete, albeit voluntary, enforcement of human rights in situations where they are violated.

4- It is the responsibility of nation-states: it is ultimately states that must ensure that human rights are respected in their jurisdictions. The role of the international community, as the Guiding Principles indicate, is to help strengthen their capacity to enforce them. Therefore, these voluntary principles are sufficient.

One can surely add to this list the arguments that diplomats in New York or Geneva do not reveal in public. Their arguments are undoubtedly much more pragmatic and real than the ones listed above, and are related to the obstacles that this type of legislation could create for the free circulation of investment and further market liberalisation. As for host countries, the majority being the poorest or developing countries, they are concerned with the risk of corporations being discouraged from investing in their countries if binding obligations are adopted. It is clear that this kind of binding rules goes against the logic that allowed what we referred to earlier as the "architecture of impunity" to be built, as it implies taking a step towards reversing the excessive widening of mechanisms that protect the "rights" of foreign investors - i.e. transnational corporations and international investment funding instruments and mechanisms.

Not only do these arguments ignore the tradition of robust theoretical debates and the principles that have historically characterised the discussion on human rights in international fora, their weak arguments are staggering. How can the international community tolerate this? And how can the members of the UN Working Group on Business and Human Rights who have assumed the defence of the Ruggie Principles as if they were rules set in stone on human rights and corporations.

The first issue we should address is that, by definition, there is no measure of time that indicates when it is an appropriate moment to address an initiative like the one led by Ecuador. Political timing is determined by a set of factors, such as the will of the actors involved. In this case, even though the debate had apparently ended in 2011, there is an important group of States and social organisations that want to put the issue back on the agenda of the UNHRC. Therefore, we can say that we are before a new "moment" - one that demands that the debate on this issue be reopened. The fact that other actors do not want to do so reveals that they are comfortable with the status quo that many – especially the affected communities - have been questioning for the past four decades. What is more, there is nothing preventing advance on both processes simultaneously. In other words, it is possible to discuss a treaty with binding obligations for corporations and promote the Ruggie principles at the same time. The argument on the "consensus that was possible" is also dynamic and depends on the historical context. There are no elements indicating that the world is not mature enough to reach a consensus on stricter enforcement of rules on human rights. Or, to put it differently, the level of tolerance towards the human rights violations of major corporations and their exorbitant profits has fallen in the public opinion, and therefore, there is now less political space to sustain a global laissez faire human rights policy for corporations on the world.

The task of elaborating this kind of Treaty is indeed complex. It implies making decisions on: what crimes are to be judged; about who and what framework will judge them; what the penalties are; how to organize the various branches of human rights; the level of applicability and detail; the extraterritorial application of the law; who is responsible; how to combine this kind of treaty with those already in effect; identifying judicial gaps; and many other issues. It is, without a doubt, a complicated task, yet its complexity does not eliminate the urgent need for it. Protecting people and communities, defending their rights and providing remedy in case of their violation are also complex tasks, but they are just as complex and vital for humanity as the development of a vaccine against AIDS, for example, or finding a cure for cancer. The complexity of these tasks does not make them less urgent or necessary for people. The issue of States' responsibilities has been examined at great length. By now, everyone knows that where the nation-state falters, only international norms and/or the international community can protect people. Moreover, as Martin Kohr from the South Center¹⁵ argues in relation to the abuses of transnational corporations - asymmetry is greater due to the fact that developed countries possess the institutional means they need to more effectively process violators of the law and human rights, and therefore, are able to better enforce the rule of law. Powerful states have a greater capacity to exert control over powerful economic interests in their territory. As for poor countries, with low levels of institutionalisation and States that are weak in comparison to transnational mega-corporations, for example, the defence of peoples' rights and access to justice are limited. Economic powers are able to use various extra-judicial mechanisms to circumvent the law, escape punishment or make it difficult to enforce sanctions. In the case of the contamination of the Gulf of Mexico, British Petroleum was condemned to paying several billions of dollars in fines by the United States government. The Bophal disaster in India or the recent Chevron case in Ecuador, on the other hand, provide telling examples of the difficulties that the communities affected by violations of human rights face in States with less economic power.

“Shielding” the rights of people, not of corporations

An international armour is needed to help protect people from the asymmetry of power produced by the accumulation of wealth and the political advantages it creates. For this, we must overturn the system mounted through international arbitration tribunals that protect investors' rights (ICSID and WTO dispute panels) - that is, the rights of major transnational corporations, which are responsible for the majority of international trade and investment flows.

The creation of a legal framework that, through one or more treaties, can serve as an international reference on a new vision on economic and political relations and rights in the contemporary world is fundamental. By doing so, the fight for human rights can provide a fundamental tool that - when complemented by the mobilisations of affected communities and social organisations, movements and networks - can expand the frontier of the applicability of human rights throughout the world.

18 June 2014

Notas:

1. Translatinas refers to transnational corporations from Latin America.
2. Friends of the Earth International, “Reclaim the UN from corporate capture” (2012) and more recently, Oxfam Internacional, “Working for the few. Political capture and economic inequality” (2014).
3. Brennan, Brid and Berrón, Gonzalo “Hacia una respuesta sistémica al capital transnacionalizado”, en Capital Transnacional vs Resistencia de los Pueblos, América Latina en Movimineto, ALAI, Quito, June 2012.
4. Joseph Stiglitz, “On the Wrong Side of Globalization”, New York Times, March 15, 2014, http://opinionator.blogs.nytimes.com/2014/03/15/on-the-wrong-side-of-glo...
5. Wealth inequality in America” by Wondershare https://www.youtube.com/watch?v=QPKKQnijnsM&feature=share
6. “Panorama Económico y Social de la Comunidad de Estados Latinoamericanos y Caribeños, 2013”, ECLAC, January 2014: http://www.cepal.org/publicaciones/xml/7/52077/PanoramaEconomicoySocial.pdf
Data for EU-15, Eurostat: http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&plugin=1&languag...
8. Stefania Vitali, James B. Glattfelder, Stefano Battiston “The Network of Global Corporate Control”, 2011
9. They rule, Eles Mandam, Proprietários do Brasil, …
10. For an analysis on “extractivism”, see Gudynas, Eduardo (2009) «Diez tesis urgentes sobre el nuevo extractivismo. Contextos y demandas bajo el progresismo sudamericano actual» en VV.AA, Extractivismo, política y sociedad, CAAP / CLAES, Quito.
11. UN Human Rights Council Resolution 17/4, June 16, 2011.
12. African Group, the group of Arab Countries, Pakistan, Sri Lanka, Kyrgyzstan, Cuba, Nicaragua, Bolivia, Venezuela, Peru and Ecuador.
13. "Statement on behalf of a Group of Countries at the 24th Session of the Human Rights Council", Geneva, September 2013: http://business-humanrights.org/media/documents/statement-unhrc-legally-...
14. The initiative of a UN Code of Conduct for Transnational Corporations (1983) and the Draft Norms on the responsibilities of transnational corporations approved in 2003 by the UN Sub-commission on the Promotion and Protection of Human Rights are of particular importance.
15. Intervention in the Seminar on Transnational Corporations and Human Rights, March 11 and 12, 2014, Palais des Nations, Geneva.

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