CORPORATE PEACEBUILDING AND THE LAW: REGULATING THE PRIVATE SECTOR FOR CONFLICT TRANSFORMATION
Jonathan Asher Kolieb (ORCID iD 0000-0002-3590-6756)
Submitted in total fulfilment of the requirements of the degree of Doctor of Philosophy
January 2017
Melbourne Law School The University of Melbourne
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ABSTRACT
Corporations have social responsibilities and legal obligations in conflict zones. Moreover, many large transnational corporations (TNCs) have the capabilities and capacities to positively contribute to the prevention and resolution of armed conflicts around the globe. However, the potential of “corporate peacebuilding” has yet to be fully realised in theory or in practice. This thesis argues that unlocking this potential requires legal and regulatory innovation. It examines the relationship between peace, corporations and the law, and suggests that the private sector has a largely untapped peacebuilding potential in large part, due to weak governance at the global and national levels.
Focusing on the governance of Australian-based TNCs, the thesis argues to realise this potential requires legal and regulatory innovation. Building upon the theory of responsive regulation, a novel regulatory framework is developed for this purpose, embodied in the regulatory diamond heuristic. It encompasses three key components: minimum standards, compliance regulation and aspirational regulation. The thesis then applies this framework to the problem at hand, and in particular explores the law’s roles in each of the constituent elements of a regulatory diamond framework that may help realise the promise of corporate peacebuilding.
The thesis argues that international criminal law norms of behaviour are the most legitimate source of minimum legal standards for TNC conduct in conflict-affected areas. It is argued that these norms are applicable to corporations as borne out by the jurisprudence of the Nuremberg-era and later international trials. It is crucial that effective pathways exist to legally enforce such standards. Despite a dearth of viable international enforcement options, it is argued that there exist several promising, but underexploited, domestic avenues for legal accountability when TNCs breach those standards. Finally, despite traditional conceptions of the law’s role being focused on norm-setting and norm-enforcement, it is suggested that well-designed laws may also facilitate and encourage TNCs to go above and beyond mere compliance with minimum standards, to become partners, alongside governments and civil society, in peacebuilding efforts around the globe.
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DECLARATION
This is to certify that:
(i) the thesis comprises only my original work towards the degree of Doctor of Philosophy, except where indicated in the Preface;
(ii) due acknowledgement has been made in the text to all other materials used; and
(iii) the thesis is less than 100,000 words in length, exclusive the front matter, figures, tables, maps, bibliographies and appendices.
Signed:
Jonathan Asher Kolieb 13 January 2017
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DEDICATION
This thesis is dedicated to my grandparents – Sara, Harry, Frieda and Jerry, who provided the inspiration to start this project, and to my sons – Gabriel and Zachary – who provided the inspiration to finish it.
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PREFACE
Aspects of this thesis have previously been published in the journal articles and book chapter listed below:
1. Jonathan Kolieb, ‘Australia: The Great Southern Land of Corporate Accountability?’ (2013) 1 Pandora’s Box Law Journal 61
2. Jonathan Kolieb and Ellycia Harrould-Kolieb, ‘Corporate Sustainable Peace- building: Exploring the Potential for Corporate Contributions to Conflict Resolution in Africa’ in Salome Bronkhurst and Urmilla Bob (eds), Conflict- Sensitive Adaptation to Climate Change in Africa (Adelphi and DWV-Berlin, 2014) (Lead author, 80% contribution)
3. Jonathan Kolieb, ‘Case Note: Kiobel v Royal Dutch Shell: A Challenge For Transnational Justice’ (2014) 16 Macquarie Law Journal 169
4. Jonathan Kolieb, ‘When to Punish, When to Persuade, When to Reward: Strengthening Responsive Regulation with the Regulatory Diamond’ (2015) 41 Monash University Law Review 136
5. Jonathan Kolieb, ‘Through the Looking Glass: Nuremberg’s Confusing Legacy on Corporate Accountability under International Law’ (2017, forthcoming) American University International Law Review
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ACKNOWLEDGEMENTS
This thesis benefitted from the wisdom and supervision of several academics at the Melbourne Law School. I began this PhD journey with Professor Gerry Simpson and am proud to finish it with him. I value his intellect and wisdom – on international law and other matters too – and thank him for sharing it with me. Professor Christine Parker came on rather late in the process as my principal supervisor. Her supervision and mentorship has been invaluable. She has expertly shepherded this project to its conclusion. Professor Sean Cooney provided wise counsel and support along the way as a co-supervisor, and Associate Professor Paul Ali volunteered to comment on the final draft. I am indebted to you all.
I thank the staff of the Melbourne Law School for their support, in particular the fellow PhDers at the Asia-Pacific Center for Military Law, the Office of Research team and the librarians. Over the duration of my PhD candidature I have been fortunate to teach alongside some great university educators, including Associate Professor Tim Lynch and Professor John Howe. Thank you for your example, your mentorship and your friendship.
Several publications arose from this PhD research. I thank the reviewers and editors of each. I would also like to thank professional accredited editor Mary-Jo O’Rourke AE who provided copyediting and proofreading services in accord with Parts D and E of the university-endorsed ‘Australian Standards for Editing Practice’.
To my family, including my parents and siblings: You have put up with a lot over the past six years. Thank you for your forbearance and encouragement.
I could not have completed this project without my wife Ellycia. Her stamina, intellect and innate curiosity continue to astound and inspire me. She has read every single word in this thesis (at least once!) and it is the better for it. Over the past six years, Ellycia has not only supported me in my academic endeavours, she has undertaken her own PhD, raised our two awesome sons and kept our home running smoothly. I love you and
v thank you. I look forward to assisting you in completing your PhD thesis in the near future.
Finally, to my two sons: Gabriel and Zachary. Of all that I have produced in the course of this PhD candidature – including this thesis – it is the two of you I am most proud. May you grow up to be mensches, like your great-grandparents that you are both named after. I love you.
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BRIEF TABLE OF CONTENTS
CHAPTER 1: Introduction 1
CHAPTER 2: Transnational Corporations in Conflict-Affected Areas: 25 Describing the Problem and the Potential
CHAPTER 3: An Innovative Regulatory Approach to Achieve 81 Corporate Peacebuilding: Addressing the “How” Question with the Regulatory Diamond
CHAPTER 4: Clarifying the Mid-Line: Identifying Minimum 133 Standards of Conduct for TNCs Doing Business in Conflict-Affected Areas
CHAPTER 5: Sharpening the Bottom-Tip of the Regulatory Diamond: 195 Corporate Legal Accountability for International Crimes in Conflict-Affected Areas
CHAPTER 6: Going Above and Beyond: The Law’s Role in 255 Aspirational Regulation for Corporate Peacebuilding
CHAPTER 7: Conclusion: The Public Policy Challenge of Realising 301 the Vision of Corporate Peacebuilding
BIBLIOGRAPHY 317
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TABLE OF CONTENTS
ABSTRACT ...... i
DECLARATION ...... ii
DEDICATION ...... iii
PREFACE ...... iv
ACKNOWLEDGEMENTS ...... v
BRIEF TABLE OF CONTENTS ...... vii
TABLE OF CONTENTS ...... viii
LIST OF FIGURES AND TABLES xv
CHAPTER 1 INTRODUCTION ...... 1
I Introduction: The Problem and Potential of Business and Peace...... 3
II Objectives ...... 4
III Significance and Scope ...... 5
IV Theoretical Approach and Method ...... 8
V Terminology ...... 11
A Armed Conflict and Conflict-Affected Area ...... 11
B Peace and Peacebuilding ...... 13
C Transnational Corporation ...... 18
D Regulation and Law ...... 19
VI Structure and Summary ...... 21
A The Problem and the Potential ...... 21
B The Regulatory Diamond as Responsive Regulation Framework ...... 21
C Locating the Law in the Regulatory Diamond Framework for Corporate Peacebuilding22
VII Conclusion ...... 23
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CHAPTER 2 TRANSNATIONAL CORPORATIONS IN CONFLICT-AFFECTED AREAS: DESCRIBING THE PROBLEM AND THE POTENTIAL ...... 25
I Introduction ...... 27
II The Modern Transnational Corporation: A Contentious and Contested Institution 29
A The Rise and Rise of the Corporation ...... 29
B The Purpose of the Corporation – Profit and Nothing More? ...... 31
C Corporations and Society: The Paradox of CSR ...... 33
D The Corporation: Part of the Solution or Part of the Problem? ...... 35
III The Conventional View: Exploring the Negative Impacts of TNCs on Armed Conflict ...... 36
A Transnational Corporations Driving Armed Conflict ...... 39
B Australian TNCs Wrongdoing in Conflict-Affected Areas ...... 41
IV The Alternative View: Theorising the Peacebuilding Potential of Transnational Corporations ...... 43
A The Liberal Peace: Triumph of Free Trade and Capitalism ...... 43
B Critique of “Economic Peace” ...... 46
C Business and Peacebuilding ...... 48
D The Idea of Peace-Through-Commerce Gathers Steam ...... 50
V Justifying Corporate Involvement in Conflict Transformation ...... 53
A Corporate Peacebuilding: Building Community ...... 53
B Corporate Attributes Conducive to Peacebuilding Impact ...... 55
C The Business Case for Corporate Contributions to Peacebuilding ...... 58
1 Peace As Business Opportunity ...... 61
2 Protecting Reputation, Upholding Values ...... 62
D The Moral Argument ...... 63
VI Towards A Model of Corporate Peacebuilding Possibilities ...... 66
A Philanthropy not Enough ...... 66
B Beyond Philanthropy? ...... 67
C The Nelson Model ...... 69
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D The Matrix of Corporate Peacebuilding ...... 73
VII Conclusion ...... 78
CHAPTER 3 AN INNOVATIVE REGULATORY APPROACH TO ACHIEVE CORPORATE PEACEBUILDING: ADDRESSING THE “HOW” QUESTION WITH THE REGULATORY DIAMOND ...... 81
I Introduction ...... 83
II The Unrealised Vision of Corporate Peacebuilding: A Failure of Regulation ...... 85
A Risk-aversion, Free-riding and Short-termism ...... 86
B Need for an Effective Regulatory Regime ...... 88
C Review of the Current Regulatory Landscape for Corporate Peacebuilding ...... 91
1 No Magic Bullet ...... 92
2 Soft, Vague, Voluntary and Modest ...... 92
D Concern over Governance of Transnational Business...... 96
E The Need for Legal Regulation ...... 96
III Looking to Responsive Regulation for a Theoretical Framework ...... 99
A Introduction ...... 99
B Recapping Ayres and Braithwaite’s Responsive Regulation ...... 100
C Design of the Regulatory Enforcement Pyramid ...... 102
D The Utility of the Pyramid ...... 104
E Shortcomings of Responsive Regulation’s Pyramid ...... 105
1 The Fuzzy Role of Law in Responsive Regulation ...... 107
2 Failure to Embrace a Full Conception of Regulation ...... 108
F An Attempt to Rectify the Dissonance: The Dual-Pyramid Model ...... 113
IV Strengthening Responsive Regulation with the Regulatory Diamond ...... 115
A Exploring the Diamond: Components of a Regulatory Regime ...... 117
B Visualising the Crucial but Limited Role of Law ...... 118
C CSR and Business Ethics – Beyond the Law ...... 120
D Visualising the Full Regulatory Potential with Aspirational Regulation ...... 123
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E Visualising Continuous Improvement: Virtuous Behaviour is more than just Law- abiding Behaviour ...... 126
F Increased Utility for Regulators and Regulatees Alike ...... 130
V Conclusion ...... 131
CHAPTER 4 CLARIFYING THE MIDLINE: IDENTIFYING MINIMUM STANDARDS OF CONDUCT FOR TNCS DOING BUSINESS IN CONFLICT- AFFECTED AREAS ...... 133
I Introduction: Searching for Standards...... 135
II Looking to International Law for Minimum Standards for Corporate Peacebuilding 137
A International Law is Standard-setter in Theory: Reflects Fundamental Norms of Humanity ...... 137
B International Law is Standard-Setter in Practice: Reflects Current State and Industry Practice ...... 139
C Universality of International Law ...... 141
D Distinguishing between Applicability, Liability and Enforcement of International Legal Standards ...... 143
III International Criminal Law as Preferred Source of Minimum Standards for TNCs in Conflict-Affected Areas ...... 145
A ICL: An Introduction ...... 145
B ICL Reflects the Key Norms of IHRL and IHL ...... 147
1 Three for the Price of One...... 149
C ICL has a Text ...... 151
D Lack of Clarity of Relevant Human Rights Standards for Corporations ...... 154
E Business Respecting Human Rights: Aspirational Goals not Minimal Standards ...... 155
F Resistance to International Human Rights Obligations for TNCs ...... 157
G Universality and Fundamental Nature of ICL Norms ...... 159
1 ICL Norms are Jus Cogens Norms ...... 160
2 Increased Recognition of Applicability and Liability for Corporations ...... 162
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H Broad Accountability Opportunities for ICL ...... 163
I Unconscionable not to ...... 164
J ICL Regulates Conflict-driving Behaviour ...... 166
1 Between Lex Generalis and Lex Specialis ...... 167
K ICL Standards are Criminal ...... 169
1 ICL revolves around collective criminality ...... 171
IV Questioning International Criminal Law’s Applicability to Corporations ...... 172
A The Problem of International Legal Personality ...... 172
B ICL and Corporations ...... 175
1 Contemporary Significance of Nuremberg ...... 176
C Nuremberg’s Confusing Legacy on Corporate Liability for International Crimes ...... 177
1 Corporate Defendants at the International Military Tribunal, Nuremberg ...... 177
2 The Industrialist Trials ...... 179
D Divergent Interpretations ...... 181
1 The Narrow Judicial Lens ...... 182
2 The Broader Legal Lens ...... 184
E A Possible Third, Socio-Legal Lens...... 190
V Conclusion ...... 192
CHAPTER 5 SHARPENING THE BOTTOM TIP OF THE REGULATORY DIAMOND: CORPORATE LEGAL ACCOUNTABILITY FOR INTERNATIONAL CRIMES IN CONFLICT-AFFECTED AREAS ...... 195
I Introduction ...... 197
II The Inadequacy of Soft-law, Multi-stakeholder Accountability Mechanisms ..... 198
III International Legal Pathways for Corporate Accountability for International Crimes in Conflict-affected Areas ...... 201
A Jurisdictional Constraints ...... 202
B Corporate Crime Remains on the Agenda ...... 206
1 Non-Justiciability Does Not Mean a Crime Has Not Been Committed ...... 206
2 Corporate Crime Comes Under Scrutiny at International Tribunals ...... 208
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3 Recognising Corporate Liability for International Crimes ...... 210
C Lex Ferenda, Not Lex Lata ...... 212
IV Domestic Legal Pathways for Corporate Accountability for International Crimes in Conflict-affected Areas ...... 215
A The US Alien Tort Statute: Contemporary Guardian of Human Rights ...... 218
1 Sarei v. Rio Tinto ...... 220
2 Kiobel: Curtailing the ATS as a Tool for Corporate Accountability in Conflict-Affected Areas221
3 Implications Near and Far ...... 224
4 Searching for “the next ATS” ...... 227
B The Great Southern Land of Corporate Accountability? Pathways of Encouraging Compliance with ICL Norms in Australian Courts ...... 228
1 The Extraterritorial Reach of Australian Law ...... 229
2 International crimes are Australian crimes...... 229
3 Other Statutory Possibilities: The Corporations Act and the Competition and Consumer Act as Accountability Tools ...... 233
4 Australian Tort Law ...... 237
5 Questioning the utility of litigation for achieving compliance with ICL standards ...... 249
V Conclusion: Envisioning the Lower Half of the Regulatory Diamond for Corporate Peacebuilding ...... 252
CHAPTER 6 GOING ABOVE AND BEYOND: THE LAW’S ROLE IN ASPIRATIONAL REGULATION ...... 255
I Introduction ...... 257
II A Turn to Informality in Contemporary Governance of TNCs: Soft and Informal as Adjectival Responses to the Limits of Just Law...... 260
A Soft-law nature of aspirational regulation of TNCs in conflict-affected areas...... 261
B The Promise ...... 263
C The Perils ...... 266
D But what role for the law? ...... 269
III A ‘new governance’ approach to the law’s place in aspirational regulation ..... 270
A Expressive Role of Law in Aspirational Regulation ...... 273 xiii
B Facilitative Role of Law in Aspirational Regulation ...... 274
C Law as Meta-Regulatory Nudge...... 276
IV Dodd – Frank’s Miscellaneous Provisions: A Model for Law-based Aspirational Regulation for Corporate Peacebuilding?...... 279
A Section 1502: The Conflict Minerals Provision ...... 281
B Section 1504: The Transparency Provision ...... 285
C Their Meta-Regulatory, Aspirational Design ...... 287
D Challenged in the Courts ...... 288
E Impact on Corporate Behaviour: A Nascent Market for Virtue? ...... 290
F Impact on Peacebuilding in the DRC ...... 292
V Conclusion: Promoting a Race to The Top of the Diamond ...... 297
CHAPTER 7 CONCLUSION: THE PUBLIC POLICY CHALLENGE OF REALISING THE VISION OF CORPORATE PEACEBUILDING ...... 301
I Introduction: Recapping the Thesis’ Objectives ...... 303
II Summary ...... 305
A The Problem and the Opportunity: The Matrix of Corporate Peacebuilding ...... 305
B Strengthening Responsive Regulation Theory with the Regulatory Diamond Framework306
C Identifying the Law’s Multifaceted Roles in the Regulatory Diamond Framework for Corporate Peacebuilding ...... 307
III Policy Recommendations ...... 308
IV Directions for Further Research ...... 312
V A Final Word: Triangulating the Practice of Peacebuilding ...... 314
BIBLIOGRAPHY ...... 317
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LIST OF FIGURES AND TABLES
Figures
Figure 1.1: Galtung’s tripartite classification of actions needed to achieve 16 sustainable peace
Figure 1.2: Simplified conflict-peace continuum 17
Figure 2.1 Adaptation of Nelson’s pyramid of business and peace 70
Figure 2.2 A generalised matrix scheme of possible conflict 73 transformation activities
Figure 3.1 Example of responsive regulation’s enforcement pyramid 103
Figure 3.2 Image of enforcement pyramid showing assumptions made 104 about regulated entity
Figure 3.3 The dual-pyramid model 113
Figure 3.4 The regulatory diamond model 116
Figure 4.1 Dunoff, Ratner, Wippman’s geometric representation of the 148 relationship between international humanitarian, human rights and criminal law
Figure 4.2 Minimum legal standards of the regulatory diamond for 193 corporate peacebuilding
Figure 5.1 Compliance regulation mechanisms of the regulatory diamond 253 for corporate peacebuilding
Figure 6.1 Aspirational regulation mechanisms of the regulatory 299 diamond for corporate peacebuilding
Figure 7.1 Roles of law in corporate peacebuilding’s regulatory diamond 308 framework
Figure 7.2 Indicative example of a regulatory diamond regime for 309 corporate peacebuilding
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Tables
Table 2.1 Matrix of Corporate Peacebuilding 75
Table 3.1 Levels of regulation applicable to Australian corporate 91 conduct in conflict-affected areas
Table 3.2 ASX Top 20’s commitments to peacebuilding-related 95 international instruments
Table 6.1 Morgan and Yeung’s characterisation of the law’s roles and 272 images
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Chapter 1: Introduction
CHAPTER 1
INTRODUCTION
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Corporate Peacebuilding and the Law
They will beat their swords into ploughshares and their spears into pruning hooks. Nation will not take up sword against nation, nor will they train for war anymore. Isaiah 2:4
Peace is not an absence of war, it is a virtue, a state of mind, a disposition for benevolence, confidence, justice. Baruch Spinoza1
Corporations being both good and evil … appear to be both responsible and irresponsible actors. Peter Madsen2
1 Baruch Spinoza, A Theological-Political Treatise (Robert Elwes trans, Tudor Publishing, 1936) [trans of: Tractatus Theologico-Politicus (first published 1670)]. 2 Peter Madsen, ‘Professionals, Business Practitioners, and Prudential Justice’ (2008) 39 McGeorge Law Review 835, 842.
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Chapter 1: Introduction
CHAPTER 1 INTRODUCTION
I INTRODUCTION: THE PROBLEM AND POTENTIAL OF BUSINESS AND PEACE
Peacebuilding is best envisaged as a society-wide effort. Peace, if it is to be achieved in any given context and sustained, requires the combined efforts of all the most significant elements of society: government, civil society and not least the private sector, which is a powerful social, economic and political force. To date, the private sector has largely been missing from conflict transformation discourse and practice. Indeed, business is often said to be a driver of armed conflicts around the globe. The private sector is often accused, not without foundation, of pursuing profits at the expense of local communities, feeding corruption and inflaming tensions in already weak governance states, and perpetuating armed conflicts.3 Considerable academic research has been conducted detailing the causal linkages between corporations and conflict.4
Business and peace do not seem like a natural coupling, yet the traditional orthodoxy that declares that the important tasks of safeguarding peace and security are solely the domain of governments assisted by civil society partners needs reconsideration.5 A growing body of literature contends that corporations – in particular, transnational corporations (TNCs) – have a largely unexploited potential to contribute to peacebuilding activities, without sacrificing their raison d’être of profit.6
The absence of “corporate peacebuilding” and the failure to curtail the worst corporate abuses in conflict-affected areas are regulatory dilemmas. This thesis builds on the work of Nelson, Fort, Haufler and others to elaborate on the theoretical contributions that
3 Karen Ballentine and Heiko Nitzschke, Profiting from Peace: Managing the Resource Dimensions of Civil War (Lynne Rienner Publishers, 2005). 4 Ibid. 5 Jennifer Oetzel, Kathleen Getz and Stephen Ladek, ‘The Role of Multinational Enterprises in Responding to Violent Conflict: A Conceptual Model and Framework for Research’ (2007) 44 American Business Law Journal 331. 6 Andrea Wegner and Daniel Mockli, Conflict Prevention: The Untapped Potential of the Business Sector (Lynne Rienner Publishers, 2003).
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Corporate Peacebuilding and the Law
TNCs can make to a sustainable peace, and develops the building blocks for a more robust regulatory and policy framework that could make those contributions a reality. It proposes a theoretical model for doing so that extends responsive regulatory theory – the regulatory diamond. It encompasses three key components: minimum standards, compliance regulation and aspirational regulation. The thesis then applies this framework to the problem at hand, and in particular clarifies the law’s roles in each of the constituent elements of a regulatory diamond framework that may help realise the promise of corporate peacebuilding.
At its core, this thesis problematises the role of law and calls for a reinvigoration and reimagining of the law’s role in addressing corporate abuses in conflict-affected areas and achieving the positive vision of corporate peacebuilding. Conflict-affected areas are often areas in which law and the rule of law are lacking or absent. TNCs have taken advantage of jurisdictional shortcomings in domestic and international law to the extent that some act with seeming impunity in conflict-affected areas. Corporate social responsibility (CSR) and business ethics have long been considered an “internal” corporate concern – something to be handled (or not) by internal or industry-based processes and principles, outside state-based legal structures. Soft-law codes of conduct and multi-stakeholder initiatives help to guide those internal processes, but hard-law – that law emanating from the state, with state-based compliance mechanisms to enforce it – plays only a minor role in regulating corporate conduct in conflict-affected areas. It is to hard-law that this thesis is focussed upon. The analysis in this thesis helps to create a clearer picture of the law’s limited but vital roles in the regulatory framework to achieve corporate peacebuilding.
II OBJECTIVES
This thesis has two primary objectives: Firstly, to develop a theoretical model of responsive regulation applicable to the governance of TNCs in conflict-affected areas that does not simply emphasise compliance with minimum standards of behaviour, but also reflects the bolder public policy goal of peace; and secondly, to examine the practical roles and functions of law within that responsive regulatory framework to facilitate the realisation of corporate peacebuilding.
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Chapter 1: Introduction
In order to achieve these objectives, the thesis brings together several fields of study, in particular combining the normative vision of the peace-through-commerce project with regulatory analysis of relevant law and corporate governance instruments, and develops some key features of a governance framework that not only holds TNCs accountable for conflict-driving conduct, but encourages them to positively assist in building and sustaining peace in the societies in which they operate.
III SIGNIFICANCE AND SCOPE
The proliferation of the modern corporation into every corner of the globe and the political and economic influence that the private sector wields demand that those concerned with safeguarding peace and security discover methods to encourage corporations to assist in preventing and resolving armed conflicts.
Regulating corporate contributions to peacebuilding and their behaviour in conflict- affected environments is important for a number of reasons, not least to further the pursuit of peace and end suffering caused by armed conflicts. This thesis argues that the worst excesses of the instrumentalities (i.e. corporations) of the capitalist system that exacerbate and even trigger armed conflicts can be mitigated. TNCs that violate fundamental standards of humanity can and should be held to account. More positively, this thesis is also motivated by the growing calls for a more responsive and responsible capitalism.7 This thesis reflects and contributes to growing management and business- ethics literatures that explore ways to institutionalise more socially responsible business conduct in an age of governance.8
There is a small but growing group of interdisciplinary scholars researching ideas such as peace-through-commerce. There are far larger communities of scholars – primarily
7 Dirk Matten and Jeremy Moon (ed), Corporate Citizenship (Edward Elgar, 2013); Andreas Scherer, Guido Palazzo and Dan Baumann ‘Global Rules and Private Actors: Toward a New Role of the Transnational Corporation in Global Governance’ (2006) 16(4) Business Ethics Quarterly 505, 505 8 Christine Parker, The Open Corporation: Effective Self-Regulation and Democracy (Cambridge University Press, 2002); Andreas Scherer, Andreas and Guido Palazzo (eds) The Handbook of Research on Global Corporate Citizenship (Edward Elgar, 2008); David Kinley, Civilising Globalisation: Human Rights and the Global Economy (Oxford University Press, 2009).
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Corporate Peacebuilding and the Law within their respective disciplines – that investigate various related issues: international lawyers investigate corporate legal personality under international law; business ethicists deliberate over the social obligations of businesses; international relations theorists debate the role of corporations in global governance; and human rights scholars examine the contours of the human rights responsibilities of business. This thesis contributes to these scholarly issues and the opening up of debate surrounding the potential to develop more peace-oriented corporate practices in conflict-affected areas through informed and well-calibrated regulation.
Moreover, this research has direct practical relevance to Australian government and civil society regulators, as well as the Australian private sector. The subject of this study is Australia-based TNCs and the domestic Australian and international legal regulation of their conduct in conflict-affected areas.9 Many Australia-based TNCs conduct business in conflict-affected areas, and the Australian government has been a longstanding contributor to peacebuilding and humanitarian activities abroad.10 Yet Australia has lagged behind in developing a robust regulatory regime to punish those companies that fail to adhere to universally recognised international legal standards, and to incentivise and facilitate Australia-based TNCs to become involved in peacebuilding activities abroad. The conclusions drawn regarding the law’s role in corporate peacebuilding provide a useful basis for recommendations for Australian policymakers and the private sector.
By way of illustration, the ASX 20 – the twenty largest companies (by capitalisation) listed on the Australian Stock Exchange – can all be considered transnational in nature, having operations, supply chains and/or customers and clients in multiple countries around the Asia Pacific region and across the globe. While exposure to conflict-affected areas varies considerably between these companies, all do business in conflict-affected
9 While the role of the local (i.e. domestic) private sector is important in this regard, it lies beyond the scope of this thesis. See eg. Jessica Banfield, Canan Gunduz and Nick Killick (eds), Local Business, Local Peace: The Peacebuilding Potential of the Domestic Private Sector (International Alert, 2006) 10 Approximately 65,000 Australian personnel have served in over 50 UN-backed peacekeeping operations dating back to the first UN-endorsed deployment of military personnel – in Indonesia’s 1947 independence struggle. Australia’s Official Development Assistance budget for 2013-14 totalled A$5.7 billion, and nine of the top twelve recipients are experiencing or recovering from armed conflict. See, eg, Australian Department of Foreign Affairs, ‘Foreign Aid Budget, 2013-14’,
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Chapter 1: Introduction areas. This conduct includes trading with parties involved in armed conflict, financing public and private projects in conflict-affected areas, and running direct operations in such areas.
The topic of regulating to realise TNCs’ peacebuilding potential is as large and diverse as business itself. Indeed, there is a multitude of legal instruments and other non-legal mechanisms that in some way purport to (or could potentially) exert some regulatory effect in regard to Australian corporate conduct in conflict-affected areas. They encompass various legal and non-legal processes, different locales, the actions of governmental and non-governmental actors, and scores of different entities within the sociopolitical contexts in which TNCs operate in “home” and “host countries”, and in “third party countries” as well.11
Notwithstanding this regulatory diversity, the thesis deals with law-based regulatory instruments. The research examines the roles of law in the regulatory framework to achieve corporate peacebuilding. Secondly, a jurisdictional demarcation has been made. This thesis focuses on domestic Australian and international law-based regulatory instruments that are designed to regulate Australian TNCs doing business in conflict- affected areas.
Omitted from the thesis analysis is consideration of the diversity of “host-state” laws that impact on Australian TNCs’ activities in conflict-affected areas. It is undeniable that these are significant sources of regulation, but the sheer diversity among host countries’ laws and local regulatory environments applicable to Australian TNCs makes meaningful assessment and analysis difficult. In societies affected by armed conflict, governance structures are often weak or entirely absent.12 Breakdowns in rule of law, corruption and ineffectual government control contribute to a difficult environment for regulating corporate conduct.13 Moreover, due to the risk of inequitable distributions of
11 Third party country regulation could take the form of large economies – such as the United States or European Union – regulating the global conduct of TNCs wishing to do business in their jurisdictions. Pertinent examples of third-country regulation will be discussed in Chapter 6 of this thesis. 12 Anita Ramasastry and Robert C Thompson, Commerce, Crime and Conflict: Legal Remedies for Private Sector Liability for Grave Breaches of International Law: A Survey of Sixteen Countries,(FAFO, 2006) 5 13 Ibid.
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Corporate Peacebuilding and the Law the regulatory burden between developed and developing countries, and in order to ensure the best chance of avoiding regulatory capture and a race-to-the-bottom among some developing countries, this thesis is predicated on the working assumption that “home-state” and international regulation is the best means of achieving an end to the conflict-driving behaviour of TNCs and realising the vision of corporate peacebuilding. The extraterritorial reach of home-states’ obligations under existing international human rights law reinforces the viability of this approach.14 Developing international standards for TNC conduct in conflict-affected areas provides the further benefit of creating a level playing field for TNCs, increasing the likelihood of acceptance of such a regulatory regime by all stakeholders involved: home states, host states, and the corporations themselves.
IV THEORETICAL APPROACH AND METHOD
The theoretical frame of reference for this work is the field of peace studies; a cross- disciplinary field of study that seeks to deepen our understanding of some of the most complex sociopolitical phenomena: war and peace.15 Peace studies is an action-oriented and practice-oriented academic discipline and is unabashedly normative in character.16 As one of the founders of the field says: ‘Without values, peace studies becomes social studies in general and world studies in particular.’17 Adherents often analogise their field of study to medicine to justify this attitude: Medicine applies science and reason not simply to understanding illnesses and maladies, but to ending them.18
Peace studies aims to develop thinking and practical strategies to minimise the occurrence and harm caused by armed conflicts, and encourage more amicable means of inter- and intra-national dispute resolution.19 In the same vein, this thesis applies a pragmatic and cross-disciplinary approach to the governance of corporate conduct in
14 Mark Gibney and Sigrun Skogyl (eds), Universal Human Rights and Extraterritorial Obligations (University of Pennsylvania Press, 2010); 15 See, eg, Oliver Ramsbotham, Tom Woodhouse and Hugh Miall, Contemporary Conflict Resolution: The Prevention, Management and Transformation of Deadly Conflicts (Polity Press, 2nd ed, 2005); Kenneth Boulding, Stable Peace (University of Texas Press, 1978). 16 David Barash, Introduction to Peace Studies (Wadsworth, 1991) 28. 17 Johan Galtung, Peace by Peaceful Means: Peace and Conflict, Development and Civilisation (Sage Publications, 1996) 13. 18 Barash, above n16, 28. 19 Ibid; Ramsbotham, Woodhouse and Miall, above n15.
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Chapter 1: Introduction conflict-affected areas. Thus, a Hobbesian view of human nature and the utility of war is not necessarily antithetical to peace studies, and the field can be viewed as a scholarly attempt to develop thinking and practical strategies to overcome what such philosophers have identified as inherent in human behaviour.20
The nature of the problem warrants a regulatory approach that draws on multiple literatures. This also follows the approach embraced by the leading scholarly research investigating how business can promote peace.21 The thesis contributes to the theoretical debates surrounding the governance of TNCs in conflict-affected areas and offers practical proposals to improve such corporate conduct. It does so by offering a new model of Ayres and Braithwaite’s responsive regulation theory – the regulatory diamond – and applying it to the problem of governance of corporate conduct in conflict-affected areas and the vision of corporate peacebuilding.
From a peace-theoretical perspective, the notion that improved regulation may be an appropriate means to close the gap between the theory and practice of corporate peacebuilding echoes the accepted principle that ‘robust legal and regulatory frameworks’ are of ‘foundational importance’ to peacebuilding.22
Adopting a regulatory method leads to examination of different research questions about the law, and is concerned with “law in action” and “law in society”, in contrast to the black-letter legal approach focusing on the “law on the books.”23 A legal analysis or proposal makes a ‘claim to internal coherence or even legitimacy’, while the crux of a regulatory perspective is the question of the effectiveness of any such proposal.24
20 David Barash and Charles Webel, Peace and Conflict Studies (Sage Publications, 2002) 29. 21 Timothy Fort and Joan Gabel, ‘Peace Through Commerce: An Overview’ (2007) 44(2) American Business Law Journal v, vi; Jolyon Ford, Regulating Business for Peace: The United Nations, the Private Sector and Post-Conflict Recovery (Cambridge University Press, 2015); Guido Palazzo and Andrea Scherer, ‘The Future of Global Corporate Citizenship, in Andrea Scherer and Guido Palazzo (eds) The Handbook of Research on Global Corporate Citizenship (Edward Elgar, 2008) 585. 22 Mats Berdal and Nader Mousavizadeh, ‘Investing for Peace: The Private Sector and the Challenges of Peacebuilding (2010) 52(2) Survival 37, 53. 23 Marc Galanter, ‘Justice in Many Rooms: Courts, Private Ordering, and Indigenous Law’ (1981) 19 Journal of Legal Pluralism 1, 5; Gabrielle Simm, ‘International Law as a Regulatory Framework for Sexual Crimes Committed by Peacekeepers’, (2012) 16 Journal of Conflict and Security Law 473, 478. 24 Simm, above n22, 477. See also, Julia Black, ‘Critical Reflections on Regulation’ (2002) 27 Australian Journal of Legal Philosophy 1, 32.
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Corporate Peacebuilding and the Law
Regulatory studies are ‘concerned primarily with effective problem-solving’.25 In the sphere of business regulation, most regulatory scholars are driven by a ‘normative commitment to how capitalist markets can and should be made to work better’, which also motivates this project.26
Taking a regulatory perspective to examining the question of corporate involvement in conflict-affected areas is justified from the perspective of the range of actors involved; for victims of armed conflict, concerned governments and the peacebuilding community, this is appropriately conceived of as a governance dilemma. More effective regulation holds out the promise of allowing governments and other concerned actors to provide access to justice for victims of corporate misconduct, hold poorly performing corporate actors accountable, incentivise more peace-oriented conduct among TNCs and even create markets for virtue.
For TNCs, regulation and compliance are familiar concepts –regulatory demands touch on a range of social, health and other issues on a daily basis. For instance, environmental and human rights due-diligence processes are integrated elements of many TNCs’ operating procedures, and the wider regulatory environment applicable in fragile or at-risk countries is considered at the highest echelons of TNCs. Regulatory costs and risks of non-compliance are factors that impact on the risk appetite and business decisions of companies investing or doing business in conflict-affected areas.27
Suggesting that effective regulation helps both to ameliorate the problem of TNCs behaving badly in conflict-affected areas, and to realise their peacebuilding potential, responds to some of the doubts surrounding the ideas espoused by the peace-through- commerce movement and the very notion of corporate peacebuilding. Critics are wary of the notion, believing that it is akin to, or may lead to, the corporatisation of the entire peacebuilding enterprise. Furthermore, involving profit-driven private actors in the
25 Bronwen Morgan and Karen Yeung, An Introduction to Law and Regulation: Text and Materials (Cambridge University Press, 2007) 4. 26 Parker, above n8; Fiona Haines, The Paradox of Regulation: What Regulation Can Achieve and What it Cannot (Edward Elgar, 2011) 18. 27 UN Global Compact-Principles of Responsible Investment, ‘Guidance on Responsible Business in Conflict-Affected and High-Risk Areas: A Resource for Companies and Investors’, (Report, UN Global Compact, 2010)
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Chapter 1: Introduction provision of a public good as vital and delicate as peacebuilding is an idea that sits uncomfortably with some.28 By offering a regulatory regime that does not simply suggest but also ‘institutionalise[s] the potential for virtue in business’,29 and specifically by stressing the vital roles of the law in the governance of TNCs in conflict- affected areas, this thesis may offer some salve to those concerns. The thesis moves away from otiose conversations about the possibility and potential for corporate peacebuilding to the more practical, policy-oriented questions of realisation and implementation.
V TERMINOLOGY
The focus of this thesis is on the regulation of transnational corporations doing business in conflict-affected areas, in support of peacebuilding endeavours. Concepts such as “transnational corporation”, “war” and “peace” are engaged by multiple academic disciplines and frequently by the lay literature as well. The sheer ubiquity of these terms belies their complexity, and the confusion and contestation over these terms among scholars. This section provides working understandings of each of the core concepts referred to in this thesis.
A Armed Conflict and Conflict-Affected Area
War and peace are phenomena that have long been examined by scholars.30 Focusing on the sociological and political aspects of the phenomenon, Clausewitz wrote two centuries ago that war is ‘an act of violence intended to compel our opponents to fulfil our will.’31 In less philosophical tones, the Oxford English Dictionary defines “war” as ‘hostile contention by means of armed forces, carried on between nations, states, or rulers, or between parties in the same nation or state.’32
28 Laura Dickinson, Outsourcing War and Peace: Preserving Public Values in a World of Privatized Foreign Affairs, (Yale University Press, 2011); Lothar Rieth and Melanie Zimmer, ‘Transnational Corporations and Conflict Prevention: The Impact of Norms on Private Actors’ (Paper No. 43 University of Tubingen, Center for International Relations/Peace and Conflict Studies, 2004) 7. 29 Ford, above n21, 3. 30 See, eg, the writings of Heraclitus (535 – 475 BCE); Plato (427 – 347 BCE); Lao Tzu (6th century BCE). 31 Carl von Clausewitz, On War (Princeton University Press, 1976) 19. 32 “War”, Oxford English Dictionary (online),
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Corporate Peacebuilding and the Law
Complicating the definitional quest is that in contemporary international relations, governments tend to eschew formal declarations of war, and the diplomatic and legal communities have largely jettisoned the term in favour of the less evocative: “armed conflict”.33 In recent times, a significant portion of the scholarly community directly studying instances of armed conflict has coalesced around a definition and recognition of a situation as an armed conflict based on the number (often around 1000) of casualties incurred.34
Beyond these descriptive definitions, many peace studies’ scholars provide analytical frameworks for the understanding and categorising of armed conflict, thereby offering more prescriptive value. Peace studies posits that war/armed conflict are extreme forms of the more general phenomenon of conflict, described as ‘the pursuit of incompatible goals by different groups/parties.’35 Variations of this definition refer to incompatible interests and needs.36 Armed conflict occurs when parties to a conflict resort to the use of force and violence to resolve their differences.37
Conflict-affected areas denote broader areas than merely the “zones of conflict” that are often referred to in the international law and international relations literatures as locales where hostilities are actively taking place and, as a result, where the laws of armed conflict are operable.38 Instead, conflict-affected areas refer to those geographical areas
33 Jean Pictet, Commentary on the Geneva Convention for the Amelioration of the Condition of the Wounded and Sick in Armed Forces in the Field (International Committee of the Red Cross, 1952) 32; Prosecutor v. Dusko Tadic (Decision on Defence Motion for Interlocutory Appeal on Jurisdiction) (International Criminal Tribunal for the former Yugoslavia, Case No IT-94-1-A, 2 October 1995) [70]; International Committee of the Red Cross, ‘How is the term “armed conflict” defined in international humanitarian law? (Opinion Paper, March 2008)
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Chapter 1: Introduction that are presently or were in the recent past directly impacted by armed conflict, as well those areas at risk of suffering from armed conflict in the future.
B Peace and Peacebuilding
Barash observes that ‘it is no exaggeration to say that peace is probably the most longed-for and widely desired human condition.’39 Nevertheless, a universal definition of peace remains elusive.40 ‘We all think we know what peace means. But in fact, different people often have very different understandings of this seemingly simple word.’41
Peace is often described in the negative; that is, peace is the absence of war or the cessation of hostilities.42 However peace studies scholars suggest this is a myopic view of the concept.43 Describing peace in exclusively negative terms is inherently problematic. Galtung illuminates this by suggesting there are two types of peace: negative and positive peace. In his landmark 1996 work Peace by Peaceful Means he offers two compatible definitions of peace and states that there can be both negative and positive peace.44
Negative peace is the absence of hostilities; a dispute has ended.45 Positive peace, on the other hand, involves far more than merely the absence of hostilities.46 Rather, it refers to a condition in which no violence – be it direct or structural violence – exists.47 Positive peace denotes genuine conflict transformation – ‘the construction of a new
Committee of the Red Cross, ‘International Humanitarian Law and the Challenges of Contemporary Armed Conflicts’ (Report, Geneva, October 2015),
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Corporate Peacebuilding and the Law environment’48 – a situation in which people have healthy, constructive, sustainable relationships, when differences are reconciled justly, needs are met and exploitation minimised or even ceased.49 Wallensteen adds that the notion of positive peace encompasses ‘broader understandings of what peace is, such as the presence of cooperation, justice and integration.’50 Barash and Webel argue that positive peace ‘denotes the continuing presence of an equitable and just social order, as well as ecological harmony.’51 This, they suggest, is the conception of peace embraced by many different religions and cultures the world over. 52 Once this positive peace has been attained, a situation of armed conflict can be considered “transformed”, and the dangers of a recidivist slide back into violence are greatly diminished.53
When contrasted with the bolder, more creative and ambitious idea of positive peace, 54 the conservatism of negative peace as a policy goal becomes apparent. Nevertheless, while some liberal scholars in the legal and international relations fields have embraced this idea, it remains on the periphery of traditional discourses in these fields.55 Given the significance they place on treaties, written agreements and the like, and their emphasis on international order and stability, these two fields of study possess a disciplinary disposition for negative peace.56 To be sure, there are substantial arguments against adopting too precise a conception of positive peace. For example, Quincy Wright highlights that history is replete with examples of states going to war ‘to end war and to secure peace.’57 Once peace becomes defined as a ‘specific ideal system’, his argument
48 Boutros Boutros-Ghali, ‘An Agenda for Peace: Preventive Diplomacy, Peacemaking and Peacekeeping’ (Report of the UN Secretary-General, UN Doc A/47/277, 17 June 1992) [57]. 49 Barash, above n16, 9. 50 Wallensteen, above n35. 51 Barash and Webel, above n20, 7. 52 Ibid, 9. 53 Ibid. 54 Barash, above n16, 9. 55 For critical assessments of the state of the field see, eg, Oliver Richmond (ed), Palgrave Advances in Peacebuilding: Critical Developments and Approaches (Palgrave Macmillan, 2010); John Heathershaw, ‘Unpacking the Liberal Peace: The Dividing and Merging of Peacebuilding Discourses’ (2008) 36 Millennium: Journal of International Studies 597. 56 Barash, above n16, 7. 57 Quincy Wright, A Study of War (University of Chicago Press, 1964) 261.
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Chapter 1: Introduction goes, it becomes something to strive for, and even to go to war for.58 He argues that peace must never ‘assume a positive form’ and if it does ‘it ceases to be peace.’59
Moreover, from a practical, policy-oriented standpoint, while positive peace may have ‘greater capacity to inspire, peace as the absence of conflict and war has the potential advantage to be easier to assess and measure.’60
While the search for peace may well be a universal imperative, ‘there are often vigorous, even violent disagreements over how to obtain it.’61 The means of achieving peace – let us refer to this generalised activity as “peacebuilding” – is, invariably and necessarily, a complicated mix of overlapping processes, sometimes complementary, sometimes not, involving different social actors and with their own dynamics.62 Goodhand speaks of ‘interconnected ecologies of peace’, adding that ‘Peacebuilding (like war) is a process which does not have a precise beginning and end and it is likely to be the result of multiple and cumulative efforts.’ 63
One of the most enduring and elegant framework models of how to develop positive peace is Galtung’s tripartite classification of conflict transformation processes (Figure 1.1).64 Galtung suggests that successful peace processes involve three distinct aspects:65 peacekeeping – actions aimed at ensuring physical security, stability and return of rule of law to conflict zones, epitomised by the interposition of UN “blue-helmets” between the warring sides peacemaking – actions at the political and governance level to settle a dispute, e.g. signing of peace agreements
58 Ibid. 59 Ibid. 60 Marc Lavine, ‘From Scholarly Dialogue to Social Movement: Considerations and Implications for Peace through Commerce’ (2009) 89 Journal of Business Ethics 603, 608. 61 Barash and Webel, above n20, 4. 62 Diehl, above n40, 8; Daniel Druckman, Doing Research: Methods of Inquiry for Conflict Analysis (Sage Publications, 2005). 63 Jonathan Goodhand, Aiding Peace? The Role of NGOs in Armed Conflict (Lynne Rienner Publishers, 2006) 13. 64 Ramsbotham, Miall and Woodhouse, above n15. 65 Johan Galtung, ‘Three Approaches to Peace: Peacekeeping, Peacemaking, and Peacebuilding’ in Peace, War and Defense: Essays in Peace Research, Vol. II (Christian Ejlers, 1976) 297.
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Corporate Peacebuilding and the Law
peacebuilding – actions aimed at rebuilding and normalising a society’s cohesion, vitality and economy, and reconciling the members of the parties to conflict, often measured over the longer term.
Peacemaking
Peace
Peacekeeping Peacebuilding
Figure 1.1: Representation of Galtung’s tripartite classification of actions needed to achieve sustainable peace.
Focusing on negative peace translates into an emphasis on peacekeeping or peacemaking processes that are aimed at preventing or ending hostilities, whereas, a focus on positive peace emphasises peacebuilding – ‘the establishment of harmonious, non-exploitative social [including economic] structures’, as Barash puts it.66 Peacebuilding can take place as a preventive measure, after hostilities have ended and even during conflict itself.
Whilst war and peace may be at opposite ends of a continuum, the transition between the two phenomena is often ‘vague and uncertain’, in terms of both chronology and interactions.67 Nevertheless, landmark moments along that continuum can be identified. In particular, the moment that large-scale violence/hostilities commence and the moment that they end are critical moments in the life cycle of any conflict. These serve
66 Barash, above n16, 9. 67 Barash and Webel, above n20, 10.
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Chapter 1: Introduction as useful chronological dividing markers for analytical purposes, delineating three phases along a conflict–to–peace continuum: (1) prior to outbreak of widespread violence; (2) during period of armed conflict/violence; (3) after major violence has ended.
The characteristics of each phase along the conflict–peace progression are different, necessitating a different calibration of and orientation to peacebuilding interventions. Loosely, before hostilities commence peace activities revolve around conflict prevention, during hostilities around conflict management and resolution, and after major violence has ceased, post-conflict reconstruction and reconciliation (Figure 1.2).68
Outbreak of Cessation of major violence major violence
PREVENTION MANAGEMENT AND RECONSTRUCTION AND RESOLUTION RECONCILIATION
Figure 1.2: Simplified conflict–peace continuum showing three phases of conflict transformation, before, during and after major hostilities.
Plainly, this is an idealised conception of complex processes for, as Wright observes, armed conflict cannot be ‘sharply distinguished from peace’.69 In reality, none of the phases or aspects of conflict transformation are discrete or easily demarcated. Indeed, conflict transformation is perhaps better conceived of as cyclical in nature – ‘an unending task, as new forms and sources of conflict arise’.70
68 Galtung, Jacogsen and Brand-Jacobsen, above n36, xvi; Diehl, above n40, 18. 69 Quincy Wright, ‘War. The Study of War’ in David Sills (ed), International Encylopedia of the Social Sciences, Vol. 16 (Macmillan, 1968) 463. 70 Galtung, Jacogsen and Brand-Jacobsen, above n36, xvi.
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Corporate Peacebuilding and the Law
These theoretical peacebuilding frameworks usefully illustrate that a sustainable peace must necessarily go beyond political leaders signing peace accords, to engage all sectors and institutions of society, and that the peace process occurs along a time continuum commencing well before actual violence and ending well after hostilities have ended.71 In Chapter 2 when the problem and potential of TNCs influencing armed conflicts will be elaborated upon, a matrix of possibilities for corporate peacebuilding will be outlined that highlights the various ways in which TNCs could contribute to the pursuit of peace – at each phase and in every aspect of conflict transformation.
C Transnational Corporation
Ironically, the United Nations Centre on Transnational Corporations in its two decades of existence (1973–1993) could not arrive at a universally acceptable definition of what is a “transnational corporation”. The UN Economic and Social Council proposed one of the more expansive definitions that emphasises the feature that distinguishes TNCs from other corproations: TNCs are ‘all enterprises which control assets – factories, mines, sales offices and the like – in two or more countries.’72 Other authors suggest a corporation must control production or be a certain minimum size (e.g. based on the number of employees, assets or revenue) in at least one foreign country to qualify as a TNC.73 This thesis does not weigh in on these definitional debates.74 For our purposes, a TNC is, as Litvin succinctly puts it, ‘a company operating in more than one country’, and an Australian-based TNC is one which is headquartered or domiciled in Australia, (including those listed on the Australian Stock Exchange.75
A transnational corporation doing business in conflict-affected areas is defined, for the purposes of this work, as a corporation having operations or business relationships in
71 Oetzel, Getz and Ladek, above n5. 72 UN Economic and Social Council, Transnational Corporations and World Development: A Re- examination (United Nations, 1978, UN Sales No E.78.II.A.5) 158. 73 Rhys Jenkins, Transnational Corporations and Uneven Development: The Internalization of Capital and the Third World (Routledge, 2012) 2. 74 Some authors prefer the term ‘multinational corporation’ or ‘multi-national enterprise’ to describe the same type of large international enterprises. This thesis adopts the UN-preferred terminology of ‘TNC.’ See, eg, UNCTAD,
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Chapter 1: Introduction regions experiencing, or at risk of experiencing, armed conflict. Business relationships include relationships with investors, investments, suppliers, clients and/or customers.
Despite their growing significance to the practice of peacekeeping and the major dilemmas that this represents (on multiple levels),76 this thesis does not specifically address the issue of private military security companies (PMSCs) or arms manufacturers.77 Rather, this thesis focuses on those TNCs that are not in the business of the provision of peace, security or arms. PMSCs and arms manufacturers are sui generis categories of corporations that have each attracted a great deal of scholarly attention. The unique issues that are raised by their involvement in conflict-affected regions, including culpability for egregious conduct directly perpetrated by their employees or products, are beyond the scope of this thesis.78
D Regulation and Law
The concept of regulation is examined in detail in Chapter 2. This term is taken broadly to refer to all mechanisms of social control to influence behaviour in furtherance of certain outcomes.79
Adopting a pragmatic approach to social ordering, some regulatory scholars conceive of the law in instrumental terms; that is, as a regulatory device – one among many.80 For
76 Alex Bellamy, Paul Williams and Stuart Griffin, Understanding Peacekeeping (Polity Press, 2nd edition, 2010) 321. 77 Ibid; Diehl, above n40; Peter Singer, ‘Warriors for Hire in Iraq’, Salon (online), 15 April 2004
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Corporate Peacebuilding and the Law the purposes of this thesis, mention of law refers to “hard law”, rather than “soft” or “informal” law.81 In that sense, law can be conceived of as the regulatory acts of the state that create binding obligations in furtherance of public policy goals.82 Regulatory scholars tend to adopt a narrow, orthodox conception of the law. This invariably recognises two key “normative” functions of law – the establishment of norms of behaviour, and enforcement of those norms.83 For instance, in responsive regulation theory the rules (with which compliance is sought) are invariably enshrined in legal form.84 Further, while compliance is sought through a range of mechanisms including consensus-based devices, the regulatory schema is understood to gain its effectiveness through the ‘benign big gun’ that the law represents.85 That is, the law provides coercive means of enforcement that are, ideally, rarely resorted to, yet incentivise regulatees to comply with the stated rules through less coercive forms. As Gunningham and Grabosky observe, responsive regulation theory operates ‘in the shadow of the law.’86 Nevertheless, in addition to these compliance-related functions, the law also possesses what Morgan and Yeung refer to (and as Chapter 6 will emphasise) as facilitative and expressive functions.87 In a regulatory sense, these functions of law are vital in encouraging “beyond compliance” behaviour.88
80 See generally, Austin Sarat, Lawrence Douglas and Martha Humphrey, Law as Punishment/Law as Regulation (Stanford University Press, 2011); Robert Baldwin, Martin Cave and Martin Lodge, Understanding Regulation: Theory, Strategy and Practice (Oxford University Press, 2nd ed, 2012). 81 Kenneth Abbott and Duncan Snidal, ‘Hard and Soft Law in International Governance’ (2000) 54 International Organization 421; John Kirton and Michael Trebilcock (eds) Hard Choices, Soft Law: Voluntary Standards in Global Trade, Environment and Social Governance (Ashgate, 2004); Joost Pauwelyn, Ramses Wessel, and Jan Wouters (eds) Informal International Lawmaking (Oxford University Press, 2012). 82 Ford, above n21, 11; Kenneth Abbott and Duncan Snidal, ‘Taking Responsive Regulation Transnational: Strategies for International Organizations’ (2013) 7 Regulation & Governance 95. 83 John Kirton and Michael Trebilcock, ‘Introduction: Hard choices and Soft Law in Sustainable Global Governance’ in: Kirton & Trebilcock (eds) Hard Choices, Soft Law: Voluntary Standards in Global Trade, Environment and Social Governance (Ashgate, 2004); Joost Pauwelyn, Ramses Wessel and Jan Wouters, ‘When Structures Become Shackles: Stagnation and Dynamics in International Lawmaking’ (2014) 25 European Journal of International Law 733; Rain Livoja and Jarna Petman (eds), International Law-making: Essays in Honour of Jan Klabbers (Routledge, 2014). 84 Ian Ayres and John Braithwaite, Responsive Regulation: Transcending the Deregulation Debate (Oxford University Press, 1992) 85 Ibid, 19. 86 Neil Gunningham and Peter Grabosky, Smart Regulation: Designing Environmental Policy (Clarendon Press, 1998). 87 Morgan and Yeung, above n25. 88 See, eg, Neil Gunningham, Robert Kagan and Dorothy Thornton, ‘Social License and Environmental Protection: Why Businesses Go Beyond Compliance’ (2004) 29 Law & Social Inquiry 307; Edwin
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Chapter 1: Introduction
VI STRUCTURE AND SUMMARY
The trajectory of the thesis follows a logical path frequently adopted in the regulatory literature: establish policy goals, then identify and examine the actors and mechanisms to achieve those goals. To do so, the thesis asks three questions in sequence: why should TNCs be involved in peacebuilding, what could those contributions entail and, most significantly, how can the law be employed to realise TNCs’ peacebuilding potential?
A The Problem and the Potential
Chapter 2 addresses the what and why enquiries: what contributions TNCs could make to peacebuilding and why they should be involved in what has heretofore been seen as a domain of activity best left to governmental and civil society actors. It elaborates on the problem and the promise that lie at the heart of this project and lays out a substantive vision of corporate peacebuilding: the “matrix of corporate peacebuilding” that builds on core lessons of peacebuilding research and practice. While important, these questions are not the foci of this thesis. Rather, the crucial questions this thesis addresses are how can TNCs’ conflict-driving behaviour be ameliorated and how, instead, can they be encouraged, compelled or prodded to embrace peacebuilding potential? – questions that are under investigated in the literatures. Exploring the means to bridge the gap between the problem and the potential of corporate peacebuilding, and in particular proposing a role for law in surmounting it, is the nub of this project.
B The Regulatory Diamond as Responsive Regulation Framework
It is argued that this potential remains largely unrealised in part because of ineffective governance of TNC conduct in conflict-affected areas. There is lacking a coherent, effective and legitimate regulatory regime that punishes and deters Australian corporate misconduct in conflict-affected areas abroad; nor are there sufficient incentives to encourage those same Australian companies to take positive steps to help build
Epstein, ‘The Good Company: Rhetoric or Reality? Corporate Social Responsibility and Business Ethics Redux’ (2007) 44 American Business Law Journal, 207.
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Corporate Peacebuilding and the Law sustainable peace. Having outlined the problem, Chapter 3 develops the regulatory theoretical framework that informs this thesis. It does so by critiquing and extending responsive regulation theory to develop a new, generalised model of responsive regulation that is useful in theorising and constructing governance regimes for complex global governance problems: the regulatory diamond. Conceptually, the regulatory diamond model incorporates both compliance regulation and aspirational regulation into the one schema, making clear that mere compliance with a set of law-based behavioural standards is not necessarily the ultimate goal but merely a waypoint of the regulatory endeavour that aspires to continuous improvement in the conduct of regulated firms.
The regulatory diamond model of responsive regulation has three primary components: law-based minimum standards (at the diamond’s midline), compliance regulation to enforce those standards (bottom-half of the diamond) and aspirational regulation (upper- half of the diamond), which encourages regulatees to embrace “beyond compliance” behaviour.
C Locating the Law in the Regulatory Diamond Framework for Corporate Peacebuilding
The law has a role in each element of the proposed regulatory diamond framework for realising the vision of corporate peacebuilding. The three successive chapters (Chapters 4–6) apply this regulatory model to the problem of how to realise the promise of corporate peacebuilding. Each chapter focuses on one of the primary elements of the regulatory diamond and investigates the role of law in each.
Chapter 4 investigates the relative relevance and appropriateness of different bodies of international law as potential sources of the legal standards that lie at the midline of the regulatory diamond for corporate peacebuilding. It argues that international criminal law is the most appropriate source from which to develop minimum legal standards for TNCs to adhere to in conflict-affected areas. Chapter 5 investigates the possibility of legal compliance mechanisms to hold TNCs accountable for violating international criminal legal standards. Finding international pathways lacking, the chapter argues that
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Chapter 1: Introduction while these standards may be derived from international law, it is on domestic Australian legal mechanisms that compliance regulation for corporate peacebuilding must rely. It demonstrates that existing Australian law – both criminal and civil – could provide the requisite enforcement and punitive measures.
Chapter 6 examines the law’s role in aspirational regulation – to encourage and facilitate TNCs to go beyond mere compliance with international criminal law standards towards engaging in peacebuilding efforts in conflict-affected areas. This regulatory domain is currently dominated by multi-stakeholder, market-oriented governance mechanisms, but there remains a valuable contribution that traditional, state-based law may make. The thesis argues that law can still perform a crucial facilitative function to encourage corporate peacebuilding. Well-designed meta-regulatory law could spur the creation of a market for peacebuilding which could incentivise corporations to enhance their contributions to building peaceful, stable societies in which they operate.
This work is intended not just as a theoretical treatment of the issues involved in developing more robust roles for the law in regulating TNCs in conflict-affected areas, but also as something of a roadmap for concerned actors and policymakers. With that in mind, Chapter 7 concludes the thesis by summarising its core findings and offers some suggestions to policymakers, as well as ideas for further research.
VII CONCLUSION
While past corporate practices that exacerbated or even triggered armed conflicts are acknowledged and inform this study, they are considered by no means determinative of future practice. The modern TNC and its growing economic, political and social power, coupled with the scourge of armed conflict that impacts dozens of countries and millions of people around the globe, represent a challenge to policymakers: how can TNCs be more effectively regulated so as to enhance their contributions to conflict transformation efforts? This thesis responds to that policy-oriented challenge. It develops a novel theoretical approach and examines practical pathways to curtail TNCs’ conflict-driving conduct and achieve the vision of corporate peacebuilding, in particular through innovative applications of the law and legal regulatory mechanisms.
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Corporate Peacebuilding and the Law
The pursuit of peace never ceases. It is hoped that this work provides a contribution to that collective effort by providing a regulatory model to bring TNCs into conflict transformation processes and make the private sector a partner in peacebuilding efforts around the globe.
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Chapter 2: TNCs in Conflict-Affected Areas
CHAPTER 2
TRANSNATIONAL CORPORATIONS IN CONFLICT-AFFECTED AREAS: DESCRIBING THE PROBLEM AND THE POTENTIAL
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Corporate Peacebuilding and the Law
The limited liability corporation is the greatest single discovery of modern times. Nicholas Murray Butler1
As a threshold issue, it seems plausible that business could contribute both to sustainable peace and to the conditions that foster violence. The latter seems to be a less novel suggestion. Timothy Fort and Cindy Schipani2
Well-considered cooperation between public and private actors increases the chances of a virtuous circle of peacebuilding rather than a vicious cycle of repeated conflict. John Bray3
1 As quoted in Wesley Truitt, The Corporation (Greenwood, 2006) 8. 2 Timothy Fort and Cindy Schipani, ‘An Action Plan for the Role of Business in Fostering Peace’ (2007) 44 American Business Law Journal 359. 3 John Bray, ‘The Role of Private Sector Actors in Post-Conflict Recovery (2009) 9(1) Conflict, Security and Development 1, 2.
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Chapter 2: TNCs in Conflict-Affected Areas
CHAPTER 2
TRANSNATIONAL CORPORATIONS IN CONFLICT-AFFECTED AREAS: DESCRIBING THE PROBLEM AND THE POTENTIAL
I INTRODUCTION
Lying at the heart of this thesis is both a problem in the traditional sense of the term and a theorised significant, yet unrealised, opportunity – a “problem” in another sense. The grave misconduct of transnational corporations (TNCs) doing business in conflict- affected areas is an enduring and persistent concern.4 Despite a great deal of attention focused on the issue by civil society actors and, in recent years, governments and international organisations such as the United Nations and World Bank, allegations of egregious corporate abuses and misconduct in conflict zones are an ongoing and persistent, if isolated, phenomenon. The means by which TNCs can cause or heighten armed conflict are well-documented.5
While it is undoubtedly true that TNCs’ activities may have deleterious consequences for the cause of peace in many contexts, it is not, and need not, be always so.6 Far less attention has been paid by the academic, civil society and governmental sectors to the largely unrealised potential of the transnational business community to become a partner in peacebuilding efforts around the globe.7
This chapter seeks to challenge the often unquestioned premise that large TNCs can only have negative impacts on war-torn societies, often exacerbating or even triggering armed conflicts. This chapter elaborates on both the negative and positive dynamics between TNCs and armed conflict. By understanding these “problems” – the conflict-
4 See, eg, Karen Ballentine and Heiko Nitzschke, Profiting from Peace: Managing the Resource Dimensions of Civil War (Lynne Rienner Publishers, 2005); Jan Joel Andersson, Tobias, Gunnar Sjostedt, Private Sector Actors and Peacebuilding: A Framework for Analysis (Swedish Institute of International Affairs, 2011). 5 Andersson, Tobias, Sjostedt, above n4. 6 John Forrer, Timothy Fort and Raymond Gilpin, ‘How Business Can Foster Peace’ (Special Report 315, United States Institute of Peace, 2012) 2. 7 Jennifer Oetzel, Kathleen Getz and Stephen Ladek ‘The Role of Multinational Enterprises in Responding to Violent Conflict: A Conceptual Model and Framework for Research’ (2007) 44 American Business Law Journal 331.
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Corporate Peacebuilding and the Law causing behaviour of TNCs and their unrealised peacebuilding potential, theorised and actual – this chapter serves to situate the thesis within the existing literatures that indicate ‘the potential role of business in both creating peace and fomenting conflict.’8
The chapter continues with Part II which provides an overview of the theoretical contestations surrounding the nature and purpose of the modern corporation. It suggests that the modern corporation can no longer be seen as purely profit-maximising but also as having responsibilities to stakeholders, including in relation to peacebuilding. Part III outlines the negative linkages between TNCs and armed conflict that dominate the scholarship on TNCs’ involvement in conflict-affected areas.9 The following two parts, Parts IV and V, outline why TNCs should be involved in peacebuilding. Part IV elaborates on an alternative point of view, and discusses the untapped positive potential of TNCs to contribute, not to violence and conflict, but to peacebuilding efforts. Part V provides three rationales for corporate involvement in peacebuilding on the basis of the peace-through-commerce literature, a nascent yet vibrant community of scholars examining potential corporate contributions to peacebuilding.10 It shows that, whether approaching the issue from a peacebuilding, managerial or business-ethics perspective, there are sound arguments to support greater integration of the private sector into peacebuilding activities.
Finally, in response to the question of what TNCs could contribute to peacebuilding, a question that remains underdeveloped in the literature, Part VI presents a new typology: the matrix of corporate peacebuilding.11 The matrix typology synthesises disparate scholarly voices and embeds the idea of corporate peacebuilding firmly within the peace studies tradition, which pays scant attention to the peacebuilding potential of businesses, often reflexively dismissing corporations as having only a negative influence on the pursuit of peace. Nevertheless, this chapter argues that a proper reading of mainstream peace theory does not only allow for corporate involvement in peacebuilding, but demands it as an essential component of building and maintaining sustainable peace in at-risk communities. The matrix of corporate peacebuilding is offered as a generalisable
8 Ibid. 9 Andersson, Tobias, Sjostedt, as above n4, 13. 10 See, eg, Timothy Fort (ed.) Peace through Commerce: A Multisectoral Approach (Springer, 2011). 11 Oliver Richmond, A Post-Liberal Peace (Routledge, 2012) 2.
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Chapter 2: TNCs in Conflict-Affected Areas typology of potential corporate contributions to peacebuilding activities based on well- established conflict transformation theory.
The critical issue of how corporate abuses in conflict-affected areas can be minimised and their peacebuilding potential realised is the central question of this thesis and will be explored in the subsequent chapters.
II THE MODERN TRANSNATIONAL CORPORATION: A CONTENTIOUS AND CONTESTED INSTITUTION
A The Rise and Rise of the Corporation
Business is a pervasive, ever-present social, economic and political force. The ubiquitous presence of the corporation in our daily lives is one of the defining features of the Western capitalist system in the early 21st century.12 The corporation, and most prominently the TNC, has become an unsurpassed fixture in every corner of the globe. No country – however underdeveloped – remains unaffected by the reach of the modern TNC. Arguably, trade and economics have ‘assumed primacy [over war]’ in underpinning and defining relationships among states and other global actors.13
TNCs are now ‘the primary instrumentalities for economic activity’ and dominate the international business landscape.14 The UN has estimated that there are some 82,000 TNCs with over 810,000 foreign affiliates directly employing over 77 million people and supply chains that criss-cross the globe involving millions more suppliers, distributors and service companies.15 The hundred largest TNCs account for
12 Martin Lindstrom, Brandwashed: Tricks Companies Use to Manipulate Our Minds and Persuade Us to Buy (Crown Business, 2011); Doris Fuchs, Business Power in Global Governance (Lynne Rienner, 2007); Anna McAlister and Bettina Cornwell, ‘Children’s Brand Symbolism Understanding: Links to Theory of Mind and Executive Functioning’ (2010) 27 Psychology and Marketing 203. 13 William H. Mott, The Economic Basis of Peace: Linkages between Economic Growth and International Conflict (Praeger, 1997) 226. 14 Edwin Epstein, ‘The Good Company: Rhetoric or Reality? Corporate Social Responsibility and Business Ethics Redux’ (2007) 44 American Business Law Journal, 207 15 UN Conference on Trade and Development, World Investment Report 2009: Transnational Corporations, Agricultural Production and Development (UN Conference on Trade and Development, 2009) 17.
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Corporate Peacebuilding and the Law approximately 6% of global GDP, have annual sales of $8.5 trillion and assets of $10.7 trillion.16 Fifty-one of the hundred largest economies in the world are corporations, while only forty-nine are nation-states. 17 Some TNCs have greater annual revenue than some countries’ GNP.18
Supplanting the dominant roles of church and government in societies of past centuries, the corporation is the pre-eminent social institution of our time. It at once shapes and reflects our lives and the world around us to an extent only rivalled by government. The corporation, and in particular, the TNC, is the embodiment of globalisation, its ubiquity a marker of modernity itself.
Yet, despite this social pre-eminence, the corporation’s nature and purpose remain contested conceptual terrain.19 In particular, the extent of a corporation’s responsibilities to society continues to be questioned and challenged.20 Moreover, as large TNCs have become recognised as significant actors in global governance systems, there have also arisen ‘new expectations [from some quarters] regarding the global social responsibility of private enterprises’ including in the areas of environmental protection, healthcare and even peacebuilding.21
Bakan has famously described the modern corporation as exhibiting ‘all the traits of a psychopath’.22 Yet our understanding and society’s relationship with the corporation as an institution could equally be characterised as rather schizophrenic.23 The modern corporation has been lauded as ‘the greatest single discovery of modern times’24 and
16 Ibid, 19. 17 Sarah Anderson and John Cavanagh, Top 200: The Rise of Global Corporate Power (Institute for Policy Studies, 2000) 3. 18 Noreena Hertz, The Silent Takeover: Global Capitalism and the Death of Democracy (HarperBusiness, 2003) 7. 19 Fuchs, above n12, 14; Daniel Litvin, Empires of Profit: Commerce, Conquest and Corporate Responsibility (Texere, 2004) xiii. 20 See, generally, Bryan Horrigan, Corporate Social Responsibility in the 21st Century (Edward Elgar, 2010). 21 Ibid, 6. 22 Joel Bakan, The Corporation: The pathological pursuit of profit and power (Free Press, 2004) 56. 23 William Allen, ‘Our Schizophrenic Conception of the Business Corporation’ (1992-3) 14 Cardozo Law Review 261. 24 Nicholas Murray Butler as quoted in Truitt, above n1, 8.
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Chapter 2: TNCs in Conflict-Affected Areas condemned as ‘an externalizing machine potentially very, very damaging to society.’25 To some, such as Micklethwait and Wooldridge, the corporation is an institution to be lauded: it is ‘the most important organization in the world… the basis of the prosperity of the West and the best hope for the future of the rest of the world.’26 Yet Hertz condemns corporate ‘behemoths that wield immense political power,’ displacing government and dominating modern life.27
The nature of the modern corporation is highly contested terrain. At least since the now- classic Berle-Dodd debate of the 1930s,28 fundamental questions such as what is a corporation and what is a corporation’s responsibilities to societies in which it operates persist as topics of rich debates in the academic, legal and public domains.29 The implications of the answers we ascribe to each of these core questions about the modern corporation inform our judgments regarding appropriate corporate management and activities, a corporation’s relationship to the law and regulation, and a corporation’s responsibilities towards issues of peace and armed conflict.
B The Purpose of the Corporation – Profit and Nothing More?
Economic theories have tended to dominate understandings of the purpose of the corporation, encapsulated by the traditional shareholder theory of the firm.30 According to Milton Friedman – the archetypal exponent of this classic conception – a corporation exists for no other purpose than to maximise profits for its owners – namely, its shareholders.31 Adherents to this orthodoxy, including Berle, argue that shareholders are
25 Robert Monks, as quoted in Joel Bakan, above n22, 70. 26 John Micklethwait and Adrian Wooldridge, The Corporation: A Short History of a Revolutionary Idea (Modern Library, 2003) 27 Hertz, above n18, 6. 28 E. Merrick Dodd, Jr, ‘For Whom Are Corporate Managers Trustees?’ (1932) 45 Harvard Law Review 1145; Adolph Berle, ‘For Whom Corporate Managers are Trustees: A Note’ (1932) 45 Harvard Law Review 1365. 29See generally, Truitt, above n1; Allen, above n23; Samuel Mansell, Capitalism, Corporations and the Social Contract: A Critique of Stakeholder Theory (Cambridge University Press, 2013); Jospeh Weiner, ‘The Berle-Dodd Dialogue on the Concept of the Corporation’ (1964) 64 Columbia Law Review 1458.; Peter Drucker, Concept of the Corporation (John Day, 1946). 30 Ronald Coase, ‘The Nature of the Firm’ (1937) 4 Economica 386; David Millon, ‘Theories of the Corporation’ (1990) 39 Duke Law Journal 201. 31 Milton Friedman, ‘The Social Responsibility of Business is to Increase Its Profits’, New York Times Magazine (New York), 13 September 1970, SM17.
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Corporate Peacebuilding and the Law the primary drivers of corporate decision-making and remain at the heart of corporate interests.32
While it is true that shareholders can theoretically sanction and even dismiss corporate directors, in practice there are structural impediments that reduce shareholder control over corporate operations and management in modern TNCs.33 This separation of ownership and management, and the “agency problem” it creates, have concerned many an economist.34 Partly for this reason, Adam Smith, the founder of market economics, was deeply sceptical of the merits of the corporate form and larger corporations in particular.35 Bainbridge counters by suggesting this is not a problem at all, but rather that ‘the unique genius of the American public corporation’ has allowed it to develop into the dominant institution it is today.36
The traditional shareholder theory of the corporation has been challenged by critics, such as Dodd, concerned about the consequences of an entity exclusively focused on maximising shareholder value.37 Stakeholder theory rejects the notion that a corporation only owes an obligation to maximise value for its shareholder-owners.38 It posits instead that duties (both legal and ethical) are owed to a range of stakeholders internal and external to the corporation, including shareholders, employees, suppliers, customers and the societies in which they operate.39
One important distinction between shareholder and stakeholder theories of the corporation is their differing views of corporate law and governance. Shareholderists tend to think of corporate governance as a private law matter, whereas stakeholderists
32 Berle, above n28, 1365, 1367. 33 Michael Jensen and William Meckling, ‘Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure’ (1976) 3 Journal of Financial Economics 305. 34 Stephen Bainbridge, The New Corporate Governance in Theory and Practice (Oxford University Press, 2008). 35 Norman Barry, ‘The Theory of the Corproration’, (2003) Ideas on Liberty 22. 36 Bainbridge, above n34, 3,10. 37 Dodd, above n28. 38 See, eg, Thomas Donaldson and Lee Preston, ‘The Stakeholder Theory of the Corporation: Concepts, Evidence and Implications’ (1995) 20 The Academy of Management Review 65; Michael Jensen, ‘Value Maximization, Stakeholder Theory and the Corporate Objective Function’ (2002) 12 Business Ethics Quarterly 235; R. Edward Freeman, Andrew Wicks and Bidhan Parmer, ‘Stakeholder Theory and “The Corporate Objective” Revisited’ (2004) 15 Organization Science 364. 39 Donaldson and Preston, ibid, 88;
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Chapter 2: TNCs in Conflict-Affected Areas perceive it as a matter of public law.40 This is no mere theoretical dispute and has direct applicability to this research. As Bainbridge highlights, if one perceives corporate governance to be in the realm of public law, this may serve to justify regulatory intervention ‘so as to achieve goals unrelated to corporate profitability.’41
C Corporations and Society: The Paradox of CSR
Over the past half-century and around the time that stakeholder theory began challenging the traditional conception of the firm as exclusively focused on shareholder value, the idea and practice of corporate social responsibility (CSR) also arose as a managerialist response to the growing calls for corporations to take heed of issues and interests beyond their bottom-lines.42 In 1971 for instance, the influential US Committee for Economic Development declared that ‘business functions by public consent and its basic purpose is to serve constructively the needs of society—to the satisfaction of society.’43
CSR is an inherently elastic concept.44 The business ethics and management literatures are replete with competing theories and definitions of CSR. 45 One conception of it is provided by Carroll, who observes that CSR is composed of four kinds of responsibilities to society: economic, legal, ethical and philanthropic.46 He suggests that while the “social” in CSR has been rather indeterminate, stakeholder theory has helpfully answered the question as to whom CSR duties are owed to.47
40 Ibid. 41 Bainbridge, above n34, 9. 42 Archie Carroll, ‘Corporate Social Responsibility: Evolution of a Definitional Construct’ (1999) 38(3) Business and Society 268. 43 Committee for Economic Development, ‘Social Responsibilities of Business Corporations’ (Statement by Research and Policy Committee, June 1971) 11. 44 Egle Svilpaite, ‘International Corporate Social Responsibility Standards: Imposing or Imitating Business Responsibility in Lithuania’ in Anne Peters, Lucy Koechlin, Till Forster, Gretta Fenner- Zinkernagel (eds) Non-State Actors as Standard Setters (Cambridge University Press, 2009). 45 Edwin Epstein, ‘The Corporate Social Policy Process: Beyond Business Ethics, Corporate Social Responsibility, and Corporate Social Responsiveness’ (1987) 29 California Management Review 99, 106. 46 Archie Carroll, ‘The Pyramid of Corporate Social Responsibility: Towards the Moral Management of Organizational Stakeholders’ (1991) Business Horizons 42 47 Ibid; Carroll, ‘CSR Evolution’, above n42, 290.
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Corporate Peacebuilding and the Law
Nowadays, CSR is ingrained business practice for most TNCs – large and small. 48 Nevertheless, it is also worth approaching the concept of CSR with some degree of scepticism, ‘for this is not about ethics, this is about business.’49 Corporations pursue profits; that is their raison d'être. Sometimes good ethics and good business align.50 While there are some companies that engage in “altruistic CSR,” most embrace a “strategic CSR” approach.51 That is, they are motivated by avoiding the downside risks to their bottom-lines that may result from not engaging in some form of community outreach.52
In this way, the interests of society can, and often do, intersect with those of private companies.53 Indeed, even Friedman, the champion of a pure economics model of the corporation, acknowledges that other factors – beyond profit-maximisation – must be taken into account in the conduct of corporations, and their management. In his classic 1970s rejection of CSR, it is often forgotten that Friedman qualifies that rejection by noting that the corporate executive’s responsibility:54
is to conduct the business in accordance with their [employers’/shareholders’] desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom. (emphasis added)
Normatively, the exclusively profit-maximising conception of the corporation has been rejected in most Western legal systems, including Australia’s.55 And whilst these legal systems have not incorporated CSR as a maxim of corporate law, they have also rejected the contrary position: that corporations can continue to operate without regard
48 See, eg, International Standards Organisation, ‘ISO26000 – Social Responsibility’ (Standard, 2010) < http://www.iso.org/iso/home/standards/iso26000.htm>. 49 Hertz, above n18, 195. 50 Ibid. 51 Keith Davis, ‘Can Business Afford to Ignore Social Responsibilities’ (1960) 2/3 California Management Review 70. 52 Hertz, above n18, 175. 53 Hertz, above n18; Friedman, above n31. 54 Friedman, above n31. 55 Robert Austin and Ian Ramsay, Ford, Austin & Ramsay’s Principles of Corporations Law (LexisNexis, 16th ed, 2015) 28. See also, American Law Institute, Principles of Corporate Governance: Analysis and Recommendations (American Law Institute, 1993).
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Chapter 2: TNCs in Conflict-Affected Areas to social considerations.56 For instance, 2006 UK reforms mandate that company directors must consider interests other than shareholders, including employees, customers and the environment when acting to promote the ‘success of the company.’57
The rise of powerful TNCs has also prompted a CSR movement, of a sort, to develop at the international level. As large TNCs have become recognised as significant actors in global governance systems, there has arisen ‘new expectations regarding the global social responsibility of private enterprises.’58 The scholarly and policy work around “Business and Human Rights” that has developed over the past decade – including with the 2011 adoption of the UN Guiding Principles on Business and Human Rights – has further embedded corporate social responsibilities into global business discourses and practices.59
D The Corporation: Part of the Solution or Part of the Problem?
The dichotomous view of the corporation is laid bare in the realm of war and peace. That is, large TNCs are often perceived as triggering or perpetuating armed conflicts around the globe.60 Yet there is a growing chorus of business ethicists, economists and entrepreneurs that suggest this negative corporate relationship to conflict can be altered. They propose that TNCs possess ‘untapped peacebuilding potential.’61 Beyond the theories of economic peace, with its linkage between economic growth leading to peace and security, theorists such as Fort and Nelson suggest TNCs could, and should, play critical direct roles in contributing to ending armed conflicts and sustaining peaceful,
56 Austin and Ramsay, above n51, 28; Corporations Act 2001 (Cth), s118; Australian Stock Exchange Principles of Good Corporate Governance and Best Practice Recommendations, Principle 10. 57 Companies Act 2006 (UK), s172. 58 Horrigan, above n20, 6. 59 John Ruggie, Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises: Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework, UN Doc A/HRC/17/31 (21 March 2011). See generally, Radu Mares (eds), The UN Guiding Principles on Business and Human Rights: Foundations and Implementation (Martinus Nijhoff, 2012 60 Nicole Deitelhoff and Klaus Dieter Wolf, ‘Business in Zones of Conflict and Global Security Governance: What Has Been Learnt and Where to from Here?’ in Nicole Deitelhoff and Klaus Dieter Wolf (eds), Corporate Security Responsibility? (Palgrave Macmillan, 2010); Melanie Zimmer, ‘Oil Companies in Nigeria: Emerging Good Practice or Still Fuelling Conlict?’ in Nicole Deitelhoff and Klaus Dieter Wolf (eds), Corporate Security Responsibility? (Palgrave Macmillan, 2010). 61 Andrea Wegner and Daniel Mockli, Conflict Prevention: The Untapped Potential of the Business Sector (Lynne Rienner, 2003).
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Corporate Peacebuilding and the Law stable societies in their place.62 The following section elaborates on these two perspectives.
III THE CONVENTIONAL VIEW: EXPLORING THE NEGATIVE IMPACTS OF TNCS ON ARMED CONFLICT
TNCs can exacerbate and perpetuate armed conflicts in areas affected by their operations. As Forrer, Fort and Gilpin put it: ‘Business and peace are often understood as opposing concepts’.63 The section below elaborates on this view of TNCs that is so prevalent in the scholarly and lay literatures. Nevertheless, this does not mean they cannot also aid in peacebuilding (as discussed in the following section). It does, however, suggest we need effective ways to regulate TNCs to prevent and deter their deleterious conduct and facilitate their more positive contributions to peace.
The transnational private sector’s involvement in conflict-affected areas has long been viewed with ‘suspicion and disapproval.’64 This conventional wisdom states that corporations are part of the problem when it comes to armed conflict and the absence of peace.65 Private companies, especially large TNCs, stand accused of fomenting, exacerbating and profiting from armed conflict.66 Accusations abound of their complicity in human rights abuses, profiteering from impoverished and at-risk communities, environmental and social degradation of fragile ecosystems and societies, and failure to assist in the social, political and economic development of those communities even as they exploit local labour and/or natural resources.67 Institutions such as the World Bank and United Nations have acknowledged as much by observing
62 Timothy Fort, Prophets, Profits and Peace: The Positive Role of Business in Promoting Sustainable Peace (Yale University Press, 2008); Jane Nelson, The Business of Peace: The Private Sector as a Partner in Conflict Prevention and Resolution (Prince of Wales Business Leaders Forum/ International Alert/Council on Economic Priorities, 2000). 63 Forrer, Fort and Gilpin, above n6, 2. 64 Mats Berdal and Nader Mousavizadeh, ‘Investing for Peace: The Private Sector and the Challenges of Peacebuilding (2010) 52(2) Survival 37. 65 Andersson, Tobias, Sjostedt, above n4, 13. 66 Ballentine and Nitzschke, above n4. 67 Ibid.
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Chapter 2: TNCs in Conflict-Affected Areas that human rights violations continue to be perpetrated in pursuit of corporate interests, including in conflict-affected regions of the globe.68
That some TNCs have engaged in these types of conduct – and continue to do so – is beyond any serious scholarly doubt. These instances are recurrent and have persisted ever since the first “great” TNCs, the British and Dutch East India Companies, ventured beyond their home shores in the 17th century,69 through the complicity of German industry in the crimes of the Nazi regime of the mid-20th century,70 to evidence of contemporary TNCs actively driving armed conflicts even in the 21st century.71
Reports of business being linked to horrific crimes that contributed to immense human suffering in fragile states have persisted through the decades, with little effective regulatory response at the domestic or international levels.72 That business activities can indeed trigger, intensify and perpetuate armed conflicts is a fundamental premise of this thesis. The last few decades have seen increased scholarly attention paid to the growing sociopolitical influence of TNCs, including their impacts on and in regions experiencing (or at risk of) armed conflict.73 A substantial literature highlights the causal relationship between various economic factors and the likelihood, intensity and frequency of armed conflict.74 The Collier–Hoeffler model, for example, posits that, rather than solely sociopolitical grievances being the crucial factor behind the outbreak
68 Final Report of the Extractive Industries Review’, (Final Report, World Bank Group, Washington DC, 17 September 2004) 83; John Ruggie, Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises: Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework, UN Doc A/HRC/17/31 (21 March 2011). 69 James Thuo Gathii, War, Commerce and International Law (Oxford University Press, 2010) 200. 70 Ibid. See also Chapter 4. 71 Ibid. See also Julia Graff, ‘Corporate War Criminals and the International Criminal Court: Blood and Profits in the Democratic Republic of Congo’ (2004) 11(2) Human Rights Brief 23. 72 International Commission of Jurists’ Expert Legal Panel on Corporate Complicity in International Crimes, ‘Corporate Complicity and Legal Accountability, Volume 1: Facing the Facts and Charting a Legal Path’, (Commission’s Report, International Commission of Jurists, 2008). 73 See, eg, Paul Collier, ‘Economic Causes of Conflict’ in Chester Crocker, Fen Osler Hampson and Pamela Aall (eds), Turbulent Peace: The Challenges of Managing International Conflict (US Institute of Peace, 2001); Mats Berdal and David Malone (eds) Greed and Grievance: Economic Agendas in Civil Wars (Lynne Rienner, 2000). 74 Paul Collier, V.L. Elliott, Håvard Hegre, Anke Hoeffler,Marta Reynal-Querol,Nicholas Sambanis (eds), Breaking the Conflict Trap: Civil War and Development Policy (World Bank and Oxford University Press, 2003); ‘Destroy and Profit: War, Disasters and Corporations’ Focus on the Global South, London, January 2006.
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Corporate Peacebuilding and the Law of hostilities, it has been found that greed is also a crucial determinant.75 The lack of economic development, resource exploitation and other commercial interests have been identified as some of the key factors fomenting and intensifying armed conflicts.76 Socio-economic triggers of armed conflict, such as poor wages and disputes over land ownership and use, are issues that often intimately involve private business interests.77 If poorly managed in post-conflict societies, these issues also increase the likelihood of a recidivist slide back into large-scale violence.78
While much of this research explores the issue from a macro-conceptual level: that is, that of economics and societies writ large, it is apparent that the instruments of economic activity – namely, specific industries and companies’ activities – may also be drivers of armed conflict.79 Poor corporate behaviour that has been documented in past and ongoing armed conflicts includes the funding of one or more of the warring parties (through both legal and illegal means),80 complicity in human rights abuses committed by the parties,81 encouraging corruption,82 trading in conflict-related goods83 and exploiting governance gaps for profit.84 At the most extreme, some specific corporate
75 Paul Collier, Anke Hoeffler, and Nicholas Sambanis, ‘The Collier-Hoeffler Model of Civil War Onset and the Cast Study Project Design’, in Paul Collier and Nicholas Sambanis (eds), Understanding Civil War: Volume 1: Africa (World Bank, 2005). 76 In relation to resource scarcity, see, eg: Thomas Homer-Dixon, The Environment, Scarcity and Violence (Princeton University Press, 1999). 77 See, eg, Ian Bannon and Paul Collier (eds) Natural Resources and Violent Conflict: Options and Actions (The World Bank, 2003); Ballentine and Nitzschke, above n4. 78 Bannon and Collier, above n77. 79 Karen Ballentine and Heiko Nitzschke, Beyond Greed and Grievance: Policy Lessons from Studies in the Political Economy of Armed Conflict (International Peace Academy, 2003) 3. 80 Pan Kanagaretnam and Susan Brown, Business, Conflict and Peacebuilding: An Operational Framework (Canadian Peacekeeping Press, 2005). 81 See, eg, Global Witness, ‘A Rough Trade: The Role of Companies and Governments in the Angolan Conflict’ (Report, December 1 1998); Sarah Joseph, Corporations and Transnational Human Rights Litigation (Hart, 2004). 82 Cheyanne Scharbatke-Church and Kirby Reiling, ‘Lies that Fester: Seeds of Corruption and Peacebuilding’ (2009) 14 New Routes 4. 83 See, eg, Louis Goreux, Conflict Diamonds, (Africa Working Paper Series No.13, The World Bank, 2001); Jarvie, James, Ramzy Kanaan, Michael Malley, Trifin Roule and Jamie Thomson, ‘Conflict Timber: Dimensions of the Problem in Asia and Africa, Volume II: Asian Cases’ (Final Report Submitted to the US Agency of International Development, 2002) . 84 Deitelhoff and Wolf, above n60.
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Chapter 2: TNCs in Conflict-Affected Areas activities have been found to directly or indirectly contribute to the outbreak and perpetuation of wide-scale violence, even armed conflict.85
A Transnational Corporations Driving Armed Conflict
Modern-day TNCs continue to ‘sustain and benefit from conflict and human rights abuse.’86 Given its prevalence in the existing literatures and in the interests of space, a comprehensive exploration of the deleterious consequences of the activities of TNCs on communities experiencing or at risk of armed conflict is not included. Instead, this section offers some illustrative examples to demonstrate the gravity and scope of TNCs’ complicity in exacerbating, triggering and perpetuating armed conflicts, including among Australia-based TNCs.
The actions and practices of the fossil fuel and other extractive industries have often been singled out and particularly documented as increasing the risk of widespread human insecurity.87 In part, this is due to the fact that frequently the natural resources they seek to extract are found in fragile, underdeveloped countries.88 For instance, control and commercial exploitation of the lucrative oil fields in Sudan and Nigeria are understood to be contributory factors to the ongoing violence experienced in both countries, were a ‘major focus of fighting’ and led to the eventual succession of South Sudan in 2011.89
85 See, eg, John Harker, Human Security in Sudan: The Report of a Canadian Assessment Mission, (Canadian Department of Foreign Affairs and International Trade, 2000); Report of the Panel of Experts on Violations of Security Council Sanctions Against UNITA (UN Security Council Report, UN Doc S/2000/203, 10 March 2000) (‘The Fowler Report’); Report of the Panel of Experts on the Illegal Exploitation of Natural Resources and Other Forms of Wealth of the Democratic Republic of the Congo, 2003 (UN Security Council Report, UN Doc S/2003/1027). 86 Anita Ramasastry and Robert Thompson, Commerce, Crime and Conflict: Legal Remedies for Private Sector Liability for Grave Breaches of International Law: A Survey of Sixteen Countries (FAFO, 2006) 5. 87 Jill Shankelman, Oil, Profits, and Peace: Does Business Have a Role in Peacemaking? (US Institute of Peace, 2006). 88 Ibid; Janet Fleischman, ‘Letter to US Secretary of State Colin Powell Ahead of His Trip to Africa’ (Human Rights Watch, 19 May 2001). 89 Harker, above n79; Ali Abdel Gadir Ali, Ibrahim ElBadawi and Atta El-Batah, ‘Sudan’s Civil War: Why has it prevailed so long?’ in Paul Collier and Nicholas Sambanis (eds), Understanding Civil War: Volume 1: Africa (World Bank, 2005) 193.
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Corporate Peacebuilding and the Law
The Harker Report specifically admonishes Canada-based Talisman Energy, noting several examples of how the company’s resources and investments in Sudan were used to exacerbate the conflict and ‘to directly support Government of Sudan military operations,’ including those resulting in alleged widespread human rights abuses and atrocities.90 Civil society pressure led by church groups led Talisman to withdraw from Sudan in 2003.91
Similarly, mining companies have helped keep the Democratic Republic of Congo in a cloud of conflict for decades through their collusion with militia groups, environmental harm such as deforestation, and inequitable distribution of profits extracted from that country’s natural resource wealth.92 In Asia, Cambodia’s bloody civil war in the 1980s and 1990s was, in part, financed through the felling and subsequent sale of large tracts of forest timber, with elements of the local and international timber industries knowingly aiding and enabling the trade.93 Similar tales of the corporate exploitation of natural resources fuelling armed conflict abound, especially in Africa.
The international trade in diamonds is another high-profile industry that has been found complicit in fuelling multiple armed conflicts in Angola and other western African countries in the 1990s and 2000s.94 Billions of dollars of these so-called “conflict diamonds” (or “blood diamonds”) provided the hard currency for governments and rebel forces to purchase arms and influence, and control of diamond mines was also frequently the objective of bitter hostilities.95 This trade (estimated by the UN at $700
90 Jan Gruiters and Efrem Tresoldi, ‘Sudan: A Cry for Peace’ (Report, Pax Christi International, 1994); Harker, above n79, 15; Stephen Korbin, ‘Oil and Politics: Talisman Energy and the Sudan’ (2003-04) 36 New York University Journal of International Law and Policy 425. 91 BBC News, ‘Talisman Pulls Out of Sudan,’ 10 March 2003
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Chapter 2: TNCs in Conflict-Affected Areas million annually96) was facilitated by DeBeers – the South Africa-based TNC that dominates global trade in diamonds. 97 DeBeers purchased diamonds from both sides of the Angolan civil war, financing both sides’ appetite for more arms and actively undermining the UN sanctions regime enacted on Angolan diamonds in 1997.98
B Australian TNCs Wrongdoing in Conflict-Affected Areas
Just like their foreign counterparts, Australian TNCs (especially those involved in natural resource extraction) have been accused of sustaining, even triggering, armed conflict and gross human rights abuses in conflict-affected areas. Several have faced costly legal action on behalf of victims of their alleged corporate malfeasance, but no Australian TNC or corporate executive has suffered criminal or civil legal sanctions for their conduct in conflict-affected regions, despite prima facie evidence of their complicity in various misconduct and alleged crimes.99
Anvil – an Australian-Canadian mining company stands accused of just that: complicity in war crimes committed by Congolese troops.100 In 2004, allegations arose that troops had raped, tortured and summarily executed up to one hundred civilians in a village proximate to Anvil’s mining operations.101 Some accounts suggest that the troops were responding to a wage protest by the mine’s local workers and came on aircraft and trucks supplied by Anvil.102
96 ‘The Fowler Report’, above n85. 97 Phillipe LeBillon, ‘Angola’s Political Economy of War: The Role of Oil and Diamonds, 1975–2000’ (2001) 100 African Affairs 55, 55. 98 LeBillon, ibid; Fowler Report, above n85. 99 Joanna Kyriakakis, ‘Australian Prosecution of Corporations for International Crimes: The Potential of the Commonwealth Criminal Code’ (2007) 5 Journal of International Criminal Justice 809. 100 Patricia Feeney, ‘Long Road to Justice: Anvil Mining and the Kilwa Massacre’ (Analysis, Open Society Initiative for Southern Africa, March 7 2012)
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Corporate Peacebuilding and the Law
Another example of conflict-driving behaviour on the part of an Australia-based TNC implicates Rio Tinto – one of the world’s largest mining companies – in triggering a civil war and complicity in widespread human rights abuses on the island of Bougainville in the 1990s.103 A dispute over low wages and environmental contamination arising from the mine, as well as stagnant economic development of the island despite the wealth being extracted, led to a decade-long insurgency and civil war that resulted in the deaths of 15,000 Bougainvilleans.104 The company stands accused of assisting Papua New Guinean military attempts to quell the uprising with armed force and brutal tactics.105
The tactics of the PNG forces were oftentimes said to be brutal: aerial bombing of villages, burning of homes, rape, torture and killing of civilians, and even a six-year ‘total’ military blockade of the island that even included the denial of medicine and other humanitarian provisions to the island. 106 Former PNG Prime Minister Sir Michael Somare and other observers allege that this forceful response by the PNG forces was embarked upon with the knowledge and logistical support of Rio Tinto management.107
These are but some of the allegations of corporate wrongdoing in conflict-affected areas levelled against TNCs in recent decades. Nevertheless, it would be misleading to suggest all or even most TNCs engage in such conduct, and any suggestion that corporations only have negative impacts on communities in or at risk of conflict is off
103 Rio Tinto – History,
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Chapter 2: TNCs in Conflict-Affected Areas the mark. Some companies have had, and continue to have, positive impacts on those types of communities and not simply through their philanthropic or CSR programs, but from their core business operations. For example, protecting civilians from the risk of armed attack and contributing to the economic development of impoverished communities recovering from conflict. In the following section, we examine the positive side of the ledger that is all too often forgotten in lay and academic discussion of the involvement of TNCs in conflict-affected areas: their peacebuilding contributions.108
IV THE ALTERNATIVE VIEW: THEORISING THE PEACEBUILDING POTENTIAL OF TRANSNATIONAL CORPORATIONS
The previous section has sought to demonstrate that the private sector is often accused, not without foundation, of inflaming tensions in already weak-governance states and perpetuating armed conflicts. While business is often considered part of the problem in conflict-affected areas, there is growing theoretical and empirical evidence to suggest that business could be part of the solution as well.109 This section highlights that it is possible to theorise and justify a positive peacebuilding role for the private sector. That is, corporations doing business in conflict-affected areas can act in a more conflict- sensitive manner, minimise the harm they cause and even contribute to conflict transformation efforts at large.110
A The Liberal Peace: Triumph of Free Trade and Capitalism
The theoretical beginning in understanding the possibility of TNCs’ contributions to conflict transformation processes lies centuries ago with the articulation of the liberal peace thesis, and the economic/capitalist peace theory that has since stemmed from it.111 In contrast to theories about why states wage war, these popular theories suggest motivations that reduce the possibility of the outbreak of armed conflict and offer
108 Oetzel, Getz and Ladek, above n7, 331. 109 Forrer, Fort and Gilpin, above n6. 110 Wegner and Mockli, above n61. Nelson, above n62. 111 Michael Doyle, ‘Three Pillars of the Liberal Peace’ (2005) 99(3) American Political Science Review 463; Charles Montesquieu, The Spirit of Laws (University of California Press, Berkeley, 1977).
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Corporate Peacebuilding and the Law support to the general proposition that corporations may be useful contributors to building peace.
Democratic peace theory posits that democracies have less of a propensity to go to war.112 In his 1795 Perpetual Peace, Kant theorised that a majority of people, of any given democratic state, would be unlikely to vote for war and therefore this makes a democratic state less likely to wage war.113 Among contemporary political scientists and international relations scholars the theory persists, albeit in more qualified terms.114
One theoretical successor of the democratic peace thesis is the economic peace thesis. Sometimes referred to as capitalist peace theory, it shares many of the theoretical underpinnings of democratic peace theory, but argues that the key determinant of peaceful behaviour is the nature of the economic system, rather than a country’s political structure.115 Specifically, those economic systems that adopt a capitalist system are less prone to wage war against one another.116
Since the 1700s, several prominent liberal philosophers and economists have embraced the idea that capitalism supports the spread of peace.117 Montesquieu claimed that ‘two nations which trade with each other become reciprocally dependent’ and are therefore averse to going to war against one another.118 John Stuart Mill claimed that ‘it is commerce which is rapidly rendering war obsolete, by strengthening and multiplying the personal interests which act in natural opposition to it.’119
112 Robert Keohane and Joseph Nye, Power and Interdependence (Longman, 2001) 48 113 Immanuel Kant, Perpetual Peace: A Philosophical Sketch (originally published 1795) (Filiquarian Publishing, 2007); Thomas Paine, Thomas, Common Sense (Philadelphia, January 10 1776)
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After World War I, Schumpeter championed the peacebuilding effect of democracy and free-market capitalism.120 The post–World War II Marshall Plan and Allied reconstruction of their former enemies’ economies were also motivated by this thinking.121 Indeed, the idea of economic peace underpins the decades-long process of economic integration of European countries that led to the European Union.122
More recently, Friedman’s ‘Golden Arches Theory of Conflict Prevention’ has introduced a broader lay audience to the idea that globalisation and capitalism ‘can have salutary benefits for stability.’123 He suggests that the presence of McDonald’s restaurants is an indicator that a country has attained a certain level of economic development such that it would not be interested in going to war anymore.124 In 2005, Friedman later modified the theory to ‘The Dell Theory of Conflict Resolution,’ arguing that no two countries in the supply chain of a large TNC like the Dell computer company would go to war with one another.125
Some contemporary research argues that it is modern democratic states’ embrace of capitalism which has prevented them from waging war against one another – not democracy as their chosen political structure itself.126 This variant of the liberal peace thesis suggests that market economies have a strong preference for the status quo and are less interested in belligerent or aggressive relations with other states.127 Some theorists point to the economic norms cultivated by capitalism, in particular the respect for contracts128 and relative openness of economies.129 Others claim that it is trade
120 Esben Andersen, Joseph Schumpeter: A Theory of Social and Economic Evolution (Palgrave Macmillan, 2011). 121 Oliver Richmond, A Post-Liberal Peace (Routledge, 2012). 122 Herman Van Rompuy and José Manuel Durão Barroso, ‘From War to Peace: A European Tale (Nobel Lecture on European Union receiving the 2012 Nobel Peace Prize)’ Oslo, 10 December 2012.
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Corporate Peacebuilding and the Law interdependence, reinforced by shared, basic ethical and legal practices, that is the critical element underpinning the ‘capitalist peace.’130 Sen highlights global capitalism’s ability to lift huge numbers of people in developing countries out of poverty and fostering peaceful societies.131
Empirical work conducted over the past two decades has concluded that there is some correlation between democracy and liberal economics and peaceful foreign policy behaviour among states.132 Research by the World Bank and others has expressly linked the push for sustainable development to decreasing incidences and intensity of armed conflict.133 Therefore, promoting democratic values and spreading liberal economics become peacebuilding strategies in and of themselves.134 It follows that corporations – the drivers and vehicles of the global liberal, capitalist economic system – may have potential to meaningfully contribute to transforming communities embroiled in armed conflicts into harmonious, stable and sustainable societies.
B Critique of “Economic Peace”
It is important to note that the validity of both the democratic and capitalist peace theses does not go unchallenged, by both academics and practitioners.135 Marxist theorists, as well as critical theorists, see the spread of free-market capitalism not as a key means for bringing about peace and development in the world, but rather as ‘one of the key harbingers of crisis and war.’136 For example, Selby is blunt in her assessment of the capitalist peace thesis: ‘Question them we must, for this liberal orthodoxy is almost
129 Erik Gartzke, Quan Li, Charles Boehmer, ‘Investing in the Peace: Economic Interdependence and International Conflict’, in Marc Busch (ed), The WTO, Economic Interdependence, and Conflict (Edward Elgar, 2007) pp. 217-64; Erik Gartzke, ‘The Capitalist Peace’ (2007) 51(1) American Journal of Political Science 177. 130 Erich Weede, ‘The Capitalist Peace and the Rise of China: Establishing Global Harmony by Economic Interdependence’ (2010) 36(2) International Interactions 206; Friedrich Hayek, The Fatal Conceit: Errors of Socialism (University of Chicago Press, 1991). 131 Amartya Sen, Development as Freedom (Alfred Knopf, 2001). 132 See, eg, Bremer, above n114. 133 World Bank, World Development Report 2011: Conflict, Security and Development (World Bank, 2011). 134 Weede, above n130. 135 See, eg, Michael Pugh and Neil Cooper (eds) Whose Peace? Critical Perspectives on the Political Economy of Peacebuilding (Palgrave Macmillan, 2008). 136 Schneider and Gleditsch, above n114, 108.
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Chapter 2: TNCs in Conflict-Affected Areas entirely mistaken.’137 These critiques emphasise that the idealised capitalist peace thesis belies the realities of the modern capitalist system; a system that has brought ‘cronyism, abusive work conditions, and the legacies of colonialism’ to developing countries and ‘may sow seeds of frustration and violence.’138 Selby highlights that globalisation and the spread of Western capitalism have also led to a parallel increase in global inequities in wealth distribution and uneven economic development across regions139 and she questions the assumption that business communities are ‘inherently pacific.’140 She concludes that ‘it would be fairer to say that contemporary patterns of economic development and globalisation are impediments to peace.’141
Even among traditional foreign policy practitioners and scholars, there is scepticism about the causal links between liberal economics and peace. For example, Nye recalls a 1990 conference where two senior US administration officials sharply differed over the value of democracy to conflict prevention. Carl Gershman, president of the US National Endowment of Democracy, stated: ‘It should be self-evident that a society organised democratically will behave more peacefully in its foreign relations.’142 Eugene Rostow, director of the US Arms Control and Disarmament Agency, retorted: ‘The notion that liberal democratic states do not go to war is the latest in a long series of myths which idealistic people have sought to save them from war.’143
Indeed, the fact that the two great conflagrations of the 20th century were fought between global trading superpowers is a counterfactual that looms large. Keeley points out that all the major countries that fought in World War I traded with one another until the outbreak of hostilities.144 Likewise, the great protagonists of World War II: the US
137 Jan Selby, ‘The Political Economy of Peace Processes’ in Michael Pugh and Hugh Cooper (eds) Whose Peace? Critical Perspectives on the Political Economy of Peacebuilding (Palgrave Macmillan, 2008) 17. 138 Forrer, Fort, Gilpin, above n6, 3. 139 Selby, above n137, 21. 140 Ibid., 24. 141 Ibid. 142 Joseph Nye, Understanding International Conflicts: An Introduction to Theory and History (Longman, 5th ed, 2004) 48-49. 143 Ibid. 144 Lawrence Keeley, War Before Civilization: The Myth of the Peaceful Savage, (Oxford University Press, 1996) 121-126.
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Corporate Peacebuilding and the Law and Japan, Germany and the Soviet Union, traded with one another before hostilities between them commenced.145
There are merits to both viewpoints regarding economic peace theory. Regardless, the economic peace theory is no panacea, but for the purposes of this thesis it is sufficient to note that despite the noted objections, some economists and international relations scholars have indicated the potential for business to help build peace. The challenge is to discover how to achieve that potential.
C Business and Peacebuilding
Despite the capitalist peace theory’s popularity among international relations scholars, the peace studies literature and the contemporary practice of peacebuilding have generally failed to consider the positive social and political impacts that corporations may have in conflict transformation processes. Peace theory and practice have heretofore had an internal disconnect between the accepted wisdom of peace being a whole-of-society effort and the neglect of the corporate contributions to peace. Insofar as they are engaged by the peacebuilding community, corporations are considered negatively, as actors whose negative influence needs to be constrained.146
Galtung, Lederach and others have all advocated a view of sustainable peace as requiring the involvement of all sectors of society.147 It involves not merely the finalisation of peace agreements between leaders, and disarmament and demobilisation of the warring parties, but, they argue, also socio-economic development to heal the rifts and alleviate the tensions and issues that were the drivers of the conflict.148 Yet these self-same thought-leaders of peace studies tend to ignore the private sector entirely save acknowledging its important role in economic development in post-conflict societies.149
145 Ibid. 146 See, eg, Johan Galtung, ‘A Structural Theory of Imperialism’ (1971) 8(2) Journal of Peace Research 81. 147 Johan Galtung, Peace by Peaceful Means: Peace and Conflict, Development and Civilisation (Sage Publications, 1996); John Paul Lederach, Building Peace: Sustainable Reconciliation in Divided Societies (US Institute of Peace Press, 1997). 148 Ibid; 149 Galtung, Peace by Peaceful Means, above n140.
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Chapter 2: TNCs in Conflict-Affected Areas
Galtung, for example, equates some forms of international trade to a form of imperialism.150
Current strategies and theories of peacebuilding largely fail to consider the role of the private sector, save its role in post-conflict economic development and reconstruction of physical infrastructure.151 Matyok, Senehi and Byrne’s 2011 volume Critical Issues in Peace and Conflict Studies sought to do as the title suggests: highlight the pressing issues within the field. Yet absent from the twenty chapters is any significant reference to the roles of the business sector.152 Keating and Knight’s Building Sustainable Peace considers the peacebuilding roles of non-governmental actors such as humanitarian relief groups, but not business groups or individual corporations.153 Similarly, the edited volume Civil War, Civil Peace examines the importance of social actors in peacebuilding, yet neglects the business sector.154 This is the trend found across the peace and conflict studies literature.155 In contrast, whole volumes have been devoted to the contributions of analogous societal actors, such as civil society, on peacebuilding efforts.156
Moreover, when corporations are discussed in the peace studies literature, the negative impacts they may have on conflict situations are invariably highlighted. Secondary research questions such as how to regulate businesses to maximise their potential peacebuilding contributions are left unexplored by this literature. For example, peace and conflict studies textbooks, such as those by Ramsbotham, Woodhouse and Miall, and Barash and Webel, do not include more than cursory treatment of business’ role in conflict transformation processes. However, both spend considerable time highlighting
150 Galtung, ‘A Structural Theory of Imperialism’, above n146, 108. 151 Jolyon Ford, Regulating Business for Peace: The United Nations, the Private Sector and Post-Conflict Recovery (Cambridge University Press, 2015). 152 Thomas Matyok, Jessica Senehi, Sean Byrne (eds) Critical Issues in Peace and Conflict Studies: Theory, Practice, Pedagogy (Rowman & Littlefield Education, 2011). 153 Tom Keating and Andy Knight (eds) Building Sustainable Peace (University of Alberta Press, 2004). 154 Helen Yanacopulos, Joseph Hanlon (eds), Civil Wars, Civil Peace (Open University, 2006). 155 Raffaele Marchetti and Nathalie Tocci (eds), Conflict Society and Peacebuilding: Comparative Perspectives (Routledge, 2011); Julie Mertus and Jeffrey Helsing, ‘Toward a More Integrated Approach’ in Julie Mertus and Jeffrey Helsing (eds) Human Rights and Conflict : Exploring the Links Between Rights, Law, and Peacebuilding (US Institute of Peace Press, 2006) 509. 156 Jonathan Goodhand, Aiding Peace? The Role of NGOs in Armed Conflict (Lynne Rienner, 2006); Mathijs van Leeuwen, Partners in Peace: Discourses and Practices of Civil Society Peacebuilding (Routledge, 2013).
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Corporate Peacebuilding and the Law the economic triggers of armed conflict and referencing specific instances of TNCs’ human rights abuses during armed conflicts.157
Why this gap exists in the peacebuilding literature (and practice) is unclear. Perhaps it can best be explained as reflecting the liberal political leanings of many in that epistemic community, rather than any theoretical objection.158 Many scholars and practitioners who work on humanitarian and human rights issues have an aversion to the corporate world, preferring to see big business as part of the problem rather than the solution.159 Another suggestion points to a structural bias inherent in the contemporary practice of conflict transformation, which is dominated by governments and civil society actors.160 This contributes to a preferencing of political aspects of peacebuilding (e.g. elections, governing institutions) in peacebuilding practice and research, to the neglect of economic issues and exclusion of business actors.161
D The Idea of Peace-Through-Commerce Gathers Steam
Despite a lack of attention paid to the question of business involvement in the general peace studies literature, a small, highly specific literature has developed to explore the role of business in peacebuilding. Fort coined the term “peace-through-commerce” to describe this niche field of enquiry and it is also the title of the 2011 volume that is the most significant single text on the field to date.162
Scholarly interest in examining in a systematic manner these corporate contributions to peacebuilding – with a view to replicating and strengthening them – has burgeoned since the turn of the millennium. In 2000, three UK-based NGOs published The
157 Oliver Ramsbotham, Tom Woodhouse and Hugh Miall, Contemporary Conflict Resolution: The Prevention, Management and Transformation of Deadly Conflicts (Polity Press, 2nd ed, 2005); David Barash and Charles Webel, Peace and Conflict Studies (Sage Publications, 2002). 158 See, eg, critique on peace studies in Bruce Bawer, ‘The Peace Racket: An Anti-Western Movement Touts Dictators, Advocates Appeasement – and Gains Momentum’, City Journal (New York), Summer 2007. 159 See, eg, Galtung, ‘Structural Theory of Imperialism’, above n146, 81; Fuchs, above n12. 160 Paul Collier, ‘Economic Causes of Civil Conflict and their Implications for Policy’ in Fen Osler Hampson and Chester Crocker (eds), Leashing the Dogs of War: Conflict Management in a Divided World (US Institute of Peace Press Books, 2007). 161 Ibid. 162 See, eg: Fort, Peace through Commerce, above n9.
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Business of Peace – Nelson’s trailblazing work – which effectively launched the peace through-commerce field of enquiry.163 Nelson, writing for a business audience, outlines a business case for peacebuilding and offers practical suggestions for executives to operationalise their commitment to peacebuilding.164 Around the same time, Gerson published several articles and a book arguing that the business community should be considered a stakeholder in peacebuilding enterprises and should be co-opted in furtherance of those efforts.165 Both scholars’ works remain highly influential and are touchstones for this thesis.
In the decade and a half since Nelson’s and Gerson’s initial publications, a nascent but ever-growing literature and scholarly community have developed around the provocative idea of engaging the business community for peace.166 Primarily based in Europe and North America and initially composed largely of business ethicists, the peace-through-commerce community has grown to encompass experts from business management, organisational behaviour and other disciplines.167 Lavine suggests that what began as a small scholarly community has now developed into a social movement, similar to the larger CSR and peace movements, with engagement by governments, business and civil society interests supplementing the academic.168
The peace-through-commerce literature has both descriptive and normative components to it.169 The descriptive component explores the question of the correlation between ethical business conduct and reduction in the intensity, likelihood and duration of conflict.170 The normative aspect of the literature asks the question of implementation: what actions can a business or an industry undertake to contribute to peace?171 Peace-
163 Nelson, above n62. 164 Ibid. 165 Alan Gerson, ‘The Private Sector and Peace’ (2000) 7(2) Brown Journal of World Affairs 141; Alan Gerson, ‘Peacebuilding: The Private Sector’s Role’ (2001) 95 American Journal of International Law 102; Alan Gerson and Nat Colletta, Privatising Peace: From Conflict to Security (Transnational Publishers, 2002). 166 Fort, above n9. 167 Marc Lavine, ‘From Scholarly Dialogue to Social Movement: Considerations and Implications for Peace through Commerce’ (2009) 89 Journal of Business Ethics 603, 606. 168 Ibid. 169 Forrer, Fort and Gilpin, above n6, 3. 170 Jennifer Oetzel, Michelle Westerman-Behaylo, Charles Koerber, Timothy Fort and Jorge Rivera, ‘Business and Peace: Sketching the Terrain’ (2010) 89 Journal of Business Ethics 351. 171 Ibid.
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Corporate Peacebuilding and the Law through-commerce offers various possibilities of conflict-sensitive and overtly peacebuilding corporate actions ‘that are to the advantage of the firm and the community.’172 This normative literature is enthusiastically aspirational in nature and suggests that peace can and should rightly be conceived of as a ‘potential goal for business.’173
Throughout her book Nelson acknowledges the immaturity of the field, an immaturity that lingers in the scholarly writing on the topic to this day.174 Fundamental issues still prompt debate among scholars, although they also illuminate the rich interdisciplinarity of the issue at hand. For example, there continues to be no one established theoretical approach, with scholars approaching the question of corporate involvement in peacebuilding from the perspectives of CSR, human rights and business ethics, to name but three.175
Further, the breadth and depth of what contributions the corporate sector could make to peacebuilding remain indeterminate, suffering from a lack of theoretical models and empirical research. As Fort and four other leading peace-through-commerce scholars confess in a 2010 article they co-authored, the state of the research ‘presents opportunities for greater theoretical contributions regarding how and why firms engage’ in peacebuilding efforts.176 Theoretical and empirical work is ongoing in this regard.177
172 John Forrer, ‘Locating Peace Through Commerce in Good Global Governance’ (2009) 89 Journal of Business Ethics 449, 450. 173 Forrer, Fort and Gilpin, above n6, 3. 174 Charles Koerber, ‘Corporate Social Responsibility Standards: Current Implications and Future Possibilities for Peace Through Commerce’ (2010) 89 Journal of Business Ethics 461. 175 CSR: Dima Jamali and Ramez Mirshak, ‘Business Conflict Linkages: Revisiting MNCs, CSR and Conflict’ (2010) 93 Journal of Business Ethics 443; Human Rights: Dorothee Baumann-Pauly and Justine Nolan, Business and Human Rights: From Principles to Practice (Routledge, 2016); David Kinley, Civilising Globalisation: Human Rights and the Global Economy (Oxford University Press, 2009); Business Ethics: Fort and Schipani, ‘Action Plan’, above n2; Epstein, ‘The Good Company’, above n14. 176 Oetzel et al, above n170. 177 Forrer, above n165, 449.
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V JUSTIFYING CORPORATE INVOLVEMENT IN CONFLICT TRANSFORMATION
There is no consensus amongst the peace-through-commerce community as to the reasons for, or the extent of, possible corporate involvement in peacebuilding.178 Drawing on the relevant literatures (peace theory, management theory, international relations theory), a vast array of theoretical justifications for effectively integrating corporate involvement into peacebuilding strategies and initiatives can be discerned, despite corporations’ traditional reticence to get involved and peacebuilding largely being considered the domain of governments and civil society groups. Arguments prevalent in the literature can be divided into those rationalising corporate involvement in peacebuilding from a community perspective and from a corporate perspective. Finally, there remains a moral argument that approaches the issue from the perspective of the relationship between the corporation and community.179 The following section summarises each of these justifications.
A Corporate Peacebuilding: Building Community
TNCs should not be involved in conflict-sensitive practices and peacebuilding initiatives merely due to their (collective) complicity in triggering or perpetuating these crises, but because they are often uniquely placed to assist.180 Indeed, the private sector is a potentially important contributor to effective, sustainable peacebuilding, some even considering its involvement vital.181
The scourge of war and armed conflict continues to afflict millions of people. Evidently, existing means of peacebuilding and the resources deployed for that purpose are in some ways deficient and need reinforcement, if not structural change. This reality suggests that ‘alternative methods of fostering peace are called for … [and] one valuable yet underutilized asset is the business community’.182 As George Kell,
178 Oetzel et al, above n170. 179 Nelson, above n62; Timothy Fort and Cindy Schipani, ‘The Role of the Corporate Governance in Fostering Sustainable Peace’ (2002) 35 Vanderbilt Journal of Transnational Law 389. 180 Andersson, Tobias, Sjostedt, above n4, 16. 181 Karolien Bais and Mijnd Huijser, The Profit of Peace: Corporate Responsibility in Conflict Regions (Greenleaf, 2005). 182 Forrer, Fort and Gilpin, above n6.
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Corporate Peacebuilding and the Law executive director of the UN Global Compact, observes: ‘Responsible investment decisions and responsible business operations ... can reinforce positive trends, build trust and stimulate peaceful and sustainable growth ... Conversely, turning a blind eye to the potential impacts of business in conflict can easily make a bad situation worse.’183 In a similar vein, Bennet notes that ‘one of the new realities of international security is that TNCs have both the power and the responsibility to foster goodwill among the people of the nations where they operate.’184
Beyond UN officials and scholars, government of various countries have also formally acknowledged the peacebuilding potential of the business sector.185 TNCs offer unparalleled ‘energy and resources’ that could be deployed to address common problems.186 Recognising this changed international environment, official US national security reports urge ‘according the business sector a major role in solving strategic challenges and fostering peace.’187
Economic development has long been understood to be a vital component of post- conflict reconstruction and to ensure long-term social stability, thereby adding a disincentive to resorting to violence.188 TNCs are increasingly recognised as ‘partners in the process of economic, social and human development in developing countries.’189 Indeed, corporate sector investment into developing countries is consistently well in excess of government aid to those countries. For instance in 2012, inward flows of foreign direct investment into developing countries (where most armed conflicts occur)
183 George Kell, ‘Foreword’ in Karen Ballentine and Virginia Haufler, Enabling Economies of Peace (UN Global Compact, 2010). 184 Juliette Bennet, ‘Multinational Corporations, Social Responsibility and Conflict’, (2002) 55 Journal of International Affairs 410. 185 Quadrennial Diplomacy and Development Review (US) (Report, US Department of State, Washington DC, 2010), 14; Quadrennial Defense Review 2010 (US) (Report, US Department of Defense, The Pentagon, Arlington, 2010); National Security Statement 2010 (US) (Report, The White House, Washington DC, May 2010). 186 Quadrennial Diplomacy and Development Review, 65. 187 Forrer, Fort and Gilpin, above n6. 188 World Bank, World Development Report 2011: Conflict, Security and Development (World Bank, 2011). 189 Kanagaretnam and Brown, above n80.
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Chapter 2: TNCs in Conflict-Affected Areas was US$703 billion.190 This figure dwarfs the official development assistance provided by OECD countries, which in the same year totalled just US$127 billion.191 The sheer amount of TNC investment in these countries (many of which are impacted by armed conflict) makes their ‘active participation ... indispensable for the success of peacebuilding efforts in countries afflicted by violent conflicts.’192 As engines of economic growth, TNCs can help wean countries off dependence on aid and onto a more sustainable path of growth.193 Indeed, due to the preference amongst development countries for “trade not aid”, TNCs’ involvement in peacebuilding efforts will likely continue to grow.194
Corporations are not only active in conflict zones but, for better or worse, they are already involved in addressing a myriad of international peace and security issues. It is business that sells arms and equips armies and militias, it is through the cooperation of the private sector that economic sanctions and trade embargoes are effectively implemented, and government agencies contract out much of their international development work to private entities. This ubiquity of the TNC, even in developing countries and conflict-affected areas, leads Ballentine to conclude that there can be ‘little doubt of the importance to conflict prevention of active company engagement with the communities in which its operations are located.’195
B Corporate Attributes Conducive to Peacebuilding Impact
TNCs, in their inherent design, have several attributes that can be harnessed to create “shared value” – shared between the business and society.196 These can be leveraged to
190 UN Conference on Trade and Development, ‘Inward and outward direct investment flows and stock, annual, 1970 -2015’ (UNCTADStat Table, 2016)
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Corporate Peacebuilding and the Law address society-wide problems like armed conflict or the threat of or recovery from it.197 This argument can be seen as an extension of the capitalist peace thesis noted earlier.
Such characteristics include the ability to deliver economic opportunities, financial resources and access to capital, social permeation and reach, technical expertise and the capacity to innovate.198 Businesses are the foundation of sustainable economic growth. They provide up to 90% of jobs in a society, provide further entrepreneurial opportunities for locals, build human and financial capital, develop physical infrastructure and promote social cohesion, and are often the largest source of revenue for local governments.199 These characteristics allow the private sector to assist in identifying and assessing how issues like armed conflict will affect a community, educating and informing stakeholders as to the problems, and even helping develop practical solutions beneficial to the community concerned.200 For example, job creation in the immediate aftermath of armed conflict is vital to underpin the social and physical reconstruction of communities.201 This is a task that the private sector is uniquely placed to assist with.202
TNCs being a major employer in many conflict-affected areas, it may be possible for them to employ people from diverse backgrounds and ethnicities and belonging to rival groups.203 Thus, businesses – simply by implementing some basic ethical standards in the workplace and hiring practices – can break down barriers between rival groups, reduce dehumanisation and dispel stereotypes that would otherwise engender animosity and psychologically make killing easier.204 Diversity is often encountered in the
197 Jane Nelson and Beth Jenkins, ‘The Role of the Private Sector in Expanding Economic Opportunity through Collaborative Action’ (Summary of Leadership Dialogue, Kennedy School of Government, Harvard University, October 2010). 198 Epstein, ‘The Good Company’, above n14. 199 Berdal and Mousavizadeh, above n64, 43; Nelson, above n62. 200 Gwynne Dyer, Climate Change and Security: Risks and Opportunities for Business (International Institute for Strategic Studies, 2009). 201 Berdal and Mousavizadeh, above n64, 43. 202 Andersson, Tobias, Sjostedt, above n4. 203 Ibid 7; Bais and Hujiser, above n174. 204 Raymond Kelly, Warless Societies and the Origins of War (University of Michigan Press, 2000); Fort and Schipani, ‘Action Plan’, above n2, 362; Daniel Bar-Tal, Intractable Conflicts: Socio-Psychological Foundations and Dynamics (Cambridge University Press, 2013); Oetzel, Getz and Ladek, above n7.
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Chapter 2: TNCs in Conflict-Affected Areas workplace, and racial and other differences mediated peaceably.205 Moreover, a corporation’s ethic may filter out into society – through its operations and its employees. Thus, through their core business practices, TNCs have the potential to become an important locus for the promotion of peace and human rights in, and between, their employees’ communities.206
Moreover, TNCs possess global networks and by virtue of these can leverage their involvement in sustainable peacebuilding affairs to great effect. TNCs can ‘reach across borders of otherwise conflicting countries,’ and provide reasons and mechanisms for those countries to peaceably resolve their dispute.207 Nelson and Jenkins found corporate partnerships (aimed at addressing development issues) had ‘impressive catalytic potential – engaging literally thousands of other business and non-business partners ... and have mobilized millions of dollars worth of cash and in-kind investments’.208
Many conflicts revolve around scarcity and competition over resource issues.209 However, it is not resource scarcity per se that creates conflict, it is a community’s inability to adapt to, or overcome, that scarcity in a positive manner that leads to conflict. For example, deWaal and Flint (2008) observe that a shortage of water was not the trigger for conflict in the Darfur region of Sudan; rather, it was the poor capabilities and minimal resources to extract existing water that fed tensions and violence. With climate change set to heighten competition over arable land and water, finding innovative solutions to overcome or adapt to scarcity of these natural resources will become ever more vital.210 A way to help resolve many resource-driven conflicts is to manage those resources more efficiently and distribute their benefits more equitably. Acting within appropriate regulatory constraints, this exercise is most efficiently
205 Cynthia Estlund, Working Together: How Workplace Bonds Strengthen a Diverse Democracy (Oxford University Press, 2003). 206 Nelson, above n62. 207 Fort and Schipani, ‘Action Plan’, above n3, 362. 208 Nelson and Jenkins, above n190. 209 Thomas Homer-Dixon, Jeffrey Boutwell and George Rathjens, ‘Environmental Change and Violent Conflict: Growing Scarcities of Renewable Resources Can Contribute to Social Instability and Civil Strife’, Scientific American (February 1993); Marcel Leroy (ed), Environment and Conflict in Africa (University for Peace, 2009). 210 Urmilla Bob and Salome Bronkhurst (eds), Conflict-Sensitive Adaptation to Climate Change in Africa (Adelphi/ACCORD/BWV, 2014).
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Corporate Peacebuilding and the Law achieved by employing the private sector.211 Indeed, on both local and global levels, humanity must innovate their way to sustainable development.212 This innovation will inexorably be developed, commercialised and spread by business.
C The Business Case for Corporate Contributions to Peacebuilding
‘The business case for peace is strong’, observes Kell.213 From a corporate perspective, the downside risks of non-involvement in peacebuilding are immense: operations and personnel at risk of physical harm, the risk of reputational harm and bottom-lines may suffer too.214 TNCs are not immune from the broader negative consequences of armed conflict. ‘From Azerbaijan to Zimbabwe, the potential and reality of violent conflict is becoming an unavoidable business issue,’ observes Nelson.215 According to Control Risks, the security threat to businesses has increased in the past decade, with over 20% of countries rated as having a high or extreme political or security risk to business.216 In a survey of companies conducted in 2008, Getz and Oetzel found that approximately 20% of companies ‘faced a moderate to significant risk that violent conflict may lead to … damage to company … kidnapping … or physical attacks on employees.’217 Brauer and Dunne make a strong case for business involvement in peacebuilding by comparing the loss of global economic output from the Global Financial Crisis and from the
211 Paul Collier, V.L. Elliott, Håvard Hegre, Anke Hoeffler, Marta Reynal-Querol and Nicholas Sambanis (eds), Breaking the Conflict Trap: Civil War and Development Policy (World Bank and Oxford University Press, 2003). 212 See, eg, Carl Folke, Steve Carpenter, Thomas Elmqvist, Lance Gunderson, CS Holling and Brian Walker, ‘Resilience and Sustainable Development: Building Adaptive Capacity in a World of Transformations’ (2002) 31 Ambio 437; UN System Task Team on the Post-2015 UN Development Agenda, ‘Science, technology and innovation for sustainable development in the global partnership for development beyond 2015’, (Thematic Think Piece No.28, 2011). 213 Kell, above n175. 214 John Ruggie, ‘Taking Embedded Liberalism Global: The Corporate Connection’ in David Held and Mathias Koenig-Archibugi (eds), Taming Globalization: Frontiers of Governance (Polity Press, 2003) 108. 215 Nelson, above n62, 5. 216 Control Risks, ‘Risk Map 2014’
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Chapter 2: TNCs in Conflict-Affected Areas presence of large-scale violence and armed conflict, and found them to be 0.5% and 9% respectively.218
Generally, ‘the goals of profitable business can be aligned with peace strategies’.219 It has been demonstrated, both in theory and in practice, that a peaceful, stable society is more conducive to allowing businesses to thrive.220 This claim is supported by a host of empirical research, including the annual Ease of Doing Business Reports produced by the World Bank.221
There are limitations to the business case for corporate peacebuilding. For instance, the business case will be stronger in some industries and for some TNCs than others. Sometimes, a cost-benefit analysis will not favour a TNC contributing to peacebuilding in a certain context For instance, consumer-facing TNCs are more responsive to reputational risks than suppliers further up supply chains. Neverhteless, these limitations reinforce the theoretical approach of this project. Rather than leaving the pursuit of corporate peacebuilding – whose economic justification may be weak in certain circumstances – to self-regulation and voluntary efforts, this thesis contends that there are vital roles for state-based legal regulation. Well-calibrated regulation, including recognition of minimum standards of conduct, robust legal accountability mechanisms and incentive structures, can strengthen the business case for corporate peacebuilding.
Furthermore, it must be acknowledged that war does create economic opportunities for some sectors, most notably the armaments industry. Moreover, critical theorists question the purported general preference of business for peace.222 Some businesses can profit handsomely from armed conflict, for example by taking advantage of social cleavages for corporate gain and creating illicit markets for conflict goods.223 But as
218 Jurgen Brauer and Paul Dunne, Peace Economics: A Macroeconomic Primer for Violence Affected States (US Institute of Peace, 2012). 219 Ibid., 12. 220 Nelson, above n62, 142. 221 See, eg, World Bank, ‘Doing Business 2014: Understanding Regulations for Small and Medium-Size Enterprises’ (Annual Report, World Bank Group, Washington DC, October 29 2013). 222 Selby, above n137, 24. 223 Jonathan Nitzan and Shimshon Bichler, The Global Political Economy of Israel (Pluto Press, 2002).
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Nelson points out military expenditures amount to just 4% of global GNP.224 Notwithstanding, the military-reliant industries, and the well-founded criticism of some self-serving corporate practices in conflict zones, the peace-through-commerce literature asserts that the vast majority of businesses, including TNCs, have a preference for peaceful, stable societies.225 In short: business profits from peace. As the UN Secretary-General Bank Ki-Moon observed: ‘Business is increasingly aware of this symbiotic relationship with society, and of the role that responsible business practices can play in fostering the very stability that business needs to prosper.’226
The underlying socio-legal institutions and infrastructure – such as the rule of law and a functioning political system – that are needed for sustainable development and maintenance of peaceful societies are one and the same.227 The private sector cannot only assist in protecting and rebuilding these types of social institutions in post-conflict contexts, but also benefit from them.228 TNCs, in general, prefer stable, secure and well- governed regions in which to do business.229 Damaged or destroyed institutions and infrastructure, and an absence of social cohesion, are often a threat to the long-term profitability and security of many a TNC operating in conflict-affected areas.230 Thus, contributing to peacebuilding is in the long-term interests of many TNCs.231 By assisting to safeguard and reconstruct economic, legal and political institutions, the private sector is, in effect, helping develop the foundations for a vibrant economy in which it can do business safely and successfully. Shankelman’s examination of the oil and gas industry led her to conclude that within that industry there was ‘a greater interest in conflict prevention and peacebuilding in a restricted and operationally- relevant way.’232
224 Nelson, above n62, 5. 225 Fort and Schipani, ‘Role of Corporate Governance’, above n172, 399. 226 Ban Ki-Moon, ‘Private Sector Engagement and Corporate Social Responsibility’, (Speech, UNA-USA Business Council for the UN, 10 January 2007). 227 World Bank, World Development Report 2011: Conflict, Security and Development (World Bank, 2011). 228 Moira Feil, ‘Here’s to Peace! Governance Contributions by Companies in Rwanda and the Democratic Republic of Congo’ in Nicole Deitelhoff and Klaus Dieter Wolf (eds.) Corporate Security Responsibility (Palgrave Macmillan, 2010). 229 Ibid. 230 Forrer, Fort and Gilpin, above n6, 12. 231 Kanagaretnam and Brown, above n80, 5. 232 Jill Shankleman, Oil, Profits and Peace (US Institute of Peace Press, 2006) 68.
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1 Peace As Business Opportunity From a corporate-strategy vantage point, armed conflict can be construed as a massive market failure.233 That failure also presents a prime business opportunity for TNCs to expand markets for their own products and services. Rebuilding a society and its institutions of governance after conflict requires large and ongoing investments of human and financial capital in every industry and social sector. Infrastructure needs repairing and modernising, agriculture and manufacturing industries need to be revitalised and a market economy revived. Millions of people are adversely affected by instances of armed conflict worldwide. With conflict often come underdevelopment, failed economies, even poverty and famine.234 These societies are, in the long-term, potential consumers and customers of products and services of TNCs. As Fort and Schipani observe: ‘There exists a dialectically-supporting relationship between business and sustainable peace: business needs stability to thrive, peace can be sustained through the relationships that business build.’235 In other words: Peace is good for business, and business is good for peace.
There is an opportunity cost to armed conflict as well.236 Destruction of markets, economies and physical and social infrastructure means businesses are hampered or lose the possibility to trade entirely.237 TNCs incur various direct costs when doing business in conflict-affected areas. These include hiring security personnel (be they government or private forces) and property losses.238 TNCs have also been known to curtail operations due to the imminence of hostilities or threats directed against their operations. For example, Western oil TNCs have been known to shut down production due to flare ups in violence in the Niger Delta.239 Further, conflict, or the imminence thereof, acts as a powerful deterrent for most businesses to enter new markets given their risk aversion.240
233 Fort and Schipani, ‘Role of Corporate Governance’, above n172, 400. 234 Ibid, 399; Sen, above n120, 16. 235 Fort and Schipani, ‘Action Plan’, above n2. 236 Nelson, above n62, 20-26. 237 Berdal and Mousavizadeh, above n64, 41. 238 Kanagaretnam and Brown, above n80, 3. 239 Zimmer, above n54. 240 See, eg, UN Environment Programme and International Institute for Sustainable Development, ‘Investing in Stability: Conflict Risk, Markets and the Bottom-Line’ (Report, 2003).
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2 Protecting Reputation, Upholding Values TNCs have been chastened by high-profile scandals of poor business practices in the past and are nowadays well aware that if there is a failure to adhere to basic standards of decency and human rights by corporate employees or their agents, their “social licence to operate” (see below) may be revoked.241 Indicative of TNC practice in similar situations, ExxonMobil hired Indonesian military forces to protect its natural gas operations in the restive Indonesian province of Aceh during the 1990s and early 2000s.242 Locals claim to have been victims of human rights abuses perpetrated by those government soldiers forces, of which they referred to as “Exxon’s army.”243 This led to Exxon suffering from reputational damage and a multi-million-dollar lawsuit in the US alleging torture at the hands of Indonesian soldiers paid by Exxon.244 Businesses in such a predicament face reputational and financial risks, as well as legal and transactional costs that make it difficult to continue business as usual.245
Moreover, simply remaining disengaged from the sociopolitical context of it’s operations, does not insulate a corporation from them. In a conflict or post-conflict context, the politics of the situation simply cannot be avoided.246 The increasing sophistication of human rights advocacy groups and multiple mass-media and communication platforms means that corporate abuses have become far more visible, even when taking place in developing countries thousands of kilometres away from corporate headquarters. TNCs are facing ever-increasing public scrutiny of their operations in conflict-affected areas and ‘are now being forced to review their traditional focus on maximising profits at any cost.’247 As a result, there are increasing
Resolution and Peacebuilding: Contributions from the Private Sector to Address Violent Conflict (Routledge, 2009). 241 Olga Martin-Ortega, ‘Business Under Fire: Transnational Corporations and Human Rights in Conflict Zones’, in Noëlle Quénivet and Shilan Shah-Davis (eds), International Law and Armed Conflict: Challenges in the 21st century (T.M.C. Asser Press, 2010). 242 Mark Mitchell, ‘Who Knew’, Time Magazine, Asia (online) Vol. 158(5), 6 August 2001
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‘demands that businesses take advantage of their unique position as agents of progress and development to denounce wrongdoing and ensure accountability, and even to contribute to peace.’248 Kanagaretnam and Brown observe that ‘today companies are realising that damage control is a lot more expensive than avoiding unethical practices in the first place.’249
Enlightened self-interest, including upholding corporate values and minimising risks to their business, is a great motivation for corporations to assume greater responsibilities for maintaining peace and security in societies in which they do business, and for getting involved in peacebuilding initiatives.250 Threats of consumer boycotts and other public pressure eventually led the diamond industry to embrace the Kimberley Process Certification System, which seeks to halt the international trade in “conflict diamonds” that financed multiple wars in western Africa during the 1980s and 90s.251
D The Moral Argument
That TNCs should “do no harm” to the societies in which they do business seems a simple moral plea, but whether a moral argument can be constructed to justify more purposeful peacebuilding is more complicated. Geoffrey Chandler, chair of Amnesty International’s UK Business Group, however, suggests a correlation between TNCs’ power and their responsibilities: ‘to fail to do good when it is in one’s legitimate power to do so is rightly condemned by the world.’252
As noted earlier, modern understandings of corporate responsibilities have broadened well beyond the traditional conception that a corporation’s obligation begins and ends at maximising value for its owners.253 This is embodied in the theory and practice of CSR, a largely Western invention that has been adopted by TNCs the world over, and embraced by the UN and leading international economic groupings such as the OECD
248 Martin-Ortega, above n241, 193. 249 Ibid. 250 Jane Nelson and Dave Prescott Partnering for Success: Business Perspectives on Multi-stakeholder Partnerships (World Economic Forum, 2005). 251 Kanagaretnam and Brown, above n80, 4. 252 As quoted in Nelson, above n62, 6. 253 Epstein, ‘The Good Company’, above n14.
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Corporate Peacebuilding and the Law and the World Bank.254 In addition, stakeholder theory seeks to supplant the more myopic, traditional shareholder theory of the corporation and provide for greater corporate awareness of responsibilities owed to a multitude of societal actors, even ‘to peace through engaging in diplomacy and peacemaking.’255
The proposition that a corporation must ensure it has a social licence to operate is now widely accepted, and involves a business ensuring that any adverse impacts of its operations on the environment and surrounding communities are minimised.256 This moral logic can be extended to the specific context of corporations doing business in conflict-affected communities.257 That entails, therefore, adopting conflict-sensitive business practices, even ‘a more active involvement of business in conflict mitigation and prevention.’258
Leaving aside the question of legality, it has been argued that, as a result of repeated and ongoing harmful effects in many situations of armed conflict, the global business community has a collective ethical obligation to right those historical wrongs by contributing positively to peacebuilding efforts wherever it is possible to do so.259
This argument gains credence when considering specific industries, such as the extractives industry, or even individual companies that have had historically poor human rights and humanitarian records.260 For example, in relation to so-called resource conflicts: Arguably, the corporate sector, and in particular the extractives industry, has an ethical obligation to assist those countries whose natural resources have contributed to its profit margins and yet have felt the brunt of its conflict-insensitive behaviour and
254 See, generally, Asli Mermod, Samuel Idowu (eds), Corporate Social Responsibility in the Global Business World (Springer, 2013); OECD,
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Chapter 2: TNCs in Conflict-Affected Areas suffered from armed conflict.261 Similarly, the moral force of calls for corporate peacebuilding is strengthened in conflicts triggered or exacerbated by impacts of climate change. Dangerous climate change began with business; it is the emission of massive amounts of carbon dioxide (and other greenhouse gases) into the atmosphere, especially from the burning of fossil fuels, from industrialised societies during the 19th and 20th centuries that is the primary cause of anthropogenic climate change.262 The largest emitters continue to be corporations and it is invariably through the operations of the large TNCs in the oil, coal and gas industries that fossil fuels continue to be extracted and burnt. With the reinforcing dynamics of climate change and conflict to be fiercely felt in developing and violence-prone regions during the coming decades, some experts have called for greater corporate contributions to ameliorate the worst effects of both armed conflict and climate change.263
There are legitimate concerns about for-profit companies being involved in often delicate sociopolitical processes of peacebuilding as noted above. Indeed, these concerns around the privatisation of the pursuit of peace, and the usurpation of state functions, inform this thesis’ approach to the issue. By embracing regulation and focussing on state-based (hard-) law’s role in achieving corporate peacebuilding this thesis offers a way forward to both advance the goal of corporate peacebuilding while mitigating these concerns. This will be elaborated upon in Chapter 3. While the vision of corporate peacebuilding should be approached with caution, TNCs sheer ubiquity in modern life, including in conflict-affected regions, means TNCs simply cannot be ignored by theorists and practitioners of peacebuilding. TNCs possess attributes that suggest they may be uniquely able, willing and suited to providing assistance to government and non-governmental partners in the furtherance of maintaining sustainable peaceful societies in which they do business. What that assistance may comprise is examined in the final section of this chapter.
261 Bannon and Collier, above n71. 262 Susan Solomon, Dahe Qin, Martin Manning, Melinda Marquis, Kristen Averyst, Melinda Tignor, Henry LeRoy Miller and Zhenlin Chen (eds), Climate Change 2007: The Physical Science Basis, Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change (Cambridge University Press, 2007). 263 Edward Cameron, Cammie Erickson, Emilie Prattico and Ryan Schuchard, ‘Business in a Climate- Constrained World: Creating an Action Agenda for Private-Sector Leadership on Climate Change’, (BSR Working Paper, 2015); Gwynne Dyer, Climate Change and Security: Risks and Opportunities for Business (International Institute for Strategic Studies, 2009).
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VI TOWARDS A MODEL OF CORPORATE PEACEBUILDING POSSIBILITIES
‘The challenge,’ as Berdal and Mousavizadeh explain, ‘lies in identifying an appropriate role for the private sector, both foreign and domestic, in building sustainable peace, not as a silver bullet or magic solution to the multiple challenges of conflict-affected societies but as a potential ally in efforts to consolidate peace.’264 Building upon seminal works in the peace studies and the peace-through-commerce traditions, the “matrix of corporate peacebuilding” is here developed. It demonstrates, in a general manner, the breadth and depth of the opportunities that exist for TNCs to contribute to the peace in areas in which they do business that are impacted by armed conflict.
A Philanthropy not Enough
Corporate involvement in peacebuilding activities will ‘look different for each firm’ and is dependent on various factors including the TNC’s capabilities and business objectives, and the societal and conflict contexts in which it operates.265 Perhaps the most widespread corporate activity that has a peacebuilding impact is philanthropy: arms-length funding of various peacebuilding and community-building projects in societies in which TNCs operate.266 In-kind support that enables such projects to fulfil their peacebuilding goals is also provided by many TNCs. This assistance keeps the TNC at a distance from the actual practice of peacebuilding, and yet the provision of capital and other resources is critical for the viability of those projects.267
Examples of this philanthropic type of corporate peacebuilding can be found across many conflict zones today, and are well-publicised by the TNCs and their affiliated foundations as examples of their broader commitments to CSR.268 Rarely are these contributions labelled by the companies as “peacebuilding.” For example, many of the largest Australia-based TNCs detail on their websites and in annual sustainability
264 Berdal and Mousavizadeh, above n64, 39. 265 Forrer, Fort and Gilpin, above n6, 9. 266 Wegner and Mockli, above n61, 138. 267 Ibid. 268 Ibid, 139 – 141.
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Chapter 2: TNCs in Conflict-Affected Areas reports their contributions to the health and education of local communities, assistance in rebuilding of critical infrastructure, and support for community and cultural facilities and programs.269 Wegner and Mockli’s Conflict Prevention: The Untapped Potential usefully lays out several justifications and examples of corporate philanthropic contributions to peacebuilding. However, as the title of their study suggests, it focuses on only one phase of the conflict transformation continuum: conflict prevention. Moreover, as they themselves acknowledge, corporate giving programs in the conflict context ‘are still exceptions.’270
B Beyond Philanthropy?
Of course, there exist examples of corporations acting to save lives, and protect and rebuild communities even at great risk to company personnel and property.271 Bais and Hujiser’s 2005 The Profit of Peace is rich in anecdotal examples of corporate actors aiding peacebuilding efforts, protecting lives and sustaining communities.272 They celebrate those TNCs that deliberately became involved in both conflict prevention and post-conflict reconstruction efforts, highlighting several examples of corporate leadership in peacebuilding efforts, such as the Durban Process for Ethical Mining,273 in which H.C. Starck cooperated with the Dian Fossey Gorilla Fund to develop a managed, regulated and sustainable process of resource exploitation in the eastern Congo that would also benefit the local communities.274
Mary Kaldor’s notion of the importance of ‘islands of civility’ in the midst of armed conflict has particular relevance to TNCs, as their operations have in the past become locales offering physical security to employees and communities in the face of threat of large-scale violence.275 With the resources available to protect their personnel and
269 See, eg, BHP Billiton, 2013 Sustainability Report, BHP Billiton
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Corporate Peacebuilding and the Law property, TNCs have also deployed those security capabilities to protect innocent civilians during armed conflict.276 Reportedly, TNCs have even become involved at the political level to help prevent conflict.277 Friedman reports that the interventions of Indian technology companies and their global corporate partners helped bring about a decrease in tensions between Indian and Pakistan amidst a flare up of border tensions in 2002.278 Friedman concludes: ‘it was the influence of General Electric, not General Powell, that did the trick.’279
These examples illustrate the ‘untapped potential’ of corporate peacebuilding that the peace-through-commerce literature highlights.280 However, while the specific stories of corporate peacebuilding contribute to circumstantial evidence of the broader potential of corporate peacebuilding, they neglect to provide a model or generalisable guidelines for such activity. The academic literature has lagged behind these real-world occurrences and there remains substantial scope to develop theoretically sound, practically viable models of corporate contributions to peacebuilding.
A review of the literature indicates that the issue of what that aspirational goal looks like in practice – that is, what corporations could possibly contribute to a peace process – has been given cursory treatment by some scholars and incomplete appraisal by others.281 There is no consensus among the models as to the ideal extent of corporate involvement in peacebuilding. Should it be confined to simply ‘doing no harm’ or should corporations be encouraged to see themselves as ‘purposeful peacebuilders’?282 Is it, as Wegner and Mockli believe, confined to ‘economic peacebuilding’ – a popular trope in the literature – or is it more expansive?283
276 Ibid. 277 Benjamin Moles, ‘India and Pakistan: A Decade Since Operation Parakram’, East Asia Forum (Canberra), 14 September 2012
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Furthermore, the works that address the question of what implementation of the theory of corporate peacebuilding may look like are replete with compelling yet underdeveloped ideas.284 Several authors offer a series of disparate guidelines, principles and frameworks for what corporate contributions to peacebuilding could be285 Some models of corporate peacebuilding are informed by the principles and practice of CSR or the growing scholarly and regulatory work done in the field of “Business and Human Rights”.286 Yete others derive from ideas of business ethics and management theory.287 Kanagaretnam and Brown come at the issue as peacebuilding practitioners and provide a practical ‘operational framework’ for business to be engaged in peacebuilding.288
C The Nelson Model
Perhaps the most popular conception of the corporate role in building peace is that proposed by Nelson. She provides a pyramidal model (Figure 2.1) of three different corporate approaches to operating in conflict zones: (1) those that seek to comply with applicable domestic and international legal standards and conventions;289 (2) those that seek to go beyond compliance to ensure harm caused by their operations is minimised;290 and (3) those businesses that seek to explicitly and deliberately engage in peacebuilding.291
284 See Nelson, above n62; Fort and Schipani, ‘Action Plan’, above n2; Timothy Fort and Cindy Schipani, The Role of Business in Fostering Peaceful Societies, (Cambridge University Press, 2004). 285 Ibid. 286 CSR: Jamali and Mirshak, above n168, 447. Business and Human Rights: UN Guiding Principles on Business and Human Rights, Principle 7, 12 and 23. 287 Fort and Schipani, ‘Action Plan’, above n2, 377; Oetzel et al, above n170. 288 Kanagaretnam and Brown, above n80. 289 Nelson, above n62, 7. 290 Ibid. 291 Ibid.
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Value
creation and peacebuilding
Risk minimisation/
do no harm
Compliance
Figure 2.1: Adaption of Nelson’s pyramid of business and peace.
As normative goals, each of these categories of business have their adherents in the literature. Some commentators coming from corporate governance and legal traditions emphasise that the legal obligations of a company should remain the focus of corporate conduct in conflict-affected areas, suggesting that business should eschew any proactive engagement in issues of peace and conflict beyond what the law demands.292 Nelson’s pyramid indicates that even this legalistic approach has some peacebuilding value. Fort and others point out that adhering to the bottom rungs of Nelson’s triangle of corporate engagement in peace is ‘good practice regardless of context and can contribute to broader peacebuilding efforts.’293 Conflict-sensitive business practices and minimising risk to corporation and community make sound business sense in almost all contexts.294 ‘Ethical behaviour [is] suitable during all phases of conflict… ranging from conflict prevention to post-conflict reconstruction.’295
At its most ambitious, the vision of peace-through-commerce argues that corporations can serve positive peacebuilding roles, as reflected in the top tier of Nelson’s pyramid.296 This tier is populated by corporations engaged in what Forrer et al describe
292 Simon Chesterman, ‘Lawyers, Guns and Money: The Governance of Business Activities in Conflict Zones’ (2011) 11 Chicago Journal of International Law 321. 293 Forrer, Fort and Gilpin, above n6, 2. 294 Ibid, 10. 295 Ibid. 296 Sweetman, above n233.
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Chapter 2: TNCs in Conflict-Affected Areas as ‘purposeful peacebuilding.’297 This occurs when corporations choose to go beyond compliance with the law, beyond merely conflict-sensitive practices, to adopt strategies that if adopted ‘create societal value and enhance shareholder value-added by optimising their positive impacts on society.’298 In her study of the oil and gas sector and peacebuilding, for example, Shankleman urges oil companies operating in conflict- affected areas to see their operations and investments as ‘social development projects’ and to eschew the traditional risk-minimisation approaches of “obeying the law” and “doing no harm” to become ‘deliberate agent[s] of transformative change.’299 Sweetman refers to these corporate policies and activities as ‘business-based peacebuilding.’300
A reasonable comprehension of these existing works suggests there is more work to be done in developing a sound, achievable model of corporate peacebuilding.301 Practical actions that corporations could undertake to contribute to peacebuilding goals would benefit from increased clarity in the literature.302 From a corporate management perspective; ‘such a gap is a potential roadblock in peace-through-commerce advancing from a good idea to good practice.’303
Some of the most thorough proposals for corporate involvement in peacebuilding have been offered by think-tanks and international advocacy organisations, frequently based on a risk-management approach to how TNCS should navigate the difficulties of doing business in conflict-affected areas.304 There is much from academic peace studies that could be incorporated into a fuller model of corporate peacebuilding to improve its effectiveness and operational clarity. For instance, timing has been identified by peace studies scholars as one of the determinative factors in the success or failure of peace interventions.305 Yet the few typologies of corporate peacebuilding that do exist
297 Forrer, Fort and Gilpin, above n6. 298 Nelson, above n62, 29. 299 Shankleman, above n225, 162-3. 300 Sweetman, above n233. 301 Forrer, above n165, 452; Oetzel et al, above n170. 302 Forrer, above n165, 452. 303 Ibid. 304 See, eg, Kanagaretnam and Brown, above n80. 305 I. William Zartman, Ripe for Resolution (Oxford University Press, 1985).
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Corporate Peacebuilding and the Law inadequately incorporate these lessons, thereby diminishing the theoretical currency and practical utility of their models.306
Well-intentioned corporate contributions to peace could backfire if improperly calibrated and timed, and ‘can cause more harm than good.’307 Bais and Hujiser note that, despite good intentions, some corporate efforts to assist at-risk communities go awry. For example, the oil giant Shell contributed as much as $60 million annually to the Niger Delta region for social and economic development; however, due to a neglect of local custom and culture, this philanthropy has ‘brought about increased corruption and lawlessness.’308
It is advisable, therefore, that corporate contributions are properly aligned to general peacebuilding strategies and objectives, and integrated with government and civil society actions. Practically, the international business community requires guidance and training, and workable models that locate its potential peacebuilding contributions within general models of peacebuilding and are based on well-established principles of peacebuilding as distilled by decades of peace studies research.309
Nelson and Prescott also warn that to be effective, corporate peacebuilding interventions must make sound business sense, harness the core competencies of business and ensure companies partner, not replace, local and foreign governments.310 These cautionary words acknowledge the reality that profit is the primary motivator for a corporation. This reality is a significant constraint that is neglected in some corporate peacebuilding models. Corporations should not be expected to act entirely altruistically or without some eye on the impact of their actions or inactions on their bottom-lines. Nevertheless, as discussed in Chapter 6, the profit-driven nature of the modern corporation can in fact be leveraged to encourage contributions to peacebuilding.
306 Oetzel, Getz and Ladek, above n7. 307 Forrer, Fort and Gilpin, above n6, 2. 308 Bais. and Hujiser, above n174, 24. 309 See, eg, ‘Guidance on Responsible Business in Conflict-Affected and High-Risk Areas: A Resource for Companies and Investors’ (Report, UN Global Compact and Principles of Responsible Investment, 2010). 310 Nelson and Prescott, above n243.
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D The Matrix of Corporate Peacebuilding
The matrix of corporate peacebuilding, detailed below (figure 2.2), synthesises many of the models that have come before and extends them by integrating the knowledge of the attributes, capabilities and motivations of TNCs with well-established theoretical principles and practices of conflict transformation.
The matrix typology embeds business-oriented strategies and practices into the elements of peace theory introduced in Chapter 1, namely, Galtung’s three aspects of conflict transformation (peacebuilding, peacekeeping and peacemaking), as well as the three phases of the conflict transformation continuum (conflict prevention, conflict management and resolution, and post-conflict reconstruction and reconciliation). This offers a more nuanced, theoretically informed account of what business could do in peacebuilding than one that draws from risk management.
Phases of Conflict Transformation
Post-conflict Conflict Conflict reconstruction prevention management and reconciliation
Peacemaking Aspects of Conflict Peacebuilding Transformation Peacekeeping
Figure 2.2: A generalised matrix schema for possible conflict transformation activities.
Whilst the phases and aspects of conflict transformation in the matrix are not always discrete or easily demarcated, the typology usefully reflects the reality that a sustainable peace must necessarily go well beyond political leaderships signing peace accords to engage all sectors of society along a time-continuum commencing well before actual violence and ending well after hostilities have ended.311 The typology also serves to highlight that, at each stage, there are different conflict dynamics which influence the
311 Oetzel, Getz and Ladek, above n7.
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Corporate Peacebuilding and the Law needs of the societies in conflict.312 This suggests that interventions must be calibrated and timed correctly to be most effective, and that different possibilities exist for corporate engagement depending on the conflict phase. These fundamental understandings of conflict transformation theory should inform any attempt to seek to theorise or enact a role for corporations in peacebuilding activities.
Corporate contributions to peace, for example those featured by Nelson, Fort and Schipani, Oetzel et al and Karagentram and Brown can now be positioned in the framework. Additionally, corporate contributions to the whole suite of conflict transformation interventions found in the general peace studies literature can be contemplated and incorporated into the matrix.313 In doing so, we come to see the breadth and depth of the potential contributions to peace that TNCs and other corporations could make.
The matrix of corporate peacebuilding permits us to see that corporate contributions to peace are not confined to the post-conflict reconstruction phase or to economic peacebuilding, as others such as Ford have emphasised, but could potentially add to every aspect of the conflict transformation process and at every phase.314 Peacebuilding goals that various authors have argued could benefit from a business contribution include post-conflict reconstruction, establishing political stability,315 and even preventing conflict and large-scale violence from flaring up in the first place.316
Unlike other models offered in the past, the matrix (see Table 2.1) highlights that due to their capabilities, corporations’ contributions to peace potentially cover each aspect of
312 Ramsbotham, Woodhouse, Miall, above n150. 313 See, eg, Dennis Sandole, Peacebuilding (Polity Press, 2011). 314 Ford, above n144. 315 Post-conflict reconstruction: John Bray, ‘International Companies and Post-Conflict Reconstruction’ (Conflict Prevention and Reconstruction Paper No. 22, The World Bank, 2005); John Bray, ‘Role of Private Sector’, above n102. Stability: Bennet, above n177, 410; Feil, above n221. Global security: Alyson Bailes and Isabel Frommelt (eds), Business and Security: Public-Private Sector Relationships in a New Security Environment (SIPRI Press, 2004). 316 Daniel Buckles (ed), Cultivating Peace: Conflict and Collaboration in Natural Resource Management (International Development Research Centre, 1999); UN Security Council, ‘The Role of Business in Conflict Prevention, Peacekeeping and Post-conflict Peacebuilding’, (UN Security Council, Press Release, UN Doc SC/8058, 15 April 2004.
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Chapter 2: TNCs in Conflict-Affected Areas creating peace – peacemaking, peacebuilding and even peacekeeping.317 Moreover, those same corporate capabilities suggest the sector could make meaningful contributions at each phase of the conflict transformation continuum; before, during and after hostilities. Previous efforts at theorising the role of business in peacebuilding have not engaged with all elements of this framework, preferring instead to focus on only one phase or, more commonly, simply referring to a generalised role in “conflict prevention” or “peacebuilding” without any great depth of discussion as to the timing, context of those contributions, nor to which aspect of peacebuilding they are contributing.318 For example, Nelson outlines a model that integrates the phases but neglects the aspects of conflict transformation;319 Oetzel, Getz and Ladek do not refer to either in their typology of ‘firm responses to violent conflict.’320
317 Johan Galtung, ‘Three Approaches to Peace: Peacekeeping, Peacemaking, and Peacebuilding’ in Peace, War and Defense: Essays in Peace Research, Vol. II (Christian Ejlers, 1976) 297. 318 See, eg, Andersson, Tobias, Sjostedt, above n4. 319 Nelson, above n62, 7. 320 Oetzel, Getz and Ladek, above n7.
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Table 2.1: Matrix of Corporate Peacebuilding PHASES OF CONFLICT TRANSFORMATION PREVENTION MANAGEMENT & RECONSTRUCTION & RESOLUTION RECONCILIATION Adhere to and spread highest Assist warring parties’ Facilitate ongoing political responsible business standards, leaderships with open dialogues. inc. transparency. communication channels and Develop financial architecture. information. Adopt international human rights Promote beneficial economic and standards. Facilitate Track I diplomacy – political agreements, including secure meetings between the Support regional and international economic and development parties’ leaderships for peace conflict prevention mechanisms accords between local gov’ts and negotiations. and effective gov’ts. international orgs and business. Facilitate and fund Track 1.5 Support local institutions and UN, Support effective and good and Track 2 diplomacy. regional orgs and sustainable governance initiatives. development NGOs. Voluntarily adopt international Promote respect for, and provide PEACEMAKING humanitarian law standards and Support initiatives to improve support to, representative political urge adoption by other actors. politics, anti-corruption and good institutions. governance. Support sustainable local planning.
Respond promptly to deleterious Maintain a business presence – Assist in developing effective impacts of operations on and employment, income for socio-political institutions. communities/environment. locals if safe to do so. Assist in expansion of local Institute profit-sharing initiatives Ensure equitable use of market for goods and services, with local communities. resources in operations. and develop strong economy.
Promote social cohesion directly Ensure operations, facilities, Build capacity of local through conduct of business, CSR employees are not communities towards self- and employment practices. involved/complicit in abuses. sufficiency. Practise sustainable development, Continue ‘low-politics’ socio- Share expertise and technical
TRANSFORMATION and respect for the environment. economic development advice with local entrepreneurs initiatives. and community leaders. Assist in developing health, educational communal institutions Invest in youth enterprises and employment, micro-credit. Develop local economy, eg by PEACEBUILDING sourcing inputs locally. Invest in social reconstruction, including physical infrastructure. Engage in integrated approaches to poverty reduction. Assist DDR (disarmament, demobilisation and reintegration) Invest in physical infrastructure, efforts by employing/training eg. utilities, transport, of benefit to former combatants. both company and community.
ASPECTS OF CONFLICT OF CONFLICT ASPECTS Contribute to early-warning Avoid involvement in illegal or Assist peacekeeping forces with systems to prevent outbreaks of unethical activities, such as logistics, funds, local knowledge. violence by sharing local corruption or bribery. Adhere to the rule of law, high knowledge, resources. Adhere to high ethical ethical standardsl; encourage Advise international organisations standards. adherence by others.
and diplomats of conflict- Adopt the Voluntary Principles Encourage embedding of CSR vulnerabilities and issues in local on Security and Human Rights. standards in corporate regulation. communities. Commit to respecting Assist in establishing legal Ensure any goods or services international humanitarian law. system, inc. criminal and supplied to militaries are not environmental law, property misappropriated. Promote security and stability rights, effective judiciary. programmes. Ensure private security contractors Ensure business operations PEACEKEEPING employed adhere to the Voluntary enhance security and stability of Principles and highest ethical local communities. standards. Assist development of laws
encouraging sustainable development and growth.
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While corporations are private actors, their potential peacebuilding contributions touch on every sphere of society, including the military, judiciary and political governing institutions. The second, peacebuilding aspect is where the majority of corporate contributions will occur, but we should not discount the important facilitative and capacity-building roles TNCs may play in effective peacekeeping and peacemaking. Businesses have the means and the self-interest to help revive the rule of law, help stamp out corruption and develop or reconstitute a functioning legal system.321 In addition, their technology and logistics capability have proven to be powerful tools when deployed for humanitarian and peacebuilding purposes in the past.322
Moreover, in the prevention and reconstruction phases, corporations have the opportunity to assist in the development of a policy and legal environment that not only prioritises security, but also attracts responsible outside investment and business activity. The private sector could aid in the revitalisation of local governance by assisting governments in developing regulatory infrastructures that encourage, innovation, creativity and business. For example, many large TNCs pay taxes or provide shares of revenue to host governments. Simply providing huge sums of money to corrupt and/or inept regimes has been shown to increase social resentment and wealth disparities, and sow the seeds for future conflict.323 Corporations could supplement their government payments with technical expertise to develop governmental standards and regulations to account for, invest and spend those monies efficiently to encourage sustainable development. Profit-sharing initiatives to benefit local communities could also be considered. Timely peaceful interventions such as these may dispel tensions and prevent them from rising to, or returning to, the level of armed hostilities.324
321 Feil, above n221. 322 Andersson, Tobias, Sjostedt, above n4, 59. 323 Madalene O’Donnell, ‘Post-conflict corruption: a rule of law agenda?’ in Agnes Hurwitz and Reyko Huang (eds), Civil War and the Rule of Law: Security, Development, and Human Rights (Lynne Rienner, 2007) 225; Robert Rotberg (ed), Corruption, Global Security, and World Order (Brookings, 2009). 324 For example, contributing to conflict in Darfur were disputes over land. See, eg, Marcel Leroy (ed), Environment and Conflict in Africa (University for Peace, 2009); Alex DeWaal and Julie Flint, A New History of a Long War (Zed Books, 2008).
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VII CONCLUSION
Conflict transformation is best conceived of as a whole-of-society effort, with TNCs enjoying a legitimate and important role in partnership with civil society and government. This chapter has served as something of a corrective to the commonly held notion that TNCs are a negative influence in conflict-affected areas and their worst excesses need to be curtailed. This is, of course, undoubtedly true in numerous situations, but TNCs have also played positive roles in such areas, aiding conflict transformation processes and contributing to the peace and economic development of warring parties. And their potential to do more in these realms is noted. The vision and rationales for corporate peacebuilding have been articulated and the matrix of corporate peacebuilding presents the scope of possible corporate contributions to that effort in a coherent typology grounded in peacebuilding theory.
Appropriately implemented, specific corporate contributions to peacebuilding should vary from context to context, depending on a variety of factors internal to the corporation and those pertaining to the particular conflict context.325 Those efforts must be carefully calibrated to acknowledge the context of the communities in question, including where they are located on the conflict–peace continuum,326 and different industries will find their interests and capabilities lend themselves to certain interventions.327 Whether a company chooses to embrace one or some of the proposed peacebuilding initiatives will depend ultimately on the decision-making of corporate management. Consideration of potential reputational risks, internal values and the applicable regulatory regimes applicable to the situation are but some of the factors that may be considered in deciding on what action, if any, are appropriate in the given context.328
325 Galia Press-Barnathan, The Political Economy of Transitions to Peace: A Comparative Perspective (University of Pittsburgh Press, 2009); Oetzel, Getz and Ladek, above n7. 326 Forrer, Fort and Gilpin, above n6, 2. 327 Tourism sector: Stephen Litvin, ‘Tourism: The World’s Peace Industry (1998) 37 Journal of Travel Research 63; Finance sector: UN Environment Programme and International Institute for Sustainable Development, ‘Investing in Stability: Conflict Risk, Markets and the Bottom-Line’ (Report, 2003)
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The matrix of corporate peacebuilding is not intended to be exhaustive, nor applicable in all situations. It is not intended as a suite of policy proposals that can be simply or directly transplanted into the field. Corporations, policymakers and other readers are advised to consider the model as a menu of idealised options for concerned businesses, with further empirical research needed to validate the model.329
For the purposes of this thesis, it is sufficient to have at least prima facie substantiated the claim that corporations have a great deal of potential to contribute to peace, and not simply to cause conflict. The more vexed question of how to achieve this is the major gap in the literature to which this thesis is addressed, namely: the dual issues of how TNCs’ conflict-driving conduct can be curtailed, and how the vision of corporate peacebuilding can be realised. It is a premise of this thesis that these are best conceived of as problems of governance. A more effective regulatory regime for TNCs doing business in conflict-affected areas would be a significant step forward in ending conflict-driving TNC conduct and realising the peacebuilding potential of TNCs. It is to the task of conceiving just such a regulatory regime, and the vital roles of the law within it, that the thesis now turns.
329 Forrer, above n165, 453.
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CHAPTER 3
AN INNOVATIVE REGULATORY APPROACH TO ACHIEVE CORPORATE PEACEBUILDING: ADDRESSING THE “HOW” QUESTION WITH THE REGULATORY DIAMOND
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In the absence of a normative framework, ad hoc efforts continue to emerge from the multilateral system in response to the problem of conflict trade. Mark Taylor and Anne Huser1
Governments worldwide have consistently failed to oversee or regulate the extraterritorial human rights practices of their companies. The only way forward is to change this. Christopher Albin-Lackey2
Pick important problems and fix them. Malcolm Sparrow3
1 Mark Taylor and Anne Huser, ‘Security, Development and Economies of Conflict: Problems and Responses’ (FAFO AIS Policy Brief, 2003) 9. 2 Christopher Albin-Lackey, ‘Without Rules: A Failed Approach to Corporate Accountability’ (World Report 2013, Human Rights Watch, 2013). 3 Malcolm Sparrow, The Regulatory Craft: Controlling Risks, Solving Problems and Managing Compliance (Brookings Press, 2000) 9.
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CHAPTER 3
AN INNOVATIVE REGULATORY APPROACH TO ACHIEVE CORPORATE PEACEBUILDING: ADDRESSING THE “HOW” QUESTION WITH THE REGULATORY DIAMOND
I INTRODUCTION
The preceding chapter has indicated the potential of corporate peacebuilding, which runs counter to the prevailing academic and lay understandings. But as Ballentine and Haufler observe ‘the potential for business actors to promote sustainable peace has not been fully realised.’4 The overwhelming available evidence suggests that TNCs are reluctant to involve themselves in peacebuilding and developing good governance in zones of conflict, and as a result their potential contribution remains largely ‘untapped.’5
So the pressing question becomes: how? How can we prevent corporate behaviour that drives armed conflicts, and tap into the positive potential of corporate contributions to peacebuilding? The purpose of this chapter is to outline an approach and framework to address this question. It is contended that the problem is best conceived of as one of governance or, more accurately: a failure of effective governance. That is, conflict- driving corporate behaviour and low incidence of corporate peacebuilding can be explained by poor, ineffectual regulation of TNCs in many conflict-affected areas. Part II provides a brief review of the existing regulatory landscape applicable to Australia- based corporate conduct in conflict-affected areas to reinforce this claim. There is an identifiable need for ‘clear and enabling regulatory frameworks’ that deter corporate misconduct in such places, and that ‘encourage, incentivise and support business and peace,’ as these are clearly absent or ineffective.6
Nelson and others have highlighted the obvious: That the majority of corporations will not realise their peacebuilding potential without external encouragement and/or
4 Karen Ballentine and Virginia Haufler, Enabling Economies of Peace (UN Global Compact, 2010) 2. 5 Andrea Wegner and Daniel Mockli, Conflict Prevention: The Untapped Potential of the Business Sector (Lynne Rienner, 2003). 6 John Forrer, Timothy Fort and Raymond Gilpin, ‘How Business Can Foster Peace’ (Special Report No.315, United States Institute of Peace, September 2012) 12.
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Corporate Peacebuilding and the Law compulsion.7 Yet there is a paucity of engagement with the issue of implementation of their vision. In particular, none have offered a thorough analysis of existing regulatory structures designed to moderate corporate behaviour in conflict zones, assessed their effectiveness or developed models of governance that may achieve their notions of corporate peacebuilding. Input from law, corporate governance and, in particular, regulatory fields of study are vital to adequately address this gap between the reality and potential of corporate conduct in conflict-affected areas.8 Many existing works also fall short, as they adopt an adversarial approach, invariably placing an emphasis on harm- minimisation – controlling the risk of poor corporate behaviour – rather than elaborating a governance regime that might unleash the peacebuilding possibilities of the modern corporation.9
With that in mind, the remainder of this chapter develops a theoretical framework for investigating and redesigning the regulatory regime to facilitate the realisation of the vision of corporate peacebuilding.10 Parts III and IV step back from the specific context of business and peace, and instead delve into regulatory theory. After presenting and critiquing Ayres and Braithwaite’s responsive regulation, the chapter presents the regulatory diamond as an extension of the original responsive regulation pyramidal model that lies at the centre of the theory.11 The regulatory diamond is offered as an improved visualisation of a responsive regulatory framework that may help realise aspirational regulatory goals such as corporate peacebuilding.12 The framework model is composed of three core elements: (1) law-based minimum standards of conduct; (2) a suite of compliance regulation mechanisms to enforce those standards; and (3) a suite of aspirational regulation mechanisms to encourage “beyond compliance” behaviour.
7 Jane Nelson, The Business of Peace: The Private Sector as a Partner in Conflict Prevention and Resolution (Prince of Wales Business Leaders Forum/ International Alert/Council on Economic Priorities, 2000). 8 Olifemi Amao, Corporate Social Responsibility, Human Rights and the Law (Routeldge, 2011). 9 Simon Chesterman, ‘Lawyers, guns and money: the governance of business activities in conflict zones’ (2011) 11 Chicago Journal of International Law 321. 10 Ian Ayres and John Braithwaite, Responsive Regulation: Transcending the Deregulation Debate (Oxford University Press, 1992). 11 John Braithwaite, ‘Fasken Lecture: The Essence of Responsive Regulation’ (2011) 44 University of British Columbia Law Review 475. 12 Ayres and Braithwaite, above n10, 35.
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In the three subsequent chapters, the regulatory diamond framework is applied to analysing the problem at hand, namely: what are the contours of a viable, coherent and effective regulatory framework to realise the vision of corporate peacebuilding. In particular, each chapter examines the role of law within one of the three core components of the theorised regulatory diamond framework for corporate peacebuilding.
II THE UNREALISED VISION OF CORPORATE PEACEBUILDING: A FAILURE OF REGULATION
Thorough examinations of why the vision of corporate peacebuilding has yet to be realised in practice is largely absent from the peace-through-commerce literature, and it has been identified as a valuable line of enquiry.13 In 2012, three prominent authors of the peace-through-commerce field critiqued the existing literature, stating that there is ‘a profound void for those attempting to determine how to engage the business community in investment and commercial activities to help create more durable peace.’14
Works relating to corporate peacebuilding have been focused on fleshing out answers to the “why” and “what” questions around suggesting TNCs can be involved in peacebuilding efforts.15 As noted in the previous chapter, far less attention has been paid in the literature to the “how” question.16 Indicative of the general trend in the literature, Forrer observes that the guidance to companies is ‘more general than specific’ and ‘more aspirational than pragmatic.’17 How to realise the vision of corporate peacebuilding as propounded by scholars such as Nelson, Fort and Schipani remains
13 Jennifer Oetzel, Kathleen Getz and Stephen Ladek ‘The Role of Multinational Enterprises in Responding to Violent Conflict: A Conceptual Model and Framework for Research’ (2007) 44 American Business Law Journal 331; John Forrer, ‘Locating Peace Through Commerce in Good Global Governance’ (2009) 89 Journal of Business Ethics 449. 14 Forrer, Fort and Gilpin, above n6, 5. 15 Jolyon Ford, Regulating Business for Peace: The United Nations, the Private Sector and Post-Conflict Recovery (Cambridge University Press, 2015); Forrer, Fort and Gilpin, above n6; Karolien Bais and Mijnd Huijser, The Profit of Peace: Corporate Responsibility in Conflict Regions (Green Leaf, 2005); Kathleen Getz and Jennifer Oetzel, ‘MNC Strategic Intervention in Violent Conflict: Variations based on Conflict Characteristics’ (2009) 89 Journal of Business Ethics 375; Timothy Fort, Business, Integrity and Peace: Beyond Geopolitical and Disciplinary Boundaries (Cambridge University Press, 2011). 16 Bais and Hujiser, above n15. 17 Forrer, above n13, 451.
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Corporate Peacebuilding and the Law under-theorised and under-investigated.18 The suggestion that the issue can be considered through a regulatory lens, let alone that the law is a key part of the solution, receives scant attention in the relevant scholarship.19
A Risk-aversion, Free-riding and Short-termism
Nevertheless, several salient ideas have been put forward. Traits common to many TNCs have been posited as reasons for the gap between the theory and practice of corporate contributions to peacebuilding, including: risk-aversion, free-riding and short- termism.20 In a more general sense, the profit motive is often perceived as militating against involvement in peacebuilding endeavours.21
Some scholars suggest that a version of the “free-rider phenomenon” is one reason for a lack of widespread corporate embrace of peacebuilding potential.22 The uncertainty and risk inherent in conflict transformation processes, they argue, means that many TNCs are unwilling to engage.23 Backing up this theory is empirical investigations that have found that ‘similar to other corporate citizenship or CSR initiatives, conflict prevention contributions are only considered appropriate for corporations when they do not affect its core finances or core business, but rather take place at the margin of core activity and are in line with corporate strategy.’24 Unfortunately, while peacebuilding efforts are in the long-term interests of many TNCs, most operate on short-term business cycles, largely negating the business logic of getting involved.25
Another impediment to realising the vision of corporate peacebuilding referred to in the literature is that few TNCs (even those operating in areas impacted by armed conflict)
18 Ford, as above n15. 19 Ford’s recent work on the regulatory possibilities of post-conflict UN peacekeeping missions is the exception that proves the rule. Ford, ibid. 20 Oetzel, Getz and Ladek, above n13, 383. 21 Ibid. 22 Ibid; Leiv Lunde and Mark Taylor, ‘Regulating Business in Conflict Zones: Issues and Options’ in Karen Ballentine and Heiko Nitzschke (eds), Profiting from Peace: Managing the Resource Dimensions of Civil War (Lynne Rienner Publishers, 2005) 315. 23 Ibid. 24 Gabriele Suder (ed), International Business Under Adversity: A Role in Corporate Responsibility, Conflict Prevention and Peace (Edward Elgar, 2008). 25 Mats Berdal and Nader Mousavizadeh, ‘Investing for Peace: The Private Sector and the Challenges of Peacebuilding’ (2010) 52(2) Survival 37, 52.
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Chapter 3: An Innovative Regulatory Approach perceive any obligation to get involved in oftentimes politically-sensitive issues that put their business interests, operations and personnel at risk of harm.26 On the contrary, executives express wariness of getting involved as they lack the know-how to constructively engage and do not want to be drawn into complex political dynamics, preferring to insulate their operations from conflict wherever possible.27
The standard business practice of TNCs is to see the issues surrounding doing business in conflict-affected areas in terms of risk management, CSR commitments and public relations.28 Often the desire to avoid or minimise the perceived risks of involving themselves in contentious and politicised issues dominates corporate thinking, necessitating that they remain ‘largely passive’ in peacebuilding efforts.29
In another important contribution to explaining the gap between the theorised potential and reality of corporate practice in conflict-affected areas, Forrer suggests three reasons.30 Firstly, ‘there simply has not been enough time for evidence of “best practices” to accumulate and be promulgated’ among the global business community.31 Secondly, NGOs and academics working on the issue have so far failed to develop a shared lexicon for corporate contributions to peacebuilding, which in turn ‘suggests meaningful differences over what peace-through-commerce means or implies to different organizations.’32 Finally, Forrer points to the continued grip of the shareholder-primacy model of corporate governance on most TNCs, and suggests, as Fort does, that it may not be the optimal approach to achieving sustainable peace.33
26 Derek Sweetman, Business, Conflict Resolution and Peacebuilding: Contributions From the Private Sector to Address Violent Conflict (Routledge, 2009) 118. 27 Ibid. 28 Forrer, Fort and Gilpin, above n6, 11. 29 See, eg, Nissim Cohen and Guy Ben-Porat, ‘Business Communities and Peace: The Cost-Benefit Calculations of Political Involvement’ (2008) 33(3) Peace and Change 426. 30 Forrer, above n13, 452. 31 Ibid. 32 Ibid., 453. 33 Fort, Business, Integrity and Peace, above n15; Forrer, above n13, 453.
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B Need for an Effective Regulatory Regime
Regardless of the explanations above, ultimately it is the failure to establish an effective regulatory regime for TNCs operating in conflict-affected areas that allows continued corporate abuses to take place and prevents realisation of the corporate peacebuilding vision.
A well-designed regulatory regime would ensure a level playing-field, entail a shared language and a more precise understanding of the types of conduct that are to be proscribed and encouraged. Forrer et al allude to governmental regulation as a critical path for realising the goals of the peace-through-commerce movement; without offering any analysis or specifics, they argue that ‘national and foreign policies must be developed to align commercial activity in conflict-affected states with other peacebuilding efforts.’34
Moreover, the reservations expressed about the legitimacy of the peace-through- commerce project also highlight the value of a regulatory approach to the issue of TNCs doing business in conflict-affected areas. Critics are rightly concerned that this sounds akin to the privatisation of peace, an idea many are reflexively wary of as it may, in effect, cause the hollowing out of altruistic peacebuilding practices led by governmental and civil society actors. 35 And there is the broader critique made by the likes of Dickinson and Rundle, relating to the outsourcing of government tasks to the private sector. It is necessary to question whether private entities have an appropriate role in the provision of peace and security – traditionally not merely state-based functions, but at the heart of conceptions of sovereignty.36 In the contentious and politicised arena of peacebuilding, these critiques have a great deal of legitimacy.37
34 Ibid. 35 Berdal and Mousavizadeh, above n25, 52. 36 Laura Dickinson, Outsourcing War and Peace: Preserving Public Values in a World of Privatized Foreign Affairs (Yale University Press, 2011); Kirsten Rundle, ‘Legality in the Contracting-Out State: Cues from the Case of Jimmy Mubenga’, (Seminar, Melbourne Law School, 12 June 2013). See also, Lothar Rieth and Melanie Zimmer, ‘Transnational Corporations and Conflict Prevention: The Impact of Norms on Private Actors’ (Paper No. 43 University of Tubingen, Center for International Relations/Peace and Conflict Studies, 2004) 7. 37 Berdal and Mousavizadeh, above n25, 52.
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This thesis and the larger peace-through-commerce project do not condone the privatizing or corporatising of peace, nor do they argue that TNCs should become the primary or even the most significant mechanisms by which peacebuilding is conducted in the modern age. 38 As Kell observes ‘private actions cannot substitute for effective governance and bi- or multi-lateral cooperation.’39 An effective governance regime that includes state-based legal mechanisms to regulate corporate peacebuilding helps alleviate those concerns. Similarly, holding TNCs accountable for their conflict-driving activities demands strengthened laws and state-based regulation.
The reality is that thousands of TNCs are already there – operating in conflict-affected areas, and influencing both directly and indirectly the communities around them, for better and for worse. As has been noted, the poor governance of these regions permits TNCs to operate largely with impunity. If their worst excesses are to be curbed and their enormous capabilities deployed for peacebuilding purposes, improved regulation is required.40 Conceivably, a robust regulatory framework could propel corporations to improve their conduct in conflict-affected areas and ensure proper monitoring of their involvement in peacebuilding to make certain they do not circumvent or supplant local government and civil society efforts but, rather, complement them.
Other authors have also alluded to the poor regulatory environment that plagues many a conflict-affected area as a major explanatory factor for the absence of corporate peacebuilding.41 For instance, Chesterman and Bismuth emphasise the failure of local laws and weak governance in host-states in curtailing the worst corporate excesses in
38 Moira Feil, Global Governance and Corporate Responsibility in Conflict Zones (Palgrave Macmillan, 2012) 29. 39 George Kell, ‘Foreword’ in Karen Ballentine and Virginia Haufler, Enabling Economies of Peace (UN Global Compact, 2010). 40 The field will ‘increase dramatically… the pressure on governments to create legislative frameworks to encourage responsible governance practices [in conflict zones].’ Timothy Fort and Cindy Schipani, ‘The Role of the Corporate Governance in Fostering Sustainable Peace’ (2002) 35 Vanderbilt Journal of Transnational Law 389, 393. 41 Ballentine and Haufler, above n4, 2; Forrer, Fort and Gilpin, above n6; Ronen Shamir and Dana Weiss, ‘Corporate Accountability to Human Rights: The Case of the Gaza Strip’ (2011) 24 Harvard Human Rights Journal 155; Charles Koerber, ‘Corporate Social Responsibility Standards: Current Implications and Future Possibilities for Peace Through Commerce’ (2010) 89 Journal of Business Ethics 461.
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Corporate Peacebuilding and the Law conflict zones.42 The breakdown of rule of law and effective governance in these areas means that local and foreign governments are often unwilling or unable to protect human rights in these areas, or punish violators. 43 On the contrary, local government officials in conflict-affected areas are all too often parties to such human rights abuses.44 Indeed, the international and home-state domains are often more promising loci for regulating TNC conduct in conflict-affected areas, yet they too are currently largely ineffectual.45
Existing international and state-based regulatory regimes applicable to TNCs in conflict-affected areas are often characterised by poor construction, vague and unclear behavioural standards, weak or absent enforcement mechanisms, and few if any incentives to encourage better corporate citizenship.46 Kanagaretnam and Brown write that the international community has failed to adopt ‘a coherent and consistent approach .... to move this [corporate peacebuilding] agenda forward.’47 This governance gap prompted Shamir and Weiss to go so far as to describe TNCs doing business in conflict- affected areas as operating in a ‘regulatory vacuum’48 and a UN report on business and human rights declared that ‘these governance gaps provide the permissive environment for wrongful acts by companies of all kinds without adequate sanctioning or reparation.’49
42 Chesterman, above n9; Regis Bismuth, ‘Mapping a Responsibility of Corporations for Violations of International Humanitarian Law Sailing between International and Domestic Legal Orders’ (2010) 38 Denver Journal of International Law and Policy 203. 43 Anita Ramasastry and Robert C Thompson, Commerce, Crime and Conflict: Legal Remedies for Private Sector Liability for Grave Breaches of International Law: A Survey of Sixteen Countries (FAFO, 2006) 5; Nicole Deitelhoff and Klaus Dieter Wolf, ‘Business and Human Rights: How Corporate Norm Violators Become Norm Entrepreneurs’ in Thomas Risse, Stephen Ropp, Kathryn Sikkink (eds) The Persistent Power of Human Rights: From Commitment to Compliance (Cambridge University Press, 2013) 235. 44 See, eg, Global Witness, ‘A Rough Trade: The Role of Companies and Governments in the Angolan Conflict’ (Report, December 1 1998). 45 Ballentine and Haufler, above n4 46 Ibid, 3. 47 Pan Kanagaretnam and Susan Brown, Business, Conflict and Peacebuilding: An Operational Framework (Canadian Peacekeeping Press, 2005) 16. 48 Shamir and Weiss, above n41. 49 John Ruggie, Protect, Respect and Remedy: A Framework for Business and Human Rights, Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises, UN Doc A/HRC/8/5 (18 June 2008) [3].
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C Review of the Current Regulatory Landscape for Corporate Peacebuilding
An overview of the current regulatory landscape for Australian TNCs doing business in conflict-affected areas illustrates the need for better public governance and better articulation of the relationship between public and private governance.
A desktop review of the public websites and annual reports of the ASX Top 20 – the twenty largest companies listed on the Australian Stock Exchange (by market capitalisation) – indicates that, in general, the conflict/peace-related regulatory instruments they believe applicable to their operations are derived from three sources: 1. industry self-regulation in the form of corporate and industry-based codes of conduct and guidelines 2. national regulation in the form of domestic Australian (and host-state) laws 3. international regulation in the form of international agreements and initiatives, for example, spearheaded by the UN.50
A typology of regulatory instruments relevant to the analysis can be derived from the review of ASX Top 20 annual reporting, based on these three levels of regulation (see Table 3.1 below).
Table 3.1: Levels of regulation applicable to Australian corporate conduct in conflict-affected areas, with illustrative examples of instruments
Industry National International Company values Anti-bribery laws UN Global Compact
Industry codes of UN Guiding Principles on Australian criminal code conduct Business and Human Rights
Economic and trade OECD Guidelines for
sanctions laws Multinational Enterprises
Voluntary Principles for Security
and Human Rights
Extractive Industries
Transparency Initiative Kimberley Process
50 See, eg, BHP Billiton, 2013 Sustainability Report, BHP Billiton
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1 No Magic Bullet These instruments will be referenced in the analysis in subsequent chapters, including the promise and limitations of several of them in helping realise the vision of corporate peacebuilding. Nevertheless, a few general observations of the existing regulatory landscape to help establish the contours of the analysis in the coming chapters is appropriate.
It is difficult to assess the regime as a whole, primarily because it is fragmented, with different regulatory instruments applicable in different contexts and to different TNCs. No one level, and certainly no single instrument, stands out as being by far the most important and effective regulatory effort when it comes to improving TNC conduct in conflict-affected areas. There is no international treaty or domestic law that effectively minimises corporate conflict-driving conduct (i.e. contributing to negative peace), let alone an instrument that encourages positive peacebuilding contributions from TNCs.
It is apparent that both the industry and national levels of regulation defer to the international level for the derivation of relevant behavioural standards. Whereas when it comes to compliance mechanisms, the industry and national levels come to the fore in displaying a range of accountability measures, ranging from industry or internal chastisement to criminal sanctions.
2 Soft, Vague, Voluntary and Modest Voluntary, collaborative, non-binding, self-monitoring instruments and codes with a scarcity of clearly defined behavioural standards dominate the industry and international regulatory landscapes. Most companies’ reporting references at least one voluntary international initiative in the realm of social responsibilities and human rights standards, such as the UN Global Compact to which they adhere, and some note their acceptance of “socially-responsible” accounting principles pertaining to those operations or materiel sourced from conflict-affected areas.51 These initiatives all have similar characteristics: invariably voluntary, and coordinated by the UN or other international organisations, they also frequently involve corporate input in their drafting.
51 See Figure 2; eg, UN Global Compact (2000)
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Managerialist responses to human rights concerns predominate, with so-called “human rights due diligence” and “human rights risk assessments” typical of initiatives to address corporate human rights concerns.52 The UN Guiding Principles on Business and Human Rights, for instance, champions the use of these types of due diligence programs as a prime means of realising great corporate respect for human rights.53 While being effective in cultivating support from the business community for these regulatory efforts,54 this managerialism obscures the peacebuilding potential of many TNCs that the peace-through-commerce literature has identified.
The norms of behaviour that do appear within the regulatory web are often vague (e.g. UN Global Compact’s ten short principles). Robust enforcement mechanisms to encourage their adherence, and hold to account those TNCs who breach them are often lacking.
Significantly, while all the ASX Top 20 TNCs do business in some form or another in conflict-affected regions, none explicitly or directly note “peace” or “conflict” as an issue of specific concern in their annual reports.55 Politically sensitive issues, including issues relating to armed conflict are routinely avoided by CSR efforts, which tend to focus on “low-politics” issues, such as improving the healthcare, environment, education services and housing of vulnerable communities. 56 In fact, the closest any of them come to acknowledging peace and conflict is the acceptance by some of the extractive industry TNCs of the Voluntary Principles for Security and Human Rights. Yet even this instrument has adopted a broadly human rights paradigm in discussing issues of corporate dealings with public militaries and private security forces, rather
52 See, eg, BHP Billiton, above n50. 53 UN Guiding Principles on Business and Human Rights, Commentary on Principle 5 and 7. 54 By way of illustration, witness the business communities rejection of the UN’s binding Draft Norms and their enthusiastic support for the vaguely-worded, voluntary Global Compact. See, generally, International Chamber of Commerce and International Organisation of Employers, ‘Joint views of the IOE and ICC on the draft “Norms on the responsibilities of transnational corporations and other business enterprises with regard to human rights”’ (Report, 1 March 2004). 55 Research notes with author. 56 Peter French, Jeffrey Nesteruk and David Risser, Corporations in the Moral Community (Harcourt Publishers, 1992).
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Corporate Peacebuilding and the Law than acknowledging the specific issues associated with armed conflict and peacebuilding.57
In fact, the most prominent instruments are not directed at addressing the problem of corporate conflict-driving behavior or encouraging corporate peacebuilding. In general, peace and conflict issues, and in particular the conflict-driving behaviour of TNCs, are not a focus or a priority of any major regulatory actor or mechanism. Any indirect peacebuilding benefit is but a byproduct of initiatives whose stated objectives are to tackle broader issues such as corporate human rights obligations or corporate social responsibilities. Indeed, these two paradigms – human rights and CSR – are evidently the paradigmatic choice for many of the international and industry-based instruments within the regulatory web. Yet, as discussed in the chapters to come, when it comes to effectively regulating corporate conduct in conflict-affected areas and realising the goal of corporate peacebuilding, these paradigms are, arguably, insufficient and of limited utility.
It is also worthwhile to note the rather modest rate of adoption of pertinent international regulatory initiatives by Australian TNCs. While the entire ASX Top 20 companies do business in some sense in conflict-affected areas, only one (BHP Billiton) has committed to the three international regulatory instruments mentioned in Table 1 that are open to corporate participation.58 Of course, some schemes are applicable to only certain industries – for example, the EITI (see Table 3.2) – to extractives. Nevertheless, the failure of the UN Global Compact to attract more than seven out of twenty of the leading Australian TNCs to its more generalised statements suggests that the permeation of these regulatory initiatives into the Australian business community – even in attracting formal commitments, let alone changing actual corporate practice – is far from complete.
57 Voluntary Principles on Security and Human Rights (2000) < http://www.voluntaryprinciples.org/what- are-the-voluntary-principles/> 58 BHP Billiton, above n50.
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Table 3.2: ASX Top 20’s commitments to relevant international regulatory instruments. Conducting UN Guiding business in UN Global Voluntary Principles on EITI conflict-affected Compact Principles Business & areas Human Rights AMP Y N N N N ANZ Y Y N N Y BHP Billiton Y Y Y Y Y Brambles Y N N N Y Commonwealth Y Y Y N N Bank CSL Y N N N N Macquarie Group Y N N N N National Australia Y Y Y N N Bank Newcrest Mining Y N Y N N Origin Energy Y N N N Y QBE Y N N N N Rio Tinto Y N Y Y Y Santos Y N Y N N Suncorp Y N N N N Telstra Y Y N N Y Westpac Y Y N N Y Westfield Y N N N N Wesfarmers Y Y N N N Woolworths Y Y N N N Woodside Y N Y N N
An assessment of the relevant scholarly literatures and current regulatory landscape suggest there is a clear need for more effective regulation and a coherent, regulatory framework to diminish corporate conflict-driving activities and realise the vision of corporate peacebuilding. Moreover, the role of law and legal instruments applicable to transnational business in conflict-affected areas requires clarification and strengthening. This chapter now takes up the task of developing a theoretical regulatory framework which can then be applied in furtherance of this agenda.
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D Concern over Governance of Transnational Business
The ineffectual regulation of TNCs in conflict-affected areas is symptomatic of a broader global governance dilemma; namely, the inability to effectively govern transnational business writ large, and the inability of any single regulatory actor (be it a state or international oganisation) to address transnational governance issues. 59 As Keohane puts it, TNCs ‘are not conventionally held accountable on a transnational basis’ and it is in their regulation where the ‘external accountability gaps are greatest.’60 Keohane argues that: [If] we are concerned about the effects of powerful entities on powerless people, we scholars should be asking how to hold corporations accountable – as national governments in capitalist societies have sought to hold corporations accountable for over a century. Globalization means that it is more difficult for national governments to hold corporations accountable than in the past. Why isn’t our field paying more attention?61
In concurrence with Keohane’s observations, there is no robust and effective regulatory scheme currently binding TNCs to adopt a conflict-minimisation, let alone a peace- maximisation approach when operating in conflict-affected areas.62
E The Need for Legal Regulation
When it comes to tackling global problems in an increasingly decentred and multi-polar world, voluntary private self-regulation is ‘seen as a possible way of filling at least some of those regulatory gaps’ created by the forces of globalisation. 63 Moreover, codes of conduct may serve a significant regulatory purpose by institutionalising standards of
59 Mathias Koenig-Archibugi, ‘Introduction: Globalization and the Challenge to Governance’ in Mathias Koenig-Archibugi, Taming Globalization: Frontiers of Governance (Polity Press, 2003) 4. 60 Robert Keohane, ‘Global Governance and Democratic Accountability’ in David Held and Mathias Keonig-Archibugi (eds) Taming Globalizaion: Frontiers of Governance, (Polity Press, 2003) 146. 61 Ibid. 62 Ibid. See generally, Forrer, above n13; Jean-Christopher Graz and Andrea Nolke (eds), Transnational Private Governance (Routledge, 2008). 63 See, eg, Jan Kooiman, ‘Governance: A Socio-Political Perspective’, in J.R. Grote and B. Gbikpi (eds), Participatory Governance (Beske and Budrich, 2002) 71-96; Christine Parker, The Open Corporation: Effective Self-Regulation and Democracy (Cambridge University Press, 2002); Thomas Conzelmann and Klaus Dieter Wolf, ‘The Potential and Limits of Governance by Private Codes of Conduct’ in Jean- Christopher Graz and Andrea Nolke (eds), Transnational Private Governance (Routledge, 2008) 98.
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Chapter 3: An Innovative Regulatory Approach behaviour within companies and industries,64 especially when the code in question is widely adopted.65 The speed at which private codes of conduct can be developed is another beneficial trait, especially when contrasted with the tedious, often decades-long process of building the requisite political support for an international treaty or national law.66
Similarly, despite the inattention to other forms of regulation vis-a-vis corporate peacebuilding, there is a strong trend in the peace-through-commerce literature to promote various forms of self-regulation, reflecting a popular theme that the responsibility for realising the vision of corporate peacebuilding rests largely with individual companies and their managements. 67
Many of these authors fail to recognise the limited utility of the ‘tentative and sporadic’ efforts at corporate self-regulation in regards to conflict-sensitive practices.68 Moreover, many fail to embrace the idea that state-based regulation is feasible, and perhaps necessary, to supplement industry-based initiatives and host-state efforts.69 Nelson observed over a decade ago that the majority of corporations will not realise their peacebuilding potential without external encouragement and/or compulsion, and this call for greater focus on the regulatory landscape continues to resonate, and is no less relevant or urgent today.70
64 Jeffrey Checkel, ‘Persuasion in International Institutions’ (Working Paper 02/14, Advanced Research on the Europeanisation of the Nation-State, Oslo, 2002). 65 Ibid. 66 Andrea Nolke and Jean-Christopher Graz, “Conclusion: The Limits of Transnational Private Governance,” in Graz and Nolke (eds), Transnational Private Governance (Routledge, 2008); Conzelmann and Wolf, above n62, 100. 67 Juliette Bennet, ‘Multinational Corporations, Social Responsibility and Conflict’, (2002) 55 Journal of International Affairs 410; Forrer, Fort and Gilpin, above n6, 3. 68 Ballentine and Haufler, n4, 2. 69 Salil Tripathi, ‘Corporate Social Responsibility’ in Michael Pugh, Neil Cooper (eds) Whose Peace? Critical Perspectives on the Political Economy of Peacebuilding (Palgrave Macmillan, 2008) 85; Surya Deva, Regulating Corporate Human Rights Violations: Humanizing Business (Routledge, 2012); Neil Gunningham, ‘Environment, Self-Regulation and the Chemical Industry: Assessing Responsible Care’ (1995) 17 Law and Policy 57; Conzelmann and Wolf, as above n62, 99. 70 Jessica Banfield, Virginia Haufler and Damian Lilly, ‘Transnational Corporations in Conflict-Prone Zones: Public Policy Responses and a Framework for Action’ (2005) 33 Oxford Development Studies 133. See also, Forrer, Fort and Gilpin, above n6.
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Despite a proliferation of industry-based CSR initiatives and an ever-increasing amount of ‘sustainability’ reporting produced by TNCs, the actual impact of these paper commitments to community, and to environment, remains disputed.71 As a 2012 study by Reyes et al concluded, the internalisation of CSR into the culture of most major TNCs is not apparent.72 In regulatory studies literature, it is well recognised that markets are created, maintained and overseen by governments, not solely by market players. The same is true of private self-regulation; it cannot operate without some state- based, public “meta-governance” that creates the framework and oversight regime for self-regulatory initiatives to flourish.73 The danger is that self-imposed codes and values frameworks take the pressure off governments to enact more onerous and enforceable regulation on these corporations, when this is precisely what is necessary to make self- regulation work, especially in relation to social and environmental concerns.74
Aside from their questionable effectiveness, these corporate codes are criticised for having a democracy and legitimacy deficit and for seeking to supplant the traditional functions of the state.75 Indeed, Gunningham, among others, notes that voluntary codes of conduct may supplement or precede public regulation, but only rarely do they make public regulation unnecessary.76 A well-conceived regulatory framework to achieve corporate peacebuilding must acknowledge and harness the trend of private self- regulation, but couple it with more effective state-based and legal regulation of TNCs in conflict-affected areas.
71 See, eg, Alberto Fonseca, ‘How Credible are Mining Corporations’ Sustainability Reports? A Critical Anaylsis of External Assurance under the Requirements of the International Council on Mining and Metals’ (2010) 17 Corporate Social Responsibility and Environmental Management 355; Jean- Christopher Graz and Andrea Nolke (eds), Transnational Private Governance (Routledge, 2008) 98; Global Witness, ‘Oil and Mining In Violent Places: Why Voluntary Codes For Companies Don’t Guarantee Human Rights’ (Report, October 2007). 72 Calderon Reyes, Ferreor Ignacio and Redin Dulce, ‘Ethical Codes and Corporate Responsibility of the Most Admired Companies of the World: Toward a third generation of ethics?’ (2012) 14(4) Business and Politics 1. 73 Kooiman, above n61; Tripathi, above n68. 74 Conzelmann and Wolf, above n62, 98. 75 Nolke and Graz, above n65, 238-240. 76 Neil Gunningham, ‘Environment, Self-Regulation and the Chemical Industry: Assessing Responsible Care’ (1995) 17 Law and Policy 57; Conzelmann and Wolf, above n62, 98-99.
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III LOOKING TO RESPONSIVE REGULATION FOR A THEORETICAL FRAMEWORK
A Introduction
This chapter applies and strengthens the normative and descriptive power of responsive regulation theory to effectively respond to the issue of corporate involvement in peacebuilding. The original pyramidal model is focused on compliance with behavioural standards. Regulation, appropriately conceived, should not be synonymous with compliance mechanisms or enforcement of rules only but, rather, should also encompass methods and mechanisms that encourage regulatees to go beyond compliance, with legal rules to satisfy aspirational regulatory goals – such as achieving corporate peacebuilding.77 The regulatory diamond integrates into the one schema both compliance regulation and aspirational regulation. It also makes explicit the central role of law within the schema. In so doing, it highlights the strengths and limitations of the law for achieving regulatory goals.
Whilst the pyramid’s end goal was rule compliance, the regulatory diamond suggests that compliance with certain legal standards is often not an endpoint but a waypoint — albeit a most important one — to improved regulatee behaviour. The regulatory diamond thereby offers a more cohesive and holistic representation of the concept of regulation that underpins responsive regulation theory and contemporary regulatory studies. Just as the pyramid offered a roadmap for regulatees to achieve compliance, similarly the regulatory diamond offers a roadmap for going beyond mere compliance to achieving regulatory goals and realising the ‘continuous improvement’ meta-goal of regulation, as posited by Braithwaite and others.78 In so doing, it also offers practical benefits for regulators and regulatees designing, understanding and operating within a given regulatory regime.
77 Jonathan Borck and Cary Coglianese, ‘Beyond Compliance: Explaining Business Participation in Voluntary Environmental Programs’ in Christine Parker and Vibeke Lehmann Nielsen (eds), Explaining Compliance: Business Responses to Regulation (Edward Elgar, 2011) 139. 78 John Braithwaite, Toni Makkai and Valerie Braithwaite, Regulating Aged Care: Ritualism and the New Pyramid (Edward Elgar, 2007) 322.
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These advances in the responsive regulation model allow for a deeper engagement in complex, globalised issues such as the governance of TNCs in conflict-affected areas, and help crystallise opportunities for better regulation that are not possible with the original regulatory pyramid.
Part III reviews responsive regulation theory and its pyramidal model showing it is a useful start for addressing the problem and potential of TNCs in conflict-affected areas but does not go far enough. Part IV proposes the regulatory diamond and its constituent parts as an adaptation of, and improvement on, the responsive regulation pyramid, including both compliance regulation (the concern of the pyramid) and aspirational regulation. Real-world examples are offered, highlighting the increased utility of the regulatory diamond as a heuristic that could aid theorists, regulators and regulatees alike.
The regulatory diamond theoretical model of responsive regulation is then employed in subsequent chapters to delve more deeply into examining the roles and functions of law in how to realise the vision of corporate peacebuilding – both preventing and deterring TNCs’ conflict-driving activities, and promoting the active involvement of TNCs in peacebuilding activities.
B Recapping Ayres and Braithwaite’s Responsive Regulation
Responsive regulation integrates the claims of the economic theory of regulation with game theory and builds upon prior empirical research conducted separately by Ayres and Braithwaite.79 The theory attempts to bridge multiple perspectives on regulation,
79 See, eg, Ian Ayres, ‘Playing Games with the Law’ (1990) 42(5) Stanford Law Review 1291; Ian Ayres, ‘How Cartels Punish: A Structural Theory of Self-Enforcing Collusion’ (1987) 87 Columbia Law Review 295; Ian Ayres, ‘Determinants of Airline Carrier Conduct’ (1988) 8 International Review of Law and Economics 187; John Braithwaite, To Punish or Persuade: Enforcement of Coal Mine Safety (SUNY Press, 1985); Peter Grabosky and John Braithwaite, Of Manners Gentle: Enforcement Strategies of Australian Business Regulatory Agencies, (Oxford University Press, 1986).
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Chapter 3: An Innovative Regulatory Approach combining elements of public, private and institutionalist theories.80 Beyond its theoretical basis, the simplicity and easily communicated design of responsive regulation’s pyramid are surely a contributing factor to the theory’s enduring popularity among regulatory scholars and practitioners, in and outside government.81
Responsive regulation has been a major theoretical force for the past two decades in the study and practice of regulation.82 New ideas and thinking about regulation have been developed since the 1992 release of Ayres and Braithwaite’s Responsive Regulation including: ‘polycentric regulation’,83 ‘the open corporation’,84 ‘decentred regulation’85 and ‘regulatory capitalism’.86 There has even been a shift away from the language of regulation to consider governance and, in particular, so-called ‘new governance’ techniques.87 Nevertheless, responsive regulation and its pyramid heuristic remain unrivalled in their applicability to multiple regulatory contexts, in both a descriptive and normative sense.88
Responsive regulation offers a solution to the policy conundrum faced by many regulators: when to punish, and when to persuade?89 Responsive regulation’s primary theoretical claim is that, to be effective, regulators and regulatory instruments should adapt (i.e. be responsive) to the actions of the entities or the people they purport to
80 Bronwen Morgan and Karen Yeung, An Introduction to Law and Regulation: Text and Materials (Cambridge University Press, 2007) 53. 81 Peter Mascini, ‘Why Was the Enforcement Pyramid so Influential? And What Price Was Paid?’ (2013) 7 Regulation and Governance 48, 53-6. 82 Ayres and Braithwaite, above n10. As Ian Ayres pointed out in a 2013 article, the responsive regulation theory generates ever increasing annual citations in scholarly literature: Ian Ayres, ‘Responsive Regulation: A Co-Author’s Appreciation’ (2013) 7 Regulation & Governance 145, 145-146; Christine Parker, ‘Twenty Years of Responsive Regulation: An Appreciation and Appraisal’ (2013) 7 Regulation & Governance 2, 2. 83 Julia Black, ‘Constructing and Contesting Legitimacy and Accountability in Polycentric Regulatory Regimes’ (2008) 2 Regulation & Governance 137, 140. 84 Parker, The Open Corporation, above n62, ix. 85 Julia Black, ‘Critical Reflections on Regulation’ (2002) 27 Australian Journal of Legal Philosophy 1, 4. 86 David Levi-Faur, ‘The Global Diffusion of Regulatory Capitalism’ (2005) 598 Annals of the American Academy of Political and Social Science 12, 14. 87 Orly Lobel, ‘The Renew Deal: The Fall of Regulation and the Rise of Governance in Contemporary Legal Thought’ (2004) 89 Minnesota Law Review 342. 88 See, eg, 2013 special issue of Regulation & Governance devoted to responsive regulation lauding the twentieth anniversary of the publication of Ayres and Braithwaite, above n10; Parker, ‘Twenty Years of Responsive Regulation’, above n81, 2; Mascini, above n80, 48. 89 Ayres and Braithwaite, above n10, 21.
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Corporate Peacebuilding and the Law regulate.90 The regulatee’s conduct will determine ‘whether a more or less interventionist [regulatory] response is needed. Rule enforcers should be responsive to how effectively citizens or corporations are regulating themselves before deciding whether to escalate intervention.’91 A regulator must be willing and have the capacity to escalate their regulatory approach from soft words to hard deeds, and likewise be willing to de-escalate when met with goodwill and appropriate behaviour from the regulated entity.92 The theory builds a dynamic model in which the strengths of the different forms of regulation compensate for others’ weaknesses, and minimises the negative impact of coercive enforcement mechanisms by applying coercion only to non- responsive or recalcitrant entities.93
C Design of the Regulatory Enforcement Pyramid
Ayres and Braithwaite captured the essence of their theory in the ‘enforcement pyramid’ (see Figure 3.1).94 The ‘arresting image’95 of the pyramid is ‘the most distinctive part of responsive regulation’.96 The pyramid depicts the relationship between regulatory devices and mechanisms, and visually demonstrates that no one regulatory method — neither self-regulation, co-regulation nor command-and-control regulation — is optimal and, rather, that a dynamic web of different regulatory techniques is preferable.97
90 Ibid 19–20. 91 John Braithwaite, Regulatory Capitalism: How it Works, Ideas for Making it Work Better (Edward Elgar, 2008) 88. 92 John Braithwaite, ‘Fasken Lecture: The Essence of Responsive Regulation’ (2011) 44 University of British Columbia Law Review 475, 483-4. 93 Ibid, 484; Mascini, above n80, 52. 94 Ayres and Braithwaite, above n10, 19–53. 95 Ayres, above n81, 145. 96 Braithwaite, Regulatory Capitalism, above n90, 88. 97 John Braithwaite, Restorative Justice and Responsive Regulation (Oxford University Press, 2002), 32; Braithwaite, Regulatory Capitalism, above n90, 88–92.
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Figure 3.1: Example of enforcement pyramid 98
Braithwaite explains that the broad, lower level of the pyramid is the most inclusive, collaborative and ‘dialogue-based [regulatory] approach we can craft for securing compliance with a just law’.99 At each successive level up the pyramid are ever more ‘demanding and punitive interventions’.100 Another way of viewing the pyramid is that self-regulation is at the base of the pyramid, whereas coercive command-and-control regulation is towards the apex, with a host of regulatory methods in between.
Dynamism is a vital component of the model and is a reflection of what Braithwaite, Makkai and Braithwaite conceive as the ultimate purpose of regulation: to ‘catalyse continuous improvement’ in the behaviour of the regulated firm or individual.101 ‘The hypothesis of responsive regulatory theory is that a regulatory pyramid that creates a flexible space for innovation at the base of the pyramid will do better by continuous improvement than prescriptive command and control’.102
98 Ayres and Braithwaite, above n10, 39. 99 Braithwaite, Regulatory Capitalism, above n90, 88. 100 Ibid 89. 101 Braithwaite, Makkai and Braithwaite, above n77, 322. 102 Ibid.
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D The Utility of the Pyramid
As Braithwaite explains, the regulatory pyramid model can also be used to illustrate the fluid assumptions made about the regulated entity by the regulator, and in turn allow the regulator to respond with the appropriate regulatory action (see Figure 3.2).103 The process of regulation commences with an initial presumption that the regulated entity is a ‘virtuous actor’.104 That is, it will comply with the rules that regulators are seeking to enforce, if it is simply made aware of its obligation and has the capacity to do so.105 If education and persuasion and other similar collaborative efforts fail, the assumption made about the regulated entity shifts from it being virtuous to it being a rational actor. In the business context, that is, the corporation will comply when it is economically rational to do so.106 However, if costly and coercive methods of regulation still fail to gain compliance, the regulator’s assumptions about the regulatee shift further, to question the competence and/or rationality of that actor.107
Figure 3.2: Image of responsive regulation's enforcement pyramid, showing assumptions made by regulator about regulated entity108
103 Braithwaite, Regulatory Capitalism, above n90, 90–1. See also Ayres and Braithwaite, above n10, 50. 104 Braithwaite, ibid. 105 Braithwaite, Restorative Justice, above n96, 31–2. 106 Braithwaite, Regulatory Capitalism, above n90, 90. 107 Ayres and Braithwaite, above n10, 50–1. 108 Braithwaite, Regulatory Capitalism, above n90, 91.
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Braithwaite offers an extreme example of this scenario: a nuclear power plant manager who has no engineering knowledge.109 In such a situation, education or dialogic forms of regulation are inappropriate. Instead, that person must be removed from their job. Moreover, if the entire corporate team managing the nuclear power plant has no engineering competence to maintain such a plant, its licence to do so must be suspended or revoked.
As a heuristic, the regulatory pyramid offered by Ayres and Braithwaite, and the responsive regulation theory that underpins it, have been hugely influential. As a model of governance, the pyramid has been adopted by various regulatory agencies, ranging from local Australian entities, such as the Australian Taxation Office and the Australian Securities and Investments Commission, to international organisations such as the OECD. From the perspective of regulators, it has appeal: the assumption that persuasion may work in the vast majority of instances means that regulators can focus their efforts on the cheaper, more collaborative options to control behaviour, and resort far less frequently to the costly and time-consuming punitive measures at the tip of the pyramid. Similarly, from the perspective of regulatees, it has appeal: favouring less onerous modes of enforcement reduces the costs, both financial and otherwise, of compliance. This dynamic model not only suggests an efficient management of regulators’ and regulatees’ resources and capacities, but also develops constructive relationships between the regulator and the regulated.110
E Shortcomings of Responsive Regulation’s Pyramid
Despite its popularity and utility, responsive regulation has not been without scholarly criticism.111 These critiques range from questioning the utility and applicability of the model in specific and varied regulatory contexts to whether the theory is overly state-
109 Braithwaite, Restorative Justice, above n96, 32. 110 Braithwaite, ‘Fasken Lecture’, above n91, 486-7. 111 See, eg, Black, ‘Critical Reflections’, above n84; Christine Parker et al (eds), Regulating Law (Oxford University Press, 2004); Fiona Haines, Globalization and Regulatory Character: Regulatory Reform After the Kader Toy Factory Fire (Ashgate, 2005); Robert Baldwin and Julia Black, ‘Really Responsive Regulation’ (2008) 71 Modern Law Review 59.
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A thorough treatment of these critiques lies beyond the scope of this thesis. Neither this chapter, nor the regulatory diamond model that is proposed herein, are intended to ameliorate all the concerns that have been raised in the literature against responsive regulation theory.113 Instead, two critiques of the original responsive regulation pyramidal model are emphasised due to their particular relevance when attempting to apply responsive regulation to global governance concerns such as TNC conduct in conflict-affected areas.
The first of these observations is that it has an ill-defined baseline. In other words: from where are the standards with which compliance is sought derived? Secondly, and perhaps most critically, with its singular focus on compliance with certain standards the original model fails to reflect the full potential of the regulatory enterprise: in responding to societal needs and desires, to seek continuous improvement in the behaviour of those being regulated. This section elaborates on these two shortcomings of the regulatory pyramid. It concludes with a presentation and critique of Braithwaite’s recent attempt to address the latter concern: the proposed ‘dual pyramid’ model.114 This chapter’s final substantive section, Part 3, then outlines an alternative solution to these shortcomings: the regulatory diamond.
112 See, eg, Neil Gunningham and Peter Grabosky, Smart Regulation: Designing Environmental Policy (Clarendon Press, 1998); Levi-Faur, above n85; Black, ‘Constructing and Contesting Legitimacy’, above n82; Fiona Haines, The Paradox of Regulation: What Regulation Can Achieve and What it Cannot (Edward Elgar, 2011); Kenneth Abbott and Duncan Snidal, ‘Taking Responsive Regulation Transnational: Strategies for International Organizations’ (2013) 7 Regulation & Governance 95; Vibeke Lehmann Nielsen and Christine Parker, ‘Testing Responsive Regulation in Regulatory Enforcement’ (2009) 3 Regulation & Governance 376; Baldwin and Black, above n110; Oren Perez, ‘Responsive Regulation and Second-Order Reflexivity: On the Limits of Regulatory Intervention’ (2011) 44 University of British Columbia Law Review 743. Braithwaite has acknowledged that some readers may rightly criticise his work as being overly state-centric: Braithwaite, Regulatory Capitalism, above n90, 87. However, he argues that these complex regulatory relationships can still be reflected with responsive regulation: John Braithwaite and Peter Drahos, Global Business Regulation (Cambridge University Press, 2000) 538–9. 113 See, eg, Braithwaite, ‘Relational Republican Regulation’ (2013) 7 Regulation & Governance 124. 114 Braithwaite, Makkai and Braithwaite, above n77, 318.
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1 The Fuzzy Role of Law in Responsive Regulation Surprisingly, Braithwaite’s description of the pyramid – over the course of two decades – rarely expounds on the source of the behavioural standards that the pyramidal regulatory responses are designed to enforce. The baseline of the pyramid is often assumed to be a set of legal standards applicable to the regulated entities – standards with which compliance is sought – although that is rarely made explicit.115
What makes this uncertain status of the law at the baseline of the pyramid all the more puzzling is that it is hard to deny the vital presence of the law, embedded within the enforcement mechanisms that populate the pyramid, even as Ayres and Braithwaite sought to diminish and even supplant the role of legal, command-and-control style regulation with their model.116 While rarely resorted to, the coercive, law-based enforcement options at the apex of the pyramid – the ‘benign big guns’117 – are the most critical elements that ensure the effective functioning of the pyramidal model. The pyramid of escalating enforcement actions that privileges dialogue-based, persuasive enforcement mechanisms functions effectively precisely because it operates ‘in the shadow of the state’,118 possessing the draconian and punitive power of the law and its administrative agencies and courts. The foundational support of the law, rather than being a crutch, is an intrinsic source of the power of responsive regulation.119
Some commentators suggest that leaving the possibility open for non-legal behavioural standards is appropriate, especially when considering the multiplicity of non- governmental actors that serve as regulators in various contemporary contexts.120 Gunningham and Grabosky argue that an overly statist (and legal) approach unnecessarily curtails the practical utility of the pyramidal model.121 Regardless of the
115 Braithwaite, ‘Fasken Lecture’, above n91, 484. Indeed, a survey of Braithwaite’s own writings on responsive regulation yields little clarity on this aspect. For example, in Regulatory Capitalism, Braithwaite wrote that the pyramid is part of a ‘craft for securing compliance with a just law’: Braithwaite, Regulatory Capitalism, above n90, 88. 116 Ayres and Braithwaite, above n10, 4. 117 Ibid 19. See generally Tanja Borzel and Thomas Risse, ‘Governance without a State: Can It Work?’ (2010) 4 Regulation & Governance 113. 118 Neil Gunningham, ‘Environmental Law, Regulation and Governance: Shifting Architectures’ (2009) 21 Journal of Environmental Law 179, 181. 119 Gunningham and Grabosky, above n111, 396. 120 See eg. Gunningham and Grabosky, above n111. 121 Ibid., 397-8.
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Corporate Peacebuilding and the Law veracity of this claim, it is suggestive of the larger dialogue in the regulatory literature on the oft-disputed relationship(s) between regulation and law.122 In light of that dialogue, gaining a better sense of the nature and possible sources of the standards that constitute the baseline of the regulatory pyramid would be helpful. More generally, a regulatory model that clarifies the role of the law and legal standards within a given regulatory regime – however significant or limited that role may be – would be useful in a theoretical and practical sense.
2 Failure to Embrace a Full Conception of Regulation Notwithstanding the legitimate critiques of responsive regulation (only some of which I have touched on above), a conceptually fraught aspect of the theory that has, arguably, not received enough critical attention is the misconceived equivalence that it makes between regulation and compliance. There is a stark dissonance between the responsive regulation pyramidal model and the broad conception of regulation embraced by Ayres, Braithwaite and the regulatory theorist community.
The regulatory pyramid neatly encapsulates this dissonance. Ultimately, if the regulator employs the pyramid and fulfils its objective, then compliance with certain behavioural (and invariably legal) standards is achieved, whether through collaborative or adversarial regulatory processes. As Braithwaite observes, the pyramid is part of a ‘craft for securing compliance’.123 Put another way, the model is focused on minimising harm and deterring ‘poor’ behaviour. In so doing, the pyramid fails to adequately capture the nature and full potential of regulation. Arguably, it overlooks half the picture. Indeed, this is all but acknowledged in Braithwaite’s later works – as discussed below.124
Compliance with standards of behaviour is an important regulatory objective, but it is not the only one – it is merely a subset of regulatory possibilities. Regulatory techniques may also be employed to go beyond compliance – to encourage behaviour to exceed
122 See, eg, Morgan and Yeung, above n79; Chris Dent, ‘Relationships between Laws, Norms and Practices: The Case of Road Behaviour’ (2012) 21 Griffith Law Review 708. 123 Braithwaite, Regulatory Capitalism, above n90, 88. 124 See, eg, Braithwaite, Makkai and Braithwaite, above n77.
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Chapter 3: An Innovative Regulatory Approach those legal standards.125 Responsive regulation’s pyramidal model does not capture the full extent of what regulation is nor its theoretical potential, even as conceived by the theory’s own authors.
The broad definition of regulation that Braithwaite and others readily adopt is about social ordering and influencing behaviour.126 In Braithwaite’s own words, regulation is ‘that large subset of governance that is about steering the flow of events, as opposed to providing and distributing’.127 In a similarly broad fashion, Braithwaite and his co- authors state the goal of regulation to be ‘continuous improvement’ in the behaviour of the regulated entity or individual.128 That is, it is not confined to mere adherence to rules or minimum standards, but also includes mechanisms that encourage people and regulated firms and entities to go above and beyond those standards.129 Thus, the pyramid model – with its focus on compliance with certain rules – seemingly misrepresents Braithwaite’s own ‘continuous improvement’ maxim that lies at the heart of the regulatory endeavour.
One of the central claims of responsive regulation is that the pyramidal model ‘hold[s] out the possibility of nurturing the virtuous citizen, deterring the venal actor and incapacitating the “irrational” or dangerously incompetent actor’130 (see Figure 3.2 above). While the model indicates a regulatory structure for the second and third actions, it fails to grasp the full regulatory potential to encourage virtuous behaviour. On the contrary, considering the way the pyramid has been described by its inventors and applied in practice, it remains a model dominated by compliance. It nurtures obedience to the law and behavioural standards derived from it. It is this law-abiding conduct in
125 See, eg, Peter Grabosky, ‘Regulation by Reward: On the Use of Incentives as Regulatory Instruments’ (1995) 17 Law & Policy 257; Judith Healy, Improving Health Care Safety and Quality: Reluctant Regulators (Ashgate, 2011); Borck and Coglianese, above n76. 126 Robert Baldwin, Martin Cave and Martin Lodge, Understanding Regulation: Theory, Strategy and Practice (Oxford University Press, 2nd ed, 2012) 3. 127 Braithwaite, Regulatory Capitalism, above n90, 1. 128 See, Braithwaite, Makkai and Braithwaite, above n77, 199–200. 129 Braithwaite, ‘Fasken Lecture’, above n91, 502; Healy, Improving Health Care Safety, above n 124, 7– 9. 130 John Braithwaite, ‘Responsive Business Regulatory Institutions’ in C J Coady and G Sampford (eds), Business, Ethics and the Law (Federation Press, 1993) 83, 89.
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A change in how Braithwaite refers to the pyramidal model over the years is enlightening. In his earliest work on responsive regulation he refers to the heuristic model as the ‘enforcement pyramid’ but in his later works it is described simply as the ‘regulatory pyramid’.132 This slippage in labels is significant. Due to its popularity among academics and policymakers, the misnamed pyramid has contributed to constraining understandings of the possibilities of regulatory regimes. Responsive regulation’s pyramid is only a partial representation of the regulatory possibilities. It reflects only the responsive regulatory approach to the enforcement of behavioural standards (as its original label accurately designated). Rewards, inducements and other regulatory mechanisms to encourage positive behaviour beyond those standards do not have a comfortable status within Braithwaite’s regulatory pyramid.
Importantly, far from being solely a shortcoming of responsive regulation, this dissonance between the theoretical conception of regulation on the one hand and practical discussions and models on the other, is replicated by many others in the regulatory field. Indeed, the false equivalence between regulation and enforcement/compliance is characteristic of much of the broader literature on regulatory theory and practice, which is dominated by an inherently negative apprehension of the subjects and purpose of regulation.133 Alternative regulatory theories share responsive regulation’s heavy focus on enforcement mechanisms to secure compliance with set behavioural rules. For example, according to Christine Parker et al, the key attributes of a regulatory regime are the establishment of behavioural standards, the monitoring of the subjects of regulation for compliance with those standards and avenues to enforce those standards.134 That is, regulation is the means by which ‘poor’ behaviour is constrained, and punished as required. Similarly, Malcolm Sparrow, while noting his
131 Ayres and Braithwaite, above n10, 50. 132 See, eg, Braithwaite, Makkai and Braithwaite, above n77, 318; Braithwaite, ‘Fasken Lecture’, above n91, 480. 133 See generally Nielsen and Parker, above n111; Haines, The Paradox of Regulation, above n111; Black, 'Critical Reflections', above n84; Morgan and Yeung, above n79. 134 Christine Parker, Colin Scott, Nicola Lacey and John Braithwaite, ‘Introduction’ in Christine Parker et al (eds), Regulating Law (Oxford University Press, 2004) 1.
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As the titles of two prominent recent scholarly texts evince, the practice of regulation is often reduced to ‘securing compliance’ with minimum standards and regulatory theories to ‘explaining compliance’.137 Responsive regulation and the broader regulatory literatures focus on safety standards and environmental protection and to a far lesser extent on the bolder regulatory goals of encouraging ever safer workplaces, and ever more sustainable environments.
Yet in contemporary understandings of the nature of regulation – including those held by the same theorists referenced in the preceding paragraphs – regulation is generally and broadly conceived. Far more than the traditional lay vision of governmental red- tape and administrative laws, Levi-Faur refers to regulation as being ‘mechanisms of control’.138 In a similar vein, Morgan and Yeung suggest regulation refers to ‘all forms of social control, whether intentional or not, and whether imposed by the state or other social institutions’.139 Black concurs with these broad understandings, defining regulation as any attempt ‘to alter the behaviour of others according to defined standards or purposes’.140
The phenomenon of regulation, argues Haines, is: better conceptualised as governance, where control originates from various public and private actors and is given effect not only through law, but also by private agreements, the implementation of non-government standards, accreditation schemes and a multitude of other potential control mechanisms.141
135 Malcolm Sparrow, The Character of Harms: Operational Challenges in Control (Cambridge University Press, 2008) 4. 136 Sparrow, The Regulatory Craft, above n3, 308. 137 Karen Yeung, Securing Compliance: A Principled Approach (Hart Publishing, 2004); Christine Parker and Vibeke Nielsen (eds), Explaining Compliance: Business Responses to Regulation (Edward Elgar, 2011). 138 David Levi-Faur, ‘Foreword’, in Braithwaite, Regulatory Capitalism, above n 19, vii. 139 Morgan and Yeung, above n79, 3-4. 140 Black, ‘Critical Reflections’, above n84, 26. 141 Haines, The Paradox of Regulation, above n111, 8 (emphasis added).
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Regulation is an expansive phenomenon and includes ‘much more flexible, imaginative and innovative forms of social control [than the law] which seek to harness not just governments but also markets (as with economic instruments), business and third parties’.142 It can involve not just direct legal intervention but also more ‘subtle manipulation of incentives and the creation of opportunity structures’.143 Regulation is perhaps better conceived as being about maximising opportunities, not merely minimising risks, in the conduct of regulated actors.144
These broad understandings of regulation also correlate with popular public-interest theories of the purpose of regulation. Baldwin, Cave and Lodge suggest that regulation is more than merely rectifying faults in the market, but encompasses the possibility of regulating for altruistic goals,145 for example to protect human rights or social solidarity.146
Of course, it must be said that this observed dissonance in the literature is not universal. Coglianese and other regulatory scholars have written on the value and efficacy of ‘flexible’ regulatory practices that go ‘beyond compliance’, for instance in the environmental protection and energy efficiency regulatory practices.147 So too, Gunningham, Sinclair, Kagan and Thornton’s work (separately and together) also explores why some companies go beyond compliance with mandated standards to maintain their ‘social licence[s] to operate’.148 Nevertheless, these authors’ works are the exception that proves the general rule.
142 Gunningham, above n 45, 181. 143 Gunningham and Grabosky, above n111, 133. 144 See generally Neil Gunningham, Robert Kagan and Dorothy Thornton, ‘Social License and Environmental Protection: Why Businesses Go Beyond Compliance’ (2004) 29 Law & Social Inquiry 307. 145 Baldwin, Cave and Lodge, above n125, 21-2. 146 Ibid. 24. 147 See, eg, Lori Bennear and Cary Coglianese, ‘Flexible Approaches to Environmental Regulation’ in Michael E Kraft and Sheldon Kamieniecki (eds), Oxford Handbook of US Environmental Policy (Oxford University Press, 2012); Borck and Coglianese, above n76; Gunningham and Grabosky, above n111, 414. 148 Neil Gunningham and Darren Sinclair, Leaders & Laggards: Next-Generation Environmental Regulation, (Greenleaf, 2002) 136. See also Gunningham, Kagan and Thornton, above n143.
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F An Attempt to Rectify the Dissonance: The Dual-Pyramid Model
Braithwaite has himself acknowledged that responsive regulation’s pyramidal model is inadequate in reflecting the ‘continuous improvement’ maxim that animates regulation. In a 2007 work on regulation in the aged-care industry, Braithwaite, Makkai and Braithwaite state that the regulatory pyramid responds to weakness and ‘a “fear” about a “risk”’ – e.g. poor business behaviour – and seeks to control or minimise that risk.149 They state that the pyramid model suggests that ‘punishments are more useful than rewards’.150
Responding to this critique, Braithwaite, Makkai and Braithwaite proposed supplementing the regulatory pyramid with a ‘strengths-based pyramid’ (see Figure 3.3), whose goal is not deterring harm, but amplifying and encouraging positive behaviour;151 ‘the strengths-based pyramid responds to a “hope” that “opportunities”
Figure 3.3: The dual-pramid model, including the strengths-based pyramid.1
149 Braithwaite, Makkai and Braithwaite, above n77, 318. 150 Ibid 317. 151 Ibid.
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[for positive regulatee behaviour] can be built upon’.152 The strengths-based pyramid contains a suite of escalating strategies that are designed to support and encourage the ‘good’ conduct of the regulated firm or individual building.
The authors argue that this ‘combination of a regulatory pyramid and a strengths-based pyramid (both for self-regulators and for public regulators) will do better still by ‘continuous improvement’ than either pyramid alone, and certainly more than any single regulatory strategy.153 While the dual-pyramid model represents an improvement in this regard over the original pyramid, it is a model not without its own shortcomings. The visual image of the dual-pyramid model represents a contradiction – it is, by its very nature, discontinuous. The idea of visually linking the two pyramids is rejected by the authors, who argue that they are composed of ‘alternative rather than complementary strategies’.154
Similarly, the labelling of the two pyramids is misleading and conceptually confused. The authors do not characterise the strengths-based pyramid as being of a regulatory nature but, rather, it is explicitly contrasted with the regulatory pyramid (see Figure 3).155 In so doing, the dual-pyramid model continues to limit our understanding of the regulatory processes it claims to model. It unnecessarily suggests that regulation is only about ensuring compliance with certain behavioural standards, while ‘better’ behavioural improvement above and beyond those standards – which is achieved through the incentives and encouragement strategies in the strengths-based pyramid – is something other than regulation.156
Braithwaite’s corpus of work has, perhaps more than any other single scholar’s, transformed our modern understanding of regulation to encompass activities going well beyond direct, government command-and-control style regulation. Yet even this revised dual-pyramid model does not fully embrace the opportunity to recognise that going ‘beyond compliance’ may also be considered regulation, nor does it clarify the role of law within the model.
152 Ibid 318. 153 Ibid 322. 154 Ibid 319. 155 Ibid. 156 Ibid 319–20. See also Ford, above n15, 220.
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Healy, Mascini and others continue to express faith in the underlying theory of responsive regulation, even as they suggest altering responsive regulation’s pyramidal model to better reflect theoretical critiques and contemporary regulatory challenges.157 It is in this tradition that this thesis now offers an alternative model of responsive regulation: the regulatory diamond.
IV STRENGTHENING RESPONSIVE REGULATION WITH THE REGULATORY DIAMOND
The regulatory diamond (Figure 3.4) is a theoretical model and heuristic that seeks to respond to the shortcomings of the pyramidal models laid out in the preceding section. The regulatory diamond provides an enhanced model of responsive regulation; one that clarifies the role of law within it and better reflects the broad, contemporary conception of regulation. It is contended that the regulatory diamond provides a more useful framework with which to respond to the complex regulatory challenges, such as the policy issue at the heart of this thesis: regulating TNCs’ conduct in conflict-affected areas to not only end their conflict-driving activities but also encourage them to realise their peacebuilding potential.
The following section introduces the key features of the regulatory diamond, noting how it is an improved visualisation of responsive regulation theory compared to the pyramidal models that have come before it. The section includes a series of real-world examples of regulation demonstrating the utility of the regulatory diamond as an explanatory and prescriptive device.
The regulatory diamond is an evolutionary, not revolutionary, proposal. It builds on the decades of scholarly work written by Braithwaite and others in advancing responsive regulation theory, and adheres to the principles of responsiveness and dynamism that lie
157 See, eg, Healy, Improving Health Care Safety, above n124; Mascini, above n80; Peter Grabosky, ‘Beyond Responsive Regulation: The Expanding Role of Non-State Actors in the Regulatory Process’ (2013) 7 Regulation & Governance 114.
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Corporate Peacebuilding and the Law at the heart of responsive regulation theory.158 Nevertheless, the regulatory diamond offers several innovations that improve the theoretical coherence and practical utility of responsive regulation. Significantly, the regulatory diamond incorporates two types of regulatory activities: compliance regulation – the regulatory mechanisms employed to encourage adherence to certain behavioural standards; and aspirational regulation – the regulatory mechanisms employed to encourage regulatees to improve their behaviour beyond mere adherence to minimum standards. Furthermore, in the regulatory diamond the law comes from the shadows to take an explicit role in the web of regulation as the source of the behavioural standards with which compliance is being sought.
Figure 3.4: The Regulatory Diamond
While the regulatory diamond is intended to supersede the Ayres and Braithwaite pyramid, the substance of responsive regulation theory remains intact. Indeed, the diamond more accurately captures the essence of responsiveness and of regulation,
158 Ayres and Braithwaite, above n10.
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Chapter 3: An Innovative Regulatory Approach thereby providing a more precise model for those addressing societal problems from a regulatory perspective, be they in academia, government, business or civil society. Moreover, the inclusion of aspirational regulation in the model arguably provides a more optimistic tone for the entire regulatory project than compliance-centred models can provide.
A Exploring the Diamond: Components of a Regulatory Regime
More than the single- or even dual-pyramid models, the regulatory diamond correlates with Braithwaite’s suggested long-term ‘continuous improvement’ objective of regulation. While regulation may be frequently perceived as being only about punishment and the deterrence of proscribed behaviour, ‘strategies that seek to influence behaviour should use both supports as well as sanctions … praise as well as punishment’.159 Regulation should include both minimum behavioural standards and idealised behavioural goals, and regulatory mechanisms that seek to attain both.160 Each of the three components of an idealised regulatory regime corresponds to a distinct element of the regulatory diamond heuristic (see Figure 4): 1) minimum standards of behaviour – represented by the midline; 2) mechanisms to enforce those standards – represented by ‘compliance regulation’ in the bottom half of the diamond; and 3) mechanisms to encourage and incentivise regulatees to exceed the minimum standards, and attempt to attain ever higher aspirational behavioural goals – represented by ‘aspirational regulation’ in the top half of the diamond.
As with the original regulatory pyramid, the shape of the regulatory diamond and the proportional space taken up by each layer on either side of the midline are deliberate and instructive. The wide mid-sections denote that these levels – representing education and dialogue-based mechanisms – are where the bulk of the regulatory interactions occur. As we move further away from the midline, each successive layer denotes progressively more onerous and punitive (if moving down) or rewarding (if moving up) regulatory activity. In both cases, the frequency of use of a particular interaction
159 Judith Healy, Improving Patient Safety Through Responsive Regulation (Health Foundation, 2013) 4. 160 Gunningham, Kagan and Thornton, above n143, 307, 309.
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Corporate Peacebuilding and the Law diminishes the further from the midline we move. The two apexes of the diamond contain the most extreme and least-used regulatory mechanisms. These are reserved for the select few who have either strayed well below the legal standards and ignored or resisted less onerous regulatory actions, or far surpassed the relevant legal standards and embraced exemplary behaviour.
B Visualising the Crucial but Limited Role of Law
Keohane discerns that law remains critical to developing effective governance regimes (read: regulatory responses) for transnational societal problems, even in the age of globalisation and decentred regulation.161 The regulatory diamond allows us to clearly and simultaneously see the role of law and its limitations within regulatory design. Contrary to the original regulatory pyramid, the regulatory diamond explicitly places law at the centre of the regulatory framework. In the regulatory diamond, the midline represents the set of minimum, mandatory standards of behaviour expected of the regulated entities. For most envisaged regulatory regimes, these take the form of explicitly legal standards that are codified, for example in legislation or subsidiary regulation, and can be enforced through legal means (i.e. through regulatory mechanisms that lie at or near the bottom tip of the diamond).
This brings law out from the shadows and clarifies its role in regulatory design. Legal standards become the touchstone from which the two sides of the diamond emanate. (Whether the modes of compliance and aspirational regulation are also legal in nature is a separate question and is not a necessary corollary of the legal origins on the standards being enforced.) We cannot commence a meaningful conversation about enforcement or encouragement mechanisms without first referencing the behavioural standards which we, at a minimum, seek compliance with and ideally seek to go beyond. This should assist regulators and regulated actors in calibrating their regulatory activities and responses.
Law is the preferred source of minimum standards at the midline of the diamond, most especially for regulation of TNCs in conflict-affected areas. From a regulatory
161 Keohane, above n59,130.
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Chapter 3: An Innovative Regulatory Approach perspective, voluntarism and reliance on self-regulation have proved inadequate for realising our regulatory goals of ending the conflict-driving behaviour of some TNCs.162 Moreover, from a business perspective, the clarity that the law provides is useful for effective management and mitigation of the issues, and would provide clear benchmarks to allow companies that exceed them to rightly laud their “conflict-responsible” efforts.163 Moreover, the law has historically proved a strong pulling factor to elicit behavioural change by TNCs in major industries on global governance issues. For instance, passage of key US anti-corruption and ozone protection did not just lead to lower reported occurrences of corruption and reduced amounts of ozone-depleting substances in US-manufactured products (respectively), but the regulation prompted US companies to became a powerful lobby that succeeded in gaining further international action on these issues.164
While law has traditionally been seen as the ultimate regulatory device,165 it is more often than not conceived of as having two functions: standard-setting and compliance with said standards.166 This traditional conception of the law ostensibly limits its utility to sourcing the midline’s minimum standards and the lower tip’s most coercive compliance regulation instruments.
However, aspirational regulation, by definition, requires regulatees to go beyond compliance with legal standards and adopt “higher” (i.e. more socially beneficial) standards of conduct.167 The regulatory diamond visualises that adherence to the law is often not the ultimate or ideal regulatory goal.168 Moreover, whilst law is a powerful instrument to regulate behaviour, in the sense of deterring and reducing instances of
162 Codes of conduct are insufficient. See previous chapters. 163 David Weissbrodt and Muria Kruger, ‘Human Rights Responsibilities of Businesses as Non-State Actors’ in Philip Alston (ed), Non-State Actors and Human Rights , Oxford University Press, Oxford (2005), 350.; Beyond Voluntarism 19. 164 Corruption: Foreign Corrupt Practices Act (1977). Ozone protection: Clean Air Act, Title VI (amended in 1990). See, generally, Michael Porter, The Competitive Advantage of Nations (Free Press, 1998). 165 Iredell Jenkins, Social Order and the Limits of Law: A Theoretical Essay (Princeton University Press, 2014) 166 See, eg, James Penner and Emmanuel Melissaris, McCoubrey and White’s Textbook on Jurisprudence (Oxford University Press, 5th ed, 2012); HLA Hart, The Concept of Law (Clarendon Press, 1994) 6; Abbot and Snidal, as above n111. 167 Borck and Coglianese, above n76, 139. See also Chapter 6. 168 Dent, above n121, 714.
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Corporate Peacebuilding and the Law behaviour deemed harmful to society, its coercive nature is ill-suited for aspirational regulation that encourages ‘beyond compliance’ behaviour. Where regulatory strategies other than conventional legal means or sanctions come into their own is in the aspirational regulation activities occupying the upper half of the diamond that seek to further the ‘continuous improvement’ goal of regulation.
Of course, the characterisation of the midline as composed of minimum legal standards does not discount the existence and regulatory effect of non-legal norms that also make claims on the behaviour and conduct of regulated actors.169 These non-legal norms may derive from a variety of alternative sources and find their form in industry codes of conduct, internal operating guidelines for businesses or personal codes, perhaps derived from religion and ethics. These norms of behaviour, even if widely socially accepted, may not correlate to legal standards.170 When these norms represent ‘tighter’ standards than the binding law, they exercise a ‘pulling power’ on the regulated individual or firm, encouraging them to go beyond the legal standards. Their practical effect suggests they should be considered an instrument of aspirational regulation and appear somewhere above the midline of the regulatory diamond. Examples of this type of aspirational regulation include companies’ internally developed social charters and industry-based CSR codes, reflecting an individual firm’s (or industry’s) idea of its ‘social licence to operate’.171
C CSR and Business Ethics – Beyond the Law
When it comes to advancing ethical business practices and CSR (as discussed in Chapter 2), business ethicists see the law as having only limited utility.172 Law is perceived as the ‘institutionalization or codification of ethics’ into rules and proscribed conduct, but many ethical concerns for the modern-day corporation exist beyond the
169 Ibid 716–17. 170 Ibid. 171 Gunningham, Kagan and Thornton, above n143, 308. 172 Noeleen McNamara, ‘CSR and Compliance: Transnational Mining Corporations in Tanazania’ (2013) 9 Macquarie Journal of International and Comparative Environmental Law 1; Andrew Hopkins, ‘Beyond Compliance Monitoring: New Strategies for Safety Regulators’ (2007) 29 Law and Policy 2; Neil Gunningham, ‘Environmental Law, Regulation and Governance: Shifting Architectures’ (2009) 21 Journal of Environmental Law 179.
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Chapter 3: An Innovative Regulatory Approach law.173 Some leading Australian and American authors in this field conceive of CSR or corporate citizenship as intrinsically voluntary exercises on the part of a corporation.174 In this way, a sharp distinction is drawn between CSR and the socially beneficial corporate practices mandated by the relevant law and legislation. The moment CSR standards or compliance with CSR codes are integrated into the law, it ceases to be CSR.175 As Parker observes this orthodoxy asserts that ‘the very idea that law might make business responsible for CSR is paradoxical’.176 CSR is, in this sense, beyond law.
While the law is considered to be a ‘definition of the minimum acceptable standards of behaviour’,177 for the most part the social responsibilities of business, including their theorised responsibilities to peacebuilding and conflict resolution that form the premise of this thesis, are considered “above and beyond” their commitment to minimal standards enshrined in legal strictures.178 Indeed, this is a point of agreement between even the fiercest critics of CSR such as Bakan, who view it as nothing than more than a smokescreen to prevent government regulation,179 and champions of CSR such as Freeman and Moon.180
For instance, Carroll’s model of CSR distinguishes between economic and legal responsibilities of business as being ‘required by society’ and ethical and philanthropic
173 Andrew Crane and Dirk Matten, Business Ethics: Managing Corporate Citizenship and Sustainability in the Age of Globalization (Oxford University Press, 2nd ed, 2010) 5. 174 Colin Crouch, ‘Modelling the Firm in its Market Organizational Environment: Methodologies for Studying Corporate Social Responsibility’ (2006) 27 Organization Studies 1533, 1534; David Vogel, The Market for Virtue: The Potential and Limits of Corporate Social Responsibility (Brookings Press, 2005); Doreen McBarnet, ‘Corporate Social Responsibility beyond law, through law, for law: the new corporate accountability’ in McBarnet, Voiculescu and Campbell (eds) The New Corporate Accountability: Corporate Social Responsibility and the Law (Cambridge University Press, 2007) 9. 175 Karin Buhmann, ‘Corporate social responsibility: what role for law? Some aspects of law and CSR’ (2006) Corporate Governance: The International Journal of Business in Society, Vol. 6(2), 188-202. 176 Christine Parker, ‘Meta-Regulation: Legal Accountability for Corporate Social Responsibility,’ in Doreen McBarnet, Aurora Voiculescu and Tom Campbell (eds.), The New Corporate Accountability: Corporate Social Responsibility and the Law, Cambridge University Press (2007), 207. 177 Crane and Matten, above n172, 5. 178 Ibid. 179 Joel Bakan, The Corporation: The Pathological Pursuit of Profit and Power (Free Press, 2004). 180 Jeremy Moon, Corporate Social Responsibility : A Very Short Introduction (Oxford University Press 2014); R. Edward Freeman, S. Ramakrishna Velamuri and Brian Moriarty, Company Stakeholder Responsibility: A New Approach to CSR, Report, (Business Roundtable: Institute for Corporate Ethics, 2006)
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Selznick, a prominent sociology of law scholar, distinguishes between the legal regulation of business and corporate social responsibilities.183 Parker sums up his conception of the law in regulation thus: ‘Legal regulation characteristically works by holding people accountable for meeting “threshold criteria of good conduct or performance” after the fact’.184 This is to be contrasted with CSR, which Selznick states is a concept that goes beyond accountability to ask of the corporation ‘whether and how much you care about your duties. An ethic of responsibility calls for reflection and understanding, not mechanical or bare conformity. It looks to ideals as well as obligations, values as well as rules’.185
A noted theorist on the role of the corporation in society, on business ethics and on CSR, Epstein, in a 2007 article explores the possibility of nurturing ‘socially beneficial economic behavior’ on the part of corporations.186 He acknowledges the limitations of law to achieve that goal alone.187 Instead he posits that there are six ‘modes of social control, that, when working in tandem may succeed in shifting CSR from rhetoric to reality’, with law among them.188 Epstein reduces the law to a bit-player in pursuing CSR objectives. Indeed, Epstein is scathing of the law’s limitations in this regard referring to it as an ‘imperfect mechanism’.189 He observes that the law ‘articulates past
181 Archie Carroll, ‘The Pyramid of Corporate Social Responsibility: Towards the Moral Management of Organizational Stakeholders’ (1991) Business Horizons 42. 182 Crane and Matten, as above n172, 54. 183 Phillip Selznick, The Communitarian Persuasion (Woodrow Wilson Center Press, 2002). 184 Parker, ‘Meta-Regulation’, above n175 quoting Selznick, ibid. 185 Selznick, above n183, 102. 186 Edwin Epstein, ‘The Good Company: Rhetoric or Reality? Corporate Social Responsibility and Business Ethics Redux’ (2007) 44 American Business Law Journal 207, 207. 187 Ibid. 188 Ibid. Epstein’s six modes of social control are: (1) Law (2) Affinity group regulation, (3) Self- regulation, (4) Ethical precepts, (5) Media, (6) Engaged civil society 189 Ibid.
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Importantly, there may be instances where few, if any, binding legal standards exist to address a particular societal concern, thereby also diminishing the viability of law-based compliance regulation mechanisms. By making explicit that the law is the basis of the midline standards in those instances, the use of the regulatory diamond assists in noting the law’s absence or weakness in generating behavioural standards. Nevertheless, even if a particular regulatory dilemma has a hazy or non-existent midline set of enforceable legal standards, the regulatory diamond heuristic usefully visualises that there may still be aspirational regulation mechanisms available to incentivise and encourage improved behaviour on the part of the regulated individuals or entities.
D Visualising the Full Regulatory Potential with Aspirational Regulation
As noted, the midline of the regulatory diamond represents minimum standards: a set of legal behavioural standards which the regulated entity must adhere to. In the regulatory diamond model, the types of regulatory activities occurring above and below the midline may be different – normatively and practically – but both are, nevertheless, rightly conceived of as being regulatory in nature.
The lower half of the regulatory diamond is an inverted Brathwaitian enforcement pyramid and the regulatory mechanisms that populate its levels represent compliance regulation. Its contents and how it works remain the same as in the original, and represent the dynamic range of enforcement mechanisms that regulators have at their disposal to ensure compliance with minimum standards. The first level, just below the midline, is composed of the most dialogue-based, collaborative and voluntary regulatory responses possible to achieve compliance. If compliance is not forthcoming through persuasion, the regulator increases the punishment, ‘escalating’ down the diamond, level by level, until compliance is achieved.192 The most onerous and severe regulatory instruments are confined to the small, lower apex of the diamond, reserved,
190 Ibid. 191 Ibid. 192 Ayres and Braithwaite, above n10, 35–6.
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Corporate Peacebuilding and the Law in reality, for the small number of unrepentant, non-compliant actors that have refused to come into line despite the whole retinue of less onerous regulatory methods having been employed beforehand.193 This continued non-compliance could result from incompetence: a fundamental lack of understanding or knowledge of what constitutes acceptable conduct, or, alternatively, irrationality – deliberate contravenentions of the mid-line legal standards despite knowing that the most punitive measures (eg. corporate dissolution) will likely be the regulatory response. As Braithwaite observes: ‘When deterrence fails, the idea is … that incapacitation is the next port of call.’194
However, even if compliance is achieved through persuasion, the regulatory diamond highlights that there remains a host of regulatory options to continue to improve the regulatee’s behaviour ‘up the diamond’ from the midline. The upper half of the diamond represents aspirational regulation and consists of regulatory strategies that hope to encourage ever more positive and productive behaviour on the part of the regulated entity vis-a-vis the issue or problem at hand.
The aspirational regulation half of the diamond is modelled on the strengths-based pyramid introduced by Braithwaite, Makkai and Braithwaite and also developed by Healy, in the contexts of aged and health-care regulation respectively.195 Aspirational regulation acknowledges that the midline is composed of only minimum legal standards of behaviour, and that possibilities exist to improve the regulated entity’s behaviour to surpass those standards and achieve ever higher behavioural goals. The inclusion of the aspirational regulation strategies that inhabit the upper half of the diamond is designed to pull regulated actors up, above and beyond the requirements of the law, to embrace behavioural change that positively contributes to the problem or issue that is being regulated. It integrates into our regulatory model the continuous improvement goal of regulation that Braithwaite and others have recognised, and is aligned with public interest theories of regulation as espoused by Baldwin, Cave and Lodge and others.196
193 Ibid 53; Braithwaite, ‘Fasken Lecture’, above n91, 504–5. 194 Braithwaite, Restorative Justice, above n96, 32. 195 Braithwaite, Makkai and Braithwaite, above n77; Healy, Improving Health Care Safety, above n124. 196 See, eg, Braithwaite, Makkai and Braithwaite, above n 77, 199–200; Baldwin, Cave and Lodge, above n125; Cass Sunstein, After the Rights Revolution: Reconceiving the Regulatory State (Harvard University Press, 1990).
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Frequently, mandating minimum behavioural standards does not achieve the ultimate objectives and interests of a regulatory agency, and the societal needs or wishes they are attempting to fulfil.197 For example, while the Australian Criminal Code helps minimise the commission of crimes and harm done to citizens,198 it does not encourage good citizenship or community-mindedness. The fulfilment of these aspirational goals lying beyond mere adherence to the law is the objective of the aspirational regulation techniques in the upper half of the diamond.
In this way, the concepts of compliance and aspirational regulation can be analogised to Galtung’s dual conceptions of negative and positive peace. Compliance regulation is attempting to end negative behaviour (i.e. that which falls below the minimum standards), while aspirational regulation’s objective is to foster positive behaviour among regulated actors that goes beyond merely the absence of harm, to useful, positive contributions to addressing the issue at hand.
Deciding what the legitimate and desirable goals of any given regulatory regime are, and what the appropriate mechanisms are to achieve such goals, is necessarily subjective and context-specific. The inclusion of aspirational regulation in the regulatory model brings into stark relief the need for clarity and legitimacy in the overarching goals of any given regulatory regime, and highlights the difficulty in discerning these. Applying the diamond demonstrates that mere satisfaction of the prescriptions of the legal standards is (almost always) not an endpoint in the regulatory relationship. The corollary of this is that the regulatory goals depend not just on a reading of the law and its behavioural requirements, but on our understanding of society and ethics, and what constitutes such ephemeral ideas as the ‘social good’ in any given regulatory context.
By way of illustration, consider the context of workplace safety. The law determines minimum standards that employers must adhere to at the risk of civil or even criminal
197 Sparrow, The Character of Harms, above n134, 2; See generally, Bennear and Coglianese, above n146. 198 Criminal Code Act 1995 (Cth).
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Corporate Peacebuilding and the Law prosecution for breaches (compliance regulation).199 However, employers are also encouraged (through education and inducement programs, for example) to conduct weekly training sessions and emergency drills, to provide health counselling and to install state-of-the-art health and safety features in their workplaces – despite not being legally required to do so (aspirational regulation).200 The overall regulatory goal is ‘to secure the health, safety and welfare of employees and other persons at work’.201 The regulatory diamond model illustrates that adherence to legal standards only partially achieves this goal. The inherent limitations of law as a regulatory instrument mean that it must be coupled with other aspirational regulation instruments to drive employers and employees to develop ever safer workplace environments. Indeed, the Victorian Occupational Health and Safety Compliance Framework incorporates ‘non-statutory guidance’ that includes guidance on ‘encouraging the implementation of optimum strategies for improving OHS performance (for example information about good management practice or describing “state of the art” technical solutions)’.202 This is an example of a regulatory agency incorporating aspirational regulation into its regulatory regime, alongside traditional compliance regulation techniques.
E Visualising Continuous Improvement: Virtuous Behaviour is more than just Law-abiding Behaviour
In the same way as in the regulatory pyramid, the quality of the behaviour of the regulated entity – and the subsequent assumptions made by the regulator – can be mapped along the vertical axis of the regulatory diamond.203 Braithwaite has three major labels categorising assumptions about a regulatee’s conduct (see Figure 3.2): virtuous (at the base), rational (in the middle) and incompetent/irrational (at the apex). However, unlike Braithwaite’s model, when mapping assumptions of the regulated entity onto the regulatory diamond the virtuous actors are not at the midline (as might be expected, since this corresponds to the baseline in the pyramidal model), but well
199 For example, in the State of Victoria, the applicable legislation is the Occupational Health and Safety Act 2004 (Vic) and subsidiary regulations: Occupational Health and Safety Regulations 2007 (Vic).
200 Ibid. 201 Occupational Health and Safety Act 2004 (Vic) s 2(1)(a). 202 WorkSafe Victoria, Victorian Occupational Health and Safety Compliance Framework Handbook (2013) 14. 203 See Figures 2 and 4.
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Assumptions about the regulated entity progressively worsen as we descend the regulatory diamond – in identical fashion to moving up the regulatory pyramid. However, the opposite is the case as we ascend the regulatory diamond from the midline. Those entities that are responding to aspirational regulation mechanisms to achieve behavioural outcomes that far exceed the legal standards can be assumed to be acting virtuously.
Nevertheless, the simplicity of ascribing labels based on generalisations is fraught, especially in the context of assessing the actions and intentions of complex organisations such as TNCs, which may not have clearly delineated decision-making processesMoreover, conceivably, there could be sound business considerations as to why a regulated firm may wish to climb the diamond, rather than descend it. Rationality – especially when it comes to business regulation – remains the most powerful motivator, over and above any sense of moral obligation to the community or perceived social responsibilities.205 Depending on the context, assumptions of regulatees’ behaviour do not just remain with regulators, but infiltrate broader society through social media and the actions of public interest groups. This may provide a powerful, pragmatic incentive for regulated entities to improve their performance – even sometimes to exceed applicable legal standards despite the immediate financial cost. In the corporate regulatory environment, exposure of corporate practices that may be legal but are perceived as in some way unethical can have profound reputational and financial impacts on a firm. Acting virtuously, it could be said, is sometimes good for business.
The exposure of poor wages and working standards in Asian factories manufacturing Nike running shoes in the 1990s and Apple iPhones in the 2000s are two cases in
204 Vogel, above n174. 205 Ibid.
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Corporate Peacebuilding and the Law point.206 Legal standards in the respective countries were being adhered to, yet through the actions of US-based public interest groups, pressure was exerted, and brands and reputations besmirched. These actions gained widespread attention and amounted to not insignificant pulling power on these retail firms to launch investigations and ultimately force improvement in the working conditions of workers throughout their supply chains.207
The corporate reaction to the 2012 Bangladeshi sweatshop fire and 2013 building collapse is also instructive in this regard.208 Before these tragedies, which involved the deaths of thousands of low-paid garment workers, little public attention was given to the poor wages and working conditions of Bangladeshi garment manufacturers. However, in their wake, European and American retailers that sourced clothing from Bangladesh were compelled to respond to these two tragedies. This was due not simply to the human toll incurred, but also due to the widespread public outrage at the perception that transnational clothing brands were complicit in the poor working conditions of workers and the inadequate safety standards that led to the large loss of life.
In May 2013, facing consumer backlash and even threats of outright boycotts,209 several prominent European clothing labels, retailers and NGOs finalised the Accord on Fire and Safety in Bangladesh – a legally binding agreement to which dozens of retailers are
206 Tim Bartley and Curtis Child, ‘Movements, Markets and Fields: The Effects of Anti-Sweatshop Campaigns on US Firms, 1993–2000’ (2011) 90 Social Forces 425; Stephen Frost and Margaret Burnett, ‘Case Study: The Apple iPod in China’ (2007) 14 Corporate Social Responsibility and Environmental Management 103. 207 See, eg, Phil Knight, ‘Nike in the Global Economy’ (Speech delivered at the National Press Club, Washington DC, 12 May 1998); John H Cushman Jr, ‘Nike Pledges to End Child Labour and Apply US Rules Abroad’, New York Times (New York), 13 May 1998, D1. 208 See, eg, Anis Ahmed and Ruma Paul, ‘Bangladesh’s Worst-Ever Factory Blaze Kills Over 100’, Reuters (online), 25 November 2012
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Chapter 3: An Innovative Regulatory Approach now signatories.210 The Accord compels retailers to pay for inspections of Bangladeshi garment factories and any necessary improvements in safety standards. The Bangladesh Worker Safety Initiative – a similar industry-based initiative – was launched by American retailers in July 2013, committing millions of dollars to improving the safety and conditions of Bangladeshi garment factories.211 That is, Western retailers, at the urging of governments and community groups, acted to raise working standards in a country thousands of kilometres away. Neither initiative was compelled by law, but nor were they the result of newfound altruism on the part of the industry. Notwithstanding the possibility that there may well have been an element of virtue motivating some industry executives, these two self-regulatory initiatives were rational attempts to improve their public relations, ward off further criticism and pre-empt any onerous governmental regulation.
Aspirational regulatory instruments are common in transnational business regulation, where international law is not traditionally considered to be directly applicable to corporations and where national laws can often be circumvented.212 That is, due to a dearth of coercive compliance regulation mechanisms, regulators – state, industry and civil society based – have attempted to develop more creative means of encouraging companies to adhere to behavioural standards derived from the law, even if not directly formally applicable to them, and even to surpass those standards.
The UN has also been a locus for transnational aspirational regulation of businesses with its efforts to internationalise CSR-style commitments. Initiatives such as the UN Global Compact and its Guiding Principles on Business and Human Rights seek to promote the respect of human rights and the environment among the international business community including in conflict-affected areas, even as the UN documents themselves acknowledge that businesses, generally speaking, have no formal international legal obligations to do so.213 Other examples of this type of aspirational
210 ‘Accord on Fire and Building Safety in Bangladesh’ (13 May 2013)
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Corporate Peacebuilding and the Law regulation from the arena of transnational business regulation include fair-trade labelling of clothing, coffee and other goods.214 These initiatives, advanced by NGOs but often co-opting the private sector as well, seek to leverage consumer buying patterns to improve the wages and treatment of farmers and workers in developing countries that produce goods consumed in more affluent countries.215
F Increased Utility for Regulators and Regulatees Alike
The original pyramid heuristic has had great success in popularising and sharing the theoretical insights of responsive regulatory design with practitioners – in government, business and not-for-profit sectors.216 Rather than obfuscating the value of responsive regulation, the regulatory diamond will strengthen it as a theoretical and practical model. The regulatory diamond heuristic represents an advance in the visualisation of regulation, one that better reflects the continuous improvement maxim that motivates the regulatory enterprise, and the entirety of possible regulatory strategies to achieve that goal.
The regulatory pyramid took enforcement of behavioural standards as the goal of regulation. Yet this runs contrary to our modern conception of regulation, as encompassing attempts to alter social behaviour. The regulatory diamond resolves this dissonance by integrating into the one model the three core components of an optimal regulatory framework: standards, compliance regulation and aspirational regulation.
For regulators, the diamond heuristic visually demonstrates that compliance with behavioural standards is but half the solution to the problem they are addressing. Their view of the regulated entity is no longer dominated by negative conceptions of an entity that needs to be curtailed and compelled to comply with minimum legal standards. With
also, John Ruggie, 'Business and Human Rights: The Evolving International Agenda' (2007) 101 American Journal of International Law 819. 214 See, eg, Peter Leigh Taylor, 'In the Market But Not of It: Fair Trade Coffee and Forest Stewardship Council Certification as Market-Based Social Change' (2005) 33 World Development 129, 130. 215 See, eg, Fairtrade Australia and New Zealand, Fairtrade
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Chapter 3: An Innovative Regulatory Approach the diamond, the conception that pervaded responsive regulation theory is moderated by the understanding that regulated entities can also exceed such standards and positively contribute to addressing the societal problem in question. From the regulated entity’s perspective, the diamond also provides some added insights. It highlights not simply the punitive measures they risk for non-compliance, but also the rewards, incentives and other regulatory techniques which may encourage them to go beyond compliance. It presents the risks and opportunities that may come their way depending on their choice of action or inaction. In the business context, the regulatory diamond assists in creating a ‘market for virtue’.217 In particular, by adding the inducements and other aspirational regulation mechanisms, it presents to regulated entities tangible options to adopt ‘better’ business practices (as adjudged by the regulator) and reap the rewards.
V CONCLUSION
Providing yet another regulatory tool does not avoid the perennial challenge confronting policymakers and concerned actors that Ayres and Braithwaite articulated over three decades ago: when to punish, and when to persuade.218 However, the regulatory diamond suggests the addition of a third consideration: when to reward.
Notwithstanding, the advantages of the regulatory diamond model over Braithwaite and Ayre’s original pyramidal model, the limits of a generalised model remain. In any given circumstance, the challenge remains to populate each level of the regulatory diamond with regulatory mechanisms that efficiently and effectively secure compliance with established minimum legal standards for the issue in question, and also encourage regulated entities to go above and beyond those standards and continuously improve their behaviour. The regulatory diamond provides a heuristic to visualise the regulatory regime in its entirety and how the different regulatory mechanisms – including legal and non-legal – relate to one another. It is hoped that the regulatory diamond, as a theoretical model and practical heuristic, will encourage continuous improvement not
217 Vogel, above n174, 162. 218 Ayres and Braithwaite, above n10, 21.
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Corporate Peacebuilding and the Law just in the response to regulatory regimes but also in their design, and help realise the full potential of regulatory relationships.
Chapter 2 has explored both the deleterious and positive impacts TNCs (could) have on the prevalence and intensity of armed conflicts. This chapter then explored the question of why TNCs’ conflict-driving behaviour persists and suggested that improved governance of TNCs is how the vision of corporate peacebuilding may be achieved. It has developed an innovative regulatory model – the regulatory diamond – for that purpose. The remainder of the thesis applies the regulatory diamond model to the problem at hand: improving corporate engagement in peacebuilding in conflict-affected areas in which they operate. The thesis turns to the task of examining the contours of the law’s crucial roles in the three primary elements of a regulatory diamond-shaped framework – minimum standards, compliance regulation and aspirational regulation – that may help operationalise the goals, not simply of bringing an end to TNC activities that drive armed conflict around the world, but of encouraging corporate peacebuilding.
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CLARIFYING THE MIDLINE:
IDENTIFYING MINIMUM STANDARDS OF CONDUCT FOR TNCS DOING BUSINESS IN CONFLICT-AFFECTED AREAS
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[N]ational, juridical and multilateral responses have begun to converge around the principle that economic activity that sustains or profits from armed conflict is unacceptable. Eric Mongelard,1 International Committee of the Red Cross
Any system of jurisprudence, if it is to be effective, must be given an opportunity to grow and expand to meet changed conditions. The codification of principles is a helpful means of simplification, but it must not be treated as adding rigidity where resiliency is essential. To place the principles of International Law in a formalistic strait- jacket would ultimately destroy any effectiveness that it has acquired. “The Hostages Trial” Judgement,2 Subsequent Nuremberg Trial, 1948
1 Eric Mongelard, ‘Corporate Civil Liability of Corporations for Breaches of International Humanitarian Law’ (2006) 88 International Review of the Red Cross 665. 2 United States of America v Wilhelm List et al. (1948)
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CHAPTER 4
CLARIFYING THE MIDLINE: IDENTIFYING MINIMUM STANDARDS OF CONDUCT FOR TNCS DOING BUSINESS IN CONFLICT-AFFECTED AREAS
I INTRODUCTION: SEARCHING FOR STANDARDS
The previous chapter developed the regulatory diamond model based on responsive regulation theory to help achieve the vision of corporate peacebuilding. Chapters 4, 5 and 6 apply that model to the problem and promise of corporate peacebuilding. In regulatory diamond terms, the purpose of this chapter is to clarify the substantive legal standards that constitute the midline of the diamond model. The following two chapters address law’s significant roles in the other two key components of the model – compliance and aspirational regulation, respectively – to facilitate the realisation of corporate peacebuilding.
This chapter argues that international criminal law (ICL) is the most appropriate, effective and legitimate body of law from which to derive behavioural standards that may yet, if not now, crystallise into legally binding minimum standards of behaviour for TNCs conducting business in conflict-affected areas, to avoid triggering or perpetuating armed conflicts.
The first step in realising the corporate peacebuilding vision is minimizing the conflict- driving activities – be they intentional or accidental – of TNCs in areas impacted by armed conflict. This is what Jane Nelson terms the “do no harm” element to achieve corporate peacebuilding,3 for we must not only define maximalist aspirations, but also identify minimum standards of corporate conduct in conflict-affected areas of which falling short should not be countenanced but rather, punished and deterred. As long as it continues to occur, ending corporate misconduct in conflict-affected areas that contributes to, triggers or exacerbates armed conflict is appropriately the primary concern of regulating TNCs doing business in such areas. This requires a clearly
3 Jane Nelson, The Business of Peace: The Private Sector as a Partner in Conflict Prevention and Resolution (Prince of Wales Business Leaders Forum/ International Alert/Council on Economic Priorities, 2000).
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Corporate Peacebuilding and the Law articulated, relevant, legitimate and coherent set of minimum standards of behaviour for TNCs to adhere to.4 The effective enforcement of those standards is a related, but separate, question that is explored in the following chapter, which focuses on legal compliance regulation possibilities lying at the bottom tip of the regulatory diamond model.
Part II of this chapter elaborates on the advantages of deriving such standards from international law as opposed to other alternative potential sources, such as domestic legal regimes or other more abstract ethical codes. Part III outlines an affirmative case for ICL as the preferred source of minimum standards of conduct for TNCs doing business in conflict-affected area, as well as some of the drawbacks of the other bodies of public international law in fulfilling that regulatory function.
In Part IV, the question of the applicability of ICL to corporations is examined. There exists a long-running scholarly debate as to whether corporations are capable of possessing international legal responsibilities. Pivotal to this debate are competing historical understandings of the treatment of major German corporations in the immediate post–War War II period, including at the Nuremberg Trials. Some scholars and jurists contend that Nuremberg stands for the principle of corporate liability for international crimes, while others view the same historical moment and come to the diametrically opposite understanding: that Nuremberg stands for denying the principle of corporate liability for international crimes. In an effort to explain these opposing understandings of the Nuremberg era’s legacy of corporate liability for international crimes, two jurisprudential lenses – the judicial and legal – are employed.
This chapter concludes with a reminder of the importance of taking a regulatory approach to this issue of corporate liability for international crimes and not simply to engage it from a doctrinal, legal perspective. By employing a third, socio-legal lens, we can reasonably question the practical utility of the Nuremberg era’s legal and judicial decisions related to corporate crimes. While ICL standards of behaviour are the preferred, most legitimate choice of minimum standards of conduct for TNCs in conflict-affected areas as part of the regulatory regime for corporate peacebuilding, their
4 Hart stated that the term “standards” provides a benchmark ‘with reference to which one can evaluate or critically appraise certain behaviour.’ H.L. Hart, The Concept of Law (Clarendon Press, 1994) 32, 81.
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identification cannot be divorced from the supplementary question of how to enforce them – a question the following chapter turns to address.
II LOOKING TO INTERNATIONAL LAW FOR MINIMUM STANDARDS FOR CORPORATE PEACEBUILDING
A International Law is Standard-setter in Theory: Reflects Fundamental Norms of Humanity
According to Fauchald and Stigen, in general, the ‘potential role international law can play’ in regulating TNCs in conflict-affected areas remains ‘poorly analysed.’5 The inherent value and traditional role of international law is to set minimum standards for international relations, including to proscribe the most egregious conduct and to define the outer limits of acceptable behaviour in international relations.6 It is no coincidence, for instance, that states frequently justify their actions with reference to international law, not least in relation to war and peace – for example, Western governments saw fit to publicly release legal briefs justifying their invasion of Iraq in 2003.7 Similarly, condemnations of state behaviour are often couched in legal terms – witness the condemnations of the Iraq War (and how it was prosecuted) by human rights groups and non-participating states.8
With public international law, there already exist bodies of law aimed at ameliorating the worst effects of armed conflict – international humanitarian law (IHL), and safeguarding fundamental rights of all humanity – international human rights law (IHRL). Moreover, there is a related body of law – international criminal law (ICL) – that seeks to punish gross breaches of these bodies of law, provide recompense to their victims and deter repeated violations.
5 Ole Kristian Fauchald and Jo Stigen, ‘Corporate Responsibility Before International Institutions’ (2009) 40 George Washington International Law Review 1025. 6 Arthur Watts, ‘The Importance of International Law’, in Michael Byers (ed), The Role of Law in International Politics (Oxford University Press, 2000) 7; Martti Koskenniemi, ‘The Fate of Public International Law’ (2007) 70 The Modern Law Review 1, 30. 7 Watts, above n7, 7. 8 Koskenniemi, ‘The Fate of Public International Law’, above n6.
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Public international law, through its related arms: IHRL, IHL and ICL has established the core, fundamental standards of behaviour in our world today.9 The bodies of law consist of standards that humanity has collectively recognised as representing basic standards of conduct among people and nations.
According to Risse and Sikkink, constructivist theorists suggest ‘international law… [is] the primary vehicle for stating community norms and for collective legitimation’.10 Koskenniemi, a philosophical thinker on the subject, sees international law (even when compared to morality or religion) as having ‘the sole vocabulary with a horizon of transcendence’.11 He goes further: ‘International law appears here less as this rule or that institution as a placeholder for the vocabularies of justice and goodness, solidarity, responsibility and faith’.12 Similarly, Harris points out in his popular textbook on international law that some scholars go so far as to suggest that this standard-setting function of international law leads them to consider whether international law is more aptly ‘classified as a branch of ethics rather than of law’.13 The prohibitions and obligations enshrined in these bodies of law are the most basic known to humankind.
The purpose of the international law project aligns well with the overarching purpose of this thesis. International law as a system is an attempt to mediate power for the betterment of the world community; it mediates the power of sovereign states vis-a-vis other states (eg. IHL) and between states and individuals/citizens (eg. IHRL). For some international jurists and commentators, the very purpose of international law is to create order and stability.14 This is reflected in the goals of the Charter of the United Nations of helping build and ‘maintain international peace and security’15 including through the pacific settlement of disputes, as is evinced in the preambles of relevant treaties and
9 Ibid; Jeffrey Dunoff, Steven Ratner and David Wippman, International Law: Norms, Actors, Process (Wolters Kluwer, 3rd edition, 2010) 29; Margaret Young, Trading Fish, Saving Fish: The Interaction of Regimes in International Law (Cambridge University Press, 2011). 10 Thomas Risse, Kathryn Sikkink and Stephen Ropp (eds), The Power of Human Rights: International Norms and Domestic Change (Cambridge University Press, 1999) 8. 11 Koskenniemi, ‘The Fate of Public International Law’, above n8, 30. 12 Ibid. 13 DJ Harris, Cases and Materials on International Law (Sweet and Maxwell, 5th ed, 1998). 14 Antonio Cassese, International Law (Oxford University Press, 2005) 40. 15 United Nations, Charter of the United Nations, 24 October 1945, 1 UNTS XVI, Preamble, art1.
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Chapter 4: Clarifying the Midline conventions.16 An illustration of this purposive claim from academia is the title of Volume One of Oppenheim’s classic and influential international law text, which simply reads: Peace.17
B International Law is Standard-Setter in Practice: Reflects Current State and Industry Practice
Contemporary regulation of corporate conduct in conflict-affected areas in large part derives its standards from international law and agreements. As the analysis in Chapter 2 has concluded, even domestic and industry-based regulation (let alone international regulation) already looks to the international plane for relevant standards (primarily to IHRL). This is certainly the case in relation to issues of war and peace. Thus, searching within bodies of international law for relevant standards of conduct for TNCs doing business in conflict-affected areas would be a continuation of existing practice, rather than a revolutionary approach. Pragmatically, rather than shifting course, it is logical to continue this regulatory trend and be guided by current practice.
Existing codes of conduct and multi-stakeholder initiatives impacting corporations’ operations in conflict-affected areas borrow, oftentimes explicitly, from human rights and humanitarian law treaties and traditions, to offer guidance on corporate conduct. Initiatives such as the UN Global Compact, Kimberley Process to prevent trade of conflict diamonds, the Extractive Industries’ Transparency Initiative and the Voluntary Principles on Security and Human Rights reference international legal principles. Similarly, government-based regulatory efforts such as the OECD Guidelines for Multinational Enterprises, UN Guiding Principles on Business and Human Rights and the aborted UN Draft Norms of Transnational Corporations all make reference to IHRL.18
16 Ibid, chapter VI; Geneva Convention (IV) Relative to the Protection of Civilian Persons in Time of War, opened for signature 12 August 1949, 75 UNTS 287 (entered into force 2 November 1950); International Covenant on Civil and Political Rights, opened for signature 19 December 1966, 999 UNTS 171 (entered in force 23 March 1976). 17 Robert Jennings and Arthur Watts, Oppenheim’s International Law, Volume 1: Peace (Oxford University Press, 9th edition, 2008). 18 See, eg, Voluntary Principles on Security and Human Rights
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These instruments are decidedly soft-law governance initiatives. That is, they are ‘principles and policies which have been negotiated and agreed between states, or promulgated by international institutions, but which are not mandated by law or subject to any formal enforcement mechanisms’.19 There are no current hard-law international instruments directly addressing the conduct of TNCs in conflict-affected areas. Regardless, Christine Chinkin observes that ‘the instruments of soft-law cannot be ignored. They provide for the shaping and sharing of values’.20 The International Council on Human Rights Policy has similarly recognised that ‘international standard- setting initiatives [for TNCs] are underway in several places, and a number of such initiatives have official government endorsement’.21 Moreover, these types of international legal standards, despite being in soft-law instruments ‘have the advantage of having already been accepted as legitimate benchmarks for corporate behaviour by leading global companies.’22 Indeed, because of their soft-law character, non-state actors such as TNCs were included into international legal processes, thereby commencing the integration of the global business community into the system of international law.
Notwithstanding the common source, there is still a need for greater clarity. At the moment, the ad hoc nature of regulation is reflected in the ad hoc and inconsistent involvement of TNCs in the development of these “soft-law” instruments, and in their inconsistent referencing and application of international legal principles. This lack of clarity undermines the regulatory purpose as it, for example, creates inconsistencies in standards that can then lead to selective compliance, forum-shopping and other strategies to circumvent any such standards.
19 Jennifer Zerk, Multinationals and Corporate Social Responsibility: Limitations and Opportunities in International Law (Cambridge University Press, 2006) 69-70. 20 Christine Chinkin, ‘The Challenge of Soft Law: Development and Change in International Law’ (1989) 38 International and Comparative Law Quarterly 850, 865. 21 International Council on Human Rights Policy, ‘Beyond Voluntarism: Human Rights and the Developing International Legal Obligations of Companies’ (Report, February 2002) 19. 22 Christopher Albin-Lackey, ‘Without Rules: A Failed Approach to Corporate Accountability’ (World Report 2013, Human Rights Watch, 2013).
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C Universality of International Law
As noted in an earlier chapter, there exist several codes of conduct and multi- stakeholder UN initiatives that regulate various industries or aspects of corporate activity. These are useful reference points in developing our standards; however, to date, no one code of conduct or regulatory instrument has attained universal acceptance. Yet it is precisely this we are searching for. Notwithstanding well-made critiques and concerns of the genuine universality of international law,23 international law is still the last best locale within which to identify a set of standards that holds out the possibility of attracting strong legitimacy and, in turn, universal acceptance and adherence.24
In theory, international law reflects and is predicated upon universal values.25 It encapsulates principles and norms based on these universal values, and as such often benefits from near universal acceptance (if not adherence). This jurisprudential advantage also leads to pragmatic ones. The legitimacy attached to core international legal standards holds out the hope of increased adherence and less fragmentation and competition among regulatory instruments and regimes.26
In addition, sourcing minimum standards from international law diminishes the possibility of forum-shopping by TNCs – a practice that bedevils other spheres of transnational corporate regulation such as taxation and protection of intellectual property.27 One of the key issues in gaining tangible support from TNCs for greater regulation is a classic collective action problem: the need for a level playing field.28 In the past, the business community has resisted regulation (in a range of subject-areas) on the basis that the regulations would create unfair business advantages to their more
23 See, eg, Sundhya Pahuja, Decolonising International Law: Development, Economic Growth and the Politics of Universality (Cambridge University Press, 2011). 24 See, eg, Theodor Meron, The Humanization of International Law (Martinus Nijhoff, 2006); Thomas Franck, The Power of Legitimacy Among the Nations (Oxford University Press, 1990). 25 International Council on Human Rights Policy, above n21, 15. 26 Robert Kolb, Peremptory International Law-Jus Cogens: A General Inventory (Hart Publishing, 2015). 27 International Council on Human Rights Policy, above n21, 19. 28 Ibid. See also Kathleen Getz and Jennifer Oetzel, Doing Business While Advancing Peace and Development (UN Global Compact, 2010); Jessica Banfield, Virginia Haufler and Damian Lilly, ‘Transnational Corporations in Conflict-Prone Zones: Public Policy Responses and a Framework for Action’ (2005) 33 Oxford Development Studies 133.
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Corporate Peacebuilding and the Law unscrupulous competitors.29 Moreover, state-based regulation, they argue, allows some businesses to escape regulation by, for example, shifting their place of domicile from one country to another. Developing core corporate peacebuilding standards from international law helps to overcomes issues of forum-shopping and selective adoption.30 Charney notes that a single country cannot ‘unilaterally regulate [corporate] power and behaviour; even the Western, developed countries have an interest in [regulating corporate behaviour internationally]’.31 Sourcing behavioural standards for TNCs from near-universally accepted norms of international law holds out the promise of a universally recognised and applied regulatory regime, and goes a considerable way to levelling the corporate playing field.32
The sheer diversity among host-countries’ laws and local regulatory environments makes it extraordinarily difficult to suggest these are viable sources of broadly applicable minimum behavioural standards. Moreover, due to the risk of inequitable distributions of the regulatory burden between developed and developing countries, and to ensure the best chance of avoiding “regulatory capture” and a race-to-the-bottom among some developing countries, deriving standards from international law – in theory with universal application – is the best means of achieving an end to the conflict-driving behaviour of TNCs and realising the vision of corporate peacebuilding. Developing international law-based standards for TNC conduct in conflict-affected areas provides the further benefit of creating a level playing field for TNCs, increasing the likelihood of acceptance of such a regulatory regime by all stakeholders involved: home-states, host-states and the corporations themselves.
Moreover, by choosing to base the minimum standards of corporate conduct doing business in conflict-affected areas on fundamental international, rather than domestic, law norms, the broadest possible suite of enforcement possibilities is possible – both at the international, regional and domestic levels, as discussed in the next chapter. Indeed,
29 Ibid. 30 Ibid, 19. See, also, Jonathan Charney, ‘Transnational Corporations and Developing Public International Law’ (1983) 32 Duke Law Journal 748; Dan Danielsen, ‘How Corporations Govern: Taking Corporate Power Seriously in Transnational Regulation and Governance’ (2005) 46(2) Harvard International Law Journal 411. 31 Charney, ibid, 749. 32 International Council on Human Rights Policy, above n21, 19.
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D Distinguishing between Applicability, Liability and Enforcement of International Legal Standards
A distinction can be drawn between the applicability or existence of legal obligations for corporations under international law, and the enforcement of those obligations.33 Even if accountability mechanisms remain relatively immature or even non-existent, that does not, automatically, translate into a denial of any duties under the law. This applies to any legal system, not least the international legal system. Enforcement only arises when the accused is subject to the jurisdiction of a judicial entity, such as a court or tribunal.34 That a judicial avenue may or may not exist to hold corporate actors to account need not, as a rule, preclude the application of behavioural standards to corporate actors or their obligation to abide by those standards.35
Public international law – to which this chapter turns to derive minimum standards of corporate conduct in conflict-affected areas – establishes the rules of conduct, but generally speaking lacks the means to enforce standards, instead devolving that exercise to states themselves.36 Fitzmaurice emphasises that ‘the legitimacy and authority of international law does not derive solely, nor even largely, from its enforceability’.37 Weber similarly suggests that legal authority is derived, in part, from the propriety of
33 Fauchald and Stigen, as above n5, 1030 See, eg, Duncan Kennedy, A Critique of Adjudication (Harvard University Press,1997) 305. 34 Brief of Yale Law School Center for Global Legal Challenges, Kiobel v Royal Dutch Petroleum Co, 133 SCt 1659 (2013). 35 Ibid, 4. 36 Fauchald and Stigen, as above n5, 1032; Brief for the United States as Amicus Curiae Supporting Petitioners in Kiobel v Royal Dutch Petroleum Co, 133 S Ct 1659 (2013) 18; Steven Ratner, ‘Corporations and Human Rights: A Theory of Legal Responsibility’ (2001) 111 Yale Law Journal 443, 463; Louis Henkin, Foreign Affairs and the United States Constitution (Oxford University Press, 2nd ed, 1996) 245. 37 Gerald G. Fitzmaurice, ‘The Foundations of the Authority of International Law and the Problem of Enforcement’ (1956) 19 Modern Law Review 1.
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Legitimacy of international legal rules, according to Franck, is the ‘inherent capacity of a rule to exert pressure on states to comply’ and is derived from internal qualities of the rule itself, independent of robust judicial enforcement mechanisms to ensure compliance;41 namely, a rule’s:42 determinancy – textual clarity of the rule coherence – compatibility of the rule with higher-order norms symbolic validation – rituals of recognition adherence – agreement with rules about application and interpretation.
While Franck’s work focuses on rule compliance by states, his understanding of legitimacy of international rules is perhaps even more salient to our search for international standards for TNCs, as the dearth of enforcement measures for international norms is even more apparent when dealing with TNCs (as discussed in Chapter 5). These criteria are used in Part 2 of this chapter to reinforce the contention that ICL is the preferred source of minimum standards of corporate conduct in conflict- affected areas with which compliance is sought. The analysis emphasises the advantages of ICL over other bodies of public international law – international human rights and humanitarian law. Due to the greater degree that it reflects these legitimating elements, it is contended that ICL is the most appropriate source of minimum standards of TNC conduct in conflict-affected areas.
38 Steve Barela, International Law, New Diplomacy and Counter-terrorism: An Interdisciplinary Study of Legitimacy (Routledge, 2014) 19. 39 Thomas Franck, ‘Legitimacy in the International System’ (1988) 82 American Journal of International Law, 705, 706; See also Barela, above n38, 30. 40 Ibid, 709; Franck, Power of Legitimacy, above n25, 16; Barela, above n38. 41 Franck, ‘Legitimacy in the International System’, above n39, 712. 42 Ibid, 712.
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III INTERNATIONAL CRIMINAL LAW AS PREFERRED SOURCE OF MINIMUM STANDARDS FOR TNCS IN CONFLICT-AFFECTED AREAS
ICL has several pragmatic, political and jurisprudential advantages over the other likely bodies of public international law which make it the preferred, most legitimate choice for the purpose of sourcing behavioural standards for regulating TNC conduct to prevent corporate conflict-driving behaviour, and ultimately to encourage corporate peacebuilding.
A ICL: An Introduction
Traditionally, states were thought to be the sole entities capable of breaching international law.43 In general, international wrongful acts were committed exclusively by states or state agents.44 The atrocities of World War II opened a new era in international law that has swept aside the traditional statist view of international law, at least insofar as international wrongful acts are concerned.45 Those wartime experiences prompted a renewed focus on the rights and obligations of individuals under international law. Rejecting classic legal positivism, the ‘critical turning point’ of the International Military Tribunal (IMT) convened at Nuremberg,46 Germany in 1946 that tried Nazi leaders, ushered in an era where grave violations of international legal norms were assigned to individuals, including civil, military and corporate leaders.47 The body
43 Lassa Oppenheim, International Law: A Treatise, Vol. 1 (Peace) (2nd ed 1912) 19. 44 Antonio Cassese, Guido Acquaviva, Mary Fan and Alex Whiting, International Criminal Law: Cases and Commentary (Oxford University Press, 2011). There were some exceptions to this rule. For instance, for centuries pirates have been considered hostes humani generis – enemies of humanity. See Gerry Simpson, ‘Piracy and the Origins of Enmity’ in Matthew Craven, Malgosia Fitzmaurice and Maria Vogiatzi (eds) Time, History and International Law (Brill, 2006) 219. 45 Gerhard Werle and Florian Jessbuerger, Principles of International Criminal Law (Oxford University Press, 3rd ed, 2014) 1. 46 Cassese et al, above n44, 40. 47 Gideon Boas, ‘What is International Criminal Justice?’ in Gideon Boas, William Schabas and Michael Scharf (eds), International Criminal Justice: Legitimacy and Coherence (Edward Elgar, 2012) 2; Robert Cryer, Hakan Friman, Darryl Robinson and Elizabeth Wilmshurst, An Introduction to International Criminal Law and Procedure (Cambridge University Press, 3rd ed, 2014) 13; Stanley Paulson, ‘Classical Legal Positivisms at Nuremberg,’ (1975) 4 Philosophy and Public Affairs 132, 138. See also Quincy Wright, ‘Legal Positivism and the Nuremberg Judgment’ (1948) 2 American Journal of International Law 405; Hersch Lauterpacht, ‘The Law of Nations and the Punishment of War Crimes’ (1944) 21 British Yearbook of International Law 58; Wade Mansell and Karen Openshaw, International Law: A Critical Introduction (A&C Black, 2014) 44; Hans Ehard, ‘The Nuremberg Trial Against the Major War Criminals and International Law’ (1949) 43 American Journal of International Law 223; Thane Rosenbaum, ‘The Romance of Nuremberg and the Tease of Moral Justice’ (2006) 27 Cardozo Law
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The uncertainty around ICL’s positive law status has been dispelled with the establishment of the ad hoc international criminal tribunals established in the 1990s to investigate and prosecute international crimes committed during the conflicts in Rwanda and the former Yugoslavia,51 and the permanent International Criminal Court (ICC) in 2002.52
The ICC is the first permanent court dedicated to prosecuting international crimes, and its constitutive document – the Rome Statute – reflects the definitive extent of contemporary international criminal law as it exists today. 5354 The Statute’s pedigree can be traced directly back to the Nuremberg Principles developed from the
Review 1731; Beth van Schaack, ‘Crimen Sine Lege: Judicial Lawmaking at the Intersection of Law and Morals’ (2008-09) 97 Georgetown Law Journal 119, 157. 48 Boas, above n47, 1; Robert Cryer, ‘International Criminal Justice in Historical Context: The Post- Second World War Trials and Modern International Criminal Justice’ in Gideon Boas, William Schabas and Michael Scharf (eds) International Criminal Justice: Legitimacy And Coherence (Edward Elgar, 2012) 188; Cassese et al, above n44, 15; Werle and Jessbuerger, above n46, 1; Hans Kelsen, Peace Through Law (University of North Carolina Press, 1944) 223. 49 See, eg, Statute of the International Criminal Tribunal for the Former Yugoslavia, UN Doc S/RES/827 (25 May 1993) art7: ‘A person who planned, instigated, ordered, committed or otherwise aided and abetted in the planning, preparation or the execution of a crime.... shall be individually responsible for the crime.’ See also, M. Cherif Bassiouni, ‘International Criminal Justice in Historical Perspective’, in M. Cherif Bassiouni, (ed) International Criminal Law, Volume III International Enforcement (Martinus Nijhoff, 3rd edition, 2008), 29. 50 Cryer et al, above n47, 188; Werle and Jessbuerger, above n46; Simpson, Law, War and Crime: War Crimes Trials and the Reinvention of International Law (Polity, 2007); Casssese, above n45, 38. Note: Cryer also acknowledges the smaller contribution to ICL of the International Military Tribunal of the Far East (convened in Tokyo) in the same period. 51 Boas, above n47, 4. 52 Ian Brownlie, Principles of Public International Law (Oxford University Press, 6th ed, 2003) 560. See, for example: Article 7 of ICTY Statute. See also Prosecutor v Tadic (Judgment) (ICTY, Appeals Chamber, Case No IT-94-1-A, 15 July 1999) [186]. 53 Rome Statute of the International Criminal Court, opened for signature 17 July 1998, 2187 UNTS 90 (entered into force 1 July 2002) (“Rome Statute”). 54 Ian Brownlie, above n52, 561; Steven Ratner, Jason Abrams, James Bischoff, Accountability for Human Rights Atrocities in International Law (Oxford University Press, 3rd ed, 2009) 10.
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The Court is the ‘first permanent, treaty based, international criminal court established to help end impunity for the perpetrators of the most serious crimes of concern to the international community’ through investigating, prosecuting and punishing breaches of ICL.57 Actions constituting war crimes, crimes against humanity and genocide have all been previously proscribed by various IHL and IHRL treaties and customary international law.58 With the Rome Statute, these international actions were unequivocally criminalised and codified.
B ICL Reflects the Key Norms of IHRL and IHL
There exists a close relationship between the three key bodies of public international law; international human rights, humanitarian and criminal law. They are all similar in their goals and underlying motivations – namely, the protection of human dignity.59 They also have interwoven histories, with each area of law experiencing substantial development in the aftermath of World War II, as part of the international community’s response to that conflict and its atrocities.60
The Nuremberg IMT judgment was influential in the drafting of international and regional human rights conventions and in turn, international human rights conventions influenced the drafting of the statutes of modern international criminal tribunals.61
55 ‘Principles of International Law recognized in the Charter of the Nuremberg Tribunal and in the Judgment of the Tribunal, with commentaries’ [1950] Yearbook of the International Law Commission, Vol II, UN Doc A/CN.4/22, 374. 56 Rome Statute of the International Criminal Court, preamble [3]. 57 “About the Court”,
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Similarly, ‘developments in humanitarian law are reflected in the law of war crimes but … decisions of international criminal tribunals also sometimes feed back into humanitarian law’.62 Writing in 2005, Alston emphasises the link: ‘Human rights and humanitarian law have moved much closer together, as the Statute of the ICC attests and the jurisprudence of the International Criminal Tribunals for the Former Yugoslavia and for Rwanda illustrate’.63 DeThan and Shorts identify a ‘clear, visible cross- pollination and cross-referencing between international criminal law, international humanitarian law and international human rights, the first and last of which are really different perspectives on the same problem.’64 They go on to observe how the ad hoc international criminal tribunals frequently reference human rights conventions and legal decisions, for example those from the European Court of Human Rights.65
Dunoff, Ratner and Wippman offer an image (Figure 4.1) of three overlapping circles to describe the relationship between these three bodies of law – each one overlapping with the other two.
IHRL IHL
ICL
Figure 4.1: Dunoff, Ratner, Wippman's geometric representation of the relationship between the three bodies of public international law.66
Tribunal for Yugoslavia, art21, Statute of the International Tribunal for Rwanda, art20, Rome Statute of the International Criminal Court, art55, 56. 62 Cryer et al, above n47, 16. 63 Philip Alston, ‘The ‘Not-A-Cat’ Syndrome: Can the International Human Rights Regime Accomodate Non-State Actors’ in Philip Alston (ed), Non-State Actors and Human Rights (Oxford University Press, 2005) 7. See also Boas, above n47, 6. 64 Claire deThan and Edwin Shorts, International Criminal Law and Human Rights (Sweet and Maxwell, 2003). 65 Ibid. 66 Dunoff, Ratner, Wippman, n9, 20.
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The three bodies of law are related, yet distinct. The overarching goals of ICL may be extremely similar to IHRL and IHL, namely the safeguarding of human dignity and international peace and security (compare, for example, the striking similarities in the vocabularies of the preambles of the Rome Statute, Geneva Conventions and UDHR).67 Yet they serve different purposes.68 IHL prohibits certain conduct during war-time, and IHRL instruments note the inviolable fundamental rights attaching to all human beings.69 These sets of international laws are focused squarely on ‘the prescription of norms for the protection of the individual in peace and war’.70 Yet neither body of law extensively criminalises conduct that breached its provisions, nor establishes procedures and tribunals to punish transgressors.71 ICL fills that void by criminalising the most egregious violations of IHRL and IHL and instituting a mechanism to enforce them.72 ICL has focussed on what Ratner et al refer to as “atrocities” – those acts that are ‘characterized by the directness and gravity of their assault upon the human person, both corporeal and spiritual’.73 In this way it is said that ICL ‘provides an answer to the failure of traditional mechanisms to protect human rights’ and humanitarian law.74
1 Three for the Price of One Choosing to derive corporate standards of conduct from ICL grants, to a great degree, the “best” of all the bodies of law. Many serious human rights violations and grave violations of IHL that we can envisage being committed in conflict-affected areas qualify as international crimes and ‘almost every international crime would be a violation of human rights law.’ 75 Thus, grave breaches of IHL that amount to a war- crime ‘by their nature, involve violations of non-derogable rights’. 76 Therefore, by choosing ICL we are embracing and validating the key norms of behaviour of the other bodies of law.
67 Cryer et al, above n47, 15. 68 Ratner, Abrams and Bischoff, above n55, 12. 69 Ibid. 70 Ibid. 71 Cassesse, ICL, above n15, 17; Dunoff, Ratner and Wippman, above n9, 646. 72 Ratner, Abrams and Bischoff, above n55, 14; Cryer et al, above n47, 13-15. 73 Ratner, Abrams and Bischoff, ibid. 74 Werle and Jessbuerger, above n46, 51. 75 Cryer et al, above n47, 13-15; deThan and Shorts, above n64, 13; Werle and Jessbuerger, above n46, 53. 76 deThan and Shorts, above n64, 124.
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The Rome Statute acknowledges this convergence of laws in several provisions. For example, the requirement in Article 36 that candidates to be judges should have established competence in criminal law and procedure, or in ‘relevant areas of international law and international humanitarian law and the law of human rights’.77 Article 21 outlines that the law that the Court shall apply ‘must be consistent with internationally recognized human rights’.78
Articles 7 and 8, which spell out the Statute’s definition of crimes against humanity and war-crimes, also substantially reference the core prohibitions of IHL and IHRL, many of which have, arguably, also achieved the status of jus cogens as well, demonstrating the overlap between the norms from all the bodies of law. Non-derogable human rights are referenced, such as arbitrary killings, torture, inhuman or degrading treatment, rape, unfair trials and wanton destruction of property. Also included is a general prohibition on the ‘violation of fundamental rules of international law’ and ‘violations of article 3 common to the four Geneva Conventions of 12 August 1949’.79 Moreover, the often highly developed case-law under international human rights treaties (in particular, the ICCPR and ECHR) has informed the ICC’s Elements of Crime – the practical ‘“check- list” of the necessary parts of offences that need to be proved’.80
As a matter of expediency, therefore, opting for ICL is a better paradigm. Cobbling together standards of conduct drawn from a variety of bodies of international law is potentially a problematic exercise both in its formulation and its implementation. For instance, the divergent vocabularies of IHL and IHRL would need to be reconciled, as would their different territorial and temporal applicability.81 Moreover, IHRL primarily obligates states, whereas IHL has also been addressed to the individual actor on the battlefield.82 When there is a viable alternative which has already addressed corporate wrongdoings related to armed conflict, which possesses other advantages as will be
77 Rome Statute of the International Criminal Court, art36(3)(b)(ii). 78 Ibid, art21(3). 79 Ibid, art8(2)(c). 80 Cryer, ‘International Criminal Justice in Historical Context’, above n48, 163; deThan and Shorts, above n64, 118. 81 deThan and Shorts, above n64, 188-126. Cryer et al, above n47, 13-15. 82 Cryer et al, ibid.
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C ICL has a Text
Clarity of the rules is crucial for creating and sustaining legitimacy of the regulatory regime, which in turn encourages voluntary compliance.83 Franck identifies the need for an international legal rule to have determinancy – that is, clarity in its construction – in order to attract and sustain legitimacy.84 He would likely agree with the proposition of regulatory scholars that the legitimacy and effectiveness of an overall regulatory regime increases when there is clarity and internal consistency of the set of norms that lie at the centre of it.85 A similar proposition is expressed by Simpson, who argues that for the viability of ICL ‘a central idea … would be the need for “coherence” among the norms that constitute the system.’86 Rather than diffused over numerous conventions and instruments, ICL has a singular, primary text: the Rome Statute. This provides ICL with a level of clarity and coherence which, when combined with the moral weight of its behavioural norms, provides ICL with a legitimacy all its own among the bodies of public international law.
The Rome Statute is a key reason to preference ICL over jus cogens or indeed other bodies of public international law. It is not merely a text, but represents a body of international law that is actively developing and deepening its rules of procedure and clarifying the Elements of Crime in subsidiary documents utilised by the ICC.87 Any suggestion that a TNC lacks sufficient guidance as to its expectations when doing business in conflict-affected areas would be dispelled by relying on the Rome Statute for their substance. Specificity is a general principle of criminal law, no less with
83 Thomas Franck, ‘Legitimacy in the International System’, above n40. 84 Ibid. 85 Franck, Power of Legitimacy, above n25; Gabrielle Simm, ‘International Law as a Regulatory Framework for Sexual Crimes Committed by Peacekeepers’ (2012) 16(3) Journal of Conflict and Security Law 1; Gunther Teubner, Law as an Autopoietic System (Blackwell, 1993). 86 Gerry Simpson, ‘International Criminal Justice and the Past’ in Gideon Boas, William Schabas and Michael Scharf (eds), International Criminal Justice: Legitimacy and Coherence (Edward Elgar, 2012) 125. 87 Elements of Crimes (International Criminal Court, 2011).
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Being able to rely on a body of law that embraces specificity in its provisions is desirous when developing minimum standards of behaviour. This is especially so when contrasted with the alternative of vaguer, more aspirational human rights principles which are currently in vogue to regulate corporate conduct.
Moreover, if we are to think of hard-law enforcement and accountability mechanisms, the standards themselves must be clear. At the moment, the OECD Guidelines, the UN Global Compact and the UN Guiding Principles on Business and Human Rights – the three leading exemplars of international instruments embracing corporate responsibilities for human rights – are vague in their prescriptive requirements.90 For effective monitoring and enforcement of any standards of behaviour, the duties must be clear to the regulatees and regulators alike. The basic notion of fairness also demands that duty-holders must be able to reasonably comprehend their obligations.91 On this point ICL trumps jus cogens, for ICL has a written text. This may sound like a rather banal statement, but arguably is hugely significant when seeking global and consistent compliance with a set of behavioural standards.
The Rome Statute details four categories of international crimes which are considered a ‘part of general international law’92 and for which the ICC has jurisdiction to prosecute: 93 a) war crimes b) crimes against humanity c) genocide
88 Cassese et al, above n44, 31. 89 Cryer et al, above n47, 17. 90 See, eg, Rory Sullivan and Nicolas Hachez, ‘Human Rights Norms for Business: The Missing Piece of the Ruggie Jigsaw – The Case of Institutional Investors,’ in Radu Mares (ed), The UN Guiding Principles on Business and Human Rights (Martinus Nijhoff, 2011); Chrstine Parker and John Howe, ‘Ruggie’s Diplomatic Project and its Missing Regulatory Infrastructure,’ in Radu Mares (ed), The UN Guiding Principles on Business and Human Rights (Martinus Nijhoff, 2011). 91 Franck, Power of Legitimacy, above n25. 92 Brownlie, above n52, 561; Rome Statute of the International Criminal Court, preamble. 93 Rome Statute of the International Criminal Court, art5. See also deThan and Shorts, above n64, 117; Cassese et al, above n44, 65.
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d) crime of aggression
The first three criminal categories encompass serious violations of customary or treaty rules belonging to the corpus of international humanitarian law, specifically the Geneva Conventions (1949) and the Genocide Convention (1948), and international human rights law, notably the so-called International Bill of Rights.94 War-crimes are defined as grave or serious violations of IHL.95 Additionally, crimes against humanity refer to egregious human rights violations not necessarily confined to a situation of active hostilities or an armed conflict per se.96 The fourth; the crime of aggression, was added to the ICC’s jurisdiction in 2010 and derives from a provision of the UN Charter prohibiting acts of aggression among the community of nations.97 Notably, the list of international crimes has remained relatively constant since the Nuremberg-era, albeit with a small change in language – “crimes against the peace” has transformed into the “crime of aggression”.
It is uncommon that a company itself is accused of directly perpetrating international crimes. Rather, allegations of corporation contributions to armed conflict ordinarily revolve around the material assistance and/or motivation given to government or other forces who then perpetrate crimes.98 Therefore, for the purposes of this thesis, it is notable that beyond the four core international crimes, ICL (as embodied in the Rome Statute) also criminalises complicity in those core crimes, and so-called “inchoate crimes”.99 That is, conduct that substantially assists in the preparation or perpetration of an international crime is, in and of itself, a crime even if no core crime is ultimately committed and no harm actually caused.100
94 Prosecutor v. Tadic, above n53, [94-137]. 95 deThan and Shorts, above n64, 117; Rome Statute, art8(2). 96 Cassese et al, above n44, 65; Rome Statute, art7(1). 97 Reference to this prohibition found in UN Charter, art1, 39; Rome Statute, art8(bis). 98 See Chapter 2 of this thesis. 99 Rome Statute, art25(3). 100 Cassese et al, above n44, 190.
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D Lack of Clarity of Relevant Human Rights Standards for Corporations
In contrast, as IHRL currently stands, there is no clarity as to the extent of the human rights obligations of companies, to what extent even that they should respect human rights norms, and in which contexts. Furthermore, the language and discourse of human rights ill suit the purpose of deriving minimum standards of conduct for TNCs. Human rights are not naturally associated with corporations, especially as they are intrinsically about human beings. But perhaps most importantly, it is what a human rights discourse tends to exclude that is the most salient point here. As Sunstein notes, the ‘emphasis on rights tends to crowd out the issue of responsibility’.101 David Kennedy’s critique of human rights law suggests along similar grounds, that ‘there are other lost vocabularies which are equally global – vocabularies of duty, of responsibility, of collective commitment’.102 Kennedy’s critique is even more incisive when it comes to searching for the most conducive body of international law with which to establish the responsibilities of TNCs. As was noted earlier, the most prominent contemporary international instruments on corporate human rights responsibilities offer only loosely- worded guidance as to a TNC’s human rights obligations, and how they should be put into action. .103
More broadly, there remains significant controversy among states as to the precise requirements of human rights law even as it applies to them.104 This lack of clarity will be amplified when attempting to define human rights standards for an entity as incomparable to a sovereign state like the private, for-profit corporation.105 To be sure, a direct transposing of state human rights obligations onto corporations would be conceptually indefensible and practically ineffectual.106 Corporations are not states. They serve different social purposes and have different relationships to society at large.
101 Cass Sunstein, ‘Rights and their Critics’ (1995) 70 Notre Dame Law Review 727, 730. 102 David Kennedy, The Dark Sides of Virtue: Reassessing International Humanitarianism (Princeton University Press, 2004) 5. 103 Parker and Howe, above n90. 104 David Kinley and Junko Tadaki, ‘From Talk to Walk: The Emergence of Human Rights Responsibilities for Corporations at International Law’ (2004) 44 Virginia Journal of International Law 931, 963-4; Ratner, above n37. 105 Ibid. 106 Nicole Deitelhoff and Klaus Dieter Wolf, ‘Business and Human Rights: How Corporate Norm Violators Become Norm Entrepreneurs’ in Thomas Risse, Stephen Ropp, Kathryn Sikkink (eds) The Persistent Power of Human Rights: From Commitment to Compliance (Cambridge University Press, 2013) 222-3.
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Developing human rights obligations for corporations requires an understanding of the inherent constraints and characteristics of the corporate form.107
E Business Respecting Human Rights: Aspirational Goals not Minimal Standards
We could question whether the choice of ICL as the source for minimum standards of corporate conduct in conflict-affected areas is setting the bar too low for TNCs. After all, surely the international community should expect more from TNCs than merely not committing war-crimes or crimes against humanity, human rights being the most likely other body of law to supply such standards of TNC conduct in conflict-affected areas that has received some support. For example, Kinley and Tadaki aruge for obligating TNCs to protect human rights within their ‘spheres of influence’.108
Indeed, ever since the “naming and shaming” public campaigns of the 1990s against corporate giants such as Royal Dutch Shell (for its conduct in Nigeria) and Nike (for its sweatshop Asian workforce), global businesses are now regularly asked to secure human rights.109 Moreover, the bulk of regulatory activity surrounding corporate involvement in conflict-affected areas has been within a human rights paradigm.110 Many of the leading Australian TNCs embrace the paradigm and lexicon of human rights to benchmark their social responsibility, especially in developing country contexts.111 For example, as noted in the previous chapter, seven of the ASX Top20 are members of the UN Global Compact – a CSR-style initiative for business.112
107 Zerk, above n19, 83. 108 Kinley and Tadaki, above n104. 109 Deitelhoff and Wolf, above n.106, 222. 110 See, eg, Voluntary Principles, above n19; UN Global Compact
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Nevertheless, however high our expectations for TNC conduct are, it does not necessarily follow that the minimum standards derived from law should be so high. The aspirational hopes for the regulation of TNCs in conflict-affected areas – to achieve corporate peacebuilding – must be checked with a good dose of reality. As identified in Chapter 2, impunity for corporations for complicity in international criminal acts is an historical and contemporary occurrence. Encouraging CSR-style programs in conflict- affected areas or proactive peacebuilding initiatives puts the cart before the horse, if there remains impunity for the most egregious corporate behaviour that contributes and exacerbates armed conflicts in the first place.
Moreover, considerable problems remain in asserting IHRL as the source of minimum standards of conduct for TNCs in conflict-affected areas. For instance, IHRL’s questionable relevance and applicability to the corporate form are a significant conceptual shortcoming.113 Coupled with its partial derogability and its non-universal acceptance, viewing the issue of corporate contributions to armed conflict through a human rights prism seems deficient.
Human rights are aspirational in nature and the dream of a world where human rights are fully protected is a utopian, if albeit noble, dream.114 Many states fall short in fulfilling their human rights legal obligations, and many people/s continue to suffer from human rights abuses round the world. Even affluent, well-developed states are often accused by advocacy groups and UN human rights monitoring bodies of breaching various provisions of human rights treaties. Given the parlous state of human rights enforcement when states fail in their obligations, the practicalities of establishing additional monitoring and enforcement mechanisms for corporate human rights obligations seems unlikely, at least in the near term. Moreover, the transnational
113 Markos Karavias, Corporate Obligations under International Law (Oxford University Press, 2013) 73; Beth Stephens, Mobilizing for Human Rights: International Law in Domestic Politics (Cambridge University Press, 2009); Oliver de Schutter, ‘The Challenge of Imposing Human Rights Norms on Corporate Actors’ in Oliver de Schutter (ed), Transnational Corporations and Human Rights (Hart, 2006); Carlos Vasquez, ‘Direct vs. Indirect Obligations under International Law’ (2004) 43 Columbia Journal of Transnational Law 947. 114 Rosalyn Higgins, Problems and Process: International Law and How We Use It (Clarendon Press, 1994) 96.
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F Resistance to International Human Rights Obligations for TNCs
Moreover, the fate of the UN Draft Norms serves as a cautionary tale. Attempting to mandate excessively high standards of conduct for corporations in conflict-affected areas could be counterproductive. If such an initiative fails to garner sufficient government and business support from around the world, much as the UN Draft Norms failed to do in 2004 despite decades of advocacy, it risks setting back attempts to regulate and improve TNC conduct in conflict-affected areas.116
The widespread resistance that greeted the draft UN Norms and the 2013 Ecuadorian- led initiative at the UN Human Rights Council reviving calls for the drafting of a treaty on business’ human rights obligations are evidence that there remains considerable reluctance on the part of the international community (both governments and business) to formally recognise binding human rights obligations of businesses at international law.117 Leading business interests strongly opposed such a move, suggesting it placed too great a financial burden on companies, misapprehended the purpose of the corporation and unfairly saddled private companies with what should appropriately be considered state obligations.118 Embedding the regulation of corporations in conflict- affected areas in human rights law arguably prevents widespread adoption and acceptance by the business community.
115 Robert McCorquodale, ‘Business, Rule of Law and Human Rights’ in Robert McCorquodale (ed), The Rule of Law in International and Comparative Context (British Institute for International and Comparative Law, 2010) 39. 116 Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights (draft), UN Sub-Commission on the Promotion and Protection of Human Rights, UN Doc. E/CN.4/Sub.2/2003/12/Rev.2 (August 13 2003). 117 Republic of Ecuador, ‘Statement on behalf of a Group of Countries at the 24rd session of the Human Rights Council’ (UN Human Rights Council, 1Setpember 2013) < https://business- humanrights.org/en/pdf-statement-on-behalf-of-a-group-of-countries-at-the-24rd-session-of-the-human- rights-council>. 118 Business and Industry Advisory Committee to the OECD, ‘BIAC Comments: Ecuador Proposal for a New Business and Human Rights Treaty’ (Press Release, 19 June 2014),
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In contrast, the diplomatic success of the Guiding Principles suggests that sometimes incrementalism and inclusivity may well be the more effective options. Further proof of this came in 2013, when a new Ecuadorian-led initiative at the UN Human Rights Council called for a revival of efforts to draft a treaty on corporate human rights obligations.119 The initiative was finally endorsed by the UN Human Rights Council after receiving significant support from developing countries, but failed to attract any substantial support from OECD countries.120 In the face of resistance from developed countries – from which most TNCs originate – it is hard to be optimistic about the chances of success for this initiative. On the contrary, Norway sponsored a rival resolution at the Council calling for a more incremental approach to implementing the Guiding Principles.121 This proposal garnered support from OECD countries and is but the latest evidence indicating there is little appetite among the major TNC “home- countries” for a reprise of the Norms.122 To be sure, a UN Working Group was established to ‘elaborate an international legally binding instrument to regulate, in IHRL, the activities of TNCs and other business enterprises’.123 It has completed two sessions that explore the ‘content, scope, nature and form of the future international instrument.’124 Nevertheless, as has been evinced by contributions at these Working Group’s session, efforts to foist direct human rights obligations or other legal obligations perceived as overly burdensome on a non-cooperative global business community seem unlikely to succeed anytime soon.
119 Republic of Ecuador, above n117. 120 UN Human Rights Council Resolution, ‘Elaboration of an international legally binding instrument on transnational corporations and other business enterprises with respect to human rights’, UN Doc A/HR/26/l.22 (26 June 2014). 20 votes for: Algeria, Benin, Burkina Faso, China, Congo, Côte d'Ivoire, Cuba, Ethiopia, India, Indonesia, Kazakhstan, Kenya, Morocco, Namibia, Pakistan, Philippines, Russia, South Africa, Venezuela, Vietnam), 13 votes against: Austria, Czech Republic, Estonia, France, Germany, Ireland, Italy, Japan, Montenegro, South Korea, Romania, the Former Yugoslavia, UK, USA; 13 abstentions: Argentina, Botswana, Brazil, Chile, Costa Rica, Gabon, Kuwait, Maldives, Mexico, Peru, Saudi Arabia, Sierra Leone, UAE (26 June 2014). 121 UN Human Rights Council Resolution, ‘Human rights and transnational corporations and other business enterprises’, UN Doc A/HRC/26/l.22 (27 June 2014) 122 Adopted by consensus, UN Human Rights Council (27 June 2014). 123 UN Human Rights Council Resolution 26/9, A/HRC/26/122 (26 June 2014). 124 See, Report on the first session of the open-ended intergovernmental working group on transnational corporations and other business enterprises with respect to human rights, with the mandate of elaborating an international legally binding instrument. 5 February 2016, A/HRC/31/50. Report on the second session of the open-ended intergovernmental working group on transnational corporations and other business enterprises with respect to human rights. 4 January 2017A/HRC/34/47 158
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These critiques, however, are not intended to be dismissive of the value of human rights law and the role it may play in the regulatory framework to realise the vision of corporate peacebuilding. Rather than being seen as the midline set of minimum legal standards for TNCs to adhere to, arguably the corpus of international human rights law – given its lofty goals and vague rights lexicon – is better conceptualised as contributing to the aspirational regulation of the corporate peacebuilding regulatory framework. Indeed, ‘the idea of human rights encompasses much more than law’ and more than merely enforceable minimum standards of behaviour.125 These ideas are elaborated upon in Chapter 6. Besides, the minimum standards designated today are not set in stone. An effective regulatory regime should be adaptable and responsive. It should possess the flexibility to raise the applicable minimum standards for TNC conduct in conflict-affected areas in the future.
G Universality and Fundamental Nature of ICL Norms
There are, to be sure, several critiques questioning the utility of ICL in practice: the immense cost of international criminal trials, their locale being often far-removed from the place of the crimes and the selectivity of its enforcement have all been issues raised in the literature.126 Yet others question the very existence and theoretical justifications of ICL, with some calling it “victor’s justice” or a “Western construct” imposed on the world.127
However, these cultural relativist/Western imperialist series of arguments are strongest in relation to IHRL and weakest when it comes to the prohibitions enshrined in ICL. For instance, the very notion and lexicon of “rights” is, arguably, a Western, liberal creation, not shared by all other cultures and religions.128 On the other hand, ICL’s purpose is the ‘protection of fundamental values of the international community’.129 It proscribes the most basic standards of humanity that have a more legitimate claim to universality than
125 International Council on Human Rights Policy, above n21, 2. 126 See generally, Christine Schwöbel (ed.), Critical Approaches to International Criminal Law: An Introduction (Routledge, 2014). 127 Ratner, Abrams and Bischoff, above n55, 26. 128 See Alston and Goodman, p513. Referencing: Robert Cover, “mitzvah”. Jomo Kenyatta, Facing Mount Kenya: The Tribal Life of the Gikuyu (1965), 109. 129 Werle and Jessbuerger, above n46, 37.
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1 ICL Norms are Jus Cogens Norms The core standards embodied in ICL do not just benefit from drawing from IHL and IHRL core standards of conduct, but also draw added legitimacy from reflecting jus cogens – the ‘peremptory norm[s] of general international law.’132
Standing above and apart from any customary or treaty law obligations, norms that are said to have attained the status of jus cogens are legal norms that reflect the essential commandments of international behaviour with universal applicability, from which no derogation is permitted – they are ‘mandatory and imperative in all circumstances’.133
Jus cogens norms embody a ‘transcendent common good’134 whose purpose is ‘to protect the overriding interests and values of the international community’.135 Portmann
130 Cryer et al, above n47, 44. 131 Leila Sadat, ‘The Effect of Amnesties before Domestic and International Tribunals: Law, Morality, Politics’, in Edel Hughes, William Schabas, and Ramesh Thakur (eds), Atrocities and International Accountability: Beyond Transitional Justice (UN University Press, 2007) 229. 132 Vienna Convention on the Law of Treaties, opened for signature 23 May 1969, 1155 UNTS 331 (entered into force 27 January 1980), art 64. 133 Alexander Orakhelashvili, Peremptory Norms in International Law (Oxford University, 2008) 8. See also, Ian Brownlie, above n52, 512-515; M. Cherif Bassiouni, ‘International Crimes: Jus Cogens and Obligatio Erga Omnes’ (1998) 59 Law & Contemporary Problems 63, 74. 134 Alan Brundner, ‘The Domestic Enforcement of International Covenants on Human Rights’ (1985) 35 University of Toronto Law Journal 219, 249-250. 135 Lauri Haanikainen, Peremptory Norms (Jus Cogens) in International Law (Finnish Lawyers’ Publishing, 1988) 4.
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Chapter 4: Clarifying the Midline refers to jus cogens norms as ‘constitutional norms of the international legal system’.136 They are binding due to the ‘character of the acts themselves whose prohibition and criminality were self-evident with or without state consent’.137 As the ICJ stated in the Corfu Channel Case, jus cogens norms are ‘elementary considerations of humanity’.138 In another case, the ICJ has stated that jus cogens norms derive ‘from principles and rules concerning the basic rights of the human person’.139 Wolff long ago observed that the jus cogens doctrine is the ‘necessary law of nations which consists in the law of nature applied to nations’.140 These peremptory norms derive tremendous legitimacy due to the moral force of the obligations themselves and the values they protect.141
While there exists no exists no definitive list of jus cogens norms it is widely-accepted that there is substantial overlap between ICL standards and jus cogens, with some commentators essentially equating the two.142 ICL prohibitions drawn from the most egregious violations of IHRL and IHL, including genocide, torture, gross violations of human rights and breaches of core obligations of IHL’s Geneva Conventions, are also considered norms having attained jus cogens status.143 Certainly, all those norms relevant to armed conflict that have been elevated to jus cogens status are also criminalised in ICL; as Triffterer comments, ICL’s function is in ‘protecting the highest legal values of this [international] community.’144 However, ICL encompasses more conduct than has been recognised as jus cogens.145 Indeed, given the highly disputed nature of which norms constitute jus cogens, we must seriously question whether firm
136 Roland Portmann, Legal Personality in International Law (Cambridge University Press, 2010) 154. 137 Orakhelashvili, above n131, 37. 138 Corfu Channel (United Kingdom v Albania) (Merits) [1949] ICJ Rep 4, 22. 139 Barcelona Traction, Light and Power Company, Ltd (Second Phase) (Belgium v Spain) [1970] ICJ Rep 3, 32. 140 Christian Wolff, ‘The Law of Nations Treated According to a Scientific Method’ reprinted in James Scott (ed), Classics of International Law, Vol. II (Clarendon Press, 1934) 10. 141 See, eg, Hersch Lauterpacht, ‘The Law of Nations and the Punishment of War Crimes’ (1944) 21 British Yearbook of International Law 58; Bassiouni, above n131; Haanikainen, above n135; Kolb, above n26; Martti, ‘The Pull of the Mainstream’ (1990) 88 Michigan Law Review 1946; Prosecutor v Furundzija (Judgment) (International Criminal Tribunal for the former Yugoslavia, Case No IT-95-17/1, 10 December 1998) 349. 142 Kolb, above n26. 143 Orakhelashvili , above n133, 50; Haanikainen, above n135, 633-687. 144 Otto Triffterer, Commentary on the Rome Statute of the International Criminal Court: Observers’ Notes, Article by Article (Beck/Hart Publishing, 2nd ed, 2008) preamble. 145 Leena Grover, Interpreting Crimes in the Rome Statute of the International Criminal Court (Cambridge University Press, 2014) 248.
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2 Increased Recognition of Applicability and Liability for Corporations Recognising the jus cogens status of these ICL prohibitions has the added appeal of strengthening the argument for recognising the applicability to corporations due to their fundamental nature.146 Henkin sums up the thinking of many international legal scholars: these norms have been identified as ‘supreme law’ and attract universal opprobrium.147 This perspective is echoed in international and national judicial decisions that seem to indicate that for a limited set of norms that ‘offend the community interest and shock the conscience of mankind’, all entities – be they states, individuals or corporations – must abide by them.148 For example, in a concurring opinion in the ICJ’s Arrest Warrant Case, Justices Higgins, Kooijmans and Buergenthal endorsed universal criminal jurisdiction for violations of international norms that enjoy the status of jus cogens.149 In the 2007 judgment, entitled Application of Convention on Prevention and Punishment of Crime of Genocide regarding the massacres of 8000 Bosnian Muslim male inhabitants of the former Yugoslav town of Srebrenica in July 1995, the International Court of Justice stated that genocide is a jus cogens norm that ‘persons or entities’ can commit.150 Further, the International Criminal Tribunal for Rwanda (ICTR) has ‘explicitly extended the genocide norm to corporations’.151 Similarly, US courts have declared jus cogens norms, such as the prohibition on genocide, applicable to corporations.152
146 Portmann, above n136, 19. 147 Louis Henkin, ‘International Law: Politics, Values and Functions: General course on public international law, vol. 216’ in Collected Courses of the Hague Academy of International Law (Brill, 1989) 18. 148 Prosecutor v Tadic, above n53. 149 Arrest Warrant Case (Democratic Republic of Congo v Belgium) (Judgment) [2002] ICJ Rep 3, 2-4. 150 Bosnian Genocide Case (Bosnia and Herzegovina v Montenegro) [2007] ICJ Rep 43. 151 Brief of Yale Law School Center for Global Legal Challenges, Kiobel v Royal Dutch Petroleum Co, 133 SCt 1659 (2013). 152 Sarei v Rio Tinto Plc,722 F3d 1109 (9th Cir, 2013) 20.
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Ultimately, the preference for ICL over jus cogens per se as the preferred source of corporate standards when doing business in conflict-affected areas lies in the suite of jus cogens norms’ undefined nature and composition. There is no separate jus cogens rule- book like ICL’s Rome Statute. In practice, the lack of defined, finite and specific prohibitions makes their appropriateness questionable. As DeThan and Shorts suggest, ‘customary international law’, including the subset of jus cogens, ‘is amorphous and elusive’.153 In a different context, Chinkin and Charlesworth also highlight this shortcoming in the jus cogens doctrine for its utility as a practical regulatory device. They suggest that its importance is derived not from its practical application but, rather, ‘in its symbolic significance in the international legal process’.154
Properly conceived, recognition of their jus cogens status strengthens the moral and legal force of ICL’s behavioural standards in general, and contributes to the legitimacy of using ICL as the preferred source of minimum standards for TNCs doing business in conflict-affected areas. This suggests that standards of corporate behaviour derived from ICL satisfy another of Franck’s legitimacy criteria: coherence.155 He argues that a rule’s legitimacy is derived, in part, from its compatibility with higher order norms.156 In the context of bodies of international law, ICL encapsulates the highest order norms of conduct yet devised
H Broad Accountability Opportunities for ICL
Choosing ICL as the body of international law from which to derive minimum standards of conduct for TNCs doing business in conflict-affected areas opens up strong accountability pathways at domestic levels. This will be discussed in greater detail in the following chapter. Suffice it here to note that some Western countries have made corporations liable for international crimes when incorporating the Rome Statute into
153 deThan and Shorts, above n64, 13. 154 Hilary Charlesworth and Christine Chinkin, ‘The Gender of Jus Cogens’ (1993) 15 Human Rights Quarterly 63. 155 Thomas Franck, Fairness in International Law and Institutions (Oxford University Press, 1995) 38-41. 156 Ibid.
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Corporate Peacebuilding and the Law their domestic laws.157 Moreover, domestic laws in many home-state countries offers civil law opportunities to pursue corporate accountability for international crimes. In contrast, the legal enforcement of IHL and IHRL standards against TNCs in domestic legal orders is often impaired through an absence of adequate legislation and viable enforcement pathways.158
Moreover, the elevation of a certain norm to jus cogens status does not automatically provide for an equivalent peremptory international enforcement mechanism.159 As Judge Kreca in the Bosnia case suggested: ‘the substance and the enforcement of jus cogens are different things ... they do not possess superior force with regard to their effect and enforcement’.160 Thus, while jus cogens norms are, arguably, applicable to corporations, there remains no international legal avenue for redress per se, save the ICC, through their criminalisation by international criminal law.
I Unconscionable not to
Supporters of corporate international criminal liability find a powerful moral argument in their favour. Jurists and scholars have written incredulously about the ramifications of the orthodox status quo view, that international criminal law is not applicable to corporations, and that corporations – due to their nature as “legal” rather than natural persons – cannot be liable for committing violations of international law.161 Essentially, these commonsense appeals can be reduced to pleas of morality and, in particular, a plea for fairness and point to the unconscionable ramifications such a stance entails – essentially immunising companies, large and small, from accountability for committing or abetting atrocities, even genocide.162
157 See, eg, International Commission of Jurists’ Expert Legal Panel on Corporate Complicity in International Crimes, ‘Corporate Complicity and Legal Accountability, Volume 2: Criminal Law and International Crimes, (Commission’s Report, International Commission of Jurists, 2008). 158 Regis Bismuth, ‘Mapping a Responsibility of Corporations for Violations of International Humanitarian Law Sailing between International and Domestic Legal Orders’ (2010) 38 Denver Journal of International Law and Policy 203, 219. 159 Orakhelashvili, above n133, 78-9, 307. 160 Bosnian Genocide Case, above n148, 658 (dissenting opinion of Judge Kreca). 161 Brief of Navi Pillay, United Nations Commissioner of Human Rights, Kiobel v Royal Dutch Petroleum Co, 133 SCt 1659 (2013). 162 Ibid. See also, Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111 (2d Cir. 2010), at 154 (Leval J).
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From this perspective, the issue of the applicability of ICL norms to TNCs is bound up with the broader challenge of maintaining the effectiveness of the international legal order, and in particular the protection of civilians and their rights in an increasingly globalised world. International law, the argument goes, has failed to adapt from yesteryear’s international community of sovereign states, to the globalised, multi- layered, networked society we experience today.163 The shifts in power away from states and to non-state actors such as corporations that globalisation portended and contributed to require an integration of these non-state actors into the international legal order for it to remain relevant and fulfil its objectives.164 Corporations – especially large TNCs – enjoy many benefits arising out of the globalised, pluralistic legal environment in which they operate.165 They possess some human rights,166 have sued sovereign states and already play a significant role in ‘developing, communicating and entrenching norms’ of international law. 167 A growing body of scholarship and international legal instruments suggest that alongside the rights and benefits that many TNCs now enjoy under the international legal order, so too exist international legal duties to abide by core human rights and humanitarian law standards.168 Proponents of corporate accountability argue that the system must be responsive to the growing economic and political
163 Robert Keohane, ‘Global Govenrance and Democratic Accountability’ in David Held and Mathias Koenig-Archibugi (eds), Taming Globalization: Frontiers of Governance (Polity Press, 2003) 130. 164 Philip Alston, ‘The Myopia of the Handmaidens: International Lawyers and Globalisation’ (1997) 80 European Journal of International Law 435; Sarah Joseph, ‘Taming the Leviathans: Multinational Enterprises and Human Rights’ (1999) 46 Netherlands International Law Review 171, 186; Robert McCorquodale, ‘Non-State Actors and International Human Rights Law’ in Sarah Joseph and Adam McBeth (eds), International Human Rights Law (Edward Elgar, 2009) 114; Larry Cata Backer, ‘Multinational Corporations, Transnational Law: The United Nations’ Norms on the Responsibilities of Transnational Corporations As a Harbinger of Corporate Social Responsibility in International Law’, 37 Columbia Human Rights Law Review 101 (2005). 165 Zerk, above n19, 77; Sarah Joseph, Corporations and Transnational Human Rights Litigation (Hart Publishing, 2004) 1-4. 166 John Ruggie, ‘Taking Embedded Liberalism Global: The Corporate Connection’ in David Held and Mathias Koenig-Archibugi (eds), Taming Globalization: Frontiers Of Governance (Polity Press, 2003) 106; Peter Muchlinski, ‘Multinational Enterprises as Actors in International Law: Creating “Soft Law” Obligations and “Hard Law” Rights’ in Math Noortmann and Cedric Ryngaert (eds) Non-State Actor Dynamics In International Law: From Law-Takers To Law-Makers 30 (Ashgate, 2010), 30. 167 Muthucumaraswamy Sornarajah, The International Law on Foreign Investment (Cambridge University Press, 3rd ed, 2010); Muchlinski, above n166, 12.; Bismuth, above n158, 205; Margaret Keck and Kathryn Sikkink, Activists Beyond Borders: Advocacy Networks in International Politics (Cornell University Press, 1999) 212. See also: Ratner, above n37, 461. 168 Danielsen, above n31; Dunoff, Ratner and Wippman, above n9, 215; Muchlinski, above n166, 13; Stephen Tully, Corporations and International Lawmaking (Martinus Nijhoff Publishers, 2007).
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ICL has criminalised those heinous acts that ‘shock the conscience of humanity’ – they are the most unimpeachable minimum standards of humanity. 170 To suggest that a certain class of entity should be exempt from punishment for such acts is itself a shocking and bizarre suggestion. To suggest that TNCs – some of which wield incredible social, economic and political power in the lives of countless billions of people, and enjoy many benefits under the international legal order – could somehow be excused is surely an untenable proposition for all but the most diehard of positivist international lawyers and capitalists.171
J ICL Regulates Conflict-driving Behaviour
Each category of international crime clearly has a potentially substantial and practical bearing on the quest for peace and curtailment of armed conflict, which requires little elaboration. On a more conceptual basis, while each of the crimes is said to be derived from various treaties, these in turn were created to give voice to the essential desires of civilisation: namely, peace and security, and civil relations among peoples.172 In this sense, ICL shares a similar normative goal to IHRL and IHL. According to Cassess, ICL reflects an attempt to ‘stem rampant violence in the world community’.173 This motivation is enunciated in the Preamble of Rome Statute itself:174
The State Parties to this Statute ... Mindful that during this century millions of children, women and men have been victims of unimaginable atrocities that deeply shock the conscience of humanity,
169 Keohane, above n163. 170 Rome Statute, preamble. 171 Fauchald and Stigen, above n5, 1030; Jordan Sundell, ‘Ill-Gotten Gains: The Case for International Corporate Criminal Liability’ (2011) 20 Minnesota Journal of International Law 648, 667. 172 See, eg, Geneva Convention (IV) Relative to the Protection of Civilian Persons in Time of War, opened for signature 12 August 1949, 75 UNTS 287 (entered into force 2 November 1950) preamble. See generally, Kirsten Fisher, Moral Accountability and International Criminal Law: Holding Agents of Atrocity Accountable to the World (Routledge, 2012). 173 Cassese, above n15, 5. 174 Rome Statute, preamble.
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Recognizing that such grave crimes threaten the peace, security and well-being of the world … Resolved to guarantee lasting respect for and the enforcement of international justice, Have agreed as follows …
Moreover, the standards of behavior that are embodied in ICL are sufficient to capture the essence of most potential corporate-driving behaviour, either help to trigger or sustain an armed conflict through its own corporate activities, or complicity in actions that do so.
While admittedly capturing less-questionable corporate practices than a human rights prism, deriving standards from ICL would demonstrate an emphasis on the direct contributions corporations make to exacerbating or triggering armed conflicts and atrocities. The conflict-driving behaviours of TNCs that has been illustrated in Chapter 1 of this thesis would all be proscribed under ICL standards of conduct. For instance, companies knowingly supplying logistics or financial assistance to tyrannical regimes or militaries that then go on to commit atrocities would likely fall foul of ICL-based standards of corporate conduct. TNCs paying off or even employing militia groups or regular troops to protect assets and sites would also open themselves up to claims of criminal wrongdoing under ICL (e.g. Rio Tinto on Bougainville, Anvil Mining in the Congo). Business practices in conflict-affected areas, such as cutting lucrative deals with rogue governments or rebel groups in order to extract oil, precious minerals or metals, might also come under scrutiny for breaching ICL standards of conduct, either directly or indirectly, if those beneficiaries of the company’s largesse then engage in criminal conduct to safeguard the company’s operations (e.g. AWB’s corrupt practices in Iraq, Royal Dutch Shell’s activities in the Niger Delta and DeBeers trade in West African blood diamonds).
1 Between Lex Generalis and Lex Specialis On the other hand, the geographical and temporal applicability of other possible candidates – both IHL and IHRL – restrict their viability to serve as the source of minimum standards for corporate conduct in conflict-affected areas. Human rights law is considered applicable at all times – lex generalis – whereas application of IHL is
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Corporate Peacebuilding and the Law applicable only in instances of armed conflict – lex specialis.175 That is, human rights protections and obligations are universal in nature and apply in peacetime, whereas IHL protections and obligations only apply during times of armed conflict and in conflict- zones.176 This self-imposed geographical and temporal limitation has been one of the reasons that IHL has retained much of its moral force.177 However, for our purposes, it reduces IHL’s utility as a source of standards for TNCs doing business in conflict- affected areas.
While there is much corporate practice that exacerbates and perpetuates armed conflicts once they have commenced – and on which IHL might be a relevant body of law – alone it does not have the jurisdictional scope to regulate corporate activities that might trigger or contribute to the outbreak of hostilities or slide a society back into armed conflict. Moreover, corporate activities outside the territorially defined conflict-zone would also arguably not be easily regulated by IHL norms. As such, IHL has limited practical utility for our purposes of preventing conflict-driving corporate behaviour and realising the vision of corporate peacebuilding.
Human rights law, leaving to one side its chequered application and acceptance by states, has a universalist claim in that it seeks to regulate conduct in all corners of the globe. The global, all-pervasive scope of human rights law – an attribute that is championed by its supporters as a great strength of the international human rights regime – is also a large impediment towards legal recognition of, and industry support for, corporate human rights obligations. This unnecessarily complicates our pursuit of minimum standards to curtail TNCs conflict-driving activities.
For a TNC, regulation of a human rights legal character would apply to all their operations, everywhere and anywhere they operate, resulting in hefty compliance costs
175 In full, lex specialis derogat legi generali. This interpretive maxim suggests that a more specific rule will trump more general rules. See, eg, Martti Koskenniemi, ‘ Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law’ (Report of the Study Group of the International Law Commission, UN Doc A/CN.4/L.682, 13 April 2006) 176 See, eg, International Committee of the Red Cross, ‘Geneva Conventions of 1949 Achieve Universal Acceptance’, (Press Release, 22 August 2006)
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Utilising a body of law that eschews both the sweeping scope of IHRL and the highly specific character of IHL seems to be warranted. A more tailored, specialized regulatory paradigm may be more appropriate and effective in achieving our regulatory goal of ending conflict-driving corporate behaviour. Fortunately, there exists just such a paradigmatic body of law: ICL.
K ICL Standards are Criminal
Most well-developed domestic legal orders around the world differentiate between two different types of law: civil and criminal. Criminal law is reserved for the more severe category of actions that warrant a legal response.179 Whilst the distinction between these two categories of law may be sometimes hard to discern there are some notable
178 International Chamber of Commerce and International Organisation of Employers, ‘Joint views of the IOE and ICC on the draft “Norms on the responsibilities of transnational corporations and other business enterprises with regard to human rights”’ (Report, 1 March 2004). 179 R.A. Duff, Lindsay Farmer, S.E. Marshall, Massimo Renzo and Victor Tadros (eds), The Boundaries of the Criminal Law (Oxford University Press, 2010).
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Generally, criminalisation of conduct has a ‘condemnatory function’ that civil law does not.181 Labelling an illegal act as “criminal” conveys the gravity of the act and ‘heightens the stigma of the activity’.182 Flowing on from this, criminal convictions ‘warrant punishment of the offender’, not simply making them ‘liable to bear some cost for what they have done.’183 Thus, criminal law attracts more severe penalties – including the potential of imprisonment, or in some countries, capital punishment.184 Civil law penalties are less punitive, for example, community service, financial fines or more moderate terms of incarceration.185 Due to the possibilities of more severe punishment, criminal law also has stricter rules of procedure to ensure fairness and a higher standard of proof needs to be satisfied.186
Similarly, in the international legal order there is no more heinous conduct conceivable than the prohibitions criminalised in ICL.187 Recalling that one of Franck’s criteria for assessing the legitimacy of a legal norm is the level of its symbolic validation, this bodes well for achieving our purpose – sourcing a set of minimum standards to apply to TNCs doing business in conflict-affected areas.188 The immorality and illegitimacy of breaching ICL standards is, to the extent possible, beyond contestation. This is reflected in the recognition by international tribunals of universal jurisdiction for the prosecution of grave international criminal offences.189 The fact that the Rome Statute has attracted 139 signatories despite fears expressed by some countries of the usurpation of state
180 See generally: Mordechai Kremnitzer, ‘A Possible Case for Imposing Criminal Liability on Corporations in International Criminal Law’ (2010) 8 Journal of International Criminal Justice 909, 915. 181 Victor Tadros, ‘Criminalization and Regulation’, in: R A Duff et al (eds), The Boundaries of the Criminal Law (Oxford University Press, 2010), 164. 182 Sundell, above 171, 665. 183 Tadros, above n179, 165. 184 Ibid 185 André Nollkaemper, ‘Introduction’ in André Nollkaemper and Harmen van der Wilt (eds) System Criminality in International Law (Cambridge University Press, 2009) 4. 186 Tadros, above n179, 165. 187 Fisher, above n170, 17; Mark Drumbl Atrocity, Punishment and International Law (Cambridge University Press, 2007) 4. 188 Franck, Power of Legitimacy, above n25, 91. 189 David Kinley Civilising Globalisation: Human Rights and the Global Economy (Oxford University Press, 2009) 149.
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1 ICL revolves around collective criminality As Simpson observes, ICL’s focus on individual guilt is not necessarily to the exclusion of organisational or structural criminal activity.190 Indeed, while individual responsibility may well be a cornerstone of ICL, upon closer inspection this body of law (necessarily) deals with crimes that require a plurality of actors acting in cooperation for their commission that suggests its applicability to instances of corporate crime.191 Conceptions of the crimes of genocide, war-crimes, crimes against humanity all contemplate collective action;192 ‘As a rule, it is a collective that is responsible [for the] systematic or large-scale use of force’ that lies at the heart of international crimes.193 Indeed, this fact led to the development of the doctrine of joint criminal enterprise (JCE) mode of liability under ICL.194 Similar to conspiracy in domestic criminal laws, JCE acknowledges that many international crimes are committed within and on behalf of an organisation – be it a state or non-state entity.195 This organisational criminal responsibility does not necessarily translate into corporate criminal responsibility, nor need it do so. Rather, it opens up individuals within that organisation to the possibility of prosecution.196 Coupled with the not incontrovertible, progressive legal view that corporations can be held directly liable for violations of ICL (to be discussed in the next section), this analysis suggests that ICL is the most relevant and legitimate body of international law from which to derive minimum standards to regulate the conduct of TNCs doing business in conflict-affected areas.
190 Gerry Simpson, ‘Men and Abstract Entities’, in der Wilt and Nollkaemper, above n183, 76. 191 Werle and Jessbuerger, above n46, 36; Prosectuor v Tadic (judgment) [191]. 192 Werle and Jessbuerger, ibid, 36. 193 Ibid. 194 Simpson, above n188, 113; Steven Powles, ‘Joint Criminal Enterprise: Criminal Liability by Prosecutorial Ingenuity and Judicial Creativity’ (2004) 2 Journal of International Criminal Justice 606. 195 Powles, ibid. 196 Karavias, above n113, 90; Fisher, above n170, 74.
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IV QUESTIONING INTERNATIONAL CRIMINAL LAW’S APPLICABILITY TO CORPORATIONS
A The Problem of International Legal Personality
While the bodies of public international law referred to in this chapter – international criminal, human rights and humanitarian law – are recognised as establishing binding norms of behaviour and offering mechanisms (of varying efficacy) to enforce such norms, a major impediment to applying such laws to corporations remains: Can corporations have obligations under international law? As Olga Martin-Ortega observes in relation to corporate international human rights responsibilities, the debate ‘has stagnated in the technical debate on international legal personality’.197
Legally created entities – such as corporations – are often subject to domestic law, possessing legal personality in much the same way as “natural persons.” Under Australian national law, for example, both natural and legal persons can sue and be sued in Australian courts and be held criminally and civilly culpable for their actions.198 On the international plane, however, the issue of legal personhood remains a concept ‘giving rise to controversy’, as the ICJ observed over six decades ago.199 In the absence of definitive pronouncements – for instance from the ICJ200 – our perspective on international legal personality, as Portmann suggests, ‘tends to be a relatively philosophical and at times abstract topic’.201
197 Olga Martin-Ortega, ‘Business Under Fire: Transnational Corporations and Human Rights in Conflict Zones’ in Noëlle Quénivet and Shilan Shah-Davis (eds), International Law and Armed Conflict: Challenges in the 21st century (TMC Asser Press, 2010) 189. See, eg, Portmann, above n136; A.A. Fatouros (ed), Transnational Corporations: The International Legal Framework, (Routledge, 1994); Surya Deva, ‘Human Rights Violations by Multinational Corporations and International Law: Where from Here?’ (2003) 19 Connecticut Journal of International Law 1; Math Noortmann and Cedric Ryngaert (eds), Non-State Actor Dynamics in International Law (Ashgate, 2010). 198 Joanna Kyriakakis, ‘Australian Prosecution of Corporations for International Crimes: The Potential of the Commonwealth Criminal Code’ (2007) 5 Journal of International Criminal Justice 809. 199 Reparation for Injuries Suffered in the Service of the United Nations (Advisory Opinion), 1949 ICJ Reports 174, at 178; Portmann, above n136, 9. 200 See: Reparations [1949] ICJ Rep 174; Legality of the Use by a State of Nuclear Weapons in Armed Conflict (Advisory Opinion) [1996] ICJ Rep 66 (‘WHO Nuclear Weapons’); Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory (Advisory Opinion) [2004] ICJ Rep 136 (‘Israeli Wall’) and Western Sahara(Advisory Opinion) [1975] ICJ Rep 12 (‘Western Sahara’). 201 Portmann, above n136, 10.
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Traditionally, international law was seen as being crafted by, and exclusively concerned with, sovereign states – the sole “subjects” of international law.202 International law exists, under this orthodox, positivist conception, ‘to regulate an international society made up, not of people, but of states’203 and is still sometimes referred to as the ‘law of nations’.204 According to these traditional understandings, corporations, as with other “objects” of international law are not directly bound by it. 205
However, a host of jurists and scholars now reject an exclusively state-based view of international law in favour of a more inclusive conception of international law.206 Alston and others have recognised that the shifts in power in the international system that globalisation portended and contributed to demand a response from international law for it to remain relevant and fulfil its objectives.207 For instance, Rosalyn Higgins, former President of the ICJ, argues that ‘the whole notion of subjects and objects has no credible reality, and, in my view, no functional purpose. We have erected an intellectual prison of our own choosing and then declared it to be an unalterable constraint’.208 Instead, Higgins advocates a new model for understanding international law: Now, in this model, there are no ‘subjects’ and ‘objects’, but only participants. Individuals are participants along with states, international organisations (such as the United Nations, or
202 Louis Henkin, ‘International Law: Politics, Values and Functions’, above n147, 208; Mongelard, above n1; Muchlinski, above n166, 10. 203 Zerk, above 19, 93 204 Harris, above n13, 1. The precise origins of “international law” as a term are often ascribed to Jeremy Bentham, 1748 – 1832; Bismuth, above n158, 204; Anne-Marie Slaughter, ‘A Liberal Theory of International Law’ (2000) 94 American Society of International Law Proceedings 240; Ruggie, above n165,104. 205 The UN’s “Business and Human Rights Framework” provides a contemporary restatement of this orthodox position in the realm of human rights: States have obligations to protect human rights, corporations should merely try and respect them: Ruggie, ‘Guiding Principles on Business and Human Rights’, above n110; Deva, above n197; Charlesworth and Chinkin, above n154. 206 See, eg, Philip Allott, ‘The Concept of International Law’, in Michael Byers (ed), The Role of Law in International Politics (Oxford University Press, 2000) 69; Michael Reisman, ‘Foreword’, in Jean d’Aspremont (ed), Participants in the International Legal System: Multiple Perspectives on Non-state Actors in International Law (Routledge, 2011) XXXV; Slaughter, above n204, 242; Harold Koh, ‘Separating Myth from Reality About Corporate Responsibility Litigation’ (2004) 7 Journal of International Economic Law 263; Wayne Sandholtz, International Norms and Cycles of Change (Oxford University Press, 2009); Deva, above n197; Charlesworth and Chinkin, above n154; Portman, above n136, 1. 207 Alston, n164; Joseph, Taming the Leviathans, above n164,186; International Council on Human Rights Policy, above n21, 9-10. 208 Higgins, above n115, 49.
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International Monetary Fund), multinational corporations, and indeed private non-governmental groups.209
Labelled the “actor conception” of international legal personality by Portmann, this approach ‘considers all entities exercising “effective power” in the international “decision-making process” international persons’.210 It is an approach that gains widespread favour among the policy-oriented New Haven School of legal scholarship, as well as constructivist international legal scholars211 who argue that the traditional view fails to adequately acknowledge the power of non-state actors and fails to reflect their global governance role in ‘developing, communicating and entrenching norms’ of behaviour.212
The reality is that a host of non-state actors – including TNCs – are already intimately involved in the creation, development and enforcement of international law.213Moreover, practical developments in international law-making since the mid- 1900s demonstrate a gradual but discernible progression to incorporate non-State actors into international legal regimes – including providing them with rights under investment treaties and even rights under human rights instruments.214 Alongside the rights and benefits that many TNCs now enjoy under the international legal order, a growing body of scholarship suggests that it is only fair that so too exist international legal duties.215
209 Ibid, 50. 210 Portmann, above n136, 208. 211 Reisman, above n206; See, for example: Robert McCorquodale, ‘The Individual and the International Legal System’ in Malcolm Evans (ed) International Law (Oxford University, 2nd ed, 2006) 307-32; Jean d’Aspremont, ‘Introduction – Non-State Actors in International Law: Oscillating Between Concepts and Dynamics’ in Jean d’Aspremont (ed) Participants in the International Legal System (Routledge, 2011) 3; Portmann, above n136, 212. 212 Keck and Sikkink, above n167, 212-217. See also: Ratner, above n37, 461; Tully, above n168, 1; McCorquodale, above n164, 114.; Backer, above n164. 213 Fauchald and Stigen, above n5, 1030; Sandholtz, above n206. 214 Muchlinski, above n166, 11. 215 Zerk, above n19, 75; Sundell, above n171, 667; Celia Wells and Juanita Elias, ‘Corporate Complicity in Rights Violations’ in Philip Alston (ed), Non-State Actors and Human Rights (Oxford University Press, 2005) 150; Ruggie, above n164, 106. Regional human rights instruments have recognised the applicability of some human rights to corporations, such as freedom of expression, right to fair trial and right to privacy. Muchlinski, above n166, 12, 30; Bismuth, above n157; Sornarajah, above n167; Michael Addo (ed), Human Rights Standards and the Responsibility of Transnational Corporations (Kluwer Law International, 1999); Autronic AG v Switzerland (1990) 178 Eur Court of HR (ser A); Reparation for Injuries Suffered in the Service of the United Nations (Advisory Opinion), [1949] ICJ Rep 174, 8.
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B ICL and Corporations
Unlike its public international law colleagues, ICL eschews the state-centricity of international law and is squarely addressed to individuals.216 Individual criminal responsibility remains the cornerstone of modern-day ICL theory and practice.217
The judgements at Nuremberg, and in particular the so-called Industrialist Trials, dispelled any suggestion that international law did not extend to private actors. On the contrary due to these landmark trials, it is unequivocally accepted that corporate executives, employees and directors may be held personally and criminally liable for egregious abuses of human rights and humanitarian law, or complicity thereof.218 Evidently, ICL then and now applies to individual actions, whether they acted as representatives of a state or a corporation, or independently.219 Therefore, ICL’s utility as a source of minimum standards of corporate conduct in conflict-affected areas remains intact.220 But whether ICL can be extended to legal persons like corporations, not just natural persons remains a matter of dispute amongst legal scholars.221
On this issue the ‘considerable influence’ that Nuremberg continues to wield ‘cannot be overstated’.222 Remarkably, proponents of liability, as well as those taking the contrary view, both invoke the legal history of the Nuremberg-era and in particular its treatment of major German corporations, to bolster their arguments.223
216 Cryer et al, above n47, 1. 217 deThan, and Shorts, above n64, 117; Werle and Jessbuerger, above n46, 41. 218 International Commission of Jurists , Report of the International Commission of Jurists Expert Legal Panel on Corporate Complicity in International Crimes, Volume 1, 2-6 (Geneva 2008) 219 Ibid. 220 Ibid. 221 See, eg, Tyler Giannini & Susan Farbstein, ‘Corporate Accountability in Conflict Zones: How Kiobel Undermines the Nuremberg Legacy & Modern Human Rights’ (2010) 52 Harvard International Law Journal 119; Cryer, ‘International Criminal Justice in Historical Context’, above n48, 146-147. 222 Cryer, ibid. 223 Jonathan Bush, ‘The Prehistory of Corporations and Conspiracy in International Criminal Law: What Nuremberg Really Said’ (2009) 109 Columbia Law Review 1094; Gwynne Skinner, ‘Nuremberg Legacy Continues: The Nuremberg Trials’ Influence on Human Rights Litigation in US Courts Under the Alien Tort Statute’ (2008) 71 Albany Law Review 321.
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1 Contemporary Significance of Nuremberg Seventy years after the fact, Nuremberg’s legacy towards holding corporations legally liable remains at the centre of the contemporary debate, yet is still mired in confusion. Clarifying that legacy is no mere historical exercise; its currency endures. The history and jurisprudence of Nuremberg inform today’s judicial decisions on the topic and are at the centre of the general debate about whether international law can and should be applied to corporations.224 Furthermore, they have significant implications for contemporary conceptions of international law and for the effectiveness of international governance, generally.
The most salient representation of the enduring precedential and normative force of the Nuremberg-era for corporate liability for international crimes is found in the ongoing spate of multi-million-dollar Alien Tort Statute lawsuits alleging corporate commission in ‘violations of the law of nations’ that have wound their way through the US court system for the past two decades.225
As discussed in Chapter 5, since the mid-1990s ATS litigation has become the most prominent legal accountability pathway for corporate misconduct in conflict-affected areas.226 The legacy of Nuremberg is frequently invoked in ATS cases in the US to both justify and deny corporate liability for international human rights abuses. 227
In 2010 for example, the Second Circuit Court of Appeals unanimously dismissed the plaintiffs’ claims in Kiobel v. Royal Dutch Petroleum (Shell) alleging the oil-and-gas TNC was complicit in grave human rights abuses in the Niger Delta, including the extrajudicial torture and execution of local community leaders.228 While the court
224 Wells and Elias, above n215; Portmann, above n136; Fatouros, above n197; Noortmann and Ryngaert, above n197. 225 Alien Tort Statute 28 U.S.C. §1350 (1789). 226 For list of prominent ATS cases lodged in US courts, see National Foreign Trade Council, Alien Tort Statute, USA Engage
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Chapter 4: Clarifying the Midline unanimously dismissed the claim, the three justices were split 2–1 as to their reasoning. Curiously, both majority and minority judicial opinions based their reasoning on interpretations of Nuremberg-era jurisprudence.
Writing the majority opinion, Justice Carbanes held that since corporations cannot be liable for international crimes under international law – a bedrock principle established, he argued, at Nuremberg – they could not be held accountable under the ATS cause of action.229 In a separate opinion, the third judge, Justice Leval, issued a blistering attack on the judicial logic of the majority decision.230 He suggested that the majority’s argument was ‘misguided, and based on misunderstandings of precedent [of Nuremberg]’.231
In order to shed light on the applicability of ICL to corporations, the following section explores Nuremberg’s legacy vis-a-vis the potential liability of corporations for violations of ICL. After briefly recapping the inclusion of corporate defendants at the Nuremberg trials – both the International Military Tribunal (IMT), conducted by the four Allied Powers, and the Subsequent Nuremberg Trials conducted by US authorities – the section continues with an examination of the divergent legal understandings of the treatment of German corporations in the Nuremberg-era.
C Nuremberg’s Confusing Legacy on Corporate Liability for International Crimes
1 Corporate Defendants at the International Military Tribunal, Nuremberg From the outset, there was strong determination among the Allied powers to prosecute German industrialists alongside the Third Reich’s military and political leaders at Nuremberg. Indeed, included on the original list of the defendants in the first (and only) trial before the IMT was Gustav Krupp, who ran the Krupp AG, a heavy industries
229 Kiobel, 621 F.3d 111 (2d Cir, 2010) 3 (Carbanes J). 230 Ibid, 154 (Leval J). 231 Ibid, 151 (Leval J).
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Yet due to ill-health (senility, partial paralysis and old age), the Tribunal granted Gustav Krupp permission to forego trial, believing he was incapable of defending himself.233 Prosecutors had hoped to replace him in the dock with his son, Alfred, who had taken over the running of the Krupp conglomerate from his father in 1941.234 However, the judges of the IMT refused to allow the proposed substitution, so the now-famous IMT trial of Nazi war criminals proceeded without a representative from German industry among the defendants.235
The Allies’ original plan for Nuremberg called for a second trial of the IMT.236 It was intended to have substantial representation of German industry amongst its defendants.237 Yet due to the nascent Cold War, the follow-up trial never happened. In particular, the Western powers were fearful of the propaganda coup that a second trial featuring defendants drawn from German heavy industries, banking and insurance might provide to the Soviet Union. As Chief US Prosecutor Jackson wrote in a diplomatically worded memo direct to US President Truman in 1946: I also have some misgivings as to whether a long public attack concentrated on private industry would not tend to discourage industrial cooperation with our Government in maintaining its defences in the future while not at all weakening the Soviet position, since they do not rely upon private enterprise.238
232 Kevin Heller, The Nuremberg Military Tribunals and the Origins of International Criminal Law (Oxford University Press, 2011). 233 Order of the Tribunal Granting Postponement of Proceedings Against Gustav Krupp von Bohlen: USA, French Republic, the UK and USSR v. Goering et al, International Military Tribunal, Nuremberg, 15 November 1945. 234 Answer for the US to the Motion Filed in Behalf of Krupp von Bohlen (Robert Jackson), USA, French Republic, the UK and USSR v. Goering et al, International Military Tribunal, Nuremberg, 12 November 1945. 235 Order of the Tribunal, above n233. 236 Preliminary Hearing, International Military Tribunal, Nuremberg, 14 November 1945, 13. See also Heller, above n232. 237 Heller, ibid. 238 Robert Jackson, ‘Memorandum for the President on American Participation in Further International Trials of Nazi War Criminals’ (13 May 1946, NA-549-2236-1) 3 as quoted in: Heller, above n232, 21.
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The IMT ended without a single German industrialist being prosecuted.239 That task passed to the subsequent trials each of the Allies held in their respective zones of Occupied Germany authorised under Allied Control Council Law No. 10 to try Nazi war criminals.240 The US was the most vigorous of the great powers intent on prosecuting and punishing the Nazi leadership through judicial trials – intending to hold dozens of follow-up trials.241 Ultimately, this ambitious plan was reduced to twelve trials that have become known as the Subsequent Nuremberg Trials.242 They were held at the Palace of Justice in Nuremburg, the venue of the IMT, yet convened exclusively by the US,243 with the panels of judges, lawyers and trial staff were drawn from the US legal system.244
2 The Industrialist Trials Despite reticence and outright protest from some quarters within the Office of Chief of Counsel for War Crimes and in US political circles in relation to targeting German industrialists at all,245 three out of the twelve subsequent trials prosecuted German industrialists.246 Some of the bastions of German industry, and scores of German corporate executives and directors who were intimately involved in aiding and abetting the Nazi war machine, were put into the dock. Additional planned prosecutions targeted
239 Robert Conot, Justice at Nuremberg, (Harper and Row, New York, 1983). 240 Allied Control Council Law No. 10 - Punishment of Persons Guilty of War Crimes, Crimes Against Peace and Against Humanity. Enacted 20 December 1945. Republished in Heller, above n232, 473. 241 Heller, ibid. 242 For a thorough analysis of the “Subsequent Nuremberg Trials” see: Heller, above n232; Grietje Baars, Capitalism's victor's justice? The Hidden Stories Behind the Prosecution of Industrialists Post-WWII in Kevin Heller and Gerry Simpson (eds), The Hidden Histories Of War Crimes Trials (Oxford University Press, 2013) 163. 243 Heller, above n232. 244 Ibid. 245 Tom Bower, Blind Eye To Murder: Britain, America And The Purging Of Nazi Germany – A Pledge Betrayed (William Collins & Son, 1981). 246 United States v Flick (‘The Flick Case’) (United States Military Tribunal, Nuremberg, Case No. 5, 22 December 1947) Trials of War Criminals before the Nuremberg Military Tribunals under Control Council Law No. 10 1946-1949, Vol. VI (US Government Printing Office, 1953); United States v Krauch (‘The IG Farben Case’) (United States Military Tribunal, Nuremberg, Case No 6, 30 July 1948) Trials of War Criminals Before the Nuremberg Military Tribunals Under Control Council Law No. 10 1946-49, Vol.VIII (US Government Printing Office, 1953); United States v Krupp von Bohlen und Halbach (‘The Krupp Case’) (United States Military Tribunal, Nuremberg, Case No 10, 31 July 1948) Trials of War Criminals Before the Nuremberg Military Tribunals Under Control Council Law No. 10 1946-1949, Vol.IX (US Government Printing Office, 1953).
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The Flick, Krupp and Farben trials, named after the conglomerates from which the defendants were employees and/or executives – collectively became known as the Industrialist Trials. These trials represent the first time in modern history when a judicial body considered cases of corporations and their agents committing war crimes and other violations of international law.
Flick, Krupp and Farben were targeted due to the perception among the Allies of the critical role each played in the German arms and related industries that were crucial to the Nazi arms-build up and execution of their war plans. The Flick Concern included coal mines and steel plants, and the Krupp Group also included heavy industries, including steel and armaments factories. I.G. Farben was, at the time, the world’s largest business conglomerate, which had a diverse range of commercial interests and most prominently was the dominant chemical company of its day.248 Among its exploits, Farben developed synthetic nitrate, which allowed the German military to become independent of foreign sources, and invented and manufactured Zyklon B – the poison gas used in the Auschwitz gas-chambers.249 Indeed, Farben epitomized the intimate role German industry held in the Nazi rise to power and its murderous war effort. For example, the camp complex at Auschwitz, did not only include Auschwitz I and II-Birkenau (the concentration and extermination camps), but Auschwitz III-Buna – a massive complex of Farben factories that dwarfed the other two camps in size and
247 Eg, cases were considered against leadership of Dresdner Bank and Deutsche Bank: see Bower, above n244; Heller, above n232, 68-9. Similarly, the exigencies of the new Cold War also dictated that planned trials of Japanese industrialists (“zaibatsu”) never took place. Charges against the president of Manchurian Heavy Industry and the President of Oji Pulp were prepared by Allied prosecutors but were never pursued at the main Tokyo war- crimes tria (“The International Military Tribunal of the Far East) or at subsequent trials. See Awaya Kentaro, ‘Selecting Defendants at the Tokyo Trial’ in Yuki Tanaka, Tim McCormack and Gerry Simpson (eds), Beyond Victor’s Justice? The Tokyo War Crimes Trial Revisited (Martinus Nijhoff, 2011) 61. 248 Farben Trial, above n246. 249 Prosecutor v Joachim Drosihn et al (‘The Zyklon B Case’) (UK Military Tribunal, Nuremberg, Law Reports of Trials of War Criminals, Vol I (His Majesty’s Stationery Office, 1947-49).
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Chapter 4: Clarifying the Midline where the camps’ inmates were forced to work.250 Farben scientists also regularly used camp inmates in a series of macabre medical and chemical experiments.251
In total, 42 industrialists were tried at Nuremberg by US authorities, with 27 found guilty of various international crimes, including war-crimes and crimes against humanity, including the use of slave-labour, plundering and spoliation of occupied territories. 252 They were sentenced to prison terms ranging from one-and-a-half to twelve years in length.253 Alfred Krupp, the owner and CEO of the Krupp Group, was sentenced to twelve years imprisonment and ordered to forfeit all his real and personal property.254 These trials established the precedent that there is no impediment to direct application of ICL to corporate managers, directors and executives.255
D Divergent Interpretations
These facts about the Industrialist Cases are well documented.256 Nevertheless, successive generations of international law scholars, practitioners and contemporary judges and tribunals keenly debate how the judgments in these cases and related decrees of the Allied powers during the Nuremberg-era ought to be interpreted vis-a-vis corporate liability for international crimes and gross human rights abuses.257
In order to explain these dichotomous understandings of Nuremberg’s legacy on corporate liability for international crimes, it is suggested that there are two different lenses – the judicial and the legal – through which we can view the Nuremberg-era’s treatment of German corporations. These labels are deliberately chosen, terms that are sometimes used interchangeably to indicate that, while their jurisprudential views are different, it is a difference borne out of nothing more than aperture and focus.
250 Joseph Borkin, The Crime and Punishment of IG Farben: The Startling Account of the Unholy Alliance of Adolf Hitler Germany’s Chemical Combine (Free Press, 1978). 251 Ibid. 252 Flick Trial, above n246; Krupp Trial, above n246. 253 Ibid; Farben Trial, above n246; Heller, above n232, 94. 254 Krupp Trial, above n246; Heller, above n232, 101. 255 Martin-Ortega, above n197, 189. 256 Ibid. 257 Ibid.
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Whether contemporary scholars and jurists consider Nuremberg stands for or against corporate liability seems largely to depend on how wide or narrow a jurisprudential lens through which we historicise the Nuremberg-era.
1 The Narrow Judicial Lens If viewing the Nuremberg-era through a narrow, positivist lens, focusing on the judicial verdicts of Nuremberg from the IMT and subsequent trials, we could reasonably conclude that corporations cannot be liable, as a rule, for international crimes.258 Adherents of this view invariably commence their argument with one of the most frequently cited passages in the IMT judgment, which seemingly supports this understanding of Nuremberg’s jurisprudence: Crimes against international law are committed by men, not by abstract entities, and only by punishing individuals who commit such crimes can the provisions of international law be enforced.259
This famous sentence drawn from the IMT judgment seems to suggest that the law, as enforced at Nuremberg, focused exclusively on individual liability, rather than imputing any responsibility to corporations (or other collective organizations).260 This traditional perspective on corporate liability under ICL reflects the long-accepted principle of societas delinquere non potest – ‘a legal entity cannot be blameworthy’ and has continued to inform the jurisdiction of all subsequent international criminal tribunals.261 As one US jurist noted, this statement means that ‘liability under the law of nations ... could not be divorced from individual moral responsibility’.262
Employing this narrow, judicial lens, the fact that no corporation was put in the dock for crimes and no corporation was punished by the judicial decisions of the Nuremberg
258 Kiobel, 621 F.3d 111 (2d Cir 2010), 145 (Carbanes J). 259 United States et al v Goering, Judgment (International Military Tribunal at Nuremberg, October 1 1946). 260 Kiobel, 621 F.3d 111 (2d Cir 2010), 145 (Carbanes J). 261 Portmann, above n136, 19; Werle and Jessbuerger, above n46, 10; Cassese et al, above n45. 262 Kiobel, 621 F.3d 111 (2d Cir 2010) 153 (Leval J)
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This is a straightforward, formalistic reading of Nuremberg’s legacy. Put simply, that no corporations were in the dock is evidence that ICL is not applicable to collective entities, such as corporations.266 This reading confirms that ICL is concerned with individual criminal responsibility exclusively.
While Articles 9 and 10 of the London Charter included the concept of criminal organisations, and some organisations were found to be criminal (e.g. the Leadership Corps of the Nazi Party, Gestapo, SD, SS),267 Spiropoulos, the Special Rapporteur on the Formulation of the Nuremberg Principles, explained in 1949, that there were ‘no penal sanction to the declaration of [organisational] criminality ... No responsibility of the organization was established’.268 Spiropoulos added that, in his analysis, ‘municipal laws, with rare exceptions, do not establish the penal responsibility of legal persons’.269 The International Law Commission, in its commentary on the Draft Code of Crimes Against the Peace and Security of Mankind held that individual responsibility is the
263 Cassese et al above n45, 15. 264 Agreement by the Government of the United States of America, the Provisional Government of the French Republic, the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Union of Soviet Socialist Republics for the Persecution and Punishment of the Major War Criminals of the European Axis, 82 UNTS 280 (signed and entered into force 8 August 1945), annex (‘Charter of the International Military Tribunal at Nuremberg’). 265 The ‘Nuremberg Charter did not provide for jurisdiction to hear claims against corporations’: Brief of Cato Institute as Amici Curiae Supporting Respondents, Kiobel v Royal Dutch Petrol Co, 133 S Ct 1659 (2013), 26 (arguing that). 266 Jean Spiropoulos, Draft Code of Offences against the Peace and Security of Mankind - Report by the Special Rapporteur, UN Doc A/CN4/25 (1950) II Yearbook of the International Law Commission Vol II 260. 267 Ratner, Abrams and Bischoff, above n55, 16-17. 268 Spiropoulos, above n266, 260. 269 Ibid, 261.
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“cornerstone” of ICL.270 This approach was affirmed by the ICTY in its 1997 Tadic decision, where it stated that: ‘no one may be held answerable for acts or omissions of organizations to which he belongs, unless he bears personal responsibility for a particular act, conduct or omission’.271
2 The Broader Legal Lens However, this narrow reading of Nuremberg’s treatment of German corporations which actively participated in the Nazi war effort does not go unchallenged.272 In fact, if the jurisprudential gaze with which we view Nuremberg is broadened, we could reasonably conclude that the criminality of German corporations was recognised, and they were punished for their crimes. Taking this approach, we conclude that Nuremberg ‘recognized that corporations had obligations under international law (and were therefore subjects of international law)’ and acknowledges ICL’s applicability to corporations.273
This legal lens encourages us to look beyond simply the absence of a corporation in the dock at Nuremberg, to examine the content of decisions handed down at the Nuremburg tribunals. It also encompasses the treatment of German corporations by the array of Allied authorities, both judicial and otherwise, exercising legal functions in the immediate post-War period.
The legal lens highlights that the basis upon which several individual industrialists were found guilty of international crimes was their participation in the criminal conduct of corporations such as IG Farben.274 As a judgment in a contemporary corporate accountability case notes there was a two-step process to the legal reasoning in the Industrialist Trials: ‘In at least three of those trials, tribunals found that corporations
270 Ibid. 271 Prosecutor v Tadic (ICTY) [186]; Cassese et al, above n45, 137. 272 Brief of Cato Institute as Amici Curiae Supporting Respondents, Kiobel v Royal Dutch Petrol Co, 133 S Ct 1659 (2013). 273 Kiobel, 621 F.3d 111 (2d Cir 2010) 180. 274 Anita Ramasastry, ‘Corporate Complicity: From Nuremberg to Rangoon: an Examination of Forced Labour Cases and their Impact on the Liability of Multinational Corporations’ (2002) 20 Berkeley Journal of International Law 91, 109; Mongelard, above n1.
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Thus, while none of the companies were formally declared criminal organisations at Nuremberg, nor were they subject to the jurisdiction of the IMT or zonal trials, the judgments in the Industrialist Trials suggest the possibility of attributing liability to the companies themselves, not just their directors or employees, for war-crimes and crimes against humanity.276 For example, in Krupp, the Tribunal repeatedly referred to the collective intent of the Krupp Group and noted the firm’s ‘ardent desire’ to employ slave labour in its factories.277 Similarly, the Farben case implicated the conglomerate itself in the crimes perpetrated in its name;278 only ‘after concluding that Farben violated international law the tribunal imposed criminal liability on Farben's employees because of their complicity in violations committed by Farben’.279
Several passages from the Farben Trial judgement support this interpretation. The Tribunal determined that Farben, as a corporate entity, had directly violated the “Laws and Customs of War” of the Hague Regulations (1907) through its use of slave labour at Auschwitz and elsewhere, and had been involved in war crimes and crimes against humanity: Where private individuals, including juristic persons, proceed to exploit the military occupancy by acquiring private property against the will and consent of the former owner, such action not being expressly justified by any applicable provision of the Hague Regulations, is in violation of international law.280
Describing Farben’s activities, the judgment determination was clear: We find that the proof establishes beyond a reasonable doubt that offenses against property as defined in Control Council Law No. 10 were committed by Farben, and that these offenses were connected with, and an inextricable part of the German policy for occupied countries as above described . . . The action of Farben and its representatives, under these circumstances, cannot be
275 Kiobel, above n273, 180 (Leval J). 276 Ramasastry, above n274, 112. 277 Krupp Trial, above n246, 1351-52. 278 Farben Trial, above n246, 1132-33. 279 Kiobel, above 273, 180 (Leval J). 280 Farben Trial, above n246, 1132-33.
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differentiated from acts of plunder or pillage committed by officers, soldiers, or public officials of the German Reich.281
Proving the conglomerate’s liability for grave violations of international law led to the convictions of the responsible individual directors and managers at Nuremberg. 282 As Engle observes, these German corporations were implicated in the crimes of their directors and vice versa.283 The judgment in the Farben case makes clear that: While the Farben organisation, as a corporation, is not charged under the indictment with committing a crime and is not the subject of prosecution in this case, it is the theory of the prosecution that the defendants individually and collectively used the Farben organisation as an instrument by and through which they committed the crime enumerated in the indictment.284
The Tribunal went on to condemn the crimes of ‘Farben and its representatives’, not solely the corporation’s representatives but the corporate entity itself.285 Similarly, in the Krupp trial, the Tribunal’s judgment referred to actions by the company, not simply the actions of individual managers or employees: ‘We conclude that it has been clearly established by credible evidence that from 1942 onward illegal acts of spoliation and plunder were committed by, and on behalf of, the Krupp firm.’286
(a) “Men” and “Abstract entities” Adherents to this broader understanding of Nuremberg’s treatment of corporate liability for international crimes suggest that the IMT’s classic statement that ‘crimes against international law are committed by men, not by abstract entities’ is decontextualised and, as a result, entirely misconstrued, by those adhering to the narrower “judicial” interpretation.287 Rather than an attempt by the IMT to constrain the scope of international criminal law (to individuals) it was intended to have precisely the opposite effect.
281 Ibid, 1140. 282 Ibid, 1107-8. 283 Eric Engle, ‘Extraterritorial Corporate Criminal Liability: A Remedy For Human Rights Violations?’ (2006) 20 St John’s Journal of Legal Commentary 287, 292. 284 Farben Trial, above n246, 1140. 285 Ibid, 1139. 286 Krupp Trial, above n246, 1370. 287 Pillay, above n161.
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Reflecting the traditional conception of international law, the Nazi defendants’ who were standing trial before the IMT argued that ‘international law is concerned with the action of sovereign States, and provides no punishment for individuals.’288 The IMT explicitly rejected the defendants’ argument by affirming that ‘international law imposes duties and liabilities on individuals as well as upon states’.289 With this in mind, the IMT’s classic dictum that ‘crimes against international law are committed by men, not by abstract entities’ takes on an entirely different meaning. The statement was intended as a rejection of this position of impunity put forward by the individual defendants.290 The Tribunal was seeking to extend accountability under international law, not restrict it.291
Thus, emphasizing these elements of the Nuremberg-era judgments, the Industrialist Trials held in the US zone at Nuremberg evince ‘the willingness of key legal actors to contemplate corporate responsibility at the international level’.292 Pillay declares that the legal treatment of these German companies supports ‘the proposition that corporations can and should be held accountable for violations of fundamental human rights norms’.293 Engle sees the trials’ legacy similarly, observing that Nuremberg is recognised as the moment and place when the ‘principle where corporations are capable of committing crimes under international law is revealed’.294
A similar understanding of Nuremberg’s value in this regard was eloquently expressed by Justice Leval in the aforementioned Kiobel Alien Tort Statute case: If past judges had followed the majority’s reasoning, we would have had no Nuremberg trials, which for the first time imposed criminal liability on natural persons complicit in war crimes; no subsequent international tribunals to impose criminal liability or violation of international law norms.295
Justice Leval went on to suggest that if the majority’s reasoning stands, it in effect creates an absurd new legal rule:
288 US v Goering (“The IMT Judgment”) 41. 289 Ibid. 290 Ibid, 447. 291 Pillay, above n161, 19-20. 292 Ratner, above n37, 447. 293 Pillay, above n161, 23. 294 Eric Engle, above n283, 291. 295 Kiobel, above n273, 153 (Leval J).
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So long as they incorporate (or act in the form of a trust), businesses will now be free to trade in or exploit slaves, employ mercenary armies to do dirty work for despots, perform genocides or operate torture prisons for a despot’s political opponents, or engage in piracy — all without civil liability to victims. By adopting the corporate form, such an enterprise could have hired itself out to operate Nazi extermination camps or the torture chambers of Argentina’s dirty war, immune from civil liability to its victims.296
(b) Looking for Law Beyond the Courtroom Furthermore, the legal as distinct from the judicial interpretation of Nuremberg’s legacy vis-a-vis corporate liability for international crimes also seeks to view the IMT as but one component of the post-War legal order that oversaw occupied Germany and punished the civil and military leadership of the Nazi regime, including leading German corporations.
Beyond formal judicial penalty, the fate of the IG Farben conglomerate is illustrative of how German corporations were treated and punished by the victors of World War II. The Allied powers established a regime to govern Germany in the immediate post-war period. The Allied Control Council, of which the UK, the US and Russia were founding members with France added later, became the sovereign of occupied Germany, succeeding the Nazi state from which it had just accepted unconditional surrender.297 The international tribunals set up in Nuremberg to try Nazi leaders were established pursuant to Allied Control Council Law No. 10 issued on 20 December 1945. Weeks earlier, the Allied Control Council issued Allied Control Council Law No. 9 of 30 November 1945 that seized the assets of IG Farben and dissolved it as a going concern with the express purpose to ‘ensure that Germany will never again threaten her neighbors or the peace of the world’.298
Arguably, this ‘Law’ to dissolve Farben, seize its assets and allow for reparations to victims from those assets is a decision of a legal – even penal – nature and forms part of Nuremberg-era jurisprudence. On this reading of history, therefore, Farben – the largest
296 Ibid. 297 Heller, above n232, 114. 298 Allied Control Council Law No 9: Providing for the Seizure of Property Owned by IG Farbenindustrie and the Control Thereof (Germany) December 1945, reprinted in 1 Enactments and Approved Papers of the Control Council and Coordinating Committee 225 (1946).
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Chapter 4: Clarifying the Midline of the German conglomerates and the one perceived as being most complicit in the Nazi war machine and crimes – was determined guilty of war-crimes and punished by the same entity that created the IMT. Indeed, Farben received a penalty of the highest order for an entity unable to be incarcerated or executed: corporate capital punishment – dissolution. Several Nuremberg legal scholars note that ‘death through seizure was as much a pronouncement of international law as Control Council Law No. 10 which was used to prosecute natural persons and organisations.’299 It was understood that corporations would be punished for their complicity in Nazi crimes, even as their individual directors and managers would also be held to account through legal prosecution at Nuremberg.300 As Justice Rogers of the US Court of Appeals observed in an Alien Tort Statute case against a TNC: ‘the Allies determined that IG Farben had committed violations of the law of nations and therefore destroyed it’.301 Farben’s punishment is but one example reflective of the treatment meted out to other German corporate giants through subsequent Allied Control Council laws, orders and proclamations.302
(c) An Appeal to Fairness and Effectiveness of International Law This perspective – predicated on morality and fairness and reminiscent of a Rawlsian conception of justice – can also find some support in none other than the IMT judgment itself.303 In the main war-crimes trial before the IMT, the defence put forward the argument of nullum crimen sine lege, essentially that the Nazi defendants were being tried for actions that were not crimes when they were committed, and that this was ex post facto justice that could not stand.304 Explicitly rejecting the positivist position on the state of international law, the IMT took a ‘naturalistic approach’ to this issue by stating that nullum crimen was a principle not of law but of justice and, as such, could be set aside if overridden by a higher-order
299 Brief of Nuremberg Scholars, Kiobel v. Royal Dutch Petroleum Co., 133 S.Ct. 1659 (2013). 300 Ibid. 301 Doe v Exxon (US Court of Appeals, DC Circuit), July 8 2011 (Rogers J). 302 See also: Allied Control Authority Control Council Law No 57: Dissolution and Liquidation of Insurance Companies Connected with the German Labour Front (Germany) 1947, reprinted in 8 Enactments and Approved Papers of the Control Council and Coordinating Committee 1 (1947); Military Government Law No 52: Blocking and Control of Property, in Denazification: Annex H: Military Government – Germany Supreme Commander’s Area of Control 46 (Office of Military Government, Civil Administration Division, Report 1 April 1947-30 April 1948). 303 John Rawls, A Theory of Justice (Harvard University Press, 1971). 304 Werle and Jessbuerger, above n46, 39.
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Summing up the legal approach to viewing Nuremberg’s treatment of German corporations, several international criminal law scholars note: ‘Nuremberg era jurisprudence establishes, therefore, that not only States and natural persons can be liable for international law violations, but also juridical entities’.307 The same group of scholars reflect on the narrower judicial interpretation of that history and state that ‘to use Nuremberg era jurisprudence as a basis to immunize corporations from liability under international law, we contend, would be contrary to the underlying goals of this jurisprudence’.308 Pillay echoes the call of several scholars by appealing to notions of fairness and effectiveness of the international legal order when arguing that: ‘A corporation cannot be permitted to commit genocide, crimes against humanity or war crimes, given that every other participant on the plane of international law is prohibited from doing so’.309
E A Possible Third, Socio-Legal Lens
Aside from the two lenses so far elucidated to make sense of the divergent views expressed by modern day scholars and jurists on the question of corporate liability for international crimes, it is also feasible to adopt a third lens through which to view the Nuremberg-era’s legacy on the issue. Widening the aperture yet further than either the judicial or legal lenses previously discussed, to take in a broader historical perspective, a socio-legal or regulatory interpretive lens requires an examination beyond the Allied Powers’ legal decrees and Nuremberg’s trials to scrutinise the actual social consequences of those legal actions.
305 Cryer, ‘International Criminal Justice in Historical Context’, above n48, 155. 306 US v Goering (IMT Judgment), 462. 307 Brief of Nuremberg Scholars, above n299, 103. 308 Ibid. 309 Pillay, above n161; Zerk, above n19, 75; Wells and Elias, above n215; International Council on Human Rights Policy, above n21, 12-13.
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Despite scores of corporate executives being tried and dozens being found guilty of war-crimes and other crimes, despite the legal orders calling for the dissolution of the major German conglomerates and the seizure of their assets, when employing this socio-legal lens one must be more circumspect that German corporations found complicit in the crimes of the Nazi state were held accountable at all.310
As was noted earlier, no representative of German industry was ever prosecuted by the IMT. Furthermore, while the combined legal decisions of the Allied Control Council and subsequent zonal trials punished the major German conglomerates and their executive leaderships, that punishment was, in real terms, minimal and short-lived. For example, the dissolution of IG Farben or other German companies never really occurred. In the three months after issuing Control Council No. 9 (which supposedly dissolved Farben and seized its assets), Farben’s stocks continued to be traded on the Munich Stock Exchange.311 Indeed, they doubled in value.312 Originally, the US intended to split Farben into 47 smaller units.313 This never happened. By 1951, local German interests and the evolving geo-political realities of the nascent Cold War had succeeded in forcing the Allies to shelve that plan, which would have considerably weakened Germany, which the Allies now could ill-afford. Instead, Farben was divided into just three companies: Bayer, BASF and Hoechst.314 Profits in the 1950s of each of these three firms quickly exceeded the profits of their predecessor, IG Farben.315 Thirty years after Nuremberg, all three were ranked in the thirty largest TNCs in the world, each ‘bigger than IG Farben at its zenith’.316
Moreover, in 1951, not three years after their sentences were handed down, almost all the industrialists that were found guilty at Nuremburg had been released from jail.317 This was motivated by political expediency and the evolving geo-politics of the period.318 Turning its attention from litigating the past war, the US began to look ahead
310 Roscoe Proud, ‘Law in Books, Law in Action’ (1910) 44 American Law Review 12. 311 Borkin, above n250, 158. 312 Ibid. 313 Ibid, 159. 314 Ibid, 161. 315 Ibid, 162 316 Ibid, 163. 317 William Manchester, The Arms Of Krupp (Back Bay Books, 2003). 318 Bower, above n245.
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According to this third, regulatory lens of the Nuremberg-era, at ICL’s definitive historical moment of punishing corporations for their involvement in some of the most heinous of atrocities, accountability was ultimately not achieved. While the relevance and applicability of ICL norms to corporate actors is acknowledged by this socio-legal lens, it illustrates that even after the atrocities of World War II, the regulation of corporate violations of ICL was largely ineffectual.
To this day, the absence of effective and respected enforcement measures bedevils all bodies of public international law.321 There exists a paucity of enforcement mechanisms, processes and institutions by which to enforce even the most widely accepted of international norms among states, let alone charting the controversial path of pursuing TNCs.322 So while theoretical debates will persist over the liability of corporations under international law, it is the practical question of actual accountability in the real-world which is, at least equally, if not more, problematic and to which the socio-legal lens serves to highlight.
V CONCLUSION
This chapter has contended that ICL is the most legitimate source from which to derive minimum legal standards of conduct for TNCs doing business in conflict-affected areas. Reasons ranged from the conceptual – the identification of international crimes is the best reflection of the international community’s collective “red-line” minimum
319 Heller, above n232; Bush, above n223, 1121. 320 Borkin, above n250, 162. 321 Mongelard, above n1, 671. 322 Haanikainen, above n135.
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Minimum standards: Behavioural norms derived from international criminal law
Figure 4.2: Minimum legal standards of the regulatory diamond for corporate peacebuilding
In the case of realising ICL obligations of TNCs in conflict-affected areas, the problem is twofold: the theoretical liability of corporations for committing international crimes, and locating effective, practical enforcement mechanisms to compel compliance with such standards. This chapter engaged the first of these issues. It argued that the divergent opinions on corporate liability under ICL can be understood as hinging on differing understandings of the Nuremberg-era’s legacy on the treatment of German corporations for crimes committed in World War II. These understandings are elucidated by a series of interpretive lenses: the judicial, legal and socio-legal. 193
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The enduring jurisprudential debates as to whether international law, and in particular ICL, can place legal obligations upon TNCs are somewhat beside the point and do not halt this thesis’ enquiry. On the contrary, they reinforce its importance, for its purpose is not to ascertain what the Law is, nor contribute to abstract, theoretical debates. Rather, its objective is to aid in the design of a viable and effective regulatory regime for TNCs doing business in conflict-affected areas to ultimately achieve the vision of corporate peacebuilding. As such, ICL is preferred for its regulatory value, not for any doctrinal purity.
Nevertheless, identifying standards of conduct is but part of the regulatory enterprise. The value of a norm, or standard of conduct, is to a large extent dependent on the ability to enforce it.323 This is reflective of a regulatory perspective on the issue. The practical utility of a legal standard that is continually ignored, circumvented or overcome without any meaningful corrective action is minimal. Ultimately, the choice of minimum standards – whether it be ICL or some other body of law – is reduced to a mere theoretical exercise if it is not coupled with the development of meaningful compliance mechanisms with which to compel TNCs to adhere to the chosen behavioural standards and hold them genuinely accountable when they fail to do so.
The significance of this is illustrated by the third, socio-legal lens through which to view the Nuremberg-era’s treatment of German corporations. This lens, with its focus on the early release of the convicted corporate leaders and the speedy resuscitation of German industry, raises serious doubts that, despite the legal decrees and judicial pronouncements to the contrary, genuine accountability for German corporate actors complicit in the crimes of the Nazi regime was never accomplished.
With this history in mind, the next chapter turns to examine what legal mechanisms exist to enforce ICL standards and hold accountable those corporations that violate fundamental standards of behaviour as recognised by ICL.
323 John Austin, The Province of Jurisprudence Determined (John Murray, 1832); Hans Morgenthau, La Re´alite´ des Normes, en Particulier des Normes du Droit International: Fondements d’une The´orie des Normes (Librarie Felix Alcan, 1934) 34-5; Portmann, above n136, 224-6.
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CHAPTER 5
SHARPENING THE BOTTOM TIP OF THE REGULATORY DIAMOND: CORPORATE LEGAL ACCOUNTABILITY FOR INTERNATIONAL CRIMES IN CONFLICT-AFFECTED AREAS
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This is one area where good law is better than good governance. Global Witness1
Enforceable rules are the only way of ensuring real, systematic change. Christopher Albin-Lackey2
1 Global Witness, ‘The US Role in Addressing Complicity of Companies in Human Rights Abuses in Conflict Areas’ (Written Testimony, Senate Judiciary Committee Subcommittee on Human Rights and International Law, September 2008). 2 Christopher Albin-Lackey, ‘Without Rules: A Failed Approach to Corporate Accountability’ (World Report 2013, Human Rights Watch, 2013).
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CHAPTER 5
SHARPENING THE BOTTOM TIP OF THE REGULATORY DIAMOND: CORPORATE LEGAL ACCOUNTABILITY FOR INTERNATIONAL CRIMES IN CONFLICT-AFFECTED AREAS
I INTRODUCTION
The purpose of this chapter is to suggest how to strengthen the regulatory framework applicable to Australia-based corporations doing business in conflict-affected regions of the globe aimed at realising the potential of corporate peacebuilding. It focuses on the lower-tip of the regulatory diamond to examine the legal compliance measures that could be deployed to regulate corporate misconduct in conflict-affected areas, in particular to punish and deter violations of international criminal law (ICL) on the part of Australian TNCs. Legal prosecution of TNCs – in international and domestic courts – may be well-suited to this critical but infrequently invoked regulatory role.
The previous chapter, Chapter 4, centred around a search for minimum standards for corporations doing business in conflict-affected areas. The chapter has established that, due to its coherence, legitimacy and relevance, ICL is the preferred source of minimum standards of behaviour for corporate conduct in conflict-affected areas, from which no violation should be countenanced. This chapter now examines the role of law in gaining compliance with those standards through coercive, legal accountability mechanisms that lie at the bottom-tip of responsive regulation’s diamond model.
This chapter analyses the question of accountability of TNCs for international crimes they may have committed in conflict-affected areas – before both international and domestic legal tribunals. This chapter argues that, given the weakness of alternative international judicial mechanisms, Australian domestic law holds out the promise of several innovative, feasible, albeit untested, pathways to hold TNCs to account for violations of ICL.
Part II highlights the prevalence of collaborative, non-coercive compliance regulatory mechanisms applicable to encouraging TNCs to do no harm in conflict-affected areas.
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Conceptually, these mechanisms lie below but near the midline of the regulatory diamond. While these serve an important function, the regulatory diamond is ineffectual without a sharper, more coercive bottom-tip, consistent with responsive regulation theory. This is the focus of the remainder of this chapter.
Part III of this chapter assesses the possibility of corporate accountability before the International Criminal Court (ICC). The analysis concludes that due to jurisdictional constraints corporate accountability for international crimes remains unlikely. However, individual executives and employees can be held individually culpable before the ICC. Moreover, the continuing evolution of the international legal order suggests that direct corporate accountability before the ICC or other international tribunals is just a matter of time. Nevertheless, finding international pathways for legal accountability wanting for the time being, the second half of this chapter turns to analysing domestic enforcement pathways. Part III begins by examining one of the most prominent legal mechanisms employed in recent years in the pursuit of corporate accountability for international crimes, including against Australian TNCs: the US Alien Tort Statute (ATS). However, the viability of this accountability pathway has been thrown into doubt with the US Supreme Court’s 2013 decision in Kiobel to curtail the extra-territorial reach of the ATS. Therefore, Part IV also presents several accountability pathways within domestic Australian law to hold TNCs to account for violations of ICL in conflict-affected areas, and provide effective avenues for victims of those transgressions to seek redress. While untested, it is contended that these domestic Australian legal avenues represent the most viable options for pursuing corporate accountability for international crimes in conflict-affected areas – thereby strengthening the bottom-tip of the diamond model of regulation to facilitate corporate peacebuilding.
II THE INADEQUACY OF SOFT-LAW, MULTI-STAKEHOLDER ACCOUNTABILITY MECHANISMS
Recalling the regulatory diamond’s shape – bulging in the middle and narrowing at the two extreme tips at the top and bottom – it represents the quantity of regulating that occurs at each level. So while an analysis of the accountability at the lower apex – namely, civil and criminal litigation – is crucial, it is important not to lose sight that in
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Chapter 6: Going Above and Beyond an effective regulatory regime, these punitive and adversarial means of accountability are resorted to only occasionally.
As referred to in Chapter 3, the majority of the current regulatory activity designed to achieve corporate compliance with international behavioural norms in conflict-affected areas can be characterised as “softer”, alternative means of accountability: less coercion, more collaboration; less punishment and more education; or, as Surya Deva has termed it, the ‘social enforcement of human rights obligations’.3 This is where the John Ruggie- led UN Guiding Principles on Business and Human Rights project comes into its own, as do similar multi-stakeholder instruments such as the UN Global Compact, and industry-based initiatives such as the Publish What You Pay and Extractive Industries Transparency Initiative.4
One recurring feature in the design of these instruments is the absence of any legal enforcement mechanisms. This has been derided by some critics; however, that critique misses these instruments’ value within a well-constructed, varied regulatory regime. The influence of these soft-law mechanisms on compliance comes not through the imposition of the law and legal penalties but, rather, through moral opprobrium and political and economic pressure from stakeholders (including consumers and suppliers), governments and civil society.5 These are the instruments and compliance mechanisms that are deployed first and most frequently, when the working assumption should be that the regulated firm is willing to cooperate in a collaborative compliance process. These instruments are designed to contribute to compliance with internationally accepted behavioural norms through education and persuasion of corporations and their directors and employees. Only when these collaboration-based compliance techniques fail are more formalised, more adversarial means countenanced. These could include, for example, the formal complaint mechanism of the OECD Guidelines for Multinational
3 Surya Deva, ‘Corporate Code of Conduct Bill 2000: Overcoming Hurdles in Enforcing Human Rights Obligations against Overseas Corporate Hands of Local Corporations’ (2004) 8 Newcastle Law Review 87, 109. 4 John Ruggie, Protect, Respect and Remedy: A Framework for Business and Human Rights, Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises, UN Doc A/HRC/8/5 (18 June 2008); Publish What You Pay, Mandatory Disclosures: Transparency Going Global
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Enterprises. At the heart of this process is a relatively inexpensive grievance mechanism: a complaint against a company is lodged with the so-called National Contact Point; if deemed warranted (after an investigation by the relevant Australian authorities), mediation is conducted between company and complainants and a non- binding Final Statement is issued which may include recommendations to the company.6
Some civil society actors, on the other hand, may be frustrated with the idea of resorting to further consensus-based regulatory techniques such as the OECD Guidelines complaints process, especially as many of these civil society entities are participants in multi-stakeholder initiatives that had presumably tried and failed at the earlier educative phase of the regulatory process to curb the corporate excesses. Other regulatory techniques that they may resort to when education and polite persuasion fail include what has become known as “naming-and-shaming” campaigns in an effort to halt egregious corporate malpractices.7 Predominantly, these types of campaigns target governments; however, the technique has also been employed with great effect against some of the world’s largest TNCs. Threatened with reputational harm through targeted naming-and-shaming campaigns related to poor labour conditions for their workers in the past two decades, Nike, Apple and WalMart all felt compelled to adjust their labour practices in line with the demands of the well-publicised campaigns against them.8 The reputational and financial costs incurred when TNCs such as these that are sensitive to consumer sentiment are targeted may be sufficient incentive to gain compliance with internationally-accepted norms of behavior.
Nevertheless, if regulatees remain unresponsive and even these harder but non-litigious regulatory mechanisms fail to gain compliance, the legal mechanisms as discussed in
6 Since 2000, there have been nine complaints lodged, seven of them were deemed substantive, two were transferred to other countries’ National Contact Points to handle. See Australian National Contact Point for OECD Guidelines for Multinational Enterprises,
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Despite the availability of a panoply of softer, less coercive, more collaborative instruments, the effective functioning of the regulatory system demands viable, powerful and coercive compliance mechanisms at the bottom apex of the diamond. That is a core precept of responsive regulation theory,9 and what Grabosky and Gunningham suggest when they observe that most effective regulatory systems operate ‘in the shadow of the State’.10 The existence of onerous punitive measures and the ever-present possibility that they will be employed serve as a powerful stimulus for regulatees to abide by minimum legal behavioural standards. In a sense, a successfully designed regulatory framework will rarely resort to the exemplary punishment that occurs at the bottom-tip of the diamond, more often than not through punitive legal prosecutions, yet this most coercive and onerous form of regulation is crucial in order to encourage compliance with behavioural standards.11
III INTERNATIONAL LEGAL PATHWAYS FOR CORPORATE ACCOUNTABILITY FOR INTERNATIONAL CRIMES IN CONFLICT- AFFECTED AREAS
It would be natural to turn to international fora to pursue corporate accountability claims for violations of ICL, with the ICC in the Hague the most likely candidate. But prospects are dim for a successful international prosecution against corporate international criminal malfeasance in the foreseeable future.
9 John Braithwaite, ‘Fasken Lecture: The Essence of Responsive Regulation’ (2011) 44 University of British Columbia Law Review 475. 10 Neil Gunningham and Peter Grabosky, Smart Regulation: Designing Environmental Policy (Clarendon Press, 1998) 478. 11 See, eg, Beth Simmons, Mobilizing for Human Rights: International Law in Domestic Politics (Cambridge University Press, 2009) 133.
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A Jurisdictional Constraints
In line with the judicial lens understanding of Nuremberg’s legacy on the liability of corporations (as discussed in the previous chapter), the constitutive documents of the modern-day ad hoc international criminal tribunals and the ICC expressly provide for jurisdiction over natural persons, not legal ones such as corporations.12 For instance, Article 25(1) of the Rome Statute – the singular instrument reflective of current, positive international criminal law – states that ‘the Court shall have jurisdiction over natural persons’, notably excluding juridical persons.13 For some scholars such as Karavias, the exclusion of legal persons is determinative of the status of corporations in relation to ICL obligations, as it demonstrates that both state practice and opinio juris have not recognised international criminal responsibility of corporations.14
However, the precise reasoning for restricting the jurisdiction of the ICC in this way is a matter of some historical dispute.15 In particular, there is confusion in the literature, and even among delegates to the Rome Conference which drafted the Statute, as to why a French proposal to include jurisdiction over legal persons was ultimately left out of the final Rome Statute text.16
During the Diplomatic Conference in 1998, the draft statute of the ICC put before the Rome Conference contained an assertion of jurisdiction over personnes morales (legal
12 Statute of the International Criminal Tribunal for the Former Yugoslavia, UN Doc S/RES/827 (25 May 1993), art 6; Statute of the International Tribunal for Rwanda, UN Doc S/Res/955 (1994) art 5; Rome Statute of the International Criminal Court, opened for signature 17 July 1998, 2187 UNTS 90 (entered into force 1 July 2002) art 25(1). 13 Rome Statute. art25(1). 14 Markos Karavias, Corporate Obligations under International Law (Oxford University Press, 2013) 100. 15 Micaela Frulli, Jurisdiction Ratione Personae, in Cassese, Antonio, Paola Gaeta and John Jones (eds) The Rome Statute of the International Criminal Court: A Commentary (Oxford University Press, 2002) 527-531. 16 Draft Statute for the International Criminal Court, art. 23, UN Doc A/CONF 183/2/Add.1 (1998). See also Frulli, above n15; Karavias, above n14, 100; Regis Bismuth, ‘Mapping a Responsibility of Corporations for Violations of International Humanitarian Law Sailing between International and Domestic Legal Orders’ (2010) 38 Denver Journal of International Law and Policy 203, 209; Andrew Clapham, ‘The Complexity of International Criminal Law: Looking Beyond Individual Responsibility to the Responsibility of Organizations, Corporations and States’ in Ramesh Thakur (ed), From Sovereign Impunity To International Accountability: The Search For Justice In A World Of States (UN University Press, 2004); Kai Ambos, ‘General Principles of Criminal Law in the Rome Statute’ (1999) 10 Criminal Law Forum 1, 7.
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According to some participants and observers, negotiations failed to come to agreement on the value or practical details of expanding the personal jurisdiction of the court to encompass corporations, suggesting it might undermine the principle of individual corporate responsibility.19 Practical concerns were also raised, such as ‘overwhelming problems of evidence’ and that there was not yet a recognised standard of corporate responsibility across all states, which this would make the principle of complementarily unworkable.20 Others familiar with the preparatory meetings suggest it was primarily a matter of diplomatic expediency.21 ‘Time was running out’ for finalising the text and so the question of jurisdiction over juridical persons, which needed further deliberation among the parties, was postponed for an unnamed later date.22 Yet others suggest that some parties were concerned its inclusion would undermine the Court’s principle of
17 UN Diplomatic Conference of Plenipotentiaries on the Establishment of an International Criminal Court, Draft Statute of the International Criminal Court, Rome, UN Doc A/Conf183/2/Add1 (April 14 1998), art76. 18 UN Diplomatic Conference of Plenipotentiaries on the Establishment of an International Criminal Court, ‘Official Records, Vol. I, Final Documents’, Rome, UN Doc A/CONF183/C1/WGGP/L5/Rev2 (15 June – 17 July 1998) 252. 19 Clapham, ‘Complexity of ICL’, above n16; Kai Ambos, ‘Article 25: Individual Criminal Responsibility’ in Otto Triffterer (ed), Commentary on the Rome Statute (1999) art25. See also International Commission of Jurists’ Expert Legal Panel on Corporate Complicity in International Crimes, ‘Corporate Complicity and Legal Accountability, Volume II: Criminal Law and International Crimes’ (Commission’s Report, International Commission of Jurists, 2008). 20 Ambos, ibid; Anita Ramasastry and Robert Thompson, Commerce, Crime and Conflict: Legal Remedies for Private Sector Liability for Grave Breaches of International Law: A Survey of Sixteen Countries (FAFO, 2006) 16. 21 Frulli, above n15; Karavias, above n14; Clapham, ‘Complexity of ICL’, above n16; Ambos, ‘General Principles’, above n16. 22 Per Saland, ‘International Criminal Law Principles’ in Roy Lee (ed), The International Criminal Court: The Making of the Rome Statute: Issues, Negotiations, Results (Kluwer Law International, 1999) 199; Clapham, ‘Complexity of ICL’, above n16.
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Regardless, while it is plain from a reading of the Rome Statute that the ICC’s jurisdiction does not extend to corporations, this fact has only limited relevance to discussing TNCs legal obligations to abide by ICL. As adherents to the legal lens approach to Nuremberg’s legacy on corporate accountability argue, the jurisdictional provisions of these constitutive documents of these tribunals do not define the extent of substantive law. Rather, they extend their respective tribunal’s jurisdiction to certain subjects and/or geographical areas.24 The inapplicability of international duties to corporations and other legal, non-natural persons cannot be inferred from jurisdictional restrictions of specific tribunals’ Statutes. In fact, the Preparatory Committee’s negotiations over the Rome Statute’s jurisdictional provisions offer a strong contraindication.25 As Clapham observes, by even countenancing the inclusion of legal persons (i.e. corporations) within the jurisdiction of the ICC ‘one could conclude that international law can actually create directly enforceable duties for corporations’.26 The fact that corporations cannot be prosecuted at these tribunals is thus reduced to a procedural matter, rather than reflecting substantive legal principles.27
Whatever the precise reason, it is important to note its current absence does not preclude the inclusion of a provision allowing for corporate criminal responsibility at some future date.28 Corporate accountability before international criminal tribunals is not foreclosed forever. In terms of a formal integration of corporations into the remit of the ICC and
23 Karavias, above n14, 100; Clapham, ibid, 157; Andrea Sereni, ‘Individual Criminal Responsibility’ in Flavia Lattanzi and William Schabas (eds), Essays on the Rome Statute of the International Criminal Court, Vol. II (Editrice il Sirente, 1999) 145-146; Ambos ‘General Principles’, above n16, 7. 24 Andrew Clapham, Human Rights Obligations of Non-State Actors (Oxford University Press, 2006); Andrew Clapham, ‘Extending International Criminal Law beyond the Individual to Corporations and Armed Opposition Groups’ (2008) Journal of International Criminal Justice 902. 25 UN Diplomatic Conference of Plenipotentiaries on the Establishment of an International Criminal Court, above n18. 26 Andrew Clapham, ‘Globalization and the Rule of Law’ (1999) 61 Review of the International Commission of Jurists 17; Eric Mongelard, ‘Corporate Civil Liability of Corporations for Breaches of International Humanitarian Law’ (2006) 88 International Review of the Red Cross 665, 673. 27 Brief of Yale Law School Center for Global Legal Challenges, Kiobel v. Royal Dutch Petroleum Co., 133 S.Ct. 1659 (2013), 5. 28 International Commission of Jurists, Vol. II, above n19, 56.
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ICL more generally, there is a well-established, regular mechanism to do so: the Review Conference.29 The Rome Statute has been amended in the past and will likely be again.30
Amending the Statute to expand the Court’s jurisdiction to encompass juridical persons (such as corporations) was not formally discussed at the first Review Conference of the Rome Statute held in 2010 in Kampala, Uganda.31 32 But if, as some observers suggest it was a matter of expediency or procedural concerns that led to legal persons exclusion (or even if there were other more substantive reasons) from the Rome Statute’s jurisdiction, the very real possibility exists that at a future Review Conference (with the next one scheduled for 2017), the Rome Statute may be so amended.33 At its most simplest, the addition of just two words – “and legal” – to Article 25(1)’s current wording of the Court’s jurisdiction would be all that is required: ‘The Court shall have jurisdiction over natural and legal persons pursuant to this Statute.’34
Indeed, it is instructive to note that a recent International Commission of Jurists report on corporate complicity in international crimes recommended just such an amendment to the Rome Statute:35 In the Panel’s view this reasoning [which saw it rejected initially] should not preclude the States Parties to the ICC Statute from including a provision for corporate criminal responsibility in the future. The fact that a corporation may be held liable for crimes under international law does not per se detract from individual criminal responsibility. Indeed, sometimes it might be more appropriate to hold a corporation responsible rather than a corporate official, if the commission of the crime had been facilitated by an explicit and collective decision of the management of a company.
29 Rome Statute, art123. 30 Review Conference of the Rome Statute of the International Criminal Court, Official Records (Kampala, 31 May – 11 June 2010),
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To do so would unequivocally align positive international criminal law with ever growing support for integrating corporations into the global legal order.36
B Corporate Crime Remains on the Agenda
Notwithstanding the significant jurisdictional impediments to trying corporations per se, corporate crime remains part and parcel of ICL theory and practice. Corporate misconduct has come under scrutiny in modern-day international criminal tribunals.
1 Non-Justiciability Does Not Mean a Crime Has Not Been Committed Reflective of the distinction that was drawn in the previous chapter between the applicability of a norm on the one hand and its enforcement on the other, just because a corporation (or an individual or other group, for that matter) is not prosecuted for a crime does not, as a matter of law or ethics, mean that no crime was committed or that a duty to refrain from participating in such crimes was absent. As Bantekas and Oette observe: ‘it was never doubted that all treaties adopted after 1945 and which proscribed international crimes entailed the criminal liability of perpetrators – irrespective of the fact that prosecutions and extraditions were rare’.37 ICL, by necessity and design, only metes out exemplary justice to a small number of perpetrators.
The legal definition of international crimes (as reflected in the Rome Statute) emphasises the requisite elements of action and intent, rather than the identity of the perpetrator or the ‘nature of their authors’.38 This supports the applicability of ICL to corporations and reflects a ‘victim-oriented approach’ that attempts to be an ‘effective limitation on oppressive power, no matter what its source.’39
36 See, eg, Clapham, Human Rights Obligations, above n24; David Kinley and Junko Tadaki, ‘From Talk to Walk: The Emergence of Human Rights Responsibilities for Corporations at International Law’ (2004) 44 Virginia Journal of International Law 931. 37 Ilias Bantekas and Lutz Oette, International Human Rights Law and Practice (Cambridge University Press, 2013) 602. 38 Bismuth, above n16, 207. See also Stephen Macedo (ed), Princeton Principles on Universal Jurisdiction (Program in Law and Public Affairs, Princeton University, 2001), principle 1(1): ‘Criminal jurisdiction is based solely on the nature of the crime.’ 39 Clapham, ‘Extending ICL’, above n24. See also Rome Statute, art7(1). See also Statute of ICTY, art5 and Statute of ICTR, art3; Robert McCorquodale, ‘Non-State Actors and International Human Rights Law’ in Sarah Joseph and Adam McBeth (eds), International Human Rights Law (Edward Elgar, 2009) 113.
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The fact that the ICC does not or cannot prosecute a corporation due to jurisdictional constraints does not negate the fact that an international crime may still have been committed. By distinguishing the substantive provisions of the Rome Statute from its jurisdictional provisions, we can reasonably suggest that, notwithstanding the impossibility of prosecution, legal persons such as corporations can commit international crimes, and that ‘international law places obligations on both the corporation and the relevant states’ to seek justice in such cases.40 Indeed, the ICJ, in the Nuclear Weapons Case and Nicaragua v USA, has authoritatively concluded that war- crimes are universally prohibited, carving out no exception for non-state actors or organisations.41 The non-justiciability of such a case before the ICC does not deny the existence of the underlying criminal conduct. This can be analogised, as Clapham points out, to a case of an individual from a non-state party to the Rome Statute who commits an international crime in the territory of another non-state party.42 This too is non- justiciable.
Therefore, even if we are of the opinion that ICL’s cornerstone principle of “individual criminal responsibility” is to the exclusion of corporate responsibility per se, ICL has been explicitly extended to non-state, private actors. Business executives, managers and even employees who commit international crimes without any association with a sovereign state can be brought to justice through ICL processes.43 On this point, there is no dispute. The practical difference is that individuals within the corporation will be held to account, rather than and not alongside the corporation itself. To be sure, the prosecution of individuals within corporations has certain drawbacks – not least, the difficult evidentiary burden in imputing collective criminal action to an individual, and the loss of the corporation’s “deep pockets” with which to compensate abuse victims.44
40 Mongelard, above n26, 671. 41 Legality of the Use by a State of Nuclear Weapons in Armed Conflict (Advisory Opinion) [1996] ICJ Rep 226; Military and Paramilitary Activities in and Against Nicaragua (Nicaragua v. USA) Judgment, [1986] ICJ Rep 14. 42 Clapham, ‘Extending ICL’, above n24. 43 Tilman Rodenhauser, ‘Beyond State Crimes: Non-State Entities and Crimes’ (2014) 27 Leiden Journal of International Law 913, 928. 44 Regis Bismuth, above n16.
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It is also significant to note that the jurisprudence of the post-WWII war-crimes trials and the ad hoc tribunals of the 1990s has unequivocally indicated that individuals within corporations (e.g. executives and board members) can be prosecuted and found liable for breaches of international criminal law. On this point, there is also no dispute. Evidently, ICL then and now applies to individual actions, whether they acted as representatives of a state or a corporation, or independently.45
While the Industrialists Trials’ legacy on the question of corporate liability under ICL may well be highly disputed, those trials established the enduring precedent that no link to state action is required for the commission of an international crime.46 In each of the Industrialist Trials, the defendants pleaded a similar defence: ‘the accused were private individuals holding no public official positions within the state, and that as they did not represent the State in any capacity, they could not be criminally liable for violations of international law (italics added)’.47 This defence was soundly rejected.48
2 Corporate Crime Comes Under Scrutiny at International Tribunals Following the Nuremberg precedent and with a view to maximizing the protection afforded to ‘victims of atrocities’, international criminal tribunals have followed this principle.49 Two cases at the International Criminal Tribunal for Rwanda, for instance, successfully prosecuted corporate leaders for utilising the resources of their corporations and their positions of authority to commit war-crimes and genocide, and allowing their employees to engage in such crimes as well.50
45 See Chapter 5 of this thesis. See generally: Antonio Cassese, Guido Acquaviva, Mary Fan and Alex Whiting, International Criminal Law: Cases and Commentary (Oxford University Press, 2011). 46 Ralph Steinhardt, ‘The New Lex Mercatoria’, in Philip Alston (ed), Non-State Actors and Human Rights (Oxford University Press, 2005) 196; Karavias, above n14, 91. 47 United States v Flick (‘The Flick Case’) (United States Military Tribunal, Nuremberg, Case No 5, 22 December 1947) Trials of War Criminals before the Nuremberg Military Tribunals under Control Council Law No. 10 1946-1949, Vol. VI (US Government Printing Office, 1953) 267. 48 Ibid. 49 Prosecutor v. Akayesu (Judgment) (International Criminal Tribunal for Rwanda, Case No. ICTR-96-4, 2 September 1998) [633]. See also: Prosecutor v Musema (Judgement and Sentence) (International Criminal Tribunal for Rwanda, Case No ICTR-96-13-A, 27 January 2000) [270]; Prosecutor v Tadic (Judgment) (International Criminal Tribunal for the former Yugoslavia, Appeals Chamber, Case No IT- 94-1-A, 15 July 1999) 654. 50 Prosecutor v. Nahimana, Barayagwiza, Ngeze (Appeal Judgment) (ICTR-99-52-A, 28 November 2007); Prosecutor v Musema, Case No. ICTR-96-13-T (27 January 2000); Prosecutor v Tadic, (ICTY Case No. IT-94-1-A, Judgment, 15 July 1999); Steinhardt, ‘The New Lex Mercatoria’, above n46; Karavias, above n14, 91; Gerry Simpson, ‘Men and Abstract Entities: Individual Responsibility and
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In Prosecutor v. Musema (2000), Alfred Musema, the director of the Gisovu Tea Factory located in Kibuye, Rwanda, was found guilty of genocide and crimes against humanity. He was found guilty not only for direct participation in the alleged crimes, but also under the doctrine of superior responsibility, which enjoyed popularity in the military context but whose applicability to commercial context was unclear.51 The Musema judgment concluded that ‘a civilian superior may be charged with superior responsibility only where he has effective control’.52 The judgment, therefore, stands as precedent for extending superior responsibility to civilian contexts, along lines the International Law Commission had previously suggested, in which ‘the civilian superior enjoys a similar position of command and exercises a similar degree of control with respect to their subordinates’ as a military commander would.53
In another case heard by the ICTR, the so-called “Media case”, three Rwandan media personalities, including the founder and director of a radio station, were prosecuted for genocide and incitement to genocide among other crimes. The charges were based on the allegation that the defendants deployed their corporate resources – namely, radio broadcasts and magazine pages – to desensitise the Hutu public and incite them to murder their Tutsi neighbours.54 After a trial and an appeal, all three were found guilty of various charges, including, for two of them, incitement to genocide.55
Similarly, corporate crime remains on the agenda of the ICC, in particular the private sector’s criminal activities that drive armed conflicts. The first Prosecutor of the ICC, Luis Moreno-Ocampo, who served in that position until 2013, publicly suggested in 2003 that he might investigate and prosecute corporate executives for international
Collective Guilt in International Criminal Law’ in André Nollkaemper and Harmen van der Wilt (eds) System Criminality in International Law (Cambridge University Press, 2009) 76; Kirsten Fisher, Moral Accountability and International Criminal Law: Holding Agents of Atrocity Accountable to the World (Routledge, 2012) 74. 51 Prosecutor v Musema (Judgment, ICTR) 141. 52 Ibid. 53 International Law Commission, Draft Code of Crimes Against the Peace and Security of Mankind, A/CN.4/Ser. A/1996/Add.1 (Part 2), 51 UN GAOR (1996), UN Doc A/51/10 (1996), art.6. 54 Prosecutor v. Nahimana, Barayagwiza, Ngeze (Judgement and Sentence), ICTR-99-52-T, International Criminal Tribunal for Rwanda (ICTR), 3 December 2003. 55 Prosecutor v. Nahimana, Barayagwiza, Ngeze (Appeal Judgment), ICTR-99-52-A, International Criminal Tribunal for Rwanda (ICTR), 28 November 2007.
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This pronouncement echoes the work of Stewart, Higgins and others who have argued that massive-scale environmental degradation and destruction can be characterised as an international crime and advocated for its inclusion in the litany of crimes detailed in the Rome Statute.58 Stewart identifies natural resource extraction as not only having ‘created perverse incentives for war, it has also furnished warring parties with the finances necessary to sustain some of the most brutal hostilities in recent history’ in a host of different conflict zones from Afghanistan to Timor Leste.59 He argues that TNCs should be prosecuted for the international crime of pillage when they knowingly exploit the natural resources of conflict-affected areas.60
Despite Ocampo’s public statement and growing scholarly support for such a move, no such prosecutions of corporate leaders have yet occurred, nor any substantial prosecutorial investigation into such corporate behaviour.61 The current Prosecutor, Fatou Bensouda, has made no public statements to suggest that she is contemplating any such investigations.
3 Recognising Corporate Liability for International Crimes On the specific issue of formal recognition of corporate liability for international crimes, there have also been several significant developments in recent years. Adding to the growing body of legal scholarship on the issue, Ramasastry and the International
56 Julia Graff, ‘Corporate War Criminals and the International Criminal Court: Blood and Profits in the Democratic Republic of Congo,’ Human Rights Brief, Vol. 2, 2011. 57 Luis Moreno-Ocampo,‘Statement by the Prosecutor of the International Criminal Court’, (Assembly of State Parties, 2nd session, The Hague, 8 September 2003)
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Commission of Jurists have (separately) reported a trend in recognising liability for international crimes to corporations in domestic courts.62 For instance, several countries, including Australia, Canada and France, have incorporated the Rome Statute into their respective domestic laws without drawing a jurisdictional distinction between natural and legal persons, allowing for corporate criminal responsibility for heinous violations of international human rights and humanitarian law in their domestic courts.63
Perhaps the most significant domestic jurisdiction – the US, home to many TNCs and a crucial market for many more – is part of this trend. In the Kiobel ATS judgment (mentioned previously and the subject of the next section of this chapter), the US Supreme Court recognised as a matter of law that corporations could be held liable for ‘violations of the law of nations’ – that is, international criminal law norms.64 Thompson, Ramasastry and Taylor contend that this amounts to evidence of (at least the genesis of) a general principle of law recognized by civilized nations which supports corporate criminal liability for egregious human rights violations.65 Supporting this finding, since the Rome Statute was finalised, Swart notes several international instruments have been adopted in various international fora recognising corporate criminal liability. 66 In particular she notes the 2005 unanimous passage by the UN General Assembly of the Basic Principles and Guidelines on the Right to a Remedy and Reparation for Victims of Gross Violations of Human Rights Law and Serious Violations of International Humanitarian Law.67 This non-binding resolution’s Principle 15 explicitly prescribes the liability of non-state actors, including corporations.68
Finally, a significant advance in recognising the possibility of direct corporate accountability before international criminal tribunals came from the Special Tribunal for
62 Ibid; Ramasastry and Thompson, above n20, 16. 63 Robert Thompson, Anita Ramasastry and Mark Taylor, ‘Translating Unocal: The Expanding Web of Liability for Business Entities Implicated in International Crimes’ (2009) 40 George Washington International Law Review 841, 893. 64 Kiobel v Royal Dutch Petroleum Corp, 569 US ___ (2013) (slip op) (Roberts CJ). 65 See, eg, France – French Penal Code, art213-3, 689-11, Canada – Crimes Against Humanity and War Crimes Act of 2000 (Canada); Australia – Criminal Code Act 1995 (Cth), div 268. 66 Beth Swart, ‘International Trends Towards Establishing Some Form of Punishment for Corporations’ (2008) 6 Journal of International Criminal Justice 947. 67 ‘Basic Principles and Guidelines on the Right to a Remedy and Reparation for Victims of Gross Violations of International Human Rights Law and Serious Violations of International Humanitarian Law’, UN General Assembly Resolution 60/147, UN Doc A/Res/60/147 (adopted 16 December 2005). 68 Ibid.
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Lebanon established in 2007 to investigate the 2005 assassination of Lebanese Prime Minister Rafik Harriri and 22 others.69 The “Harriri Tribunal”, as it is often referred to, is a hybrid international court, similar to the Special Court for Sierra Leone.70 In January 2014, two journalists and two media companies were held in contempt by the Tribunal by publicising the names of individuals who were said to be called as witnesses before the Tribunal. Nowhere in the RPE or Statute did it state conclusively whether legal persons could be prosecuted for contempt of the Tribunal. The contempt judge (who now serves as the President of the Tribunal) examined the relevant rule – Rule 60bis of the Rules of Procedure and Evidence of the Tribunal – and found nothing in the rule to exclude legal persons, such as corporations, from its reach. In his ruling, Justice Baragwanath made note that corporations can be held criminally liable under domestic Lebanese criminal law, and that there is an ‘international trend’ towards recognising the liability of corporations under ICL.71
C Lex Ferenda, Not Lex Lata
Given that the most likely international tribunal to investigate and prosecute corporate wrongdoing in conflict-affected areas has yet to do so, and that its own constitutive document prevents it from prosecuting corporations themselves, restricting its ambit to the prosecution of natural persons such as corporate managers or directors – whom it has singularly failed to investigate, let alone prosecute – the doctrinal answer may be to conclude that at the present time corporations are not directly accountable under ICL for egregious violations of human rights and humanitarian law. An analysis of the literature supporting corporate liability under international law may leave the objective reader with the feeling that this is more hopeful prescription than description, advocating what international law should be (lex ferenda), not what it is (lex lata).72 However, the
69 See Special Tribunal for Lebanon,
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From the IMT at Nuremberg onwards, successive international judicial bodies have been willing to extend the reach of international law as a matter of necessity and regime- effectiveness taking up the challenge expressed in Nuremberg’s List judgment: ‘[International law] must be elastic enough to meet the new conditions that natural progress brings to the world’.74
A modern reaffirmation of these ideas is found in the jurisprudence of the ICTY. In an interlocutory decision during the Tadic trial, the Tribunal (led by President Antonio Cassesse) observed that ‘throughout its history the development of international law has been influenced by the requirements of international life’.75 The Tribunal continued: A state sovereignty oriented approach [to international law] has been gradually supplanted by a human being oriented approach. Gradually the maxim of Roman law hominum cause omne jus constitutim est [all law is created for the benefit of human beings] has gained a firm foothold in the international community as well.76
The Tribunal went on to lay out a moral basis for regulating civil wars in a similar fashion as it does conflicts of an international character: ‘Why protect civilians from belligerent violence, or ban rape, torture or the wanton destruction of hospitals, churches, museums or private property, as well as proscribe weapons causing unnecessary suffering when two sovereign states
73 Theodor Meron, The Humanization Of International Law (Nijhoff 2006); Janne Nijman, ‘Non-State Actors and the International Rule of Law: Revisiting the ‘Realist Theory’ of International Legal Personality’ in Math Noortmann and Cedric Ryngaert (eds) Non-State Actor Dynamics In International Law: From Law-Takers to Law-Makers 119 (Ashgate, 2010); Peter Muchlinski, ‘Multinational Enterprises as Actors in International Law: Creating “Soft Law” Obligations and “Hard Law” Rights’ in Math Noortmann and Cedric Ryngaert (eds) Non-State Actor Dynamics In International Law: From Law- Takers To Law-Makers 30 (Ashgate, 2010) 11; Ole Kristian Fauchald and Jo Stigen, ‘Corporate Responsibility Before International Institutions’ (2009) 40 George Washington International Law Review 1025, 1042. 74 United States v List (United States Military Tribunal, Nuremberg, Case No 7, 19 February 1948) (‘The Hostage’ case) Law Reports of Trials of War Criminals, Vol I (His Majesty’s Stationery Office, 1947-49) 53. 75 Reparation for Injuries Suffered in the Service of the United Nations (Advisory Opinion), [1949] ICJ Rep 174, 178. 76 Prosecutor v Tadic (Decision on Defence Motion for Interlocutory Appeal on Jurisdiction) (International Criminal Tribunal for the former Yugoslavia, Case No IT-94-1-A, 2 October 1995) [97].
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are engaged in war, and yet refrain from enacting the same bans or providing the same protection when armed violence has erupted “only” within the territory of a sovereign state? If international law, while of course duly safeguarding the legitimate interests of States, must gradually turn to the protection of human beings, it is only natural that the aforementioned dichotomy should gradually lose its weight.77
This groundbreaking judgment which calls for the shedding of doctrinal straitjackets has been echoed by countless international jurists, scholars and diplomATS, including Theodor Meron and Philip Alston.7879 In a similar vein, three justices of the ICJ noted in the 2003 Arrest Warrants Case that there has been an ‘emergence of values which enjoy an ever- increasing recognition in international society. One such value is the importance of the punishment of the perpetrators of international crimes’.80
Allowing for the direct enforcement of ICL by the ICC for conflict-driving conduct on the part of corporations will require the integration of corporations into the court’s jurisdictional scope. Perhaps a significant step towards formal positive law recognition of corporate liability is the increasing acceptance and internalisation of ICL norms by TNCs themselves into their own company and industry-based codes of conduct and operating procedures.81 Initiating ICL-based multi-stakeholder initiatives akin to the UN Global Compact or Voluntary Principles on Security and Human Rights would also be a step towards aligning the “is” with the “ought.”82
77 Ibid. 78 Cassese later stated that that indeed was his intent: ‘We were breaking new ground. You go beyond the black letter of the law because you look at the spirit of law.’ Quoted in: Heikilina Verrijn Stuart and Marlise Simmons, The Prosecutor and the Judge: Benjamin Ferencz and Antonio Cassese: Interviews and Writings (Amsterdam University Press, 2009) 47. See also, Theodor Meron, The Humanization of International Law (Martinus Nijhoff, 2006) ch1, 2; Tamas Hoffman, ‘The Gentle Civilizer of Humanitarian Law – Antonio Cassese and the Creation of the Customary Law of Non-International Armed Conflicts’ in Casten Stahn and Larissa Van Den Herik (eds) Future Perspectives on International Criminal Justice (TMC Asser Press, 2010) 58, 68. 79 Upendra Baxi, Human Rights in a Posthuman World : Critical Essays (Oxford University Press, 2007). 80 Arrest Warrant Case (Democratic Republic of Congo v Belgium) (Judgment) [2002] ICJ Rep 3 (separate opinion of Higgins, Kooijmans and Buergenthal JJ). 81 Thomas Risse, Kathryn Sikkink and Stephen Ropp (eds), The Power of Human Rights: International Norms and Domestic Change (Cambridge University Press, 1999). 82 David Weissbrodt and Muria Kruger, ‘Human Rights Responsibilities of Businesses as Non-State Actors’ in Philip Alston (ed.) Non-State Actors and Human Rights; Hans Kelsen, Pure Theory of Law (translated ed, Lawbook Exchange, 2009).
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What seems probable is that whatever their formal status within the international legal system may be today, corporations will almost certainly be sewn more firmly into the fabric of a globalised legal order in the decades to come.83 Indeed, in that regard the words penned in 1946 by Lord Quincy Wright, legal adviser to the IMT at Nuremberg, provide a hopeful observation with which to conclude this section:
International law is progressive ... The pressure of necessity stimulates the impact of natural law and of moral ideas and converts them into rules deliberately and overtly recognized by the consensus of civilised mankind ... I am convinced that international law has progressed, as it is bound to progress if it is to be a living and operative force in these days of widening sense of humanity.84
IV DOMESTIC LEGAL PATHWAYS FOR CORPORATE ACCOUNTABILITY FOR INTERNATIONAL CRIMES IN CONFLICT-AFFECTED AREAS
While the international legal system has developed a great deal since 1945’s IMT at Nuremberg – with the creation of the permanent ICC a notable advance – it seems unlikely today that there exist adequate and effective international judicial mechanisms possessing the capabilities and jurisdiction to prosecute corporations and their executive leaderships for international crimes.85 Perhaps in the future international tribunals will be developed that can legitimately exercise universal jurisdiction to hold Australia- based corporate actors liable for serious human rights violations and other international crimes in global conflict-zones. This would go some way to providing for a level playing field in terms of global trade and investment. In the interim, as is frequently the case when it comes to the implementation of international legal standards, the search for
83 Larry Cata Backer, ‘Multinational Corporations, Transnational Law: The United Nations’ Norms on the Responsibilities of Transnational Corporations As a Harbinger of Corporate Social Responsibility in International Law’ (2005) 37 Columbia Human Rights Law Review 101. 84 Quincy Wright, ‘War Crimes Under International Law’ (1946) 62 Law Quarterly Review 40, 51. Cited with approval in judgment of United States v Altstoetter (United States Military Tribunal, Nuremberg, Case No 3, 4 December 1947) (“The Justice case”), 967-8. 85 Mongelard, above n26, 671.
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Beyond the pragmatic reasons there are also sound legal arguments for looking domestically for effective compliance regulatory tools. The principle of complementarity is a vital aspect of the functioning of the ICC and international law in general. Enshrining the principle into the Rome Statute and the ICC’s due process was crucial to allaying concerns of many states fearful of usurpation of their sovereign rights. The principle, simply put, suggests recourse, in the first instance, should be to one’s domestic judicial system for redress before resorting to international tribunals. Complementarity ‘is a rule of both necessity and good faith among nations, given the dearth of international mechanisms for enforcing international law’.87
Arguably, there also exists an international legal responsibility of States to allow for such corporate liability lawsuits in domestic courts.88 This responsibility emanates from the jus cogens status of the core international crimes, as well as the various international human rights treaties that have been endorsed by states such as Australia.89 Signatory states are obliged to take steps to allow the full realisation of human rights. For example, the International Covenant on Civil and Political Rights states that: Where not already provided for by existing legislative or other measures, each State Party to the present Covenant undertakes to take the necessary steps, in accordance with its constitutional processes and with the provisions
86 Ibid, 671-8; Harold Koh, ‘Separating Myth from Reality About Corporate Responsibility Litigation’ (2004) 7 Journal of International Economic Law 263; Anne-Marie Slaughter, ‘A Liberal Theory of International Law’ (2000) 94 American Society of International Law Proceedings 240; Andrew Guzman, How International Law Works: A Rational Choice Theory (Oxford University Press, 2008); Ryan Goodman and Derek Jinks, ‘How to Influence States: Socialization and International Human Rights Law’ (2004) 54 Duke Law Journal 621. 87 Brief of Navi Pillay, United Nations Commissioner of Human Rights, Kiobel v Royal Dutch Petroleum Co, 133 SCt 1659 (2013). 88 See, eg, Mark Gibney and Sigrun Skogyl (eds), Universal Human Rights and Extraterritorial Obligations (University of Pennsylvania Press, 2010); Lisa Yarwood, State Accountability under International Law: Holding States Accountable for a Breach of Jus Cogens Norms (Routledge, 2012). 89 See, eg, Simmons, above n11; Danwood Mzikenge Chirwa, ‘The Doctrine of State Responsibility as a Potential Means of Holding Private Actors Accountable for Human Rights’ (2004) 5 Melbourne Journal of International Law 1.
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of the present Covenant, to adopt such other measures as may be necessary to give effect to the rights recognized in the present Covenant.90
Similar provisions appear in, for example, the International Covenant on Economic and Social Rights, and the Conventions of the Rights of the Child.91 None envisage exemptions for corporations from the domestic regulatory measures the state should adopt to fulfil its responsibility. There is a growing body of support in the international legal scholarly community for the enforcement of international law norms in domestic courts. For example, the 2011 Maastricht Principles on Extraterritorial Obligations of States in the area of Economic, Social and Cultural Rights, a project of the International Commission of Jurists, states that regarding business enterprises ‘States must adopt and enforce measures to protect economic, social and cultural rights through legal and other means ... where the corporation, or its parent ... company has [at least] substantial business activities in the State concerned’.92 Similarly, the Committee overseeing the implementation of the International Convention on the Elimination of All Forms of Discrimination has urged signatory states to take ‘appropriate legislative or administrative measures’ to prevent corporate human rights abuses overseas. For instance, in CERD’s 2010 “Concluding Observations” to Australia, and with specific reference to the foreign activities of Australia’s extractive sector, encouraged the government to ‘fulfil its international commitments’ and ‘regulate the extraterritorial activities of Australian corporations abroad.’93
The second half of this chapter turns to examine the potential role of domestic law to more effectively regulate Australian TNCs in conflict-affected areas. The analysis continues below with an examination of the most prominent domestic legal tool for victims of gross corporate human rights abuse committed by TNCs in conflict-affected
90 International Covenant on Civil and Political Rights, opened for signature 19 December 1966, 999 UNTS 171 (entered in force 23 March 1976) art 2(2). 91 International Covenant on Economic, Social and Cultural Rights, opened for signature 16 December 1966, 993 UNTS 3 (entered into force 3 November 1976) art 2. 92 Maastricht Principles on Extraterritorial Obligations of States in the area of Economic, Social and Cultural Rights (2011) art 25. See also: International Council on Human Rights Policy, ‘Beyond Voluntarism: Human Rights and the Developing International Legal Obligations of Companies’ (Report, February 2002). 93 UN Committee on the Elimination of Racial Discrimination, “Concluding observations of the Committee on the Elimination of Racial Discrimination: Australia” UN CERD/C/AUS/CO/15-17, 13 September 2010, [13]. See also similar statements in CERD’s Concluding Observations regarding UK (2011) CERD/C/GBR/CO/18-20 (14 September 2011) and the USA (2014) CERD/C/USA/CO/7-9, 25 September 2014.. 217
Corporate Peacebuilding and the Law areas to seek redress the past two decades: the US Alien Tort Statute. After providing a brief introduction to the ATS, and the facts of a prominent Australian corporate defendant in an ATS claim, this section proceeds to examine the US Supreme Court’s judgment in the Kiobel case (the ATS case referred to earlier in this chapter). With this judgment, the Supreme Court has neutered the most popular tool for corporate accountability claims of the past two decades, including against Australian TNCs, by denying the ATS’s universal, extraterritorial reach.94 While the curtailing of the ATS by the US Supreme Court in its Kiobel decision was a significant setback, the worldwide trend to seek enforcement of international law norms in domestic courts continues.95 It is contended that with the curtailment of the ATS as an accountability pathway, there are several promising legal pathways in Australia worthy of exploration. With this in mind, the chapter’s final substantive section explores several innovative domestic Australian legal pathways to ensure accountability for Australian TNCs who breach ICL norms in conflict-affected areas and, more generally, fail to mitigate their conflict-driving behaviour.
A The US Alien Tort Statute: Contemporary Guardian of Human Rights
The US ATS brevity and arcane original purpose, belies its impact on corporate accountability efforts in recent decades. The ATS is a 1789 US law (enacted by the first Congress) that grants US federal courts the jurisdiction to hear tort claims submitted by non-Americans for ‘violations of the law of nations’.96 Passed in an effort to combat piracy and the harassment of foreign ambassadors, the ATS states that: 97 [US] district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.
The ATS lay largely dormant for two centuries, until the 1980s, when human rights advocates successfully invoked the ATS on behalf of foreign victims for human rights
94 Kiobel v. Royal Dutch Petroleum Co, 569 US ___ (2013) (slip op). 95 See, eg, Steven Ratner, ‘Corporations and Human Rights: A Theory of Legal Responsibility’ (2001) 111 Yale Law Journal 443; International Commission of Jurists, Vol. I, above n35. 96 Alien Tort Statute, 28 USC §1350 (1789). 97 Ibid.
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Chapter 6: Going Above and Beyond abuses committed abroad by foreign governments.98 Following the 1995 landmark Kadic decision which stated that violations of the law of nations did not require state action in order to be actionable, a second wave of ATS litigation commenced, this time against transnational corporations. 99 These judgments seemingly permitted US courts to exercise universal jurisdiction in hearing civil claims alleging ‘specific, universal and obligatory ... violation[s] of the law of nations’: a recapitulation of the fundamental prohibitions of international criminal law. 100 The alleged victims need not be Americans, the misconduct or crime need not have been committed on American soil and the alleged corporate perpetrator (or accomplice) need not have been an American company.
As a result, the ATS became one of the most powerful and successful legal pathways for victims of gross human rights abuses and other war-crimes around the world to pursue justice. Since the mid-1990s, scores of ATS suits have been filed against US and non- US TNCs.101These multi-million-dollar lawsuits revolve around allegations of corporate commission and/or complicity in war crimes and serious human rights violations committed in developing countries. ATS cases have been launched alleging corporate abuses in conflict zones and repressive states such as Colombia, Sudan, Liberia, Cote d’Ivoire, Indonesia and Myanmar.102 With this innovative use, the ATS became the premier legal avenue for holding TNCs legally accountable for violations of international criminal law norms and providing redress to victims from around the world.103
98 Filártiga v Peña-Irala, 630 F2d 876 (2nd Cir, 1980). 99 Kadic v Karadzic, 70 F.3d 232 (2d Cir.1995). 100 Sosa v Alvarez-Machain, 542 US 692, 732 (2004). 101 For descriptions of prominent ATS cases lodged in US Federal Courts, see: National Foreign Trade Council. ‘Alien Tort Statute,’ USA Engage.
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1 Sarei v. Rio Tinto Australian companies have not been immune from ATS litigation. A multi-million- dollar claim for damages was filed against Rio Tinto, the Melbourne-headquartered mining giant, in 2000.104 Sarei v. Rio Tinto remains the largest and most significant legal action of the past two decades against an Australian corporation alleging complicity in war-crimes and gross human rights abuses in a conflict-affected area.
The case revolved around the actions of Rio Tinto – one of the largest publicly listed companies in Australia – on the small Papua New Guinean island of Bougainville, where it operated the world’s largest open-pit copper mine.105 Originally lodged in 2000 on behalf of thousands of Bougainvilleans, the lawsuit sought compensation from the company and its local subsidiary for their complicity in genocide, war crimes and other gross human rights abuses allegedly meted out by the Papua New Guinean police and military during Bougainville’s war for independence during the 1990s.106 Allegations against the company also included adverse health effects and environmental destruction caused by the improper disposal of mining waste and that Rio Tinto engaged in discriminatory employment practices by underpaying local workers and housing them in poor conditions.107 (Incidentally, the islanders suggest that their rebellion began, in part, in response to these alleged corporate practices.108)
Rio Tinto has vigorously defended itself against those charges. In 2011, eleven years after the legal dispute had commenced and ten years after the conflict had effectively ended with the signing of the Bougainville Peace Agreement, 109 Rio Tinto appealed to the US Supreme Court, challenging the ATS’s applicability to events that occurred
Mass Atrocities: Revisiting Transitional Justice’ (2011) 13 International Studies Review 85; Martha Minow, Between Vengeance and Forgiveness (Beacon Press, 1998). 104 Sarei v. Rio Tinto, PLC., 221 F. Supp. 2d 1116 (2002). 105 Ibid. 106 See generally, John Braithwaite and Ray Nickson, ‘Timing Truth, Reconciliation and Justice After War’ (2012) 27 Ohio State Journal of Dispute Resolution 443; Anthony Regan, ‘Autonomy and Conflict Resolution in Bougainville, Papua New Guinea’ in Yash Gai and Sophia Woodman (eds), Practising Self- Government: A Comparative Study of Autonomous Regions (Cambridge University Press, 2013) 412. 107 Sarei v Rio Tinto (2002). 108 Ibid. 109 Bougainville Peace Agreement, Papua New Guinea and Leaders representing the people of Bougainville, signed 30 August 2001, Part B ‘Autonomy’, Part C ‘Agreed Principles on Referendum’.
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2 Kiobel: Curtailing the ATS as a Tool for Corporate Accountability in Conflict-Affected Areas The original claim in Kiobel v. Royal Dutch Petroleum was filed in 2002 by the families of Dr Barinem Kiobel and eleven other Nigerian activists who had been campaigning against the environmental degradation of the Niger Delta allegedly caused by the ongoing operations of global oil giants Royal Dutch Petroleum and Shell Oil, and their local Nigerian subsidiary. The claimants were seeking compensation under the ATS, alleging that the companies had, among other things, aided and abetted the unlawful detention, torture and extrajudicial killing of these activists (in 1995) by the Nigerian military.112
In a 2010 ruling referred to earlier in this chapter, the US Second Circuit Court of Appeals unanimously dismissed the suit, with the majority deciding that the ATS did not apply to corporations.113 While the case was dismissed unanimously, the justices passionately split 2–1 on the question of whether corporations can be held legally liable for international crimes. Both majority and minority opinions relying heavily on the
110 Petition for writ of certiorari filed in Sarei v Rio Tinto on 23 November 2011,
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Kiobel and her fellow plaintiffs appealed to the US Supreme Court, which accepted certiorari to review the question of the ATS’s applicability to corporations and to address the issue of corporate liability under international law.115 Many international legal scholars, not to mention lower court US justices, were eager to have the highest US court issue a final determination on the matter. Indeed, the Kiobel case was one of the most anticipated cases on a crowded Supreme Court docket; its practical consequences would impact billions of dollars of present and future ATS claims against corporations, and would be felt in many a corporate boardroom, and among human rights victims groups and their advocates. Its jurisprudential implications would have been no less noteworthy, with the highest US court, a court held in high regard internationally, weighing in on a vexing issue of international law: whether corporations can be held liable for international crimes.
Nevertheless, the issue (and Nuremberg’s legacy in that regard) was ultimately left unaddressed by the US Supreme Court. 116 In a highly unusual move, after hearing oral arguments and having received dozens of amicus curiae briefs on the issue, the Court requested that additional arguments be presented and ordered new briefs submitted on a separate and distinct legal issue: the extent of the extraterritorial scope of the ATS.117 Re-argument in the case was held and it was on this question of law that the Court ultimately made its 2013 decision.118
114 For example Sarei v. Rio Tinto PLC, 487 F.3d 1193, 1201–02 (9th Cir, 2007); Doe v. Unocal Corp., 395 F.3d 932, 948 (9th Cir, 2002); Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111 (2d Cir, 2010); In re S. African Apartheid Litigation., 346 F. Supp. 2d 538; Presbyterian Church of Sudan v. Talisman Energy, Inc. (Presbyterian Church II), 374 F. Supp. 2d 331, 338 n.11 (S.D.N.Y. 2005); Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111 (2d Cir, 2010). 115 Petition for writ of certiorari, above n110. 116 John Bellinger, ‘Stop Press: Supreme Court Orders Kiobel Reargued to Address Extraterritoriality’, Lawfare (online), March 5 2012
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The nine justices of the US Supreme Court were unanimous in dismissing the case. However, that unanimity belies the divergence in legal reasoning conveyed in four separate decisions.
Chief Justice Roberts wrote the Opinion of the Court and was joined by the other three conservative justices and Justice Kennedy, so often the swing vote on the court. Roberts decided the case on jurisdictional grounds, relying on a 2010 Supreme Court decision dismissing a claim alleging fraud against the National Australia Bank.119 Roberts quoted approvingly from the Morrison v. NAB judgment (authored by Justice Scalia), agreeing that ‘when a statute gives no clear indication of an extraterritorial application, it has none’.120 He concluded that nothing in the text of the ATS or its drafting history, or court precedents rebuts the ‘presumption against extraterritoriality’.121
Two of the justices (Scalia and Thomas) of the majority also penned a concurring judgment that suggested the majority’s formulation was too lax and that any ATS cause of action ‘will fall’ unless the relevant action giving rise to the claim is ‘domestic conduct’, that is ‘within the US’.122
The concurring opinion signed by the four liberal justices (Breyer, Ginsburg, Kagan and Sotomayor JJ) rejected the majority’s far-reaching denial of the ATS’s extraterritorial jurisdictional scope. Instead, these justices narrowly constructed their judgment to address the facts of the case at hand, determining that ‘the parties and relevant conduct lack sufficient ties to the United States for the ATS to provide jurisdiction’.123 Nevertheless, this minority opinion makes clear that similar scenarios and claims brought before US courts could ‘invoke a national interest’, in particular the US’s ‘distinct interest in preventing the US from becoming safe harbour … for a torturer or other common enemy of mankind’ that would satisfy the ATS’s jurisdictional test.124
119 Morrison et al v National Australia Bank Ltd et al 561 US 247 (2010). 120 Kiobel v. Royal Dutch Petroleum, 569 US ___ (2013) slip op 4 (Roberts J). 121 Ibid, slip op 7 (Roberts J). 122 Ibid, 1 (Alito J). 123 Ibid, 2 (Breyer J) 124 Ibid.
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In a further twist, Kennedy J, who provided the crucial fifth vote in support of the Roberts CJ opinion, also issued a separate one-page opinion that reflected his discomfort with expansive interpretations of the majority’s decision. Kennedy J stated that ‘a number of significant questions regarding the reach and interpretation of the [ATS]’ remain unanswered, including its ‘extraterritorial application [which] may require some further elaboration and explanation’ in future cases.125
3 Implications Near and Far Some commentators have described the Supreme Court’s Kiobel decision in fatalistic terms, labelling it, for example, the ‘death knell’ and ‘zombification’ of the ATS.126 Whilst the decision was a significant setback for corporate accountability for violations of international law, news of the ATS’s death has been greatly exaggerated.
What seems clear is that the consequences for TNCs will differ depending on where they call home. By rejecting the extraterritoriality of the ATS, the Kiobel decision has curtailed the extent to which the ATS can be employed to hold foreign TNCs accountable for alleged misconduct in conflict-affected area, but does not foreclose the possibility of future ATS suits against American companies or by American citizens.127
Indeed, in the years since it was handed down, lower courts and legal scholars have continued to parse the Kiobel decision and apply the ruling in different ways,128
125 Ibid, 1 (Kennedy J). 126 Michael Goldhaber, ‘The Global Lawyer: The Zomibifcation of the Corporate Alient Tort’, The Litigation Daily (Washington DC) 21 April 2013; Mia Swart, ‘Alien Tort Ruling is a Snub for Global Justice’, Business Day (Johannesburg) 7 May 2013. 127 Kolieb, ‘Case Note’, above n103. 128 See, eg, Ingrid Wuerth, ‘The Supreme Court and the Alien Tort Statute: Kiobel v Royal Dutch Petroleum Co’ (2013) 107 American Journal of International Law 601; Ralph Steinhardt, ‘Kiobel and the Weakening of Precedent: A Long Walk for a Short Drink’ (2013) 107 American Journal of International Law 841; Vivian Grosswald and David Sloss, ‘Reviving Human Rights Litigation After Kiobel’ (2013) 107 American Journal of International Law 858; Elizabeth Holland, ‘ATS Case Developments Post- Kiobel: Interpreting the ‘Touch and Concern’ Standard’, Corporate Social Responsibility and the Law (by Foley Hoag) September 13 2013.
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Nevertheless, in practical terms the Court’s Kiobel decision means that, as a general rule, foreign victims of human rights abuses cannot invoke the ATS to sue foreign companies for conduct in foreign lands in US courts any longer – so-called “foreign- cubed cases”. Since Kiobel, several long-running ATS cases have also been dismissed. Most prominently, the Supreme Court declined to hear the appeal in Sarei v. Rio Tinto, opting instead to vacate and remand the case to a lower court for reconsideration in light of the Kiobel decision.130 In a succinct two paragraph decision, the Ninth Circuit’s Court of Appeal took note of the Kiobel judgment and promptly dismissed the claim ‘with prejudice’.131 This brought to an end the Bouganvilleans’ thirteen year-long ordeal to see justice done. Arguably, the quick dispatch of Sarei is indicative of what is to come for similar ATS lawsuits alleging human rights abuses committed in foreign lands by foreign companies against foreign victims.
While the fate of so-called “foreign-cubed” cases is now bleak, nevertheless the Kiobel opinions hold out the possibility that the ATS could still be an effective instrument to pursue American companies for gross human rights abuses and war-crimes committed abroad. 132 Kiobel’s majority and minority opinions and, critically, Kennedy J’s concurrence, leave open the possibility that ATS cases that ‘touch and concern the territory of the United States … with sufficient force [may] displace the presumption against extraterritorial application’.133
129 Daimler Chrysler v. Bauman; Ralph Steinhardt, The ATS After Kiobel, AJIL Unbound (ASIL, 2014). See, for example: Daimler AG v. Bauman 571 U.S. 310 (2014); Al Shimari v. CACI (Court of Appeal, 4th Cir, July 2014); In re South African Apartheid Litigation, 15 F. Supp 3d 454 (SDNY 2014); Yousuf v. Samantar, 699 F. 3d 763 (Court of Appeals, 4th Cir, 2012). 130 Writ of certiorari accepted on 22 April 2013 — days after the Kiobel decision handed down. On the same day, the Supreme Court vacated the judgment and remanded the case to lower court for further consideration. ‘US Supreme Court Order List, Monday April 22 2013’
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The justices did not elaborate on what fact pattern may satisfy this standard but, extrapolating from the Kiobel scenario, it is likely that there will be a limited category of cases that satisfy the test.134 Indeed, in an ATS suit seeking damages from several multinational companies for complicity in South Africa’s Apartheid regime, the claims against two foreign companies were dismissed as they did not satisfy the ‘touch and concern’ test.135 However, the claims against two US companies (IBM and Ford) were allowed to stand.136 It is likely that American companies may still fall foul of the ATS, almost certainly for human rights abuses committed on American territory and likely even for conduct beyond its shores.137
Furthermore, Breyer J’s observation that there is a clear US national interest in not providing safe harbour to war criminals seemingly leaves open the possibility for lower courts to find that “foreign-cubed” ATS claims alleging the most heinous of atrocities may well satisfy the ‘touch and concern’ test posited by the Kiobel majority to rebut the presumption of extraterritoriality.138 As foreseen by the justices themselves, further litigation is required to clarify what foreign conduct (and by whom) may trigger application of the ATS.139
Finally, it is worthwhile to reflect on the fact that the Court did not directly answer the question of corporate liability for international crimes – the question for which it originally granted certiorari to ponder. Significantly, even Roberts CJ’s opinion implied, in obiter dicta, that corporations could be liable for violations of the ‘law of
134 See, eg, Meir Feder, ‘Commentary: Why the Court unanimously jettisoned thirty years of lower court precedent (and what that can tell us about how to read Kiobel)’, SCOTUS Blog (19 April 2013). 135 In re South African Apartheid Litigation (Order) 02 MDL 1499 (SAS) (SDNY 26 December 2013). 136 Ibid. Other cases that have been quickly dismissed or curtailed in the wake of the Kiobel ruling by the US Supreme Court include: Al Shimari v CACI 758 F. 3d 516 (2014) (Court of Appeals, 4th circuit) and Balintulo v Daimler AG, 727 F. 3d 174 (2013). However, others continue. In Sexual Minorities of Uganda v Lively 960 F Supp 2d 304 (D Mass 2013), a Federal Court judge declined to dismiss the case, and in Ahmed v Magan, Civil Action No.2:10-cv-00342 (S.D. Ohio 2013) a judge awarded a $15 million judgment in a successful ATS action. See also: Julian Ku and John Yoo, ‘The Supreme Court Unanimously Rejects Universal Jurisdiction’, Forbes (New York) 21 April 2013 137 Donald Childress, ‘The Alien Tort Statute, Federalism and the Next Wave of International Law Litigation’ (2012) 100 Georgetown Law Journal 709; Wuerth, above 127; Kolieb, ‘Case Note’, above 103. 138 Kiobel v Royal Dutch Petroleum, 569 US ___ (2013) (Slip Op) 2 (Breyer J). 139 Ibid.
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4 Searching for “the next ATS” ATS lawsuits arising out of abuses suffered during situations of conflict or widespread violence blazed a new path for corporate accountability for violating international law norms. In the post-Kiobel period, despite the likelihood that the ATS retains some viability, much of its potential for holding Australian TNCs liable for violations of ICL has been severely circumscribed. Nevertheless, the decision in Kiobel is far from the end of the pursuit of legal accountability for Australian corporate misconduct committed in conflict-affected areas around the world. On the contrary, it will shift the focus to alternative bases of claims, and perhaps alternative jurisdictions. As Childress argues, rather than styming human rights litigation, Kiobel may presage ‘a brave new world of transnational human rights litigation’ as victims (and their advocates) seek out similarly innovative avenues to justice, and accountability can be discovered elsewhere.141
Given ineffectual international legal mechanisms and the curtailment of the ATS as a viable mechanism to pursue Australian TNCs, accountability advocates and victims of egregious corporate human rights abuses will look to other countries with the means and willingness to do so. Several countries have seemingly amenable legal systems, for instance providing for universal jurisdiction over international crimes.142 Australia is one such possibility. In fact, Australia’s legal system offers several feasible and attractive pathways for holding TNCs accountable for violations of ICL norms in conflict-affected areas, including civil actions and even criminal prosecutions.
140 Ibid, 14 (Roberts CJ). 141 Donald Childress, ‘Kiobel Commentary: An ATS Answer With Many Questions (And the Possibility of a Brave New World of Transnational Litigation)’, SCOTUS Blog (18 April 2013); David Lornie, ‘Class Action Suit Against Bougainville Copper Dismissed by US Court’, Papua New Guinea Post-Courier (Port Moresby) 1 July 2013. 142 Jonathan Kolieb, ‘Australia: The Great Southern Land of Corporate Accountability?’ (2013) 1 Pandora’s Box Law Journal 61; Amnesty International, Universal Jurisdiction: A Preliminary Survey of Legislation Around the World — 2012 Update (Amnesty International Publications, 2012); International Commission of Jurists, Vol. I, above n35.
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B The Great Southern Land of Corporate Accountability? Pathways of Encouraging Compliance with ICL Norms in Australian Courts
Australian law has an important role in regulating the conduct of Australia-based TNCs, including when doing business in conflict-affected areas. It is contended that Australian courts are a potentially fertile, but largely untested, ground for pursuing corporate accountability litigation, Australian or foreign. Various statutory and common law bases of actions are possible. Rather than presenting an exhaustive review of possibilities under Australian law, this final section of the chapter focuses on some of the more promising avenues for holding corporate actors accountable in Australian courts for serious human rights abuses and other international crimes committed in conflict-affected areas, through three innovative pathways: (1) Australia’s criminal code; (2) corporate governance and consumer protection laws; and, finally, (3) Australian tort laws.
To be sure, there are other Australian laws applicable to Australian TNCs doing business in conflict-affected areas and directed towards the goal of peacebuilding. Of particular note are Australia’s sanctions regimes, which implement UN-derived and autonomous sanctions.143 Such laws prohibit Australian governments and private entities from engaging in business activities with proscribed foreign entities, be they governments, militaries, individuals or corporations.144 Corporations, as well as corporate directors and employees, face large fines and imprisonment for breaching of sanctions.145 Currently, Australian sanctions are in place against governments and individuals in such countries as Sudan, Cote D’Ivoire and the Democratic Republic of Congo – all countries directly impacted by armed conflicts.146
Nevertheless, while the peacebuilding and conflict-mitigating potential of well- calibrated sanctions is accepted, Australia’s sanctions regimes do not purport to directly regulate ICL standards. So the analysis here confines itself to those innovative legal
143 Charter of the United Nations Act 1945 (Cth); Charter of the United Nations (UN Sanction Enforcement Law) Declaration 2008 (Cth); Autonomous Sanctions Act of 2011 (Cth). 144 Department of Foreign Affairs and Trade, ‘Sanctions’,
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1 The Extraterritorial Reach of Australian Law Before detailing those specific legal options, there is one further preliminary issue that should be dispensed with. That is whether, as a matter of constitutional law, Australian laws can have extraterritorial reach. On this question, there is a century of legal precedents establishing that section 51 of the Constitution of Australia permits the Parliament to craft laws that regulate activities beyond Australia’s shores provided they have ‘sufficient nexus with trade and commerce between Australia and other countries’.147 In one of the most recent examples, XYZ v. Commonwealth (2006), the extraterritorial validity of Australia’s anti-child-sex crime provisions was unsuccessfully challenged.148 The High Court upheld precedents such as the Polyukovich war-crimes case and unequivocally concluded that sex-crimes provisions of the Criminal Code were valid law under the “external affairs power” found in s51 of the Constitution, and the case was a legitimate exercise of ‘the full powers associated with sovereignty’.149
2 International crimes are Australian crimes Most relevant to the regulation of conflict-driving corporate behaviour through Australian courts are the “international crimes” provisions that were incorporated into the Criminal Code Act 1995 (Cth) in 2002 in fulfilment of our obligations as a signatory to the Rome Statute of the International Criminal Court.150 Whether by deliberate act or accident, what is significant for our purposes, as Joanna Kyriakakis has pointed out, is that unlike the ICC which has its jurisdiction confined to natural persons,151 by incorporating the Rome Statute’s international crimes into domestic Australian law through an amendment to the Australian Criminal Code – which enjoys jurisdiction over natural and legal persons – it also enables the prosecution of corporations for the
147 Justin Gleeson, ‘Extraterritorial Application of Australian Statutes Proscribing Misleading Conduct’ (2005) 79 Australian Law Journal 296, 296. 148 XYZ v. Commonwealth (2006) 80 ALJR 1036. 149 Polyukovich v Commonwealth (1991) 172 CLR 501, per Gleeson CJ [19]. 150 International Criminal Code (Consequential Amendments) Act 2002 (Cth). 151 Joanna Kyriakakis, ‘Australian Prosecution of Corporations for International Crimes: The Potential of the Commonwealth Criminal Code’ (2007) 5 Journal of International Criminal Justice 809.
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Moreover, the presumption against extraterritoriality that the US Supreme Court has employed to gut the ATS of much of its force is turned on its head in the Australian criminal context. That is, the anti-corruption and international crimes provisions of the Criminal Code are explicitly extraterritorial in nature.155 The intent behind their incorporation was precisely to proscribe certain conduct wherever it may occur around the globe, in Australia or elsewhere, unbounded by Australian territorial jurisdiction. Although there are questions of whether Australian courts could and would choose to exercise universal jurisdiction, existing case law, including the war-crimes case of Polyukovich v. Commonwealth (1991), suggests there is strong likelihood that Australian courts would be willing to entertain the prosecution of grave international crimes, even if they were committed abroad.156
Potential punishment could include hefty fines and imprisonment of individual executives. 157 Furthermore, in Australian criminal proceedings the trial judge has discretion to compel a guilty corporate party to make reparations to its victims as compensation for loss incurred.158 Indeed, one of the advantages of criminal, as opposed to civil, prosecution is the broader range of possible sanctions.159
152 Ibid. 153 Criminal Code Act 1995 (Cth), part 2.5, s12.1 states: (1) This Code applies to bodies corporate in the same way as it applies to individuals. It so applies with such modifications as are set out in this Part, and with such other modifications as are made necessary by the fact that criminal liability is being imposed on bodies corporate rather than individuals. (2) A body corporate may be found guilty of any offence, including one punishable by imprisonment. 154 Kyriakakis, above n151. 155 Criminal Code Act 1995 (Cth), s70.5 and 268.117, respectively. 156 Polyukovich v. Commonwealth (1991) 172 CLR 501. For further analysis see, eg, Gillian Triggs, ‘Implementation of the Rome Statute for the International Criminal Court: A Quiet Revolution in Australian Law’ (2003) 25 Sydney Law Review 507; Jonathan Clough, ‘Not So Innocents Abroad: Corporate Criminal Liability for Human Rights Abuses’ (2005) 11 Australian Journal of Human Rights 1. 157 See, eg, Criminal Code Act 1995 (Cth), s268.4, 268.9, 268.24. 158 Crimes Act 1914 (Cth), s21B. 159 Clough, above n156.
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(a) Precedents Exist Overseas, the most prominent case of a businessman being prosecuted for complicity in war crimes, under similar legislation to Australia’s Division 268 provisions, occurred in The Netherlands. Frans van Anraat was accused of supplying the precursors for chemical weapons to Saddam Hussein throughout the 1980s despite knowing their intended use. He was found guilty by the District Court at The Hague in 2005 of complicity in war-crimes committed by Saddam Hussein’s regime in Iraq.160 He has fought his conviction through the Dutch courts and the European Court of Human Rights to no avail and is currently serving a 17-year prison term.161 The District Court’s judgment found that: It had been established that the accused consciously and solely acting in pursuit of gain, has made an essential contribution to the chemical warfare program of Iraq during the nineteen eighties. His contribution has enabled, or at least facilitated, a great number of attacks with mustard gas on defenseless civilians. These attacks represent very serious war crimes.162
Notably, van Anraat was acquitted on a charge of complicity in genocide.
To date in Australia, no criminal prosecution of Division 268 crimes has been attempted, be it against a corporate defendant or otherwise. However, one case was lodged under the Division 268 international crimes provisions, against the Sri Lankan President Mahinda Rajapaksa in 2011. It never proceeded to trial. This episode serves as a salutary example of the obstacles, over and above the standard procedural and evidentiary requirements, that need to be overcome before any successful prosecution under Division 268 could be made.
In the Rajapaksa case, a Sri Lankan-born, naturalised Australian filed an indictment in the Melbourne Magistrates Court alleging crimes against humanity were committed by Sri Lankan President Mahinda Rajapaksa during that country’s victorious 2009 military campaign over the Tamil Tigers. Just days later, the Attorney-General Robert
160 Van Anraat v. The Netherlands (2005) Judgement LJN: AX6406, Rechtbank’s-Gravenhage, 09/751003-04, English Translation,
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McClelland declined to approve the prosecution, thereby ending it before it had even begun.163
According to the statute, the Attorney-General must approve any prosecution of international crimes, otherwise it fails to go forward.164 They need not publicly cite any reasons for disapproving such a case, as there are no public criteria by which the decision choice is to be made.165 It seems reasonable to surmise from the Rajapaksa case that the Attorney-General is aware of the diplomatic and legal implications of opening Australia’s courts to war crimes claims against foreign heads of state. No doubt a similar calculus may factor against approving any such claims against TNCs, with the added factor of economic and trade ramifications to Australia’s economy of any such prosecution to consider as well.
Nevertheless, gaining the Attorney-General’s approval is not inconceivable for the pursuit of corporate accountability claims arising from egregious conduct in a war- ravaged region. In the age of social media and a 24/7 news cycle, media and political pressure on the Attorney-General to allow a prosecution would be immense if there was damning public evidence that an Australian corporation had been directly involved or even complicit in war-crimes while doing business abroad. This, too, highlights the role of NGOs and civil society activism in this aspect of the regulatory landscape. Non- governmental actors would be critical in publicising the atrocities committed and the need for accountability, and applying the political pressure needed to garner the approval of the Australian government for such a prosecution. In this instance, the NGOs would be not pushing for the creation of behavioural norms, but rather for enforcement of and compliance with fundamental, universally-accepted norms already enacted into Australian law.
163 For background on the Rajapaksa case, see, eg, Steve Butcher, ‘War Crimes Charges Struck Out’, The Age (Melbourne), November 25 2011, 9; Monique Cormier and Anna Hood, ‘Prosecuting International Crimes in Australia: The Case of the Sri Lankan President’ (2012) 13 Melbourne Journal of International Law 235 164 Criminal Code Act 1995 (Cth), s268.121. 165 Criminal Code Act 1995 (Cth), s268.122. See also Cormier and Hood, above n162.
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3 Other Statutory Possibilities: The Corporations Act and the Competition and Consumer Act as Accountability Tools The Corporations Act 2001 (Cth) and the Competition and Consumer Act 2005 (Cth) are also worth considering in the context of corporate accountability, as their provisions provide several behavioural standards that apply to all companies doing business in Australia (discussed in the previous chapter) and, importantly, include punitive measures that could be pursued against companies that breach those standards. These two pieces of legislation may provide the bases of court actions against corporate actors that breach norms of behaviour enshrined in ICL, initiated by Australian government agencies or private actors. For example, the Corporations Act’s directors’ duties to act in good faith and in the best interests of the company could conceivably be breached if directors engaged or aided in serious human rights abuses in regions of the world where they do business. 166
Section 2 of the Competition and Consumer Act 2010 (Cth) (the “CCA”) states the object of the act is ‘to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection.’167 According to the Australian Competition and Consumer Commission, the government agency that oversees implementation of the CCA, its objectives include ‘to prevent corporations and businesses from behaving anti-competitively or unconscionably, contravening an industry code of practice or treating consumers unfairly or deceptively’.168 Chapter 2 of the Australian Consumer Law (Schedule 2 of the CCA) includes a general ban on misleading, deceptive or unconscionable conduct (s18 and s20, 21 respectively).169
166 Corporations Act 2001 (Cth), s179-190B; Walker v Wimborne (1976) 137 CLR 1. For an elaboration of Australian companies’ directors’ duties see: Australian Securities and Investment Commission, ‘What are my duties as a director?’,
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These are the most widely used provisions in the CCA and the Attorney-General has described these provisions as creating ‘norms of business conduct’.170
Moreover, the CCA makes available extensive remedies, including damages, injunctions and compensatory orders. Under s236, the CCA provides that a person/entity that suffers loss or damage due to a contravention of the Act may recover the amount of the loss or damage ‘against that person … or against any person involved in the contravention (italics added)’.171 Thus, a company that has aided, abetted or in any way been involved in the contravention may be held liable. The CCA outlines civil and criminal penalties for corporations, and corporate employees and executives, for a range of corporate misconduct.
Whilst it has yet to be employed for this purpose, it is conceivable that the CCA could be employed to hold corporations and directors accountable for misconduct in conflict- affected areas. The CCA could be invoked to bring claims against corporations that undertake unconscionable conduct in conflict-affected areas or misrepresent their activities in such regions to Australian consumers.172 Consider, for example, the scenario of a hypothetical Australian mining company that has mining operations in a country ravaged by decades of armed conflict. In an effort to safeguard its operations, the corporation provides financial and logistical assistance to an armed group/government forces that engage in foreseeable war-crimes. It is plausible that a legal argument could be developed that any alleged complicity in war-crimes or egregious human rights violations in that foreign country on the part of the corporation or its subsidiaries might amount to ‘unconscionable conduct’ under the definition of the Act (and related case law), and public denials of such complicity might amount to ‘misleading or deceptive conduct’ under the definition of the Act (and related case law) – both leading to prosecution in Australian courts. Given the chequered history of several Australian corporations operating abroad (as illustrated earlier), this hypothetical scenario is not beyond the realm of possibility.
170 Attorney-General’s Department (Commonwealth of Australia), The Australian Consumer Law: A Guide to Provisions (November 2010)
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None other than the Commonwealth Solicitor-General Justin Gleeson wrote in 2005 that these CCA provisions could be employed to regulate foreign activities of Australian corporations.173 Sections 5 and 6 of the CCA, enacted in 2011, explicitly extend the application of much of the CCA (including the bans on unconscionable and misleading and deceptive conduct) to ‘conduct outside Australia’.174 That is, the CCA has ‘significant extraterritorial reach.’175 Companies incorporated in Australia or foreign companies carrying on business in Australia are subject to the Australian Consumer Law within and outside Australia.176
However, there is a political impediment to overcome; s5 of the CCA states that if a claim for damages is to be brought against a corporation for a breach of the CCA arising from conduct that occurs outside Australia, ministerial consent must be granted.177 This was inserted ‘to ensure that international relations are not adversely affected by litigation in Australian courts’.178 Unlike the Criminal Code’s ministerial-oversight provision for prosecution of international crimes, the CCA states that the minister must publish their reasoning and a refusal to give consent can only be on grounds that the ‘law of the country in which the conduct concerned was engaged in required ... or authorised ... the conduct’ and that the litigation is not in ‘national interest’.179 It is useful to note that ministerial consent has been granted in a private claim for damages under the CCA relying on conduct outside of Australia against a foreign corporation.180 Moreover, a bill drafted by the government is currently tabled before Parliament would repeal sections 5(3) – (5) of the CCA, thereby removing the requirement for Ministerial consent before launching private actions based on conduct outside Australia. This was one of the recommendations of the Competition Policy Review (“the Harper Review”)
173 Ibid. 174 Competition and Consumer Act (2010) (Cth), s5-6. 175 Donald Charrett, ‘Australian Consumer Protection Law – A Potent Weapon in Construction Disputes’ (2011) 6(3) Construction Law Journal 23, 23. 176 Norcast S.ár.L v Bradken Limited (No 2) [2013] FCA 235; Adams v Cape Industries Plc [1990] Ch 433, 530; Bray v Hoffman-La Roche Ltd (2002) 118 FCR 1, [60]-[63]. 177 Competition and Consumer Act 2010 (Cth), s5(3)-(4). 178 Treasury Department (Commonwealth of Australia), ‘Guidance on obtaining Ministerial Consent to Rely on Extraterritorial Conduct in Private Proceedings’, (Guidance Note) < http://www.treasury.gov.au/Access-to-Information/InformationPublicationScheme/Guidance-on- obtaining-Ministerial-consent-to-rely-on-extraterritorial-conduct-in-private-proceedings>. 179 Competition and Consumer Act 2010 (Cth), s5(5) 180 Norcast S.ár.L v Bradken Limited (No 2) [2013] FCA 235.
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Corporate Peacebuilding and the Law launched in 2014 and completed in 2015,181 and enjoys bipartisan support having been approved without objection by the Senate Economics Legislation Committee in 2015.182 At the time of writing, the Bill had not yet been voted on, but given the bipartisan support for the measure, it is likely to be in the near future.
Regardless, there is substantial case law to suggest that, even though the underlying conduct may be based on actions – even criminal conduct – committed in a foreign country, the specific misleading, deceptive or unconscionable conduct that breaches the CCA may be deemed to have been committed in Australia through action/inaction or communication and representations made by the company to Australian consumers or businesses. For instance, in a recent Federal Court Case, while a business’s operations were predominantly offshore and its website was produced and maintained overseas, it was found that the company was still liable for misleading and deceptive conduct based on communications made from that website to Australian consumers.183
Similar consumer protection-style legislative provisions have been deployed in strategic litigation against TNCs in foreign courts to hold them accountable for human rights abuses committed in developing countries. For example, Nike was not only the target of a fierce civil society campaign for the labour practices it tacitly condoned in Chinese and other foreign factories manufacturing its sports shoes, it was also a target of litigation. In Kasky v. Nike Inc., a consumer activist named Marc Kasky launched litigation against Nike in 1998 in the Californian Superior Court for misrepresentation, false statements and material omission in its publicly released company statements and reports regarding working conditions in its global supply chain.184 The basis of the claim was a Californian statute prohibiting false advertising and unfair competition.185 The case was eventually settled out of court in 2003, but not before the Supreme Court of California had established the precedent that such litigation against companies based
181 Ian Harper, Peter Anderson, Su McCluskey, Michael O’Bryan ‘Competition Policy Review Final Report’ (Commonwealth of Australia, March 2015) 112. 182 Senate Economics Legislation Committee (Commonwealth of Australia), Competition and Consumer Amendment (Deregulatory and Other Measures) Bill 2015, (Parliamentary Report, May 2015) 18. 183 Australian Competition and Consumer Commission v Valve Corporation (No 3) [2016] FCA 196; Bray v Hoffman-La Roche [2002] FCA 243; Brosnan v Katke [2015] FCA 203. 184 Kasky v. Nike, 45 P. 3d 243 (2002). 185 Unfair Competition Law, California Business and Professional Code §17200 (1977); False Advertising Law, § 17500 et seq. (2002).
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Chapter 6: Going Above and Beyond on their own misleading public statements is viable as a matter of Californian law. Kasky reportedly agreed to a $1.5 million settlement after he was satisfied that Nike had made substantial improvements in the working conditions of its foreign labourers.186
4 Australian Tort Law Civil litigation in domestic courts is a powerful instrument to hold companies to account for gross abuses, including in conflict-zones. Specifically, the law of torts holds out the heretofore underexplored possibility of holding corporate actors accountable for their misconduct in conflict-affected areas.187 As the International Council of Jurists’ Expert Panel on Corporate Complicity remarked: ‘Conduct at the heart of gross human rights abuses will often also contravene the domestic law of tort.’188 This international expert panel went on to observe that the law of torts is one of ‘the richest avenues towards ensuring the legal accountability of companies when they are complicit in gross human rights abuses’.189
For whatever reason, perhaps Australia’s non-litigious legal culture, civil claims have been little utilised in the Australian context in attempts to hold Australian TNCs accountable for their actions abroad.190 Nevertheless, Australia has not seen a wave of activist litigation akin to the dozens of multi-million dollar Alien Tort Statute lawsuits lodged against TNCs in US courts. Australia’s common law may offer promising avenues for victims of serious corporate human rights abuses to seek monetary compensation. While Australia does not have a statute equivalent to the ATS, ordinary tort law may suffice.191 The advantages of civil law claims, in which the victims of the alleged abuses, not government authorities such as the Attorney-General, maintain control over the litigation process, is worthy of exploration in the effort to achieve judicial punishment for Australian corporate abuses committed in conflict-affected areas.
186 Lisa Girion, ‘Nike Settles Lawsuit Over Labor Claims,’ Los Angeles Times, September 13 2003. 187 See, eg, Mongelard, above n26, 666. 188 International Commission of Jurists, Vol. I, above n35, 6. 189 Ibid, 5. 190 Kolieb, ‘Great Southern Land’, above n142. 191 Ibid.
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Under the law of torts, aggrieved parties – be they individuals, groups or even corporations – may seek damages (i.e. monetary compensation) for misconduct, negligence or other ‘socially unreasonable’ conduct which has caused harm or loss.192 William Prosser, the American doyen of the law of torts stated that: The law of torts is concerned with the compensation of losses suffered by private individuals in their legally protected interest, through conduct of others which is regarded as socially unreasonable.193
(a) Established Torts Joseph and other scholars have argued that greater use of ‘ordinary tort law’ could be an effective means of securing corporate accountability for human rights abuses.194 Well- established torts such as negligence, trespass of person or land, and wrongful death could potentially be employed to hold TNCs to account for human rights abuses committed abroad,195 and have been invoked in the past for incidents of corporate human rights abuses.196 For example, victims could employ the tort of trespass of person for allegations of torture, the tort of battery for physical harm and the tort of wrongful death for extrajudicial killing.197 Cases such as Sithole v Thor Chemicals and Lubbe v Cape Plc – two UK cases – demonstrate how human rights victims can deploy negligence claims as a basis for seeking accountability from foreign TNCs.198
The drawback to this approach would be the apparent trivialising of the gravity of the crimes in question, with flow-on effects as to whether justice can be considered to be
192 William Prosser, Handbook of the Law of Torts (West Publishing, 2nd ed, 1955) 1. Cited with approval by Harold Luntz, David Hambly, Kylie Burns, Joachim Dietrich and Neil Foster, Torts: Cases and Commentary, (LexisNexis Butterworths, 6th ed, 2008) 76. 193 Ibid. 194 Sarah Joseph, above n72, 19. See also: Earthrights International, Out of Bounds (2013); Richard Meeran, ‘Tort Litigation against Multinational Corporations for Violations of Human Rights: An Overview of the Position Outside the United States’ (2011) 3 City University of Hong Kong Law Review 1, 3; Cees van Dam, ‘Tort Law and Human Rights: Brothers in Arms: On the Role of Tort Law in the Area of Business and Human Rights’ (2011) 3 Journal of European Tort Law 221. 195 Jane Stapleton, ‘Civil Prosecutions – Part 2: Civil Claims for Killing or Rape’ (2000) 8 Torts Law Journal 1. 196 See, eg, In Re: Union Carbide Corporation Gas Plant Disaster at Bhopal, India in December 1984, 634 F. Supp. 842 (1986); 197 See, eg, Craig Scott (ed.), Torture as Tort (Hart, 2001); Mongelard, above n26, 678. These torts have been successfully invoked by victims of human rights abuses in other jurisdictions. 198 Sithole v Thor Chemicals Holdings & Desmond Cowley (2000) WL 1421183; Lubbe v Cape Plc, 7 [1998] CLC 1559 (CA); [2000] 1 WLR 1545 (HL). 238
Chapter 6: Going Above and Beyond achieved.199 To suggest that torture is merely trespass of person may permit the successful collection of compensation on the part of the victim, but would obfuscate the profound criminality of the torturous acts of the defendant/s.
(b) A Tort for “Violations of the Law of Nations”? Australian courts may also consider recognising a separate and distinct common law cause of action to sue for grave human rights abuses. There is nothing in legal theory to prevent the development of new torts. This is dependent on judges’ willingness to recognise new causes of action based on evolving societal notions of individual rights and duties. On the contrary, the law of torts is marked by continual evolution. As Prosser notes: New and nameless torts are being recognised constantly, and the progress of the common law is marked by many cases of first impression, in which the court has struck out boldly to create a new cause of action, where none has existed before … [T]he law of torts is anything but static, and the limits of its development are never set. When it becomes clear that the plaintiff’s interests are entitled to legal protection against the conduct of the defendant, the mere fact that the claim is novel will not of itself operate as a bar to the remedy.200
Prohibitions on genocide, war-crimes and crimes against humanity constitute jus cogens – inviolable, non-derogable principles of international law. Beyond their criminalisation, it is reasonable to suggest that the most egregious crimes known to humankind should appropriately be considered the basis for tort claims as well, allowing victims to sue for compensation for any harm caused.201 Such a tort, it could reasonably be argued, should have universal applicability – regardless of the actor being a sovereign, an individual or a corporate entity. That is the resultant effect of their incorporation into Australia’s Criminal Code.
Indeed, the Kiobel decision may have curtailed its extraterritorial scope, but the US’s ATS remains a statutory recognition of a cause of action for violations against the law of
199 Scott, ibid; Francois Larocque, ‘The Tort of Torture’ (2009) 17 Tort Law Review 158. 200 Prosser, above n192. As quoted by Edward Hyland, ‘International Human Rights Law and the Tort of Torture: What Possibility for Canada?’ in Craig Scott (ed), Torture as Tort: Comparative Perspectives on the Development of Transnational Human Rights Litigation (Hart, 2001) 401, 411. 201 See, eg, Mongelard, above n26, 687.
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Corporate Peacebuilding and the Law nations.202 In Sosa, the US Supreme Court concluded the ‘the door is still ajar for new causes of actions under the law of nations,’ that such a claim should ‘rest on a norm of international character accepted by the civilized world,’ and such norms should be ‘specific, universal and obligatory’.203 Proposals for establishing new torts based on international crimes have been widely proposed by international legal scholars.204 It is not unreasonable to suggest that Australian courts may be willing to recognise a “tort of violations against the law of nations”, or something of that ilk, as a legitimate cause of action.
(c) Reviving the Tort of Breach of Statutory Duty for Corporate Malfeasance Furthermore, the 2002 incorporation of the Rome Statute’s international crimes into the Australian Criminal Code gives rise to the possibility of criminal prosecution of corporations for international crimes, as discussed above, but also expands the risk of civil claims for damages being pursued against them.205 The little-used, yet centuries- old, tort of breach of statutory duty (BSD) may also present a basis in civil law to hold corporate actors to account for any harmful misconduct in conflict-affected areas and beyond, for that matter.206
A tort may also arise from conduct that amounts to criminal conduct. A statutory provision that prescribes penal penalties (such as fines and imprisonment) for its breach does not preclude the possibility of a civil cause of action under the tort of BSD.207 Jane Stapleton observes the ‘recent emergence’ of a trend for defendants pursuing civil law claims damages from alleged perpetrators of violent killing and rape. 208 The same may be possible in the case of international crimes.209 Other countries have sought to
202 Sosa v Alvarez-Machain, 542 US 692, 732 (2004). 203 Ibid. 204 See, eg, Larocque, above n199. 205 Jan Wouters and Lee Chanet, ‘Corporate Human Rights Responsibility: A European Perspective’ (2008) 6 Northwestern Journal of International Human Rights 262. 206 See, eg, Waugh v Kippen (1986) 160 CLR 156. An Australian High Court case that stands for this principle that the tort of BSD may apply even when criminal sanctions are incorporated into the statute in question. Bernadette Richards, Melissa DeZwart and Karinne Ludlow, Tort Law Principles (Lawbook Co., 2013) 494. 207 Luntz et al, above n192, 558. 208 Stapleton, above n195. 209 Ibid.
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Chapter 6: Going Above and Beyond sharply curtail or even abolish the tort of BSD, but it remains an established cause of action in Australian courts.210
Historically, tort litigation was deferred until any criminal prosecution had concluded; however, Australian case law has rendered this rule ‘obsolete’ in Australian courts, although judges may exercise some discretion in this regard.211 Considering the impediments to criminal prosecution of corporations under Division 268’s international crimes, chiefly the formal authorisation of the Australian Attorney-General, the potential of civil law to achieve accountability in instances of corporate abuses abroad is worthy of exploration.
Until the 19th century, the presumption was that common law permitted a person harmed by a breach of statutory duty to bring an action for damages. However, due to the proliferation of regulatory statues in the 19th and 20th centuries, this doctrine necessarily became highly qualified to prevent the oft-referred “flood-gates” of litigation from opening.212 Under current Australian law, a defendant must prove that they had a ‘right to the performance by the defendant of the statutory duty, but also that the legislation evinced an intention that an action for damages would lie for its breach’.213 Sometimes, such as in the case of several occupational health and safety legislations, the intention not to allow civil claims based on breaches of statutory provisions is made explicit; however, more often than not ‘the statutes say nothing about civil remedies for breaches of their provisions. The judgments of the courts say all’.214 Invariably, BSD claims, therefore, turn on a question of statutory interpretation at the hands of judges; can the judge discern Parliament’s intention to create or disallow civil causes of action based on a breach of a statutory duty? Needless to say, this judicial undertaking has its critics – suggesting it is nothing more than ‘an exercise of judicial choice’ masquerading as statutory interpretation.215
210 Canada abolished the BSD tort: Saskatchewann Wheat Pool [1983] 1 SCR 205. UK: English Law Commission recommended abolishing or sharply constraining the tort of BSD. English Law Commission, ‘Administrative Redress: Public Bodies and the Citizen’ (Consultation Paper 187, 2008). 211 Luntz et al, above n192, 77; Halabi v Westpac Banking Corporation (1989) 17 NSWLR 26. 212 Luntz et al, above n192, 541. 213 Ibid. 214 Lord Diplock, Boyle v Kodak Ltd [1969] 2 All ER 439, 446. 215 Luntz et al, above n192, 542; Sovar v. Henry Lane Pty Ltd (1967) 116 CLR 397.
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The case law in the tort of BSD is dominated by industrial liability cases, with employees claiming damages against their employers for accidents in the workplace.216 In this set of cases, courts have been willing to recognise the validity of such claims. Overseas, the BSD tort has come under sustained criticism. For example, the Canadian Supreme Court ruled in 1983 that the tort of BSD does not exist under Canadian law,217 and a 2008 English Law Commission policy paper recommended its abolition or severe contraction vis-a-vis actions against public agencies.218 The BSD tort also has its supporters and it remains an established cause of action in Australian courts.219
According to the leading text on tort law in Australia, to establish a cause of action under this tort of BSD, the aggrieved person must establish, before a court of law, that: The right to the performance of the statutory duty in question is enforceable by an action in tort; The duty is imposed on the defendant; The plaintiff is a person protected by the statutory duty; The harm suffered by the plaintiff is within the class of risks at which the legislation is directed; The defendant was in breach of the duty; and The breach caused the harm for which the plaintiff seeks damages.220
The success or failure of any such BSD claims based on Division 268 crimes will be intimately linked to the established or proveable facts of each individual claim. This evidentiary burden is a significant hurdle, as the collection of eyewitness testimony and other evidence from conflict-affected areas may be dangerous or even impossible.
Beyond satisfying the evidentiary burden, the success of BSD tortious claims turns on a question of statutory interpretation; can the trial judge discern Parliament’s intention to
216 Richards et al, above n206, 495; Luntz et al, above n191, 543. 217 The Queen v Saskatchewan Wheat Pool [1983] 1 SCR 205 (Sup Ct, Canada). 218 English Law Commission, above n210. 219 The BSD tort ‘operate[s] as an important part of the mechanism of private law for vindicating rights created by the shapers of public values, the legislature.’ Neil Foster, ‘Private Law and Public Goals: The Continuing Importance of the Action for Breach of Statutory Duty’ Obligations IV Conference (Singapore, 2008). 220 Richards et al, above n206, 496.
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(d) The Right to Reparations: Fundamental Concept in International Criminal Justice A preliminary hurdle which must be cleared for the success of a BSD claim based on a Division 268 crime is whether the Parliament intended to make available a civil cause of action with the Division’s enactment. While this must ultimately be tested in the courts, there are indications that suggest a court may find in the affirmative.
Division 268 enshrines in Australian law prohibited conduct amounting to the most egregious crimes known to human civilisation – those encompassed by ICL. On this point there is near-universal agreement, despite less than universal agreement on the appropriate forum to prosecute such crimes.223 Division 268 was enacted to give effect to Australia’s obligations under the Rome Statute of the ICC. A fundamental principle of that treaty is the right to reparations (i.e. compensation) for victims of the crimes it enumerates. Article 75(1) of the Rome Statute states: The Court shall establish principles relating to reparations to, or in respect of, victims, including restitution, compensation and rehabilitation. On this basis, in its decision the Court may, either upon request or on its own motion in exceptional circumstances, determine the scope and extent of any damage, loss and injury to, or in respect of, victims and will state the principles on which it is acting.
The right to reparation has been a feature of the international legal scene for decades. The Rome Statute, as noted earlier, does not make new substantive law, but instead enshrines in treaty form pre-existing international law. Indeed, since the inception of modern laws of war with The Hague Conventions of 1899 and 1907, there has existed
221 Sovar v Henry Lane Pty Ltd (1967) 116 CLR 397. 222 See, eg, Jean-Marie Henckaerts and Louise Doswald-Beck, Customary International Humanitarian Law: Volume 1: Rules (Cambridge University Press, 2005). 223 Rome Statute, preamble: ‘the most serious crimes of concern to the international community’.
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Provision of reparations to victims by states breaching international humanitarian law is considered by the ICRC and many other international legal observers a well-established principle of customary international law.226 Moreover, individuals may be personally responsible for providing reparations to victims of international crimes they have committed.227 Under Article 75(2) of the Rome Statute, the court is empowered to ‘make an order directly against a convicted person specifying appropriate reparations to, or in respect of, victims, including restitution, compensation and rehabilitation’.228
Australian state practice also supports the principle of reparation for international crimes, as it reflects the practice in domestic jurisdictions to allow for the compensation of victims of crime by both state agencies and perpetrators.229 Moreover, arguably, when the Australian Parliament – with an overwhelming bi-partisan majority – approved the incorporation of Division 268 – it voiced its active support for the principles of international justice enshrined in the Rome Statute’s text. That is, not only the crimes were imported with that act, but also the principles of the body of law in which they are found, including the principle of reparation to victims. Evidence in support of this contention can be found in the speeches offered by leaders from all sides
224 Hague Convention (IV) respecting the Laws and Customs of War on Land, opened for signature 18 October 1907 (entered into force 26 January 1910), art3, annex (‘Regulations respecting the Laws and Customs of War on Land’); Second Protocol to the Hague Convention for the Protection of Cultural Property (1907), art38; Draft Articles on State Responsibility for Internationally Wrongful Acts, with commentaries in International Law Commission, Report of the International Law Commission on the Work of Its Fifty-Third Session, UN GAOR, 56th sess, Supp No 10, UN Doc A/56/10 (2001), art35, 37. 225 Factory at Chorzo (Germany v Poland) (Merits) [1928] PCIJ (Ser A) No.17 . 226 Henckaerts and Doswald-Beck, above n222, 537(rule 150). 227 Ibid, 551 (rule 151). 228 Rome Statute, art 75(2). 229 See, eg, Victims of Crime Assistance Act 1996 (Vic); Australian endorsement of ‘Basic Principles and Guidelines on the Right to a Remedy and Reparation for Victims of Gross Violations of International Human Rights Law and Serious Violations of International Humanitarian Law’, UN General Assembly Resolution 60/147, UN Doc A/Res/60/147 (adopted 16 December 2005).
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Chapter 6: Going Above and Beyond of Australian politics in the Federal Parliament during enactment of this legislation, as well as Australia’s longstanding support for payment of reparations for international crimes, including post–World War II reparations to Holocaust victims from the German state and complicit German corporations.230
Australia is largely virgin ground for these types of large-scale tort-based compensation claims against major multinationals. Indeed, the sole prominent Australian case against a corporate defendant whose fact-pattern reflects a stereotypical ATS claim is a $4 billion civil lawsuit launched against BHP Billiton in the mid-1990s.231 It alleged environmental destruction and human rights abuses committed in the course of operating the Ok Tedi open-pit copper and gold mine in the Fly River region of Papua New Guinea.232 After two years of litigation, BHP settled out of court, agreeing to a reported $500 million settlement deal, including $110 million in compensation to local landholders.233 Illustrative of the approach of Australian courts, the jurisdictional question of forum non conveniens was not even raised in the Ok Tedi litigation against BHP.234
Formally, the out-of-court settlement prevented any meaningful legal precedent from being established. Nevertheless, insofar as victims of corporate misconduct were recompensed, it should be considered a successful civil action brought against an Australian TNC. There seem few judicial impediments for more of the same.
230 Joint Standing Committee on Treat (Commonwealth of Australia), The Statute of the International Criminal Court, (Report 45, May 2002); Second Reading Speeches, International Criminal Court (Consequential Amendments) Bill 2002 (Cth).
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(e) Overcoming Procedural and Doctrinal Hurdles The potential application of the tort of BSD in conjunction with the recently enacted Division 268 crimes or recognition of a general tort of “violations of law of nations” overcomes many of the procedural and doctrinal hurdles that make difficult criminal prosecution under the same provision, or civil prosecution under the tort of negligence.
Moreover, if a BSD tort based on the international crimes provisions of the Criminal Code or a general tort of “violations of law of nations” was recognised by Australian courts, this would offer some advantages over criminal prosecution. A strong presumption could be made that both causes of action (and perhaps even more generic negligence claims) would encompass extraterritorial behaviour, and neither category of actions would require Attorney-General or ministerial consent before a claim was launched, with the victims managing the litigation process (unlike a criminal prosecution under Australia’s international crimes provisions or a civil claim arising from the CCA).
Reflective of well-established principles of Australian law and employing the same reasoning as in Kiobel, a strong presumption could be made that an Australian tort claim (especially a violations of law of nations tort) would have extraterritorial applicability if a sufficient nexus existed between Australia, the parties and the alleged conduct.235
Similarly, if a statutory duty based on the Division 268 crimes could be established, it would overcome the extraterritoriality defence that might otherwise be available to a corporate defendant. A principle of Australian law is that laws are assumed to be restricted to the jurisdiction of the Australian legal system – namely, the territory of Australia.236 A corporation could conceivably argue that its actions abroad are not subject to Australian laws. However, because Division 268 gives rise to duties that are explicitly extraterritorial in nature, any tort based on them must, by that very fact, also encompass extraterritorial behaviour. The jurisdictional reach of the Division has no territorial qualification. It is universal, and therefore so are any subsequent BSD tort claims based on it.
235 Gleeson, above n147. 236 Niboet v. Niboyet [1878] 4 PD 1, 7; Barcelo v. Electrolytic Zinc Co. of Australasia Ltd. (1938) 48 CLR 391, 422.
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Some of the self-same arguments that corporate defendants have employed in ATS lawsuits could foreseeably be attempted here for tort-based claims against them. However, on balance, the relevant case law suggests that the results would be less favourable to their cause here in Australia.
For example, Australia has not followed the US judicial tests for establishing forum non conveniens and has laxer interpretation of the jurisdictional principle. Instead of placing the onus on the defendants to establish whether there is a more appropriate forum elsewhere, as US courts do, Australian courts ask whether the Australian forum is ‘clearly inappropriate’.237 In rejecting a more sweeping interpretation of forum non conveniens, the High Court of Australia addressed the issue of ‘international comity’ – the legal principle ordinarily invoked to support a more robust forum non conveniens test that bars the hearing of cases before a given tribunal: If one turns from what is praised as judicial comity to what is condemned as judicial chauvinism, it seems that the broader forum non conveniens discretion is liable to bring with it the notion that ‘citizens or residents deserve somewhat more deference than foreign plaintiffs...238
The practical difference is that there is a far lower likelihood that an Australian court (when contrasted with itsCanadian and US counterparts) would dismiss a tort claim on the basis of forum non conveniens. Illustrative of this, the jurisdictional question of forum non conveniens was not even raised in the Ok Tedi Litigation against BHP.239
Civil and criminal corporate accountability pathways are not mutually exclusive. Nevertheless, from the perspective of the victims, as well as from the perspective of regulatory effectiveness, there are several advantages that civil lawsuits have over criminal prosecutions. Tort cases require a lower standard of proof to be satisfied for success than criminal trials. In Australian courts, ‘on the balance of probabilities’ is the
237 See Voth v Manildra Flour Mills (1990) 171 CLR 538; Oceanic Sun-Line Special Shipping Co. v Fay (1988) 165 CLR 197. 238 Oceanic Sun-Line Special Shipping Co Inc v Fay (1988) 165 CLR 197, 254. 239 Joseph, above n72. Interestingly, the forum non conveniens doctrine has been ruled as incompatible with the Brussels Convention by the European Court of Justice and no longer applicable in UK cases with foreign-domiciled defendants. See Owusu v. Jackson and others, European Court of Justice, C- 281/02.
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Corporate Peacebuilding and the Law civil standard, rather than the stricter ‘beyond reasonable doubt’ standard in criminal trials.240 In practical terms, not only does this make a successful claim more likely, it also substantially balances the playing field between victims who all too often are underfunded and poorly organised, as compared to the large corporate defendants that have high-priced legal teams and a large pool of financial and human resources available to them.
A civil cause of action arising from breach of duty found on the basis of Division 268 would not need Attorney-General approval, unlike criminal prosecution of the alleged corporate defendants under the same Division. This clears a political hurdle from the path of accountability that might be otherwise difficult to overcome, especially considering the economic and political clout of large TNCs.
Civil accountability for corporate conduct in conflict-affected areas also holds out conceptual regulatory advantages, over criminal prosecution. Arguably, it could achieve justice in a more efficient manner, in terms of both deterring and punishing misbehaviour, and compensating victims. In turn, these consequences have the potential to prompt behavioural change on the part of the company in question and its industry peers.241
Significantly, a civil suit is framed in the currency of modern business: money. The compensatory and punitive damages that a tort claim may give rise to expose a TNC to potentially considerable financial risks. While Australian courts do not have a tradition of massive punitive and compensatory damage awards comparable to the US, the deterrence effect on entire industries that a handful of high-profile prosecutions may have on corporate human rights due diligence and oversight practices could be far- reaching.242
Arguably, risks to a company’s bottom-line may be more useful in changing its conduct than the risk of criminal prosecution of some of its employees or directors, or of the
240 CR Williams, ‘Burdens and Standards in Civil Litigation’, (2003) 25 Sydney Law Review 165. 241 Mongelard, above n26, 670. 242 Uri Gneezy and Aldo Rustichini, ‘A Fine is a Price’ (2000) 29 Journal of Legal Studies 1.
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Chapter 6: Going Above and Beyond company itself.243 Moreover, compensation for victims is a fundamental tenet of most modern justice systems.244 That a civil cause of action, through the tort of BSD, would provide such compensatory relief to victims of egregious criminal conduct aligns well with the overall goals of our justice system, as English Chief Justice Holt reflected three hundred years ago: Wherever a statute enacts anything, or prohibits anything, for the advantage of any person, that person shall have remedy to recover the advantage given him, or to have satisfaction for the injury done him contrary to law by the same statute; for it would be a fine thing to make a law by which one has a right, but no remedy but in equity.245
5 Questioning the utility of litigation for achieving compliance with ICL standards Commencing and winning human rights litigation against corporate giants are two very different things. The experience of victims pursuing ATS claims is informative in this regard. Evidentiary and logistical problems are large, as many of the witnesses and much of the physical evidence could be thousands of miles away in politically fragile regions of the globe, or may have even been destroyed or killed. Moreover, most of the accountability pathways outlined here are untested. Their viability remains unproven. And even if such a suit ultimately ends with a victory in the courts, the time and cost to attain that victory would be considerable. ATS suits, for example, have often taken over a decade to wind their way through the US courts until reaching a final determination, accruing monumental legal fees along the way. These factors offer strong deterrents that may dissuade all but the strongest of claims.
Australian civil litigation and criminal prosecutions are far from the most efficient means to regulate and improve corporate behaviour in the world’s conflict zones and fragile states. Legal commentators question the utility and impact of strategic litigation
243 See generally, Jane Nelson and Dave Prescott Partnering for Success: Business Perspectives on Multi-stakeholder Partnerships (World Economic Forum, 2005); Matten, Dirk and Jeremy Moon (ed), Corporate Citizenship (Edward Elgar, 2013). 244 See, eg, Richards et al, , above n206, 4. 245 Anon (1704) 6 Mod 26-7 per Holt CJ.
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Corporate Peacebuilding and the Law in general.246 Gerald Rosenberg, among others, highlights the relative small number of cases compared to the scale of the problems as indicative of its minimal impact. He refers to human rights litigation as a ‘hollow hope’ for furthering social change.247
Corporate accountability claims may also have deleterious effects, including on Australia’s economy and foreign relations.248 It is useful to recall the underlying rationale of the US Supreme Court for denying the extraterritoriality of the ATS in the Kiobel decision. All the judicial opinions by implication accepted the position that the US, and US courts, should not be the ‘custos morum [moral custodians] of the whole world’.249 Evidently, the US Supreme Court was reluctant to sit in judgment on the conduct of other countries’ wars, or prosecute those that perpetrated atrocities and human rights in far-off countries with no obvious connection to the US. Indeed, Roberts CJ explicitly worries that this might be akin to ‘unwarranted judicial interference’ in foreign policy – an area of policy best left to the other branches of government.250 He is concerned about negative repercussions if the courts were to weigh in on such issues and, as a result, he pulls the US court system back from exercising universal jurisdiction, even for heinous international crimes.251 This reticence reflects the argument put forward by the US Government’s amicus brief, which urged the Court to deny the extraterritoriality of the ATS and dismiss the suit as this type of litigation involving foreign companies’ conduct in foreign countries ‘poses serious risks to the United States’ foreign relations with foreign states’.252 Moreover, the US has argued
246 Gerald Rosenberg, The Hollow Hope: Can Courts Bring About Social Change? (University of Chicago Press, 1991); Simmons, above n11 247 Rosenberg, ibid, 1. 248 The Australian Government filed an amicus brief in Sosa v. Alvarez (Ninth District) in 2004 together with the governments of Switzerland and the United Kingdom suggesting that interpreting the ATS as having extraterritorial scope ‘can interfere with national sovereignty and impose legal uncertainty and costs.’ Brief of the Governments of the Commonwealth of Australia, The Swiss Confederation and the United Kingdom of Great Britain and Northern Ireland as Amici Curiae in Support of Petitioner, Sosa v Alvarez 542 US 692 (2004). 249 Kiobel v Royal Dutch Petroleum, 569 US ___ (2013) (slip opinion) 12 (Roberts CJ) quoting approvingly from United States v The Jeune Eugenie, 26 F Cas 832, 847 (Story J) (Mass, 1822). 250 Ibid. 251 See, eg, Kenneth Anderson, ‘Kiobel v Royal Dutch Petroleum Co: The Alien Tort Statute’s Jurisdictional Universalism in Retreat’ (2012–13) Cato Supreme Court Review 149; ‘Alien Tort Statute — Extraterritoriality — Kiobel v Royal Dutch Petroleum Co’ (2013) 127 Harvard Law Review 308. 252 Brief of US Government in Am. Isuzu Motors v. Ntsebza 553 U.S. 1028 (2008), 18; Supplemental Brief of the United States as Amicus Curiae in Partial Support of Affirmance Submission in Kiobel v Royal Dutch Petroleum Co.
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Chapter 6: Going Above and Beyond that ATS suits encroach on the potential for using trade and economic liberalisation as tools for development and democratization, by creating ‘uncertainty for those operating in countries where abuses might occur’.253 The distinct possibility exists that similar ‘foreign policy considerations’ arguments may be invoked by Australian courts to eschew consideration of ATS-style corporate accountability claims regarding misconduct in foreign countries. 254
Nevertheless, the blunt instrument that is corporate litigation remains a vital component of any effective regulatory framework to improve corporate behaviour in conflict- affected areas, and its appeal endures from the point of view of the victims of corporate malfeasance seeking justice and reparations.255 Court prosecutions raise the stakes for corporations that ignore well-established ICL norms.256 Furthermore, there is a growing body of empirical evidence that suggests it may be working.257 The rise in corporate human rights accountability litigation, including ATS lawsuits in the US, has exerted pressure upon companies across the globe to adopt more rigorous human rights due diligence processes to avoid the so-called ‘zone of legal risk’, especially when doing business in fragile or conflict-affected regions of the world.258
Even more than civil actions, criminal prosecution of Australian TNCs for misconduct committed in conflict-affected areas remains a form of exemplary justice and exemplary regulation. And this is as designed. Neither the international nor domestic judicial systems have the capacity to cope with multitudes of large-scale litigation, nor, from the regulatory perspective, are they designed to be anything other than seldom deployed – that is, populating the lower-tip of the regulatory diamond. A few high-profile corporate accountability claims or prosecutions will have a symbolic effect – as is theorised in
253 Brief of US Government, ibid, 20. 254 Brief of Australia, Switzerland and UK in Sosa v Alvarez, above n243, 2. 20. Brief of the Governments of the United Kingdom of Great Britain and Northern Ireland and the Commonwealth of Australia as Amici Curiae in Support of the Defendants-Appellees/Cross-Appellants, Sarei v. RioTinto 671 F.3d 736 (9th Cir. 2011); Supplemental Brief of the United States, Kiobel, as above n247. 255 Koh, above n86. 256 Gneezy and Rustichini, above n242. 257 Simmons, above n11; Childress, ‘The Alien Tort Statute’, above n137. 258 International Commission of Jurists, above n35, 7; Institute for Human Rights and Business, ‘The “State of Play” of Human Rights Due Diligence: Anticipating the Next Five Years’ (Report, IHRB, 2011).
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Corporate Peacebuilding and the Law responsive regulatory theory.259 They will send strong signals to the private sector, encouraging greater adoption of preventive measures and adherence to voluntary codes of conduct such as the UN Global Compact and other business and human rights initiatives.
V CONCLUSION: ENVISIONING THE LOWER HALF OF THE REGULATORY DIAMOND FOR CORPORATE PEACEBUILDING
We are now equipped to populate the compliance regulation in the bottom half of the regulatory diamond heuristic. Adding to our diamond heuristic the compliance- regulation mechanisms raised in this chapter to achieve corporate compliance with the fundamental standards of conduct enshrined in ICL, a possible regulatory regime for corporate peacebuilding continues to take shape (see Figure 5.1). Their placement is not random but rather, reflective of an idealised progression of instruments in a responsive regulatory regime, as discussed in previous chapters. Efforts at compliance commence on the rungs closest to the midline, with purely collaborative, multi-stakeholder, soft- law initiatives such as the UN Global Compact that fulfil their regulatory function largely through education and persuasion. At the bottom extreme lies the ultimate in legal punishment for a corporation – dissolution and forfeiture of assets – with the intervening levels denoting progressively harsher, more coercive means of seeking compliance with the behavioural standards reflected in the prohibitions of ICL.
259 Christine Parker, The Open Corporation: Effective Self-Regulation and Democracy (Cambridge University Press, 2002).
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Minimum standards: Behavioural norms derived from international criminal law
UN Global Compact
OECD Guidelines, NGO awareness/pressure campaigns
Directors’ duties/CCA Escalating suite of Tort litigation compliance regulation mechanisms Criminal prosecution
Dissolution, seizure of assets
Figure 5.1: Compliance regulation mechanisms of the regulatory diamond for corporate peacebuilding
The past and present of accountability for corporate malfeasance committed in conflict- affected areas provide little comfort for victims of such abuse. Internationally, the prospects of a 21st century version of the Nuremberg-era Industrialist Trials, perhaps before the ICC, are dim due to jurisdictional, political and resource constraints. Moreover, the denial of the ATS’s extraterritorial reach by the US Supreme Court has severely curtailed the prospects of this prominent contemporary means of regulating corporate conduct in conflict-affected areas.
Nevertheless, when it comes to the future, domestic enforcement of ICL norms offers some promise. Heretofore untested domestic avenues of legal accountability, such as imposition of penalties under Australian legislation related to corporate duties and consumer protections, civil litigation on behalf of victims and even criminal prosecution
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To be sure, accountability for Australian corporations’ serious misconduct in conflict- affected areas has never been litigated in Australian courts. Nor has there been any punitive government action taken against a corporation or its management for misconduct in such areas, save the single case of AWB’s role in the Iraqi Oil-for-Food scandal in which several civil claims launched by the Australian securities regulator remain pending before the courts.
These promising domestic Australian judicial enforcement mechanisms should be appropriately viewed as the sharp lower tip of enforcement measures within a coherent regulatory regime. They operate alongside the ever-expanding web of international and domestic multi-stakeholder initiatives designed to employ soft-power to educate, persuade and shame the corporate community into adhering to ICL norms of conduct in conflict-affected areas. Conceived this way, the objective of achieving widespread compliance among Australian TNCs with ICL standards of behaviour when doing business in regions of the world plagued by armed conflict, seems possible.
This chapter has served to highlight that far from operating in a regulatory vacuum, Australian TNCs can be held accountable for misconduct committed in far-off countries. Importantly, adherence to ICL’s fundamental standards of behaviour, as reflected in ICL, is but half of corporate peacebuilding’s regulatory agenda. The top half of the regulatory diamond framework remains to be addressed and filled with aspirational regulation mechanisms. While compliance with ICL may prevent the most heinous corporate contributions to exacerbating or triggering armed conflicts, it does little to advance the cause of positive peace, and build more stable and secure societies in which to do business. Questions of how the law could be deployed to encourage the Australian business community to go above and beyond mere compliance with minimum legal norms of behaviour, so as to become actively involved in peacebuilding efforts around the globe (alongside government and civil society actors), remain unanswered. Clarifying the role of law in aspirational regulation to achieve the vision of corporate peacebuilding is the focus of the next chapter.
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CHAPTER 6
GOING ABOVE AND BEYOND:
THE LAW’S ROLE IN ASPIRATIONAL REGULATION FOR CORPORATE PEACEBUILDING
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Corporations are not responsible for all the world’s problems, nor do they have the resources to solve them all ... [but] a well run business ... can have a greater impact on the social good than any other institution or philanthropic organization. Michael Porter260
260 Michael Porter, ‘Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility’ [2006] (December) Harvard Business Review 92.
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CHAPTER 6
GOING ABOVE AND BEYOND: THE LAW’S ROLE IN ASPIRATIONAL REGULATION FOR CORPORATE PEACEBUILDING
I INTRODUCTION
Even if TNCs complied with minimum standards of behaviour as inscribed in ICL when doing business in conflict-affected areas, this alone would be insufficient to declare the promise of corporate peacebuilding a reality or our regulatory scheme a success. On the contrary, merely ‘doing no harm’, and minimising their conflict-driving behaviour must be seen as only an intermediate goal.261 Utilising the regulatory diamond heuristic,262 we can put it slightly differently: it gets us precisely half-way; that is, to the midline of the idealised regulatory diamond model of governance outlined in Chapter 3.
Chapter 4 argued that ICL norms were the most appropriate set of minimum standards of conduct for TNCs in conflict-affected areas that form the midline of the regulatory diamond for corporate peacebuilding. Chapter 5 focussed on sharpening the vital bottom-tip of the regulatory diamond by examining international and domestic legal avenues for gaining compliance and deterring breaches of those ICL standards. However, to achieve the vision of corporate peacebuilding, global and national policymakers must not only prevent a race-to-the-bottom among TNCs, but also promote a race-to-the top: incentivise, encourage and facilitate TNCs to embrace virtuous behaviour and social responsibilities to continually improve their contributions to the development of sustainable, peaceful societies in the areas in which they do business. The thesis now turns to examine the law’s possible roles in aspirational regulation – the third key component, and the upper-half of the regulatory diamond. This chapter argues that law has a role in nudging TNCs towards and facilitating the attainment of the aspirational goal of corporate peacebuilding.
261 Jane Nelson, The Business of Peace: The Private Sector as a Partner in Conflict Prevention and Resolution (Prince of Wales Business Leaders Forum/ International Alert/Council on Economic Priorities, 2000) 28. 262 Jonathan Kolieb, ‘When to Punish, When to Persuade, When to Reward: Strengthening Responsive Regulation with the Regulatory Diamond’ (2015) 41 Monash University Law Review 136.
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Aspirational regulation is a regulatory terrain for which law (in the traditional, hard, state-based sense of the term) is prima facie ill-suited. The orthodox conception of the law sees it confined to mandating behavioural standards (– chapter 4) and mechanisms by which to enforce them (– chapter 5).263 Aspirational regulation relies less on these traditional regulatory techniques and instead seeks to encourage behaviour that is socially beneficial ‘above and beyond’ what is legally mandated.264 This leads some scholars to suggest that for law to play a role in ‘beyond compliance’ regulation it should adopt the guise of soft-law or informal-law.265 Indeed, soft-law, informal-law and entirely non-legal instruments are aplenty in attempting to improve corporations’ social, ethical and environmental practices.266 Similarly, these types of voluntary, multi- stakeholder governance initiatives (MSGIs) dominate the aspirational regulatory landscape for corporate peacebuilding – a task for which these types of regulation are well-suited.267
Nevertheless, this chapter contends that the aspirational regulatory terrain in general, and the advancement of corporate peacebuilding in particular, need not be ceded to
263 HLA Hart, The Concept of Law (Clarendon Press, 1961) 6; John Austin, The Province of Jurisprudence Determined, (John Murray, 1832) 18; Andrew Crane and Dirk Matten, Business Ethics (Oxford University Press, 2010) 5; Mary Ellen O’Connell, The Power and Purpose of International Law: Insights from the Theory and Practice of Enforcement (Oxford University Press, 2008); Chapter 3 of thesis. 264 Paul Grabosky, ‘Regulation by Reward: On the Use of Incentives as Regulatory Instruments,’ (1995) 17 Law and Policy 257; John Braithwaite, Toni Makkai and Valerie Braithwaite, Regulating Aged Care: Ritualism and the New Pyramid (Edward Elgar, 2007) 322; Jonathan Borck and Gary Coglianese, ‘Beyond Compliance: Explaining Business Participation in Voluntary Environmental Programs’ in Christine Parker and Vibeke Lehmann Nielsen (eds), Explaining Compliance: Business Responses to Regulation (Edward Elgar, 2011) 139; Kolieb, as above n3. 265 Kenneth Abbott and Duncan Snidal, ‘Hard and Soft Law in International Governance’ (2000) 54 International Organization 421; Kirton and Trebilcock, Hard Choices, Soft Law, above n6; Pauwelyn, Wessel and Wouters, above n5. 266 “Soft-law”, “informal law”, and “multi-stakeholder governance” are terms commonly found in the literature. These are not always synonymous, nor are they mutually exclusive or in opposition to other forms of law-based governance. They are used here primarily in contrast with “hard”, “formal” state- based law. See generally, Abbott and Snidal, above n6; Joost Pauwelyn, Ramses Wessel, and Jan Wouters (eds) Informal International Lawmaking (Oxford University Press, 2012). 267 Noeleen McNamara, ‘CSR and Compliance: Transnational Mining Corporations in Tanazania’ (2013) 9 Macquarie Journal of International and Comparative Environmental Law 1; Sean Gilbert, ‘The Transparency Evolution’ (2002) 19(6) The Environmental Forum 19; John Kirton and Michael Trebilcock (eds), Hard Choices, Soft Law: Voluntary Standards in Global Trade, Environment and Social Governance (Ashgate, 2004); Chapter 3 of thesis.
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MSGIs and other soft-law mechanisms,268 as responsive regulation theory states an “all of the above” regulatory approach is preferred.269 Whilst soft-law, MSGI and industry- based instruments may take the lead in aspirational regulation, the law (and traditional state-based lawmaking) is a vital and effective mechanism to incentivise TNCs to go ‘beyond compliance’ with minimum legal standards and strengthen their peacebuilding activities.
The chapter proceeds with a recap of the traditional conception of law which confines it to establishing behavioural standards and serving as a powerful enforcement device to ensure compliance with said standards. The chapter continues (Part II) with a discussion and critique of the turn to informality within governance circles, which includes the rise of the MSGI that have filled the void in transnational regulation of TNCs in conflict- affected regions. Part III draws on recent regulatory theory and business ethics scholarship to outline a framework for reconceptualising the law which allows it to shed its perceived confinement to compliance regulation, to embrace a significant, if albeit secondary, role in aspirational regulation. In aspirational regulation, the law’s expressive and facilitative functions come to the fore.270 Both international and national lawmaking (of the “hard” variety) can assist by articulating the socially-beneficial policy goals motivating the regulatory enterprise (corporate peacebuilding in our case), thereby crystallising the social expectations of TNCs. Well-designed law may also complement and enhance the effectiveness of MSGIs and industry-based mechanisms.
Finally, Part IV examines a substantive illustration of law-based aspirational regulation for corporate peacebuilding: the recently-enacted US “conflict minerals” legislation which has prompted the likes of Google, Samsung and Apple to voluntarily rid their entire supply chains of certain minerals that have been implicated in the financing of the armed conflicts in the Democratic Republic of Congo and surrounding region.
268 Brigitte Egelund Olsen and Karsten Engsig Sorensen, ‘Strengthening the Enforcement of CSR Guidelines: Finding a New Balance between Hard Law and Soft Law,’ Legal Issues of Economic Integration Vol.41(1) (2014), 9-35. 269 Ian Ayres and Braithwaite, Responsive Regulation, 1992. 270 Bronwen Morgan and Karen Yeung, An Introduction to Law and Regulation: Text and Materials (Cambridge University Press, 2007) 6.
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TNCs are not altruistic by nature and are instead motivated primarily by profit. To realise the promise of corporate peacebuilding, as theorised by the likes of Fort, Schipani and Nelson, we must not deny this reality but, rather, develop regulatory tools, including legislation that do not fight against market-forces and corporations’ profit- driven nature, but capitalise on them.271 By embracing a ‘new governance’ approach to the role of law in regulation, we can conceive of a role for traditional, state-based legal regulation as a legitimate and effective means of aspirational regulation, and a complementary mechanism to the soft-law approach of MSGIs that lie at the heart of aspirational regulation.272 Just as Vogel and others have investigated how to create a ‘market for virtue’, this chapter explores how the law may be utilised to create a “market for peace”.273
II A TURN TO INFORMALITY IN CONTEMPORARY GOVERNANCE OF TNCS: SOFT AND INFORMAL AS ADJECTIVAL RESPONSES TO THE LIMITS OF JUST LAW
Chapter 3 surveyed the existing landscape of regulatory mechanisms that in some way seek to improve corporate behaviour in conflict-affected areas through increased conflict-sensitive business practices and peacebuilding. As noted in that chapter, one of the most striking features of the landscape is that it is dominated by soft-law, industry- based and multi-stakeholder governance initiatives. Of course, this is not a sui generis problem, but emblematic of global governance today. It reflects the more general turn to collaborative forms of regulation observed in many disparate governance domains at the
271 Timothy Fort and Cindy Schipani The Role of Business in Fostering Peaceful Societies, (Cambridge University Press, 2004); Nelson, above n2. 272 Orly Lobel, ‘The Renew Deal: The Fall of Regulation and the Rise of Governance in Contemporary Legal Thought’ (2004) 89 Minnesota Law Review 342; Edwin Epstein, ‘The Good Company: Rhetoric or Reality? Corporate Social Responsibility and Business Ethics Redux’ (2007) 44(2) American Business Law Journal 207. 273 David Vogel, The Market for Virtue: The Potential and Limits of Corporate Social Responsibility (Brookings Institution, 2005).
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Chapter 6: Going Above and Beyond national and international levels.274 Soft-law and multi-stakeholder initiatives are ‘the new normal’ in global governance of transnational corporate activities.275
By labelling governance projects as law, however adjectivised, their authors seek to co- opt the legitimacy of law without the need to maintain (the non-adjectivised) law’s structural and government-centric form.276 Importantly, these informal lawmaking initiatives frequently eschew mandating precise, clear minimum standards of behaviour. Instead, many such initiatives offer up aspirational goals or principles to which regulatees are asked to voluntarily adhere.277 Without the monitoring and enforcement mechanisms of state-based law, such as police, government agencies and the judicial system, informal lawmaking and multi-stakeholder governance efforts rely primarily on the goodwill and cooperation of regulatees to gain compliance.278
A Soft-law nature of aspirational regulation of TNCs in conflict-affected areas
Despite the noticeable absence of hard law, or perhaps because of it, the regulation of transnational corporate activities, in particular in relation to conflict-affected or conflict- prone communities, has a decidedly soft-law character.279 Key features of much of the contemporary lawmaking occurring in relation to TNCs’ social responsibilities (including when doing business in conflict-affected areas), is privatised and producing
274 David Levi-Faur, ‘The Global Diffusion of Regulatory Capitalism’ (2005) 598 Annals of American Political Academy and Social Science 12, 12; Paul Stephan, ‘Privatizing International Law’ (2011) 97 Virginal Law Review 1573. 275 Don DeYoung, ‘Breaking the Yardstick: The Dangers of Market-Based Governance’ (2009) 55 Journal of Finance Quarterly 126. 276 Joost Pauwelyn, Ramses Wessel and Jan Wouters, ‘Informal International Law as Presumptive Law’ in Rain Livoja and Jarna Petman (eds), International Law-making: Essays in Honour of Jan Klabbers (Routledge 2014) 75; Sylvia Karlsson-Vinkhuyzen and Antto Vihma, ‘Comparing the Legitimacy and Effectiveness of Global Hard and Soft Law: An Analytical Framework’ (2009) 3 Regulation and Governance 400. 277 For example, the UN Global Compact’s listing of ten aspirations to which companies should try and respect. John Kirton and Michael Trebilcock, ‘Introduction: Hard Choices and Soft Law in Sustainable Global Governance’ in Kirton and Trebilcock (eds), Hard Choices, Soft Law, above n8. 278 Kirton and Trebilcock, ibid. 279 Pauwelyn, Wessels and Woulters, Informal International Lawmaking, above n5; Kirton and Trebilcock (eds), Hard Choices, Soft Law: Voluntary Standards in Global Trade, Environment and Social Governance (Ashgate, 2004); Tanja Borzel and Thomas Risse, ‘Governance Without a State: Can it Work?’ (2010) 4 Regulation and Governance 113.
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Corporate Peacebuilding and the Law responsibilities of the “soft-law” variety.280 MSGIs that involve collaborative, informal lawmaking among industry, government and civil society partners have emerged as the primary means of encouraging improved corporate conduct vis-a-vis human rights and armed-conflict concerns.281
In the regulatory vacuum created by the absence of formal lawmaking and law enforcement in the regulation of TNCs in conflict-affected areas, MSGIs have rushed in. The Voluntary Principles on Security and Human Rights, the UN Global Compact, and the Extractive Industries Transparency Initiative are all examples of the burgeoning field of informal international lawmaking; global governance of TNCs occurring outside the strictures of traditional lawmaking that purports to encourage better corporate conduct vis-a-vis their potential conflict-driving activities.282
Insofar as these MSGIs seek adherents or signatories to go beyond compliance with established legal standards of behaviour, they can be rightly understood as examples of aspirational regulation. All of them lack robust enforcement measures – indeed, all are designed to rely primarily on self-enforcement, but nevertheless exert some real social, economic and/or political pressure on corporations to improve their behaviour in conflict-affected areas and minimise conflict-causing behaviour.283 Each of these initiatives assists in realising the aspirational goal of enhanced corporate contributions to peacebuilding. To put it another way, the realm of aspirational regulation for corporate peacebuilding is presently dominated by MSGIs and industry-based initiatives that take a decidedly soft-law approach.284
280 See, eg, Dinah Shelton, Commitment and Compliance: The Role of Non-binding Norms the International Legal System (Oxford University Press, 2000); Cashore, Benjamin, ‘Legitimacy and the Privatization of Environmental Governance: How Non-State Market-Drive (NSMD) Governance Systems Gain Rule-Making Authority’ (2002) 15(4) Governance: An International Journal of Policy, Administration and Institutions 503; Virginia Haufler, A Public Role for the Private Sector: Industry Self-Regulation in a Global Economy (Carnegie Endowment for International Peace, 2001); Charles Wolfe Jr, Market or Government: Choosing Between Imperfect Alternatives (MIT Press, 1988). 281 David Vogel, ‘The Private Regulation of Global Corporate Conduct’ in Walter Mattli and Ngaire Woods (eds), The Politics of Global Regulation (Princeton University Press, 2009) 151. 282 Voluntary Principles on Security and Human Rights
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The proliferation of MSGIs, in particular in relation to transnational CSR, has led to an increased scholarly examination of the promise and perils of this type of governance.285 The following sections highlight several of the most oft-cited advantages of this type of governance, and then outline some of its limitations as described in the scholarly literature.
B The Promise
Arguably, market-based governance overcomes several of the factors that sometimes prevent traditional lawmaking at the national and international levels to effectively address transnational or global issues.286 These factors include short-term political horizons of national leaders, lack of capacity within government (an especially acute concern in some least-developed and conflict-affected countries), stifling bureaucracy and the influential lobbying of concerned parties such as business interests.287
Market-based governance is often quicker to establish, more cost-effective and more politically and economically attractive to a range of stakeholders – including civil society actors, corporations and governments.288 Soft-law is ‘more easily achieved. It allows stakeholders to go further as well as faster than hard law’.289 MSGIs hold out the promise of being ‘able to spur cognitive, discursive and normative changes, which
285 See, eg, Andreas Scherer, Guido Palazzo and Dan Baumann ‘Global Rules and Private Actors: Toward a New Role of the Transnational Corporation in Global Governance’ (2006) 16(4) Business Ethics Quarterly 505; Neil Gunningham, ‘Environment, Self-Regulation and the Chemical Industry: Assessing Responsible Care’ (1995) 17 Law and Policy 57; Haufler, above n21; Pauwelyn, Wessel, and Wouters, Informal International Lawmaking, above n5. 286 Christine Chinkin, ‘The Challenge of Soft Law: Development and Change in International Law’, (1989) 38 International and Comparative Law Quarterly 850, 850; Liliana Andonova and Manfred Elsig, ‘Informal International Lawmaking: A Conceptual view from International Relations’ in Pauwelyn, Wessel, and Wouters, Informal International Lawmaking, above n5, 63; Philipp Dann and Marie Engelhardt, ‘Legal Approaches to Global Governance and Accountability’ in Pauwelyn, Wessel and Wouters, Informational International Lawmaking, above n5, 106. 287 Ibid. 288 Kirton and Trebilcock, ‘Introduction’, above n18. 289 Ibid.
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Market-based governance also claims a type of legitimacy that state-based lawmaking does not. MSGIs allow for the direct participation of a wider range of societal actors in the regulatory process.291 This is an especially significant feature when formal lawmaking efforts are stalemated.292 In turn, this process-inclusivity arguably adds to the (perceived) legitimacy of process, and therefore legitimacy of its outcomes.293 MSGIs provide institutional platforms where alliances between NGOs, governments and companies can form, and where discursive processes that change perceptions of corporations’ role in society can occur. 294
An inclusive approach to governance that includes non-state actors may help cultivate a sense of ownership of process and outcomes that may in turn lead to greater adherence to agreed-on norms among regulated corporations. Market-based governance offers ways to engage actors along supply chains and leverage the power of consumer choice and voluntary incentives as mechanisms for change.
Advocates of MSGIs suggest that they are both symptomatic of globalisation, and a useful response to it. By providing voices to transnational actors other than states, MSGIs help democratize global governance, and open up the possibility of better leveraging the private sector’s expertise and resources for public benefit. A corollary of this is that MSGIs can bring human rights and other public policy concerns into the boardroom and help embed them in corporate culture and practices.295
290 Maria Gjolberg, ‘Explaining Regulatory Preferences: CSR, Soft Law or Hard Law? Insights from a Survey of Nordic Pioneers in CSR’ (2011) 13(2) Business and Politics 1 291 Sylvia Karlsson-Vinkhuyzen and Antto Vihma, ‘Comparing the Legitimacy and Effectiveness of Global Hard and Soft Law: An Analytical Framework’ (2009) 3 Regulation and Governance 400; Julia Black, ‘Constructing and Contesting Legitimacy and Accountability in Polycentric Regulatory Regimes’ (2008) 2 Regulation & Governance 137; Helmut Breitmeier, The Legitimacy of International Regimes (Routledge, 2008); Benjamin Cashore, ‘Legitimacy and the Privatization of Environmental Governance: How Non-State Market-Drive (NSMD) Governance Systems Gain Rule-Making Authority’ (2002) 15(4) Governance: An International Journal of Policy, Administration and Institutions 503. 292 Kirton and Trebilcock, ‘Introduction’, above n18. 293 Cashore, above n31; Karlsson-Vinkhuyzen and Vihma, above n31. 294 Gjolberg, above n30; Chinkin, above n26. 295 John Ruggie, Just Business: Multinational Corporations and Human Rights (Norton, 2013), 190.
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Indeed, as Pauwelyn highlights, MSGIs can often attract ‘thick-stakeholder consensus’ – by including many societal actors in lawmaking and monitoring and enforcement measures beyond the state.296 This gives MSGIs a source of legitimacy that state-centric governance in the guise of law sometimes lacks (‘thin state consent’).297
Incrementalism is another argument in favour of MSGIs, especially in thematic and geographical areas of transnational corporate activity that, to date, are ineffectually regulated. Shelton argues that MSGIs can serve as useful catalysts for the development of hard-law instruments.298 She suggests that a soft-law instrument/MSGI is most effective when it ‘stands not in isolation but as a precursor or supplement to a hard-law instrument’.299 Bayne believes that hard-law and soft-law initiatives can be complementary. In particular, he argues that MSGIs and their development can be innovative proving grounds for regulatory ideas.300 Soft-law is able to act as precursor or even a stimulus to getting hard-law initiatives moving.301
MSGIs are not restricted to adopting a law-based form, revolving around standards of conduct and enforcement means. Instead, voluntary incentives and other novel, non- legal or quasi-legal mechanisms for change can be entertained.302 Moreover, ‘principles’ rather than ‘standards’ that frequently form the normative element of MSGIs can assist in legal norm-development.303 Furthermore, their flexibility in form – as opposed to state-based treaties – allows far easier amendment and adaptation in response to appraisal of an MSGI’s successes and failures. This responsiveness to the changing variables within the regulatory context is appealing.
296 Joost Pauwelyn, Ramses Wessel and Jan Wouters, ‘When Structures Become Shackles: Stagnation and Dynamics in International Lawmaking’ (2014) 25 European Journal of International Law 733, 734. 297 Ibid. 298 Dinah Shelton, ‘Normative Hierarchy in International Law’ (2006) 100 American Journal of International Law 291, 320. 299 Ibid. 300 Nicholas Bayne, ‘Hard and Soft Law in International Institutions: Complements, Not Alternatives’, in Kirton and Trebilcock, Hard Choices, Soft Law, above n8, 347. 301 Ibid; Gjolberg, above n30. 302 Shelton, ‘Normative Hierarchy’, above n38; Bayne, above n40. 303 Wayne Sandholtz, International Norms and Cycles of Change (Oxford University Press, 2009); Shelton, above n22.
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Finally, market-based governance circumvents the perennial enforcement problem with international law. That is, with no international police force and feeble international judicial capabilities how are international legal obligations to be enforced? MSGIs may preference vague, voluntary principles over clear binding standards but, due to their thick-stakeholder consensus, as mentioned previously, they attract widespread adoption and commitment by target firms.304 Market-based governance seeks not centralised command or control, and in those characteristics lie its appeal and strength. The UN Global Compact, for instance, consists of ten vague CSR-related principles, it eschews legal formalities and has no binding enforcement mechanisms describing itself as a ‘principles-based framework’.305 Yet it has attracted commitments from over 9,100 companies from over 165 countries. In recent years scores of country-based Global Compact Networks have developed around the world to further advance the CSR agenda of the Global Compact amongst local businesses through educational seminars, workshops and publications.306
C The Perils
Despite these regulatory advantages, for many observers there remain significant problematic aspects of market-based governance mechanisms. Some commentators, stakeholders and states are skeptical of the value of market-based governance –when assessed both individually and conceptually as a core element of global governance design.307
Primarily, these critiques of MSGIs revolve around a healthy skepticism about allowing powerful TNCs to regulate themselves – supplanting or upending the traditional role of sovereign governments to do so. To put it another way, market-based governance risks allowing the fox too much control over running the hen-house.
304 Pauwelyn, Wessel and Wouters, above n36, ‘When Structures Become Shackles’, above n36, 734; Jane Nelson and Dave Prescott Partnering for Success: Business Perspectives on Multi-stakeholder Partnerships (World Economic Forum, 2005). 305 UN Global Compact
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MSGIs are more closed than public, state-based forms of governance. Monitoring, accountability and oversight mechanisms often rely on the cooperation of the industry participants themselves, and are derided as weak and ineffectual.308 Adherence to voluntary codes often suffers from a lack of information and collective action problems on the part of consumers and participating corporations.309 Some critics also note that MSGIs are limited to situations in which a ‘business case’ exists or where companies perceive hard-law regulation to be unavoidable.310 Gjolberg illustrates this by pointing out that the Forest Stewardship Council’s certification scheme, feted as a model MSGI, in fact covers only 1.8% of total global forests, the majority being in the northern hemisphere, while the need is greatest in the south.311
While proponents suggest, as noted earlier, that MSGIs can actually increase legitimacy, in reality the question of legitimacy cuts both ways. By seeming to displace the role of elected governments in regulating the conduct of corporations, we could argue that MSGIs lack legitimacy when compared to traditional government-based regulation.312 Corporations do not participate in democratic elections, nor can they be expected to share the same public policy goals or motivations as governments. Corporations remain profit-driven and it would be foolish to suggest that their involvement in MSGIs is not also motivated (at least in part) by profit.
Similarly, the soft-law approach taken by MSGIs prioritises consensus and compromise and as a result may adopt less stringent standards or expectations of behaviour than those possible through hard lawmaking.313 Shelton and McCorquodale notes the value of voluntary CSR and human rights related MSGIs, but caution that the international governance framework for these issues cannot be left solely to such instruments.314
308 Peter Muchlinski, ‘Multinational Enterprises as Actors in International Law: Creating “Soft Law” Obligations and “Hard Law” Rights’ in Noortmann and Ryngaert (eds), Non-State Actor Dynamics In International Law, above n45, 30. 309 Ibid. 310 Gjolberg, above n30. 311 Ibid. 312 Karlsson-Vinkhuyzen and Vihma, above n31; Kirton and Trebilcock, ‘Introduction’, above n18. 313 Ibid. 314 Shelton, Commitment and Compliance, above n21; Robert McCorquodale, ‘Corporate Social Responsibility and International Human Rights Law’ (2009) 87 Journal of Business Ethics 385.
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Consistent adoption and respect of minimal standards of acceptable behavior require state-based, formal lawmaking.315
In a similar vein, the substantial voice MSGIs give to corporations in global governance has been queried as being ‘undemocratic… and dangerous.’316 While giving voice to different societal actors and sectors is seen as democratic, in this context the question is posed as to why wealthy corporate interests get a voice in international governance when many minorities and marginalised groups remain underrepresented. Women, indigenous groups, and underdeveloped countries are all marginalised by the dynamics of globalization; corporations, on the contrary, are not. By prioritising the market, MSGIs preference wealthy voices, yet it is often lower socio-economic groups and underdeveloped regions that suffer the most from corporate human rights and environmental abuses. MSGIs give tremendous regulatory clout to corporations and rely on the willingness of industries and individual corporations to cooperate in order to achieve the desired governance outcome.
A common criticism of many CSR initiatives and MSGIs in the inter-linked fields of corporate social and environmental responsibilities is that rather than serving as a testing ground and an early step in the incremental development of more binding norms of conduct, MSGIs may, on the contrary, prevent the hardening up of norms and stymie formal lawmaking on the subject-matter.317 In that sense, MSGIs are seen by some as roadblocks, not roadmaps, for more effective governance of their activities.318 According to this view, MSGIs are embraced by industry actors in a deliberate attempt to avoid more onerous and coercive state-based governance. Combined with a healthy skepticism as to the efficacy of MSGIs to achieve the desired behaviour change, this is seen in some quarters as the worst of all outcomes.
On a deeper level, it is feared that the rise of MSGIs may usher in an era of governance without government and the possibility of ‘regulatory capture’.319 In other words,
315 Ibid. 316 Kirton and Trebilcock, above n18. 317 Joel Bakan, The Corporation: The pathological pursuit of profit and power (Free Press, 2004). 318 Vogel, Market for Virtue, above n14; Jennifer Zerk, Multinationals and Corporate Social Responsibility: Limitations and Opportunities in International Law (Cambridge University Press, 2006). 319 Gjolberg, above n30.
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Chapter 6: Going Above and Beyond governments that allow corporations to act as regulators, not just regulatees, may, in effect, be ceding their sovereignty and ceding the law to private actors. At worst, this type of regulation may favour the interests of the regulated corporations, rather than the public interest and common good.320
D But what role for the law?
Notwithstanding these burgeoning debates as to the efficacy, value and pitfalls of multi- stakeholder governance generally, especially in contrast to harder law alternatives,321 it would be foolish to deny the durability and attraction of MSGIs. This is a form and process of regulation that possesses popular appeal in an age of globalisation and fragmented global governance.322 Global dynamics suggest MSGIs and soft-law mechanisms will remain features of the regulatory landscape for transnational corporate regulation. Moreover, it is evident that MSGIs dominate the aspirational regulatory mix for corporate peacebuilding.
Undoubtedly, engaging industry in informal lawmaking processes has many appealing features – especially for an area of regulation as sparsely populated by either hard or soft-law as the corporate peacebuilding domain.323 The issue under consideration here, therefore, is not whether or not to pursue multi-stakeholder instruments, it is how those mechanisms of aspirational regulation can be bolstered by innovative applications of the traditional governmental levers that sovereign states have to influence and shape corporate behaviour beyond compliance with minimal standards.
The debate over whether hard or soft-law – state-based or multi-stakeholder regulation – of companies in conflict-affected areas should be preferenced – is a false choice. Moreover, it distracts from the issue of conceptualising a role for law in aspirational
320 Davarnejad, above n45. 321 See, eg Shelton, Commitment and Compliance, above n21; Kirton and Trebilcock (eds), Hard Choices, Soft Law, above n8; Rain Livoja and Jarna Petman (eds), International Law-making: Essays in Honour of Jan Klabbers (Routledge, 2014). 322 Lobel, above n13; Margaret Young, Trading Fish, Saving Fish: The Interaction of Regimes in International Law, (Cambridge University Press, 2011). 323 Stefan Voigt, ‘The Economics of Informal International Law: An Empirical Assessment’ in Pauwelyn, Wessel, Wouters (eds), Informal International Lawmaking (Oxford University Press, 2013); Muchlinski, above n46.
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Corporate Peacebuilding and the Law regulation. This is usefully illustrated by the current debate over whether to codify corporations’ human rights obligations in treaty form, or continue apace with Ruggie’s collaborative, soft-law approach to the issue.324 The calls of McCorquodale, deSchutter and others for a binding treaty on business’ human rights obligations can be seen as a positive step, however they advance a vision of law confined to its traditional roles in standard-setting and enforcement – that is, the law as the critical compliance regulation device.325
By definition, the law cannot mandate aspirational regulation. A treaty detailing prohibited conduct would simply raise the midline of the regulatory diamond, rather than entering the realm of aspirational regulation above it. If mandatory standards of conduct are enshrined in treaty or national law in furtherance of peacebuilding objectives, that is a net positive. But it cannot be considered aspirational regulation but, rather, standard-setting and compliance regulation.
Imagining a role for law in aspirational regulation – to incentivise and encourage TNCs to go beyond legally-mandated standards of behaviour to embrace more socially beneficial behaviour in conflict-affected areas – requires an enlarged understanding of the law’s regulatory functions than that provided by the orthodox point of view.
III A ‘NEW GOVERNANCE’ APPROACH TO THE LAW’S PLACE IN ASPIRATIONAL REGULATION
Conceiving of the law through a regulatory lens assists us in theorising law’s role in aspirational regulation beyond its traditional standard-setting and enforcement roles. Drawing on the regulatory, behavioural economics and business ethics literatures, this
324 John Ruggie, ‘A UN Business and Human Rights Treaty?’ (Issues Brief, Kennedy School of Government, Harvard University, 28 January 2014); Oliver deSchutter, ‘Towards a Legally Binding Instrument on Business and Human Rights’ (CRIDHO Working Paper Series, Institute for Interdisciplinary Research in Legal Sciences, 2015); McCorquodale, above n55; Karin Buhmann, ‘The Development of the ‘UN Framework’: A Pragmatic Process Towards a Pragmatic Output’ in Radu Mares (eds), The UN Guiding Principles on Business and Human Rights: Foundations and Implementation (Martinus Nijhoff, 2012); International Commission of Jurists, ‘Needs and Options for a New International Instrument in the Field of Business and Human Rights’ (Report, June 2014). 325 McCorquodale, above n55; deSchutter, above n65.
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Chapter 6: Going Above and Beyond section challenges the traditional notion of law as revolving around legal standards and compliance to them, as a result of which the law would have little, if any, role to play in aspirational regulation, such as in the domains of CSR or corporate peacebuilding in particular.326 These scholars comprehend the limitations of traditional command-and- control style legal regulation – especially in relation to transnational governance challenges – not as a death knell for the law’s role in regulation, but as a call for more innovative legal responses.327
While the law does not serve as the primary device by which behavioural change is achieved, it nevertheless has a significant task in aspirational regulatory design. It expresses the public policy objectives of the entire regulatory enterprise and facilitates the effective deployment of other regulatory devices to realise those objectives. Beyond its roles as standard-setter and chief enforcement mechanism, the law has the ability to serve as a powerful ‘nudge’ to TNCs doing business in conflict-affected areas, to encourage them to explore their positive peacebuilding potential.
A useful starting point in developing this conception of the role of law in aspirational regulation is Epstein’s theory of social control, which demystifies the law by suggesting it is but one of six modes of social control.328 They are: (1) law; (2) affinity group regulation; (3) self-regulation; (4) ethical precepts; (5) media; and (6) engaged civil society.329 When deployed in concert, he posits, they may achieve ‘corporate behavior that is beneficial rather than harmful’.330
This pragmatic approach to the law is akin to that taken by some regulatory scholars. Indeed, several have applied Epstein’s typology to regulatory problems related to the
326 Edwin Epstein, ‘The Corporate Social Policy Process: Beyond business ethics, corporate social responsibility, and corporate social responsiveness’ (1987) 29 California Management Review 99; Morgan and Yeung, above n11; Christine Parker, ‘Meta-Regulation: Legal Accountability for Corporate Social Responsibility’ in Doreen McBarnet, Aurora Voiculescu and Tom Campbell (eds), The New Corporate Accountability: Corporate Social Responsibility and the Law (Cambridge University Press, 2007); Richard Thaler and Cass Sunstein, Nudge: Improving Decisions About Health, Wealth and Happiness (Yale University Press, 2008). 327 See, eg, Ella Joseph, ‘Promoting Corporate Social Responsibility: Is Market-Based Regulation Sufficient?’ (2002) 9(2) New Economy 96. 328 Epstein, ‘The Good Company’, above n13, 201. 329 Ibid. 330 Ibid
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Corporate Peacebuilding and the Law field of corporate activity in conflict-affected areas. For instance, Runnels and Burton critique the US Foreign Corrupt Practices Act on the basis of its rigidity and questionable impact on achieving the overall goal of ending corruption.331 Their reform arguments are premised on an application of Epstein’s six modes of social control to the problem at hand.332
Morgan and Yeung’s schematic of law’s ‘images’ and ‘functions’ is also helpful in articulating its role in aspirational regulation.333 They argue that there are, generally speaking, two images of law: ‘law as threat’ and ‘law as umpire’ and the law possesses both a facilitative and an expressive role in regulating conduct in both images (Table 6.1).334
Table 6.1: Morgan and Yeung’s characterisation of the law’s roles and images335
Law’s image Law’s role Law as threat Law as umpire
Law’s facilitative role: Proscribing conduct and Creating and policing the law as an instrument for threatening sanctions for boundaries of a space for shaping social behaviour violation to deter that free and secure conduct interaction between participants
Law’s expressive role: Legitimating coercion Reflecting shared or law institutionalising agreed morality of the values community of players
Morgan and Yeung’s images of the law may be transposed onto the regulatory diamond heuristic, with ‘law as threat’ being a convenient image through which to view the role of the law in compliance regulation and ‘law as umpire’ as an apt characterisation of
331 Michael Runnels and Adam Burton, ‘The Foreign Corrupt Practices Act and New Governance: Incentivizing Ethical Foreign Direct Investment in China and other Emerging Economies’ (2012) 34 Cardozo Law Review 295. See also Runnels, Kennedy and Brown, ‘CSR and the New Governance: In Search of Epstein’s Good Company in the Employment Context’ (2010) 43 Akron Law Review 501. 332 Runnels and Burton, ibid. 333 Morgan and Yeung, above n11, 6. 334 Ibid. 335 Morgan and Yeung, above n11, 6.
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Chapter 6: Going Above and Beyond how the law may operate within aspirational regulation. In the absence of its coercive or standard-setting functions, to be effective as an aspirational regulatory tool and exercise its facilitative and expressive role, the law necessarily adopts a softer hue.336
A Expressive Role of Law in Aspirational Regulation
From a regulatory perspective, the law has a vital role to play in providing definitional clarity not simply of the ‘lowest common denominator of socially acceptable behavior’ of corporations, but also of what Epstein may recognise as ‘good company’ behaviour as well.337
Importantly, the law articulates and codifies (in writing) the aspirational goals towards which regulation and governance tools are directed. Whether it is the protection of human rights, the minimisation of health and safety concerns in the workplace (OH&S regulation) or, in our case, the realisation of corporate peacebuilding, the law often provides a statement of purpose – publicly elucidating the policy goals being pursued through the regulatory enterprise.
While the bulk of the actual aspirational regulatory practice occurs at the more collaborative, middle rungs of the regulatory diamond – through voluntary multi- stakeholder initiatives such as the UN Global Compact – the shadow of the law nevertheless helps provide a purposive direction to the regulatory project.338 While the UN’s Guiding Principles on Business and Human Rights, Global Compact and Voluntary Principles, for instance, are multi-stakeholder, market-oriented initiatives, they were not originally market-driven. Rather, all were instigated by governments or multilateral organisations (in the upper half of the regulatory diamond).339 That is, it
336 Ibid. 337 Epstein, ‘The Good Company’, above n13; Morgan and Yeung, above n11. 338 Neil Gunningham and Peter Grabosky, Smart Regulation: Designing Environmental Policy (Clarendon Press, 1998). 339 See generally, Ruggie, Just Business, above n36; John Ruggie, ‘Business and Human Rights: The Evolving International Agenda’ (2007) 101 American Journal of International Law 819.
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Corporate Peacebuilding and the Law was national and international public policy and institutions that set the aspirational goals and imbued those values into the regulatory agenda.340
The law expresses the socially-desirous outcomes that the regulators aspire to achieve. Law can clearly articulate these goals to the market, to regulatees and to the public writ large with a legitimacy that non-law and soft-law mechanisms frequently lack.341 The law does not merely express the minimum standards of conduct that should be adhered to, but also signals to the market the higher expectations of how a ‘good’ (in Epstein’s words) or ‘virtuous’ (in mine) company behaves.342
B Facilitative Role of Law in Aspirational Regulation
The law’s facilitative function, rather than its norm-creation and compulsion functions, comes to the forefront in aspirational regulation through supporting and assisting market-based mechanisms to work effectively.
Contrary to narrow understandings, the law’s role is not limited to commanding, controlling, enforcing or standard-setting. Rather, the law may also be deployed to make more gentle regulatory “nudges” – and prompt the socially desirable behavioural outcomes. Morgan and Yeung use the term ‘facilitative role’ to describe this.343 This does not refer to soft-law or market-based instruments which we could reasonably suggest are more facilitative than coercive. On the contrary, the references to law here are very much to the hard-law, traditional state-based form.
A scheme that creates and regulates tradeable pollution permits is an example of the law’s facilitative function offered by Morgan and Yeung.344 Instead of only proscribing
340 Marc Eisner, ‘Private Environmental Governance in Hard Times: Markets for Virtue and the Dynamics of Regulatory Change’ (2011) 12 Theoretical Inquiries in Law 489, 491. 341 Shelton, ‘Normative Hierarchy’, above n38; Chris Dent, ‘Relationships between Laws, Norms and Practices: The Case of Road Behaviour’ (2012) 21 Griffith Law Review 708. 342 Epstein, ‘The Good Company’, above n13; Vogel, Market for Virtue, above n14. 343 Morgan and Yeung, above n11. Others adopt different wording but it is an idea embraced by many regulatory theorists that endorse a public interest theory of regulation. See generally Robert Baldwin, Martin Cave and Martin Lodge, Understanding Regulation: Theory, Strategy and Practice (Oxford University Press, 2nd ed, 2012). 344 Morgan and Yeung, above n11, 7.
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Chapter 6: Going Above and Beyond pollution emissions above a certain level and sanctions for those that breach it, the law also offers incentives to reduce emissions. The law can develop an institutional framework – the rules of the game, so to speak – but the tactics and actions of each regulated entity – the players – are left up to them.345
In several works, Coglianese has explored this facilitative function of the law in his empirical investigations into innovative US environmental regulation.346 For instance, together with Nash, he has investigated the US Environmental Protection Authority’s Performance Track Program – a regulatory regime that seeks to create incentives for polluters to improve their environmental protection beyond the mandatory legal standards.347
Furthermore, Sunstein and Thaler’s “nudge” is instructive when it comes to contemplating the facilitative role of law within aspirational regulatory design.348 Although approaching the regulatory task from a different disciplinary angle (and lexicon), Sunstein and Thaler suggest that traditional lawmaking can eschew coercive, command-and-control style form and instead become a ‘nudge’ that may, in turn, influence the behaviour of the regulated individuals or corporations.349
In their bestselling book Nudge: Improving Decisions about Health, Wealth and Happiness, Sunstein and Thaler apply behavioural economics ideas to public policymaking, arguing that the ‘choice architecture’ presented to a consumer or corporation ‘greatly affects [their] decisions’.350 These choice architectures are ‘pervasive and unavoidable’.351 For Sunstein and Thaler, a nudge is ‘any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives’.352 Given their
345 Ibid. 346 See, for example: Cary Coglianese and Evan Mendelson, ‘Meta-Regulation and Self-Regulation,’ in Martin Cave, Robert Baldwin and Martin Lodge, The Oxford Handbook on Regulation (2010). 347 Cary Coglianese and Jennifer Nash, ‘Beyond Compliance: Business Decision-making and the US EPA’s Performance Track Program’ (Regulatory Policy Program Report RPP-10, John F. Kennedy School of Government, Harvard University, 2006). 348 Thaler and Sunstein, above n67. 349 Ibid. 350 Ibid, 252. 351 Ibid. 352 Ibid, 6.
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Corporate Peacebuilding and the Law prevalence, Sunstein and Thaler call on ‘choice architects’ to implement nudges that prompt people and corporations to move in a socially beneficial direction.353 Similarly, Gneezy’s experimental research (conducted with various co-authors) supports the view that well-designed choice architecture can be an efficient and effective means of influencing behaviour.354
By designing these choice architectures with well-calibrated incentives and feedback mechanisms, governments can ‘nudge’ – as opposed to compel – consumers or corporations to behave in a certain fashion.355 ‘Nudges are not mandates’ but nevertheless, in the context of implementing government policy, they could adopt legal form.356
Another example of a legal nudge that could be adopted to embrace this facilitative role in aspirational regulation is mandating disclosure of information and transparency of conduct from regulated corporations. By facilitating the provision of information (rather than mandating specific behavioural standards) to the market and public, the law serves in a secondary capacity. Its impact is indirect – relying on market forces to be influenced themselves by the provision of information regarding corporate conduct and, ultimately, in turn elicit the desired change in the corporation/s.
C Law as Meta-Regulatory Nudge
Furthermore, Parker’s explorations of how “meta-regulation” can be applied to encourage greater uptake of CSR by corporations provides a practical regulatory technique to give expression to the facilitative and expressive roles of the law.357 Meta-
353 Ibid. 354 Uri Gneezy and Aldo Rustichini, ‘A Fine is a Price’ (2000) 29 Journal of Legal Studies 1; Omar Al- Ubaydli, Steffen Andersen, Uri Gneezy and John List, ‘Carrots That Look Like Sticks: Toward an Understanding of Multitasking Incentive Schemes’ (2015) 81 Southern Economic Journal 538. 355 Thaler and Sunstein, above n64. 356 Ibid, 6. 357 Christine Parker, The Open Corporation: Effective Self-Regulation and Democracy (Cambridge University Press, 2002); Parker, ‘Meta-Regulation’, above n67; Sharon Gilad, ‘It Runs in the Family: Meta-regulation and its Siblings’ (2010) 4 Regulation and Governance 485; Mia Mahmudur Rahim, ‘Meta-Regulation Approach of Law: A Potential Legal Strategy to Develop Socially Responsible Business Self-regulation in Least Developed Common Law Countries’ (2011) 40 Common Law World Review 174; Coglianese and Mendelson, above n83.
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Chapter 6: Going Above and Beyond regulation provides a useful framework within which to develop effective aspirational regulatory instruments to assist in realising the promise of corporate peacebuilding.
Meta-regulation is the regulation (ordinarily by government) of internal self- regulation.358 It is a dynamic, ‘process-oriented’ form of regulation.359 It is a technique that seeks to take advantage of the “new governance” landscape described by Lobel, Ford and others, including the proliferation of different non-state-based forms of regulation and market-based governance mechanisms. 360 It ‘explicates that a state- centered conception of laws is not sufficient in a pluralized society and the decentered understanding of law is not quite capable of incorporating social values into corporate behaviour’.361 Meta-regulation is a technique that deploys the law not to mandate or command corporations to comply with certain standards at the risk of punitive measures, but rather to encourage corporations to engage in learning about the industries and problems that they are trying to manage and then ‘put in place internal governance structures, management practice and corporate cultures aimed at achieving responsible outcomes’.362
Legal meta-regulation, Parker theorises, is an attempt by law to mould what Selznick refers to as companies’ ‘consciences’.363 Or as Parker puts it, ‘getting companies “to want to do what they should do” – not just legally compliant outputs or actions’.364 She suggests that legislation, for example, that mandates enhanced corporate disclosure around social and environmental responsibilities is meta-regulatory law aimed at nudging affected companies to enhance their CSR practices and embed a CSR ethos into their corporate culture.365 This regulatory technique works by creating effective
358 Parker, ‘Meta-Regulation’, above n67, 207. See also: Rahim, ibid. 359 Gilad, above n98. 360 Lobel, above n13; Cristie Ford, ‘New Governance, Compliance, and Principles-Based Securities Regulation’ (2008) 45 American Business Law Journal 1. 361 Rahim, ‘Meta-Regulation Approach’, above n98, 206. 362 Parker, ‘Meta-Regulation’, above n67, 208; Gilad, above n98. 363 Phillip Selznick, The Communitarian Persuasion (Woodrow Wilson Center Press, 2002) 101. 364 Parker, ‘Meta-Regulation’, above n67, 208 quoting Selznick, ibid 102. 365 Ibid. See also Gilad, above n98; Laura Albareda, Tamyko Ysa, Joseph Lozano and Heike Roscher, ‘The Role of Governments in Fostering CSR’ in Andrew Kakabadse and Mette Moorsing (eds), Corporate Social Responsibility: Reconciling Aspiration with Application (Palgrave Macmillan, 2006) 112.
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Corporate Peacebuilding and the Law feedback – or learning – loops that encourage continuous improvement.366 It “works” because it leverages market forces and social activism that impacts on markets, to increase the reputational and financial risks of a poor CSR record and, on the flipside, presents an opportunity for well-performing companies to distinguish themselves from their competitors in the marketplace.367 Legal meta-regulation is ‘an approach to legal regulation in which the internal “corporate conscience” is externally regulated’.368
Meta-regulation is already a technique employed at both the domestic Australian and transnational levels.369 Domestically, initiatives such as the Star Ratings for energy efficiency370 and nutritional content of packaged foods are meta-regulatory in design.371 In the realm of corporate regulation, as Parker notes, the Australian Competition and Consumer Commission already devolves to individual corporations the development of internal compliance mechanisms without direct regulatory oversight through “enforceable undertakings” in negotiated settlements with corporations.
Internationally, the three Basel Accords on banking regulation,372 as well as the World Health Organization’s International Code of Marketing Breast Milk Substitutes are contemporary examples of meta-regulation.373 A more recent example – related to the issue of armed conflict – is the European Union’s introduction in 2015 of a product- labelling scheme requiring all importers to the EU to clearly label the origin of all products produced in the occupied Palestinian territories.374
366 Ibid. 367 See, eg, Rahim, ‘Meta-Regulation Approach’, above n98. 368 Parker, ‘Meta-Regulation’, as above n67, 237. 369 Ibid. 370 COAG Energy Council, Equipment Energy Efficiency Program, Energy Rating
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Parker cautions that meta-regulation does have its pitfalls as a regulatory technique.375 For instance, she cautions that law risks being ‘hollowed out into a focus on process that fails to recognise and protect substantive and procedural rights. If the law itself fails to recognise and protect substantive and procedural rights, then business will doubly fail to do so’.376 Nevertheless, Parker argues that in an age of ‘plural governance’ or what Lobel calls ‘new governance’, the law’s regulatory role needs to adapt and evolve beyond the setting and enforcement of standards.377
In summing up this section, we can conceive of an important role for law in aspirational regulation in general and for corporate peacebuilding in particular. Embracing that role requires shedding the orthodox perspective that sees the law only as a standard-setting and enforcement tool, and recognising that it also has valuable functions not to coerce or compel, but to articulate values and policy goals, and facilitate the effective operation of other social control mechanisms. Illustrations of law performing these functions in the guise of meta-regulatory nudges are provided in the following section.
IV DODD – FRANK’S MISCELLANEOUS PROVISIONS: A MODEL FOR LAW-BASED ASPIRATIONAL REGULATION FOR CORPORATE PEACEBUILDING?
There are several examples of hard-law mechanisms that have been adopted to encourage “better” corporate citizenship in conflict-affected areas, and in other aspects of corporate affairs, such as environmental protection and sustainability.378 Perhaps the most prominent legislative efforts at aspirational regulation relate to climate change mitigation. Many of the various legislative responses to dangerous climate change
375 Parker, ‘Meta-Regulation’, above n67, 207. 376 Ibid. 377 Lobel, as above n13. 378 Cary Coglianese and Jennifer Nash, ‘Performance Track’s Postmortem: Lessons from the Rise and Fall of EPA’s ‘Flagship’ Voluntary Program’ (2014) 38 Harvard Environmental Law Review 1; Katharina Momsen and Thomas Stoerk, ‘From Intention to Action: Can Nudges Help Consumers to Choose Renewable Energy?’ (2014) 74 Energy Policy 376; Mar Campins-Eritja and Joeyeeta Gupta, ‘Non-State Actors and Sustainability Labelling Schemes: Implications for International Law’ (2002) 2 Non-State Actors and International Law 213.
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Corporate Peacebuilding and the Law explicitly embrace a market-oriented approach.379 A carbon tax or cap-and-trade schemes aimed at reducing carbon dioxide emissions have been introduced in dozens of countries around the world.380 These statutory responses to the problem do not prohibit further carbon dioxide emissions, but simply increase the cost to consumers and/or industry on doing so. This indirect, meta-regulation is an example of aspirational regulation that rejects direct command-and-control legislating and instead relies on market forces to achieve the regulatory objective – a reduction in carbon emissions.
In relation to the problem that lies at the heart of this thesis: namely, transnational corporate activity negatively impacting armed conflicts, there also exist several examples of hard-law initiatives that can be characterised as aspirational regulation. Two examples of law-based aspirational regulation designed to encourage corporate peacebuilding behaviour come (perhaps surprisingly for some readers) from the US. They do not mandate compliance with certain behavioural standards per se. Instead, the laws are designed to act as meta-regulatory nudges that leverage market powers in order to elicit the desired behavioural change in targeted industries, surpassing what is legally required of them. They mirror Parker’s and Rahim’s calls for enhancing disclosure requirements as a meta-regulatory device to encourage socially beneficial corporate behaviour.381
In the wake of the 2008 Global Financial Crisis, the US Congress sought to increase regulation of the US financial and banking sectors to prevent a recurrence of such a crisis.382 The piece of legislation that eventually passed to give effect to that purpose
379 See, eg, Ans Kolk and Jonatan Pinkse, ‘Market Strategies for Climate Change’ (2004) 22 European Management Journal 304; Annie Petsonk, Daniel Dudek and Joseph Goffman, ‘Market Mechanisms and Global Climate Change: An Analysis of Policy Instruments’, (Report, Environmental Defense Fund, Pew Center on Global Climate Change, 1998). 380 According to the International Carbon Action Partnership, there are 17 emission trading schemes operating in jurisdictions accounting for 40% of global GDP. Emissions Trading Worldwide: ICAP Status Report 2015, International Carbon Action Partnership,
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Chapter 6: Going Above and Beyond was the Dodd–Frank Wall Street Reform and Consumer Protection Act (2010), consisting of over 800 pages of statutory text.383 Amid the voluminous provisions on financial sector regulation, the Dodd–Frank Act contains two provisions that are illustrative of the type of formal lawmaking that can be said to constitute aspirational regulation for corporate peacebuilding. Both included as “miscellaneous provisions” that have little relevance to the ostensible purpose of the legislation.384 Instead, the so- called “conflict minerals” and “anti-bribery” provisions were inserted into the statute (at the last minute) to advance the international conflict resolution objectives of their congressional authors and civil society advocates.385
A Section 1502: The Conflict Minerals Provision
Buried deep in the Dodd–Frank Act is an obscure provision that does not per se ban the mining of conflict minerals (which would have been a classic example of command- and-control style regulation) but, rather, leverages market forces to encourage consumer electronics manufacturers to cease using certain minerals sourced from central African countries in their products.386 The provision begins by expressing its conflict resolution raison d’etre: It is the sense of Congress that the exploitation and trade of conflict minerals originating in the Democratic Republic of the Congo is helping to finance conflict characterized by extreme levels of violence in the eastern Democratic Republic of the Congo, particularly sexual- and gender-based violence, and contributing to an emergency humanitarian situation therein, warranting the provisions [that follow].387
The so-called conflict minerals (CM) statutory provision is a prime example of aspirational regulation enacted by a government regulator to facilitate positive CSR
383 Dodd-Frank Wall Street Reform and Consumer Protection Act (2010), Pub L No 111-203, § 1502. Dodd-Frank in the act’s title refers to the Senate and House committee chairs that successfully shepherded the legislation through the political process: Senator Chris Dodd (D-Connecticut) and Congressman Barney Frank (D-Massachusetts). 384 The 15th and penultimate chapter of the Act entitled: ‘Title XV – Miscellaneous Provisions’. 385 Dodd-Frank Wall Street Reform and Consumer Protection Act (2010), s1502, ‘Conflict Minerals’; s1504, ‘Disclosure of Payments by Resource Extraction Issuers’. 386 Dodd-Frank, s1502. 387 s1502(a): Sense of Congress on Exploitation and Trade of Conflict Minerals Originating in the Democratic Republic of Congo’.
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Corporate Peacebuilding and the Law outcomes in conflict-affected areas. Specifically, it is seen as a leading statutory attempt at encouraging ‘responsible sourcing’ by TNCs doing business in a conflict-afflicted area of central Africa.388 Representative Barney Frank – one of the leading congressional supports of the provision states its purpose more bluntly: ‘The purpose is to cut off funding to people who kill people’.389
For at least two decades, the causal link between natural resource extraction and numerous armed conflicts in Africa has been established.390 The decades-long conflict engulfing the Democratic Republic of Congo (DRC) and encompassing surrounding countries has long been understood to be driven, in part, by the desire to control rich natural assets of the country – in particular its subterranean mineral wealth, especially in eastern Congo.391 By some estimates, there is as much as $24 trillion in tin, tantalum, tungsten and gold (3T+G) in Congo’s eastern hills.392
Government forces and militia often battle for control of mines and surrounding areas, leaving a terrible toll on locals. In turn, proceeds from the sale of these 3T+G minerals – either by government-backed entities or other armed groups – are, in the words of the US State Department, used to ‘perpetuate the cycle of conflict, human trafficking physical and sexual violence and human rights abuses’.393 Hence, echoing the success
388 Henry Lowenstein, ‘Dodd-Frank’s Conflict Minerals Rule: The Tin Ear of Government Business Regulation’ (2014) 24 Southern Law Journal 189. 389 As quoted in: Devon Maylie, ‘New Law Pressures Congo’s Mines’, Wall Street Journal (New York), April 26 2011. 390 Report of the Panel of Experts on Violations of Security Council Sanctions Against UNITA (UN Security Council Report, UN Doc S/2000/203, 10 March 2000) (‘The Fowler Report’); Ian Smillie, Blood on the Stone: Greed, Corruption and War in the Global Diamond Trade (Anthem Press, 2010); Global Witness, ‘A Rough Trade: The Role of Companies and Governments in the Angolan Conflict’ (Report, December 1 1998),
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Some jewellery and even toothpaste may contain conflict minerals. But the highest profile industry impacted by the CM provision is undoubtedly the high-tech electronics industries and it is in this industry where perhaps the most promising responses to the CM legislation has arisen.397 The vast majority of today’s electronic gadgets and computing equipment includes the 3T+G minerals. In turn, these may be sourced from the DRC and surrounding countries.398 For example, tin is the most common solder on circuit boards found in electronics equipment; a flat-screen television contains, on average, 4.8 grams of tin solder, and a smartphone 3 grams.399 Tungsten accounts for a smartphone’s vibrate function and tantalum is an essential component in the production of high-quality capacitors found in everything from aircraft to laptop computers, medical pacemakers to smartphones.400
Significantly, section 1502 does not ban the purchase, import or use of these so-called conflict minerals sourced from the DRC or surrounding countries.401 There is no prohibitory aspect to the provision. Instead it requires the public reporting of any such uses of conflict minerals in manufactured products – and places the onus on the end- manufacturer to investigate its entire supply chain, including refiners, smelters and the
394 See, eg, Amnesty International, Conflict Diamonds
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Corporate Peacebuilding and the Law mines themselves.402 The legislation demands that all companies selling products to US consumers and registered with the US Securities and Exchange Commission (SEC) must ‘disclose annually’ their use of conflict minerals in their products.403
The legislation has created a new requirement of supply-chain due diligence and disclosure for companies, but does not outright ban the use of conflict minerals.404 The authors of the legislation understood that an outright prohibition would be untenable both politically and commercially, and would likely have been at risk of a successful legal challenge by companies affected.405 As it was, the law’s disclosure requirements have been sharply criticised by Republican lawmakers and corporate interest groups, with one congressman referring to them as being a ‘massive paperwork burden on US companies’.406
Advocacy groups such as the Enough Project and Global Witness, as well as a small number of congressmen who take an active interest in African affairs, hailed the law’s passage as a landmark moment in attempts to end the armed conflict in the Congo.407 Similarly, the US State Department and DRC government both publicly supported passage and implementation of the law.408 Indeed, in 2012 the DRC government introduced legislation requiring companies operating in its domestic 3T+G mining
402 Dodd-Frank, section 1502(b)(1)(A). 403 Ibid. 404 Ibid. 405 Marshall Chase, ‘Conflict Minerals and the Democratic Republic of Congo: Responsible Action in Supply Chains, Government Engagement and Capacity Building’ (Business Sustainability Roundtable Report, May 2010) 12.
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Chapter 6: Going Above and Beyond sectors to undertake supply-chain due diligence according to the OECD Standard.409 Eleven other African states have since also established similar measures.410
By requiring companies to conduct and then publicise their supply chain audits, the conflict-minerals law hopes to harness market forces to shame the companies into abolishing the use of conflict minerals in their supply chains. Importantly, it is not to shame them into compliance – because the mining and use of conflict minerals is not deemed illegal under US law, but rather (merely) unethical. While there are fines for non-compliance, those refer only to the submission and quality of the reporting, not whether the audit identifies conflict-mineral use.411 The success of the provision depends on the internal actions taken by the TNC. This is the essence of its meta- regulatory nature – it requires TNCs to regulate themselves.
B Section 1504: The Transparency Provision
The CM provision is not the sole provision in the Dodd–Frank Act intended to have a positive impact on corporate activities in conflict-affected areas. Section 1504 in the Miscellaneous Provisions section of the bill is a provision requiring increased financial transparency for the extractives industry.412 Just like the CM provision, this anti-bribery provision is drafted not as prohibition, but as a meta-regulatory ‘nudge’.413
Section 1504 requires that all “resource extraction issuers” – that is, companies involved in the exploration and exploitation of oil, gas and mineral resources – must disclose all financial payments over US$100,000 to foreign governments pertaining to the commercial development of said resources.414 This goes well beyond the pre-existing legal standards – primarily, the US Foreign Corrupt Practices Act (1977) and the
409 Ved Nanda, ‘Conflict Minerals and International Business: US and International Reponses,’ (2014) 20 ILSA Journal of International and Comparative Law 285. 410 Ibid. 411 US Securities and Exchange Commission, Conflict Minerals Final Rule, Release No. 34-67716, File No. S7-40-10 (13 November 2012). 412 Sometimes known as the Cardin-Lugar Amendment after its two chief sponsors: Senators Ben Cardin (D-Maryland) and Richard Lugar (R-Indiana), Dodd-Frank, s1504. 413 Senator Chris Dodd said in a Senate floor speech that he hoped s1504 would ‘impose a new international transparency standard.’ (C-SPAN, May 17 2010.) Available at:
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This provision adopts the same meta-regulatory approach as the CM provision. The legislation is designed not to elicit behavioural change through traditional command- and-control – there is neither a command nor enforcement protocol to halt payments to foreign governments. Rather, the provision’s modus operandi is predicated on the free market providing the impetus to prompt the desired behavioural change in TNCs; namely, fewer bribes and facilitation payments to foreign governments.416 Through the disclosure requirement, the law facilitates social control via the market. It allows the market to be the primary behaviour-change instrument. The law simply feeds information to the market; market actors are then free to act on that information as they see fit.
There is other more traditional lawmaking in the anti-bribery field. The US Foreign Corrupt Practices Act (1977) and the UN Convention Against Corruption (2003) both prohibit the bribery of foreign government officials, and detail monitoring and enforcement measures to ensure compliance.417 They are exemplars of traditional approaches to lawmaking and compliance regulation: establishing clear minimum standards – e.g. proscribing bribery – and penalties for any breach of said standards.
In contrast, section 1504 goes both further and not as far as these hard-law efforts. It goes further in the sense that the category and type of payments that must be disclosed under the provision are far broader than in any of these hard-law instruments. That is, there need not be any illegality involved in the payments; they may indeed be legitimate and legal payments to local government entities. Section 1504 seeks to expose the totality of the extractive industry’s payments to government. Nevertheless, section 1504 does not go as far: as opposed to the FCPA and the international conventions, section 1504 only requires disclosure. 418 It does not prohibit any payments nor punish payers or
415 Ibid. 416 Dodd-Frank, s1504,para ‘(2) DISCLOSURE’. 417 Foreign Corrupt Practices Act (1977) 15 USC. §78dd-1; UN Convention against Corruption, opened for signature 31 October 2003, 2349 UNTS 41 (entered into force 14 December 2005) (178 parties to the treaty, as at December 2015). 418 Dodd-Frank, s1504.
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Interestingly, the development of this hard-law legislative provision also demonstrates the catalytic possibilities of MSGI and other soft-law instruments. The antecedents of this bribery-disclosure provision can be found in civil society-led, multi-stakeholder voluntary initiatives such as the Extractive Industries Transparency Initiative.419 In a sense, section 1502 is the EITI in legislative form.
C Their Meta-Regulatory, Aspirational Design
Former Justice of the US Supreme Court Louis Brandeis said that ‘publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants; electric light the most efficient policeman’.420 These provisions follow a similar rationale. They do not demand corporations halt using conflict minerals or providing facilitation payments to governments. Instead, as per Parker’s and Rahim’s suggestion, these provisions’ modus operandi is to facilitate the disclosure of information to the market, in the hope that market forces will elicit the desired behaviour change.421
By increasing transparency and demanding disclosure of these rules, the hope is that affected corporations will be nudged to alter their behaviour – specifically, reducing their use of conflict minerals in their product-lines and reducing the extent of illegitimate payments to foreign governments or their agents. The provisions are designed to achieve these socially-beneficial goals not through prohibitions but by compelling disclosure of corporate practices, so that companies will be influenced through their own internal due-diligence and risk-management processes, as well as being chastened by potential repercussions in the marketplace.
419 Extractive Industries Transparency Initiative
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The legal challenges and resistance these provisions face from some industry quarters is indicative that, just like compliance regulation, not all mechanisms of aspirational regulation need to be consensual and collaborative in nature.422 The command-and- control aspect of lawmaking remains but, instead of directly proscribing certain conduct, these provisions demand merely transparency of conduct. These are meta- regulation schemes in which command-and-control legislation is used but not to command nor to control but, rather, to facilitate and amplify the market’s behaviour change potential – to moderate the activities of corporations in conflict-affected areas.
D Challenged in the Courts
Implementation of the CM and anti-bribery provisions (as with many other elements of Dodd –Frank) has been slow, in large part due to legal challenges launched by industry groups.423 At the direction of the Act, the US Securities and Exchange Commission drafted a Final Rule to oversee corporate compliance with the CM provision’s reporting requirements in 2012.424 The National Association of Manufacturers, the Business Roundtable and the US Chamber of Commerce challenged the legality of aspects of the Rule, including on grounds that the requirement to describe products as ‘not found to be DRC conflict free’ (as per s1504(b)(1) violates companies’ constitutionally protected guarantee of free speech.425 After several hearings and appeals, that litigation remains ongoing. In the interim, the courts have denied industry-led efforts to halt the annual reporting requirements.426 In 2014, the first wave of annual CM reporting was submitted and in June 2015, 1258 companies participated in the second wave of CM reporting.427
422 Michael Seitzinger and Kathleen Ruane, ‘Conflict Minerals and Resource Extraction: Dodd-Frank, SEC Regulations, and Legal Challenges’ (Congressional Research Service, April 2 2015) 19. 423 Ibid. 424 US Securities and Exchange Commission, Conflict Minerals Final Rule, Release No. 34-67716, File No. S7-40-10 (13 November 2012). See, generally, US Securities and Exchange Commission, Factsheet: Disclosing the Use of Conflict Minerals
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To date, section 1504’s transparency requirements remain dormant. The SEC’s Final Rule implementing Dodd–Frank’s section 1504 was issued in August 2012.428 Two months later it was challenged by the American Petroleum Institute, the US Chamber of Commerce, Independent Petroleum Association of America and National Foreign Trade Council on various administrative and constitutional law grounds.429 The US District Court (DC) vacated the SEC Rule on administrative law grounds in 2013.430 Growing frustrated with the delay, in September 2014 Oxfam sued the SEC to demand publication of a revised Final Rule.431 In December 2015, the SEC’s ‘re-propose[d] rules’ to implement section 1504 were released to the public.432 These rules were open for comment until February 2016, with the intention of issuing a Final Rule later in 2016.433 It remains to be seen whether these new rules will be challenged in the courts.
Aside from the legal challenges, some industry representative groups have been vocal in their opposition to these provisions.434 They cite, in particular, the excessive compliance costs and the resultant disadvantage that these provisions cause to US-based corporations.435
Nevertheless, on passage, these two legislative provisions were celebrated in some quarters – including some TNCs – as major steps to curb the economic drivers of armed conflict and to end corporate practices that were considered to be driving corruption, human rights abuses and conflict.436 They were conceived in the hope of raising CSR in
428 US Securities and Exchange Commission, Conflict Minerals: Disclosure of Payments by Resource Extraction Issuers: Final Rules, 17 CFR 240, 249 and 249b (12 September 2012). 429 American Petroleum Institute v. SEC, 953 F. Supp. 2d 5 (D.C. 2013). 430 Ibid. 431 Oxfam America Inc v. SEC, 14-13648 (D. Massachusetts 2015). 432 US Securities and Exchange Commission, Conflict Minerals: Disclosure of Payments by Resource Extraction Issuers: Final Rules, 17 CFR 240, 249 and 249b (12 September 2012). 433 Ibid. 434 See, eg, Dustin Walsh, ‘Auto Industry Stells Itself for ‘Conflict Minerals’ Rule, Automotive News (online), September 24, 2013
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Whether the provisions have achieved these lofty goals remains an open question. The consequences of the implementation of these two provision have become a useful illustration of the vagaries of this type of regulation and the strong headwinds that confront efforts to legislate corporate social responsibilities. Nevertheless, as a prototypical example these provisions hold out the promise of effective law-based aspirational regulation.
E Impact on Corporate Behaviour: A Nascent Market for Virtue?
The CM provision has had major repercussions for some of the largest global electronics manufacturers, including alterations in the way they do business in conflict- affected areas of central Africa. The regulatory purpose of section 1502 – reducing the use of conflict minerals – has been embraced by some of the leading companies affected. The ongoing litigation and continuing opposition expressed by some in industry has not prevented two rounds of annual CM reporting from over a thousand TNCs (2014 and 2015), stating whether their supply chains are CM–free and the efforts they undertook to determine that.438
While the participation rate seems healthy, civil society groups have warned against equating reporting with being CM–free.439 For instance, amongst 100 companies’ reports from 2014 analysed by Global Witness and Amnesty International nearly 80% ‘failed to meet the minimum requirements’ of section 1502 in that they inadequately
‘Taking Back the Narrative on Dodd-Frank’s Conflict Minerals Provision’, The Hill (Washington DC), December 15 2015. 437 See, eg, Global Witness, Conflict Minerals
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Chapter 6: Going Above and Beyond tracked the minerals used back through their supply chains.440 Only 16% of reporting companies took the required steps of going beyond their direct suppliers to contact the refiners and smelters that process their minerals.441 Despite this poor start, it is expected that over time more rigorous due-diligence processes will be developed by companies affected by the law.442 Already there are signs of improvement. Google reported an increase from 36% (in its 2014 report) to 57% (in its 2015 report) of its smelters as being verifiably CM–free.443 This mimics Apple’s reporting: 31% of smelters in 2014 CM-free, up to 60% in 2015.444
To assist in the implementation of the CM law and achieve its goal of minimising the use of conflict minerals, several industry-based regulatory initiatives were launched. These are exemplars of the desired results of effective meta-regulation. The Conflict- Free Sourcing Initiative was launched in 2013 by leading electronics manufacturers; it provides independent, third party auditing of smelters and refineries in its members’ supply chains with the goal of being CM–free.445 Over 300 companies, including the likes of 3M, Apple, Toshiba and Hewlett-Packard, are currently members of the CFSI.446 In a similar vein, the World Gold Council launched the Conflict-Free Gold Standard, which aims to improve the quality and consistency of the gold industry’s due diligence in this area.447 Perhaps most ambitiously, the Solutions for Hope project was launched in 2011 between Motorola and AVX (a leading electronic components manufacturer) to ‘serve as a platform to support responsible sourcing, peacebuilding,
440 Ibid. 441 Ibid. 442 PriceWaterhouseCoopers, ‘Time to get Started: Conflict Minerals’ (Report, May 2013)
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Corporate Peacebuilding and the Law and community development’.448 Solutions for Hope has two ongoing projects – the responsible, conflict-free sourcing of tantalum in the DRC and of gold in Colombia.449
Seemingly, a nascent ‘market for virtue’ has been identified and embraced by some of the leading technology brands that are now racing to rid their supply chains of conflict minerals entirely.450 Several high profile, high-tech companies – whose products utilise conflict minerals – have been quick to publicly embrace the goal of becoming CM– free.451 For instance, Intel – the maker of ubiquitous microprocessors – has committed to a supply chain entirely CM–free by 2016.452 Hewlett-Packard has similarly stated that its goal is ‘for a majority of our 3TG [i.e. conflict minerals] production procurement spend to be DRC conflict free by the end of 2016’.453 Apple, in its 2015 filing, seems to embrace a similar goal. It states that 88% of its smelters and refiners are verified or in the process of being verified as being CM–free.454 For the remainder, says the company filing, ‘Apple is working with its suppliers to verify the rest [are CM free] or remove them from its supply chain’.455
F Impact on Peacebuilding in the DRC
These provisions are directed at ameliorating some of the issues that the scholarly literature has identified as core drivers of societal instability and armed conflict around the world: corruption and trade in minerals from conflict-zones. In a sense – certainly for their authors – these provisions are attempts at not only encouraging corporations to abide by domestic and international legal standards of conduct, but also going beyond
448 Solutions for Hope,
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Chapter 6: Going Above and Beyond and co-opting those corporations into processes of conflict management and resolution in the fragile and conflict-affected states in which they do business.
Despite the support shown by leading global companies to reduce their CM content in their products, the peacebuilding impact of the CM provision and such efforts is hard to quantify.456 The Enough Project – an advocacy organisation that was a fierce advocate of CM legislation – commissioned research on the CM law’s impact on the armed conflict in the eastern Congo. The research outlines several promising developments on the ground, including that in 2014 67% of mines in eastern Congo provinces were no longer controlled by armed groups or the Congolese military. This was in marked contrast with the observation by the UN Group of Experts in 2010 (prior to Dodd– Frank’s passage) that ‘almost every mining deposit was controlled by a military group in Congo’s Kivu Province’ since passage of the CM law.457 The Enough Project’s researchers also found that minerals that go through conflict-free compliance programs sell for a substantial premium over those that do not,458 and that those miners who were previously involved in the mining of CM have been able to find other work and income.459 The Enough Project also lauds the establishment of the CFSI and other compliance and auditing programs that have sprouted up locally in the DRC, regionally – among central African governments – and by the OECD and UN, all to assist companies to comply with the CM law.460 Hawksley, a BBC correspondent, agrees with the thrust of the Enough Project’s report, reporting that from his observations in Bukavu in eastern Congo, the CM provision is an example of how ‘soft power from far away can tackle poverty and conflict in the developing world’.461
These laudatory claims about the success of the CM law are not without their critics. Lauren Wolfe and David Aronson highlight that the US law has indeed prompted major
456 See, eg Jeroen Cuvelier, Steven van Bockstael, Koen Vlassenroot, Claude Iguma, ‘Analysing the Impact of the Dodd-Frank Act on Congolese Livelihoods’, (SSRC Conflict Prevention and Peace Forum, Report, November 2014). 457 Fidel Bafilemba, Timo Mueller and Sasha Lezhnev, The Impact of Dodd-Frank and Conflict Minerals Reorm on Eastern Congo’s Conflict, (Enough Project, 2014) 2. 458 Ibid 2. 459 Ibid 3. 460 Ibid. 461 Humphrey Hawksley, ‘Dodd-Frank Act deters US firms from using conflict minerals in supply chains’, YaleGlobal Online, MacMillan Center, Yale University, 10 July 2012
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Furthermore, some sceptical commentators and researchers urge caution in causally connecting passage of the CM law and the reduction in militant control of mines.470 Wolfe suggests that the backers of the provision may have had the best of intentions but displayed ‘a huge level of naiveté of how enforceable this law is’.471 She points to the ease with which militia groups and companies could launder minerals through places such as China and Brazil.472 Critics also highlight the poor acceptance of the “tag and bag” certification system put in to place by the central Congolese government. A frequently cited source, Adalbert Murhi Mubalama, South Kivu’s Minister of Mines is
462 David Aronson, ‘How Congress Devastated the Congo’, New York Times (New York), August 7 2011; Lauren Wolfe, above n133. 463 Wolfe, ibid. 464 Ibid. 465 Ibid. 466 Ibid. 467 Sudarsan Raghavan, ‘How a Well-Intentioned US Law Left Congolese Miners Jobless,’ Washington Post (Washington DC), November 30 2014, A2. 468 Wolfe, above n133. 469 Ibid. 470 Ibid; Raghavan, above n208. 471 Ibid. 472 Ibid.
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Finally, yet other commentators have questioned whether s1502 results in an effective embargo on eastern DRC minerals which may have unintended negative consequences on the local economy– not just the local warlords. They fear that some companies may simply shift their supply chains elsewhere, outside the Congo’s conflict-racked provinces. This echoes the broader argument against such regulation: that some TNCs may opt to withdraw operations from a certain conflict-affected area rather than comply with new standards of conduct or reporting requirements. Nevertheless, recalling that (as stated in Chapter 4) the first regulatory task is to ensure TNCs “do no harm” in such areas, that a TNC whcih does not wish to contribute to peacebuilding pulls out of a region is not necessarily a poor outcome.
In the case of mining in the Congo, TNCs may withdraw motivated by good intentions or simply to avoid the compliance costs of adhering to the CM law. Such a ‘de facto embargo’ would hit artisanal miners the hardest.474 Potentially, this could simply drive the remaining trade in 3G+T into the hands of militia and predatory Congolese army units, but otherwise shift a large proportion of the sourcing of those minerals elsewhere.475 As Aronson writes: ‘It’s easier to sidestep Congo than to sort out the complexities of Congolese politics — especially when minerals are readily available from other, safer countries’.476 For example, Malaysia Smelting – the largest purchaser of Congo’s tin prior to implementation of the legislation – halted all purchases from the country altogether.477 It has subsequently resumed sourcing tin from the Congo, but only after establishing a due diligence program to verify its Congolese tin could be declared CM–free.478
473 As quoted in Raghavan, above n208. 474 Nick Heath, ‘How Conflict Minerals Funded a War that Killed Millions, and Why Tech Giants are Finally Cleaning Up Their Act’ TechRepublic (online), 2014,
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These criticisms are challenged by the CM law’s supporters, including such groups as The Enough Project and Global Witness. But perhaps a more salient response comes from local organisations working to bring peace and human rights protections to eastern Congo. In a 2014 open letter, responding to some of the criticisms that Wolfe and others lay bare, a coalition of over two dozen civil society organisations from North Kivu (one of the Congolese provinces most affected by conflict minerals trade), celebrates the impact of the CM provision in their communities.479 They conclude thus: In our findings, we also noted that the campaign against conflict minerals as well as the requirements of section 1502 of the Dodd–Frank legislation give armed groups no choice but to change the sector of activity, in the absence of a market for their minerals. It is indeed an achievement for the campaign and the legislation to have forced armed groups to leave the artisanal mining sector.480
Whatever the short-term impact to date and despite the best of intentions on the part of its authors, whether section 1502 of the Dodd–Frank Act will have a net positive impact for peace in central Africa remains to be seen. Certainly, there are some indications that this may not be the case. Nevertheless, even if those concerns are borne out, the CM provision stands as a useful model of the potential for law-based aspirational regulation for corporate peacebuilding. Moreover, it is reasonable to suggest that the mere existence of these types of journalistic investigations, as well as the NGO analysis and advocacy that stems from it to encourage TNCs to do better, are evidence of the success of the CM provision. Indeed, the development of this ‘learning loop’ is exactly what meta-regulation is designed to do, encouraging continuous improvement as a result.481
Finally, it is worthwhile to note that the innovative, meta-regulatory approach adopted by s1502 of the Dodd-Frank Act has had ripple effects in other jurisdictions. Following
479 Groupe d’Appui à la Traçabilité et la Transparence dans la Gestion des Ressources Naturelles (Support Platform for Traceability, and Transparency in the Management of Natural Resources), ‘Six facts from the North Kivu civil society organizations specialized in the sector of natural resources, in response to the open letter addressed to governments, companies, non-governmental organizations and other actors that work in the field of ‘conflict minerals’ (Letter, October 15, 2014) < https://gattrn.wordpress.com/2014/10/15/six-facts-from-the-north-kivu-civil-society-organizations- specialized-in-the-sector-of-natural-resources-in-response-to-the-open-letter-addressed-to-governments- companies-non-governmental-organizat/>. 480 Ibid. 481 Parker, ‘Meta-Regulation’, above n67. See also, Parker, The Open Corporation, above n98.
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Chapter 6: Going Above and Beyond the passage of the CM law in the US, the European Parliament and Commission began investigating the possibility of passing complementary legislation or directives to apply to corporations doing business with (and within) the EU.482 While the European institutions have yet to finalise a conflict minerals law, it does seem likely to occur in the coming year or two, which may extend a conflict-minerals certification scheme (even further than the US version) to all EU importers and their supply chains of conflict minerals from all conflict-affected areas around the world.483
Dodd–Frank’s section 1504 anti-bribery transparency provision has also prompted a spate of similar legislation among developed economies: the EU adopted similar transparency standards in 2013, and France, the UK, Norway and Canada have all passed similar national laws requiring the extractive industries to increase their disclosure of payments made to foreign governments.484
V CONCLUSION: PROMOTING A RACE TO THE TOP OF THE DIAMOND
We can imagine a diversity of initiatives and mechanisms that could be rightly considered aspirational regulation for promoting greater corporate attentiveness to their impact on peace and armed conflict. Mechanisms that leverage market forces such as consumer boycotts, divestment campaigns and labelling requirements are just some examples of initiatives that are currently employed to encourage and pressure
482 European Commission Directorate-General for Trade, ‘Report on the Public Consultation on a possible EU Initiative on Responsible Sourcing of Minerals Originating from Conflict-Affected and High-Risk Areas’, (European Commission, July 2013,
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Corporate Peacebuilding and the Law corporations in this regard (see Figure 6.1).485 By raising consumer awareness of corporate behaviour and channelling public outrage these mechanisms seek to deter corporate misconduct and encourage more positive peacebuilding contributions. Indeed, these three regulatory strategies have been deployed with regard to a single armed conflict – the enduring Israeli–Palestinian conflict. Consumer boycotts and divestment campaigns are core features of the Boycott-Divestment-Sanctions movement.486 Further, in November 2015 the European Commission adopted guidelines for all 28 EU member states to ensure that products originating in West Bank Israeli settlements are labelled as such.487
Other law-based aspirational regulatory techniques that could be deployed for corporate peacebuilding include entrenching into law tax incentives schemes and establishing preferred government contractor schemes for those TNCs embracing their peacebuilding roles.488 Development of accreditation schemes and expansion of the CM mandatory disclosure regime to encompass other conflict-related issues are also conceivable.489 Figure 1, on the following page, provides an indication of how these types of aspirational regulatory techniques may fit into a regulatory diamond model for corporate peacebuilding.
Leveraging market forces can be an effective way of changing behaviour. However, despite, or perhaps because of, the proliferation of market-oriented MSGIs in recent years regulating transnational corporate activity (including vis-a-vis issues of peace and armed conflict), there remains a significant role for the law in aspirational regulation. In a certain sense it can be said that the market needs the law, and the law needs the
485 European Commission, Interpretative Notice on Indication of Origin of Goods from the Territories Occupied by Israel Since June 1967 [2015] Official Journal of the European Union C375/4. 486 See, eg Boycott, Divestment, Sanctions
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Chapter 6: Going Above and Beyond market. This is true on several levels, not least that the law helps create, shape and sustain the institutional and social structures within which private industry operates. Governments are market players too in other senses of the term: they are sources of credit, insurance and financing to corporations. They procure goods and services in the marketplace and enter into billion-dollar contracts with private firms.490 And on the regulatory level it is also true. The law operates most effectively when complementing the market, and the market operates most effectively when undergirded and supported by an effective legal system.
National and international ratings and prizes for excellence in Business in Peacebuilding
NGO, business and state reporting requirements Illustrative mechanisms of of business impacts on conflict/peace aspirational regulation for corporate peacebuilding Consumer boycotts and NGO awareness campaigns
OECD Guidelines, UN Guiding Principles on Business and Human Rights
Multistakeholder governance initiatives, such as
UN Global Compact, EITI, Voluntary Principles
Figure 6.1: Aspirational regulation mechanisms of the regulatory diamond for corporate peacebuilding
490 See, eg, Giselle Datz, ‘Governments as Market Players: State Innovation in the Global Economy’ (2008) 64(1) Journal of International Affairs 35.
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Overcoming traditional conceptions of law that confine it to compliance regulation, this chapter has outlined a new governance approach to the law that envisages it performing both a facilitative and an expressive function in aspiration regulation. As illustrated in this chapter, the law can wield a powerful regulatory effect not through command-and- control style traditional legislation and court decisions but, rather, through utilising market forces.
Just as the most effective compliance-regulation regimes are often constituted by a mixture of hard and soft, formal and informal lawmaking and governance instruments, so too with effective aspirational regulation. The market is a powerful actor, impacting human rights around the world. Market forces are also powerful tools to encourage behaviour change among TNCs. There is room within our understanding of international legal regimes for MSGIs. Concurrently, it is prudent not to discard traditional state-based lawmaking in favour of new governance. Encouraging TNCs to go ‘above and beyond’ minimum standards enshrined in law will require the use of both soft-law initiatives, like MSGIs, and hard-law. Neither is a panacea; both are required. We must develop innovative ways for traditional law and market-based mechanisms to complement and reinforce one another.
The inclusion of meta-regulatory nudges into the Dodd–Frank Act directed at improving corporate conduct in conflict-affected countries is a potential model for aspirational regulation. It demonstrates the expressive and facilitative roles of law: a model of lawmaking that does not simply seek compliance with applicable minimum standards of domestic and international law, but catalyses market forces to facilitate “beyond compliance”, positive peacebuilding behaviour on the part of TNCs.
The success of the US conflict minerals law – in prompting dozens of prominent companies to declare their willingness to be CM–free, and spurring copycat legislation in other jurisdictions – may presage a growing wave of meta-regulatory efforts designed to encourage “continuous improvement” among TNCs doing business in conflict- affected regions of the world. This would be one important element of a regulatory regime designed to go some way to realizing the aspirational goal of corporate peacebuilding.
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Chapter 7: Conclusion
CHAPTER 7
CONCLUSION: THE PUBLIC POLICY CHALLENGE OF
REALISING THE VISION OF CORPORATE PEACEBUILDING
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There can be no peace without justice, no justice without law and no meaningful law without a Court to decide what is just and lawful under any given circumstance.
Benjamin Ferencz1 Prosecutor, Subsequent Nuremberg Trials, US Zone, Occupied Germany (1946-49)
1 Benjamin Ferencz, as quoted in Paul Williams and Michael Scharf, Peace with Justice? War Crimes and Accountability in the Former Yugoslavia (Rowman and Littlefield, 2002) 137.
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CHAPTER 7
CONCLUSION: THE PUBLIC POLICY CHALLENGE OF REALISING THE VISION OF CORPORATE PEACEBUILDING
I INTRODUCTION: RECAPPING THE THESIS’ OBJECTIVES
Sustainable peace – and the peacebuilding efforts required to achieve it – requires the collaboration of the major social sectors: government, civil society, and not least, the private sector. This thesis contributes to the knowledge and practice of conflict transformation by exploring the unrealised potential role of large TNCs in peacebuilding, and most significantly, how to achieve it through more effective legal regulation of TNCs doing business in conflict-affected areas.
At heart, the absence of corporate peacebuilding and the failure to curb some of the worst corporate abuses in conflict-affected areas are problems of governance. It is ineffectual regulation of TNCs doing business in conflict-affected areas that permits some TNCs’ conflict-driving conduct to persist and, at the same time, that prevents a realisation of their peacebuilding potential. Conversely, a well-designed regulatory regime, integrating innovative uses of the law, would help raise the behavioural standards of TNCs in conflict-affected areas, would help realise the theorised vision of corporate peacebuilding.
This thesis makes a contribution to the literatures that discuss the potential for corporations to help build positive peace, and the regulatory structures that could help encourage such corporate conduct in practice. The thesis examined the possibilities for effective, law-based governance mechanisms to assist in ending corporate contributions to fomenting and exacerbating contemporary armed conflicts, and help realise the vision of corporate peacebuilding as theorised by the likes of Nelson, Fort and Haufler.2 The research has broad applicability across different industries and countries, but for the
2 Jane Nelson, The Business of Peace: The Private Sector as a Partner in Conflict Prevention and Resolution (Prince of Wales Business Leaders Forum/ International Alert/Council on Economic Priorities, 2000); Virginia Haufler, A Public Role for the Private Sector: Industry Self-Regulation in a Global Economy (Carnegie Endowment for International Peace, 2001); Timothy Fort, Business, Integrity and Peace: Beyond Geopolitical and Disciplinary Boundaries (Cambridge University Press, 2011).
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By responding to the questions of why, what and most importantly, how corporations could be involved in peacebuilding activities when doing business in conflict-affected areas, this thesis sought to overcome many conceptual obstacles that prevent a more effective embrace by regulators and by industry of the corporate peacebuilding role. The thesis achieves this overall aim, by addressing the two objectives as outlined in the introductory chapter; developing a theoretical model of regulation to achieve corporate peacebuilding, and secondly, clarifying the roles of law within that framework.
After justifying corporate involvement in peacebuilding matters and outlining the ‘matrix of corporate peacebuilding’ – a typology of possible TNC contributions to peacebuilding (Chapter 2), the thesis developed the regulatory diamond framework that extends responsive regulation theory to better reflect the goal of realising continuous improvement in regulatees’ behaviour, not simply gaining compliance with minimum legal standards (Chapter 3). The remainder of the thesis then applied the regulatory diamond to the governance of TNCs in conflict-affected areas, with a particular focus on exploring the law’s role in each of the three key constituent elements: minimum, law-based standards (Chapter 4), compliance regulation (Chapter 5) and aspirational regulation (Chapter 5) to achieve corporate peacebuilding.
This thesis has questioned the assumption that the law has little role, if any, to play in improving corporate conduct in conflict-affected areas and facilitating corporate peacebuilding. Rather, the thesis clarifies the limited but crucial roles that law plays in effectively curtailing the conflict-driving activities of TNCs and facilitating TNCs’ constructive engagement in peacebuilding.
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II SUMMARY
A The Problem and the Opportunity: The Matrix of Corporate Peacebuilding
After Chapter 1’s introduction, the thesis’ substantive chapters commenced with an elaboration of the peril and promise of TNCs doing business in conflict-affected areas. While history and contemporary practice are replete with examples of TNCs acting in a manner that intensifies and triggers armed conflicts, including complicity in corruption and gross human rights abuses, it is not always so. Corporate conflict-driving activities still occur with alarming frequency and impunity. On the flipside, TNCs have also played positive roles: aiding conflict transformation processes, and contributing to the peace and economic development of the otherwise warring parties, yet the corporate potential to contribute to peacebuilding activities remains under-theorised. Chapter 2 countered the orthodox viewpoint that TNCs are always a negative influence in conflict- affected areas and offers justifications for their inclusion in peacebuilding processes. Building on core lessons of peacebuilding research and practice as accumulated over the past half-century, the chapter develops the ‘matrix of corporate peacebuilding.’ It is a (non-exhaustive) typology of potential contributions TNCs could make at each stage and in every aspect of the conflict transformation continuum.
While significant, the questions of what contributions TNCs could make to peacebuilding and why they should be getting involved in what has heretofore been seen as a domain of activity best left to governmental and civil society actors are not the focus of this thesis. Rather, the most crucial question this thesis addresses is how to bridge the gap between the problem and the opportunity – and realise the untapped potential of corporate peacebuilding. Deploying regulatory theory as a theoretical approach, the thesis argued that it is a failure of governance – at both the national and international levels – that has led to the unrealised vision of corporate peacebuilding. In this way, the thesis also sought to offer a response to the plea of Keohane and others to fill the gaps in global governance through which TNC activities often slip.3
3 Robert Keohane, ‘Global Governance and Democratic Accountability’ in David Held and Mathias Keonig-Archibugi (eds) Taming Globalizaion: Frontiers of Governance, (Polity Press, 2003) 146.
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B Strengthening Responsive Regulation Theory with the Regulatory Diamond Framework
All leading, Australian-listed TNCs conduct some business in conflict-affected areas around the globe, with some of them members of multi-stakeholder governance initiatives focused on human rights or CSR standards. Yet, the current regulatory landscape applying to Australian TNCs doing business abroad is lacking in coherence, effectiveness and clarity. From this critique of the existing regulatory landscape, Chapter 3 began a rethinking of the regulatory framework that may be deployed to encourage corporate peacebuilding and clarifying the possible roles for law within it. The chapter critiqued and extended responsive regulation theory and its associated pyramidal model.4 It advanced a new regulatory model particularly suited to the governance of complex global problems such as improving the peacefulness of corporate operations in conflict-affected areas.
Titled the “regulatory diamond”, it is composed of three core elements: minimum law- based standards (found at the diamond’s mid-line), compliance regulation (found in the diamond’s lower-half) and aspirational regulation (found in the diamond’s upper-half). Significantly, the model clarifies the law’s role as the source of the behavioural standards that lie at the centre of the regulatory model. Moreover, the regulatory diamond visually demonstrates that the ultimate objective of the regulatory enterprise is not merely compliance with standards of behaviour inscribed in law, but rather the continuous improvement of regulatees’ conduct even ‘above and beyond’ what the law mandates, towards an aspirational, public policy goal: in our case, corporate peacebuilding.
The remainder of the thesis explored the components of the regulatory diamond when applied to the goal of corporate peacebuilding. It showed that there remains significant roles for the law in reducing the harmful impacts of TNC conduct on armed conflict and encouraging genuine corporate engagement in peacebuilding activities.
4 Ian Ayres and John Braithwaite, Responsive Regulation: Transcending the Deregulation Debate (Oxford University Press, 1992). 306
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C Identifying the Law’s Multifaceted Roles in the Regulatory Diamond Framework for Corporate Peacebuilding
The final three substantive chapters examined the law’s important regulatory functions in each of the three main components of the regulatory diamond framework in relation to realising the vision of corporate peacebuilding. Chapter 4 concluded that international criminal law (ICL) is the optimal body of law from which to derive minimum behavioural standards for TNCs in conflict-affected areas that would, if complied with, go a considerable way to ending their conflict-driving behaviour. These ICL standards constitute the midline of the regulatory diamond. Chapter 5 addressed the role of law in compliance regulation, represented by the bottom half of the regulatory diamond. It shows that, while the standards may have an international origin, some of the most viable and robust enforcement tools to ensure TNCs ‘do no harm’ in conflict-affected areas exist within domestic Australian law.
Chapter 6 examined the role of law in aspirational regulation – above the midline of the regulatory diamond. Traditionally, law is considered an effective standard-setter and enforcement mechanism, but in aspirational regulation both of these tasks recede. Indeed, voluntary, soft-law governance mechanisms tend to dominate this regulatory domain. Nevertheless, it is argued that there remains a valuable contribution that hard, state-based law may make in aspirational regulation. Contrary to traditional understandings of law, it can also be deployed in innovative, ways to encourage and facilitate TNCs to ‘do good’ in conflict-affected areas beyond mere compliance with legal standards. For instance, meta-regulatory law could help develop a market for peacebuilding, and incentivise TNCs to go beyond mere compliance with minimum legal standards to strengthen their contributions to building peaceful, stable societies in which they operate. Conflict minerals and transparency laws in the US are exemplars of this approach.
Based on the above findings, the roles of law in the regulatory diamond framework for corporate peacebuilding can be represented visually, as in Figure 7.1 below.
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Meta-regulatory law to encourage greater corporate engagement with peacebuilding
International criminal law norms as minimum standards for TNCs in conflict- affected areas
Civil and criminal domestic legal accountability mechanisms
Figure 7.1: Roles of law in corporate peacebuilding’s regulatory diamond framework.
III POLICY RECOMMENDATIONS
One important advantage for taking a regulatory approach to this topic is that it moves away from otiose conversations about the possibility and potential for corporate peacebuilding to the more practical, policy-oriented questions of realisation and implementation. The mechanisms outlined that form components of each aspect of the regulatory diamond are all viable today, some even operable in various jurisdictions around the world.
In Chapters 4, 5 and 6, different features of the regulatory diamond framework as applied to corporate peacebuilding have been examined. This thesis’s focus was not on “filling” the diamond with the specific regulatory proposals in a prescriptive fashion. Rather, it identifies the roles of law in each primary component of the regulatory diamond model, and provides some illustrative examples of how the law could be
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deployed, even in aspirational regulation – which has largely been seen as the domain of soft-law, market-oriented governance mechanisms.
Following these suggestions about the roles of law, and keeping in mind the multitude of other relevant non-legal regulatory mechanisms, Figure 7.2 below provides a possible representation of a regulatory regime to achieve the vision of corporate peacebuilding based on the regulatory diamond mode of responsive regulation. This is, to be sure, incomplete, and is provided for illustrative purposes only.
Assumptions about regulated corporation’s behaviour
Virtuous National and international ratings and prizes for excellence in Business in Peacebuilding Illustrative mechanisms of aspirational regulation NGO, business and state reporting requirements of business impacts on conflict/peace
Consumer boycotts and NGO awareness campaigns
OECD Guidelines, Minimum legal standards UN Guiding Principles on Business and Human Rights ICL norms of behaviour
Law-abiding Multistakeholder governance initiatives, such as UN Global Compact, EITI, Voluntary Principles
OECD Guidelines, NGO awareness campaigns, consumer boycotts Illustrative mechanisms of Directors’ duties/CCA fines compliance regulation
Tort litigation
Criminal prosecution
Incompetent/irrational Dissolution, seizure of assets
Figure 7.2: Indicative example of a regulatory regime for corporate peacebuilding based on the regulatory diamond model of responsive regulation.
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The conclusions drawn begin to crystallise the contours and content of the law’s role in corporate peacebuilding. In turn, these provide a useful basis for recommendations that Australian policymakers – in government, in civil society and in the corporate sector – may wish to consider.
Business and human rights concerns, even business and peace, are now issues that are discussed at United Nations’ forums, and by governments and civil society across the globe. Furthermore, many Australian TNCs continue to do business in regions of the world experiencing or impacted by armed conflict. Yet Australia has not implemented an effective regulatory regime to punish companies that fail to adhere to universally recognised international legal standards in conflict-affected areas, and to incentivise and facilitate Australian TNCs’ involvement in positive peacebuilding actions while operating abroad.
The Australian government could seek to enact legislation akin to the US conflict minerals and transparency legislation, and NGOs could seek to make use of the accountability avenues available to them to challenge Australian corporate conduct in conflict-affected areas – for instance, more appeals to the OECD National Contact Point, facilitating civil and criminal legal cases on the part of alleged corporate human rights victims in conflict-affected areas. Australian TNCs could incorporate ever more effective human rights due-diligence internal processes, and greater internal protocols to be attentive and responsive to peacebuilding opportunities and their potential negative impacts on armed conflicts in which regions where they operate.
There are both historical and contemporary indications that formal acceptance by the international community and institutions of corporate accountability for international crimes under international law will develop as international law continues to develop. Australian voices are capable of playing a leading role in this evolution of global governance to enable corporate adherence to the minimum standards of ICL. The Australian government was an active participant in the negotiations of the Rome Statute and the Kampala Review Conference. Placing corporate criminal liability on the agenda is something that should be considered. Certainly, such an amendment would align the ICC’s jurisdictional reach with that exercised by Australian courts hearing prosecutions of the same international crimes. 310
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Moreover, as explained in Chapter 5, the significance of the formal recognition in international law of corporate criminal liability is not, even today, an insurmountable obstacle in achieving Australian corporate compliance with the standards enshrined in that body of law. Existing Australian law – both criminal and civil – provides the requisite enforcement and punitive measures. Here we suffer not from a lack of possible measures, but from a failure of political will and application to enforce existing domestic law.
Furthermore, there is much scope for Australian governments (federal and local) to embrace a meta-regulatory and/or nudge approach to encourage corporate peacebuilding, as described in Chapter 6. The absence of creative legislative responses to clamp down on corporate contributions to armed conflict – as have been enacted in the US and other jurisdictions – serves to highlight that the innovation in this regulatory space is occurring largely beyond Australia’s shores.5 Indeed, noting here the US’s and EU’s statutes on not just conflict minerals but blood diamonds6 and corruption,7 it is evident that successive Australian parliaments have fallen behind the US and other foreign counterparts in implementing legislation to end corporate abuses in conflict- affected areas, and encouraging Australian-based TNCs to curtail conduct that drives armed conflicts.8
More broadly, the general state of ASX-listed companies’ sustainability reporting has been criticised by a leading superannuation industry representative body as being ‘very
5 See generally, Parliamentary Joint Committee on Corporations and Financial Services (Commonwealth of Australia), ‘Corporate Responsibility: Managing Risk and Creating Value’, (Committee Report, June 2016). 6 US: Clean Diamond Trade Act of 2003, 19 USC ch. 25 §3901 (2003); EU: European Council Regulation (EC) No. 2368/2002 (20 December 2002) implementing the Kimberley Process certification scheme for the international trade in rough diamonds [20020] OJ L 358/28, 31.12.2002. 7 US: Dodd-Frank Wall Street Reform and Consumer Protection Act (2010), s1504; EU: Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC [2004] OJ L 390/38. 8 Craig Deegan and Marita Shelly, ‘Corporate Social Responsibilities: Alternative Perspectives about the Need to Legislate’ (2014) 121 Journal of Business Ethics 499.
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The Australian Parliament should enact similar conflict minerals legislation forthwith, and also take a prominent role in this area of ‘regulatory capitalism’ more reflective of the prominence of the Australian resources sector in global markets and as a logical extension of the country’s commitment to human rights and humanitarianism.12
IV DIRECTIONS FOR FURTHER RESEARCH
The proposition that corporate peacebuilding should be encouraged, even compelled, raises many questions deserving of further research that are beyond the scope of this project, of both a theoretical and empirical nature. The proliferation of the modern corporation into every corner of the globe, and the political and economic influence that the private sector wields, demands that those concerned with safeguarding peace and
9 Australian Council of Superannuation Investors, The Sustainability Reporting Journey: Corporate Reporting in Australia – Disclosure of Sustainability Risks Among S&P/ASX200 Companies (Research Paper, Australian Council of Superannuation Investors, May 2013). 10 For example, Rio Tinto filed a 2015 conflict minerals disclosure form with the US Securities and Exchange Commission:
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Chapter 7: Conclusion security discover methods to encourage corporations to assist in preventing and resolving armed conflicts.
This thesis contributes to the opening up of scholarly debate and practical investigation of corporate peacebuilding and how to achieve it, including through well-calibrated regulation. Future research could help develop theoretical and practical understandings of the range of potential corporate contributions to peacebuilding. Empirical research to document and evaluate current corporate peacebuilding efforts in a range of conflict- affected areas would be particularly significant to advancing the theoretical soundness and practical embrace of the idea of corporate peacebuilding, and validate the utility of the matrix of corporate peacebuilding offered in Chapter 1.
Projects that assist in contextualising our understanding of corporate peacebuilding would also be valuable. For instance, it is clear that different corporations and industries have different capacities and impacts on conflict-affected societies. Flowing from this, it would be worthwhile to examine whether specific industries possess different ethical obligations to assist in peacebuilding activities, and how these obligations could be realised for specific industries and in different cultural and social contexts.
Rather than focusing as this thesis has done on developing a framework and exploring the law’s role in advancing corporate peacebuilding, further research could be conducted on specific non-legal regulatory mechanisms that have been touted by various groups and governments as constructive responses to corporate contributions to conflicts. Many have been mentioned throughout this thesis: the OECD Guidelines for Multinational Enterprises and its associated Specific Instance dispute resolution process and the UN Global Compact, to name two multi-stakeholder governance initiatives warranting further enquiry as to their peacebuilding impact.
In the previous chapter, it was noted that market-oriented governance mechanisms dominate the regulatory landscape for corporations’ social responsibilities. Further research could be conducted investigating the efficacy of such mechanisms, and to quantify and qualify their purported impact on corporate peacebuilding. Of particular interest are consumer-led initiatives such as the grassroots boycott and divestment campaigns against companies doing business with apartheid South Africa in the 1980s 313
Corporate Peacebuilding and the Law and 90s, and against Israel (and Israeli settlement products) in the present day. These are high-profile instances of consumer-led action whose instigators claim to have peaceful intent. Do consumer boycotts such as these have any material impact on corporate decision-making and on prospects for peace on the ground? What are the factors that determine a boycott campaign’s success?
There is a small but growing group of multi-disciplinary scholars working on topics related to peace-through-commerce and business and peace. There are far larger communities of scholars – primarily within their respective disciplines – that investigate various related elements of those issues: international lawyers investigate corporate legal personality under international law; business ethicists deliberate over the social obligations of businesses; international relations theorists deliberate over the role of corporations in global governance; and human rights scholars debate the contours of corporations’ human rights responsibilities It is hoped that researchers and practitioners find points of inspiration and contestation within these pages and through that, advance the conversation – in particular on how law can best be deployed to further the practice of positive corporate engagement in conflict transformation processes.
V A FINAL WORD: TRIANGULATING THE PRACTICE OF PEACEBUILDING
Peace is possible. The vision of corporate peacebuilding is possible. This thesis couples an optimistic, hopeful – some may even say utopian – vision of corporate peacebuilding with a rigorous legal analysis and practical, clear-eyed proposals grounded in regulatory theory.
This thesis began by stating that a precise definition of peace is illusory. So too is its realisation. It is one of those terms that is intangible in definition and in practice. Yet, alongside love and happiness, it remains one of the most universally venerated and sought-after phenomena, across cultures, socio-economic classes, races and geographies. When referring to societies afflicted by violent armed conflict, it is perhaps easier to see what peace may entail: the cessation of violence; and healthy, harmonious relations between peoples and amongst communities.
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The notion of transnational companies actively partnering with governments and civil society to prevent, manage and resolve armed conflicts is no pipedream. But it does require an appropriate, effective and legitimate governance regime to enable it. Moreover, it requires cooperation and collaboration. Responsive regulation theory is premised on the idea that collaboration is better than confrontation, and this informs the design of the regulatory diamond. Usefully, this echoes Albert Einstein’s understanding of peacebuilding as well: ‘Peace cannot be kept by force; it can only be achieved by understanding’.13
Rather than simply criticising or punishing large corporations for their role in driving armed conflicts, we must seize on their capacities to contribute to our collective response to these human challenges. In collaboration, government, civil society and the corporate sector make a powerful triumvirate of forces to wage peace even in the world’s most vulnerable and fragile regions.
13 Albert Einstein, ‘Speech to the New History Society’ (14 December 1930). Reprinted in Albert Einstein, Cosmic Religion: With Other Opinions and Aphorisms (Covici-Friede, 1931) 67.
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