GLOBALISATION AND THE RISE OF MULTINATIONALS – THE DIVERGENCE OF RESPONSIBILITY AND ACCOUNTABILITY Minor Dissertation presented by Benjamin Leupi (LPXBEN001) in partial fulfilment of the requirements for the degree of Master of Law University of Cape Town at the University of Cape Town Word Count: 25 136 Supervisor: Jacqueline Yeats Submitted on: 16.05.2014 The copyright of this thesis vests in the author. No quotation from it or information derived from it is to be published without full acknowledgement of the source. The thesis is to be used for private study or non- commercial research purposes only. Published by the University of Cape Town (UCT) in terms of the non-exclusive license granted to UCT by the author. University of Cape Town Statement STATEMENT Research dissertation presented for the approval of Senate in fulfilment of part of the requirements for the Master of Law in approved courses and a minor dissertation. The other part of the requirement for this qualification was the completion of a programme of courses. I hereby declare that I have read and understood the regulations governing the submission of Master of Law dissertations, including those relating to length and plagiarism, as contained in the rules of this University, and that this dissertation conforms to those regulations. - 2 - Statement CONTENT STATEMENT ..................................................................................................................................................... - 2 - BIBLIOGRAPHY ................................................................................................................................................. - 5 - LIST OF ACRONYMS AND ABBREVIATIONS ............................................................................................................. - 16 - 1 INTRODUCTION .................................................................................................................................. - 20 - 1.1 Motivation ................................................................................................................................................... - 20 - 1.2 Problem Definition ...................................................................................................................................... - 21 - 1.3 Objective Target .......................................................................................................................................... - 21 - 1.4 Structure ...................................................................................................................................................... - 22 - 2 GLOBALISATION AND THE RISE OF MULTINATIONALS ................................................................................... - 23 - 2.1 Globalisation and Multinationals ................................................................................................................ - 23 - 2.2 The Impact of Globalisation ........................................................................................................................ - 24 - 2.2.1 The Top 100 Economic Entities ................................................................................................... - 24 - 2.2.2 The Increase of Power of the Private Sector ............................................................................... - 26 - 2.2.3 Public Perception, Responsibilities and Opportunities ............................................................... - 28 - 2.2.4 The Admonishing Conscience of Civil Society ............................................................................. - 28 - 2.2.5 Forms of Corporate Misconduct ................................................................................................. - 29 - 2.2.6 Interim Conclusion ...................................................................................................................... - 31 - 3 GLENCORE XSTRATA PLC – ‘THE BIGGEST COMPANY YOU’VE NEVER HEARD OF’ ............................................... - 33 - 3.1.1 Marcell Reich and the Eve of “Fall Gelb” ..................................................................................... - 33 - 3.1.2 The Emergence of Zug and Switzerland to the World’s largest Commodities Hub .................... - 34 - 3.1.3 Glencore’s Flotation and the Merger with Xstrata ...................................................................... - 39 - 3.1.4 The Future Lies in Africa – Glencore Xstrata’s Listing on JSE ...................................................... - 46 - 3.1.5 The Giant’s Alleged Corporate Misconduct ................................................................................ - 48 - 3.1.6 Interim Conclusion ...................................................................................................................... - 51 - 4 THE ACCOUNTABILITY GAP ................................................................................................................... - 52 - 4.1 The Accountability Gap ............................................................................................................................... - 52 - 4.1.1 Divergence Between Responsibility and Accountability ............................................................. - 52 - 4.1.2 The Cause of the Accountability Gap .......................................................................................... - 53 - 4.1.3 Interim Conclusion ...................................................................................................................... - 56 - 5 LEGALLY BINDING APPROACHES TO CLOSE THE GAP ................................................................................... - 57 - 5.1 Enactment of Binding Extra-Territorial Law ................................................................................................ - 57 - 5.2 Foreign Direct Liability ................................................................................................................................. - 60 - 5.3 Interim Conclusion ...................................................................................................................................... - 64 - 6 NON-BINDING PRINCIPLE BASED FRAMEWORKS ........................................................................................ - 66 - 6.1 Unilateral Guiding Principles: King Report III and CRISA ............................................................................. - 67 - 6.2 Multilateral Guiding Principles: The OECD Guidelines For Multinational Enterprises ................................ - 69 - 6.2.1 Introduction and System of the Guidelines ................................................................................. - 70 - 6.2.2 Reasons for the Revisions in 2000 and 2011 ............................................................................... - 71 - 6.2.3 The Revised Guidelines ............................................................................................................... - 73 - 6.2.4 National Contact Points ............................................................................................................... - 76 - 6.2.5 Interim Conclusion ...................................................................................................................... - 79 - 7 SWITZERLAND: PUBLIC AND POLITICAL DEBATES ........................................................................................ - 82 - 7.1 NGOs and Coalitions .................................................................................................................................... - 82 - 7.2 Activities on a Political Level ....................................................................................................................... - 84 - 7.2.1 Parliamentary Requests .............................................................................................................. - 84 - 7.2.2 Interdepartmental Platform on Commodities: Background Report ........................................... - 84 - - 3 - Statement 8 FINAL CONCLUSIONS AND RECOMMENDATIONS ......................................................................................... - 89 - 8.1 Final Conclusions ......................................................................................................................................... - 89 - 8.2 Recommendations ....................................................................................................................................... - 91 - 8.2.1 National (Swiss) Level .................................................................................................................. - 91 - 8.2.2 International Level ...................................................................................................................... - 93 - 8.3 Concluding Remarks .................................................................................................................................... - 94 - 9 ADDENDA ......................................................................................................................................... - 95 - 9.1 Corporate Clout 2013 .................................................................................................................................. - 95 - 9.2 Probo Koala ................................................................................................................................................. - 98 - 9.3 Human Rights Violations Conducted by Multinationals .............................................................................