LIABILITIES OF MNCs AND STATES?
As the previous chapters have shown, it is easy for MNCs to cross national jurisdictions and conduct their business. In the wake of this proliferation, both home and host states do derive benefit. However, IP must not be forgotten and neglected in such circumstances.
The obligations of MNCs (section 5.1) and States’ measures (section 5.2) to respect, secure and promote IP’s rights will be the analysed in this chapter.
5.1 Obligations of MNCs
The more powerful a MNC is, the more duties are attached to it.
This section explains the slow progress in international law in monitoring MNCs’ operations (sub-section 5.1.1) and the extent to the rights based approach in MNCs’ operations (sub-section 5.1.2).
5.1.1 The slow progress in international law
During the past decades, MNCs have entered into numerous bilateral and multilateral trade agreements and have also been subject to customary international law. The underlying reason is however not to set their obligations to protect human rights in the host states but rather to safeguard their assets. The movement towards the former mentioned obligations is indeed very slow. An example at the regional level is article 36 the COAS which provides that MNCs are bound to the national laws of the host countries. However, there is only little overall progress.
The nascent customary law in imposing MNCs’ obligations is explained mainly by the fact that MNCs are non-state actors and have no legal personality in international law. It is therefore doubtful whether they should abide by obligations. Indeed, much opposition has been raised on this issue. In addition to that, the subjects of laws which demand protection by MNCs have only been recognized recently, for example, most of IP’s rights in UDDRIP. Due to these reasons, attempts brought under the international plane to regulate MNCs have either remained as soft laws only or been rejected. These attempts are mainly the UNCTC which is now rejected, the OECD Guidelines, and the Norms.
They all mention that MNCs have to abide by their hosts’ domestic laws as well as international laws and standards. The UNCTC dealt explicitly with environmental protection whilst the Guidelines address the common problem of bribery and corrupt practices  that occur between MNCs and states for the formers’ ‘improper advantage’. This provision is essential as bribery and corruption only severe poverty and destruct “democratic institutions and the governance of corporation"  . The Norms on the other hand holds its importance in its provision which makes MNCs subject to monitoring and verification by the UN(REFERENCE).
These instruments can serve as a solid ground for the movements of the international community to monitor corporate behavior and at the same time can serve as a strong shield to protect IP.
5.1.2 Extent to the rights based approach in MNCs’ operations
“The social responsibility of business is to increase its profits"  .When one observes that the number of violations made by MNCs is taking the toll, quick assertion is made that it will be most favorable to IP to extend IP’s human rights obligations to MNCs. The main arguments against such an approach will be discussed first, followed by the supportive ones.
MNCs have an obligation to step back when it comes to the internal affairs or politics  of the host states. These prohibitions are regulated by soft laws only. Therefore there are no responsibilities as such on MNCs to promote IPs’ human rights which can be seen as an internal affair of the state. MNCs cannot get involved in those issues for the simple reason that they will exert their influence and authority on the state to their own advantage and goals, something which is the least desirable for the citizens. Thus they should limit their roles to that of conducting business.
The duties of MNCs to observe IPs’ human rights will only arise where the law asks them to do so. They can only observe economic and social rights. Civil and political ones are the state’s responsibility to protect. Another point of view which justifies the limitation of obligations of MNCs is that some states are themselves violators of human rights. The latter will be very reluctant to enter into contracts with MNCs which are bound by human rights standards, the result being the loss of opportunities.
Turning next to the reasons why obligations must be imposed on MNCs, it is to be noted first of all that this approach can be beneficial to their worldwide reputation and consequently to their business growth due to good human rights record. In the absence of obligations, MNCs cause gross violations of rights that tarnish their reputation and their activities are monitored. This however depends to the extent to which MNCs are known to the public. Those such as Shell and BP are much likely to be affected if they are responsible for violations because they are well known.
Secondly, whatever be the rational behind, MNCs, mainly those in the extractive sector, are developing and applying policies concerning human rights in their day to day functioning. Moreover, under the scrutiny and critics of watchdog organisations like NGOs, MNCs have adopted the concept of CSR. It is all about contributing to economic development while improving the conditions of the society.
Suffice to say, all these are not proving to be effective due to their inadequacy or they have been applied only partially, let alone not having been respected at all. The voluntary efforts made by of MNCs can thus be strengthened or rendered effective if the host state as well as the international community put in force laws which will regulate the entities.
The third reason resides in the fact that MNCs are private entities. Given this status attached to them, there is a fear that they make an abuse of this to exert their power on the citizens of the host state without being held liable. Hence, human rights must be protected at all costs regardless to the private status of MNCs. Besides, the UDHR mentions that “every individual and every organ of the society" are bound to observe human rights  . However, despite attempts to outstretch obligations on MNCs, the host states are often unwilling or unable to impose that MNCs fully implement human rights in their activities.
5.2 STATES’ MEASURES
Having seen the obligation which lies on MNCs, we will now turn to those which are incumbent on the host states (sub-section 5.2.1) as well as home states (sub-section 5.2.2).
5.2.1 Obligation of host states to protect
It is the duty of each State with an indigenous population to develop a proper administrative and judicial system to defend and protect the rights of the latter. Hitherto, in almost all international instruments concerning human rights, there is a provision which makes a State responsible to protect its individuals. Had there been no such law, human rights would be more jeopardized than they actually are and in doing so, it is extending obligations indirectly over and above to MNCs.
It is to be noted that obligations of States towards IP are twofold. Firstly they cannot engage in any actions which would result in deprivation of rights and secondly, states have the duty to protect IP from violations of private entities. In either case, states will be held liable if they have not complied with these obligations.
The gaps which exist in domestic laws will be stressed upon (SSS A) followed by the obligation of home states to legislate and provide remedies (SSS B).
Gaps in domestic laws
The extractive sector has become the focus of attention of states as it yields much to the economy. Why would the state sacrifice its economic growth to that of the survival of IP who are treated as minority group of the society? Indeed, the trend is that more and more laws regarding the extractive sector are being passed in states across the globe to encourage extractive activities.
A compilation of jurisprudence by the UN  reveals the innumerable violation of IP’s human rights in almost all countries ranging from the least developed to the developed ones or from countries with poor human rights records to those having good ones. The justification is that states, despite holding their obligations towards human rights in general, are not giving due attention to the particular rights pertaining to IP.
An example illustrating this is, Canada, which has good promising general human rights records but has ill- treated its IP by adopting discriminatory laws that hamper their enjoyment to their rights. Its practices are equally compromising as Canada has formed alliances with states that have caused brutalities to advocators of Indigenous rights  and in 2007, it voted against the UNDRIP at the General Assembly.
Obligation to legislate and to provide remedies
As per Article 2(2) of the ICCPR, each state must take the necessary initiative “to adopt such laws or other measures as may be necessary to give effect to the rights recognized in the present Covenant". The question which arises here is whether this provision extends to the regulation of MNCs. Surely, states must be able to pass laws regarding all persons under their jurisdiction which commit violations of rights, including MNCs. This is not an option to them but an obligation.
Indeed, according to the IACHR, the state will be held responsible if there has been a violation of human rights by a private person, condemning it for its negligence in preventing and responding to the illegal act as per the Convention. This is what happens usually. Oil and gas companies sometimes enter into contracts for activities which are illegal and result in the violation of economic rights of IP. This has left the state indifferent which has not taken any measures to save those rights. When adopting such attitude, states are acting as complicit of MNCs.
Thus, the host states must regulate MNCs operating under their jurisdiction through legislation and in addition, they must put also into operation monitoring and implementation systems to ensure compliance. They must also devise ways as to the extent they will allow MNCs to enter their jurisdictions. Moreover, policies formulated by states to attract MNCs in the extractive industries must also contain provisions for the promotion, security and respect of IP’s human rights. Sometimes, conditions are attached as to licenses as to how the operations are to take place.
The imposition of high standards on MNCs is however problematic as first of all it can be very costly. Thus, as a matter of convenience, universal standard must be set internationally. Secondly, developing countries for the time being are reluctant to set laws governing MNCs as they need those foreign investments for their economic growth.
IP are the marginalized and vulnerable groups which need more protection than the rest of the society. Due to this, the state has to adopt specific and distinct laws that take into account their particularities. To give them an even stronger protection, IP are now embedded in numerous constitutions of America. These cover most of the rights and it is interesting to note that the Constitution of Mexico (1992) even grant the right of access of IP to the judiciary  .
However, the duty of states to protect IP does not encompass only the adoption of legislative measures. They must in addition provide for effective remedies to them whenever they have been victim of violations. Article 2(3) of the ICCPR does impose this requirement on states.
5.2.2 Obligation of Home States
There is a principle that prevails in the international plane that a state can regulate all the activities of its nationals within its territory, be it individuals, corporations and others. This is called the territorial principle. It is thus mandatory for them to adhere to the state’s internal laws. However, it is perplex to exert such a power on activities of nationals which take place outside the territory.
Here, a distinction has to be drawn between the parent and the subsidiary companies. If the parent company is incorporated in a state, the latter cannot extend its laws to that of the company’s foreign subsidiaries. However, this is not a definite rule. It all depends on the rules of jurisdiction applied in a state  .
This section analyses the indirect obligations of home states to control MNCs (SSSA) followed by the issue of evidence (SSSB)
Home states, as contrasted to host states, have no direct obligations internationally to control their nationals abroad. Indeed, international law, which is always evolving, has not reached such a point of imposing such a pervasive extraterritorial regulatory obligation on home states  . However, it is contrasted with the principle that the nationals of a home state remain under the latter’s control even when they are in the territory of a foreign state  . As such, this can be interpreted as if a MNC has been committing violations of rights in the foreign territory, it would be for the home state to curb its illegal acts.
Secondly, a state cannot cause harm to others. Such negative obligation is a duty under international law. A state must do its best possible to halt the negative impacts that its nationals are causing to foreign states. It can be said, from this point of view, that therefore home states have the capacity to take hold of their MNCs operating abroad.
International law on the control of nationals by home states calls for urgent recognition for the simple reasons that MNCs are, as noted in the previous section, not under the regulation of international law and that host states are not willing to curb their activities even in case of human rights violations for fear of losing investments.
It is often argued that the obligation of home states to protect human rights extend to their positive duty and diligence to regulate MNCs  . Such duty can also be justified by the fact that they derive profits from the overseas operation of their MNCs and therefore, it is reasonable that they control those private entities. Another argument is that if a state has the right or obligation to protect its nationals abroad  , a correlative duty would be to make sure that there is compliance with international law regarding human rights.
The issue of evidence
However, an adoption of such law by the international community will not be the end of the problems. Difficulties will still arise for the following reasons. Firstly, the issue of evidence is rather complicated. There are two sets of evidence that will be required. It has to be proved that the corporation indeed has violated a right under a convention which the host state was bound to respect and that the home state’s failure to act with due diligence to control the company has resulted in such violations. REFERENCE
To prove that there was an absence of diligence, this must be accompanied by the evidence that the violations were foreseeable. Another difficulty lies in the fact that economic, social and cultural rights, as mentioned in the ICESCR  , are to be respected progressively as per the resources which are available to the state.
Thus, the determination of whether the home state is to be held responsible for violations becomes hard to be proved and causes ambiguity as to the limits of its obligation in respect of such rights. If the home state is held responsible, the next obligation which follows is that to provide remedies to the victims, here, IP. Thus, whereas host states have the obligation to protect their IP, home states on the other hand must ensure that MNCs are respecting those peoples’ rights.