Download Will Corporate Social Responsibility fill the liability gap Created by

Will Corporate Social Responsibility fill the
liability gap Created by Multinational
Corporate Structures ?
Professor Irene Lynch Fannon,
School of Law
University College Cork, 2015
@ireneucc
#EnvLaw2015
State Actors and Corporate Actors
• “The TNC [or MNC] today is one of the largest actors in
the environmental field, but international law still remains
focused on state liability, and although many developed
nations now have extensive environmental protection in
place through statutory tort regimes, corporate actors are
able to employ a number of strategies to elude effective
oversight when they operate transnationally.”
• Claire Bright-Staath and Benedict Wray: Corporations and Social Environmental Justice
http://ssrn.com/abstract=2207317
The State and The Corporation-Different approaches in the
EU- incentives and international leadership.
• COM(2013) 92 final
• COMMUNICATION FROM THE COMMISSION TO THE
EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN
ECONOMIC AND SOCIALCOMMITTEE AND THE
COMMITTEE OF THE REGIONS A DECENT LIFE FOR ALL:
Ending poverty and giving the world a sustainable future.
In the EU-direct regulation addressed to
member states.
• DIRECTIVE 2013/30/EU OF THE EUROPEAN PARLIAMENT AND OF
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THE COUNCIL 12 June 2013 on safety of offshore oil and gas
operations and amending Directive 2004/35/EC-EU only.
To be in force by July 19, 2015.
MNCs and TNCs
• Why multinational corporations and transnational
corporations create domestic overseas subsidiaries.
• Cheap labour, no or little taxes and no rules/ no
enforcement).
• “Enclave Economies” and FDI.
Aguiire, Daniel: Multinational Corporations and the Realisation of Economic, Social and Cultural RightsMultinational Corporations and the Realisation of Economic, Social and Cultural Rights
Fall, 200435 Cal. W. Int'l L.J. 53
Corporate Liability for Economic, Social and Cultural Rights Revisited: The Failure of International Cooperation
Fall, 2011 California Western International Law Journal 42 Cal. W. Int'l L.J. 123
Amao, Olufemi: Corporate Social Responsibility, Human Rights and the Law. (Routledge 2010).
Kevin P. Gallagher and Lyuba Zarsky, The Enclave Economy. Foreign Investment and Sustainable Development in Mexico’s Silicon Valley , The MIT Press (2007) ISBN 978-0-262-57242-2 214
Mabey, Nick and McNally, Richard: Foreign Direct Investment and the Environment- From Pollution Havens to Sustainable Development. OECD 1999.
The corporate actor-the missing piece.
• “The transition to sustainability requires policy changes that often go against
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immediate economic incentives for higher resource exploitation and pollution.
Institutional responses will always lag behind economic pressures, especially
in highly competitive global markets. As the source of many of these
economic pressures, developed countries have a responsibility to: reduce
unsustainable consumption levels; provide resources to support
environmental governance in developing countries; and to ensure their
companies operate responsibly abroad.”
OECD: FDI and the Environment (1999) p. 4
MNCs, TNCs and the effects of jurisdiction
• Tax issues very much to the fore in Ireland.
• Ongoing concerns regarding ‘sweat shop’ labour in countries such
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as Pakistan and Bangladesh.
Human rights abuses (often connected in this context to
environmental issues).
Environmental degradation in countries such as Nigeria and
Ghana.
Question of liability key. Choice of Law and Choice of Forum
issues.
Monks, Robert: The New Global Investors ( Capstone 2000).
P. T. Muchlinksi, Multinational Enterprises and the Law. (OUP 2007).
C. M. J. Ryngaert, Jurisdiction in international law. (OUP 2008).
Parents and subsidiaries –the corporate veil and
the liability gap.
• The corporate veil- a simple, ancient and lethal doctrine.
• “In an international tort case piercing the veil enables the
imputation of liability to the parent company for the acts
of its subsidiary …it remains in practice an almost
impossible barrier to surmount.”.*
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*Bright and Wray p. 21 where the authors refer to J. H. MATHESON, ‘The Modern Law of Corporate Groups: An Empirical Study of Piercing the Corporate Veil in the Parent-Subsidiary
Context’, (2008) 87 N. Carolina L. R. 1091
P. I. BLUMBERG, ‘Accountability of Multinational Corporations: The Barriers Presented by Concepts of the Corporate Juridical Entity’ (2004) 24 Hastings Int & Comp. LR 297 at 300
Filling the gap- exceptions and fine
distinctions.
• English law
Adams v Cape Industries [1990] Ch. 433
Prest v Petrodale [2013 ] UKSC 34
• EU Law
Brussels 1 Regulation 44/2001/EC
• Dutch Law
Dutch Environmental Defense Organisation v Shell UK [2013]
• The Alien Torts Act
Filártiga v Pena-Irala. 630 F.2d 876 (2d Cir. 1980)
Doe I v Unocal, 395 F.3d 932 (9th Cir. 2002), holding that a ‘private party, such as Unocal’ could be sued
under the ATCA.
Kiobel v Royal Dutch Petroleum Co. 2010 U.S.App. LEXIS 19382 (2d. Cir. 2010)
Doe et al v Exxon Mobil Corporation et al (D.C Cir. 2011) No. 09-7125.
The ‘political reality’.
• Political problems with the state-corporate nexus and
public- private nexus.
• Understanding the corporate actor. The trouble with
corporate law theory and its politicisation.
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Sjafjell B: Internalizing Externalities in EU Law: Why Neither Corporate Governance nor Corporate Social Responsibility Provides the Answers George Washington International Law
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Stout L: The Shareholder Value Myth (Barrett-Koehler Publishers, San Francisco 2012)
Myers C: C Meyer, Firm Commitment, Why the Corporation has failed us and how to restore trust in it, (Oxford University Press, Oxford, 2013)
RJ Gilson and R Kraakman, Market Efficiency after the Financial Crisis: It’s Still a Matter of Information Costs, Stanford Law School Working Paper Series No. 458 and
Columbia Law School Center for Law and Economic Studies Working Paper Series No. 470. http:// ssrn.com/abstract=2396608.
Cheffin B: (2015) Seattle Law Review
Lynch Fannon: From Genius to Quackery (forthcoming)
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Review, Vol. 40, No. 4, pp 977-1024
CSR- The good and the bad.
• The bad- it is the best option which corporate law theory can offer at this
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point, until we change how theory supports more proactive law making.
The bad- it can be ‘hi-jacked’* by those who prefer a self-regulatory
approach but who resist regulation.
The good- it is possible to persuade management to act responsively and
responsibly. This is good for business, good for the environment and good
for subsequent generations.
*Lynch Fannon, I: The Corporate Social Responsibility Movement and Law’s Empire: Is There a Conflict? 2007 NILQ 1
A new horizon- getting from here to there.
• Understanding corporate (not state) power.
• Changing the theory which influences the corporate legal
framework.
• Allow shareholders and management to understand the
importance of the issue and to act.
• Allow home states to impose liability on parents for
actions of subsidiaries.
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By Beate Sjåfjell: Internalizing Externalities in EU Law: Why Neither Corporate Governance nor Corporate Social Responsibility Provides the Answers George Washington International
Law Review, Vol. 40, No. 4, pp 977-1024. Sustainable Companies (OUP, 2014).
Marc T. Moore: Corporate Governance in the Shadow of the State (Hart, 2013).