ANALYSIS: Set-back for Corporate Accountability on Human Rights

Last week, events in the US made it harder to hold multinational companies accountable for contributing to human rights abuses in their global operations. In a case against oil giant Shell for allegedly contributing to human rights abuses in Nigeria, the US Supreme Court ruled that the Alien Tort Statute, the piece of US legislation used for the case, simply does not apply.

The ruling may very well pull the rug from under a number of similar cases brought against companies such as Daimler, Rio Tinto, and Siemens. Human rights defenders fear that the ruling effectively dismantles one of the most visible mechanisms available to hold large multinational companies to account for their human rights impacts in developing countries.

Companies are not pirates
In layman’s terms the Supreme Court ruling in the Kiobel case concludes that the ATS cannot be assumed to apply to acts committed outside the US. In legal terms it does not have extraterritorial effect. In other words merely having a corporate presence in the US does not mean that you can be sued under the ATS for something you have done in Nigeria or any other foreign country.

One can be surprised that it took so long to come to such a seemingly simple conclusion. The Alien Tort Statute (ATS) is not just any piece of legislation. It was enacted by US Congress in 1789. Partly, it is believed, to combat piracy on the high seas. Two hundred years later it was evoked by human rights campaigners as a means to hold multinational companies legally accountable for alleged human rights wrongdoings by their overseas subsidiaries.

For human rights campaigners, the 18th century anti-piracy law has been a corner stone in campaigns against 21st century multinationals. The Supreme Court ruling last week, appears to have finally shipwrecked the ATS, hinting drily that “pirates may well be a category unto themselves”.

A symptom - not a solution
For the past two decades, the ATS has been one of the most visible manifestations of the global need for greater clarity on the human rights responsibility of corporate actors. The decision to limit the application of the ATS will be welcomed by some and bemoaned by many. But regardless of view point, the Supreme Court’s decision reminds us that the global governance of corporate behavior on human rights should not and cannot be dealt with through 18th century anti-piracy laws. As such the ATS is as much a symptom of a problem as a solution to the problem.

Business related human rights abuses, whether owing to environmental degradation, land grabs or use of forced labour, should in so far as possible be addressed in the national and local contexts where they occur. Whether one believes in extraterritorial mechanisms or not, the real challenge is to ensure that effective access to justice exists as close to victims as possible. Such mechanisms, whether judicial or non-judicial, state-based or non-stated based, are ultimately the most effective guarantor of just outcomes for victims, and for the accused. However, where such mechanisms fail, extra-territorial mechanisms are a necessary part of the solution. As such the decision by the Supreme Court may be a setback for human rights, but it is not the end of the world.

New global solutions for local problems
Proponents of extraterritoriality rightly claim that the global economy has become too complex and too integrated for any one country to manage on its own. Multinational companies are too mobile and too powerful to be reined in by national courts. Therefore, companies should be accountable not only in the host countries were they do business, but also in the home country where they have their headquarters.

This principle of overlapping jurisdictions is a key part of the United Nations Framework on Human Rights and Business. This all-new framework was unanimously endorsed by the United Nations Human Rights Council in 2011, including by governments such as China, South Africa, Russia, Brazil, UK, US, Nigeria, Uganda, Mexico, Japan, Saudi Arabia, Korea, and Thailand, just to mention some.

The same principles have subsequently been incorporated into the OECD Guidelines for Multinational Enterprises, a code of conduct for companies headquartered in any one of the OECD countries. This has led to a strengthening of the OECD National Contact Points. These are bodies capable of receiving complaints of alleged human rights abuses by companies domiciled in an OECD country. Exactly the type of case that the ATS now appears no longer to accept.

Dinosaurs die – evolution continues
This is evidence that the Supreme Court ruling on the ATS is a conservative interpretation of on antiquated law. The ruling explains that the ATS does not apply extraterritorially because this “would imply that other nations, also applying the law of nations, could hale our citizens into their courts for alleged violations of the law of nations occurring in the United States, or anywhere else in the world. The presumption against extraterritoriality guards against our courts triggering such serious foreign policy consequences, and instead defers such decisions, quite appropriately, to the political branches.”

Proponents of extraterritoriality claim that such concerns are not fit for modern-day global capitalism. They argue that the overseas conduct of companies domiciled in a country’s jurisdiction should not be viewed as a foreign policy matter for that country, but as a matter of domestic policy and jurisdiction.

The recent developments in the UN and OECD confirm this trend. In comparison to these contemporary frameworks the ATS was always a dinosaur used for a purpose for which is was never intended. And as we all know, while dinosaurs become extinct, evolution continues.