The problem with actions taken by corporations

A few years ago, millions of people all over Europe demonstrated against the planned trade agreement of the EU with the USA (TTIP). A main point of criticism had been privileged suing rights by corporations, which could be dealt with by arbitration courts and thereby independent of national courts (ISDS short for Investor-State Dispute Settlement). This gives corporations the opportunity to sue a state, if the latter passes laws, which put investments by corporations at risk or make them less profitable. Reason for the about 900 actions taken by corporations in the past were among other environmental protection acts, labour laws or health regulations. For example the Swedish energy company Vattenfall sued the Federal Republic of Germany due to her phasing out nuclear energy. However, corporations do not necessarily bring action or win their case for a government abandoning a draft proposal. The sheer threat of making demands amounting to millions and billions can be sufficient as examples from Canada show.

The Chamber of Labour criticises: international corporations have an extremely well developed network and substantial assets, giving them access to top lawyers, thousands of lobbyists and a well-functioning marketing machine to protect their rights and interests. Thus, where is the need for parallel justice system?

Following the enormous wave of protest by the civil population towards arbitration courts, the EU Commission now intends to reform these and to set up a global, permanent court of justice for investment disputes, the so-called Multilateral Investment Court (MIC). This too would have the purpose to sue states for compensation and would only be accessible by corporations and investors.

“People need more rights, corporations need rules!”

Hence, on the one hand the signatories of the Campaign demand that the EU and its Member States withdraw from existing investment agreements, which contain privileged rights to sue for corporations and not to conclude any such agreements in future. On the other hand, 200,000 supporters demand globally binding rules, which also hold international corporations accountable for their global activities. Large corporations act with opaque property and supply chain structures, which serves global profit maximisation and at the same time makes legal responsibility more difficult. Hence, even in case of serious human rights abuses and und destruction of the environment, such as land grabbing and expulsion, large scale air pollution, forced labour, violence and contract killings, it is very difficult or not at all possible to prosecute them. That is why organisations all over the world support a Binding Treaty on Business and Human Rights (UN-Binding Treaty). Its aim is to change the balance of power in favour of people to ensure that (1) local communities from the global South get the opportunity to sue internationally operating corporations in countries such as France, Germany or Great Britain. The treaty would (2) determine that corporations can be held responsible for their offences and that (3) the due diligence obligations for corporations would be regulated by law both at EU and at national level. That way, corporations would have to ensure that human rights are also observed in case of international business and along the global value chain.

The power of large corporations is crumbling

In spite of the severe resistance of corporations and wealthy states, a first draft of the UN-Binding Treaty has already been published for discussion. Whilst initially critics of the treat rejected the discussion, the attacks have now become stronger as they are beginning to question the mandate of the working group. However, even they have noticed that the issue has become too big for it to be ignored any longer. In the meantime, the EU Parliament has adopted eleven resolutions, which support the Binding Treaty or any related cooperation. Individual EU Member States too are currently working on laws regarding the due diligence obligations of corporations. According to French law, since 2017, corporations with more than 5,000 employees are obliged to identify and avert human rights risks also along the value chain. This means, the momentum exits to abolish special suing rights and to limit the far-reaching privileges of corporations. Anyone who would like to be actively involved finds more information on the campaign website.

Further information:

Rights for People, Rules for Corporations – Stop ISDS!

AK EUROPA: Multilateral Investment court (MIC): Special rights without obligations