The Elusive Saviours
Chapter 7: The inaccessible transnational corporation
Businesses fall under local and national, not international,
laws and regulations. Since their activities are spread internationally,
therefore, transnational corporations can exploit the differences in national
rules, and they do so routinely in the case of labour legislation (regarding
child labour and working hours, for instance) and taxation policy. The
entire legal structure and internal financial organisation of these companies
is based on fiscal differences, and Advisors on international fiscal law
flourish on the specialism they euphemistically call
"taxation planning".
The same situation applies to environmental legislation,
where it is now possible for multinational enterprises to exploit differences
in local legislation, free from the sanctions that could be imposed by
international rules and regulations. A number of international organizations
have been trying for years to fill this vacuum, and have proposed codes
of conduct and internationally binding regulations based on agreements
and conventions. Only in a few instances is this legislation specifically
aimed at transnational corporations. This chapter looks at the degree to
which they bind international companies.
Voluntary codes of conduct
The OECD and ILO
codes, operational for several years, are specifically directed at transnational
corporations as a separate group of entrepreneurs. They cover a broad range
of subjects. In the OECD code, the "the
pollutor pays" principle has been operative since 1976, and, in 1992,
it was expanded to include a section on the environment and accident prevention
and a chapter on the responsibility of investors from OECD and non-OECD
countries.
For many years, the United
Nations has been negotiating with representatives of the international
business community to compose a code of conduct for transnational corporations.
These were never completed and were finally transferred to the agenda of
the transnational commission of the UNCTAD.
In the draft version of the United Nations
code of conduct, where the negotiations have reached a stalemate, "environmental
information", repair to damage to the environment and test practices
for determining environmental safety are among the subjects discussed.
-
Environmental codes of conduct
There are a number of other international
codes of conduct created by international organizations which cover either
a large number of subjects (including the environment), or one specific
environmental issue.
-
General:
-
OECD Guideline for
Multinational Enterprises (OECD);
-
ILO's Tripartite Declaration
of Principles Concerning Multinational Enterprises (ILO-ME);
-
Specific:
-
International Standards Organization's Technical Environmental
Standards (ISO);
-
UNEP's Environmental
Guidelines (UNEP-EG);
-
ILO's Code of Practice
on Accident Prevention (ILO-AP);
-
Conseil Europeen des
Federations de l'Industrie Chimique's Guide to Safe Warehousing for
the European Chemical Industry (CEFIC-SSC);
-
CEFIC's principles
and Guidelines for the Safe Transfer of Technology (CEFIC-TOT);
-
FAO's International
Code of Conduct on the Distribution and the Use of Pesticides (FAO);
-
UNEP's Awareness
and Preparedness for Emergencies at the Local Level (UNEP-APELL);
-
There are also some more recent codes relating to the
"environmental conduct" of transnational corporations which have
been created by employers organizations:
-
International Chamber of Commerce's Environmental Guidelines
(ICC-EG);
-
Chemical
Manufacturers Association's Responsible CARE Program (CMA);
-
The Business Charter for Sustainable Development;
-
The Japanese Keidanren's
Global Environmental Charter;
The last group are directed at the business and industry
community in general rather than transnational corporations, which they
mention only occasionally. The Benchmark Survey noted that in 1991 less
than fifty per cent of the corporations in the study applied any of these
codes to their practice. Later research indicated that one third of the
companies in the Survey signed the 1992 Business Charter for Sustainable
Development while seventy per cent of the Japanese companies had signed
the Keidanren's Global
Environmental Charter the same year.
International environmental
principles?
The Japanese corporate organization, Keidanren,
urges its members
-
"to make environmental protection a priority at overseas
sites"
-
"to apply Japanese standards concerning the management
of harmfull substances"
-
"to actively work to implement effective and rational
measures to conserve energy and other resources even when such environmental
problems have not been fully elucidated by science"
The Business Charter on Sustainable Development
of the International Chamber of Commerce (ICC) recommends corporations
to apply the same company principles internationally and to watch that
suppliers do likewise. The OECD recently
developed "Guidelines for the Prevention of Accidents", advising
that
"hazardous installations in non-OECD countries
should meet a level of safety equivalent to that of similar installations
in OECD countries."
The international business community subscribes
increasingly, it appears, to voluntary environmental principles. However,
these codes of conduct do not require companies to apply the toughest environmental
standards (as applied for example in the country of origin) internationally.
Even the most far-reaching, that of the Japanese Keidanren
only recommends the international application of local standards.
International application of environmental principles
is, in all these codes, a very voluntary, individual decision.
-
Surprisingly little attention to the application
of international company environmental management
The Benchmark Survey identified unambiguous
results: <25>
"The participating companies were all large transnational
corporations. Thus they could be expected to have extended procedures and
policies for overseas subsidiaries and affiliates. However, both the statistical
analysis and an evaluation of the material submitted by individual corporations
indicated surprisingly little consideration for the international aspects
of corporate activities. Regulatory discrepancies and the decentralized
organization favoured by many TNCs may account for that finding.
Approximately half of the respondents had allocated
Environmental Health and Safety responsibilities to their controlled affiliates;
only 15 per cent had arrangements with their non-controlled affiliates.
Other companies stated that they intended to observe local regulations.
Some companies gave explicit accounts of their international responsibilities
in their policy statements. Other corporations stated that they were prepared
to establish their own standards if local ones were inadequate or absent.
The more positive finding was that a handful of corporations had pledged
to employ the same standards world-wide, thus meeting the recommendations
of UNCED.
That group included BF Goodrich, Amoco,
AB Volvo, Union Carbide, Boehring, Ingelheim, and Ciba-Geigy."
The fact that active management concerning the environment,
safety and health is restricted to the national level indicates the influence
of national rules and regulations.
Conventions, guidelines and treaties
In recent years, one large environmental conference
has followed the other, most with a specific goal. They resulted in resolutions,
final declarations and protocols which can be interpreted as policy recommendations
for the international community. The goal was sometimes more extensive,
for example to establish a guideline or convention that a certain target
group should observe, or in the hope that part or all of it would be taken
up in national legislation. In these policy recommendations, transnational
corporations as a specific type of company are markedly unmentioned.
United Nations
environmental and health organizations such as the WHO
and UNEP follow these guidelines, but,
in general, they are applied on a voluntary basis and are weakened if they
are not ratified world-wide. Nevertheless protocols and conventions can
form the foundation of far-reaching international regulatory activities,
which can directly influence transnationally operating corporations. To
date, these are more the exception than the rule, the forced reduction
of production of CFCs and the ban on trade in hazardous wastes being the
best known examples, both of which were established following the path
of the convention, but not without problems.
-
The Montreal Protocol
The Vienna Convention for the protection
of the ozone layer (operational since September 1988) and the Montreal
Protocol relating to substances which damage the ozone layer (operational
since January 1989) created a policy resolution to gradually ban CFCs by
1996. Reacting to this, the world's largest producer of CFCs, Dupont,
announced it would stop its production by 1994. This did not entirely solve
the CFC problem, since not all the CFC product varieties fell under the
original protocol, including HCFCs, a CFC group with an extra hydrogen
atom which is less destructive than other CFCs but does destroy ozone.
Dupont and other
producers have now switched to this HCFC to replace CFCs (for example in
automobile air conditioning systems).
In 1991, the Protocol's Scientific Assessment Panel
concluded that CFC alternatives, especially HCFCs, were more harmful than
expected. As a result, the Montreal
Protocol was amended and this amendment ratified early in 1994 and
became operational on June 14 1994. It was agreed that HCFCs and the halons
will be phased out, but more slowly: by 2030.
The Basel Convention
The world currently produces around 400 billion
tonnes of hazardous waste (including diluted waste water) per year, of
which eighty five per cent comes from the United States and five to seven
per cent from the European Union. The first agreement banning the international
trade in hazardous (meaning toxic, radioactive or other health threatening
wastes) was established in the Lomé Convention, which banned all
transport of radioactive and hazardous wastes from the European Community
to ACP (Africa, Caribbean, Pacific) countries. This was only applicable
to Lomé Convention countries and left out 78 of those in the Third
World.
The Basel Convention established a more detailed
agreement, but with weaker content, rejecting a UNEP
draft, and leaving only clauses on the "control" and "management"
of the international trade, but no ban. This effectively legalized the
trade in hazardous wastes under specific conditions, such as that known
as Prior Informed Consent i.e. the receiving country must be informed beforehand
and agree to the shipment. It is not difficult for a large, money-weilding
company to acquire a signature indicating such consent. The Basel Convention
also allows plenty of room for subjective interpretation and a resourceful
trader will find it is full of holes. It has been so stripped of teeth
that it can be easily bypassed, which occurs on a large scale.
Yet only 64 countries ratified this convention.
In the meantime, an attempt has been made to reach a new agreement within
the OECD banning the export of wastes
from OECD countries. On March 25, 1994
the OECD countries agreed in Vienna to
a total ban on exporting toxic wastes to non-OECD countries. The 64 signatories
of the Basel Convention also signed this agreement, which, while not water
tight - it has such escape routes as the category "recyclables"
- is expected to cut off the new markets for toxic wastes which arose in
Eastern Europe and Asia in recent years.
The most far-reaching efforts to create comprehensive
multilateral agreements took place at international conferences, such as
UNCED in
1992. But the treaties reached at such meetings have to be ratified by
a certain number of the states whose governments participated before they
become operational. Ratification means that the treaty is binding in that
country, and it will abide by the rules of arbitrage and sanctions. The
international effectiveness of a multilateral treaty is highly dependent
on the number of ratifications. The more there are, the more it can be
said that the treaty truly represents international legislation for our
international legislation is fact based on consensus between states, and
if there is no consensus the legislation does not exist.
-
What is wrong with international environmental law?
To answer this question, we quote from:
"Advice on the environment: a world-wide problem. Towards a politic
of sustainable development." National Advisory Board for Development
Cooperation, No. 101, June 1993, Page 40 ff.
"Based on these treaties, state practice and internal
jurisprudence we can conclude that a number of principles in international
law have been developed this century which form the foundation of modern
international environmental law. The following principles fall underthis
category:
-
the principle of sovereignty, that every state has the
right to practice its own socio-economic and environmental policies.
-
the principle of good neighbourliness, leading to the
obligation to consider the interests of the neighbouring country and not
to intervene unjustly and cause damage to its natural environment and economic
activities and, in connection with this, the duty to provide immediate
information and consultation, and
-
the principle of international liability for unlawful
deeds. In certain circumstances this can be applied to across the border
environmental damage.
In modern international law a number of important principles
are being created. Besides the principles of good neighbourliness and international
liability for illegal deeds, important in across the border environmental
damage, these are in the main principles which flow from the duty of states
to cooperate internationally and the involvement in, albeit the right of,
people and nations to a healthy living environment.
Despite the positive developments, we have to conclude
that the existing international body of legal instruments is inadequate.
This is due to a number of factors which partly have to do with the as
yet inept development of international environmental law and partly with
fundamental characteristics of existing international law. The following
problems can be seen:
-
In international law the states are the most important
actors. As a result not systematic legislature but disaster law and partial
approaches are developed.
-
All states, and particularly developing countries, meet
with difficulties in translating international laws to creating national
legislation and developing the controlling apparatus.
-
Other actors, such as corporations (whether or not transnational)
and individuals have almost no formal judicial status at the international
level. It is difficult to charge them and to proceed against them on the
international level for environmental crimes. Even at the national level
experience indicates that it is often difficult for states, and in particular
for developing countries, to successfully fight legal battles against international
corporations.
-
It will not always be easy to coin development in the
area of environmental law in a treaty text, either because the development
of law is still in the growing stage or because important elements in it
(specific duties and sanctions) are still being strongly fought against.
The experience in other areas teaches us that in such cases the form of
non-binding texts should be chosen. In most cases the text will to an extent
become binding and will be felt in the development of other instruments."
Expanding body of environmental instruments
International environmental laws and regulations are
patently limited. This is one of the reasons why international environmental
policy has generally remained ad-hoc and reactive for a long time. The
principles of Stockholm (1972) were an important breakthrough. But the
first major, cohesive policy lines for the future were agreed to at UNCED,
in its Agenda
21. Even here the transnational corporation disappeared from sight
as separate category of business within the total business community, to
which separate international treaties and conventions can be directed.
No binding measures were formulated for this type of company. This was
a success of the business lobby operating throughout the UNCED
period (see chapter 2).
Since UNCED,
a great diversity of "instruments" have been developed which national
governments apply in the context of national rules and regulations.
-
The diversity of the body of environmental instruments
<26>
There are a number of ways international
treaties and conventions can be translated into national environmental
policy. The UNCTC describes the following categories:
-
Prohibition orders and legal instructions.
-
Demands relating to environmental effect analysis and
planning for land use.
-
Demands relating to reporting, availability of information,
monitoring and observation programmes.
-
Quality standards.
-
Demands concerning tests and availability.
-
Introduction of "the pollutor pays" principle.
-
Introduction of the "prevention and precaution"
principle.
-
Price and tax measures.
-
Subsidies and government investments.
-
Legislation pertaining to liability and compensation.
-
Executive and mandatory measures and dispute procedures.
-
Extra-territorial legislation.
These instruments have been developed for the application
and use of those individual nation states that have ratified treaties and
conventions. True international instruments, such as the saleability of
internationally agreed national emission rights are still at the stage
of opinionated discussion. National governments often apply different instruments
in introducing or enforcing international treaties and conventions. This
increases the existing diversity in the development of environmental policy
in the various countries of the world.
Generally, transnational corporations find this
diversity in rules and regulations difficult. The lobby for the harmonization
of international environmental regulations was more important to international
business and industry than the creation of environmental codes of conduct
or treaties and conventions: 62 per cent of the transnationals researched
in the Benchmark Survey want the United
Nations to reform discrepancies in environmental rules and regulations.
More than half are in favour of initiatives for the international development
of a communal set of national environmental policies. The main aim of this
harmonization is not so much simplification but the "levelling of the
playfield" for all players on two levels:
-
equalization of the conditions for international
competition (between transnationals, that is to say, export industries)
-
equalization of national conditions for competition
(between national companies and importing companies).
This is the territory of international trade
relations. At the present time, the most far-reaching development in international
law is concentrated on this very territory: the GATT
international trade agreement. The international business community has
centred all available attention and influence on this event, as GATT
does not only seem capable of simplifying and harmonizing legislation,
but also weakening and nullifying strict national environmental rules and
regulations. We will look at this more closely in the next
chapter.
Summary
Despite the non-mandatory nature of specific codes of
conduct pertaining to the way transnational corporations work, they have
long fought the development of strict codes of conduct. In recent years,
however, the international business community increasingly endorses voluntary
environmental principles. But the existing codes of conduct are quite general,
not demanding, for example, that companies apply the toughest environmental
standards internationally. There is not monitoring and enforcement of these
standards and no sanctions for companies who flout them.
Conventions, treaties and protocols are less voluntary
and can form the foundation for far-reaching international regulations
which directly influence the activities of the corporation operating in
many countries. To date, however, these are exceptions, most notably the
ban on CFCs and on trade in hazardous wastes. Both were devised - not without
difficulties - through conventions.
Transnational corporations lobby against mandatory
international legislation, and in particular against those agreements that
identify them as a separate category. They also oppose the international
diversity in rules and regulations. The international business community
sees the lobby for harmonization in international environmental legislation
as more important than the creation of environmental codes of conduct or
international treaties and conventions.
Comments and questions are welcome:
CONTRAST Advies - Milieu
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