Monday, 2 September 2019

The UN Draft Norms on the Responsibilities of Transnational Corporations vs the WHO Code of Marketing of Breast-milk Substitutes


For full article PDF, with introduction, citations and footnotes please see Linkedin.

Global Human Rights and Corporate Social Responsibility 


The international ‘Human Rights’ concept was advanced in the UN Preamble to the Universal Declaration of Human Rights in 1945, and was built upon in subsequent covenants, with concepts focused initially on protecting individuals and groups from abuses by states. The idea that corporations should not violate human rights evolved as a result of expansion of industry and trade supply chains into the competitive global market economy . Increasingly, business activities take place outside of the country where the business is registered. Transnational corporations (TNCs) are one step ahead of the globalisation phenomenon and their influence continues to grow, to the extent that their budgets and sphere of influence may exceed those of the nations in which they operate. Breaking up their spheres of influence between different countries restricts state ability to ensure corporate accountability and domestic social welfare.

The development of a legislative framework for Corporate Social Responsibility (CSR) has been challenged in several ways. International law is increasingly shaped by transnational corporations, and some authors are sceptical of the real potential for good behaviour by corporations without binding legislation to keep human rights abuses in check. Corporations’ stated commitments to responsible behaviour is linked to broader respect for accepted norms in human rights laws, such as the right to life, children’s rights and environmental sustainability. These goals are often in tension, however, with existing binding legislation such as the World Trade Organisation’s rules for reducing barriers to trade, which may result in weaker states compromising national health requirements  and consumer demands. In the absence of any global authority for regulating CSR, attempts have been made in domestic courts to litigate against corporate violations of human rights.

Historical Justice Litigation


The Alien Tort Claims Act (ATCA), also known as the Alien Tort Statute (ATS), was first presented in 1789 as a means of litigating in the United States (US) between non-US citizens, in any violation of the laws of nations or US treaties , in hopes of avoiding international disputes. Few cases were brought to federal courts under the ATCA between its inception and 1980, but with the rise of globalisation, commercial activities between diverse nations saw a renewed need for such litigation. 
The use of the ATCA resurfaced in 1980  in Filartiga v. Pena-Irala, wherein the court ruled that international law or jus cogens, known in the USA at the time as the law of nations, was a fundamental part of United States federal law. This expanded the scope of the ATCA to redressing non-domestic abuses. Thus, while the treaty’s original intent may be unclear, and this move to adjudicate on the matters of foreign states was probably not an intention of the original drafters of the ATCA , its evolution into a vehicle for actions between foreign entities has served a purpose, partly to litigate but also to highlight the difficulties involved in litigating in any nation against international human rights violations. The scope of the ATCA was further developed in the case of Kadic v Karadic , when abuses committed by Karadic were deemed to violate the laws of nations, whether under the auspices of a state or as a private individual, and in the 1997 case of Doe v Unocal Corp, setting an important precedent where a corporation was treated for the first time as a legal person under the ATCA. 

In 2004, a landmark case, Sosa v. Alvarez-Machain, began to narrow the terms of the ATCA. The court held that no international norms were violated in the holding of Alvarez-Machain and this limited the scope of the ATCA to more serious abuses than the reported detention and transfer by law enforcement agencies. A further dispute has been seen to reduce the scope further. In Kiobel v. Royal Dutch Petroleum Co., the corporate defendant Royal Dutch Petroleum (Shell) was held not to have committed unlawful acts which concerned the US, despite those acts including torture and murder of community leaders. A related case, Wiwa v Royal Dutch Petroleum Co, was dismissed as ‘forum non conveniens’, on the grounds that another state may be a more appropriate forum for the extraterritorial case. In a press release, the Centre for Constitutional Rights expressed concern over what was seen as a limitation of the extent to which US Legislation be used as an example and aid development of international law. 

The Royal Dutch Petroleum Co cases are ongoing in the Dutch courts, and it has been suggested that the tarnished corporate image and bad PR surrounding the human rights abuses by Shell, along with investor pressure, may be enough to encourage the corporation to behave better. Indeed, recent moves by Shell may point to a better awareness of social and environmental responsibility but under the current legislative environment they still may not be held accountable for future human rights violations. The ATCA remains one of the few regimes where individual victims may seek damages for international crimes, and there is a concern that the US courts may decide not to accept a case, if the matter might adversely affect economic outcomes in the US under the ‘political question doctrine’, a limitation enabling the dismissal of a case on the grounds that US governmental interests may be impaired in politically sensitive cases. 

Out-of-court settlements can also undermine the development of corporate limitations. They can be kept confidential, thus maintaining a favourable public relations image and keeping details of the case out of the media, and settling out of court also prevents the setting of legislative precedent, so that future cases are unable to draw on rulings . The out of court settlement of Doe v Unocal Corp was seen as a human rights victory but an unfortunate development in terms of strengthening the existing litigation and answering legal questions. A holocaust victims’ case against banks alleged to have profited from Nazi slave labour was similarly settled out of court, affecting later slave labour cases. Thus, despite some successes, it appears there are ways in which corporate bodies can avoid punitive damages and precedent-setting judgements in cases where human rights have been violated under the ATCA, and few other litigation options exist. The global corporate battle for self-regulation and its undermining of potential for binding legislation on social responsibility is well illustrated in the history of the International Code of Marketing of Breastmilk Substitutes (the WHO Code), discussed in the next section. 

The International Code of Marketing of Breastmilk Substitutes 


The World Health Organization’s International Code of Marketing of Breastmilk Substitutes (WHO Code) is a non-binding health policy framework to regulate the marketing of infant formula. It was developed after a libel suit was filed in the Swiss courts by Nestlé against the publisher of a 1974 report, ‘Nestlé Kills Babies’, documenting the deaths of infants in Africa resulting from Nestlé products . While the Swiss court found that the report was indeed libellous , the judge cautioned the corporation on its grossly unethical behaviour, and the evidence presented to the court and ensuing public media discussion highlighted severe abuses by Nestlé knowingly causing thousands of infant deaths internationally and prompted an international boycott against the corporation . In 1978, the Health and Scientific Research Subcommittee of the US Senate, chaired by Senator Edward Kennedy, held investigatory hearings on the marketing of infant formula , which determined that the marketing practices of the corporation had led to the use of the product in situations where it should not be used, and this led to the drafting of the WHO Code in 1981, providing a framework for legislation to prevent the marketing of breastmilk substitutes . In discussions at the World Health Assembly in 1981, regarding whether the WHO Code should be a ‘regulation’ or a ‘recommendation’, the softer language of a non-binding code was favoured despite unanimous support for the WHO Code and some calls for stronger language. 

Today, an estimated 823,000 infants and 20,000 mothers die annually as a result of inadequate breastfeeding rates, and it has been reported that reducing formula use would prevent more infant deaths than any other health policy. Yet evidence suggests that Nestlé regularly breaks the WHO Code, continuing to use advertising and marketing practices contra to the agreement . Nestlé also uses tactics to undermine any policies which they see as threatening profits: corporate political lobbying , industry funded studies which cast doubt on science, gifts to state officials, and misleading information on issues related to infant feeding are well documented practices . Marketing claims for infant formula are not evidence based , and Nestlé has been criticised for their marketing strategy in developing countries  and product labelling in incorrect languages  which causes product misuse, leading to malnutrition and high mortality. Even in the UK, corporate interference undermines breastfeeding and costs the NHS £40 million per year, according to conservative estimates, but NHS officials and health workers accept generous donations and sponsorship from formula manufacturers . 81% of British mothers wish to breastfeed and try to do so but many fail, citing difficulties and lack of support, and at 6 weeks only 55% were still breastfeeding. 

Formula manufacturers use aggressive marketing tactics similar to those historically seen in the tobacco industry, including hijacking the legislative and political process . US trade representatives have criticised countries for promotion of breastfeeding as a barrier to trade which harms the profits of the US dairy industry . Despite cultural differences enshrined in the regional legislations for human rights, the rights of infants and children for a good start in life and not to be harmed are universally agreed , but the threat of litigation may undermine state resolutions to improve infant health , and the consistent lawfare implemented by industry and front groups continues to place infant and maternal health at risk , while heavy investment in public relations strategies diverts criticism whenever civil society questions corporate actions . The Global Reporting Initiative, a self-appointed reporter on CSR standards, lauded Nestlé as a new organizational stakeholder in 2011  and has been condemned by other human rights advocates. Today, Fortune ranks Nestlé as one of their 50 most admired companies and includes social responsibility as one of the factors in calculating their rankings, with a revenue of US$ 90.8 billion, despite the ongoing boycott. 

Infant formula can be a lifesaving product, if used correctly, but corporate resistance to regulation has caused the unnecessary deaths of millions of infants. The non-binding WHO Code has thus not been sufficient to satisfactorily reduce infant mortality or affect real corporate behaviour. Corporate accountability being left to voluntary and self-regulated industry standards poses unacceptable costs to corporations in a competitive market economy , and they are unlikely to follow fair or sustainable practices which impose costs without profitable benefits . 

Recent Attempts to Regulate Corporate Social Responsibility 


The lawfare tactics seen in the formula industry are as effective in many other industries where there exist very necessary products for agriculture , medicine  and even national security. The need for binding obligations on corporations resulted in the UN Commission on Human Rights drafting the Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights in 2004, with the intention to impose binding obligations on states and corporations. Business was, naturally, ‘vehemently opposed’ to the Draft Norms . 

In the subsequent years, human rights advocates, state representatives and corporate lobbyists have endeavoured to come to an agreement. In 2008, John Ruggie was appointed to propose a framework for business and human rights, in which he proposed that the state has a duty to protect human rights; corporations have a responsibility to respect human rights; and effective remedies for victims are required . This was followed by the 2011 Guiding Principles on Business and Human Rights , with less focus on binding elements, other than a caution that States should bear human rights law obligations in mind when pursuing investments or contracts since existing international law in such issues may be binding, and a lack of any accountability or enforcement mechanisms . 

In 2015, a new strategy came into play: the United Nations Global Compact’s Sustainable Development Goals (SDGs). It was hoped that the SDGs would provide a substantive framework for corporate action . Meanwhile, domestic and regional bodies have wavered on support for the Guiding Principles. The Council of Europe, the EU and others expressed initial support and have drawn on the Guiding Principles for a regional strategy on CSR . However, critics have suggested the Guiding Principles are not positivist law, may undermine the role of states in making economic decisions, and contain contradictory articles . A working group in October 2018 highlighted that human rights advocates continue to demand binding obligations and criminal liability for organizations, including in areas affected by conflict . And in March 2019, it was leaked that the weakened EU, one of the Guiding Principle’s greatest initial allies, may be considering withdrawal from the treaty ‘to protect business interests’, a decision which would place economic concerns over human rights. 

Recommendations


Many of the decisions made by states, corporations and international legislative bodies such as the WTO are centred around economic precedence and Gross Domestic Product (GDP). Increase in trade and GDP have been linked to improvements in national health spending and education in developing countries, but factors such as national health and education outcomes are not counted when calculating GDP. When breastfeeding rates fall and infant mortality rises, for example, the increased sale in feeding and medical paraphernalia result in an increase in GDP. Industry lobbyists also exaggerate the importance of economic growth within their industry. Moving the discussion away from one solely centred on economic development may be a useful way for transforming the political and economic discussion into technical, legal questions about social rights and responsibilities. 
The absence of any global regulatory authority with binding rules for CSR needs to be resolved . 
Corporations must consider economy in order to remain competitive, and the profitability of CSR has not been satisfactorily established. Expecting TNCs to establish, adhere to and self-report on non-binding CSR frameworks is not reasonable, no matter how the corporations themselves may advocate for them. In some cases, binding obligations have been passed with success. In the US forbidding corporations from conducting transactions with business connected with apartheid South Africa, the binding nature of the legislation created real economic and social change. The international political will surrounding the binding Ozone Convention  has driven new innovation and had a lasting positive effect on the environment without negatively impacting corporate interests. The level playing field in these cases was advantageous to all corporations involved, rather than just playing to the strengths of those with the largest public relations budgets. The effectiveness of binding legislation is thus proven to be a positive force socially and economically. 

Conclusion 


As we have seen, corporations use a host of public relations strategies, political lobbying and marketing techniques to ensure profits, and this is natural in a competitive market. Where internationally binding legislation does not exist to prevent human rights violations, TNCs may use tactics which negatively affect domestic social and health outcomes but escape litigation, and victims may have no recourse for reparations in domestic courts. The ATCS has been a useful forum for highlighting not only corporate abuses, but also the difficulties inherent in bringing TNCs to justice. 

The United Nations Commission on Human Rights Draft Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights and the Sustainable Development Goals are developing useful substantive frameworks which corporations might follow, but without binding effects and enforcement mechanisms it is unlikely that corporate culture will see any change beyond increased political lobbying and public image spending. 

Permitting TNCs to direct the discourse surrounding potential regulations will see a focus on economic imperatives, whilst legislators should enable a discussion about human rights, social welfare and the binding responsibilities of corporate entities to obey international laws. Evidence seen in the Ozone Convention and South African divestment suggests that binding legislation can drive innovation and create positive environmental and social change. There is still hope that the Draft Norms can become a powerful driver for sustainable development and human rights, even placing sensible limits on potentially lifesaving products, and all but the largest monopolies should welcome a level playing field and a reduction in human rights violations internationally. 


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