Academic journal article The George Washington International Law Review

A Soft Law Mechanism for Corporate Responsibility: How the Updated Oecd Guidelines for Multinational Enterprises Promote Business for the Future

Academic journal article The George Washington International Law Review

A Soft Law Mechanism for Corporate Responsibility: How the Updated Oecd Guidelines for Multinational Enterprises Promote Business for the Future

Article excerpt

I. INTRODUCTION

Over the past decade, international business and foreign direct investment have experienced far-reaching structural change.1 In response, the Organisation for Economic Co-operation and Development (OECD) released the update of its Guidelines for Multinational Enterprises (MNE Guidelines)2 in May 2011. Under the new MNE Guidelines, a total of forty-two countries3 have committed to stronger standards for corporate behavior. For the first time, an inter-governmental agreement has put forth guidelines on human rights abuse by corporate entities and responsibility for their supply chains. This Article provides an overview of several of the new features of the MNE Guidelines. It argues that the MNE Guidelines have demonstrated the potential for soft law to be as effective as hard law in changing corporate culture. Case law from the National Contact Points (NCPs)4 acts as evidence of the development and implementation of soft law norms within the context of the MNE Guidelines. The OECD, through soft law measures, has confirmed its influence and will continue to play a major role in developing stronger governance of multinational enterprises and other international economic activities. One of the highlights of the OECD's work is that it is continually evolving and adapting to the growing needs of a global marketplace. Through its latest update of the MNE Guidelines, the OECD affirms its commitment to addressing tomorrow's challenges.

Part II of the Article provides an analytical look at the nature of Multinational Enterprises (MNEs) and the cross section of surrounding issues encompassed by public international law and corporate responsibility. Part III focuses on the influence of the OECD as an international economic organization on corporate responsibility and outlines the background of the update of the MNE Guidelines. Part IV highlights several prominent features of the update of the MNE Guidelines and identifies remaining issues of scope and institutional framework for the future. The process of the update shows how the MNE Guidelines act as a soft law mechanism that is effective in improving global corporate behavior.

II. THE NATURE OF MULTINATIONAL ENTERPRISES WITHIN PUBLIC INTERNATIONAL LAW

The protection and promotion of individual human rights are core functions of public law recognized by most international agreements as a duty on states. Due to the fact that MNEs have a substantial influence on local communities, they should arguably have more responsibility in upholding high levels of environmental and social accountability.5 Furthermore, "[t]he business community shares responsibility for restoring growth and trust in markets." 6 An evaluation and analysis of corporate behavior of MNEs begs the question "whether voluntary self-regulation by firms through corporate social responsibility can [truly] operate as an effective channel for transnational norm implementation."7 "To the extent that these private sector standard-setting and benchmarking activities are effective, questions loom regarding their ability to reflect choices congruent with the public values underlying the private commitments."8 When dealing with multifaceted issues intertwined between the public and private sector, it helps to step back and take a global approach.

When MNEs assume responsibility in relation to individual rights, they act as private actors promoting public law norms through voluntary activity.9 Additionally, MNEs "have the opportunity to implement best practice policies for sustainable development that seek to ensure coherence between economic, environmental and social objectives."10 In this way, corporate responsibility activity by MNEs not only overlaps with the subjects of public law, but also connects directly with the norms of public international law. Instead of countries mandating corporate behavior through a top-down legislative approach, MNEs can actually act as the catalyst for countries to attain public goals because MNEs operate within several countries and seek to operate on a level playing field across their markets. …

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