Academic journal article American University International Law Review

Banks as Human Rights Enforcers? a Comparative Analysis of Soft Law Instruments

Academic journal article American University International Law Review

Banks as Human Rights Enforcers? a Comparative Analysis of Soft Law Instruments

Article excerpt

i. introduction

Globalization, largely fueled by foreign direct investment, is undeniably associated with a wide range of benefits, particularly in terms of economic growth.1 However, globalization is also accompanied by serious dangers, especially with regard to sustainability, which includes environmental and human rights (HR) issues.2 One of these dangers lies in the discrepancies that exist between the power and reach of large-scale economic forces and the ability of societies to manage the adverse consequences of their activities.3

The impact that businesses can have on HR has attracted high levels of attention in the last decade, but the legal framework remains confusing. HR have traditionally been construed vertically as a shield protecting individual citizens from actual or potential harm inflicted by states, rather than corporations or other non-state actors.4 Corporate HR responsibility is currently governed by a puzzle of soft law instruments of questionable efficacy, and attempts at regulating business conduct under international HR law have invariably failed.5 The current HR obligations imposed upon businesses by existing legal frameworks are therefore very poorly constructed.6

That is not to say that businesses are completely exempted from HR responsibilities and domestic regulation of corporate activities, such as, inter alia, criminal law, labor law, and environmental law, which undoubtedly affect HR.7 In addition, several jurisdictions regulate business conduct abroad through rules of extraterritorial application.8 However, international HR law largely ignores the responsibilities of businesses, thus allowing them to operate with virtual immunity in many circumstances.9

Under the traditional, state-centric, construction of international HR law, states, rather than corporations, are held vicariously liable for business actions that have an adverse impact on individuals' HR.10 In fact, under international law, host states have the primary duty to protect HR against abuse by third parties, including businesses.11 This duty imposes an affirmative obligation on host states to exercise due diligence in the form of appropriate policies, legislation, regulations, and adjudication to ensure that the activities of private parties do not impinge on the enjoyment of internationally guaranteed HR of individuals and groups within their jurisdiction.12 In reality, however, host states are often unable or unwilling to control corporate behavior, either because multinational enterprises (MNEs) wield significant power or because host states' regulatory powers are restricted by international treaties, such as international investment agreements.13

Although many recognize the need for a legally binding instrument to impose HR obligations on MNEs, that need is still a long way from being met. Laudable efforts are being made to create such an instrument, for example, the Human Rights Council (HRC) Resolution 26/9 of July 14, 2014, established "an open-ended intergovernmental working group on transnational corporations and other business enterprises with respect to [HR]."14 The working group's mandate is "to elaborate an international legally binding instrument to regulate, in international [HR] law, the activities of transnational corporations and other business enterprises."15 However, the viability of such a legally binding instrument is questionable: the Resolution establishing the working group was adopted by a vote of 20 to 14, with 13 abstentions.16 The countries that opposed its adoption include the United Kingdom, the United States, and several other western countries;17 therefore, it is reasonable to question whether this instrument will ever see the light of day.

In light of the previously discussed problems, alternative ways to enforce HR standards should be explored. Specifically, existing tools can be harnessed to influence investor behavior and contribute to the development of a more responsible investment environment. …

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