Norm Contestation in the BHR Field—The Role of Corporate Actors as Entrepreneurs, Antipreneurs, and Saboteurs

Abstract

The quest for corporate accountability remains unabated in the business and human rights (BHR) field. This paper examines the role of multinational corporations (MNCs) and Business Interest Associations (BIA) as entrepreneurs, antipreneurs and saboteurs in setting human rights standards. Through this conceptualization, this paper argues that corporate accountability remains elusive because of corporate actors’ normative power and influence in the BHR norm contestation. It attributes corporate actors’ influence in the norm contestation to the UN multistakeholder design that sees nonstate actors as partners and stakeholders in setting global human rights standards. This paper then argues that to force a norm change in the BHR field, there is a need to rethink the BHR governance model. Corporate actors must be reconceptualized as ‘regulated individuals’ during norm discussions and standard-setting processes.

I. Introduction

Globalization in the twenty-first century is changing the world in many ways. One of these is the growth in the economic power of multinational corporations (MNCs). ¹ The growth of MNCs has made them active participants as nonstate actors in international law norm-making, notwithstanding that they are traditionally not subjects of international law. ² More importantly, business interest associations (BIAs) have emerged globally to protect the collective interests of businesses in international law-making. ³ Therefore, the coalition of MNCs into BIAs has further made them influential in shaping global norms relating to trade, human rights, environment, climate, and investment.

This article conceptualizes the role of corporate actors in the ongoing norm contestation in the BHR field. Using the international relations theory of norm contestation, I classify corporate actors as entrepreneurs who promote self-regulatory regimes, antipreneurs who resist regulations and saboteurs who weaken established norms. Through this conceptualization, this paper argues that corporate accountability remains elusive because of corporate actors’ normative power and influence in the BHR norm contestation. It attributes corporate actors’ influence in the norm contestation to the UN multistakeholder design that sees nonstate actors as partners and stakeholders in setting global human rights standards. This article then argues that to force a norm change in the BHR field, there is a need to rethink the BHR governance model. Instead of seeing MNCs and business associations as partners or stakeholders, they must be reconceptualized as regulated entities, as the World Health Organization (WHO) has done through the Framework Convention on Tobacco Control (FCTC). ⁴

There is a debate about whether MNCs should be subject to international law. ⁵ The argument is that state parties who are signatories to the UN Charter can only be held accountable under international law. ⁶ Other scholars argue that corporations belong to the category of ‘persons’ under international treaties and charters. They argue that the rigid distinction between states and corporations is impossible because corporations take advantage of international law but avoid responsibilities. ⁷ However, Barnali Choudhury notes that this debate is not ‘entirely helpful’. ⁸ Instead, she argues that the focus should be on corporations as actors in international economic law who actively participate in global governance frameworks. This paper adopts and extends Choudhury’s view—it argues that corporate actors’ participation in international law-making should be regulated in the BHR field, especially when their interests and biases may undermine intergovernmental organizations’ mandate to protect the people and the planet. It focuses on procedural regulation, not substantive regulation of MNCs, although one can lead to the other.

This paper proceeds in five sections. Section II examines the theory of norm contestation. It looks at the role of norm agents as entrepreneurs, antipreneurs and saboteurs during norm contestations. The actors’ activities account for the success or failure of a norm change in a field. Section III applies this theory to the BHR field to understand how corporate actors promote self-regulatory norms as entrepreneurs, resist legal obligations as antipreneurs and weaken attempts to implement a smart mix of regulations as saboteurs. It argues that through instrumental, structural and discursive powers, corporate actors are able to frame the voluntary/regulatory debate, influence the UN, and coordinate domestic resistance to HRDD laws. Section IV then considers normative actions required to force a norm change in the BHR field. It argues that to promote a corporate accountability norm, the UN multistakeholder governance model must be redesigned to account for the power imbalance among nonstate actors. This reconfigured structure would recognize corporate actors as regulated entities. Second, a critical mass of state and nonstate actors must pull in the same normative direction to reduce antipreneurs’ influence further. Section V concludes that the normative role of nonstate actors in international law cannot continue unignored. Intergovernmental organizations and scholars must harness the power of nonstate actors to protect people and the planet.

II. The theory of norm contestation

The norm contestation theory explains how norm actors contest, replace or weaken a universally accepted norm. ⁹ Nicole Deitelhoff and Lisbeth Zimmermann define norm contestation as an ‘interactive practice’ that involves ‘at least two participating agents’ who express disapproval towards another norm. ¹⁰ Similarly, Wayne Sandholtz and Kendall Stiles describe norm contestation as ‘disagreements about which norms apply and what the norms require or permit in a given situation …’. ¹¹ Norm contestation is driven and controlled by three categories of norm agents: entrepreneurs, antipreneurs, and norm saboteurs.

Norm entrepreneurs are actors who convince others to embrace new norms. They first identify a normative problem by attacking the underlying morality of the status quo. ¹² Entrepreneurs then proffer viable solutions through a new norm. ¹³ However, the extent of the norm change depends on how entrenched or institutionalized the existing norm is. The more institutionalized a norm is, the more difficult it will be to change it and vice versa. ¹⁴ Alan Bloomfield categorizes entrepreneurs as pure entrepreneurs and competitive entrepreneurs. While pure entrepreneurs advocate for a radical change in the status quo, competitive entrepreneurs seek less radical change—an incremental change. ¹⁵ Entrepreneurs may push for a radical or incremental change depending on their motives and how entrenched a norm is.

In contrast, antipreneurs are ‘actors who defend the entrenched normative status quo against challengers’. ¹⁶ Antipreneurs use two strategies. First, they refute the claim that the existing norm is problematic and requires a solution—they emphasize the slogan ‘If it ain’t broke, don’t fix it’. ¹⁷ Even if they concede that there is a problem, they block efforts to proffer viable solutions since they enjoy the strategic advantages of incumbency. ¹⁸ Antipreneurs tag entrepreneurs as idealistic, naïve dreamers or dangerous radicals. ¹⁹ In accomplishing their goal, antipreneurs can act as veto players who block every institutional effort to produce new policies or laws. ²⁰ Like entrepreneurs, antipreneurs can also be categorized based on their resistance level. While pure antipreneurs implacably resist norms without concessions, creative resisters may concede to some degree of normative change while still primarily defending the status quo. ²¹

Even when antipreneurs fail to maintain the status quo, they may still contest a norm as saboteurs. ²² Saboteurs seek to block the implementation of an already accepted norm at a domestic, regional or global level. ²³ They are motivated by furthering their interests in pushing back a normative regime. Saboteurs’ activities have some consequences on the lifespan of an accepted norm. First, norm saboteurs’ actions can weaken a universally accepted norm, leading to norm decay, regression, or erosion. ²⁴ Second, their activities can lead to the replacement of the norm. Third, it can lead to the strengthening of the existing norm: norm robustness. ²⁵ Fourth, it can result in restricting the applicatory scope of the original norm or substituting the old with the new norm. ²⁶

The next section applies the norm contestation theory to the BHR field. It conceptualizes corporate actors’ roles in the ongoing norm contestation between voluntary and regulatory regimes. This exercise helps understand the normative actions that account for contemporary weak regulatory developments in the quest to hold MNCs accountable for human rights, climate, and environmental abuses.

III. Norm contestation in the BHR field

Corporate actors are amorphous in setting human rights standards. Depending on their interest, they are entrepreneurs, antipreneurs, and saboteurs. However, regardless of their roles, corporate actors are generally motivated by interconnected political and economic broad objectives, which include (1) promoting self-regulatory norms, (2) preventing the adoption of international legally binding rules that affect corporations, (3) preventing the introduction of monitoring and accountability mechanisms for corporations under national and international frameworks and (4) preventing the establishment of an international system that would allow victims to obtain reparations where national legislation is insufficient or not sufficiently implemented. ²⁷ Although it would be anecdotal to argue that all corporations reject regulation, this article only focuses on how MNCs and BIAs influence regulatory norms.

To understand the corporate influence on BHR norms, this article applies Michael Barnett and Raymond Duvall’s conceptualization of power and David Birchall’s analytical framework on corporate power. ²⁸ Power is defined as ‘the production, in and through social relations, of effects that shape the capacities of actors to determine their circumstances and fate’. ²⁹ For BHR norm contestation, power can be defined as the production, by MNCs and BIAs, in and through social relations, of effects that shape their capacities to prevail over other norm agents. Corporate actors wield different types of power, which may be structural, instrumental, relational and discursive. ³⁰

Structural power refers to the ability of actors ‘to decide how things shall be done, the power to shape frameworks within which states relate to each other, relate to people or relate to corporate enterprises’. ³¹ Through structural power, actors can create a framework that forces other actors to act in ways that achieve a preconceived desired outcome. ³² Therefore, ‘structural power enables us to see not only that two partners are dancing but also that they are dancing on a well-prepared stage that ensures that only certain steps in the dance are possible’. ³³

Instrumental power refers to the capacity of an actor to influence others through its resources. ³⁴ Lobbying, political campaign contributions, asymmetry of knowledge and privileged access to decision-making are some tactics MNCs and BIAs deploy to achieve their aims. Access to decision-making institutions gives MNCs and MIAs another form of power: relational power. Relational power is invoked through established relationships among actors. Relationality gives corporate actors the ability to cocreate frameworks through shared understandings. ³⁵ Therefore, relational power connotes the ability of an actor ‘power to do’ something rather than ‘power over’ other actors. ³⁶

Discursive power refers to an actor’s ability to shape discourse and outcomes ‘through promoting ideas, setting social norms and expectations, and even shaping identities’. ³⁷ Language is essential in setting a discourse. Therefore, through language, discourse is used in setting narrative structures, apportioning blame, creating and setting boundaries of knowledge and establishing legitimacy. Birchall notes that discursive power is ‘the softest and perhaps the most pervasive form of power, wherein one exercises power by influencing, shaping or determining [another’s] very wants. It is a form of power that “does not simply pursue interests but creates them”’. ³⁸

These types of power are not mutually exclusive—they overlap and can be mutually reinforcing. In the discussion below, this article briefly illustrates how corporate powers advance MNCs’ courses as entrepreneurs, antipreneurs and saboteurs to shape a corporate accountability norm. These powers allowed them to control the narrative, substitute regulatory initiatives with voluntary ones and build networks and alliances with developed countries and international organizations.

A. Corporate actors as entrepreneurs and antipreneurs

The history of corporate influence on international norms has mostly been about resisting obligations and promoting self-regulation. This is demonstrated in norm contestation in various international law fields, including climate change, ³⁹ intellectual property ⁴⁰ and investment law (IIL). This article will illustrate the contestation in IIL because of its practical relevance to the business and human rights field—corporate strategies in IIL set the stage for BHR norm contestation. The author’s claim is that corporate actors play mutually reinforcing roles as entrepreneurs and antipreneurs to promote voluntary norms and resist mandatory obligations. ⁴¹

Corporate actors, including BIAs and MNCs, as entrepreneurs employed discursive strategies to shape IIL’s debate on investor rights and obligations. Nicolas Perrone refers to this strategy as a notion of legal imagination: the ability to shape a worldview through which other actors’ discourse or actions converge. ⁴² Corporate actors created a metalanguage of investor protection through a legal imagination, using private property and contractual rights language to decouple IIL from investor obligations. ⁴³ Influential business actors and lawyers, including Hermann Josef Abs, Eberhard Reinhardt, Hartley Shawcross and George Washington Haight, whose views on protecting foreign investment without corresponding investor obligation, subtly controlled the narrative in IIL. ⁴⁴ As entrepreneurs, their ideas of investment protection became one of the fundamental principles upon which BIAs and MNCs built the foundation of investor-state dispute settlement (ISDS). ⁴⁵ By lobbying, networking and submitting ambitious proposals, these entrepreneurs convinced governments and international organizations that foreign investment is transformative for any country. ⁴⁶ Events from the late 1940s through the 1960s will further illustrate how corporate actors converted ideas into action.

After the Second World War, the question turned to how to govern the international economy to promote world trade and ensure prosperity. The International Trade Organization (ITO) first attempted to regulate investment activities through negotiations between developed and developing countries between 1946 and 1948. ⁴⁷ Developed countries favoured investment protection, citing the need to secure foreign investors’ property. However, developing countries, especially in Latin America, argued that foreign investors should be subject to domestic legislation and courts (the Calvo Doctrine). ⁴⁸ These negotiations culminated in the Havana Charter of 1948. The Charter recognized investors’ and states’ rights and obligations. However, Article 11 of the Charter provides that states’ protectionist powers would not be exercised unreasonably or unjustifiably. ⁴⁹

BIAs vehemently resisted this move, including the International Chamber of Commerce (ICC). The ICC Honorary President, Arthur Guinness, told negotiators that they were creating ‘a rule of the road for world trade, and we businessmen represent the users of the road and also those who produce the revenue to maintain the road’. ⁵⁰ The ICC argued that investor obligations were vague, which may incentivize host states to take hostile measures against foreign investors arbitrarily. The ICC’s resistance ultimately culminated in the United States’ refusal to ratify the Havana Charter, leading to the death of the ITO. ⁵¹ Business resistance to foreign investors’ obligations may have been successful because their interests align with those of developed countries, especially the United States. ⁵² Here, we see an alliance between the corporate actors and developed countries.

However, corporate actors are not just antipreneurs, they are also entrepreneurs, creating their own narratives through structural and discursive powers. In 1949, the ICC prepared a code of conduct for foreign investors, downplaying the need for investor obligations. It attacked the rhetoric that MNCs are agents of neocolonialism and advocated for an investment-friendly environment where MNCs can thrive. ⁵³ The ICC leveraged its instrumental powers, pitching its ideas to governments, the United Nations (UN) and the international community. ⁵⁴ Although the ICC draft code was not widely accepted, as developing countries like Egypt, Cuba and Indonesia continued to nationalize investors’ properties, BIAs continued to strengthen their network. ⁵⁵ In the late 1950s, BIAs networked in different groups and created associations and proposals to recognize investors’ rights in international law. ⁵⁶

Two influential business actors emerged from these coalitions that shaped the discourse on investors’ rights. Hermann Abs, a Deutsche Bank director, and Hartley Shawcross, general counsel at Dutch Shell, led other business professionals and lawyers to develop a draft treaty that promoted investors’ rights without corresponding obligations. ⁵⁷ Popularly called the Abs-Shawcross draft, it enjoyed the support of business communities, including the ICC. Although the draft was criticized for omitting foreign investors’ obligations and the vagueness of the text, business leaders explained away these ambiguities, preferring to leave them to further interpretation by the ISDS tribunals. With the support of the World Bank and its general counsel, Aron Broches, the International Centre for the Settlement of Investment Disputes (ICSID) was created in 1965 to interpret treaties and resolve investment disputes. ⁵⁸ The ISDS was designed to be ‘an antidote to claims of redistribution, recognition, and attempts to embed foreign investor rights into the relevant locality’. ⁵⁹ Put differently, it became a tool for legal imagination that designs rules of the game within which other actors would play. ⁶⁰ Investment treaties and the ISDS played a mutually reinforcing role in promoting investors’ rights, which created a regulatory chill among developing countries. ⁶¹

B. Filling the vacuum—replacing regulation with voluntary codes

By the 1970s, tensions increased due to a lack of corporate regulation. Trade unions and developed countries criticized MNCs for their atrocities, including supporting a coup to topple a democratically elected government in Chile. ⁶² Shell plc was also criticized for human rights violations in the Niger Delta region of Nigeria and complicity in Nigeria’s use of force against the Ogoni people. ⁶³ These events accentuated a governance gap that arose from the nonregulation of MNCs. As a result, in 1974, there was renewed regulatory pressure from the UN Group of Eminent Persons (GEP), which recommended an investment code of conduct containing rights and obligations for states and investors alike. ⁶⁴ The same year, the UN General Assembly also approved the Charter of Economic Rights and Duties of States (CERDS). ⁶⁵ Developing countries championed the Charter to establish a New International Economic Order (NIEO) recognizing corresponding rights and obligations for states and MNCs. ⁶⁶

However, developed countries and corporate actors again resisted these regulatory measures. Business leaders denounced the CERDS as an attack on private investments and an attempt to stifle the global economy. ⁶⁷ They also argued that the GEP proposal for states-MNCs corollary rights and obligations would ‘discriminate against MNCs and disrupt investment flows and development’. ⁶⁸ Expectedly, the developed countries voted against the CERDS, and corporate actors sought an alternative to global regulation. ⁶⁹

Amidst this contestation, the ICC, again, proposed voluntary guidelines to steer discussions away from regulation and investor obligations. In 1972, the ICC released guidelines that outlined investors’ voluntary responsibilities. ⁷⁰ These guidelines were influenced by business actors, including former Unilever adviser Pieter Kuin and Royal Dutch Shell’s John Blair, who maintained that MNCs should only be good citizens. As good citizens, MNCs are expected to develop ‘respect for other nationalities and cultures’. ⁷¹ Such behaviour would earn MNCs the right to a ‘quiet enjoyment’ of their investments—a quid pro quo. ⁷² The ICC sought the support of the Organization for Economic Co-operation and Development (OECD) to internationalize these guidelines. Although the OECD Business and Industry Advisory Committee (BIAC) welcomed the proposal, the OECD Development Committee was less impressed because the text did not address the political dimension of foreign investment. ⁷³

Sensing resistance from trade unions and developing countries, in 1975, the business community joined forces with developed countries to promote negotiating voluntary guidelines that followed the ICC guidelines. ⁷⁴ The OECD guidelines were quickly approved in 1976, making it the first OECD document legitimizing the MNCs’ voluntary responsibilities. The guidelines are considered morally binding documents without any force of law. ⁷⁵ Since then, corporate actors have actively promoted voluntary codes in international organizations through sustained alliances with developed countries whose interests are to maintain economic opportunities in newly independent states. Indeed, it has been noted that BIAs have established themselves as a ‘triumphant’ lobbyist for global economic deregulation in forums such as the UN and the World Trade Organizations (WTO). ⁷⁶

This new landscape birthed another discursive corporate strategy. MNCs created voluntary codes of conduct in the form of Corporate Social Responsibility (CSR), which further shifted the conversation from mandatory obligations. ⁷⁷ For example, when Nestlé was accused of deceptive market practices to promote its sales in Africa in 1971, it simply elaborated its code of conduct. ⁷⁸ Nestlé elaborated on its voluntary code as a strategic CSR construct to downplay the importance of regulation and promote self-regulatory norms. ⁷⁹ Through public campaigns, sponsoring, TV advertisements and publication of corporate voluntary codes, CSR became a tool for legal imagination that actively shaped the public’s perception of corporations and entrenched corporate voluntary norms. ⁸⁰

C. 1976-2010—Business and human rights

During this period, developing countries continued to push mandatory norms, which birthed regulatory initiatives, including the 1976 draft for a comprehensive and legally binding UN Code of Conduct on Transnational Corporations and the 2003 Draft Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises (Draft Norms). ⁸¹ However, developed countries and the business community controlled the agenda to maintain resistance. ⁸² Their resistance was further fuelled by the rise of neoliberalism in the 1990s, which sought to liberalize trade and investment rules. ⁸³ Through the corporate capture of the OECD and the UN, BIAs successfully killed the Draft Norms and replaced them with more voluntary rules, including the Global Compact in 2003. ⁸⁴ The Global Compact is significant because it birthed a partnership between the UN and corporate actors—corporate actors became co-owners of voluntary initiatives instead of subjects of regulation. ⁸⁵ This demonstrates corporate instrumental and relational powers to influence norms.

Consultations about the United Nations Guiding Principles (UNGPs) on business and human rights followed the Global Compact in 2005 when John Ruggie was appointed the Special Representative of the UN Secretary-General. Sensing the political contestation that engulfed the regulation of MNCs, Ruggie introduced Pillar II: the corporate responsibility to respect human rights (CR2R) norm. ⁸⁶ Although the UNGPs had the prospect of imposing an array of expansive obligations on businesses, MNCs and BIAs resisted it. ⁸⁷ For example, in a letter dated 14 October 2005, the ICC and IOE demanded that Ruggie reinforce the voluntary regime instead of creating legal regulation—demands showing the double character of BIAs as entrepreneurs and antipreneurs. ⁸⁸ Considering that the Draft Norms failed because they lacked business backing, it was obvious that the demand could not be ignored. ⁸⁹ Like the voluntary codes in the 1970s, the UNGPs continued the CSR rhetoric amid institutionalized voluntarism. ⁹⁰

When Ruggie introduced Human Rights Due Diligence (HRDD) as a way for MNCs to show corporate responsibility, he imagined a BHR regime where states could harden soft law through legislation. However, like in IIL, HRDD is an expression of corporate legal imagination to resist regulation. ⁹¹ First, the business community welcomed Ruggie’s idea of HRDD. ⁹² However, they rejected any grievance and binding obligations as part of the ‘Respect, Protect, and Remedy framework’. ⁹³ They also rejected any legal obligation or enforcement mechanism arising from the conduct of HRDD. In effect, BIAs conceived and promoted HRDD as an institutional practice where they remain in control of the process without any legal repercussions for their failure. Through the HRDD multistakeholder design, MNCs are awarded agencies as quasiregulators in the BHR field. ⁹⁴ The dice were already loaded; when victims participate in the HRDD process, they play within the rules predetermined by corporate actors who reject legal accountability. Indeed, it has been noted that ‘[f]rom a political science perspective, the concept of corporate human rights due diligence is also seen critically as being part of a tendency towards a privatization of human rights and an increasing corporate power of definition in the field of human rights’. ⁹⁵

Looking at Ruggie’s role in the emergence of the CR2R norm, he could be classified as a competitive entrepreneur who sought a less radical change—an incremental change—in the BHR field. Contrary to developing countries, NGOs’ and CSOs’ treaty demands (radical change), Ruggie pushed for a smart mix of voluntary and regulatory regulations ‘which do not by themselves create new legally binding obligations but derive normative force through their endorsement by states and support from other key stakeholders, including business itself’. ⁹⁶ He envisioned that a smart mix of regulations of a mutually reinforcing system would produce a cumulative change where corporations respect human rights without external pressure. Peter Muchlinski concludes that Ruggie made ‘a compromise between greater procedural commitments to control human rights risks in business operations, possibly reinforced by national legal obligations, but stopping short of full international legal liability for human rights abuses’. ⁹⁷

Before the UNGPs, corporate actors were pure antipreneurs and entrepreneurs. However, they changed their position during the negotiations leading to the endorsement of the UNGPs. Corporate actors were creative resisters to the CR2R norm—they conceded to some degree of normative change while still primarily defending the status quo. Although MNCs and BIAs acknowledge that corporations are responsible for conducting HRDD, they maintain that such exercise must be voluntary with no legal sanction for noncompliance. They also ensured that the HRDD process is not mandated to produce any specific human rights-related outcome. ⁹⁸ In effect, corporate actors are comfortable with the CR2R norm, similar to CSR initiatives, as part of a legal imagination strategy. ⁹⁹

The next subsection illustrates how antipreneurs have quickly become norm saboteurs. As earlier stated, norm saboteurs are actors committed to weakening universally accepted norms. Despite corporate actors’ acceptance of the CR2R norm, they are weakening its hardening into a legal norm that imposes human rights, environment, and climate obligations.

D. Corporate actors as saboteurs—the rise of weak HRDD legislation

To implement the UNGPs’ objectives, some entrepreneurs, including NGOs and CSOs, are pushing states, especially in Europe, to mandate corporations to conduct HRDD through legislation. ¹⁰⁰ This would force norm change at the domestic level. Starting with France in 2017 and followed by Switzerland, Germany and Norway, HRDD legislation is beginning to emerge. ¹⁰¹ The laws require corporations to conduct HRDD, failure of which will attract a range of state sanctions, including civil/administrative fines and civil remedies (damages). ¹⁰² Although HRDD legislation is slightly different in scope and substance in each state, they share similar weaknesses regarding their limited scope, unenforceable mechanisms, and lack of access to remedies. ¹⁰³ The final text of these laws does not reflect CSOs’ and NGOs’ intentions. Entrepreneurs initially proposed stronger and broader legislative bills to ensure MNCs are held accountable.

This section, aims to show how corporate activities at the domestic level manifest global neoliberal objectives discussed in the previous section. This is because domestic BIA are local agents of norm diffusion that can shape international norms’ normative scope and diffusion. ¹⁰⁴ My thesis is that domestic BIAs’ activities, as part of a corporate global network, act as saboteurs in implementing the CR2R. For example, SwissHoldings, a confederation of Swiss-based multinational enterprises, states on its website that ‘[f]avorable business conditions for multinational enterprises in Switzerland that’s what we stand for!’ ¹⁰⁵ Due to space constraints, this article uses examples from two countries—Switzerland and France—to show how BIAs act as saboteurs. Other examples abound in the United Kingdom, ¹⁰⁶ Germany, ¹⁰⁷ Norway ¹⁰⁸ and the European Union. ¹⁰⁹

E. France

A group of entrepreneurs sponsored a legislative bill that proposed a stronger accountability measure than the final text. The entrepreneurs were a coalition of environmental human rights activists, international NGOs, Catholic Socialists, legal justice advocates, academics, left-wing politicians and trade unions. ¹¹⁰ The proposed bill imposed legal liability on corporations to conduct HRDD. It also places the burden of proof of compliance on corporations, not rightsholders. However, French business associations, including the French Association of Private Enterprises and the Movement of the Enterprises of France, rejected this bill, labelling it vague and ambiguous, and, in turn, lobbied for a weaker version of the bill in the French National Assembly. ¹¹¹ Although the final text reversed the burden of proof on corporations and placed it on rightsholders, a judge could still impose a civil fine of €10-30 million for MNCs’ failure to comply with the law. ¹¹²

Notwithstanding their ‘victory’ in the parliament, saboteurs used the judiciary to weaken the CR2R norm further. The French Constitution provides that even if a bill is passed by the parliament either through a government bill or a private member bill, it can still be reviewed by the French Constitutional Council before the presidential assent. The Constitutional Council decides whether a proposed bill conforms with the Constitution. ¹¹³ Leveraging on the provision, saboteurs launched a final attack on the legislation, arguing that the bill infringes on companies’ freedom to trade and do business. It also argued that the legislature’s €10-30 million civil fine arising from ambiguous HRDD requirements was contrary to the provision of Article 8 of the 1789 French Declaration of the Rights of Man and of the Citizen, which requires penal provisions to be clear and specific. Although the Council rejected the first argument, it agreed with saboteurs that the civil fine was unconstitutional because the requirements of the HRDD were vague. ¹¹⁴ Notwithstanding that the court recognized that it might grant injunctions against MNCs, the absence of civil fines considerably weakened the legislation as there is no deterrence against human rights abuse.

F. Switzerland

An alliance of NGOs, supported by church groups, human rights groups, trade unions and political parties mainly from the left, launched a responsible business initiative (RBI) to amend Article 101a of the Swiss constitution, which will require Swiss companies to carry out HRDD and make them liable for harm caused by companies they control. ¹¹⁵ The proposed amendment covered MNCs, their subsidiaries, supply chain relationships and affiliates over which they have de facto control. ¹¹⁶

However, antipreneurs, now turned saboteurs, weakened the RBI by lobbying the Swiss Parliament. ¹¹⁷ Consequently, the Council of States made a counterproposal that considerably weakened the RBI. ¹¹⁸ The counterproposal limits liability to certain larger Swiss parent companies. Also, it only covered cases where MNCs exercise actual and legal control, not de facto control. ¹¹⁹ The second legislative house, the National Council (comparable to the House of Representatives), further watered down the scope of the RBI. It submitted another counterproposal that reduced the law to a reporting legislation only on cases relating to conflict minerals and child labour. ¹²⁰ The National Council also removed provisions relating to corporate liability. ¹²¹ At the end of the legislative process, the entrepreneurs of the bill concluded that ‘the multinational corporations’ lobbyists have won the day in parliament’. ¹²²

Furthermore, BIAs, including SwissHoldings and Economiesuisse, actively influenced the public perception of the RBI through discursive framing. They organized campaigns against the RBI and sponsored advertisements in popular newspapers, warning the public of the negative economic impact of such an initiative. ¹²³ For example, BIAs argued that the law would harm Swiss companies and make Switzerland less attractive to business than other countries. Particularly, SwissHoldings contended that the HRDD proposal sponsored by entrepreneurs is ‘contrary to the spirit’ of the CR2R norm because it imposed government obligations on corporations. ¹²⁴ It took Ruggie’s intervention to correct the misinformation that the UNGPs must remain a soft law. ¹²⁵ He clarified that states’ HRDD legislation follows Principle 3 of the UNGPs, which allows states to adopt a smart mix of voluntary and legal regulations to foster business respect for human rights. ¹²⁶

In response to BIA’s discursive powers, NGOs hung banners and signs from their windows and across streets. However, the financial strength of the saboteurs means that their campaign had a wider reach than the entrepreneurs. Although measuring the campaign’s effect on citizens is difficult, the market reacted negatively to the possibility of the RBI. A survey of the capital market shares of 185 Swiss companies that would likely be affected by the RBI fell in anticipation of stricter regulation. ¹²⁷ In the end, although the RBI gained a popular vote of 50.7 per cent of the voting population, most cantons (states) rejected the proposal. Thus, the RBI did not pass the Swiss constitutional requirement of a double majority. ¹²⁸ This was the first time an initiative would fail to pass despite widespread support for over half a century. ¹²⁹ Consequently, the weaker counterproposal from the parliament automatically became law.

The events in France and Switzerland show that norm CSOs and NGOs are pushing for a norm change through domestic legislation, as Ruggie envisaged. However, saboteurs access institutional forums, including the legislature, judiciary and mass media, to restrict the applicatory scope and weaken the CR2R norm. Experience from the Swiss and French cases shows that saboteurs use three strategies: first, they obstruct the implementation of the law; second, they engage in fearmongering to arouse public fear; and where these first two fail, they restrict the scope of the law. ¹³⁰ Even worse, saboteurs are turning HRDD legislation, originally intended as a sword against corporate abuse, into a shield against corporate accountability. ¹³¹ This is because the HRDD laws, instead of providing legal accountability, have fuelled MNCs’ structural powers, which allow them to show cosmetic compliance and subjectively interpret the law. The effect of these weakening efforts can lead to the decay, regression and erosion of the CR2R norm because, as stated in Section 2, these are the ripple effects of norm weakening.

The final draft of the recently adopted EU Corporate Sustainability Due Diligence Directive (Directive) demonstrates how saboteurs’ activities can lead to norm regression. The Directive undercuts the progress made in the UNGPs, ¹³² as most European countries led by France and Germany ‘played the games of big businesses’ and BIAs, including BusinessEurope, Eurochambres, the French Movement of the Enterprises of France (MEDEF) and the Association Française des Entreprises Privées. ¹³³ Corporate lobbyists directly influenced state negotiation, causing Germany to, at some point, pull back its support for the Directive during the final stages of the negotiation. ¹³⁴ This situation allowed France to make a final onslaught to weaken the draft proposal. ¹³⁵ Contrary to Principle 14 of the UNGPs, which states that all businesses should conduct HRDD, saboteurs argued against a comprehensive HRDD for all businesses in the Directive. Although the earlier draft of the Directive would have covered 1 per cent (1) of all EU companies, saboteurs ensured that the final text covers less than 1 per cent (roughly 16,000 to fewer than 5,500 companies). ¹³⁶ Similarly, contrary to Ruggie’s position that financial institutions have HRDD responsibilities, ¹³⁷ Saboteurs lobbied and succeeded in excluding financial institutions from downstream activities covered by the Directive. ¹³⁸

In the end, the European states acted in the interests of their business groups to produce a ‘business-friendly’ or ‘business-centric’ legislative framework. ¹³⁹ The weakening of the Directive is significant in the norm contestation process because, by regulating global supply and value chain networks, the Directive has an extraterritorial reach to other parts of the world, especially developing countries. ¹⁴⁰ Indeed, the EU Commission hopes ‘[t]he Directive will … become a new global standard with regard to mandatory environmental and human rights due diligence’. ¹⁴¹ Given the potential of the Directive to influence legislative developments outside Europe, ¹⁴² there is a high risk of CR2R norm regression as the Directive diffuses to other parts of the world, replacing stronger global HRDD norms with weaker EU norms.

The ongoing norm contestation raises a nagging question of how we can prevent norm decay and ultimately force a change in the status quo in the BHR field. The next section argues that the UN multistakeholder framework, which has fuelled corporate powers, must be reconsidered to change the status quo. Also, a critical mass of states and nonstate actors (CSOs, NGOs, academics, and local communities) must collectively pull in the same normative direction to counteract MNCs’ number and economic and political influence. While there is no single silver bullet solution to legal accountability issues, these proposals are modest steps to block some avenues through which corporate actors exercise their powers.

IV. Towards corporate accountability—rethinking the BHR governance model

Corporate actors’ role in promoting a voluntary regime, resisting the corporate accountability norm, and weakening hard laws calls for the need to rethink the BHR governance model. The UN multistakeholder governance model sees MNCs as partners with other nonstate actors. ¹⁴³ This model brings together norm actors with conflicting motives. ¹⁴⁴ While MNCs and business associations seek to evade obligations to maximize wealth for shareholders at any cost, CSOs and NGOs seek to protect people and the planet from corporate harm. This is like a relationship between David and Goliath. Therefore, it stands to reason that corporate actors’ powers would likely trump other nonstate actors and influence decisions on a norm change. ¹⁴⁵

Essentially, the multistakeholder design hides the asymmetry of power relationships between norm actors. ¹⁴⁶ It grants business associations and MNCs privileged and preferential access to decision-makers in international law, allowing them to exercise instrumental, discursive and structural powers fully. ¹⁴⁷ The politicoeconomy under which discussions occur contributes to a weak regulatory framework in the BHR field because ‘having ‘businesses ‘at the table’ or as ‘stakeholders’ contributes to the weakening of standards’. ¹⁴⁸ The structural power dynamics of the UN multistakeholder system make it impossible to force a norm change as antipreneurs are more powerful than entrepreneurs. ¹⁴⁹ It has been noted that multistakeholderism in the BHR field is not designed or capable of producing a corporate accountability norm. ¹⁵⁰ Surya Deva warns that ‘…corporations and their interests are likely to have an upper hand in what comes out of the multistakeholderism among various stakeholders. Unless proactive steps are taken to address these asymmetries’. ¹⁵¹

Therefore, there is a need to rethink the multistakeholder design and fashion a new governance model that accounts for the power asymmetry among norm actors. In doing this, the UN must properly classify MNCs as regulated actors. ¹⁵² This is because ‘[i]t is imperative to insist on the distinction between governments as the duty bearers in the HR framework, vulnerable people as rights-holders, and businesses as potential rights violator’. ¹⁵³ By this, this article does not intend to wade into the debate on whether corporations are subjects or objects of international law. Instead, it emphasizes the UN’s role in controlling MNCs’ participation in decision-making, like how other international institutions have treated businesses and their associations. ¹⁵⁴ For example, the World Health Organization (WHO) created guidelines for nonstate actors’ participation (‘Guidelines’) through the Framework Convention on Tobacco Control (FCTC). ¹⁵⁵ Through this framework, WHO sought to disentangle public health decisions from the clutches of big tobacco associations.

Article 5.3 of the FCTC prescribes that WHO’s engagement with nonstate actors must be for the public health benefit. The engagement with nonstate actors must not influence WHO, particularly in setting and applying policies, norms and standards. Nonstate actors’ engagement with WHO must be based on transparency, openness, inclusiveness, accountability, integrity and mutual respect. The Guidelines then mandate WHO conduct due diligence and risk assessment to screen out any engagement with nonstate actors with the risk of conflict of interest, undue influence, using the WHO to serve private interests, and using WHO as a white-washing tool for public image. The Guidelines expressly prohibit WHO from dealing with the tobacco industry or nonstate actors that work to further the interests of the tobacco industry. ¹⁵⁶ These Guidelines also require states to denormalize CSR and block interactions and partnerships with the tobacco industry (unless otherwise necessary). ¹⁵⁷ In effect, Article 5.3 constitutes two mutually reinforcing norms. The first norm recognizes a fundamental conflict between public health and industry interests. ¹⁵⁸ The second, a control governance norm, advocates that public health policies should be protected from industry interference. ¹⁵⁹ Indeed, Article 5.3 is described as ‘a highly innovative provision and the first of its kind in an international treaty’. ¹⁶⁰

Expectedly, tobacco companies opposed the Convention. First, they tried to use stakeholder consultation to secure industry participation and delay decisions. ¹⁶¹ They also challenged the right of WHO to convene treaty negotiations, warned developing countries that allowing such a treaty would undermine their sovereignty, claimed that the Convention is inconsistent with other treaties, sought alliances with other business associations that may potentially be impacted, proposed joint ventures with countries, promoted CSR as an alternative to regulation, lobbied governments and sponsored public relations activities to discourage the public. ¹⁶² Corporate strategy was to first prevent the treaty negotiations from taking place, then to undermine them and, failing that, to weaken the final product. ¹⁶³ This is similar to the corporate actors’ role as entrepreneurs, antipreneurs, and saboteurs in the BHR field.

The FCTC is widely ratified and implemented between developed and developing countries. ¹⁶⁴ Although the tobacco industry is not entirely free from corporate influence, ¹⁶⁵ the WHO’s framework sets a precedent in international law and promotes a norm of corporate accountability in the tobacco industry. For example, Article 5.3 of the Convention has influenced the domestic framework in some states, including Australia, Uganda, Ethiopia, Brazil, Uruguay, Georgia and Spain, which now prohibit tobacco-related CSR activities as a tool for self-promotion. ¹⁶⁶ This domestication has influenced host states to make tobacco-control regulations, even in the face of ISDS regulatory chill. In Philip Morris v Uruguay and Philip Morris Asia v Australia, ISDS tribunals confirmed states’ powers to regulate health issues relating to tobacco control. ¹⁶⁷ Although MNCs continue to contest states’ rights to regulate tobacco investments, the ISDS decisions in Australia and Uruguay point to the FCTC’s influence in promoting the primacy of tobacco control, public health, human rights, and sustainable development over corporate profit. ¹⁶⁸

The UN must take a cue from the WHO engagement rules in regulating private sector participation in the BHR field. ¹⁶⁹ Tobacco control and human rights are both public issues that intergovernmental organizations oversee. Hence, the possibility of the UN learning from the WHO. Indeed, one of the arguments against adopting the FCTC in international law was that other intergovernmental organizations may adopt the same framework. This argument recognizes the possibility of adopting the FCTC template in organizations, including the UN. Article 5.3 of the FCTC provides a template for the UN to reduce the risk of corporate actors’ instrumental, structural and discursive powers. Excluding nonstate actors with obvious partisanship from accessing the UN will ensure that MNCs are considered regulated entities, not stakeholders. This new arrangement does not mean businesses’ technical or informational input is not valued or needed. Instead, it shows a deliberate effort to filter information or activities that undermine the integrity and mandate of the UN to protect people instead of private interests.

Although in 2022, following the WHO engagement rules, the UN Working Group on BHR submitted a report to the UN General Assembly on the issue of corporate capture of state laws and regulations, ¹⁷⁰ the Working Group must embark on the same task, this time focusing on the UN engagement rules with nonstate actors. This does not mean that the corporate UN capture will be over; however, it begins the reconceptualization of nonstate actors’ role in the UN’s multistakeholder design. This will minimize antipreneurs influence in decisions relating to corporate accountability because, as the Latin maxim goes, nemo judex in causa sua (no one should be a judge in their cause).

Furthermore, to complement the reconceptualized status of businesses as regulated entities in setting BHR norms, a critical mass of nonstate (including rights holders) and state actors must push for a corporate accountability norm, ¹⁷¹ as already demonstrated through the emergence of the Draft treaty for a Legally Binding Instrument on Transnational Corporations and Other Business Enterprises with Respect to Human Rights (‘Draft LBI’), which is the latest effort from entrepreneurs to force a norm change in international law. ¹⁷² Although some developed countries were initially lukewarm and even opposed the draft treaty, the draft treaty is increasingly gaining traction from some developed countries, including the European Union, Switzerland, and the United Kingdom. ¹⁷³ There is an attitudinal change because of the continued push by an alliance of pressure groups, CSOs, academics, independent experts, NGOs, and some developing countries. ¹⁷⁴ The point here is that to change the status quo in international law, there must be a coalition and alliance of norm entrepreneurs to counteract corporate powers. The collective agreement of states and nonstate actors (including rights holders) that pulls in the same normative direction would counterbalance corporate powers. ¹⁷⁵ Corporate powers will be reduced as other nonstate actors, including local communities, CSOs and NGOs, enter the international space and exert influence. ¹⁷⁶

It would be naïve to suggest that corporate actors will not contest a corporate accountability norm through a treaty or any other framework. ¹⁷⁷ Like the process leading to the FCTC, corporate resistance is expected and will likely be backed by some developed countries because of the political-economic environment of the BHR field. ¹⁷⁸ Indeed, it has been noted that ‘the supporters of a legally binding instrument are not as powerful and financially strong as those in favour of the UNGPs’. ¹⁷⁹ Business communities have already opposed the draft treaty because, according to them, the treaty solutions are ‘concerning’ and ‘an unnecessary and inappropriate response’ to a global challenge. ¹⁸⁰ They argue that the Draft LBI reverses the UNGPs’ progress and threatens states’ economic development. ¹⁸¹ They also contend that the treaty threatens the partnership model established by the UN. ¹⁸² Indeed, 17 African Civil Societies have accused the business community of preventing or delaying the treaty’s adoption and weakening its content, a role not dissimilar to how tobacco companies attacked the FCTC. ¹⁸³ If the UN were to follow Article 5.3 of FCTC in the process leading to the Draft LBI, the Open-ended Intergovernmental Working Group on BHR must recognize a fundamental conflict between human rights and industry interests and advocate for a control governance mechanism that protects the treaty from industry interference. This would be a modest start to restructuring the UN governance system.

Both developed and developing countries adopted Article 5.3 of the FCTC in response to a globalized epidemic in the tobacco industry. It is time to declare a global epidemic that requires a similar approach in the BHR field. Maybe then, the UN can reduce corporate powers in setting human rights standards.

V. Conclusion

This article examined norm contestation in the BHR field. Using the international relations theory of norm contestation, it classified corporate actors’ roles as entrepreneurs, antipreneurs and saboteurs in the ongoing debate about voluntarism and regulation in the BHR field. Corporate actors promote self-regulatory regimes as entrepreneurs, resist regulation as antipreneurs and weaken hard laws as saboteurs. Through this conceptualization, this article argues that corporate accountability remains elusive because of corporate actors’ normative power and influence in the UN multistakeholder system. Corporate actors’ instrumental, structural and discursive powers have made them a formidable force against any chance of a norm change in the BHR field. This article then argued that to force a norm change, there is a need to rethink the BHR governance structure. Instead of seeing corporate actors as partners, they must be reconceptualized as regulated entities, at least in their participation in global standard setting. The WHO’s FCTC gives the UN a cue on how to regulate corporate participation. In creating this framework, the UN must first recognize a fundamental conflict between human rights and corporate interests and then create a control governance mechanism that protects human rights from corporate interference. To force a norm change in the BHR field, the UN must disentangle human rights from corporate power.