Rights as Usual

This blog post by Dr Gamze Erdem Türkelli, Begüm Kilimcioğlu and Prof. Thalia Kruger is part of a Blog Series on Colonization in, of and through Business and Human Rights published on Rights as Usual. 

Thalia Kruger researches and teaches Private International Law. She is a member of the  University of Antwerp’s Research Group Law and Development. Within Private International Law she works on different topics such as international contract law, international family law and international civil procedure, and is particularly interested in the links with human rights and fairness.

Gamze Erdem Türkelli is an Assistant Research Professor at the Law and Development Research Group. Her work is situated in the interface of international law, human rights law and sustainable development. She conducts research into transnational human rights obligations (including business and human rights), hybrid public-private actors in international law such as multistakeholder partnerships, ‘innovative’ development financing, children’s rights as well as accountability and responsibility.  

Begüm Kilimcioğlu is a PhD researcher at the University of Antwerp under the supervision of Prof. Thalia Kruger and Research Ass. Research Prof. Gamze Erdem Türkelli on investigating the use of private law and private regulatory tools in preventing adverse human rights impact in global value chains of the extractive sector. She is affiliated with the research groups Law & Development and Personal & Property Rights.

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Historical wrongdoings linked to colonization and continuing today have caused persistent global inequalities. This reality is particularly visible in the extraction and subsequent flow of natural resources. To balance the scales, we need to reverse the direction of cost and benefit flows; we need to place the costs on the countries that have historically benefitted and continue to benefit from extractive practices. This blog argues that the current inequalities have to be rectified with the use of tools drawn from public and private international law. While this might not be easy (section 2), these tools entail obligations on State and private players (section 3) in order to rectify persistent inequalities.

1. Context

The flow of natural resources from areas that were formerly colonized (often referred to as the ‘Global South’) to wealthy countries (often former colonizers, and often aligned with so-called ‘Global North’ countries) has continued largely unabated following the independence of former colonies. A wealth of scholarship over the last sixty years has highlighted that the extraction of resources during the colonial era led to the transfer of value from the colonized areas to colonizing empires, and was a leading factor in the subsequent accumulation of wealth in the Global North. So much so that, according to the research done by Hickel, Dorninger, Wieland and Suwandi, when measured in Northern prices, the resource drain from Global South to North amounted to 242 trillion dollars between 1990 to 2015.

As a result, Global North countries have been able and continue to grow their economies and achieve better living standards for their populations. At the same time, Global South countries are still battling poverty, unemployment, and stark inequalities in their societies. Furthermore, they are dealing with environmental degradation and the impacts of the climate crisis, presenting themselves far more severely in the Global South than in the Global North. Climate change and environmental degradation could be considered, to a large extent, a consequence of the carbon emissions generated by business activities (see Fairplanet, 2022). These extractive business activities continue through business structures or global value chains. Multinational enterprises (MNEs) are often structured in such a way that the mother company is incorporated where the money is supposed to flow (say the Global North) while a subsidiary, often wholly-owned, or without much independence, is incorporated at the place of extraction (which is often in the Global South). Such structures allow MNEs to strategically circumvent certain laws: the mother companies often have only limited reporting duties under the laws applicable to them and can escape accountability under the laws of the countries where the real harm is done. The subsidiaries, on their part, are accountable only under the laws where they operate and not under the standards imposed by the home countries of the mother companies. Thus, the human and environmental costs of extraction are borne by people and communities in the Global South while profits flow into private businesses in the Global North.

2. Hurdles in Placing the Costs Where They Belong

Human rights comprise the language often used to hold businesses to account for historical and current extractive practices. Yet, complex businesses such as MNEs navigate between legal systems (as explained above) and thus challenge the operation of public and private international law. MNEs’ structures make it difficult to hold perpetrators of human rights violations accountable, because of the traditionally territory-based and territorially-bound understanding of human rights law, as part of public law, and of corporate and contract law, as part of private law. In this regard, contrary to what one might imagine, public and private international law often prevents rather than facilitates tackling historically rooted global inequalities. Particularly, international law (both public and private) has presented three obstacles.

(i) Firstly, (public) international law remains state-centric (Koskenniemi, 2016). This premise also often holds true when international human rights law is operationalized; despite the rich debates in scholarship and practice on operationalizing human rights obligations extraterritorially (or beyond borders) and beyond the state (see for instance Gibney et al (eds), 2022). According to the traditional view of human rights law, the domestic State owes human rights obligations to those in its territorial jurisdiction, which is dependent on ties such as nationality, residence, or presence. However, this jurisdictional approach tying obligations to territory does not correspond to the realities of today’s integrated and hyper-globalised world. The shortcoming of such an interpretation of human rights law is two-fold. Firstly, it would mean that States have no obligations towards citizens of other countries, even if their own wealth is based on activities in these other countries. Secondly, corporations would be liberated from any liability for human rights abuses under international law, despite the wealth they amass and the ways they do so, which lead to such abuses. While the state-centricity of international law and the territorially-bound understanding of obligations have been challenged by scholars over the last two decades, they have persisted particularly in the practice of most judicial bodies. Thankfully, in the recent years, some judicial bodies have also begun to expand the understanding of jurisdiction and of relationships generating obligations (See for instance the Advisory Opinion of the Inter-American Court of Human Rights OC-23/17, dated 15 November 2017, para 81).

(ii) Secondly, the corporate structures that transcend national borders solicit the question of who, among the home and host states, should regulate them (Kuschnik, 2008) and through what legal means. Today, even the simplest products go through complex chains of production that unfold in different countries and continents (Halloran, 2018). In what is often seen as their fiduciary responsibility, MNEs are legally enabled to maximize their profits and minimize their costs. Corporate laws of various legal systems allow MNEs to structure their businesses through a multitude of subsidiaries. Private international law enables the exercise of this freedom by allowing for the recognition of foreign corporate structures and facilitating contractual choices (Pistor, 2019).

(iii) The third hurdle emanates from a combination of the first two. Although efforts are being made, strong and binding international law instruments that can regulate private businesses across borders are still inexistant (Ruggie, 2017). The traditional understanding of territorial jurisdiction enables companies to escape liability by spreading their activities through various legal systems, creating questions as to which State can and should regulate them. This situation further exacerbates existing inequalities and the unlevel playing field between economically powerful home states and less powerful host states. On the one hand, the wealth accrued through extraction continues to accumulate in the jurisdictions which are the home states of MNEs. On the other hand, these MNEs continue to operate in host states where the natural resources are located in ways that lead to human rights violations and without due accountability.

3. The Progress Made and Possible Solutions

(i) International Momentum in Regulating MNEs

Despite the challenges, there has been steady progress worldwide in recognizing that the human rights obligations of States extend beyond their territory both in scholarship and soft law instruments (see Advisory Opinion OC-23/17 of the Inter-American Court, The UN Committees on the Rights of the Child General Comment No.16 and Economic, Social and Cultural Rights General Comment No.24). In this vein, certain Home States of MNEs have started to adopt mandatory due diligence legislation (e.g. the French Loi de Vigilance law, the German Lieferkettengesetz, the EU Corporate Sustainability Due Diligence Directive and the EU Corporate Sustainability Reporting Directive). Moreover, negotiations to adopt a Legally Binding Instrument to regulate business enterprises (see the third revised draft) are ongoing at the UN Human Rights Council based on an initiative jointly sponsored by Ecuador and South Africa. The initial idea, as first proposed in 2013, was to create a legally binding instrument on transnational corporations and other business enterprises and directly regulate their activities with respect to international human rights law. Many Global South countries were in favor of the idea whereas there was fierce opposition from the Global North (especially the EU and the US). The latter claimed that the treaty process was counter-productive and polarizing (Ruggie, 2014). Since 2013, after many meetings and continued lobbying (Luthango & Schulze, 2023), the third revised draft of the treaty does not aim to put direct obligations on businesses but rather places the obligation on State Parties to ensure that corporations respect human rights (potentially also extraterritorially). Although a legally binding treaty would undoubtedly be an important landmark in regulating corporate behavior, conditioning corporate obligations on the intermediation of States (rather than placing them directly) makes the treaty an ordinary public international law instrument and curtails its potential to address challenges linked to state- and territory-centricity. Furthermore, the treaty’s implementation being dependent on the intermediation of powerful home states of MNEs with long-lasting and continued extractive relationships with host states, the treaty’s success could exacerbate existing inequalities.

(2) Permanent Sovereignty over Natural Resources

Effectively regulating the MNEs through human rights law is only one prong of the solution. It must be accompanied by measures allowing the countries where MNEs mostly operate to take control of their natural resources. The idea of giving back the control over their natural resources that countries have lost during colonization has been on the international agenda since the 1950s when the developing countries started to regain their independence (Pahuja, 2011). The permanent sovereignty over natural wealth and resources were seen as a basic constituent of the right to self-determination. Thus, in support of the independence of the formerly colonized countries, the UN General Assembly passed the ‘Permanent Sovereignty over Natural Resources’ (PSNR) Resolution in 1962.

The Declaration underscored a number of important principles. First, PSNR is a ‘right of peoples and nations’ to be ‘exercised in the interest of their national development and of the well-being of the people of the State concerned’. Second, it is up to the peoples and nations to take decisions around the ‘exploration, development and disposition of [natural] resources’ as well as the rules and conditions governing the role of foreign investment therein. Third, the profits from the exploitation of natural resources ‘must be shared in the proportions freely agreed upon … between the investors and the recipient State’ and without putting into jeopardy the PSNR of the recipient state. PSNR may also entail the exercise of certain rights, such as taxation with regard to natural resources.

(3) The Enabling International Environment

The idea of PSNR is still as relevant today as it was in the 1960s. The value extracted from the Global South continues to be appropriated by the Global North through various business structures. To tackle this disequilibrium, international economic structures must be reformed to battle the legacies of colonialism. In this regard, relationships in key areas like trade and finance must be conducive to the attainment of development objectives, and thus create an enabling international environment. An enabling international environment denotes ‘international conditions that facilitate and support sustainable development policies’, including ‘international economic rules and policies, such as in the arena of trade, finance and investment, that are systematically coherent and conducive to sustainable development, as well as institutions of international law and global economic governance that are participatory, equitable, non-discriminatory and inclusive of all nations and communities.’ (Tan, 2021). Such enabling international environment demands systemic solutions to achieve sustainable development in all its facets, including through reduced inequalities, access to public services such as health, education and public goods such as water, food as well as appropriate climate action through adaptation and mitigation, among others (see international cooperation for an enabling environment by the UN Department of Economic and Social Affairs, 2001).

The enabling international environment must also allow developing countries to preserve national policy space to set and implement domestic strategies to support sustainable development. This policy space includes not only having and exercising authority to make and implement ‘national social and economic policies’ but also ‘the right to regulate and impose restrictions on social and economic activities in the public interest’ (Tan, 2021). This national policy space is currently curtailed by various rules under international investment, trade, finance regimes and private international law instruments. Such rules prevent the achievement of sustainable development aims set by developing countries.

(iv) Respecting Local Structures

Lastly, it is also essential to recognize the local legal structures. In this regard, for instance, it is explicitly recognized under South African and Nigerian laws that the resources of the land belong to the people and the State is their custodian (see Preamble Mineral and Petroleum Resources Development Act of South Africa, Nigerian Minerals and Mining Act Part I) Although the local citizens have property rights to their natural resources by law, in practice they often do not reap any benefits from the use of these natural resources even while they face negative consequences through dispossession and environmental pollution (Amao, 2007). In order to effectively give meaning to the local laws protecting peoples’ ownership of their natural resources, concession contracts and loyalty agreements with State and non-State entities should abide by this principle and payments should benefit the owners of the resources, i.e. the people. This also necessitates that international legal structures around investments through treaties or through private contracts respect local legal structures and do not undermine them.

4. Conclusion

 While we know that the wrongs of the past are still continuing today, and are exacerbating global inequalities, this issue is difficult to tackle. The consequences of colonialism continue and are unfortunately enabled by the current state of public and private international law. Righting the wrongs of the past entails reversing the direction of flows. Instead of the extraction of profits and wealth towards home States, of which many are former colonizing and imperialist powers, and placing the burdens on communities and countries where extraction happens, legal mechanisms should seek to ensure that benefits go to the communities where natural resources are found. They should also shift the costs back where they belong: those engaging in extractive practices with adverse human rights impacts. This means that wealthy countries as well as wealthy businesses have to pay for the wealth that they have accumulated and continue to acquire through the extraction of natural resources elsewhere in the world. To shift the costs of corporate activity, including the costs necessary to ensure that business practices are human rights-compliant, where they belong (i.e. with MNEs and their home states) requires efforts on multiple levels. It requires an effective legal framework to close the governance gaps so that corporations cannot shirk their duties and escape responsibility. The legal framework should be built on the reality of the current context where resources and money easily flow across borders and obligations should follow too. Furthermore, besides legal processes such as the negotiated internationally binding instrument that would set down home state obligations to regulate business enterprises, global North States have to recognize the permanent sovereignty over natural resources of developing countries. Global South States are entitled to and should be accorded the necessary regulatory space. All States, not just host states, should have obligations to regulate businesses to ensure compliance with international human rights (and environmental) law, the laws of host states and force them to bear the costs of business activities they engage in, many of which have historically resulted in human rights violations and environmental degradation.