Legal and Ethical Considerations of TNCs and Human Rights Violations

This essay provides a comprehensive analysis of the complex relationship between transnational corporations (TNCs) and human rights violations. It begins by outlining the challenges in regulating TNCs and their potential for disregarding national interests, including manipulation of transfer prices and circumvention of laws. The essay then presents two scenarios: one where corporations are held responsible for their actions, citing the Nevsun Resources case, and another where violations often go unpunished due to gaps in national and international laws. The essay discusses the difficulties in defining corporate responsibility, especially given the complex structures of multinational companies. The conclusion emphasizes the competition among states to attract TNCs, sometimes at the expense of human rights, and the limitations of current regulatory frameworks. It examines the historical context of the UN Commission on Transnational Corporations and explores the legal implications of TNC activities within the context of globalization and the importance of attractiveness.

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Introduction
World practice has proven that profitable big corporations such as transnational
corporations (TNCs) are not necessarily beneficial to the national economies of exporting and
receiving countries, and the power of TNCs allows them to ignore these discrepancies. It can be
said that today TNCs are practically uncontrollable and this is a very difficult problem, which the
world community has been trying to solve for more than 30 years1. Many authors point to the
manipulation of transfer prices, the circumvention of national legislation in order to conceal
income from taxation, the establishment of monopoly prices, dictation of conditions that infringe
the interests of host countries, enticing highly qualified specialists from different countries.
In connection with the growing importance of TNCs in the global economy and their
impact on individual states, the urgency of regulating the interaction of TNCs with the country of
location of the parent company and the host country increases2. In 1974, the Commission on
Transnational Corporations and its working body, the TNC Center, were established at the
Economic and Social Council of the United Nations, which at that time was engaged in the
“phenomenon” of companies and the development of a code of conduct. For many years, the UN
Commission on TNCs, the International Monetary Fund (IMF) and the World Bank have been
trying to create uniform rules of conduct for TNCs (TNC Code of Conduct). The main idea of
these rules is to ensure maximum freedom of movement of goods and capital, liberalization of
national markets3.
1 Secretary-General of the OECD, Corporate Governance and Business Integrity: A stocktaking of Corporate
Practices, (2015)
2 Wilkinson John, ‘Stories of Globalization: Transnational Corporations, Resistance and the Corporate State - By
Alessandro Bonanno and Douglas H. Constance’ (Journal of Agrarian Change Oct. 2011) <EBSCOhost,
doi:10.1111/j.1471-0366.2011. 00325.x>.
3 Daugareilh Ian. Social responsibility of the transnational company and globalization of the economy (Brussels,
Belgium: Bruylant 2010).

Scenario 1: It is not naïve
It is not naïve in the sense that a number of nations have been able to implicate many big
corporations and held them responsible for different violations. It should be noted that the host
country countries usually regulate the behavior of big corporations through national legislation,
without making an official distinction for TNCs and national corporations, and the host countries
regulate the activities of TNCs on their territory through national foreign investment laws. For
example, in October 6, 2016, the Supreme Court of British Columbia issued a landmark decision
authorizing a civil remedy for modern slavery for the first time in a case involving Canadian
mining company Nevsun Resources, which operates a mine in Eritrea, Africa4. The factual frame
of events took place between 2008 and 2012 at the Bisha mine, where three workers alleged that
the company would have been complicit with its local subcontractor Segen Construction, who
would, in concert with the army, make use of forced labor under inhumane conditions at the
mine. These workers took the case to Vancouver, headquarters of the parent company of the
mine, in November 2014 on charges of "cruel, inhuman and degrading treatment" and "acts of
torture and intimidation". The study of actions brought before the courts relating to human rights
violations by multinationals shows that in recent years, in Canada, civil liability claims seem to
open up more promising avenues for victims5. Indeed, under Canadian national law, civil
liability, which defines the obligation to make good the damage caused to others, can be engaged
if a party has failed to act with due diligence to prevent harm or injury to a victim. To engage
this civil liability, three conditions are necessary, namely the existence of a willful or involuntary
fault, the existence of a damage, and a causal link between the fault and the damage. At common
law, involuntary misconduct may result from a breach of the duty of care (or lack of diligence),
4 Choc v Hudbay Minerals Inc., 2013 ONSC 1414.
5 Araya v Nevsun Resources Ltd. , 2016 BCSC 1856.

interpreted as a legal obligation of vigilance, foresight and prudence that leads to avoid acts or
omissions that may be likely to cause harm to others. It may also result from the negligence of
the author, and would then be unreasonable behavior that may cause harm6.
Scenario 2: It is naïve
Despite the few successful legal redress, it is important to note that most of the corporate
violations of human rights often go unpunished due to significant gaps in national and
international legal regimes. As shown, some of the less developed countries, in areas where
multinationals operate, do not aspire to or are unable to impose sanctions of a criminal nature or
to provide effective civil remedies in cases of committing violations of TNCs in their territories
within the framework of its national law, the while the home states usually have no
jurisdictionon the extraterritorial actions of transnational corporations carried out by their
subsidiaries in host states. Thus, the national law of both the Home State and the Host State often
does not allow for effectively bringing TNCs to responsibility in the Host States for human rights
violations in the territories of the latter. In this regard, the problem of bringing TNCs to
responsibility for the violation of human rights on the basis of the norms of international law is
of particular importance7.
Until now, international law in the field of human rights actually lacks norms and
mechanisms that would allow TNCs to be held accountable for human rights violations and thus
oblige TNCs to comply with international legal standards of human rights8.
6 Sarquis Arl, ‘Responsibility for Human Rights: Transnational Corporations in Imperfect States’ (Political Studies
Review 2015) < http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=110222655&site=ehost-live>
7 Mattar, Mohamed, ‘Corporate Criminal Liability: Article 10 of the Convention against Transnational Organized
Crime’ (Journal of International Affairs Fall/Winter2012 2012)
8 Lim Alwyn, ‘Transnational Corporations, Imperfect States, and the Responsibility for Human Rights’ (International
Studies Review September 2015) <doi:10.1111/misr.12235> accessed 4th November 2018.

While scandals involving large companies such as Shell, Nike or Coca-Cola have been
the subject of much debate in emerging countries, recourse against Canadian mining companies,
such as Barrick Gold or HudBay Minerals, sued for serious harm human rights, have been
increasing in recent years in Canadian jurisdictions. Spotlight on developments in Canadian case
law on the violation of human rights by multinationals abroad and on the obstacles to this
framework.
Indeed, the multinational company remains a difficult entity to define, since it defines
itself as a group, most often large, "operating from a national base [the parent company], and
which has established a abroad several subsidiaries in several countries, with a strategy and
organization conceived on a worldwide scale9. For example, the multinational Anvil Mining, a
Canadian mining company exploiting copper and silver in the Congo10, illustrates the complexity
of such an organization. The company is listed on the Toronto Stock Exchange and the
Australian and German Stock Exchanges11. Its head office is in Australia, but its shares are only
5% in Australia, while 50% in North America. In 2012, the Chinese company Minmetals
Resources acquired 90% of Anvil's capital, even though it was prosecuted in Quebec by victims
for acts of complicity in war crimes and crimes against humanity of a massacre in Kilwa, Congo.
The victims, whose appeal was rejected in Quebec, are unlikely to have their cases heard in
Chinese courts, which are reluctant to hear cases whose facts have occurred abroad. The large
size of these companies and the versatility of their configuration make it difficult to determine
9 Edwin Sutherland, ‘White-Collar Criminality’ American Sociological Association <http://www.asanet.org/about-
asa/asa-story/asa-history/past-asa-officers/past-asa-presidents/edwin-h-sutherland> (Accessed on 11/3/18)
10 Canadian Association Against Impunity (ACCI) c. Anvil Mining Ltd. , 2011 QCCS 1966, para. 4 and 7.
11 Cournier Moss, ‘Canadian Mining Companies and Human Rights Violations Abroad: Does Canada Meet
International Requirements? (Unpublished master's thesis: University of Montreal, Qc. 2013)

the responsibility for human rights violations12. In fact, in terms of their structure, it is obvious
that this responsibility becomes a difficult exercise. The offenses committed by multinationals
are usually complex and hidden, as they are often the result of complicity with local security
agents or national contractors who help multinationals bypass local standards13.
Conclusion: It is naive
The reality today is that states (especially developing states) are competing with each
other in an effort to create the most favorable conditions for big corporations such as TNCs,
which sometimes even leads to infringement of the interests of the population living in their
territories. In order to encourage TNCs to start activities in a particular country, governments of
some developing countries may offer TNCs all kinds of “ benefits ”, ranging from tax breaks and
government subsidies to “ weak ” labor or environmental legislation and ignoring gross human
rights violations carried out by TNCs14
Since 1992, the United Nations Commission on Transnational Corporations no longer
exists. Created in the context of the New International Economic Order, its dissolution equates to
the entry of the regulation of the activities of transnational corporations (TNCs) in the "legal
time" of globalization. Some of the functions of the Commission, including the Inventory of
National Regulations on Foreign Direct Investment, have been transferred to another UNCTAD
12 Daugareilh, Ian (eds.). Social responsibility of the transnational company and globalization of the economy.
(Brussels, Belgium: Bruylant. 2010)
13 Calliess, Gralf-Peter, and Jens Mertens, ‘Transnational Corporations, Global Competition Policy, and the
Shortcomings of Private International Law’ (Indiana Journal of Global Legal Studies Summer 2011)
<doi:10.2979/indjglolegstu.18.2.843>. accessed 4th November 2018
14 EIDENMÜÜLLER, H. The Transnational Law Market, Regulatory Competition, and Transnational Corporations’
(Indiana Journal of Global Legal Studies, Summer. 2011) <http://search.ebscohost.com/login.aspx?
direct=true&db=a9h&AN=67045330&site=ehost-live>. Accessed on 4th November 2018

Division15. Its main mission, which was to put in place a code of conduct for TNC activities, was
definitively abandoned. The dissolution of the Commission can have three meanings. First, the
regulation of TNC activities can only be sparse. It consists of disparate solutions of domestic law
and international law that, paradoxically, do not recognize TNCs as having a defined legal status.
In domestic law, as in international law, the legal status of TNCs is not a status of legal persons
but of "private economic powers". Second, the regulation of TNC activities in the context of
globalization is not limited to the regulation of foreign direct investment. The activities of TNCs
involve several branches of domestic law whose investment law is only one component. In
addition, international law as well as national laws relating to TNCs are subject, in the legal time
of globalization, to the imperative of attractiveness. Attractiveness is an economic paradigm that
refers to measures taken by host states to attract foreign investors. Globalization has produced a
right of attractiveness which is constituted by a normative set aimed at creating the investment
climate sought by the TNCs but which exceeds the law of the inciting State16. The legal
requirements for attractiveness are set by some international organizations, including the OECD,
and no longer UNCTAD , occupies a place of first order17. The attractiveness of internal laws is
assessed according to their compliance with the guidelines of these organizations. Its
implementation requires interaction between TNC strategies and public policies. These three
considerations make it possible to understand legally the economic technique of transfer pricing.
Transfer price refers to the prices applied by an STN to all the exchanges of tangible and
15 OECD Foreign Bribery Report: An analysis of the crime of bribery of foreign public officials, Foreign Bribery
Report, OECD Publishing, 2014, <http://dx.doi.org/10.1787/9789264226616-en>
16 Bonanno, Alessandro, and Douglas H. Constance, ‘Powers and Limits of Transnational Corporations: The Case of
ADM’ ( Rural Sociology, Sept. 2000) <EBSCOhost, search.ebscohost.com/login.aspx?
direct=true&db=a9h&AN=3582165&site=ehost-live.>
17 John D. Sullivan, Andrew Wilson, Anna Nadgrodkiewicz ‘The role of corporate governance in fighting
corruption’ (Center for International Private Enterprise 2013) <http://www.cipe.org/publications/detail/role-
corporate-governance-fighting-corruption-issue-paper> (Accessed on 11/3/18)

intangible goods occurring in the intra-firm trade developed within its integrated area. Contrary
to what is stated by some authors, who express reservations about its existence, empirical studies
have measured the extent of the adverse effects of transfer pricing. TNCs circumvent
unfavorable domestic law to benefit from the application of a more favorable domestic law18.
Domestic laws being deficient, TNCs take advantage of legal loopholes to freely choose their
submission to the most attractive domestic law. But the use of the assumption of lawlessness and
thesis of the gaps in the law is limiting the legal classification of transfer prices.
Transfer pricing and all the management techniques that allow it to be implemented are acts of
circumvention of internal laws. Several branches of the internal laws are concerned by this
technique of synthesis. Tax law, commercial law, banking and financial law are only the
branches most visibly affected. The complex nature of the transfer pricing technique precludes
the discernment of actually circumvented rules. This synthetic technique aims to circumvent
several domestic legal orders as well as several branches of internal law. The interconnection of
TNC business and financial strategies makes this discernment somewhat haphazard.
The second side of the issue of impunity for multinational companies is to relocate activities to
countries where criminal laws are less stringent. In general, polluting factories are located in less
developed countries. As a result, disasters resulting from the use of prohibited substances in
developed countries do not pose a legal concern to multinationals, as in the case of Shell's oil
spills in the Niger Delta in 2007. The notion of "environmental racism can be used here to
describe the phenomenon of racial discrimination that multinationals exhibit when they
18 Prihandono Ian, ‘Transnational Corporations and Human Rights Violations in Indonesia’ (Australian Journal of
Asian Law. 2013) < http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=102767215&site=ehost-
live>. Accessed November 4, 2018.

intentionally violate environmental standards in lesser-developed countries19. In developed
countries, such as Canada, where human rights legislation is advanced, the reality of the double
standard still seems to be observable, since companies that comply with environmental standards
do not necessarily apply them in the United States. the countries of the South where they do
business.
19 OECD Foreign Bribery Report: An analysis of the crime of bribery of foreign public officials, Foreign Bribery
Report, OECD Publishing, 2014,<http://dx.doi.org/10.1787/9789264226616-en>

Bibliography
Araya v Nevsun Resources Ltd. , 2016 BCSC 1856.
Bonanno Alessandro, and Douglas H. Constance, ‘Powers and Limits of Transnational
Corporations: The Case of ADM’ (Rural Sociology, Sept. 2000) <EBSCOhost,
search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=3582165&site=ehost-live>
accessed 4th November 2018
Calliess, Gralf-Peter, and Jens Mertens, ‘Transnational Corporations, Global Competition Policy,
and the Shortcomings of Private International Law’ ( Indiana Journal of Global Legal Studies
Summer 2011) <doi:10.2979/indjglolegstu.18.2.843> accessed 4th November 2018
Canadian Association Against Impunity (ACCI) c. Anvil Mining Ltd., 2011 QCCS 1966, para. 4
and 7.
Cournier Moss. Canadian Mining Companies and Human Rights Violations Abroad: Does
Canada Meet International Requirements? (Unpublished master's thesis University of Montreal,
Qc. 2013).
Daugareilh Ian (eds.). Social responsibility of the transnational company and globalization of
the economy. (Brussels, Belgium: Bruylant 2010).
Edwin Sutherland, ‘White-Collar Criminality’ American Sociological Association
<http://www.asanet.org/about-asa/asa-story/asa-history/past-asa-officers/past-asa-presidents/
edwin-h-sutherland> accessed 4th November 2018
Eidenmüüller Hesbon, ‘The Transnational Law Market, Regulatory Competition, and
Transnational Corporations’ (Indiana Journal of Global Legal Studies, Summer. 2011)
http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=67045330&site=ehost-live
accessed 4th November 2018

John D. Sullivan, Andrew Wilson, Anna Nadgrodkiewicz ‘The role of corporate governance in
fighting corruption’ (Center for International Private Enterprise 2013)
<http://www.cipe.org/publications/detail/role-corporate-governance-fighting-corruption-issue-
paper> accessed 4th November 2018
Lim Alwyn, ‘Transnational Corporations, Imperfect States, and the Responsibility for Human
Rights’ (International Studies Review September 2015) < doi:10.1111/misr.12235> accessed 4th
November 2018
Mattar Mohamed, ‘Corporate Criminal Liability: Article 10 of the Convention against
Transnational Organized Crime’ (Journal of International Affairs Fall/Winter2012 2012)
<http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=84319354&site=ehost-live>
accessed 4th November 2018
OECD Foreign Bribery Report: An analysis of the crime of bribery of foreign public officials,
Foreign Bribery Report, OECD Publishing, 2014,<http://dx.doi.org/10.1787/9789264226616-
en>
Prihandono Isack, ‘Transnational Corporations and Human Rights Violations in Indonesia’
(Australian Journal of Asian Law 2013) <http://search.ebscohost.com/login.aspx?
direct=true&db=a9h&AN=102767215&site=ehost-live>. Accessed November 4, 2018.
Sarquis Arl ‘Responsibility for Human Rights: Transnational Corporations in Imperfect States.
(Political Studies Review 2015) <http://search.ebscohost.com/login.aspx?
direct=true&db=a9h&AN=110222655&site=ehost-live> Accessed November 4, 2018.
Secretary-General of the OECD, Corporate Governance and Business Integrity: A stocktaking of
Corporate Practices, (2015).