Big companies profit from poverty

Shouldn’t International law be changed to oblige them to uphold human rights under specific circumstances?

COMMENT | BONITA MEYERSFELD | There is some disagreement among legal practitioners and scholars about whether corporations have duties under international law.

Many argue that only states are bound by international law, and it is those states which are obliged to regulate how businesses operate within their borders. Corporations have only a voluntary responsibility to avoid committing human rights violations through their operations.

I have been doing research in the area of corporate accountability for human rights violations since 2006. My most recent paper looks at the role of multinational corporations (multinationals) in benefiting from and perpetuating structural poverty in the global south.

I argue that international law can no longer exempt corporations from liability for human rights violations, including those arising from poverty. Under certain circumstances, corporations should have duties under international law to ensure human rights are fulfilled. I argue that this is particularly true when it comes to socio-economic rights such as the rights to housing, education, food, water and healthcare.

International human rights law must be developed to impose duties directly on multinational corporations to alleviate poverty in the developing countries where they operate.

This is not an absolute duty – it would only arise in certain circumstances and for specific periods of time, as I show in my paper.

Poverty and corporations

Some estimate that as many as 1.3 billion people live in poverty – more than 10% of the world’s population, the vast majority in the global south.

Poverty is also deadly. It is estimated that at least 21,300 people die every day as a result of poverty and inequality. Poverty is a human rights violation, affecting the rights to dignity, life, food and water.

Businesses have a long history of profiting from human rights abuses. Finance and transport companies have acknowledged ties to the slave trade. European banks reportedly assisted South Africa’s apartheid government to procure arms.

Even when they are not directly responsible for human rights violations, multinational corporations may be complicit. Multinationals based in the global north tend to exploit developing countries for their cheap labour, natural resources and weak regulatory frameworks. In other words, corporations benefit from poverty.

International law

In 2005, Professor John Ruggie was appointed as the United Nations secretary-general’s special representative on the issue of human rights and transnational corporations and other business enterprises. He developed the United Nations Guiding Principles on Business and Human Rights. This framework adopts the position that only states are subjects and have duties under international human rights law.

The UN guiding principles are organised around three pillars, known as Protect, Respect and Remedy. The first pillar relates to states’ obligations to uphold human rights. It includes the duty to regulate businesses to ensure they do not violate rights through their operations. The second pillar refers to corporations’ responsibility to respect human rights. This is voluntary and not a legal obligation. The third pillar ensures that victims of human rights violations have access to effective remedies.

This framework relies on three factors: states which have the interests of their citizens at heart, corporations complying with human rights standards, and effective remedial systems. If all three work together, then the UN guiding principles can address corporate accountability for rights violations.

In practice, however, this is not the case. Many states, particularly those in the developing world with high levels of poverty, rely on foreign investment. This creates a power imbalance when negotiating with large multinational corporations. Multinationals are able to demand favourable investment conditions, including relaxing laws that might protect human rights.

Under the UN guiding principles, if states do not impose obligations on corporations to comply with human rights, they do not have such obligations.

Next steps

Not all corporations should have the same duties as states. I propose a set of factors that would determine when a corporation might have a duty under international human rights law to fulfil socio-economic rights. These factors are: the extent of the violation, the position or vulnerability of the victim, the urgency of the situation, and whether the corporation is the only actor that can fulfil the right.

For example, let us imagine a scenario in which a company operates a mine in the Central African Republic. It has built a hospital for its workers and management. Surrounding the mining operations are indigent communities who resided in the area before the operations began.

One day, a child from one of the settlements is knocked over by a car. Her injuries are not life-threatening, but they are severe and the child is in terrible pain. The closest hospital is the mine-owned private hospital. There is a public hospital, but it is far away and travelling there would take time and be costly. The child’s family rushes her to the mine’s hospital for emergency treatment. Does the hospital have a legal duty to admit the child and pay for her treatment?

Applying a combination of the factors, the answer is yes. The child is vulnerable by virtue of her age and poverty, the situation is urgent, and the mine hospital is the only entity that can fulfil the right under the circumstances.

Using this framework, I argue that international human rights law should be developed to mitigate the harm of poverty in the global south, by imposing duties on corporations that benefit from poverty. Some corporations have a perverse incentive to keep communities poor. International law has a role to play in overturning this state of affairs.

Ultimately, my proposal seeks to review what we think of as a fair and just economy. Nothing will change if only states have obligations under international law. The global economic market is neither free nor fair. It has created the most severe human rights violations of our age. International human rights law must address this.

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