The Extraterritorial Dimension of the State Duty to Protect Human Rights in Relation to Business Activities Casajuna Artacho, Estela del Mar LL.M Candidate, International Human Rights Law (Economic Relations) School of Law University of Essex edmcas@essex.ac.uk ABSTRACT The duty to protect has been identified by the Special Representative to the UN Secretary General on Business and Human Rights (SRSG) as one of the fundamental pillars of the Guiding Principles on Business and Human Rights. This paper discusses its jurisdictional scope concluding that the state duty to protect human rights is not territorially limited. This paper will then argue that the exercise of extraterritorial obligations is not subject to legal constraints under the international legal system. Finally the general findings in parts one and two of the paper are applied to the concrete example of Export Credit Agencies. KEY WORDS Decisive influence standard, domestic measures with extraterritorial application, due diligence, duty to protect, effective or overall control standard, exports credit agencies, extraterritoriality, jurisdiction. 1
INTRODUCTION The problem of extraterritorial state obligations has featured prominently at various stages of the development of the Ruggie Principles. In response to perceived legal doctrine and political difficulties, the Special Representative to the UN Secretary General on Business and Human Rights (SRSG) concluded that the extraterritoriality of state obligations remains an unsettled issue in international law. This paper discusses how international human rights law extends a home state s responsibility to protect human rights extraterritorially in a manner that is beyond mere permissibility. Bearing in mind that most scholars address the issue of extraterritorial obligations by mapping the limits of jurisdiction under international law, this paper will examine the territorial and nationality principles. Pointing out the most practical difficulties about the exercise of extraterritoriality, this paper examines an alternative source that does not impose international legal constraints on the enforcement of obligations, namely domestic measures with extraterritorial implications. The paper then considers how the general findings apply to a concrete scenario of exports credit agencies. Highlighting particularities of exports credit agencies this paper provides strong arguments in favour of the extraterritorial application of the state duty to protect human rights. The importance of this research is not only a compilation of doctrine and general discussion, but also an up-dated practical approach to a current debate in business and human rights. 1. THE STATE DUTY TO PROTECT HUMAN RIGHTS: EXTRATERRITORIAL OBLIGATIONS? The duty to protect has been identified by the SRSG as one of the fundamental pillars of the Guiding Principles on Business and Human Rights. 1 The state duty to protect lies also at the very core of international human rights regime. 2 However, as this paper will next discuss, its jurisdictional scope is disputed. 1.1 Permissibility Approach: Ruggie s Principles Under the first pillar of the SRSG s 2008 Report states have a legal duty to protect all those within their territory from violations of their human rights by both State officials and non-state actors (NSAs), including corporations, for those human rights with regard to which the state has accepted legal obligations. 3 But, does a home-state s responsibility to protect human rights extend extraterritorially? 1 U.N. Human Rights Council, Promotion and Protection of All Human Rights, Civil, Political, Economic, Social and Cultural Rights, including the Right to Development: Protect, Respect and Remedy: A Framework for Business and Human Rights, U.N. Doc. A/HRC/8/5 (2008), (hereafter 2008 Report), para.9. 2 Ibid, para.50. 3 See ibid, para.27-50. 2
The SRSG s review of the commentaries and jurisprudence under the core UN human rights treaties suggests that the treaties do not require states to exercise extraterritorial jurisdiction over business abuse. 4 According to the Guiding Principles: At present, states are not generally required under international human rights law to regulate the extra-territorial activities of business domiciled in their territory and/or jurisdiction. Nor are they generally prohibited from doing so, provided there is a recognized jurisdictional basis. 5 Thus, far from asserting the existence of extraterritorial obligations, the Guiding Principles take a permissibility approach to the extra-territorial exercise of jurisdiction. 1.2 Beyond permissibility: International Human Rights law It is generally recognized that human rights law imposes certain obligations which states are bound to comply with. 6 These are duties to respect, protect and fulfil. 7 This paper will focus upon the duty to protect. 1.2.1 Duty to protect: concept and State responsibility The duty to protect requires states to prevent third parties from interfering with the enjoyment of human rights. 8 It entails a duty to take positive steps that extend to both economic, social and cultural rights, and civil and political rights. 9 The prevention of violations is often achieved through legislation, 10 such as by regulating national companies to ensure that they do not violate labour rights. The extraterritorial dimension of the duty to protect imposes an obligation to protect individuals abroad from human rights violations that can be attributed to actions committed by third parties over which the State has jurisdiction. 11 For example, it implies the duty to regulate national companies to ensure that they do not infringe human rights in other countries in which they operate. 12 4 J. Ruggie, Business and Human Rights: Mapping International. Standards of Responsibility and Accountability for Corporate Acts, U.N. Doc. A/HRC/4/35 (2007), (hereafter 2007 Mapping Report). 5 See J. Ruggie, Guiding Principles on Business and Human Rights: Implementing the United Nations Protect, Respect and Remedy Framework, (2011) U.N. Doc. A/HRC/17/31 (hereafter GP or Guiding Principle), Principle 2(2), emphasis added. 6 S. SKOGLY, Beyond National Borders: States Human Rights Obligations in International Cooperation (Antwerpen, Intersentia, 2006), p.69. 7 See H. SHUE, Basic Rights: Subsistence, Affluence and U.S. Foreign Policy (The University of Chicago Press, 1994) and A.EIDE, The Right to Adequate Food as a Human Right: Final Report, (1987) UN.Doc.E/CN.4/Sub.2/1987/23 for further. 8 Skogly, supra n.6 at p.69. 9 F. COOMANS and M. T KAMMINGA, Extraterritorial Application of Human Rights Treaties (Oxford, Hart, 2004) p. 61. 10 SKOGLY, supra n.6 at p.70. 11 Ibid. 12 Ibid. 3
In addition to regulation, the obligation to protect also entails an obligation that states investigate, punish and redress actions by NSAs that violate human rights within its territory or jurisdiction. 13 This is the socalled due diligence test. Here, the responsibility of the State is engaged by an act that initially was not attributable to the State, but the omission of protecting individuals and regulating NSAs creates a breach of an international obligation attributable to it. 14 Hence, states have been found to be in breach of their international obligations in relation to the activities of corporations within their territory for their failure to exercise due diligence. 15 The obligation of due diligence also has an extraterritorial dimension 16 based on the State s failure to exercise due diligence in respect of the acts of natural or legal persons within its jurisdiction. 17 Regarding corporate nationals, this possibility should be explored, otherwise TNCs could easily bypass the mandate of municipal law by transferring or relocating their business operations offshore where human rights are less stringent. 18 Possible grounds for obligations will be discussed later in this paper. 1.2.2 Basis for extraterritorial obligations The circumstances under which states have an extraterritorial obligation to protect human rights in relation to business activities should be considered separately for civil and political rights (CPR) and economic, social and cultural rights. Treaties concerning CPR contain a jurisdiction clause that operates as a threshold to determine whether the State is bound by the treaty, and whether a state act can be characterized as internationally wrongful. 19 Conversely, ESCR do not refer to the concept of territory or jurisdiction. 20 This lack of reference occurs not only in the International Covenant on Economic, Social and Cultural Rights (ICESCR), but also in other treaties dealing with ESCR such as those concerning racial and gender equality. 21 a) Civil and Political Rights 13 See for example: Velazquez Rodriguez v. Honduras, Merits, IACtHR (29-07-1988); Herrera Rubio v. Colombia, HRC, Com. No. 161/1983, (2-11-1987); Ergi v. Turkey, ECHR, App. No. 23818/94 (28-07-1998); Timurtas v.turkey, ECHR, App. No. 23531/94, (23-06-2000) and A v. UK., ECHR, App. No. 3455/05 (19-02-2009). 14 See, ILC, Draft articles on Responsibility of States for Internationally Wrongful Acts, with commentaries (2011), Art.2. 15 Kichwa Indigenous People of Sarayaku v. Ecuador (Merits), IACtHR, (17-062012); Awas Tigni Comminity v. Nicaragua (Merits), IACtHR, (31-08-2001); The Social and Economic Rights Action Center and the Center for Economic and Social Rights v. Nigeria, AComHR, Com.No. 155/96 (27-05-2002); and Guerra v Italy, ECHR, App.No116/1996/735/932 (19-02-1998). 16 Mc. CORQUODALE and P. SIMMONS, Responsibility Beyond Borders: State Responsibility for Extraterritorial Violations by Corporations of International Human Rights Law, Modern Law Review, Vol. 70.4 (2011), p.618. 17 See for example Loizidou v. Turkey, preliminary objections, ECHR, App.No 15318/89 (23-031995) para. 62; the decision was confirmed Cyprus v. Turkey, ECHR App.No.25781/94 (10-05-2001). 18 S.DEVA, Acting extraterritorially to Tame Multinationals Corporations for Human Rights Violations: Who Should Bell the Cat, Melbourne Journal of International Law, Vol. 5, pp. 37-65, (2004), p.49. 19 M, MILANOVIC, Extraterritorial Application of Human Rights Treaties (Oxford, Oxford University Press 2011), p.46. 20 SKOGLY, supra n.6 at p.73. 21 Ibid. 4
Supported by the existence of jurisdiction clauses, a state s obligation to prevent and punish human rights violations has traditionally extended to its own territory, but this conventional view is no longer uncontested within international human rights law. 22 Nowadays, the state duty to protect is interpreted in a manner that expands beyond territorial boundaries. For example, the Human Rights Committee (HRC) states in its General Comment No. 31 that the obligation in article 2(1) of the International Covenant on Civil and Political Rights (ICCPR) applies to anyone within the power or effective control of the State Party, even if not situated with the territory of the State Party. Thus, the formulation contained in article 2(1) ICCPR within its territory and subject to its jurisdiction is now interpreted as meaning within its territory or subject to its jurisdiction. 23 What is important here is: the relationship between the individual and the State in relation to a violation of any of the rights set forth in the Covenant It would be unconscionable to permit a State to perpetrate violations on foreign territory which violations it could not perpetrate on its own territory. 24 In relation to business activities, the HRC has recently recognized the extra-territorial obligations to ensure respect for rights contained in the ICCPR: The State party is encouraged to set out clearly the expectations that all business enterprises domiciled in its territory and/or its jurisdiction respect human rights standards in accordance with the Covenant throughout their operations. It is also encouraged to take appropriate measures to strengthen the remedies provided to protect people who have been victims of activities of such business enterprises operating abroad. 25 Although it is clear that extraterritorial conduct can engage human rights obligations, it is unclear under what exact circumstances individuals can be brought within the jurisdiction of a state. 26 In that sense, the criteria have evolved from the doctrine of effective or overall control 27 to the decisive influence standard. 28 As we will discuss in the third part of this paper, the decisive influence standard opens the door for home State responsibility by virtue of the State s economic, financial and political support to TNCs. b) Economic, Social and Cultural Rights (ESCR) 22 See ICCPR, art. 2(1); ECHR, article 1 or ACHR, article 1. See MILANOVIC, supra n.19 for further. 23 See also, HRC, Concluding Observations: Iran, UN.Doc.CCPR/C/79/Add.25 (1993); HRC, Lopez Burgos v. Uruguay Com.No. R 12/52 (6-06-1979) at, para. 10.3. The position was reaffirmed by ICJ, Advisory Opinion on the Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory (2004) at para.109. 24 Lopez Burgos v. Uruguay, ibid, at. para.12.2-3. 25 HRC, Concluding Observations: Germany, UN.DOC.CCPR/C/DEU/CO/6 (2012) at. para.16. 26 F, COOMANS and R. KÜNNEMANN, Cases and Concepts on Extraterritorial Obligations in Economic, Social and Cultural Rights, (Intersentia, 2012), p.164. 27 See ICJ, Case concerning the military and paramilitary activities in and against Nicaraua (Nicaragua v. United States of America), (1986) or ICTY. Prosecutor v. Dusco Tadic (07-05-1997). 28 ICJ, Case concerning application of the convention on the prevention and punishment of the crime of genocide (Bosnia and Herzegovina v. Serbia and Montenegro) (2007); or ECHR, Ilascu and Others v. Moldova and Russia, App.No.48787/99, (8-07- 2004). 5
It is easier to argue that treaties without a jurisdiction clause entail an extraterritorial obligation to protect human rights. Thus, for example, in ratifying the ICESCR states undertake extraterritorial obligations. 29 Here, the basis for the extraterritorial obligation to protect human rights can be based both on the obligation of international assistance and cooperation, contained in article 2(1), or on the doctrine of effective or decisive control. 30 Recognition of the extraterritorial dimension of the states duty to protect has been more explicit on the part of the Committee on Economic, Social and Cultural Rights (CESCR) than the HRC. The general comments issued by the CESCR show a clear trend in the recognition of extraterritorial obligations in relation to third parties. In that sense, in order to comply with states international obligations regarding the right to health, states must prevent third parties from violating the right to health in other countries if they are able to influence those third parties by legal or political means. 31 Similarly, states should take steps to prevent companies from violating the right to water in other countries. 32 Again in 2005, the CESCR urged states to consider regulating the responsibility resting on the public sector. 33 The CESCR s recognition of the term extraterritorially was explicit when it stated that States should extraterritorially protect the right to social security by preventing national entities from violating this right in other countries. 34 Other treaty bodies have also addressed the regulation of third parties registered in their territory. For example, in its concluding observations on Canada the Committee on the Elimination of Racial Discrimination (CERD) called on the State to take the appropriate legislative or administrative measures to prevent acts of transnational corporations registered in Canada which negatively impact on the enjoyment of rights of indigenous peoples in territories outside Canada. 35 Not only treaty bodies produce relevant support for the existence of extraterritorial obligations. The UN Special Rapportaur on the right to food has also stated that the extraterritorial obligation to protect requires the State to ensure that third parties subject to its jurisdiction do not violate the right to food in other countries. 36 This implies an obligation to put in place effective domestic regulation and monitoring mechanisms as well as provide effective remedies. 37 Moreover, a group NGOs and academics coming together as the extraterritorial obligations consortium, launched the Maastricht Principles on Economic, 29 M. SEPÚLVEDA, Obligations of International Assistance and Cooperation in an optional protocol to the international covenant on economic, social and cultural rights, Netherlands Quarterly of Human Rights, 24 (2007), p.271. 30 See M. GONDEK, The Reach of Human Rights in a Globalising World: Extraterritorial Application of Human Rights Treaties, (Intersentia, 2009), p.295 for further. 31 CESCR, General Comment 14: The right to the highest attainable standard of health (2000), para.39. 32 CESCR, General Comment 15: The right to water (2003) para.33. It also clarified the concept of third parties means: individuals, groups, corporations and other entities, as well as agents acting under their authority, para.23. 33 CESCR, General Comment 17: The right of everyone to benefit from the protection of the moral and material interest resulting from any scientific, literally or artistic production of which he or she is the author (2006), para.55. 34 CESCR, General Comment 19: The right to social security (2008) para.53-54. See also F, COOMANS, The extraterritorial scope of the international covenant on economic, social and cultural rights in the work of the United Nations committee on economic, social and cultural rights, Human Rights Law Review, 11(1) (2011), p.29. 35 CERD, Concluding Observations: Canada (2007) para.17. See also CERD, Concluding Observations Canada 2012, para.14. 36 UN Doc. E/CN.4/2005/47 para.53. 37 Supra n.15 at, para.33. 6
Social and Cultural Rights in 2011. This launch aimed to clarify the content of states extraterritorial obligations. 38 Principle 24 clarifies that the extraterritorial obligation to protect entails taking necessary measures to ensure that NSAs that a state is in position to regulate, as outlined in principle 25 (such as transnational corporations), do not nullify or impair the enjoyment of economic, social and cultural rights. 1.3 Conclusion By examining international human rights law and its interpretation, this paper has argued how the extraterritorial dimension of the duty to protect goes beyond permissibility to become a State obligation. While further clarification of the concept is needed, it is hoped that the now operational Optional Protocol to the ICESCR will provide case law to take the concept further. Meanwhile, the jurisprudence of the HRC and the International Courts, as examined in the last part of this paper, provide enough bases for the existence of extraterritorial obligations. Also, the Maastricht Principles and the reports of the UN Special Rapportaurs have taken a decisive approach that adds further value and clarification. This paper clearly disagrees with the permissive approach to extraterritorial obligations taken by the Ruggie Principles. Amid a wave of increasing international recognition of extraterritorial obligations, Ruggie s formulation is seen as a step backwards that weakens the interpretation of human rights obligations. This paper defends the extraterritorial obligation to protect human rights as pivotal to fighting the governance gap and impunity that globalization has created in an existing State-centric human rights regime that has not yet discerned how to hold TNCs directly accountable for human rights violations committed abroad. 2. SOLVING JURISDICTIONAL OBSTACLES Having argued the State s extraterritorial obligation to protect human rights against abuses by TNCs, this paper will now discuss how the exercise of this duty does not face legal constraints under the international legal system. 2.1 Regulation to fulfil the extraterritorial duty to protect human rights States generally have a wide discretion to choose the most appropriate policies to discharge their human rights obligations. 39 As outlined above, legislation is one of the ways in which states can fulfil their extraterritorial duty to protect human rights. 40 Two possibilities will be now discussed: the direct use of extraterritorial jurisdiction and domestic measures with extraterritorial implications. 2.1.1 Direct use of extraterritorial jurisdiction 38 The Maastricht Principles on Extraterritorial Obligations of States in the area of Economic, Social and Cultural Rights (2011), preamble. 39 Guiding Principles, principle 1. 40 See page 3 above. 7
According to Zerk, direct use of extraterritorial jurisdiction means only those direct assertions of jurisdiction over the foreign conduct of individuals and companies. 41 It implies a use of extraterritorial jurisdiction in the form of the ability of a state, via various legal regulatory and judicial institutions, to exercise its authority over actors and activities outside its territory. 42 There are three ways in which jurisdiction may be asserted: prescriptive, adjudicative or enforcement jurisdiction. 43 Regulating TNCs over which the state has control or jurisdiction implies a use of prescriptive jurisdiction. This concerns the ability of states to prescribe laws. 44 Prescriptive jurisdiction is governed by public international law. 45 Its legally permissible extend and its limits are framed by bases of jurisdiction. 46 Recognized under customary international law these bases are territory, nationality, passive personality, the protective principle and universality. 47 Of these, this paper focuses on territory and nationality. 48 Although in certain areas extraterritorial jurisdiction is accepted or even welcomed by states, such as in anti-corruption, anti-trust, securities regulation, environmental protection and general civil and criminal jurisdiction, 49 when it comes to the protection of human rights, bases of jurisdiction pose difficulties for the regulation of TNCs. This is partly because international law is fundamentally concerned with relations between the states. 50 Nationality Principle Based on the nationality principle, states can regulate their nationals regardless of where they are. 51 However, states are reluctant to assert extraterritorial jurisdiction, and usually create a parallel jurisdiction on the basis of the nationality and territory principles. 52 Beyond the unwillingness of states, the nationality ground also imposes legal obstacles for the extraterritorial regulation of TNCs. Firstly, the issue of how to apply the nationality principle to TNCs arises. 53 For example, which companies are own nationals and which are foreign? Without a general rule under international law, 54 the best 41 J. ZERK, Extraterritorial jurisdiction: lessons for the business and human rights sphere from six regulatory areas, Corporate Social Responsibility Initiative Working Paper No. 69. (Cambridge, Harvard University, 2010) p. 13 42 See A, CASSESE,, Second edition (Oxford, Oxford University Press, 2005) pp.48-53p. 49. 43 GONDEK, supra n.30, p.51. 44 A. V. LOWE, Jurisdiction in M. EVANS (ed), International Law, 2d.ed. (Oxford, Oxford University Press 2006) at, p.340 45 See ZERK, J., Multinationals and Corporate Social Responsibility: Limitations and Opportunities in International Law (Cambridge, Cambridge University Press, 2006), p. 113 ff. 46 GONDEK, supra n.30 at p.51. 47 ZERK, supra n.41 at p.18. 48 Ibid. 49 RUGGIE 2010, supra n.5 at para.46, with refrence to ZERK, supra n.41. 50 ZERK supra n.45 at p.100. 51 Ibid, p.106. 52 GONDEK, supra n.45 at p.52. 53 ZERK, supra n.41 at p.22. 54 Ibid. 8
indication until now has been to consider the place of the incorporation as the relevant criteria, followed by the place from which day-to-day decision making is made, i.e. the real seat of the company. 55 More complexity presents when considering the organizational structures of TNCs. 56 Usually a TNCs have a parent company in a developed State (home-state), and several subsidiaries registered in respective States of operation (host-states). 57 The parent and the subsidiaries have their own legal personality with their own rights and responsibilities that is, they are constituted as separate companies. While a parent company is regulated by the home-state, every subsidiary is ruled by a host-state. The liability of each of these entities is protected by the doctrine of limited liability, which protects a corporation s shareholders from personal responsibility for corporate actions. 58 This also applies where the shareholder is another company. 59 Thus, between the parent company and its subsidiaries there is what known as a corporate veil, preventing a finding of liability against a parent company for the actions of its subsidiaries. 60 The concept of the corporate veil operates a clear constraint upon the exercise of extraterritorial jurisdiction on the grounds of nationality. A home state is not entitled to assert prescriptive jurisdiction over foreign subsidiaries abroad. Thus, the nationality principle only entitles a home-state to regulate its locally incorporated parent companies. Finally, traditional grounds of jurisdiction are designed to protect, not human rights, but the territorial sovereignty of states. 61 By virtue of the principle of non-interference, each state should refrain from acting in a manner that interferes in the way other states and their governments operate within their own territory. 62 However, under international human rights law, the prevention of human rights violations should be something in which all states have an interest. 63 Nevertheless, up to now only serious human rights violations, including those committed by NSAs, are seen as not purely a matter for domestic jurisdiction. 64 Territoriality Principle Under the territoriality principle each state has jurisdiction to regulate the activities of companies within its own territorial boundaries. 65 This is the most commonly used basis for jurisdiction. 66 However, activities 55 Ibid. See also, S. DEVA Corporate Human Rights Violations: A case for Extraterritorial Regulation in C. LUETGE, Handbook of the Philosophical Foundations of Business Ethics, (Dordrecht, New York: Springer, 2012), p.1078. 56 ZERK, supra n.45 at p. 63. 57 COOMANS, supra n.26 at p. 225. 58 S. LEADER, Corporate Accountability in R. Goodin, et al eds, The Oxford Handbook on Public Accountability (OUP: 2013) p.4. 59 P. MUCHLINSKI Multinational Enterprises and the Law (Oxford University Press, 2007). p.918. 60 S. JOSEPH, Corporations and Transnational Human Rights Litigation (Hart, 2004), p. 129. 61 ZERK, supra n.45 at p.135. 62 ZERK, supra n.45 at p.152. 63 GONDEK, supra n.45 at p.52. 64 See ZERK, supra n.45 at p.152. See for further S. RATNER, International Law: The Trials of Global Norms 160 Foreign Policy 65 (1998) for further. 65 ZERK, supra n.41 at p.13. 66 Ibid. 9
may sometimes go beyond state borders, as is usually the case for TNCs, for example in cases of criminal complicity or conspiracy. 67 The territoriality principle has further developed into the effects doctrine, which permits states to have jurisdiction over foreign actors and conduct on the basis of the effects (usually economic) of those actors occurring within their own territorial boundaries when those effects are substantial, and a direct result of the conduct at issue. 68 The effects doctrine has territorial connections, but it is seen as an exercise of extraterritorial jurisdiction because jurisdiction is asserted over foreign conduct. 69 Although the effects doctrine could provide a potential basis for the extraterritorial regulation of TNCs, it is not yet extensively used by the states. 70 Indeed, it still seems restricted to economic effects, rather than human rights concerns. 71 2.1.2 Domestic measures with extraterritorial application The direct assertion of jurisdiction is by far not the only possibility to fulfil the duty to regulate TNCs over which states have jurisdiction or control. Indeed, there are many ways in which states can prevent third parties from infringing human rights abroad. 72 By taking domestic measures with extraterritorial reach states have tried to influence conditions, standards and behaviours in other countries, 73 for example, by requiring parent companies, as a matter of law, to implement certain reporting procedures throughout a multinational group to combat money laundering. 74 This is what this paper refers as parent-based regulation. It provides for indirect extraterritorial regulation that reflects the use of a home-state s jurisdiction over the parent on the basis that the parent is a national of or is located within the territorial boundaries of the state. 75 Moreover, it relies on the control that the parent company exercises over its subsidiaries abroad. In other words, parent-based regulation aims to regulate the behaviour of foreign subsidiaries through their parent companies. This concept permits the solution of the jurisdictional obstacles that traditional grounds of jurisdiction impose on the regulation of TNCs. This is because these measures make use of territorial, not extraterritorial jurisdiction, although geographically speaking, they can still have far reaching effects. 76 67 Ibid. 68 Ibid, at p.19. 69 Ibid. 70 Ibid, at p.87. 71 Ibid. 72 See COOMANS, supra n.26 at p.230 ff 73 Ibid, at 16. 74 Ibid. 75 ZERK, supra n.45 at p.141. 76 Ibid. 10
From a human rights perspective, domestic measures with extraterritorial application constitute a potentially successful means of regulating the behaviour of TNCs. Dozens of different types of measures might be envisaged: introducing human rights criteria before granting an advantage, imposing corporate governance and reporting requirements concerning human rights standards, satisfying human rights requirements prior to admission to the Stock Exchange, human rights requirements in procurement contracts or human rights requirements for the granting of public funding. In such ways, states can fulfil their commitment to regulating in a manner that satisfies the duty to protect human rights without confronting the problems raised by a direct use of extraterritorial jurisdiction. This possibility must not be overlooked. 2.3 Conclusion International law does not preclude the existence of extraterritoriality, 77 and this paper has highlighted how states have used it when political willingness exists. However, when it comes to the regulation of TNCs to protect human rights abroad, international law does not yet provide a satisfactory basis to exercise the direct use of extraterritorial jurisdiction. As a general rule, states are not entitled to prescribe laws for foreign subsidiaries of locally incorporated parent companies. However, as discussed here, there are still plenty of opportunities for parent-based regulation by the home state, based on the jurisdiction exercised over the national parent company. This concept offers a practical solution for the fulfilment of the extraterritorial dimension of the state duty to protect human rights. The study of one of the measures proposed is subject of review in the next part of this paper. 3. EXPORT CREDIT AGENCIES (ECAs), HUMAN RIGHTS AND HOME STATE RESPONSIBILITY This part aims to apply the general findings of parts one and two to a concrete example, Export Credit Agencies. 3.1 ECAs: Concept and significance ECAs are public institutions that provide assistance to exporters and investors, principally in the form of insurance policies and guarantees on bank loans. 78 For example, ECAs help companies to export by acting as guarantors and providing credit to send goods to overseas buyers before they have been paid for. 79 In the context of promoting commerce in emerging economies and lesser developed countries, ECAs are an extremely important actor for the private sector. 80 However, the human rights impacts of ECA supported exports and investment can be severe. It has been documented that ECAs have facilitated 77 CASSESE, supra n.42 at 48-53. 78 Introduction to UK Export Finance available at: http://www.ukexportfinance.gov.uk/about-us/introduction-to-ecgd. Accessed on 7 June 2013. 79 Ibid. 80 K. KEENAN, Export Credit Agencies and the International Law of Human Rights (Halifax Initiative Coalition, 2008) p.1, available at: http://www.halifaxinitiative.org/updir/ecas_and_hr_law.pdf. Accessed 7 June 2013. 11
corporate activity related with adverse human rights impacts, including forced displacement of local populations, workplace injuries, the destruction of sacred cultural sites, or paramilitary and state repression. 81 To take advantage of the fact that export finance is nowadays a key element of the global economy and one on which businesses rely, 82 it is necessary to make ECA a powerful tool for states to influence the way companies registered in their territories behave beyond their borders. In other words, states are in a position to ensure that the credit conceded by ECAs is dependent on or connected in some way with human rights. 83 In that sense, states can introduce human rights criteria regarding people impacted overseas prior to granting public funding, as a domestic measure with extraterritorial application. Here, states can introduce human rights conditionality for spending public money ensuring that companies are respectful of human rights, including the rights of people located outside its territory of jurisdiction. 84 Selected examples Good practices exist at the international and the national level in this regard. At the international level, the OECD has adopted environmental and bribery concerns into eligibility criteria concerning export finance. 85 At the national level, the UK s Export Credits Guarantee Department has committed to making the environmental and social impacts of specific projects public. 86 Through the Buyer Credit Facility application form, the potential environmental and/or social impact of projects are publicised before granting a loan. 87 This form also contains a section in which applicants must state, depending on the risks of the project, whether goods or services will have an actual or potential impact on human rights, amongst other things. For risky projects, external stakeholders are welcomed to provide information. 88 In Canada, the so-called C- 300 Bill, the Corporate Accountability of Mining, Oil and Gas Corporations in Developing Countries Acts, aims to ensure that TNCs operating in the mining, oil or gas sector, act in accordance with Canada s commitments to international human rights standards. 89 81 See ECA-WATCH, Race to the Bottom Take II: An Assessment of Sustainable Development Achievements of ECA-Supported Projects Two Years after OECD Common Approaches (2003) Rev. 6, available at: www.eca-watch.org/eca/race_bottom_take2.pdf Accessed 7 June 2013, for further. 82 J. EVANS, Human Rights and Labour Standards: The duty of exports credits agencies, (OECD Smart Rules for Fair Trade: 50 years of Export Credits, 2010) p.66. 83 N, BERNAZ, Enhancing Corporate Accountability for Human Rights Violations: Is Extraterritoriality the Magic Potion? Journal of Business Ethics (November 2012), p.9. 84 Ibid, p.6 85 OECD, Common Approaches on the Environment and Officially Supported Exports Credits (2007) and OECD Council Recommendation on Bribery and Officially Supported Exports Credits (2006). 86 BERNAZ, supra n.83 at p.9. 87 UK Export Finance, Buyer Credit Application Form, para 10.2.2.3 ff. Available at: http://www.ukexportfinance.gov.uk/assets/ecgd/files/prods-servs/apli-form-speciments/july-2011-revisions/buyer-creditapplication-form-july2011.pdf. Accessed on 7 June 2013. 88 BERNAZ, supra n.83 at p.10. 89 C-300 Bill, Article 3, available at: http://www.parl.gc.ca/housepublications/publication.aspx?docid=3658424. Accessed 11 June 2013. 12
Although good practices exist, it would be an overstatement to say that the granting of export finance is nowadays dependent on human rights or even environmental criteria. 90 Nevertheless, domestic measures with extraterritorial application are growing and it is an area that could certainly be further developed. 91 3.2 ECAs, human rights and home state responsibility This paper will now trace a means of securing accountability that can impute a TNC s actions in a host state to the home state, based on the key role that ECAs play. In doing so, it will develop the grounds for exercising due diligence. 3.2.1 Due diligence Imposing a due diligence obligation on a home state implies that it is first necessary to determine when a home state exercises jurisdiction over a TNC abroad, and then, what the scope of the obligation imposed by a due diligence standard is. 92 Bearing in mind that there is no human rights jurisprudence on the issue of home state accountability for TNCs acting abroad, this paper will apply by analogy human rights jurisprudence regarding other NSAs. a) Delimiting home-state jurisdiction over a TNC abroad As outlined in the first part of this paper, in imposing human rights obligations beyond borders two tests should be considered: the effective or overall control standard and the decisive influence standard. Effective or overall control standard The effective or overall control standard has been used in international law to impose state liability for the actions of non-state actors on the basis of the degree of control that the State exerts over them. The ICJ established the first criteria in the Nicaragua case, finding that it was necessary to prove that the State exercised effective control over the NSA to attract liability. 93 More recently, the Tadic case saw the test evolve into one requiring overall control, which involves not only financial or even military assistance (effective control), but also, coordination or help in the planning of the military activity. 94 Both, the effective and overall control tests could easily be counter-argued by States in relation to companies, as they do not exercise effective or overall control over TNCs and TNCs usually have autonomy in their day-to-day operations, both at home and abroad. 95 90 BERMAZ, supra n.83 at, p.11. 91 Ibid at p.7. 92 S. NARULA, International Financial Institutions, Transnational Corporations in M. LANGFORD Global Justice, State Duties: The Extraterritorial Scope of Economic, Social, and Cultural Rights in International Law, (New York, Cambridge University Press, 2013), p.140. 93 Ibid. 94 Tadic, supra n.27 at para.130-131. 95 GIBNEY, TOMASEVKI and VEDTED-HANSEN, Transnational State Responsibility for Violations of Human Rights, Harvard Human Rights Journal, supra n.12 (1999) p.287. 13
Decisive influence standard The effective or overall control standard seems to have loosened since the European Court of Human Rights (EHCR) decided Ilascu and Others v. Moldova or Russia. 96 In finding Russia responsible the court did not require its participation in the specific operation, 97 nor its coordination of the general planning of the military activity. 98 Instead, the Court found Russia responsible for not acting to prevent human rights violations when there was the existence of a continuous and uninterrupted link of responsibility on the part of the Russian Federation for the applicants fate. 99 In that sense, the court found that Russia was providing an existential influence for the maintaining of a military force. 100 The same standard was reiterated in the Genocide case. Although the Federal Republic of Yugoslavia did not exercise effective control over the operations at issue, 101 the court found the existence of an undeniable influence over the army, the root of which was founded on the strength of the political, financial and military links between the two. 102 The distinction between control and influence is crucial to supporting extra-territorial human rights obligations in the context of TNCs. The relationship between the state and TNCs is likely to be more similar to the circumstances in the Ilascu and Genocide cases than the Nicaragua or Tadic cases. As said above, ECAs play a decisive role in the ability of TNCs to operate abroad, 103 offering for example overseas insurance to cover political and commercial risks. 104 In that sense, by virtue of the home-state s economic and financial support, the decisive influence standard provides a line of argumentation through which home-states should be held responsible for the extraterritorial actions of its TNCs operating abroad. 105 Put differently, individuals whose human rights are violated abroad, could fall within the jurisdiction of the TNCs home-state if that State offers export finance to the TNCs without considering human rights conditions. b) Scope of obligation imposed by a due diligence standard In the Velazquez Rodriguez case, the IACtHR held Honduras responsible for its lack of due diligence in preventing human rights violations. 106 In Herrero, 107 the HRC held Colombia responsible because it did not take effective measures to remedy the violation, finding that it must investigate the violations and take steps to ensure that the same violations do not occur in the future. Lastly, in the Genocide case 108 the ICJ found 96 Ilascu, supra n..28. 97 Nicaragua case supra n.27 at para.115. 98 Tadic, supra n.28 at, para.130-131. 99 Ilascu, supra n.28. 100 NARULA, supra n.83 at p.143. 101 Bosnia and Herzegovina v. Serbia and Montenegro, supra n.28 at para. 399. 102 Ibid, 428-438. 103 NARULA, supra n.92 at p.143. 104 Ibid. 105 NARULA, supra n.92 at p.144. 106 Velazquez Rodriguez, supra n.13 at para.172. 107 HRC, Herrera Rubio v. Colombia, supra n.13. 108 Genocide case, supra n.28 at para.436. 14
that Serbia must have acted positively to prevent NSAs whom it had ability to influence from committing foreseeable human rights violations. As such, jurisprudence seems to require a good-faith effort to prove foreseeable violations by NSAs over whom they are able to exert some degree of authority. 109 Thus, one way to satisfy the due diligence obligations of home-states could be to regulate corporate activity by enacting domestic measures with extraterritorial obligations, such as regulating the granting of public money from ECAs to TNCs operating abroad. Although no means exhaustive and lacking an analysis of the practical difficulties, the doctrinal changes proposed in this part are first steps to fulfilling extraterritorial duties. CONCLUSIONS Taking Ruggie s position regarding extraterritoriality, as outlined in the Guiding Principles, the aim of this paper was to determine the extent to which states are required to regulate the human rights standards of companies beyond their own territorial boundaries. It also sought to discuss the extent to which states are permitted to use extraterritorial jurisdiction to protect human rights. After consolidating positions in part one and two, this paper developed one of the possibilities that permit states to take an immediate and important step towards the protection of human rights against abuses by TNCs, namely the regulation of ECAs. Using this example, this essay advocates home-state domestic measures with extraterritorial application as a way of dealing with the current situation of corporate impunity. It is high time that new legal principles are developed and invoked to close the gap that globalization has created. 109 NARULA, supra n.92 at p.146. 15
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