Evaluating redress mechanisms governing the human rights practices of transnational business: lessons for institutional design and operation
This project addresses the urgent need to provide vulnerable workers and communities with more effective means of defending their human rights when these are violated by businesses from countries overseas. We will develop a regulatory reform model that explains how the various functions and powers of contrasting 'redress' mechanisms affect the strength of regulatory systems and promote long term change in business behaviour.
- The University of Melbourne – Kate Macdonald, Fiona Haines and Samantha Balaton-Chrimes
- The Corporate Responsibility Coalition (CORE), UK
- ActionAid Australia
- Federation of Homeworkers Worldwide
- Monash University – Shelley Marshall
- The University of Newcastle – Tim Connor
- University of Essex – Sheldon Leader
Australian Research Council Linkage Grant: AUD $328,000,
Partners: AUD $286,632 in kind; AUD $83,516 cash for 2011-14
Currently, individuals and communities harmed by the activities of transnational businesses (that is, businesses operating outside their home country) have inadequate available means of redress (Rees 2008). The central aim of this project is to design strengthened transnational regulatory systems for use by vulnerable workers and communities.
Transnational business and human rights: the regulatory challenge
The recent experiences of a tribal community in the Indian state of Orissa (Macdonald 2009) provide graphic illustration of the central problem addressed by this research. The lives of many Kondh tribal people were severely disrupted in the early 2000s by the arrival of the UK-listed mining company Vedanta to establish a bauxite mining site in the Niyamgiri Hills and construct an alumina refinery nearby. Indigenous communities alleged that the company's operations were causing environmental and human rights violations, including serious damage to livelihoods, health and environment due to contamination of river and ground water around the refinery. Such rights are protected in Indian legislation, the Indian constitution and multiple international human rights conventions ratified by India.
Affected tribal families made multiple attempts to have their grievances addressed. Communities organised public protests, directly lobbying political representatives at district, state and national levels. Government officials were unresponsive, being closely aligned with foreign business interests. An appeal to India's National Environment Appellate Authority was dismissed. They considered appeal to India's National Human Rights Commission, but found its recommendations were not legally binding. They turned to Indian courts, but the legal process dragged on unsuccessfully for over four years, with communities struggling to find the requisite resources to persist. With support from international human rights organisations, they considered taking their case to UK courts but were deterred by the difficulty of demonstrating sufficiently direct links between the UK parent company and its Indian subsidiary. They also considered taking the case to the 'National Contact Point' office established in the UK to administer the OECD's Guidelines for Multinational Enterprises, but were discouraged by the unavailability of binding remedies. In 2008 the international NGO Survival International took a complaint to the UK NCP on their behalf, and the final statement was strongly in favour of the community. In May 2009, full scale mining was allowed to proceed, but was stopped again in 2010 by the Minister for Environment and Forests. This decision was appealed to the Supreme Court of India, the highest jurisdiction. The resulting judgement was broadly in favour of the tribal communities. It directed local decision making councils – Gram Sabhas – to hold meetings to vote on whether the mine should go ahead. All 12 Gram Sabhas voted against the mine. Although there were multiple barriers to redress at the national level and only weak and non-binding grievance mechanisms at the international level, the Kondh people have emerged from this battle with the outcome they wished for. Yet this battle took many years, sapped the resources of the community, and required the support of hundreds of local, national and international organisations to protect the human rights of this vulnerable group.
Similar scenarios exist in factories, farms and mine-affected communities in many parts of the developing world. Allegations against both foreign and local companies commonly relate to: labour rights violations (precarious employment, long hours, inadequate wages, child labour, poor occupational health and safety and restricted freedom of association); physical safety, economic and cultural rights violations (displacement of individuals and communities from land by mining and agribusiness without their free, prior and informed consent or active participation; increase in violence and conflict in mine-affected communities); and health and livelihoods rights violations (e.g. social and environmental harm from mining and agribusiness) (Haines 2005; Connor and Dent 2006; Human Rights Council 2008; Macdonald 2009).
The proliferation of cases such as these reflects the weakness of current regulatory systems intended to enforce acceptable standards of corporate conduct when businesses operate beyond the boundaries of their national regulatory jurisdictions. This regulatory deficiency at the transnational level threatens the human rights of affected individuals and communities, and poses significant commercial and political risks for many businesses as problems are dealt with through more volatile informal and political channels.
Emerging regulatory responses
For some years, efforts to reach agreement on an international regulatory approach to this challenge were crippled by highly polarised debates on voluntary versus mandatory approaches. Among practitioners in this field, attention has increasingly turned to non-judicial mechanisms of redress as potential means of resolving this impasse (Rees 2008), spearheaded by the United Nations Secretary-General's Special Representative on business and human rights, whose mandate was established in 2005, in significant part to work towards better utilising the considerable potential of non-judicial mechanisms. Non-judicial mechanisms are mandated to receive complaints and resolve disputes, but are not empowered to produce binding adjudications. They therefore go beyond corporate self-regulation but stop short of legal regulation.
The non-judicial redress mechanisms in which we are interested operate extra-territorially – not only in the host country but also in the home country or through regional or multi-lateral mechanisms. Our research will explore various categories of non-judicial, extra-territorial redress mechanisms:
- multi-stakeholder initiatives targeting transnational companies, such as the UK's Ethical Trading Initiative (ETI); the Fair Labor Association (FLA); and the Roundtable on Sustainable Palm Oil.
- Complaint mechanisms within certification schemes, such as Rainforest Alliance (RA) and Fairtrade Labelling Organisation (FLO).
- mechanisms based in home countries of transnational corporations (TNCs), applying to TNC operations offshore (e.g. National Contact Point (NCP) offices in each OECD country to administer the OECD Guidelines on Multi-National Enterprises; safeguard policies of Export Credit Agencies).
- mechanisms receiving complaints associated with projects financed by inter-governmental organisations or development banks (e.g. the. International Finance Corporation's (IFC) Compliance Advisor Ombudsman (CAO); the Asian Development Bank (ADB) Accountability Mechanism.)
Drawing on a comparative study of existing redress systems, we will develop a theoretical model of regulatory design that will enable us to identify:
- an appropriate set of functions and powers that new or reformed redress mechanisms should possess.
- principles to guide how managers of non-judicial redress systems engage with other players (regulators, businesses, and worker or community organisations) within transnational regulatory systems.
- strategies by which affected individuals and communities can make the most effective use of available non-judicial redress systems.
Our goal is to identify practical means of creating redress mechanisms that promote sustained business compliance with human rights norms, and that are accessible and responsive to affected workers and communities. We are particularly interested in designing mechanisms that engage and strengthen local systems of state-based and private compliance, dispute resolution and redress. Analysis therefore focuses not only on the direct effects of transnational redress mechanisms on access to remedy and human rights compliance, but also the interactions of transnational systems with host country governments, and with local business, worker and community organisations.
Despite increasing interest in such non-judicial redress mechanisms over recent years, the operational dynamics of this kind of mechanism remain poorly understood. It is unclear how they should be designed and managed to achieve stronger compliance by businesses. There is very little theoretical or empirical basis on which to resolve pressing practical dilemmas regarding the appropriate functions and powers of redress mechanisms, or how they should interface with existing judicial and private regulatory systems at local, national and international levels.
There has been significant debate on whether home country governments should give existing redress mechanisms greater powers of investigation and enforcement, or a wider range of available remedies. Some have suggested that governments should play a more active role in monitoring the impacts of companies abroad in relation to recognised human rights standards, or should perform more extensive research, training and advisory functions. Such expanded functions and powers could be given to existing bodies, or could be facilitated by creating a new specialised body, as currently proposed by some human rights organisations in the UK (Zerk 2007; Zerk 2008). One important aim of this project is to help answer these questions about the specific functions and powers required of new or reformed redress mechanisms.
However, there are limits to the range of regulatory powers that can or should be extended to such mechanisms. In particular, being non-judicial, they lack certain adjudication and sanctioning mechanisms. It is therefore critically important to identify the strategies that can be adopted both by managers of non-judicial redress systems and by affected individuals and communities to make the most effective possible use of available instruments.
For example, some have suggested that non-judicial redress bodies could contribute more effectively to building capacity in host country regulatory systems by entering into cooperative agreements with host country regulatory agencies, or with home country agencies responsible for international development assistance. Or they might more effectively influence norms and incentives that are detrimental to human rights compliance by developing stronger dialogue and collaboration with business organisations, with home country government agencies responsible for international trade and investment, or with national human rights institutions in home and host countries (Palmer 2003). Worker and community organisations trying to defend their human rights also face difficulties in knowing how best to engage with the existing array of redress mechanisms. In particular, there have been significant debates about the relative merits of collaborative forms of engagement with corporate and multi-stakeholder systems as opposed to strengthening the capacity of worker and community organisations to organise collectively to achieve more transformative demands for system reform (Macdonald and Marshall 2010). Sometimes it is possible for workers and communities to employ a mix of these approaches; often, however, they confront difficult strategic trade-offs. Therefore, another central project aim is to develop a set of principles to guide strategic choices of managers of non-judicial redress systems and of individuals and communities seeking to defend their human rights, concerning how they can best engage with other players in transnational regulatory networks.
This research has significant practical implications for policy and social action in Australia and the UK in particular, but also in other OECD countries. It also has practical implications for those individuals and communities affected by human rights abuses due to transnational business activity; those affected are often among the most vulnerable and marginalised within their own societies.
The research is both significant and innovative on a theoretical level. Drawing on emergent theories of networked regulation, we will examine interactions between at least three distinct types of networks: networks connecting worker and community organisations and their supporters; networks of government agencies and regulators; and networks between businesses. At its core, the idea of networked regulation emphasises dispersion of power and capacities among a diverse array of state and non-state actors. Each party has some influence over prevailing drivers of (non)compliance, but no single one of them is fully authoritative (Grabosky 1995; Black 2001). A central implication of this view of regulatory processes is that regulatory outcomes will depend not only on formal powers and functions of specialised regulatory agencies, but also on how regulators engage with a broader array of state and non-state actors (Drahos 2007). We will develop a theoretical model of networked regulation that will systematise our understanding of these multi-level network dynamics. This model will be used to identify design and operational principles to assist these redress bodies to support sustained business compliance with human rights norms.
Finally, the project is innovative on a methodological level. See below.
Detailed in-country work is critical to gaining insight into the micro-level dynamics of transnational networked governance and the social power relations that underpin them, yet there has been very little empirical research of this kind. Our distinctive methodological approach will involve extensive qualitative fieldwork in India and Indonesia entailing collaboration between Australian researchers and leading Australian and international development and human rights organisations.
The project will benefit from collaboration between academic researchers and partner organisations who have on-the-ground experience and relationships in local communities. The partner organisations are uniquely placed to collect reliable information from vulnerable communities and workers about human rights breaches related to transnational business activity, and about their efforts to obtain redress. The academic team will draw on their cross-disciplinary expertise and established record of influencing related policy debates to assist partner organisations to solve this regulatory design problem.
Figure 1: Structure of comparative case analysis
* MSI = Multi-Stakeholder Initiative. IFI = International Financial Institution.