International Law Observer is glad to welcome a guest contribution by Richard Reibstein. Richard Reibstein is an environmental attorney, analyst and trainer with expertise in pollution prevention and regulatory policy innovation. He also teaches environmental law and policy at Boston University.
The focus on voluntary reporting, norms, guidance, and the concept that companies can do well by doing good is laying a foundation for the evolution of a more humane transnational commerce. But this foundation will not be strong unless it incorporates legal accountability. Without the ability to enforce pledges of responsibility, promises remain mere promises, and those who have sincere intentions may not be distinguishable from those who don’t. Without recourse to legal process, injuries will continue, and both prevention and compensation will remain rare. In an essentially anarchic system, the irresponsible may retain the competitive advantages that result from lower costs. Legal accountability is necessary to reliably green the worldwide supply chain.
There is as yet no system of international law that effectively holds companies liable for harm they might cause in other countries. This situation presents an opportunity to corporations who wish to powerfully signal that they are committed to responsibility. By willingly committing to be subject to legal process that effectively permits cross-border claims, corporations can prove that their socially responsible policies are truly credible. Such actions will help foster the development of effective governance within and across national boundaries. Legal liability to ensure responsible transnational commerce will benefit responsible companies.
For good reason, citizens and consumers have become accustomed to the idea that businesses typically oppose environmental regulations, would like to see enforcement decline, and would like to capture and control regulatory agencies. If businesses wish the public to have a different perception, they should actively shed their traditional positions towards government, and assist in the development of new rules that clearly serve the public interest. This includes the adequate funding of regulatory agencies and stronger laws to ensure widespread compliance with environmentally and socially responsible practices. Enforcement of sensible regulations is clearly in the interest of responsible businesses, because irresponsible businesses avoid the costs of compliance and thus gain a competitive advantage. If such enforcement programs are not adequately funded and staffed, then competitors can operate at lower costs. In order for the external costs of pollution to be internalized in the operational costs of all companies, an adequate government inspection and enforcement program is a necessity. It should be the mark of a sensible – much less responsible – corporation, that it takes action to support the full funding of adequate inspection and enforcement programs, to combat violators.
International environmental law provides little recourse against transnational corporations who transgress against individuals. If you are injured, you may sue a transnational company under the laws of either your nation, or the nation in which the dominant corporation is headquartered. Not all states allow such suits. The United States does – under the Alien Tort Claims Act – but it is not clear how effectively this law provides for international justice.[i] Courts have not yet definitively stated how this law is to be applied in the modern era,[ii] and there is serious opposition to strong application.[iii] Even if you could gain the court’s permission to sue in the country where the corporation is headquartered, the expense of traveling there for that purpose, transporting witnesses and evidence, and perhaps relocating for an extended period of time, might make such suit impractical.
Corporations may strengthen the network of national systems by executing legal documents that bind them internationally to principles they already accept when doing business at home. No other act can more powerfully bespeak commitment to responsibility. Such documents can be enforceable stand-alone covenants, published as declarations to the public, or they can be incorporated into contracts. These instruments could state that those who are harmed by their actions are parties to the agreement. They could waive the right to object to specified forums convenient to potential plaintiffs in locations where business nexus exists. These instruments could specify the conditions by which the corporation will allow itself to be held liable, the processes to which they could be subjected, and the assets that would serve as concrete, undeniable commitments to be held to legal standards. These legal declarations could designate international courts or arbiters to adjudicate disputes, and be written to commit persons and property to the outcome of their deliberations.
Extending the expectation of enforceable liability to cross-boundary accountability provides a market opportunity. What if a company published binding documents to the effect that it willingly subjected itself, worldwide, to the same principle-agent law to which it is accustomed in its own country? What if it promised to appear in court – wherever it did business – to answer to legitimate charges for vicarious liability, and bound itself by the commitment of assets and the stipulation of process, if it failed to live up to its promise? It is possible that the attorney who recommended such a course of action to a client could be accused of failing in the duty of zealous representation. But to this charge the attorney should answer that the corporation could, by this action, powerfully assure responsible consumers and investors worldwide of its intentions to be responsible, and thus be positioning itself to capture the growing market of responsible customers.
A company contracting for hazardous operations could post a bond to ensure that cleanup funds would be available in case of an accident. Companies operating in areas with inadequate enforcement could pool funds to establish a third-party auditing function. Companies could establish transparent programs of ambient monitoring, opening them up for host country adoption, to further the development of environmental protection at the same time as they provide assurances of their own performance.
The internationally responsible corporation could make clear that it will accept service of process, and that it will not oppose appropriate assertions of applicable jurisdiction. Subjecting oneself to liability before being forced to by law may seem to be a dereliction of the fiduciary responsibility to shareholders. But if a corporation – a legal person – is not willing to be liable for crimes or breaches of contract or of duty, that is an amoral entity that does not deserve limited liability. This is especially so if they expect to be held strictly liable in their home country for injuries from ultrahazardous operations, but are not willing to see the principle extended to the country where they or co-venturers engage in such operations.
Governments can create programs that favor such acceptance of responsibility. Tax credits, export assistance, insurance programs could help cover the expanded potential liabilities that would result, and home governments could also lend legal assistance in combating illegitimate claims and negotiating with host governments. Laws could clarify that fiduciary responsible must be seen within the context of duties owed to society in general, and ensure that no shareholder derivative suit can succeed against a corporation that commits to international liabilities consistent with those faced at home. Purchasing preferences could be extended to corporations providing concrete assurances that they accept legal process involving international plaintiffs. These and other government actions could make the willing acceptance of international responsibility a desirable and indispensable feature of the world economy.
Corporations need not wait for the development of international bodies that will adjudicate transnational claims, nor for the universal establishment of effective laws such as the U.S. Alien Tort Claims Act. When corporations allow themselves to be sued for improperly abetting the crimes of suppliers, or actions or inactions that negligently caused injury, their commitment to responsibility may be rightly credited. Consumer and watchdog groups may take note, and spread the word, about corporations that have taken the extraordinary step of submitting themselves to the risk of losing money, for the sake of environmental justice. When a corporation seeking recognition for responsible policies provides in advance for the cleanup of land and the compensation of victims of pollution, and supports the adequate funding of local environmental enforcement, monitoring and education, then we will know that it has put its money where its mouth is. If responsible business is indeed an essential core value, then it should be able to withstand the test of accountability.
[i] Passed in 1789 as part of the act creating the U.S. Judicial system (28 U.S.C. Section 1350), it states that “[t]he district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States”. For a presentation of views for and against vigorous application of the act, see the website for PBS’s 1/9/04 show, “Global Business vs. Global Justice”, at http://www.pbs.org/now/politics/alientortdebate.html.
[ii] For example, when Florida U.S. District Judge Jose E. Martinez ruled on a case involving the act in September, 2006, he “asked the 11th U.S. Circuit Court of Appeals to provide guidance to trial courts in handling cases brought under the Alien Tort Claims Act… Martinez wrote, “There is a pressing need for clarification of these issues.” The Daily Business Review, October 30, 2006, Julie Kay, “11th Circuit Asked to Clarify Corporate Liability”. At http://www.law.com/jsp/ihc/PubArticleIHC.jsp?id=1161939931304.
[iii] See, for example, “The Alien Tort Claims Act: Is Our Litigation-Run-Amok Going Global?”, by John Howard, Vice President of International Policy and Programs at the U.S. Chamber of Commerce, urging repeal of the law because of the danger of unwarranted litigation posed by “pirates of the plaintiff’s bar”. At http://www.uschamber.com/press/opeds/0210howarditigation.htm.
The legal world continues to operate within its separate little fiefdoms, with the pace of legal change failing to match the changes to international business. Yet by continuing to stir discussion, as is done with your blog post, we can only hope for positive developments.