The Era of Corporate Criminal Responsibility

This post is a part-response to Anmol Jain and Tanushree Ghosh’s thought-provoking article ‘Corporations as un-indicted co-perpetrators before the ICC’ published earlier on this blog, which forgot to take account of the recent developments in the Business and Human Rights Treaty that contemplates a legally binding treaty regime to hold corporations criminally liable. Following the Zero Draft that was published last year, the Inter-governmental Working Group that was mandated under Resolution 26/9 in 2014 finally released the Revised Draft in July 2019.

The road to the revised draft was not easy. Despite being voluntary, the UN Guiding Principles (UNGPs) released over seven years ago have already managed to influence leading companies into developing policies aligning with the GPs and carrying out effective auditing, and states into formulating National Action Plans and reporting. I believe that this allowed domestic systems become more receptive towards corporate criminal responsibilities, marking a substantial change from the 1998 Rome Conference where the delegates raised concerns that including ‘legal persons’ under the ICC’s jurisdiction would lead to subverting the complementarity principle by vesting it solely before the ICC (since not all domestic systems recognised corporate criminal liability). The recent developments could eventually pave the way for an amendment in the Statute. Moreover, the repeated assertions of the Draft eventually turning into a ‘legally binding treaty’ are meant to elaborate the sharp distinction between the present endeavour and the UNGPs, whose stated ‘responsibility to protect is distinct from issues of legal liability and enforcement’.

In its the preambular provisions, the revised draft acknowledges that non-state actors, such as corporations operating within the control and jurisdiction of member states, can become and often are embroiled in situations of human rights violations. Thus, apart from the responsibility that rests on states (‘primarily’) to protect its own subjects, the Drafts acknowledge the direct human rights obligations that corporations owe to individuals. The Draft is based on the understanding that corporations are indeed motivated by considerations of profit in the commission of crime. Legal principles have traversed a long way from the time of the industrialist cases which saw the organisations labelled as ‘criminal’ by the relevant court without assigning any liability, or the time when courts took the stand that the generation of profits by corporations in the context of international crimes could only be condemned from a “moral standpoint” (U.S. v. Ernst von Weizsaecker et al. (Ministries case)).

The Revised Draft is an improvement over the Zero Draft since it seeks to impose liability not only upon transnational corporations but also upon all other forms of business enterprises, ‘irrespective of their size, sector, operational contexts, ownership and structure’. Nevertheless, the draft does seem to acknowledge that violations of human rights, as Osiel believes, are more likely to be committed by transnational corporations by virtue of their operational resources. This is seen through the construction of Article 3(1) with the words, ‘…including particularly but not limited to those of a transnational character…’. Those in favour of imposition of equal obligations upon small and medium sized enterprises, which are inevitably covered by this expansive definition, maintain that workers in smaller businesses are confronted with tougher working conditions. However, to ensure a balance between competing interests of businesses and humanitarian considerations, the same treaty also accommodates provisions for providing incentives and other measures to SMEs, upon which the obligations would have otherwise seemed too onerous (Article 5(6)). The provision that the treaty would also include business activities that are ‘including but not limited to productive and commercial activity’ would also likely cover companies where the States could have otherwise claimed exceptions on account of performing public or state functions, such as Private Military Companies (PMCs).

The Draft seeks to impose liabilities on corporations through several modes: commission, compliance and facilitation with abuses, aiding & abetting, negligence, recklessness, strict liability and non-observance of due diligence standards along supply chains, independent contractors, parent and subsidiary relationships, etc. Article 5 of the new draft clarifies that this adherence to due diligence standards would involve the incorporation of standards as part of their contractual arrangements and impact assessments. Although the Draft has sought to impose relationships along the lines of ‘contractual relationships’ (Article 3(2)), some authors have expressed hopes that the scope will be expanded as negotiations, as the scope does not cover the wide array of ‘business relationships’ that can exist, such as equity controls or economic dependencies.

Another feature of the Revised Draft that I consider to be quite commendable is the distinction drawn between ordinary violations of international human rights laws and international crimes. Although the list of human rights violations that could lead to imposition of criminal liabilities remains vague, Article 6(7) enlists offences that could be termed as ‘grave’ and would warrant punishment commensurate with their gravity. The provision, couched in mandatory terms, seeks to ensure that states provide for ‘criminal, civil and administrative liability’ for these crimes within their domestic legislation. The seemingly “vague” nature of human rights obligations could ensure that the treaty remains abreast with the ever increasing number of possible violations, for instance, the efforts between the Chinese state and Google to provide censored search engines or data breaches or other ICT-led violations. The Draft also takes note of environmental violations that have assumed importance in light of the surrounding discussions on global warming and climate change and is in consonance with the 2019 Draft ILC Principles on the Protection of Environment in Relation to Armed Conflicts.

The provisions make it clear that the fact that the corporation has been found criminally liable will not exclude the liability of natural persons. However, here again I propose that during the course of further negotiations set to be held in October, states must ensure that the individual liability of natural persons is commensurate with their positions in the organisation. Similarly, the liability of corporations and natural persons could turn on factors such as the nature of commercial transactions such as whether the corporation had been transacting in ordinary goods and services or chemicals and weapons used in warfare, sole suppliers or dealers in business, time period of involvement, etc. Similarly, where the business has exercised due diligence in adequate standards (due diligence being on the lowest spectrum of responsibility contemplated), and an individual employee or agent has committed an offence, it would seem to defeat principles of justice to hold the enterprise liable.

Previously, when the activities took place in another state, reasons of ‘forum non conveniens’ and ‘non-extraterritorial application’ of domestic laws made regulating corporations more complex. However, Article 4 of the Revised Draft has elucidated upon the ways through which states could ensure effective implementation, an aspect that was absent in the Zero Draft. The courts where the victims are domiciled have also been conferred jurisdiction, and victims are entitled to diplomatic and consular access; a significant departure from the provisions under the Zero Draft (Article 7(1)(b)). This provision is helpful since it acknowledges that the victims who primarily belong to developing countries may not otherwise be able to access domestic forums of the country where the enterprises are registered. There are also provisions on international cooperation between the country of origin and host countries to assist in investigation, exchange of information and enforcement of court decisions.

The Draft contemplates participatory mechanisms for all stakeholders, such as victim participation at all levels, the protection of the human rights of defenders and witnesses, involvement of civil society organisations, etc. As part of its remedial mechanisms, it proposes the creation of an institutional mechanism – the International Fund for Victims. As compared to its previously hidden position under ‘victims’ rights’, the new draft has ensured that this provision is more prominently displayed. Articles 5(2)(d) and 5(3) incorporate public reporting obligations as a method of ensuring compliance. Such reporting makes sure that stakeholders in the business, such as shareholders, are aware of the repercussions of dealing with all such business enterprises. Consider the case of Nike which was subjected to public disapproval, loss of reputation and profits in the 1990s when instances of labour abuses in their supply chain came to light.

Conclusion

The Revised Draft is a crisper and more concrete version of the Zero Draft that has done away with several erroneous provisions, such as those allowing the exercise of universal jurisdiction, which was criticised by some as establishing a neo-colonial normative framework which would again see prosecutions largely from the African states brought before the Courts. Similarly, some deficiencies that were pointed out in this post, such as the “contractual relationships” terminology, might undergo modifications in the course of the next session. In the meantime, I suggest that the states and transnational corporations continue to comply with the “soft-law” UNGPs.

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