The function of international law is to provide a legal basis for the orderly management of international relations. The traditional nature of that law was keyed to the actualities of past centuries in which international relations were inter-state relations. The actualities have changed; the law is changing.¹

Introduction

¶ 1         A piece published in the Harvard Law Review in 2001 made an ostensibly innocuous statement on the extant state of international law regarding the legal status of corporations.

Though corporations are capable of interfering with the enjoyment of a broad range of human rights, international law has failed both to articulate the human rights obligations of corporations and to provide mechanisms for regulating corporate conduct in the field of human rights. Since the nineteenth century, international law has addressed almost exclusively the conduct of states. Traditionally, states were viewed as the only "subjects" of international law, the only entities capable of bearing legal rights and duties. Over the last fifty years, though, the gradual establishment of an elaborate regime of international human rights law and international criminal law has begun to redefine the individual's role under international law. It is now generally accepted that individuals have rights under international human rights law and obligations under international criminal law. This redefinition, however, has occurred only partially with respect to legal persons such as corporations: international law views corporations as possessing certain human rights, but it generally does not recognize corporations as bearers of legal obligations under international criminal law.²

¶ 2         The article also stated that "international law is virtually silent with respect to corporate liability for violations of human rights"³ and "has neither articulated the human rights obligations of corporations nor provided mechanisms to enforce such obligations."⁴

¶ 3         The above statements have been the subject of severe strictures by a section of the scholarly community who view them as a misstatement of the law.⁵ Some of these scholars, supported by human rights activists, have proceeded to argue that international human rights law imposes direct duties on corporations and other private actors.⁶

¶ 4         The two opposing positions have recently been challenged by the United Nations ("UN") Secretary-General's Special Representative on the issue of Human Rights and Transnational Corporations and Other Business Enterprises ("SRSG")⁷ mandated by the UN's apex human rights body,⁸inter alia, to identify and clarify the obligations of corporations in international law. Then UN Secretary-General Kofi Annan appointed Professor John Ruggie of the Kennedy School of Government at Harvard University to this position in July 2005.⁹ Within the terms of his original two-year mandate, which, upon his request, has since been extended by another year, the SRSG has come to the conclusion that the position of the corporation in international law has undergone some change, but that this change is not as far-reaching as that expressed by a number of academics and civil society groups.

¶ 5         Both at the issuance of his interim report in 2006¹⁰ and at the submission of what would have been a final report at the conclusion of his original mandate in 2007, the SRSG took a position somewhat at variance with the two opposing views and essentially adopted a middle position.¹¹

¶ 6         Ruggie's reports indicate that in the course of the past few decades, the legal status of corporations in international law has shifted to some extent from the classical position, with corporations now considered bearers of duties under international criminal law.¹² The SRSG believes that while this shift is emerging in the international criminal context, it has not yet extended to other aspects of human rights law. Ruggie's report notes, however, that significant changes are occurring in the domestic and international planes that suggest that a more far-reaching shift, that would more fully integrate private business enterprises into the international legal system, will occur some time in the near future.¹³

¶ 7         This clarification is of immense significance because the cacophony that has surrounded this discussion has, over the years, constituted a formidable obstacle to any meaningful progress in identifying the proper place and role of corporations -- especially multinational corporations ("MNCs") -- in contributing to the solution of many global problems.¹⁴ Even with the clarification, which is a product of broad consultations with representatives of the divergent positions,¹⁵ it is not certain that the disputation will die down.¹⁶ It can only be hoped that interested parties can move beyond the unhelpful intellectual debates on the legal status of corporations¹⁷ and begin to focus strongly on formulating solutions to the monumental problems confronting humanity, some of which MNCs¹⁸ have played a substantial role in creating.¹⁹

¶ 8         The terms "international legal person" or "legal personality"²⁰ are usually employed in reference to entities that are "capable of possessing international rights and duties and endowed with the capacity to take certain types of action on the international plane."²¹ Such entities are also known as subjects of international law.²² It is a trite fact that the international legal and political system is state-centric.²³ It is primarily concerned with, and concentrates its attention on, nation-states. J.L. Brierly's 1963 definition of international law as "the body of rules and principles of actions which are binding upon civilized States in their relations with one another"²⁴ was representative of the common position at the time he wrote. The overwhelming focus on states has led many scholars and commentators to conclude that international law is law pertaining to states only and that only states are the subjects of international law.²⁵ This view is quite entrenched and under its extreme version, individuals, MNCs, intergovernmental and non-governmental organizations all interact with the international system, but are objects rather than subjects.²⁶

¶ 9         This conclusion is not of merely theoretical importance,²⁷ but is of particularly pressing significance and consequence to the modern world. It suggests that the activities of other actors in the international plane are not under direct international legal control, even when such activities represent a clear breach of the stipulations and regulations of the international legal system.²⁸ This point is more pronounced in the human rights arena which, by its nature, makes the primacy of application to states more easily justifiable.²⁹

¶ 10         Over the course of time, noticeable changes have begun to occur in the perception and reception of non-state actors on the international stage.³⁰ The structure of international law has undergone some transformation with the recognition that, in certain situations and under a range of circumstances, some other entities besides the state come within the direct protection of international law or owe some clearly defined duties to uphold the dictates of that law. This is particularly evident with regard to human rights and humanitarian issues.³¹

¶ 11         There is a glaring gap in this movement toward change. While the international rights and duties of international organizations and, to a lesser extent, individuals, have received some recognition under the international legal system, the same cannot be said of the MNC.³² There appears to now be a grudging acceptance that international law governs the activities of juridical persons that implicate international criminal law.³³ It is generally believed that the changes in the international legal position and responsibility of corporations have been limited to international criminal law. However, one should not lose sight of the strong insistence in some quarters that the changes extend beyond international crimes to other aspects of international human rights.³⁴

¶ 12         Therefore, a critical, unresolved question confronting contemporary international legal scholars and practitioners centers on the extent to which other actors in the international sphere, besides states and intergovernmental organizations, possess international legal personality.³⁵ As a matter of fact, the controversy surrounding international legal personality is an age-old one.³⁶ Today, the issue acquires greater importance considering the growing relevance and significance of the MNC in an era of globalization and liberalization of trade and investment.³⁷ The fact cannot be gainsaid that the status of the corporation in the international sphere has appreciated significantly over the years. Corporations play key roles in the global marketplace and participate vibrantly in the shaping of international law, albeit indirectly. Their rights, especially regarding investment issues, have also been recognized in a number of international instruments.³⁸ International environmental law also imposes a few direct duties on corporations.³⁹ Nonetheless, corporations still remain clearly outside the mainstream of international law.⁴⁰

¶ 13         Some observers have made the point that international law cannot continue to play the ostrich and pretend that these corporations can be under the effective control of national laws and institutions only.⁴¹ Victims of multinational corporate abuses, particularly in the human rights and environmental arenas, have raised their voices and international policymakers are beginning to take note.⁴² As a result, a number of high-level discussions among scholars, policymakers, business groups and non-governmental organizations have commenced to locate the proper place of business entities in international law.⁴³ The most prominent of such initiatives at the moment is the appointment of the SRSG.

¶ 14         This article traces the controversy surrounding the position of the corporation in international law up to this point and examines the changes in the international legal status of corporations as well as challenges to direct corporate regulation and accountability. In essence, it looks not only at the issues of whether and to what extent international law directly regulates corporations, but also whether it should. This work focuses primarily on MNCs in view of the fact that, of all types of corporations and business organizations, they are -- because of their "amorphous nature"-- the least likely to be amenable to the control of any particular state, thus simultaneously raising problems for, and inviting, international legal control.⁴⁴ When determining the subject of a legal order, the obvious answer is the body or entity to whom the norms of the legal order apply, and more specifically, whose conduct such order regulates or licenses by imposing duties or conferring rights. However, a legal system (in this case international law) may in some circumstances regulate or license the conduct of other lesser entities, such as MNCs, without direct regulation. The focus of the present study, however, is on direct, not indirect regulation.

¶ 15         This article is organized into five major parts. Part I takes a look at the origin and evolution of the MNC. The utility of tracing the origin and growth of MNCs may rightly elicit skepticism, which is further exacerbated by the fact that it is difficult to reconcile the disparate historical accounts. Yet a historical excursion is useful if only to illuminate and contextualize the amazing journey and interesting evolution of the MNC from a barely noticed business association to the major force it has become today with an enormous influence on social, economic, political and legal developments domestically and internationally.⁴⁵

¶ 16         Part II tackles the perennial problem of international legal personality. The predominant views and theories of legal personality are examined regarding the status (or lack thereof) of corporations as subjects of international law. The issue of whether corporations are entities capable of possessing rights and duties in international law is most relevant to the debate on the role of the international system in controlling the activities of MNCs operating in various parts of the world.

¶ 17         Part III discusses the changing position of the MNC in international law. This part critically examines the SRSG's conclusions on this issue. This article, however, limits itself to that aspect of the SRSG's assignment alone and does not address other issues covered in his mandate. Part IV offers some rationale for this change in position, as well as challenges thereto and Part V concludes the article. The object of this work is to provide a further opportunity to think critically about the place of MNCs in international law and to lay a foundation for forging the right course for advancing human rights and promoting corporate accountability, thus improving the lot of those adversely affected by corporate conduct, particularly in developing countries.

I.    Origin and Evolution of the Multinational Corporation

¶ 18         The first known use of the term "multinational corporation" was by David Lilienthal at a conference at Carnegie Mellon University in 1960.⁴⁶ This fact, of course, has no bearing on the age of the MNC, an entity whose existence dates back at least several centuries.⁴⁷

¶ 19         Indeed, a number of classical scholars and economic and business historians trace the origin of MNCs to more than 2000 years ago. According to Karl Moore and David Lewis, "the businesses operated by the ancient Assyrian colonists [in the second millennium B.C.] constituted the first genuine multinational enterprises in recorded history."⁴⁸ From the 13th to the 16th centuries, many European businesses involved in such diverse sectors as banking, mining and manufacturing had investments and operations across political borders and conceivably could be categorized as transnational or multinational.⁴⁹

¶ 20         Some scholars, however, reject any notion of the existence of the MNC in earlier epochs. One commentator encapsulates the criticisms thus:

[M]ultinationals . . . have been traced back two thousand years by classical scholars. This is accurate in the sense that certain trading groups were transnational. It is anachronistic in that nation-States did not exist at the time, thus giving a different meaning to multinational. If we add the word "corporation," we again must realize that it is a legal term given precise meaning only recently. In any case, modern multinational corporations can be discerned emerging in the seventeenth century and flourishing, for example, in the shape of the Dutch and British East India companies.⁵⁰

¶ 21         Still other scholars situate the emergence of the MNC in the second half of the 19th century.⁵¹ One legal scholar notes: "Although business enterprises probably have had some type of foreign operations since the Middle Ages, multinational corporations as we now know them did not appear until the mid-nineteenth century, when advances in technology, manufacturing, and management processes made possible the international division of a firm's production."⁵²

¶ 22         Regardless of the precise history and evolution of the MNCs, some inescapable facts jump to attention. One is that the modern MNCs differ in many significant respects from their precursors, particularly in terms of their size, reach and sophistication of operations.⁵³ Secondly, MNCs were not significant features in the global marketplace or political landscape until fairly recently -- perhaps as recently as after World War II.⁵⁴

II.    Theories of Legal Personality

¶ 23         Before delving into the important theoretical discussion of personality and subjectivity, it is instructive to note that determining the subjects of international law is closely bound up with the basic concept of international law itself. Thus, as one concept has undergone a significant metamorphosis, invariably so has the other. Until the early part of the twentieth century, international law was defined with an exclusive focus on states and their relations with each other.⁵⁵ The reason for this definition is easy to understand. At that time, international law was law that pertained to the affairs of states, and only certain states at that: the reference was only to "civilized states" or "Christian nations," terms that excluded the vast majority of countries that compose the contemporary international community.⁵⁶ As international law's reach and interests went beyond the activities of states, a shift in definition became inevitable. According to Michael Akehurst, the matter of definition of international law has "become more complicated due to both the expansion of the scope of international law into new areas and the emergence of actors other than states on the international plane."⁵⁷ This remarkable redefinition is reflected in the more modern writings on international law.⁵⁸

¶ 24         Various theories exist regarding the notion of legal personality in the international system. The question has been posed countless times, and answers attempted equally as often, concerning which entities are subjects of international law.⁵⁹ This frequency in itself reveals the difficult and controversial nature of the subject, while also suggesting its importance.⁶⁰ The question of whether MNCs are subjects of international law would have been easier to answer if there were clear agreement among scholars on what constitutes legal personality under the international legal system.⁶¹ "Unfortunately, there is little agreement among scholars on the essential elements of legal personality."⁶² This part navigates the murky waters of the controversy surrounding this issue in order to present a clearer picture of the status of MNCs in international law.

¶ 25         Professor Christian Okeke, in his epic work on the subject entitled Controversial Subjects of Contemporary International Law: An Examination of the New Entities of International Law and Their Treaty-Making Capacity, outlines three essential elements that should be considered conditio sine qua non for an entity to be properly regarded as a subject of a legal system. Such an entity must (1) possess duties as well as responsibility for violating those duties; (2) have the capacity to benefit from legal rights as a direct claimant and not as a mere beneficiary; and (3) in some capacity, be able to enter into contractual or other legal relations with other subjects of the system.⁶³ The extent to which any entity meets these criteria appear to be strong factors in determining whether or not they are considered subjects of the international legal system.⁶⁴

¶ 26         One of the leading theories on international legal personality is the traditional, classical or orthodox theory that emphasizes the position and capacity of states. "According to that theory, the only subjects of international law are nation-states. All other entities, particularly individuals and business organizations, interact with international law indirectly through their national governments."⁶⁵ Providing a rationale for this position, Lassa Oppenheim reasoned that "[s]ince the Law of Nations is primarily a law between States, States are, to that extent, the only subjects of the Law of Nations."⁶⁶

¶ 27         This traditional theory finds sanctuary mainly in the hallowed domain of subscribers to the classic dualist theory in international law. Dualism, unlike its counterpart theory, Monism,⁶⁷ is well-known for its association with "positivist theories and with the notion that States, not individuals, are the primary subjects of international law."⁶⁸ While discussing the work of a noted dualist, the German scholar Heinrich Triepel, respected scholar John Starke noted Triepel's contention that "state law deals with individuals, international law regulates the relations between states, who alone are subject to it."⁶⁹

¶ 28         The traditional theory has faced vigorous challenges over the years.⁷⁰ Some scholars question the validity of this view in the first place, seeing it as inconsistent with the history of international law.⁷¹ It was essentially on that basis that two scholars described the proposition that public international law deals with relations among states as a "nineteenth century canard."⁷² These scholars view the emphasis on relations among states, to the exclusion of individuals, as a derogation from historical understandings of international law that garnered greater strength more recently as a product of 19th century positivism.⁷³ Besides, the theory did not seem to match the practice.⁷⁴ Malcolm Shaw observes that, in practice, there is less certainty that the orthodox position affirming states as the only subjects of international law was ever maintained.⁷⁵ He supports this claim by noting that non-state entities including the Holy See, insurgents and belligerents, international organizations, chartered companies, and some territorial entities such as the League of Cities have at some point or other been accorded a degree of recognition as international legal persons.⁷⁶

¶ 29         Another critique of the traditional view is one that does not dismiss that view altogether, but holds that the notion of states as the only subjects of international law is not carved in stone. Proponents of this view argue that modern developments in the international system have had a substantial effect on legal attitudes toward non-state entities such as international organizations, individuals, MNCs and a host of others, incontrovertibly catapulting them into the category of subjects of international law. In Reparations for Injuries in the U.N. Service,⁷⁷ the International Court of Justice, in an advisory opinion, stated that international organizations such as the United Nations are subjects of international law.⁷⁸

¶ 30         As stated previously, under the classical theory, "states were the sole subjects of international law, whereas no direct relation between that law and individuals existed."⁷⁹ Diametrically opposed to the traditional theory that states are the only subjects of international law is the theory that assigns that important position to individuals. The influential French scholar Leon Duguit was a pioneering figure of this theory. "For him not states but individuals are subjects of international law."⁸⁰ Toward the end of the first part of the twentieth century, another French scholar, Georges Scelle, argued that individuals are the only subjects of international law, anchoring that view on the contention that the State and other collectivities were a fiction and none of them could be a subject of international law.⁸¹ Some commentators have observed that the position staked by Duguit and Scelle should be understood in the context of the Third French Republic in which these scholars sought to defend individual liberties against abuse of state power by the rulers.⁸² Critics have assailed this view as an abandonment of legal analysis and as an excursion into philosophy.⁸³

¶ 31         Despite the criticism of the French scholars' theory, the stock of individuals in international law has appreciated considerably over the years,⁸⁴ as the individual "acquired a status and stature [that] transformed him from an object of international compassion into a subject of international right."⁸⁵ Philip Jessup was among the earliest commentators on the transformation of the international legal position of the individual.⁸⁶ He recognized that states traditionally were the subjects of international law and that in international legal relations the individual had to rely on the state, but added that this situation had substantially changed over the years and that the change was not likely to be quickly truncated.⁸⁷

¶ 32         Sir Hersch Lauterpacht, in his revision of Lassa Oppenheim's seminal work, attributes the recognition of, and justification for, the international legal personality of the individual to the development of human rights and humanitarian values. As a consequence, he contends, the traditional view has become moribund:

The various developments since the two World Wars no longer countenance the view that, as a matter of positive law, States are the only subjects of International Law. In proportion as the realisation of that fact gains ground, there must be an increasing disposition to treat individuals, within a limited sphere, as subjects of International Law.⁸⁸

¶ 33         At a different forum, Lauterpacht also argued that, because international law has witnessed an expansion beyond the issues of war, the definition of international legal personality must also expand to include international organizations and individuals.⁸⁹ He asserted that international law is flexible enough to allow for the admission of new entities into the revered club of subjects of international law.⁹⁰

¶ 34         One of the major arguments deployed by proponents of the subjectivity and personality of the individual in international law revolved around the point that, even if it were conceded that international law was designed to govern inter-state relations only, the realities that led to that design had become moribund and present realities called for a different approach.⁹¹ Moreover, the case for asserting the legal personality of the individual gained strength as individuals were granted access in a number of instances to claim their rights directly before international tribunals.⁹² The Nuremberg Tribunal set up at the end of the Second World War rejected a submission that international law is only concerned with the actions of states and declared that international law has long imposed duties not only upon states, but also upon individuals.⁹³

¶ 35         The legal position of the MNC and the arguments surrounding it have followed a somewhat similar trajectory. As a matter of fact, when Judge Jessup hypothesized in the 1940s that individuals have become the subjects of international law, he included corporations and partnerships within the meaning of "individual."⁹⁴ The following section focuses on corporations and subjectivity under international law.

¶ 36         Those challenging the international legal orthodoxy excluding corporations (and other non-State actors) as subjects of international law have adopted a multi-pronged strategy. The first approach is to reject it as an offspring of nineteenth century positivism, which should not displace relevant natural law principles of earlier origins.⁹⁵ Secondly, the challengers dismiss the orthodox view as obsolete,⁹⁶ a relic of a past era which is irrelevant today because it is incompatible with modern realities.⁹⁷ They, therefore, can be seen as seeking to liberate humanity from the thralldom of such a historical artifact of a concept. Opponents of the current paradigm that places MNCs outside the core of international law have also attacked it by arguing for the abandonment of the subject-object dichotomy.⁹⁸ They call for its replacement with the notion of participants, a term that is broad enough to encompass states, international organizations, individuals, private non-governmental groups and MNCs.⁹⁹ Another weapon in the arsenal of attacks is the contention that international legal personality is not a prerequisite for the imposition of rights and duties.¹⁰⁰ Instead, international legal personality follows attribution of rights and duties.¹⁰¹ A final argument to hold corporations accountable is that corporations are international legal persons because they already, in certain international settings, possess rights and duties and the capacity to enforce those rights.¹⁰²

¶ 37         Looking at Okeke's criteria,¹⁰³ a credible case could be made that MNCs, at least to a certain extent, are subjects of international law: they have rights, possess duties and are empowered to vindicate their rights.¹⁰⁴ Ascription of international legal personality to the MNC has been anchored partly on the volume, transboundary nature and international effect of multinational corporate activity, coupled with access to international legal processes.¹⁰⁵ Drawing from previous and present activities involving these business enterprises, Jonathan Charney comfortably posits that MNCs possess international legal personality and have had an enduring participation in the international legal system.¹⁰⁶ As examples of such participation, he offers the fact that public international law has been applied to contracts concluded between MNCs and state entities, as well as corporate access to forums established under international conventions or by intergovernmental organizations for the settlement of disputes.¹⁰⁷ He further observes that certain principles of public international law, by virtue of their broad acceptance, have become binding on the international operations of MNCs. MNCs are bound by principles of international law when advising international organizations and lobbying national governments on pertinent international issues.¹⁰⁸

¶ 38         David Ijalaye holds a similar view, advancing the claim that MNCs can now be regarded as selective subjects of international contract law for contracts entered into with states.¹⁰⁹ International arbitral practice provides some support to this position. For instance, in the Libya-Oil Companies Arbitration,¹¹⁰ Umpire Dupuy applied international law in a dispute between a state and a private oil company, viewing international law as part of the governing law of the contract (in addition to Libyan law).¹¹¹

¶ 39         Elihu Lauterpacht, looking at the dispute settlement mechanisms contained in modern investment treaties as well as earlier developments in investor-state arbitration, reasons that these developments have "put an end to the myth, so prevalent until the end of the Second World War, that only States are subjects of international law and that individuals cannot posses rights or bear duties directly under international law."¹¹² He thus contends that corporations, by virtue of these agreements and other modern developments in the international system, have been shown to possess international legal personality.¹¹³

¶ 40         In a book review, Michael Reiterer "challenges the proposition that 'states alone are the subject of international law'"¹¹⁴ and believes that nongovernmental organizations (NGOs), transnational corporations and individuals are "new (at least partly) subjects of international law."¹¹⁵ Reiterer observes that traditional international law concerned itself principally with relations between sovereign entities and recognized them as the sole subjects of international law, but notes that events have veered in a direction in which nation-states, while still the main actors in international law and international relations, have had to give up their claim to being the sole subjects of international law.¹¹⁶ This observation accords with the conclusion of another scholar that "[t]he modern trend is to recognize that there are other subjects of international law, including certain corporations."¹¹⁷

¶ 41         The above views are by no means conclusive on this issue. Many jurists, scholars and commentators have questioned the conclusion that the extension of international legal personality to corporations is an established fact. The authors of a leading American casebook on international law, after discussing the point that MNCs have become the subject of considerable controversy stemming from the economic and political power they wield, the complexity that surrounds their operations and the difficulties associated with exercising legal authority over them by either home or host states, nevertheless identify with the traditional view.¹¹⁸ In their opinion, "[s]uch corporations are private, nongovernmental entities; they are subject to applicable national law, and they are not international legal persons in the technical sense. That is, they are not generally subject to obligations and generally do not enjoy rights under international law."¹¹⁹ A similar sentiment is expressed by Francois Rigaux, who states that "transnational corporations are neither subjects nor quasi-subjects of international law."¹²⁰

¶ 42         Ian Brownlie, while noting that "jurists have argued that the relations of states and foreign corporations as such should be treated on the international plane and not as an aspect of the normal rules governing the position of aliens and their assets on the territory of a state,"¹²¹ minces no words in rejecting that argument. Instead, he makes the contrary assertion that "[i]n principle, corporations of municipal law do not have international legal personality. Thus, a concession or contract between a state and a foreign corporation is not governed by the law of treaties."¹²² Peter Malanczuk, in a relatively recent study of the MNC, adopts a similar position, rejecting outright the notion that special "internalized contracts" with a sovereign state suffice to render a corporation a subject of international law, "even in a partial or limited sense."¹²³

¶ 43         The views expressed immediately above find support in the jurisprudence of the Permanent Court of International Justice (PCIJ) and its successor, the International Court of Justice (ICJ). In the Serbian Loans Case,¹²⁴ the PCIJ held that the governing law for an agreement not concluded between subjects of international law should be the municipal law of the State concerned with the dispute.¹²⁵ In the Anglo-Iranian Oil Company Case¹²⁶ involving the government of Iran and a British oil company, the ICJ adopted a line of reasoning that suggested that an oil corporation was not a subject of international law.¹²⁷ Accordingly, it refused to exercise jurisdiction when Iran declined to consent to the Court's jurisdiction.¹²⁸ The ICJ opined that the contract was not an international treaty and thus did not invite the intervention of the Court.¹²⁹

¶ 44         Other scholars have argued that, because of the decentralized nature of the international legal order, where no centralized law-making and law-enforcing authorities exist, possession of rights and duties alone is not sufficient to confer legal personality.¹³⁰ An international person, the argument continues, should be capable of making¹³¹ and enforcing international law.¹³² In essence, there has to be a public component in which the role of the subject transcends private interests and includes some functions of a public character.¹³³

¶ 45         The views above, while forceful, nevertheless adopt a very restricted approach to the definition and inclusion of subjects of international law. A more helpful approach would be to recognize, first, that states are the primary and predominant subjects of international law,¹³⁴ but that this recognition is not exclusionary.¹³⁵ Accordingly, other legal entities are not necessarily non-subjects, nor are they precluded from gaining international legal personality at some point in time. Second, a subject of international law does not have to possess the same character or share all attributes of a state to fit into the definition of a subject.¹³⁶ Third, there are degrees of legal personality and so all subjects do not have to be on the same plane at the international level.¹³⁷ As Okeke puts it, "any subject of law must be capable of having certain rights and duties under the given legal system, any differences in the degree of capacity notwithstanding."¹³⁸ Viewed from those perspectives, it becomes easier to conclude that MNCs to an extent have, or at least have the potential to possess, international legal personality.¹³⁹

¶ 46         The SRSG confronted the debate at this juncture or somewhere close to it and came to his own conclusions on the present position of MNCs and other business enterprises in international law. The next part examines these conclusions.

III.    The Changing Position of the Multinational Corporation

¶ 47         The growth in size and influence of MNCs has elicited calls to hold them accountable in various ways, including under international law.¹⁴⁰ A clear response to these calls was the August 2003 drafting and adoption of a set of norms ("Norms") to govern business conduct by the United Nations Sub-commission for the Protection and Promotion of Human Rights.¹⁴¹ The cool reception, loud controversy, polarization and deadlock¹⁴² that accompanied the adoption of the Norms and their subtle rejection in 2004 by the sub-commission's parent body, the now-defunct UN Human Rights Commission,¹⁴³ led to the appointment of a SRSG in 2005.¹⁴⁴

¶ 48         The SRSG has a broad five-part mandate,¹⁴⁵ including an assignment to "identify and clarify standards of corporate responsibility and accountability for transnational corporations and other business enterprises with regard to human rights,"¹⁴⁶ and to "elaborate on the role of states in effectively regulating and adjudicating the role of transnational corporations and other business enterprises with regard to human rights, including through international cooperation."¹⁴⁷ The SRSG is still in the process of completing his mandate but has already made some pertinent conclusions, particularly in relation to the legal status of corporations in international law.¹⁴⁸ The next section discusses his conclusions on the issue.

¶ 49         In his interim report presented in 2006, the SRSG, ostensibly heeding the call of prominent human rights groups such as Amnesty International, was quite mindful of the awful situation in which some states have exhibited an unwillingness, indifference or inability to protect human rights.¹⁴⁹ Thus, he entertained the notion that "it may be desirable in some circumstances for corporations to become direct bearers of international human rights obligations, especially where host governments cannot or will not enforce their obligations and where the classical international human rights regime, therefore, cannot possibly be expected to function as intended."¹⁵⁰ But that particular point should not be conflated with the critical inquiry of whether such obligations already exist. Ruggie, thus, questioned the conclusion of the drafters of the Norms that they are a reflection and restatement of international legal principles applicable to business in the area of human rights, yet simultaneously path-breaking as the first non-voluntary international initiative on this issue which are thus directly binding on corporations.¹⁵¹ Viewing this conclusion as an overreach, the SRSG stated:

But taken literally, the two claims cannot both be correct. If the Norms merely restate established international legal principles then they cannot also directly bind business because, with the possible exception of certain war crimes and crimes against humanity, there are no generally accepted international legal principles that do so. And if the Norms were to bind business directly then they could not merely be restating international legal principles; they would need, somehow, to discover or invent new ones.¹⁵²

¶ 50         The SRSG's repudiation of the Norms was assailed by many human rights activists and scholars who insisted that the onus on the SRSG was to build his mandate on the progress that the Norms represented, and not to chart a new course that rejects this advancement.¹⁵³ Ruggie acknowledged the criticisms but, in his responses, remained unconvinced that such a radical transformation in the international legal position of the corporation has already taken place.¹⁵⁴ He reiterated that he was not utilizing the Norms as the key foundational element of his assignment due to his concerns, upon research and consultations with international experts, that their legal and conceptual frameworks were "poorly conceived" and "highly problematic," and that the doctrinal claims were "excessive."¹⁵⁵ Ruggie expressed fears that the Norms would turn global corporations into "benign twenty-first century versions of East India companies, undermining the capacity of developing countries to generate independent and democratically-controlled institutions capable of acting in the public interest -- which is by far the most effective guarantor of human rights."¹⁵⁶

¶ 51         Professor David Weissbrodt, an architect of the Norms, responded to the SRSG's criticisms by accusing Ruggie of drawing his conclusions from the advocacy script of lawyers for the international business community.¹⁵⁷ He also observed that, while the SRSG's rejection of his team's legal conclusions was reportedly based on the views of "mainstream international lawyers and other impartial observers," not one of them was cited in the report.¹⁵⁸ Ruggie apparently accepted this challenge when, in a later article in the American Journal of International Law, he cited some supporting authorities for his position, including (as Professor Weissbrodt had claimed) the International Chamber of Commerce (ICC) and the International Organization of Employers (IOE), but also a number of notable commentators.¹⁵⁹

¶ 52         In his 2007 Report to the Human Rights Council, the SRSG shed more light on his thinking on this issue. He meticulously reviewed the work of scholars on the subject and suggested that there has been a metamorphosis in the position of corporations -- both in doctrine and practice -- in some areas of international law, but cautioned that the wind of change has not blown across many other aspects of international law, including most human rights obligations. According to the SRSG:

Long-standing doctrinal arguments over whether corporations could be "subjects" of international law, which impeded conceptual thinking about and the attribution of direct responsibility to corporations, are yielding to new realities. Corporations increasingly are recognized as "participants" at the international level, with the capacity to bear some rights and duties under international law. . . . [T]hey have certain rights under bilateral investment treaties; they are also subject to duties under several civil liability conventions dealing with environmental pollution. Although this has no direct bearing on corporate responsibility for international crimes, it makes it more difficult to maintain that corporations should be entirely exempt from responsibility in other areas of international law.¹⁶⁰

He again rejected the UN Sub-Commission on the Promotion and Protection of Human Rights' attribution of direct obligations for human rights on corporations, aligning himself with the "traditional view of international human rights instruments . . . that they impose only 'indirect' responsibilities on corporations -- responsibilities provided under domestic law in accordance with states' international obligations."¹⁶¹ While noting that "[n]othing prevents states from imposing international responsibilities directly on companies,"¹⁶² he said that a pertinent question revolved around whether states have in fact done so.¹⁶³ He answered the question -- in the negative -- when he surmised: "In conclusion, it does not seem that the international human rights instruments discussed here currently impose direct legal responsibilities on corporations."¹⁶⁴

¶ 53         Ruggie's reference to the term "participants" is not insignificant. Without doubt, the objective behind the substitution of participants for subjects by such eminent jurists as Rosalyn Higgins¹⁶⁵ and Theodor Meron¹⁶⁶ is the discontinuation of "the sterile debate" on who are the subjects of international law and a change in focus to devising veritable solutions to real problems.¹⁶⁷ It is likely that the SRSG shares this objective and considers his report an invitation to move the conversation on this issue along those lines.

¶ 54         Ruggie is a firm proponent of the view that states bear a major responsibility in addressing human rights issues, including those associated with corporations. In his assignment, he has examined human rights treaties and treaty body commentaries to identify any requirements for states to exercise extraterritorial jurisdiction.¹⁶⁸ Through this mechanism, home states can police the activities of their corporations doing business abroad, especially in settings where institutional capacity for holding those corporations accountable is weak or non-existent. A successful application of extraterritorial jurisdiction will eliminate the double standards that characterize the foreign operations of some MNCs compared to their operations in their home countries.¹⁶⁹ Presently, however, there is little to inspire confidence that home states would be inclined to regulate their corporations for the benefit of people in other countries without international law requiring them to do so.¹⁷⁰ Even if home states were willing to do so, it is not at all guaranteed that host states would not resent or reject such exercise of jurisdiction as interference with their territorial sovereignty¹⁷¹ and as a move verging on imperialism.¹⁷² The SRSG's interest in extraterritorial jurisdiction is crucial in that it may contribute significantly to bridging the divide between home and host states on this issue, thus bringing together the divergent interests to work for the common good of humanity.¹⁷³

¶ 55         The SRSG also hinted at the possibility that some recent innovative soft law arrangements governing the activities of corporations might harden into binding obligations. "As they strengthen their accountability mechanisms, they also begin to blur the lines between the strictly voluntary and mandatory spheres for participants. Once in, exiting can be costly."¹⁷⁴ His expectation, therefore, is that soft law norms will mature into international legal principles that define corporate responsibility and effect accountability in the event of breach.¹⁷⁵

¶ 56         Ruggie also does not close his eyes to the numerous weaknesses of current efforts at self-regulation, including free-riding, non-suitability for small and medium sized enterprises, scant participation of even major developing country corporations, and the omission or non-participation of state-owned enterprises located in emerging economies. Exuding optimism, however, he believes that if history is any guide, the international community will be able to control or cure the problem the moment we get to a "tipping point."¹⁷⁶ He states that his mandate is dedicated to getting us to that point.¹⁷⁷ This particular point is shared by many other observers, who believe that direct regulation of MNCs remains a premature idea that will only come to fruition when corporate social responsibility becomes widely practiced or the tolerance threshold for corporate misbehavior is met, making it impossible to cope with corporate excesses.¹⁷⁸

¶ 57         In light of the foregoing discussion on the limited changes in the position of MNCs in international law, it is prudent to inquire into the possible reasons behind those changes and the prospects for their further advancement. The following part is devoted to this assignment.

IV.    Rationale for Change and Challenges

¶ 58         A variety of variables account for the appreciation of the position of MNCs in international law, the most prominent of which are their rise in economic stature, the growth in their global influence, and the corresponding need for this power to be balanced with equivalent responsibility.¹⁷⁹ While certain factors have prompted the shift, others constitute obstacles to further changes in the position of corporations in international law. These factors must be closely examined to determine whether or not enhancing the status of corporations in international law is the prudential, and not just the jurisprudential, course to take.¹⁸⁰ Wolfgang Friedmann's admonition almost five decades ago still resonates today: "It would be as dangerous to uncritically accord subjectivity to the private corporation in international law as it would be to deny its factual participation in the evolution of public international law."¹⁸¹

¶ 59         More than three decades ago, a "Group of Eminent Persons" reported that "[m]ultinational corporations are important actors on the world stage."¹⁸² If there are any changes to this observation since then, it is that such corporations have grown even stronger and become even more important actors in global affairs. A number of developments in recent years have strengthened the case for an increased role and responsibility for MNCs in international law. MNCs have continued to grow in size, geographic spread, economic power and political influence.¹⁸³ Thus, it is becoming much more unrealistic to continue to keep them on the legal periphery.¹⁸⁴ Beyond simply being held accountable for their activities, some commentators argue that MNCs should have positive obligations as well: their enormous resources and capacities should be harnessed for addressing pressing global problems.¹⁸⁵ Other scholars assert that, since many of these corporations have acquired the kind of power that was until recently the exclusive preserve of states, it is only appropriate that they should shoulder the caliber of responsibilities that are imposed on states by international law.¹⁸⁶

¶ 60         A concomitant of the expansion of corporate power is an enormous potential for abuse. Large corporations have been implicated in or associated with practices that undermine the realization of objectives behind some international legal provisions on human rights and the environment. In many instances, no legal liability attaches as a result of these practices, thus fostering a situation where victims have no real remedies for the violation of rights guaranteed them under domestic and international law.¹⁸⁷ This state of affairs is partly attributable to the fact that sometimes the governments that are expected to hold corporations accountable are the architect of these wrongful actions or complicit in the perpetration of the wrongs against their citizens.¹⁸⁸ Moreover, because of their scramble for the economic investments of MNCs, developing countries end up too enfeebled to regulate or control them.¹⁸⁹ In any case, MNCs are more likely to demonstrate a preference for those countries with lax regulatory frameworks over business or industrial activities.¹⁹⁰ In developing countries, the absence of the technical and legal expertise that are essential for monitoring or regulating complex activities, such as environmental pollution, also serves as an impediment to any initiatives by persons in these countries to bring MNCs under control.¹⁹¹

¶ 61         Political considerations also play a role. The leaders of government in some of these countries are quite familiar with the ability of some big foreign corporations to engineer the removal of public officials who are obstacles to the success of their enterprises in the country.¹⁹² As some of these leaders are not eager to lose their privileged political positions, they are constrained to do the politically expedient thing, that is, play along and turn a blind eye to corporate misdeeds in their domain. This point does not impeach the fact, however, that many of these leaders are corrupt souls who do not have the interests of their citizens at heart and who not only directly oppress them, but also use the business sector to consolidate their hold on power.¹⁹³

¶ 62         Even where national regulators are active, international regulation still appears to be preferable because the ability of national officials to "actually control the behavior of corporations operating within their borders has been substantially diminished by the global dispersion of assets," thus making it virtually impossible for any single state to be able to place some of these MNCs under their control or exercise any meaningful influence over them.¹⁹⁴

¶ 63         In all of this, international law has largely remained aloof, effectively fostering corporate impunity.¹⁹⁵ Without a doubt, the current situation has succeeded in placing MNCs in a sphere where their operations are conducted in a legal and moral vacuum and the protection of "personal" interests is the cardinal rule.¹⁹⁶ Tolerating this unpalatable state of affairs is clearly unconscionable. The minimal measures adopted by international policymakers in the form of voluntary initiatives have been largely ineffective, thus leading to cries for binding enforceable rules.¹⁹⁷ The rules desired would go beyond the current approach that rewards free-riding and other forms of disobedience, while essentially placing responsible companies at a competitive disadvantage.¹⁹⁸ Undoubtedly, there is something wrong with a system that closes its eyes to obvious misbehavior as states shirk their responsibility and corporations escape accountability. It has become imperative to fortify the international legal system and re-orient it to proactively address some of the serious problems plaguing humanity as a result of corporate operations worldwide. The foregoing reasons provide a real rationale for the changing position of the MNC in international law.

¶ 64         The conceptual and philosophical difficulties regarding the imposition of direct obligations on MNCs in international law present formidable obstacles to accomplishing that goal.¹⁹⁹ Apart from the issue of legal personality already exhaustively discussed here, a major philosophical constraint to imposing direct human rights obligations on corporations is the argument that human rights obligations are meant to constrain the power of the state over citizens and should not be trivialized by applying them to interactions between citizens.²⁰⁰ The apprehension is that such a restructuring of the human rights system would end up being inimical to the notion of human rights itself and the protection of individual rights.²⁰¹ Proponents of imposing direct human rights obligations on MNCs counter that "we can legitimately reverse the presumption that human rights are inevitably a contract between individuals and the state; we can presume that human rights are entitlements enjoyed by everyone to be respected by everyone."²⁰² However, opponents of such an expansive view of human rights respond that, while it may not necessarily be wrong to adopt such a presumption, proponents need to provide a persuasive reason for us to do so, but so far have fallen short of that.²⁰³ "Instead, we are called upon to expand human rights law at the same time that we continue to face enormous problems in implementing even the limited, state-centered version of human rights."²⁰⁴

¶ 65         Beyond the conceptual challenges, however, there are also practical problems to making corporations international legal persons or holding them directly accountable under international law.²⁰⁵ It almost goes without saying that the challenges to an enhanced legal status for MNCs in international law or attribution of direct responsibilities to them are legion.²⁰⁶ One set of challenges represents obstacles or objections to an enhanced status, while another set of challenges pertains to problems that could emanate from an acceptance of corporations as subjects of international law. The rationale for a change in the international legal structure to accommodate multinational corporations appears to be on solid ground.²⁰⁷ However, it would be imprudent to gloss over the serious questions occasioned by efforts to enhance the status of corporations and simultaneously saddle them with direct obligations in international law.

¶ 66         One practical objection to enhancing MNC's legal status is that granting MNCs "direct participation in the international legal system could create a void if it resulted in a weakening of state regulation of MNCs without a corresponding strengthening of international regulation."²⁰⁸ With such a void, MNCs would be freer and in a better position to pursue the expansion of their economic and political influence worldwide. This situation, it is further argued, may be detrimental to the well-being of other actors who hold competing interests on the global stage.²⁰⁹

¶ 67         Another practical objection to an expansion of the corporate role is premised on the belief that international law lacks the capability to resolve the most difficult political, military, and economic issues that confront humanity and that "only the nation-state and its domestic system has been able to do so successfully."²¹⁰ Implicit in this contention is the premise that, at present, the nation-state is the only possible juridical entity with enough power to keep the activities of multinational corporations from prejudicing other human interests.²¹¹ It stands to reason, therefore, that if MNCs are endowed with significant international legal personality and, by virtue of that, receive increased freedom from state control, the result could be a shift in distribution of world power in undesirable proportions.²¹²

¶ 68         This objection lacks merit, however, as it is quite difficult to maintain a serious argument that human rights and other issues of current global relevance, such as the environment, public health, poverty and security, can properly be addressed only, or even primarily, at the national level.²¹³ In the integrated and globalized society that we live in today, the importance of international cooperation or other collective and concerted efforts that transcend national boundaries cannot be overemphasized.²¹⁴ When the overwhelming influence and stature of the MNC vis-a-vis all but the mightiest of states is factored in, critical questions arise about the prudence of following that course of action.²¹⁵ Moreover, international involvement is not coterminous with complete national displacement. International law can define prohibited acts and give primacy over their investigation and prosecution to national authorities, with international legal processes stepping in only when states have shown an unwillingness or inability to act. International criminal law already provides such a model through the complementarity principle enshrined in the International Criminal Court Statute.²¹⁶

¶ 69         An enhanced status for MNCs also raises eyebrows because of the perception that it is tantamount to a multiplication of key players in the international legal system, with the attendant possibility of crippling international law and relations. If history of empires is any guide, the danger may be real: "Historians attribute the anarchy of Western Europe's dark and early middle ages to its surfeit of sovereigns and semi-sovereigns."²¹⁷ With the above problems, it is clear that the task is to search for solutions that are both responsible and effective.²¹⁸

¶ 70         A considerable challenge to boosting the position and role of corporations in international law is the conflict between short-term economic development and human rights protection in developing countries. Richard Falk draws attention to this tension when he embraces the utility of a "framework of international legal obligations" in the protection of human rights, particularly in countries where human rights regulation is inadequate or non-existent.²¹⁹ Nevertheless, he is apprehensive that "given the clear benefits of foreign investment in mitigating poverty, imposing international standards that reduce the attractiveness of countries with minimal regulation would, in the short term at least, likely accentuate human suffering."²²⁰ The logic of this position appears to be that raising human rights standards in these countries would reduce their competitiveness and thus frustrate their economic and social development. While this argument may have some merit when the focus is on certain labor rights, its validity is doubtful when it is applied to grave abuses such as slavery and forced labor -- abuses of which some MNCs have been accused.²²¹ Yet, in view of the fact that many proposals for direct human rights duties of MNCs usually include a broad array of labor rights, this challenge remains a formidable one.²²²

¶ 71         Further, the attachment of direct obligations to corporations, whether in the human rights arena or in other contexts, could create practical problems of enforcement. Many advocates of direct human rights responsibilities of corporations seem to favor the creation of international institutions to give effect to those responsibilities, such as an international tribunal or a mechanism to monitor operations or receive complaints against MNCs and ensure compliance with international regulations.²²³ Skeptics wonder if this development would not result in the overflooding of any such system, thereby rendering it impotent. However, if accountability is a desirable goal, the pursuit of it should not be abandoned simply because the process can be cumbersome or expensive. Instead, it behooves policy makers and interested observers to come up with workable machineries for effectuating the intent of the regulations' designers.²²⁴

¶ 72         A more serious challenge, however, is the fact that even the advent of direct international regulation of MNCs and the creation of international institutions to enforce those international norms may only amount to a marginal contribution to the struggle for corporate accountability. International tribunals simply will not have the capacity to hold more than a limited number of MNCs to account, out of the tens of thousands scattered across the world.²²⁵ Accordingly, some scholars advocate alternatives (particularly the use of domestic court systems or private arbitral bodies) that will make it more feasible to reach a huge number of actors involved in human rights abuses.²²⁶

¶ 73         Some scholars also argue that imposing direct human rights obligations on MNCs will not augur well for the interests of human rights protection in the sense that a strong regulatory framework would likely meet with states' resistance while a watered down arrangement would be counter-productive, trivializing the whole notion of human rights in the process. According to one variation of this argument, "the imposition of direct obligations on private corporations, backed by an effective international mechanism to enforce those obligations, would represent a significant disempowering of states. As such, it is a fundamental change that states are likely to resist strongly."²²⁷ On the other hand, imposition of direct obligations without the backing of an effective enforcement mechanism may amount to a failed strategy.²²⁸ Regarding the first prong of this argument, states are widely believed to be reluctant to share their privileged position with, or yield some of their sovereign powers to, corporations at the international level.²²⁹ Notably, state reluctance to extend legal personality to corporations cuts across geographic and ideological lines.²³⁰

¶ 74         Balancing the need to develop and strengthen democratic accountability mechanisms in developing host countries and creating international rules and processes for addressing corporate abuses constitutes yet another challenge. The SRSG has given some attention to this issue, stressing the imperative of not unduly focusing on international options at the expense of stymieing the emergence and fortification of the necessary political and social structures for protection of human rights in developing countries.²³¹ One benefit of strengthening domestic institutions in contradistinction to an overwhelming focus on direct international regulation of multinational corporations is that it increases the possibility of holding all businesses -- not just the multinationals -- accountable for their human rights and environmental abuses. This approach becomes more attractive if considered in light of the SRSG's observation that "[e]vidence suggests that firms operating in only one country and state-owned companies often are worse offenders than their highly visible private sector transnational counterparts."²³² This argument is further accentuated by the observation that the raison d'etre of regional and international human rights regimes is "to cause States internally to guarantee basic rights and not merely to allow access to the [regional or international] system."²³³ It can hardly be gainsaid that we defeat that purpose, at least partially, when we place an inordinate emphasis on international processes at the expense of, or with scant regard to, the development of internal guarantees at national levels.²³⁴ Besides, the experience with the International Criminal Court ("ICC"), marked by frustration and unfulfilled expectations as opposed to the euphoria that greeted its emergence, has shown the limitations of excessive focus on international channels.²³⁵ Accordingly, there have been calls for increased emphasis on national prosecution, with the ICC playing a proactive role in providing assistance to states in that regard.²³⁶

¶ 75         Human rights groups, however, argue that since it may take a while to develop domestic institutions, it is necessary to institute international measures in the interim.²³⁷ Both arguments have considerable merit. A possible way to bridge the gulf between the two camps would be to carve out a role for MNCs in building or strengthening domestic institutions in countries of operation -- which would require, of course, that they be sufficiently incentivized and interested in doing so.²³⁸ Such a move may actually be a significant contribution to the realization of the objectives of the international human rights regime.²³⁹ In sum, lawmakers must keep in mind the need to craft an international solution that does not ultimately jeopardize institutional development in developing countries.²⁴⁰

¶ 76         There is also the issue of corporate ambivalence or lack of enthusiasm toward acquiring international legal personality.²⁴¹ Unlike some other subjects of international law, or any other legal system for that matter, who agitate for recognition or parity with other subjects,²⁴² corporations do not seem in a hurry to be regarded as international legal persons. Their stance may be explained by the fact that non-status benefits them more, as through their influence they continue to shape and share in the benefits of the international legal system without being saddled with the obligations.²⁴³ The campaign for an enhanced international legal status would have been far less challenging if MNCs were at the forefront of the battle to confer them with personality or did not constitute a hindrance themselves to the realization of the change in position.²⁴⁴ Considering that effective solutions to problems occasioned by MNC activity demand a collaborative approach involving the corporations themselves,²⁴⁵ the task of engineering a change in corporate attitude in this regard, as daunting as it may be, is one that demands serious attention.²⁴⁶

¶ 77         Moreover, the topic of corporate personality in international law recently seems to be dominated by an interest in attributing responsibilities directly to corporations. Meanwhile, many appear to lose sight of the fact that a component of legal personality could be the endowment of substantive rights and procedural capacity to bring claims before international organs.²⁴⁷ In other words, there is a 'rights' element to the equation²⁴⁸ that may empower corporations to make human rights claims before international tribunals.²⁴⁹ As Patrick Macklem has observed in a different but related context, "with international corporate obligations come international corporate rights."²⁵⁰ This situation raises a number of interesting questions and challenges. For instance, will some states, say Venezuela or Bolivia, be enamored of a system that allows energy corporations operating in their respective domains to bring claims founded on interference with the right to property?

¶ 78         It is worth noting that a similar question arose regarding individual capacity and some writers were persuaded that states would be disinclined to confer such authority on individuals.²⁵¹ With the benefit of hindsight to view how far the individual has come in this regard, there is solid ground for a counter-argument that the problem may not be as big as imagined and that some states -- particularly home states of the multinationals -- would welcome an opportunity to settle human rights issues arising out of foreign investment before neutral international tribunals. Such transfer of jurisdiction would relieve home states of the onerous responsibility of seeking avenues for protecting the interest of their corporate nationals abroad, leaving the corporations to avail themselves of the opportunities provided by the neutral international forum.²⁵² An added advantage is that the resulting minimization of state intervention in foreign investment-related disputes would actually militate in favor of inter-state relations, thus contributing to international law's fulfillment of its underlying purpose of avoiding conflicts and maintaining peace and stability.²⁵³

¶ 79         MNCs may also show considerable interest in that arrangement because of the convenience of not having to go through governments almost all the time in order to resolve disputes between the MNC and other entities or persons.²⁵⁴ It is quite possible therefore that MNCs, seeing the benefits derivable from having a procedural capacity before international human rights tribunals, may condition any acceptance of direct human rights obligations on a corresponding capacity to appear before tribunals as direct claimants.²⁵⁵ Even if they do not exact any such conditions, international corporate rights may emerge anyway as a natural corollary of the imposition of international corporate obligations.²⁵⁶

¶ 80         Such a posture is not likely to be well received. One should not lose sight of the fact that states -- with or without questionable human rights records -- are not the only likely opponents of rights for corporations. Civil society groups and other human rights advocates are not particularly enthusiastic about such a development.²⁵⁷ Considering that, in the field of international investment, the investor-protection provision that permits corporations to bring direct claims against governments has been viewed as eviscerating national sovereign authority and restricting the interests of citizens, the conferment of international rights to corporations would likely engender great opposition.²⁵⁸ The complexity surrounding the various dimensions of this issue certainly presents a significant challenge to the further enhancement of the legal status of corporations in international law.

¶ 81         Some of these factors typify the challenges that will continue to dog efforts to integrate MNCs more fully into the international legal system as subjects, holding rights and bearing duties not only in the human rights area but also in general international law. Nevertheless, in view of the overwhelming evidence that MNCs are becoming dominant players on the domestic scene and key participants on the international stage, there is little option but to reconsider their current legal status.²⁵⁹ They exercise greater influence, in some respects, than other entities such as international organizations which have been clearly recognized as subjects of international law.²⁶⁰ The acknowledgment of this reality offers strong support for a significant change in this area, as "the continued viability of the international system depends upon the close conformity of public international law to international realities."²⁶¹

V.    Conclusion

¶ 82         A quarter of a century ago, one scholar observed that "[t]he spread of the multinational corporation in the post-World War II period has given rise to considerable scrutiny, some puzzlement, and even some alarm."²⁶² Without question, the position of MNCs in international law has been a subject of interesting debates and intense disputation. The debate has revolved around whether private corporations are subjects of international law or mere players in the international legal system. Subjects of international law hold rights, bear duties, participate in lawmaking and, in some cases, play a role in enforcing the law. Classicists have insisted that only states are subjects of international law. This orthodox position made it virtually impossible for non-state entities to be accorded recognition as subjects of international law.²⁶³

¶ 83         The past six decades have ushered in some significant changes to the international legal system, with the inclusion of several other entities, notably international organizations and individuals (to some extent), as subjects of international law. For years, it was believed that this wind of change did not blow in the direction of MNCs, and so they remained at the periphery, not the center, of international law.²⁶⁴ However, the past few years have witnessed amazing developments in the international legal system, leading to the indisputable recognition that international law has started, and will continue, to play a greater role in the lives of people across the globe.²⁶⁵ A pertinent question is whether the ongoing changes in the international system will be wide enough to accommodate business enterprises, especially MNCs.

¶ 84         Recent developments, particularly the work of the SRSG, Professor John Ruggie, suggest that major changes are occurring in relation to the international legal status of business organizations. Proponents welcome these changes, and some demand more far-reaching restructuring of the international legal system as it pertains to human rights and the environment to accommodate and obligate MNCs. The belief is that a clear integration of MNCs into the international legal system will be accompanied by an articulation of direct responsibilities of these corporations under international law. There remains some room for skepticism, though, in view of the conceptual challenges that have long stood in the way of this fundamental change in the structure of international law.

¶ 85         Leaving aside the conceptual, however, some pertinent problems with unequivocally accepting corporations as subjects of international law pertain to the practical questions raised by such envisaged development. Will it redound to the benefit of international law generally, and human rights protection in particular, to have corporations as bearers of rights and duties? More specifically, is the solution not at the state level, with states afforded every needed tool to rein in the excesses of corporations operating in their territory? The questions posed reveal only some of the points of resistance that states and MNCs are expected to put up against such fundamental changes in the international legal order.

¶ 86         The SRSG seems to offer two options: give home and host countries another opportunity to address the problem of corporate human rights abuses through extraterritorial legislation and the development of democratic accountability structures, or watch corporate abuses ascend to intolerable levels and reach a tipping point at which point international regulation becomes inevitable. The critical question, however, remains: just how far are we from the tipping point?

ENDNOTES