Wednesday, February 27, 2008

World Transnational Corporation Regulatory Authority

You can second this proposal by sending an email to Mike by clicking here or sign up in Pledge Bank.

Mike Brady, Coordinator of Cambridge SP Adopters' Group, will be speaking about the following policy proposal in the SP Adopters' amphitheatre in Tangun. Many of the ideas appear in a chapter he has written for the book 'Global Obligations for the Right to Food' published this month. See:

UPDATE: Thanks to everyone who has come to the meetings. A further round will be held in the near future. Return here for news.

You can listen to a short introductory talk by clicking here. It should open in your mp3 player. If not, paste this link:

You can register as an Adopter (which is free) when you do so or visit the Simpol site, where you will also find further information. Adopters undertake to either vote for candidates, within reason, at elections who pledge to implement SP alongside other governments or to encourage their preferred party to make this pledge.

Second the proposal by sending an email to Mike by clicking here or sign up in Pledge Bank.

Title: World Transnational Corporation Regulatory Authority

Proposer: Mike Brady

Can your suggested policy be implemented by a country acting alone?: No. The fear of competitive disadvantage is fundamental to the reluctance of governments regulating transnational corporations.

Summary: This new body will be responsible for ensuring that transnational corporations abide by existing human rights, environmental, labour and other relevant agreements. It will accept reports of breaches from appropriate authorities or public petition and, if it finds there is a case to answer, will bring a prosecution before the International Criminal Court. The Court will be empowered to levy fines based on annual turnover on the corporation and to award governments the right to levy punitive tariffs on the home government of the corporation for seeking an unfair competitive advantage by failing to enforce the agreements. Corporations with a turnover and geographic coverage above set minimums will be required to register as 'globally incorporated companies' and submit annual independently-audited reports of their performance against standards already agreed to in the UN Global Compact for assessment.

Further information:

As summarised above there are several elements to the proposals.

* Formation of the World Transnational Corporation Regulatory Authority.

This is analogous to national regulatory authorities, such as the Office of Fair Trading or Trading Standards officers that exist in the UK to ensure businesses abide by legislation.

It is to be an autonomous body with a protected budget from the UN and a mandate to carry out investigations at the request of third parties and on its own initiative. It is also to be proactive in seeking evidence that transnational corporations are abiding by internationally-agreed standards.

A central philosophy to the formation of the Authority is that it is to take as its starting point existing agreed international instruments in the areas of protection of human rights, the environment, labour conditions and other relevant areas.

* Authority's role in investigating complaints against corporations

The Authority will accept allegations of malpractice by any corporation or business whatever its type or size from:

- governments
- registered non-governmental organisations
- public petition

The public petition system will be analogous to the 'civil public action' used in countries such as Brazil. If a community has a grievance against a business then it can petition the Authority by collecting signatures of people in the affected area or areas. The threshold for triggering an investigation by the Authority will need to be set.

The Authority will then appoint an investigator tasked with determining:

- if there is a case to answer
- if national measures in the affected country and the home country of the corporation provide a satisfactory means of complaint and redress
- if national measures, where available, have been used
- whether governments have failed in their responsibility to hold the corporation to account

If there is a case to answer and there is a failure at national level the investigator can pass a file to a prosecutor of the International Criminal Court, which will have its mandate extended to accept these reports and to hear cases involving transnational corporations as well as governments. If the case is being dealt with satisfactorily at national level in a reasonable time scale then the case will be monitored, but action not necessarily taken by the authority.

* Authority's role in auditing company activities

The Authority will require corporations above a set turnover and global coverage to register as 'globally incorporated companies' and submit annual independently-audited reports on their performance, both financial and against the internationally-agreed standards (this is inspired by a similar proposal from the European Parliament for a European Incorporated Company - which has been blocked by the European Commission).

The initial requirements will be in line with the 10 points of the existing UN Global Compact, a voluntary system which invites companies to submit reports. The Global Compact is fundamentally flawed, however, as it does not require audited reports to be submitted, does not audit the reports itself and does not have a complaints or monitoring mechanism.

The Authority will have the power to investigate reports submitted and a designated member of the board of the corporation will be legally responsible for ensuring they are accurate, in the same way that is is common practice for the Financial Director to be legally responsible for financial reports.

The Authority will be empowered to levy fines itself if reports are not submitted on time and to provide a file of evidence to prosecutors of the International Criminal Court if:

- reports are not truthful or complete
- there is evidence of breaches of the agreed standards

* Role of the International Criminal Court

The prosecutor of the International Criminal Court will act like a barrister briefed by the investigators of the Authority.

Corporations will be prosecuted for breaches for redress for the affected community and for punitive fines, which are to be based on company turnover (there are examples of existing sanctions at EU and national level following this approach).

Governments will to be prosecuted for seeking unfair competitive advantage by failing to enforce the agreed standards on corporations. The onus will be on the home government of the corporation to enforce the regulations. The government of the country where the offence took place may also be prosecuted, but it should be recognised that the power of such governments is sometimes limited because of the power of corporations and their home nations.

The International Criminal Court may require governments to pay redress for the affected community and punitive fines. It may also or alternatively award other governments the right to levy punitive tariffs on exports from the guilty country to recoup lost income due to the unfair trading practice. This is similar to the enforcement mechanism used by the World Trade Organisation and found to be effective in forcing governments to change trading policies judged to be illegal under WTO agreements.

Note on the background to this proposal:

This policy suggestion arises from public meetings held by the Cambridge SP Adopters' Group (CAMSPAG) since 2002, on a variety of topics such as 'Making all trade Fair Trade' and 'Holding corporations accountable'. These meetings had input from experts in these areas. One meeting looked at the specific case of Coca Cola's alleged trade union busting activities in Colombia as a case study. Policy discussion papers were produced as a result of these meetings, which have been made available in the policy zone of the Simpol-UK site, a way open to all SPAG's for sharing the results of their discussions. Simpol-UK held a policy forum at the House of Commons on the same topic with the Coordinator of CAMSPAG and an expert from the campaign to hold Nestlé to account over its environmentally damaging water bottling activities in São Lourenço, Brazil. This was written up in the It's Simpol ! newsletter.

The discussion has also been informed by proposals made by George Monbiot in his book 'The Age of Consent' for an International Fair Trade Organisation to replace the World Trade Organisation.

The proposals for a world regulatory authority and the creation of 'globally incorporated companies' appear in a chapter in the book entitled: "Global obligations for the right to food" published in January 2008. See:

This book arises from a project led by Professor George Kent of the University of Hawaii to be presented to the UN Standing Committee on Nutrition. The book argues that the global community of nation states has a responsibility under existing human rights instruments to act collectively to ensure the right to food. The chapter on transnational corporations by the proposer of this policy suggestion, argues that current forms of regulations by individual governments and voluntary agreements (specifically the UN Global Compact and the OECD Guidelines for Multinational Enterprises) are failing to provide the protection necessary. The UN once had an office for Transational Corporations, which proposed binding regulations and was wound up for daring to do so. The Special Representative on Transnational Corporations, John Ruggie, who reported to the UN Human Rights Council in 2007 made some constructive suggestions regarding regulations, but recognised there are substantial obstacles to such an approach. He concluded:

"The permissive conditions for business-related human rights abuses today are created by a misalignment between economic forces and governance capacity. Only a realignment can fix the problem. In principle, public authorities set the rules within which business operates. But at the national level some governments simply may be unable to take effective action, whether or not the will to do so is present. And in the international arena states themselves compete for access to markets and investments, thus collective action problems may restrict or impede their serving as the international community’s “public authority.” The most vulnerable people and communities pay the heaviest price for these governance gaps."

There is, therefore, pressing need for the suggested policy to be supported within SP and eventually implemented.