Corporate Power

Transnational Corporations (TNCs) have accumulated tremendous economic and political power in recent decades. Today TNCs play a vastly outsized and largely unwelcome role in the formation of the hegemonic narratives that shape our political and economic lives. As nation states’ capacities to defend the public interest have been eroded, corporate power has fewer and fewer checks on its excesses and almost no accountability for wrong doing.

The causes of this surge in TNC power are multiple. This article will focus on TNCs as global actors, the structures and mechanisms that grant them impunity for wrong doing, and the deepening and widespread popular resistance to TNC extractivism and destruction of the planet. The article will describe some of the geopolitical dimensions of TNC power, notably the EU’s role as a guardian of this power. It will also briefly discuss the multiple strategies of resistance to this asymmetry of power – TNCs vs the State and vs the People – and will explain the key battle ground at the United Nations Human Rights Council (UNHRC) and the drive to create a “legally binding instrument on Transnational Corporations and other business enterprises with respect to human rights”, which is entering a crucial negotiating phase on the first draft of the Treaty in 2019.1

What is Corporate Power?

Chilean President Allende’s speech at the UN General Assembly in December 1972 described how “huge “transnational” corporations were waging war against sovereign states and that they were “not accountable to or regulated by any parliament or institution representing the collective interest…In a word, the entire political structure of the world is being undermined”. His words, referring to destabilizing and interventionist activities by large US corporate interests, were an early acknowledgement of the threat posed by recent incarnations of corporate power.2

Less than a year later, Allende was deposed in a CIA-supported coup and replaced by the brutal dictatorship of Augusto Pinochet. Chile was involuntarily reshaped as the laboratory for neoliberal corporate rule and power.

Decades of destructive and predatory operations of TNCs on all continents have been well documented: from mineral and oil extraction; land and ocean grabs; deforestation; take-overs of public services, and high-risk financial speculation. During this time, US and European (and increasingly Brazilian, Russian, Indian, Chinese and South African) TNCs have maintained and safeguarded dominance over the resources of the Global South.3

Business has largely continued as usual for the big banks in the time since the crisis. TNC crimes have persisted and justice remains out of reach. A far from exhaustive list includes: Rana Plaza, Bangladesh; destruction around River Doce in Brazil; The Marikana massacre of 36 miners at the Lonmin Platinum mine, South Africa; brutal attacks on the communities of Standing Rock, US; the role of European arms corporations in fuelling the wars in the Middle East, and the increasing role of privatised military and security corporations in the securitisation of the EU’s Border regime and the detention of migrant and refugee peoples.4

Credit: Victor Barro/ Friends of the Earth International

How does Corporate Power work?

The Global Redesign Initiative (GRI) launched by the Davos World Economic Forum5 is just one example of a concerted effort to put TNCs and other private interests at the heart of political and multilateral processes, underpinned by the belief that deregulation, privatisation and competitive endless growth is the only framework for any economy, even at the cost of peoples, workers and environmental rights (often referred to as ‘neoliberalism’). And even as the Financial Crises drew wide attention to the power of financial and other corporations (e.g in the agriculture and commodities sector), less scrutinized were the ways in which national and international law have been skewed in favour of capital and transnational corporations. As Juan Hernandez Zubizarreta wrote ” the reinterpretation of legislation in favour of capital and transnational corporations and the regulatory asymmetry this causes vis-a-vis the rights of the unprotected majorities are undermining the rule of law, the separation of powers and the very essence of democracy.”6

Credit: Jared Rodriguez / Truthout/CC BY-NC-ND 2.0

Architecture of Hard Law – a new global Corporate rule

The development of the World Trade Organisation (WTO) and the proliferation of Free Trade Agreements (FTAs) and International and Bilateral Investment Agreements (IIAs & BITS) in recent decades have ushered in an era of global corporate rule. Many of these agreements also carry the now notorious Investor to State Dispute Settlement (ISDS) mechanism, which allows corporations to use international arbitration courts to sue nation states for alleged discriminatory policies, for perceived loss of profits or for adjustments to contracts. The financial penalities involved can be catastrophic for many states, as noted in ISDS in Numbers.7

Hard protection for corporate interests give TNCs greater powers than many states, compounding the wealth disparity—the annual revenue of Walmart, Shell and ExonMobil, for example, are larger that the gross domestic product of countries such as Austria, South Africa and Venezuela.8

Corporations have also gained immense leverage through the policies of the global financial institutions – the International Monetary Fund (IMF), World Bank, and International Financial Instruments. Similarly, immense tax breaks and elaborate mechanisms that facilitate tax avoidance and tax evasion have worked to TNCs advantage. Overall, current data suggest global, annual tax losses of $500 billion or more, representing over 20% of corporate tax revenues.9

Corporate economic and political power has also expanded and consolidated through processes of mergers and acquisitions. The mega-mergers of Bayer-Monsanto, China National Chemical Corporation (ChemChina)-Syngenta and DuPont-Dow grants three corporations virtual control of global seeds and agrochemicals.10

The EU – Between Corporate Power and Corporate Capture

The asymmetrical nature of corporate power is rarely more visible than in the institutions and practices of the EU, where it manifests in the corporate capture of policy making; in the widespread ‘revolving doors’ practice, where EU and other government officials take up high level corporate functions on leaving office; in the easy and regular access to EU officials enjoyed by corporate leaders and lobbyists; and in the intense lobbying activities of TNCs at both EU and national levels. There is deep resistance to implementing a compulsory lobby register. This preferencing of corporate interests is also reflected in the EU’s defence of European corporations around the world, and in its aggressive push for far-reaching Trade and Investment Agreements that favour corporate interests.

Powerful associations represent corporate interests in the European Union, sometimes on a sectoral basis (European Services Forum) or multisectorally, as in the Round Table of Industrialists or Business Europe. These Corporate Forums, with their concentration of economic power also leverage political power and influence as they have easy access to EU officials and policy makers at the EU and national levels. EU member states end up acting as conduits fro corporate interests through the European institutions (The Council of the European Union; the European Council; the EU’s Committee structure), as documented in a recent report by Corporate Europe Observatory.11

Like the US, the EU has been hostile to recent initiatives for binding regulations on TNCs, undermining its claims to be a defender and proponent of human rights and the public interest. On the floor of the UN Human Rights Council (UNHRC) the EU has staunchly defended corporate interests in the context of recent work towards a binding Treaty on TNCs and human rights. The EU’s spokesperson uses language and messaging that parallels the ideas of the International Chamber of Commerce (ICC) and the International Organisation of Employers. The individual member states have remained remarkably quiet since a vote in 2014 that led to the current process towards a treaty on TNCs and human rights, when every European member state on the UNHRC voted against the process. The EU’s positioning at the UNHRC is described in the ENCO Report The EU and the Corporate Impunity nexus.12

In her book Shadow Sovereigns, Susan George describes the opaque but politically powerful modus operandi of TNCs and corporate capture as we see in the EU: “Its not just their size, their enormous wealth and their assets that makes the TNCs dangerous to democracy. It is also their concentration and cohesion, their cooperation and capacity to influence, infiltrate and in some areas virtually replace governments”.13

Why is Corporate Power a problem?

The reorientation of national and international law to favour capital and TNCs has compounded power asymmetries, and undermined the rule of law and the primary role of the state in the protection of human rights, and allowed corporations to operate free from regulatory control and with almost total impunity.

Palace des Nations, Geneva. Victor Barro/Friends of the Earth International

Throughout the past four decades, TNCs’ activities have deeply and destructively effected countries and peoples all over the world, as documented in the cases submitted to the Permanent Peoples’ Tribunal in Sessions on European TNCs in Latin America (2006-2010) and on TNCs in mining and land grabs in the Southern Africa region (2016-2018).14

At the same time, resistance, particularly from the communities affected by TNC activities, has grown and there have been significant initiatives to address violations of human rights and increasing corporate impunity.

Within the UN, the Center on Transnational Corporations (UNCTC) was established in 1975, and sought to establish a framework of accountability for TNCs in relation to human rights. But the UNCTC was closed down in 1993 by UN Secretary General, Butros Butros-Ghali at the insistence of the US. UN efforts resumed when Kofi Anan launched the Global Compact with TNCs at the January 1999 World Economic Forum. But without hard rules, the Global Compact’s self-regulation framework and voluntary guidelines have failed to stop corporate impunity.

Work on another self-regulation framework was initiated in July 2005, when Kofi Anan appointed John Ruggie as Special Representative to address the widening gap between the rule of law and the daily operations of TNCs. Ruggie’s work resulted in the UN Guiding Principles (UNGPs) endorsed by the UNHRC in 2011. The EU and its member states have pushed hard to implement the UNGPs. But as evidence from all over the world—including Europe—demonstrates the UNGPs are failing to address the core of the problem, the UNGPs’ failings are obvious. Voluntary corporate social responsibility (CSR) is not an adequate approach to tackle the current scale of corporate crime and impunity.15

Challenges to Corporate Power?

The communities affected by the operations of TNCs are central to efforts to address the asymmetry of corporate power versus states and citizens, and in launching a campaign for a Binding Treaty on TNCs and Human Rights. The campaign was established as the Global Campaign to Reclaim Peoples Sovereignty, Dismantle Corproate Power and Stop Corporate Impunity (often referred to simply as ‘The Global Campaign’) in 2012 (a convergence of affected communities, social movements and diverse sectors, 250 internationally)16 with further broad support mobilised jointly with the Treaty Alliance, which was set up in 2014.

From the 1970s onwards, affected communities have been the first line of defence of human rights and the environment in response to TNC activities. Iconic cases of resistance are those of Union Carbide in Bhopal, India, Rana Plaza (Bangladesh), Texaco-Chevron in the Ecuadorian Amazon, of Shell in the Niger Delta regton (Ogoni land), Nigeria, Lonmin in Marikana (South Africa), and most recently Vale in Mariana and Brumadinho, Brazil.

The Global Campaign arose in the context of resistance campaigns of social movement mobilisation and protest against the mega institutions of corporate power and neoliberal globalisation: the WTO, the IMF and the World Bank.

Credit: Jared Rodriguez / Truthout/CC BY-NC-ND 2.0

Several binding legal and juridical initiatives are being established in various parts of the world to address the power of corporations in specific countries. Some are already in place – the Binding Law on Due Diligence in France and the Right to Say No legislation (based on the principle of Free Prior Informed Consent) which has been given juridical status in the recent ruling of the High Court of South Africa.17

The UNGPs and voluntary self-regulation for TNCs have proved unfit for purpose and have been roundly rejected by affected communities. Instead, affected communities are insisting that new international, legally-binding rules for TNCs and human rights are urgent, necessary and possible.18

What next?

In the face of deepening resistance, the failure of corporate self-regulation and corporate social responsibility to rein in the power and impunity of TNCs, some UN Member states are again working towards binding regulation. Ecuador, with the support of South Africa, submitted a resolution to the UNHRC In June 2014. This historic resolution was narrowly carried, with 20 votes in favour, 14 against and 13 abstentions,19 and led to the creation of an Open Ended Inter Governmental Working Group (OEIGWG) mandated “to put in place a legally binding instrument on Transnational Corporations and other business enterprises with respect to human rights”.20

In the intervening years, the preparatory work on the Treaty brought three key groups to the floor of the UNHRC: the member states; the social movements and affected communities, and corporate representatives with ECOSOC status at the UN – the International Chamber of Commerce (ICC) and the International Organisation of Employers (IOE).

The process towards the treaty has advanced significantly in the relatively short time since 2014. In October 2018, the chair of the working group, Luis Gallegos, ambassador of Ecuador, presented a ‘zero draft’ of the treaty, paving the way for substantive negotiations.

Ninety six member states participated in the fourth session of the working group.

Parliamentarians have also mobilised at national and international level. 350 members of parliament from the Global South and Europe have signed on to the Global Inter-Parliamentary Network (GIN) in support of the Binding Treaty and are active at national level, urging governments to engage constructively and pro-actively in the process of negotiation.

The convergence of movements and networks in the Global Campaign is engaged in sustained activities at the national and regional levels. When the UN working group meets in Geneva each year, the Global Campaign engages in a Week of Peoples Mobilisation, with work both inside the UN buildings and outside to raise awareness of the process and to engage with the public, media and policy makers. This strategy has been crucial in ensuring the treaty process has remained on track and progressed to negotiation stage.

The Global Campaign, in broad consultation with affected communities, movements and experts from across the world, also developed and submitted its own proposal for a Treaty. This proposal text “Treaty on Transnational Corporations and their Supply Chains with regard to Human Rights” (2017) advocates for a robust and ambitious Treaty that includes: Direct binding obligations on TNCs; Extra Territorial Obligations of States; Primacy of Human rights over Trade and Investment Agreements and the conditionalities of the International financial and trade institutions (for example the IMF, World Bank and the WTO); State cooperation on the operations of TNCs along their entire supply chains; an International Tribunal on TNCs and human rights, and mechanisms of enforcement and the rights of affected communities.21

The Binding Treaty process will continue to face challenges. The global rise of authoritarianism and the roll-back of democratic processes and displacement of democratic governments, as in Latin America and Asia will likely have negative consequences. The European Union member states will continue to threaten to withdraw from the process.

But movements will also continue to engage in shaping the content of the Treaty. The Global Campaign, together with the Treaty Alliance, are working to ensure governments actively engage in the fifth session of the working group in October 2019, to keep pressure up for a robust Treaty that will deal effectively with the impunity of TNCs and provide access to justice for affected communities.

Nobody underestimates the challenges that lie ahead. Neither governments nor peoples’ movements have been here before. Preparing and realising any Treaty is a colossal undertaking – but a treaty that addresses the concentrated power of Transnational Corporations with respect to their obligations on human rights is probably among the most challenging.

Transnational Corporate power is formidable. Their influence casts a long shadow. Sustained political will and active participation and courage from governments will be crucial to turning back the juggernaut of mega corporate power and establishing a new international legal regime that gives primacy to human rights over corporate profit and corporate crime.

And this time, an organised movement, determined and global, will be a key factor in shifting the balance of forces and moving governments forward in this historic moment.