Master Ngeblog

40 Cornell Int'l L.J. 171

Cornell International Law Journal
Winter 2007

Article

*171 PUTTING REGULATION BEFORE RESPONSIBILITY: TOWARDS BINDING NORMS OF CORPORATE SOCIAL RESPONSIBILITY


Thomas McInerney [FNd1]

Copyright (c) 2007 Cornell University; Thomas McInerney


I. Introduction....................................... 171
II. Intellectual History.............................. 176
A. Changing Nature of the State................. 176
B. Increased Managerial Innovation and Flexibility.. 180
C. Self-Regulation Comes of Age................. 182
III. Critique of Voluntary CSR from a Developmental Perspective.. 183
A. Generating Compliance: The Limitations of CSR.. 184
B. Regulating Firms is a State Function........ 188
C. Learning to Regulate (and Govern)............ 190
D. Beyond Economic Orthodoxy..................... 193
IV. Examples of Alternatives: African Cases........ 195
A. Lesotho High Water Dam Prosecutions.......... 195
B. Forest Law Enforcement and Governance in Cameroon.. 196
V. Conclusion......................................... 199


I. Introduction
Corporate activities that harm the environment, violate labor and human rights, and corrupt state actors and institutions remain problems in all market economies. Nowhere are these problems more acute than in developing countries. On the other hand, in developed countries, many think that state action constitutes a principal remedy for market failure. On this view, domestic regulatory systems can do the work of protecting the environment and worker rights, while the judiciary can ensure that human rights are upheld and corruption prosecuted. Yet the general view is that, whether due to inadequate resources, ineptitude, or perfidy, the same expectations do not hold for developing countries. [FN1] As evidence of corporate transgressions has mounted, it is noteworthy that there have been few calls for international super-regulators to oversee these matters, *172 nor has much attention been devoted to remedying the presumed shortcomings in developing country regulatory systems that thwart effective remedies for these social harms. Instead, policy makers and many activists have focused on voluntary corporate social responsibility (CSR) measures. [FN2]
CSR is an umbrella term that refers to a variety of initiatives ranging from voluntary codes of conduct to programs whereby companies can undergo external audits to verify the adequacy of their practices in a variety of areas of social concern. [FN3] Although generally lacking formal state power of sanction, these efforts look to international law for their normative authority, intending to apply sometimes-latent international legal prescriptions directly to corporations. Following the practices of many state-level regulatory programs in recent years, these initiatives are consistent with the broader trend in regulatory policy away from so-called “command-and-control” regulatory techniques and towards voluntary firm-level self-regulation and self-policing. [FN4]
While important in helping to galvanize public opinion around the issues, this article contends that, as currently constituted, voluntary CSR initiatives remain problematic. Properly understood, voluntary CSR measures should supplement not supplant state regulation. [FN5] Yet, supporters of voluntary CSR initiatives fail to recognize this fact. They equivocate on the role of government regulation and thus confuse the proper role of CSR. [FN6] *173 The reasons for this equivocation are not incidental but rather central to the CSR movement. [FN7]
There are two reasons for this phenomenon. The first issue relates to the competing discourses involved in addressing CSR questions. Roughly stated, these discourses can be defined as globalist or developmentalist. The globalists include those whose inspiration for addressing CSR matters stems from globalization, which they reduce to questions of foreign direct investment (FDI) and outsourcing by multinational corporations in developing countries. [FN8] Among the globalists are those who posit a declining--even shrinking role--for the state. [FN9] Globalists contend that multinational corporations (MNCs) elude national regulation because they operate in multiple jurisdictions. [FN10] On the other hand, as the name suggests, *174 developmentalists view matters from a developmental perspective. On this view, the challenge of private sector activities in developing countries is not limited to issues of FDI and outsourcing but rather involves broader issues of institutional and market strengthening and coordination with other development priorities.
In this paper, I contend that the globalists have framed the debate incorrectly. A key reason for this conceptual mistake is that the globalists have wrongly assumed that the state is in decline. This view is a broad-brush swipe rather than the product of detailed analysis. Indeed, developments in the field of comparative and international political economy show that the story is much more complicated. [FN11] On this view, rather than international convergence towards one model of capitalism, states maintain distinctive types of market economies and respond to the pressures of globalization in distinct ways. [FN12] Moreover, state level regulatory systems remain central to defining the trajectories of different systems. [FN13] Other studies speak more of a changing role of the state or of the state being constrained in certain respects, but belie the hyperbolic claim that the state is declining in importance, is less relevant, or is unable to do its job. [FN14] Rather than true across the board, the constraints hypothesis may be true in some respects but less in others. In particular, while states may be constrained in areas of monetary policy and financial markets, there appears to be much less support for the view that the state is constrained in matters of social, trade, industry, and innovation policies. [FN15] Even the sly multinational enterprises (MNEs) credited for supposedly eluding law and regulation of states are subject to the laws of every jurisdiction in which they do business. [FN16] Indeed, the race to the bottom argument often made in reference to MNEs' supposed attempts to seek out unregulated markets also does not stand up to scrutiny. [FN17] If states cannot be shown to be subject to *175 substantial constraints in the exercise of their power, then a key argument for international rather than state-based corporate social responsibility measures would seem to be lost. Moreover, even if states can be shown to be too weak to deal with implacable MNCs, then what grounds exist for believing that mere voluntary measures will prove potent instruments of control?
Second, the globalists have reduced most of the problems involving economic activity in developing countries to exogenous factors attributable to linkages with advanced industrial economies. Economic globalization thus emerges as the culprit, while endogenous sources of social harm are ignored. [FN18] While recognizing that the problems associated with economic globalization are real, the problems affecting capitalist development in developing countries are not reducible to problems of economic globalization. Were we to magically ensure that all outsourcing and FDI were done in accordance with the highest international standards, many developing countries would still face massive problems of regulation and governance directly related to the types of social harms that CSR attempts to address. Only the developmentalist perspective speaks to those needs.
The globalists' third misconception relates to the reasons behind this set of assumptions. To uncover these reasons, one must examine recent economic and political history. As this paper will argue, that history exposes the intellectual roots of voluntary CSR programs in neoliberal economics. It calls into question a shared assumption among CSR advocates that market failure can be remedied by market mechanisms.
This paper is divided into five parts. Part II consists of an overview of some of the intellectual, policy, and business trends that have fed support for CSR programs. This paper contends that a proper understanding of CSR initiatives involves recognition of its origins in the post Reagan-Thatcher regulatory agenda, which has changed fundamental expectations about business regulation and economic development. Part III critiques some of the key assumptions concerning voluntary CSR programs with particular attention to concerns in developing countries. It highlights two significant problems: first, the lack of rigorous enforcement of such initiatives; and, second, the lack of state involvement in their enforcement and definition, which undermines the broader development goals of democratic governance and the creation of well-regulated market economies. In light of these problems, this paper argues for using capacity-building of legal and regulatory authorities as a way to address these issues. Part IV describes and analyzes two examples of how domestic legal and regulatory *176 actors can be empowered to further the public interest in their societies. A conclusion follows in part V.

II. Intellectual History
To understand where the voluntary CSR movement draws its raison d'être, one must consider recent intellectual history. Three general trends are worth noting: first, the demise of the post-WWII regulatory and developmental state, as exemplified by the New Deal institutions in the United States and social democracy in Europe; second, market-oriented radical transformations affecting business organizations; and, third, the emergence, as a result of these trends, of new programs of self-regulation throughout the developed world. What follows is a simplification of these complex trends; however, it should nevertheless help contextualize the environment in which voluntary CSR programs have emerged.

A. Changing Nature of the State

The modern regulatory state emerged alongside the growth of industrial economies. [FN19] The conditions necessitating greater governmental control over economic activities include an increase in harmful externalities, such as pollution, injuries to workers, monopolistic tendencies within industry, a multiplication of the number of economic actors, and an increase in technological complexity requiring greater coordination among firms. Government's ability to address these new concerns depended upon the creation of large administrative units or bureaucracies to support its efforts. The multiplicity of actors and situations required a vast regulatory apparatus supported by significant resources.
For the sake of illustration and because of its influential role in affecting regulatory practices internationally, I will focus on the United States's experience. In the United States, the modern regulatory state was, in large part, an outgrowth of the New Deal. Prior to that time, the federal government played a relatively small economic and social role. [FN20] What regulation existed was accomplished primarily through common law courts. [FN21] Judges, not bureaucrats, were the arbiters of regulation. As the guardians of the common law, judges resisted attempts by legislatures to enact laws protecting health, safety, and the environment as unwarranted infringements on the judiciary's power to determine proper regulatory objectives. The Lochner decision, [FN22] in which the Supreme Court struck down a New York statute limiting the hours bakers could work on the grounds that it unconstitutionally infringed the freedom to contract, was one of the more notable examples of this type of thinking. Legislative efforts to regulate the *177 market grew significantly with the New Deal. After initially suffering losses when the Supreme Court cast aside a number of early New Deal enactments, the Roosevelt administration succeeded in enacting numerous laws to minimize the social harms of the market. [FN23] This marked the beginning of a larger trend. Between the New Deal and the 1970s, the federal government created dozens of new agencies designed to regulate a whole range of industries and remedy a variety of social ills. [FN24] The scope of the changes that occurred has led some constitutional scholars to consider the period a second American “rights revolution” or an effective amendment to the federal constitution. [FN25] Similar trends occurred in Western European and developing countries. The growth of capitalism globally spurred efforts to restrain its negative effects.
Noteworthy among these developments is the qualitative changes to regulatory efforts that occurred between the New Deal and the 1960s and 1970s. In the New Deal period, the primacy of Keynesian economics led to a regulatory agenda designed to better manage the economy. [FN26] By the 1960s and 1970s, government regulation became more concerned with protecting individual rights than with promoting collective goods. [FN27]Across OECD countries, as regulation became less about demand management, through such institutions as centralized wage bargaining, and more about individual rights, such as laws against discrimination in employment, broader support for a dominant state presence in the economy eroded.
The emergence of economic stagnation and growing business unrest over bureaucratic “red tape” fed arguments for curtailing the growth of the federal bureaucracy in the U.S. [FN28] The economic crises of the late 1970s and early 1980s--stagflation, energy shortages, and a decline in international competitiveness--led to complaints about regulatory controls. [FN29] Congress also began asserting its power, seeking to reign in administrative action. [FN30] Likewise, courts began scrutinizing agency actions with greater frequency. [FN31] Immediately after his election, President Reagan began a program of comprehensive regulatory reform. Reagan's reforms from that time have since spread throughout the advanced industrialized economies and developing countries. [FN32] It is important to review their main elements.
*178 Executive Order 12291 ushered in a comprehensive program of ex ante procedures and criteria applicable to any new regulation. [FN33] This change empowered the U.S. Office of Management and Budget to act as a central authority for scrutinizing new regulatory initiatives. Two moves proved particularly instrumental in setting the climate in which emphasis on voluntary CSR grew. First, the order mandated the use of cost benefit analysis and the choice of the least burdensome alternative in connection with any proposed regulation. [FN34] Second, it mandated that regulators consider alternatives before advancing new regulations. [FN35] With this subtle shift, the view of the state as taking on a strong role in controlling capitalism was replaced by a general presumption against regulation unless it could be otherwise justified. [FN36]
The OECD regulatory reform program illustrates how diffuse these practices have become. According to the OECD, states have adopted regulatory management systems involving explicit standards for regulatory quality, the use of regulatory impact analysis, systematic public consultation on regulation, use of alternatives to regulation, review and updating of regulation, and a reduction in administrative red tape. [FN37] It is safe to say that these principles represent mainstream thinking on regulation today.
Aside from the question of defining proper regulatory ends was the question of means. Critics complained that “command-and-control” regulatory regimes were costly and unnecessarily punitive. [FN38] This attack sought to eliminate rigid governmental prescriptions and instead to allow for greater flexibility in achieving traditional regulatory aims. [FN39] The result has been, among other things, a growing shift towards self-regulatory or management-based regulatory strategies, described more fully in Part I.C below.
The second prong of the regulatory reform agenda has been a program of deregulation in several areas, including communications and broadcasting, discrimination, endangered species, occupational health and safety, *179 public utilities, and the environment. [FN40] Deregulatory programs were followed by successive waves of re-regulation. In the area of economic regulation, states created new frameworks for introducing competition into previously uncompetitive industries through unbundling, withdrawal of subsidies, and use of competition law. In the area of social regulation, enforcement was frequently weakened and, in some areas, regulatory burdens lightened.
The push for deregulation and regulatory reform originating in OECD countries has since been exported globally through the intervention of international financial institutions. Drawing from the widely shared belief that excessive regulation hampered economic growth, development agencies promote the reduction of unnecessary regulatory barriers and excessive red tape. [FN41] Likewise, structural adjustment programs have forced reductions in state spending that have compromised state regulatory capacity in some instances. [FN42] International trade agreements have also driven states to remove rules that discriminate against foreign firms, thus reducing regulatory burdens in certain areas.
The third change in the nature of regulation was the demise of the developmental state in both OECD and developing countries. Slowing growth in OECD countries helped bring about the decline of the Keynesian developmental state. Driven by declining growth rates, tax revolt, and the need for fiscal restraint to avoid currency devaluation in a post-Bretton Woods environment, state dirigiste policies fell into disrepute. Restraints on state subsidies for national champions and caps on budget deficits as a result of economic integration further tied the state's hands. In combination with many of these forces, developing countries faced added pressure for fiscal prudence from international financial institutions. In light of the manifest shortcomings of import substitution policies and the subsequent debt crisis, structural adjustment programs and conditionality were imposed on states as a way of reducing wasteful support for state-owned enterprises and profligate expenditures on state-owned industry and infrastructure. The rise of the good governance agenda and its application to states in the South further pressured them to avoid the risk of corruption through wholesale reductions in state-sponsored investment. [FN43] Privatization, competition, and a reduction of state involvement in the economy have become central components of economic policy more generally and development policy more specifically. [FN44] The simultaneous reduction in domestic demand management and downward pricing pressures on products*180 due to international competition and technological change brought about a decline in aggregate demand in many countries. [FN45] Consequences notwithstanding, private sector development is now the dominant, if not sole, economic policy paradigm. [FN46] Osborne and Gaebler's now famous metaphor about the state steering and not rowing has diffused internationally. [FN47] A dramatically different model of the state has become dominant in OECD countries, developing countries generally, and sub-Saharan Africa in particular.

B. Increased Managerial Innovation and Flexibility

In the last thirty years, management and production have undergone tremendous change. It is not, as the most exuberant proponents of the “new economy” suggest, one that renders traditional criteria for valuing companies wholly irrelevant. Instead, it constitutes a change in the fundamental approaches to private enterprise. According to the new approach to management, the ability to change, constantly improve processes, and reduce costs is a hallmark of success. [FN48]
Throughout much of the twentieth century, business organizations, particularly larger firms, tended to be bureaucratic, centrally organized, [FN49] and, as a result, slow and frequently inefficient. This corporate model, typified by the system of Fordist mass production, established set manufacturing processes and rigid management techniques, which limited opportunities for change. [FN50] Gradually throughout developed economies, reductions in aggregate demand, increased international competition that limited pricing power, shortened product cycles that rendered inventories obsolete more quickly, and the growing knowledge-intense nature of work, strained bureaucratic business models. [FN51] In addition, the emergence and success of many high technology companies, with few fixed assets, led many to see flexibility and intellectual capital as the hallmarks of success. [FN52]
Three interrelated changes are particularly noteworthy. First, firms increasingly began incorporating team production methods. In contrast to the large centrally-directed firm described in Alfred Chandler's work, *181 decentralized structures, oriented to team or group decision-making, became diffuse. [FN53] Under the influence of Japanese production techniques, firms began incorporating production practices that put increasing control in the hands of employee-directed teams. [FN54] Decentralized groups were given the opportunity to use their judgment to set priorities and improve processes. [FN55]
Second, many firms began to incorporate flexible production techniques. The move to flexible production and shortened production times made product offerings more responsive to changes in demand. [FN56] Whereas a high degree of responsiveness to demand previously was confined to small, craft producers, these techniques proliferated among larger firms during the latter part of the twentieth century. [FN57] For instance, the development of just-in-time inventory practices has allowed businesses to anticipate and respond to demands of the market while eliminating sunken inventory costs in outmoded and uncompetitive products. [FN58] Today's firms can combine a high degree of flexibility in product offerings with high output.
Third, firms instituted new approaches to quality control. Techniques such as benchmarking, or “iterated goal setting,” which allow companies to base the development of a new product on comparisons with best practices in an industry and consider competing alternative products, [FN59] have become recognized as leading management techniques. One of the central features of this type of process is the review and modification of these goals in light of experience. [FN60] Error detection and correction in some firms now occur in real time. [FN61] Moreover, through the process of standardization, such thinking has even become institutionalized. ISO 9000, a widely-used management system standard, has effectively codified the practice of constant monitoring and continuous improvement with respect *182 to quality assurance. [FN62]
These changes in business organization have allowed firms to adapt to the uncertainty of rapid economic, institutional, and technological changes. [FN63] In contrast to more rigid manufacturing processes, which view manufacturing decisions as fixed, the new system treats every arrangement as provisional. [FN64]
As a result of these changes in business practices, the regulator's task has become more challenging. No longer can governments depend on consistent business practices in setting regulatory requirements. The very malleability of management practices makes it difficult even to pinpoint the business practices that require regulation. A given practice may become outmoded before agencies can promulgate regulations controlling a certain type of conduct. The relative decline in vertical integration strategies, brought about through contracting, has given rise to more network-oriented forms of organization. Due to this increased flexibility in business, governments must constantly keep pace with the economy. Firms may not intend to evade regulatory initiatives, but regulators are slow to respond to their rapidly-changing practices. [FN65] Within this framework, traditional command-and-control regulatory systems have had to change.

C. Self-Regulation Comes of Age

While self-regulation has existed in a variety of forms for years (e.g., stock exchanges and the legal profession in the United States), mounting criticism in the 1980s and 1990s of command-and-control regulation as inadequate led to increased attention to alternative regulatory programs. The idea was a pragmatic response to diminished resources, as well as a realization that traditional regulation was ineffective and had generated unintended consequences. [FN66] In the United States, the advent of the Organizational Sentencing Guidelines in 1991 allowed for greater reliance on firm-level compliance to leverage dwindling state resources and ensure achievement of regulatory objectives. [FN67] Throughout the OECD, regulators no longer see companies strictly in adversarial terms but rather recognize them as important partners in achieving regulatory objectives. [FN68]
As a result, firm-level self-regulatory measures have grown in importance. Typically, compliance or management-based regulatory strategies provide incentives for firms voluntarily to implement compliance systems *183 and sanction firms that lack such systems. [FN69] While the approaches taken differ among jurisdictions, there is widespread agreement that declining state resources, growth in the number of regulated entities and complexity of business, and the inefficacy of traditional command-and-control regulation require regulators to leverage the resources of private entities in pursuing regulatory objectives. [FN70] Similar considerations would seem to hold in developing countries, although to different degrees depending on a particular country's circumstances.
In some cases, process-oriented solutions have been suggested in place of strict adherence to clear cut rules. ISO 9000 and ISO 14000, the quality assurance and environmental standards developed under the auspices of the International Organization for Standardization, have proved influential in placing the management systems approach at the center of discussions on regulation. These approaches afford companies greater latitude in achieving compliance; companies can satisfy regulatory requirements provided they adopt the proper processes for addressing a particular regulatory issue. This approach has its shortcomings, however, as many observers have noted that companies can have the correct process in place while failing to achieve substantive performance criteria.

III. Critique of Voluntary CSR from a Developmental Perspective
In light of the historical context provided above, this section undertakes a critical examination of voluntary corporate social responsibility. First, I argue that even if norms such as protecting the environment or human rights generally are valued, taking a purely voluntary approach to promoting compliance with such norms will produce few results. Second, I argue that notwithstanding the presumed international dimension of CSR, control of individual business firms is generally the province of states. Third, I argue that voluntary, international CSR programs undermine development priorities, including strengthening domestic governance, insofar as domestic regulatory institutions fail to develop the capacity to protect their citizens. Finally, I contend that a more robust model of regulation complements efforts to transcend the neoliberal model of the state by providing a positive role for the state in driving economic development.

*184 A. Generating Compliance: The Limitations of CSR

CSR proponents use economic incentives as the basis generating compliance with CSR norms. For the most part, these economic incentives and disincentives are linked to corporate reputation. Thus, CSR proponents maintain that firms respond to CSR-related concerns as a result of the self-interested goal of boosting their reputations with consumers, trading partners, and investors. A good reputation will translate into improved sales and profitability or higher stock price, while a bad reputation will have the opposite effect. As to the influence on sales, effects on reputation would be most evident for companies with strong consumer brands. Examples include the consumer pressure imposed on companies such as Nike for its reportedly abusive labor practices, or Shell for its failure to intercede on behalf of Ken Saro Wiwa. In the language of CSR, a key challenge of the movement is to exploit these “reputational drivers” effectively. Proponents argue that firms will act in a socially responsible manner in order to maintain positive reputations among the public. It is worth noting that this argument is neoclassical in substance. Unpacking the argument exposes the following logic:
(1) Firms will choose to do what is economically in their best interests.
(2) Acting in a socially responsible manner clearly inures to their economic benefit.
(3) Therefore, firms will follow social responsibility norms.
As the following analysis of regulation and compliance shows, this logic is fundamentally flawed. If CSR was intended to correct market failure, does it make sense exclusively to rely on market forces as the solution? [FN71]
Even conceding that certain firms might be responsive to improved stock price or customer pressures, these factors are unlikely to generate a high level of compliance. Consumers, trading partners, and shareholders may not countenance slave labor practices by firms or massive disregard for the environment, such as occurred at Bhopal. Yet, given the large number of companies operating in the world, the limited attention of the actors involved, and the voluntary nature of the whole arrangement, it is unlikely that companies will be driven to achieve more than a minimum of social responsibility. Most companies are unknown to consumers and, as experience has shown, to the extent consumers seem to respond to these issues, they have focused on a few companies. Similarly, investor pressure to promote CSR among companies is essentially limited to listed firms and, in *185 any event, generate relatively low-powered incentives to which companies respond by trying to avoid major scandals.
There is, however, reason to question the strong rationality assumptions that CSR proponents attribute to firms. It is not self-evident that even if the posited incentives exist, firms will necessarily choose to act upon them. Indeed, this assumption is itself neoclassical in nature. The evolutionary traditions in economics and the related field of capabilities theory have supplemented the neoclassical view by exploring limitations on profit-maximizing behavior. Nelson and Winter have argued convincingly that rather than maximize profits at every stage, firms are profit-seeking. [FN72] Existing paths and the results of intrafirm “truces” may persuade many employees to leave well enough alone. [FN73]
In summary, there is reason to believe that serious flaws are involved with any CSR initiative that relies almost exclusively on market forces to encourage firms to adopt it. Although discussions of CSR have tended to view them as without historical parallel, this is certainly not the case. Studies of organizational compliance are well advanced and bear intrinsically on the question of what public policy actors can do to induce firm compliance with particular norms. Socio-legal studies and comparative analyses of organizational compliance in OECD countries are particularly relevant.
Many regulatory scholars recognize that there are four types of companies with which regulators have to deal. [FN74] These four types include: those who know the law and are willing to follow it (Group A); those who do not know the law but would like to be law abiding (Group B); those who know the law and do not want to follow it (Group C); and those who do not know the law and do not wish to be law abiding (Group D). Most CSR literature does not even reflect these basics. As this analysis suggests, Group A firms are willing to comply on intrinsic grounds. Yet for CSR proponents, it seems that it is precisely Group A that represents its greatest source of support. Surely CSR must be more ambitious than seeking to ensure that the good continue to be good.
The most convincing argument in favor of voluntary CSR strategies concerns Group B firms. In this case, CSR can serve an educational purpose. The precise limits of CSR are clear with respect to companies in Groups C and D. Under this logic, CSR proponents contend that Group C and D firms should follow CSR norms because it is economically rational to do so. To these proponents, I ask: as rational economic actors, why aren't they already doing it? Bounded rationality can be the only answer. Indeed, bounded rationality may explain the move towards CSR by Group B firms. Yet if Group C and D firms, after having been shown the error of their ways by CSR campaigners, have not acted, can one still rely on *186 bounded rationality to explain their behavior? Could it be that there are good, countervailing economic reasons to explain the socially irresponsible behavior of these firms?
A wide range of compliance literature supports these arguments. Generally it shows that voluntary standards are not self-enforcing. Firm compliance decisions are not solely responsive to the threat of sanction; however, some form of sanction is essential for firms' willingness to comply. [FN75] In competitive markets without the risk of sanction, the likelihood of opportunism by firms dramatically increases. [FN76] One of the leading proposals for management-based regulation advanced by Ayers and Braithewaite recognizes this fact explicitly. They call for voluntary self-regulation not as a stand-alone solution but instead as part of a system of governmentally-enforced self-regulation. [FN77] They reason that firms must have discretion to determine appropriate means of achieving regulatory goals, but that government must oversee and enforce relevant standards, particularly in dealing with less cooperative firms.
*187 In contrast to CSR discussions in which reputational advantage is the dominant driver, research has helped conceptualize compliance in terms of a dynamic process. Bridget Hutter conceptualizes compliance as an outgrowth of a longstanding relationship and series of interactions between the regulated firm and regulators. [FN78] From this perspective, one can say that firms have an enforcement “career,” meaning an ongoing relationship between the firm and the regulator. [FN79] “Enforcement officials interpret, classify, and test the regulated and act accordingly,” she writes. [FN80] Consistent with the notion of graduated enforcement pyramids developed by Ayers and Braithwaite, as this regulatory career unfolds, the regulator can gradually intensify coercion in the event that the regulated firm fails to comply. [FN81] This view does not assume that regulators must use coercion, but rather it recognizes that achieving something more than compliance among the willing requires an array of instruments, as well as regulatory authorities with historical and current knowledge of the entities they regulate. [FN82] In other words, voluntary compliance may occur spontaneously but any serious discussion of compliance with a given regulatory regime requires some reference to enforcement tools as well. [FN83] Indeed, the very notion of voluntary compliance posited by Ayers and Braithwaite contends that the coercive power of the regulator is essential to generating voluntary compliance. [FN84]
Sophisticated public policies reflect this realistic understanding of the proper role of sanctions in any regulatory regime. The Ministry of Justice and Erasmus University in the Netherlands together developed an innovative approach to assess the likelihood that regulatory compliance will occur. They produced a Table of Eleven (“T11”) key determinants of compliance that effectively synthesized much of the research on the topic. [FN85] This framework demonstrates that the factors driving compliance decisions are multifaceted and complex. The T11 indicators break down the analysis into three aspects: (1) spontaneous compliance dimensions (i.e., those that generate voluntary compliance); (2) control dimensions (i.e., factors based on the likelihood of enforcement as drivers of the compliance decision); and (3) sanctions dimensions.
Consistent with the earlier discussion of Group A and B firms, most CSR compliance can be attributed to spontaneous factors. Following the T11 analysis, knowledge and general acceptance of particular CSR rules or *188 standards by firms, their normative commitment to such rules or standards, and the possibility of informal control account for most CSR compliance. [FN86] Contrary to radical skeptics, the existence of these influences shows that firms are not wholly opportunistic.
Again, this is only the beginning of the analysis. Voluntary CSR initiatives-- unlike binding state-imposed regulations--can rely only on these spontaneous compliance drivers. Standing alone these considerations are insufficient. They ignore Group C and D firms and fail to take into account that the phenomenon of spontaneous compliance occurs within a regulatory system that provides sanctions for non-compliance. The control and sanctions dimensions of the T11 framework are of critical importance to deal with Group C and D firms (and to motivate A and B firms). [FN87] Factors such as the control probability (T7) and detection probability (T8) reflect the fact that scrutiny of firms by regulators contributes significantly to levels of compliance. When dealing with uncooperative firms, the state's ability to devote substantial resources to such investigations is an important contributor to its success. Moreover, regulatory and law enforcement bodies can enforce their audit powers through the courts. The state can even employ the threat of enforcement as a bluffing strategy designed to push recalcitrant firms into compliance. [FN88] Such factors clearly influence the importance of an audit to the audited firm. It is only logical that it also positively influences compliance. In contrast, private verification schemes, although more thorough than self-reporting systems, do not permit auditors an unlimited amount of time. Without mandatory audit rules, audited firms have great incentives to limit the costs of the endeavor by reducing its duration.
Finally, sanctions available to regulators extend beyond direct economic penalties. Regulators can issue warnings, suspend licenses of firms or their agents, deny permits, issue injunctions, and increase the frequency of inspections. As Ayres and Braithewaite suggest with the enforcement pyramid, regulatory and enforcement bodies can adjust their actions in response to the regulated community's conduct. Serious economic consequences follow from the state's use of any of these powers against particular firms. In contrast, CSR initiatives must rely on the power of reputational risks, which have only an indirect or uncertain cost element, as disincentives.

B. Regulating Firms is a State Function

Despite an increase in international commerce and law-making, regulation*189 remains state-based. [FN89] On a general level, voluntary CSR initiatives seek to create an international regulatory framework that applies directly to firms, bypassing the state. In light of the constraints on state expenditures arising from international financial institutions and global capital market pressure, this attempt to regulate from above is understandable. As a matter of regulatory and development policy, however, it is mistaken.
States occupy a privileged position in connection with regulatory activities. [FN90] Much attention has been given to state activity in shaping the substance of international law through international fora, but along the way the central role of state-based regulation in the process of controlling economic activity has become obscured. Hirst and Thompson describe the state as the “locus of governance in a galaxy of increasingly interlinked institutions of governance above and below it.” [FN91] In one sense, state-level regulatory systems constitute that locus. [FN92] Only states can undertake the necessary work to ensure that the international norms to which they have bound themselves in international fora are respected in their territories.
International fora produce norms that by their very nature can be generalized across a variety of jurisdictions. Cosmopolitan democracy [FN93] remains a valid concept when it comes to defining generally agreed-upon norms, but it is inadequate for local regulation, something that must occur through local deliberative democratic processes. Moreover, regulation of firms is in its essence particularistic. It is something states are uniquely able to do.
Only states have the knowledge necessary to regulate industries operating within their territories. They incorporate firms, whether as subsidiaries of multinationals or domestic firms. Regulatory personnel at the state *190 level have intimate knowledge of the regulatory framework within their jurisdictions. They understand the strengths and weaknesses of domestic regulatory capacity and can assess the relative need for self-regulatory measures over traditional command-and-control regulation. From a practical perspective, the state should implement structures to facilitate the participation of the public in setting standards that concern matters of CSR.
In comparison to voluntary CSR measures, which at best offer limited coverage of firms and industries, states regulate comprehensively. [FN94] An environmental law, for instance, applies to all firms of a certain size. Health and safety laws apply to all firms operating certain types of facilities. CSR measures cannot claim the same degree of coverage. Generally, they only apply to a subset of usually self-selecting firms. They may target only firms in certain industries or those that agree to participate in a given program. Their inconsistent coverage makes the rationale for the existence of CSR initiatives--states' lack of regulatory capacity--ring hollow.
States can also provide monetary incentives and disincentives. One way they can do so directly is by manipulating fiscal policy. For example, states can tax firms that pollute excessively. Thus, fiscal policy, with its ability directly to effect corporate profits, can potentially be much more powerful than CSR, which depends on reputational damage, and any subsequent indirect effects on corporate profits, as its incentive mechanism.

C. Learning to Regulate (and Govern)

At their core, arguments promoting voluntary standards over regulation in developing countries rest on utilitarian or pragmatic justifications. Proponents reason that many states are unable to fulfill their obligations to enforce international or domestic legal norms, and thus the international community must create some alternative system to prevent inappropriate practices. Such a view focuses solely on outcome-oriented values while ignoring process-oriented ones: maintaining certain norms are only valuable insofar as their outcome (corporate regulation) is achieved. It sees no social gains to be realized in the processes (setting up state regulatory bodies, for example) that make such outcomes possible. In other words, how society comes to adhere to particular norms generates social goods distinguishable from the outcomes. Such a process is particularly important for struggling democracies and emerging market economies.
In many developing countries, state structures are weak. [FN95] Resource-strapped regulators lack the ability or means to ensure that rules are followed.*191 Poor enforcement authorities, such as justice ministries, hinder vigorous litigation. Corruption distorts state functions. Despite the prevalence of these phenomena, many developing countries are attempting to improve state performance. These reforms, however, do not occur in a vacuum. To be effective, the state must take meaningful actions to address society's concerns. [FN96] Enforcing norms related to corporate social responsibility thus constitutes an important part of the development of the state along with the development of the market.
By developing their capacity to regulate economic activity and harmful corporate conduct, states gain vital knowledge. Initial enforcement actions and prosecutions of corporations may be difficult and challenging, but by engaging in the process, enforcement personnel learn two things. First, they learn that effective regulation is possible. In addition, they learn the techniques and challenges involved in holding firms accountable for their actions. These results improve comprehensive state regulatory capacity.
Successful enforcement efforts help garner public support and enhance regulatory legitimacy. [FN97] In this sense, command-and-control regulatory systems, though frequently disparaged among regulatory scholars today, may, through their brightline rules and clear enforcement practices, positively influence the public's perception of the state's legitimacy. [FN98] Moreover, strong regulatory legitimacy strengthens both the state and the market. Unless the development of state capacity occurs jointly with the development of the market, it becomes more likely that the weakness of the former will jeopardize the latter.
Alternatively, if the state shows itself to be ineffective in controlling market actors, then the state may come under attack. Angered by incompetence or lack of vigor in the executive, citizens may demand more. For regulation and, more broadly, governance to improve in many developing states, the conditions for effective redress and communication between state and citizen must be strengthened. [FN99] Perpetuating the existing system of elite dominance can only hamper the development process.
Strengthening these conditions involves generating local knowledge about the preferred method to control corporations in particular jurisdictions. Different jurisdictions will experience different labor practices, different production practices, and different incentive schemes. Different tax structures may enable regulators to provide incentives or disincentives that are unique to a jurisdiction. Different corporation laws may facilitate the imposition of sanctions designed to correspond to prevailing organizational structures in a jurisdiction. Different civil and criminal procedure *192 laws may make it more or less likely that actions can be successfully brought or defended. Different licensing regimes may give regulators tools with which to control firm behavior that are unique to a jurisdiction. Likewise, regulatory institutions learn to regulate better through improved understanding of the firms within their jurisdiction. [FN100] To the extent that regulators develop a deeper knowledge of firm histories in their jurisdiction, they can better determine which regulatory techniques to apply. States--not private auditing firms, NGOs making an occasional visit to a country, or the press--are best equipped to distinguish cooperative from uncooperative firms and regulate accordingly. [FN101]
The learning that occurs within regulatory and enforcement bodies is not consigned to each institution standing alone. Such bodies can share practical experience horizontally. As it becomes understood that one method of dealing with violators works better than another, knowledge can be shared across agencies. An environmental agency, for example, may share useful experience with an occupational health and safety regulator that improves practice in the latter, for example. Good knowledge dissemination practices among these bodies may improve the state of public management overall.
Nor is learning confined to regulatory institutions. The process of defining and developing a legal understanding about law and regulations designed to implement CSR norms concerning the environment, labor, or human rights domestically, enriches countries' legal systems. States implementing statutory or regulatory provisions related to CSR can tailor enactments to their legal systems generally, while responding to the views of their citizens in determining an acceptable level of rigor for such provisions. Under conditions of scarce resources, the state must ensure coordination of regulatory priorities with broader development agendas. Moreover, after enacting relevant norms, courts and administrative tribunals can develop doctrine and case law that ensure compatibility between such norms and domestic systems. Through legislative and judicial activity, domestic actors know whom to turn to if dissatisfied. National debates can develop the best methods of regulating negative labor or environmental practices. Likewise, courts can explore national positions on the distinction between nuisance and environmental harm, or tort and human rights violations. By rooting CSR provisions in domestic legal systems, countries may organically tie such provisions to their shared experiences and hopes.
The view that states must exercise regulatory power within their jurisdictions over CSR matters does not limit them to command-and-control regulation. States may choose to develop structures in which management system standards or other more flexible regulatory structures are built into existing systems. Even states that have endorsed specific non-governmental*193 standards, such as ISO 14000, have retained their power to regulate. Rather than exempting ISO 14000-certified firms from all forms of environmental regulation, for instance, certified firms may qualify for less intrusive or less frequent inspections, or receive favorable treatment in enforcement and settlement proceedings. [FN102] Yet, the decision whether such matters ought to be left to wholly self-regulatory initiatives must be subject to much closer scrutiny in states struggling to assert their power and establish their legitimacy.
For these reasons, the expansion of voluntary CSR regimes that sidestep state institutions creates significant problems for developing countries. Even assuming that such initiatives can deliver the social goods, they leave state institutions no better off. Indeed, to the extent that regulation of the economy comes to be seen as something that non-state actors accomplish, the priority of building regulatory capacity in already fragile African states will be underemphasized. As their markets develop, the gap between states' ability to oversee the market and actual market activity will only widen. Under these conditions, if voluntary initiatives, even the more rigorous ones, leave social conditions unimproved, the shortfall in state regulatory capacity should elicit even greater concern.

D. Beyond Economic Orthodoxy

The call for the state to take a central role in private sector regulation is only one part of the effort to overcome the most pernicious applications of economic orthodoxy. Rather than stand by as passive observers of the development process favored by neoliberals, states must develop their capacity to foster development in strategic and intelligent ways. Turning over power to control (i.e., regulate) socially harmful practices to the private sector through CSR initiatives effectively undermines the development of state capacity not only to regulate but also to expand the domestic economy and mitigate social harms. [FN103]
The history of neoliberalism is a history that casts state intervention in the economy as a necessary evil to be avoided. Yet, continuing declines in economic growth rates in African states, even after neoliberal reforms, suggests that a development policy that looks exclusively to the private sector may be misdirected. As the International Monetary Fund (IMF) and World Bank are forced to reconsider the approach to structural adjustment, a new understanding of the role of the state and the need for more flexibility*194 in economic policy is emerging. [FN104] Heterodox economists such as Robert Wade and Joseph Stieglitz have made compelling arguments supporting a larger role for the state in economic development. From this perspective, notwithstanding the failure of certain state-led development policies such as import substitution, the state is viewed as an important catalyst for growth. [FN105] The state is thus not merely the source of the “rules of the game,” after which it must withdraw. Viewed in this context, voluntary CSR appears lost in the wilderness. At its core CSR posits a central role for non-state, voluntary approaches to regulation in relevant fields. An improved economic understanding of the role of the state, as opposed to the market, sees the need for a strong state capable of investing to promote growth, rather than a weak state buttressed by regulatory forces that operate independent of its authority. Only strong state institutions can promote economic growth and reduce negative externalities.
If it is true that the neoliberal critique of the state has supported the rise of voluntary CSR initiatives, and to the extent that development experience now suggests that this critique has been oversold, one cannot consider voluntary CSR without first rethinking the perception of the state's role. That role involves designing regulatory policy in harmony with economic and development policy. Improved state capacity is a precondition for the state playing a role in promoting economic development. In departing from neoliberalism--both in its anti-Keynesian and liberalization phases--CSR begins to appear less compelling. If a greater role for the state is accepted--particularly in developing countries--it is no longer necessary to accept the enfeebled solution of voluntarism. Instead we may look towards a revitalized state that can vigorously and justly advance development.

*195 IV. Examples of Alternatives: African Cases
The critique offered in the previous section proceeded on a general level. The following section sets out some specific examples of how state regulatory and enforcement authorities in African states can work to develop strong responses to societal needs. The first seeks to show the value of state anti-corruption enforcement. This case illustrates how increasing state capacity can enable states to confront socially irresponsible corporate conduct. The second concerns a more technical matter involving efforts of state regulators to coordinate their regulatory approaches and ensure equitable treatment in international negotiations. Maintaining the developmentalist view advanced in this paper, these initiatives do not suggest that ambitions have been categorically achieved but rather speak to the challenges involved in creating functioning regulatory and enforcement systems.

A. Lesotho High Water Dam Prosecutions

In 1999, the Attorney General of Lesotho charged a former chief executive of the Lesotho Highlands Water Project (LHWP) with accepting $2 million in bribes from international companies over ten years. [FN106] Sponsored by the World Bank, the European Union, and the European Investment Bank, the LHWP is Africa's largest dam project in history, meant to supply South Africa with water and Lesotho with electricity. The Lesotho courts found the former official guilty of thirteen counts of bribery and fraud linked to the LHWP and sentenced him to eighteen years in prison. [FN107] After his conviction, more than a dozen European and North American construction companies were also implicated in the scandal. [FN108]
Among the firms was Germany's Lahmeyer International GmbH (owned by RWE). Lahmeyer was charged on twelve counts of bribery and convicted of seven. [FN109] It was fined approximately $1.6 million. On appeal these counts were all sustained and the fines were increased to approximately $2 million. Similarly, Canada's Acres International was convicted of two counts of bribery but succeeded in having one count overturned on appeal. It was fined approximately $2 million for its actions. In addition to these prosecutions, the French firm, Schneider International, pled guilty and was fined $1.6 million for its involvement. Finally, an agent of an Italian member of the consortium Impreglio pled guilty to arranging to bribe the chief executive of the project. These actions represent “the first time that courts in a developing country have convicted an international company for paying bribes rather than just prosecuting a local official for taking bribes.” [FN110]
*196 By all accounts, conducting a prosecution of this magnitude required substantial resources. [FN111] The litigants were located all over the world. Tracing the proceeds of the bribes required judicial cooperation with multiple jurisdictions, including Switzerland. Other than Switzerland, most other OECD countries and the EU failed to support these prosecutions. [FN112] Surprisingly, none of the project sponsors were willing to offset the costs of the prosecutions. [FN113] Moreover, because the project was established as a corporation separate from the state, the Lesotho government had no recourse to any funds held by the corporation to offset its costs. While South Africa considered offsetting some of the expenses, at this time they appear not to have fulfilled the offer. The United States provided some assistance in the form of computers and Westlaw access in the law library of the Court of Appeals. [FN114]
Notwithstanding these impediments, the Lesotho courts performed well. According to judges on the Courts of Appeals and High Court, the difficulty involved in coming to terms with large legal teams assembled by the firms under indictment was significant. [FN115] The dedication of time and resources for a small country such as Lesotho was also considerable. Demonstrating the commitment of the government, this poor country facing an HIV/AIDS epidemic had to devote resources to this case that could have been used elsewhere. [FN116] Judges from other jurisdictions and practitioners provided assistance to the judiciary and Attorney General's office. [FN117] To maximize judicial resources, one judge was assigned to the cases full time. The noticeable pride of those involved in the trials was that they had launched a major prosecution on a matter of principle. In the words of a former South African judge, the Lesotho prosecuting authorities “set an example of good governance, and have delivered a blow on behalf of all countries who face major challenges in strengthening their infrastructure through project activity.” [FN118] It is a victory for the rule of law that a country such as Lesotho was able to overcome international banking secrecy in just over a year and make a successful case against some of the world's largest and most powerful contractors.

B. Forest Law Enforcement and Governance in Cameroon

The Africa Forest Law Enforcement and Governance (AFLEG) initiative is a clear instance in which the international community has enhanced *197 regulation and enforcement instead of using voluntary CSR to address significant environmental risks. After holding a summit in Yaounde in 1999, the states in Western Congo Basin held a summit in 1999 designed to ensure that forests remained a renewable resource able to ensure biodiversity. Later, ministers from some of these countries indicated their interest in focusing on forest law enforcement and governance issues. From these beginnings, the AFLEG initiative was launched under the auspices of the New Partnership for African Development (NEPAD) “to strengthen high level commitment . . . to build capacity for forest law enforcement, in particular relating to illegal logging and hunting, associated trade, and corruption.” [FN119] Because the ministerial-level focus of AFLEG is quite general and encompasses a number of states, I will focus on the experience of one of the participating AFLEG states, Cameroon, which has taken substantial steps in protecting its forests.
Timber is the second biggest export of Cameroon. As an effort to improve the efficiency of the timber industry, increase tax compliance by logging firms, and improve the welfare of local and indigenous peoples through community involvement in forest management, Cameroon enacted the Forest Act of 1994 (the “Act”). [FN120] Cameroon initially passed the Act under the World Bank's mandatory terms of conditionality, but the Act's implementation required additional efforts lasting approximately five years. [FN121] The Act's focus on preserving forests as a source of an economically important resource combines concern for the environment with broader development priorities. [FN122]
The Ministry of Environment and Forests administers the Act through the Central Control Unit (CCU). The law initiates a decentralized program of forest management, giving local communities the right to manage up to 5,000 hectares of forest on a twenty-five-year rotation pursuant to a management plan. Communities incur expenses for filing the plans but collect royalties in the form of leases to logging companies. In addition, communities receive a portion of taxes assessed by the central government for forest activities. Private firms must obtain Forest Management Units that entitle them to log over a given area for a specified period, subject to regeneration requirements. [FN123]
The CCU monitors compliance with the Act through field inspections. In 2000, the Cameroon government, after discovering substantial evidence *198 of corruption and irregularities in the forestry sector, invited Global Witness, an international NGO, to work alongside the CCU inspectors and other Ministry departments to provide independent observation. [FN124] In addition to providing independent verification, Global Witness helped strengthen capacity among the inspectorate. It publishes periodic reports detailing both compliance with the law and the practices of the inspectors, such as failure to sanction observed violations.
According to the Independent Observation reports issued by Global Witness, since the system of independent observation began, official statements issued and prosecutions for illegal logging have increased. [FN125] As a result of this program of law enforcement and independent monitoring, significantly more illegal logging practices have been exposed in Cameroon than in neighboring countries. [FN126] However, Global Witness has exposed cases involving both a lack of cooperation and transparency, and even corrupt practices, of the Ministry, demonstrated by the lack of scrutiny over permit violations by certain private firms. [FN127] The Ministry has appeared reluctant to issue official statements regarding offenses, and there is transparency regarding fines. [FN128] In addition, the standards for documenting detected infractions appear inadequate for judicial proceedings, and CCU personnel undertake the inspection missions inadequately prepared. [FN129] Global Witness recommends a program of training to build capacity within the institution. [FN130]
The lesson of Cameroon is that states can enhance local law enforcement through the sustained involvement of the international community, including bilateral and multilateral donors and the NGO sector. However, the Cameroon forestry initiative has not been without its critics. In particular, many doubt the success of the community-based governance approach. As the Global Witness review suggests, corruption and incompetence undermine the CCU's effectiveness. [FN131] Analysis suggests that there is cause for optimism, however, and the shortcomings may be attributed to growing pains as the state comes to terms with administering the new law. To development professionals working with state administrative and legal institutions, the challenges Cameroon faces are familiar. Having already created a workable legislative framework, the Ministry must eliminate corrupt practices from its inspection function, develop enforcement capacity, prosecute cases to conclusion, and improve its oversight competence. Meeting those challenges could make Cameroon an example for the *199 Congo Basin region. [FN132]

V. Conclusion
Proponents of the position that states should defer to international voluntary CSR initiatives as a way of regulating important aspects of their economies, in areas such as labor, human rights, and the environment, erroneously assume that states will not need to develop this capacity. [FN133] To the contrary, globalization of production and trade is inevitable, requiring states to develop the relevant capacity quickly.
The AFLEG initiative and Cameroonian efforts to enhance traditional state regulatory and enforcement capacity, rather than advance a voluntary CSR approach targeted at MNCs, may be indicative of the international community's desire to develop a rigorous response to the issue of forest conservation. If this conclusion is true, then it may be reasonable to conclude that the matters with which voluntary CSR programs are concerned do not enjoy the degree of political support needed to get serious about the issues. From this perspective, voluntary CSR is a short-term compromise, useful only until the international community considers it necessary to take more forceful action. Unfortunately, rather than adopt a developmentalist approach--viewing these programs as transitional efforts on the way to more rigorous domestic regulation over CSR matters--the discourse surrounding voluntary CSR employs the same optimism that characterized utopian visions in the past.
Given the predominance of market economies in today's world, improving regulation must be a priority. Voluntary measures can only play a role if states establish basic regulatory frameworks. Contrary to assumptions of voluntary CSR proponents, state regulation of the environment, labor rights, enforcement of human rights, and anti-corruption laws cannot be delegated to international or private organizations. Empowering domestic regulators is an essential component of the struggle to realize the positive benefits of capitalist development while limiting its negative effects. As experience with the New Economy showed, we ought to be skeptical of the view that the rules of the game have shifted fundamentally, such that the old problems no longer exist. This article contends that despite the increasing dependence of firms in OECD countries on production in developing countries, the challenges of today are the same as those that regulators have faced throughout the industrialization process. Contrary to the universalistic aspirations of CSR, strengthening domestic regulatory and enforcement institutions in developing countries is messy work, involving processes of trial and error. While the coercive power monopolized by state regulatory authorities has its limitations, it also has many benefits *200 which must not be understated. It is at great peril that we cede these responsibilities to untested methods that intuition, analysis, and experience suggest are bound to fail.
[FNd1]. General Counsel, International Development Law Organization, Rome, Italy. An earlier version of this article was released as the George Washington University Law School Public Law Research Paper No. 123 and appeared as part of the International Development Law Organization's Voices of Development Jurist Working Paper Series.

[FN1]. See, e.g., Tim Pringle & Stephen Frost, The Absence of Rigor and the Failure of Implementation: Occupational Health and Safety in China, 9 Int'l. J. Occup. Env't. Health 309 (2003).

[FN2]. Examples of these initiatives include AccountAbility 1000 Framework; AA1000 Assurance Standard; Business Principles for Countering Bribery; CERES Principles; Clean Clothes Campaign: Model Code; Eco-Management and Audit Scheme; Ethical Trading Initiative: Base Code; Fair Labor Association: Workplace Code of Conduct; UN Global Compact; Global Reporting Initiative; Global Sullivan Principles of Corporate Social Responsibility; ICC Business Charter for Sustainable Development; Marine Stewardship Council's Principles and Criteria for Sustainable Fishing; The Natural Step Principles; OECD Guidelines for Multinational Enterprises; Shell Business Principles; SIGMA: Sustainable Guidelines for Management.

[FN3]. Among OECD countries, these areas are generally thought to be delimited by the law and thus CSR is sometimes assumed to refer to efforts to exceed legal requirements. Other discussions, particularly those concerning developing countries, invoke CSR as a way of supplanting or overcoming inadequacies in domestic legal orders. Confusing matters further is the recent trend among business interests in the United States and elsewhere to re-define the term by leaving out the word “social.” Hence, one sees press conferences with business executives promoting “corporate responsibility,” which usually amounts to no more than executives and firms obeying the law. The precise boundary between CSR initiatives and legal requirements are unclear in these discussions. For the purposes of this paper, I will consider CSR as the effort to overcome inadequacies in existing legal structures and enforcement regimes in developing countries with respect to the social issues identified above. This paper criticizes the attempts by various actors to remedy these problems primarily through voluntary measures.

[FN4]. See, e.g., OECD, Regulatory Policies in OECD Countries: From Interventionism to Regulatory Governance (2002) (describing the need to maximize voluntary compliance).

[FN5]. See, e.g., Dara O'Rourke, Outsourcing Regulation: Analyzing Non-Governmental Systems of Labor Standards and Monitoring, 31 Pol'y Stud. J. 1 (2003).

[FN6]. See, e.g., U.N. Environment Programme, Guide to the Global Compact: A Practical Understanding of the Vision and Nine Principles at 25, available at http://www.uneptie.org/outreach/compact/docs/gcguide.pdf (“Whilst recognizing that the role of governments in ensuring respect for human rights remains extremely important ...”). Although this comment seems quite strange--rather than just extremely important, most people view the state as the central, dominant authority in ensuring adherence to human rights law--it is a formulation that is quite common in CSR literature.

[FN7]. Indeed, in the European Commission's statement on CSR, voluntarism is an essential defining element of these initiatives. See Commission Green Paper on Promoting a European framework for Corporate Social Responsibility (July 18, 2001), at 8 (defining CSR as “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with stakeholders on a voluntary basis”). This bias towards voluntarism with respect to adherence to fundamental human rights by firms has generated some unseemly formulations. In a brochure on CSR from the international law firm Freshfields Bruckhaus Deringer, clients are advised that “companies should seek to avoid compulsory or child labor” and “take due account of the need to protect the environment.” Freshfields Bruckhaus Deringer, Corporate Social Responsibility 5 (2004) (emphasis added). It should go without saying that on any formulation, firms have an absolute moral imperative to avoid compulsory labor. Likewise, does the notion of “taking due account” of the environment in countries of operations not seem incredibly weak in contrast to similar legal obligations?

[FN8]. See, e.g., Michael Santoro, Beyond Codes of Conduct and Monitoring: An Organizational Integrity Approach to Global Labor Practices, 25 Hum. Rts. Q. 407 (2003). The introduction to this article illustrates the central focus on issues of outsourcing by multinationals:
At the turn of the century, multinational corporations (MNCs) have learned-- often the hard way as a result of embarrassing exposés--that their bottom line can suffer when they fail to live up to public expectations about honoring human rights in third world countries. Among other things, global marketing firms are being asked to provide transparent assurance that their suppliers in third world nations avoid the use of child labor and honor workers rights to acceptable living wages, overtime pay, safe and healthy working conditions and free association.
Id. at 408. Similarly, Freshfields Bruckhaus Deringer contends that the rationale for CSR is attributed to globalization of business and market liberalization that has led many companies to initiate international operations. Freshfields Bruckhaus Deringer, supra note 7, at 5.
[FN9]. See Nicola Phillips, State Debates in International Political Economy in Globalizing International Political Economy 82, 82 (Nicola Phillips ed., 2005) (describing hyperglobalist view); David Held, Governare la Globalizzazione 30 (2005) (stating that many have posited the end of the nation state as a result of globalization).

[FN10]. Cynthia Day Wallace, The Multinational Enterprise and Legal Control: Host State Sovereignty in an Era of Economic Globalization 11 (2002) (citing dominant view that MNCs can take advantage of the complexity of political and legal systems to create a world of their own which must accommodate itself in the conduct of its operations to many legal systems but is not in any real sense subject to any of them).

[FN11]. See generally Peter A. Hall and David Soskice, Varieties of Capitalism (2001).

[FN12]. Id.

[FN13]. Id. at 4 (“Our premis[e] is that many of the most important institutional structures--notably systems of labor market regulation, of education and training, and of corporate governance--depend on the presence of regulatory regimes that are the preserve of the nation-state.”).

[FN14]. Linda Weiss, States and the Global Economy: Bringing Domestic Institutions Back In 10 (2004). See also Held, supra note 9, at 30.

[FN15]. Weiss, supra note 14.

[FN16]. Wallace, supra note 10. A common but mistaken argument is that because the revenues of MNEs often exceed the budgets of various developing countries, the private firms essentially dominate those states. See Pall A. Davidsson, Legal Enforcement of Corporate Social Responsibility within the EU, 8 Colum. J. Eur. L. 529 (2002) (stating that economic power of MNEs often surpasses that of states). But this is a rather hasty conclusion to draw from comparing these figures. As will be described later in the article, states wield many instruments with which to enforce law and regulation, and it cannot be said ipso facto that modest state revenues preclude states from enforcing law against even the largest international firms.

[FN17]. Studies of tax rates, supposedly a key driver of firm arbitrage between jurisdictions, suggest, that the race to the bottom argument is misleading. See Geoffrey Garrett, Global Markets and National Policies: Collision Course or Virtuous Circle?, 52 International Organization 787, 801 (1998) (citing tendency for multinational producers to locate in countries with large public economies and high taxes); M. Ramesh, Globalization and Social Security Expansion in East Asia, in Weiss, supra note 14, at 83 (showing significant expansion of social welfare in Korea and Taiwan during period when they were integrating rapidly with the global economy); John M. Hobson, Disappearing Taxes or ‘Race to the Middle’? Fiscal Policy in the OECD, in Weiss, supra note 14, at 49 (noting that states have been able to attract increased foreign investment while simultaneously maintaining and, in some cases, increasing corporate income tax yields).

[FN18]. See Freshfields Bruckhaus Deringer, supra note 7.

[FN19]. See Robert Baldwin and Martin Cave, Understanding Regulation: Theory Strategy and Practice (1999) (describing rise of regulatory state in Britain throughout nineteenth century).

[FN20]. Alan Brinkley, Liberalism and Its Discontents 38 (1998).

[FN21]. Cass Sunstein, After the Rights Revolution: Reconceiving the Regulatory State 12-13 (1990).

[FN22]. Lochner v. New York, 198 U.S. 45 (1905).

[FN23]. Sunstein, supra note 21, at 20.

[FN24]. Id. at 24 (noting that between 1930 and 1940, the federal government created 17 new agencies but that later expansion of the regulatory state far exceeded this number. Between 1960 and the mid-1980s, more than 55 new agencies were created).

[FN25]. Id. See generally Bruce Ackerman, We the People: Foundations (1991).

[FN26]. Sunstein, supra note 21, at 21.

[FN27]. Id. at 29.

[FN28]. Nicolas Spulber, Managing the American Economy from Roosevelt to Reagan 107 (1989).

[FN29]. OECD, Towards Full Employment and Price Stability (1977).

[FN30]. See INS v. Chada, 462 U.S. 919 (1983). Congress's attempt to create a legislative veto was a particularly noteworthy instance of a larger movement for legislative oversight.

[FN31]. Sunstein, supra note 21, at 30.

[FN32]. See James M. Boughton, The Silent Revolution: The International Monetary Fund 1979-1989 (2000). The author describes these developments in reference specifically to the IMF experience; however, the observations have wider applicability: “The term ‘silent revolution’ ... refers here to a shift in the prevailing paradigm for international economic and political relations, away from tendencies toward autarky, insularity, mercantilism, and governmental planning and control over economic activity; and toward a common set of beliefs and policies based on open international trade and finance, competitive pricing and production decisions, and cooperation between countries. To a great extent, the silent revolution of the 1980s resulted from a shift in economic philosophy toward a new classical synthesis in which government has an indirect role in, but not a direct responsibility for, ensuring national economic prosperity; in which private economic activity is promoted through good governance and the development of physical and social infrastructure.” Id. at 3 (footnote omitted).

[FN33]. See generally Exec. Order No. 12,291, 46 Fed. Reg. 13,193 (Feb. 17, 1981).

[FN34]. Id.

[FN35]. Id.

[FN36]. See, e.g., Boughton, supra note 32 (referring to the generally light-handed approach to the regulation of markets by the Reagan Administration).

[FN37]. See generally, OECD, supra note 4.

[FN38]. Baldwin and Cave, supra note 19, at 35-39.

[FN39]. Id.

[FN40]. Spulber, supra note 28, at 107.

[FN41]. See International Finance Corporation, Doing Business in 2004: Understanding Regulation (2004).

[FN42]. See, e.g., Rainforest Foundation, Forest Management Transparency, Governance and the Law: Lessons from the Congo Basin 39 (2003), available at http://www.forestsmonitor.org/afleg/en/Case_studies.pdf.

[FN43]. Boughton, supra note 32.

[FN44]. See, e.g., Michael U. Klein & Bita Hadjimichael, The Private Sector in Development (World Bank 2003) (“Openness and competition are key reasons we can have hope for poverty reduction.”).

[FN45]. Dean Baker et al., Globalization and Economic Policy (1998).

[FN46]. See, e.g., Klein & Hadjimichael, supra note 44.

[FN47]. David Osborne & Ted Gaebler, Reinventing Government: How the Entrepreneurial Spirit is Transforming the Public Sector 25 (1993).

[FN48]. See generally Thomas F. McInerney, Implications of High Performance Production and Work Practices for Theory of the Firm and Corporate Governance, 2004 Colum. Bus. L. Rev. 135 (2004).

[FN49]. See Charles F. Sabel, Design, Deliberation, Democracy: On the New Pragmatism of Firms and Public Institutions (1995), available at http:// www2.law.columbia.edu/sabel/papers/Design.html.

[FN50]. See generally Michael Piore & Charles Sabel, The Second Industrial Divide (1984). See also Alfred D. Chandler, Jr., The Visible Hand: The Managerial Revolution in American Business (1977).

[FN51]. Piore & Sabel, supra note 50, at 60.

[FN52]. Susan Helper et al., Pragmatic Collaborations: Advancing Knowledge While Controlling Opportunism, 9 Indus. and Corp. Change 443 (2004).

[FN53]. See generally Sabel, supra note 49. See also Helper et al., supra note 52, at 5.

[FN54]. Benjamin Coriat, The ‘Abominable Ohno Production System.’ Competences, Monitoring, and Routines in Japanese Production Systems, in The Nature and Dynamics of Organizational Capabilities 213, 217, 228 (Giovanni Dosi et al. eds., 2000).

[FN55]. Eileen Appelbaum & Peter Berg, High Performance Work Systems: Giving Workers a Stake, in The New Relationship: Human Capital and the American Corporation 102, 103 (Margaret M. Blair & Thomas A. Kochan eds., 2000).

[FN56]. See Rosemary Batt, Work Organization, Technology, and Performance in Customer Service and Sales, 52 Indus. & Lab. Rel. Rev. 539 (1999).

[FN57]. See generally Piore & Sable, supra note 50, at 221 (describing flexible production techniques).

[FN58]. Timothy J. Sturgeon, Modular Production Networks: A New American Model of Industrial Organization, 11 Indus. & Corp. Change 451, 482 (2002).

[FN59]. Sabel, supra note 49, at 4.

[FN60]. Charles F. Sabel, Learning by Monitoring: the Institutions of Economic Development, in The Handbook of Economic Sociology 137, 155 (Neil J. Smelser & Richard Swedberg eds., 1994).

[FN61]. Steven J. Spear, Just-in-Time in Practice at Toyota: Rules-in-Use for Building Self-Diagnostic, Adaptive Work Systems 24 (Harv. Bus. Sch., Working Paper No. 02-043, 2002).

[FN62]. See The ISO 9000 Handbook 19-27 (Robert W. Peach ed., 2nd ed. 1992). For an analysis of the broader significance of the continuous improvement philosophy, see John Braithwaite & Peter Drahos, Global Business Regulation 615-16 (2000).

[FN63]. Manuel Castells, Rise of the Network Society 165 (2000).

[FN64]. Sabel, supra note 49, at 17.

[FN65]. See e.g., O'Rourke, supra note 5 at 21 (noting that The Gap, for instance, may not know which suppliers it is using at a given time).

[FN66]. Ian Ayres & John Braithwaite, Responsive Regulation: Transcending the Deregulation Debate 158 (1992).

[FN67]. See U.S. Sentencing Commission, Guidelines Manual, §§8A1.1-8.A1.2 (Nov. 2002).

[FN68]. See OECD, supra note 4, at 16-17.

[FN69]. See Christine Parker, Reinventing Regulation within the Corporation: Compliance-oriented Regulatory Innovation, 32 Admin. & Soc. 529, 530 (2000). See also Cary Coglianese & David Lazar, Management-Based Regulatory Strategies: Prescribing Private Management to Achieve Public Goals, 37 Law & Soc'y Rev. 691, 694 (2003) (defining management-based regulation in terms of commands issued to firms to engage in the planning and decision-making needed to identify both technologies and performance targets needed to achieve socially desired goals).

[FN70]. OECD, Reducing the Risk of Policy Failure: Challenges for Regulatory Compliance (2000); Gunther Teubner, Juridification - Concepts, Aspects, Limits, Solutions, in Juridification of Social Spheres: A Comparative Analysis in the Areas of Labor, Corporate, Antitrust, and Social Welfare Law 3, 32-40 (Gunther Teubner ed., 1987).

[FN71]. In this respect, CSR deviates substantially from the understanding of what regulation involves. See Tony Prosser, Law and the Regulators 270-77 (1997) (noting that major role of regulators is to create and police markets where they would not arise or do so spontaneously). Faced with this fact, CSR advocates could contend that CSR is not designed to address market failure. As such, CSR could then cede any responsibility for remedying market failure to regulatory bodies. Yet, because there appears to be little of substance to distinguish CSR's relevant areas of concern from those of traditional regulation, there would then seem to be minimal territory for which CSR could claim exclusivity.

[FN72]. Richard R. Nelson & Sidney G. Winter, An Evolutionary Theory of Economic Change 31 (1982).

[FN73]. Id. at 110.

[FN74]. Baldwin & Cave, supra note 19, at 101-2; Ayers & Braithwaite, supra note 66, at 19.

[FN75]. OECD, Voluntary Approaches for Environmental Policy 86 (2003) ( “Binding approaches are more likely to be environmentally effective than non-binding approaches - if non-compliance does not trigger any sanctions, any environmental improvements would have to rely on strong commercial/strategic interests of firms.”); Alan Cameron, Supervision at the Micro Level: Do Disclosure-Based Regimes Work? in The Future of Domestic Capital Markets in Developing Countries, at 153 (Robert E. Litan et al. eds., 2003) (arguing that credible threat of enforcement is needed to ensure that disclosure-based regulatory regimes work).

[FN76]. Experience with the OECD Convention against Bribery of Foreign Officials in Connection with International Business Transactions should be sufficient to cast serious doubt on the most optimistic advocates of CSR. The 1997 OECD Convention was signed and ratified by 35 OECD member and non-member states. To date, other than a handful of prosecutions in the United States, which had enacted a predecessor law, the Foreign Corrupt Practices Act in 1977, none of the other 34 signatories has undertaken a prosecution. Peter Eigen, Multinationals' Bribery Goes Unpunished, Int'l Herald Tribune, Nov. 12, 2002, at 6. Nor does it appear that states have actively taken an interest in investigating allegations of bribery. Of twenty allegations of bribery involving United Kingdom companies or citizens, only two are under formal investigation. Moreover, the UK has failed to provide assistance to the Nigerian government seeking to recover $1.3 billion in state funds deposited in 23 UK banks by the Abacha regime. Susan Hawley & Andrew Phillips, Bribery Begins at Home, The Guardian, Oct. 6, 2004. The lack of prosecutions perhaps explains the view of 60 percent of German firms surveyed that the risk of corruption was “of no real significance” and, therefore, changing management practices was not necessary. Jimmy Burns, Laws Fail to Halt international Business Bribery, Fin. Times, October 15, 2002, at 12. Similar views were found in another survey by the investment firm Friends Ivory & Sime. According to their findings, “a large proportion [of companies surveyed] appears to have inadequate policies and implementation mechanisms.” The Short Arm of the Law, The Economist, Feb. 28, 2002, at 63, 65. Moreover, The Economist contends that while “a few” multinationals have taken steps to eliminate bribery, many more “have merely pretended to stamp it out.” Id. As logic would dictate, because the threat of prosecution remains illusory in most OECD jurisdictions, bribery by firms continues unabated and many firms have failed to change internal policies and procedures to prevent bribery from occurring.

[FN77]. Ayres & Braithwaite, supra note 66. See also Parker, supra note 69 (conceptualizing regulatory compliance in terms of persuasion, education, and cooperation followed by sanction for failure to implement compliance systems).

[FN78]. Bridget M. Hutter, Compliance: Regulation and Environment 195 (1997).

[FN79]. Id.

[FN80]. Id.

[FN81]. Ayres & Braithwaite, supra note 66.

[FN82]. See, e.g., Hutter, supra note 78, at 196, 206-28.

[FN83]. Ayres & Braithwaite, supra note 66, at 19 (“strategy based totally on persuasion and self-regulation will be exploited when actors are motivated by economic rationality”).

[FN84]. Id. at 39 (“[t]he key contention of this regulatory theory is that the existence of the gradients and peaks of the two enforcement pyramids channel [ ] most of the regulatory action to the base of the pyramid--in the realms of persuasion and self-regulation”).

[FN85]. OECD, Regulatory Policies in OECD Countries: From Interventionism to Regulatory Governance 79 (2002).

[FN86]. The category of Cost-Benefit analysis is left out here, as I believe it is a notion that applies to all of T11 factors and influences firm decisions comprehensively.

[FN87]. In this regard, I will only appeal to the experience of one who has represented firms subject to regulation. In this experience, the attitude of the regulated firm towards the regulator ranges from outright fear to, at a minimum, formal respect based on the implicit understanding of the powers they hold to make one's life miserable.

[FN88]. Hutter, supra note 78, at 216.

[FN89]. Wallace, supra note 10, at 1187-88.

[FN90]. This statement may seem a platitude but given CSR discourse, it seems necessary to make it explicit.

[FN91]. Paul Hirst & Grahame Thompson, Globalization in Question: The International Economy and the Possibilities of Governance 190-91 (1996).

[FN92]. Part of the reason that the role of the state has been obscured in recent law and policy literature on corporate social responsibility issues arises from recent trends in international relations scholarship. Matters of globalization and the transformation of contemporary governance that occurs under conditions of globalization are an important strand of international political economy. See, e.g., Nicola Phillips, State Debates in International Political Economy, in Globalizing International Political Economy 82 (Nicola Phillips ed., 2005). One school of thought, which some refer to as “hyperglobalist,” has been particularly influential. It views globalization as “an inexorable, encompassing and irreversible process of global integration which heralded the obsolescence of ‘national’ entities, not only states but also economies, societies, systems of regulation, modes of governance and so on.” Id. at 91-92. Another school of thought centers on the importance of non-state actors in global governance. See generally Private Authority and International Affairs (A. Claire Cutler et al. eds., 1999). According to these authors, “private authority can have structuring effects that are quite comparable to those of public authority in terms of their significance for citizens more generally.” Id. at 369. Both strands of the debate, while identifying some important elements in international political economy today, have discounted the role of the state too severely. For additional arguments consistent with this position, see generally Weiss, supra note 14.

[FN93]. See David Held, Democracy: From City-states to a Cosmopolitan Order?, in Prospects for Democracy 13, 37-44 (David Held ed., 1993).

[FN94]. The voluntary nature of CSR measures necessarily implies that they are less comprehensive than state regulation, as they rely on the “enlightened self-interest of companies” to pursue action in support of their goals. In fact, prefaces to both the UN Global Compact and the OECD Guidelines state that they are not regulatory instruments. See From Red Tape to Road Signs 7-8 (Core Coalition 2004) available at http://www.corporate-responsibility.org (stating that application of OECD Guidelines on Multinational Enterprise, UN Global Compact, and other voluntary CSR initiatives has been patchy at best).

[FN95]. Paul Ocheje, A “Rights” Approach to Governance in Africa, in Legitimate Governance in Africa: International and Domestic Legal Perspectives 168 (Edward Kofi Quashigah & Obiora Chinedu Okafor eds., 1999) (stating that “evidence of the weakness of the African state abounds”).

[FN96]. See Report of the Secretary-General's High-Level Panel on Threats, Challenges and Change, A More Secure World: Our Shared Responsibility (United Nations 2004) (recognizing that states are the front-line actors in dealing with various threats to international security, including threats to economic development).

[FN97]. See Baldwin & Cave, supra note 19, at 35.

[FN98]. Id.

[FN99]. Ochejie, supra note 95, at 171.

[FN100]. This effect should be presumably more dramatic among regulators that have decentralized their operations.

[FN101]. Cf. Stephen Breyer, Regulation and its Reform (1982) (describing a variety of possible state-based initiatives to regulate corporations on an industry by industry basis while cautioning against excessive state regulation).

[FN102]. For some of the difficulties involved in state sanctioning of private standards, see Errol E. Meideiger, Environmental Certification Programs and U.S. Environmental Law: Closer than You May Think, 31 ELR 10162, 10166 (2001) (“The most obvious means of incorporating certification into law is for an authoritative legal body to require that firms operating within its jurisdiction to be certified.”).

[FN103]. See George Parker, Hungary Can Hold to Its Eurozone Course, Says New Prime Minister, Fin. Times, Oct. 23, 2004. In this article, the Prime Minister of Hungary is quoted as saying that “We have got 700,000 people out of 10m who don't have enough money to eat one decent meal a day ... you can't tell them to take responsibility for their own welfare, that the state doesn't have a role.” Id.

[FN104]. See, e.g., IMF Independent Evaluation Office, Evaluation of the IMF's Role in Poverty Reduction Strategy Papers and the Poverty Reduction and Growth Facility (2004) (discussing country-authored Poverty Strategy Reduction Papers).

[FN105]. See Atul Kohli, State-Directed Development: Political Power and Industrialization in the Global Periphery (2004) (“there is a stunning lack of evidence for the proposition that less government facilitates more rapid industrialization in the developing world .... On the contrary, the evidence shows that state intervention aimed at boosting investor profitability is strongly associated with rapid industrialization”). Kohli's work is, to my knowledge, the latest and most nuanced analysis of the role of the state in economic development. As such, his work responds to and validates some of the central findings of Robert Wade. See generally Robert Wade, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization (1990). Likewise, Dani Rodrik has been a vocal spokesperson for the role of the state in catalyzing economic development. See Dani Rodrik, In Search of Prosperity: Analytic Narratives on Economic Growth (Dani Rodrik ed., 2003). Particularly relevant for countering conventional economic wisdom, Rodrik finds that state involvement in the economy has not been incompatible with growth. As research on cross-national comparisons of development trajectories expands, those calling for unbending application of market liberalization measures will find less empirical footing.

[FN106]. David Greybe, Official Faces Charges Over R12 Million Bribes, Bus. Day (Johannesburg), July 29, 1999.

[FN107]. Highlands CEO to jail for bribe: News24, June 4, 2002, available at http://www.news24.com/News24/Archive/0,,2-1659_1194693,00.html (last visited Dec. 18, 2006).

[FN108]. Id.

[FN109]. C of A (CRI) 6 of 2002 (Lesotho).

[FN110]. Eigen, supra note 76.

[FN111]. Testimony of Guido Pelzhorn, U.S. Senate Foreign Relations Committee, July 21, 2004, at P 7.

[FN112]. Id.

[FN113]. The World Bank subsequently blacklisted Acres International and Lahmeyer International GMBH from any business for three years.

[FN114]. Interview with Eric M. Bost, U.S. Ambassador to South Africa.

[FN115]. Interview with Mahapela Lehohla, Chief Justice of the High Court of Lesotho (Jan. 2004).

[FN116]. Pelzhorn, supra note 111, at P 19.

[FN117]. Indeed, the chief prosecutor was a South African attorney, Guido Pelzhorn.

[FN118]. Southern Africa Documentation and Cooperation Center, Lesotho: Courts Send Strong Messages on Corruption re Highland Water Project, August 25, 2003.

[FN119]. International Institute for Sustainable Development, Sustainable Developments (2003), available at http:// www.iisd.ca/download/asc/sd/sdvol60num3e.txt.

[FN120]. The focus on timber as the rationale for the Act contrasts with the experience of other jurisdictions, such as Nepal and India, where forest management is concerned primarily with matters of subsistence. See David Brown & Kathrin Schreckenberg, Community Forestry: Facing up to the Challenge in Cameroon 6 (2001). See generally Global Witness, Forest Law Enforcement in Cameroon: 2nd Summary Report of the Independent Observer December 2001-June 2003 (2003).

[FN121]. See Brown & Schreckenberg, supra note 120, at 15.

[FN122]. See Timothé Fometé, National Team for Cameroon's Forest & Environment Sector Programme, Forests and Democratic Development in Cameroon (Mar. 12, 2002) (transcript available at http:// www.odi.org.uk/speeches/envgov2002/meeting2.html).

[FN123]. See Global Witness, supra note 120, at 1-2.

[FN124]. Interview with Global Witness Oct. 5, 2004. According to the staff person interviewed, the government made this invitation under pressure from the UK and the World Bank.

[FN125]. Global Witness, supra note 120, at 3.

[FN126]. Id. at 4.

[FN127]. Id. at 9.

[FN128]. Id. at 12-13.

[FN129]. Id. at 9.

[FN130]. See id.

[FN131]. See id. at 9.

[FN132]. See id. at 4.

[FN133]. See generally Peter Leigh Taylor, In the Market But not of It: Fair Trade Coffee and Forest Stewardship Council Certification as Market-Based Social Change, 33 World Dev. 129 (January 2005) (emphasizing the importance of governance in connection with voluntary market reform mechanisms).




40 CNLILJ 171

END OF DOCUMENT

© 2009 Thomson Reuters/West. No Claim to Orig. U.S. Govt. Works.

Selengkapnya...... Posted under | NO COMMENTS

6 Nw. U. J. Int'l Hum. Rts. 262

Northwestern University Journal of International Human Rights
Spring, 2008

Article

CORPORATE HUMAN RIGHTS RESPONSIBILITY: A EUROPEAN PERSPECTIVE


Jan Wouters [FNa1]
Leen Chanet [FNaa1]

Copyright © 2008 Northwestern University School of Law, Northwestern University Journal of International Human Rights; Jan Wouters, Leen Chanet

I. Introduction
*1 Corporations, especially multinational enterprises (“MNEs”), have become ever larger and more powerful since the 1970s, [FN1] often surpassing the economic power and influence of states. Thanks to the development of modern communication technologies and the freer movement of goods and services through trade, corporations have also become more mobile and are now able to move capital and business to wherever conditions are most favorable. Because of high production and labor costs in industrialized countries, global competition, and the constant need to explore new markets, many corporations are now driven to developing countries.
*2 Corporations often bring significant benefits to the states where they operate; by generating tax revenues, creating jobs, transferring skills and technologies and generally raising the standards of living, they often make a positive contribution to the development of a country. [FN2] However, they may also cause human rights problems. Developing countries are often clamoring for foreign direct investment (“FDI”) and will compete to attract corporations by offering them attractive investment terms. Thus, they may be tempted to lower working and environmental standards in hopes of attracting MNEs in search of ever-lower production costs. [FN3] Developing countries may also lack the adequate means and resources to enforce existing standards. [FN4] Some MNEs or their suppliers may take advantage of the resulting lack of enforceable regulations, leading to poor working conditions, restrictions on freedom of association and collective bargaining, and possibly child labor. Moreover, in some cases, local governments commit human rights abuses with the explicit or tacit support of corporations. This situation raises two questions: First, how can human rights violations by corporations be avoided and redressed? Second, how can corporations' positive contributions to the countries where they operate be increased?
*3 The current state of international law regarding the position of MNEs is strikingly unbalanced. International law still focuses too much on protecting the rights of corporations (especially through international rules on trade and the protection of FDI) and lags far behind in regulating their responsibilities. It is telling, for instance, that the statutes of the relevant international criminal tribunals remain silent on the question of criminal responsibility of corporate entities for their involvement in international crimes like war crimes and crimes against humanity. International human rights instruments are also notoriously silent about such responsibilities. In Europe today, the European Convention on Human Rights is seen more as an instrument that provides rights for corporations rather than one that lays down obligations for them, unless they are vested with state powers and/or are controlled by the state. [FN5]
*4 In the absence of hard law, there has been a marked tendency to use soft norms when addressing corporate human rights responsibility. Soft norms, like those embodied in the United Nations (“UN”) Global Compact to the Organization for Economic Cooperation and Development (“OECD”) Guidelines on Multinational Corporations, the International Labour Organization's (“ILO's”) Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy, and corporate codes of conduct, are all deliberately kept legally non-binding. Follow-up mechanisms, if they exist, are aimed at dialogue rather than confrontation.
*5 Against this backdrop, the European Union (“EU”) has an important role to play in ensuring that its corporations respect and protect human rights wherever they operate. Since human rights are core principles of the EU, [FN6] it has a special responsibility to ensure that they are protected. The EU has addressed the issue of corporate human rights responsibilities as part of its corporate social responsibility (“CSR”) policy developed in the last decade. The purpose of this article is to assess the effectiveness of Europe's CSR policy with regard to human rights.
*6 This article is divided into four parts. In Part II of this article, we will search for the most appropriate framework capable of ensuring that corporations effectively take up the duty to uphold human rights and live up to that duty. We start from the assumption that corporations do indeed have the duty to behave responsibly towards a variety of stakeholders. In an attempt to move beyond the traditional divide between voluntary and regulatory approaches, we will argue that a mixed framework is needed. Indeed, the ‘business case’ for corporate responsibility -- that the profit-motive will encourage socially responsible business -- is not in itself able to guarantee responsible corporate behavior in all circumstances. Mere reliance on the law, however, will not suffice either. Therefore, public authorities should create a framework which maximizes the benefits of social responsibility for corporations. At the same time, however, regulatory measures must be provided to address the worst cases of human rights violations. In Part III we will use the framework set out in Part II to evaluate the EU's CSR policy and practice. We will first discuss the EU's CSR policy and discuss whether it follows the mixed approach we have advocated in Part II. Thereafter, we will assess to what extent the EU, and its Member States, have developed an appropriate regulatory framework for CSR. We will argue that the European Commission, which is the motor of the EU's CSR policy, despite having high ambitions at the outset, subsequently settled for an unsatisfactory voluntary approach to CSR. Finally, in Part IV, we will make recommendations on what steps should be taken to achieve the mixed CSR-framework that would best ensure corporate human rights compliance in the EU. In practice, the EU and its Member States have put in place some elements of a mixed CSR-framework, but they leave much to be desired.

II. In Search of a Corporate Human Rights Responsibility Framework

*7 Milton Friedman's vision that the one and only social responsibility of business is to use its resources to engage in activities designed to increase its profits [FN7] is an archaic notion. Society now expects corporations to behave responsibly with regard to a wide range of stakeholders, including shareholders, consumers, workers, persons living in the vicinity of its operations, and even the wider community and the environment. Society's expectations are reflected in academic literature which argues that there is an evolution in international law towards the recognition of direct responsibility of corporations for human rights compliance. [FN8] The aim of this article, however, is not to delineate the substantive human rights obligations of corporations under current or future international law. We will discuss neither their material content -- the kind of rights which corporations are obliged to protect and whether those are only negative or also positive rights -- nor the degree of involvement in the violations required for a company to be liable. [FN9] Rather, we start from the assumptions that corporations have at least an ethical and moral duty to behave responsibly towards their stakeholders and that they may incur criminal or civil liability for grave human rights violations. Taking these concerns as a starting point, we search for the most efficient framework for ensuring such corporate human rights responsibility.

A. The Choice Between a Regulatory or Voluntary Approach
*8 At the heart of the current debate about corporate responsibility lies the question of whether a regulatory or voluntary approach is more appropriate for ensuring corporate human rights, social and environmental responsibilities. NGOs and civil society, together with a significant number of academics are in favor of the former, while business typically prefers the latter. The proponents of a regulatory approach argue that corporate human rights responsibilities are too important an issue to be left completely in the hands of corporations. [FN10] They feel that the immense economic power that corporations have acquired should be accompanied by corresponding responsibilities. [FN11] Moreover, as corporations have been accorded important rights, including under investment law and even under human rights law, [FN12] proponents of the regulatory approach claim that there is no reason why they should not bear duties as well. [FN13]
*9 Proponents of a voluntary approach, in contrast, argue that there is no need for regulatory intervention since the market itself steers corporations towards responsible behavior. [FN14] According to the ‘business case’ on CSR, responsible business behavior is also good economic behavior, since it leads to an increase in profitability. [FN15] Thus, responsible corporate behavior within a voluntary framework is argued to be a win-win situation for business and society, while regulatory interference would put unnecessary burdens on business without providing any additional benefit.

B. A Hybrid Framework: The Need to Move Beyond a Choice Between a Voluntary or Regulatory Approach
*10 In line with other recent academic analysis, we would like to move the debate beyond the black-and-white argument of voluntary versus regulatory approaches. [FN16] In our view, it would be misleading to see the two approaches as diametrically opposed and mutually exclusive for several reasons. In practice, legislation may take on different roles in a continuum, from soft to hard norms. It may create several incentives for corporations, including preferential public procurement; regulatory bodies with certain monitoring tasks; requirements for reporting on human rights issues; or civil or criminal remedies against non-complying corporations, among other options. Indeed, regulation may be used to make a voluntary approach more efficient. [FN17] Seeing regulatory and voluntary initiatives as opposing extremes overlooks the fact that corporations already have several legal responsibilities, for example, corporate responsibility with respect to health and safety norms and working conditions. [FN18]
*11 On the other hand, the creation of a regulatory framework does not mean that voluntary initiatives are not important. Indeed, the law is only one of a range of factors that influence corporate behavior. [FN19] In some cases, corporations may be expected to do more than the law literally requires and, at the very least, not take advantage of its loopholes. [FN20] Voluntary and regulatory approaches should therefore not be seen as mutually exclusive, but rather as complementary. [FN21] The question to be resolved is, then, what particular mixture of regulatory and voluntary elements best ensures corporate human rights responsibility.

C. An Assessment of the ‘Business Case’ of CSR
*12 Proponents of the ‘business case’ explain that corporations are financially rewarded for behaving responsibly in various ways. They argue that not only consumers, but also investors and even workers, attach importance to corporations' human rights records and have a clear preference for responsible businesses. [FN22] Thus, the market itself acts as an important and sufficient incentive for corporations to take human rights into account, since responsible behavior leads to higher profits. This assumption leads them to conclude that a voluntary approach to corporate responsibility is sufficient. In order to determine whether the ‘business case’ is a useful, sufficient and/or necessary approach to ensuring corporate human rights responsibility, we will critically examine the available evidence on these assumptions. Before doing so, however, we would like to put the ‘business case’ into the right perspective.

1. The ‘Business Case’ as a Means for Ensuring Responsible Corporate Behavior
*13 When discussing the ‘business case’ for corporate responsibility, it is important to see things from the right angle. As explained above, we start from the assumption that corporations have human rights, social and environmental responsibilities with respect to a wide range of stakeholders. Thus our goal is to ensure that businesses live up to these responsibilities. The question then arises as to what would be the best means to reach that goal; in other words what kind of framework would be the most efficient in ensuring that corporations take up their human rights obligations. If proven correct, the ‘business case’ for corporate responsibility could lead to the conclusion that the best means for ensuring responsible behavior are regulatory instruments which make the ‘business case’ work, or alternatively, the ‘business case’ could be shown to work without any regulatory intervention whatsoever. Thus the ‘business case’ for corporate responsibility may inform us as to the means needed for ensuring responsibility. The idea that good responsible behavior leads to increased profits may be a good incentive for corporations to act responsibly, but it should never be seen as the ultimate reason for responsible behavior. [FN23] Corporations have to behave responsibly because it is their duty to do so, not because it helps them to make more profits. [FN24] Indeed, if respect for human rights is fundamental to our society, whether or not ensuring such respect would bring economic advantages is irrelevant; achieving it remains our final goal. Therefore, if corporate social responsibility were not economically profitable, as proponents of the ‘business case’ for corporate responsibility claim, we would have to look for other means to reach our goal, not simply drop the goal because of the inherent conflict. It is important to keep this perspective in mind when reflecting on the EU's approach to corporate responsibilities, where it is sometimes hard to distinguish goals from means.

2. The Impact of Socially Conscious Consumerism on Corporate Behavior
*14 With this perspective in mind, we will now assess the merits of the ‘business case.’ [FN25] First, proponents of the ‘business case’ base their argument on the premise that consumers take corporations' human rights records into consideration. A company with a positive human rights image would therefore be rewarded by consumers, and conversely, a company known to violate human rights would suffer from consumer avoidance and possibly even boycotts. [FN26] Indeed, research has shown that consumers claim to take a corporation's human rights record into account and that consumers are willing to pay more for ethically produced goods. [FN27] A 1997 survey found that seventy-one one percent of French consumers would choose a ‘child-labor-free’ product even if it were more expensive than the alternatives. [FN28] Other surveys show that more than 30% of UK customers claimed to have boycotted stores because of ethical concerns and that 60% said to be prepared to participate in a boycott in the future. [FN29]
*15 There is a discrepancy, however, between what consumers say and what they actually do. [FN30] In practice, only a small minority of consumers take social considerations into account when shopping. [FN31] It is true that the segment of consumers who base decisions on corporate responsibility is growing, evidenced by the fact that consumer awareness in the UK of the Fair Trade Brand doubled to 50% between 2003 and 2005, and sales of all Fair Trade Products increased by 51% between 2003 and 2004. [FN32] Nonetheless, the impact of socially conscious consumerism on business profits still appears to be limited.
*16 The question then arises how the impact of socially conscious consumerism can be increased. One reason consumers might not take human rights considerations into account when shopping may be that they lack adequate information about the responsible or irresponsible behavior of corporations. [FN33] Most products do not contain any information about the conditions of their production, and if products do have a certain label, consumers may not know its exact meaning and may not trust its credibility. They might be aware of the human rights behavior of large corporations -- and then mostly in cases of recent scandal -- but they will hardly ever be aware of the human rights record of lesser known brands. [FN34] This general lack of information makes it hard for consumers to compare different products and leaves them unable to make informed choices. To do so, they would need easily accessible, comprehensible, and credible information about the human rights records of corporations. There is thus a role for public authorities to create a general regulatory framework to make the ‘business case’ for corporate human responsibility work. Governments could require credible human rights reporting with effective monitoring. They could also support or even create a credible social label and adopt advertising laws to combat false or misleading social statements in advertising. Only then would consumers be able to make informed choices, taking human rights into account. [FN35]

3. The Impact of Socially Responsible Investment on Corporate Behavior
*17 Investors are seen as a second category of stakeholders who influence the behavior of corporations. [FN36] The idea is that socially responsible investors take corporations' human rights policies into account when deciding in which company to invest. [FN37] Socially responsible investment (“SRI”) is thus arguably an effective market incentive for respecting human rights, since it may be assumed that non-responsible corporations will find it harder to attract investors and might even see their share prices drop. Investors may have two reasons for investing their money in a responsible way, both of which point towards a confirmation of the ‘business case’ for responsibility. First, some investors may decide only to invest in ‘responsible’ corporations because they feel it is their moral duty to do so. They do not want to lend their support to corporate human rights violations through their investment decisions. For others, SRI may simply be a means of ensuring greater share returns. Indeed, under the ‘business case’ reasoning, socially responsible corporations would be more profitable and SRI would make perfect economic sense. [FN38] However, empirical research has not been able to prove unequivocally that SRI leads to higher profits. At best, [FN39] the risk-adjusted returns of a carefully constructed, socially-screened portfolio are neither better nor worse than if no social criteria are included in stock selection. [FN40] This means that there is a place in the market for both responsible businesses and SRI, but an increase in responsible business behavior or SRI is not self-evident. In practice, a socially responsible stock index was introduced in the UK in 2001 -- the FTSE4Good Index -- which uses criteria based on CSR. Although SRI is growing, [FN41] it still only accounts for a very small part of the European stock market, [FN42] meaning that it is unable to affect share values. [FN43] Nevertheless, in some cases SRI may have some influence on corporate policies through shareholder activism. [FN44]
*18 All in all, the ‘business case’ for corporate responsibility based on investor preferences seems to be weak as the market share of SRI is still very low. It could be improved by putting an enabling framework into place that provides investors with easily accessible and credible information on corporations' human rights policies. The actual influence of SRI on corporate policies, however, could remain weak; to have a significant effect on shareholder value, the uptake of SRI must dramatically increase. [FN45] Admittedly, shareholder activism may have some influence, but it seems insufficient to have a real influence in most cases.

4. The Impact of Workers on Corporate Behavior
*19 A third category of stakeholders who could make corporations act in a more responsible way are workers. [FN46] The idea is that the brightest and best people will not want to work for a company with a bad human rights record. However, this idea falls short. On one hand, research has shown that ninety-two percent of UK employees considered it important that their employers be socially responsible and sixty percent said they felt strongly about it. [FN47] Some firms are indeed more attractive to some employees because of their social reputation. [FN48] On the other hand, it has not been proven that the labor market provides incentives for all corporations to behave responsibly and there is no evidence that firms without strong reputations for social responsibility find it difficult to attract first-rate, highly committed employees. In the end, having a strong reputation for responsible corporate behavior is only one of the many ways of making a firm a desirable place to work. [FN49] Nevertheless, employees may sometimes pressure a company to behave more responsibly. [FN50]

5. The ‘Business Case’ Does Not Suffice
*20 Having reviewed the empirical evidence, it does not seem self-evident that responsible behavior is indeed good for business or conversely that irresponsible behavior is bad for profits. Behaving responsibly may be beneficial for some corporations in some situations whose marketing strategy is built entirely on their social reputation. [FN51] Similarly, irresponsible behavior may be costly for well-known brands, since they may be easily targeted by media campaigns. [FN52] However, it has not been proven that corporate responsibility will generally make a company more profitable. Thus, “the market for virtue is not sufficiently important to make it in the interest of all firms to behave more responsibly” [FN53] and an appropriate regulatory framework is needed.

D. A Hybrid Framework is Necessary to Make the ‘Business Case’ Work and Address Its Failures
*21 An important factor in the failure of the ‘business case’ for corporate human rights responsibility is the absence of an appropriate framework to make it work. In order to improve the ‘business case’ for corporate responsibility, public authorities should put such an enabling framework in place. In quite the same way that market efficiencies can only be assured if public authorities ensure fair competition, it may very well be that responsible corporate behavior will only be rewarded if the right framework is in place. As already mentioned, a first role for public authorities is to ensure that consumers, investors and workers alike have access to clear and credible information on the behavior of corporations so that they are able to make informed decisions. Thus, reporting on non-financial issues according to certain guidelines could be made mandatory, verification of social claims should be ensured, and monitoring of code of conducts must be put in place. [FN54] In addition, misleading advertising laws should be adopted to combat false social claims. Apart from that, public authorities can also influence the behavior of corporations through their role as economic actors, especially through public procurement decisions. Ironically, business representatives who favor the ‘business case’ are opposed to the implementation of such a framework designed to make the ‘business case’ work, which raises doubts about their true belief in such a ‘business case’. Indeed, “[i]f voluntary adherence to CSR standards is ‘good for business,’ what do business entities have to fear from legally-binding obligations to respect human rights and environmental standards?” [FN55]
*22 Even with an appropriate enabling framework in place, however, not all corporations would gain from behaving responsibly. If the choice is left to business, with shareholder value as the only justification for responsible -- or irresponsible -- behavior, it cannot be assumed that responsible behavior will always win out in a conflict of demands. In some cases the immediate gains from violating human rights or exploiting weak laws in developing countries may be larger than their potential costs. Admittedly, the more responsible option may be beneficial for the long-term reputational interests of a company, but even then corporations may prefer short-term profits and/or taking advantage of limited business opportunities. [FN56]
*23 This leads us to the conclusion that the ‘business case’ for corporate human rights responsibility is a useful, but not sufficient, means for attaining our goal of ensuring responsible corporate activity. Accordingly, corporate human rights responsibility cannot be left to the market alone. [FN57] Effective state action is necessary to ensure that grave human rights violations by business are not tolerated, whether they happen in the corporation's home or host state. Such violations must be redressed and victims must receive reparations. There is thus a need for civil and criminal procedures to address serious violations of human rights.
*24 The fact that legally enforceable remedies are needed does not mean that voluntary initiatives lack value. If we want corporations to truly behave responsibly, it is important that they not only comply with the letter, but also with the spirit, of the law. [FN58] As Mary Robinson, former UN High Commissioner for Human Rights, has aptly pointed out: “Regulation is crucial to minimize abuses and to enforce compliance with minimum norms but it alone will not establish the ‘business case’ for making the necessary changes. To do so we must provide incentives, so that doing the right thing also makes good business sense.” [FN59]

III. The European Union's CSR Policy: An Appropriate Approach to Corporate Human Rights Obligations?
*25 In the previous part, we argued that a hybrid framework is needed to ensure responsible corporate behavior. Such a framework will have to consist of enabling elements which help to make the ‘business case’ work as well as an effective sanctions mechanism to address failures of the ‘business case’ that may still occur in spite of the preventive framework.
*26 In this part we will assess to what extent the EU's CSR policy intends to establish such a hybrid framework for CSR. We will discuss the European Commission's Green Paper on CSR of 2001 which is the real starting point of the EU's CSR policy (section A), its follow-up Communication of 2002 which launched the EU Multi-Stakeholder Forum (section B) and the activities and outcome of the Forum (section C). The Forum's conclusions, together with the review of the Lisbon Strategy in 2005, which emphasized the importance of growth and jobs (section D) have shaped the Commission's current -- purely voluntary -- approach to CSR (section E). Its approach can be contrasted with the one of the European Parliament, which is in favor of a mixed approach to CSR, which in our view would be more desirable (section F). In spite of the European Commission's early ambitions to put a basic enabling regulatory framework into place, and consistent calls from the European Parliament and NGOs for regulatory measures, the voice of business has prevailed, resulting in a purely voluntary approach to CSR (section G).

A. The Starting Point for the EU's Corporate Social Responsibility Policy: the European Commission's Green Paper on CSR of 2001
*27 Although there had been some earlier initiatives, [FN60] the real starting point for the EU's CSR policy was the issuing of the European Commission's (“Commission”) Green Paper on the promotion of a European framework for corporate social responsibility (“Green Paper”) in 2001. [FN61] Following the tradition of EU Green Papers, it aims to “launch a wide debate and seek views on corporate social responsibility at a national, European and international level.” [FN62] The Green Paper defines CSR as “a concept whereby corporations integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis,” [FN63] but makes it clear that CSR should not be seen as a substitute for regulation or legislation concerning social rights or environmental standards, including the development of new appropriate legislation. On the specific issue of human rights, the Commission notes that “binding rules ensure minimum standards applicable to all, while codes of conduct and other voluntary initiatives can only complement these and promote higher standards for those who subscribe to them.” [FN64] Although CSR itself is seen as something voluntary, the Commission clearly envisages an active role for public authorities: [FN65]
[The] main contribution of a European approach [would] be to complement and add value to existing activities by providing an overall European framework, aiming at promoting quality and coherence of corporate social responsibility practices, through developing broad principles, approaches and tools, and promoting best practice and innovative ideas, [and by] supporting best practice approaches to cost-effective evaluation and independent verification of corporate social responsibility practices, ensuring thereby their effectiveness and credibility. [FN66]
Nevertheless, it is clear that the ‘business case’ for CSR lies at the base of the Commission's approach. The Commission believes that socially and environmentally positive behavior “can result in better performance and can generate more profits and growth,” [FN67] acknowledging, however, the “need for better knowledge and further studies on the impact of corporate social responsibility on business performance.” [FN68] All in all, the underlying rationale of the Commission seems to be that there is a ‘business case’ for CSR, but that public authorities should create the necessary framework conditions to make this ‘business case’ work.
*28 In the Commission's vision, responsible corporate behavior should be promoted by enabling consumers and investors alike to take a corporation's human rights, social and environmental record into account. It sees an important role for the EU in establishing the necessary means for providing consumers and investors with reliable information to allow them to make informed decisions. More concretely, the Commission addresses the importance of social responsibility reporting, the monitoring and verification of CSR practices, [FN69] and suggests the creation of a public social label. [FN70] As regards SRI, it points out the need for further standardization, harmonization and transparency in screening tools and metrics used by screening agencies. [FN71] In addition, public authorities would have a direct role to play by “support[ing] education and awareness-raising around labor conditions issues, promot[ing] best practice through sponsorship of company awards, facilitat[ing] ... the development of multi-stakeholder partnerships, develop [ing] ... standards in social labeling, and us[ing] ... public procurement and fiscal incentives in promoting labeled products”. [FN72]
*29 The Green Paper succeeded in its aim to launch a wide debate and received a large number of reactions from different stakeholders and public authorities. [FN73] On some issues, especially the role of public authorities in providing a regulatory framework for CSR, different stakeholders have taken diametrically opposed views. NGOs emphasize that a purely voluntary approach to CSR would be insufficient and that voluntary commitments should not be seen as a substitute to regulation or legislation. [FN74] Instead, they propose a mixture of voluntary and regulatory instruments. [FN75] Business and employers' organizations agree with the Commission's definition that CSR involves actions that go beyond regulatory compliance. [FN76] They clearly favor a voluntary approach to CSR, which they see as a more efficient way to promote good corporate practices than prescriptive governmental codes and regulations. [FN77] Emphasizing the inappropriateness of “a one-size-fits-all” approach, [FN78] they stress the need for flexibility [FN79] which could best be addressed by voluntary initiatives. [FN80] Moreover, they claim, regulatory initiatives would also be unnecessary because of the high standards of existing regulations. [FN81] According to some organizations, the only role for public authorities is to encourage voluntary corporate initiatives and to promote best corporate practices. [FN82] CSR Europe, [FN83] however, sees scope for regulation on specific matters of widespread social concern such as health and safety or exploitative employment. [FN84] It also supports CSR-enabling legislation, citing the examples of disclosure regulations in the UK, France and Germany. [FN85]

B. The Commission's Communication on CSR as a Business Contribution to Sustainable Development and Launch of the EU Multi-Stakeholder Forum on CSR in 2002
*30 After the consultation process, the Commission adopted a new Communication on CSR as a business contribution to sustainable development in July 2002. [FN86] The basic policy views of the Commission do not seem to have changed since its Green Paper. It confirms its definition of CSR and, while it expresses its belief in the ‘business case’ for CSR, it continues to see a role for a European CSR framework to make the ‘business case’ work. [FN87] More concretely, it sees room for EU action aimed at improving transparency and thus credibility of CSR practices. [FN88]
*31 Indeed, there has been an increase in guidelines, principles and codes relating to CSR, which cannot be easily compared, [FN89] which causes confusion for business, consumers, investors, other stakeholders and the public.” [FN90] Therefore, “there is a need for a certain convergence of concepts, instruments, practices, which would increase transparency without stifling innovation, and would offer benefits to all parties.” [FN91] Further, greater consensus is necessary “on the type of information to be disclosed, the reporting format, the indicators used and the reliability of the evaluation and audit procedure [as that] would allow for a more meaningful benchmarking and communication of corporations' performance within particular sectors and for businesses of similar size.” The guidelines developed by the Global Reporting Initiative (“GRI”) are a good example which could serve as the foundation of such consensus. [FN92] Apart from convergence, it is also important that codes be effectively implemented, monitored and verified, [FN93] that social and environmental claims be made and assessed in accordance with commonly agreed-upon criteria, and that such claims be monitored by Member States and stakeholders. [FN94] There is also room for an EU approach to SRI. [FN95]
*32 In order to make progress on all these issues, the Commission launches in this Communication an EU Multi-Stakeholder Forum (“Forum”) on CSR whose purpose is to facilitate dialogue between business and their stakeholders. The aim of this Forum is:
to promote transparency and convergence of CSR practices and instruments, through (1) exchange of experience and good practice between actors at EU level, (2) bringing together existing initiatives within the EU, and seeking to establish common EU approach and guiding principles, including as a basis for dialogue in international fora and with third countries and (3) identifying and exploring areas where additional action is needed at European level. [FN96]
The Commission invites the Forum to address and develop guiding principles on the issues discussed above: the effectiveness and credibility of codes of conduct, the problem of CSR measurement, reporting and assurance, labeling schemes based on the core ILO conventions and environmental standards, and the disclosure of SRI policies on pension and retail funds. [FN97] In theory, it would have been possible for the Commission to develop these guidelines itself. The reason for entrusting this task to the Forum was that the Commission absolutely wanted “ownership” of the CSR principles by all stakeholders.

C. Activities and Outcome of the EU Multi-Stakeholder Forum on CSR
*33 The outcome of the EU Multi-Stakeholder Forum on CSR was unfortunately far less ambitious than it could have been. From the very start, business representatives dominated the debate in the Forum, succeeding immediately in downgrading its mandate when it was formally established at its first High-Level Meeting on October 16, 2002. [FN98] According to its self-adopted mandate, the Forum was
to promote innovation, transparency and convergence of CSR practices and instruments through improving knowledge about the relationship between CSR and sustainable development ... by facilitating the exchange of experience and good practices and bringing together existing CSR instruments and initiatives, with a special emphasis on SME specific aspects [and by] exploring the appropriateness of establishing common guiding principles for CSR practices and instruments, taking into account existing EU initiatives and legislation and internationally agreed instruments such as OECD Guidelines for multinational enterprises, Council of Europe Social Charter, ILO core labor conventions and the International Bill of Human Rights. [FN99]
The mandate of the platform had one crucial difference from that envisaged by the Commission in its Communication: it lacked the objective of “identifying and exploring areas where additional action is needed at the European level.” [FN100] This determined the outcome of the Forum as no proposals for legislative actions could have been proposed by a platform that did not have a mandate to do so. [FN101]
*34 The Multi-Stakeholder Forum presented its Final Report with results and recommendations at its last High-Level Meeting in June 2004. [FN102] According to its foreword, the Final Report is a “fair record of points of consensus identified during the twenty month process and work of the Forum, [which] was presented, discussed and agreed [subject to internal consultation led by some NGOs with their constituencies]”. It recognizes, though, that “some differences and debates ... remain.” [FN103] In reality, no consensus was reached. [FN104] Indeed, the Final Report of the Forum represents the business approach to CSR, presenting it as “the voluntary integration of environmental and social considerations into business operations, over and above legal requirements and contractual obligations. CSR is about going beyond these, not replacing or avoiding them.” [FN105]
*35 Not surprisingly, the recommendations made by the Final Report are very weak. The Final Report recommends that “public authorities ensure that there is both a legal framework and the right economic and social conditions in place to allow corporations which wish to go further through CSR to benefit from this in the market place, both in the EU and globally,” [FN106] but does not explain what such a framework should look like. On the issue of reporting and monitoring, for instance, it merely “notes that for trade unions and NGOs, transparent CSR reporting is a particularly important process in providing meaningful information, a clear record of CSR development and assessing credibility.” [FN107] Since business representatives have always opposed the adoption of mandatory reporting rules, no consensus was reached. The recommendation on the establishment of an enabling framework for CSR thus rings hollow. Only on the issue of public procurement is the outcome somewhat more positive, with the request for “EU and/or Member States [to] consider and evaluate how to use public funds in the most responsible and effective manner, taking into account environmental and social, as well as economic considerations.” [FN108] In sum, few of the European Commission's and Parliament's early ambitions remain, and no progress has been achieved in the establishment of a regulatory framework, which would have enabled the ‘business case’ for CSR.

D. The Lisbon Strategy and its 2005 Review
*36 In order to understand the further evolution of the EU's policy on CSR, it is important to keep in mind that its CSR policy has been made a part of the “Lisbon Strategy”. The European Council's Lisbon Declaration of March 2000 [FN109] sets the goal for the EU to become, by 2010, “the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion”. [FN110] To help the EU achieve this rather bold objective, the European Council suggests a fully decentralized approach in which both corporations and civil partners would be actively involved. [FN111] This suggestion has been interpreted by the European Commission as “a special appeal [from the European Council] to corporations' sense of social responsibility regarding best practices on lifelong learning, work organization, equal opportunities and sustainable development.” The Commission sees its CSR-policy as a means of contributing to the Lisbon goals. [FN112]
*37 Given the integration of the EU's CSR policy into the Lisbon Strategy, a review of the latter clearly would have an impact on the former. Such refocusing took place in 2005 when, following recommendations from a High-Level report prepared by Wim Kok [FN113] and a concurring Communication from Commission President Barroso and Vice-President Verheugen, [FN114] the Council re-launched the Lisbon Strategy with a focus on growth and employment. [FN115] Delivering stronger, lasting growth and creating more and better jobs is now seen as the key to meet Europe's wider economic, social and environmental ambitions. [FN116] Indeed, the revised Lisbon Strategy aims to “[embed] the European commitment to social cohesion and the environment in the heart of the growth process--to be a means of growth rather than a claim on it.” [FN117]
*38 In reality, the result of the refocusing of the Lisbon Strategy is that its goal of social cohesion -- and thus also the CSR debate -- has been made subordinate to the achievement of economic growth and more and better jobs. [FN118] This not only seems to make a special CSR-aimed policy less relevant, but may also imply that CSR is only a policy objective insofar as it does not contradict the superior aims of growth and jobs. This is problematic, since corporate responsibility should be a goal in itself; the fact that it may bring economic benefits may act as an incentive for policymakers, but should not be their motivation for ensuring compliance by corporations. Just as corporations should not act responsibly merely because it will increase their profits, public authorities should not promote responsible corporate behavior on the grounds of its economic benefits. Respect for human rights has to be considered a priority and should not risk being sacrificed for economic growth. Sadly, however, CSR no longer seems to be a priority for the EU. [FN119]

E. The Commission's Current Approach to CSR
*39 Following the final report of the Multi-Stakeholder Forum on CSR and the review of the Lisbon Strategy, the Commission issued its latest Communication on CSR, entitled “Implementing the partnership for growth and jobs: making Europe a pole of excellence on CSR.” [FN120] The name of the document is telling: in accordance with the refocusing of the Lisbon Strategy, the Commission sees CSR as merely a means to create growth and jobs rather than an end in itself. Abandoning the view that CSR needs an enabling public framework in order to be profitable for corporations, the Commission now opts for a completely voluntary approach, believing that “an approach involving additional obligations and administrative requirements for business risks being counter-productive and would be contrary to the principles of better regulation.” [FN121] It “acknowledg[es] that enterprises are the primary actors in CSR, [and] has decided that it can best achieve its objectives by working more closely with European business.” [FN122] With this, the Commission leaves behind both its mixed approach to CSR and the idea that multi-stakeholder involvement is essential to the promotion and development of CSR. Instead, it chooses to favor the most powerful of stakeholders, namely business.
*40 On the important issue of ensuring transparency and credibility of CSR practices, for instance, the Commission admits that consumers still lack clear information on the social and environmental performance of goods and services, including information on the supply-chain, but sees only room for voluntary actions as a remedy. [FN123] The Commission thus does not conclude that the voluntary approach taken by the Forum did not succeed in making progress on the matter and that time has come for some regulatory intervention. Indeed, the only role the Commission sees for itself with respect to CSR is to raise awareness in order to promote best practices [FN124] and to support multi-stakeholder initiatives. [FN125] The Forum itself is to be regularly reconvened, but merely with a view to continually reviewing progress on CSR in Europe. [FN126]
*41 Moreover, the only follow-up to the Forum is a European Alliance on CSR, a purely voluntary alliance of European enterprises, set up by the Communication. The Alliance will function as an umbrella for new or existing CSR policies. It is not a legal instrument, but a purely political process to increase European corporations' compliance with CSR. [FN127] The fact that there are no formal requirements for declaring support for the Alliance, and that the European Commission will not keep a list of corporations that support it, stresses its purely voluntary character. [FN128] Contrary to the Multi-Stakeholder Forum, which started with a rather broad mandate and included a variety of stakeholders, [FN129] the only ambition of the Alliance is to bring business together. It has been launched as a joint initiative of the Commission and part of the business world without even consulting other stakeholders. [FN130] Business representatives are thereby favored above other stakeholders and the furtherance of CSR has been entirely entrusted to business itself. [FN131]

F. The Contrasting View of the European Parliament
*42 It is interesting to contrast the evolution of the Commission's CSR policy with the view of the European Parliament. The Parliament has always been in favor of a mixed approach to corporate human rights responsibility, combining voluntary and regulatory mechanisms. [FN132] It accepts that the starting point to CSR is a voluntary approach, [FN133] and that voluntary initiatives promoting the ‘business case’ for CSR should be preferred to legislation as a more effective and efficient way of achieving measurable outcomes. [FN134] Nevertheless, it considers that regulation, where appropriate, is an option. [FN135] To start with, the Parliament would like public authorities to create an enabling framework for CSR. It emphasizes the importance of providing consumers and investors with credible information on CSR practices and has asked for mandatory reporting on social and environmental issues, [FN136] independent verification of reports, [FN137] the creation of a European Monitoring Platform [FN138] and a proposal on social labeling. [FN139] It has also called for the use of advertising laws to combat false and misleading social and human rights claims. [FN140] In order to create incentives for corporations to behave more responsibly, it has suggested taking corporations' social and human rights behavior into account in public procurement decisions. [FN141] Finally, should this preventive, enabling framework fail, the Parliament recognizes the need for remedial measures, and has suggested the possibility of initiating civil liability proceedings against corporations domiciled in the EU under European conflict of laws rules. [FN142] The framework envisaged by the European Parliament thus reflects our idea of an optimal corporate human rights responsibility framework, set out above.
*43 Unsurprisingly, the European Parliament does not approve of the current CSR policy of the Commission and the way business has succeeded in dominating the Multi-Stakeholder Forum. This is shown by the Parliament's March 13, 2007 Resolution on corporate social responsibility: a new partnership [FN143] adopted in response to the Commission's Communication. The resolution starts by stating that CSR must be linked to the principle of corporate accountability [FN144] and “notes the concerns expressed by some key stakeholders about the lack of transparency and balance of the consultation procedure undertaken before adoption.” [FN145] While it recognizes the Commission's definition of CSR, it makes it clear that stakeholders have not reached a consensus on an appropriate definition for CSR. [FN146] Importantly, it expresses its disappointment stemming from the lack of progress that has been made since the Green Paper, believing that the time has come to shift emphasis from “processes” to “outcomes.” [FN147] Indeed, while the Commission has been busy creating “political processes” -- first the Forum and then the Alliance -- not much has been achieved on the various elements of the Parliament's proposed framework on CSR. Apparently seeing no better option to further the debate, it suggests to expand the role of the Alliance as envisaged by the Commission, adding to its aims the identification and promotion of specific EU action and regulation to support CSR. [FN148]

G. An Evaluation of the EU's CSR Policy
*44 The evolution of the EU's CSR policy has thus, to this point, been rather disappointing. The European Parliament has consistently supported a mixed approach to CSR and has proposed an interesting framework which closely resembles the theoretical framework we set out in the first part of this article. However, it has done so from the sidelines. Although the European Commission also seemed to have rather great ambitions in the early development of its CSR policy, it has completely dropped these under the influence of business and the review of the Lisbon Strategy. Unfortunately, it now favors a completely voluntary approach to CSR that does not suffice to ensure corporate compliance with human rights responsibilities.

IV. Developing a European Hybrid Framework for Corporate Human Rights Responsibility
*45 We have now evaluated the EU's CSR policy, as it has been developed by the European Commission. This part of the article will take a step back and focus on the actual development of a European hybrid framework for corporate human rights responsibility, rather than on the EU's policy. Indeed, although the Commission has completely abandoned the idea of a mixed approach to CSR, there have been some initiatives, by the EU and a number of Member States, to develop certain regulatory elements of a CSR framework. We will evaluate these initiatives against the ideal framework as it has been set out in Part II and assess to what extent an appropriate framework has already been developed, by the EU and/or Member States, and which elements are still lacking or need improvement.
*46 First, we will address the elements of an enabling framework for CSR, aimed at making the ‘business case’ for CSR work. Afterwards we will assess whether an appropriate sanctions mechanism has been set in place, in case the preventive framework fails.

A. Creating an Enabling Framework for CSR
*47 In order to make the ‘business case’ for CSR work, public authorities have to establish an appropriate framework. First, they have to ensure that stakeholders have easy access to credible information on corporate human rights behavior, so that they are able to make informed choices. The measures taken by the EU to ensure such access to credible information will be evaluated in the first subsection of this part. Second, they should use their own economic power to influence corporate human rights behavior, particularly through considering human rights in public procurement decisions. The possibilities EU law offers for doing so will be discussed in the second subsection of this part.

1. Improve Transparency and Ensure Credibility of Corporations' Social and Human Rights Claims
*48 Improving the access through credible information on corporate human rights behavior has been recognized by the European Parliament as an important task for public authorities in creating an enabling framework designed to make the ‘business case’ work. This is demonstrated by the fact that the Parliament has consistently argued in favor of more mandatory reporting, independent verification of reports and monitoring compliance with codes of conduct. [FN149] It has also suggested the use of misleading advertising regulations to combat unfaithful claims. [FN150]
*49 Early on in the development of its CSR policy, the Commission also saw a role for public authorities in improving the transparency and credibility of corporations' human rights claims. It stressed the need for more convergence of CSR instruments and pushed for more monitoring of CSR commitments, even suggesting that a social label be created. [FN151] However, as discussed above, the EU Multi-stakeholder Forum failed to achieve consensus on the issue, [FN152] and the Commission later dropped the idea of regulatory intervention, considering it counterproductive and bad for innovation. [FN153]
*50 Nevertheless, the EU has taken some measures to ensure that stakeholders have access to credible information on corporate human rights behavior through reporting and through the use of laws on misleading advertising laws.

i) Measures to ensure transparency and credibility through reporting
*51 The 2003 Accounts Modernization Directive, which amends earlier directives on the annual and consolidated accounts of certain types of corporations, banks and other financial institutions and insurance undertakings, [FN154] imposes an obligation on corporations to take non-financial matters into account in the preparation of their annual reports. It requires all annual reports to “include at least a fair review of the development and performance of the company's business and of its position, together with a description of the principal risks and uncertainties it faces.” [FN155] The Directive points out explicitly that “to the extent necessary for an understanding of [these elements], the analysis shall include both financial and, where appropriate, non-financial key performance indicators relevant to the particular business, including information relating to environmental and employee matters.” [FN156] When transposing the Directive into national law, Member States may waive the obligation to provide this non-financial information for small corporations. [FN157]
*52 Thus, while the Directive does not impose an absolute obligation to provide non-financial information in all annual accounts, it does require corporations to include information on environmental and employee matters insofar as it is necessary for a good understanding of the company's business development, performance or position. However, this is only a very small step toward the mandatory disclosure of credible information on matters of corporate social responsibility. Such a mandate would require clearer guidance on the exact information to be disclosed, explicitly including human rights matters. It could build on the experience of private initiatives such as the Global Reporting Initiative, as has been suggested earlier by both the Commission and the Parliament. Under current EU law, however, corporations only have very limited obligations to report on their corporate human rights compliance. [FN158]
*53 It is regrettable that the EU has not provided for mandatory reporting on social and human rights matters. [FN159] Although an increasing number of corporations report on a voluntary basis, it is unrealistic to believe that soon all corporations will do so; the ‘business case’ for voluntary reporting thus does not apply consistently to all corporations. [FN160] The argument that mandatory reporting would stifle innovation and that it is still too soon to adopt a specific reporting standard is exaggerated. Indeed, it seems perfectly possible to require corporations to respect certain guidelines for their social and human rights reporting, while avoiding overly detailed rules that may not be appropriate for all cases. The fact that it would be more difficult and costly for small and medium enterprises to provide comprehensive human rights reports may influence the specific requirements imposed on them, but is not a reason per se to abandon the idea of mandatory reporting.

ii) The use of misleading advertising laws
*54 The use of legislation on misleading advertising and unfair commercial practices is an interesting means of ensuring the credibility of corporations' social claims. While not obliging corporations to subscribe to any substantive rules, it offers the possibility of holding them responsible for making false claims. Specifically, corporations could be held accountable for false claims about their adherence to certain codes of conduct or their respect for human rights.
*55 Kasky v. Nike is a well-known example of the use of misleading advertising regulations. In 1998, a California resident sued Nike for unfair and deceptive practices under California's Unfair Competition Law [FN161] and False Advertising Law, [FN162] claiming Nike had made misrepresentations of its working conditions in factories overseas in letters to newspaper editors and university presidents. [FN163] According to Nike, its claims were political speech and the lawsuit was therefore barred by the First Amendment. In reversing the decisions of the California Superior Court [FN164] and the California Court of Appeals, [FN165] the California Supreme Court [FN166] qualified Nike's statements as commercial speech and allowed the case to proceed. Nike then appealed to the U.S. Supreme Court, which first granted certiorari, but then dismissed it as improvidently granted because of jurisdictional problems and sent the case back to the Californian courts for further proceedings. [FN167] Nike and Kasky subsequently reached a settlement in September 2003 [FN168] and the merits of the case were never decided. As a result, the California Supreme Court's decision that Nike's statements were commercial speech still stands and it remains undetermined whether Nike's public relations campaign actually infringed California's Unfair Competition and False Advertising Laws. Critics have attacked both the California Supreme Court's judgment and the Supreme Court's refusal to decide the issue. Perhaps surprisingly, part of the criticism was based on the potentially negative effects of the rulings on CSR. Some critics argued that the judgments would have a chilling effect on CSR reporting because corporations would become less transparent about their CSR policies, fearing possible liability. [FN169] Indeed, following California's Supreme Court judgment, Nike announced that “it would limit its work in corporate accountability, not release its 2002 corporate responsibility report and restrict public platform activities.” [FN170] In 2005, however, Nike published its 2004 corporate social responsibility report and made a return to transparency, finding that “the risks of any future lawsuit were far outweighed by benefits of transparency.” [FN171] Indeed, corporations have good business reasons for continuing to tell their side of the story, they just need to be more careful that what they say is accurate. A potential chilling effect would in any event be avoided if reporting on social and human rights issues were mandatory. [FN172]
*56 The use of misleading advertisement laws against false social or environmental commercial claims is also possible under EU law. It had been suggested by the European Parliament [FN173] even before the recent revision of the European advertisement rules made their relevance to false social or human rights claims more explicit. Inaccurate or incomplete representations by corporations about CSR or their adherence to and compliance with voluntary codes of conduct can be attacked on the basis of the 2005 Unfair Commercial Practices Directive [FN174] or the 2006 Directive Concerning Misleading and Comparative Advertising. [FN175] The former applies to unfair business-to-consumer commercial practices and the latter aims to protect traders. [FN176] As business-to-consumer practices are the most relevant for us, we will focus on the Unfair Commercial Practices Directive. [FN177]
*57 The Unfair Commercial Practices Directive (“Directive”) generally prohibits misleading practices as unfair commercial practices, insofar as they (1) are contrary to the requirements of professional diligence and (2) materially distort or are likely to materially distort the average consumer's economic behavior with regard to the product. [FN178] The latter means that they have to “appreciably impair the consumer's ability to make an informed decision, thereby causing the consumer to take a transactional decision that he would not have taken otherwise.” [FN179] The term ‘transactional decision’ is understood quite broadly by the Directive to mean “any decision taken by a consumer concerning whether, how and on what terms to purchase, make payment ... for, retain or dispose of a product or to exercise a contractual right in relation to the product, whether the consumer decides to act or to refrain from acting.” [FN180] Given the fact that a large proportion of consumers claim to take the human rights record of corporations into account, [FN181] it can be argued that false commercial statements on human rights issues will indeed materially distort -- or at least be likely to materially distort -- the consumer's ability to make an informed decision, and thus will fall under the general prohibition of the Directive.
*58 According to the Directive, a commercial practice shall be regarded as misleading “if it contains false information and is therefore untruthful or in any way ... deceives or is likely to deceive the average consumer, even if the information is factually correct, in relation to one or more of [a certain list of] elements, and in either case causes or is likely to cause him to take a transactional decision that he would not have taken otherwise,” [FN182] including the “geographical or commercial origin of the product.” [FN183] Thus, deceptive information about “the working conditions in which the advertised goods were produced, or ... the countries in which the production took place” would be prohibited. [FN184]
*59 Another prohibited practice, insofar as it misleads or is likely to mislead the average consumer, is the “non-compliance by a trader with commitments contained in codes of conduct [FN185] by which he has undertaken to be bound, where (i) the commitment is not aspirational but firm and capable of being verified, and (ii) the trader indicates in a commercial practice that he is bound by the code.” [FN186] The Unfair Commercial Practices Directive thus explicitly provides a means of ensuring that corporations comply with the voluntary codes they have subscribed to. Finally, it is in all circumstances prohibited for a trader (1) to claim to be a signatory to a code of conduct when he is not; (2) to claim that a code of conduct is endorsed by a public or other body when it is not; or (3) to display a trust mark, quality mark or equivalent without having obtained the necessary authorization. [FN187] The Directive thereby ensures a minimum control of the use of code of conducts and labels in commercial statements.
*60 On the whole, the substantive provisions of the Directive are satisfying. Subject to reasonable interpretation by enforcement bodies, the Directive lays down effective rules that clarify its use as a means to ensure the credibility of corporate social and human rights statements.
*61 As regards enforcement of the rules, the Directive gives Member States several options. The bottom line is that persons or organizations which have, according to national law, a legitimate interest in combating unfair commercial practices, should be able to take action against such practices. It is up to Member States, however, to decide on the form of such action. They can allow them to go to court and/or to bring unfair commercial practices before an administrative authority, which must be competent either to itself decide on complaints or to initiate appropriate legal proceedings. [FN188] It is “for each Member State to decide which of these facilities shall be available and whether to enable the courts or administrative authorities to require prior recourse to other established means of dealing with such complaints, including [proceedings before bodies of code owners].” [FN189]
*62 However, the Directive's sanctions for misleading practices are rather disappointing. Member States are only obliged to allow the courts or administrative authorities dealing with complaints to order cessation of the unfair practice, or to institute appropriate legal proceedings for an order of cessation. If the unfair commercial practice is imminent, courts must be able to order prohibition of the practice or institute legal proceedings for an order of such prohibition. Besides that, Member States may give the courts or administrative authorities the power to require publication of its decision and the publication of a corrective statement. [FN190] Such publication would inform consumers that certain advertising was misleading and may have a negative impact on the image of a corporation. It therefore encourages corporations to avoid misleading advertising.
*63 A lot of flexibility, therefore, is left to Member States in deciding how to deal with complaints. Indeed, enforcement mechanisms vary widely between Member States, ranging from a state-controlled regime to self-regulation. The Nordic countries have an efficient state-controlled enforcement system. They have instituted a consumer ombudsman who polices advertisements and responds to complaints. This ombudsman can issue fines or prohibit further publication of the advertisements in question. More controversial cases are sent to the market court. [FN191] In other countries, such as the UK, Ireland and Belgium, enforcement is in the hands of a self-regulatory body. The efficiency of such bodies differs greatly: whereas some operate quite well with a rather high degree of independence from the advertising industry, others are not so independent, do not include a wide range of stakeholders and do not even publish their decisions. [FN192] In any event, in practice, proceedings often take a long time, which means that decisions are frequently reached after the advertising is already over. In such cases, publication of the decision would be the only possible remedy. Since several countries do not allow judges to order publication, however, corporations may get away with misleading advertising without being effectively sanctioned. [FN193]

2. Obligate Human Rights Consideration in Public Procurement Decisions
*64 Taking human rights into account in public procurement is another manner of enabling the ‘business case’ for CSR to work. Such measures would enable public authorities to use the awarding of public contracts as a means of encouraging businesses to comply with human rights responsibilities. Attaching a certain weight to human rights considerations seems perfectly legitimate as it would represent the collective preferences of citizens who increasingly want to buy products from responsible corporations. [FN194] Since public procurement is an important sector of the European Community, with spending by public authorities accounting for 16.3% of the Community GDP, [FN195] it may prove to be a very efficient incentive for corporations to improve their social behavior.
*65 Indeed, the potential of public procurement to increase corporate human rights compliance was recognized early on by the European Commission and Parliament, and has also been encouraged by civil society. Already in its Green Paper, the Commission recognized the potential of public procurement as a means of encouraging the use of social labels. [FN196] In their reactions to the Green Paper, several NGOs also stressed the role of public procurement as a means to encourage responsible corporate behavior. They asked the Commission and other EU institutions to take social and environmental considerations into account for their own procurement and to ask Member States to do the same. [FN197] The European Parliament has called on the Commission to raise awareness among public purchasers about the possibilities offered by existing Community law with regard to the integration of social and environmental considerations into public procurement. [FN198] In 2001, the Commission had issued an interpretative Communication on Community law applicable to public procurement, explaining the admittedly rather restrictive possibilities for integrating social considerations into public procurement. [FN199] Moreover, in its follow-up Communication to the Green Paper it suggested that EU Member States “[make] access to public procurement conditional on adherence to and compliance with the OECD Guidelines for Multinational Enterprises, while respecting EC international commitments.” [FN200]
*66 The potential to consider human rights in public procurement decisions is based on the European Directives in this area -- that seek to harmonize national laws -- and especially the binding interpretation of these Directives by the European Court of Justice (ECJ). Since the latest Directive on public procurement of 2004 [FN201] only partly codifies earlier judicial interpretations of the previous Directives, [FN202] the case-law of the ECJ remains important. For reasons of clarity, we will take the current Directive as a starting point in explaining the role of social considerations in the award of public contracts, and refer to relevant case-law where needed.
*67 There are three stages in the awarding of a public contract to the most suitable bidder. First, certain candidates may be or must be excluded from participation according to Articles 45 and 46 of the Directive. Already at this stage, the social behavior of a candidate -- or the lack thereof -- may be taken into account. Thus, a candidate who has been convicted for participation in a criminal organization, corruption, fraud or money laundering is excluded. [FN203] More importantly, an economic operator may, inter alia, be excluded from participation if he “has been convicted by a judgment which has the force of res judicata in accordance with the legal provisions of the country of any offence concerning his professional conduct” [FN204] or if he “has been guilty of grave professional misconduct proven by any means which the contracting authorities can demonstrate.” [FN205] According to the Preamble to the Directive, national law can determine that non-compliance with environmental legislation or legislation on unlawful agreements in public contracts are offences concerning the professional conduct of the economic operator concerned or grave misconduct. [FN206] It is thus for the Member States to define these concepts in their national legislation and to determine whether noncompliance with certain social obligations constitutes grave professional misconduct.
*68 Second, the suitability of the remaining candidates has to be checked in accordance with the criteria of economic and financial standing and of professional and technical knowledge or ability. [FN207] According to the ECJ, no other criteria may be taken into account, which means that there is no room in this particular determination for social considerations. [FN208]
*69 Third, all eligible offers are ranked and the most suitable candidate is awarded the contract. At this stage, social considerations have a role to play, as ECJ case-law demonstrates. In Beentjes, [FN209] the ECJ was confronted with the question of whether social considerations, specifically measures aimed at combating long-term unemployment, could be taken into account in the award of public contracts. The Court made it clear that there is indeed room for social considerations to be taken into account in the actual awarding of the contract. According to the Directive, a public contract has to be awarded either to the one offering the lowest price or to the most economically advantageous tender. [FN210] In order to determine the most economically advantageous tender, public authorities may take various criteria into account, such as price, period for completion, running costs, profitability and technical merit. As the Directive does not contain an exhaustive list of criteria, authorities may also use other criteria as long as they are aimed at identifying the most economically advantageous offer, [FN211] are given sufficient publicity, [FN212] and comply with all relevant provisions of Community law, such as the principle of non-discrimination. [FN213]
*70 The ECJ further elaborated its view on the potential for additional award criteria in Concordia Bus. [FN214] The case concerned the awarding of a contract for the urban bus network of Helsinki according to the most economically advantageous offer standard, which was to be assessed by reference to three categories of criteria: the overall price of operation, the quality of the bus fleet, and the operator's quality and environment management. The Court reiterated that the award criteria listed in the Directive are not exhaustive, which means that additional criteria may be used. [FN215] Importantly, it pointed out that not all of the award criteria used by the contracting authority to identify the most economically advantageous tender must necessarily be of a purely economic nature, since factors which are not purely economic may influence the value of an offer from the point of view of the contracting authority. [FN216]
*71 As Article 6 of the Treaty Establishing the European Community demands that environmental protection requirements be integrated into the definition and implementation of Community policies and activities, [FN217] there is clearly room for environmental criteria when assessing the most economically advantageous offer, as long as certain conditions are fulfilled. The additional award criteria -- in this case related to the preservation of the environment -- must be linked to the subject-matter of the contract, should not give the contracting authority an unrestricted freedom of choice as regards the award of the contract, must be expressly mentioned in the contract documents or the tender notice, and must comply with all the fundamental principles of Community law, in particular the principle of non-discrimination. [FN218]
*72 The possibility of taking into account environmental considerations when awarding contracts according to the economically most advantageous tender was confirmed in EVN AG, Wienstrom GmbHi. [FN219] This case concerned a contract for the supply of electricity, where the criterion that the electricity would be produced from renewable energy sources was given a weight of forty-five percent. [FN220] The ECJ reiterated the conditions for award criteria laid down in Concordia Bus and pointed out that the contracting authorities are free not only to choose the criteria for awarding the contract, but also to determine their weight, provided that the weight enables an overall evaluation to be made of the criteria applied in order to identify the most economically advantageous tender. [FN221] Given that the use of renewable energy contributes to the reduction in emissions of greenhouse gases (one of the main causes of climate change), and considering that the EU and its Member States have pledged to combat climate change, the Court accepted that the use of renewable energy be used as a criterion with a forty-five percent weight. [FN222] Insofar as all relevant conditions are complied with, nothing seems to exclude the extension of this case-law to the use of the human rights behavior of a company as an additional award criterion. The fact that the Treaty on the European Union ranks fundamental rights among the principles on which the Union is founded -- and which are considered to be common to all Member States [FN223] -- may provide support for that argument. [FN224]
*73 Although the 2004 Directive was intended to include previous case-law, [FN225] it fails to include a reference to social or human rights considerations as additional award criteria. In its non-exhaustive list of award criteria linked to the subject-matter of the public contract which may be taken into account when awarding the contract to the most economically advantageous tender, it only mentions quality, price, technical merit, aesthetic and functional characteristics, environmental characteristics, running costs, cost-effectiveness, after-sales service and technical assistance, delivery date and delivery period or period of completion, and the lowest price. [FN226] Regrettably, no criteria regarding the social performance of the bidder are mentioned, contrary to the draft Directive, which at the European Parliament's insistence contained specific provisions relevant to workforce matters as part of the award criteria. [FN227]
*74 The Directive does, however, mention social and environmental considerations as “special conditions relating to the performance of a contract” which may be set out by the authorities, provided that they are compatible with Community law and are indicated in the contract notice or in the specifications. [FN228] The Preamble mentions “compl[iance] in substance with the provisions of the basic International Labour Organisation (ILO) Conventions, assuming that such provisions have not been implemented in national law” as an example of such a contractual condition. [FN229] In principle, it would have been possible to refer to other instruments of international human rights law as well, thus encouraging Member States to take compliance with human rights standards into account in awarding public contracts. [FN230]
*75 When evaluating the role of social considerations in the current European public procurement regime, one cannot but have mixed feelings. On the one hand, it is very positive that social considerations clearly have a role to play. Case-law from the ECJ has made it clear that public authorities may use social considerations as additional award criteria as long as certain conditions are fulfilled. The new Public Procurement Directive states explicitly that, subject to certain conditions, social considerations may be posited as contractual performance conditions. Moreover, national legislation may determine that non-compliance with certain social obligations constitutes grave professional misconduct, thereby making it possible to exclude non-complying candidates from participation in public contracts.
*76 On the other hand, it is unfortunate that the new Public Procurement Directive has not explicitly listed social considerations as an award criterion and has generally failed to clarify their scope in public procurement. Such clarification would have encouraged Member States to pay attention to the social and human rights record of corporations when awarding public contracts. In practice, the public procurement policies of Member States increasingly take social factors in account. [FN231] However, more could be done and the European Parliament has found it necessary to point out “that major efforts should be undertaken by the Commission and Member State governments at national, regional and local level to use the opportunities provided by the revision of the public procurement Directives in 2004 to support CSR by promoting social and environmental criteria amongst potential suppliers.” [FN232]

B. Providing for Redress and Deterrence
*77 Even if a perfect preventive framework were in place, the occurrence of human rights abuses can not entirely be ruled out. Therefore, it is important to have an effective sanctions mechanism in place to redress potential human rights violations. Such a mechanism needs to ensure that victims receive adequate reparation and that corporate wrongdoers are held to account. It also serves to deter corporations from committing future violations.
*78 There are two principal ways of providing for redress and deterrence, namely civil liability proceedings and criminal proceedings. Since each has its own advantages, an ideal framework should provide for both. Currently, however, the European framework fails to do so.

1. The Use of Civil Liability Proceedings
*79 Foreign direct liability proceedings are one means for holding corporations accountable and providing reparations for victims. The European Parliament has referred to corporate accountability as one means of ensuring that corporations respect human rights [FN233] and has addressed the issue of foreign civil liability for European corporations in a number of resolutions. In 1999, it made reference to the rules regarding conflict of laws, [FN234] and in its next resolution on CSR it pointed out “that the 1968 Brussels Convention (now Brussels I Regulation) [ ... ] enables jurisdiction within the courts of EU Member States for cases against corporations registered or domiciled in the EU in respect of damage sustained in third countries.” [FN235] It also asked “the Commission to compile a study of the application of this extraterritoriality principle by courts in the Member States ... [and] call[ed] on the Member States to incorporate this extraterritoriality principle in legislation”. [FN236] In its latest resolution on CSR in 2007, it again explicitly pointed out the possibilities offered by the Brussels I Regulation for bringing EU-domiciled corporations before European courts expressing its belief “that CSR policies can be enhanced by better awareness and implementation of existing legal instruments [and] call [ing] on the Commission to organize and promote awareness campaigns and monitor the implementation of the application of foreign direct liability according to the Brussels Convention.” [FN237]
*80 Indeed, according to European conflict of laws regulations, foreign direct liability cases are possible in the EU. Thanks to Council Regulation 44/2001, [FN238] better known as the “Brussels I Regulation,” concerning the allocation of jurisdiction in civil and commercial matters [FN239] in the EU, [FN240] the courts of EU Member States are competent to adjudicate civil proceedings against corporations based in the EU for acts which have taken place outside the EU even if the damage occurred outside the EU and the victim is not domiciled in the EU.
*81 The Regulation's primary rule for allocating jurisdiction is the domicile of the defendant, with Article 2 (1) stipulating that “persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State.” [FN241] The ECJ has made clear that “although the court seized must be that of a Contracting State, that provision does not further require that the plaintiff be domiciled in [a Member] State.” [FN242] This means that persons domiciled in a non-Member State, i.e. the most likely victims of abuses by multinationals overseas, may sue a company before the courts in the Member State where the company is domiciled. [FN243]
*82 Apart from this general rule of jurisdiction, there is also another provision which may be of interest to plaintiffs: if a dispute arises out of the operations of a branch, agency or establishment of a company domiciled in the EU, the parent company may also be sued in the courts of the State where that branch, agency, or establishment is located. [FN244] This is so even if those acts -- e.g., the lack of supervision -- have effects outside the state where the branch is situated. [FN245] The added value for plaintiffs is that if a parent company and its branch responsible for the actual damage are domiciled in different EU countries, plaintiffs can choose whether to institute proceedings in the State of the parent company -- on the basis of the general rule of Article 2 (1) of the Brussels I Regulation -- or in the State of its branch. As civil procedures are different in all Member States, with class-actions for human rights violations, for instance, being exclusive to the UK, this extra choice of forum may in practice be very useful.
*83 Such use of the competence of the European courts to deal with civil cases against corporations on the basis of their being domiciled in the EU has been referred to as a “European ‘Foreign Tort’ Claims Act,” [FN246] making reference to the Alien Tort Claims Act (“ATCA”) of the United States. [FN247] Nonetheless, the mechanism provided by the Brussels I Regulation differs from the ATCA in several ways. [FN248] First, as opposed to ATCA, the Brussels I Regulation does not require the plaintiff to be an alien. The domicile of the defendant in the EU is sufficient in order to establish jurisdiction and neither the domicile nor the nationality of the plaintiff is relevant in this respect. [FN249] Second, the Brussels I Regulation may be relied upon in all civil proceedings against corporations domiciled in the EU. ATCA, on the other hand, can only be invoked in case of an alleged violation of the ‘law of nations.’ The instituting of proceedings against a company domiciled in the EU on the basis of the Brussels I Regulation does not per se determine the law applicable to the conflict. [FN250]
*84 Finally, the doctrine of forum non conveniens, often an important procedural hurdle to ATCA foreign direct liability cases, will not bar adjudication under the Brussels I Regulation. According to the doctrine of forum non conveniens, a court may stay an action brought before it if an alternative forum exists to which plaintiffs may turn that would be more appropriate, unless substantial justice could not be done there. [FN251] As the general principle that defendants may be sued in the courts of the State of their domicile is a mandatory rule wherefrom no derogation is permitted, courts in which a case is brought on the basis of the Brussels I Regulation cannot rely on the doctrine of forum non conveniens to decline jurisdiction. This is so even if the competing forum would be in a non-Member State.
*85 Such a conclusion could already be implied from the ECJ judgment in the Group Josi Reinsurance Company SA case, which stated that the rules on jurisdiction that are now reflected in the Brussels I Regulation are “applicable where the defendant has its domicile or seat in a Contracting State, even if the plaintiff is domiciled in a non-member country.” [FN252] This was also the conclusion reached by commentators. [FN253]
*86 The ECJ has now explicitly confirmed the non-applicability of the forum non conveniens doctrine in the case of Andrew Owusu v. N.B. Jackson. [FN254] In that case, the Court began by confirming the applicability of Article 2 of the Brussels Convention in cases where the conflict involves “relationships between the courts of a single Contracting State and those of a non-Contracting State rather than relationships between the courts of a number of Contracting States”. [FN255] Once the Court came to this conclusion, it addressed the question of the applicability of the doctrine of forum non conveniens in such cases. First, it stressed the mandatory nature of Article 2 of the Brussels Convention, and the fact that it can only be derogated from in the cases expressly provided for by the Convention. There is no such exception on the basis of the forum non conveniens doctrine, although the question was discussed by the drafters of the Brussels Convention. [FN256]
*87 The ECJ next explained that application of the doctrine of forum non conveniens would prevent the principle of legal certainty, which is one of the objectives of the Brussels Convention, from being fully guaranteed. [FN257] This principle requires that “a normally well-informed defendant [be] reasonably able to foresee before which courts, other than those of the State in which he is domiciled, he may be sued.” [FN258] Since the forum non conveniens doctrine allows courts a wide discretion as regards the question whether a foreign court would be a more appropriate forum, it would undermine the predictability of the rules of jurisdiction laid down by the Convention and thus undermine the principle of legal certainty. [FN259]
*88 The Court also reasoned that the application of the doctrine of forum non conveniens would undermine the legal protection of persons established in the Community, since defendants are generally better placed to conduct their defense before the courts of their domicile and the forum non conveniens doctrine would not allow them to reasonably foresee before which other court he may be sued. [FN260] Moreover, the forum non conveniens doctrine would also cause problems for claimants. Indeed, when defendants consider an alternative foreign court more appropriate, it would be up to claimants to prove that they would not be able to obtain justice there. Alternatively, claimants would have to prove that the foreign court in fact does not have jurisdiction to try the action, or that, in practice, they are unable to obtain effective justice before that court. [FN261]
*89 Finally, the forum non conveniens doctrine is only recognized by a limited number of States, so its application would undermine the uniform application of the jurisdictional rules of the Brussels Convention and therefore run counter to its objective of harmonization. [FN262]
*90 The Court then logically concluded that the Brussels Convention does not allow courts to invoke the doctrine of forum non conveniens in order to decline their jurisdiction based on the domicile of the defendant, even in cases where the competing forum is that of a Non-Member State. [FN263]
*91 The clarification by the ECJ that the issue of forum non conveniens is irrelevant if a defendant company has its domicile in an EU Member State is important. Indeed, as a number of UK cases have shown, corporations have systematically relied on the doctrine of forum non conveniens as a means to stay tort proceedings by foreign claimants. At minimum, the invocation of forum non conveniens results in lengthy proceedings. One example is the Edward Connelly vs. RTZ Corporation case. It dealt with a UK national who had contracted cancer of the throat, allegedly as a result of negligent exposure to uranium dust during his work in a uranium mine in Namibia. Relying on legal aid, he brought proceedings in England against the parent company of the mining company and another associated company, both of which were registered in England. After endless court battles about forum non conveniens, the House of Lords agreed that “the Namibian forum is not one in which the case can be tried more suitably for the interests of all the parties and for the ends of justice.” [FN264] However, the Queen's Bench Division subsequently held that the case was time-barred. [FN265]
*92 Another well-known case in which the issue of forum non conveniens has been debated at length is Lubbe & Ors v. Cape. In this case, more than 3000 South African claimants sued Cape for damage they sustained due to their alleged exposure to asbestos resulting from the activities of a Cape subsidiary mining company in South Africa. In 2000, after lengthy proceedings, the House of Lords allowed the case to proceed because in South Africa:
the plaintiffs would have no means of obtaining the professional representation and the expert evidence which would be essential if these claims were to be justly decided. This would amount to a denial of justice. In the special and unusual circumstances of these proceedings, lack of the means, in South Africa, to prosecute these claims to a conclusion provides a compelling ground, at the second stage of the Spiliada test, for refusing to stay the proceedings here. [FN266]
*93 A puzzling question is why, if the Brussels Regulation can be a useful tool for European civil damages claims against European corporations for human rights abuses abroad, have there not been more cases? One of the reasons may be that procedural laws in Europe are less favorable than in the US. The general principle that the loser of a case pays its own as well as the winner's costs may raise the threshold for launching a case. [FN267] Other reasons may be the general lack of contingency fee arrangements and the impossibility for class actions (the UK, traditionally home to European civil liability cases, being a notable exception to both). Of course, the lengthy duration of civil trials, problems of evidence and lack of funding also may have an influence.
*94 However, it may also be that it is still too soon to assess the real impact of the ECJ ruling in the Owusu case. The UK has traditionally been the European country where most of the civil cases against (parent) corporations have been launched by foreign victims for damages sustained abroad. One can only assume that now that the important procedural hurdle of forum non conveniens has been lifted by the ECJ, more suits against corporations will be launched. A recent article in the Financial Times suggests that this is exactly what is happening. [FN268] One of the claims launched in the aftermath of the Owusu judgment is a collective action brought by 12,500 Ivorians who say they were poisoned by toxic chemicals dumped by a ship chartered by Trafigura, an oil trading company, in 2006. [FN269]

2. The Use of Criminal Accountability
*95 To this point, there have not been any EU initiatives in the field of criminal corporate responsibility for grave human rights violations. [FN270] Professor Olivier De Schutter has suggested that the EU could adopt an instrument requiring its Member States to criminalize serious corporate violations of human rights, regardless of whether those violations are committed at home or abroad by one of their nationals or habitual residents. EU instruments dealing with trafficking in human beings and sexual exploitation of children, which provide for extraterritorial incrimination, could serve as a model for such an instrument. It would also be preferable to action by individual Member States. De Schutter argues convincingly that, if the right legal basis were found, there would be no conceptual difficulties in adopting such an instrument. [FN271]
*96 As for now, the only examples of criminal cases brought against corporations for grave human rights violations are national ones. Human rights NGOs and victims associations have tried to use the more user-friendly criminal jurisdictions of Member States to hold multinationals accountable. These systems are, in particular, States whose systems of criminal procedure are based on the civil law “partie civile” model. In this model, private individuals can bring a complaint and the investigating criminal magistrate is required to take it up. The “partie civile” model, in combination with national criminal statutes that provide for extraterritorial jurisdiction for international crimes such as war crimes, crimes against humanity and genocide, has opened the door to some interesting proceedings.
*97 A well-known and disappointing example is when proceedings were launched against Total, a French corporation, in France and Belgium by Burmese claimants. [FN272] The claimants in the French case alleged that Total made them engage in forced labor in the construction of a pipeline. However, since Burmese law does not provide for jurisdiction over forced labor, and there is not enough available information to know whether the acts could have been seen as ‘sequestration,’ the proceedings were discontinued in 2006. Indeed, the necessary information could only have been supplied by the claimants, which in the meantime had reached a settlement with Total. [FN273] Availing themselves of the then-existing Belgian ‘universal jurisdiction law’ for international crimes, the claimants in the Belgian case alleged that Total was guilty of crimes against humanity and complicity with the Burmese regime in crimes against humanity. Subsequently, however, the ‘universal jurisdiction law’ was changed, and it now provides a much more limited scope for jurisdiction. After a long jurisdictional battle between the Constitutional Court and the Court de Cassation, the latter stopped the proceedings. [FN274] Following injunctions by the Minister of Defense, supplanting the Minister of Justice, the Prosecutor has twice taken up the case again, but judicial authorities recently decided that the judgment of the Court de Cassation was final and that the case could not go further. [FN275]

3. Civil and Criminal Accountability as Complementary Parts of an Effective Sanctions Mechanism
*98 Both criminal and civil accountability are valuable tools in the effort to promote corporate social responsibility. Civil liability proceedings present some advantages over criminal proceedings, as victims can institute proceedings without having to await action on their behalf and the burden of proof is generally lighter than in criminal cases. Moreover, the negative publicity generated by a civil liability case may be very worrisome for corporations and may have a positive influence on their human rights behavior. [FN276] Nevertheless, sometimes criminal proceedings may be more appropriate. In criminal cases, the state apparatus may help to fight against impunity of corporations and ease the burden of proof imposed on victims to prove corporate misconduct. [FN277] Moreover, victims may be better compensated when the corporation itself, rather than one or more of its directors, is held directly accountable. [FN278] Criminal cases may also help to ensure that the same violation will not be repeated in the future, since sanctions may be imposed on the corporation. [FN279] Finally, a criminal case directed against a corporation may generate a lot of attention from the media, thus publicly shaming the corporation in question.
*99 Ultimately, both civil and criminal liability could prove to be effective measures in promoting corporate human rights compliance. Since they are complementary, an effective sanctions mechanism should allow for both.
*100 Unfortunately, the current EU framework regarding corporate human rights responsibility fails to do so. It allows for civil liability proceedings against corporations domiciled in Europe, for human rights abuses committed anywhere, but does not provide for corporations' criminal responsibility. An instrument concerning corporations' criminal responsibility would be necessary to ensure an effective European sanctions mechanism.

V. Concluding Observations
*101 In an attempt to move the debate beyond the black-and-white divide between voluntary and regulatory approaches to corporate responsibility, we have searched for an appropriate framework for ensuring that corporations respect human rights. Our conclusion is that such a framework must include enabling measures to make the ‘business case’ for corporate responsibility work and thereby encourage responsible corporate behavior. In addition to such enabling measures, redress, in the form of civil and criminal procedures, must be available for the worst cases of human rights abuses.
*102 Unfortunately, the EU has not yet chosen to take this path, instead preferring a purely voluntary approach in cooperation with business. The European Commission started its CSR policy with higher ambitions and envisioned an enabling framework for CSR. These ambitions were later abandoned, however, likely because of the dominance of business in the Multi-Stakeholder Forum and the Lisbon Strategy review in 2005. Calls from the European Parliament for a more comprehensive framework have not yet succeeded
*103 Nevertheless, some elements of a regulatory framework have been put in place. Some progress has been made in providing consumers, investors and workers with access to credible information about corporations' social and human rights responsibility, although the result is far from satisfactory. Corporations are now expected to report on social and environmental matters, but no guidelines have been adopted. Also, the Unfair Commercial Practices Directive may be relied on to combat false or misleading social statements, but national enforcement systems vary widely and are not always efficient. Unfortunately, no progress at all has been made on the issues of verification and monitoring. Some leeway has also been given to public authorities to take human rights into account in public procurement, which may provide an incentive for corporations to act more responsibly.
*104 As far as an effective sanctions mechanism is concerned, the Brussels I Regulation is crucial in that it provides the authority to bring foreign direct liability cases against corporations domiciled in the EU without permitting the application of the forum non conveniens doctrine. For the time being, however, it has not often been relied on. Moreover, all tort liability cases initiated so far have either been dismissed or have been the object of a settlement between the parties. As regards criminal proceedings, there is not yet an EU instrument providing for the possibility of criminal proceedings against corporations for grave human rights violations. There have been some cases in Member States, but none of them has resulted in a conviction.
*105 We cannot but therefore unfortunately conclude that the European Union's approach to corporate human rights responsibility has thus far largely failed. Although some progress has been made, the approach falls far short of ensuring human rights compliance by all corporations.
[FNa1]. Professor of International Law and the Law of International Organizations, Director of the Leuven Centre for Global Governance Studies and Institute for International Law, Katholieke Universiteit Leuven.

[FNaa1]. Research collaborator, Institute for International Law and Junior Member, Leuven Centre for Global Governance Studies, Katholieke Universiteit Leuven.

[FN1]. Philip Alston, The ‘Not-A-cat’ Syndrome: Can the International Human Rights Regime Accommodate Non-State Actors?, in Non-State Actors and Human Rights 1, 17 (Philip Alston ed., Oxford University Press 2005).

[FN2]. See, e.g., Sean D. Murphy, Taking Multinational Corporate Codes of Conduct to the Next Level, in 43 Colum. J. Transnat'l L. 389, 397 (2004-2005); Menno T. Kamminga, Holding Multinational Corporations Accountable for Human Rights Abuses: A Challenge for the EC, in The EU and Human Rights 553, 554 (Philip Alston ed., Oxford University Press 1999).

[FN3]. Murphy, supra note 2, at 389-99.

[FN4]. Id.

[FN5]. See generally Marius Emberland, The human rights of Companies: Exploring the Structure of ECHR Protection (Oxford University Press, 2006).

[FN6]. Treaty on European Union art. 6, para. 1, Dec. 29, 2006, 2006 O.J. (C 321 E) 5 [hereinafter EU Treaty]. (“The Union is founded on the principles of liberty, democracy, respect for human rights and fundamental freedoms, and the rule of law, principles which are common to the Member States.”).

[FN7]. See Milton Friedman, The Social Responsibility of Business is to Increase its Profits, N.Y. Times Mag., Sep. 13, 1970, at 122-26 (quoted in Aaron A. Dhir, Realigning the Corporate Building Blocks: Shareholder Proposals as a Vehicle for Achieving Corporate Social and Human Rights Accountability, 43 Am. Bus. L. J. 365, 365 n.4 (2006)).

[FN8]. See, e.g. Nicola Jägers, Corporate Human Rights Obligations: In Search of Accountability, (Intersentia 2002); Andrew Clapham, Human Rights Obligations of Non-State Actors 195-270 (Oxford University Press 2006).

[FN9]. On the debate on corporate complicity and the margins of a company's responsibility, see, e.g., The Global Compact, The United Nations Global Compact: Advancing Corporate Citizenship, (2005), http:// www.unglobalcompact.org/docs/about_the_gc/2.0.2.pdf (last visited Apr. 21, 2008) (for use of the concept of “spheres of influence”); see also International Council on Human Rights, Beyond Voluntarism: Human Rights and the Developing International Legal Obligations of Companies 121-141 (2002) (discussing different degrees of ‘complicity’ in human rights violations).

[FN10]. See, e.g., Pall A. Davidsson, Legal Enforcement of Corporate Social Responsibility Within the EU, 8 Colum. J. Eur. L. 529, 552 (2002) (stating that “certain aspects of CSR are so critical to human welfare that they cannot be left to the discretion of the private sector”).

[FN11]. See generally David Kinley & Junko Tadaki, From Talk to Walk: The Emergence of Human Rights Responsibilties for Corporation at International Law, 44 Va. J. Int'l L. 931, 935 (2003-2004). The authors take the idea that the power of transnational corporations has to be accompanied by commensurate duties under international human rights law as the starting point of their examination of the possibility of directly regulating such corporations at the international level.

[FN12]. See generally Emberland, supra note 5.

[FN13]. See, e.g., Peter Muchlinski, Corporate Social Responsibility and International Law: The Case of Human Rights and Multinational Enterprises, in The New Corporate Accountability: Corporate Social Responsibility and the Law 431, 433, (Doreen McBarnet, Aurora Voiculescu & Tom Campbell, eds., 2007).

[FN14]. For example, see the responses of business representatives to the Commission Green Paper-Promoting a European Framework for Corporate Social Responsibility COM (2001) 366 final (July 18, 2001); see also CSR Europe, CSR Europe's Response to the European Commission Green Paper “For a European Framework on CSR”: Proposals for Action, para. 7 (DEC. 21 2001), available at http://ec.europa.eu/employment_social/soc-dial/csr/csr_responses.htm (“These [voluntary] actions are motivated by a conviction that there is an inherent bottom line value in CSR as intelligent self interest for corporations that also brings benefits for society”); ICSCA, Green Paper on Promoting a European Framework for Corporate Social Responsibility -ICSCA Statements 1 (Dec. 27, 2001), available at http://ec.europa.eu/employment_social/soc-dial/csr/csr_ responses.htm (“Companies with this [responsible] corporate philosophy are generally more successful and profitable than others; they benefit from sustainability as a competitive advantage.”); World Business Council for Sustainable Development, Corporate Social Responsibility: Making Good Business Sense, 7 (Jan. 2000), available at http:// www.wbcsd.org/DocRoot/IunSPdIKvmYH5HjbN4XC/csr2000.pdf, (“For any company, giving a high priority to CSR is no longer seen to represent an unproductive cost or resource burden, but, increasingly, as a means of enhancing reputation and credibility among stakeholders -- something on which success or even survival may depend. Understanding and taking account of society's expectations is quite simply enlightened self-interest for business in today's interdependent world.”).

[FN15]. See, e.g., David Vogel, The Market for Virtue: the Potential and Limits of Corporate Social Responsibility 16 (Brookings Institution Press 2005) (“According to the business case for CSR, firms will increasingly behave more responsibly not because managers have become more public-spirited -- though some may have -- but because more managers now believe that being a corporate citizen is a source of competitive advantage.”).

[FN16]. See generally Sorcha MacLeod, Reconciling Regulatory Approaches to Corporate Social Responsibility: The European Union, OECD and United Nations Compared, in 13 European Public Law 671 (2007); Doreen McBarnet, Corporate Social Responsibility Beyond Law, Through Law, for Law: The New Corporate Accountability, in The New Corporate Accountability: Corporate Social Responsibility and the Law, 9, (Doreen McBarnet, Aurora Voiculescu & Tom Campbell eds., 2007). See also Jennifer A. Zerk, Multinationals and Corporate Social Responsibility: Limitations and Opportunities in International Law, 34-40 (Cambridge University Press 2006).

[FN17]. Cf. infra Part D.

[FN18]. See McBarnet, supra note 16, at 31.

[FN19]. Zerk, supra note 16, at 35.

[FN20]. Id. at 34.

[FN21]. Davidsson, supra note 10, at 552.

[FN22]. Vogel, supra note 15, at 16-17. Vogel describes the benefits corporate social responsibility is supposed to bring for business as: “A more responsibly managed firm will face fewer business risks than its less virtuous competitors: it will be more likely to avoid consumer boycotts, be better able to obtain capital at a lower cost, and be in a better position to attract and retain committed employees and loyal customers. Correspondingly, firms that are unable or unwilling to recognize this new competitive reality will find themselves disadvantaged in the marketplace: both “responsible” and “sophisticated” investors will regard their shares as too risky; the value of their brands and thus their sales will decline as a result of media exposure, public protests, and boycotts; and the morale of their employees will suffer.” Id. He then assesses the existence of a business case for corporate social responsibility and the actual demand of stakeholders for responsible corporate behavior. Id. chs 2,3. The structure of our own discussion of the merits of the business case (no. 9 and following) draws upon this. See also McBarnet, supra note 16, at 17-19.

[FN23]. See Doreen McBarnet, supra note 16, at 24-25.

[FN24]. See Davidsson, supra note 10, at 532.

[FN25]. See Vogel, supra note 15, at 46-74. The structure of our assessment of stakeholders' demand for responsible behavior is based on Vogel's model. It also provided the basis for our substantive analysis.

[FN26]. See id. at 47-56 (assessing the influence of consumers on corporate behavior).

[FN27]. See, e.g., id. at 47.

[FN28]. S. Garone, The Link Between Corporate Citizenship and Financial Performance, Conference Board, Research Report 1234-99-RR, 9 (quoted in Vogel, supra note 15, at 47).

[FN29]. See Vogel, supra note 15, at 48.

[FN30]. Id.

[FN31]. Id. (“[S]tudies suggest that the true number of socially conscious consumers may even be lower [than 10 percent].”) Vogel refers to a 2004 European survey (Michel Capron and Françoise Quairel-Lanoizelee, Mythes et Réalités de l'entreprise responsible 57 (La Decouverte 2004)), which found that while seventy-five percent of consumers indicated that they were ready to modify their purchasing decisions because of social or environmental criteria, only three percent had actually done so. Other studies in Britain have reported that approximately five percent of the public strictly follows ethical concerns in their purchasing, while “ethical boycotts” affect less than two percent of market transactions. Dara O'Rourke, Opportunities and Obstacles for Corporate Social Responsibility in Developing Countries, World Bank/International Finance Corporation 22 (March 2004). See also Vogel, supra note 15, at 51-52 (discussing the limited effects of consumer boycotts).

[FN32]. Between 2002 and 2005 there has been a 265% rise in Fairtrade products. A 2006 Survey by the Co-operative Bank in November 2006 put the UK ethical consumption market at £29 billion, an 11.4 per cent rise on the previous year compared to a 1.4 per cent rise in household expenditure more generally. See McBarnet, supra note 16, at vii.

[FN33]. See Vogel, supra note 15, at 52. Vogel also suggests their lack of knowledge arises from lack of interest rather than lack of available information. Id. We do not agree and believe that consumers still have no easy access to the necessary information, so that a conclusion on their interest in the matter cannot be so easily reached.

[FN34]. See McBarnet, supra note 16, at 26.

[FN35]. See Olivier De Schutter, The Accountability of Multinationals for Human Rights Violations in European, Law, in Non-state actors and human rights, 226, 227 (P. Alston ed., 2005). See also BEUC, European Consumers' Organisation, Corporate social responsibility: BEUC Comments on the Green Paper, 2-3 (Feb. 6, 2002), http://ec.europa.eu/employment_social/soc-dial/csr/pdf/092-NGOEU_BEUC_EU_020207_en.pdf (stating its view that it is a governmental duty to create a situation where consumers have an informed choice to buy sustainable and ethical products for a competitive price).

[FN36]. Vogel, supra note 15, at 60-72.

[FN37]. Id. at 16-17.

[FN38]. Id. at 21-23. Vogel also suggests that the second group of investors, compared to the first group, is becoming increasingly important, compared to the first group. Id.

[FN39]. Since their inception, two major ethical stock indexes, the FTSE4Good Index and the Dow Jones Sustainability Index have underperformed the market by 3% and 8% respectively. Id. at 35-36.

[FN40]. Id. at 37. See also Kevin Campbell & Douglas Vick, Disclosure Law and the Market for Corporate Social Responsibility, in The New Corporate Accountability supra note 13 at 277 (“Previous empirical studies of the comparative performance of ‘ethical’ and ‘non-ethical’ corporations did not provide clear evidence that CSR improved a company's value in the stock market, but they did not clearly indicate that CSR activities hurt performance, either”). Their own empirical study leads to similar equivocal results, which are, however, not encouraging in the sense that socially responsible corporations performed worse than other corporations during bad market times.

[FN41]. See McBarnet, supra note 16, at 18 (“SRI investment in France rose 76 per cent in 2004, with 60 per cent of that accounted for by institutional investors.” (quoting Ethical Corporation, Business Briefs, Ethical Corporation, Sept. 2005, at 4).

[FN42]. Approximately 0.36%. See Vogel, supra note 15, at 61.

[FN43]. Id. at 62-63.

[FN44]. Id. at 64-65. See also McBarnet, supra note 16, at 37-38 (stating that NGOs, for instance, have bought shares in order to be able to exercise shareholder rights at annual general meetings.)

[FN45]. See Vogel, supra note 15, at 62-64 (according to one model SRI should occupy at least 25% of the market to be able to have an influence on share prices).

[FN46]. See id. at 56-60 (providing an assessment of the influence of employees on corporate behavior).

[FN47]. McBarnet, supra note 16, at 19.

[FN48]. Vogel, supra note 15, at 58.

[FN49]. Id. at 58-59.

[FN50]. See id. at 59-60.

[FN51]. Id. at 50-51.

[FN52]. Id. at 29-33.

[FN53]. Id. at 17, 29-34.

[FN54]. See, e.g., Davidsson, supra note 10, at 552-553. Note that a variety of regulatory techniques may be used to achieve these objectives. While it is crucial that public authorities make sure all necessary mechanisms are put in place, they do not necessarily need to provide all of them themselves and may delegate some to the private sector.

[FN55]. Sorcha MacLeod, Corporate Social Responsibility Within the European Union Framework, 23 Wis. Int'l L.J. 541, 551 (2005).

[FN56]. See, e.g., De Schutter, supra note 35, at 227 (“With respect to many socially responsible practices, companies will frequently find themselves in the familiar situation where what would be profitable in the long run if other competitors act similarly will be costly in the short run, where certain competitors seeking an immediate return on the investment of the shareholders, will act otherwise.”). See also McBarnet, supra note 16, at 25; The Platform of European Social NGOS: Social Platform Response to the Commission's Green Paper, II.1 (Nov. 26 2001) [hereinafter European Social NGOs], available at http:// ec.europa.eu/employment_social/soc-dial/csr/pdf/092-NGOEU_Platform-of-European-Social-NGOs_EU_011126_en.htm, (“all actors need to acknowledge that short-term profit and social responsibility are not always reconcilable”); Davidsson, supra note 10, at 532 (“Additional costs are involved in adopting new policies and schemes to align existing company practices with social responsibilities, and these additional costs will not always result in increased profits. Even where consumers or investors reward ethical conduct, practices that are socially harmful could be even more profitable.”).

[FN57]. See, e.g. Davidsson, supra note 10, 552 (“Certain aspects of CSR are so critical to human welfare that they cannot be left to the discretion of the private sector.”).

[FN58]. See McBarnet, supra note 16, at 47-54 (on the need to comply with the spirit of the law and the problem of ‘creative compliance’).

[FN59]. MacLeod, supra note 55, at 551 (quoting Mary Robinson, United Nations High Commissioner for Human Rights, RSA World Leaders Lecture: Beyond Good Intentions: Corporate Citizenship For a New Century (May 2002)).

[FN60]. See, e.g., Commission Communication on Multinational Undertakings and Community Regulations, COM (73) 1930 final (Nov. 7, 1973); see also MacLeod, supra note 55, at 543; Parliament Resolution on EU Standards for European Enterprises Operating in Developing Countries: Towards a European Code of Conduct of April 14, 1999, 1999 O.J. (C 104/180).

[FN61]. Commission Green Paper on Promoting a European Framework for Corporate Social Responsibility, COM (2001) 366 final (July 18, 2001) [hereinafter Commission Green Paper on CSR].

[FN62]. Id. at 7.

[FN63]. Id. at 8. See also Commisson Communication on Promoting Core Labour Standards and Improving Social Governance in the Context of Globalization, COM (2001) 416 final (July 18, 2001) (confirming the Commission's view that CSR initiatives are of a voluntary nature).

[FN64]. Commission Green Paper on CSR, supra note 61, at 15.

[FN65]. Olivier De Schutter, Corporate Social Responsibility European Style, 2 European Law Journal 203, 207 (2008).

[FN66]. Commission Green Paper on CSR, supra note 61, at 7.

[FN67]. Id. at 8 (“The economic impact of corporate social responsibility can be broken down into direct and indirect effects. Positive direct results may, for example, derive from a better working environment, which leads to a more committed and productive workforce or from efficient use of natural resources. In addition, indirect effects result from the growing attention of consumers and investors, which will increase their opportunities on the markets. Inversely, there can sometimes be a negative impact on a company's reputation due to criticism of business practices. This can affect the core assets of a company, such as its brands and image”). See also id. at 9 (“Financial institutions are making increasing use of social and environmental checklists to evaluate the risks of loans to, and investments in companies. Similarly, being recognized as a socially responsible enterprise, for example, through listing in an ethical stock market index, can support the rating of a company and therefore entails concrete financial advantages”).

[FN68]. Id. at 9.

[FN69]. Id. at 18-19.

[FN70]. Id. at 21.

[FN71]. Id. at 22.

[FN72]. Id. at 21.

[FN73]. All responses to the consultation on the Commission Green Paper on CSR are available at http://ec.europa.eu/employment_social/soc-dial/csr/csr_ responses.htm.

[FN74]. See, e.g., E-mail from Dr. Allen White, Director, Global Reporting Initiative, in response to the call by the European Commission for input to the discussion opened by the recent Green Paper on Promoting a European Framework for Corporate Social Responsibility, supra note 61; Clean Clothes Campaign, Reaction from the Clean Clothes Campaign to the European Commission Green Paper “Promoting a European framework for Corporate Social Responsibility” (Dec. 21, 2001) [hereinafter Clean Clothes Campaign] http:// www.cleanclothes.org/news/01-12-21.htm; European Social NGOs, supra note 56, paras. I.15, 1.16; Oxfam International, The European Commission's Green Paper: Promoting a European framework for Corporate Social Responsibility: A Submission by Oxfam International, para 16 (Jan. 2002), available at http:// ec.europa.eu/employment_social/soc-dial/csr/pdf/091-NGOINT_OXFAM_INT_020121_ en.pdf, [hereinafter Oxfam International]; Traidcraft Exchange, EU Corporate Social Responsibility Green Paper: Submission by Traidcraft Exchange, 2 (Dec. 2001), available at http://ec.europa.eu/employment_social/soc-dial/csr/pdf/091-NGOINT_Traidcraft_INT_011221_en.pdf, [hereinafter Traidcraft Exchange]; but see Letter from Chris Wille, Director, Rainforest Alliance, to the European Commission (Dec. 28, 2001) (stating that “CSR and certification are voluntary systems and should be market driven, otherwise they will not succeed in the long term”).

[FN75]. See, e.g., Oxfam International, supra note 74, para. 19; Traidcraft Exchange, supra note 74; Clean Clothes Campaign, supra note 74.

[FN76]. CSR Europe, CSR Europe's Response to the European Commission Green Paper “For a European Framework on CSR”: Proposals for Action, para. 7 (Dec. 21 2001), available at http://ec.europa.eu/employment_social/soc-dial/csr/pdf/043-COMPNETEU_CSREUROPE_EU_011221_en.pdf, [hereinafter CSR Europe]; see also id. at para. 15 (“It is illogical to speak of regulating CSR activities, if they are simultaneously to be encouraged as activities that lie beyond regulation”).

[FN77]. International Chamber of Commerce Group on Business in Society, ICC Comments on the European Commission Green Paper “Promoting a European Framework for Corporate Social Responsibility” (Dec. 20, 2001), available at http:// ec.europa.eu/employment_social/soc-dial/csr/pdf/043-COMPNETEU_CSREUROPE_EU_ 011221_en.pdf; see also Association des Industries de Marque, AIM® POSITION PAPER: AIM Reply to the Green Paper on Corporate Social Responsibility, (Jan. 2002), available at http://ec.europa.eu/employment_social/soc-dial/csr/pdf/043-COMPNETEU_AIM_EU_020118_en.pdf; CSR Europe, supra note 76, para. 22.

[FN78]. ICSCA, Green Paper on Promoting a European Framework for Corporate Social Responsibility: ICSCA Statements (Dec. 27, 2001), available at http:// ec.europa.eu/employment_social/soc-dial/csr/pdf/031-ORGINT_ICSCA_INT_011227_ en.pdf.

[FN79]. CSR Europe, supra note 76, paras. 3, 4.

[FN80]. International Chamber of Commerce, ICC Comments on the European Commission Green Paper “Promoting a European Framework for Corporate Social Responsibility” (Dec 20, 2001), available at http://ec.europa.eu/employment_ social/soc-dial/csr/pdf/042-COMPNETINT_International-Chamber-of-Commerce-ICC_ INT_011220_en.pdf.

[FN81]. Id.

[FN82]. Id.

[FN83]. CSR Europe is a business driven network made up of over fifty member companies and linking fifteen national and international partner orgs around Europe, who together represent over 1200 businesses.

[FN84]. CSR Europe, CSR Europe's Response to the European Commission Green Paper “For a European Framework on CSR”: Proposals for Action, para. 16, (Dec. 21 2001), available at http://ec.europa.eu/employment_social/soc-dial/csr/pdf/043-COMPNETEU_CSREUROPE_EU_011221_en.pdf.

[FN85]. Id. at para. 17.

[FN86]. Commission Communication concerning Corporate Social Responsibility: a Business Contribution to Sustainable Development, COM (2002), 347 final, (July 2, 2002).

[FN87]. Id. at 5.

[FN88]. Id. at 8.

[FN89]. Id. at 12-13

[FN90]. Id. at 8.

[FN91]. Id. at 12-13 (references omitted).

[FN92]. Id. at 14.

[FN93]. Id. at 13.

[FN94]. Id. at 15.

[FN95]. Id. at 16.

[FN96]. Id. at 17.

[FN97]. Id. at 18.

[FN98]. For an interesting and revealing discussion of the establishment and early life of the Forum, see Olivier De Schutter, Corporate Social Responsibility European Style, 14 European Law Journal No. 2, 203, 210-214 (2008).

[FN99]. EU Multi-Stakeholder Forum on CSR, Objectives, Composition and Operational Aspects (Oct. 16, 2002), para. 1, available at http:// circa.europa.eu/irc/empl/csr_eu_multi_stakeholder_forum/info/data/en/CSR%20Forum%R̈ules.htm.

[FN100]. De Schutter, supra note 98, at 213.

[FN101]. Id. at 213-214.

[FN102]. EU Multi-Stakeholder Forum on CSR, Final Report, (June 29, 2004), available at http://circa.europa.eu/irc/empl/csr_eu_multi_stakeholder_ forum/info/data/en/CSR%20Forum%C20final%20report.pdf, Foreword.

[FN103]. Id.

[FN104]. De Schutter, supra note 98, at 214.

[FN105]. EU Multi-Stakeholder Forum on CSR, supra note 102, at 2-3. Richard Howitt, member of the European Parliament and Rapporteur on CSR has confirmed that no definition has been reached on the definition of CSR. At the Review Meeting of the Forum in 2006, he said that “despite the fact that it has been said many times today that there is a consensus on the definition of CSR and that this is a consensus of the forum, really there isn't. We mustn't deceive ourselves about that. There is a European Commission definition of CSR that is in its communication, which we respect, but we should also respect that there are other views out here about the appropriateness of that definition. To say that there is a consensus where there isn't, I think it unhelpful.” Id.

[FN106]. Id. at 15.

[FN107]. Id. at 15.

[FN108]. Id. at 16.

[FN109]. Lisbon European Council, of Mar. 23 and 24, 2000, Presidency Conclusions, available at http://www.consilium.europa.eu/ueDocs/cms_ Data/docs/pressData/en/ec/00100-r1.en0.htm.

[FN110]. Id. para. 5.

[FN111]. Id. para. 8.

[FN112]. Commission Green Paper on CSR, supra note 61, para. 6 (stating that the European Union is concerned with corporate social responsibility as it can be a positive contribution to the strategic goal decided in Lisbon).

[FN113]. High Level Group, Facing the Challenge, The Lisbon Strategy for Growth and Employment (Nov. 2004) available at http:// ec.europa.eu/growthandjobs/pdf/kok_report_en.pdf, [hereinafter The Lisbon Strategy].

[FN114]. Communication from President Barroso and Vice-President Verheugen to the Spring European Council -- Working Together for Growth and Jobs: a New Start for the Lisbon Strategy, at 24, COM (2005) (Feb. 2, 2005).

[FN115]. Lisbon European Council, Mar. 23 and 24, 2000, Presidency Conclusions, para. 6, available at http://www.consilium.europa.eu/ueDocs/cms_ Data/docs/pressData/en/ec/00100-r1.en0.htm.

[FN116]. Communication from President Barroso and Vice-President Verheugen to the Spring European Council -- Working Together for Growth and Jobs: a New Start for the Lisbon Strategy, at 7, COM (2005) (Feb. 2, 2005).

[FN117]. The Lisbon Strategy, supra note 113, at 39. In that sense aiming for growth and jobs is believed to go hand in hand with promoting environmental and social objectives. See id. at 4, 12.

[FN118]. Interestingly, the European Parliament does not seem to accept the new focus for the Lisbon Strategy. In its Resolution on a European Social Model for the future of September 2006, it indicates its disagreement with the European Council and the Commission, “call[ing] on the Commission and the Council to respect the initial equilateral triangle of the Lisbon strategy and to develop an approach that is better balanced between economic coordination on the one hand and employment and social policy on the other.” European Parliament Resolution on a European Social Model for the Future, 2006/340 final (Sept. 6, 2006), para. 11.

[FN119]. See De Schutter, supra note 98, at 206.

[FN120]. Commission Communication Implementing the Partnership for Growth and Jobs: Making Europe a Pole of Excellence on CSR, COM (2006) 136 final (Mar. 22, 2006).

[FN121]. Id. at 2.

[FN122]. Id.

[FN123]. Id. at 7.

[FN124]. Id. at 6.

[FN125]. Id. at 7.

[FN126]. Id. at 3.

[FN127]. Id.

[FN128]. Id. at 6.

[FN129]. See supra Part III.B.

[FN130]. According to the European Economic and Social Committee, the European Alliance on CSR is “of the nature of a joint initiative on the part of the Commission and part of the business world, and ... the other interested parties were not consulted.” Opinion of the European Economic and Social Committee on the Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee: Implementing the Partnership for Growth and Jobs: Making Europe a Pole of Excellence on Corporate Social Responsibility, para. 1.10, COM (2006) 136 final (Dec. 30, 2006).

[FN131]. See De Schutter, supra note 98, at 216 (noting that this perceived preference for business was a particularly damaging political message).

[FN132]. Parliament Resolution on EU Standards for European Enterprises Operating in Developing Countries: Towards a European Code of Conduct of 14 April 1999, 1999 O.J. (C 104) 180, Preamble, Recital F [hereinafter Parliament Resolution on EU Standards for European Enterprises].

[FN133]. Parliament Resolution 2002/278 on the Commission Green Paper on Promoting a European Framework for Corporate Social Responsibility (COM(2001) 366 - C5-0161/2002 - 2002/2069(COS)) of 30 May 2002, 2003 O.J. (C 187 E), Preamble, Recital J [hereinafter Parliament Resolution on the Commission Green Paper].

[FN134]. Id. para. 2.

[FN135]. Id. Preamble, Recital J.

[FN136]. Id. para. 6.

[FN137]. Id. para. 8.

[FN138]. Parliament Resolution on EU Standards for European Enterprises, supra note 132, para. 14.

[FN139]. Parliament Resolution on the Commission Green Paper, supra note 133, para. 11.

[FN140]. Id. para. 33. See also id. Preamble, Recital 12.

[FN141]. Parliament Resolution on EU Standards for European Enterprises, supra note 132, para. 28.

[FN142]. Parliament Resolution on the Commission Green Paper, supra note 133, para. 54. For a discussion of the possibility to initiate civil liability proceedings against companies based in the EU for damage abroad, see infra Pt. IV.B.1.

[FN143]. European Parliament resolution on corporate social responsibility: a new partnership of 13 March 2007 (2006/2133(INI)).

[FN144]. Id. para. 1.

[FN145]. Id. para. 2.

[FN146]. Id. paras. 3-4.

[FN147]. Id. para. 7.

[FN148]. Id. para. 13.

[FN149]. See, e.g., Parliament Resolution on EU Standards for European Enterprises, supra note 132, at para. 14; Parliament Resolution on the Commission Green Paper, supra note 133, paras. 6, 8, 11.

[FN150]. Parliament Resolution on the Commission Green Paper, supra note 133, para. 33. See also id. Preamble, Recital 12.

[FN151]. Commission Green Paper on CSR, supra note 61, para. 66,.

[FN152]. Cf. supra Part III.C.

[FN153]. Commission Communication Implementing the Partnership for Growth and Jobs: Making Europe a Pole of Excellence on Corporate Social Responsibility, at 2, COM (2006) 136 final (March 22, 2006).

[FN154]. Council Directive 2003/51 of June 18, 2003, Amending Directives 78/660/EEC, 83/349/EEC, 86/635/EEC and 91/674/EEC on the Annual and Consolidated Accounts of Certain Types of Companies, Banks and Other Financial Institutions and Insurance Undertakings, 2003 O.J. (L 178) 16-22 (EC) [hereinafter Accounts Modernization Directive].

[FN155]. Id. art. 1, para. 14 (amending Council Directive 78/660, art. 46(1)(a), based on Article 54(3)(g) of the Treaty on the Annual Accounts of Certain Types of Companies, 1978 O.J. (L 222)). For consolidated accounts see Accounts Modernization Directive, supra note 154, art. 2, para. 10(a) (replacing Directive 83/349, art. 36(1), Based on Article 54(3)(g) of the Treaty on Consolidated Accounts, 1983 O.J. (L 193)).

[FN156]. Accounts Modernization Directive, supra note 154, art. 1, para. 14 (amending Council Directive 78/660, art. 46(1)(b), based on Article 54(3)(g) of the Treaty on the Annual Accounts of Certain Types of Companies 1978 O.J. (L 222)). For consolidated accounts see Accounts Modernization Directive, supra note 154, art. 2, para. 10(a) (replacing Directive 83/349, art. 36(1), based on the Article 54 (3) (g) of the Treaty on Consolidated Accounts 1983 O.J. (L 193)).

[FN157]. Accounts Modernization Directive, supra note 154, art. 1, para. 14 (adding a fourth paragraph to Council Directive 87/660, art. 46, 1978 O.J. (L 222)).

[FN158]. However, some member states have gone further than EU law requires. The UK, Belgium and Germany, for instance, require pension fund managers to state whether and how they take social, environmental and ethical decisions into account in their investment decisions. See Occupational Pension Schemes (Investment, and Assignment, Forfeiture, Bankruptcy, etc.) Amendment Regulations, 1999 S.I. 1999/1849, reg. 11A(a) (U.K.) (amending Occupational Pension Schemes (Investment) Regulations, 1996, SI 1996/3127 (U.K.)); Local Government Pension Scheme (Management and Investment of Funds) (Amendment) Regulations, 1999, S.I. 1999/3259 (U.K.) (amending Local Government Pension Scheme (Management and Investment of Funds) Regulations, 1998, S.I. 1198/1831 (U.K.)); Law concerning Supplementary Pensions and the Fiscal Regime of Such Pensions and of certain Supplementary Benefits Concerning Social Security, April, 28, 2003, art 42, §1 (F.R.G.); McBarnet, supra note 16, at 32. France requires disclosure of social issues in annual reports and accounts of listed corporations. Nouvelles Régulations Economiques, Law No. 2001-240 of May 15, 2001, Journal Officiel de la Rṕublique Française [J.O.] [Official Gazette of France], May 16, 2001, art. 116, p. 7776. Publication of a ‘bilan social’ providing employee-related information about inter alia health, salaries and working conditions has been required since 1977. Decree No. 77-1354 of December 8, 1977, Journal Officiel de la République Française [J.O.] [Official Gazette of France], December 10, 1977, p. 5751.

[FN159]. Some EU Member States, however, require reporting. See, e.g., Halina Ward, Legal issues in corporate citizenship, prepared for the Swedish Partnership for Global Responsibility 3-4 (International Institute for Environment and Development) (Feb. 2003).

[FN160]. Id.

[FN161]. Cal. Bus. & Prof. Code § 17200 et seq. (2003).

[FN162]. Id.

[FN163]. Petition for Writ of Certiorari, at 3-4, Nike Inc. v. Kasky, 539 U.S. 654 (2003) (No. 02-575), 2002 WL 32101098.

[FN164]. Kasky v. Nike, Inc., 93 Cal. Rptr. 2d 854 (Cal. Ct. App. 2000).

[FN165]. Kasky v. Nike, Inc., 2 P.3d. 1065, 97 Cal. Rptr. 2d 511 (Cal. 2000).

[FN166]. Kasky v. Nike, Inc., 45 P.3d 243, 119 Cal. Rptr. 2d 296 (Cal. 2002), rehearing denied (Jul 31, 2002).

[FN167]. Nike, Inc. v. Kasky, 539 U.S. 654, 657-658 (2003).

[FN168]. Nike agreed to contribute $1.5 million to the Fair Labor Association (FLA), which will use these funds to focus on three primary areas: (1) improving independent monitoring in manufacturing countries, (2) developing worker education and economic opportunity, and (3) advancing a common global standard to measure and report on corporate responsibility performance. William Baue, The Implications of the Nike and Kasky Settlement on CSR Reporting, Ethical Corporation (September 23, 2003), available at http:// www.ethicalcorp.com/content.asp?ContentID=1130.

[FN169]. For a discussion of the potential effects of the ruling on CSR reporting see Michele Sutton, Between a Rock and a Hard Place: Corporate Social Responsibility and Potentially Legal Liability Under Kasky v. Nike, 72 UMKC L. Rev. 1159, 1178-1182 (2004). See also Vicky McIntyre, Note, Nike v. Kasky: Leaving Corporate America Speechless, 30 Wm. Mitchell L. Rev. 1531, 1562-1565 (2004).

[FN170]. Sutton, supra note 169, at 1175 (quoting Baue, supra note 168).

[FN171]. Sarah Murray, Nike makes the step to transparency, Financial Times, Apr. 13, 2005, at 12 (quoting Hannah Jones, Nike's Vice-President of Corporate Responsibility).

[FN172]. Baue, supra note 168.

[FN173]. Parliament Resolution on the Commission Green Paper, supra note 133, para. 33 (“Calls on the Commission to enforce strong consumer protection measures to uphold the credibility of corporate information in relation to environmentally and socially responsible business practice, in particular applying provisions regarding misleading advertising;”). See also id. Preamble, Recital 12.

[FN174]. Parliament Directive (EC) 2005/29, Concerning Unfair Business-to-Consumer Commercial Practices in the Internal Market and Amending Council Directive 84/450 (EEC), Directives 97/7 (EC), 98/27 (EC) and 2002/65 (EC) of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council, of 6 November 2005, sec. 1, 2006 O.J. (L 149) 22 [hereinafter Unfair Commercial Practices Directive].

[FN175]. See generally Parliament and Council Directive 2006/114 (EC) Concerning Misleading and Comparative Advertising (codified version), of 12 December 2006, 2006 O.J. (L 376) 21 [hereinafter Misleading Advertising Directive].

[FN176]. Id. art. 1.

[FN177]. The provisions of the Directive had to be transposed into national law and should have entered into force by December 12th 2007. Unfair Commercial Practices Directive, supra note 174, art. 19.

[FN178]. Id. arts. 5, 6.

[FN179]. Id. art. 2(e). This requirement reflects the fact that the scope of the Directive is limited to practices related to a commercial transaction in relation to a product. See id. at art. 3(1).

[FN180]. Id. art. 2(k).

[FN181]. See supra Pt. II.

[FN182]. Unfair Commercial Practices Directive, supra note 174, at art. 6(1).

[FN183]. Id. at art. 6, para. 1(b). Under the Misleading Advertising Directive, information provided about the geographical or commercial origin of a product also has to be taken into account to determine whether advertising is misleading. Misleading Advertising Directive, supra note 175, art. 3(a).

[FN184]. See De Schutter, supra note 35, at 301.

[FN185]. According to Article 2(f) of the Unfair Commercial Practices Directive, “code of conduct” means “an agreement or set of rules not imposed by law, regulation or administrative provision of a Member State which defines the behavior of traders how undertake to be bound by the code in relation to one or more particular commercial practices or business sectors.” Unfair Commercial Practices Directive, supra note 174, art. 2(f).

[FN186]. Id. art. 6, para. 2. The Misleading Advertising Directive in turn defines “misleading advertising” as “any advertising which in any way, including its presentation, deceives or is likely to deceive the persons to whom it is addressed or whom it reaches and which, by reason of its deceptive nature, is likely to affect their economic behaviour or which, for those reasons, injures or is likely to injure a competitor.” Misleading Advertising Directive supra note 175, art. 3(a).

[FN187]. Unfair Commercial Practices Directive, supra note 174, art. 5.

[FN188]. Id. art. 11, para. 1.

[FN189]. Id. art. 10 juncto art. 11, para. 1.

[FN190]. Id. art. 11, para. 1.

[FN191]. See Bradford Rohmer, Greenwash Confronted: Misleading Advertising Regulation in the EU and its Member States, 6, 22-23 (Friends of the Earth Europe) http://www.foeeurope.org/corporates/pdf/greenwash_confronted.pdf (last visited Apr. 15, 2008).

[FN192]. Id. at 6-7, 35-40.

[FN193]. Id. at 6, 22-23.

[FN194]. Surveyed consumers apparently hold this collective preference, but, for a more nuanced discussion, see c.f. supra Pt. II.

[FN195]. See EU Policy on Public Procurement, http:// europa.eu/publicprocurement/index_en.htm, (last visited Apr. 15, 2008).

[FN196]. See Commission Green Paper on CSR, supra note 61, para. 83; see also Parliament Resolution on the Commission Green Paper, supra note 133, para. 17.

[FN197]. BEUC, European Consumers' Organisation, supra note 35, at 1-2; Clean Clothes Campaign, supra note 74; Traidcraft Exchange, supra note 74, at 4; Oxfam International, supra note 74, paras. 35, 40; Opinion of the Committee of the Regions on the Green Paper on Promoting a European Framework for Corporate Social Responsibility, at 3, 7, COM (2001) 366 final (March, 14, 2002), available at http://ec.europa.eu/employment_social/soc-dial/csr/pdf/012-GOVEU_Committee-of-the-Regions_EU_020327_en.pdf; Social Accountability International, Social Accountability International's comments to the European Commission's Green Paper: “Promoting a European Framework for Corporate Social Responsibility” 1 (Dec. 29, 2001) http://ec.europa.eu/employment_social/soc-dial/csr/pdf/031-ORGINT_SAI_INT_011229_en.pdf.

[FN198]. Parliament Resolution on the Commission Green Paper, supra note 133, para. 17. The European Parliament had already recognized the importance of public procurement as an incentive for corporations complying with international standards. Parliament Resolution on EU Standards for European Enterprises Operating in Developing Countries: Towards a European Code of Conduct of 14 April 1999, 1999 O.J. (C 104), 180, para. 28.

[FN199]. Commission Interpretative Communication on the Community Law Applicable to Public Procurement and the Possibilities for Integrating Social Considerations into Public Procurement, COM (2001) 566 final, 2001 O.J. 27-41 (Nov. 28, 2001).

[FN200]. Commission Communication concerning Corporate Social Responsibility: a Business Contribution to Sustainable Development, at 23, COM (2002), 347 final, 23 (July 2, 2002).

[FN201]. Council Directive 2004/18 (EC), On the Coordination of Procedures for the Award of Public Work Contracts, Public Supply Contracts and Public Service Contracts, 2004 O.J. (L 134) 114-240, Corrigendum O.J. (L 351) 44. [hereinafter Public Procurement Directive]. For the water, energy, transport and postal services, a separate Directive has been adopted: Council Directive 2004/17 (EC), Coordinating the Procurement Procedures of Entities Operating in the Water, Energy, Transport and Postal Services Sectors, 2004 O.J. (L 134), 1-113, Corrigendum O.J. (L 358) 35.

[FN202]. The Public Procurement Directive aimed to codify the previous case-law of the ECJ, as can be seen in the first Recital, according to which the Directive “is based on Court of Justice case-law, in particular case-law on award criteria.” Public Procurement Directive, supra note 201, Preamble, First Recital.

[FN203]. Id. art. 45, para. 1.

[FN204]. Id. art. 45, para. 2(c).

[FN205]. Id. art. 45, para. 2(d).

[FN206]. Id. Preamble, para. 43.

[FN207]. Id. art. 44.

[FN208]. Case 31/87, Gebroeders Beentjes BV v. State of the Netherlands, 1988 E.C.R. 4635, para. 17 juncto para. 28. Note that the use of environmental management standards may be taken into account at this stage. See Public Procurement Directive, supra note 201, art. 48, para. 2(f).

[FN209]. Case 31/87, Gebroeders Beentjes BV, 1988 E.C.R. 4635.

[FN210]. Id. para. 18 (referring to Article 29 of the Directive applicable at the time, which corresponds to Article 53 of the Public Procurement Directive, supra note 201).

[FN211]. Id. para. 19.

[FN212]. Id. paras. 2, 31.

[FN213]. Id. paras. 20, 29-30. This has been confirmed by later case law. See generally C-225/98, Commission v. France, 2000 E.C.R. I-7445 (concerning combating unemployment as an additional award criterion).

[FN214]. Case C-513/99, Concordia Bus Finland, 2002 E.C.R. I-07213.

[FN215]. Id. para. 54.

[FN216]. Id. para. 55.

[FN217]. Treaty Establishing the European Community, Art. 6, of 29 December 2006, 2006 O.J. (C 321 E) 37 [hereinafter EU Treaty] (“Environmental protection requirements must be integrated into the definition and implementation of the Community policies and activities referred to in Article 3, in particular with a view to promoting sustainable development.”).

[FN218]. Case C-513/99, Concordia Bus Finland, at paras. 56-64.

[FN219]. Case C-448/01, EVN AG, Wienstrom GmbH v. Wienstrom GmbH, 2003 E.C.R. I-14527.

[FN220]. Id. paras. 15-18.

[FN221]. Id. paras. 34, 37-39.

[FN222]. Id. paras. 40-42. Austria lost the case however, because (1) the criterion was not accompanied by requirements which permit to verify the information submitted by tenders and (2) tenders were required to state how much electricity they could supply from renewable energy sources to a non-defined group of consumers, and allocated the maximum number of points to whichever tender stated the highest amount, where the supply volume was taken into account only to the extent that it exceeds the volume of consumption expected in the context of the procurement, i.e. the criterion was not directly related to the subject-matter of the public procurement contract. Id.

[FN223]. The first paragraph of Article 6 of the EU Treaty provides: “The Union is founded on the principles of liberty, democracy, respect for human rights and fundamental freedoms, and the rule of law, principles which are common to the Member States.” EU Treaty, supra note 217, art. 6.

[FN224]. De Schutter, supra note 35, at 311.

[FN225]. Public Procurement Directive, supra note 201, Preamble, Recital 1.

[FN226]. Id. art. 53, para. 1.

[FN227]. Christopher Bovis, EU Public Procurement: Case Law and Regulation 178 (Oxford University Press, 2006).

[FN228]. Public Procurement Directive, supra note 201, art. 26.

[FN229]. Id.

[FN230]. De Schutter, supra note 35, at 312.

[FN231]. For a very short overview see EUROPA, Employment & Social Affairs, Corporate Social Responsibility, http://ec.europa.eu/employment_ social/emplweb/csr-matrix/csr_topic_allcountries_en.cfm?field=14. Examples of countries that take social criteria into account in their public procurement policies are Belgium, France, the Netherlands and Slovenia.

[FN232]. Resolution on Corporate Social Responsibility: a New Partnership, Eur. Parl. Doc. (COM 62) para. 39 (2007).

[FN233]. Id. para. 41.

[FN234]. Parliament Resolution on EU Standards for European Enterprises Operating in Developing Countries: Towards a European Code of Conduct, of 14 April 1999, Preamble, Recital 18, 1999 O.J. (C 104), 180 (“having regard to Article 220 of the EC Treaty regarding reciprocal recognition of court judgments (31 Treaty EU), the 1968 Convention on jurisdiction and the enforcement of judgments in civil and commercial matters, usually known as the Brussels Convention, (now Brussels I Regulation).”) Rapporteur Richard Howitt's proposal for the resolution included a more explicit paragraph, in the operative part of the resolution, at para. 24: “requests the European Council to confirm the interpretation in the 1968 Brussels Convention that, for cases of basic duty of care, legal action may be taken against a company in the EU country where its registered office is, in respect of any third country throughout the world and calls on the Commission to study the possibility of enacting done by MNEs, thus creating a precedent for developing customary international law in the field of corporate abuse.” Committee on Development and Cooperation, Report on EU standards for European Enterprises operating in developing countries: towards a European Code of Conduct, A4-0508/98, (Dec. 17, 1998), available at http://www.cleanclothes.org/codes/howit.htm.

[FN235]. Parliament Resolution on the Commission Green Paper, supra note 133, para 50.

[FN236]. Id.

[FN237]. Resolution on Corporate Social Responsibility, supra note 232, para. 37. See also id. para. 32 (“Calls on the Commission to implement a mechanism by which victims, including third-country nationals, can seek redress against European companies in the national courts of the Member States[.]”).

[FN238]. Council Regulation 44/2001 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters, of 22 December 2000, 2001 O.J. (L 12) 1-23 (EC) [hereinafter Brussels I Regulation]. The Brussels I Regulation is the successor to the 1968 Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters.

[FN239]. Brussels I Regulation art. 1, para. 1.

[FN240]. Council Decision 2006/325, 2006 (L 120), 22 (EC). Although the Regulation is not directly applicable to Denmark, the country is bound by it through the Agreement between the European Community and the Kingdom of Denmark on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters of 19 October 2005, 2005 O.J. 62-70.

[FN241]. Brussels I Regulation art. 2, para. 1 (“Subject to this Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State.”). According to Article 60 para. 1 of the Brussels I Regulation, the domicile of a company or other legal person or association of natural or legal persons, is the place where it has its (a) statutory seat, (b) central administration, or (c) principal place of business. Id. art. 60, para. 1. If the defendant is not domiciled in a Member State, the jurisdiction of the courts of each Member State shall, subject to Articles 22 and 23, be determined by the law of that Member State. Brussels I Regulation art. 4, para. 1.

[FN242]. Case C-412/98, Group Josi Reinsurance Company SA v. Universal General Insurance Company (UGIC), 2000 E.C.R. I-5925, para. 45.

[FN243]. See id. paras. 57-61.

[FN244]. Brussels I Regulation art. 5, para. 5.

[FN245]. See De Schutter, supra note 35, at 265; Geret Betlem, Transnational Litigation Against Multinational Corporations Before Dutch Civil Courts, in Liability of multinational corporations under international law 283, at 286-288 (Menno T. Kamminga and Saman Zia-Zarifi eds, Kluwer Law International, 2000) (referring to the findings of the ECJ in Case C-439/93, Lloyd's Register of Shipping v. Société Campenon Bernard, 1995 E.C.R. I-961).

[FN246]. De Schutter, supra note 35, at 265.

[FN247]. Alien Tort Claims Act, 28 U.S.C. § 1350.

[FN248]. See Jan Wouters, Leen De Smet & Cedric Ryngaert, Tort Claims Against Multinational Companies for Foreign Human Rights Violations Committed Abroad: Lessons from the Alien Tort Claims Act?, in Globalisation and Jurisdiction, 183-200 (P.J. Slot and M. Bulterman eds., 2004).

[FN249]. De Schutter, supra note 35, at 266. This is why he refers to the mechanism as a “Foreign” and not an “Alien” Tort Claims Act.

[FN250]. On the question of the law applicable to tort actions for human rights violations see De Schutter, supra note 35, at 274-75.

[FN251]. See, e.g. Lubbe & Ors v. Cape plc., UKHL 41, [2000], 1 WLR 1545 (applying the classic Spiliada test).

[FN252]. Case C-412/98, Group Josi Reinsurance Company SA v. Universal General Insurance Company (UGIC), 2000 E.C.R. I-5925, at para. 61. The Court continues: “It would be otherwise only in exceptional cases where an express provision of the Convention provides that the application of the rule of jurisdiction which it sets out is dependent on the plaintiff's domicile being in a Contracting State,” but the jurisdictional rules relevant for our purposes (as referred to above) do not provide for this. Id.

[FN253]. De Schutter, supra note 35, at 271-272 (“The position thus expressed by the European Court of Justice seems to suggest that, if it had answered either the Harrods or the Lubbe courts on the interpretation of the 1968 Brussels Convention in those cases, it would probably have found the application of the forum non conveniens doctrine, in situations where the United Kingdom has jurisdiction based on the domicile in that State of the defendant, to be incompatible with the requirements of the Brussels Convention, or, today, with those of Regulation No. 44/2001.”). The Court of Appeals in Re Harrods disagreed and the House of Lords did not need to ask for a preliminary ruling from the ECJ, since it had already decided that the English courts had jurisdiction. See id. at 268-272 for more information on the cases. See also Halina Ward, Securing Transnational Corporate Accountability Through National Courts: Implications and Policy Options, 24 Hastings Int'l & Comp. L. Rev. 451, 461-462 (2000-2001) (stating that Group Josi Reinsurance Company SA “spells the death of the forum non conveniens principle in foreign direct liability cases involving dependant companies domiciled in England and Wales”).

[FN254]. Case C-281/02, Andrew Owusu v. N.B. Jackson, 2005 E.C. R. OJ C 106, available at http://curia.europa.eu/.

[FN255]. Id. para. 35.

[FN256]. Id. para. 36.

[FN257]. Id. para. 38.

[FN258]. Id. para. 40.

[FN259]. Id. para. 41.

[FN260]. Id. para. 42.

[FN261]. Id. para. 42.

[FN262]. Id. para. 43.

[FN263]. Id. para. 46.

[FN264]. Connelly v. RTZ Corporation plc & Ors. UKHL 30 [1997] C.L.C. 1357.

[FN265]. Connelly v. RTZ Corp plc & Anor [1999] C.L.C. 533.

[FN266]. Lubbe & Ors v. Cape plc., UKHL 41, [2000], 1 WLR 1545. For a description on the evolution of the proceedings in this case see Halina Ward, Corporate Accountability in Search of a Treaty? Some Insights from Foreign Direct Liability (Royal Institute of International Affairs, May 2002), http:// www.chathamhouse.org.uk/files/3033_corporate_accountability_insights.pdf.

[FN267]. Ward, supra note 159, at 16.

[FN268]. Michael Peel, European Lawyers in Hunt for Big Game, Financial Times, Jan. 30, 2008, available at http://www.ft.com/cms/s/0/927bab82-cf57-11dc-854a-0000779fd2ac.html.

[FN269]. Id. The case has been allowed to go forward as a class action and is expected to go to trial shortly. Leigh Day & Co, Press Release: Ivory Coast -- Alleged Toxic Waste Claims, Feb. 2, 2007, http:// www.leighday.co.uk/doc.asp?doc=1032&cat=850.

[FN270]. Resolution on Corporate Social Responsibility, supra note 232, para. 31, 41. Although it might be possible to read an implied reference to criminal mechanisms in the call from the European Parliament on the Commission “to implement a mechanism by which victims, including third-country nationals, can seek redress against European corporations in the national courts of the Member States” and its belief “that the CSR debate must not be separated from questions of corporate accountability.”

[FN271]. See De Schutter, supra note 35, 282-295, for a discussion of the possibility and the form of a European initiative inviting the Member States to adopt certain measures to ensure that certain forms of corporate conduct, leading to severe violations of human rights, are made punishable by criminal legislation applicable not only in the territory of each Member State, but also to the conduct of corporations established in a Member State, even when the conduct takes place outside the territory.

[FN272]. For background information about the case and a description of the proceedings, see generally Olivier De Schutter, Les Affaires Total et Unocal: Complicité et Extraterritorialité dans l'Imposition aux Entreprises d'Obligations en Matière de Droits de ‘lHomme, 52 Annuaire Français de Droit International, 55 (2006).

[FN273]. See id. at 70-71.

[FN274]. Id. at 68. The Court de Cassation asked the Constitutional Court for a preliminary ruling in 2004 on the question of whether it was discriminatory, and therefore unconstitutional, that the law allowed cases brought by Belgian nationals to proceed, but did not do the same for plaintiffs who had obtained refugee status at the time of launching the case. The question was of particular relevance for the case, since one of the plaintiffs had indeed obtained such refugee status as the Court de Cassation recognized on May 5, 2004. Id. The Constitutional Court ruled that the distinction between Belgian nationals and persons having obtained refugee status was indeed discriminatory on April 3, 2005.. Id.

[FN275]. Id. After the judgment of the Court de Cassation the law was adapted to the ruling of the Constitutional Court and the Minister of Defense, supplanting the Minister of Justice, ordered the Prosecutor to start proceedings to have the 2005 judgment of the Court de Cassation retracted, on the grounds that it was based on a no-longer existing provision. Id. On March 28, 2007, the Court de Cassation did not accept the demand for retraction, arguing that retraction was only possible for the benefit of those who have been negatively affected by proceedings undertaken against them and not for the benefit of the partie civile. Id. Upon a second injunction of the Government, the case was taken up again by the Prosecutor, but recently stopped by judicial authorities. See Joan Condijts, Les Birmans déboutés: Total l'emporte, Le Soir, Mar. 5, 2008, http:// www.lesoir.be/actualite/monde/la-justice-met-fin-aux-2008-03-05-582191.shtml.

[FN276]. See Jägers, supra note 8, at 213-214 (discussing the advantages of civil cases).

[FN277]. De Schutter, supra note 35, at 282.

[FN278]. Id.

[FN279]. Andrew Clapham, The Question of Jurisdiction Under International Criminal Law Over Legal Persons: Lessons from the Rome Conference on an International Criminal Court, in Liability of multinational corporations under international law, 139, 147 (M.T. Kamminga and S. Zia-Zarifi eds., Kluwer Law International 2000); De Schutter, supra note 35, at 282-283.






END OF DOCUMENT

© 2009 Thomson Reuters/West. No Claim to Orig. U.S. Govt. Works.

Selengkapnya...... Posted under | NO COMMENTS