Perhaps one of the greatest challenges regarding corporate compliance with human rights and environmental norms is stakeholder access to effective redress mechanisms, which uphold and protect stakeholder rights, be they national, international, or merely rights established in non-binding voluntary codes of conduct or institutional safeguard policies.

Effective redress, ideally is framed in formal and binding normative systems, in which a stakeholder impacted by negligent corporate behavior:

  • is systematically informed about the corporate conduct;
  • has access to public and private sector information about his/her situation relative to the corporate conduct;
  • knows what his/her rights are relative to the investment/private activity;
  • can give an opinion about his/her concerns and interests relative to the proposed investment or ongoing business activity;
  • can bring a complaint to a partial (or preferably non-partial) mechanism respective to an established binding or non-binding right;
  • can receive a credible review of the complaint, and have a just solution or action to redress a violation;
  • can ensure that wrongs are corrected, that damage is repaired and that violations are not repeated;

Whether such mechanisms are legally binding (framed in an established legal system with an independent arbiter or a judicial mechanisms) need not necessarily affect the outcome, although clearly, holding corporations accountable to established legal systems should tend to provide stronger incentives for the corporation to act within legal limits. Obviously, where legal systems are weak or co-opted, this may not be the case.

For the community engaged in the Uruguayan Pulp Mill case, the situation was in many ways a desperate one, in part because there was a critical jurisdictional problem that the community (particularly the Argentine stakeholder community) could not resolve, which was that the investment project was across the border, in another country, where the community of Gualeguaychú did not have legal standing.

No less daunting reality, the main financial actors were literally oceans apart, some in Washington DC, and others in northern European countries, neither of which were very accessible, further compounded by the fact that these financial actors practically had no contact whatsoever with local community stakeholders and that most of them did not even operate in the language of the stakeholder community, which was for the most part, solely in Spanish.

If we consider hence what each investment driving actors offered in terms of redress mechanisms or access to justice forums, we can see quickly that the options were extremely limited and practically intangible for the local community.

In the end, the actual effectiveness of a redress mechanisms will depend on the visible outcome of cases submitted to it, and its capacity of the mechanisms, despite it’s limitations and physical or substantive distance from the case, to actually provide protection of rights (legal or otherwise).

The Citizens Assembly of Gualeguaychú reached for every possible forum, sent every possible message to every possible actor within their reach and knowledge. They actioned every leverage point, and followed every possible path before them based on the nature of the rights based (formal and informal) opportunities that came before them along the way.

IFI Safeguards, Control Mechanisms and Accountability

IFIs such as the World Bank for example, and particularly its financial arm the IFC, or regional banks like the EIB or IADB, oblige companies that receive loans from their agencies (in the case of the WBG this includes: IBRD, IDA, IFC or MIGA) to comply with their Social and Environmental Performance Standards and Disclosure Policy. The IFC policies, for example include considerations for many key areas of impacts such as for example:

  • Social and Environmental Assessments and Management Systems
  • Labor and Working Conditions
  • Pollution Prevention and Abatement
  • Community Health Safety and Security
  • Land Acquisition and Involuntary Resettlement
  • Biodiversity Conservation and Sustainable Natural Resource Management
  • Indigenous Peoples Policy
  • Cultural Heritage

IFI safeguards have evolved over several years and undergo permanent and systematic revisions to improve their coverage and effectiveness to address the evolving understanding of the concerns IDF projects bring to local communities. They generally are designed to protect local communities from negative externalities (social and/or environmental) are generally internal conditions set by the IFI to the company, and bind the company as well as IFI staff (loan officers) to ensure that the IDF project is complying with the IFIs safeguards.

Revisions of safeguards generally involve transparent and open participatory consultations and reflect the concerns of local stakeholders that have participated in the consultation processes (these are generally NGOs or other civil society actors that follow IFI safeguard evolution), although they may not always be framed in the way in which stakeholders would prefer and they do not always reflect the opinions and needs of all stakeholders.

An example of important advances made on safeguard policies is the evolution of the Extractive Industries policies of the World Bank stemming from wide based consultations processes and an extensive and in-depth Extractive Industries review.[1]

Sometimes however, these safeguards create tensions with IFI clients, who see regulatory limitations such as these as cumbersome or costly. IFI staff commonly argue that improving safeguards in the form of more strict social or environmental controls scare off clients, and limit business. As safeguards appear or improve, so does pressure to ease existing safeguards that tend to cause significant hurdles for companies to get around.

Several years ago, IFC eliminated safeguard references to “Prior and Informed Consent” that had been given to indigenous peoples and local communities placing the ultimate decision over investment project citing to the communities. Instead, in an early 2000s review the safeguard wording went from consent to “Prior and Informed Consultation” which essentially transfers the power and right of the decision to project sponsors, effectively lessening the right or entitlement. In a more recent re-review of the Performance Standards, the “consent” condition came back for projects involving indigenous peoples.

The Uruguayan Pulp Mill case was greatly affected by this wording nuance, as the central issue in the case, picked up clearly by the CAO in the audit, was the lack of social license for the project. Had IFC stayed to its former policy of heavily weighing in community consent for their investments, this conflict would have been avoided altogether, and the project would have been moved a few kilometers downstream where their was no community opposition whatsoever.

It is important to note that neither IFIs or companies receiving financial assistance from IFIs are “legally” accountable to comply with the safeguards under local or international law, or at least there are no cases yet where they have been held accountable in any way. The Uruguayan Pulp Mill case drew attention to one of IFC’s Safeguard Policies (7.0) on International Waterways, which gives due consideration to riparian states and the need for projects to comply with bilateral or international law governing river borders. Given that Argentina had filed a complaint against Uruguay at the International Court of Justice (ICJ), for alleged violations of the Uruguay River Treaty in the unilateral issuance of a permit for the construction of the two mills, it seemed reasonable that IFC should not move forward with the investment until this legal conflict was effectively resolved.

The legal rationale of this argument was strong, and many of the financial actors, including Calyon, Nordea, Finnvera, became concerned with the ICJ case, scrambling to obtain legal advice from their counsel. In the end, IFC ignored the pending legal case at the ICJ and decided to go forward with the investment, in clear violations of its own International Waterways Policy 7.0. If the ICJ found Uruguay guilty of violating the treaty (which it eventually did) then IFC by supporting the investment would be complicit in these violations (which it is). These are some of the inconsistencies we find in the way institutions like the World Bank manage their own international due diligence.

One key aspect of the safeguard policies is that IFIs, such as the IBRD and the IFC of the World Bank, or the IADB, which we have already mentioned, have established control functions or agents to review the IFI’s and project sponsor compliance with Safeguard Policies. In the case of the IBRD there is the World Bank Inspection Panel (WBIP) and in the case of the IFC’s Compliance Advisory Ombudsman (CAO) undertakes such review. Regional banks like the IADB also may have such control bodies. These are generally control mechanisms that are independent of the agencies they review, and that report directly to the institution’s President.

Panels such as the WBIP or CAO, although non-binding, create incentive for IFIs and for corporations seeking funding from IFIs to get environmental and social aspects of investments right, although such incentives do not always provide the needed pressure to ensure compliance. While in some cases, complaints to these types of mechanisms have achieved measurable results, other times, such as in the case of the Botnia Pulp mill in Uruguay, the IFC and more generally, World Bank Group upper management (including the Board of Directors) have completely ignored the CAO audit and recommendations. This is an inherent weakness of such redress system and until the non-binding aspect of international compliance mechanisms are made binding, the effectiveness of these systems will depend on the political will of the IFI and of corporations to follow panel recommendations and adhere to safeguard policies.

Nonetheless, it should be noted that the opinion of the panels, and perhaps more so, the final decision of an IFI like the World Bank, to resolve to provide financing (or reject financing) to a corporation, sends a very strong message to the financial community (actors of the FDI arena) indicating that the investment project is in compliance with international standards, and that it is in fact complying with the institution’s commitments to protect local stakeholders, even if in practice this may not be the case. This is an important point as the integrity and strength of IFI safeguard normative frameworks and its effectiveness in protecting the right of local stakeholders, depends on the IFIs voluntary effort to comply with its own due diligence. The integrity of an IFI’s rights (policy) system is only as strong as its commitment to uphold it.

What we’ve learned from practice in the Botnia pulp mill case, and the IFC’s involvement in the case (IFC is the IFI responsible for overseeing policy compliance), is that as the political exposure increases of the IFI’s complicity in policy violations or in not carrying out its due diligence in ensuring that the corporation meets policy obligations, IFI staff responsible management decisions are placed in evidence and up for institutional scrutiny. In such a situation, it is our experience that IFI staff are less willing to admit to faults, and may press forward to defend personal stakes and reputation, ignoring project policy concerns, ultimately ignoring stakeholder interests. In the Botnia pulp mill case, a scathing CAO audit and report, which essentially sided with complainant stakeholders, for example, was unable to sway the institution to redress policy wrongs. It is lamentable in this case, that what is otherwise a very effective mechanism to review policy (stakeholder right) compliance, and identify rights violations, is weakened by the IFI’s inability to hold staff accountable to its own policy safeguards. This is perhaps the weakest link in the IFI redress system. We might speculate that the IFI complaint mechanisms systems may actually be strengthened in cases where the personal stakes of IFI staff is less publicly and institutionally visible and where corrections of safeguard policy violations can be made without significant repercussions to program staff and responsible management, although this hypothesis remains to be tested.

Control agents such as the WBIP and CAO can be considered (albeit limited from a legal perspective) as the access to justice mechanisms offered to stakeholders to review policy compliance by IFI projects. The Safeguard Policies act as the rights or entitlements given to local communities by the IFI. The integrity and effectiveness of the process determines the level of guarantee of such rights or entitlements and will determine, as a consequence, the effective (or not effective) realization of the “rights” granted by IFIs to their stakeholders. It is important to note that the control mechanisms (both WBIP and the CAO) do not have binding authority over IFI projects. Their audits, reports, conclusions and recommendations, although they may carry (not always) important political weight inside these institutions, do not oblige the executing agencies (IFC or IBRD for example) or the project sponsors (the company) to change or carry out recommendations that the control agents might make. In the Uruguayan Pulp Mill case, despite a damning audit by the CAO, IFC ignored the recommendations made by the CAO in the case.

The conclusions of these bodies are merely declaratory and provide upper-management at the banks, such as the President, the Board of Directors or the Agency Vice Presidents with review and audit information about project compliance or non-compliance with Safeguard Policies. This point was central to our arguments before the World Bank’s Board of Executive Directors. We pointed repeatedly to the CAO audit requesting that the Board members inquire with IFC as to compliance with or consideration of the CAO recommendations to address the findings in the audit.

IFI redress mechanisms is that these can be important forums to bring policy complaints, they can result in important project impacts and corrections, but in terms of providing binding and effective rights protection for stakeholders, they do not at present, offer strong guarantees for stakeholder rights protection. They can be used, however, creatively in advocacy instances to leverage impact in other forums. In the Botnia case, CEDHA filed numerous complaints based on a critical CAO Audit of the Botnia project, and was able to have important impact in many forums designed to protect and uphold stakeholder rights.

The Utilization of Access to Justice Result in Alternative Forums

The CAO audit produced in the Uruguayan Pulp Mill case, despite not having much weight for the Board of Executive Directors or even for the IFC staff, which largely ignored the findings, was actually one of the most effective tools we had to defend our case and build our strategy before other forums, including before local courts, before international tribunals such as the Inter-American Human Rights Commission, or before private and public banks which intended to finance Botnia or ENCE.

This is a point which merits some further consideration, that is, the usage of the audits and reports of IFI accountability bodies in alternative forums, outside the institutions in which they were prepared.

In the case of the Botnia Pulp Mill for example, the CAO Audit and Preliminary Report (two standard publications the CAO makes in complaint reviews) were offered as expert evidence in several legal and extra-judicial complaint processes. One of these included the Inter-American Commission on Human Rights (the first time an IFI complaint mechanism offered evidence to an international human rights tribunal).[2] This effectively brought a non-binding due diligence complaint filed at an inter-governmental body, to a binding human rights tribunal, also an intergovernmental institution with some of the same State actors as the “board” of the institution. While in one forum, those actors may not be accountable or have to comply with their commitments or with due diligence, in the second forum (IACHR) they definitely are bound.

In another instance where we used the CAO audit in an alternative outside forum was as evidence presented against Botnia and ENCE in a legal criminal complaint filed in an Argentine federal circuit court against corporate executives of the project sponsors (the company) for violations to national environmental and human rights laws. It is clear that the value of the evidence produced by an inter-governmental agency’s prosecutorial actor, presented to a judge in national level criminal complaint holds a high degree of political value, perhaps more so than evidence collected or presented by a party to the case. This was the first time that CAO evidence was submitted in a national court in Argentina.

Later in that same criminal case, we further extended to inter-agency or inter-forum strategic approach by submitting the names of the 23 World Bank Executives Directors who voted in favor of granting a loan to Botnia, despite having evidence from the CAO that the project was in violations of the Banks’s safeguard policy and that the project was also precluding a ruling of the International Court of Justice (Argentina vs. Uruguay).

The CAO Audit was also aggressively presented before private bank and before the OECD Guidelines National Contact Points of Finland, Norway and Sweden, offered as intergovernmental agency evidence in favor of our advocacy position. The CAO Audit has important leverage and impact at each of these forums, better positioning our case, and offering independent legitimacy to our arguments coming from a high respected inter-governmental agency.

The use of reports, findings and recommendations of financial institutions, deriving from non-binding compliance forums in external forums which may have binding character (human rights tribunals and national courts, for example), partially gets around the limitations offered by IFI forums, which have generally been criticized of having no teeth to force accountability on financial actors. This was but one example of how in a single case, we could explore the use of cross filings in multiple forums, in a quest to seek a higher degree of accountability.

While the findings of an IFI complaint mechanism may be stunted in the IFI itself, and lead to dead-end or no-outcome recourse for stakeholders, the presentation of IFI control mechanism findings at alternative non-IFI forums, can serve to leverage political action, draw attention and place company non-compliance of Safeguards, national and international in visible national and international forums.

Others hopefully will follow in other case. We know in one case for example, that following our push for IFI-Human Rights tribunal dialogue, there an official information request was sent from the Inter-American Commission on Human Rights to the Inter-American Development Bank (IADB) regarding a project the IADB was financing.

We’ve heard from many colleagues that the IFI panels such as the World Bank Inspection Panel or the CAO are useless forums because they “have no teeth” or never get anything done. It is our view that such criticism is shortsighted, failing to grasp the full potential that the mere deliberation and conclusions that these panels (even though they are non-binding) might have on independent third actors that might be in the process of making go or no go decisions about committing investment funds.

An important lesson to draw from this section is that where relationships do not exist (as for example between an IFI and a human rights tribunal (such as the Inter-American Commission on Human Rights), bridges can be built linking evidence of abuses created in institutions with no binding mechanisms, to institutions with obligatory and binding process.

State Norms and Regulations

Foreign companies operating in host countries are formally and legally bound by national and local laws, regulations and other norms established locally to control corporate behavior, protect human rights and the environmental.

However, stakeholder and community rights and entitlements are not always guaranteed in IDF by local and national laws for many reasons. Some of these include:

  • Prior negotiations by the company with the host government to reform, enact new, or eliminate local laws or exempt the company from compliance with some specific law;
  • Relative ignorance of local judicial actors, prosecutors, attorneys and advocacy groups on the human rights impacts that corporations, particularly international corporations,  can have on local communities;
  • Where a strong body of laws or regulations governing corporations may exist, there is generally little capacity, budget, and/or political priority in developing countries to enforce environmental (or human rights) legislation or control conduct;
  • The large imbalance of power that may exist between the company (which brings large investments) and the host government (local or national) and the subsequent influence that the company exerts on the three branches of government (legislative, judicial, or executive); this can lead to lack of willingness of prosecution;
  • The relatively small fines or insignificance punishment for violations of the law which are greatly outweighed by company profits, leading companies to knowingly violate national legislation and simply pay fines if they are even levied;
  • The threat of the company to the local government of leaving the country or locality in search of a more permissive operating environment – this has been especially visible in the garment or automobile industry;
  • Limitations set out by Host Government Agreements (HGAs) relative to commercial rights trumping stakeholder rights (see section on HGAs for a list of such limitations);
  • National laws and norms may not be sufficiently developed in the corporate realm in matters related to social and environmental impacts of corporate behavior, and maybe even less developed when addressing multinational abuses of such norms and their violations.

We found that the national court systems in Argentina and in Uruguay were extremely limited in regards to bringing any degree of justice in the case. The case was far too politicized to expect that the court systems would act independently. This circumstance is obviously conditioned by the weakness of the independence of the judiciary from political influence, which is the case in both countries.

Perhaps a strong conditioning factor in both Argentina and Uruguay, were the positions of the Governments in the case. While one would like to believe that the courts are independent of politics, it was clear that in both Argentina and Uruguay, the position of the executive power heavily weighed in on court decisions, actions, and inaction.

In Argentina for example, when the Kirchner government was actively engaged in opposing the mills against Uruguay, the justice system tolerated very controversial road blocks put up by the community at the international border crossing. At that time, the executive argued that the “right of protest was above the right of freedom of movement (and transportation). The justice system seemed to have no problems with the roadblocks, tolerating them despite sporadic judicial opposition from a few actors who were fed up with not being able to cross the bridge into Uruguay. Yet when the political position of the government began to change in the latter years of the conflict, and reestablishing political alliances between Uruguay and Argentina became the priority, the justice system acted quickly to disband protests and prosecute individuals who manned the roadblocks.

International Law

International law, norms and standards are perhaps the most developed and uniform normative guidance to help understand, define and set corporate human rights and environmental obligations in IDF. Unfortunately, holding corporations accountable to such law and norms, is extremely difficult, creating one of the most important hurdles to guarantee human rights of stakeholder communities in IDF.

When we first met members of the then informal Citizens Assembly of Gualeguaychú to discuss advocacy options, the Assembly was set on the idea that the case should be taken to the international level, with a complaint to be filed by Argentine against Uruguay, preferably at the International Court of Justice (ICJ).

This belief was based on the advice given to the Assembly by the president of an internationally well known Buenos Aires-based environmental NGO, who felt that the international legal arena would be the best strategy to achieve results. His argument was that the Assembly should file an injunction order against Argentina to force the Executive Power to bring a legal complaint at the ICJ against Uruguay. His reasoning was probably based on past litigation experience or on a common professional confidence (in this case of a lawyer) that forums that we know and that formal processes offer the best chances to advance a case.

We should say that our own legal team at CEDHA also believed that filing an international complaint was the best option (with the difference that in CEDHA’s view, at the Inter-American Commission on Human Rights was a better choice).

In the end, neither option proved to be very insightful or useful. The short sightedness of strategy of these two NGOs (including our own) can be explained due to our tendency to reach for low hanging fruit, or to utilize forums with which we are comfortable and about which we have knowledge. Lawyers also tend to over value the litigation route, presuming that an end judgment in a court of justice (however long it may take) is the best guarantee that justice shall be served. This is so despite abundant example of verdicts that are never complied with, or that ultimately do not correct the wrongs committed. In the end, neither “formal” international legal option was very realistic considering the time frame we had before us.

After much deliberation, our advice to the Assembly at the time, was that Botnia and ENCE were on a timeline to begin construction in late 2006, and if we did not block their ability to set the first stone in the construction of the mills, by the time we might have a first verdict from the international bodies, the mills would be built, and that it would be difficult, if not impossible, to revert.

Considering that we did not have any leverage over the Uruguayan government, we felt that a strategy to block financing, which was essential for the construction of the mills’ infrastructure and even for the viability of the overall investment, was the only immediate viable procedural option that might have leverage over the project.

In the end, we were right about the ineffectiveness and inappropriateness of the international legal forums. We filed the human rights tribunal case anyhow, because the momentum and disposition of the legal team pushed for the filing. However, true to what we anticipated, the Inter-American Commission on Human Rights the case has stalled at that level. The IACHR has never formally admitted the case since its filing in 2006. The other legal strategy, to sue the Argentine government in order that the Executive Power file a complaint at the ICJ was nixed by the community. Instead, the Government, of its’ own volition took the case to the ICJ, which as expected, took nearly three years to rule that we were right about the Uruguayan violation of the river treaty, but also as we expected, the court did not order a suspension or relocation of the projects. Both legal complaints, from a legal perspective were mostly useless for the community.

We should stress, however, that both complaints did have significant political and media impacts, and that in the end could be a reason in and of itself to consider the “international law” route. The case filed to the Inter-American Human Rights System (a regional tribunal), placed Uruguay in an uncomfortable position, mobilizing and obliging its’ Foreign Ministry to address the accusations and confront the human rights tribunal. This filing made local and national headlines in both countries, and drew attention of the actors involved on the ground. We should say however, that the filing at the regional human rights tribunal had virtually no impact on the financial and corporate actors in the case. Botnia ignored the filing altogether, as did media sources in Europe. The World Bank’s IFC as well as the other banks involved also ignored the Inter-American Human Rights System complaint. Perhaps its should be a surprise, in the end, since the Inter-American Commission also largely ignored the complaint, putting it on standby, and this killing any political and social momentum that it might have picked up with the original filing. This simply goes to show how important media and political attention and relevance are to these complaints.

The ICJ complaint filed by Argentina against Uruguay had a very different impact on the case, and this should be noted. We already had Argentina expressing its concerns and opposition to World Bank financing of the pulp mill loans at the Banks Executive Directors Board, and at IFC. This was itself an important tone set at the IFI in regards to the case. The ICJ case however, raised the ante on the case for the IFC and for the World Bank Group more generally.  We had argued that the projects and the way IFC had addressed its due diligence violated the IFC’s International Waterways Policy 7.0, and that if the case went to the ICJ, as it appeared it would, there was enough merit to hold off loans to the companies until the ICJ came out with its ruling, since if the ICJ found Uruguay to have violated international law, then the IFC would also be complicit in these violations.

This line of reasoning was strong and made strong echoes for World Bank Executive Directors, as well as at international private banks such as Nordea, Calyon, and others. The complaint filed by Argentina introduced a serious concern amongst financial actors, not only that the Botnia and ENCE mills might be deemed illegal, but that the companies might have to cancel the projects altogether. The political and financial implications were large enough to make important waves in project evolution.

We can draw some general conclusions from our experience with the relevance and use of international legal instruments in this example.

  1. First of all, the politics generated around the case, are critical to consider in an international filing; the politics should be favorable so that the filing actually creates political resonance that might result in a change of behavior of the political actors.
  2. Reaction time of the forum is key. Will the international forum engage? And how quickly will it do so? Will delays in the processing of the case at an international forum compromise the short or medium term objectives?
  3. The resilience of the financial sector to the filing is critical. Will the financial sector be stirred by the filing to the point of considering a change of strategy or withdrawing support to the project?
  4. The capacity or willingness to act by the forum is fundamental. Can or will the international forum take the measures that are desired by the victims? In this case, it was canceling the project, which was a highly unlikely result from the ICJ case.

Voluntary Codes, Guidelines and Industry Standards

We see globally a steady evolution over the past several decades of what is commonly referred to as Corporate Social Responsibility (CSR). This area of corporate advocacy, most of it coming from corporations themselves, or consulting outfits that advise corporations. Many CSR proponents today adopt the idea that business, as a social actor, has obligations beyond the generally conceived notion that “the business of business is business” – or profit, in the Milton Friedman sense.[3]

The idea that corporations or other business should also be a “good corporate citizen” is steadily permeating our society, placing business into social arrangements such as programs of corporate philanthropy. This growing trend plays itself out in two quite different dimensions.

The first and more traditional of these two dimensions is philanthropy-oriented. The business, which is an active and wealthy actor in society, provides charitable contributions generally attending to the social and economic needs of more vulnerable groups of society, providing a range of products or services in sectors such as health, housing, education, and sports. This “corporate giving” generally takes place in the geographical vicinity of the business (to neighbors) or in direct relation to the families of the recipients. When the company is larger, the recipients may be a much broader group or even entirely across society.

As the CSR movement has evolved over the past several decades, random corporate philanthropy given out on more or less a “first come first serve basis”, has reached out to an nascent civil society sectors (non-profit groups). This emerging partnership better channeled corporate funds to organizations that represent vulnerable groups and who are in a better position to organize social programs utilizing funds more strategically to benefit the target groups. We call this evolution in corporate giving, which grew strongly during the 1990s and 2000s, “strategic philanthropy”.

The prevailing critique of this sort this philanthropic form f of CSR is that it is largely void of actual responsibility in terms of a company’s negative impacts to society, particularly environmental and in terms of human rights violations that may be occurring because of business activity (violation of worker rights, discrimination, health impacts, land rights, indigenous rights, economic impacts, etc.).

Corporate philanthropy has provoked extensive criticism from both the left and the right ends of the spectrum, and is labeled by many to be simply a public relations exercise and gimmick to aimed at improving a company’s image and good standing with workers and with the community, which ultimately serves to better the chances of rejection of or opposition to the company for its actual operational impacts on the environment and on human rights.

A more conservative viewpoint was held by the ultra-capitalist, Milton Friedman, who in the mid 20th Century went as far as to say that corporate social responsibility was pure communism, stating firmly that the only role of business was to make a profit. .

The second dimension of CSR is oriented to the company’s actual operational performance, and this is where voluntary codes and industry standards come into play. This dimension is entirely unrelated to its eventual philanthropic activities. For our discussion, this is where we’d like to focus attention to momentarily.

In this CSR dimension of voluntary codes and corporate standards, the business is actually recognizing that its activities might have negative externalities on such issues as worker rights, on the environment, on human rights, etc.. Generally this recognition appears from past conflicts arising in the business’ practices, or from the broader sector in which the company operates, such as the apparel industry, or in the extractive industries, in which over the past several decades extensive and systematic abuses (such as slave labor, water contamination, or intrusion on cultural lands, etc.), have surfaced as recurring problems of the sector.

The company finds itself pressed by stakeholders (workers, communities), or advocacy groups (like ours), which contest certain aspects of the company’s production processes, This leads to repetitive and rising conflict that can begin to chip away at the legitimacy and the community’s tolerance (or social license), ultimately placing serious constraints that can block production altogether. While in some cases local democratic institutions (legislatures, judiciary, etc) might be able to solve such conflicts, in other cases, either due to Executive Power intromission (a local mayor, or minister) on behalf of the company, or the public sector more generally is simply not sophisticated or independent enough to resolve such problems.

In such cases, companies which understood that they needed to solve these rising problems, began to come up with their own internal accountability system, recognizing the issues of concern (slave or child labor for example), and they began promising to abide by some sort of internal ethical code of conduct. Levi Strauss for example, was the first company to produce a code of conduct focusing supply chain accountability, it’s  “Global Sourcing and Operating Guidelines”  to address the growing concern and conflict over worker abuses in apparel manufacturing overseas. [4] Today hundreds of such corporate codes exist, some pertaining to single companies while others are broader and include entire industrial sectors. All of them have the similarity that they are generally company-produced and enforced, and have no legal binding obligations.

For the sake of our discussion, evaluating strategies and choosing to press a company to uphold a voluntary code, we need to evaluate the degree to which there is some indication that the company is serious about upholding the code, that it effectively has a strong policy to avoid the harms it pretends to avoid, that its’ management practices reflect that intent, and that it shows resolve to reverse harms when they surface. Voluntary codes are only as good as the integrity and commitment assigned to them by the company that purports to uphold them.

In the Uruguayan Pulp Mill case, CEDHA utilized a number of voluntary codes claiming accountability to the actors that upheld the codes. The more visible of these were:

  • IFC Social and Environmental Safeguards (now called the Performance Standards)
  • The Equator Principles (a sector code for responsible banking)
  • The OECD Guidelines for Multinational Enterprises
  • Nordea’s International CSR and Human Rights Obligations

The first of these, the IFC’s Social and Environmental Safeguards are internal guidelines used extensively and quite effectively by the World Bank Group to ensure that its business practice, particularly in the design of projects, adheres to what the World Bank considers sustainable social and environmental practices. The World Bank, in the case of the Safeguards, offers a conflict resolution mechanism, the Compliance Advisory Ombudsman (CAO) which hears complaints from stakeholders and can carry out an audit of the project in question. CEDHA filed a case against Botnia at the CAO and an audit was carried out. The results of the audit, which in this case substantiated many of our claims, is non-binding for IFC and for the World Bank Group more generally, but does have considerable weight on how staff at IFC operated subsequently.

The Equator Principles are a similar set of guidelines used mostly by private banks. In this case, we first approach ING which intended to finance Botnia. However, in the case of the Equator Principles, there is no procedure or forum to actually file a complaint. This is a key point, since as we indicated previously, the voluntary code is only as good as the company’s commitment to uphold it, and that has to do with policy and management systems and procedures to address problems. ING had the policy but failed to develop the other two. We felt however, that we could ignore the lacking procedure and file a complaint anyway, to the ether. We created what we called “the Equator Principles Compliance Complaint”[5] and filed it to many of ING’s clients, shareholders, news media, NGOs that followed corporate activity, etc. Soon after our complaint, ING withdrew US$480 million of pledged investment. We cannot be sure it was because of our complaint, but the reality is they back out of the investment, probably to avoid risk.

The OECD Guidelines for Multinational Enterprise is also a voluntary code, drafted by States promising to monitor corporate compliance of companies of their origin operating overseas. The OECD offers stakeholders to submit complaints (called Specific Instances) to a forum run by the particular State (called National Contact Points—NCPs) in which the State acts as a mediator between the parties. The company participates voluntarily and any recommendations issued by the NCPs is non-binding.

CEDHA filed three Specific Instances in the Uruguayan Pulp Mill case, against Botnia (at the Finnish NCP), against Finnvera, the Finnish Export Credit Agency (at the Finnish NCP) [CREATE LINK], and against Nordea (at the Swedish and Norwegian NCPs) [CREATE LINK].

Corporate Compliance of Human Rights

Perhaps the most recent embodiment of the CSR debate, and as to whether or not corporation actually have more responsibilities than merely to make money, is the discussion that has been evolving at the international level for over a decade regarding the human rights due diligence of business practices.

The Uruguayan Pulp Mills case was not alien to the business and human rights debate, in fact, several complaints filed in the case focused specifically on corporate and State human rights violations related to the pulp mill investments. These included specifically on human rights, the complaint filed before the Inter-American Human Rights System [LINK] focused on alleged human rights violations of Argentina residents by the Government of Uruguay, but also the OECD complaints centered on human rights concerns over the practices by Botnia [LINK] and the complicity of the government of Finland through its support via Finnvera [LINK] (the Finnish Export Credit Agency), and finally the complaint presented against Nordea [LINK], for human rights violations as per its own corporate policy.

Generally, human rights violations are brought to human rights tribunals against States, not business. At these forums, States are held accountable for their duty to protect against violations of human rights of individuals and communities. The question of whether business can also be held accountable for human rights violations is a topic of much debate over the past 10+ years.

In the pulp mill case, CEDHA’s point of departure was manifestly clear on this point. Business is absolutely accountable over human rights violations which they definitely can perpetrate. As a matter of principle and very systematically throughout our institutional documentation, comments, press articles, and complaints, we strongly affirmed this linkage and relationship as a self-evident truth, ignoring that a debate exists on the matter. This strong and stated conviction avoiding the mention or existence of any doubt on the matter, buttressed the sense of legitimacy of the claims. General public opinion will not stop to consider whether a given forum (such as a human rights tribunal) will be applicable or not for corporations, or whether there is any semantic or substantive relevance to this discussion. The reader who is not a specialist on human rights issues will likely presume that yes, corporations are accountable for human rights violations. This presumption works to the favor of the community and the case, and should be capitalized on by the advocacy strategy.

In CEDHA’s press release [LINK TO PRESS RELEASE] about the complaint filed before the OECD Guidelines forum (which functions as a mediator of a voluntary process), consider how we phrase this issue:

Amongst the allegations made by CEDHA in the Specific Instance complaint, which are grounded in many violations already confirmed in Botnia’s project respective of IFC Environmental and Social Safeguards as well as human rights violations denounced before the Inter-American Commission on Human Rights, ….

We should note that we do not expressly mention that the complaint filed before the Inter-American Commission on Human Rights is not against Botnia, but rather Uruguay, but rather let the reader make his/her own assumptions about the specifics of the complaint, which for the general public will likely be that the complaint is indeed filed against the company. .

We should also note that this case was contemporaneous with a moment of great importance on the evolution of global thinking on the human right and business linkage, both shortly after the appearance of the UN Norms on Human Rights and Transnational Corporations, as well as the subsequent UN Mandate to explore the links between Human Rights and Business. The case would be a showcase for how some of the key issues surrounding these initiatives were addressed in practice and would also help to inform the UN mandate, which has begun to solidify the issue at the global level and amongst intergovernmental, State, corporate and civil society organizations.

a) The UN Norms on Human Rights and Transnational Corporations (the UN Norms)

In the late 1990s, theUN Sub-Commission on Human Rights sponsored the creation of a working group (led by David Weissbrodt of the University of Minnesota) which channeled the human rights and business linkage towards an effort to establish binding international law, obliging corporations to adhere to international human rights. The discussion led to intense debate between State, business and civil society groups, which differed profoundly on just how this linkage should be treated by the international community, and whether business actually can be held accountable for human rights violations. The position of most companies and some States was that only States have human rights obligations, while civil society groups and some more progressive States held firmly to the wording of the Universal Declaration on Human Rights, which clearly states that human rights are the responsibility of “all organs of society”, and hence, business is clearly accountable. [FOOTNOTE THE UDHR]

The UN Norms on Human Rights and Business were approved in 2003 by the Sub Commission on Human Rights, [CHECK YEAR], but these were still born in the sense that they would never move on into the form of a global treaty, nor did States or business accept or apply them in any meaningful manner. CEDHA has been part and strongly engaged in the civil society push to adopt the norms and were happy to see them approved (albeit waterdown and convoluted from State editing of the more robust earlier versions of Weissbrodt’s original documents). We were however disillusioned with the way States and companies received the norms, as they were largely ignored or caused outright opposition from the actors we were trying to influence.

Instead a new debate began, led by a newly created mandate under the leadership of Harvard Professor John Ruggie, who made the next step of evolution possible, bringing the conflicting actors (State, business and civil society) back to the discussion table. John Ruggie was already well known for having co-authored the UN Global Compact, which helped usher in the human rights discussion around corporate due diligence in the UN System and amongst corporations.

b) The UN Global Compact

The UN Global Compact, which appeared in the later 1990s, firmly and definitely, through its voluntary stature (which made companies and States comfortable easing into the business and human rights agenda, but which in turn made civil society organizations weary that they would ever be taken seriously) introduced 9 human rights principles (later 10), ranging from children rights, workers rights, discrimination, environment, and the 10th (which appeared in [YEAR]), corruption .

The voluntary nature of the UNGC made the 9 principles allowed for companies to sign on the Compact, slowly folding in human rights into policy and management, without having to be legal accountable for doing so. Civil society criticized the compact strongly precisely because it has no teeth, but for the most failed to recognize that in fact the compact was ushering in a whole new era for corporate policy and discussion. John Ruggie’s Human Rights and Business framework which was so overwhelmingly approved by all actors in the late 2000s would never have been possible if business had not previously been slowly led by the hand with the voluntary and not-so-frightening Compact.

From the standpoint of accountability, there is little offered by the Compact in terms of process. There is no formal complaint mechanism to file complaints for corporate violations of the Compact. Corporations simply adhere or not at will to the promises they make by signing the Compact.

In the pulp mill case, the UN Global Compact comes up in two specific circumstances which provide useful examples of the strengths and weaknesses of the Compact in advocacy work.

The first instance we will mention has to do with the undeniable weakness of the voluntary code, not only due to its lack of enforceability, but also due to the overly emphatic belief that many corporate actors as well as State actors, assign to the validity and legitimacy of corporate adherence to the Compact. There is an underlying but false presumption by many actors that simply because a company is a UN Global Compact signatory, that they are a responsible company.

We see this very clearly in the Pulp Mill case in relation to claims CEDHA made of corporate violations to the UN Global Compact by Botnia, filed before State accountability forums such as the National Contact Points (NCPs)under the OECD Guidelines for Multinational Enterprises procedures.

CEDHA’s OECD Specific Instance against Botnia was eventually closed by the Finnish NCP on the grounds that Botnia was in their view a responsible company precisely because they are a Compact signatory. The Finnish NCP suggested rather bluntly that:

“Botnia S.A has also stated that it adheres to the principles of the UN Global Compact … [and that] This, for its part, ensures that Botnia S.A will use acceptable methods and adhere to internationally acceptable practices.” [LINK OR FOOTNOTE]

CEDHA also made allegations of corporate violations of the Compact when we filed a complaint against the private multinational bank based in Sweden, Nordea. In this case, our complaint was not filed in particular forum, but rather simply, we confronted the company with what we called a CSR Complaint, where we list a series of violations to the company’s corporate policy, of international human rights, and specifically, of the UN Global Compact.

Much like in the case of CEDHA’s Equator Principles Compliance Complaint [LINK], which has no formal complaint filing procedure since no mechanism exists, we simply utilize a rhetorical approach that presumes that naturally, a violation of the UN Global Compact, should have a complaint procedure, and while a formal one may not exist, we are going to proceed as if it does, and as if the company must engage by addressing the complaint in some procedural manner. We mentioned earlier, that public reaction to our human rights violations allegations against Botnia was largely accepted in public opinion as valid, we experienced a similar reaction from the public, including many media sources, which contacted CEDHA inquiring about the procedure that the CSR compliance complaint would follow, asking about how Nordea would have to react and what would happen if they did not comply.

The public naturally presumes that a “complaint” results in some kind of consequence, and this presumption naturally includes that the consequence for the actors involved, and particularly the company accused, will have to respond by some sort of logical format or procedure. This presumption helps leverage the relevance of what otherwise would be simply a non-binding, forum at which none of the actors has and responsibility whatsoever to engage. Essentially, by simply presuming accountability, and not stating otherwise before the public, we get the benefit of the doubt and the presumption of process to work in our favor. placing direct pressure on the companies or States involved to respond.

The public hence, and stakeholders in particular (in this case of Nordea, e.g. clients, shareholders, Nordic societies, etc.) by hearing that a complaint was filed against Nordea, presumed that that Nordea would have to respond, and comply with whatever procedure that complaint placed in motion.

Already several presumes logically follow. First that the company may or may not be guilty of the violation, and hence that the response within this presumed procedure will reveal whether the company is guilty or innocent.

We should not undervalue the importance of the attention drawn by the complaint. Even if the complaint does not actually result in binding decision favorable to the complainant, it is likely that an important number of stakeholders or general public will be likely to be influenced to presume there must be an issue at hand. In many cases, particularly ones involving companies in contaminating industries like mining, or in this case, the pulp mill sector, there is already a public bias to disbelieve in the corporate defense, and a presumption of guilt of contamination.

We can use this presumption of guilt effectively to draw attention to the case, to raise awareness of the issues, and to bring pressure on the company and on financial or political actors supporting the company to bring more scrutiny to reviewing due diligence.

This is precisely what occurred in the Pulp Mill Case with the several complaints filed in non-binding forums such as the OECD, CAO, and the invented forums we approached such as the Equator Principles and CSR compliance complaints. .

c) The Ruggie Framework: Protect, Respect, Remedy

The more recent evolution of the Human Right and Business relationship lies in the framework presented in 2008 by Professor Ruggie to the UN, the so called Protect, Respect, and Remedy framework [LINK TO FRAMEWORK DOC-2008] with the subsequent Guiding Principles published in 2010 [LINK to GPs]. This framework is quickly becoming the measurement bar for corporate and State due diligence over the relevance of human rights to corporate conduct and to the oversite of State agencies over that conduct.

While the Pulp Mill Case advocacy work we carried out took place largely before the Ruggie Framework was approved in 2008 by the UN Human Rights Council, this case provide unique insight to Ruggie’s work, in as much as CEDHA was one of the most active actors in contributing to the discussion and making recommendations to the mandate and the resulting reports (and framework, guidelines, etc.) that derived from it.

What made this case of extreme relevance to the thinking and evolution of the mandate, was that so many complaints were filed at so many different forums on a single case. This allowed for interested parties evaluating global corporate accountability to examine and compare with a single case and a single set of evidence, how each forum functioned , to what extent the key issues were addressed, to what extent the actors involved engaged or did not with the forum, and to what extent the forum itself provided any real accountability of the actors to the victims..

As we read the principle documents deriving from the Protect, Respect, and Remedy framework, for those that are familiar with the case, we can quickly recognize elements that are addressed by the framework, such as how a State (in this case Finland), through its various agencies and representations (IFC, OECD NCPs, Public Export Credit Agencies, etc) can have multiple roles, some promoting business, some controlling it, and some acting as supposed non-partial mediator, and yet take on extremely different and contradicting positions.

To sum up some of the key elements to consider of Ruggie’s approach, the Protect, Respect, Remedy Framework and the Guiding Principles, the division of our thinking into these three pillars and the consideration of the Guiding Principles document, will help us think through the various dimensions in which our case might play out in terms of how various State and non-State actors will approach the case. It will also help us consider (particularly though the Guiding Principles document) the specifics substantive elements of due diligence.

We should stress however, that the Ruggie approach insists on a division between State Duty as a binding obligation and Corporate Responsibility as a voluntary one, a division CEDHA opposed from the beginning. The debate at the international level, and particularly amongst legal experts is a valid one, in terms of who is the ultimate subject of international law (States vs. everyone—as stated in the Universal Declaration of Human Rights). Our position, as we mentioned above, is firmly grounded in the latter position, and hence we depart from a presumed binding obligation of business to comply with human rights. Our rhetoric hence in all of our documents avoids making any reference to any “voluntary” nature or presumption of such norms.

Final Words on Voluntary Codes for Corporate Accountability Advocacy

Botnia was a typical CSR-minded company (in the philanthropic sense), bestowing gifts on the community, including ski tickets to Finland, philanthropic donations to the community, or and secretly paid Uruguayan and Argentine actors and public figures to speak well of the company or to oppose the pulp mill conflict generally. They recruited paying considerable sums to famous musicians to hold concerts financed by the company. But such actions do not guarantee any degree of legal or other due diligence compliance with respect to practice. Botnia covered up worker accidents with money to families so they would not speak to the press. They confiscated worker telephones so that they would not communicate to the outside world during accidents, etc.

Many multinational companies use philanthropy (some very strategically relevant and welcome philanthropy) to gain public approval for “doing good” in society. The CSR movement generally, and particularly in a continent like Latin America is full of corporate reference and policy suggesting that “companies must do much more than simply comply with the law”. The thinking goes that companies need also (voluntarily) to make society a better place by adding social value to society.

This results in creative Public Relations programs, offering goods and special benefits to local communities to win over this communities. By donating to local sports teams, to hospitals, to schools, by providing educational scholarships, or contributing to local charities, companies find their rating improve, and so does the defense of the company, when things might go wrong, such as with environmental damage, or worker accidents.

Voluntary codes and corporate adherence to such codes appear for many reasons, ranging from the need to improve public image and minimize opposition through corporate greenwashing (or human rights relevant blue washing) to actual efforts by corporations who sincerely make efforts at reducing their social and environmental impacts.

We wont really know in first instance, what drives a particular company to develop or adhere to a voluntary code, until a problem arises with the company and the issues addressed by the code. At that moment we will see first hand (and according to the severity of the violations committed and the implications to the company to redress them) to what extent the company is really committed to upholding the code. Some companies may decide to respect the codes that they have signed unwaveringly, which might entail considerable costs to the company such as changing production techniques, canceling contracts with suppliers, or introducing new and costly management reforms. Others may simply ignore the consequences and chose to continue business as usual rendering voluntary codes absolutely useless.

In terms of our advocacy, before discarding a voluntary code approach because we are concerned that it has no teeth to hold the company accountable, we should at least have some evidence showing the company has acted in one way or another. And even if the company will not uphold the code, voluntary code approaches, can have multiple effects on a company such as raising public awareness over the violations. We should be clear about what we expect to achieve with the complaint or use of a voluntary code forum or procedure, and what it can really offer in terms of accountability. Partial gains (while not necessarily resolving a case) can sometimes be absolutely and very worthwhile gains at a specific moment of the case.

In the Pulp Mill case, for example, while the complaints filed against Botnia and Finnvera gained little in terms of getting a ruling against the company or the export credit agency, they were both extremely important in leveraging the engagement of the State of Finland, which before the complaints, had refused categorically to engage. That in and of itself is an enormous contribution to the case.

An important risk of acting in a CSR dimension is that society tends to confuse, corporation social responsibility as defined by the CSR movement, which is essentially about charity, with corporate accountability to the law, to environmental and social norms and codes, to human rights or to international law.

The almost comical statement by the Finnish government regarding the Pulp Mill case illustrates this point. The Finnish NCP suggested that Botnia, by signing on (not necessarily by complying with) to a voluntary code of conduct like the UN Global Compact, can be expected to utilize acceptable methods and practices. A State or corporate actor will generally assign far greater credence to companies that enter into voluntary agreements and corporate sector standards, than does civil society.

The risk with this tendency is that many actors, particularly ones close to the State or to the private sector, will tend to believe that the company by signing such codes and entering voluntarily into sector agreements, should be given the benefit of the doubt. We see this for example in the leadership and respect many State agencies and CSR agencies working on voluntary codes and standards assign to companies such as Shell, BP, Barrick Gold, Chevron, Rio Tinto, which have both a proven trackrecord of being CSR leaders, but conversely an abysmal history of systemic human rights violations and contamination.

While most anyone can and will appreciate the social contributions that a company can make as a good “corporate citizen”, in attractive CSR programs, we should not confuse this with “corporate accountability”. However, deconstructing these presumption and changing the departure points of the discussion in order to get to the crux of the issues, may not be easily done.

What is perhaps most important to determine as we try to define an advocacy strategy in each particular case and whether we will make the effort and invest the resources in approaching a voluntary code forum is to what extent we can expect the actors at fault to adhere to the commitments they’ve made in the forum, and whether there are stakeholders or other sectors of society that might leverage pressure on the company to uphold those commitments (shareholders, clients, media, etc.), whether the corporate actor pursued wishes to comply or not.

A good CSR program does not equal human rights compliance or even ethical practice. You can’t cleans with one hand, what you’ve soiled with the other. CSR initiatives have largely left human rights and legal obligations off of the agenda and have focused more on company outreach into society in terms of their corporate giving and social investment. CSR programs and activities are often divorced from the actual production processes, and generate island-operations more linked with public relations and corporate image exercises, however valid and legitimate they might be.

Further, even with the best interests at heart of CSR officers at a given company, this doesn’t mean that those officers have final say or any significant leverage power over the real decisions makers of the company. At the French private financial bank, Calyon, CSR staff had one opinion about the involvement of Calyon in the Botnia pulp mill, while finance staff of the same bank, had clearly a different take on the project, largely ignoring environmental and social concerns, and writing them off as a technicality non applicable based on the fact that Calyon’s investment was not actually going directly to the project, and hence social and environmental commitments made by Calyon under the Equator Principles did not apply.

CEDHA had a very positive engagement with Calyon’s CSR team, who were open to discuss issues surround the pulp mill and specific to our Equator Principles Compliance Complaint [LINK TO COMPLAINT]. In a person to person meeting we held in Paris, however we were bluntly told by Calyon’s Financial Officer that the Calyon’s commitments to the Equator Principles only pertained to project finance, and since the support Calyon was offering Botnia took the form a general operations loan, the Calyon would not apply the Equator Principles. Calyon decided that year to give Botnia general support financial assistance. That same year, Calyon was a leading candidate to receive the Financial Times yearly award given to the world’s most sustainable bank. They didn’t get the award, we hope, because they chose to finance Botnia and that’s precisely what we said on our press releases.

(from one of CEDHA’s press releases published in Norway) the Financial Times, ran an 8 page section on Responsible Banking, suggesting the Uruguay pulp mill case, is a test case for international bank responsibility, and that the world was looking at the evolution of the Equator Principles as the benchmark for responsible banking. ING Group of Netherlands, withdrew US¤480 million pledged support to Botina , following an Equator Principles Compliance Complaint submitted by CEDHA. Shortly afterwards, Calyon of France, lost a bid to be named Sustainable Bank of the Year, purportedly due to its public announcement that it would serve as financial arranger for Botnia.[6]

In conclusion, the voluntary commitment of corporations to human rights legal framework does not guarantee that such rights are actually being realized, and does not necessarily offer an effective, transparent, equitable and fair channel of redress for a stakeholder who claims a right violations. This is an important weakness of voluntary systems of human rights compliance framework. Voluntary commitments are only as strong as the complaint mechanisms created by corporations (many times such arrangements do not exist), their real commitment to abide by them, and their effectiveness in gaining attention, responding to, and resolving existing complaints, or by non-corporate state mechanisms designed to monitor corporate compliance.

As the Botnia case has shown us, even at the very highest levels of corporate normative evolution (the financing system devised by the IFC), even a condemning internal audit showing social and environmental norms violations, is not always enough to ensure that financial actors (public or private) abide by their own normative frameworks. While there is not an enforceable independent power and process in place, the system will always suffer from potential self interest, political priorities and subjectivity, at the expense of human rights and stakeholder protection.

In the end, the integrity and effectiveness of the entire access to justice system (in terms of addressing a corporate violation of a right) will determine whether a specific right is actually protected and the degree to which an individual or community whose rights are violated and seek effective remedy.

National Redress Mechanisms When Dealing with Multinationals

The public good, and legal rights, in the end, are guaranteed by state-sponsored  mechanisms established to do so. While in some countries, these mechanisms may be too weak to provide such guarantees, human rights protection still remains in the public sphere.

This section will not focus on general issues to consider when conducting advocacy at the national level (which would be a monumental task), but rather, it will cover some of themore typical dynamics concerning national advocacy over conflicts involving multinational enterprises.

The Uruguayan Pulp Mills Case was addressed nationally both in Uruguay and in Argentina, and offers many lessons. Various components of the case were brought before national courts in both countries, including administrative claims Uruguay (which CEDHA did not file and which will not be covered in this publication), as well as criminal complaints filed in Argentina against company executives of Botnia and ENCE. We will also mention, in the context of this criminal, the novel inclusion we made of World Bank Executive Directors into the criminal complaint.

Perhaps the first and foremost concern of addressing multinational cases in national spheres is the relative weakness of State judicial institutions, compared to the countervailing leverage and power of multinational companies over State or local governments, due to the large economic and political influence such companies might wield over local actors.

We tend to overstress our confidence (this is a particular fault of lawyers) that legal complaints in national courts of developing countries, against multinational enterprises are likely to be effective. But we tend to ignore that politics, especially the decisions of the Executive Power, in developing countries, has strong influence over and generally limits judicial independence. This was definitely so in the pulp mills case.

We should remember, that in the case of Uruguay, Botnia’s investment, at 2% of GDP was the largest foreign investment ever in Uruguay. This fact was crucial in terms of how the national government approached the case, how the local economy and local actors from the economy viewed the investment (quite favorably), and to what extent society could be influenced to come up behind the case (in favor or against our position). The Uruguayan court system had little influence in the conflict, and received little pressure form civil society in any meaningful way. The Uruguayan Prosecutor Viana files a complaint [BRIEF EXLANATION AND LINK TO THE COMPLAINT]

For Argentina, the economies around the investment, taken at the national level were largely irrelevant. There was some important economic interest of logging companies and other industrial product companies across the river, in Argentina, that saw the benefits of two very large pulp mill producers in their vicinity, and were expecting large economic windfalls from the investments. These actors would pop up every so often, in favor of the mills, particularly when the bridges were closed for weeks, months, even years, on end, due to protests.

Argentina’s government engagement would be mostly political and driven by the interest of the national government to gain political capital from public energy and support of the cause.

The national judicial system in Argentina however, played a minor role in the case. CEDHA did file, along with the governor and vice governor of Entre Rios and nearly 40,000 residents of the of Gualeguaychú, a criminal legal complaint against Botnia and ENCE executives. [LINK to PRESS RELEASE]

But coming back to the case in particular and the dynamics of redress in national systems in cases involving large multinational investments in developing countries, oftentimes the extremely powerful economic and political drivers of the investment are operating outside of the borders of the country, which weakens the relevance and influence of national systems to address the key issues, or gain leverage or influence over the decision makers.

The Uruguayan Pulp Mill Case is a perfect example of such a case, where large multinational companies (buttressed by other players also from the pulp mill sector more generally), public export credit agencies, multilateral investment banks, and large private multinational banks work collaboratively to generate the momentum necessary to push the investment strongly along a path to fruition. The government of the recipient country, particularly if it is looking to promote foreign investments (as was the case with Uruguay), plays a welcoming and facilitating role, where all of the State’s agencies begin to align to make the investment happen, catering to the needs, and readily acquiescing to the requests of the company and financial actors, with little or no relevant social or environmental conditionalities on the project beyond the expected permitting processes for other companies (generally much smaller and in cases like the pulp mill sector, with which the local government has little or no experience).

This collusion for external actors may happen unbeknownst to the local government, and decisions to transfer entire industrial sectors might even occur before there is local knowledge of the intent. The decision to develop a pulp mills sector in Uruguay, for example, came from outside of Uruguay, as the leaders of the paper producing sector, were the ones exploring potential places to invest in the expansion of pulp production which they foresaw already in the 1990s.

A study produced by the Asian Development Bank and the government of Japan, produced many years earlier [FIND REFERENCE and LINK IF POSSIBLE] in fact, was key in identifying Uruguay as a key target country for producing the sort of fast growing trees that would be needed for the rapid expansion of the paper industry, as personal computers and inexpensive printers placed printing inexpensively in the hands of home computer users. .

When large multinational companies begin to target developing countries with weak governance systems, or developing countries that are eager to invite investments, in practically any sector as long as they come, we are likely to see the Executive Power strongly behind such strategies, without much care for the social and environmental costs that such investments might entail. If we add to this a system in which the judicial sector is weak or easily influenced by the Executive Power, the likelihood that such investments will occur with strong regard for environmental protection, becomes very small.

And even where there might be somewhat stronger democratic institutions and process in place, such as in a country like Uruguay, the larger the investment relative to GDP the larger the leverage the company will have in its negotiations with the host government in terms of obtaining favorable tax exemptions, operating permits, legal concessions and or reforms needed, infrastructure requirements (such as roads or port facilities), guarantees against local protests, oppositions, etc. Botnia was offered a fiscal paradise in Uruguay, paying practically no taxes on production, and benefiting from a tax free zone for exports.

The Executive Power goes out of its way in such cases, to ensure that the investment occurs and in the most inviting way for the company. We see similar dynamics occurring today in Argentina in the mining sector, where the tax incentives and other financial benefits of investing in Argentina are enormous.

The problem we have in such cases in terms of carrying out national advocacy around the case, is the relative isolation of the company relative to the opposition it might face locally. For all intents and purposes, Botnia was not in Uruguay, it was projected on a fiscal and political island of sorts, where everything coming out of Botnia, including its’ pollution, would leave the country along the Uruguay River. Even the key inputs to the mill, including most of the technology used was imported, high level executive staff was also brought from abroad, utilizing mid to low level workers from Uruguay, most of which did not come from Fray Bentos, but from outside cities, bringing a large influx into the small country town, which led to increased violence, prostitution, alcoholism, and other vices of urban life largely absent before in Fray Bentos before the arrival of the pulp mill.

The long standing advocacy carried out in Gualeguaychú by thousands of people, and to a lesser extent by many individuals and groups in Uruguay, which gained local and national press, which stayed in the headlines for weeks, months, and even years as the communities decided to block international traffic between the countries, was mostly unknown to the actors and stakeholders of those outside actors in their countries.  While upwards of 50,000 people, then 80,000, then 100,000 and then 120,000 marched to the San Martín International Bridge spanning across the Uruguay River between Gualeguaychú (Argentina) and Fray Bentos (Uruguay), the financial actors supporting the investment mostly ignored the conflict. They could do so because they were not there to see the protestors. They could easily not open or read emails about the protest, and rarely saw any information about the case in their own local media.

Interestingly however, when CEDHA filed a criminal complaint in an Argentine federal court, against company executives (Botnia and ENCE), and then proceeded to name World Bank Executive Directors in the complaint, indicating that these had decided to vote in favor of the loans to Botnia, we were able draw important attention abroad, particularly at the IFIs, to the case. The focus on complicity of the World Bank Executive Board Members created great unease at the board, as any one of them, should they pass through Buenos Aires, could conceivably be called to trial.

The original press release title and first paragraph is reproduced below [LINK?]:

 

Criminal Claim Filed against 23 World Bank Executive Directors for Approving Controversial Pulp Mill Investment Project

World Bank Members Could be Called to Trial in Argentina

December 5th, 2006 – Concepción del Uruguay – Argentina. The twenty three World Bank Executive Directors who voted to approve a US$170million IFC loan and a US$370 MIGA loan to support the construction of a Finnish papermill in construction by Botnia on the Argentine-Uruguayan border, were added yesterday to a criminal claim filed earlier this year in Argentine Federal Courts for the intent to contaminate the environment and could be called to testimony in an Argentine Federal Court.

 

The Bank’s EDs quickly began consulting their legal office, to make sure they would not be and could not be tried … they supposed their safety due to the immunity granted to international organization staff, but the unease caused by the measure was clearly unsettling several of the EDs that signed voted to provide Botnia with financing. Unfortunately, the weak vigor with which the Argentine judicial system engaged on the case, ultimately dissipated this risk for the directors and things slowly returned to business as usual at the World Bank, ignoring the still massive social outcry of local communities against the project.

Large corporate investments in developing countries with weak local governments, tend to place corporate interests above social and economic interests of local communities. Advocacy at the national level, if it does not cross the border in a meaningful way and stir environments back at home or in financial circles for the investment, tends not to have significant effects on multinational enterprises. Local governments that are strongly behind investments, or that do not have incentives, will power, or political power to oppose them, also weaken the relevance of national advocacy strategies. Unless national tactics can in some what hinder the normal operations of multinational companies (through worker strikes, boycotts, or other protests that affect production, etc.), if the national or sub-national government cannot be engaged to influence the company, the likelihood of advocacy success is greatly reduced.

Advocacy against large multinational companies in national spheres are most effective when justice systems are strong and independent from the executive power, when control agencies (environmental agencies) are willing to force due diligence and regulatory compliance, when and when protest tactics can stop production. One potentially effective way to leverage national action is moving advocacy outside the border, when the multinational may be more vulnerable to critique or due diligence control.


[2] The CAO’s Preliminary Report was submitted to the Inter-American Commission in a case brought by CEDHA and Juan Carlos Vega representing 50,000 local stakeholders against the Government of Uruguay for allowing Botnia project violations of human rights enshrined in the American Convention on Human Rights.

[3] This idea is commonly attributed to Milton Friedman.