Global Regulation of Corporate Conduct: Effective Pursuit of a Slave-Free Supply Chain

68 Am. U. L. Rev. 1821 (2019).

* Professor of Law and Executive Director, LL.M./J.S.D. Program in Intercultural Human Rights and Founder & Director of the John J. Brunetti Human Trafficking Academy, St. Thomas University School of Law, Miami. Member of the Pontifical Council for Justice and Peace, (2012–2017), now part of the Dicastery for Promoting Integral Human Development, The Vatican. I wish to thank Ms. Tessa Juste for her excellent assistance with the research for this Article. I also thank the editorial team of the American University Law Review for its diligent and talented review of this Article.

Attractive as they seem, free trade and capital flows have also brought about major negative impacts. Achieving socially sustainable globalization and maintaining a global economic order that respects human dignity remains a matter of concern. Human-by-human exploitation in the form of modern slavery is deeply entrenched in many businesses, large and small. In recent years, there has been a proliferation of efforts towards building a supply chain that would be free from questionable practices and abuses of the human rights of workers. Efforts have been made to advocate for a human rights-based code of conduct for businesses, for a meaningful corporate social responsibility, and for ethical consumerism. Existing law, policy, and social activism have made some strides toward committing businesses to trace their supply and to cutting ties with contractors accused of using forced labor. Still, the law is unsettled as it regards corporate liability. Globalization, the complexities of outsourcing, extended supply chains and their mostly unregulated nature have exacerbated trafficking in humans. This extraordinary problem, as it persists, calls for extraordinary measures. A business as usual approach has not solved the problem. It is time for nation states to step up their regulatory approach regarding businesses. Individually and as a community, nation states need to create a rule-based system for corporations forcing compliance, a system that would be workable and effective.

“[W]e all know quite well that the enjoyment of human rights can also be threatened by non-State actors. Private persons may exercise a considerable constraint on other individuals. This fact is putting the State in a situation where it may have to intervene into the relations existing between the individuals, drawing limitations to their freedom to act.”¹

Introduction

Slavery is not just the solitary act of one individual. In the economic sector, it can arise at various stations of production and distribution of goods and services. In the modern division of labor, creation and distribution of a product often requires cooperation of various entities, mostly commercial, from raw materials to finished merchandise—a so-called “supply chain.”² In a globalized economy wedded to the goal of minimizing labor costs, resource extraction, growth of farm products and livestock, as well as manufacturing as the beginning phases of the chain of supply are often moved to countries with substantially lower wages and fewer protections for workers and service providers. Too often, the labor conditions in these countries are nothing short of exploitative; in the aggregate, the abuse of labor in these mostly developing countries constitute the elements of modern slavery, i.e., trafficking in human beings. The most promising approach to staunching this problem effectively is to address the entity in control of the supply chain, i.e., the corporation, generally in highly developed countries, that sets up the chain of supply by outsourcing some of its parts.

In line with free market principles, the goal of generating goods and services free of slave labor has been pursued by appeals to the conscience of corporations, their self-restraint by voluntary codes, and the threat of consumer boycotts.³ There is an enormous number of entities that have been established to trace, explore, assess, analyze, conclude and report on the scope, magnitude, and effectiveness of corporate initiatives to protect vulnerable workers in their supply chains. This Article will evaluate the success of these efforts, although thorough research on this matter is difficult to undertake. Their sheer number, their uncountable websites and sub-sites, missions, visions, and projects also create a blurred, almost Kafkaesque, situation. It is hard to come out with a clear picture or understanding of what exactly corporations are doing to effectively end modern slavery in their supply chains and provide services and products that are free of slave labor. But the blame does not fall on these entities, often because it is difficult to ascertain empirically the internal workings of corporations.

The efforts made by a good number of corporations in this regard are not to be trivialized either. On the contrary, they are to be appreciated and commended for their voluntarismin combating this battle. The proliferation of efforts toward building a supply chain free from questionable practices that have led to extreme abuse of workers’ human rights and, even worse, to the facilitation of human trafficking by exacerbating the demand for cheap labor, products, and services, is indeed admirable. Whether advocating for a human rights-based code of conduct or for the power of ethical consumerism, groups and movements indicative of social activism from various workers’ organizations, religious organizations, humanitarian agencies, and private companies have all dealt with the issue of how corporations should address forced or exploitative labor in their chain of supply. To their credit and within the boundaries of their respective mandates, certain groups have been fairly successful in getting some big businesses to commit to tracing their supply chains and cutting ties with contractors accused of using the means of modern slavery.

The following questions arise and will be addressed in this Article. Is reliance on consumer initiatives such as boycotts and labeling of products made free of slave labor the proper approach? To the extent corporations have addressed this issue, has the reliance on voluntary self-restraint been successful? Aren’t corporations under the binding legal obligation to maximize profit for their shareholders? Wouldn’t they violate their raison d’êtreby worshipping other gods than mammon, i.e. the interests of their workers? Thus, the time may have come to redefine the legitimate purpose, the mission of corporations. This can effectively be done only by nation states. But, are they able and willing to do that? Governments may not yet read and comprehend the signs of the times that may mandate such action.⁴

[t]he Pharisees and Sadducees were opposed to each other in principles and in conduct; yet they joined against Christ. But they desired a sign of their own choosing: they despised those signs which relieved the necessity of the sick and sorrowful, and called for something else which would gratify the curiosity of the proud.

Matthew Henry & Noah Webster, Matthew Henry Bible Study: Revised King James Version 788 (P.F. van der Schelde ed., 2011). So far, the nation state continues to bend before corporations for fear of breaking, but bending for too long is losing its validity. In his address to the Third World Meeting of Popular Movements, Pope Francis warned attendees that “[c]orruption, arrogance and public display by leaders increases collective unbelief and a sense of abandonment, and feeds the mechanism of fear that sustains that evil system.” Pope Francis, Address of His Holiness Pope Francis to Participants in the 3rd World Meeting of Popular Movements, Libreria Editrice Vaticana (Nov. 5, 2016), https://w2.vatican.va/content/francesco/en/speeches/2016/november/documents/papa-francesco_20161105_movimenti-popolari.html. There is over-confidence in voluntary reporting, disclosures, and transparency of the almighty market, and on the players that animate it—the globally active corporations. Governments seem to be playing a rope-a-dope in this contest between maximum corporate profit and respect for elementary human rights,⁵ holding in abeyance the ultimate effective weapon, which is binding regulation.

In an era when the term “sovereignty” has come back to justify a “my country first” mentality without regard for the lesser members of the world community, is the nation state pursuing a fair-weather responsibilityvis-à-visthe safeguarding of universal human rights and human dignity? Can or should nation states advance further in their regulatory functions related to business and thus go beyond what is presently mandated in the legislation of so-called “big four” coerced labor regulatory schemes?⁶ In a globalized world, is it even possible for one nation state to claim that it will be able to end trafficking within and outside of its borders? Do and should nation states have any responsibility to regulate business conduct beyond their borders, based on their obligations under human rights law? As individual states? As a community of nations? What would animate or inhibit individual and collective state intervention? As this Article will illuminate, this vexing economic and social condition that has seen millions suffer under the yoke of modern slavery has also challenged our vision for human dignity.

I. Delimiting the Problem: What Corporate Behavior Conflicts with the Ideal of an Order of Human Dignity?

A. The Notion of Human Dignity and Human Rights

Great historic movements for human freedom, equality, and solidarity were the predecessors that gave rise to demands for human rights universally. The American and French revolutions particularly referenced the idea of the rights of man. The new world order after the World War II heralded the human being and human dignity as the centerpiece of the particular structure of an international order that justifies basic political and social institutions established to respect and protect human dignity. This in turn constitutes a fundamental value in many legal systems. Enshrined in positive law as demands for all important values that constitute human dignity are the Universal Declaration of Human Rights;⁷ the International Covenant on Civil and Political Rights;⁸ and the International Covenant on Economic, Social and Cultural Rights.⁹ There are also equivalent expressions in regional human rights conventions, as well as the bills of rights embodied in national constitutions of various countries, showing that human rights became and still remain at the heart of good governance despite various legal and political interpretations over time.

Though recognition of human rights is realized in positive law, it is well accepted that the concept of human rights stems from the doctrine of natural rights,¹⁰ which holds that individuals are entitled to fundamental rights beyond those prescribed by law, merely by virtue of being humans possessed with sympathy and psychological imagination, or because they are created in the image of God.¹¹ The notion of human dignity, though undefined, referenced in the Universal Declaration of Human Rights seemed to have gained consensus by all traditions representing nations within the United Nations.¹² The idea of human rights is an essential part of the liberal creed, since it refers more to a state of feeling, rather than to a statutory provision. The positive manifestation of human rights law can be traced back hundreds of years through the development of the legal history of many Western countries,¹³ which progressively recognized that human rights cannot be created or granted but are firmly grounded in the basic dignity¹⁴ and equality of each person.¹⁵ Consequently, the political systems cannot and should not simply be “value-neutral” for pragmatic purposefulness,¹⁶ because such systems would not be able to accomplish human aspirations. As articulated in these universal documents, peoples’ aspirations have not changed, though they still have to be fulfilled. In 1980, Yale professors McDougal, Lasswell, and Chen, who developed the New Haven School of Jurisprudence, wrote:

[T]he peoples of the world, whatever their differences in cultural traditions and styles of justification, are today increasingly demanding the enhanced protection of all those basic rights, commonly characterized in empirical reference as those of human dignity, by the processes of law in all the different communities of which they are members, including especially the international or world community.¹⁷

Their assessment still rings true today. The demands have not changed, but the processes of law have not been able to fully realize the promise of 1948. We are still far away from the ideal of human dignity. The laws in action at all levels of government lag behind the laws on the books when it comes to human rights, particularly in the areas of slavery and forced labor.¹⁸ The duty of nation states to respect the right of persons to be free from slavery has been overwhelmingly achieved by legal prohibitions and the subsequent conduct of states.¹⁹

It suffices to note in this regard that the prohibition of slavery has reached the rare and exceptional status of a jus cogens norm.²⁰ Beyond that, it was considered a crime against humanity in the Nuremberg Charter,²¹ the Tokyo Charter,²² and the Statutes of the International Criminal Tribunal for the former Yugoslavia²³ and International Criminal Tribunal for Rwanda,²⁴ though there is no definition of the term per se in any of these documents. Human rights conventions have also prohibited “slavery” on a universal and regional level, though they also fail to include any express definition.²⁵ Various cases in the context of World War II could be read as including forced or compulsory labor under enslavement as a crime against humanity²⁶ and, moreover, as holding accountable corporations and industrialists that used slave labor.²⁷ In the context of human trafficking and on the basis of more recent developments in the field, one can legally argue that certain forms and situations of human trafficking are akin to the old phenomenon of enslavement and thus warrant the same treatment in the word and practice of the law.²⁸

However, the missing piece today is the reluctance on the part of nation states to comply with their duty to protect the individual from abuse by third parties, those non-state actors that Professor Eckart Klein refers to,²⁹ including corporations and their respective chains of supply. The magnitude and scope of the problem are still open questions, as the next section will illustrate.

B. Facts and Figures: A Dim Picture

The most recent UN Global Compact Progress Report 2018 enumerates a number of achievements of the alliance of companies committed to respecting human rights. This includes labor rights—in line with Sustainable Goal 8, Decent Work and Economic Growth—as well as fundamental universal principles by “leveraging their supply chains and taking collective action to address decent work deficits.”³⁰ It also spotlights the facts that approximately a third of companies partaking in the UN Global Compact (“UNGC”)³¹ consider human rights in their supply chain and their subcontracting operations. Over 450 million people work in supply chain-related jobs.³² Forty-two percent of companies report conducting due diligence processes on potential suppliers, which seems to be good progress.³³

However, the UNGC report is unable to confirm many of these statistics because they are based only on surveys and voluntary corporate reporting.³⁴ We have to take their credibility at face value. Even exulting these numbers, they still leave much to be desired, particularly in light of the fact that the above statistics include reporting for only forty-five corporations of North America, a minuscule number of companies compared to the 608 companies that represent Europe.³⁵ Add the fact that corporations surveyed reported that their top challenge was extending strategy for implementation of principles throughout the supply chain,³⁶ and you would understand the cautionary note.

Reality speaks a different language when it comes to the impact of global trade and economy in the life of those millions counted above. The estimates testify to a massive concentration of wealth in the hands of mega-corporations covering the planet substantially.³⁷ Their conduct based on the present corporate structure, which focuses on the best interest of shareholders, can at best be considered to be morally conscious, if they so choose, while they continue to operate in an environment that has created fertile ground for exploitation with impunity. The expansive urbanization in each and every country of the world, the galloping speed of development in technology and communications, the increased mobility and the uncontrolled and mismanaged migration³⁸ have augmented the consequent ills that characterize global life today: exploitation, inequality, disparities in wealth distribution, and deeper polarization amongst countries of the North and South and the West and East, as well as within the borders of each and every country.³⁹ Because of economic inequality, in 2017 alone, 258 million people left their home countries to migrate to other nations.⁴⁰ When we add the phenomenon of the unregulated world market for human labor⁴¹

[t]he incentives that have given rise to human and product supply chains both grow from comparative advantage in the global context—the idea that each country will benefit from specializing in what it can offer most cheaply to the global economy, be that coal or workers, and that global growth will be maximized when firms are permitted to draw resources and labor from wherever they are cheapest.

Jennifer Gordon, Regulating the Human Supply Chain, 102 Iowa L. Rev. 445, 485 (2017). we encounter a vulnerable human resource readily available to be used and abused as modern slaves.

With all due respect to skeptics and to politically correct fanatics, the fact of the matter is that slavery has never left us. Except for the fact that slavery is no longer institutionalized in any political and legal system, and that modern slaves are no longer a legally registered investment,⁴² the types of exploitation, degradation, and mistreatment encompassing any or all features attached to the right of ownership in situations of absolute control of one person over another, induced through force, fear, fraud, and coercion are starkly similar to the old phenomenon of chattel slavery. Facts and figures indicate that there is no such a thing as a world free from modern slavery.⁴³ Indeed, a permanence of abject poverty, unemployment, inadequate housing, lack of medical care, and education has created a sub-stratum of an unexhausted pool of vulnerable people who, aspiring for a better life, have become easy prey for human traffickers.⁴⁴ These social conditions constitute the root causes—the push factors—for the readily available expendable and renewable supply.

Despite recent progress, two reports on human trafficking from the International Labour Organization (ILO) and the U.S. Department of State show that there is still much to do to eradicate modern-day slavery. These studies shed some light on the people who have fallen prey to human trafficking. The first study done by the ILO offers a global estimate of forty million people falling prey to modern slave-trader and human traffickers in 2016 alone, of which twenty-five million people are considered to be victims of forced labor.⁴⁵ All of them were coerced or deceived into doing jobs they are not free to leave.⁴⁶ Considered to be a conservative estimate, this encompasses sixteen million forced laborers in the private economy and almost five million in forced sexual exploitation.⁴⁷ Among private industries that exploit forced labor, construction, agriculture, manufacturing, and fishing ranked high.⁴⁸ Twenty-three percent of forced labor trafficking victims are migrants, internally or internationally moved across state borders and administrative lines.⁴⁹ In a separate report, the ILO estimates that 152 million children are victims of child labor and almost half of them are aged five to eleven years.⁵⁰ The cost of coercion amounts to $150.2 billion in illegal profits,⁵¹ all of this generated in the private economy.⁵² It is not a coincidence that the highest profits come from Asia, estimated at $51.8 billion, and from developed economies, estimated at $46.9 billion.⁵³ The highest profits come about because of the large number of victims in Asia and the high profit per victim extracted in developed economies.⁵⁴

It is no surprise that corporate outsourcing and the supply chain availability is highly concentrated in Asia. The manufacturing industry of United States alone outsourced fifty-three percent of its operations abroad, and about forty-four percent of outsourcing industries list profit, by reducing operating costs, as their top reason for outsourcing.⁵⁵ Among the top outsourced countries in terms of workforce are India, Indonesia, China, the Philippines, and Thailand.⁵⁶

The second report comes from the U.S. Department of State. The Trafficking in Persons Report (“TIP Report”) of 2018 identified 10,011 victims of human trafficking (commercial sexual exploitation and forced labor) in the Americas alone.⁵⁷ Of these identified human trafficking victims, only 2139 were survivors of forced labor.⁵⁸ There is a stark contrast between this data and the ILO figures, which estimate that there are over one million victims of forced labor in the Americas.⁵⁹

forced labor, sometimes also referred to as labor trafficking, encompasses the range of activities—recruiting, harboring, transporting, providing, or obtaining—involved when a person uses force or physical threats, psychological coercion, abuse of the legal process, deception, or other coercive means to compel someone to work. Once a person’s labor is obtained by such means, the person’s prior consent to work for an employer is legally irrelevant: the employer is a trafficker and the employee a trafficking victim.

TIP Report 2018, supra note 57, at 32. The TIP Report data indicates that a meager 100,409 victims were identified globally in 2017, out of which 23,906 were survivors of labor trafficking⁶⁰—compare the latter number to the twenty-five million people in forced labor as estimated by the ILO report above.⁶¹ Despite efforts by individual governments to control trafficking within their own borders, the available data suggests that current legal frameworks are insufficient to end modern slavery.

The situation is far worse regarding violations of human rights, including the right to be free from slavery and forced labor, when committed by corporations abroad.⁶² Governments have beenreluctant to enact legally binding norms that would establish true accountability for corporate conduct detrimental to human rights.

II. Past Trends in Domestic Law

Sporadic as they are, some nations have already concerned themselves with making legal decisions that are intended to confront human trafficking in the supply chain. Countries that are home to many multinational corporations like the United States, the United Kingdom, France, and Australia have been at the forefront of such regulation. There is ample literature that describes, analyzes, and assesses these laws, so this Article will not focus at length on all of them. It suffices to note that such regulation could be mapped into three categories: mandatory transparency, mandatory due diligence, and public procurement laws.

A. Regulating Corporate Conduct: Law in Books

Mandatory transparency laws, aimed as consumer empowerment laws, require companies to disclose and report on actions they are taking to address modern slavery in their business operations offshores.⁶³ Thus, such regulation expands disclosure trends to include social policy issues. The two main mandatory transparency legislations are the California Transparency in Supply Chains Act of 2010(CTSCA)⁶⁴ and the UK Modern Slavery Act of 2015.⁶⁵ They are established on the premise that, upon corporate disclosure,⁶⁶ the consumers would be able to “distinguish companies on the merits of their efforts to supply products free from the taint of slavery,”⁶⁷ consequently contributing to the eradication of slavery through the power of their purchasing decisions. The consumer pressure would thus come to bear fruit in forcing companies to clean up their direct supply chain.⁶⁸ Evaluation of such efforts has shown that only limited change in corporate conduct did result from such regulation.⁶⁹

Additionally, the only enforcement mechanism in the CTSCA, listed under § 1714.43(d), is “an action brought by the Attorney General for injunctive relief.”⁷⁰ To date, the Attorney General of California has not pursued any such injunctions.⁷¹ In addition, the CTSCA does not confer standing upon victims of forced labor, or upon the consumers of products made by companies whose supply chains are not free of trafficking.⁷² Plaintiffs have tried to indirectly utilize the CTSCA by filing consumer complaints arguing that some disclosure statements made pursuant to the act amounted to false advertising, but their efforts have been unsuccessful thus far.⁷³ Specifically, the California courts and the U.S. Court of Appeals for the Ninth Circuit have interpreted the disclosure statements as aspirational and not necessarily statements of the actual success of companies’ actions to combat trafficking in their supply chains.⁷⁴ As a result of the lack of a full-bodied enforcement structure in the CTSCA, companies subject to the act are not monitored as to whether or not actions match their disclosure statements, nor are they the subject to direct financial penalties.⁷⁵ Hence, the regulation has not succeeded in curbing the abuse.⁷⁶

The other set of regulations features a mandatory due diligence requirement, which mandates businesses to have in place a human rights due diligence process to identify, prevent, mitigate, and account for how a company addresses any negative impacts of their business activities on human rights.⁷⁷ The French law,⁷⁸ for example, demands corporations to create and implement a vigilance plan. The law requires large French companies⁷⁹ to assess and address the adverse impacts of their business activities on human rights and the environment. It mandates publication of annual public vigilance plans linked to the company’s own activities, as well as the activities of companies under their control with whom they have established a commercial relationship, such as suppliers and subcontractors.⁸⁰ On a smaller scale, the U.S. Trade Facilitation and Trade Enforcement Act of 2015⁸¹ removed the “consumptive demand” clause of the Tariff Act of 1930, which allowed the importation of goods produced by forced labor in cases where domestic product could not meet the demand.⁸² The law now prohibits the importation of all products made by forced labor.⁸³ The burden lies with the importing company to conduct supply chain due diligence to prove that products are not made with forced labor down to the bottom of the global supply chain.⁸⁴ Otherwise, the company’s imported merchandise could be denied entry into the United States or seized by U.S. Customs and Border Protection and the company could be prosecuted.⁸⁵

Countries like the United States have also integrated regulation to prevent modern slavery into public procurement practices. The U.S. Federal Acquisition Regulation (FAR)⁸⁶ prohibits the government from accepting a federal contract sourced abroad unless a company certifies that they will not sell a product suspected of being produced with forced labor and child labor or of relying on human trafficking.⁸⁷ FAR expects the corporation to make a good faith effort to ensure that forced labor or child labor was not used to make their products; the contractors need to certify that they and their subcontractors are not engaged in human trafficking.⁸⁸ Contractors must prepare certification and compliance plans for contracts that are sourced abroad and exceed $500,000 in value.⁸⁹

One can see that although there are some tools available to address human trafficking in the supply chain, they either have not been utilized to their full potential or they are addressing the problem very tangentially. Additionally, the lack of extraterritorial application of most of these laws has created a gap in their enforcement.⁹⁰ This enforcement gap was addressed and upheld by the U.S. Supreme Court in its Kiobel decision.⁹¹

B. The Supreme Court’s KiobelDecision: A Model of Law in Action

In Kiobel v. Royal Dutch Petroleum, Co.,⁹² the Supreme Court discusses the longstanding presumption of statutory interpretation that without explicit indications to the contrary in their statutory text, laws are presumed not to apply extraterritorially.⁹³ In this case, the presumption was specifically being applied to the Alien Tort Statute (ATS),⁹⁴ which enables non-U.S. citizens to raise claims for torts violating the law of foreign nations in U.S. federal courts.⁹⁵ Citizens of Nigeria, who had received asylum in the United States, brought a claim against two multinational oil corporations from the Netherlands and the United Kingdom, as well as their subsidiary in Nigeria.⁹⁶ The torts alleged were aiding and abetting the Nigerian government in perpetrating “(1) extrajudicial killings; (2) crimes against humanity; (3) torture and cruel treatment; (4) arbitrary arrest and detention; (5) violations of the rights to life, liberty, security, and association; (6) forced exile; and (7) property destruction.”⁹⁷ These acts were allegedly undertaken to stifle local opposition to oil exploration arising out of concerns about a potentially harmful environmental impact.⁹⁸ In Kiobel, the Court ultimately held that claims under the ATS are not exempted from the presumption against extraterritorial application unless the claims “touch and concern the territory of the United States . . . with sufficient force to displace the presumption.”⁹⁹

The presumption against extraterritoriality as applied in Kiobel has prompted myriad critiques of the case’s implications for victims of international human rights violations seeking restitution.¹⁰⁰ Some argue that Kiobel virtually eliminated all hope of succeeding in tort claims against U.S. and foreign corporate entities.¹⁰¹ Others contend that Kiobel specifically precludes the liability of foreign businesses, but U.S. companies could still be liable, as cases concerning these companies are much more likely to pass the “touch and concern” test of Kiobel.¹⁰² Either case exemplifies the need for a legal framework to hold corporations accountable for human rights abuses, according to other critics of Kiobel: “[T]he perceived threat of U.S. litigators and judges to bypass the legal systems of other sovereigns . . . seems to be dated, in light of the realities of modern globalization and transnational character of corporate activity today.”¹⁰³

It has also been asserted that the presumption of European support for the holding in Kiobel is misplaced.¹⁰⁴ While the governments of the Netherlands and the United Kingdom filed amicus briefs in support of the respondents in Kiobel, it should be noted that it was corporations from these very nation states who were being brought before the U.S. courts.¹⁰⁵ However, the European Commission also filed an amicus brief for the European Union in Kiobel, arguing that “the United States’ exercise of universal [civil] jurisdiction [with no U.S. nexus of the parties or conduct] under the ATS is consistent with international law.”¹⁰⁶ This stance by the European Union in Kiobel is further borne out by the application of the Brussels I Regulation,¹⁰⁷ commonly thought of as the “Alien Tort Statute of the European Union.”¹⁰⁸ This regulation not only holds European corporations responsible for their torts overseas, but also extends to non-European corporations that are subsidiaries of European companies.¹⁰⁹ The Brussels I Regulation has not yet been heavily relied upon, as European legal traditions tend to lean more on criminal trials than civil proceedings for the righting of perceived wrongs, but nevertheless, the existence of this regulatory framework for tortious corporate actions in foreign jurisdictions illustrates opposition to the notion that “corporations should be free from liability for their overseas involvement in violations of international law.”¹¹⁰

A final argument in opposition to the consequences of Kiobel is that certain human rights violations, particularly those that have risen to the level of being absolute and non-derogable, i.e., torture, genocide, and slavery, are universally proscribed. International law requires that nation states “provide victims of human rights violations with access to justice and effective remedies.”¹¹¹ In light of the peremptory nature of certain human rights, nation states arguably fail to meet their obligations under international law when they fail to redress the violation of those rights by multinational corporations, whether those violations occur extraterritorially or not.¹¹²

Even if this argument is not accepted, there is no reason why goods and services that come into the United States at the tail end of a global supply chain could not be seen as “touching and concerning” the territory of the United States.¹¹³ This fact would remove the presumption against extraterritorial application of the ATS and would allow it to be applied against acts of enslavement down the line in foreign contexts. In any event, claims against U.S. citizen corporations should still be allowed.¹¹⁴

C. Shifting Responsibilities De Jure and De Facto

Beyond the uncertain route of the ATS, today’s scholarship and news place much emphasis on supply chain disclosure regimes as a way to reach consumers. The hope is that consumers will then react negatively toward companies who use slave labor.¹¹⁵ While there is a dearth of empirical scrutiny of the efficacy of disclosure regimes, disclosure regimes are not designed in a way that achieves any success in stopping corporate abuses of human rights. Disclosure regimes simply help shift the burden onto the consumer, who is now tasked to be well informed and alert about what she purchases in order to make a conscious decision. While this might sound good, it is impractical. First, it is impossible to reach all consumers with awareness and knowledge about which companies are in compliance and which are not before they make the decision to purchase or to boycott. We cannot expect that consumers will go and read “the dirty lists” published by some governments before they go shopping.¹¹⁶ This should not be the homework of consumers generally, though there is nothing wrong with more enlightened consumers making moral decisions in commercial transactions of everyday life. Indeed, the consumer should not be burdened with thinking about how decent the product or service they purchase is; rather, the companies should be expected to serve slave-free products and services. Even if we were to accept shifting the burden to consumers as a solution to the problem, the present legal regime does not “fully [commit] a company to eliminate coerced labor from supply chain or face legal liability.”¹¹⁷ Moreover, experimental studies have shown that supply chain disclosure regimes are unlikely to modify consumer behavior to the extent that they will reduce human rights abuses by corporations.¹¹⁸

While trust is vested in the voluntary social responsibility commitment of corporations and the attendant reporting disclosures, many have concluded that the legal regime almost accepts that “human trafficking is an ongoing issue that cannot be fully controlled by the company itself.”¹¹⁹ Others believe that setting higher expectations on transparency will make corporations use their control as customers to influence their global supply chains and increase accountability of suppliers for underperformance on challenging issues like human rights and human trafficking.¹²⁰ It sounds good, but are we right to trust that corporations will actually use their power and clean up their supply chain voluntarily? Does their structure position them properly to do the right thing? The answers to these questions depend on our view of the legal responsibility of corporations.

III. Excursus: The Bottom Line as the Legal Responsibility of Corporations

Demand has been dubbed as the “pull factor” for the aggravated exploitation of labor. There is a market demand for a broad range of cheap products and services. Corporations are willing to satisfy this demand in conformity with their appetite for maximum profit.

To make it easier to quickly respond to this demand, corporations have been focused on the advantages of globalization, outsourcing, and the openness of free trade. Globalization is about promoting free trade, which improves the productivity of firms. The attenuated effect of globalization is a wider variety of goods available to the consumer at lower prices.

Companies have numerous incentives to engage in offshore activities that help them reduce the costs of production. These offshore activities can include a favorable trade agreement with a host country, reduced tariffs, or improved infrastructure in a host country. The common understanding is that “[e]veryone benefits from this gain in productivity.”¹²¹ Indeed, outsourcing and global trade have boosted the living standards of most people in the developed world, but the staple of consumerism has become tainted by use of slave labor in products and services. Some industries are making efforts to respond to the demand for transparency and combat trafficking in their supply chain,¹²² but the truth is that they are still not fully equipped to effectively clean their supply chain all the way to the bottom. KnowTheChain is a resource that lists industries that have made efforts to minimize forced labor in their supply chain, noting particularly the food and beverage industry with Unilever as the industry leader,¹²³ the garment industry featuring Adidas as its anti-forced labor champion,¹²⁴ and the information technology industry with Intel Corp. leading the way in its disclosures regarding forced labor policies and prevention.¹²⁵ But, is this good enough? Can corporations within their own structure and mission genuinely satisfy the tenets of corporate social responsibility?

Economist Milton Friedman’s now infamous article, The Social Responsibility of Business is to Increase its Profits,¹²⁶ has been the cornerstone of the argument against corporate social responsibility (“CSR”) since it was first published in 1970.¹²⁷ Friedman’s primary contentions are twofold: (1) that CSR is nothing but thinly veiled, pseudo-intellectual socialism aimed at destroying the free market and Western society; and (2) the only social or moral responsibility of a business is to serve the interests and objectives of its shareholders because corporate executives are the shareholders’ agents.¹²⁸ By its nature, a for-profit entity exists to maximize profit.¹²⁹

There is a longstanding and robust counterargument to this emphasis on shareholders’ profit interests, in favor of CSR, based on either or both of the notions that “engaging in such behavior is appropriate because it is good for business”¹³⁰ and it is “the right thing to do.”¹³¹ It follows that CSR may in fact be beneficial to the shareholders as much as to other stakeholders affected by corporate decision making. But proponents of CSR cannot deny the fact that such action by corporate entities is, virtually always voluntary.¹³² Regardless of which side of the debate is correct about the ethical obligations of corporate executives regarding social responsibility,¹³³ perhaps a more pressing question remains as to whether corporations are capable of consistently implementing socially responsible policies if, at their foundation, profits are the absolute measure of whether corporate officers are upholding their fiduciary duty as a matter of legal obligation. As famously established in Dodge v. Ford Motor Co.,¹³⁴ corporations must be run to produce a profit.¹³⁵

Theoretically, socially responsible corporate practices are permissible to the extent that they do not diminish profits. But, if a socially responsible choice, such as absolutely eliminating forced labor from a corporation’s supply chain, is an action that would reduce the profitability of the business, it is arguable that this is not a decision within the corporate officers’ authority. This poses a problem if society is to rely on the voluntary adoption of CSR policies as the necessary corporate contribution to ending labor trafficking. Of course, if trafficking and poor labor conditions become public knowledge resulting in a loss of profits, then it could be argued that adopting new CSR policies is both the ethical and legal duty of the corporate executives.

For example, when it was publicized in the 1990s that the shoe and clothing company Nike had exploited workers within its factories outside of the United States, the public outcry and subsequent fall in profits caused Nike to quickly adopt CSR practices around forced labor in its supply chain.¹³⁶ While this example can be taken as an indication that CSR is viable when exploitative practices are known to the public, it could also serve as an incentive for corporate officers to obscure any exploitation from public knowledge.

The argument so far has established that the corporate structure itself juxtaposes the corporation’s legal and institutional pressure to its moral pressure, thus boxing corporations into doing what they can without disturbing the bottom line-—the profit of their shareholders. The argument now turns to the main actor, the nation state, and its responsibility under the law to secure protection for human beings from slavery, human trafficking, and forced and compulsory labor.

IV. The States’ Responsibilities Regarding Human Rights

There is no contestation that nation states individually are the primary addressees of human rights obligations under international human rights law and, as a community of nations, “collectively they are the trustees of the international human rights regime.”¹³⁷ What are the legal bases that mandate nation states to protect against human rights abuses committed by corporate actors?

Under Article 2(1) of the International Covenant on Civil and Political Rights (“ICCPR”),¹³⁸ “[e]ach state party . . . undertakes to respect and to ensure to all individuals within its territory and subject to its jurisdiction the rights recognized in the present Covenant, without distinction of any kind.”¹³⁹ The duty to respect, the most fundamental of state obligations, is thus the first duty that a state undertakes by subscribing to international human rights law. The provision mandates a state’s non-interference with human rights: the state should refrain from harmful acts toward the individual and not encroach upon the rights enshrined in the Covenants.¹⁴⁰ In the context of human trafficking, according to this interpretation, the state incurs no responsibility as long as it does not make it a state policy to involve itself in human trafficking, and its agents acting on behalf of the state do not directly get involved in it.¹⁴¹ Concerns could also arise regarding the conduct of law enforcement personnel and border control agents toward the treatment of human trafficking victims. If a state designated a trafficked person illegally crossing its border as a criminal rather than a victim and deported that person in violation of the principle of non-refoulement,¹⁴² then this could be considered a failure of the state’s duty to respect. On the other hand, a corrupt state agent may be involved at any stage of human trafficking as a facilitator. In such a case, state’s liability is not a priori invoked. However, it is incumbent upon the state to investigate the allegation, to prosecute and punish the perpetrator as required by the law. Consequently, the state remains in compliance with its duty to respect human rights.¹⁴³

The duty to respect is closely connected to the duty to ensure,¹⁴⁴ which establishes obligations for the states to create and maintain a public order that encompasses a decent life for the individuals, a life compatible with the inherent dignity of the human being. The duty to ensure involves a duty to protect human rights. In lay terms, this means that the state must protect the individual from harm caused by more assertive, aggressive, and abusive third-party, non-state actors.¹⁴⁵ The preventive dimension of human rights law foresees that private conduct might interfere with the liberty, rights, and freedoms of the individual. The law itself mandates “the state to take positive measures against the encroachment of rights by power forces beyond the state.”¹⁴⁶ Compliance with state’s obligation to protect human rights requires criminalization of human trafficking at all its stages: recruiting, transferring, transporting, harboring, or receiving persons for the purpose of exploitation.¹⁴⁷ It also requires setting up the necessary administrative infrastructure to ensure implementation of fair labor standards, access to movement without improper restrictions and also application of a fair and non-discriminatory immigration policy and law in its territory and under its jurisdiction.¹⁴⁸

Remedies must be available and accessible in cases of infringing activities and acts that interfere with the enjoyment of human rights.¹⁴⁹ Lack of investigations, scarce prosecutions, and penalties that are not commensurate to the gravity of the crime would violate the state’s duty to protect.¹⁵⁰ “Lack of due diligence on the part of the state is a violation imputable to the state, no matter what form it takes: direct omission, tolerating the act, or, even worse, covering it up.”¹⁵¹ This duty encompasses state’s protective function in combating trafficking of persons, including when perpetrated by corporations abroad.¹⁵² The nation state should have the political will to adopt effective regulation by enacting new legislation or amending existing laws that prohibit corporate crimes, such as the use of slave labor in their business activities, investigate the abuses when they happen, and provide an effective remedy to the victims. States evading their responsibility to protect by either their inability or their unwillingness to meet their obligations under international human rights law and tolerating human rights-abusing corporations send a message that corporations are too powerful to hold accountable, and that they stand above the law.¹⁵³ Indeed, collective action by nation states, to the moment of the writing of this Article, has not gone beyond soft law, as the section below indicates.

V. Past Trends in the Collective Response of Nations to Regulate Corporations

A. The United Nations Global Compact

Launched in 1999, the UNGC is considered to be a universal principles-based approach to social responsibility by corporations.¹⁵⁴ It is cherished as the United Nations flagship for responsible business action and, consisting of ten principles, it is built on the fundamental belief that business can be a powerful force for good and play a significant role in improving our world. The UNGC describes itself as a “call to companies to align strategies and operations with universal principles on human rights, labour, environment and anti-corruption, and take actions that advance societal goals.”¹⁵⁵ The first two principles relate to human rights and respectively state that “[b]usinesses should support and respect the protection of internationally proclaimed human rights; and make sure that they are not complicit in human rights abuses.”¹⁵⁶ Two other principles that align with the topic of this Article relate to labor rights and they respectively direct that businesses should uphold “the elimination of all forms of forced and compulsory labour, ‘and’ the effective abolition of child labour.”¹⁵⁷ Counting 9997 companies, 162 countries, and having issued 61,284 reports in its records, the UNGC celebrates efforts to engage corporations in initiatives that respect human rights.¹⁵⁸ However, looking at the findings of the 2018 UNGC Progress Report, the picture remains dim. According to the report, only twenty-seven percent of companies have reported performing risk assessments directly linked to human rights while only seventeen percent have reported conducting impact assessments linked to human rights.¹⁵⁹ The fact is that companies do not seem to respond well to calls requiring action to respect and support human rights throughout their supply chains and operations. A statement by Lise Kingo, CEO and Executive Director of the UNGC, clarifies further the call on businesses to place human rights at the center of their strategy and explains that the “deep changes needed to achieve the Goals will require transforming value systems, establishing a culture of integrity and aligning business practices with universal principles.”¹⁶⁰

A comparative analysis of some of the data included in the report is warranted to understand the value of government regulation in various aspects represented by the ten principles of the UNGC. While ninety percent of companies that answered the survey in 2018 reported that they have some policy in place that relates to all ten principles, the numbers reveal a glaring gap when it comes to assessing the impact¹⁶¹ of their activities on society. In the year 2018, only sixteen percent of companies conducted impact assessments as they relate to human rights policies, only twenty-six percent were related to labor, and fifty percent to the environment.¹⁶² While fifty percent might not seem to be a great success in assessing the impact on the environment, it still indicates a much higher rate of compliance than in the area of human rights and labor. Generally speaking, there is more robust regulation of the environment—globally, regionally, and domestically—which in turn affects corporate compliance. Better results are not based on the moral conscience of the corporations, but companies perform better if they are forced to comply with legally binding provisions.

For almost two decades, the principles called upon businesses to adopt corporate behavior to prevent abuses and to respect human rights. While this call remains a noble move, alas, aligning businesses with universal principles of human rights has proven to be a true challenge.

B. The United Nations Guiding Principles on Business and Human Rights

The UN Guiding Principles on Business and Human Rights (“UNGPs”), informally known as the “Ruggie Framework,”¹⁶³ were the first corporate human rights responsibility initiative to be endorsed by the United Nations through its Human Rights Council in 2011.¹⁶⁴ The UNGPs constitute a set of thirty-one guidelines for governments and businesses to address human rights abuses and are intended to mitigate and remedy any such abuses.¹⁶⁵ The UNGPs stand on three pillars that constitute the basis for their implementation:

(a) States’ existing obligations to respect, protect and fulfill human rights and fundamental freedoms; (b) [t]he role of business enterprises as specialized organs of society performing specialized functions, required to comply with all applicable laws and to respect human rights; (c) [t]he need for rights and obligations to be matched to appropriate and effective remedies when breached.¹⁶⁶

For a long time, the UNGPs have been considered the foundations for action by nation states, civil society and the private sector. In many respects, they have guided the various initiatives that have been promulgated by all these actors, of course with limited success, as indicated in the above sections.

Indeed, the UNGPs faced a lot of critique from various sides at the time they came out. A meaningful assessment came from the Senior Director for International Law and Policy at Amnesty International emphasizing that

[t]he draft guiding principles enjoy broad support from business, precisely because they require little meaningful action by business. Prof. Ruggie has acknowledged that governments often fail to regulate companies effectively, and that companies working in many countries evade accountability and proper sanctions when they commit human rights abuses. The fundamental challenge was how to address these problems. His draft guiding principles fail to meet this challenge.¹⁶⁷

The reality we face today has proven the above assessment to be accurate. To date and despite many efforts, governments have still failed to regulate corporate behavior effectively.

C. Excursus: Amnesty International’s Corporate Crimes Principles

Impunity for corporate crimes committed offshore has always been at the center of the concern of global human rights organizations emphasizing that “corporate actors need to know that they will be held to account for corporate crimes.”¹⁶⁸ In 2016, Amnesty International co-hosted the Corporate Crimes Principles (“CCPs”) to make good on this conviction.¹⁶⁹ It specifically urged state actors like France, Germany, the United States, and the United Kingdom to take measures in order to hold companies criminally accountable for serious human rights abuses committed overseas.¹⁷⁰ The CCPs were developed by legal experts and supported by Amnesty International and the International Corporate Accountability Roundtable¹⁷¹ and are aimed at advancing the investigation and prosecution of human rights abuses. The CCPs define corporate crime as “[i]llegal conduct that is linked to a human rights abuse, including conduct that should be criminalised in order to meet requirements under international law even if the State has failed to do so.”¹⁷² Inter alia, they recommend enacting stronger legislation; investigating corporate crime as a matter of priority; ensuring financial, technical, and human resources to investigate and prosecute corporate crime; empowering investigators and prosecutors with the understanding that serious human rights abuses by companies can amount to a crime in the domestic legal system; and encouraging cross-border cooperation with police and the judiciary in relevant jurisdictions, including host states where crimes are alleged to have been committed.¹⁷³

While these principles remain within the domain of efforts promulgated by non-state actors, they nevertheless seem to have been a good point of reference for the most recent initiative by nation states: create a legally binding instrument that mandates corporate respect for human rights by regulating corporate activity.

VI. Trending Now: Toward A Legally Binding Instrument

Realizing that the recommendatory UNGPs did not effectively ameliorate corporate conduct to sufficiently respect human rights, the UN Human Rights Council membership concluded that a binding treaty is necessary.¹⁷⁴ Consequently, UN Human Rights Council Resolution 26/9 established a working group named the Open-ended Intergovernmental Working Group on Transnational Corporations and Other Business Enterprises with Respect to Human Rights (“IWG”). The IWG’s mandate is “to elaborate an international legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises.”¹⁷⁵ Over the course of three years, government and non-governmental representatives, academics, practitioners, and even some corporate representatives from various nations met to discuss the scope, function, and content of a binding treaty. The work of the IWG resulted in a treaty draft known as the “Zero Draft,” which was released in July 2018.¹⁷⁶

In its preamble, the draft invokes the rules of international law of human rights regarding international responsibility of states, by stressing particularly that

the obligations and primary responsibility to promote, respect protect and fulfill human rights and fundamental freedoms lie with the State, and that States must protect against human rights abuse by third parties, including business enterprises, within their territory or otherwise under their jurisdiction or control, and ensure respect for and implementation of international human rights law.¹⁷⁷

This language is in line with Article 2 of the ICCPR.¹⁷⁸ The treaty covers human rights violations in the context of transnational business activities,¹⁷⁹ but fails to enumerate the specific human rights that would fall under the treaty. Later versions of the treaty are to address this issue, particularly considering that the two major treaties on human rights separate civil and political rights from economic, social, and cultural rights. Business activities of transnational character encompass any for-profit activity undertaken by natural or legal persons.¹⁸⁰ Thus, the treaty targets only private multinational corporations but not purely domestic corporations or state-owned enterprises. Grievances for human rights violations may be addressed in the court of the state where acts or omissions occurred, or in the state in which the violator is domiciled.¹⁸¹ This means that nation states will be mandated to include extraterritorial jurisdiction in their respective legislation. This is a step forward from the standard contained in the UNGPs, which asserts that, under human rights law, nation states are not generally required to regulate the extraterritorial activities of businesses domiciled in their territory and/or under their jurisdiction.¹⁸²

Intending to cut impunity, this provision would also allow the courts in the host state to exercise jurisdiction over companies domiciled abroad. Furthermore, at the request of victims, the court may apply the law of the sending state.¹⁸³ There is no statute of limitations for violations of human rights that constitute crimes under international law.¹⁸⁴ Victims are afforded prompt access to justice and remedies, while the state investigates all human rights violations effectively, promptly, thoroughly, and impartially.¹⁸⁵ The treaty requires the state to establish criminal, civil, and administrative liability.¹⁸⁶ States must ensure that “all persons with business activities of transnational character” undertake human rights due diligence “throughout such business activities,”¹⁸⁷ as well as the activities of their “subsidiaries and . . . entities under [their] direct or indirect control.”¹⁸⁸ But, the treaty allows states to exempt certain small or mid-sized businesses to avoid undue administrative burdens.¹⁸⁹ The due diligence provision contemplates that a corporation prevent the activities of business partners in their supply chain, or be held liable.¹⁹⁰ This stance departs from the UNGPs, which sought to prevent, mitigate, and account for human rights impact through its corporate human rights due diligence provision. The standard is no longer just about the process of progressively taking steps, but it is about an outcome: prevent abuses in the respective business activities, including those in the supply chain, or incur liability.¹⁹¹ The treaty foresees a monitoring mechanism, a Committee of Independent Experts and a Conference of States Parties.¹⁹²

In many respects, the Zero Draft indicates much progress toward regulating corporate behavior. It accomplishes what is acceptable of a first draft and creates a solid basis for further discussion. Of course, no one is expecting nation states, particularly the sending nations, to be thrilled at the prospects of accepting responsibility that they have intentionally avoided. Consensus on the content of the treaty will need time to build, and the draft will change in so many respects. Unfortunately, nation states with the most powerful corporations, like the United States and Canada, have already opted out of participating in any of the IWG discussion sessions.¹⁹³ Nations like Russia and China, as well as the European Union, are not satisfied with the contents of the draft treaty, but at least they are part of the discussion.¹⁹⁴ The fact is that while some nation states resist regulation of corporate conduct, peer pressure—legal and non-legal—will soon force action. Corporations will have to face sub-national, national, and international human rights regulations with binding force.

An example of the global compliance pull on a legal regime that is binding only in one region of the world is the European General Data Protection Regulation,¹⁹⁵ in effect since May 25, 2018. It has already spurred action by businesses around the world—Google, Facebook, and others—with a view to ensuring that customers in various parts of the world not be treated differently.¹⁹⁶ Within the United States, the State of California is trying to follow the regulatory lead of the European Union.¹⁹⁷ Political controversy in such areas accentuates rather than diminishes the need for progressive development of international law.

VII. Appraisal: Is this Development Toward a Global Treaty Regime Compatible with the Goal of a World Order of Human Dignity?

As stated above, human dignity has been defined, in post-World War II international law, as the guiding light for a newly values-based international community.¹⁹⁸ Law should “serve human beings, not the other way round.”¹⁹⁹ To that end, the goal of law has to be to ensure maximum access by all to the processes of shaping and sharing all things humans value. A thorough empirical study has established such value aspirations as power, wealth, affection, well-being, respect, rectitude, skills, and enlightenment.²⁰⁰ Legal regulations curbing human trafficking in global supply chains definitely promote the shaping and sharing of power, affection, well-being, rectitude, and respect.

Nation states have a responsibility to protect and ensure human rights, having the common good of a world order of human dignity in the center of their considerations. Hence, nation states have to interfere with the private sector by enacting laws and regulations to comply with their obligations under human rights law and policy. Governments regulate to provide protection when needed. That is the job of government. But, when is regulation too much?

One may ask whether legal regulation on the global plane is compatible with the goal of providing community access to power, which in turn helps maximize self-determination of the community. This goal would mandate regulation at the lowest community level possible, because therein lies the community’s access to the process of decision making.

The principle of subsidiarity addresses this concern and is cherished by constitutional and religious traditions alike.²⁰¹ Stemming from the recognition of the dignity, unity, and equality of all people, the common good has a social and a community dimension, as it belongs to everyone and remains common.²⁰² A good society is one that remains at the service of the dignity of the human being—for the good of all people and the good of the whole person.²⁰³ But, the dignity of the human being can only be promoted amongst an aggregate of cultural, economic, social, and professional relationships between the individual and the social groupings he or she belongs to. These relationships constitute the communities that make decisions that affect the life of the corresponding community as a whole and the life of every individual part of the community. It is this network of relationships, central to the identity of the individual, that create the apt ground for the common good. Access to decision making has to start at the lowest level. This constitutes the essence of subsidiarity. The principle of subsidiarity thus requires societies of a superior order to adopt attitudes of subsidiumwith respect to lower-order societies.²⁰⁴

On the basis of this principle, all societies of a superior order must adopt attitudes of help (“subsidium”)—therefore of support, promotion, development—with respect to lower-order societies. In this way, intermediate social entities can properly perform the functions that fall to them without being required to hand them over unjustly to other social entities of a higher level, by which they would end up being absorbed and substituted, in the end seeing themselves denied their dignity and essential place. Subsidiarity, understood in the positive sense as economic, institutional or juridical assistance offered to lesser social entities, entails a corresponding series of negative implications that require the State to refrain from anything that would de facto restrict the existential space of the smaller essential cells of society. Their initiative, freedom and responsibility must not be supplanted.

Compendium of the Social Doctrine of the Church, Libreria Editrice Vaticana ¶ 186, https://www.vatican.va/roman_curia/pontifical_councils/justpeace/documents/rc_pc_justpeace_doc_20060526_compendio-dott-soc_en.html (last visited June 1, 2019). Pope Leo XIII in the first great social encyclical, Rerum Novarum,²⁰⁵ suggested that the government is supposed to assume only such tasks that are beyond the capacity of the individual or a private group. Any acts or functions that can be performed by the private sector with the same effectiveness as when undertaken by the government should be performed by society.²⁰⁶ As Jacques Maritain stated, the government should “leave to the multifarious organs of the social body the autonomous initiative and management of all the activities which by nature pertain to them.”²⁰⁷ The principle of subsidiarity mandates that the higher order entity supports the lower order entity when in need.²⁰⁸ It also helps the lower order entity to coordinate its activity with the rest of society,²⁰⁹ as guided by the common good. Thus, subsidiarity involves the government having negative and positive obligations to secure the common good.²¹⁰

The principle of subsidiarity also undergirds, in many respects, the structure of federalism in its birthplace, the United States. The founding fathers designed the Constitution to leave many issues in the hands of the states, as the federal government was only to do what the states could not do for themselves.²¹¹ In particular, evidence of the notion of subsidiarity in the United States is seen in the Tenth Amendment to the U.S. Constitution, which provides that “[t]he powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”²¹² In a broader context, federalism creates the milieu for the principle of subsidiarity to flourish, as it links individuals and groups in a union that has greater capacities to provide for the common good, while preserving the self-composition of the parties involved.²¹³ Federalism can increase access to power and thus enhance democratic experiences.²¹⁴ It encourages decision making and problem solving at the place where the affected individuals reside.²¹⁵ It is an architecture for freedom²¹⁶ that balances pluralism and homogeneity, protects and empowers minorities, and distributes government services.²¹⁷

The governance scheme within the European Union exemplifies the implementation of the principle of subsidiarity in an intergovernmental context.²¹⁸ The principle of subsidiarity was first incorporated into the governance of the European Union through the Maastricht Treaty with the goal of allocating power in a way that recognizes the sovereignty of the individual member states and provides for the betterment of the European Community as a collective, centralized whole.²¹⁹ The use of the principle of subsidiarity and its definition in the treaty has two dimensions. The negative dimension, in which the European Community is obligated not to interfere with the lower body—the member states—when the lower body can sufficiently achieve the proposed action.²²⁰ The positive dimension, in turn, requires that the higher body has an obligation, or duty, to help the lower body if the lower body cannot sufficiently achieve its goal.²²¹ The principle of subsidiarity was further fleshed out in the Treaty of Amsterdam, Amending the Treaty on European Union, the Treaties Establishing the European Communities and Certain Related Acts (“Treaty of Amsterdam”).²²² The Protocol on the Application of the Principles of Subsidiarity and Proportionality,²²³ annexed to the Treaty of Amsterdam, is based on four criteria:

(1) the close-to-the-citizen criterion (“to ensure that decisions are taken as closely as possible to the citizens of the Union”), (2) the sufficiency criterion (the action must bring value over and above that which could be achieved by individual Member-State’s government action alone), (3) the benefits criterion (“action at Community level would produce clear benefits by reason of its scale or effects compared with action at the level of the Member States”), and (4) the autonomy criterion (“the action should secure greater freedoms for the individual”).²²⁴

These criteria are a good basis for assessing, by analogy, the feasibility of when and at what extent the principle of subsidiarity can be applied to possible solutions for the societal problem of trafficking in persons.

To conclude, the basic premise of human rights is that each person has inherent and inalienable rights simply because they were born and not because it is something given to them by a higher authority. The principle of subsidiarity “presuppose[s] that human flourishing requires freedom” and conditions to reach ultimate fulfillment.²²⁵ Therefore, the inherent right to freedom that is held by all individuals should be protected through the negative and positive dimensions of subsidiarity by the various levels of government. To put this idea in the human trafficking context, an individual’s human dignity and worth can and should be affirmed by being free from slavery. Each level of society is then responsible for promoting the lower level’s aims that point toward helping the individual obtain freedom from slavery. The higher levels would violate the subsidiarity principle if they took on the tasks that would be more effectively undertaken by a lower level body. However, they would also violate subsidiarity, if they do not offer assistance to the lower level, when the latter is about to fail in the protection of the individual’s right to be free from slavery.

Due to their interlocking transnational nature, global supply chains that include elements of modern slavery can, on the prescriptive level, be best combatted by regulation on the global level, via treaty and its subsequent implementation at the domestic level. Under the treaty, the subsidiarity principle would mandate that society, including corporations, and the nation state work together to effectively combat the trafficking links in the chain of supply. In a federation, the federal government would ratify the pertinent treaty, something the lower level authorities do not have competence to do, and then would delegate responsibilities to the component states and private entities for ensuring that each individual remains free from slavery in the most effective way.

When dealing with human rights issues, it is important to recognize that there will be differences among cultures when trying to apply international norms consistently; but, the principle of subsidiarity recognizes that those issues must be overcome and presumes that each nation state will seek to achieve a common good.²²⁶ The principle of subsidiarity promotes shared responsibility among higher and lower ranked authorities. International law will set the standard and must entrust the implementation to the individual nation states down to their local authorities, unless it is shown that the standards cannot be met sufficiently at the local level. Defining each level’s obligations to further the common good, as well as monitoring the implementation of those obligations appears to be a way in which the principle of subsidiarity can be made operational in any architecture of authority.

Under subsidiarity, it would indeed make sense that corporations exercise self-constraint not to abuse human rights, by means of their choosing. But, this feature of subsidiarity does not in and of itself provide a guarantee of accountability. Corporations, being profit-driven, so far have been accountable mostly to their shareholders. The solution is not an assumed enlightenment of each and every shareholder, not to mention that this stance would shift the onus of responsibility to the shareholder. Hence the nation state, as the entity that is accountable to all people through elections, should properly serve its people and always defend their interests. In this case by regulating corporate conduct.

Conclusion

Human trafficking within and beyond national borders is a serious problem not amenable to simple solutions. Past trends in decisions have not succeeded in putting an end to this massive enslavement and cutting slave labor in the supply chain will not be possible under the present international or national legal regimes. With no penalties for non-compliance, no independent bodies to ensure compliance, no avenues of redress for victims of such exploitation, the existing regulations remain lex simulata. More drastic measures are now warranted. The conditioning factors that perpetuate modern slavery in business operations have not changed for the better. On the contrary, there is an exacerbated risk of more people falling into the trafficking trap, while powerful multinational corporations further expand their geographical base of production, distribution, and value chains, spreading their tentacles worldwide.²²⁷

Corporations pursuing the interest of shareholders accept only limited self-restraint regarding human rights. Most of their policy remains on paper while their operational code differs. Corporations mostly pay lip service to the idea of human rights.

The remedy of so-called “consumer activism” has not been effective so far, and it is doubtful that it will gain any traction in the future to effectively impose accountability for violations of fundamental human rights in the chain of supply.

Various countries face strong opposition by business lobby groups to the regulation of corporations warning against “overly prescriptive” laws that place what they call an “undue burden” on them.²²⁸ In the United States, corporations are considered to be the driving force of the economy and organized society, i.e., the government, should stay out of their way. Operating in the atmosphere of the exceptional American capitalism—coupled with the idea of ordered liberty, equality for all, strong on meritocracy, and bringing about personal happiness—corporations have indeed generated the greatest amount of wealth and prosperity ever known in history. The product of an economy of the people, by the people and for the people, the U.S. corporate establishment operating on the territory of the United States abides by the rules of a well-grounded social, economic, and political system based on the rule of law. But, in the era of the globalized economy we live in, decisions made by a corporation regarding any matters related to its business operations have a much broader impact and transcend the borders of any one sovereign nation. They indeed may touch and concern the life and livelihood of populations from multiple sovereigns. Being profit-driven, and more often than not even excess-driven,²²⁹ they will shun the fundamentals of respect for human rights, unless mandated not to do so.

The nature of the world economy today requires that the government play a greater role than that of a mere arbiter, challenging the market logic that the government should stay out of the business of businesses. Even in countries that have a greater affinity for regulation, there are no truly effective measures to protect the worker in supply chains or economies of poor countries. Yet, these countries are not shy to set mandatory standards on an acceptable curvature for bananas.²³⁰ It goes without saying that if regulation is deemed necessary and is strictly imposed for the curvature of a banana, it would be even more necessary to make sure that these bananas are not coming to the market through slave labor.

A collective prescription into hard law that mandates national action seems to be a good way to arrive at that goal. When nation states feel threatened, as they did by the transnational organized crimes, they act.²³¹ The reality is that they do not have the same sense of threat or urgency about the activity of corporations. This has to change.

Global Regulation of Corporate Conduct: Effective Pursuit of a Slave-Free Supply Chain

Share this post

Contact Us

Join Our Mailing List