Corporate power: A David and Goliath struggle for the 21st century
This article focusses on transnational corporations (TNCs) as global actors, the structures and mechanisms that grant them impunity for wrongdoing, and the deepening and widespread popular resistance to TNC extractivism and destruction of the planet.
Brid Brennan and Gonzalo Berron
Transnational corporations (TNCs) have accumulated tremendous economic and political power in recent decades. Today TNCs play a vastly outsized and largely unwelcome role in the formation of the hegemonic narratives that shape our political and economic lives. As nation states’ capacities to defend the public interest have been eroded, corporate power has fewer and fewer checks on its excesses and almost no accountability for wrongdoing.
The causes of this surge in TNC power are multiple. This article will focus on TNCs as global actors, the structures and mechanisms that grant them impunity for wrongdoing, and the deepening and widespread popular resistance to TNC extractivism and destruction of the planet. The article will describe some of the geopolitical dimensions of TNC power, notably the European Union’s role as a guardian of this power. It will also briefly discuss the multiple strategies of resistance to this asymmetry of power – TNCs vs the State and vs the People – and will explain the key battleground at the United Nations Human Rights Council (UNHRC) and the drive to create a ‘legally binding instrument on transnational corporations and other business enterprises with respect to human rights’, which is entering a crucial negotiating phase.1
What is corporate power?
Chilean President Salvador Allende’s speech at the UN General Assembly in December 1972 described how huge ‘transnational’ corporations were waging war against sovereign states and were ‘not accountable to or regulated by any parliament or institution representing the collective interest … In a word, the entire political structure of the world is being undermined’. His words, referring to destabilising and interventionist activities by large US corporate interests, were an early acknowledgement of the threat posed by recent incarnations of corporate power.2
Less than a year later, Allende was deposed in a CIA-supported coup and replaced by the brutal dictatorship of Augusto Pinochet. Chile was involuntarily reshaped as the laboratory for neoliberal corporate rule and power.
Decades of destructive and predatory operations of TNCs on all continents have been well documented: from mineral and oil extraction, land and ocean grabs, and deforestation to takeovers of public services and high-risk financial speculation. During this time, US and European (and increasingly Brazilian, Russian, Indian, Chinese and South African) TNCs have maintained and safeguarded dominance over the resources of the Global South.3
Business has largely continued as usual for the big banks in the time since the global financial crisis. TNC crimes have persisted and justice remains out of reach. A far-from-exhaustive list includes: Rana Plaza, Bangladesh; destruction around the Doce River in Brazil; the Marikana massacre of 36 miners at the Lonmin platinum mine in South Africa; brutal attacks on the communities of Standing Rock, US; the role of European arms corporations in fuelling the wars in the Middle East, and the increasing role of privatised military and security corporations in the securitisation of the EU’s border regime and the detention of migrant and refugee peoples.4
How does corporate power work?
The Global Redesign Initiative (GRI) launched by the Davos World Economic Forum5 is just one example of a concerted effort to put TNCs and other private interests at the heart of political and multilateral processes, underpinned by the belief that deregulation, privatisation and competitive endless growth is the only framework for any economy, even at the cost of peoples, workers and environmental rights (often referred to as neoliberalism).
And even as financial crises drew wide attention to the power of financial and other corporations (e.g., in the agriculture and commodities sector), less scrutinised were the ways in which national and international law have been skewed in favour of capital and transnational corporations. As Juan Hernandez Zubizarreta wrote, ‘the reinterpretation of legislation in favour of capital and transnational corporations and the regulatory asymmetry this causes vis-a-vis the rights of the unprotected majorities are undermining the rule of law, the separation of powers and the very essence of democracy’.6
The development of the World Trade Organisation (WTO) and the proliferation of free trade agreements (FTAs) and international and bilateral investment agreements in recent decades have ushered in an era of global corporate rule. Many of these agreements also carry the now notorious investor-state dispute settlement (ISDS) mechanism, which allows corporations to use international arbitration courts to sue nation states for alleged discriminatory policies, for perceived loss of profits or for adjustments to contracts. The financial penalties involved can be catastrophic for many states.7
Hard protection for corporate interests gives TNCs greater powers than many states, compounding the wealth disparity – the annual revenues of Walmart, Shell and ExxonMobil, for example, are larger than the gross domestic product of countries such as Austria, South Africa and Venezuela.8
Corporations have also gained immense leverage through the policies of the global financial institutions, the International Monetary Fund (IMF) and World Bank. Similarly, immense tax breaks and elaborate mechanisms that facilitate tax avoidance and tax evasion have worked to TNCs’ advantage. Overall, current data suggest global annual tax losses of $500 billion or more, representing over 20% of corporate tax revenues.9
Corporate economic and political power has also expanded and consolidated through processes of mergers and acquisitions. The mega-mergers of Bayer-Monsanto, China National Chemical Corporation (ChemChina)-Syngenta and DuPont-Dow grant three corporations virtual control of global seeds and agrochemicals.10
The EU – between corporate power and corporate capture
The asymmetrical nature of corporate power is rarely more visible than in the institutions and practices of the EU, where it is manifested in the corporate capture of policymaking; in the widespread ‘revolving doors’ practice where EU and other government officials take up high-level corporate functions on leaving office; in the easy and regular access to EU officials enjoyed by corporate leaders and lobbyists; and in the intense lobbying activities of TNCs at both EU and national levels. There is deep resistance to implementing a compulsory lobby register. This preferencing of corporate interests is also reflected in the EU’s defence of European corporations around the world, and in its aggressive push for far-reaching trade and investment agreements that favour corporate interests.
Powerful associations represent corporate interests in the EU, sometimes on a sectoral basis (e.g., European Services Forum) and sometimes multisectorally (e.g., Round Table of Industrialists or Business Europe). These corporate forums, with their concentration of economic power, also leverage political power and influence as they have easy access to EU officials and policymakers at the EU and national levels. EU member states end up acting as conduits for corporate interests through the European institutions (the Council of the European Union, the European Council, the EU’s Committee structure), as documented in a recent report by Corporate Europe Observatory.11
Like the US, the EU has been hostile to recent initiatives for binding regulations on TNCs, undermining its claims to be a defender and proponent of human rights and the public interest. On the floor of the UN Human Rights Council, the EU has staunchly defended corporate interests in the context of recent work towards a binding treaty on TNCs and human rights. The EU’s spokesperson uses language and messaging that parallels the ideas of the International Chamber of Commerce (ICC) and the International Organisation of Employers. The individual member states have remained remarkably quiet since the vote in 2014 that led to the current process towards a treaty on TNCs and human rights, when every European member state on the UNHRC voted against the process. The EU’s positioning at the UNHRC is described in The EU and the Corporate Impunity Nexus, a report by the European Network of Corporate Observatories.12
In her book Shadow Sovereigns, Susan George describes the opaque but politically powerful modus operandi of TNCs and corporate capture as we see in the EU: ‘It’s not just their size, their enormous wealth and their assets that makes the TNCs dangerous to democracy. It is also their concentration and cohesion, their cooperation and capacity to influence, infiltrate and in some areas virtually replace governments.’13
Why is corporate power a problem?
The reorientation of national and international law to favour capital and TNCs has compounded power asymmetries, undermining the rule of law and the primary role of the state in the protection of human rights, and allowing corporations to operate free from regulatory control and with almost total impunity.
Throughout the past four decades, TNCs’ activities have deeply and destructively affected countries and peoples all over the world, as documented in the cases submitted to the Permanent People’s Tribunal in sessions on European TNCs in Latin America (2006-10) and on TNCs in mining and land grabs in Southern Africa (2016-18).14
At the same time, resistance, particularly from the communities affected by TNC activities, has grown and there have been significant initiatives to address violations of human rights and increasing corporate impunity.
Within the UN, the Centre on Transnational Corporations (UNCTC) was established in 1975, and sought to establish a framework of accountability for TNCs in relation to human rights. But the UNCTC was closed down in 1993 by UN Secretary-General Boutros Boutros-Ghali at the insistence of the US. UN efforts resumed when Secretary-General Kofi Annan launched the Global Compact with TNCs at the January 1999 World Economic Forum. But without hard rules, the Global Compact’s self-regulation framework and voluntary guidelines have failed to stop corporate impunity.
Work on another self-regulation framework was initiated in July 2005, when Annan appointed John Ruggie as Special Representative to address the widening gap between the rule of law and the daily operations of TNCs. Ruggie’s work resulted in the UN Guiding Principles (UNGPs) endorsed by the UNHRC in 2011. The EU and its member states have pushed hard to implement the UNGPs. But as evidence from all over the world – including Europe – demonstrates, the UNGPs are failing to address the core of the problem. Their failings are obvious; voluntary corporate social responsibility (CSR) is not an adequate approach to tackle the current scale of corporate crime and impunity.15
Challenges to corporate power?
The communities affected by the operations of TNCs are central to efforts to address the asymmetry of corporate power versus states and citizens, and in launching a campaign for a binding treaty on TNCs and human rights. The campaign was established as the Global Campaign to Reclaim People’s Sovereignty, Dismantle Corporate Power and Stop Impunity (often referred to simply as the Global Campaign) – a convergence of affected communities, social movements and diverse sectors, 250 internationally16 – in 2012, with further broad support mobilised jointly with the Treaty Alliance, which was set up in 2014.
From the 1970s onwards, affected communities have been the first line of defence of human rights and the environment in response to TNC activities. Iconic cases of resistance are those relating to Union Carbide in Bhopal, India; Rana Plaza, Bangladesh; Chevron-Texaco in the Ecuadorian Amazon; Shell in the Niger Delta region (Ogoniland), Nigeria; Lonmin in Marikana, South Africa; and most recently, Vale in Mariana and Brumadinho, Brazil.
The Global Campaign arose in the context of resistance campaigns of social mobilisation and protest against the mega-institutions of corporate power and neoliberal globalisation: the WTO, the IMF and the World Bank.
Several binding legal and juridical initiatives are being established in various parts of the world to address the power of corporations in specific countries. Some are already in place, such as the Binding Law on Due Diligence in France and the Right to Say No legislation (based on the principle of free prior informed consent) which has been given juridical status in a recent ruling by the High Court of South Africa.17
The UNGPs and voluntary self-regulation for TNCs have proved unfit for purpose and have been roundly rejected by affected communities. Instead, affected communities are insisting that new international, legally binding rules for TNCs and human rights are urgent, necessary and possible.18
Given the failure of corporate self-regulation and corporate social responsibility to rein in the power and impunity of TNCs, some UN member states are again working towards binding regulation. Ecuador, with the support of South Africa, submitted a resolution to the UNHRC in June 2014. This historic resolution was narrowly carried,19 and led to the creation of an open-ended intergovernmental working group (OEIGWG) mandated ‘to put in place a legally binding instrument on transnational corporations and other business enterprises with respect to human rights’.20
In the intervening years, the preparatory work on the treaty brought three key groups to the floor of the UNHRC: the member states; social movements and affected communities; and corporate representatives such as the International Chamber of Commerce and the International Organisation of Employers.
The process towards the treaty has advanced significantly in the relatively short time since 2014. In October 2018, the chair of the working group, Ecuadorian Ambassador Luis Gallegos, presented a ‘zero draft’ of the treaty, paving the way for substantive negotiations. Ninety-six member states participated in the fourth session of the working group.
Parliamentarians have also mobilised at national and international levels. Some 350 legislators from the Global South and Europe have signed on to the Global Interparliamentary Network in support of a binding treaty and are active at national level urging governments to engage constructively and proactively in the process of negotiation.
The convergence of movements and networks in the Global Campaign is engaged in sustained activities at national and regional levels. When the UN working group meets in Geneva each year, the Global Campaign engages in a Week of Peoples’ Mobilisation, with work both inside the UN buildings and outside to raise awareness of the process and to engage with the public, media and policymakers. This strategy has been crucial in ensuring the treaty process has remained on track and progressed to negotiation stage.
The Global Campaign, in broad consultation with affected communities, movements and experts from across the world, has also developed and submitted its own proposal for a treaty. This proposal text, ‘Treaty on Transnational Corporations and their Supply Chains with regard to Human Rights’ (2017), advocates for a robust and ambitious treaty that includes: direct binding obligations on TNCs; extraterritorial obligations of states; primacy of human rights over trade and investment agreements and the conditionalities of the international financial and trade institutions (e.g., the IMF, World Bank and WTO); state cooperation on the operations of TNCs along their entire supply chains; an international tribunal on TNCs and human rights; and mechanisms of enforcement and the rights of affected communities.21
The treaty process will continue to face challenges. The global rise of authoritarianism and the rollback of democratic processes and displacement of democratic governments, as in Latin America and Asia, will likely have negative consequences. The EU member states will continue to threaten to withdraw from the process.
But movements will also continue to engage in shaping the content of the treaty. The Global Campaign, together with the Treaty Alliance, are working to ensure governments actively engage in the fifth session of the working group in October 2019, to keep pressure up for a robust treaty that will deal effectively with the impunity of TNCs and provide access to justice for affected communities.
Nobody underestimates the challenges that lie ahead. Neither governments nor people’s movements have been here before. Preparing and realising any treaty is a colossal undertaking – but a treaty that addresses the concentrated power of TNCs with respect to their obligations on human rights is probably among the most challenging.
Transnational corporate power is formidable. Their influence casts a long shadow. Sustained political will and active participation and courage from governments will be crucial to turning back the juggernaut of mega-corporate power and establishing a new international legal regime that gives primacy to human rights over corporate profit and corporate crime.
And this time, an organised movement, determined and global, will be a key factor in shifting the balance of forces and moving governments forward in this historic moment.
This article is reproduced from the website of the Transnational Institute (TNI, www.tni.org), an international research and advocacy institute committed to building a just, democratic and sustainable planet.
Brid Brennan is Project Coordinator of TNI’s Corporate Power programme. She has put TNI at the heart of dynamic international networks from every continent campaigning against trade liberalisation. She is co-founder of the European Solidarity Centre for the Philippines and, most recently, RESPECT, a Europe-wide anti-racist network for migrant domestic workers.
Gonzalo Berrón, TNI Associate Fellow, has played a leading role in coordinating Latin American movements resisting corporate ‘free trade agreements’. He has been an integral part of ongoing discussions with civil society and progressive governments on building an alternative, just regional trade and financial architecture in Latin America. He worked as Coordinator of the Secretariat of the Hemispheric Social Alliance and was until recently with the International Office of Central Única dos Trabalhadores – CUT (Unique Workers’ Center), Brazil. Though Argentinian, he has been based in Brazil for many years.
1. The open-ended intergovernmental working group (OEIGWG) mandated at the UNHRC in June 2014 ‘to develop a legally binding instrument on TNCs and other business enterprises with respect to human rights’ will further advance negotiations on the draft treaty text in its fifth session in October in Geneva.
2. In his address to the UN General Assembly in December 1972, President Allende highlighted, among others, the destabilising and interventionist activities carried out by the Kennecott Copper Corporation and the International Telephone & Telegraph Corporation (ITT). See https://www.nytimes.com/1972/12/05/archives/allende-at-un-charges-assault-by-us-interests-chilean-president.html
3. In what is a relatively recent development, big corporations (such as Vale in Brazil extending its reach to Mozambique) or similar corporations from the so-called BRICS (Brazil, Russia, India, China, South Africa) countries are repeating similar patterns of human rights violations and other corporate abuses – as has been well documented in the People’s Permanent Tribunal (PPT) session on TNCs in Southern Africa. See http://aidc.org.za/3rd-session-peoples-permanent-tribunal/
4. This is documented in the Transnational Institute series on Border Wars (https://www.tni.org/en/publication/border-wars) and in the testimonies provided to the PPT on ‘the violations with impunity of the human rights of migrant and refugee people’ (http://transnationalmigrantplatform.net/migrantppt/).
5. Gleckman, H. (2018). Multistakeholder Governance and Democracy: A Global Challenge. Routledge, London, pp. 52-78. See also, by the same author, Readers’ Guide: Global Redesign Initiative (2012). Boston Center for Governance and Sustainability at the University of Massachusetts, Boston (available from https://www.umb.edu/gri).
6. Hernandez Zubizarreta, J. (2015). ‘The new Global Corporate Law’, in State of Power 2015. Transnational Institute, Amsterdam. http://www.tni.org/stateofpower2015
7. Olivet, C., Müller, B. and Ghiotto, L. (2017). ISDS in Numbers. Transnational Institute, Amsterdam. Corporations and investors have won 70% of the cases brought against Latin American and Caribbean countries – resulting in these states paying foreign companies $20.6 billion, which could cover Bolivia’s budget for health and education for four years.
8. Transnational Institute (ed.) (2014). State of Power 2014: Exposing the Davos Class. Transnational Institute, Amsterdam.
9. Tax Justice Network Briefing, November 2017.
10. African Centre for Biodiversity (2017). The three agricultural input mega-mergers: Grim reapers of Africa’s food and farming systems. https://acbio.org.za/wp-content/uploads/2017/04/Mega-Mergers-Summary-Bayer-Monsanto.pdf
11. Corporate Europe Observatory (CEO) (2019). Captured states: when EU governments are a channel for corporate interests. https://www.corporateeurope.org/en/2019/02/captured-states-when-eu-governments-are-channel-corporate-interests-0
12. European Network of Corporate Observatories (ENCO) (2018). The EU and the Corporate Impunity Nexus: Building the UN Binding Treaty on Transnational Corporations and Human Rights. Published by Amis de la Terre France, CETIM, Observatoire des multinationales, OMAL and the Transnational Institute (TNI). https://www.tni.org/files/publication-downloads the_eu_and_corporate_impunity_nexus.pdf
13. George, S. (2015). Shadow Sovereigns: How Global Corporations Are Seizing Power. Polity Press, Cambridge, p. 18.
14. Both the PPT judgements on European corporations in Latin America (46 cases) and on mining and land grabs in Southern Africa (16 cases) culminated in a demand for binding regulations on TNCs. Available at: http://www.enlazandoalternativas.org/IMG/pdf/TPP-verdict.pdf and at http://aidc.org.za/download/ppt_2018/List-of-Cases-presented-in-previous-PPT-Hearings.pdf
15. Ozden, M. (2018). ‘Transnational corporations and human rights: What is at stake in the United Nations debate over the Norms on the Responsibilities of Transnational Corporations and other Business Enterprises with Regard to Human Rights’. http://www.cetim.ch/legacy/en/documents/bro2-stn-A4-an.pdf
16. International Call to Action (2012). https://www.stopcorporateimpunity.org/call-to-international-action/
17. The Xolobeni community and the Amadiba Crisis Committee defending their territory against titanium mining on the east coast of South Africa won a historic judgement in the Pretoria High Court on 22 November 2018 upholding their right to say no to mining. http://aidc.org.za/magnificent-victory-for-the-right-to-say-no-to-mining/
19. The vote at the UNHRC was carried by 20 votes in favour, 14 against and 13 abstentions. In favour were: Algeria, Benin, Burkina Faso, China, Congo, Côte d’Ivoire, Cuba, Ethiopia, India, Indonesia, Kazakhstan, Kenya, Morocco, Namibia, Pakistan, Philippines, Russian Federation, South Africa, Venezuela and Vietnam. Against: Austria, Czech Republic, Estonia, France, Germany, Ireland, Italy, Japan, Macedonia, Montenegro, Republic of Korea, Romania, the United Kingdom and the United States. Abstaining: Argentina, Botswana, Brazil, Chile, Costa Rica, Gabon, Kuwait, Maldives, Mexico, Peru, Saudi Arabia, Sierra Leone and the United Arab Emirates.
20. Resolution 26/9 establishing the OEIGWG, https://documents-dds-ny.un.org/doc/UNDOC/GEN/G14/082/52/PDF/G1408252.pdf?Open
21. Treaty on Transnational Corporations and their Supply Chains with regard to Human Rights (October 2017). Proposal from the Global Campaign to Reclaim People’s Sovereignty, Dismantle Corporate Power and Stop Impunity. https://www.stopcorporateimpunity.org/binding-treaty-un-process/
*Third World Resurgence No. 341/342, 2019, pp 16-20