Voluntary Compliance and Obligatory Monitoring: Making Corporate Codes of Conduct Work

• Author: Anton Moiseienko
• Position: LL.M. candidate at University of Cambridge, LL.B. (Kiev University, with honours)
• Pages: 25-47

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VOLUNTARY COMPLIANCE AND OBLIGATORY MONITORING:

MAKING CORPORATE CODES OF CONDUCT WORK

Anton Moiseienko*

A INTRODUCTION

The crucial role of transnational corporations (TNC) in global economic development was

recognised decades ago.1 The economic might of TNCs not only exceeds resources of

developing countries, but is comparable to those of major world powers. As of 2011, 29

TNCs (taken separately) owned currency reserves greater that those of the US State

Treasury.2

At the same time, legal regulation of TNC’s activities is conventionally considered to be

within the sphere of States’ domestic laws. While some advocate international legal

personality of TNCs,3 the idea has not received universal approval among scholars, let alone

States.4 Contemporary public international law is instead concerned with States’ obligations

to control the TNCs that operate within their jurisdiction.

Inevitably, this approach poses questions that relate both to the scope of States’ obligations

with respect to TNCs and to effective implementation of these obligations. First, what

conduct of TNCs should be promoted or prohibited through State measures? Second, which

States must bear responsibility for implementing these measures, given that TNCs operate in

numerous jurisdictions and the precise nature of their connection to a particular State is

difficult to establish? Third, what should these measures be in order to be effective?

In other words, the concern is when an individual State must effectively impact TNCs, how it

should do so, and whether this is at all possible.

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*LL.M. candidate at University of Cambridge, LL.B. (Kiev University, with honours).

1 See Jonathan I. Charney, ‘Transnational Corporations and Developing Public International Law’ [1983] Duke

LJ 748.

2 Jonathan I. Charney, ‘29 Institutions Richer than the US’ (18 July 2011) <http://www.reporter.com/usa/29-

institutions-richer-than-the-united-states/> accessed 28 October 2013.

3 Noemi Gal-Or, ‘NAFTA Chapter Eleven and the implications for the FTAA: the institutionalization of

investor status in public international law’, (2005) 14 Transnational Corporations 121, 131.

4 Ian Brownlie, Principles of Public International Law (7th edn, OUP 2009) 66-67.

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I will argue below that the UN 'Protect, Respect and Remedy' Framework for Business and

Human Rights does not provide comprehensive answers to the first two questions. The UN

Framework is, indeed, a valuable guidance on the principles that States should adhere to in

order to fulfil their human rights obligations in the context of TNCs’ activities. But so far as

there is no clear answer to the when and how questions, the UN Framework remains an

indication of the final destination and not a roadmap.

Being a delicate and carefully balanced account of relevant contemporary international law,

the UN Framework smartly avoided States’ suspicion and resistance associated with detailed

or overly progressive documents on TNCs. Yet the UN Framework is not an adequate basis

for taking practical measures directed at curbing TNCs’ misconduct, e.g. in the domain of

human rights.

Consideration of approaches based on self-regulation, in particular adoption of corporate

codes of conduct, is an inevitable consequence. In this note, I discuss the advantages and

disadvantages of corporate self-regulation (against the background of advantages and

disadvantages of relying primarily on State enforcement measures) and conclude that the

adoption of corporate codes of conduct is an effective way to secure TNCs’ compliance with

relevant standards and that it can be backed by 'soft' involvement of States.

I further offer an alternative model of regulation through corporate codes of conduct, based

on constant monitoring of observance by joint commissions with participation of government,

civil society representatives, and the corporation itself. Particular attention is attached to the

experience of the OECD, whose control of multinational enterprises is based on a loosely

similar idea.

This approach would entail publicity and stimulate TNCs to adhere strictly to their codes of

conduct. Meanwhile, States would only be obliged to sanction non-disclosure or improper

disclosure of information. This would grant States much freedom in determining what kinds

of actions they would address through their legislative frameworks and how. In States where

adequate remedies exist, finding a specific violation of the code of corporate conduct might

lead to penalties; at the same time, the proposed model of TNC regulation would not

prejudice the less developed States that lack capacities to do so.